Category: Economy, Markets and Macro Views

During the August Market Crash, we had recommended to HOLD Bartronics Stock at Rs 175. The stock since then has swiftly moved up to Rs 250. ICICI Research has initiated coverage on Bartronics with a price target of Rs 335, potential upside of 38% from current levels.

Bartronics India Ltd (BIL), one of the first Automatic Identification and Data Capture (AIDC) solutions company. It is investing more than Rs 270 crore
into a new 80-million smart cards manufacturing facility, that would make it one of the biggest players in South Asia and enable revenue growth by 130% CAGR over FY07-09E. Having an order book for more than 100 million smart cards over next two years is expected to generate 3.5x FY07 revenues from this segment alone.

The Indian Retail Growth story is intact and BIL has tied up with Intel and designed products and solutions for point of sales having starting price from Rs 32,000 onwards. These products are more than 20% cheaper to ones used by the industry currently and also more complex, which gives the retailers like Reliance, Big Bazaar, Subhiksha and others a huge advantage.

Currently, the stock is trading at 10.32x FY09E earnings and 6.23x FY09E EV/EBIDTA, which is very attractive. Most of the global players are trading between 15-28x FY09E earnings. Using this method, the stock can be valued at Rs 340, 15x FY09E diluted EPS of Rs 22.66.

You are Reading this First Here: Citigroup Research just a while ago upgraded India’s number one retailer – Pantaloon Retail India’s stock price target to Rs 626 from Rs 545. This upgrade is the outcome of London Investor conference on India.

Kishore Biyani and the Sr. Management of Pantaloon has indicated value unlocking exercise in its subsidiaries over the next three months, with the listing of Future Capital and private placements of Future Bazaar and Future Media. Future Capital will list within the next 3 months. Pantaloon expects a valuation of Rs25bn-30bn, while Citi values this at Rs18.6bn. Future Capital now has 75 retail locations and management expects a credit book of US$1.5-2bn by FY11, while assets under management are about US$1.2bn.

Management expects 10-15% dilution in the media & e-tailing subsidiaries through private equity placement. Management indicates a base valuation of US$50mn for Future Media and US$70mn for Future Bazaar. Future media has bought the on-screen media rights all of INOX Leisure screens for the next 30 months.

Pantaloon’s management is clearly shifting its focus from the top line towards margins and ROE. SOTP based price target to Rs626 (from Rs545 earlier), incorporating the value of Future Bazaar and Future Media, as well as rolling forward our target 30x P/E multiple for core Pantaloon to mid FY09E. Pantaloon Retail is expected to post diluted EPS of Rs 13.05 and Rs 16.51 for FY08 and FY09 respectively.

Key notes from the energy / oil / gas conference held in New Delhi.

The demand-supply gap in gas is likely to narrow sharply in the next few years. India’s energy mix looks set to change toward being more gas dependent, albeit marginally. Increasing gas supplies should lead to a quantum jump in cities under the CGD umbrella.
The evolving regulatory environment should facilitate growth in the sector.

We see that India’s dependence on oil is set to fall to 29% in the next 2 decades while dependence on Gas and Nuclear Energy will increase.

In fact, India’s expected dependence at 6% on Nuclear Energy in 2030 is higher than the global average of 5%. Estimated total gas demand in the economy to increase to ~280mmscmd by FY12E (~180 currently), while new and existing domestic supplies would increase to ~150mmscmd.

Apart from this, India will also lay 8,400 Kms of Gas pipeline at an estimated cost of $ 6 Billion. Most of this will be undertaken by GAIL and RIL.

If you are holding RIL, then just hold the stock tight for few more years or maybe another decade 🙂

Unitech Ltd, will be included in National Stock Exchanges benchmark – S&P CNX NIFTY from the 5th of October.

Unitech is the first Real Estate stock to enter the Index beating India’s premier realty developer DLF. Unitech was up 7% at Rs 280.

The news has triggered all the Real Estate stocks. Akruti, OMAXE, Orbit and Ansal are the leading gainers from the space.

Bajaj Auto launched 125-cc ‘XCD’ at a price of Rs 41,000.The product is aimed at upgrading entry-level segment customers to 125-cc bikes from existing 100-cc bikes. Bajaj plans to manufacture 20,000 units of the new product, ramping it upto 50,000 units by November 2007. Bajaj Auto has a margin of Rs 3,000 / bike. Hero Honda’s Super Splendor is the only bike in this segment and is priced at Rs 44,000.

The launch of ‘XCD 125’ to stem the decline in Bajaj’s motorcycle volumes and
improve market share for Bajaj. We had reported that Bajaj recorded a 22% yoy decline in domestic motorcycle sales on a year-to-date basis.The success of the bike is critical to Bajaj as it shifts its focus towards high-end bikes.

Kotak retains outperform rating on the company with a price target of Rs 2,750.

The government appears set to approve Reliance Industries‘ pricing formula for the gas it plans to produce from July next year from KG basin with minor changes. The empowered Group of Ministers (eGoM), which had its third meeting today morning, was near unanimous on the need to honour the government’s commitment to allow marketing and price freedom to investors in oil and gas, reports suggest. The eGoM has left the final decision on RIL’s gas pricing to External Affairs Minister Pranab Mukherjee.

Meanwhile, RIL board of directors fixed 12 October 2007 as the record date for the purpose of determining the shareholders of Indian Petrochemicals Corporation (IPCL) who will be entitled to receive equity shares RIL in terms of the scheme of amalgamation. RIL will issue its 1 equity share of Rs 10 each for every 5 equity shares of the IPCL held on record date.

Reliance Industries stock hit a life time high crossing Rs 2,000 and is currently traded at Rs 2,015.