BUY Finolex Industries - ICICI
Friday, May 25, 2007
Finolex Industries is the largest PVC pipe and second largest PVC manufacturer in India.
Demand-supply mismatch for PVC
During 2001-2006, capacity addition grew at a miniscule CAGR of 2%, whereas demand continued to surge in double digits at a CAGR of 11%. This has resulted in firm PVC prices and high capacity utilisation rates for domestic manufacturers.
Robust demand for PVC pipes
Finolex is the leader in PVC pipes with a 20% market share in the domestic organised market. PVC pipes are used for irrigation as well as in sanitation and plumbing systems in the construction sector.
Timely capacity expansions, cost reduction initiatives
Finolex has doubled its PVC resin capacity from 130,000 to 260,000 tpa in 2006 by setting up a VCM (vinyl chloride monomer)-based new facility
ICICI expects the company to report net sales of Rs 1282.50 crore in FY08 and net profit of Rs 78 crore, translating into an EPS of Rs 6.29. At the current price of Rs 78, the stock trades at a P/E multiple of 13.8x its FY07 earnings of Rs 5.64 and 12.4x its FY08E EPS of 6.29. On an EV/EBIDTA basis, the stock is available at 6.7x FY08E earnings. ICICI believes that the stock is attractively valued and set a price target of Rs 93.6, for 3-6 months, an up-side potential of a 20%
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Published by Webmaster @ 2:52 PM IST.
Mindtree Consulting will underperform - HSBC
Wednesday, May 23, 2007
Its not just the dolalr that is addign to the wos of Mindtree consulting, but mere profit growth of 30% as a mdicap IT counter. HSBC analyst says it is overvalued and has the possiblity to deliver NEGATIVE returns. HSBC has set a Target Price of Rs 715 on the stock.
HSBC expects FY08e revenues at INR7.8bn (+32% y-o-y) and profits of INR1.2bn (+30% y-o-y). MT should continue to benefit from margin leverage as it gains scale. It had cash of USD64m, was FCF positive with a ROAE of 32% in FY07.
Given its strong performance (+85% since listing), HSBC expects the stock to give muted returns in the near term despite strong EBITDA growth. One-off events such as ESOP (employee share option plan) dilution and higher taxes are likely to impact FY08 earnings growth.
Trades at a 10-50% premium to the top five offshore vendors. Valuation premium to large vendors should correct over the next 12 months, though we expect MindTree to continue trading at a premium to peers. HSBC target price of INR715 is based on a 10% premium to fair
value of 16x FY09e earnings.
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Published by Webmaster @ 10:25 AM IST.
ICICI Bullish on Tamilnadu Newsprint and Paper
Friday, May 18, 2007
Tamil Nadu Newsprint and Paper Ltd (TNPL) is one of the major players in the domestic paper industry. The company has embarked upon a massive capex to ride the demand-driven upswing in the sector. The first phase of capex will get completed by June 2007, making TNPL the first to bring its capex on-stream amongst peers undergoing technological upgrade. We believe these initiatives will place its key business matrices on a higher-thanindustry growth tragectory in the form of revenue and profit growth, aided by an expansion in margins. TNPL also plans to set up a mini cement plant and an IT park on its unused land to the west of Chennai.
At the current price of Rs 87, the stock discounts its FY08E EPS of Rs 16.87 by 5.16x. This is below its historical average of 8x. On a P/BV basis, it is available at 0.9x FY08E and on an EV/EBIDTA basis, at 4.89x FY08E earnings. ICICI rates the stock an Outperformer with a target price of Rs 135 at its historical average of 8x earnings. This is conservative considering the improving business fundamentals, rising efficiencies and better return ratios.
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Published by Webmaster @ 8:29 PM IST.
Pantaloon Retail a SELL - Merill Lynch
Our Research Analyst had reported this exclusive story about the SELL recommendation on India's number one retailer - Pantaloon Retail India Ltd.
