Bharath Forge

Bharath Forge Limited (BFL) is the second largest forging company in the world. The flagship company of the US $ 1.50 billion Kalyani Group, BFL commenced operations in 1966.

It has state-of-the-art manufacturing facilities spread over nine locations in six countries -India, Germany, Sweden, Scotland, North America and China. The company is one of the first in the Indian automotive component industry to have adapted inorganic growth as a means to establish a global manufacturing footprint.

BFL has a rich history of acquisitions. In 2004, it acquired Carl Dan Peddinghaus (CDP), the 2nd largest forging company in Germany that is mainly engaged in the manufacture of passenger car components, followed by CDP Aluminiumtechnik, a company in Germany that manufactures aluminium components for automotive applications. In 2005, BFL acquired Federal Forge, now known as Bharat Forge America Inc., which provided BFL with a manufacturing presence in USA - one of its largest markets. This was followed by the acquisition of Imatra Kilsta, AB, Sweden along with its wholly owned subsidiary Scottish Stampings, Scotland. Then in December 2005, Bharat Forge signed a JV with FAW Corporation - the largest automotive group in China, marking its entry into the Chinese automotive market. After this venture, BFL became the largest forging company in China. These acquisitions have provided BFL an access to customers in new geographies, enhanced its technological capabilities and enlarged its product range as well.

Investment Rationale

1) Expansion, Acquisition to Trigger Revenue Growth

BFL is planning to expand its capacities in various product segments. It has also chalked out a strategy to take over small forging companies abroad to enlarge its customer base. Its global acquisition strategy consists of two key elements. First, it hopes to broaden its customer base by bringing in a wider portfolio of product offerings. Secondly, these global facilities would assist BFL in working with renowned OEMs as an engineering and development partner.

2) De-risking the Business Model

The company is continuously attempting to de-risk its business model by improving its product mix and establishing presence in key markets like the US, Europe and China. The company is looking to increase the contribution from non-automobile components, a segment which the company has identified as a potential area for growth. BFL also sees huge potential in sectors like energy, hydrocarbons and aviation and has embarked on Rs 350 crore capex programme to emerge as a key player in these segments.

3) Dual Shore Manufacturing

BFL follows a dual shore manufacturing strategy to cater to its global customers. Dual shore manufacturing means the capacity to manufacture all key products across engine and chassis components from a minimum of two locations. Under this strategy, the company has established more than one manufacturing location for all core components, one close to the customer and one in a low-cost, but technologically competitive destination. The focus is on creating a position of global leadership in engine and chassis components of passenger cars and commercial vehicles.

4) Consolidated Revenue to Drive Growth

Along with domestic capacity expansions, the company is focusing on increasing capacity utilization of its overseas businesses as well. These companies are currently operating at around 50-60 per cent of their total capacity. Going forward, BFL plans to increase utilization levels to around 70-80 per cent, which would not only spur volumes but also boost its top-line. The increased volumes and improvement in margins would translate into a substantial jump consolidated sales and profits.

Risks & Concerns

a) Slowdown in Automobile Sector

BFL's growth is closely linked to the growth of the Indian as well as the global automotive industry. The latest trend in the US indicates a decline in the demand for passenger cars and CVs. Furthermore, a slowdown in the domestic market has been reported as well. The compounding effect of the slowdown in these markets - domestic, US and European - provides a bleak outlook to BFL's revenues and profit growth in the coming times.

b) Delay in Project Completion

BFL is on the verge of acquiring four new contracts from global players worth US$ 50 million each by the end of FY07. Any delay or non-execution of these contracts would also affect the revenue estimates for the company.

c) Failure to Turnaround Acquired Businesses

BFL has acquired companies across the world, which are running at much lower capacity utilization and some were even making losses. The long-term strategy of these acquisitions is to boost capacity utilization and improve EBITDA margins in the next 2-3 years. Any delay or failure on these fronts would also adversely affect the consolidated revenue estimates.

d) Valuations

At the CMP of Rs 91, BFL is trading at 27.9x and 10.9x its FY09E and FY10E standalone EPS, respectively, and 18.5x and 6.4x its consolidated EPS. Considering the deteriorating global automobile sales, sluggish domestic demand and adverse foreign currency movement, the stock is valued at 7x. Its consolidated FY10E EPS of Rs 14.5 is to arrive at a target price of Rs 102.

