Stock view on Aban Offshore, Tata Chemicals, Axis Bank

Asit C. Mehta on Aban Offshore - Target of Rs 2932

Asit C. Mehta has recommended a buy rating on Aban Offshore (AOL) with a target of Rs 2932 in its September 23, 2008 research report. "We expect AOL’s sales to grow at a CAGR of 58% and PAT to grow at a CAGR of 294% from FY08 to FY10E. Addition of new rigs and renewal of contracts is expected to lead AOL’s growth in FY09E and FY10E. At the CMP of Rs 2380, AOL is trading at 7.9x its FY09E EPS and 4.9x its FY10E EPS. Considering average P/E multiple of 6.4x for the international players, we recommend Buy on “Aban Offshore Ltd.” for a target price of Rs 2932, which is equivalent to a forward P/E multiple of 6x to AOL’s FY10E EPS of Rs 488.7," says Asit C. Mehta's research report.

Karvy Stock Broking on Tata Chemicals - Target of Rs 441

Karvy Stock Broking has maintained its buy rating on Tata Chemicals with a target of Rs 441 in its September 23, 2008 research report. "The consolidated net sales and net profit of Tata Chemicals is expected to grow at CAGR of 29.4% and 37.4% during FY08-10E on the back of organic growth as well as inorganic growth. At the current market price of Rs 272 the stock is trading at 10.7xFY09E and 7.3xFY10E expected earnings. Hence, we maintain our target price of Rs 441 and rate the stock as a BUY.," says Karvy Stock Broking's research report

Anand Rathi Securities on Axis Bank - Target of Rs 790

Anand Rathi Securities has recommended a buy rating on Axis Bank with a stoploss of Rs 675 and with a target of Rs 790. "We suggest buying this stock at around current price with a Stop Loss of Rs 675 with the target of Rs 790. Accumulate more if it comes close to the support level. If it moves above Rs 790 level then it can even touch Rs 840 Levels," says Anand Rathi's research report.

Stock View on Reliance Capital, Sesa Goa

MOTILAL Oswal on Reliance Capital

MOTILAL Oswal downgrades Reliance Capital to ‘neutral’ with a revised target price of Rs 1,340. Reliance Capital’s management has reiterated its objective to emerge as one of the leaders in all business verticals of financial services. The strategy is to create ‘a difficult-to-replicate’ distribution reach across the country, a mass retail customer base and exploit cross-sell opportunities. However, the larger businesses are linked to capital markets, which pose growth uncertainty in the current environment. Life insurance premiums are growing rapidly and Reliance Capital is fast gaining market share. The company has rapidly built its consumer finance book, which stood at Rs 8,100 crore as of June ’08. Motilal expect profits and return ratios to remain low in this business. The general insurance business witnessed strong topline growth in FY08, but is likely to continue reporting losses in FY09. Profitability is expected only in FY10. The broking and distribution venture is scaling up fast and has gained ~3.5% market share in the first year of operation from purely retail business. Motilal has reduced its fair valuations for general insurance, broking and consumer finance businesses due to bleak outlook on either business growth and/or profit growth.

KOTAK SECURITIES on Sesa Goa

KOTAK Securities reiterates a ‘buy’ rating on Sesa Goa with a target price of Rs 300 per share for an investment horizon of eight months. The stock price has been tumbling continuously over the past few weeks. It has now fallen more than 50% from its peak and is even trading at a discount to the price Vedanta paid last year to acquire the company from Mitsui. At that time: (i) iron ore prices were half that of the present levels;
(ii) sales volumes were considerably lower,
(iii) cash levels were also much lower; and
(iv) other competitors had shied away from bidding due to imposition of Rs 300/tonne export duty on iron ore just before the process.

Several factors have collectively led to this fall. The key negatives are:
(i) seasonal weakness;
(ii) lower import demand from China, given curtailed steel production due to Olympics and Paralympics;
(iii) global commodities sell-off as financial institutions pull out funds to enhance liquidity amidst the global financial crisis; and
(iv) higher coke prices in China causing weakness in low-grade iron ore prices.

However, these negatives are fading away and this will result in a dramatic shift in sentiment, going forward.

Stock Views on Power Grid, Karnataka Bank, Bharti Airtel

INDIABULLS SECURITIES on Power Grid

INDIABULLS Securities initiates coverage on Power Grid Corporation with a ‘buy’ rating. Power Grid is a central transmission utility engaged in inter-state and inter-regional power transmission business. Over a period of 16 years, it has emerged as one of the largest and best-managed transmission utilities in the world. Currently, it operates around 67,000 circuit km of transmission lines, along with 111 sub-stations and transmits 40-45% of the power generated in the country. The company has around 45 projects in hand, which will drive its revenues and earnings in the medium term. Indiabulls estimates that Power Grid’s net sales and net profit will witness a CAGR of 20.5% and 19.5%, respectively, by ’10 on the back of significant investment opportunities. At the current market price (CMP), the stock is trading at a price-to-book (P/B) multiple of 2.7x. Based on the valuations, the target P/B multiple of the stock is 3.29x, resulting in a fair value price of Rs 110. This implies a potential upside of 21% from the CMP.

DEUTSCHE BANK on karnataka Bank

DEUTSCHE Bank has a ‘sell’ rating on Karnataka Bank with a target price of Rs 115. The ‘sell’ call is based on the following parameters: (i) Frequent equity dilution by the bank in its pursuit of maintaining higher Tier-I ratio, resulting in lower normalised leverage and return on equity (RoE); (ii) Consistently deteriorating asset quality, as higher exposure to retail and small & mid-corporate segments makes it vulnerable to any significant downturn in the asset quality cycle; (iii) Large proportion of the investment portfolio in available for sale category exposes the bank to higher mark to market risk; (iv) Unsatisfactory traction on the fee income front; and (v) Absence of consolidation as a trigger after FY09, as the Reserve Bank of India (RBI) is unlikely to allow foreign banks to acquire private sector banks.

HSBC on Bharti Airtel

HSBC retains ‘overweight’ rating on Bharti Airtel with a target price of Rs 1,002. The investment thesis expects sharp growth in the domestic wireless market, outstanding execution of a low-leverage, low-cost business model with high return on invested capital, and continued alignment of majority and minority shareholder interests. Principal risks will be upward revision of subscriber-based criteria for additional spectrum, hike in spectrum charges, aggressive international expansion and higher capital expenditure (capex) than HSBC’s estimates. Receipt of 3G spectrum should aid Bharti in consolidating market leadership. If the new entrants are able to manage roll-outs, players like Tata Teleservices, Reliance Communications and BSNL will be more vulnerable. The impact on Bharti will be the least. Bharti was willing to pay the government an additional Rs 2,600 crore for 4.4 MHz to start up 2G spectrum.

Stock Views on Bartronics, Onmobile Global, PG CIL, HDFC

HDFC Securities on BARTRONICS INDIA - Target RS 234
HDFC Securities has initiated coverage on the stock with a ‘buy’rating saying the fast growing AIDC (Automatic Identification and Data Capture) technology in India will further boost the company’s order book and topline. “The company’s market share of around 90-95% in smart card and RFID (radiofrequency identification) segments offers all AIDC solutions under one roof. The company’s early entry into smart card manufacturing, will help retain its dominance in the area,” said HDFC in a note to its clients. It expects the revenues and profits of the company to grow at CAGR of 72% and 78% over FY08 to FY10E (estimated). “The stock is trading at 6.5 times and 3.8 times its FY09 (estimated) and FY10 (estimated) FDEPS (fully diluted earnings per share),” said the note.

MACQUARIE Research on Onmobile Global - TARGET PRICE: RS 650

MACQUARIE Research has initiated coverage on OnMobile Global with an ‘outperform’ rating saying the stock has a 42% upside from current levels. “We are excited about the opportunities in the Indian mobile value-added service (VAS) sector as well as in emerging markets. OnMobile is India’s No 1 mobile VAS provider, with around 30% share of India’s VAS market (ex-SMS),” said Macquarie in a note to its clients. The brokerage expects a 2 year FY3/08–10E EPS CAGR of 42.5% for the company, led by topline CAGR of 58%, marginally offset by one-time dip in margin in FY3/09E. According to Macquarie, recent M&A transactions have opened the door for OnMobile to tap the potential offered by the international VAS market. “OnMobile’s international revenues are likely to grow at a faster pace (FY3/08–13E CAGR of 63%) than growth of its domestic revenue (35.5%),” said the note. The brokerage feels that change in business model and large premiums for future acquisitions could result in value destruction for On-Mobile.

CITIGROUP on PG CIL - TARGET PRICE: RS 86

CITIGROUP Global Markets has initiated coverage on the stock with a ‘sell’ rating saying PGCIL will be FCF (free cash flow) negative until FY12E (and potentially beyond) and will not offer much dividend yield. “Investors consider dividend yield as a reason to invest in utilities with regulated earnings streams. We think PGCIL would be very compelling the day growth capex stops,” said Citi in a note to its clients. Citigroup expects PGCIL’s earnings to grow at a 15% CAGR over FY08-11E with RoE of 13-15%. If compared with the peers, PGCIL has traded at a premium to NTPC post listing, says Citi. “We note that PGCIL’s listing happened prior to the Reliance Power IPO and the associated lofty valuations for all Indian Electric Utility stocks during that time, and thus its valuations have been further propped up. And we feel the premium is not sustainable,” the note said. Citigroup has set its target price for PGCIL at a P/BV (price to book value) of 2.2x FY10E, which is at a around 10% discount to the implied ‘ceiling’ multiple for NTPC.

CLSA Research on HDFC - TARGET PRICE: RS 2,330

CLSA Research has maintained a ‘buy’ rating on the stock saying HDFC has not seen deterioration in asset quality due to rise in rates and its plans to list a couple of subsidiaries in CY09 may act as a catalyst. “HDFC expects its growth to sustain at +20% for next three years, as housing affordability remains high and it continues to gain market share from banks. Spreads might contract in short term due to liquidity crunch, however estimated to remain around 2.2%,” said CLSA in a note to its clients. According to CLSA, most of HDFC subsidiaries continue to scale up with better profitability amongst their competitors. “HDFC standard life (HDFC’s life insurance subsidiary) has a persistency rate of +85% which is the highest amongst all players; HDFC Mutual funds have much higher net margins than any other asset manager in India (2nd largest player) and HDFC bank is the most profitable banking franchise in India,” the note said. “Adjusting for the value of subsidiaries, HDFC is trading at 4.2x FY09CL (calendar year), with an estimated ROE of 25% in FY09CL,” the note added.

