Buy Centurion Bank - Deutsche research
Friday, November 30, 2007
Deutsche Bank Equity Research has maintained a BUY recommendation on Centurion Bank of Punjab. The bank has very rapidly tackled the issue of rising NPLs in 2-wheeler finance by deliberately tightening credit filters and withdrawing from some regions. Centurion is also preemptively rationalizing the personal loans portfolio to preclude NPLs spinning out of control. Here too filters have been tightened and the bank is focusing more on the segments which have demonstrated favourable credit loss characteristics. Growth, however, has not faltered as SME lending has grown 140%, mortgages 100% and construction equipment 22%. Integration of the merger with Lord Krishna Bank (LKB) is smoother than initially apprehended. Technology should be integrated by Apr'08. Low-cost deposits in these branches have risen from 16-17% to 19-20%.
With NIM having stabilized and asset quality managed, concerns have reduced. Deutsche maintain BUY with a target of INR55.
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Published by Webmaster @ 11:21 AM IST.
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Lehman on Crompton Greaves
Lehman Brothers equity research has initiated coverage on Crompton Greaves with an OVERWEIGHT rating and an EqualWeight rating on ABB India Ltd.
Crompton Greaves Ltd: CGL
Large investments in the Indian power transmission and distribution (T&D) sector will likely drive impressive earnings growth for CGL over the next five years. CGL is among the five largest power T&D equipment manufacturers in India with a presence across product categories. The company will likely benefit from large opportunities in the Indian power T&D sector, where we estimate a market of INR1870 bn over the next five years.
European acquisitions [Ganz Transelektro and Microsol Holdings] have plugged the gaps in CGL's product portfolio and have given the company access to the growing European and North American markets. Apart from high-voltage direct current (HVDC) technology, CGL now has access to a full suite of T & D products and services. CGL has an unexecuted order book of INR70 bn.
CGL is expected to report a PAT of Rs 548 crore for FY08 and RS 682 crore for FY09. Lehman has set a one year price target of Rs 500 on the stock.
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Published by Webmaster @ 10:57 AM IST.
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BUY JSW Steel - Merger with SISCOL
Thursday, November 29, 2007
JSW's expansion plans ahead of schedule and strong demand leading to higher capacity utilization, expect the company's steel output to register a CAGR of 28.3% over FY07-10 from 2.6mtpa to 5.6mtpa. JSW's crude steel making capacity is expected to rise by 2.6x to 10mtpa by 2010 from current 3.8mtpa. The company is also increasing its upstream capacities, cushioning it from any downturn in the industry.JSW merged its group company Southern Iron and Steel Company (SISCOL) effecting an equity dilution of 8.7%. With long product prices expected to rise faster than flat products, the merger of SISCOL would be value attractive. Expect SISCOL to add Rs2,437mn to the bottomline of JSW in FY09.
Expect the company to report a consolidated EPS CAGR of 31.4% over FY07-09 led by robust volume growth and imp roved realizations. At CMP Rs963, the stock trades at 10.1x and 7.1x on consolidated EPS of Rs94.8 in FY08 and Rs136.1 in FY09 respectively. Recommend a BUY with a target price Rs1,240 based on 6x FY09E consolidated EV/EBIDTA. Our target price implies a P/E multiple of 9.1x on FY09 consolidated EPS.
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Published by Webmaster @ 12:19 PM IST.
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ABN Amro Bullish on Tata Chemicals - Lot of Hidden value
Wednesday, November 28, 2007
Tata Chemicals Ltd [TCL] business model has too many moving parts with a presence across diverse but not so glamorous sectors such as soda ash, branded edible salt and fertilisers. TCL is the third-largest producer of soda ash in the world today and India's leading fertiliser producer and distributor, as well as having a strong management pedigree.The next leg of India's growth story will have to involve raising agricultural productivity and TCL is a play on this structural trend. TCL is not only one of the most energy-efficient urea manufacturers in India, but also has strong brands in phosphatic and complex fertilisers. TCL is not only one of the most energy-efficient urea manufacturers in India, but also has strong brands in phosphatic and complex fertilisers. Even more interesting are TCL's plans to reach out to over 2.5m farmers through its distribution network of Tata Kisan Sansars, a one-stop shop for farmers.
TCL's investments in Tata Group companies is valued at Rs47bn, well above the carrying value of Rs7.7bn on TCL's books. The group holding itself translates to Rs 200 / share.
TCL currently trades at FY09F P/E of 10.4x and P/B of 1.8x, a near 50% discount to the BSE Sensex, despite having a comparable FY09F ROE of 17.7% and FY07-09F EPS CAGR of 19% on our estimates. TCL's valuations look well-supported by its FY09F equity free cash flow yield of 6.7% and dividend yield of 3.8%. ABN Amro values TCL's core business at Rs90bn using a three-stage DCF model and add the value of its investment portfolio at a 30% holding company discount to get a target price of Rs450 per share, implying upside of 47% from current levels.
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Published by Webmaster @ 12:15 PM IST.
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CLSA underweight on NTPC and Dr Reddys Labs
Tuesday, November 27, 2007
NTPC is now among the most expensive power utilities in the world. It is trading at 40- 60% premium to average valuations of its Asian, Chinese, US and European peers. CLSA believes the potential upsides from coal mining, merchant power capacity, sale of fly ash, carbon credits etc. are now already factored in the stock price. NTPC offers high earnings stability and steady earnings growth. However, at these valuations the stock may no longer act as a defensive. Downgrade to UNDER-PERFORM with a 12 month Target price of Rs 215.
