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Wednesday, December 31, 2008

KRChoksey views on Unitech, Gujarat Gas, DLF

Unitech - Target of Rs 73

KRChoksey Research has recommended a buy rating on Unitech with a target price of Rs 73 in its November 5, 2008 research report. "The sales for the Q2FY09 were stagnant at Rs 983.1 crore marginally down 3.0% y-o-y and 4.7% q-o-q but the operating margins is up by 1190 bps to 62% from 50%. We believe most of the concerns are already priced in, and recommend a BUY with a target price of Rs 73. At the target price the stock would be valued at 5.9x FY09E EPS of Rs 12.31, implying an upside potential of 47.17%," says KRChoksey's research report.

Gujarat Gas - Target of Rs 280

KRChoksey Research has recommended a buy rating on Gujarat Gas Company with a target price of Rs 280 in its November 13, 2008 research report. "Gujarat gas reported net sales of Rs 324.6 crore, up 17.3% Y-o-Y, on the back of increase in average realization to Rs 11.4/scm from Rs 9.8/scm in Q3CY08. We recommended a BUY on the stock with target price of Rs 280, giving an upside potential of 36%. At the target price the stock would be valued at 10.0x its CY08E EPS of Rs 28.1," says KRChoksey's research report.

DLF - Target of Rs 414

KRChoksey Research has recommended a buy rating on DLF with a target price of Rs 414 in its research report. "DLF had a stagnant quarter due to erratic market conditions. Going forward, company plans to launch aggressively mid housing apartments and commercial verticals. DLF has a 64 msf under development and a net D/E ratio of 0.6x which is much lower than most of its peers. We believe DLF is best placed to tide over the difficult times. We recommend a BUY with a target price of Rs 414. At the target price the stock would be valued at 8.1x FY09E EPS of Rs 50.65, implying an upside potential of 58.0%," says KRChoksey's research report.

Tuesday, December 30, 2008

KRChoksey Views on Jagran Prakashan, GSPL, Sejal Architectural

Jagran Prakashan - Target of Rs 70

KRChoksey Research has recommended a buy rating on Jagran Prakashan with a target price of Rs 70 in its November 11, 2008 research report. "On Y-o-Y basis, advertising revenue had shown a growth of 23.2% to Rs 143.7 crore and subscription revenue of 2.0% to Rs 47.2. We recommend a BUY with a target price of Rs 70 representing an upside potential of 36% from current levels," says KRChoksey's research report.

Sejal Architectural - Target of Rs 105

KRChoksey Research has maintained its buy rating on Sejal Architectural Glass with a revised target price of Rs 105 in its November 4, 2008 research report. "The company has surged from a loss making company in Q1FY09 to a profit of Rs 2.2 crore in Q2FY09. The net profit margin of the company stood at 15.7% for Q2FY09. We maintain our BUY recommendation on the stock, although we have revised the target price downwards from Rs 124 to Rs 105, due to macro-level headwinds faced by the construction industry. At the target price, the stock would be valued at 15.5x FY10E EPS of Rs 6.8," says KRChoksey's research report.
GSPL - Target of Rs 36

KRChoksey Research has maintained its buy rating on Gujarat State Petronet (GSPL) with a target price of Rs 36 in its November 4, 2008 research report. "GSPL reported net sales of Rs 118.5 crore, up 24.4% y-o-y; volume was below our expectation and declined to 14.9 mmscmd. We maintain a BUY on the stock with target price of Rs 36, giving an upside potential of 21%. At the target price the stock would be valued at 5.0x its FY10E CEPS of Rs 7.1, and 1.5x P/BV, " says KRChoksey's research report.

Monday, December 29, 2008

Stock Views on Sun TV, Kesoram Industries, VST Tillers

LKP Shares on VST Tillers - Target of Rs 175
LKP Shares has recommended a buy rating on VST Tillers Tractors, with 6-month price target of Rs 175, in its report dated November 1, 2008. "Given the robust free cash generation VSTT would have a book value of Rs 150 this fiscal, market capitalization which is a fourth of its revenues and the stock trading at 3xFY'09E earnings with a dividend yield of 4% offers good value for investors and we recommend a BUY with a six month price target of Rs 175," says LKP Shares' report.

SKP Securities on Kesoram Industries - Target of Rs 666

SKP Securities has a buy rating on Kesoram Industries with a target price of Rs 666 in its November 6, 2008 research report. "Net sales were up by 32.77% to Rs. 889.56 crores in Q2FY09 over Q2FY08. Considering the supply glut in the cement industry and discounting the external economic environment, we are reducing our target price. We recommend a BUY on the stock with a target price of Rs 666 at 5 x FY10E earnings," says SKP Securities' research report.

KRChoksey on Sun TV - Target of Rs 220

KRChoksey Research has recommended a buy rating on Sun TV Network with a target price of Rs 220 in its November 11, 2008 research report. "On Y-o-Y basis, advertising revenue (including radio business) and broadcast fee (Time slot model) grew 30% to Rs 136.0 crore and Rs 39.0 respectively. We recommend a BUY with a target price of Rs 220 representing an upside potential of 37% from current levels. At target price, the stock valued at 19.6x FY09E EPS of Rs 11.2," says KRChoksey's research report.

Sunday, December 28, 2008

Stock Views on Sintex India, Shiv Vani Oil, Petron Engineering Construction

Hem Securities on Sintex India - Target of Rs 314

Hem Securities is bullish on Sintex India and has recommended buy rating on the stock with a target of Rs 314, in its November 11, 2008 research report. “Sintex Industries’ consistent performance in both top line and bottom line, vig-orous growth in order book and it’s recent acquisitions show phenomenal growth in the company’s financials. Due to its ability to quickly deliver affordable housing projects, the company has secured a strong order book of Rs. 14 billion for monolithic construction which will be executed over 1-2 years. The company has got approval from 16 states for its prefab business which is the biggest entry barrier for any new entrant. So, the company is shifting its focus from textiles to plastic division to grab the growing opportunities and thereby continue on its growth trajectory. Therefore, the company’s revenue which is coming from 3-4 segments shall provide a hedge against cyclicality of its operations.”

“The stock at the current market price of Rs 218 will trade 11.24 times to its earnings of Rs 19.38 (TTM) and 1.97 times to its book value of Rs. 110.74 and is expected to provide huge upside potential in medium term. We initiate a ‘BUY’ signal on the stock at the current levels with a target of Rs 314 in the medium term investment horizon with an appreciation of approximately 44%,” says Hem Securities' research report.

Nirmal Bang on Shiv Vani Oil - Target of Rs 544

Nirmal Bang has maintained its buy rating on Shiv Vani Oil & Gas Exploration Services with a revised target price of Rs 544.1 in its November 5, 2008 research report. "Shiv Vani Oil registered strong top line growth of 92.4% y-o-y to Rs 187.2 crore for 2Q 09. We reiterate our BUY rating on Shiv Vani Oil. However, we are revising the target price to Rs 544.1 based on our FY10 earnings to factor in the slowdown of the economy in general and sector in particular," says Nirmal Bang's research report.

Nirmal Bang on Petron Engineering Construction

Nirmal Bang has recommended a buy rating on Petron Engineering Construction in its November 5, 2008 research report. "The company reported a Net Sales of Rs 118.6 crore in Q2 FY 09 as against Rs 65.02 crore in Q2 FY 08 an increase of 82.4% on YoY basis and Rs 94.49 crore in Q1 FY 09 an increase of 25.5% QoQ basis. We expect the company to achieve Net Sales of Rs 456.38 crore and Rs 684.57 crore, EBIDTA of Rs 45.49 crore and Rs 69.68 crore, Adj. PAT of Rs 17.92 crore and Rs 27.57 crore for FY 09 and FY 10 respectively. At projected EPS of Rs 16.99 for FY 09 and Rs 26.01 FY 10 the stock is trading at Price Earning Multiple of 8.3x and 5.4x respectively. Buy," says Nirmal Bang's research report.

Saturday, December 27, 2008

Stock Views on Gateway Distriparks, Kirloskar Brothers, HEG, Gateway Distriparks

KRChoksey on Gateway Distriparks - Target Rs 97

KRChoksey Research has recommended a buy rating on Gateway Distriparks, with price target of Rs 97, in its report dated October 23, 2008. "The company remains cautious on the pricing outlook of its CFS business, amidst slowing container volumes. We expect the margins of its rail business to improve, as the impact of the price hikes would be seen in the subsequent quarters. The company is confident of maintaining healthy growth on the back of its robust expansion plan. At CMP of Rs 75, the stock is trading at 8.3x on FY09E EPS of Rs 9.0. We recommend a BUY on this stock with target price of Rs 97, which represents an upside potential of 29%," says KRChoksey's research report.

SKP Securities on HEG - Target of Rs 319

SKP Securities has maintained its buy rating on HEG, with price target of Rs 319, in its report dated October 31, 2008. "The demand for graphite electrodes has been increasing globally as well as domestically in the steel industry and HEGL being the leading graphite manufacturer in India will be able to take the advantage of the situation with its increased capacity. At the current level of Rs 135.25 and excluding the investment value, HEGL is trading at 2.74 x FY09E earnings and 1.74 x FY10E earnings of Rs 35.90 and Rs 56.58 respectively."

"We have valued the core business of the company at 5 x FY10E earnings, taking value of the stock to Rs 282.91 per share. The value of the company is further increased by Rs 37 per share by discounting HEGL's investment value in Bhilwara Energy Ltd. by 50%. We maintain our BUY recommendation on the stock with a target price of Rs 319 per share, upside potential of 137%," says SKP Securities' research report.

KRChoksey on Kirloskar Brothers - Target Rs 113

KRChoksey Research has recommended a buy rating on Kirloskar Brothers, with price target of Rs 113, in its report dated October 23, 2008. "At the CMP of Rs 80.5, the stock is trading at 7.7x FY08 EPS of Rs 10.4 and 7.6x FY09E EPS of Rs 10.6. We ‘Re-rate’ the stock and recommend a BUY with a target price of Rs 113, implying an upside potential of 40%. At the target price, the stock would be valued at 10.7x FY09E EPS of Rs 10.6," says KRChoksey's research report.