Angel Broking Views on Gujarat State Petronet, Gujarat Gas Company

Angel Broking on Gujarat State Petronet - Target price Rs 133

Angel Broking has maintained buy rating on Gujarat State Petronet with target price of Rs 133 in its May 09, 2008 research report. "GSPL is likely to be one of the prime beneficiaries of the increased gas availability from the KG basin as well as from the West Coast. Pipeline expansion is expected to drive future growth for the company. Strategic stakes in CGD ventures are likely to add value over the next couple of years. We have valued GSPL using DCF methodology, Cost of Equity - 15.6%, WACC - 10.1% and Terminal growth rate - 2.5%. Due to higher volatility we have assigned higher risk premium to the company and subsequently downgraded our Target Price. We remain positive over the prospects of GSPL and maintain a Buy, with a Target Price of Rs107 (Rs133)" according to Angel Broking report.

Angel Broking on Gujarat Gas Company - Target price Rs 340

Angel Broking has maintained its buy rating on Gujarat Gas Company with a revised target price of Rs 340 in its May 9, 2008 research report. "We believe CY2008 will be a challenging year for Gujarat Gas as gas supplies would continue to be a concern. However, we expect Guj gas to secure supplies of about 0.5-1.0mmscmd from different sources like the RIL KG basin gas, Petronet Spot LNG and incremental volumes from PMT fields. Gujgas' parent British Gas is actively seeking Spot LNG for Gujarat Gas, which we believe will ease out the concerns about gas supplies. Demand remains robust in current operational areas and expansion into newer territories will provide further impetus to gas sales."

He further added, "The stock has recently corrected significantly on the bourses over concerns about the CGD Regulations and gas supplies. CGD regulations are not likely to impact Gujgas' performance and the company has successfully tied up supplies with GAIL. Owing to these developments, we have revised our numbers and assigned the stock a lower multiple. The stock is available at 9.2x CY2009E EPS of Rs 28.4. We are positive on the company's growth prospects and maintain a Buy on the stock, with a revised target price of Rs 340 (Rs 396), says Angel's report.

Stock views on Petronet LNG, CESC, Asian Paint

Asit.C.Mehta on Asian Paint - Target price Rs 1419

Asit.C.Mehta research ahs maintained buy rating on Asian Paint wih target price of Rs 1419 in its May 13, 2008 research report. "Asian Paints Ltd. (APL) consolidated revenue for Q4 FY08 increased by 18.2% from Rs. 9,589 million in Q4 FY07 to Rs 11330 million in Q4 FY08. Whereas the consolidated revenue for FY08 increased by 20% from Rs 36,699.7 million in FY07 to Rs. 44,043 million. The growth was due to: The quantity sold increased by 18.7% from 481812 tonnes in FY07 to 571,911 tonnes in FY08. Increase in the value of sales due to good market conditions prevailing in domestic and Middle East. At CMP of Rs. 1230.0 the stock is trading at 25.6 x FY09E & 19.9x FY10E earnings per share. With Industry and company’s outlook remaining status quo and in line with our expectations. We maintain a “BUY” recommendation for Asian Paints Ltd. price-objective of Rs 1419 (implying a forward P/E multiple of 23x) on account of robust domestic demand for decorative paints" says Asit.C. Mehta research report.

Angel Broking on CESC - Target price Rs 643

Angel Broking has maintained buy rating on CESC with target price of Rs 643 in its May 13, 2008 report. "We remain positive on the domestic Power Sector and expect it to grow in line with the country’s GDP growth. Our positive stance stems from the fact that peak power demand in excess of 13% gives immense opportunity to players like CESC, who are in a position to tap this huge opportunity on account of their vast experience. Further, with the company also having huge expansion plans which are on track, we believe rapid growth would continue going ahead"

"We expect CESC to record a CAGR growth of 7.6% in Top-line over FY2008-10, while Bottomline would grow at a CAGR of 10.4% in the mentioned period. At the CMP, the stock is trading at 14.9x FY2010E EPS and 1.7x FY2010E P/BV. We have introduced our FY2010 estimates. We have also assigned a lower FY2010 P/BV multiple to the company’s existing Power business at 1.75x (earlier 2.5x FY2009E) owing to drop in relative valuations. Hence, we revise our SOTP Target Price to Rs 643 (Rs 723). Nonetheless, considering that the company is inexpensive in terms of P/BV on FY2010E basis, we maintain a Buy on the stock" according to Angel broking research report.

Angel Broking on Petronet LNG - Target price of Rs 90

Angel Broking has upgraded its rating on Petronet LNG to buy rating with a target price of Rs 90 in its May 9, 2008 research report. "Dahej expansion to 12.5 mmtpa (current 6.5 mmtpa) is slated to come on stream July onwards in a phased manner. Expanded capacity will help Petronet process more Spot volumes till the 2.5mmtpa contracted supplies from Qatar commence October 2009 onwards. For the next 2-3 years, growth will primarily be driven by Spot LNG and the expanded capacity will benefit from the situation."

"The company is now also diversifying into different segments like power, port development, etc., which is expected to generate value over a period of time. We have valued Petronet on DCF methodology with a Cost of Equity of 15.2% (high as it is a high beta stock), Cost of Debt - 10% and WACC - 9.2%. The stock is currently available at 9.8x FY2010E EPS of Rs7.7. Based on our DCF valuation model, we upgrade the stock to a Buy, with a target price of Rs 90," says Angel's research report

Stock View on Great Offshore, Tata Steel, Bharat Forge

ULJK Securities on Great Offshore - Target Rs 664

ULJK Securities has recommended an accumulate rating on Great Offshore with a target of Rs 664 in its September 9, 2008 research report. "Sales are expected to grow at a CAGR of 32% and profit is expected to grow by 21% over FY08-FY10E as contracts are expected to be done at higher day rates. Its EPS is seen at Rs 59.6 in FY09E and at Rs 80.4 in FY10E. At a CMP of Rs 543, the stock trades at a P/E of 9x & 6.6x its FY09E & FY10E earnings respectively. It is trading at EV/EBITDA multiples of 6.5x F2009 and 4.9x F2010. Based on the DCF methodology, we arrive at a share price of Rs 664. We recommend an accumulate rating on the stock with a target of Rs 664," says ULJK Securities' research report.

Religare on Tata Steel - Target price Rs 780

Religare Research has recommended a buy rating on Tata Steel with a target price of Rs 780 in its September 9, 2008 research report. "Tata Steel has historically traded at a forward EV/EBITDA band of 2–6x and at a P/E band of 2–7x across steel price cycles. We have valued the company at an EV/EBITDA multiple of 5x on FY10E–a discount to Asian and European steel players. At our target price, the stock would trade at a P/E of 6.2x one-year forward, Buy,target of Rs 780," says Religare's research report.

Indiabulls Securities on Bharat Forge - Target Rs 320

Indiabulls Securities Research has maintained its buy rating on Bharat Forge with a target of Rs 320 in its September 5, 2008 research report. "We have valued Bharat Forge by using a three stage Discounted Cash Flow (DCF) model with explicit forecast till 2010, middle period forecast between 2011-15, and terminal period from 2016. Free cash flows for the explicit period were calculated based on projects announced by the Company. For the middle and terminal period, cash flows were estimated assuming a free cash flow growth of 15% and 5%, respectively."

"For discounting the estimated free cash flows, we have assumed a WACC of 13.2% based on the cost of equity of 15.5% and cost of debt of 7.4%. This valuation gives us a target price of Rs 320, which is 27.8% more than the current market price of Rs 250.45. Hence, we reiterate our Buy rating on the stock," says Indiabulls Securities' research report.

Stock View on Reliance Communications, Idea Cellular, Assam Company, Great Offshore

Angel Broking on Reliance Communications - Target Rs 595

Angel Broking has maintained its buy rating on Reliance Communications (RCOM) with a target of Rs 595 in its September 20, 2008 research report. "We expect RCOM to record a 24% CAGR growth in Top-line over FY2008-10E, while Bottom-line is expected to grow at a CAGR of 17% over the same period. We estimate a relatively flat Margin profile. At Rs 374, the stock is trading at 10.9x FY2010E EPS. We maintain a Buy on the stock, with a Target Price of Rs 595. This includes Rs 479 as the core business value and Rs 116 as the value of the towerco, Reliance Infratel," says Angel Broking's research report.

Angel Broking on Idea Cellular - Target Rs 104

Angel Broking has maintained its buy rating on Idea Cellular with a target of Rs 104 in its September 20, 2008 research report. "At Rs 82, the stock is trading at 14.5x FY2010E EPS. We maintain a Buy on the stock, with a Target Price of Rs 104. This includes Rs 73 as the value of the core business and Idea’s stake in Indus Towers fetches Rs31. We have been conservative on the core business valuations, given the Margin pressures likely to be faced by the company owing to falling ARPUs, intensifying competition and regulatory risks," says Angel Broking's research report.

Anagram Research on Assam Company - Target price Rs 24

Anagram Research has upgraded its rating on Assam Company to buy with a target price of Rs 24 in its September 20, 2008 research report. "At CMP of Rs 20 we find the stock attractively valued. The stock looks expensive in terms of earnings as tea business contributed 80% of earnings while price factors in the future prospects of oil & gas business. We upgrade our rating to Buy with a price target of Rs 24," says Anagram's research report.

Stock Views on Everest Kanto Cylinder, Amtek Auto, Arvind Mills

CITIGROUP on Everest Kanto Cylinder

CITIGROUP remains positive on Everest Kanto Cylinder (EKC) and has recommended a ‘buy’ rating with a price target of Rs 365 due to its highest leverage to the strong growth that city gas in India is likely to witness over the next few years. EKC is the largest domestic manufacturer of high-pressure gas cylinders used for storage of industrial gases and CNG. EKC’s Q1 FY09 net profit of Rs 35 crore was up 57% year-on-year y-o-y) and well above expectations. The 12-month target price of Rs 365 is based on 19x September ’09E consolidated earnings. Key risks include: 1. Exposure to a single supplier; 2. China — a hitherto unexplored market; 3. Competition — low physical barriers to entry have led to some players entering the market in the recent past; 4. Project risk — EKC is implementing significant expansion plans that are subject to time and cost overruns; 5. CPI — integration and execution risks related to the acquisition of CP Industries; 6. Crude prices.

EDELWEISS on Amtek Auto

EDELWEISS has maintained its ‘accumulate’ rating on Amtek Auto and awaits clear signs of margin improvement. The company has been facing resistance to price revisions from its customers. Over the past three years, the standalone capex was Rs 1,500 crore. The company plans to consolidate its operations now, with incremental capex of only Rs 200 crore over the next two years. This is expected to aid improvement in return ratios, going forward. In addition, the company is looking at inorganic growth opportunities abroad to cement its position in the European and American auto markets. This project is valued at Rs 300 crore, of which, Amtek Auto’s equity contribution will be Rs 75 crore. The joint venture is likely to start operations Q4 FY10E onwards, and is expected to improve the company’s margins, going forward. The merger of group companies and subsidiaries is on track, and is likely to be completed by the end of March ’09. Further, the company is likely to house all its overseas subsidiaries in a Netherlands based holding company to streamline the group structure.

