Analysts' corner

Godrej Consumer, Opto Circuits, Sobha Developers & DLF

GODREJ CONSUMER
Reco price/date: Rs 784/April 4;
Current/target price: Rs 783/Rs 640
Godrej Consumer acquired 51 per cent of Darling Group in 2011. Darling Group Holdings operates in 14 countries across Africa, selling hair extension products under the brand name 'Darling'. Managements of both PKF (business advisors) and Ukwala (Supermarket) are confident of the long-term opportunities in East Africa. However, both managements highlighted lack of capital as a key constraint for growth. From a global perspective, Kenya is ranked very high (and top-ranked among East African countries) in the ease of doing business index and we understand more companies are now using Nairobi as a gateway to do business in East Africa. Sell.

-Espirito Santo Securities

OPTO CIRCUITS
Reco price/date: Rs 59/April 4;
Current/target price: Rs 58/Rs 64
Opto Circuits' group company Cardiac Science has signed a definitive agreement with US-based Mortara Instrument to sell its diagnostic cardiology products business for $21 million. The amount will be used to repay the debt and for product development. The motive behind this deal is to streamline focus on select high value products in the resuscitation category. However, this is likely to be mitigated by the new developments in the US wherein all AEDs will have to undergo the premarket approval (PMA) process for approval. Note that AEDs constitute 20 per cent of overall sales and sizable part is coming from the US. The restructuring (more such moves in the offing) and regulatory issues along with suspense over the launch of MySense have compelled us to initiate further downward revision in target price. Downgrade to Hold.

-ICICI Securities

SOBHA DEVELOPERS
Reco price/date: Rs 371.30/April 3;
Current/target price: Rs 349.25/Rs 385
Sobha reported Q4FY13 sales of 1.07 million square feet (up 24 per cent y-o-y, up nine per cent q-o-q) worth Rs 670 crore (up 26 per cent q-o-q, up 45 per cent y-o-y), thus meeting 100 per cent/110 per cent of its FY13 target - a good performance given that the new Minerwa Mills project wouldn't have contributed significantly to Q4 sales. While steady volumes are a near-term positive, these are mostly priced into the stock. Further, we believe there are risks to sustained strong, positive cash flows, given the high inventory, planned commercial capex and land acquisition ahead. Maintain HOLD.

-Religare Institutional Research

DLF
Reco price/date: Rs 253.20/April 2;
Current/target price: Rs 235.25/Rs 260
We remain "out of consensus" equal-weight on DLF, given the near-term earnings challenge, high single-market (Gurgaon) dependence and full valuation (27x F2014E and 19x F2015E EPS). While DLF has a plan to scale up operations, we believe it will play out in earnings in FY15-16. Pending balance sheet issues include Rs 7,500 crore in unbilled receivables (unwind with Phase V monetisation), roughly Rs 1,600 crore Convertible Compulsory Preference Shares (promoter funded - might be valued at Rs 3,000 crore), a few pending court cases (IT demand of Rs 3,000 crore) and the CCI case. Neutral.

-Morgan Stanley