Category: Equity Research

Kotak Securities and DSP Merill Lynch have put a BUY recommendation on Panacea Bio tech with a price target of Rs 513.

Panacea’s net sales rose 55.4% driven by 64% growth in vaccine sales and 32% growth in formulation sales. The Novartis-Pancea joint venture has registred a 100% growth in sales. Net Profit after tax rose sharply 149% to Rs 1.48 bn against Rs 529 mn. EBITDA margins expanded to 27.8% against 22.1% in FY06. The company reported fully diluted EPS of Rs 22.4

For FY08 and FOY09, Kotak expects Panacea to report EPS of Rs 31 and Rs 35 respectively. Kotak and Merill Lynch both maintain a BUY with a price target of Rs 513.

The Steel stocks are all on fire. Sharekhan and HDFC upgraded JSW steel to a BUY. Now ABN Amro has put a BUY on Tata Steel with a price target of Rs 700.

Tata Steel’s bold move to acquire Corus will lift its profits sufficiently to overcome equity dilution. ABN expects its strategy of pursuing high-value, high-growth markets, while growing its low-cost production base, to deliver strong returns. Tata Steel’s consolidated profits will increase 89% in FY08, while EPS on a fully-diluted basis will rise 25%. In ABN’s opinion, the market has focused on the potential 41% increase in issued shares, but may have underestimated the earnings contribution Corus can offer.

Tata Steel will deliver an average EPS CAGR of 23% over FY08-10, with sales volumes boosted by the Corus acquisition plus further expansion of its facilities and given a robust steel price outlook in Europe and India. ABN Amro reiterates Buy rating on the stock, with an increased price target of Rs 700, based on 2x FY08E P/B.

Tata Steel’s projections by ABN Amro.
Tata Steel is likely to report full year revenue of Rs 1173388 1188933 1232227 million for FY08 FY09 and FY10. Fully diluted EPS is expected to be around Rs 93.3, Rs 110 and Rs 113 for the corresponding years.

One should not be surprised even if the stock surpasses Rs 700.

Their are BUY reports coming from HDFC Securities and Sharekhan on JSW Steel. The company has lined up a 2.6x jump in capacity over FY06-10 to 10mtpa, which would arguably make it the second largest steel manufacturer in India.

JSWS embarks on a Rs170bn expansion over the next few years, Sharekhan does not expect debt-equity ratio to cross 1.1x. JSWS has a track record of strong project execution and has also been able to bring down specific investment cost per tonne with each phase of expansion.

At 5.5x FY08E earnings, we see room for further appreciation in the stock price. Notably, JSWS offers significant volume growth over the next few years, and hence is not a pure leverage story on steel prices. However, considering the scale and growth visibility, SSKI analyst believes that the stock deserves to trade at a premium to peers. SSKI / Sharekhan initiates coverage on JSWS with a price target of Rs 729 per share.

JSW Steel is expected to report an EPS of Rs 103.3 for FY08 and Rs 112.5 for FY09.

Note from Dalal Street Business:
JSW Steel is at the top of Holding List of Sr. Fund Manager, Sunil Singhania @ Reliance Fund.

In a significant investment update, Citigroup analyst, Rahul singh and Saurabh Handa have upgraded Reliance Industries Ltd to Buy/Low Risk from Hold/Low Risk with a new Target price of Rs 2,005 from Rs 1,450.

They cite the following reasons for the change in Rating. Exploration success leading to switch to traditional multiples for the E&P business. Sustained refining cycle leading to core earnings upgrade (17-19% for FY08-09E) and higher contribution from RPL.

In absence of new refineries in the Middle East, due to cost inflation, which bodes well for RIL’s margins in FY08-09E. Besides, RIL’s differentials over benchmarks have expanded to US$5-8/bbl over the past five quarters, the primary driver of earnings upgrade.

The Sum of Parts Valuation of Reliance Industries Ltd is as follows.

IPCL Rs 29
Reliance Petroleum Rs 243
E&P Assets Rs 631
Organised Retail Rs 125
Total value of investments & other assets Rs 1,027
EV of businesses Rs 826
Net Debt adjusted for key investments Rs (934)
Value of Treasury stock Rs 245

Citigroup Research analysts have downgraded Infosys Technologies Target price from Rs 2,580 to Rs 2,400. Citi analysts have discussed with the management of Infosys who see robust demand but rising rupee is a concern. Infosys is likely to report an EPS of Rs 80.20, Rs 97.48 and Rs 110.64 for FY2007, FY2008 and FY2009. Thus Citi analyst have revised the target price downwards to Rs 2,400.

In an earlier report released early this morning, Citi analysts see the Indian Rupee stronger against US Dollar which will hurt companies like Infosys and TCS.

In the wake of Mega DLF Real Estate IPO, we at Dalal Street Business felt that it is of utmost importance to educate the Indian investor on how Real Estate has matured as a Industry but still with lot of issues.

Due to DLF-IPO Scam in 2006, the promoters of DLF get a Zero on Transparency issues.

How DLF Cheated Small Investors – Part -1

The DLF IPO Scam on Small Investors – Part 2

Over period of time various Research Houses have recommended various Stocks because of Land Bank saga. JeeZ!!! Also, don’t forget the hype which Udayan and Mitali create on CNBC TV 18 on Land Bank Stories, which is utter non-sense. This is no FUC*ING Bollywood. We are here to create some serious wealth and build the Indian economy.

Days are not far from the impending correction in Global Equities as suggested by some J P Morgan Analyst in early Jan-07 [I forget his name, but he is a Desi] Here are some of the Research Reports by very good institutions. We don’t care for third rate brokerage houses like Anand Rathi, Karvy, Religare, Anagram etc.

[All the following reports are PDF, Right click on the link, choose “Save As” and download them]

• Citigroup Research – India Real Estate December 2006
• Citigroup Research – India Real Estate May-2007
• DSP merill Lynch on Ansal Properties and Infrastructure
• ENAM – India Real Estate Research
• Kotak – Sobha Developers
• Macquarie – India Property Research
• Macquarie Research – Mahindra Gesco
• Macquarie Research – Unitech
• Sharekhan – India Realty
• UBS – Unitech

Also read on how to value Indian real estate stocks. Keep your fingers crossed until our research team comes out with its recommendation on DLF IPO.