Religare Views on Axis Bank, Divis Labs, Deepak Fertilizers, PSL, Gujarat Industries Power

Buy Gujarat Industries Power Co, Target Rs 123

Religare Research has maintained its buy rating on Gujarat Industries Power Company with a target price of Rs 123 in its August 6, 2008 research report. "The company's revenue at Rs 2,624.5 million was above our estimate by 31.4% due to higher fuel prices for its gas based power plants at Baroda. The higher fuel cost being a pass-through increased the revenue by 22% YoY. The EBITDA of the company at Rs 554.5 million was down 21.4% YoY mainly due to the additional O&M expenditure incurred during the planned annual shutdown of its 250MW lignite based plant at Surat. The net profit of the company was also below our expectation by 8% at Rs 224.9 million, showing a negative growth of 40.5% YoY due to additional O&M expenditure and lower other income."

"We are revising our estimates to incorporate the higher fuel cost which is a pass-through and the delay in commissioning for its SLPP II project. The stock is currently trading at 1x its FY09 and FY10 book value, a considerable discount to its peers. We have revised our DCF assumptions for the risk-free rates to 9.3% from the earlier 8.4% to reflect the current interest rate scenario. Based on the weighted average of the DCF and P/BV methods, we arrive at the target price of 112 down from our earlier target price 123 maintaining our Buy recommendation," says Religare's research report.


Buy PSL, Target of Rs 500

Religare Research has maintained its buy rating on PSL with a target price of Rs 500 in its July 16, 2008 research report."Net sales increased by 59% YoY to Rs 6.5 billion on the back of strong volume growth (+32.8%) and Rs 600 million of additional revenue contribution from the sale of pipe manufacturing mill to the US subsidiary. EBITDA increased by 46.2% YoY and 24% QoQ to Rs 594 million. EBITDA margins expanded by 180bps QoQ to 9.1%. Adjusted PAT increased by 52% YoY and 41.1% QoQ to Rs 260 million. Adj. PAT margins expanded by 120 bps QoQ to 4%."

"At the CMP of 310, the stock trades at 9.0x FY09E diluted earnings. We maintain our Buy recommendation on the stock target of Rs 500," says Religare's research report.

Buy Deepak Fertilizers, target of Rs 183

Religare has maintained its buy rating on Deepak Fertilizers and Petrochemicals Corp with a price target of Rs 183 in its June 10, 2008 research report. "The company is expanding its diluted nitric acid capacity to 1,350MT/day from 900MT/day by June 2009 with a total investment of Rs 1.1 billion. This is expected to elevate its market share from 48% to 58%, while boosting the production of nitro phosphates and ammonium nitrate. The company has started to procure."

"0.2–0.3mmscmd of LNG from GAIL through its Dahej-Uran pipeline, which is expected to increase plant capacity utilisation. It also expects gas supply from the Reliance KG-basin to commence shortly. This apart, Ishanya will lend an added dimension to profitability. We maintain our Buy recommendation on the stock with a price target of Rs 183," says Religare's research report.

Buy Divis Labs, target of Rs 1833

Religare has maintained its buy rating on Divis Laboratories with a target price of Rs 1833 in its June 10, 2008 research report. "Divi's remains our preferred pick in the Indian CRAMS space, given its healthy relationship with top innovators amid a growing outsourcing trend. Through its focus on high-margin CCS, the company's EBITDA margin will remain amongst the highest in the CRAMS segment. Further, as Divi's emerges from its heavy capex phase, we expect return ratios to improve significantly. We estimate a PAT CAGR of 28% to Rs 6bn over FY08-FY10, and maintain Buy with a target price of Rs 1,833," says Religare's research report.

Buy Axis Bank, target of Rs 805

Religare Research has maintained its buy rating on Axis Bank with a revised target price of Rs 805 in its July 16, 2008 research report. "Axis Bank's Q1FY09 results have surpassed our estimates primarily on the strength of higher loan growth and robust non-interest income. NII expanded 93% YoY to Rs 8.1 billion, driven by increased asset growth as advances and deposits swelled 48% and 46% respectively. In another key positive, fee income surged 80% YoY during the quarter to Rs 4.8 billion, aiding net profit growth of 89% to Rs 3.3 billion.""The management expects to maintain the robust business growth momentum in the coming months. However, the weakening asset quality remains a concern. We have revisited our estimates for fee-based income to incorporate the strong growth during the quarter, while raising our estimate for provisioning expenses in FY09 and FY10 on account of higher non-performing assets and depreciation on investments. On a net basis, these changes have no impact on our profit targets. In light of the increased market risk, we have raised our DDM valuation assumptions for risk free rate to 9.1% and beta factor to 1.2. This gives us a revised target price of Rs 805 from Rs 984. We maintain a Buy on the stock," says Religare's research report.