Godrej Properties Ltd
Banking on land
The company proposes to use the issue proceeds for acquisition of land development rights for new projects, construction of new projects, repayment of loans and to meet working capital requirements.
Godrej Properties Ltd (GPL), a subsidiary of the renowned Godrej Industries Ltd, is involved in developing residential, commercial, retail and information technology projects across the country. GPL’s total land reserve currently stands at 391 acres, translating into a saleable area of 50.2 million sq. ft. Around 50% of its saleable area is coming from a township project in Ahmedabad, which will be executed over the next 10 years. Currently, Godrej and Boyce Manufacturing Co. Ltd has leased 36.5 acres of land for a period of 99 years, commencing from April, to Godrej Industries, which, in turn, has given development rights to GPL. We believe that the IPO is fairly priced. However, investors can look at alternative, existing listed firms such as Anant Raj Industries Ltd, which have a debt-free balance sheet, land at prime locations and trading at significant discount to our one-year forward NAV.
Tata Chemicals Ltd
During November, Tata Chemicals Ltd acquired about 1 million equity shares of Rallis India Ltd at Rs908.50 per share, raising its stake from 46% to 50.1%, thereby making Rallis India a subsidiary of Tata Chemicals.
The acquisition of a majority stake in Rallis India will bring about a positive change in the business model of Tata Chemicals. As a result of the consolidation of Rallis India’s financials with those of Tata Chemicals, the latter’s estimated FY2011 profit after tax (PAT) will increase by Rs51.60 crore (50.06% of Rallis India’s estimated FY2011 PAT), leading to a 6% increase in its estimated FY2011 earnings per share (EPS) to Rs37.80. The upward revision in the EPS estimate for FY2011 would act as a trigger for raising the price target for the stock going ahead. Our earning estimates do not include the consolidation of Rallis financials. At the current market price of Rs315, the stock is trading at 11.3x and 9.2x its FY2010 and FY2011 expected earnings.
Marico Ltd continues to dominate the branded coconut oil market, worth approximately Rs1,500 crore, with its flagship brand Parachute and the refined safflower oil market, including Saffola and Sweekar.
Supported by a strong brand portfolio, Marico has witnessed a healthy double-digit revenue growth for 16 consecutive quarters.
The Kaya venture is expected to break even by the end of the year and clock in approximately Rs300 crore revenue by FY2012. The management expects robust growth in domestic as well as international business to drive consolidated revenues by approximately 16% in FY2010.
We expect Marico to witness 15.4% compounded annual growth rate in revenues and 18.9% in profit over FY2009-12.
Voltas Ltd is seeing a gradual improvement in businesses, especially in the unitary cooling products (UCP) and the domestic electro mechanical projects (EMPS) segments, besides some parts of the engineering products services (EPS) segment.
As growth in UCP and EPS segments (except textiles), along with domestic EMPS, is picking up, only the international EMPS segment is a concern: slack order inflows even with crude at over $70 (Rs3,276) per barrel. Voltas’ order backlog has declined for five consecutive quarters now. The current order backlog is Rs4,360 crore, down 22% year-on-year.
We expect the earnings before interest, taxes, depreciation and amortization margin to expand 146 basis points in FY2010 to 8%. We maintain our sell rating and new target price of Rs169 (Rs129 earlier) is at 15x one-year-forward estimated earnings (December 2011).