Motilal Oswal, Tata Motors, Infosys

Motilal Oswal
CMP: Rs 1,874.30
Target price: Rs 2,400

Citigroup has maintained its buy rating of Motilal Oswal Financial Services, while raising its price target to Rs 2,400, after its stronger-than-expected third quarter earnings. “We are raising earnings by 27-46% for FY08E-10E to factor in stronger-than-expected industry growth, higher wealth management and fund-based incomes,” the investment bank said in a report. According to them, MOFS, which has a well-balanced retail and institutional franchise (over 60% retail), is relatively lower risk than its peers due to its lower margin finance dependence and is well positioned to benefit from the structural growth in financial services spectrum,” it said.

Mahindra Lifespace
CMP: Rs 844.90
Target price: Rs 1,096

Sharekhan has initiated coverage on Mahindra Lifespace Developers, a special economic zone (SEZ) developer, with a buy rating and price target of Rs 1,096 citing attractive valuation. “Given MLD’s operational expertise in SEZ and premium brand in the other verticals, we value the Chennai and Jaipur SEZs and the other planned developments at 1.0 times NAV (net asset value) of Rs 1,038 per share,” the retail brokerage said in a note to its clients. “We value the balance land for which it has no development plans in the short to medium term at Rs 58 per share, i.e. at a discount to the current market price,” it said. Sharekhan estimates the company’s earnings per share (EPS) in 2007-08 at Rs 8.8, as against Rs 4.4 in 2006-07. In 2008-09, its EPS is seen at Rs 33.7.

Larsen & Toubro
CMP: Rs 4,062
Target price: Rs 5,003

Lehman Brothers has initiated coverage on L&T with an overweight rating and a 12-month price target of Rs 5,003 citing expectation of strong earnings and order book growth. “We project an earnings CAGR (compounded annual growth rate) of 45% over FY07-10 and ROE (return on equity) of 31% in FY08E (adjusted for investments in subsidiaries),” the investment bank said. Lehman expects the company’s order book to grow 40%, on a compounded basis, toll 2009-10. “We expect L&T Infotech, L&T Finance and certain manufacturing subsidiaries to record growth in excess of 30% over the next three years. Value discovery in some of the subsidiaries is a strong possibility over the next three years, in our view,” it said.

Infosys
CMP: Rs 1501.80
Target price: Rs 1,900

JP MORGAN Securities remains cautious on Infosys, after its third quarter earnings, as it expects pressure on volumes/prices from financial services clients from the fourth quarter (January-March). “With Infosys’ revenue growth on a declining trend (Y/Y US$ revenue growth has moved from 41% in 1QFY08 to 32% in 3QFY08), we wait for results from TCS and Wipro to see the sector trend,” the foreign brokerage said. “On a share price basis, the stock has been already weak pricing in some of the disappointment and would trade sideways in our view,” it added.

Tata Motors
CMP: Rs 769.25
Target price: NA

MERRILL Lynch has rated Tata Motors a neutral amid talk the company is the front-runner to acquire two loss-making premium brands. “We believe the stock is undervalued on existing operations, but we expect upside to be capped on likely acquisition of loss-making global brands. We could turn positive if the stock comes off sharply post-deal announcement or if Tata loses the bid,” the investment bank said. Merrill remains positive on the company’s businesses.

“We expect 25.3% EPS CAGR over FY08-10E driven by growth in buses, due to government thrust on urban transport, light vehicles, and new cars including Nano. We also expect a rebound in trucks and cars in fiscal 2009,” it said. On the expected launch of Nano, Merrill said, “In our forecasts, we have assumed 75K (75,000) in FY09, and 200K (200,000) in FY10, with profit breakeven at a volume of 225k (225,000).

We see some positive risk to these estimates, given the potential of the market, and also the positive feel on initial specs,” it added.