Motilal Oswal's Large and Mid Cap Picks

motilal_large&mid_05Nov10.pdf (207 KB)

Motilal Oswal has come out with following stock recommendations .

Large cap stocks:

Bharti Airtel - We are upgrading our SOTP-based target price to Rs430 - Rs488/share for India & SA business. We maintain Buy.

BHEL - The quality of earning is set to improve, with EBITDA growth of 36% CAGR over FY10-12 along with superior RoE's of 33% and 54% over FY11 and FY12. We re-iterate Buy with a target price of Rs2,934, based on 20x FY12E earnings.
SBI - SBI would command valuation premium for its size and for being proxy to growth in financial service space in Indian economy. We assume consolidated RoE of 16-18% over FY09-12.
Mid cap stocks:

Anant Raj Industries: We expect revenues to increase at 70% CAGR over FY10-12 and net profit to increase at 35% over FY10-12. Our FY12 NAV for ARIL is Rs210/share.
ING Vysya - ING Vysya Bank is a play on increasing return ratios, backed by improvement in core operating performance and improving balance sheet profile. The stock trades at 11x FY12E EPS of Rs35 and 1.6x FY12E BV of Rs239. Strong growth coupled with improving return ratios can potentially re-rate the stock. We reiterate Buy with a target price of Rs475 (2x FY12E BV)
Tulip Telecom - We expect 31% earnings CAGR over FY10-12E driven by 29% EBITDA CAGR. At CMP of Rs898, the stock trades at a FY12 P/E of 6x and EV/EBITDA of 3x; maintain Buy with a DCF-based target price of Rs. 250.

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