Friday, December 26, 2008

Stock Views on Infotech, Indraprastha Gas, Patel Engg

PINC Research on Infotech - Target of Rs 58
PINC Research is bullish on 3i Infotech and has maintained buy rating on stock with a target of Rs 58, in its November 11, 2008 report, "At the CMP of Rs 43, 3i is trading at a P/E of 3.0x and EV/EBIDT of 3.8x its FY09 estimates. We believe that 3i’s exposure to the BFSI vertical, a leveraged balance sheet and its ability to fund new growth would continue to be concern areas in the coming quarters but we believe the recent de-rating of valuations factors in these concerns to a large extent. Hence, we believe that at current levels the stock offers value vis-a-vis growth rates and hence we maintain our ‘BUY’ recommendation with a 12 month price target of Rs 58," says PINC's research report.

KRChoksey on Patel Engg - Target Rs 347

KRChoksey Research has maintained its buy rating on Patel Engineering, with price target of Rs 347. "At the CMP of Rs 169 the stock is trading at a forward P/E of 7.3x, based on its FY09E EPS and 6.0x its FY10E EPS. We anticipate slowdown in order inflow and an increase in interest expense, which will impact the net profit margins of the company. We therefore downgrade our target price from Rs 501 to Rs 347, however, maintaining a BUY rating," says KRChoksey's research report.

Parag Parikh on Indraprastha Gas - Target of Rs 154.5

Parag Parikh Financial Advisory Services has recommended a buy rating on Indraprastha Gas with a target price of Rs 154.5 in its November 1, 2008 research report. "For the quarter ended 30th September, 2008 Indraprastha Gas Limited (IGL) has posted 24.5% growth in net sales to Rs 2,166.7 million as compared to Rs 1,740.96 million for the quarter ended 30th September 2007. We have valued the company on DCF as well as PE multiple basis and recommend a BUY for the scrip at the current levels with a price target of Rs 154.5 giving an upside of 49.20%. At our target price, the stock will trade at 11.5x FY09 earnings," says Parag Parikh Financial Advisory Services' research report.

Thursday, December 25, 2008

Stock views on HEG, Nava Bharat Ventures, Dishman Pharma, Gateway Distriparks

PINC Research on HEG - Target of Rs 205

PINC Research has maintained its buy rating on HEG with a target of Rs 205 in its November 5, 2008 research report. "HEG reported a decent 15% YoY growth in its revenues for Q2FY09 which stood at Rs 3 billion. A Rs 300 million provision for losses on account of mark-to-market on forex loans, dampened the profits, which fell by 25% on YoY basis. We believe that HEG would continue to maintain its margin and incremental volumes would drive its profit growth going forward."

"At the CMP of Rs 149, it is trading at P/E of 3.4x and EV/EBDIT of 2.3x discounting its FY10 estimates. We believe this is at substantial discount to its fair value, which also includes 36% stake in BEL. Hence we maintain ‘BUY’ recommendation on the stock with a revised price target of Rs 205 on a 12 month investment horizon," says PINC' research report.

PINC Research on Nava Bharat Ventures - Target of Rs 190

PINC Research has maintained its buy rating on Nava Bharat Ventures with 12-month price target to Rs 190 in its November 7, 2008 research report. "Nava Bharat Ventures Ltd. (NBVL) once again reported an excellent set of results in Q2FY09 as it posted a 157% increase in revenues, at Rs 4 billion, with 70% contribution from the ferro alloy division alone. Net profits grew by 127% to Rs 1.2 billion."

"At the CMP of Rs110, the stock is trading at a P/E of 2.3x and EV/EBIDT of 1.2x its FY10E earnings We believe these are very attractive valuations for a company with a very robust business model where the company can switch between power and ferro alloys production depending on the market conditions. Hence, we maintain our ‘BUY’ recommendation on the stock but revise our 12-month price target to Rs 190," says PINC's research report.

Reliance Money on Dishman Pharma - Target Rs 185

Reliance Money has recommended a buy rating on Dishman Pharmaceuticals and Chemicals, with a 12-month price target of Rs 185, in its report dated October 31, 2008. "Dishman Pharmaceuticals & Chemicals reported 35% growth in its consolidated revenues to Rs 2520 million during Q2FY09, which was in line with our expectations. To capture the market wide correction in the valuations, we are revising down our target price to Rs 185 (i.e 8x FY10EPS) from our earlier DCF based target price of Rs 320. Thus, we maintain our rating on Dishman Buy with revised target price of Rs 185," says Reliance Money's report.

India Capital Markets on Gateway Distriparks

India Capital Markets has maintained its buy rating on Gateway Distriparks, in its report dated October 31, 2008. "Gateway Distriparks Ltd (GDL) has reported impressive Q2FY09 numbers in revenues on back of increase in volume growth by 13% on qoq basis. On standalone basis GDL’s revenues grew by 32% on yoy to Rs 554 million in Q2FY09 on the back of rationalization of cost structure at Mumbai CFS. GDL overall handled 110,175 TEUs (up by 22% on yoy & 13% on qoq). GDL has deployed 12 rakes which are running on domestic and EXIM routes which will enhance to total of 40 rakes in next 18 months. Snowman’s performance has improved on operational level. We remain positive on the stock, but recent global worsening financial conditions may slow down the export – import (EXIM) trade. We continue to remain BUY on the stock," says India Capital Markets' research report.

Wednesday, December 24, 2008

Stock Views on Marico, Union Bank, Akruti City

KRChoksey on Marico - Target Rs 64

KRChoksey has recommended a buy rating on Marico with target of Rs 64 in its report on October 22, 2008. "Marico’s net sales increased 30.1% Y-o-Y to Rs 603.5 crore in Q2FY09 as against Rs 463.8 crore during Q2Y08. EBITDA of the company registered a growth of 14.1% Y-o-Y to 73.9 crore & PAT rose by 11.6% Y-o-Y to Rs 47.1 crore. The second half of FY09 is expected to present significant challenges in the domestic consumer products business, though the long term fundamentals of the company remains strong. At CMP of Rs 53.3, the stock is trading at 18.5x on FY09E EPS of Rs 2.8. We recommend a BUY on this stock with target price of Rs 64.0, which represents an upside potential of 20.0%," says KRChoksey's research report.

Emkay Global on Union Bank - Target of Rs 200

Emkay Global Financial Services has maintained its buy rating on Union Bank of India with a target of Rs 200 in its November 3, 2008 research report. "Union Bank of India’s (UBI) reported net profit of Rs 3.6 billion for Q2FY09. The operating performance for Q2FY09 was much stronger than we expected with 48.6% growth in NII and 47% growth in fee income. The improving asset quality and strong cost/asset ratios remain positives for the bank."

"We have upgraded our earnings estimates for the bank by 10% each for FY09 and FY10. We continue to maintain it as one of our top picks. The stock is currently trading at 0.9x FY10E ABV and 3.9x FY10E FDPER. We maintain our BUY recommendation on the stock with price target of Rs 200," says Emkay Global Financial Services' research report.

HDFC Securities on Akruti City

HDFC Securities has recommended a buy rating on Akruti City in its report dated November 12, 2008. "Akruti’s revenues and EBITDA grew by 5%and 9% respectively on account of an increase in other income (including income from JVs). Akruti had EBITDA margins of 98% and PAT margins of 78% in Q2 FY09 due to its high mix of commercial projects (49% of land bank) and very little presence in the residential segment (10% of land bank) as compared to other players. Akruti City, with its land bank in these areas, is in a position to tap this market. Given the visibility in project execution, its diverse land bank and strong presence in SRA schemes, we recommend a BUY on the stock," says HDFC Securities' research report.

Tuesday, December 23, 2008

Indiabulls Securities on Hindustan Petroleum, Bharat Forge

Hindustan Petroleum
Indiabulls Securities Research has upgraded its rating on Hindustan Petroleum Corporation to buy in its November 21, 2008 research report. "HPCL’s net sales for Q2’09 increased 42.7% yoy to Rs 312.1 billion. For Q2’09, Hindustan Petroleum Corporation Limited (HPCL) reported a net loss of Rs 32.2 billion. We have revised our estimates to consider the current macroeconomic and political environment."

"At the current price of Rs 228.5, HPCL’s stock trades at a forward P/E of 14.4x and 6.5x for FY09E and FY10E, respectively. Based on our valuation, we have arrived at a fair price value of Rs 265, implying an upside potential of 16.2%. Thus, we upgrade our rating on the stock to Buy," says Indiabulls Securities' research report.

Bharat Forge - Target of Rs 130

Indiabulls Securities Research has maintained its buy rating on Bharat Forge with a target of Rs 130 in its November 21, 2008 research report. "Bharat Forge (BFL)’s stock has plunged 63%. At the current market price (CMP) of Rs 92.40, the stock is trading at a forward P/E of 8.3x and 8.1x for its FY09E and FY10E earnings, respectively. We have valued BFL by using the DCF valuation methodology, assuming a WACC of 13.1% and a terminal growth rate of 5%."
"Our valuation suggests a target price of Rs 130, which provides a potential upside of more than 40% from the CMP. At the current levels, we believe that BFL is a compelling long-term investment. Hence, we maintain our Buy rating on the stock," says Indiabulls Securities' research report.

Monday, December 22, 2008

Angel Broking on Ceat, Ranbaxy Labs

Ceat - Target of Rs 43

Angel Broking has recommended a buy rating on Ceat with a target price of Rs 43 in its November 21, 2008 research report. "The current global economic situation also hampers the possibility of large scale exports, though the global price is higher by Rs 22 per kg (Bangkok — Rs 87) than the price in the Indian market. But, there is no hurry in the industry, especially the tyre manufacturers, to stock rubber heavily. The Tyre industry strongly believes that the price would further decline and Rs 50 seems to be within reach. We recommend a Buy on CEAT with target price of Rs 43," says Angel's research report.

Ranbaxy Labs - Target of Rs 316

Angel Broking has maintained its buy rating on Ranbaxy Laboratories with a target of Rs 316 in its October 31, 2008 research report. "For the quarter, the company posted Net Sales of Rs 1,882 crore, registering a yoy growth of 14.7%. At current valuations, the stock trades at 15.6x CY2008E and 10.0x CY2009E earnings, a deep discount to its historical valuations."