MORGAN Stanley on Arvind Mills

MORGAN Stanley has downgraded Arvind to ‘equal-weight’ and reduced the target price to Rs 34 from Rs 85. It believes that multiple macro headwinds are likely to force Arvind into a loss-making company in FY09. A slowdown in end consumer (US and EU) demand for its denim fabrics business is likely to delay the potential recovery in the denim cycle. A sharp rise in input costs such as cotton, power, fuel and chemicals is likely to impact margins. Huge debt and related financing costs are likely to impact net profit. The company’s forward cover for the dollar at Rs 40 for FY09 is likely to cap the potential benefit due to the current depreciation in the rupee. Although the company is adopting stringent cost-control measures, these may not be sufficient to help it earn a profit in FY09. In the current market environment, investors will be unwilling to pay value for its real estate and joint ventures, which can only be monetised in FY12. The positive catalysts are quick monetisation of its large real estate properties and cost control-driven margin expansion.

Stock Views on Glodyne Technoserve, HCL Technologies, ITC

Reliance Money on Glodyne Technoserve - Target Rs 815

Reliance Money has maintained its buy rating on Glodyne Technoserve with a target of Rs 815 in its September 22, 2008 research report. "At the current market price Rs 683, Glodyne is trading 11x FY09E and 6x FY10E. We maintain BUY, with a revised 12 months target price Rs 815; we had earlier given a target price of Rs 784. On our revised target price stock will be valued at 13x FY09E and 8x FY10E," says Reliance Money's research report.

Reliance Money HCL Technologies - Target Rs 248

Reliance Money has recommended a hold rating on HCL Technologies with a target of Rs 248 in its September 22, 2008 research report. "Industry headwinds have taken its toll on the stock performance of HCL Technologies and it has corrected by almost 25% in the last 5 months. We expect HCL Technologies revenue and net profit to grow at a CAGR of 24% and 32% over FY08E-10E. HCL technologies stock trades at a P/E of 10x FY09E and 9x FY10E earning. We continue to recommend a HOLD on HCL Technologies with a reduced target price of Rs 248, at our target price the stock will be valued at 11x for FY09E and 9x FY10E earning," says Reliance Money's research report.

India Infoline on ITC - Target price Rs 214

India Infoline has recommended a buy rating on ITC with a target price of Rs 214 in its September 22, 2008 research report. "In the coming quarters, we believe the higher cigarette prices would get successfully absorbed by the industry and ITC's cigarette volume decline would significantly reduce. Outlook for the non-cigarette businesses such as hotels and paper remains positive with continued demand buoyancy while the FMCG - others segment is expected to turn profitable by FY10. With the entry into the personal care category, we expect ITC to become a tough competitor for Hindustan Unilever and Godrej Consumer Products. Also, strong cash flows from cigarette business can be invested in advertising heavily to build the personal care portfolio in the initial stage. We recommend a buy with a target of Rs 214," says India Infoline's research report.

Stock Views on Mahindra & Mahindra, Dabur, Reliance Power

Merrill Lynch on Mahindra & Mahindra

WHILE Merrill Lynch has reiterated its ‘underperform’ rating on Mahindra & Mahindra (M&M), it has revised the price target to Rs 536 from Rs 499 due to additional value of listed subsidiaries, and a 4% lower dilution on assumed non-conversion of foreign currency convertible bonds (FCCBs). Merrill Lynch has the following concerns: Unexciting overall prospects of core business, restricted by highly competitive and margineroding utility vehicles segment, as well as substantial investments, which will dilute earnings and return parameters. Over the next three years, capital outlay is estimated at Rs 9,000 crore on an existing base of Rs 7,000 crore. Around 50% of the company’s investments are expected to be related to acquisitions/joint ventures, possibly in new forays, or where the management’s capability is yet to be proven, for example two-wheelers, auto parts etc. Standalone capital expenditure (capex) surge will sharply increase fixed overheads, and therefore, drag down mediumterm profitability, as well as the return ratio.

HSBC on Dabur

HSBC has assigned an ‘overweight’ rating to Dabur India with a price target of Rs 110. The recent sluggishness in the share price can be attributed to the slowdown in growth for foods from 20%+ earlier to around 15% in the past few quarters. However, since the integration with the consumer care division (CCD) has been completed, and supply chain issues have been sorted out, the foods segment is set to return to 20%+ growth in the next quarter. This may be the trigger that the market seeks to re-rate the stock. HSBC has valued Dabur at 21x FY10E earnings per share (EPS) of Rs 5.25 to get a target price of Rs 110. Dabur has averaged a 12-month forward price-earnings (P/E) multiple of 24.6x over the past two years with minimum and maximum P/Es of 17.1x and 29.9x, respectively. The stock is currently trading at 21.1x FY09E EPS. Given its robust business model, which is well-diversified over a large number of segments, with brands targeted at each category of consumers, Dabur is currently trading below its deserved multiple.

BNP Paribas on Reliance Power

BNP Paribas has initiated coverage on Reliance Power by assigning a ‘reduce’ rating. Reliance Power is a power utility at an early stage of development with revenue expected to start only in FY10, when its first power project becomes operational. The company has an ambitious plan to become the second-largest power generator in India by adding ~31 gigawatts (gw) of capacity by FY16. However, the company faces significant headwinds as only one project has attained financial closure. Further, 66% of the land required for its projects is yet to be acquired. Its hydroelectric projects are in very early stages of development with the risk of being shelved. BNP Paribas believes that Reliance Power will find it difficult to prevent project cost escalations on rising equipment and construction costs. Rising interest rates and a global credit crunch can increase debt costs above the company’s estimates.

Stock View on Lupin, Opto Circutes

CITIGROUP on Lupin - TARGET PRICE: RS 938

CITIGROUP Global Markets has maintained its ‘buy’recommendation on the stock saying the company’s initiative to build a global presence through small acquisitions and the buyout of a majority stake in Pharma Dynamics of South Africa would boost inorganic growth. “This is the company’s third acquisition in FY09 after Hormosan (Germany) and a minority stake in Generic Health (Australia). We believe the small size has kept valuations reasonable & expect all deals to be EPS and RoI accretive from FY10,” said Citi in a note to its clients. Citi has rated Lupin as ‘medium risk’ citing generic competition in Suprax (around 5% & 16% of sales & PBT) as the key reason. According to Citi, rising input costs due to Chinese government’s crackdown on environmentally unfriendly plants could hurt profitability. “Inability to effectively integrate the Kyowa acquisition could take a heavy toll on profitability as well as return ratios,” added the Citi note.

KOTAK Securities on - TARGET PRICE: RS.463

KOTAK Securities has maintained a ‘buy’rating on the stock saying the valuations are very attractive considering the strong market positioning, potential introduction of new products, front end R&D set up (with the Criticare acquisition) and strong management. The brokerage expects OCIL to register a 56.7% and 43.7% compounded growth in revenues and earnings, respectively over the next two years. It expects revenue growth of 73.9% to Rs 8.1 billion and net profit growth of 43.5% to Rs 1.9 billion in FY09. “The key growth drivers for topline would likely to be stents business which is expected to grow at about 80% while non-invasive segment is expected to grow at 77%, mainly due to Criticare acquisition,” said the Kotak note. According to Kotak, net profit margin is likely to decline to 23.8% in FY10 as against 28.3% in FY08 mainly due to higher interest cost. “The company has raised $52 million debt to fund the Criticare acquisition. We expect 43% and 44% growth in EPS in FY09 and FY10, respectively. In FY09, we expect EPS of Rs.20.2 while in FY10 we expect EPS of Rs.29,” the note added.

Srock Views on Pantaloon Retail, Bartronics, HDIL

MORGAN Stanley on Pantaloon Retail

MORGAN Stanley advises investors to accumulate Pantaloon Retail’s stock at current levels. The company reported stock selection guide (SSG) for value and lifestyle retailing at 14.1% and 8.2% year-on-year, respectively, in August. The average SSG for value retailing for the past three months is 12.2%, while for lifestyle retailing it is 11.5%. There were no store additions in home retail and SSG stood at 25.8% in August. Sales for the value and lifestyle retailing segments grew by 49% and 38% y-o-y, respectively. The ‘5 Din Mahabachat’ from August 13-17 generated sales of Rs 200 crore, and nearly 60 lakh footfalls were generated in Big Bazaar and Food Bazaar stores. The top six cities in revenue terms accounted for nearly 60% of the total ‘5 Din Mahabachat’ sales. The stock is trading at 14x FY09E earnings, adjusting for value of its subsidiaries Future Capital, Home Solutions, Future Media and Future Bazaar. Morgan Stanley expects Pantaloon to deliver an EPS CAGR of 56% for the next five years.

HDFC Securities on Bartronics

HDFC Securities initiates coverage on Bartronics India with a ‘buy’ rating. With 90% and 95% market share in smart card and radio frequency identification (RFID) segments, respectively, the company offers all automatic identification & data capture (AIDC) solutions under one roof. Its early entry into smart card manufacturing will help it to retain its dominance in the area. Bartronics is the only manufacturer of smart cards in the country. Its smart card capacity has already been booked for the next two years. It also has the capability to provide end-to-end AIDC solutions, which will help it to expand its order book and topline. The company’s revenues and profits are expected to witness a CAGR of 72% and 78% over FY08-FY10E. At the current market price, it is trading at 6.5x and 3.8x its FY09E and FY10E forward EPS, respectively. HDFC Securities has arrived at a discounted cash flow (DCF)-based target price of Rs 234 — an upside of 53% from current levels. While the bull case target price is Rs 339 (upside of 122%), the bear case target price is Rs 147 (downside of 4%) from current levels.

BNP Paribas on HDIL

BNP Paribas initiates coverage on Housing Development & Infrastructure (HDIL) with a counter-consensus ‘reduce’ rating. HDIL focuses on the lucrative Mumbai slum rehabilitation segment, which is characterised by high margins and high entry barriers. Slum rehabilitation projects account for 34.5% of its land bank. However, funding constraints and delays due to state elections next year are likely to slow its progress. The company’s target of rehabilitating 15,000 slum tenements annually starting in FY09 is ambitious, since the best it has done so far is 3,000 tenements annually. BNP Paribas’ channel checks with slum dwellers indicate that the company is likely to face several roadblocks, especially in the Mumbai airport slum redevelopment project. HDIL’s earnings stream is highly volatile and there are significant risks in achieving the estimates of the market, which is yet to factor in execution delays. BNP Paribas would like to gain more comfort on the company’s ability to scale up its operations and execution before turning positive.

Stock Views on Info Edge, ONGC, HUL

CLSA on Info Edge

CLSA has cut Info Edge’s stock rating to ‘underperform’. The company’s flagship job portal, Naukri.com, is decelerating due to a slowdown in hiring in the domestic IT services sector as well as banking. CLSA has reduced earnings estimates for FY09-11 by 10-26%. For FY09, the company is likely to miss its 35-50% year-on-year (y-o-y) revenue growth outlook and post 20-25% growth in revenues instead. Valuations at 35x March ’09 and 26x March ’10 earnings look expensive as growth slows. Info Edge’s valuations cannot be defended by mid-single digit earnings per share (EPS) growth, which the company is likely to post this fiscal. Even assuming an upturn in FY10 and beyond, the stock’s 22-23% EPS compound annual growth rate (CAGR) over FY08-11 justifies a target price of Rs 650 — 13% down from the current levels.

