Indian Equity Research and Investment Strategy
Bajaj Auto first quarter results are way below street expectations. The company reported net profit at Rs 226.47 crore in the first quarter of FY08 as against Rs 266.01 crore in corresponding quarter of previous year.
Bajaj Auto net sales also declined to Rs 2109.1 crore versus Rs 2202.66 crore in the same quarter of previous year.
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.
iGate has posted decline of 36.72% in the first quarter net profit at Rs 14.3 crore (Rs 143 million) versus Rs 22.6 crore (Rs 226 million) in the earlier quarter.
The revenue was also down 5.09% at Rs 199.4 crore (Rs 1.99 billion) as against Rs 210.1 crore (Rs 2.1 billion).
Infosys Technologies missed the street expectations and marked the end of an era of QoQ. QoQ Net Profits Fell to Rs 1079 crore in the first quarter of FY08 against Rs 1,144 crore in the previous quarter.
Infosys Q2 and FY08 guidance
The company is expected to post growth of 16.9-18.3% in the revenues in FY08 at Rs 16,238-16,433 crore. Infosys is expected to deliver growth of 13-14.1% in FY08 EPS at Rs 78.20-79.
FY08 EPS (Excluding tax write back) is seen at Rs 77.31-78.11.
This FY08 revenue outlook is based on rupee rate of 40.58 per USD.
The Q2 revenues are seen at Rs 3,952-3,993 crore, a growth of 4.74-5.83% and EPS seen at Rs 18.88. Net profit is expected to go down 0.05% at Rs 1078 crore. Infosys revised guidance in the dollar terms in upward and in Rupee terms down.
Results of HDFC Bank for Q1-07 [Quarter ended June] were in line with Citigroup and Dalal Street Analyst Expectations.
HDFC Bank reported a net profit at Rs 321 crore for the quarter. The net interest income has gone up by 27.46% at Rs 1,042.2 crore (Rs 10.42 billion) Operating profit also seen a surge of 41% in first quarter at Rs 783.68 crore (Rs 7.83 billion).
The Board approved raising equity USD 1 billion or Rs 4200 crore, whichever is higher, from domestic or international markets and Allotted shares worth Rs 1390.1 crore to parent HDFC via preferential issue.