Pantaloon's value retail same-store sales growth has been slipping for the last 3 months. April was a shocker with only 2 % growth – the lowest ever in last 3 years (ignoring the festival seasonality of Oct/Nov). Business has been dull in April but it it unclear as to which stores suffered from weak sales. Poor April has pulled down the YTD same store sales growth to 17% - significantly lower than 34% in FY05 and 23% in FY06. Summer is the time when Retail Sales pick up around the world but we are seeing a fall in Pantaloon.
Cons. sales for April grew 64% YoY, much lower than the avg 80%+ growth over the last four months. Pantaloon needs to grow at over 100% YoY over the next two months to achieve our full year sales target. This looks difficult to achieve.
Falling same-store sales growth in value retail is an additional negative. Add to it imminent inventory write off of Rs450mn as per mgmt. The outlook is deteriorating and valuations are not reflecting the likely earnings slowdown. Merill reiterates Sell on Pantaloon.
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Published by Webmaster @ 9:40 AM IST.
Buy PTC India - ICICI
Tuesday, May 15, 2007
ICICI has reiterated an OUTPERFORMER rating on the PTC - Power Trading Corporation.
PTC India's results for the year ending March 31, 2007 (FY07) were below expectations. Net sales at Rs 3,766.66 crore (estimate: Rs 3,933.54 crore) were impacted due to access factors and real-time transmission congestion. Going forward, we expect PTC's traded volumes to increase on account of higher utilization from the Tala unit (4 billion units) and significant volumes from long-term agreements starting Sept 2008.
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 high growth, high-margin long-term trading should help it sustain growth and also improve margins.
ICICI Research has set a price target of Rs 95 per share of PTC India using a DCF valuation and reiterates an OUTPERFORMER rating on the stock. Click here to download PTC report.
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Published by Webmaster @ 10:40 PM IST.
JP Morgan Underweight on Mosear Baer
Saturday, May 12, 2007
JP Morgan in a research report is bearish on the prospects of Moser Baer. Moser reported muted 4QFY07 results, with 5% Q/Q revenue growth and 6% Q/Q EPS growth – low given that Mar quarter is typically seasonally strong.
Management expects normal seasonal weakness in 1HFY08 with pricing pressure in both DVDR and CDR. Management expects PV revenues of US$80-100 million in FY08, slightly lower than our earlier estimates.
JP Morgan's sum of parts valuation based Dec-07 price target remains at Rs325/share [CMP of Rs 370] and they expect weak performance in 1HFY08 to impact the share price negatively. Further, Moser has announced plans to raise US$150 million that will result in equity dilution or further deterioration of D/E ratios.
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Published by Webmaster @ 6:55 PM IST.
Automotive Axles - Outperformer
Thursday, May 10, 2007
Automotive Axles Ltd (AAL) reported a whopping 57.1% growth in net sales to Rs 157.4 crore while net profit surged 41.8% to Rs 14.4 crore for the quarter ending March 31, 2007 (Q2FY07). EBITDA margins dipped marginally from 17.9% to 17.2%.
ICICI Research had projected an EPS of Rs 37.5 for FY07 and the company has delivered an EPS of Rs 18.5 in the first six months. ICICI is confident the company will achieve an estimated revenue growth of 26.7% (CAGR) and net profit growth of 25.7% over FY06-08E.
ICICI maintains revenues estimates and reiterate OUTPERFORMER rating with a target price of Rs 716. Read the entire report here.
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Published by Webmaster @ 7:27 PM IST.
Buy Zuari Agro for Short Term - ABN Amro
Wednesday, May 09, 2007
ZIL [Zuari Industries Ltd] has been trading in a narrow range for the last 3 weeks and is showing signs of breaking out of the range. Further the short and medium term moving averages have converged around the current price and are moving up.
Current Price : Rs169
Target Price : Rs201
Upside : 19%
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Published by Webmaster @ 2:24 PM IST.
TCS Analyst Meet.
Tuesday, May 08, 2007
Here are the excerpts from TCS Analysts Meet. No slowdown in BFSI; Robust demand environment. TCS management reiterated its view on the pricing uptick being on track – new clients are coming at 5-10% higher price point. TCS indicated that deal flow remains strong and lot of smaller deals (US$20-50 mn) were being awarded by existing clients.