"While the stock would remain lackluster in the near term, we believe that at current valuations, the stock discounts the concerns fairly well. Thus, we maintain our BUY recommendation on the stock with an 18-month revised SOTP Target Price of Rs 316 (Rs 410), wherein the core business is being valued at a P/Ex of 16x CY2009E core earnings (multiple lowered on back of lower visibility on the US business) giving it a fair value of Rs 218, Rs 24 for the non-core income and Rs 75 has been ascribed to NPV of the FTF opportunities available to the company," says Angel Broking's research report.

Sunday, December 21, 2008

PINC Research on Triveni Engineering, Deepak Fertilizers, Time Techno

Triveni Engineering - Target of Rs 45
PINC Research has upgraded its rating on Triveni Engineering to buy with a target of Rs 45 in its November 21, 2008 research report. "Triveni Engineering and Industries Ltd. (TEIL) reported a YoY growth of 41% in net sales to Rs 4.3 billion for Q4FY08. Net profits surged by 5.4x to Rs 270 million. Although we expect the profitability to be impacted by higher cane price, we believe the same would be partially compensated by liquidation of low cost sugar of SS 07-08 and better distillery product prices. Hence, we upgrade our recommendation to ‘BUY’ with a price target of Rs 45 (valuing at 6.5x) on a one year investment perspective," says PINC's research report.

Deepak Fertilizers - Target Rs 80

PINC Research has recommended a buy rating on Deepak Fertilizers, with price target of Rs 80, in its report dated November 7, 2008. "Deepak Fertilisers and Petrochemicals Corporation (DFPCL) posted net sales of Rs 3.8 billion in Q2FY09 (+ 67% YoY). Revenues from chemical segment jumped by 63% to Rs 2.5 billion due to price & volumes increase in AN (Ammonium Nitrate) and fertilisers along with increased trading revenues. Sales of manufactured fertiliser surged by 4x to Rs 586 million pushing fertiliser sales up by 71% to Rs 1.2 billion. Consequently, net profit surged by 91% to Rs 418 million."

"At the CMP of Rs 59, DFPCL is trading at a P/E of 3.7x, EV/Sales of 0.6x and EV/EBIDT of 2.6x discounting its FY10 estimates. Spike in chemical prices, favorable fertiliser policy and expected increase in availability of gas augurs well for DFPCL. Accordingly, we expect higher sales volumes of methanol and fertilisers in FY10. With the recent correction in its stock price, DFPCL is available at attractive valuations. Hence we revise our recommendation upwards to ‘BUY’ with a target price of Rs 80 on a time horizon of 6-12 months. Our target price implies a PE of 5x FY10E earnings," says PINC's research report.

Time Techno - Target of Rs 50

PINC Research has maintained its buy rating on Time Technoplast with a target of Rs 50 in its November 21, 2008 research report. "We have moderated our outlook primarily due to the deteriorating economic conditions. Even though feedstock prices continue to ease, we believe the bigger threat to earnings is from lower offtake from the auto sector. We remain confident of the company’s ability to sustain margins in the 19-20% band and maintain our ‘BUY’ recommendation, but have revised downwards our price target to Rs 50 to reflect the lower earnings," says PINC's research report.

Saturday, December 20, 2008

KRChoksey views on Sterlite Industries, Dishman Pharma, Mahindra Lifespaces, SAIL

Sterlite Industries - Target Rs 455
KRChoksey Research has recommended a buy rating on Sterlite Industries, with price target of Rs 455, in its report dated October 24, 2008. "At the CMP of Rs 208,65, Sterlite is trading at 3x based on TTM EPS of Rs 67.5. We expect Sterlite to continue to be impacted by lower EBITDA margins due to fall in base metal prices. However, the highly integrated business models in all the commodities and huge cash balances (Standalone cash level : Rs 7800 crore). Hindustan zinc is completely debt free company with Rs 9395 crore cash which translates to Rs 220 per share. We recommend a BUY on the Stock with a target price of Rs 455 which is an upside potential of 118% from the CMP," says KRChoksey's research report.

Dishman Pharma - Target Rs 247.60

KRChoksey Research has recommended a buy rating on Dishman Pharmaceuticals, with price target of Rs 247.60, in its report dated October 29, 2008. "In Q2FY09, the company’s sales have increased by 39.2% on a y-o-y basis to Rs 255.6 crore. The EBITDA for the quarter has increased by 41.8% to Rs 52.4 crore compared to Rs 37.7 crore, whereas the margins have increased marginally by 40bps to 20.9% as against 20.5% a year earlier. The net profit of the company declined by 90.1% y-o-y to Rs 2.8 crore against Rs 27.7 crore, due to MTM losses of Rs 30.01 crore in the quarter under review. At the CMP of Rs 139.6 the stock is trading at 8.9x, TTM EPS of Rs 15.7 and 6.5x FY09E EPS of Rs 21.6. We assign BUY rating to the stock with a target price of Rs 247.6, implying an upside potential of 50%. At the target price, the stock would be valued at 11.5 x FY09E EPS of Rs 21.6," says KRChoksey's research report.

Mahindra Lifespaces - Target Rs 394
KRChoksey Research has recommended a buy rating on Mahindra Lifespaces, with price target of Rs 394, in its report dated November 1, 2008. "At the CMP of Rs 187, Mahindra Lifespaces is trading at 8.3x FY09E EPS. The Company trading at a P/BV of 0.85 and has a comfortable balance sheet compared to its peers. It has a Net Debt/Equity ratio of 0.3x and also has a healthy Interest Coverage ratio 30.9. The company is trading below its book value per share of Rs 209. Both of Mahindra key SEZ are operational and the processing areas sold (100%in Chennai and 25-30%in Jaipur) which gives visibity to company earning and captive demand for the residential component in the segment. Looking at the strong growth prospects of all its verticals, we recommend a BUY with a target price of Rs 394, an upside potential of 111%. At the target price the stock would be valued at 17.5x FY09E EPS of Rs 22.52," says KRChoksey's research report.

SAIL - Target Rs 110

October 22, 2008. "Net sales increased 34% Y-o-Y to Rs 12,238.59 crore in Q2FY09 but volume growth declined by 16.1%. All its businesses - Heavy structurals, Pipes, TMT rounds, Plates, Tin plates showed healthy growth. Though the company exhibited 17% Y-o-Y growth in operating profit, its operating profit margins declined by 395 bps to 28.06% compared to 32.01% in Q2FY08. Margins declined mainly because of increase in raw material prices and employee cost which has gone up on account of salary revision due to implementation of 6th Pay commission. Net profit of the company increased 18% Y-o-Y to Rs 2,009.6 crore. Net profit margin dipped by 213 bps Y-o-Y from 18.55% to 16.42%."

"The company is currently trading at a forward P/E of 7x at our base case valuation which assumes average EBITDA margins of 24% and average realization of Rs 33,000/ton. We recommend a hold on the stock with a target price of Rs 110 which is an upside potential of 9%," says KRChoksey's research report.

Friday, December 19, 2008

Emkay Global views on Bharti Airtel, Bharat Heavy Electricals, ICRA

Bharti Airtel - Target of Rs 1025

Emkay Global Financial Services has maintained its buy rating on Bharti Airtel with price target of Rs 1025 in its November 3, 2008 research report. "Its Q2FY09 results were slightly below our estimates primarily due to higher than expected fall in the mobile ARPU (Q2FY09 ARPU came was at Rs 331 v/s our estimate of Rs 341). The net sales for the quarter grew by 6.3% QoQ to Rs 90.2 billion v/s our estimate of Rs 91.4 billion. Post Q2FY09 results we have reduced our ARPU estimates by 3.2% each and once again increased the subscriber estimates by 3% and 3.6% for FY09E and FY10E respectively. We maintain buy rating with revised price target of Rs 1025 (from Rs1168 earlier) based on DCF value of core business at Rs 906 per share and value of tower business at Rs 119 per share," says Emkay Global Financial Services' research report.

Bharat Heavy Electricals - Target of Rs 1520

Emkay Global Financial Services has maintained its buy rating on Bharat Heavy Electricals (BHEL) with price target of Rs 1520 in its November 3, 2008 research report. "Its of 34.7% yoy to Rs 53.4 billion (against our estimates of Rs51.3 billion) driven by healthy order backlog of Rs 1040 billion. On account of sQ2FY2009 net profit at Rs 6.15 billion is above our expectations primarily because of better than expected topline growth. Net sales witnessed a strong growth lowdown in economic activity, high interest rest and lack of adequate funding for new projects we expect some slowdown in BHEL’s order inflow as well as order execution."

"Consequently we are downgrading our earnings estimates by 3% for FY2009 and 9% for FY2010. Also in order to factor the earnings downgrade and slowdown in order inflow we downgrade our price target for BHEL to Rs 1520, which is based on average of 16X BHEL’s FY2010 earnings, 12X its FY2010 EV/EBIDTA and DCF (WACC of 13.5%)," says Emkay Global Financial Services' research report.

ICRA -

Emkay Global Financial Services has maintained its buy rating on ICRA in its November 3, 2008 research report. "Its net profit of Rs 98 million for Q2FY09 was in line with our expectations driven by strong growth in revenues and improvement in operating leverage. The operating revenues have grown by 32% yoy to Rs 343 million driven by strong growth in the rating services and BPO business. We had valued the company at 15% premium to the Sensex multiple which it self has been derated to 10x. We are revising our price target on the stock to Rs 600, which values the company at 11.5x FY10E EPS (15% premium to the Sensex multiple). We maintain our Buy recommendation on the stock," says Emkay Global Financial Services' research report.

Thursday, December 18, 2008

Stock Views on VST Tillers, Bartronics India

Sunidhi Securities on VST Tillers - Target of Rs 135
Sunidhi Securities & Finance has recommended a buy rating on VST Tillers Tractors with a target of Rs 135 in its November 21, 2008 research report. "During Q2FY09 OP & NP margins stood at 16.7 and 10% against 13.7 and 7.2% respectively. During H1FY09 OP margin has moved up from 13.1% to 14.6% and net margin surged from 7% to 8.3%. VSTTL expects to continue its progress in establishing a sizeable market share for power tillers in states such as West Bengal, Karnataka, Orissa and Andhra Pradesh during the coming years. This apart, the prospects of exporting power tillers appear to be bright."