Dr. Reddy's management is pro-actively addressing the problem via accelerating product transfer to India; which will improve its competitive positioning in German market in FY09. Newsflow on product transfers will begin in 2HFY08 and an accompanied improvement in margins will be a short-term trigger for the stock. However, key risk is rising competition in Germany from new entrants impacting pricing, taking away the incremental benefit from lower cost sourcing in India. Valuations are reasonable at 17.2x FY09, but risks from German market and currency appreciation will continue to weigh on stock price performance. CLSA Maintains an Underperform rating with a 12 month target price of Rs 630.
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Published by Webmaster @ 8:53 PM IST.
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GMR Infra Fully Valued SOTP Valuation - Neutral Rating
Merill lynch just a while ago initiated coverage on the stock of GMR Infrastructure with a neutral rating. GMR's head-start in profitable airport development at India's capital city (Delhi), fast growing cities such as Hyderabad and at Istanbul, Turkey. With India likely to auction 35 non-metro airports & many east-European airports coming-up for bidding, we see immense opportunity for growth ahead. Expansion into toll road development as India aims to quadruple road capex and also Power Generation. Entry into real-estate development led by access to prime land-bank (next to airports) and scale-up the business through SEZs.
GMR has a portfolio of extremely profitable assets such as airports
– Delhi airport / Aerotropolis; Hyderabad & Istanbul with multiple / new revenue streams.
Here is the sum of parts valuation of GMR Infrastructure stock.
Airports - Rs 176
Power - Rs 48
Roads - Rs 8
Total - Rs 232. The valuations have been done on DCF basis. GMR Infra is likely to report an EPS of Rs 1.16 and Rs 2.38 for FY08 and 09 respectively. Merill Lynch maintains a neutral rating with a price objective of Rs 232 on the stock.
DalalStreet.Biz Analyst Recommendation: We do not recommend our investors to invest in the stock as we are not very comfortable with the absurd valuations GMR enjoys on the basis of land bank and other valuations. Yes, we are conservative and we believe in value investing.
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Published by Webmaster @ 11:43 AM IST.
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Buy Titan Industries - Merill Lynch
Monday, November 26, 2007
Merill Lynch has initiated coverage on Titan Industries with a BUY recommendation.Initiate with a Buy, PO of Rs1,850 - 30% potential upside Titan is a high quality, high growth domestic consumption story. Its offers strong brand equity, wide distribution & high quality mgmt coupled with strong structural growth drivers.
Titan sells watches through a mix of exclusive brand outlets (EBOs), multi brand outlets and dealers.On a pan India basis Tanishq is today the largest branded jeweler but on an individual city basis it is invariably much smaller than the city market leader. Management's focus now is to set up larger Tanishq stores in the existing cities and offer wider variety to drive higher footfalls. Titan has recently launched a new value format, Gold Plus in second tier cities. Product offerings will be limited to pure gold jewelry to drive volumes from a consumer base. Prescription eye wear – is Titan's latest venture, currently in pilot stage.
Titan's EPS is expected to grow 44% in FY08E, 43% in FY09E and 53% in FY10E. The acceleration in FY10E assumes turnaround in precision engineering and take-off in eyewear. Assuming this does not happen, we estimate FY10E EPS will nonetheless grow strongly by 40%. Titan is expected to report an EPS of Rs 36.34 and Rs 51.88 for FY08 and 09 respectively.On the basis of DCF valuation, Merill has set a target price of Rs 1,850 on the stock.
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Published by Webmaster @ 3:48 PM IST.
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Buy Indoco Remedies - Reliance Money
Reliance money has initiated coverage on Indoco Remedies with a BUY rating. Indoco has recently entered into a JV partnership with US based Amneal Pharmaceuticals to develop, manufacture, market and distribute 10 ophthalmic products for the US market.The patents of 3 products have already expired and rests are under patent. Indoco expects few Para-IV opportunities from these product baskets. The important aspect worth noting is that the cost of product development and manufacturing would be borne by the duo equally. Indoco will get margin of 10% on the manufacturing cost and above that it will have 40% share profits on marketing the products in USA.On the domestic formulation space, Indoco expects to outpace the industry growth by improving by 18-20% in next couple of years. On the export front, Indoco expects its regulated market sales to grow over 40% CAGR for next couple of years on the back of ramp-up in European business and fresh business flowing from Brazil, Australia, South Africa etc.
At current price of Rs 270, the stock is trades at 3.0x it EV/EBITDA FY09E and trades at 5x its FY09E respectively. Reliance money has set a Target price of Rs 419 on the basis of DCF Valuation, the stock is available at 8x of its FY09E earnings and 5x its FY09E EV/EBITDA.
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Published by Webmaster @ 10:19 AM IST.
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Accumulate Ahmednagar Forging and Shiv Vani Oil
Friday, November 23, 2007
Ahmednagar Forgings Ltd - AFL
AFL is a 50.7% subsidiary of Amtek Auto, manufactures small- and medium-sized forged components such as connecting rods, gear blanks, shafts, transmission components, flanges and hubs.The company's sales for the quarter grew by 30.5% to Rs159.2 crore. The growth was led by a 16% increase in the domestic sales and a 62.5% surge in exports. The operating profit margin (OPM) increased by 100 basis points to 20.3%. As a result, the operating profit grew by 37.3%. Higher interest and depreciation costs led the profit after tax (PAT) to grow by 26.8% to Rs17.1 crore.
