Stock views on ING Vysa Bank, Suzlon Energy, Balrampur Chini, Shobha Developers

ENAM Securities on ING Vysa Bank - Target RS 240

ENAM Securities has retained its “outperformer” rating on the stock with a price target of Rs 240, following robust second quarter numbers. “ING Vysya registered a 43% year-on-year growth in net interest income to Rs 1.56 billion driven by 26% growth in advance and 43-basis point improvement in NIM to 2.87%. The bank has shown a strong growth in NII over the past few quarters and the fee income growth is also impressive,” the Enam note to clients said. “While the tier-1 capital at 7% is bit of a constraint, the bank can still do well this year, even without raising any additional capital. The stock quotes at one time FY09(estimated) book value and 6.9 times FY09 earnings and is attractively valued,” the note added. While the stock has corrected significantly, given the multiple uncertainties, we believe it is best to stay away at this point, it goes on to add.

Morgan Stanley on Suzlon Energy - Target RS 52.45

Morgan Stanley has “downgraded” Suzlon Energy from overweight to equal-weight while lowering the price target to Rs 52.45 from the earlier Rs 450, citing slowdown in the global wind turbine market and the unresolved technological issues. “We expect a slowdown in the global wind turbine market in C2009, with growth moving down to only 6% from 25% in C2008,” says the report. Further, the foreign brokerage also does not expects Suzlon “to get access to REpower technology in the short term.” Morgan Stanley also feels that with the cancellation of the rights issue of the company, debt will become the primary source of funding the growth at Suzlon. “We believe that Suzlon is doing the right things... trying to delay the purchase of Martifer’s stake in REpower and cutting back on capex,” says the report. However, on our reduced numbers, we still perceive risk to Suzlon’s debt covenants. If the Martifer stake purchase cannot be pushed back, we expect Suzlon to breach its debt covenants, potentially resulting in punitive action from lenders, it adds.

ICICI Securities on Shobha Developers

ICICI Securities has maintained a “buy” on Sobha Developers after the company’s second quarter results were in line with expectations with revenues and PAT dipping 10% Y-o-Y and 13% Y-o-Y to Rs 2.9 billion and Rs 490 million, respectively. The brokerage, however, has downgraded the company’s NAV owing to sluggish sales and stretched balance sheet. According to the brokerage, the company is facing headwinds in the form of downturn in realty and strained balance sheet. “The debt level has increased three times to Rs 19 billion in one year, and new sales and project launches have slowed down. We lower FY09(estimated) NAV estimate to Rs 282/share (target price at Rs 169/share), assuming 25% drop in selling prices and increased timelines by 8-10 years (reducing development pipeline 55-65%). ICICI Securities has also lowered FY09E & FY10E earnings estimates by 51% and 71%, respectively. Sobha’s balance sheet is stretched and any respite through the proposed rights issue of Rs 3.5 billion will be temporary unless housing demand picks up, it adds.

Merrill Lynch on BALRAMPUR CHINI

Merrill Lynch has maintained an “underperform” rating on Balrampur Chini Mills while lowering the price target from Rs 56 to Rs 43. The brokerage’s revised price target is based six times FY09 (estimated) EV/EBITDA, which is equivalent to the long-term average of the sector since 1996, excluding periods of very low or negative profit. “Our price objective cut is driven by 17% cut in FY09E EPS and 6% cut in our target valuation multiple,” says the report. According to Merrill Lynch, key factors driving the earnings cuts are “4% higher sugarcane costs, 18% higher interest costs and 7% lower sugar sales volumes”. We expect the company’s earnings to remain under pressure due to fall in availability of sugarcane, the key raw material, adds the report.