Broker alert: Why it's time to buy Infosys and Hindalco

Firstpost tries to make your life easier by offering you a list of stock recommendations from various brokerages houses. Here’s the list:

•Motilal Oswal is ’neutral’ on Shoppers Stop with a price target of Rs 257 per share, after it cut the company’s revenue estimates by 3 to 4 percent for the years ending March 2012 and March 2013. The stock is currently trading marginally higher at Rs 263. The brokerage attributed the rating to a slowdown in same-store sales growth and an aggressive expansion plan in future years.

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While same-store sales growth has softened, revenues could further be impacted by a depreciating rupee as the price of imported goods (which constitute 30-35 percent of sales) may increase by 15-20 percent. Overall, margins are expected to come under pressure in the second half of 2012 and 2013 (financial). A recovery is expected only in 2014.

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•Citi Investment Research is bullish on Hindalco with a price target of Rs 203 per share. The stock is trading at Rs 114.75, indicating potential gains of of almost 80 percent. The Hindalco stock has been hammered ecently - it fell 3 percent on Monday and 7 percent over the past 10 days due to a lack of relief from the Bombay High Court on the Income tax order which levied a hefty tax demand, and because of a potential hike in coal prices from Coal India.

However, according to the report, Citi believes the tax liability figure (Rs 11 billion) quoted in the press is erroneous and that Hindalco will now have to appeal against the IT demand and claim relief against the order. Also, while the impact of the change in coal pricing mechanism is too early to ascertain, Citi expects the coal cost to rise by around 5 percent.

•Religare Research has a ‘buy’ rating on Hexaware Technologies with a price target of Rs 110 per share. The stock is trading at Rs 79.7, suggesting a potential gain of 37 percent. The company has seen a sharp recovery in both volumes and margins over the past year due to structural changes like improved management, leaner organisational structure and focused client hunting/mining. Religare expects this growth momentum to continue and the company to clock 16 percent growth in revenues (on a compounded annual basis) between March 2011 and March 2013. That’s ahead of its mid-cap rivals. Over the past year, Hexaware’s shares have climbed 23 percent vis-a-vis the Sensex, which fell by 25 percent.

•Nomura is bullish on Infosys with a price target of Rs 3,300 per share vis-a-vis its current price of Rs 2,871 , indicating a possible upside of 15 percent. Nomura says the shift in IT spending allocations and simple economics should power Tier-1 IT companies. Within this group, the brokerage prefers companies like Infosys as they are better poised for a rebound. It also expects Infosys to see major benefits from the rupee’s depreciation because of its relatively low level of hedging compared with peers. For the December-ending quarter, Infosys is expected to post a 3.5 percent quarter-on-quarter growth, closer to the lower end of its guidance.