AFL stock trades at attractive valuations of 7x its FY2009E earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.5x. One can BUY the stock for a Target of Rs 300 in 12 months.
Shiv Vani Oil & Gas Exploration Service Ltd - SVL
We first initiated coverage on Shiv Vani Oil and Gas in September. Now it is time to upgrade the stock target based on recommendations from Indiainfoline Analyst.
So far, only 22% of the on-land acreage under the first six rounds of NELP has been awarded under licensing, as compared to 64% for deepwater and 75% for shallow water. This would directly benefit SVL, which is primarily an on-shore player.
SVL has a contract in hand to develop coal-bed methane (CBM) fields with ONGC. The ONGC contract is worth Rs7.5bn and is to be executed in 24 months. SVL stock trades at P/E multiple of 9. 2x and 7.2x on estimated earnings of Rs46.3 and Rs58.5 for FY09 and FY10 respectively. With expected rise in Margins and Order book,Indiainfoline recommends a BUY with a target price of Rs648, implying an upside of 52.8%.
SSKI Securities have set a target price of Rs 450 on the stock in October.
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Published by Webmaster @ 2:48 PM IST.
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LIC Housing + Lanco Coverage by ICICI Sec
ICICI Securities, has not initiated coverage on LIC Housing Finance [We had in July] and Lanco Infratech. Here is a Detailed Review about the same.LIC Housing Finance:
RBI's directive to commercial banks to reduce focus on housing finance will benefit focussed players like LICHF. Expect a 28% CAGR in bottom line to Rs 455 crore over FY07-09E. Its significant exposure to retail book will help in registering healthy yields.
LICHF's net profit grew 33% to Rs 279.1 crore in FY07 from Rs 208.5 crore in FY06. Its ROA is expected to improve to 1.8% in FY08E from 1.4% in FY06. Assuming a ROE of 18%-19%, even after factoring in the equity dilution, I-Sec arrives at a fair value of Rs 402 per share, 1.6x its FY09E ABV. LICHF also has a 39.3% stake in LIC MF AMC. As on Oct 31, 2007, the AMC's AUM amounted to Rs 16,245 crores. This translates into Rs 46 per share of LICHF. Adding all these gives a target price of Rs 448, an upside of 20% over a 12-15 month period.
Lanco Infratech:
ICICI has revised the earnings expectations of Lanco Infratech and hence also raising the price target of the stock. Upgrading FY08E, FY09E & FY10E revenue estimates 3%, 13% and 19% respectively – similarly, profit estimates have been raised 7%, 17% and 28% respectively. Lanco is trading at FY08E, FY09E & FY10E P/E of 22.6x, 10.4x and 6.6x with EPS estimates of Rs19.7, Rs42.8 and Rs67.3 respectively.
Sum of the pars Valuation of Lanco Infratech:
Lanco Real Estate - Rs 176
Construction - Rs 153
Power - Rs 139
New Power Projects - Rs 107
Carbon Credits - Rs 19
Hence I-Sec recommends a BUY with a Target Price of Rs 594.
DalalStreet Analyst Note
We are recommending adding GIC Housing Finance in small quantities at Price of Rs 63. Dividend Yield works out to 3.5%. Potential LIC Housing Finance story on GIC Housing Finance stock.
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Published by Webmaster @ 8:50 AM IST.
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BUY Ranbaxy Labs - Kotak
Thursday, November 22, 2007
Kotak has initiated coverage on Ranbaxy with a BUY rating in view of the company's strong product pipeline, increased contribution of the branded generic business and acquisitions, growth from domestic and semi-regulated markets.
Ranbaxy's Para-IV pipeline comprises around 18 first-to-file products representing a market size of ~ US$26 bn valued at innovator prices. In the next two years, the company is expected to benefit from the launch of complex injectables in the area of Penems and Limuses, which has a market potential of over US$3 bn.
Ranbaxy has been very active in inorganic growth in the last two years where it has acquired nine businesses in European, CIS and African region valued close to US$450 mn. Ranbaxy is the second largest pharma company by sales in the domestic market with 4.95% market share.In the last two years, Ranbaxy has been focusing on partnerships to reduce money spent on innovative research. In line with the focus, the company is de-merging its Drug Discovery Research operation into a separate company and likely induction of one or more strategic partners.
Ranbaxy is expected to report an EPS of Rs 19.7 for FY08. The stock is trading at 20.2x CY08 earning estimates. Kotak initiates coverage with a BUY recommendation with target price of Rs.490 over a one-year time horizon.
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Published by Webmaster @ 2:06 PM IST.
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BUY JP Associates - ML + Sharekhan
We had an exclusive coverage of Jaiprakash Associates [JP Associates] last month. Now Merill Lynch and Sharekhan have upgraded the stock.JPA has launched the first tranche of a 3mn sq. ft development (see Chart 4) at its NOIDA land bank. Sales at JP Greens are likely to be robust at >1mn sq. ft in FY08E. The initial response to the bookings appears to be very strong, as the average rate stands at Rs6,000 per square foot. Formula 1 Holdings has confirmed signing a contract with JPSK Sports (subs. of JPA) to stage the first-ever F1 Grand Prix at NCR, India in 2010. We think F1 circuit will be accompanied with related land bank, which would justify investment.