ABG Shipyard

ABG Shipyard formerly known as Magdalla Shipyard Private Ltd, is the flagship company of the ABG Group. The company is into shipbuilding and ship-repair activities. It has the distinction of being the largest private sector shipbuilding yard in India.

ABG Shipyard's state-of-the-art manufacturing facilities in Surat, is spread across 32.54 acres. This shipyard has the capacity to construct 23 ships on a modular basis. The yard has been certified by DNV - one of the world's leading registrars for certification as ISO 9001:2000 compliant.The company is expanding its manufacturing facility in Surat and setting up a new shipyard in Dahej as well. The new facility in Dahej will have the capacity to build eight large vessels a year, ranging from Handymax and Panamax to Aframax.

These expansion plans have been financed through a mix of initial public offer proceeds, debt and private placement of equity. ABG raised Rs 157 crore through its maiden public offer, a majority of which would be utilized to fund the Dahej shipyard.

Investment Rationale

1) Diversified Product Portfolio

Shipbuilding sector is directly related to the fortunes of the shipping industry, which is cyclical by nature. Hence, to de-risk this factor, ABG has diversified its vessel offerings by catering to the oil and gas sector, short sea trade and the coast guard. The company has built support and utility vessels for oil and gas companies, and pollution control and interceptor vessels for the coast guard. These vessels are always in demand and provide a cushion to the company whereby it is not severely affected by the volatility in the shipping cycle.

2) Demand for Off-shore Vehicles

Of late, oil prices have touched record highs and that has led to a dramatic rise in the level of exploration activities with several oilrigs being set up. Normally, a single oilrig requires about 15 off-shore vehicles (OSV), which is an investment of around Rs 300 crore per rig, considering an average cost of Rs 18 crore to 20 crore for one OSV. In such a situation, the demand for OSVs is expected to be very strong. OSVs contribute about 30 per cent of ABG's order book. Recently, ABG bagged an order worth US$480 million from Essar Oilfields Limited, Mauritius to build tow self-elevating rigs as well.

3) Extension of Subsidy

Governments across the globe provide assistance to their domestic shipbuilding industry in the form of subsidy. Some countries like China provide assistance in the form of zero per cent interest and tax benefits. Such assistances have helped Asian companies out price their Indian peers in global biddings in the past. However, in 2002, the Indian government started a subsidy scheme under which it provides a 30 per cent subsidy for all export orders and domestic orders for ships greater than 80 meters. Such subsidy income, which constitutes about 16 per cent of ABG's shipbuilding revenues, will boost its earnings and enable it to compete with its international peers.

4) High Replacement Demand

The International Maritime Organisation has issued a directive to phase out all single-hull tankers by 2010 to reduce oil pollution in the oceans. This regulation will accelerate the demand for double-hull tankers. Furthermore, the average age of an Indian fleet is about 16 years. This factor will add to the replacement demand since 60 per cent of the current Indian fleet would need to be replaced within five years. ABG, which is expanding its capacity, would be optimally placed to capitalize on this buoyant demand.

Risks & Concerns

a) Discontinuation of Subsidy

Subsidy accounts for nearly 16 per cent of ABG's shipbuilding revenues and 13 per cent of the total revenue. Shipping Ministry of India is to provide subsidies worth Rs 400 crore to two major private shipyards, ABG and Bharti, but only ABG has received any amount from the ministry, and that too only Rs 20 crore. While the industry players are confident about receiving the subsidy, the wait may be longer. Furthermore, there are talks about the subsidy being cut down to 20 per cent.

b) Competition from Domestic, International Players

Domestic competitors include state-owned shipyards like Cochin Shipyard and private sector players, Bharti Shipyard are strong competitors. The company also has to compete against Chinese and South Korean companies. The competition can affect ABG's pricing and impact margins.

c) Order Cancellations

The shipbuilding sector has borne the brunt of the global trade and economic slowdown in the form of fewer new shipbuilding orders along with the cancellation of existing orders. However, the management of ABG has indicated that they have not witnessed any cancellations till now. Furthermore, ABG receives 20 per of the order amount as a non-refundable advance, which reduces the chances of an order being cancelled.

d) Valuations

ABG trades at 3.5x FY09E earnings and 2.2x FY10E earnings. Concerns of global economic growth slowing down and the credit crunch have led to decline in stock prices of shipbuilding companies. ABG's order book in excess of 10x FY08 revenues provides sustained revenue visibility, but concerns of current global trade slowdown and the renewal of subsidy by the Government of India prevail. ABG is at a 30 per cent discount to global average at 4.21x CY09E earnings. The target price would be at Rs 160, which means an upside of 38 per cent from current level.

