2007 | Dalal Street

Equity Research

HDFC Sec Bullish on Wockhardt

August 6, 20072 min read

HDFC Securities in a Research Report has put a BUY recommendation on Wockhardt with a price target of Rs 570. Last week, we had reported that Citigroup also had a BUY recommendation on Wockhardt with a Price Target of Rs 530.

HDFC Securities is bullish on Wockahrdt’s prospects, especially in the European market where it is the largest Indian company. Currently, the company derives more than 50% of its revenue from the European market. It has also ramped up its US business by introducing a number of generic products here. Last year, its US business grew by more than 50% and is expected to perform extremely well in the next two years on the back of strong New Drug Applications which are in pipeline.

Wockhardt is also active in New Chemical Entity research. Its proprietary molecule, WCK 771 is currently in phase II. The company has started capitalizing on the opportunity offered by CRAMS (Contract Research And Manufacturing).

Wockhardt is expected to report an EPS of Rs. 35.1 for CY07 and Rs 43.9 for CY08. The stock currently trades at a forward PE of 10.6x and 8.5x respectively. The stock is trading at a steep discount to its peers. HDFC Securities recommends a BUY, with a price target of Rs 570 based on a PE of 13x on the CY08 expected EPS of Rs 43.9

Breaking Corporate India Earnings News

Punj Lloyd Order + GMR SEZ

August 6, 20071 min read

Punj Lloyd has secured a Rs 590 crore contract for building a sulphur block at Bina Refinery of Bharat Oman Refineries at Bina, Madhya Pradesh. The lump-sum turnkey contract entails engineering, procurement, construction and commissioning assistance (EPCC) services and has been bagged amidst stiff International competitive bidding. Order Book of Punj Lloyd now stands at Rs 16,400 crore.

GMR Infrastructure announced during market hours today, 6 August 2007, that it had entered into a memorandum of understanding (MOU) with Tamil Nadu Industrial Development Corporation (TIDCO) for the development of a multi product special economic zone (SEZ) in the Krishnagiri District, Tamil Nadu. GMR Infrastructure reported a net profit of Rs 0.73 crore on sales of Rs 7.07 crore in Q1 June 2007. The current market price of Rs 816 discounts its Q1 June 2007 annualised EPS of Rs 0.09, by a PE multiple of 9066. We recommend a SELL on GMR Infrastructure.

Equity Research

Top picks from Sharekhan

August 6, 20072 min read

Sharekhan Research has released a list of top stock picks. However, we are not comfortable with the entire list and here the ones which we recommend from it.

HCL Technologies:
At the current market price the stock trades at 14.3x FY2008 and 12.5x FY2009 estimated earnings (which is around 33% discount to valuation of Infosys). Target Price Rs 396.

Bharti Airtel Ltd:
At the current market price the stock trades attractively at 26.0x FY2008 and 20.6x FY2009 earning estimates. Target Price Rs 1,100.

HDFC Bank:
At the current market price the stock is quoting at 20.9x FY2009E earnings per share, 8x FY2009E pre-provision profits and 3.1x FY2009E book value. Buy with a price target of Rs 1,355.

ITC:
At the current market price the stock trades at 21.2x FY2008 and 17.5x FY2009 estimated earnings. Target Price Rs 200.

JP Associates:
The company is the largest private sector hydropower player and is currently sitting on a huge construction order book of Rs7,200 crore. Taking cognisance of the governments target of achieving 50,000MW in hydropower electricity by 2012. Target Price Rs 1,061

Maruti Suzuki Udyog:
At current levels, the stock is trading at 11.5x its FY2009E and is available at an EV/EBIDTA of 6.8x. Buy with a price target of Rs 921.

Economy, Markets and Macro Views

Amtek Auto Results – Insight

August 6, 20071 min read

We at Dalal Street Business had first recommended Amtek Auto a year ago. Citigroup had recommended Amtek last month. Amtek’s results were above the street expectations.

Adjusted consolidated PAT (excluding derivative trading gains of Rs215m), rose 35% Y/Y, driven by robust top-line growth (+48% y/y), supported by c30% growth in the parent’s revenues. The result also reflects the impact of consolidation of Benda Amtek and Amtek Siccardi in this quarter. Consolidated EBITDA margins at 17.4% Y/Y, (-10bps Y/Y, -100 bps Q/Q) were affected by input cost pressures.

Stand-alone PAT after excluding derivative gains rose 21% y/y, due to strong growth in revenues. Subsidiary performance has improved substantially QoQ (YoY is irrelevant, given that the consolidation impact of Benda Amtek and Amtek Siccardi was from 1QFY07) – while revenues rose c3% QoQ, EBITDA rose 10% QoQ, driven by a margin expansion of 200bps)

Market Crashes are the best opportunity to BUY this stock. Even today when the entire market is down, Amtek is up 0.5%.

Breaking Corporate India Earnings News

VSNL Likely to Invest More in South Africa

August 6, 2007July 18, 20201 min read

As per reports, Infraco, South Africa’s third network operator, which has been formed to lower the broadband costs, is planning to invest close $700 million to build an undersea cable network. The cable network will connect Africa, America and Europe. Tata group-controlled Videsh Sanchar Nigam (VSNL) may invest close to $200 million for the cable project.

The South African telecom regulator has invited strategic partners to invest in the submarine cable project. Since VSNL has its own undersea cable projects across the globe, it is interested in equity participation in Infraco’s cable project.

Currently, the Tata group, through VSNL and Tata Africa, has a 26% holding in South Africa’s second national telecoms operator, Neotel. The Tata Groups Telecom ventures when clubbed together make them the third Largest Telecom Service Provider in India.

Economy, Markets and Macro Views

Indian Markets Down Again

August 6, 20071 min read

The American Home crisis has gripped the Asian Markets this morning. Hang Seng Index is down 530 points while NIKKEI is down 190 points.

Dalal Street opened down 400 points and is currently down 362 points at 14,775. Major losers in the BSE-SENSEX are ACC, ICICI bank, Bajaj Auto, Hindalco and Reliance Energy. None of the SENSEX stocks are trading in positive category. The ratio of Put to Call Ratio is 1.3 in favour of the Puts.

Long Term Investors can pick in very small quantities of companies with sound management, business and cash flow [More Downside expected]. Do read our Research Section to see what Brokerage Houses have recommended and do not just blindly BUY. Convince yourself with EPS and the growth the company has to offer.

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