Investor's Eye: Update - Bharat Electronics, Speciality Restaurants

 

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Summary of Contents   STOCK UPDATE Bharat Electronics Recommendation: Buy Price target: Rs1,180 Current market price: Rs996 Seasonally strong period ahead; upgraded to Buy Key points Bharat Electronics Ltd (BEL), a leading defence equipment public sector company, generally books the bulk (45-50%) of its revenues in Q4 and tends to announce a healthy dividend pay-out too in the same quarter. We expect the company to report a 12% growth in revenues to Rs3,080 crore for Q4FY2014 with quarterly earnings of close to Rs76-77 per share. The ongoing churn towards industrial/engineering stocks and improving sentiment towards public sector companies should also aid in re-rating of the stock along with healthy Q4 results.  BEL is a cash rich public sector company with a healthy order book of over Rs24,500 crore (4x its FY2013 revenues) and is available at a price/earnings of less than 10x its FY2014E earnings. Thus, we believe that the risk-reward ratio is quite attractive and the stock could give 15-20% returns in the next few months (with a limited downside risk of 5-8%). We upgrade our rating on BEL to Buy with a price target of Rs1,180.   Speciality Restaurants Recommendation: Hold Price target: Rs160 Current market price: Rs141 Book partial profit; downgraded to Hold Key points Speciality Restaurants Ltd (SRL) has appreciated by close to 30% since our last update on the stock five weeks back and is largely factoring in the expected improvement in the financial performance achieved on the back of price hikes and a better demand environment. We remain positive on the long-term secular growth trend in discretionary consumption and SRL is among the best in the fast growing fine-dining space. However, given the sharp appreciation in the stock recently and the limited upside from the current levels in the near term, we are downgrading our rating on SRL to Hold. We also advise investors to use the momentum to book at least partial profit in the Rs145-150 range. At the current market price the stock trades at 15.8x its FY2016E earnings and it would be better to wait for better price points to re-enter the stock. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

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