TCS is expected to report an EPS of Rs 53, Rs 63 and Rs 74 for FY08, FY09 and FY10 respectively. With dollar under severe pressure from Indian Rupee, we maintain a BUY target on TCS but with a lower price target of Rs 1550. 21% upside from current levels.
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Published by Webmaster @ 10:50 PM IST.
JP Morgan Overweight on HDFC
HDFC Ltd 4Q beat JP Morgan [JPM] estimates; Profit was 7% higher, mainly from better fee growth and a lower cost-to-income ratio. JPM raised May08 price target is Rs1,824, which implies 9% upside from the current price. JPM retained OW rating given firm business dynamics and defensive nature of the stock.
Subsidiaries add 30% to sum of parts: 56% of subs value from HDFC Bank, 31% from the life company, and 10% from the mutual fund. Stock catalysts are likely to be continued market share increases at the expense of competitors, as well as value unlocking in ICICI's insurance holding company.
HDFC is expected to report an EPS of Rs 74 and Rs 90 for FY08 and FY09.
DalalStreet. Biz recommend a Blind BUY on this stock whenever their is a market correction. You can expect 25-30% returns YoY.
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Published by Webmaster @ 8:45 AM IST.
HSBC Overweight on HCC
Monday, May 07, 2007
HSBC in a report released jus ta while ago is overweight on Hindustan Construction Company. They have set a price Target of Rs 125.
HCC declared their full year number with sales growth of 19% to INR23.6bn (vs HSBC
estimate of INR24.3bn). The PBT was up 20% yoy, however, higher tax rate (additional
INR220mn due to removal of 80IA benefit) has resulted in decline in a profit to
INR793mn (vs HSBC estimates of INR857mn). The lower sales growth has been due to
the excessive snowfall and rain at some of its project sites resulting in project execution delay. The net profit growth was impacted by higher staff cost (up 59%), higher interest (50%), and depreciation cost (up 52%, capex of INR3.8bn)
HSBC has reduced FY08e and FY09e profit by 11% and 7% to INR1.18bn and INR1.56bn respectively. HSBC reduced FY08e sales by 4% to INR30.7bn, while increasing the sales of FY09e marginally. HCC's EPS is expected to be around INR4.6 and INR6.1 for FY08e and FY09e.
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Published by Webmaster @ 6:15 PM IST.
UBS Maintains BUY on ACC and Grasim
Sunday, May 06, 2007
UBS Investment research has maintained BUY recommendations on cement majors ACC and Grasim industries. However, UBS has revised the price target downwards to Rs 1,090 from Rs 1,225 for ACC and Rs 3,100 from Rs 3,300 for Grasim.
ACC:
ACC's Q1FY07 revenue (Rs16.35bn), EBITDA (Rs5.07bn) and pre-ex PAT (Rs3.44bn) were significantly better than estimates - Rs15.9bn, Rs4.6bn and Rs3bn respectively. Entire difference in PAT from our estimate was due to higher EBITDA.
ACC is expected to report an EPS of Rs 76.45 and Rs 80.76 for FY08 and FY09.
Grasim Industries:
Grasim's standalone Q4 pre-X PAT (Rs4.5bn) was in line with our estimate (Rs4.6bn), as were revenue and EBITDA. In FY07 consolidated earnings grew 89%, faster than standalone earnings growth of 78%, driven by 249% earnings growth at subsidiary, Ultratech.
Grasim is expected to report an EPS of Rs 252 and Rs 276 for FY08 and FY09 respectively.
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Published by Webmaster @ 8:56 AM IST.
Citi bearish on Unitech, Parsvnath and Ansal
Saturday, May 05, 2007
In a research note released by Citigroup, analysts have recommended a SELL on Unitech, Parsvnath Developers Ltd and Ansal Properties and Infrastructure. Spiraling property prices, rising interest rates, regulatory intervention in developer funding (on concerns of an asset bubble), supply coming on stream, and aggressive land acquisition by developers (and wannabe developers) are adding to the industry woes.