According to media reports, ICICI Venture Funds Management is planning to invest about USD800 million (Rs3,148 crore) to pick up a stake in Jaypee Infratech, which is a unit of the Jaypee group's listed entity, JP Associates.
Sum of the Parts valuation as given by Merill Lynch,
Infrastructure - Rs 1288
Cement - Rs 398
Power - Rs 335
Hotels Rs 23
Steel - Rs 21
Projecta @ Book Value - Rs 82
Minus Debt - Rs 343
JP Associates Per share Value - Rs 1,805. This is also the target price set by ML. Sharekhan has set a Target Price of Rs 2025 on JP Associates.
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Published by Webmaster @ 10:06 AM IST.
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Sharekhan bullish on HDFC
Wednesday, November 21, 2007
Before Sharekhan's coverage we would like to let you know that HDFC is a blind BUY at any rate. Hold it for 12-24 months, you will see the returns :-)HDFC has created significant value in its subsidiaries. Three of these-HDFC Bank, HDFC Life Insurance and HDFC Mutual Fund-are valued at Rs883 per share. They are also growing at a faster rate than HDFC. Separate listing of Insurance subsidiaries is on the cards too.
HDFC has gained significant market share in the past couple of quarters. Also, continuous CRR hikes by the RBI have benefited HDFC the most, as banks are unable to bring down their lending rates to protect their margins. HDFC doesn't need to maintain CRR, hence its incremental spreads have widened as incremental borrowing costs have declined while lending rates have remained stable.
Core mortgage business is expected to grow at 25-30% over the next couple of years. In Q2FY2008, HDFC's margins expanded and the core operating performance was very strong (up 56% yoy). We expect the earnings before exceptionals to grow at 26% CAGR over FY2007-10E. NPAs are less than 1%
HDFC is expected to report an EPS of Rs 72, 90 and 109 for FY08, 09 and 2010 respectively. Valuing the core mortgage business at 22x its FY2010E earnings
per share (EPS) and adjusting Rs 954 for the value to its subsidiaries, Sharekhan sets a target price of Rs 3,360.
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Published by Webmaster @ 12:21 PM IST.
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Buy Strides Arcolab - Kotak
Kotak has initiated coverage on Strides Arcolab Ltd with a BUY rating after the some big ticket foreign deals.Aspen will become a strategic, equal and regional partner in Strides' Latin American operation. The transaction values the Latin American operations of Strides at over US$260 mn. Aspen will be a global partner for the development and global marketing of oncolytics.
Strides will acquire 51% interest of Co Pharma Ltd, Aspen's UK based generics subsidiary, for Rs.230 mn. Strides will acquire 80% of Formula Naturelle (Pty) Ltd, a wholly owned subsidiary of Aspen, for Rs.197 mn (35 mn rand), which will own a basket of neutraceutical products currently marketed by Aspen in South Africa.
All these transactions will result in a net outflow of Rs 3.0 billion to the company. Strides is expected to report a fully diluted EPS of Rs 21.1. The stock is available at 13.9x FY08 earnings. Kotak recommends a BUY with DCF-based one-year target price of Rs.400.
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Published by Webmaster @ 12:02 PM IST.
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Hold Indian Hotels - Morgan Stanley
Tuesday, November 20, 2007
Unlike other sectors which are painting aggressive growth stories [we have to see their execution capabilities yet], the Hotel sector is something being invaded by Realty companies in India now. Existing big players, Indian Hotels[Taj Group by Tata] and Oberois have a very laid back expansion plans.The demand-supply mismatch will likely continue for at least the next 18 months.
Rights Issue to Dilute Equity:The company intends to raise Rs14.4 billion through a rights issue of equity shares and non-convertible debentures. Further, it will issue warrants that will be convertible into equity 12 months after the rights offering. This should raise an additional Rs7.8-9 bn. However, these rights offerings
will dilute earnings by 30%.
MS forecasts a 29% earnings CAGR in F2007-09, EPS will be diluted due to the planned rights offering. Indian Hotels is likely to report an EPS of Rs 7.32 and Rs 7.2 for FY08 and 09 respectively. Morgan Stanley has set a target price of Rs 180 on the stock with a Long Term Outperformer rating.
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Published by Webmaster @ 11:06 PM IST.
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Indiainfoline bullish on Voltas
Monday, November 19, 2007
Last month we had coverage on VOLTAS Ltd by Citigroup and Edelweiss. Now Indiainfoline has upgraded the stock on the back of strong order backlog.Voltas' order book of Rs27bn for its electro-mechanical division ensures healthy revenue growth for next two years. Expect the electro-mechanical division revenues to witness 41.5% CAGR over FY07-09E driven by higher infrastructure spending in Middle East and boom in retail, IT and entertainment sector in domestic market.
Traditionally, unitary segment has been a laggard. However, it has witnessed a sharp increase in EBIT margins since last three quarters, which we feel is structural and sustainable. Voltas is expected to report an EPS of Rs 6.3 and Rs 9.2 for FY08 & 09 respectively. Indiainfoline has set a target price of Rs 265 on the stock.
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Published by Webmaster @ 11:42 AM IST.
