Fundamentals: Why you should buy Sun Pharma and Axis Bank

Here are some views from brokers/analyst on specific companies :

•Espirito Santo is bullish on Sun Pharma and has initiated coverage on the stock with a target price of Rs 700 per share against its current market price of Rs 627 per share, reflecting an upside of 11 percent. According to the report, the company is well placed to start its next leg of growth due to complex product launches in the US, scale-up of emerging markets foot print, sustained growth in the domestic market and inorganic growth. During the financial year 2007-12, it has seen a 30 percent compound annual growth rate (CAGR) at the operating profit level driven by the management’s focus on profitable growth.

Sun Pharma is a global generic company and a leader in the domestic formulations market.

 •Edelweiss has a buy rating on Axis Bank with a target price of Rs1,372 against its current price of Rs 1,028 per share, reflecting gains of 33 percent . While the company reported a 22 percent year on year growth in net profit for the June quarter, ahead of estimates, its net non-performing asset (NPA) ratio increased to 0.31 percent from 0.25 percent in January-March quarter. Similarly, gross NPA ratio too rose to 1.06 percent as against 0.94 percent sequentially. This was indicative of some amount of stress in its assets (loans).

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However, Edelweiss says that concerns over its asset quality remains unfounded as it has consistently delivered commendably with GNPLs around 1 percent. Also the managements effort to scale up retail banking should help allay investors concern. It expects net profit to rise by 16 percent for the year ended March 2013.

•Kotak has a reduce rating on Castrol India with a target price of Rs 562 per share. It is currently trading at 545 per share. While the company reported better than expected top line numbers for the June quarter, its net profit 15 percent mainly due to a increase in employee cost, higher advertisement expenditure, higher carriage, freight and insurance cost etc. The company’s management also indicated that while the lubricant market growth has been sluggish due to the economic slowdown and inflationary pressure, it is focusing on driving volume growth through increasing distribution reach, etc.

However, Kotak says the current price discounts most of the positives and hence they recommend a reduce rating. Investors can exit from the stock at this point in time and can look for a better entry price, the report said. In the last one year, the stock has fallen by 4.5 percent against the 7.5 percent fall of the Sensex.