Analysts' corner

Axis Bank, GlaxoSmithKline Pharmaceuticals, Reliance Communications & Havells India

AXIS BANK
Reco price/date: Rs 1,399/ June 10;
Current/target price: Rs 1,356.30/Rs 1,535
Axis Bank has underperformed the benchmark index (Sensex) by 7.5 per cent after its Q4FY13 results. Its net interest margin (NIM) has been aided by recent capital infusion while its liability franchise continues to be one of the best in the industry. Asset quality has been holding well contrary to street expectations. However, the risk of asset impairment remains high, as it has only a third of power portfolio operational in nature. Nonetheless, stock trades at a 50 per cent discount to HDFC bank's (3.9x FY14E ABV) trading multiple. Upgrade to Accumulate from Reduce.

-Kotak Securities

GLAXOSMITHKLINE PHARMACEUTICALS
Reco price/date: Rs 2,706/ June 7;
Current/target price: Rs 2,504.55/Rs 2,236
We believe 35 per cent of Glaxo's portfolio should come under price control, which includes some of its best-selling drugs such as Augmentin. The price of Augmentin 500/125 mg is likely to fall 55 per cent and could account for 24 per cent of the overall impact of price control. We believe the impact of a fall in prices will be mitigated to some extent by price increases up to permissible limits for strong brands such as Zantac and Betnovate, coming out of price control and volume gain. More, given the strong brand franchise, controlled products of Glaxo would take price increases, linked to the wholesale price index, every year, in our assessment. We reduce our CY13/14 net profit estimates 20-25 per cent to factor in the impact of price control. The stock has rallied in the recent past and now trades at 38x CY13 earnings per share of Rs 71.22 on market expectations of an open offer from the parent. While Glaxo PLC might be interested in raising its stake, the valuation will be a deterrent, in our view. Downgrade to Reduce.

-Nomura Equity Research

RELIANCE COMMUNICATIONS
Reco price/date: Rs 116/June 7;
Current/target price: Rs 111/NA
Though Relaince Jio Infocomm deal will allow Relaince Communications (RCom) to improve its asset utilisation, the company appears to be offering a significant discount. However, the incremental cash flows for RCom would aid in repayment of debt. RCom's debt has shot up in the past five years. By the end of March 2013, its net debt was Rs 39,000 crore. We believe the arrangement is a key positive for RCom, as it is a right step in monetising assets. This deal would increase the tenancy on RCom's towers, increasing the chances of a stake sale in its tower business. This could further deleverage its balance sheet. Since April 2, when the fibre optic network sharing deal was announced, RCom shares have gained Rs 85 per cent from Rs 63 to Rs 116 on June 6, on wide speculation of such a deal coming in. We wait for clarity on the nature of payments and rentals. Remain Neutral

-Angel Broking

HAVELLS INDIA
Reco price/date: Rs 723/June 7;
Current/target price: Rs 717.75/Rs 829
Key takeaways of FY13 annual report are increased attempts in terms of deepening and strengthening the channel reach, continued investments in manufacturing, and reaching fast the point when all products will be manufactured in-house. Exports are up 21 per cent year-on-year. 50 per cent of Neemrana fixtures production is earmarked for Sylvania. Havells continued to invest in capacity (FY13 standalone capital expenditure, or capex, at Rs 120 crore). Also, for Sylvania, capex increased to Rs 49.1 crore in FY13 versus Rs 34 crore in FY12 as production lines were increasingly being reoriented towards light-emitting diode products. Maintain Buy.

-Motilal Oswal