BHARAT FORGE
RESEARCH: DEUTSCHE BANK
RATING: BUY
CMP: 316

Deutsche Bank maintains `Buy rating on Bharat Forge with a target price of 435. Bharat Forges Q4FY11 standalone operating results are marginally below expectations. Revenue is 820 crore, EBITDA is 199 crore and EBITDA margin is at 24.2%. The miss in revenue was offset by lower-than-expected raw material costs. Contribution per tonne at 84,050 was in line. Exports revenue at 358 crore were 15% below expectations and were partly offset by 1% higher domestic revenues. Key negative surprise is on other expenditure, which is 16% higher leading to 3% lower EBITDA. Standalone PAT at 100 crore was higher by 16% versus the estimate due to lower depreciation and taxes.

AXIS BANK
RESEARCH: CLSA
RATING: BUY
CMP: 1219

Axis Bank seems to be highly vulnerable to a sharp rise in interest rates due to maturity mismatches, higher share of wholesale deposits and higher proportion of non-SLR bond. Corporate profitability is high, but CLSA sees risks due to potential slowdown in investment cycle; share of retail profit has declined to 7%. Rising RWA/ total asset ratio suggests increase in risk profile on fund-based and non-fund based exposures. Overseas loans are 16% of loans and Axis has also opened a subsidiary in the UK. RoA of 1.5% is among the highest and receding asset quality pressures will support 23% CAGR in profit over FY11-14. CLSA expects earnings to grow at 23% CAGR over FY11-14 led by loan growth and receding asset quality pressures. Moreover, profitability is one of the best.

DIVIS LAB
RESEARCH: BANK OF AMERICA
RATING: BUY
CMP: 750

Divis Q4 profit at Rs175 crore grew 35% y-o-y and 78% q-o-q, which was 70% ahead of the estimates. This was mainly led by a 30% beat in sales at 480 crore driven by higher volume pick up in generic APIs. Carotenoid sales grew to 20 crore while revenue mix favoured generic API compared to custom synthesis. As a result, EBITDA grew 30% y-o-y at 194 crore with margins also largely in line at 40.3%. Bank of America expects contribution from the recently commissioned unit from H2FY12E, ramping to 400-500 crore over the next two years. Scale up of carotenoid business to 160 crore by FY13E, higher orders from repeat customers and new DMF supplies would drive sales outlook. Divis trades at 14.3x FY13E P/E, which is at an about 20% discount to its historic average.

MANAPPURAM GENERAL FINANCE
RESEARCH: UBS
RATING: BUY
CMP: 112

Manappuram General Finance and Leasing (MGFL) is one of Indias largest gold finance companies with $1.7 billion in assets under management (AUM) as of March 2011. MGFLs AUM recorded a 93% CAGR in FY07-11, and UBS forecasts a 43% CAGR in FY11-13. While competition in the segment is increasing, MGFL is attractive as it has advantages over the non-banking financial companies from its brand and branch network. It also has a shorter turnaround time and lower costs per loan compared to the banks. UBS estimates average ROA/ROE of 4.4%/23% in FY12-13 as UBS expects NIMs to decline. However, given that 59% of its branches are less than two years old, there could be strong productivity gains once growth normalises in the medium term. However, given the outlook for medium-term growth and ROE, UBS thinks the risk-reward is attractive.

POWER GRID
RESEARCH: J P MORGAN
RATING: OVERWEIGHT
CMP: 98

J P Morgan maintains the `Overweight rating on Power Grid Corp, with a target price of 116, offering 17.4% upside potential from current levels. YTD, the stock has outperformed the Sensex by 13.5% in CY11, owing to its defensive characteristic. Terminal value contributes 70% to the enterprise value of 917 billion. PGCIL reported March PAT of 750 crore, ahead of consensus estimates of about 690 crore. EBIT of 1,280 crore was broadly in line. PAT surprise was led by higher other income and lower capital costs. In FY11, operating leverage, partly led by economies of scale, stands out. OPM improved about 170 bps during the year mainly as staff costs increased only 2.6%.

TATA STEEL
RESEARCH: MORGAN STANLEY
RATING: OVERWEIGHT
CMP: 585

Tata Steel reported a good adjusted consolidated PAT of 1,900 crore in Q4FY11, up 115% Q-o-Q but down 29% Y-o-Y and ahead of general expectations. EBITDA was 4,470 crore, about 5% lower than estimates but was remarkable for the solid beat at Tata Steel Europe, which delivered EBITDA/t of $85 versus estimate of $57. Tata India reported EBITDA/t of $400, up 4% Q-o-Q and down 3% Y-o-Y and 9% lower than estimates. TSEs EBITDA/t of $85/t was aided by an average realisation of $1,192/t and operating cost of $1,108/t. In Q1FY12, Morgan Stanley expects higher raw material costs to be largely negated by increased steel prices. Realisations increased 7% Q-o-Q to 44,400/t, in line with the expectation. However, staff costs and other expenditures were higher than expected.

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Investors Guide does not accept responsibility for consequences of financial decisions taken by readers on the basis of information provided herein. The aim is to provide a reasonably accurate picture of financial and related opportunities based on information available with us. The Times of India Group has invested in several companies; a list of the names of some of the investee companies can be viewed at http://www.brandcapital.co.in