CREDIT Suisse on ONGC

CREDIT Suisse maintains ‘neutral’ rating on Oil and Natural Gas Corporation. ONGC Videsh (OVL) has recently displayed a propensity to bid and acquire near discovered reserves after a year of adding to an exploratory portfolio. It has bid for Imperial Energy and is reported to be interested in stakes in Tanganyika Oil and Block 32 in Angola. Imperial Energy has reserves in Russia, but little production. Tanganyika has heavy oil reserves in Syria that need to be developed. Block 32 in deep-water Angola is yet to begin project development. Buying multibillion-dollar assets through competitive bids is unlikely to leave much value on the table now, while OVL will run capital expenditure (capex) and project-completion risks. Upside at such acquisitions can be generated by project execution — getting production volume to more than current estimates; and/or via a sustained high-oil-price environment. ONGC’s strategy of bidding for such assets implies that it is banking on its execution ability, which is a good sign.

HSBC on HUL

HSBC recommends ‘overweight’ rating on Hindustan Unilever (HUL) with a target price of Rs 277. Crude and palm oil prices have declined by 30% in the past 3-4 months. Palm oil is the main input for soap manufacture, while crude oil affects other inputs such as packing materials and linear alkyl benzene. The correction in commodity prices will not be meaningfully reversed in the near term and will impact HUL’s bottomline positively. Hence, HSBC increases its ’08 EPS estimates by 2.9% and ’09E EPS by 4.4%. It estimates that HUL’s topline growth will slow to 11.8% next year from 18% estimated this year, as both volume and price growth moderate from current levels. However, benign commodity prices will result in margin expansion, and bottomline growth is expected to be 18.5% next year, which is higher than this year’s 17.1%. HSBC values HUL at a price-to-earnings (P/E) multiple of 25x December ’09E. There is likely to be high demand for HUL as a large-cap defensive stock.

Stock View on AIA Engineering, Container Corp, Kamat Hotels, Bajaj Hindustan

KOTAK Securities on AIA Engineering - TARGET PRICE: RS 1,870

KOTAK Securities has maintained its “buy” recommendation on the stock saying the stock is attractively valued at current levels, in the context of its growth prospects. The brokerage says that despite sharp increases in raw material prices and sharp rupee-dollar movements the company has been able to effectively maintain its operating margins, as it has been able to pass on price hikes. “Going forward, the management is confident of maintaining the margins in the 23-25% range. We maintain our earnings estimates for AIA and expect it to report an EPS (earnings par share) of Rs 98.1 in FY09E (estimated),” the Kotak Securities note to clients said. “The current market price, said the Kotak note, discounts FY09E earnings at 16.1, which we believe is attractive considering the growth prospects for the company going forward due to capacity expansion and strong demand for the products of the company,” the note added.

ENAM Securities on Container Corp - TARGET PRICE: RS 1,035

ENAM Securities has maintained its “outperformer” rating on the stock. Enam believes that despite improving visibility on earnings (19% CAGR over FY07-09E) and sustainability of RoE (return on equities) at around 25%, the stock trades at a 12% discount to the Sensex valuation. “Compared with global peers, admittedly with high barriers to entry, Container Corporation trades at 40% discount,” the Enam note said to its clients. According to Enam, growth in India’s export-import trade and investment in rail, road and ports infrastructure would drive growth for the company. “Steep increase in rail haulage charges had dampened volume growth in the past three years. Current pricing environment remains stable, with IR to hike haulage charges twice a year,” said the note. The brokerage expects Container Corporation EXIM throughput to revert back to long average of 14% per annum. “Lower flat discounts and increase in tariff are expected to drive 244 bps expansion in EBIT margin over the next two years,” the note added.

Sharekhan on Kamat Hotels

SHAREKHANhas initiated coverage on Kamat Hotels and has advised investors to maintain a cautious view on the stock. Though the stock is attractively priced, the inability of the hotel group to fund its expansion plans is a key potential risk to the earnings estimate for FY10, the research note said. “The company’s revenues are heavily dependent on two properties — The Orchid and VITS — in Mumbai. These two properties are like to face stiff competition with incremental supply of rooms from Sahara Star. We believe, the occupancy rate of these properties may remain suppressed due to economic slowdown,” the Sharekhan report added. According to Sharekhan, the hotel group’s growth would be driven by a 37% rise in its room inventory to 773 rooms by FY10. Also, an increase in properties under management contracts will contribute to the topline growth.

MORGAN Stanley on Bajaj Hindustan - TARGET PRICE: RS 240

MORGAN Stanley has assigned an “overweight rating” on Bajaj Hindustan, as it expect the company to do well in coming months. As the largest domestic sugar producer, Bajaj Hindustan seems well positioned to benefit from the favourable domestic sugar outlook, the brokerage said in a report. “As our expectation of a tighter sugar balance unfolds, investors may start discounting the higher sugar and ethanol realisations. BJH has increased crushing and distillery capacity more than three times in three years and seems poised to drive revenue growth in a constructive pricing environment,” said the Morgan note to clients. Aggressive government intervention to control sugar prices and cane cost could be one of the risk factors, according to Morgan. “We expect a sharp rally in Bajaj Hindustan’s stock price as the company reaps the benefits of aggressive capacity expansion in a constructive sugar pricing environment. We estimate the stock has more than a 25% chance of a price move (up or down) of more than 25% in a month, based on a quantitative assessment of historical data,” the note added.

Stock Views on Bajaj Hindusthan, IFCI, Sterlite Industries, ABB

ICICI Direct on Bajaj Hindusthan - Target of Rs 188

ICICIdirect.com has come out with its report on Bajaj Hindusthan. According to the research firm Bajaj Hindusthan has an upside potential of 10%."Bajaj Hindusthan, the largest sugar producer in the country would benefit from the rising sugar prices. The Supreme Court judgment on sugarcane pricing at Rs 110/ quintal would also benefit the UP-based sugar producers. Bajaj Hindustan, having the largest ethanol/alcohol capacity of 800 kilo litre per day (KLPD), would benefit the most from the rising prices of rectified sprits, which have risen to Rs 26/litre."

"We believe rising sugar prices, in anticipation of lower production in SY09 would benefit the company, since it is the largest sugar producing company. At the current price, it is trading at SY08E EPS of Rs 5.0 at 34.6x and SY09 EPS of Rs 14.6 at 11.8x. Bajaj Hindusthan has an upside potential of 10% with a target of Rs 188 in one month perspective."

ICICI Direct on Buy IFCI above Rs 48.35 Target 52

ICICIdirect.com has recommended to buy IFCI above Rs 48.35 with a stoploss of Rs 48 and target of Rs 49/52/higher.

Emkay Global on Sterlite Industries - Buy Target of Rs 953

Emkay Global Financial Services has maintained its buy rating on Sterlite Industries (India) with a target of Rs 953 in its September 10, 2008 research report. "We believe the current prices more than factor the downturn in the zinc cycle and ignore the volume growth in Hindustan Zinc. Further, there is a possibility of ASARCO being acquired by Sterlite as early as Dec 2008, which might result in additional value creation for shareholders of Sterlite Industries. We maintain BUY on Sterlite with a target price of Rs 953 considering the restructuring to be value neutral for Sterlite Industries," says Emkay Global's research report.

HDFC Securities on ABB - Resistance at Rs 1180

HDFC Securities has come out with its report on ABB. According to the research firm ABB has support of Rs 766 and resistance at Rs 1180 with 3 months perspective, in its September 11, 2008 report. “ABB possesses a very unique business model due to which it is in a better position even in this sluggish economic scenario. The slowdown in order inflows and longer lead-time of certain large size orders could be a revenue dragger in the short term. But, huge investments in the power and infrastructure sector could provide a cushion for ABB to bag some orders. Moreover, it possesses astrong Balance Sheet with a good working capital cycle as compared to its peers and sufficient free cash reserves could always help ABB in difficult times. ABB being a technologically advanced company has always commanded premium valuations even in worsesituations. It is currently quoting at a P/E of 31.5 times its CY08 (E) earnings," says HDFC Securities.

Stock Views on Puravankara Projects, Rolta India, Great Offshore, Sanghvi Movers

Karvy on Puravankara Projects - Buy Target of Rs 302

Karvy Stock Broking has maintained its buy rating on Puravankara Projects with a target price of Rs 302 in its August 12, 2008 research report. "Puravankara declared its 1Q FY09 results which were lower than our expectations. Net sales increased by 31% YoY and 2% QoQ as against our expectations of 58% YoY and 24% QoQ. Net profits for the quarter rose by 41% YoY as against our expectations of 52% on account of lesser than expected share coming from associates."

"Puravankara stands to benefit in the long run. We have revised our price target on Puravankara to Rs 302 per share valuing the company at a 15% discount to our FY10E NPV (Net Present Value) of Rs 356 per share maintaining a BUY at current levels," says Karvy's research report.

Hem Securities on Rolta India - Buy Target of Rs 390

Hem Securities has initiated a buy rating on Rolta India with a target of Rs 390 in its September 10, 2008 research report. "Being one of the pioneer IT companies of the country, Rolta has been on a growth trajectory with its top line and bottom line growing with a CAGR of 37.26% and 36.96% respectively. Presently, the stock is trading at Rs 331.75 which is at 20.30 times to its earnings of Rs 16.34 and 4.51 times to its book value of Rs 73.60. Since the stock seems to offers extremely good investment opportunities, we initiate a ‘BUY’ signal on the stock with a target price of Rs 390 in medium to long term investment horizon expecting an appreciation of about 18% from the current level of Rs 331.75," says Hem Securities' research report.

ULJK Securities on Great Offshore - Buy Target of Rs 664

ULJK Securities has recommended an accumulate rating on Great Offshore with a target of Rs 664 in its September 9, 2008 research report. "Sales are expected to grow at a CAGR of 32% and profit is expected to grow by 21% over FY08-FY10E as contracts are expected to be done at higher day rates. Its EPS is seen at Rs 59.6 in FY09E and at Rs 80.4 in FY10E. At a CMP of Rs 543, the stock trades at a P/E of 9x & 6.6x its FY09E & FY10E earnings respectively. It is trading at EV/EBITDA multiples of 6.5x F2009 and 4.9x F2010. Based on the DCF methodology, we arrive at a share price of Rs 664. We recommend an accumulate rating on the stock with a target of Rs 664," says ULJK Securities' research report.

SKP Securities on Sanghvi Movers - Buy Target of Rs 340

SKP Securities has recommended buy rating on Sanghvi Movers, with 9-month target price of Rs 340, in its report dated September 9, 2008.

