Edelweiss puts buy on Sterlite

Company: Mahindra & Mahindra
Broking House: Sharekhan
Current Price: Rs 819.80

Mahindra and Mahindra has reported a strong volume growth in its UV sales. In August 2009 its UV sales registered a robust growth of 41.8 per cent year-on-year to 16,631 units and a year-till-date growth of 36 per cent yoy. The demand in the three-wheeler segment remains subdued with a decline of 16.7 per cent yoy in the YTD period (April-August). But the company’s plan to launch one product each in the goods and the passenger carrier segment by the end of FY2010 could mitigate the decline in the three-wheeler sales. Currently, the stock is trading at 14.1x its FY2011E. However, the broking house sees a limited upside at the current level and maintained its hold rating on the stock.

Company: Sterlite Industries
Broking House: Edelweiss
Current Price: Rs 745.90

Sterlite Technologies is likely to grow significantly over the next few years as its core business operations. Domestic demand drivers for optical fiber remains strong due to low internet penetration and fast growing wireless subscribers. For power transmission and distribution, Rs 4,20,000 crore is budgeted to be spent in the Eleventh Plan. Of which, the conductors’ share is Rs 31,500 crore. STL has the technology to manufacture optic fiber and power conductors in-house and is poised to become third largest for optic fiber globally. STL’s core earnings are likely to post a 33 per cent CAGR over FY09-12E. The broking house says the stock has a 12x P/E on FY11E earnings and puts ‘buy’ rating.

Company: Cipla
Broking House: Angel Broking
Current Price: Rs 264.95
Cipla recorded a 30 per cent growth in its exports, while its Domestic sales grew by 15 per cent yoy in FY2009. Exports form 55 per cent of its topline. In the US, which accounts for 29 per cent of its exports, Cipla has partnered with 21 companies for 118 products. It has invested about Rs 2,000 crore in capex over the past three years for setting up facilities in Sikkim, Indore and Goa. The company is also planning to dilute seven to eight per cent equity to raise around Rs 1,500 crore. The broking house marginally tweaked its estimates, after factoring in a higher sales growth of 12 per cent CAGR over FY2009-11E, primarily driven by exports. The stock is trading at 19.2x its FY2010E and has got a ‘reduce’ rating.

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