UBS gives a high five: Buy Coromandel, Exide, Havells

The economic volatility is taking a heavy toll on markets across the globe. This, in turn, is making investors panicky, who are now on a sell-off spree, expecting lower returns.

Our domestic markets - the BSE and the NSE - too have been hammered as FIIs sold almost Rs 10,214 crore worth of shares in August 2011. While the Sensex slumped 8.3 percent in the last three months, the BSE mid-cap index was down 7 percent.

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The fall in stock markets offers a reasonably good chance for investors to do some bottom fishing as a large number of stocks trade at a discount to their future earnings. In its ‘India Mid-cap September 2011’ report, UBS Investment Research has talked about some mid-cap stocks that displayed resilience in earnings and stock price in the last down cycle and continue to do so. Some of the stocks that came in for a special mention in the research report are :

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Coromandel International: UBS has set a price target of Rs 416 per share vis-a-vis its current trading price of Rs 296.9 per share on 12 September. Its earnings per share (EPS) are expected to increase 37.5 percent to Rs 24.34 per share in financial year 201-12 compared to Rs 17.7 a year earlier. It is one of the low-cost manufacturers of phosphatic and complex fertilisers in India.

Exide: UBS is bullish on the company with a price target of Rs 200 per share compared to its current trading price of Rs 133.2. Its revenues are expected to surge by a robust 42 percent, aided by a sharp ramp-up in the four-wheeler and two-wheeler capacity. It has a market share of 45 percent in the industrial segment, 72 percent in auto original equipment and 73 percent in replacement auto.

Havells: This company’s price target stands at Rs 510 per share, reflecting an upside potential of around 50 percent from its current price of Rs 344 per share on Monday. The company is a leader in the electrical consumer durable space and is a market leader in the switchgear (20 percent share) and fan segment (13 percent share).

VIP: Entry of new brands and launches are expected to lead to a 23.2 percent rise in revenues for the year ended March 2012. UBS has a price target of Rs 1,010 per share vis-a-vis its current market price of Rs 956 per share. Its wide distribution reach and diversified product portfolio have helped the company garner a market share of 58 percent in terms of revenue vis-a-vis its competitors like Samsonite (26 percent) and Safari (7 percent).

Triveni Engineering: The price target for this company has been fixed at Rs 85 per share, reflecting an upside potential of almost 292 percent from its current market price of Rs 22.7 per share. EPS is expected to move up to Rs 5.23 per share from Rs 2.8 per share in the year-ago period. Post demerger, the listed company comprises divisions that include portfolios like sugar, the high growth water treatment and the high speed gear unit. It also has a 21.8 percent stake in Triveni Tubines, which is expected to be listed soon.

Motherson Sumi’s share price is likely to jump to Rs 280 per share against its market price of Rs 201.3 per share. While revenues are expected to increase by 15.7 percent, net profit may grow 22 percent. The company’s focus on the inorganic growth strategy seems to be paying off as it derives a large chunk of its revenues from the high-growth European markets. For now, the company is keen on taking its return on capital employed on a consolidated basis to 40 percent, said Pankaj Mittal, chief operating officer.

Emami has a price target of Rs 550 per share from its current price of Rs 456 per share. Earnings are expected to rise on the back of its Zandu acquisition, international sales and new product launches. It has high gross margins of 59-65 percent because of its focus on under-penetrated categories.

Dish TV has an upside potential of almost 44 percent - price target Rs 110 per share - compared to its current market price of Rs 75.15. The company is expected to make a profit in the fiscal 2012 compared to the losses earlier. It has a 31 percent market share and is India’s first and largest TV operator in India with a subscriber base of 8.9 million users.

DB Corp: India’s one of the leading print media companies is expected to benefit from its strong leadership position as this allows it to command premium ad rates over its peers. UBS has forecast a print ad revenue CAGR of 14.5 percent for the next four years. It has a price target of Rs 310 per share vis-a-vis its current price of Rs 226.85 per share.

Pidilite Industries: Rising consumption from Indian households, coupled with a pick-up in construction activity, augurs well for the company as its revenues are expected to edge up 18.4 percent for the year ended March 2012. It has a price target of Rs 200 per share compared to its current market price of Rs 164.5 per share.