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.