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JP Morgan Downgrades NALCO - Exit
Friday, November 16, 2007
JP Morgan has downgraded National Aluminum Company Ltd - NALCO with an underweight rating. NALCO stock price shot up by by almost 42% over the past fortnight. Following the stock price surge, Nalco is now among the most expensive aluminum companies, globally. JP Morgan sets a downward target price of Rs 245 on NALCO by Dec-2008. Macquarie Research has also given an underperform rating on the stock with a target of Rs 270.
NALCO is expected to report an EPS of Rs 26.5 and Rs 22 for FY08 and FY09 respectively. Nalco's EBITDA margins expected to compress by 1280bps in 08, EPS set to decline by 28% yoy in FY08 and 16% yoy in FY09. The calculations are based on global aluminum price forecasts. Target price implies an EV/EBITDA multiple of 5.8.
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Published by Webmaster @ 10:59 PM IST.
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Midcap Picks from CLSA
Wednesday, November 14, 2007
CLSA has come up with midcap investment ideas for the Indian market. Here is an overview. The following companies have been covered Adlabs Films, Balaji Telefilms, Bharat Electronics, Everest Kanto Cylinder, Exide Industries, Opto Circuits, Redington India, Saregama, Sintex Industries, Television 18, Welspun Gujarat and Zee News.
The chart below shows various ratios and figures such as EPS, P/E, EBITDA, Dividend Yield etc.
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Published by Webmaster @ 10:41 PM IST.
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Reduce GAIL - Kotak
Monday, November 12, 2007
Kotak Securities just a while ago has changed the recommendation on Gas Authority of India Ltd from ADD to REDUCE. There is no real reason for the re-rating of the stock.
The increase to the street's expectations of likely steep increase in GAIL's earnings from its proposed investment (Rs180 bn) in new pipelines. Expect GAIL's gas transportation volumes to jump up sharply beyond FY2010E but our view of the stock is tempered by (1) potential inimical gas pipeline transportation regulations, (2) unsustainable nature of earnings of LPG and petrochemical businesses and (3) short-term negative surprise from potential increase in subsidy burden.
Here is the Sum of the Parts Valuation of GAIL and Target Price
Natural Gas Transportation - Rs 135
LPG Production - Rs 104
Petrochemicals - Rs 29
Oil & Gas Upstream - Rs 21
Investments in ONGC and Others - Rs 79
Cash - Rs 26
Hence based on SOTP, GAIL has a target price of Rs 380 / share.
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Published by Webmaster @ 11:13 AM IST.
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ABB + BHEL + Capital Goods Review from Credit Suisse
Friday, November 09, 2007
Credit Suisse continues to be optimisitc about the performance of Capital Goods Sector in India. Here are the top recommendations form the sector and their TARGET PRICES.For ABB, around 33% of revenue and 43% of PAT accrue in the last quarter of the year. During the nine months ended September, ABB has registered revenue of Rs40.9 bn, which, extrapolated for the full year, is in line with our estimates. The stock is relatively stable and maintain OUTPERFORM rating with a DCF-based target price of Rs1,812.
BHEL is also seasonal in generating revenue. The first half generally accounts for 33% of the full-year revenue and around 22-25% of PAT. Expect the company to perform substantially well in the coming quarters, due to a combination of better execution momentum and implicit volume growth coming out of capacity addition, as the company moves from 6,000 MW to 10,000 MW by the end of 2007. Maintain OUTPERFORM rating with a DCF-based target price of Rs3,117.
Admittedly, BEML had a poor second quarter. However, rating call cannot be changed on a single quarter's performance in isolation, and would wait and see how subsequent quarters pan out for the company. We expect BEML to perform in line with our expectation. BEML generates close to 35-40% revenue and around 25% PAT in the first half. Maintain OUTPERFORM rating with a DCF-based target price of Rs 1,851.
Crompton Greaves witnessed lower revenue growth. Management has been very sanguine on its margins since it is benefiting from the appreciation in the rupee and it expects the margin improvement shown to continue. We maintain our revenue estimates for the company, expecting margin expansion for the business, and we increase our FY08 and FY09 EPS estimates by 4.8% and 4.1%, respectively. Maintain our OUTPERFORM rating with a target price of Rs 475.
Neutral on Cummins India with a Price Objective of Rs 409. Cummins operates in an industry that is relatively more competitive than the space operated by the others.
Suzlon Energy has again given positive guidance and there is also implicit volume growth as it is doubling its earlier capacity expansion plans from 1,500 MW to 3,000 MW. We maintain our estimates and move towards a DCF-based target price of Rs2,385. There is a sum-of-theparts (SOTP) angle building up with the proposed listing of its gearbox subsidiary, Hansen Transmission. Other coverage on Suzlon Energy. Dipan Mehta says Suzlon's next 4 quarters will be surprises and it was his Diwali pick.
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Published by Webmaster @ 5:16 PM IST.
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RCom + Bharti Airtel, Mixed Recommendations
With Anil Ambani's nexus in the Telecom Ministry becoming obvious form out of turn favors Reliance is receiving, causing a huge loss to Government exchequer. Sunil Mittal is not going to sit quiet this time and refused to withdraw the petition filed against DoT.However, here are some mixed views from Research Analysts on the stocks of Bharti Airtel and Reliance Communications.
HSBC Global Research:
Solid 2Q08 results; strong subscriber growth and margin expansion offset by 6% q-o-q drop in ARPU. Increase capex forecast; more towers to be built to meet higher subscriber targets imposed by regulator. Maintain Overweight but trim DCF-based target price by 3% from INR1,170 to INR1,140 to reflect, higher capex, lower subscriber quality and faster subscriber growth.
