Analysts' corner

Colgate-Palmolive (India) Ltd, Reliance Industries Ltd, KPIT Cummins & ITC

COLGATE-PALMOLIVE (INDIA) LTD
Reco price/date: Rs 1,332/March 11;
Current/target price: Rs 1,315.15/Rs 1,300
We upgrade Colgate Palmolive to neutral and raise our target price, too. Over the past couple of years, despite significant competitive pressure from both MNCs and domestic players in the oral care segment, Colgate Palmolive has been able to hold market share and deliver consistent revenue growth. While we expect Colgate Palmolive to continue to deliver stable earnings growth, we believe current valuations build in a significant premium versus the long-term average. We believe the stable attractive nature of the business has already been captured in the current premium valuation vs. the sector. We upgrade it to Neutral, but believe valuations leave only limited upside potential from current levels.

-Nomura Equity Research

RELIANCE INDUSTRIES LTD
Reco price/date: Rs 851/March 11;
Current/target price: Rs 843.70/Rs 893
The research analyst has upgraded Reliance Industries, while earlier the analyst had downgraded the stock to underperform in June 2012, amid concerns over gross refining margin (GRM) outlook and a sharp cut in KG-D6 reserves. However, there is now increasing evidence that the refining outlook is improving. Reliance's GRM is up in the past two quarters and the strength appears sustainable. Its earnings growth is also likely to recover in FY14E-15E to 8-13 per cent year-on-year. Thus, the analyst has raised his price objective for Reliance by nine per cent and raised long-term GRM estimates by $1 a barrel. Thus, current ratings stand at Neutral.

-Bank Of America Merrill Lynch

KPIT CUMMINS
Reco price/date: Rs 110/March 11;
Current/target price: Rs 106.90/Rs 120
KPIT is on track to exceed its FY13E dollar revenue growth guidance (32 per cent plus, organic 20 per cent) and could end the year with 34 per cent, implying five per cent q-o-q growth in Q4 predominantly led by Systime (up seven per cent). For FY14E, initial discussions suggest organic revenue growth could moderate to 15-20 per cent, in line with FY13E organic growth but above Nasscom's initial estimate of 12-14 per cent while Ebitda margins could rise 100 bps y-o-y. Deceleration in Cummins' business IT spends could pressure FY14E estimates & continues to dictate our HOLD rating.

-ICICI DIRECT

ITC
Reco price/date: Rs 287/March 7;
Current/target price: Rs 297/Rs 308
After value-added tax (VAT) hikes in Bihar and Gujarat, state-level VAT has been raised in J&K (to 40 per cent from 30 per cent) and Rajasthan (to 65 per cent from 50 per cent). Rising ad valorem state tax lowers ITC's ability to fully appropriate its pricing power and makes it vulnerable to state-level event risks. Budgets in Kerala, West Bengal and Tamil Nadu over the next two weeks are a key near-term risk. EPS CAGR of 15 per cent over FY13-15E, compared with less than 20 per cent in the past four years, will make it difficult to sustain FY14E PER of 27x. Maintain in-line rating.

-Standard Chartered Research