Category: Equity Research

Citigroup Research in a report released just a while ago has put a BUY recommendation on Fortis Healthcare with a price target of Rs 100.

Fortis Healthcare is a Ranbaxy group company. Fortis has fallen 24% since its listing in May-07. We at Dalal Street Business had an Avoid recommendation on the IPO. However, we believe that the company is in a sunrise business and one may start accumulating the stock in small lots.

Citi believes inadequate health care infrastructure and limited government investment provide significant opportunities for the private sector. Fortis has scaled up through organic and inorganic measures, and has built a strong brand equity in North India. Fortis’ focus on super-specialty care bodes well for the company. Fortis will enter a high-growth phase over the next few years (a 53% EBIDTA CAGR over FY07-10E), led by improving efficiencies in existing hospitals and rapid expansion. It also has an aggressive acquisition track record.

Fortis is expected to report a fully diluted EPS of Rs -2.18 for FY08 and Rs 0.60 for FY09.

ICICI Bank’s Stock Research team has put a BUY recommendation on Tamilandu Newsprint Ltd [TNPL] and Power Trading Corporation India [PTC].

Tamilnadu Newsprint Ltd:
TNPL could increase its average realisation by 8.65% to Rs 35,092 per tonne of paper. This was achieved by reducing newsprint production by 46% to 2,950 tonnes and increased production of copier by 23% to 44,407 tonnes. TNPL added another 7.5 MW of wind power bringing it to 37.5MW. Mill Development Plan Phase-I is underway as per schedule. It is expected to come on stream in August 2007. The backward integration initiatives taken in phase-I would give a saving of Rs 2250 per tonne and is expected to add Rs 45 crore to the bottom line.

TNPL is trading at a P/E multiple of 5.51x its FY08E EPS of Rs 16.87. These valuations extremely attractive for a company that is likely to record earnings growth of 36% during FY07-FY08E. Moreover, with an EV/EBIDTA at 5.09x in FY08E, current valuations are even more attractive. TNPL is an out performer with a price target of Rs 135 over the next 12 to 15 months.

Power Trading Corporation:
During FY07, PTC has entered into long-term power purchase agreements (PPAs) for six projects aggregating a capacity of 3,144 MW, and power sale agreements (PSAs) for another six projects aggregating a capacity of 2,314 MW. The cumulative capacity tied up through PPAs stands at 6676.3 MW and on sale through PSAs/MOUs for sale stands at 5286.5 MW.

The company has also entered into MoUs for another 35 projects totaling to a capacity of 16,703 MW. The PPA and PSA for these are still being negotiated. Development of new businesses gained further momentum with several advisory cum-transaction agreements being structured. PTC’s advisory service, which commenced in the previous year, has an order book of Rs 3 crore

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 highgrowth, high-margin long-term trading should help it sustain growth. Buy PTC with a price target of Rs 95.

Citigroup in a research report released just a while ago has put a BUY recommendation Tech Mahindra with a price target of Rs 1920.

TechM is the largest Indian IT services player in the TSP space. IT spend by TSPs is expected to remain robust – and TechM should be a prime beneficiary given its strong relationships with the likes of BT (which owns 31% of the company) and AT&T.

Target FY09E P/E multiple of 21x represents a 10% premium to our fair-value multiple for Satyam – which Citi believes is justified by TechM’s 32% recurring EPS CAGR over FY07-FY10E (vs. 20% for Satyam).With superior growth prospects, TechM should continue to trade at a premium to more diversified players like Satyam / HCL Tech and i-Flex.

Tech Mahindra is likely to report a fully diluted EPS of Rs 63.55 and Rs 91.23 for FY08 and FY09 respectively.

If you would like to read the entire report drop a line to feedback @ dalalstreet.biz

Citigroup in an exclusive research report released just a while ago on Indian Auto sector has a BUY on Amtek Auto and Amtek India. They are neutral on Bharat Forge Ltd.

Our internal research analyst had recommended Amtek Auto a year ago. Citigroup has put a BUY recommendation Amtek Auto Ltd with a price target of Rs 521 up from Rs 458. Amtek Auto is expected to report fully diluted EPS of Rs 29.05 and Rs 34.76 for FY08 and FY09 respectively. Target price of Rs521 is based on 15x FY09E fully diluted EPS estimates. The current multiple is well supported by earnings CAGR of 25% over FY07E-09E.

Citi has also put a BUY-1M on Amtek India [Amtek Auto group company] with a price target of Rs 221. Amtek India is expected to report fully diluted EPS of Rs 13.32 and Rs 18.46 for FY08 and FY09 respectively. Citi forecasts consolidated fully diluted earnings to grow at 38% CAGR over FY07E-09E driven by top-line growth and moderate expansion in margins.

Target price of Rs221 for Amtek India, implying c30% upside from current levels, is based on 12x FY09E EPS estimate of Rs18.5 (fully diluted). Target price implies a one-year forward P/E of 16.6x on our FY08E EPS, c30% premium to current levels, which we believe is well supported by strong earnings CAGR over the next two years.

ICICI Securities expects Saregama to once again dominate the Indian music industry and replicate its dominant performance which it showed for decades. Given the robust growth in the high margin business like publishing and home video coupled with effectively utilization of the music library ICICI expects Saregama to command improved valuations given its high earnings visibility. At the current price of Rs 302, the stock at a P/E of 21.15x FY08E EPS of Rs14.28 and 16.77x FY09E EPS of Rs 18.01. ICICI rates the stock as an OUTPERFORMER with a price target of Rs 405, 22.5x FY09E.

The company is expected to report an EPS of Rs 14.28 for FY08 and Rs 18.01 for FY09. You can download and read the entire report. [PDF]

Kotak Sec research group has put a BUY on Container Corporation of India Limited [CONCOR] with a price target of Rs 3,000. Potential upside of 35% from current levels.

Container traffic expected to touch 20 mn TEUs by 2015:
In FY07, Indian ports handled 5.4 mn TEUs as against 4.6 mn TEUs in FY06, thereby recording strong YoY growth of 17.1%.

Headroom for raising traffic till rail freight corridor becomes operational:
Currently, Concor runs approximately 16 to 17 trains in a day. On an average, it runs two trains to Mundra port, one to Pipavav and the remaining between JNPT and Delhi ICD. It is expected to go up to 22 and ultimately to a maximum of 25 trains per day on the current network of Indian railways.

Foray into end-to-end logistics services:
Concor has successfully forayed into offering end-to-end logistics solutions to its customers for domestic cargo. The company has tied up with various service providers like road transporters and coastal shipping companies to offer the entire gamut of logistics services.

Cold chain project:
Concor has already commenced commercial operations of its cold chain project in a phased manner. The entire cold chain project is being carried out under a wholly owned subsidiary named Fresh and Healthy Enterprises Ltd, incorporated in February 2006.

Auto carrier project:
Concor is moving ahead with its auto transportation project. The company has developed a special design of wagons to carry cars across the country on the Indian Railway network, primarily to bring down the cost incurred on transportation.

Financials of Container Corporation of India Limited:
Kotak maintains earnings estimates for FY08 and expect Concor to report net sales of Rs.38.3 bn, EBIDTA margin of 30.3% and PAT of Rs.8.2 bn, thereby translating into an EPS of Rs.126.7 and CEPS of Rs.144.3.

In FY09, Kotak expects Concor to report net sales of Rs.45.3 bn, that is, sales growth of 18.3%, EBIDTA margins of 30.0% and PAT of Rs.9.7 bn, that is, YoY growth of 17.9%, thereby translating into an EPS of Rs.149.3 and CEPS of Rs.169.9.