“Considering Sanghvi’s dominant position in the crane-hiring business, we believe that it is one of the best proxy plays on the infrastructure boom. With 5 major clients (fast growing capital goods and construction companies) contributing around 70% -75% of the revenues and its cranes being booked for the next 12 to 18 months ensures strong revenue visibility in the forthcoming quarters. Going ahead, factors like demand supply gap, improving rentals and effective utilization will witness SML's topline to grow at a CAGR of 32%. At the current market price of Rs 216.55, the stock is trading at 7.38x FY10E earnings of Rs 29.36. We have taken the avg of P/E and DCF valuations to reach our target price and recommend a buy to the stock with a 9-month target price of Rs 340", says the report

Stock Views on Union Bank of India,

Mafatlal Securities on Union Bank of India - Buy Target Rs 205
Mafatlal Securities has recommended a buy rating on Union Bank of India with a target of Rs 205 in its September 11, 2008 research report. "At the current price of Rs 147.60 the scrip discounts its estimated EPS of FY09 and FY10 by 5.28x and 3.91x respectively. The scrip is currently trading at a PE ratio of 5.37x (TTM) which is at a discount of 39% to the industry PE of 7.45x. The scrip is trading at 1.10x and 0.88x of estimated BV of FY09 and FY10. We recommend a “BUY” on UNBK with a target price of Rs 205 and an investment horizon of one year," Mafatlal Securities' research report.

Anand Rathi on Punjab National Bank - Buy Target of Rs 515

Anand Rathi Securities has recommended to buy Punjab National Bank (PNB) between Rs 490 and Rs 495 with a stoploss of Rs 485 and a target of Rs 515 in its September 12, 2008 research report.

ICICIdirect.com on Tata Motors - Buy above 424

ICICIdirect.com has recommended to buy Tata Motors above Rs 425 with a stoploss of Rs 424 and target of Rs 427/435/higher in its September 12, 2008 report.

Deutsche Bank on Kotak Mahindra Bank - Target of Rs 600

Deutsche Bank has downgraded its rating on Kotak Mahindra Bank to Hold with a target of Rs 600

IIFL View on Apollo Tyre, Britannia, Rel Comm, Bombay Rayon

Apollo Tyre - Buy Target price of Rs 43

IIFL has downgraded Apollo Tyre from buy to add, as the stock’s recent rally has reduced the upside. However, target price remains unchanged at Rs 43, September 11, 2008, "Apollo Tyre’s (ATL) brownfield and greenfield expansion projects, which would increase its capacity by ~20%, would enable it to maintain its above-industry-average volume growth. Replacement demand for CV tyres, ATL’s key segment, continues to be strong (it rose 10.6% YoY in 1QFY09). We expect a sharp decline in the company’s EBIDTA margin to 6.4% in 2QFY09ii on account of high rubber prices from 10.2% in 1QFY09. We expect margins to expand to more than 10% in 4QFY09, as a decline in crude-oil prices causes raw-material prices to ease. We cut our EPS estimate for FY09 by 5% to factor in high rubber prices and retain estimates for FY10. We downgrade our rating from BUY to ADD, as the stock’s recent rally has reduced the upside. Our target price remains unchanged at Rs 43,"says IIFL research report

Britannia - Buy Target price of Rs 1765

IIFL has recommeded buy rating on Britannia with a target price of Rs 1765, September 11, 2008 report. "Britannia is the market leader in the Rs 80 billion biscuits market in India, with brands such as Tiger, Good Day and 50:50. The stock has underperformed the BSE FMCG Index by 15.4% over the last 12 months despite a sharp turnaround in its operating performance. Uncertainty on the ongoing legal tussle between the two largest shareholders has been one of the key overhangs on the stock. Other concerns have been rising raw-material prices and Britannia’s constrained pricing power in view of intensifying competition. However, with indications of an early resolution of the majority shareholders’ dispute and improving outlook on operating conditions, we believe the key concerns should start abating."

"We expect the operating turnaround at Britannia to gather pace and forecast earnings CAGR of 25% over FY08-11ii. BUY with a one-year target price of Rs 1765, based on 14x FY10ii earnings. We value the stock at a 25% discount to its three-year average multiple to factor in the ongoing promoter dispute," according to IIFL research report.

Rel Comm - Buy Target of Rs 529

IIFL has downgraded Reliance Communication's FY09 earnings by 21%; recommended to add the stock with target price of Rs 529."Reliance Communications’s (RCOM) Broadband business came out with the highest asset-turnover ratio as well as profitability amongst all its businesses in FY08, while the Global division dragged down aggregate measures. RCOM’s strategy of leaving forex loans unhedged proved 340bps more expensive than its investment yield, amplified by the massive size of the investments (US$3bn). On the same basis, RCOM may make an FX loss of more than Rs4bn in 2QFY09. Per-tower procurement cost is 13% higher than Bharti’s, despite lower visibility of multiple occupancy. We downgrade RCOM’s FY09 earnings by 21% (for FX and expectation of weakness in wireless results) and the rating to ADD, with a DCF target price of Rs 529," according to IIFL research report.

Bombay Rayon - Buy Target of Rs 474

IIFL is bullish on Bombay Rayon Fashions and has recommeded buy rating on the stock with target price of Rs 474. "Bombay Rayon Fashions (BRFL) is one of India’s largest integrated garment manufacturers, catering primarily to mid-premium brand retailers in Europe. The company is well positioned to take advantage of strong demand and price increases offered by this client segment, unlike its competitors in other countries such as Turkey and China, which face rising costs and appreciating currencies. The company has an aggressive capacity expansion plan, on which we base our projection of 50% and 60% CAGR in revenue and PAT over the next three years. We value the stock at a PE of 10.3x on one-year-forward earnings, in line with its peers’ multiples. This gives a one-year target price of Rs 474. Buy for 39% upside," according to IIFL research report.

Motilal Oswal View on Mahindra, Maruti Suzuki, Hero Honda

Buy Mahindra & Mahindra

Motilal Oswal has maintained buy rating on Mahindra & Mahindra, in its report dated September 2, 2008.

"Overall volumes improved by 7.9% YoY to 26808 units and 12.6% YTD growth. Tractor sales increased by 15.6% YoY to 7597 units (16% domestic growth and 6% export growth), and YTD growth of 10.6%. We estimate 10.7% volume growth in FY09E, implying residual growth of 9.7%. There is a strong possibility of volume upgrade in tractors and 3-wheelers, whereas we would revise downwards our volume estimates for Logan. On our current estimates, the stock trades at 8.6x FY09E EPS of Rs 68.6 and 7x FY10E EPS of Rs 84.3. Maintain Buy," says Motilal Oswal's research report.

Buy Maruti Suzuki

Motilal Oswal has maintained buy rating on Maruti Suzuki, in its report dated September 2, 2008.

"Domestic volume de-grew by 10% YoY to 54113 units, first significant contraction in a long time. Exports grew by 1% to 5795 units. Our current estimate is FY09 volume growth of 11.6% (8% domestic & 60% export growth), implying residual growth of 15% v/s YTD growth of 6%. We would be revising our volume estimates downwards. The stock trades at 10.6x FY09E EPS of Rs 62.8 and 9.3x FY10E EPS of Rs 71.2. Maintain Buy," says Motilal Oswal's research report.

Buy Hero Honda

Motilal Oswal has maintained its buy rating on Hero Honda in its September 2, 2008 research report. "Hero Honda volumes increase 26.8% YoY to 305,516 units, in-line with our estimates and the strongest growth among all two-wheeler companies. YTD volumes grew by 19% to 1,481,077 units. Motorcycle volumes grew by 28% YoY to about 293,000 units and YTD growth of 19%. Also, scooters registered about 4% volume growth to about 12,000 units and YTD growth of 30.5% to about 49,800 units. Our FY09 estimates factor in a 8.1% volume growth, implying a 1.7% residual growth. We are in the process of reviewing our volume estimates. Based on our current estimates, the stock trades at 15.1x FY09E EPS of Rs 56.6 and 13.4x FY10E EPS of Rs 64. Maintain Buy." According to Motilal Oswal report.

Stock Views on Indiabulls Real Estate, OnMobile Global

Deutsche Securities on Indiabulls Real Estate - TARGET PRICE: RS 300

Deutsche Securities has initiated coverage on Indiabulls Real Estate with a ‘hold’rating as it feels the company has limited track record in execution. Weakness in the Mumbai office market for highend office properties, and a large free float — which allows much larger head-room for “borrowing” and selling short — are downsides for the stock. According to a Deutsche Bank note, Indiabulls’ revenue growth would be driven by volumes and stake sale of associate and/or subsidiaries. “We expect a revenue CAGR (compound annual growth rate) of 41% over FY08 to FY11 (estimated). We expect EBITDA margins to drop from 72% in FY08 to 55% in FY11 (estimated), mainly driven by higher costs (land, construction, employees, SG&A). Further, we expect the tax rate to increase from around 28% in FY08 to nearly 30% in FY11 (estimated). Thus, while we expect volume growth (around 40%), we expect PAT (profit after tax) to grow by only a 19% CAGR over FY08-11 (estimated),” the note to clients said. However, the Deutsche Bank note added that the demerging and listing of its forays in power and retailing would drive growth and shareholder value in the near term. Meanwhile, SEZs, townships and annuities from com-pleted projects will drive long-term growth, it added.

Citigroup Global on ONMOBILE GLOBAL - TARGET PRICE: RS 630

Citigroup Global Markets has initiated coverage on OnMobile Global with a ‘buy’ rating saying OnMobile Global is India’s largest VAS (valueadded services) operator (35% share) in a rapidly growing market [FY08-11 (estimated) CAGR at 51%. The estimated 36% EPS (earnings per share) CAGR over FY08-11 (estimated), was due to the company’s increasing international presence, said Citi. “Though it ap-pears high in the current environment, we believe our target PE (price to earning) of 25x Mar-10E is justified by OnMobile’s strong growth prospects and is in line with the multiple for comparable peers,” the note added. According to the Citi note, the domestic VAS has gradu-ated from being a glorified sub-set of p-to-p SMS to a well-demarcated segment.

Stock Views on DLF, Suzlon Energy, Sesa Goa, GAIL

DEUTSCHE Global Markets view on DLF - Ratings Hold

DEUTSCHE Global Markets Research has downgraded its ratings on DLF to “hold” because of weakening demand, falling property prices and tight financial markets. The firm has reduced its revenue forecasts for the company for the next two years to 19% and 25% owing to delay in execution of the projects, lower product prices across verticals, and deterioration in product mix in favour of low-margin mid-end housing. Increase in construction costs and other expenses (staff, SG&A) due to new launches, says Deutsche Global, has lead to significant margin compression. Hence the firm has cut profit estimates of the company by approximately 24% and (approx.) 29% for the next two years. Deutsche has reduced the NAV (net asset value) per share from Rs 700 to Rs 532.

