Punj Lloyd - Investment Recommendation
Tuesday, February 27, 2007
Delhi based construction company Punj Lloyd is doing extremely well after the takeover of SembCorp - SEC.Punj Lloyd's [PLL] order book has grown from Rs 1,200 crore to Rs 10,300 crore. On a consolidated basis the current order backlog is Rs 14,300 crore. PLL's average order size has increased from $30 Million to $200 million and the company management is hopeful to achieve $ 300 million. PL is the second largest EPC contractor after L&T.
I went through the transcripts of their conference call [PDF] and find that they are trying to improve the margins of SEC by outsourcing engineering design work to India. For this they are hiring close to 700 engineers in FY08 and 1,300 in FY09. This will directly add to the bottomline of SEC.
Valuations and Investment Rationale:
PLL (including SEC) is expected to post a CAGR of 77% in revenues between FY06-09E and
99% in earnings for the same period. At the CMP of Rs 835, the stock trades at a P/E Ratio of 15.4x and 9.9x our FY08E and FY09E EPS estimates of Rs 54 and Rs 84. We have a 12-month price target of Rs 1,400, an upside of 65% using a 3-stage DCF model.
Budget time is a good opportunity to BUY if you are a long term investor as some stocks like PLL and TCS are available at attractive prices. However, just by 50% of your intended investment now as J P Morgan and other analysts are underweight on India.
Labels: Punj Lloyd
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Published by Webmaster @ 1:04 PM IST.
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Citi reiterates BUY on ABB India
Monday, February 19, 2007
Citigroup Research in its report on ABB has reiterated a BUY with Low Risk and has set a price target of Rs 4,400, 16% upside from current levels.
ANN (India) reported a 4QCY06 PAT at Rs1.35bn (up 43% YoY) was 7% ahead of estimate of Rs1.26bn on faster execution of orders leading to net sales of Rs14.3bn, which was 5% ahead of estimates.
ABB (India) booked Rs14.1bn (up 40% YoY) of fresh orders in 4QCY06, ending the year with an order backlog of Rs33.7bn (up 60% YoY). In CY06, the company booked orders worth Rs56.2bn (up 50% YoY). Strong industrial growth and power capex imply future order inflows.
The power capex cycle will be stronger for longer as the first concrete numbers of the Ministry of Power’s (MoP) generation targets for the XIIth Plan (FY12-17E) at 86.5GW has started trickling in, implying that capacity addition targets in the 10 years from FY07E-FY17E is likely to be 153.5GW.
Target price of Rs4,400 is based on a P/E of 34x FY08E which is a ~50% premium to BHEL, in line with the premium over the last 3 years.
Labels: ABB India
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Published by Webmaster @ 2:05 PM IST.
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Kotak Maintains BUY on AIA Engg
Thursday, February 15, 2007
Irrespective of what happens with the CRR, Kotak Securities has retained BUY rating on AIA Engineering with a price target of Rs 1520, 18% upside from current levels. AIA Engineering has reported good Q3FY07 results, which were in line with analyst estimates.
AIA Engg's expansion plans are on track. The company plans to increase its capacities from 65,000 TPA to 115,000 TPA by end of March-2007 and increase rise further to 165,000 TPA by October-2007. To cater to the demand of mill internals, the company is setting up another 100,000 TPA plant for manufacturing high chrome mill internals.
The company has an order book of Rs 3.7 bn of which 55% is for exports.
AIA Engg is expected to earn EPS of Rs 52, 76 and 101 for FY07, FY08 and FY09 respectively. The price target for AIA Engineering is Rs 1520.
Labels: AIA Engineering, Kotak Recommendations
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Published by Webmaster @ 11:20 PM IST.
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Citigroup revises Satyam target upwards
Friday, February 09, 2007
In a research report released minutes ago by Citigroup equity research, they have maintained a BUY recommendation on Satyam Computers Ltd and revised the price target upwards to Rs 582 from Rs 510, 20% appreciation available from current levels.
3Q07 reported numbers were in-line with consensus expectations – however, considering that restricted stock unit (RSU) charge was deferred until next quarter, the results were below expectations.
3Q margins were boosted by seasonal/one-off items like lower leave encashment charges (down from Rs350m to Rs100m QoQ) and lower gratuity (down from Rs110m to Rs30m QoQ). All these seasonal factors reverting to normal levels and introduction of RSU charges will restrict any margin improvement in 4Q.
Satyam's top-line growth story remains intact with good client wins and strong hiring of ~47% LTM, we believe that revenue outlook for FY08 remains strong. Margin pressures are likely to
continue. Despite factoring in a 150bp improvement in pricing in FY08, the full impact of RSU and wage hikes will result in a margin decline of ~100bps in FY08.
