Dalal Street

Goldman Sachs which has initiated coverage on India’s laregst company, Reliance Industries Ltd has upgraded it to BUY from Neutral with a 12 month price target of Rs 1660.

They value Reliance on sum-of-the parts methodology based on peak cycle valuation of 5.5X FY2008E (March) EBITDA for refining, near-peak cycle valuation of 6.0X FY2008E EBITDA for the petrochemical business, and DCF for the E&P and organized retail ventures to arrive at our target price of Rs1,660.

The sum of parts valuation of Reliance Industries’s individual business segments are valued as follows.

Chemicals – Rs 244
Refining – Rs 256
Investments – Rs 181
Reliance Petroleum Value – Rs 169
Reliance Retail – Rs 154
E&P Existing – Rs 61
E&P New – Rs 595

E&P probably means exploration and production.

Goldman expects fully diluted EPS of Rs79, Rs76 and Rs101 for FY07, 08 and 09 ending in March.

Tags: Dalal Street, Goldman Sachs, Reliance Industries, Emerging Markets

Citigroup wireless research group in its report is extremely bullish on the Indian wireless growth story. It has pegged the Indian mobile phone subscriber tele-density at 27% at the end of March-2009. It is not now that Citigroup has turned bullish on the Indian wireless space, but right from May-2006, its Asian Telecom head was very optimistic about Bharti Airtel Ltd.

Bharti Airtel Ltd: Buy/Low Risk (1L) with a target price of Rs750

According to Citi research, it estimates an FY06 – 09E EPS CAGR of 46.5% or more than double that of the broader market report and expects EPS of Rs 20.7, Rs 30.3 and Rs 37.5 for the FY ending March in 2007, 2008 and 2009 respectively. Valuations adjusted for growth (EV/EBITDA of 11.8x FY08E) still look reasonable. 12-month forward target price of Rs750 (previously Rs600) is based on DCF, which suggests a fair value of Rs749 as of March 2008 (rolled forward from March 2007). This is based on WACC of 10.8%, terminal growth rate of 3.5% and beta of 0.9 (implying a terminal EV/EBITDA multiple of 8.0x).

Additionally, most regulatory concerns are behind us and 3G recommendations, though discomforting, cannot derail the growth path, in our view. The strategic shareholding of SingTel, which the company has increased over time, leaves us comfortable with execution issues and new initiatives (such as electronic recharge, vendor tie-ups or a One Alliance partnership).

Reliance Communications Ltd: Buy/Medium Risk (1M) with a target price of Rs570.

According to Citi research, it estimates an FY06 – 09E EBITDA CAGR of 63.4% and expects EPS of Rs 13.7, Rs 20.8 and Rs 28.8 for the FY ending March in 2007, 2008 and 2009 respectively. RCOM’s 12-month target price of Rs570 is based on 11.2x FY09E EV/EBITDA, similar to the implied target EV/EBITDA for Bharti based on our DCF estimate.

RCOM’s valuation multiples are likely to closely track Bharti’s due to the liquidity overflow from the latter, notwithstanding the risk of technology transition. In addition, the risks associated with technology shift to GSM may get significantly mitigated in case RCOM makes a successful bid for Hutch Essar, besides according it a clear market leadership. As a secondary valuation methodology, we apply a target P/E of 27.5x FY08E for a fair value of Rs570.

Tags: Dalal Street, Telecom India, Emerging Market, Telecom Stocks

Here is a list of stock in the aggressive BUY list of HDFC securities.

Stock and their Target Prices are as mentioned below.

Ratnamani Metals 630
Punj Lloyd 1430
Dr. Reddys Labs 1000
AMTEK AUTO 400
WOCKHARDT 540
SKF INDIA 400
RANBAXY LABS. 525
BHEL 2975
Larsen & Toubro 1760
BAJAJ AUTO 3100

Tags: Dalal Street, Invest India, Stock Recommendation, Stock Research