"During FY09, sales are expected to go up by 40% to Rs 260 crore and net profit by 45 per cent to Rs 20.9 crore, which would yield an EPS of Rs 36. We recommend BUY with a target of Rs 135 in the medium term. The 52-Week high and the low of the share has been Rs 259/88," says Sunidhi Securities & Finance's research report.

Nirmal Bang on Bartronics India - Target of Rs 155.5

Nirmal Bang has maintained its buy rating on Bartronics India with a revised target price of Rs 155.5 in its November 6, 2008. "Sales witnessed strong growth of 136.9% y-o-y to Rs 160.7 crore in 2Q 09. At current levels the stock looks undervalued and holds strong potential for upside. We reiterate BUY rating on BIL. However, we are revising our target price to Rs 155.5 to factor in the slowdown of the economy in general and anticipated slowdown in the company’s US business," says Nirmal Bang's research report.

Wednesday, December 17, 2008

Stock Views on ACC, Power Grid, Bank of Baroda, Steel Authority of India, Hindustan Construction, Reliance Industries

ABN Amro on ACC

ABN Amro has cut ACC’s earnings and downgraded it to ‘sell’. ACC seems financially well-placed with moderate expansion plans, but its earnings outlook has weakened, since the industry may see excess supply for at least two years, which will lower cement prices. FY09 cement demand growth YTD, at 6.6%, is below expectations, due to the stress in credit markets and delays in capex. So, demand estimates for FY10 and FY11 fell by 200 bps each to 8%, which exposes the industry much longer to surplus supply. Restructuring over the past five years has seen ACC exiting non-core businesses. The company, which had high gearing in the last business cycle (1997-03), now seems in a stronger financial position. ABN estimates it will have a debt-equity ratio of just 7% even after financing its entire planned capex of Rs 3,700 crore over the next three years. This will raise its capacity by 9.6%, slightly ahead of the expected demand growth. ACC looks cheap, trading at a cement enterprise value/mmt of $61 (vs replacement cost of $110), but ABN sees more downside to its earnings, given the overhang of excess supply.

HSBC on Hindustan Construction

HSBC Global has reiterated its ‘underweight’ rating on Hindustan Construction Company (HCC). It has factored in a dividend payment of Re 1 per share, implying a dividend yield of 2.2%. Thus, the total potential return on investment in shares over the next year is -1.8%. HSBC considers the share price to be volatile. For Indian stocks, HSBC considers the average cost of equity to be 11%. A volatile Indian stock with a potential total one-year return of 10 percentage points on either side of 11%, i.e. 1-21%, merits a ‘neutral’ rating. As the potential total one-year return on HCC is less than 1%, HSBC reiterates its ‘underweight’ rating on the stock. A key upside catalyst for the stock is sharp increase in order inflows and reduction in leverage, resulting in lower interest costs. A sharp drop in execution volumes along with demand slowdown remain key downside risks to HSBC’s valuation

CITIGROUP on Power Grid Corporation

CITIGROUP has maintained its ‘sell’ rating on Power Grid Corp (PGCIL) with a target price of Rs 69. PGCIL’s shares have outperformed the Sensex, post its IPO. Despite correcting more than 55% from its peak, it is not in the value zone yet. They are trading on par with NTPC, which appears unjustified. The key upside risks are: 1) Favourable CERC regulations for FY10-14E; 2) Faster-than-expected project execution; and 3) Higher non-core business profits. PGCIL has the potential to generate 14-17% returns on its regulatory equity base, compared with NTPC’s 14-22%. NTPC under-reports its profit/net worth. PGCIL matches depreciation under the tariff with reported depreciation, whereas NTPC’s depreciation under the Company Law is higher than under the tariff. PGCIL’s target price of Rs 69 is set at 1.8x FY10E P/BV from 2.2x earlier — a 10% discount to the target P/BV multiple for NTPC. PGCIL’s H1 FY09 reported PAT, at Rs 700 crore, was down 15% y-o-y. But this is largely due to forex fluctuations and a pass-through in tariffs.

Indiabulls Securities on Bank of Baroda

INDIABULLS Securities has reiterated its ‘hold’ rating on BoB. The bank reported an average performance in Q209, even as its asset quality improved. It expects interest income to grow by 16% in FY09, against 31% in FY08, as the growth rate of advances is likely to fall to 23% in FY09 vis-à-vis 28% in FY08. In addition, the expected fall in yield on investments will affect interest income. Advances may be under pressure due to the global financial crisis and slowdown in the domestic economy. Over 20% of the loan book is accounted for by real estate and SMEs, which are prone to default in the current domestic scenario. BoB’s net interest margin (NIM) increased by a mere 4 bps sequentially to 2.8%. NIM is likely to be under pressure in the coming quarters due to increased cost of deposits, though RBI has lowered its key policy rates. With increased risk-aversion, BoB may shift the mix of interestearning assets from high-yield, risky advances to safer, low-return investments. This is likely to reduce the average yield, further pressurising NIM.

MERRILL Lynch on Reliance Industries
MERRILL Lynch has retained it ‘buy’ rating on Reliance Industries (RIL). Its refining margin has consistently been higher than the benchmark Singapore complex refining margin. Analyses suggests RIL’s superior refining margin is due to its ability to refine heavier crude than Dubai. Compared to the last refining downturn, RIL is set to benefit more in FY10-FY11E from its ability to refine heavier crude. Reliance Petroleum’s (RPL) refinery, which is expected to start operations soon, can process even heavier crude than RIL and has a superior product slate. The average discount of Arab heavy to Dubai since FY01 is $2.4/bbl. The discount has sustained at over $5/bbl even in the past six weeks, despite the slump in oil prices. Merrill Lynch estimates RPL’s refining margin at $12.9/bbl if it were to operate in Q3 FY09, vis-à-vis Singapore margin of $7.3/bbl. It will produce more gasoline than RIL. Gasoline cracks have always been at a premium to naphtha and LPG cracks. Merrill Lynch feels that a weakening in diesel and gasoline cracks is the main risk to RPL attaining such high margins when it begins operations.

EDELWEISS on Steel Authority of India

SAIL has a saleable steel capacity of 13 mt. But with no major capacity expansion over the next two years and moderate demand scenario, incremental volume growth is seen at 0.6 mtpa in FY09E and may decline by 0.4 mtpa in FY10E on production cuts. SAIL’s average volume-based growth till FY10 will be more muted than that of Tata Steel and JSW Steel. The company is targeting completion of modernisation-cum-expansion by end-FY11, which is set to hike its saleable steel capacity to 23.1 mtpa, up 78% from FY08 levels. It will also improve the company’s productivity and refine its product mix. While the project will put SAIL in the global league, its timely completion looks daunting. Due to its scale and operational vastness, SAIL is best-positioned among its peers to gain from Indian steel consumption growth in the next two years. But in the absence of tangible volume growth, slow demand growth for steel, exposure to tight coking coal market, highest susceptibility to government norms on prices, and potential delay in expansion plan, Edelweiss expects SAIL’s margins to be under pressure in the next two years.

Tuesday, December 16, 2008

Stock Views on Infosys, Garware Offshore,

Justtrade.in on Infosys - Target Rs 2090

Justtrade.in has maintained buy rating on Infosys Technologies with a price target of Rs 2090 in its report dated 28 th August, 2008."Infosys an IT and consulting company with revenues of over US$ 4 billion, designs and delivers technology enabled business solutions. It trades at a PE multiple of 20.8 based on EPS for trailing twelve months ended 30th June 2008, Price to Book ratio of 7.2 on 2008 Book-Value and Price to Sales ratio of 5.9 based on net sales for trailing twelve months ended 30th June 2008. On the basis of our research, we feel that this is a good stock to buy at the current market price of Rs 1708. If everything goes well, the price is likely to appreciate to Rs 2090, within 12 months, translating into a gain of about 22.5%." According to Justtrade.in report.

India Capital Markets on Garware Offshore - Target Rs 244

India Capital Markets has recommended a buy rating on Garware Offshore Services with a target price of Rs 244 in its October 29, 2008 research report. "Garware Offshore Services (GOSL) has reported excellent numbers in Q2FY09 with strong revenue growth in revenues 79% yoy at Rs 446 million. GOSL is currently trading at a discount of 30-40% to its peer group. Our target price of Rs 255 was based on DCF valuation on a long term perspective. However, contraction in multiples will lower our target price to Rs 144, which works at 4x FY2010 earnings. Hence we recommend a BUY on the stock," says India Capital Markets' research report.

KRChoksey on Petronet LNG - Target Rs 48

KRChoksey Research has maintained its buy rating on Petronet LNG with a target price of Rs 48 in its October 20, 2008 research report. "Net profit declined 10.5% y-o-y to Rs 103.4 crore for the company owing to lower taxes and higher other income. Effective tax rate drop 272 bps y-o-y to 31.1% which restricted decline in PAT. At the CMP of Rs 39.1, Petronet LNG is trading at 6.4x its TTM earnings and 6.3x its FY09E EPS of Rs 6.2. We maintain a buy on the stock with target price of Rs 48. At the target price the stock would be valued at 6.8x its FY10E EPS of Rs 7.0, and 1.5x P/BV," says KRChoksey's research report.

Monday, December 15, 2008

SKP Securities views on TIL, Shree Cements

TIL - Target Rs 300

SKP Securities has recommended a buy rating on TIL with a target price of Rs 300 in its October 29, 2008 research report. "Net sales were up by 49.69% for Q2FY09 at Rs 264.12 crores. PAT was up by 49.02% y-o-y at Rs 9.12 crores. At the current level of Rs 156.60, TIL is trading at 3.14 x FY10E earnings of Rs 49.91. We are revising our price target and recommend a BUY to the stock with a target price of Rs 300 at 6 x FY10E earnings, giving it an upside potential of 92%," says SKP Securities' research report.

