Friday, November 9, 2012

How market analysts differ on perception of same company within 3 days from the same Research house

I read this funny article recently in Economic Times. It shows how market analysts differ on perception of the same company within 3 days, from the same house. It shows how important it is to have independent understanding and views and not blindly follow the recommndations

Kotak Units not on Same Page on GCPL Rating , RAJESH MASCARENHAS MUMBAI 

Even as brokerages rue the fall in retail participation in equity market, two divisions of a leading broking house have come out with contradictory recommendations on the share of the same company for its retail and institutional clients within a space of just three days.The broking house is Kotal Securities while the company in question is Godrej Consumer Products (GCPL).

The first report was published on Friday (November 2) by Kotak Institutional Equities,which retained its Add rating with a price target of.760.GCPL shares gained 0.6% to.724 on that day.An Add rating,according to Kotak Institutional Equities,forecasts a 5-15 % return by the stock over the next 12 months.

On Monday November 5,a report from another unit Kotak Securities Private Client Research downgraded the GCPL stock to Sell with a target price of.600.The stock fell 5% to.688 on the day.

When contacted,Dipen Shah,head of Kotak Securities private client research,said such a contradiction,while not a usual occurrence,was not an anomaly since analysts from both divisions didnt discuss their recommendations and both cater for a different class of investors whose views on certain aspects of a companys performance were not necessarily similar.A pretty strong Chinese Wall exists between both groups which cater for different sets of clients,institutional and non-institutional, said Shah.While not too much difference exists on financial parameters available to analysts from one-on-ones and concalls with management,etc,we feel markets have discounted the positives (on GCPL) too fast and that it could be due for a correction. However,that does not mean we are perennially negative on the stock.If there is a correction,but the fundamentals continue to remain robust we could well be positive on the stock, Shah clarified.

In a report for its institutional clients,Kotak Securities said: We increase FY2014E earnings by ~2% as GCPL reported a good quarter with strong volume growth in all segments,the launch of new products,marketshare gains and cross pollination of products across geographies, the report added.For its private clients,Kotak Securities said: We believe that GCPL is trading at expensive valuations,and likelihood of earnings disappointment is rising,given a less favourable base (high growth in Q3FY12,as well as less favourable forex position from Q4FY12 onward. 

However,a few market experts doubted the existence of a Chinese Wall in the capital market.There is always a doubt whether a Chinese Wall exists in the capital market, said Arun Kejriwal,CEO,Kris Research.The fact that two different client servicing arms of the same organisation have made opposite recommendations three days apart and stock prices have moved as suggested indicate that no such wall exists.It also indicates that probably the price target of the second report came after the first failed to achieve its objective


Tue, Dec 11, 2012 at 15:30

Exit Bajaj Auto: Sukhani

Sudarshan Sukhani, is of the view that one can exit Bajaj Auto. ......
Sukhani told CNBC-TV18, “......
I am very gratified because when Bajaj Auto  was Rs 1,800, we had given repeated buy signals and suggested it is likely to cross Rs 2,000. Once the stock hits the target then it should go out of the radar because then the only effort we are making is to exit at the maximum highest possible price, we do not want to add to our positions now.
So those who have it, should be looking to exit now either below today’s low or make some strategy for exiting the stock. There is no further buying till new patterns come.”

Tue, Dec 11, 2012 at 16:01

Buy Bajaj Auto with a target of Rs 2400: Sekhar

Phani Sekhar, Angel Broking is of the view that one can buy Bajaj Auto with a target of Rs 2400...He told CNBC-TV18, “For Bajaj Auto good times have just begun because this two-wheeler market has reached such a steady state with muted volumes and very low ability for OEMs to increase prices. Anyone with innovative products like Bajaj Auto is bound to do well and that is something that you have already seen with both Discover 125ST and Pulsar 200NS. The market share in the executive segment has increased in the last six months from 17 percent to 23 percent, which is no mean achievement. Moreover the three-wheelers which are a very high operating margin business for Bajaj Auto have started doing well.”

He further added, “So with 40,000 new permits coming from Delhi government expect domestic three-wheeler volumes to increase meaningfully. The export volumes of three-wheelers which had fallen to about 14,000 units per month have also increased to about 24,000 units per month. So expect a steady 10-11 percent volume growth in three-wheelers. What it does to the earnings profile of Bajaj Auto next year is earnings will increase by minimum of 20 percent and might go all the way to 25 percent and valuations today at 15 times are not very demanding. So the investor can hold on to Bajaj Auto and maybe buy on more declines for the target of Rs 2,400 over a one year timeframe


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