Citigroup research has downgraded Reliance Communications and Idea Cellular to HOLD and maintained a BUY rating on Bharti Airtel with target price of Rs 1,170.
DSP Merrill Lynch is of the view that RCom may outperform in the short term, however, their pick for long term is still Bharti Airtel with a bear case price objective of Rs 1020 and a base case price objective of Rs 1,175. It maintains a BUY recommendation with a 12 month target price of Rs 1,300.
HDFC Securities says move with sentiments and make money: Bharti is trading at 11.3x FY09E EV/EBITDA, which is at 23% discount to RCOM’s 13.9x FY09E EV/EBITDA. The value migration from Bharti to RCOM is apparent during last quarter as Bharti has been trading historically at 10-15% premium to RCOM. This has vindicated our call of RCOM outperforming Bharti in the short to medium term. This is due to uncertain regulatory policies which could affect Bharti in respect of subscriber criteria for additional 2G spectrum allocation and spectrum usage charges.
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Published by Webmaster @ 3:58 PM IST.
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Parsvnath + Unitech - ICICI Direct
ICICI Direct has initiated coverage on two of North India's large realty players, Parsvnath Developers and Unitech Ltd with a Outperformer and Performer rating.Parsvnath Developers:
Parsvnath Developers is developing more real estate than any other realty company in India. Parsvnath has a pan-Indian presence across 47 cities in 17 states. It is developing 153 million sq ft of saleable real estate over the next 4-5 years. Its land bank is mostly fully paid up and has clear title. Further, the cost of its land under development is about Rs 260 per sq ft.
The 153 million sq ft the company is developing is spread over 33 residential project (32.63 million sq ft), 22 commercial project (4.73 million sq ft), 18 integrated townships (77.55 million sq ft) and 4 IT parks (6 million sq ft). ICICI believes the company will be able to withstand any downturn in any segment by having presence in all segments.
Parsvnath's proven execution capabilities, diversified land reserves and better visibility in earnings make the stock an attractive investment bet. Factoring in a price escalation of 2.5% annually, the projected NAV comes to Rs 423. ICICI has assumed a 10% premium to arrive at our target price of Rs 465.
Unitech Ltd:
Unitech, the second largest listed realty company, has a pan-India presence and operates across all segments. Unitech is the second largest listed real estate company in India. The company plans to develop about 215 million sq ft by FY10, which is expected to generate free cash of Rs 30,000 crore.
The company follows a strategy of mostly outright sales, rather than leasing out its properties. The key focus remains on an efficient allocation and churn of capital. Pre-sales contribute a considerable amount to the company's overall funding requirement. Unitech intends to derive about 65-70% of its revenues from the residential segment as it offers highest return with lowest risk.
Unitech is gradually expanding its operations beyond the National Capital Research (NCR) with two key objectives – to de-risk its portfolio from exposure to a single region and leverage on the growth opportunities in other cities. Factoring in a price escalation of 2.5% annually, the NAV comes to Rs 404 at a discount rate of 14%. Given its execution capabilities, diversified land reserves, and low-risk high return model, we believe it should trade at a 15% premium to its NAV. This gives us a target Rs 465 over a 12-month timeframe.
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Published by Webmaster @ 3:40 PM IST.
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Canara + Corporation + Oriental Bank - House Views
Thursday, November 08, 2007
Canara, Corporation and Oriental bank have reported weak numbers in their core business [Banking], yet DSP Merrill Lynch in a report has different recommendations for each of the stocks.Canara Bank:
Canara Bank's 2QFY08 PAT, although in line with estimates at Rs4bn owing to higher than expected other income and lower provisions, has shown lackluster topline performance. Topline has de-grown by 20% yoy and 12% qoq on the back of margin pressure. Margins have collapsed by 18bps qoq and 79bps yoy to
Earning forecast cut by 3% for FY08 and 4% for FY09, factoring in lower margins stemming from cost pressures. Canara Bank is expected to report earnings of Rs 39.45 and 44.48 for FY08 and FY09 respectively. DSPML is NEUTRAL on the stock.
Corporation Bank:
Corporation bank,s 2QFY08 net income grew 27% yoy to Rs1.6bn (2% ahead of MLe) largely on back of higher other income (treasury profits) and lower provisions. Loans grew 17%yoy (from +35%yoy in 2QFY07) and while margins held-up qoq, on yoy basis, margins declined by +15bps to 2.85%, as deposit costs rose resulting in top line growth of only 18%yoy (v/s. 25% estimated). Rise in funding costs (up 136bps yoy) resulted in margin pressure.
Corp Bank is expected to report an EPS of Rs 44.01 and 52.30 for FY08 and FY09 respectively. DSPML maintains a SELL rating on the stock at CMP of Rs 452.
Oriental Bank of Commerce:
OBC reported a 24% yoy de-growth in earnings to Rs2.36bn in 2QFY08 (15% below MLe) as margins compressed and fee income declined yoy and qoq. NII de-grew by 3% yoy (10% yoy growth- MLe) to Rs4.0bn. DSPML estimates that on a yoy basis margins for 2QFY08 have declined by +50bps as deposit cost increased owing to a shift in deposit mix (CASA declined by +300bps yoy). OBC loan growth has also slowed down to 21% yoy (29% yoy avg. in FY07) and incremental LDR (YTD) has come down to 28%.