Shree Cements - Target Rs 900

SKP Securities has recommended a buy rating on Shree Cements with a 6-month target price of Rs 900 in its October 22, 2008 research report. "Profit after Tax (PAT) is marginally up by 1.19% at Rs. 107.49 crores in Q2FY09 compared to the same period last year. The fall was largely due to increase in interest costs (up by 97.28%, due to the debt taken for capex). However, tax rate was lower to 21.10% in Q2FY09 from 30.59% in Q2FY08. This helped the company to to post a positive growth. We recommend a BUY on the stock with a 6 months target price of Rs 900 at 8x FY10E earnings, giving it an upside potential of 78%," says SKP Securities' research report.

Sunday, December 14, 2008

Motilal Oswal views on TCS, Marico, United Spirits

TCS - Target Rs 760

Motilal Oswal has maintained its buy rating on Tata Consultancy Services (TCS) with a target of Rs 760 in its October 22, 2008 research report. "TCS reported USD revenue growth of 3.2% QoQ and 11.2% YoY at USD 1574 m (v/s our est. of USD 1,600 million). PAT at Rs 12.6 billion grew 1.4% QoQ (1.2% YoY), significantly below our estimates (Rs 14.1 billion) due to forex losses of Rs 2.6 billion. We are revising our FY10 USD revenue growth estimates downward by 470bp from 19% to 14.3%, on account of client specific issues with respect to TCS and overall demand uncertainty."

"Our FY09 EPS stands revised to Rs 58.1 from Rs 60.4 while we have lowered our FY10 EPS to Rs 63.3 from Rs 69.1. We are assuming an average rate of Rs 45.2/USD for FY09 and Rs44/USD for FY10 against our earlier estimate of Rs 43/USD for FY09 and Rs 42/USD for FY10. We expect FY08-FY10 revenue CAGR of 19% and EPS CAGR of 11%. The stock is trading at 8.6x FY10E earnings. We revise our target price to Rs 760 (12x FY10 EPS), implying 39% upside. Maintain Buy," says Motilal Oswal's research report.

Marico - Target Rs 65

Motilal Oswal has maintained its buy rating on Marico with a target of Rs 65 in its October 22, 2008 research report. "Marico posted in-line net sales of Rs 6 billion, a growth of 30% YoY. Adjusted net profit grew 11.6% YoY to Rs 471 million against our estimate of Rs 495 million."
"The management has given a cautious outlook on volume growth for 3QFY09. Prices of copra are likely to retreat in line with other edible oils in the coming weeks, which would be margin accretive for Marico. We expect adjusted PAT growth to remain under pressure in FY09 (16.5%); margin expansion of 90bp would result in 20% PAT growth in FY10. The stock is trading at 17.7x FY09E EPS of Rs 3 and 14.9x FY10E EPS of Rs 3 .6. We maintain Buy, target of Rs 65," says Motilal Oswal's research report.

United Spirits - Target Rs 1351

Motilal Oswal has maintained its buy rating on United Spirits with a target of Rs 1351 in its October 22, 2008 research report. "Revenues at Rs 9 billion (est. of Rs 9.2 billion) were up 20%. PAT at Rs 939 million (est. of Rs 1.05 billion) was up 17%. Gross margin declined 610bp due to sharp increase in raw material and packaging cost. EBIDTA margin improved 20bp due to sharp decline in advertising spend (down 340bp) and staff cost (down 240bp). EBIDTA is Rs 1.8 billion v/s est. of Rs 1.9 billion, up 21% YoY."

"We believe the growth story in United Spirits is intact. Volumes are expected to grow at 12% CAGR in the long term and the outlook from the regulatory changes continues to be positive. We are downgrading FY09 and FY10 EPS (excluding treasury stock) estimates from Rs 56.6 and Rs 77.6 to Rs 47.6 and Rs 67.6. The stock is trading at 16.3x FY09 EPS of Rs 47.6 and 11.5x FY10 EPS of Rs 67.6. Maintain Buy,target of Rs 1351" says Motilal Oswal's research report.

Saturday, December 13, 2008

Motilal Oswal views on Bajaj Auto, Grasim Industries, GAIL

Bajaj Auto - Target Rs 905

Motilal Oswal has maintained its buy rating on Bajaj Auto with a target of Rs 905 in its October 24, 2008 research report. "Revenues grew 8% to Rs 25.5 billion. Lower depreciation (by 33%) and lower tax rate (at 30.5% of PBT v/s 33.4% in 2QFY08) boosted recurring PAT to Rs 2.27 billion (5% de-growth). We are upgrading our earnings estimates by 12% to Rs 62.5 for FY09 and by 10.8% to Rs 72 for FY10 to factor in savings from the VRS at the Akrudi plant and savings in raw material cost. The stock trades at 7.4x FY09E and 6.4x FY10E EPS. We maintain Buy, target of Rs 905," says Motilal Oswal's research report.

Grasim Industries - target Rs 1725

Motilal Oswal has maintained its buy rating on Grasim Industries with a target of Rs 1725 in its October 23, 2008 research report. "Revenues grew 8.4% YoY to Rs 26.8 billion, driven by 17% growth in cement revenues and 45% growth in sponge iron revenues. However, higher other income and lower tax provisioning restricted PAT decline at 16% to R 4.2 billion."

"We are revising our earnings estimates downwards by 7.8% (to Rs 250) for FY09 and by 21.8% (to Rs 202) for FY10 to factor in higher cost push in cement and sponge iron, lower VSF demand and pricing, and change in cement pricing assumption. The stock is valued at 4.7x FY09E consolidated EPS, and EBITDA of 3.4x FY09E EV and USD 46/ton. We maintain Buy with a target price of Rs 1,725 (SOTP-based)," says Motilal Oswal's research report.

GAIL - Target Rs 372

Motilal Oswal has maintained its buy rating on GAIL India with a target of Rs 372 in its October 24, 2008 research report. "It reported PAT at Rs 10.2 billion, up 79% YoY from Rs 5.7 billion and 14% QoQ from Rs 8.9 billion. We remain positive on GAIL in view of increase in gas transmission volumes going forward. We expect GAIL’s transmission volumes to increase by 55% in FY10 to 130mmscmd."

"We are cutting our FY09 and FY10 EPS estimates by 4% to factor in the reduction in our LPG price assumption based on recent sharp correction in crude prices. We have also reduced FY10 gas volumes to 130mmscmd to account for delay in commencement of RIL’s gas production to 4QFY09. Our FY09 estimates could see a boost if subsidy burden is reduced due to fall in oil prices. The stock trades at 7.5x FY09E EPS. Our target price is Rs 372 per share. We reiterate Buy," says Motilal Oswal's research report.

Friday, December 12, 2008

Motilal Oswal views on Bank Stocks - Union Bank, ICICI Bank, SBI

Union Bank - Target Rs 225

Motilal Oswal has maintained its buy rating on Union Bank of India with a target of Rs 225 in its October 27, 2008 research report. "NII grew 49% YoY to Rs 9.8 billion on the back of the strong improvement in margins and 26% YoY growth in loans. We are impressed by the core operating performance in 2QFY09 and expect the strong trend to continue. NII growth, cost of funds and margin movements are encouraging. Asset quality has improved significantly and would enable lower provisions ahead."

"We are upgrading our estimates by 5% for FY09 and FY10. We expect the bank to report EPS of Rs 31 and Rs 36 in FY09 and FY10. We expect BV to be Rs135 in FY09 and Rs164 in FY10. The stock is trading at 4x FY09E EPS and 0.9x FY09E BV. RoE would remain strong at 24%+ over next two years. Maintain Buy, target of Rs 225," says Motilal Oswal's research report.

ICICI Bank - Target of Rs 581

Motilal Oswal has maintained its buy rating on ICICI Bank with a target of Rs 581 in its October 27, 2008 research report. "ICICI Bank's NII grew 20% YoY in 2QFY09 (in line with exp) driven by stable margins on the back of slower loan growth (7%), lower term deposits (8% decline), and higher CASA growth at 16%. CASA ratio improved to 30%. PAT was flat in 2QFY09 to Rs 10.1 billion."

"We are reducing our target multiple of ICICI Bank to 1x FY10E ABV given its subdued core RoE (<12%) for the next couple of years. We are reducing our target valuations for all its subsidiaries due to lower expected growth. Adjusted for value of subs at Rs 175 per share, the stock trades at 0.4x FY09E BV. Maintain Buy with a revised target price of Rs 581, an 84% upside," says Motilal Oswal's research report.

SBI - Target of Rs 2057

Motilal Oswal has maintained its buy rating on State Bank of India with a target of Rs 2057 in its October 27, 2008 research report. "SBI’s 2QFY09 PAT of Rs 22.6 billion, driven by strong core business performance. Key highlights: 1) loans up 37% and deposits up 28%; CASA ratio marginally up YoY, decline QoQ; CASA deposits grew by 27% YoY, 2) 45% NII growth v/s our estimate of 30%; margins improve 15bp YoY to 3.16% in 1HFY09, 3) fee growth (ex forex) of 40%, and 4) gross NPA at 2.5% and net NPA at 1.3%; some stress visible."

"We have increased SBI’s earnings by 8% for FY09 to factor in higher fees, higher margins growth. However, for FY10, we have reduced our estimate by 2%, due to higher provisions. Adjusted for value of SBI Life at Rs117 in FY09 and Rs133 in FY10, SBI trades at 0.8x FY09E Cons BV and 0.7x FY10E Cons BV. Maintain Buy, target Rs 2,057," says Motilal Oswal's research report.

Thursday, December 11, 2008

Stock Views on Everest Kanto, PNB, Dishman Pharma

PINC on Everest Kanto - Target Rs 210
PINC Research has maintained its buy rating on Everest Kanto Cylinder with a target of Rs 210 in its October 24, 2008 research report. "Everest Kanto Cylinder Ltd’s (EKC) Q2FY09 results were in line with expectations as it reported a 73% YoY growth in net sales to Rs 2.2 billion on back of volume growth and full quarter contribution from CP Industries. OPM expanded by 72bps to 31.8% while net profits rose by 52% to Rs 432 million."