MERRILL Lynch on SUZLON ENERGY - Rating Buy

MERRILL Lynch has maintained its “buy” rating on Suzlon saying the company remains on track for material scale-up in operations across the wind turbine value chain. Suzlon, says the Merrill note, has pre-poned its purchase of Martifer’s 22.48% stake in REpower for a pre-determined price of 270 million pound sterling. “This acquisition shall consolidate Suzlon’s holding in REpower to (approx.) 90%, enough to press for a domination agreement, which is key for integrating REpower and derive synergy benefits from a unified product and market strategy,” the note said. Merrill has valued Suzlon’s wind business at 18.5 times estimated 1-year-forward earnings, at Rs 296 per share. “This is conservative given it is 20% and 25% discount to its current PER (price to earning) and peers respectively. Suzlon’s 71.3% stake in Hansen is valued at Rs 76 per share at 10% discount to the price objective of 330 pence,” the note added.

CITI Investment on SESA GOA - Rating Sell

CITI Investment Research has initiated coverage on Sesa Goa with a “sell” recommendation saying that most positive triggers for the stock are already priced in. The future iron ore price hikes, says Citi, are expected to be substantially lower relative to FY09 and risks of government intervention to contain inflation remain as downside risks for the stock. At the price target of Rs 145, the note says, Sesa Goa would trade at 3.8 times 12-month forward PE (price-to-earning). “The PE multiple is at a discount to global majors (forward PE of around 7-9 times), justified given their relative size, diversified product mix and higher market cap,” the Citi note said. Sesa Goa, says Citi, has significant growth plans and is part of an industry with strong pricing power.

ICICI Securities on GAIL - Rating Buy

ICICI Securities has maintained its “buy” rating on the stock saying the company will benefit from gas grid expansion and improved visibility on gas supply. Post-commencement of NGG (national gas grid) operations, says ICICI Securities, GAIL’s returns may settle below its recent average as the future growth will likely be skewed toward annuity earnings from transmission. “Assuming the absence of growth in the existing business beyond FY11E, GAIL’s RoCE (return on capital employed) is likely to be 16.4% in FY16E versus 14.8% in FY09E,” the note said. ICICI Securities expects GAIL’s EBITDA CAGR (compound annual growth rate) at 12.3% and net income CAGR at 8.6% over FY08-11E, driven by gas transmission business, expected to grow at 16% revenue CAGR through FY08-11E (estimated).

Stock View on Raymond, GAIL, Puravankara Projects, Jaiprakash Associates

MERRILL LYNCH view on Raymond - RATING: UNDERPERFORM

MERRILL Lynch has maintained its ‘underperform’ rating on Raymond as the near-term earnings will remain subdued with denim continuing to be a huge drag on overall performance. The management has indicated that it may reduce its involvement in the denim business — this can be a time-consuming process. Raymond’s 50:50 denim joint venture with Belgian denim major UCO NV continues to pile losses (Q1 ’09 loss Rs 40 crore, FY08 loss Rs 120 crore). Losses are driven by suboptimal capacity utilisation in overseas facilities, continued poor denim market and rising cotton prices. Worsted capacity expansion by 7 million metres at Vapi is on track. This will take the total capacity to 38 million by March ’09 and can potentially help free up about 140 acres at Thane, where a part of its worsted capacity is currently located. Merrill Lynch estimates that this land may be worth over Rs 200 per share. However, the Thane closure is unlikely to be taken up before elections next year. Worsted fabric performance is likely to improve in the current fiscal. Merrill Lynch has assumed a 4% year-on-year (y-o-y) rise in realisations driven by price increases and a richer mix. This, together with slightly weaker wool prices, should drive EBIDTA margin expansion by 150 bps. FY09 will be a year of consolidation and streamlining of businesses. The management intends to entirely focus resources on 4-5 key brands. To this end, it aims to expand its retail network judiciously, with a larger proportion of stores through the franchise route in tier-III and IV towns. Raymond added 31 stores in Q1, to reach 518 stores.

INDIA INFOLINE view on GAIL - RATING : BUY

INDIA Infoline has maintained its long-term ‘buy’ rating on Gas Authority of India (Gail) with a target price of Rs 450. In its annual report, the company has emphasised on clean fuel industrialisation by creating green energy corridors. This is in line with its ongoing capacity expansion plan, which is focused on developing a countrywide gas grid and setting up city gas projects in 28 cities within the next five years. Gail registered net sales growth of 12.2% y-o-y to Rs 18,000 crore in FY08. This was driven by a robust growth of 52.6% y-o-y in LPG sales and 17.8% y-o-y growth in polymer sales. LPG volumes remained flat, but realisations were up by 52.2% y-o-y as sharing of under-recoveries declined 11.7% y-o-y. Petrochemicals volumes rose by 12.8% y-o-y, whereas realisations for the segment rose by 4.5% y-o-y. Gas trading volumes grew by 2.5% y-o-y to 23.3 billion scm and transmission volumes increased from 77.29 mmscmd in FY07 to 82.1 mmscmd in FY08. The profit and loss statement was a mixed bag with robust topline expansion and increase in operating margins being offset by a higher effective tax rate and one-time write-back of Rs 340 crore in the previous year. The balance sheet continues to remain strong with a fourth consecutive year of decline in the debt-equity ratio and a sharp improvement in return on capital employed (RoCE) in FY08.

DEUTSCHE BANK view on Puravankara Projects - RATING: SELL

DEUTSCHE Bank has initiated coverage on Puravankara Projects with a ‘sell’ rating. Its asset-light business model, strong balance sheet and good financial disclosures make Puravankara an excellent developer. However, high floor space index (FSI) on its landbank, coupled with over-concentration in the residential vertical and in Bangalore, are threats in the current environment of weakening demand and tight financial markets. Given its net worth, Puravankara has an asset-light model with a smaller land bank and at a lower cost (unlike peers). Furthermore, its land bank is largely paid for, implying less time and risk in securing clear land titles. The low gearing of 48% should enable it to replenish its land bank during cyclical slowdowns. Deutsche Bank believes that financials will be driven by scaling-up operations, coupled with moving up the value chain. The high FSI (~3.1x vis-à-vis ~1.2x for peers) on its land bank in the current environment of strong headwind can make marketing a challenge. Though Puravankara has been around for nearly two decades, its completions to date are lower than its peers in Bangalore. Concentration in residential (~80% of land bank) and Bangalore (63%), which is seeing significant oversupply, are other concerns. The trading price of Rs 165 is at a 30% discount to discounted cash flow (DCF)-based NAV of Rs 236. With a 19% downside potential to the target price, Deutsche Bank recommends a ‘sell’ rating.

EDELWEISS on Jaiprakash Associates - RATING : BUY

EDELWEISS Securities has maintained a ‘buy’ rating on Jaiprakash Associates (JPA) . Since November ’07, of the total 4.7 million sq ft that it owns, JPA has been able to sell 2.9 million sq ft in Greater Noida and 3.6 million sq ft in Noida, till date. Supported by its low land acquisition cost, the company is offering properties at various price points to ensure offtake. Accordingly, sales price varies from ~Rs 5,500-10,000/sq ft in Greater Noida and Rs 4,800-6,400/sq ft in Noida. The company has received Rs 900 crore in cash at Greater Noida and Rs 590 crore at Noida. JPA has completed sub-contracting for the project and has finalised 24 sub-contractors. The management has guided that the expressway will be available for commuting in time for the Commonwealth Games. JPA will retain project planning, equipment ordering and raw material procurement. Financial closure for the project is complete and land and forest clearances have been secured. The management has highlighted its intent to bring all the power entities under one fold. It indicated the need for infusing $500 million by September ’09, for which, it is considering various options like securitising operational power plants. The company reiterated its intent to convert first warrant issue (~Rs 1,985 crore at Rs 397/share; Rs 400 crore put in till date). To tackle concerns of the open offer, following the second warrant conversion (~10% dilution), it plans to defer shareholders meeting to extend conversion window till FY11E. After factoring in concerns over further cement price correction this year in the northern market, Edelweiss has lowered its EPS by 18.6% in FY09E and 23.3% in FY10E. While earnings growth is likely to remain moderate in the near term, long-term value remains in the stock.

Ten stocks worth investing in – Part III

Opto Circuits India

Opto Circuits, too, is seen as a good investment, with the stock having fallen by over 45 per cent since it high in January 2008, thereby rendering its valuations attractive at 13 times FY09 estimated earnings and 9 times FY10 earnings.

The company manufactures healthcare products in the invasive and non-invasive segments. Historically, the company has been growing at 47 per cent during the last five years ending FY08, mainly on account of a series of organic and inorganic initiatives.

Given the strong growth across segments, the company is expected to grow at about 57 per cent during FY08-10, while its net profits could grow at a 45 per cent.

A part of this growth will come from by its subsidiary EuroCor, which is engaged in the design and manufacture of cardiac and peripheral stents. The estimated size of the global market for its products is pegged at $8 billion, and growing 15 per cent annually.

Opto's other business segments include medical electronic and monitoring products such as optical sensors, electro-medical equipment, security systems and pulse oxymeters manufactured.

The company's unique chip design capabilities, USFDA approved products and strong relationship with customers, have led to a 51 per cent revenue growth in the past.

Also, the company recently acquired US-based Criticare Inc for $70 million to strengthen its position in the non-invasive space. Along with this, the analysts also estimate that its invasive business would grow at 55 per cent during FY08-10, on the back of a strong product portfolio as well as a series of products to be launched in the near future.

Besides good fundamentals, the research houses like its business model, where the company is a niche player in the medical equipments commanding high margins along with high entry barriers.

Sintex Industries

Sintex is a strong play on the domestic consumption story. The company's popularity improved sharply after its foray into the plastic water-tank segment. While it is still a leader in the business, it has also moved into and emerged as a leader in many value-added plastic-based products.

These include new concepts like prefab and monolithic construction, which notably are growing at a fast clip. Analysts expect these businesses to grow at about 70 per cent, driven by strong order book of Rs 1,500 crore (65% of FY08 sales) and growing demand for quick and affordable mass housing solutions.

Additionally, the company has also emerged as a strong player in the auto and electric plastics product segment, after making several acquisitions in these businesses in FY08. The full impact of these acquisitions will be visible from FY09 and is expected to contribute about 27 per cent of consolidated revenues.

Driven by larger product portfolio, geographical diversification, higher domestic demand and benefits of its acquisitions, the company is estimated to grow over 50 per cent in consolidated earnings. At Rs 291, the stock is trading at attractive valuations of 10 times and 6 times estimated FY09 and FY10 consolidated earnings, respectively.

Thermax

Thermax was among the stocks that have fallen sharply due to the slow down in the industrial capex seen recently. High input cost also impacted sentiment, leading to a 60 per cent fall in its share price where valuations at 13 times its FY09 estimated earnings and 11 times FY10 earnings are proving to be attractive.

Importantly, except for these short-term blips, the company's fundamentals continue to hold ground. The company's order book of Rs 2,637 crore (Rs 26.37 billion) provides revenue visibility of about two years.

