Brokerage firm Sharekhan is bullish on Zee Entertainment, Maruti Suzuki India and Cox and Kings with a target price of Rs 620, Rs 5790 and Rs 250, respectively. The brokerage firm believes a normal south-west monsoon and the increase in government employees’ pay along with arrears may boost passenger vehicle (PV) demand in coming month. Of late, shares of Zee Entertainment came in focus after the company confirmed the sale of its sports business to Sony Pictures Network India (SPN) in an all cash deal. On Friday, shares of Zee Entertainment, Maruti Suzuki and Cox and Kings were trading higher by 0.15 per cent, 2.13 per cent and 0.70 per cent, respectively.
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Zee Entertainment Enterprises
Recommendation: Buy
Target price: Rs 620
Investment Rationale: Management of the company has confirmed the sale of its sports business to Sony Pictures Network India (SPN) in an all cash deal of Rs 2,600 crore ($385 million). The proposed sale involves transfer of the entire stake in two sports subsidiaries, namely Taj Television India and Taj TV, Mauritius. The sports business had been the weakest link in Zee Entertainment’s (ZEEL) portfolio since its launch a decade back in FY2006. The sports business had hardly delivered any profit. Sharekhan believes ZEEL’s move to exit from the loss-making sports business as a landmark deal for the company. Also, the management’s intent to remain a pure play media company gives us confidence on prudent capital allocation going forward. The brokerage house has revised upwards ZEE’s earnings estimates for FY2018. Sharekhan continues to remain positive on ZEEL, as it is a play on the structural India consumption theme and expect further re-rating in the next 12-15 months. The brokerage house has maintained ‘Buy’ rating on the stock with a revised price target of Rs 620.
Maruti Suzuki India
Recommendation: Buy
Target Price: Rs 5,790
Investment Rationale: Maruti Suzuki India (MSIL) derives around 30 per cent of its volume from the rural areas. A normal south-west monsoon (after two back-to-back drought years) and the hike in government employees’ salaries along with arrears (courtesy 7th Central Pay Commission recommendations) are likely to boost passenger vehicle (PV) demand significantly. These two factors, coupled with the upcoming festival season would boost PV demand further, especially for the small cars and hatchbacks where MSIL has a clear leadership position. MSIL has envisaged a sales target of two million units in the domestic market by FY2020, backed by new product launches and a wider distribution reach. The company is aiming for an industry leading 10 per cent compounded annual growth rate (CAGR) volume growth over the next four years. It is well poised to gain from the improving PV industry demand and is among our preferred picks in the automotive space. Sharekhan maintained ‘Buy’ on Maruti Suzuki shares with price target of Rs 5,790.
Cox & Kings
Recommendation: Buy
Target Price: Rs 250
Investment Rationale: The company’s key focus going ahead would be on improving the business fundamentals of its key segments and reducing the debt on its consolidated books. Sharekhan has broadly maintained its earnings estimates for FY2017 and FY2018. The sustenance of double-digit growth in the domestic leisure travel business and the Meininger business would be the key performance drivers in the near term to medium term. Sharekhan maintain Buy recommendation on the stock with an unchanged price target of Rs 250.
