Category: Equity Research

Citigroup research has terminated coverage on Shipping Corporation of India Limited due to lack of investor interest in the stock.

Given global shipping team’s expectations of a stablisation in charter rates over 2007 / 10E in the tanker and the dry bulk segments, we expect SCI’s earnings to decline moderately over FY07-10E.

Final recommendation for the security is Sell/Medium Risk (3M) with a target price of Rs 171. Target price for SCI is calculated by using simple average of the long-term P/BV and the current NAV. Fair-value NAV/share is Rs204. SCI’s long-term average P/BV is 0.68x. The share price trades within a fairly steady band of +/-1 standard deviations. At an FY08E P/BV of 0.68x, the fair value is Rs138. SCI’s EPS is expected to fall to Rs 30.09 and Rs 27.46 for FY 08 and FY 09 respectively.

Shriram Transport Finance Company Limited delivered strong quarterly results on the back of strong asset growth. In addition to this, a marginal decline in the cost of funds also came in as a surprise. On the flipside, a wait and watch approach towards securitising its new CV loan book and more aggressive provisioning make us revise our estimates marginally downwards. RoAs continue to move up and we expect them to reach 3% by the end of this fiscal. UTI Securities upgrades target price to Rs. 195 and assign an ‘Outperformer’ rating to the stock.

Preowned CV disbursements grew 77.4% yoy, while new CV disbursements grew at 3.8% yoy. On a QoQ basis, new CV loan disbursements have declined by 30.5% while they have grown by 3.8% on a YoY basis.The quarter continued to witness increase in the share of institutional funds (from 67% to 78% yoy) in the borrowing book of the company. Reduction in the cost of funds, which was at 10.3% during the quarter, was a positive surprise.

Earnings per share (EPS) are expected to grow at a CAGR of 55% over the next two years. The company is expected to deliver RoA of 3% and 3.5% for FY08E and FY09E respectively and RoE of 27% and 29% for FY08E and FY09E respectively. The stock currently trades at 2.2X FY08E and 1.7X FY09E Adjusted Book Value (ABV). One year target price of Rs. 195 for the stock implying a 18% upside.

Sharekhan Equity Research has raised the price target of WS Industries a small cap company from Rs 75 to Rs 108.

Q1FY2008 WS Industries’ (WSI) top line grew by 21% to Rs.47.7 crore, which was slightly above expectation.The profit after tax (PAT) increased by 142.4% to Rs3.95 crore; the PAT growth was higher mainly due to a decrease in both the interest cost, which dropped by 9% year on year (yoy) to Rs1.72 crore, and the depreciation cost, which fell by 4.6% to Rs9 crore yoy. A healthy order book of Rs190 crore, which is about 1.15x its FY2007 revenues.

WSI’s realty subsidiary at the current realisable value of Rs3,500 per square feet. Taking WSI’s current 59% stake in the realty venture, Sharekhan arrives at a value of Rs29 per share, which gives us a fair value of Rs108 per share of WSI. Sharekhan is positive on the stock and maintain Buy recommendation with a revised price target of Rs108.

Here is the list of stocks Kotak Research has recommended in the past and they have followed up on the same. We are not comfortable with the entire list for variety of reasons – Management, Growth etc or our analyst may have not thoroughly studied the stock. The filtered list of stocks with Target price quoted by Kotak is as follows.

• Strides Acrolab – Rs 475
• Indraprastha Gas – Rs 165
• Bharat Forge – Rs 401
• Allcargo Global – Rs 1,346
• Punjab National Bank – Rs 699
• Tata Motors – Rs 902
• Mahindra and Mahindra – Rs 926
• Amtek India – Rs 222
• Wipro – Rs 560
• HCL Technologies – Rs 390
• TCS – Rs 1,350
• AIA Engineering – Rs 1,709
• ONGC – Rs 1,070
• Crompton Greaves – Rs 345
• Satyam Computers – Rs 552

Buy small quantities of PNB, if you don’t have any, for really long term [5 years] and HOLD them tight.

Power Trading Corporation – PTC was recommended by ICICI Securities Research. In a follow up report they have reiterated a BUY with a price Target of Rs 96 within 3-4 months.

We had recommended Mphasis last month. Citigroup in a report released just a while ago has recommended a BUY on the stock with a price target of Rs 400.

Mphasis reported consolidated numbers (Mphasis + EDS India) after the merger with EDS India. Revenue at Rs.5.32b was up 6% qoq (up 14% in US$ terms) while net profit was Rs.513m (-19% qoq) – negative swing of ~Rs.145 qoq in forex line. Mphasis (ex EDS) reported revenues and net profits of Rs.3.55b and Rs.410m as against our expectation of Rs.3.54b and Rs.297m.

Target price of Rs400 is based on 24x FY09E EPS. We believe P/E remains the most appropriate valuation measure given Mphasis’ profitable record and high earnings visibility.

HDFC Securities in a Research Report has put a BUY recommendation on Wockhardt with a price target of Rs 570. Last week, we had reported that Citigroup also had a BUY recommendation on Wockhardt with a Price Target of Rs 530.

HDFC Securities is bullish on Wockahrdt’s prospects, especially in the European market where it is the largest Indian company. Currently, the company derives more than 50% of its revenue from the European market. It has also ramped up its US business by introducing a number of generic products here. Last year, its US business grew by more than 50% and is expected to perform extremely well in the next two years on the back of strong New Drug Applications which are in pipeline.

Wockhardt is also active in New Chemical Entity research. Its proprietary molecule, WCK 771 is currently in phase II. The company has started capitalizing on the opportunity offered by CRAMS (Contract Research And Manufacturing).

Wockhardt is expected to report an EPS of Rs. 35.1 for CY07 and Rs 43.9 for CY08. The stock currently trades at a forward PE of 10.6x and 8.5x respectively. The stock is trading at a steep discount to its peers. HDFC Securities recommends a BUY, with a price target of Rs 570 based on a PE of 13x on the CY08 expected EPS of Rs 43.9