The company has also taken several initiatives, which should help sustain growth in years come. Thermax operates in a specialised segment within the engineering sector, catering to the needs of a number of industries. Also, the company is leader in small and medium-sized industrial boilers, heaters, and captive power plants in the energy sector.

Notably, the company will gain from its entry into higher capacity boilers, which are used by power utilities. It recently signed a 15-year agreement for sub-critical boilers up to 800MW with Babcock and Wilcox. The company has already completed the first phase of 3,000MW boiler facility at Baroda and the second phase is expected to be complete by October 2008.

In this direction, the company has already announced its largest order win ever, valued at Rs 820 crore (RS 8.2 billion) for the supply of a coal fired boiler to a captive cogeneration plant of a refinery.

While the margins may remain under pressure as 70-75 per cent of its order backlog is on a fixed price basis, these are already reflecting in the share price. Such issues are being taken care off with the company immediately securing inputs for new orders.

TV18

Stocks from the media sector are finding favour among many research houses post the market correction. Television Eighteen India (TV18) is India's premier 'Business News' broadcaster and leading content provider in the electronic media space. It owns and operates business channels CNBC TV18 and CNBC Awaaz and has several strategic investments in the internet business such as moneycontrol.com, which is among Asia's largest financial portals and commoditiescontrol.com.

The company's existing businesses have been doing well; news operations has witnessed a CAGR of over 54 per cent for the last three years, while the web and news wire business are currently in an investment phase.

Its internet subsidiary, Web18, operates different businesses like travel, technology, movie bookings and financial news. While TV18 holds 85 per cent in Web18, revenues are still small, but offer good scope for growth over the longer term.

On the existing and new businesses, the company's revenues are expected to grow at over 37 per cent over the next 2-years. However, its ability to replicate its success in its foray into print and digital media needs to be watched.

The company has already started the process and is acquiring 53 per cent stake in Infomedia. The acquisition will provide the company access to the yellow pages directory business and, several special interest magazine segments.

In the medium to long run, benefits would also accrue from its JV with Forbes (English business magazine), Jagran Prakashan (Hindi business daily) and global media giant Viacom for a strategic alliance across television, film and digital media.

Ten stocks worth investing in – Part II

IDFC

The country's infrastructure needs should only rise as the economy grows bigger. Even at current projections, the opportunity is huge. The proof: the Eleventh Five Year Plan indicates that $500 billion worth of investment will be required for creation of new infrastructure space, which in turn is positive for companies like Infrastructure Development Finance Company, a leading infrastructure financing institution.
The company's infrastructure lending business is expected to grow at CAGR of 37 per cent during FY08-FY10. While interest spreads could see some pressure, better fund management should help offset some of this.
Additionally, non-interest income should continue to contribute about 47 per cent of total income during FY08-FY10, driven by consistent increase in asset management fee, income from its principle investment book and growth in IDFC-SSKI (broking and investment banking) business.
IDFC has also entered into an agreement to acquire 100 per cent stake in Standard Chartered AMC.
Overall, the net interest income is expected to grow at CAGR of 28 per cent during FY08-FY10, with net interest margin expected to hover at 3 per cent.
Looking at its business growth and expertise in infrastructure financing, we believe the stock is undervalued and provides an investment opportunity for decent return in medium term.
At Rs 105, the stock is trading at 16 times its FY09 estimated earnings and 12.5 times FY10 earnings. The research house has puts a price target of Rs 160 per share.

L&T

Thanks to the slower growth in industrial production and capital goods output in the recent past, Larsen & Toubro (L&T), too, has seen its share price being hammered down. This offers an opportunity to buy into the country's largest engineering and construction player, which is among the best plays on India's infrastructure and industrial capital expenditure (capex) boom.
Also, the benefits of its diversification into power equipment, shipbuilding, defence equipment and railways are yet to pay, and help sustain growth in the long-run.
Flush with cash flows from high oil prices, the Middle East region is likely to achieve infrastructure spend of $1,000 billion. L&T has not fully exploited the opportunity in the region due to constraints of resources. In case of slowdown in India, the company can derive more growth in Middle East.
These factors and a strong order book of Rs 52,700 crore, the company is expected to maintain its growth at about 35 per cent over the next two years. Any value unlocking from its IT and Finance subsidiaries (expected to be listed separately) would further add to the shareholders wealth.
Regards valuation, at Rs 2,357, the stock is trading at 22 times its estimated FY09 consolidated earnings and 17 times FY10 earnings, which is not very expensive historically.
On SOTP basis (factoring valuations of different businesses and subsidiaries), analysts have estimated a fair value of Rs 3,000-3,200 per share.

Maruti Suzuki

India's leading passenger car company, Maruti Suzuki is available at half the price compared to its 52-week high of Rs 1,252 per share seen in October 2007.
Historically, the share price of Maruti has been trading in the PE band of 13-17 times. But, thanks to the market turmoil, it is now trading at just eight times its FY09 estimated earnings.
The correction was partly on account of concerns over the rising input cost (for the company) and, high crude oil prices and interest rates (for its customers).
Analysts believe that though concerns remain in the near term, the stock should get rerated in the long run on account of benefit accruing from new launches, including WagonR Duo, Zen Estilo, Diesel Swift and SX4.
Also, with the ongoing expansion at Manesar plant, exports are expected to go up. The company will manufacture small cars for supply to its parent's customers in global markets.
Estimates indicate that Maruti will be exporting about 100,000 units to its parent, Suzuki Motor Company of Japan, while another 50,000 units would be supplied to Nissan Motor Company. The expansion of its capacities should also help company to maintain its margins, helped by economies of scale.
Along with the benefits of new launches and the expansion, the company's target of selling one million cars in the domestic market by FY2011, translates into a volume growth (for domestic market) of 12 per cent over next three years.
Overall, the company is expected to grow at decent pace. Investors can use the current market conditions to gain from the stock's re-rating once the macro concerns ease out in the future.

Ten stocks worth investing in – Part I

Aban Offshore

In light of rising global crude oil prices, drilling oil from the deep water has become an alternative and feasible option. This, however, has also led to increasing demand for offshore drilling services.
As a result of this, the day-rates for different offshore drilling equipment and services have gone up significantly and the availability of rigs has reduced drastically.

This is despite the fact the numbers of rigs added during FY09 were the highest. The favourable change in the industry has also meant better days for the companies in this space, like Aban Offshore, one of Asia's largest oil drilling equipment and services providers. The company operates about 16 jack-ups, three drill ships and one semi-submersible ship.

Apart from higher demand, the company will also benefit from re-pricing of its existing assets at higher day-rates as contracts come up for renewal, besides substantially ramping up of its asset base through organic and inorganic initiatives.
The company is estimated to maintain a strong revenue growth of about 70-80 per cent over the next two years. Analysts say that if its Singapore-based subsidiary, Aban Singapore gets listed, it would help the company raise some funds that may be used to reduce debt (on its own books) raised for the acquisition of Sinvest, and unlock value for its shareholders.
The stock is trading at attractive valuations viz. at a one-year forward PE of just 7 times its consolidated FY09 earnings.

Bharti Airtel

Bharti Airtel, which commands about 24 per cent market share of the Indian mobile industry, will be the key beneficiary of the fast growing subscriber base.
India's mobile subscriber base is expected to touch 500 million by FY10 from 300 million currently, translating into an annual growth of over 30 per cent, mainly on account of rising affordability.
Also, the company has amongst the most extensive networks in the country covering 71 per cent of the country's population, which Bharti aims to increase to 80-85 per cent by March 2009.
Besides the growth from its core business, the embedded value in the company's tower businesses is equally worth a mention. The combined value of the tower business of Bharti Infratel and Indus Towers is estimated at Rs 165-170 per share of Bharti.

Going forward, even as the core business continues to grow at a healthy pace, new offerings like DTH and IPTV (to be launched soon) and foray into markets including Sri Lanka, should boost growth rates further.
Analysts expect Bharti's consolidated topline and bottomline growth to range 25-30 per cent (annually) during FY09 and FY10. At Rs 748, the stock is trading at a PE of 17 times and 14 times its estimated FY09 and FY10 consolidated earnings, respectively.

HCC

Hindustan Construction Company , a leading construction company, has presence across diverse segments including transportation, hydro and nuclear power, irrigation and water supply, marine projects, utilities and urban infrastructure.
The company's diverse portfolio of projects along with higher spending towards infrastructure makes HCC one of the better investments among companies in this sector.
Also, diversification has not only helped in managing growth, it has also helped sustain high margins.
The rising contribution from the power, water and irrigation segments has helped the company to improve its operating margins from 9.1 per cent in FY07 to 11.9 per cent in FY08.
Besides, in real estate business, it plans to develop 186 million sq ft of land on 14,000 acres of land in Maharashtra. Out of this, the 12,500-acre Lavasa-based Township (near Pune) is HCC's flagship realty project, which will be developed in phases over 12 - 15 years.
However, considering the prevailing uncertainty in the realty market, the stock has been hammered down. Analysts believe that there is excessive negative sentiment built up in the stock price, which is why the stock is trading at discount to its fair value.
Fundamentally, rising infrastructure spending in the country should drive the growth in HCC's core business. A strong order book of Rs 9,560 crore, which is 3.1 times its FY08 revenues, provides visibility. Any improvement in the sentiment towards the real estate sector should provide further fillip to the stock.
On an SOTP basis, HCC's fair value is pegged at Rs 165 per share, comprising of core business at Rs 98-110 per share and Lavasa project at Rs 34-40 per share. Adjusted for Lavasa and other real estate projects, the stock trades at 9 times it's FY09 estimated earnings and 6 times FY10 earnings.

Stock views on Andra Bank, Honda Motors

Kotak Securities on Andra Bank - TARGET PRICE: RS 81

Kotak Securities has initiated coverage on Andhra Bank with an ‘accumulate’ recommendation, saying the bank has one of the lowest NPAs (non-performing assets) in the industry and hence is better placed vis-à-vis its peers. The fact that the bank has been focusing on high yielding segments like agriculture, infrastructure, SMEs and retail has helped it deliver higher margins as compared to other public sector banks, says Kotak. “The bank’s gross NPA came down from 5.04% in FY04 to 1.07% in FY08 and net NPA declined from 0.93% to 0.17% during the same period,” the Kotak Securities note to clients said. The brokerage expects the bank to post an earnings growth of 1.1% CAGR (compound annual growth rate) for FY08-10E (estimated) as a result of moderate loan growth and lower noninterest income. However, says the note, the noninterest income would contribute less in the banks total income due to subdued equity market as well as increase in bond yields with corresponding fall in bond prices.