"The stock trades at an EV/Sales of 1.4x and EV/EBIDTA of 5.2x FY10 estimates. Robust demand for CNG cylinders coupled with growing contribution from lucrative jumbo cylinders business is expected to provide sustained revenue growth and higher margins in the coming quarters. Thus, we maintain our ‘BUY’ recommendation with an 18-month price target of Rs 210," says PINC's research report.

PNB - Target Rs 627

Karvy Stock Broking has recommended a buy rating on Punjab National Bank (PNB) with a target of Rs 627 in its October 21, 2008 research report. "During 2QFY09, we expect the bank would its deposit and advances by 19.5% and 20% (Y/Y) respectively. We estimate NII to grow by 14.8% (Y/Y) to Rs 14.8 billion. At current price the stock quotes at 1.2x adjusted book value FY10, we value the bank at Rs 627 per share at 1.46x ABV FY2010. We rate the stock as a BUY with a target price of Rs 627," says Karvy Stock Broking's research report.

Dishman Pharma - Target Rs 250

Karvy Stock Broking has maintained its buy rating on Dishman Pharmaceuticals & Chemicals with a target of Rs 250 in its October 29, 2008 research report. "The net revenues for the quarter reported at Rs 2.52 billion with 35.1% y-o-y and 6.8% q-o-q growth rate, against our estimates at Rs 2.43 billion. The net profits for the quarter before exceptional items stood at Rs 339.87 million. The company maintains its guidance of reporting Rs 10500 million revenues in FY09 with 23% to 24% margins at EBITDA level and operational PAT to the tune of Rs.1500mn."

"We maintain our revenue and earnings estimates for FY09E & FY10E. We expect revenues and earnings to grow at a CAGR of 31.4% and 27% from FY08 to FY10E driven primarily from the high margin CRAMS segment. The stock is currently available at P/E of 6.9x on FY10E basis. On account of compressed valuations, we downgrade our PE multiple from 13.1x to 10.5x on FY10E diluted EPS at Rs 23.6 and revise our price target downwards by 24% to Rs 250. We continue to rate the stock as a "BUY," says Karvy Stock Broking's research report.

Wednesday, December 10, 2008

Emkay Global on Piramal Life, Bank of India, Deepak Fertilizers

Piramal Life - Target Rs 270

Emkay Global Financial Services has recommended a buy rating on Piramal Life Sciences with a target price of Rs 270 in its September 1, 2008 research report. “Piramal Life Sciences Limited (PLSL), the demerged R&D entity of Piramal Healthcare (PIHC) began operations a decade ago. PLSL today boasts of a world class drug discovery facility, a strong pipeline of 15 molecules (half of them in Phase I and Phase II) and in-licensing agreements with global innovator companies like Eli Lilly, Merck and Pierre Fabre Laboratories. Our risk adjusted DCF based NPV is Rs 270 per share. From the infrastructure view, the company is a value play. The replacement cost of its R&D facility is 50% of its current Enterprise Value (EV). PLSL trades at a significant discount to its only comparable competitor, SPARC. Despite having a stronger pipeline of 15 molecules as against 8 for SPARC, PLSL trades at a significant discount (80%) to SPARC's market cap. We initiate coverage on the stock with a buy rating and a DCF based target price of Rs 270,” says Emkay Global Financial Services' research report

Bank of India- Target Rs 340

Emkay Global Financial Services has recommended a buy rating on Bank of India with price target of Rs 340, in its report dated October 23, 2008. "Bank of India (BOI) has reported a net profit of Rs 7.6 billion for Q2FY09, far ahead of our expectations. The stock currently trades at valuations of 4.7 x FY10E EPS and 1.0x FY10E ABV, with an FY10 ROE of 24%. We maintain BUY rating on the stock with a price target of Rs 340," says Emkay Global Financial Services' report.

Deepak Fertilizers - Target Rs 64

Emkay Global Financial Services has recommended a buy rating on Deepak Fertilizers with price target of Rs 64, in its report dated October 24, 2008. "Deepak Fertilizers and Chemicals reported strong performance in Q2FY09 on back of higher margins in Chemicals Segment (up 550 bps yoy) and good performance in Fertilizer Segment (EBIT of Rs 95 million against loss of Rs 15 million). We maintain our BUY rating with 25% upside," says Emkay Global Financial Services' report.

Tuesday, December 9, 2008

LKP Shares on Plastiblends India, BASF India, Jyothy Labs

Plastiblends India -Target Rs 200

LKP Shares has recommended a buy rating on Plastiblends India with an 18-month price target of Rs 200 in its research report. "Despite being a small cap company with a market capitalization of only Rs 650 million, Plastiblends has not tapped the capital markets since its IPO in the early nineties and given its strong balance sheet and robust cash flows we do not expect any equity dilution going forward as it would be able to fund its expansion plans comfortably through internal accruals. Given the scalability of the business and the ROI we believe that PIL is well placed to achieve critical mass in masterbatches during the next three years and the stock trading at 3xFY'10E with a dividend yield of 7% is an exciting small cap pick. We recommend a BUY on the stock with an 18-month price target of Rs 200," says LKP Shares' research report.

BASF India - Target Rs 300

LKP Shares has recommended a buy rating on BASF India with an 18-month price target of Rs 300 in its research report. "Post second quarter results we believe that BASF should be able to report a 37% CAGR growth in net profits over the next two years on the back of a 34% CAGR growth in revenues over the same period. BASF India with an ROCE of 35% having the ability to grow its profits at 35% over the next two years trades at 5xFY'10E earnings with a dividend yield of 3% with the possibility of another open offer going forward remains a defensive investment bet in the present uncertain markets. Any dips below Rs 200 are a good buying opportunity and we recommend a BUY on the stock with an 18-month price target of Rs 300," says LKP Shares' research report.

Jyothy Labs - Target Rs 300

LKP Shares has recommended a buy rating on Jyothy Laboratories with a one-year price target of Rs 300 in its October 29, 2008 research report. "With the Sensex itself trading at 10x we believe that there is a compelling reason to buy JLL which is trading at 6x with a dividend yield of 4% and above all it is a debt free company (cash per share of Rs 65) which came out with its IPO a year back in November 2007 at Rs 690 (Rs 5 paid up) purely to provide an exit to private equity investors and did not collect any funds for itself. JLL has corrected to Rs 215 now from its peak of Rs 965 in early January 2008 and at CMP of Rs 215 we believe that it is an attractive investment bet for investors with a one-year price target of Rs 300, which is a 40% upside from current levels," says LKP Shares' research report.

Monday, December 8, 2008

Reliance Money views on Chennai Petroleum, Elder Pharma, Biocon

Chennai Petroleum - Target Rs 175

Reliance Money has upgraded its rating on Chennai Petroleum Corporation from hold to buy with a target price of Rs 175 in its October 23, 2008 research report. "As expected, Chennai Petroleum has posted disappointing Q2 FY09 results, thanks to lower Gross Refining Margins, huge inventory losses, and one month maintenance shut down during the last quarter. Although the outlook on refining margins is not great, still at current levels, stock is extremely cheap."

"The company also has a strong track record of declaring dividends, and the average dividend yield for the past 15 years is at around 6%, giving a good support to stock price on the downside. Keeping in view the fact that CPCL is the cheapest refinery stock available coupled with attractive dividend track record, we upgrade the stock from HOLD to BUY with a target price of Rs 175 based on 3x FY10 EV/EBITDA multiple," says Reliance Money's research report.

Elder Pharma - Target Rs 338

Reliance Money has maintained its buy rating on Elder Pharmaceuticals with a revised target price of Rs 338 in its October 23, 2008 research report. "With the lower than expected performance in H1FY09 and sharp correction in the valuations across the sector, we revise down the valuation for Elder. We have changed the valuation model from DCF basede earlier to PE multiple based. Hence, we value Elder Pharma at Rs 338 (i.e 6x its FY10 EPS) from earlier DCF based target of Rs 509 per share."

"Though we have revised down our target price to Rs 338 mainly to capture overall market valuations, we maintain our positive stance on the future earnings backed by increased shifting of manufacturing to excise free zones and consistent brand building efforts of the company. Hence, we maintain our BUY recommendation on Elder with the revised target price of Rs 338," says Reliance Money's research report.

Biocon - Target Rs 167

Reliance Money has maintained its buy rating on Biocon with a revised target price of Rs 167 in its October 24, 2008 research report. "Biocon reported 58% growth in its consolidated revenues to Rs 4422.9 million in Q2FY09, coupled with OPM of 16.6% (a sharp fall from 28.8%) and resulted in a flat PBT at Rs 557.1 million. Though we have revised down our target price to Rs 167 mainly to capture overall market valuations, we maintain our positive stance on the future earnings backed by strong pipeline of biosimilars and progress in its discovery pipeline. Hence, we maintain our buy recommendation on Biocon with the revised target price of Rs 167," says Reliance Money's research report.

Sunday, December 7, 2008

Angel Brocking Views on Godawari Power, Sun Pharma, Glaxo Pharma, Alembic

Godawari Power - Target Rs 115
Angel Broking has maintained its buy rating on Godawari Power & Ispat with a target of Rs 115 in its October 24, 2008 research report. "Godawari Power & Ispat’s (GPIL) Top-line grew 86% yoy to Rs 331 crore (Rs 178.2 crore) in 2QFY2009. The company’s Bottom-Line surged 48.3% to Rs 31.8 crore (Rs 21.4 crore). We have revised our FY2009 and FY2010 estimates including our realisation assumption as we believe that prices across its products have peaked out. Growth in Bottom-line is expected to be slower owing to 494bp Margin contraction factored in by us. At the CMP, the stock is trading at 2.0x FY2009E and 1.8x FY2010E EPS and 0.4x FY2010E P/BV. We maintain a Buy on the stock, with a revised Target Price of Rs 115 (Rs 280)," says Angel Broking's research report.

Sun Pharma - Target Rs 1600

Angel Broking has upgraded its rating on Sun Pharmaceutical Industries from neutral to buy with a target of Rs 1600 in its October 24, 2008 research report. "The company posted Net Sales of Rs 1,177.8 crore registering yoy growth of 82.2%. Robust Sales growth along with expansion in Operating Margins aided Net Profits to end the period at Rs 512.8 crore yoy surging by 134.4%. In FY2008, Sun Pharmaceuticals clocked robust growth following launch of FTF products."

