Broker alert: Time to drop Idea, plant additions boost Hindalco

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• Antique Stock Broking is bullish on Cummins Indiaand has a price target of Rs 474 per share. The share is currently trading at Rs 404.5, indicating potential gains of up to 17 percent. Consistent cost control efforts, along with capacity addition, are expected to accelerate Cummins’s earnings in the future. Revenues and profits are expected to grow at a compounded annual growth rate (CAGR) of 12 percent and 6.5 percent till March 2014.

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•Edelweiss maintains its ‘buy’ rating on Hindalco Industries with a price target of Rs 266 per share vis-a-vis the stock’s current price of Rs 124.55 per share, reflecting a possible jump of 113 percent. Ongoing capex plans augur well for the company as it plans to partly commission its Mahan smelter by December. Hindalco has been adding 10,000 tonnes per annum (tpa) of aluminium capacity every year by debottlenecking. Over the past year, the stock has fallen by a steep 39 percent compared with the BSE Sensex, which declined by 22.6 percent.

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• Kim Eng has a ‘sell’ recommendation on Idea Cellular with a price target of Rs 68 per share compared with its current price of Rs 89.36 per share. Over the last six months, the share had risen by a sharp 27 percent even as the Sensex declined by almost 20 percent as the company increased call tariffs by 20 percent in 7 circles. However, Kim Eng believes it is premature to be optimistic on Idea because rate hikes are unlikely to be succesful given slowing growth and high proportion of price-sensitive rural subscribers. Almost 52 percent of Idea’s subscribers are from rural areas, the brokerage noted.

• Nomura Equity Research has downgraded United Spirits to neutral from its previous ‘buy’ rating and has a price target of Rs 850 per share compared with the current market price of Rs 804.2 per share owing to lowered expectations for its domestic business profitability and high debt. The report also highlighted concerns about group company Kingfisher Airlines. Although there is no direct link between the two companies – barring the fact they have the same promoter – Kingfishers’ mounting losses and need for funds are situations that need to be carefully monitored.

• ICICI Securities maintains its ‘buy’ rating on Gujarat State Fertilisers & Chemicals (GSFC) with a price target of Rs 600 per share compared with its current market price of Rs 440.5 per share reflecting a growth of almost 37 percent on the back of sustained profitability across segments. Over the past 12 months, the stock has risen by 47 percent.