BNP Paribas on Honda Motors - TARGET PRICE: RS 884

BNP Paribas has upgraded its rating on two-wheeler major Hero Honda from ‘reduce’ to ‘buy’. The brokerage believes that potential upside on volume and earnings upgrades may act as positive catalysts for the stock. The year-to-date (YTD) growth in retail sales for Hero Honda, says the brokerage, were up 18% y-o-y (year-on-year) versus industry growth of 9.8% and going forward too, the volume growth looks healthy. “We don’t see any risk to our volume estimate, because our FY09 volume growth of 12.9% implies a 10% growth over the next eight months compared to a 17% growth achieved in the first four,” BNP Baribas note said in its note to clients. The brokerage has increased the FY09 EPS (earnings per share) and FY10 EPS estimates by 6.9% and 9.1% respectively. It expects the company’s net margins to be protected by fiscal benefits. “We do not see any threat to Hero Hondas’s net margins because we expect the aggregate 3-3.5% price increase (taken in two parts) coupled with lower tax rate due to fiscal benefits from the Haridwar plant to offset input cost pressure on the EBITDA line,” the note added.

Stock Views on Balaji Telefilms, Ranbaxy, Jyothi Structures, Hindalco Industries

MERILL Lynch on Balaji Telefilms - TARGET PRICE: RS 177

MERILL Lynch has maintained its “underperform” ratings on Balaji Telefilms. Recently, the STAR Group (STAR) had said it would sell 25.99% stake in BTL to the promoters or parties nominated by it at Rs 190 per share in 240 days. This implies that Balaji would be free to do programming for STAR’s rivals in certain time slots. “However, given the dominance of STAR Plus in the Hindi general entertainment (GE) space, we believe that the incremental opportunity could have lower ratings and higher costs. We think it is fraught with lower margins, lower RoE, and therefore, not positive for Balaji,” the Merrill note to clients said. “We believe earnings in Balaji’s core content business is set to slow — 12% CAGR (FY08-10 estimated) against a robust 27% (FY05-07),” the note added, citing limited prime time slots left for programming in the Hindi GE space, weak ratings on STAR Plus, entry into lower margin movies and higher costs on political intervention in labour matters as the reasons.

UBS on Ranbaxy - TARGET PRICE: RS 511

UBS has downgraded its ratings on Ranbaxy from “neutral” to “sell” , citing the ongoing investigation by the US Food and Drug Administration as a major concern. “We believe the ongoing US investigation is unlikely to be resolved in the short term and that negative publicity and heightened scrutiny are likely to result in slower product approvals in the US and other markets. We, therefore, now value Ranbaxy’s core business in line with tier-II Indian generic companies at 18 times adjusted forward earnings,” the UBS note to clients said. UBS has slashed its price target for Ranbaxy to Rs 511 from Rs 593 earlier and lowered its earlier earning per share estimate for 2008 by nearly 33% to Rs 12.78. “Our lower 2008 forecast is primarily due to FX translation loss on FCCBs,” the UBS note to clients added, also mentioning that the business outlook for the company remained “challenging”. “We believe Ranbaxy continues to face challenges in the EU market and that 10-12% year-on-year (Y-o-Y) represents the best case organic revenue growth for the company,” the note said.

MF Global on Jyothi Structures - TARGET PRICE: RS 192

MF Global has recommended a “buy” on Jyoti Structures, citing strong order flows, and an export focused business model which exposes the company to fewer operational risks. The brokerage expects JSL to report a 41% compounded annual growth in revenues between FY08-10 (estimated) and a 39% CAGR in earnings. According to MF Global, the company plans to invest more than Rs 600 million (FY09E) to strengthen its export presence in areas like the Middle-East and Africa. “The capex would mainly be towards buying construction equipment and CNC machines,” the MF Global note to clients says. MF Global expects the company to outperform its peers in a rising input cost scenario. It expects an inflow growth of 25% each during FY09E and FY10E and any positive surprise with respect to inflows would lead to a further increase in profit after tax for JSL.

ENAM Securities on Hindalco Industries - TARGET PRICE: RS 182

ENAM Securities has assigned an “underperformer” ratings to Hindalco as it feels the company’s proposed rights issue is diluting the growth of the company Hindalco is planning a rights issuance of three shares for seven existing shares at Rs 96 per share. “This is in contrast to the earlier envisaged one share for every three shares around Rs 120 per share and is round 30% discount to FY08 book value per share. The issuance hints at a sense of urgency for fund raising, given tight capital market conditions, to retire $3-billion bridge debt that expires in November 2008,” the Enam note to clients said. “We reduce our FY09 and FY10 earnings per share estimate to Rs 17.5 (Rs 19.9 earlier) and Rs 22.7 (Rs 24.4 earlier), respectively, to reflect more-than-anticipated rights dilution at lower price and attendant net interest impact,” the note added.

Hem Securities Views on Gujarat Fluorochemicals, United Spirits, Aban Offshore

Buy Gujarat Fluorochemicals - Target of Rs 300

Hem Securities has recommended a buy rating on Gujarat Fluorochemicals with a price target of Rs 300 in its June 11, 2008 research report. "The company has been a pioneer in the refrigerant business and is has also diversified into the power generation and carbon credits. The chemical complex commissioned in Dahej will strengthen the cost competitiveness of the company by making it amongst the most integrated manufacturers of these products and add longevity to the company’s refrigeration business. The growing demand for PTFE is also expected to take the company on higher rungs of success. The company’s top line and bottom-line has grown with a CAGR of 61.41 % and 92.92 % re-spectively from FY05 to FY08, indicating the robust growth in its business."

"Presently, the stock is trading at Rs 195 which is 7.05 times to its earnings and 2.28 times to its book value. Keeping in view the robust opportunities in the industry, capacity expansion of the company and the growth rate of Gujarat Fluorochemicals, we initiate a ‘BUY’ signal on the stock with a price target of Rs 300 in the long term investment horizon, expecting an appreciation of 54% from the current price of Rs 195" says Hem's research report.

Buy United Spirits - Target of Rs 1803

Hem Securities has initiated a buy signal on United Spirits with a target price of Rs 1803 in its August 7, 2008 research report. "United Spirits Ltd has announced outstanding results for Q1FY09. The company being the largest spirits company in the country had posted good results for the year ended March 2008. The Net sales grew by 16.75 per cent to Rs 31663 million in FY08, while the bottom line stood at Rs 3210.60 million with net profit margins scaling up to 10.14 per cent versus 8.55 per cent clocked in the previous year."

"Presently, the stock is trading at Rs 1342 which is at 38.34 times to its earnings and 6.06 times to its book value of Rs 221.31. Since the stock seems to offer extremely good investment opportunities, we initiate a ‘BUY’ signal on the stock with a target price of Rs 1803 in medium to long term investment horizon expecting an appreciation of about 34 % from the current level of Rs 1342," says Hem's research report.

Buy Aban Offshore - Target of Rs 5555

Hem Securities has initiated a buy rating on Aban Offshore with a target price of Rs 5555 in its August 6, 2008 research report. "The company posted excellent financial figures for the quarter ended June 2008. The net sales for the company gone up by 93.52% to Rs 2469.51 million for the Q1FY09 as against the net sales of Rs 1276.13 million for the Q1FY08. The net profit for the company rose to Rs 715.10 million for the Q1FY09 in comparison to net profit of Rs 283.75 million for the Q1FY08 with the growth rate of 152.02%."

"We initiate a ‘BUY’ signal on the stock at the current levels with a target of Rs 5555 in the medium to long-term investment horizon with an appreciation of 120.25%," says Hem's research report.

Emkay Global views on MRO-TEK, Tech Mahindra, Thermax, Jindal Saw

Buy MRO-TEK - Target of Rs 92
Emkay Global Financial Services has maintained its buy rating on MRO-TEK with a target price of Rs 92 in its August 5, 2008 research report. "MRO-Tek Ltd ended the first quarter with 29.6% YoY increase in revenues to Rs 314.4 million on account of about 10% revenue contribution from the company’s own manufactured products. During the quarter, PAT declined by 12.5% YoY and 63.8% QoQ to Rs 19.4 million on account of Rs 11.6 million loss on exchange fluctuation."

"At current market price of Rs 52 , MRO-Tek discounts its FY09E and FY10E EPS by 5.8x and 3.8x respectively and thus available at an attractive valuation. But based on the overall macro scenario and the PE contraction taking place across large cap scrips, we follow a cautious and conservative approach in assigning a PE multiple to the scrip. After taking into account the earning downgrades and PE contraction, we maintain our BUY recommendation on the scrip with downgraded target price of Rs 92 (from Rs 128). At our target price, the scrip discounts FY09E and FY10E EPS by 10.3x and 6.6x respectively," says Emkay Global Financial Services' research report.

Buy Tech Mahindra - Target Rs 990

Emaky research has maintained buy ratng on Tech Mahindra with target price of Rs 990 in its June 11, 2008 report. "We note that post the 20%+ steep correction in Tech M’s stock price over the past 3 weeks , the valuations on stock have become extremely compelling with the stock now trading at 11x FY09 adjusted earnings of Rs 66 and less than 10x FY10 adjusted earnings and hence upgrade our rating on the stock from ‘HOLD’ to ‘BUY’ with a revised target price of Rs 990, based on 13x adjusted FY10E earnings of Rs 76.1. We have also revised our FY09 and FY10 revenue estimates by 5-6% and FY09E arnings by 4.4%. (our earnings estimates based at Rs 41/USD for FY09 and Rs 40/USD for FY10) on account of greater clarity emerging on the revenue front" according to Emkay report.

Buy Thermax - Target Rs 546

Emkay report has maintained buy rating on Thermax with target price of Rs 546 in its June 10, 2008 report. "We have cut our earnings estimates by 10.8% and 15.0% for FY2009E and FY2010E respectively. At the CMP of Rs420, the current valuations are 14.5X FY2009E and 11.8X FY2010E earnings. We believe that, current valuations are factoring investor concerns i.e. (1) low order backlogs (2) lowest visibility in revenues during last 5 years and (3) concerns on operating margins due to fluctuation in raw material prices. Further, the current 1-year forward valuations are closer to (1) valuations at the start of secular uptrend in the Capital & Engineering Sector (FY2003) and (2) the restructuring phase (FY2001) - approximately 13-14X. We believe that, there is very little downside from current levels" according to Emkay report.

Buy Jindal Saw - Target of Rs 941

Emkay Global Financial Services has maintained its buy rating on Jindal Saw with a target price Rs 941 in its August 6, 2008 research report. "In Q2CY08, JSL reported 34.76% growth in the net sales from Indian operations on year on year basis. In Q2CY08, it reported the net turnover of Rs 10.175 billion as against Rs 12.855 billion in Q3FY07 (the comparable quarter which includes Rs 7.55 billion from Indian operation and Rs 5.3 billion from USA operations which has been sold off last year) in the corresponding quarter of last year."

"We have maintained BUY on the scrip with revised target price of Rs 941 based on SOTP valuation method. We have taken conservative approach in assigning the target price on the scrip. The target price includes Rs 145 per share as value of quoted investment (at 50% discount to its market value) and Rs 796 as one year forward DCF value of the pipe business. At our target price, the scrip discounts CY09E EPS of Rs 79 by 11.9x," says Emkay Global Financial Services' research report.