Month: July 2007

Citigroup in a report released a while ago has maintained BUY rating on Chennai Petroleum Corp Ltd [CPCL] with target price of Rs 360.

Citi maintained Buy/Low Risk (1L) rating on CPCL with a target price of Rs 360. CPCL looks well positioned to capitalize on the sustained upturn in refining margins. In this context, CPCL’s capacity expansion by 40% (up from 7.5MTPA to 10.5MTPA) and increased complexity appear timely.

Citi raised FY08-09 estimates by 19- 25% on the back of sustained strength in the refining cycle and reduced chances of subsidy burden. Introducing FY10E. The new target of Rs 360 is based on EV/EBITDA of 5.5x mid-FY09E, at the high end of its historical trading range but at a meaningful discount to peers (6.0-7.0x). Dividend yield of 5.6% provides downside support.

Citigroup Research in a report released just a while ago has put a BUY recommendation on Fortis Healthcare with a price target of Rs 100.

Fortis Healthcare is a Ranbaxy group company. Fortis has fallen 24% since its listing in May-07. We at Dalal Street Business had an Avoid recommendation on the IPO. However, we believe that the company is in a sunrise business and one may start accumulating the stock in small lots.

Citi believes inadequate health care infrastructure and limited government investment provide significant opportunities for the private sector. Fortis has scaled up through organic and inorganic measures, and has built a strong brand equity in North India. Fortis’ focus on super-specialty care bodes well for the company. Fortis will enter a high-growth phase over the next few years (a 53% EBIDTA CAGR over FY07-10E), led by improving efficiencies in existing hospitals and rapid expansion. It also has an aggressive acquisition track record.

Fortis is expected to report a fully diluted EPS of Rs -2.18 for FY08 and Rs 0.60 for FY09.

ICICI Bank’s Stock Research team has put a BUY recommendation on Tamilandu Newsprint Ltd [TNPL] and Power Trading Corporation India [PTC].

Tamilnadu Newsprint Ltd:
TNPL could increase its average realisation by 8.65% to Rs 35,092 per tonne of paper. This was achieved by reducing newsprint production by 46% to 2,950 tonnes and increased production of copier by 23% to 44,407 tonnes. TNPL added another 7.5 MW of wind power bringing it to 37.5MW. Mill Development Plan Phase-I is underway as per schedule. It is expected to come on stream in August 2007. The backward integration initiatives taken in phase-I would give a saving of Rs 2250 per tonne and is expected to add Rs 45 crore to the bottom line.

TNPL is trading at a P/E multiple of 5.51x its FY08E EPS of Rs 16.87. These valuations extremely attractive for a company that is likely to record earnings growth of 36% during FY07-FY08E. Moreover, with an EV/EBIDTA at 5.09x in FY08E, current valuations are even more attractive. TNPL is an out performer with a price target of Rs 135 over the next 12 to 15 months.

Power Trading Corporation:
During FY07, PTC has entered into long-term power purchase agreements (PPAs) for six projects aggregating a capacity of 3,144 MW, and power sale agreements (PSAs) for another six projects aggregating a capacity of 2,314 MW. The cumulative capacity tied up through PPAs stands at 6676.3 MW and on sale through PSAs/MOUs for sale stands at 5286.5 MW.

The company has also entered into MoUs for another 35 projects totaling to a capacity of 16,703 MW. The PPA and PSA for these are still being negotiated. Development of new businesses gained further momentum with several advisory cum-transaction agreements being structured. PTC’s advisory service, which commenced in the previous year, has an order book of Rs 3 crore

At the current market price of Rs 57, the stock is trading at 10.05x its FY09 earnings, 5.50x on FY09 EV/EBITDA and 2.33x FY09 P/BV. The company’s increased focus on highgrowth, high-margin long-term trading should help it sustain growth. Buy PTC with a price target of Rs 95.