Analysts' corner

Motherson Sumi, Sangam (India), Bharti Airtel & Mahindra & Mahindra

MOTHERSON SUMI
Reco price/date: Rs 259/October 15;
Current/target price: Rs 255.85/294
The research firm has a buy on Motherson Sumi Systems Ltd (MSSL), India's second-largest automobile parts supplier, with a 12-m sum of the parts-based target price of Rs 294, implying 13 per cent potential upside. The rationale is the current stock price implies a 50 per cent discount to MSSL's European business (or 0.2X EV/sales versus peers at 0.4X), which drives 80 per cent of revenues and looks poised to outperform peers on revenue growth (20 per cent compound annual growth rate, or CAGR) during FY13-FY15E. Structurally, amid growing consolidation in the global auto parts industry, it believes MSSL is well poised, as it has an experienced management, with a strong record of growing organically and via joint ventures and acquisitions. Buy

-Goldman Sachs

SANGAM (INDIA)
Reco price/date: Rs 34/October 14;
Current/fair value: Rs 36.15/46
CRISIL Research reiterates its fundamental grade of 3/5 on Sangam (India). Sangam, the largest firm in the dyed poly viscose (PV) yarn market in India, is consolidating its position to reap benefits from its capacities and focus on sweating of assets. Long-term prospects remain positive due to the increasing applications of PV fabrics and favourable price competiveness in relation to dyed cotton yarn and growing preference for denim. Sangam faces short-term challenges of weak demand and rupee depreciation-led high raw material prices. Revenues are expected to grow at a two-year CAGR of three per cent to Rs 1,560 crore in FY15. Earnings before interest, taxes, depreciation and amortisation (Ebitda) margin is estimated to improve to 14.8 per cent in FY15. We expect a profit after tax (PAT) of Rs 74.4 crore and an earnings per share (EPS) of Rs 18.9 in FY15. Gearing is expected to improve to 1.3x in FY15. The sum-of-the-parts method's fair value is Rs 46 a share. Good Fundamentals

-CRISIL Research

BHARTI AIRTEL
Reco price/date: Rs 334/October 14;
Current/target price: Rs 339/387
Expect Bharti to capture 40 per cent of the incremental revenue market share as it is best placed among peers to capture incremental data revenue (it captured 43 per cent over last year which went unnoticed). It is likely to be the biggest beneficiary of rising smartphone penetration - shipments rose 3x over the last year to 9.3 million in Q1FY3/14. Reiterate an outperform rating and marginally raise our sum of the parts-based target price to Rs 387, led by a one-nine per cent increase in our FY15-16 EPS estimates. Key re-rating catalysts are expected from revenue market share gains in data, higher-than-forecast rates in India and a stable policy environment. Outperform

-CIMB

MAHINDRA & MAHINDRA
Reco price/date: Rs 873/October 11;
Current/target price: Rs 867/1,000
Domestic tractor volumes grew 24 per cent yoy over April-September 2013, driven by monsoon and a rise in crop prices. Reservoir levels are 17 per cent higher than the 10-year average, indicating the rabi crop is likely to be good while crop prices are still rising, good for farmer profitability. The stock trades at 10X FY2015E standalone EPS (ex subsidiary value), cheap, given the long-term earnings growth potential is robust, driven by low penetration of utility vehicles and tractors in India. We maintain a target price of Rs 1,000 on sum of the parts. Maintain Buy

-Kotak Institutional Equities