"Going into FY2009, the company would see potential upsides from Pantaprazole and Amifostine. Sun has maintained its guidance of 25% rise in its US business, while ex-USA regions are expected to deliver 18-20% growth. On the back of robust 1HFY2009, we have upgraded our Net Profit numbers for FY2009 and FY2010 by 34% and 23%, respectively. On the valuation front, at the CMP, the stock is trading at 13.9x FY2009E and 15.2x FY2010E Earnings. We upgrade the stock to Buy from Neutral, with a Target Price of Rs 1,600," says Angel Broking's research report.

Glaxo Pharma - Ttarget Rs 1250

Angel Broking has maintained its buy rating on Glaxo Pharma with a target of Rs 1250 in its October 24, 2008 research report. "Advent of the Product Patents Regime in India is more beneficial for MNC Pharmaceutical companies in the long run. Glaxo, which has a strong parentage, is our preferred pick in the MNC Pharmaceutical space on the back of management’s commitment to launch its products through its listed arm. This is evident from the 9 product launches that the company plans to carry out through its listed entity. On the valuation front, at Rs980, stock is trading at 19.0x CY2008E and 16.9x CY2009E Earnings. Including the significant cash on the books (constitutes around 18% of market capitalisation), the stock is trading at 15.4x CY2008E and 13.7x CY2009E Earnings, which we believe is attractive. We maintain a Buy on the stock, with a Target Price of Rs 1,250," says Angel Broking's report.

Alembic - Target Rs 44

Angel Broking has maintained its buy rating on Alembic with a target of Rs 44 in its October 24, 2008 research report. "For 2QFY2009, Alembic posted Net Sales of Rs 344.7 crore registering a growth of 13.1%. During 2QFY2009, the company posted Net Profits of Rs 15.0 crore, substantial part of which came on the back of Rs 22.5 crore forex losses booked by the company. Alembic has re-aligned its business model to leverage the opportunities available in the Pharmaceutical sector."

"Over the years, the company has also invested in R&D and built infrastructure to cater to the Regulated markets. The company is now through with its investment phase. The company’s 1HFY2009 performance has been impacted by forex losses on account of which we have pruned our FY2009 and FY2010 estimates by 54% and 23%, respectively. At Rs 27, stock is trading at 8.0x FY2009E and 4.2x FY2010E Earnings. We maintain a Buy on the stock, with a Target Price of Rs 44," says Angel Broking's research report.

Saturday, December 6, 2008

Stock View on Alembic Pharma

WHEN A 100-year-old business undertakes restructuring to unlock its hidden value, it offers an attractive opportunity for investors to pick up assets at ‘value for money’ prices. Alembic is one such company that is transforming itself from a pure domestic pharmaceutical company to a ‘complete’ pharma company, with a presence across the entire pharma value chain.

BUSINESS:

With a turnover of Rs 1,000 crore, Vadodara-based Alembic is one of the oldest pharma companies. It lost out on growth to other players during the 1990s. The company, now managed by fourth-generation promoters, is restructuring its operations to catch up on lost opportunities. Alembic is an integrated manufacturer of formulations and active pharma ingredients (APIs) with 70% of its business coming from the domestic market. Its formulations business, consisting of generic as well as branded formulations, accounts for 70% of its total revenue, while APIs contribute the remaining. The company spends 4.5% of its sales towards R&D. It is involved in generic research, innovative research towards novel drug delivery systems (NDDS) and undertaking bio-equivalence studies. Recently, it entered into an out-licensing deal for its NDDS for Keppra XR, a leading anti-epileptic drug, with Belgium-based innovator company, UCB Pharma.

GROWTH STRATEGY:

Alembic has adopted a dual-pronged strategy of new products for existing geographies and existing products for new geographies. While anti-infectives contribute more than 50% to its domestic formulation sales, the company has broad-based its product portfolio to include products from high growth chronic therapeutic areas like respiratory, orthopaedic and gynaecology. The acquisition of Dabur Pharma’s non-oncology business in January ’07 helped the company to include more such products in its portfolio.

Alembic’s global strategy is to be the preferred supply chain partner to multinational pharma companies. Towards this, it has been investing in FDA-approved manufacturing facilities and research centres. Through these initiatives, the company aims to increase its share of international business to nearly half of its revenues over the next 2-3 years.

FINANCIALS:

The company’s net sales have seen a compound annual growth rate (CAGR) of 14.5% since ’03 to reach Rs 990 crore in FY08. Net profit during the same period grew over 29% to Rs 112.2 crore. This growth has been completely organic in nature. The stock currently offers a dividend yield of 4.8%, which is relatively higher than that of its similar-sized peers. On an average, the company distributes around 20% of its net profit as dividends and this ratio has remained constant over the years. Dividends have recorded a five-year CAGR of 45%, which is faster than the growth in the company’s profits. Alembic plans to hike its dividend payout to 35-40% in the next three years.

The company has restructured its domestic business and invested heavily in acquiring new products, building up field force and creating new business divisions. While this has had a negative impact on its profitability during the first two quarters of this fiscal, the company expects the full benefits of restructuring to be visible in FY10.

Alembic has land bank of 50 acres, which it plans to monetise in future to boost its cash flows. It is also considering acquisitions to expedite its growth.

VALUATIONS:

The company’s EPS is Rs 4.3. With an increase in products and production capacities, and emphasis on global business and R&D expertise, Alembic expects to achieve year-on-year growth of over 25% in its FY09 turnover to Rs 1,250 crore. Accordingly, considering the company’s estimated earnings for FY09, the stock is currently trading at a forward P/E of four times. This is quite attractive compared to the P/Es of similar-sized peers.

Beta: 0.8
Institutional Holding: 14.03%
Dividend Yield: 5.8%
P/E: 6 M-Cap:
Rs 354.4 cr

Friday, December 5, 2008

Stock view on Allied Digital

THE GLOBAL IT infrastructure management services (IMS) business is estimated to be $100 billion. Around 60-70% of the IMS activity can be outsourced, which translates into a huge business opportunity for Indian companies in this space. There are some players who try to benefit from the cost arbitrage model, as is done by many IT services companies. But others follow a slightly different business model. Allied Digital Services is one such established company in this space, which focuses on technology and a centralised service approach to solve most of its customers’ problems. Such a business model has dual advantages — less dependency on manpower skill, which is scarce in the market, and better manpower utilisation.

With the fall in the broader market indices, its stock has almost lost one-third of its value from its peak. But the company’s fundamentals remain strong and it has managed to grow at a healthy rate of more than 50% in the past few quarters. We believe that the current growth momentum will continue for the next few years and investors can enter the stock at the current price levels.

BUSINESS:

Allied Digital is into IT infrastructure management, security management and technical support services. The company, which has long been present in the domestic market, is now also looking at global markets. It has set up a network operation centre and security operation centre in Mumbai to serve its customers. As part of network maintenance, it tries to use different kinds of software tools to solve the problems of its customers. Currently, it solves 70-80% of the problems through technology, whereas the remaining 20-30% need human interaction. This model is 30-35% cheaper than the peoplecentric model. It also offers a package of managed security services to the clients.

FINANCIALS:

Allied Digital’s net sales have risen more than three times over the past two years. Net profit has grown by four times during the same period. It has consistently tried to improve its operating margins over the past few years by using a better mix of technology and people. Its current operating margin of 24% reflects an improvement of about 500 basis points over three years. It has maintained a higher return on capital of more than 50% in the same period. Its debt-equity ratio is around 0.1. This provides enough space for the company to acquire small companies in new geographies to access new markets.

GROWTH DRIVERS:

The company has started venturing into overseas territory, mainly the US and Australia. It acquired a US company called EnPointe Global Services, a carved-out subsidiary of Nasdaq-listed EnPointe Technologies in July this year. Since the deal is a mix of cash and stocks, Allied Digital will leverage the sales and marketing expertise of the parent company (EnPointe Technologies), which holds stocks of Allied Digital. This will drive its overseas earnings in future.

On the domestic front, the company sees ITenabled services, pharma outsourcing, knowledge process outsourcing and contract manufacturing as some of the demand growth areas for its network and security operations.

VALUATIONS:

The stock is trading at a priceearnings (P/E) multiple of 10-11. A major part of the company’s revenue is annual in nature. Though the current economic outlook is bleak, it will be difficult for many of Allied Digital’s existing clients to cut down on non-discretionary expenses like network and security management, which are critical for the survival of any business. Further, as global majors resort to outsourcing to cut costs, it will provide more business opportunities for Allied Digital. The company’s fundamentals look sound. Its stock has always outperformed the Sensex in the past one year. Investors can consider adding this stock to their portfolio.

Beta: 0.35

Institutional Holding: 23%

Dividend Yield: Nil

P/E: 10.3

M-Cap: Rs 520 cr

Thursday, December 4, 2008

Stock Views on Bharti Airtel, Jet Airways, Lanco Infra, MTNL

HSBC Global Research on Bharti Airtel

HSBC Global Research has assigned an ‘overweight’ rating to the stock saying the company’s strong balance sheet and infrasharing models will allow it to consolidate its revenue market share leadership further. “We value the core business at 12.5 times FY10 (estimated) EPS (earnings per share) at Rs 660 per share and tower valuations of Rs 183 per share,” said HSBC Global Research in a note to its clients. The research firm is positive on Bharti based on a combination of expected sharp growth in the Indian wireless market, execution of a low-leverage, low-cost business model with a high return on invested capital, and a close alignment of majority and minority shareholder interests. However, it views higher regulatory charges and aggressive international expansion as key downside risks.

Citi investment research on Jet Airways

Citi investment research has changed its rating on the stock to ‘sell/high risk’ from sell/medium risk with a revised target price of Rs 167 from Rs 440. “Jet merits a high risk rating, given the competitive scenario in the domestic market, unstability in its international operations and its highly leveraged balance sheet,” said Citi in a note to its clients. Citi believes that Jet’s operating cash losses will continue into FY10 and expects the company will need to raise fresh funds to refi-nance debt repayment (around $280 million over FY09/10E). “Debt/equity ratios are rendered meaningless given the significantly affected net worth — debt-equity is forecast at seven times end FY10E (including asset revaluation reserves),” said the Citi note. According to Citi, the company will face recurring losses of over Rs 36 billion (earlier Rs 20 billion) over FY09-FY10 due to decelerating passenger traffic and escalating cost pressures (aided by depreciating rupee). It expects the yields to dip by 12% in FY10E as lower fuel prices will be passed on to the customers.