NAV is best way to value Indian developers : Citi expects NAV to be the standard valuation benchmark for at least the near term, with P/E multiples used more as a secondary methodology or "sanity test". However, not every institution values Realty stocks like Citi does. Here is how others value Real Estate Stocks.
In the same report, Citi analysts expect Unitech EPS to grow to Rs 20.2 for FY08 and Rs 33.9 for FY09. Parsvnath's EPS is expected to be Rs 37 and Rs 68 for FY08 and FY09. Ansal Properties' EPS is expected to be Rs 31.8 and Rs 54 for FY08 and FY09.
Citi says the earnings forecast is already factored into current share price and recommends a SELL with 10% downward potential. Citi expects NCR and other properties to cool off and hence the recommendation.
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Published by Webmaster @ 11:39 PM IST.
Subros Outperformer - ICICI Research
Friday, May 04, 2007
Subros, a leading automobile air-conditioner manufacturer, reported a 8.7% growth in net sales for Q4FY07, while net profit declined 16.6%. For the full year, the company reported 14.6% revenue growth on buoyant volume growth, despite pressure on realizations. EBITDA margins improved marginally (50 basis points) to 11.4%, mainly due to increasing localization of raw materials that eased realization pressures. Net profit increased 14.2% to Rs 28.4 crore in line with ICICI's expectations.
On the back of strong demand outlook, backed by surging volume growth from its key customers - Maruti Udyog and Tata Motors - ICICI maintains earning estimates for FY08. Post ICICI's recommendation (Sept 21, 2006) at price of Rs 230, the stock surged to a high of Rs 299. It has corrected and is currently trading at Rs 235. At this price, it is available at attractive valuations of 7x its FY08E EPS of Rs 33.7. ICICI reiterates OUTPERFORMER rating on the stock.
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Published by Webmaster @ 3:47 PM IST.
Bharti Airtel Outperformer - Macquaire
In a research note released to high net worth clients, Macquaire has rated Bharti Airtel as an Outperformer with a 12 month Price Target of Rs 1050, 25% potential upside from current levels. Bharti Airtel is expected to report an EPS of Rs 37 for FY08 and Rs 50 for FY09.
Bharti Airtel reported a fantastic Q4 and highest ever EBITDA margin of 41.6%, an
expansion of 80bp QoQ and 410bp YoY. Bharti’s performance in 4Q and FY3/07 was impressive despite subscriber deactivation of 300k in 4Q and the hit from the phase out of roaming rentals and sharp cuts in roaming tariffs that took effect from 15 February 2007. Bharti’s ROE was 37.4% in FY3/07 and free cashflow break-even was achieved in 4Q FY3/07, well before the consensus estimate.
On DCF Methodology, Macquaire sets a price target of Rs 1050 and Bharti Airtel is their top telecom pick in Asia.
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Published by Webmaster @ 11:01 AM IST.
MindTree Consulting No Upside - JP Morgan
Wednesday, May 02, 2007
JP Morgan in a research note released just a while ago has initiated coverage on MindTree Consulting with NEUTRAL rating with no potential upside for the next 6 months.
Mindtree's fundamentals are good but with 84% post-IPO appreciation their is no room for more till Dec-07.
JP Morgan expects the share price to trade in a narrow range over the next 9-12 months as earnings catch up with the sharp share price appreciation and the market starts to focus on earnings growth during FY08-FY09 and beyond. They advise investors to enter on declines below Rs630.
JP Morgan expects Mindtree consulting to report sales of Rs 78o crore for FY08 and Rs 1060 crore for FY09 and an EPS of Rs 30.4 and Rs 42.7 respectively. With Indian Rupee under pressure, one needs to take a cautious outlook about Indian IT companies. Mindtree Consulting is one of the scrips in IPO scam where brokers would manipulate the stock post listing.
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Published by Webmaster @ 8:37 AM IST.