OBC is expected to report an EPS of Rs 35.69 and 41.37 for FY08 and FY09 respectively. DSPML maintains a BUY with a target price of Rs 280.
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Published by Webmaster @ 8:38 PM IST.
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Suzlon should Sizzle - Citi
Wednesday, November 07, 2007
Citigroup which upgraded the stock of Suzlon Energy with a price target of Rs 1,700 in June, has upgraded the stock again with a new target price, on the back of major orders and clear earnings visibility.
Suzlon delivered 1,000MW in 1HFY08 and is set to deliver 1,500+MW volumes in 2HFY08. Delivery of higher volumes in 2HFY08 should lead to better fixed cost apportioning resulting in WTG margins improving to 16.1% levels for the full year.
The average annual WTG market looks set to jump to 26GW/year over the next 5 years vis-a-vis 10GW/year over the previous 5 years. Suzlon being one of the most vertically integrated WTG suppliers is well placed to leverage on this growth.
Suzlon can now discount at a higher P/E multiple of 26 and rolling forward to FY09 earnings, BUY Suzlon with a target price of Rs 2,227. Suzlon is expected to report an EPS of Rs 47.55 and Rs 69.54 for FY08 and FY09 respectively.
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Published by Webmaster @ 10:53 AM IST.
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Gujarat Apollo Industries - ABN Amro Investment Call
Tuesday, November 06, 2007
Gujarat Apollo Industries Ltd (GAI) is a leading supplier of asphalt road construction equipment with ~30% market share and is a direct beneficiary of the investments in road infrastructure. Rs3,300bn worth of investment (including share of private sector of Rs877bn) is proposed for road infrastructure in the 11th five year plan.
GAI has started its diversification in related areas. It recently tied up with an European Company for manufacturing of 2 models of soil compactors and 3 models of tandem vibratory compactors. It has also concluded exclusive technical know how agreement with a German Company for design and manufacture of crushers and aggregate producing equipment.
GAI's export revenues contributed 21.8% of its turnover in FY07. Export market being more lucrative as compared to the domestic market, GAI going forward, intends to grow share of exports to 50% of sales by 2010 by way of doubling its equipment capacity to ~400 equipments in phases with an investment of Rs500mn.
The stock currently trades at Rs 249, GAI trades at an attractive valuation of 12.7x FY08F EPS of Rs19.6 and 9.5x FY09F EPS of Rs26.1. ABN Amro initiates a Buy on GAI with a price target of Rs325.
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Published by Webmaster @ 10:43 AM IST.
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Shoppers Stop - Lackluster Quarter
Monday, November 05, 2007
Shopper's Stop (SSL) has reported revenue growth of 38% at Rs2.77bn, EBITDA of Rs134m and PAT of Rs2.3m (decline from Rs80m in Q2FY07). Growth in the business is driven by 200,000 sq. ft. of retail space added since April 2007 and 19% growth in like to like stores. New store addition, addition of new formats [Arelia and Clinque] and service tax on rentals have dragged the profitability in the business with EBITDA margins dipping from 8% in Q2FY07 to 4.8% in Q2FY08.SSL has added less than 400,000 sq. ft. of retail space in the last two years, as against Pantaloon Retail, which has added 4m sq. ft. SSL has lined up plans to add 8-10 Shopper's Stop annually over the next four years and also reach 35 Hypercity outlets by 2011, execution of the same would be the key monitorable.
UBS Investment Research maintains a NEUTRAL rating with price target of Rs550 is based on 10.9% WACC, with a 5.5% terminal growth assumption. SSKI maintains a NEUTRAL rating with a target price of Rs 516. Macquaire research seems to be more optimistic on the company and maintains a BUY with a price target of Rs 650 [Seems little bit high to us compared to its performance]
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Published by Webmaster @ 10:28 AM IST.
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Add Pidilite to Strengthen Your Folio - HDFC
Sunday, November 04, 2007
Pidilite Industries Ltd (PIL) has been a pioneer and market leader in the field of consumer and speciality chemicals in India. Its brand Fevicol, Steelgrip, Acron, Dr.Fixit, Fevitite and M-seal are some of the most trusted brands in India.PIL expanded the Adhesives and sealants range by introducing marble glue and wood re-inforced adhesive under brand name Fevicol, fast setting epoxy adhesive under the brand name Fevitite Super Fast, new generation adhesive under the brand name Cheetah Glue, easy to use sealant under the brand name Dr. Fixit Gapfill and masking tape under the brand name US-PRO. PIL recorded exports in the Consumer and Bazaar Products of Rs.51 crs in FY07, a staggering growth of 60%. Exports of Speciality Chemicals grew by 33.3% to Rs.46 crs. Products of PIL have found good acceptance in international markets with exports to more than 50 countries.
PIL's revenues have grown remarkably by about 18% CAGR over the last 5 years. This has been mainly due to concerted efforts towards brand building activities in its consumer and bazaar segment. FY07 was a historical year for PIL, wherein all the segments grew significantly. Net sales grew by about 21% in FY07, backed by 14-16% growth in the last 3-4 years. The net profit growth has been pretty steady in the range of 20-22% over the last 2-3 years.
PIL is in a comfortable position and satisfy its wants of further acquisitions and expansion plans. The stock is quoting a PE of 21 times its FY08 (E) earnings. One may enter PIL in the 173-184 band for a target of Rs.225 in 3-4 quarters says HDFC Securities Analyst.