M&A story buried: Satyam has clearly stated in the investor release that it is not looking to get acquired [Speculators bought rumors of CapGemini BUYING out Satyam due to low promoters stake in the company], the M&A story gets buried.
Satyam is expected to report an EPS of Rs 25.18 and Rs 30.23 for FY08 and FY09. After the below-expectation quarterly performance, Satyam is back to a 28% discount to Infosys (vs. 22% before Satyam's 3Q results). Our target price builds in a 25% discount to Infosys.
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Published by Webmaster @ 10:22 AM IST.
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Macquaire Bullish on Sterlite for 12 Months
Tuesday, February 06, 2007
Macquaire Equity research in its report is bullish on the prospects of Sterlite Industries and puts a 12 month price target of Rs 852 using sum of parts valuation methodology.
Strong 3Q results: Net sales at Rs68.1bn grew 94% driven by all-round volume growth and higher LME prices. EBITDA at Rs29.5bn grew 215%. Net profit at Rs12.9bn grew 225%.
Zinc – the prime contributor: The zinc business contributed around 67% of net profits and we expect this to continue with our forecast of higher zinc prices and 50% expected capacity expansion.
Aluminium – huge volume growth: With the faster-than-expected stabilisation of its 250kt new smelter, this subsidiary has seen growth of 309% in its operating profits to Rs5.4bn. We expect this business to continue its stellar performance with our forecast of lower alumina prices.
Copper – peaking out: The company realised TC/RCs of 34.8c/lbs for this quarter, driving operating profits to grow 58% to Rs4.5bn. We expect TC/RCs to drop to around 16c/lbs and estimate profits to fall sharply by 50% from next quarter onwards. However, we expect 30% volume growth to lower the impact somewhat.
JV Vedanta alumina refinery on track: The 1mt alumina refinery is expected to be commissioned by March 2007 and will add to profitability in FY08.
Sterlite is expected to to maintain its high profitability, even with our falling forecast for all metal prices. Macquaire expects a recovery in zinc prices, earnings upgrades, visibility on the ADS offering and its purchase of residual stakes in HZ IN from the government to drive the stock up.
Attractive valuations: Sterlite is one of the fastest growing diversified base metals company, while the stock is trading at just 7x PER, which is around 30% discount to its peers globally. We expect this anomaly to correct. Macquaire sets a 12 month target of Rs 852.00 based on a sum of parts methodology.
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Published by Webmaster @ 12:27 PM IST.
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Merill Lynch Upgrades Satyam and Infotech Enterprises
Saturday, February 03, 2007
DSP Merill Lynch has upgraded Satyam Computer Services Ltd to a BUY rating with a price target of Rs 575. Though Satyam missed the 3Q Rupee revenue and profit guidance due to forex losses, margin improvement was ahead of expectation. DSPML raises FY08 and FY09 EPS estimates by 5 and 10% to Rs 25.52 and Rs 31.60 and price target by 15% on roll-forward of forecasts.
While Satyam met its USD revenue guidance, a steep Rupee appreciation and relatively lower hedging than peers resulted in a 3Q revenue and EPS guidance (before Restricted Stock Unit charge) by ~0.5% and ~3.7%.
20 to 25% PE discount to Infy may continue
Satyam’s 20 to 25% PE discount to Infosys may sustain given lower visibility to earnings, as reflected in the revenue and profit miss this quarter and lower forecast earnings growth of ~23% CAGR vs 30% for Infosys and TCS.
Infotech Enterprises Ltd:
Based on a robust operating performance in Q3FY07 and sustainable EBITDA margin expansion, DSPML has revised Infotech’s FY08 and FY09 earnings estimates upwards by 10 and 9% respectively to Rs 24.9 and Rs 30.95 . Based on this they have set a target price of Rs400 (17% potential upside from current levels) at a target PE of 16x FY08E and at a target PEG of 0.5 for FY08E to FY07-09E growth.
EBITDA margin expanded by 100bps driven by utilization (150bps impact). Given room for further improvement in utilization, increasing proportion of EMI revenue and scale benefits we believe these improvements are sustainable. GSD growth picked up (grew 9% qoq) ahead of our expectations, post two flat quarters driven by strong order intake of GBP6mn in Europe, ramp-up in clients like Swisscom, and growth in US operations. EMI grew by a robust 9% qoq driven by a ramp up in existing clients like Bombardier and Alstom.
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Published by Webmaster @ 1:33 AM IST.
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