Category: Equity Research

Citigroup in a research report released just a while ago has maintained a BUY on Indraprastha Gas with a price target of Rs 156. Indraprashta Gas is expected to record a 21% annual growth between 2006-09.

Citi projects growth in PNG penetration, with renewed focus as compliance-led skew toward CNG should moderate; (2) regulatory upside potential, with the Delhi government mandate for conversion of new LCVs to CNG; (3) geographical growth in the National Capital Region; and (4) discretionary demand growth.

Indraprastha Gas is expected to report an EPS of Rs 9.18 and Rs 11.06 for FY07 and FY08 respectively. On DCF model Citi recommends a BUY with a price target of Rs 156. Target price for IGL is also based on a Price/Cash Earnings of 11.1x FY07E.

Citigroup in its research report continues to be Bullish on the prospects of Bharti Airtel. Citi factors into its price targets the valuations of Telecom Towers these companeis have which are likely to be hived off as separate entities and may also be listed on NSE or BSE.

Bharti Airtel Leads the Pack:
Bharti’s towerco has a headstart given: 1) the highest tower market share (~40%), 2) unconditional rollout plans (30,000 towers in FY08), and, most importantly, 3) an MoU with Vodafone that imparts greater visibility on average tenancy and operating margins.

Citi has set a 12-month forward target price of Rs 960 is based on core DCF of Rs 800 and a towerco option value of Rs158.

Reliance Communications:
In the case of RCOM, however, Citi uses EV/EBITDA in the absence of a detailed balance sheet and lack of transperency from Management. 12-month target price of Rs510 is based on 9.6x FY09E EV/EBITDA, at a 15% discount to Bharti’s target multiple (ex- towerco) to reflect the uncertainty regarding the timing of GSM rollout and the associated challenges. Citi also maintains a Medium Risk rating on RCom.

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%

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.

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.

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.