Target Price = Rs 912
- Godrej Consumer Products Ltd (GCPL) is a big beneficiary of the expected consumption boom in India. A rising proportion of the middle-income families will translate into a strong demand for its products like soaps, hair
colours and toiletries. - The market share gains in the soap business through the consolidation of brands (Godrej No 1) and the launch of new products will lead to a robust growth, outpacing the growth in the soap market.
- The hair colour segment offers huge opportunity owing to its under-penetration and a strong 16-20% compounded annual growth rate (CAGR). GCPL with its dominant market share and a quality product basket should reap handsome gains.
- Cash flows are expected to grow at a CAGR of 22% in the FY2005-08 period; the same will be deployed in purchasing growth by augmenting capacities and through inorganic growth aspirations.
- GCPL trades at a PER of 31.7x its FY2007E earnings in view of the inorganic growth triggers and the shareholders' value maximising strategy.
Satyam Computers
Target Price = Rs 900
- Unlike some of its front-line peers, Satyam has shown a healthy and consistent sequential growth over the past six to eight quarters.
- Despite the continued losses of its subsidiaries and the other cost pressures, the company.s top line growth has been accompanied by stability in profitability.
- It has levers to support its profitability like the turn-around in its subsidiaries, the broadening employee base, an increasing offshore contribution etc which would limit any downside to its profitability.
- It is ahead of some of its peers in terms of bagging business in the recently announced large outsourcing deals.
- It trades at attractive valuations of 20.7x its FY2007E earnings, which is still at a considerable discount to some of its peers.
ITC
Target Price = Rs 220
- ITC is the undisputed market leader in the cigarette business in India. Over the years ITC has gained substantial pricing power in the market and has been posting a good volume growth in the business.
- ITC has diversified its revenue stream by successfully channelising the huge cash flows generated from the cigarette business into new and upcoming businesses like hotels, fast moving consumer goods (FMCG), paperboards and agri-marketing.
- ITC's huge investment in these businesses has now started reflecting in a robust growth in the revenues as the profits.
- ITC's venture into agri-marketing through e-Choupal is now set to replicate the urban mall mania in rural areas through Choupal Sagar. Choupal Sagar is expected to be a major revenue and profit driver for ITC over the long term.
- With an earnings CAGR of 23.4% over FY2005-07E the stock is attractively quoting at a PER of 28.3x its FY2007E earnings.