ICICI Securities on Lanco Infra

ICICI Securities has maintained its ‘buy’ rating on the stock. “We believe that the expected commissioning of Amarkantak I (300MW) by end-November 2008 would result in reducing execution risk/discount associated with Lanco’s power portfolio,” said ICICI Securities in a note to its clients. According to ICICI Securities, Lanco’s ongoing litigation with MP SEB to convert Amarkantak I from PPA (power purchase agreement) to merchant is expected to be resolved soon and even 50% conversion will provide upside of Rs 35/share. “Lanco has emerged as the sole bidder for the 1,320 MW coal-based power plant at Rajpura, Punjab. We ex-pect the tariff of the project to be lucrative, providing healthy upside along with Rs 70 billion EPC potential,” said the note. The NAV (net asset value) estimates for Lanco stand at Rs 65 billion or Rs 296 per share, the ICICI note said.

Merrill Lynch on MTNL

Merrill Lynch has maintained its ‘underperform’ rating on the stock with a lowered target price of Rs 65 from Rs 110 earlier, saying it has valued the company’s core telecom business at a 25% discount. “The discount captures the risk of potential large cash outgo towards its assured 3G licences. The stock appears cheap at a price/book of around 0.4 times FY09 and this reflects its low RoE (return on equities) of around 2-3%,” said Merrill Lynch in a note to its clients. Merrill Lynch has cut earnings by 35% for FY09E and 29% for FY10E. “This reflects around 3-5% cut in topline and 4% rise in operating costs. We now forecast MTNL’s EBITDA margin at 11-13% for FY09-10E vs 10% margin in 1H FY09,” the note said.

Wednesday, December 3, 2008

Stock Views on HTMT Global, ABG Shipyard, Idea Cellular

PINC Securities on HTMT Global

PINC has initiated coverage on HTMT Global Solutions with a ‘buy’ rating as it feels that the company has a well-established presence in the domestic market and that its future acquisitions would help it to tap global market opportunity. “HTMT was one of the early players to tap the domestic market, which now contributes around 19% of sales with Airtel being a client since 2005 and contributing 15% of sales,” says the report. PINC also believes that future acquisitions would enable Hinduja Group company HTMT to vouch for a pie of the untapped potential that the outsourced BPO market offers. Although PINC expects modest growth rates going forward. Valuations, it feels, are at a significant discount to peers while net cash on the books of Rs 259 per share is currently greater than the CMP of the stock, which offers value at a cheap price.

Asit C Mehta on ABG Shipyard

Asit C Mehta has maintained a ‘buy’rating on ABG Shipyard even while revising its target price downwards after the company reported a drop in the net profit in the second quarter and its interest cost also went up significantly. The report highlights the point that ABG Shipyard’s PAT reduced from Rs 341.1 million in Q2FY08 to Rs 260.8 million, registering a decline of 23.5%. “The decline in PAT is mainly on account of higher interest costs,” says the report. The broking house even expects future order inflows to slow down for the company due to the ongoing credit crisis. “Although there exists replacement demand for offshore vessels, fleet owners/carriers may delay their investments in new ships due to the crisis, says the report. Considering the outlook on future order inflows, the outfit has lowering its target P/E multiple. “At current market price ABG is trading at an attractive P/E multiple of 4.6 time FY09E earnings (excluding subsidy) and 2.7 times FY10E earnings (excluding subsidy),” says the report. The target price has been lowered from Rs 365 to Rs 264.

Credit Suisse on Idea Cellular

Credit Suisse has upgraded Idea Cellular’s rating to ‘outperform’ while lowering the price target from Rs 95 to Rs 60. The foreign broking firm has changed its estimates to factor in the company’s expansion into nine new circles and the acquisition of Spice, among other reasons. Credit Suisse has also taken cognisance of the increasing competitive pressures and has reduced its estimates on Idea’s core 11 circles. “This leads to an estimated EPS decline of 39% and 40% in FY09 and FY10, respectively,” says the report.

Tuesday, December 2, 2008

Stock Views on Hero Honda, Canara Bank, Ahok Layland

EMKAY on Hero Honda

EMKAY maintains a ‘buy’ rating on Hero Honda. The company’s Q2 FY09 results were in line with expectations. While net sales, at Rs 3,200 crore (yo-y growth of 36%), were in line with estimates, EBIDTA at Rs 440 crore (yo-y growth of 49%) was ahead of expectations by around 4%. However, significantly higher tax provision (Q2 FY09 tax rate was 32%, against expectation of 24%) resulted in net profit of Rs 310 crore (y-o-y growth of 51%), which was below expectation by 2%. The higher tax rate is due to reduction in target production at the company’s Haridwar plant from 750,000 to 600,000 units. The required residual growth in FY09 and declining raw material prices warrant volumes/earnings upgrade in FY09, as well as FY10. However, considering the cautious stand adopted by the management, Emkay is leaving its estimates unchanged as of now.

CLAS on Canara Bank

CLSA maintains ‘underperform’ rating on Canara Bank as the RoE is likely to be capped at ~12% for FY09-10 due to the sharp increase in loan loss provisioning costs. Canara Bank reported a 46% y-o-y growth in topline, led by 26% y-o-y loan growth and margin expansion of 24 basis points to 2.7%. Margin expansion was a reflection of: a) improving pricing power and increase in lending rates; and b) repayment of high cost deposits by Canara Bank in the previous year, which reduced cost of deposits from 6.8% in Q2 FY08 to 6.6% in Q2 FY09. Despite loan growth being sustained at +20% and margins likely to expand further, earnings growth in coming quarters and in FY10 will remain muted as Canara Bank will need to provide for: a) higher wage costs under the new wage settlement; and b) loan loss provisions as delinquencies pick up, since the bank has no cushion due to its dismal coverage levels. As a result, RoE is likely to remain at ~12%, justifying Canara Bank’s low price-to-book multiple of 0.7x FY10 book.

Citigroup on Ahok Layland

CITIGROUP maintains ‘sell’ rating on Ashok Leyland and revises the risk rating to ‘medium’ because growth prospects for the company appear limited, and a rising capital outlay poses risks. Fundamentally, the key reasons for a healthy growth outlook in commercial vehicles include a sustained pick-up in economic activity, focus on infrastructure spending and a strong replacement cycle. Moreover, growth in agriculture, infrastructure and manufacturing sectors — all of which have positive linkages to the freight business — should remain positive over the long term. However, the near term looks challenging for Ashok Leyland due to sharp increase in interest rates, which will affect demand. A slowdown in the economy will also lead to a slowdown in the investment cycle, which will impact Ashok Leyland’s profitability. The 12-month target price of Rs 19 for the company is based on 4x March 10E consolidated EPS, based on trough valuation multiples to reflect slower-than-expected earnings growth.

Monday, December 1, 2008

Stock Views on Titan, Cipla, Petronet LNG

HSBC on Titan Industries

HSBC reiterates ‘overweight’ rating on Titan Industries. The company’s second-quarter FY09 results were quite good. It reported a 53% increase in sales and 88% net profit growth. Moreover, both the watches and jewellery divisions posted satisfactory sales growth and handsome margin expansion. HSBC expects that the effects of the slowdown will be reflected in Titan’s results from Q3 onwards. Nevertheless, the risks to FY09E estimates are more to the upside than the downside. However, HSBC has cut the company’s EPS estimate for FY10E by 3.5% to factor in slower demand next year. HSBC has identified the following growth drivers for Titan: 1) The company has recently forayed into the eyewear business with 30 stores, which may cross 150 stores by FY11E; 2) New designs and innovation across products should take wallet share; 3) Increase in charges for making jewellery; and 4) Increased preference of consumers for branded jewellery. HSBC values Titan at 20x FY10E EPS, with a target price of Rs 1,100 per share. The target price gives a potential total return of 31%.

INDIA Infoline on Petronet LNG

INDIA Infoline upgrades Petronet LNG from a ‘market performer’ to a ‘buy’, with a target price of Rs 48 and upside of 22.8%. The company reported a flat sales growth, despite a near 10% fall in sales volumes to 75 TBTUs as one high-pressure pump was de-commissioned for repair. The fall in volumes was higher than expected as the repair work stretched over a period of 3.5 months. However, the volume decline was offset to some extent on account of higher realisations aided by depreciation in the rupee. Going ahead, the 5 mmt expansion at Dahej terminal is scheduled to commence operations in Q4 FY09, while the Kochi project is likely to go on stream in ’12. With domestic gas supplies expected to increase, Petronet will find it tough to market the costlier regasified LNG. Further, with tightness in the international market, sourcing long-term LNG at affordable prices is difficult. However, the 35% correction in the company’s stock price over the past couple of months is unwarranted and is steeper than the perceived risks.

MERRILL Lynch on Cipla

MERRILL Lynch maintains ‘underperform’ rating on Merrill Lynch, despite stable margin outlook, given rich valuations and lack of upside triggers. Cipla’s Q2 net income was 7% lower than Merrill Lynch’s estimates due to higher-than-expected forex loss (Rs 100 crore) despite 23% growth in topline and stable margins of 23.3%. Cipla trades at 21x FY09E and 16x FY10E earnings — over 25% premium to the average of the domestic generics sector. The stock has corrected in the past few weeks and it is expected to be range-bound, given lack of visibility on big product upsides. Within inhalers, Cipla has developed eight HFA inhalers for the European Union market, and six products have been submitted, which can involve a long clinical trial process. The company is setting up capacities at different places (four plants in Indore SEZ coming up in February ’09); the full impact of this will be seen later. Work on the Goa SEZ remains stalled (Rs 150 crore has been invested so far). Cipla faces the risk of fluctuating margins in the coming quarters, given high contribution from low-margin HIV products (>30% of revenues) and pricing pressure in developed markets.
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