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Published by Webmaster @ 9:01 AM IST.
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SELL IndiaBulls + Hindalco - Citi
Friday, November 02, 2007
Citigroup Research has recommended a SELL on Indiabulls and Hindalco Industries Ltd.
Indiabulls Ltd
Under best case assumptions, Indiabulls can potentially be valued at Rs930 per share, with new initiatives [Life Insurance, Asset Management, Institutional Broking, Private Equity, Commodity Exchange etc] at Rs152 per share on FY09 estimates and a value of Rs778 per share for existing brokerage and finance businesses. Are they trying to be another Reliance capital ?
Citi maintain base case estimates, valuation and recommendation (Sell, 3M) as it is still too early to ascribe any definite values to these businesses pending execution.
Target price is Rs550 based on a sum-of-the-parts calculation. Apply an 18x FY09E earnings multiple based on the Sensex FY09E multiple of 19x. Citi does not apply a discount to market multiple as Indiabulls continues to retain its market share despite increasing competitive pressures. This values the broking business at Rs192. Maintain a target multiple of 2.0x FY09E PBV for the asset finance businesses on sustained high growth in the portfolio and factor in additional capital raised. This values the asset finance business at Rs358.
Dalal Street Analyst Reco
If you hold Indiabulls, do not exit completely, but you can partially SELL and look at different opportunities.
Hindalco Industries Ltd
Hindalco's PAT at Rs6.4bn came in above expectations on lower tax and better than anticipated copper TC/RCs. EBITDA fell by 7% yoy due to pressure on realizations. We revise PAT estimates for FY08E-09E by 1% to -3% on changes in LME prices, exchange rates and TC/RC margins, FY07 Annual Report details and 1HFY08 trends.
With weaker aluminium realizations given an appreciating rupee, lower copper TC/RC margins, and rising input costs, we expect a 14% fall in cons FY09E EPS. However, we marginally adjust our TP from Rs142 to Rs146 on: our target multiple raised from 7x to 8x (mid-point of recent trading range), which gives Rs128, to which we add value of IDEA Cellular holding; upward re-rating of metal stocks; and rollover to FY09E EPS.
EPS expectations for FY08 and FY09 are Rs 19.8 and Rs 14.4 respectively. Citi maintains a Sell with a target price of Rs 146.
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Published by Webmaster @ 8:38 AM IST.
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Buy Divis Labs - Merrill Lynch
Thursday, November 01, 2007
Merrill Lynch has put a BUY recommendation on Divis Labs. Divis 2Q PAT was 37% ahead of expectations driven by higher sales and a huge surprise in EBITDA margin (42.9% margin vs. MLe of 37.5%) driven by the Custom Manufacturing Services (CMS) business.Divis high margin trend is largely driven by increasing CMS contribution, which we estimate to grow to 65% of revenues by FY09E vs. ~50% in FY07. ML expects overall margins to increase 240bp to 36.3% in FY08E and sustain at this level.
Divis' likely launch of eight nutraceutical products under the "Vivital" brand is expected to start generating revenues from 3Q onwards and scaleup to at least US$40-45mn p.a. over the next three years.
Divis is expected to register a revenue CAGR (FY07-10E) in the CMS business. And EPS CAGR of 48% (FY07-10E) on the back of 37% revenue CAGR (FY07-10E) and impact of tax benefits. EPS expectations for FY2008 is Rs 48.4 and for FY09 is Rs 68.4. On the basis of sum of parts valuation, Merrill recommends a BUY with a target price of Rs 2,250.
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Published by Webmaster @ 4:28 PM IST.
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Grasim Industries - Strength from Cement and Fibers
Grasim Industries Ltd is drawing strength from almost all its business verticals. Q2 consolidated PAT (Rs6.2bn) grew 50% YoY, driven by Ultratech's strong performance. Grasim's H1 FY08 consolidated PAT was Rs12.9bn (up 52% YoY); that is, an EPS of Rs140.70. This is 48% of FY08 consensus EPS estimate of Rs293.50, implying that estimate is reasonable, as H2 is traditionally stronger than H1 for cement and VSF businesses. Q2 was characterised by strong earnings growth in all divisions -VSF (EBITDA growth +82% YoY), cement (25%) and sponge iron (+418%).Grasim's total capex plan is Rs61.2bn for FY08 and Rs18.2bn for FY09. In addition to 95KTPA VSF capacity expansion in Kharach (Gujarat) and Harihar (Karnataka), Grasim is planning an 88KTPA greenfield VSF plant in Vilayat (Gujarat). For cement, the company expects Shambhupura (4.4mt) and Ultratech's Tadipatri (4.9mt) be commissioned by end-FY08 and Kotputli (4.4mt) by Q1FY09.
Macquarie and UBS have upgraded Grasim's earnings expectations. UBS expects Grasim to report revenue and profit of Rs 16,4022 crore + Rs 2691 crore for FY08 and Rs 18,187 crore + Rs 3022 crore for FY09 resulting in EPS of Rs 293 and Rs 329. UBS has put a BUY with a target price of Rs 4,100 on the stock based on SOTP valuation method.
Macquarie expects Grasim to report an EPS of Rs 280 for FY08 and Rs 308 for FY09 respectively. It has set a Target price of Rs 4,520 on DCF computations.
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Published by Webmaster @ 9:34 AM IST.
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