Stock Views on Aban Offshore, CIPLA, TATA POWER

Asit C Mehta Investment on ABAN OFFSHORE

Asit C Mehta Investment Interrmediates has reduced its price target for Aban Offshore to Rs 577 from the earlier Rs 1,295 due to increasing interest rates and higher operating costs. The brokerage also expects the global exploration and production demand (E&P) to fall on account of lower crude prices and economic slowdown. “We expect day rates to go down on account of a fall in crude oil price and a slowdown in the world economy, which can affect global E&P capex and fuel demand," it says in a recent report. It has reduced FY2009E and FY2010E earnings by 20% and 22%, respectively, mainly due to increasing interest rates, softening jack-up day rates in Asia, and higher operating costs. Considering the downward revision in estimates and outlook, we are lowering our PE multiple from 3.5 times to 2 times for FY10E, it adds.

Indiabulls on CIPLA

Indiabulls has maintained a ‘buy’ rating on Cipla after its third quarter topline increased due to a sharp rise in formulation exports and a consistent performance in the domestic market. “Cipla beat our expectations for Q309 as the topline swelled 21.5% y-o-y to Rs 1,340 crore,” the report says. The brokerage also expects Cipla to maintain its market share without compromising on margins. “The company’s exports are increasingly getting skewed towards higher-value higher-margin formulations over bulk drugs,” it explains. According to the report, Cipla’s anti-asthma segment, which constitutes 25% of its revenues, is likely to get a boost as consumers shift from CFC inhalers to non-CFC inhalers in accordance with the Montreal Protocol’s deadline for banning the use of CFC inhalers by 2010. The report also highlights that fact that Cipla boasts of low leverage levels and absence of FCCBs, unlike peers such as Ranbaxy and Glenmark.

ICICI Securities on TATA POWER

ICICI Securities has initiated coverage on Tata Power with a ‘hold’ rating while advising investors to consider aspects like loan servicing and project funding capabilities of the company. “Falling coal prices do not augur well for Tata Power as it has a long position on coal. The company’s subsidiaries may face difficulty in servicing loan taken to acquire 30% stake in two Bumi mines, KPC & Arutmin,” states the report. The brokerage also feels that the slowdown in metals in China and the resultant sluggishness in power consumption, long-term coal prices will most likely be at $40-45 per thermal equivalent (TE). “Thus, Tata Power will either refinance $950-million loan or raise additional loan in India to repay the Bumi debt, which appears difficult given the highly leveraged balance-sheet,” says the report. Moreover, Tata Power requires at least Rs 1,000 crore to fund its ongoing projects, notes the report.

BLUE STAR

PREMIER AIR-CONDITIONING and commercial refrigeration provider Blue star works under three business segments and earns 7% of its total revenues through exports. The electro mechanic project and packaged air-conditioning system business contributes the most to its top line. The segment comprises central air-conditioning, packaged air-conditioning and electrical contracting businesses, besides after- sale services and customised original equipment manufacturing business. Under the segment, the company provides HVA (heating, ventilation and air-conditioning), M&E (mechanical and engineering) and VRF (variable refrigerant flow) products and services. Blue Star is the country’s first and only manufacturer of VRF systems and owns nearly 20% market share.

Blue Star offers a range of contemporary window and split air-conditioners under cooling products segment. It also manufactures and markets a range of commercial refrigeration products and services catering to the industrial, commercial and hospitality sectors.

The electronics segment exclusively distributes hi-tech professional electronic equipment and industrial products . The company has moved up in the value chain by offering system integration, apart from distributing products like analytical instruments, medical electronics, data communication products, material testing, and measuring instruments from global manufacturers.

The company exports to middle-east countries like the UAE, Qatar, Bahrain, Oman and Kuwait.

FINANCIALS

Falling demand has affected the top line and profitability in the electro mechanic (EM) and cooling segments . Both the segments, which contribute nearly 80% to the bottom line, showed a negative growth in profitability in the December quarter. On the other hand, electronics segment posted a 31% growth in revenues and 19% growth in profits during the quarter. On the export side, though the product export business witnessed profitability, it was contributable to a 10% dollar appreciation against the rupee in the quarter. However tight control over total expenses has helped profit margins post stability in the last three quarters.

GROWTH POTENTIALS

Contracting global and domestic demands are expected to have a significant effect on the electro mechanic and cooling business, especially pertaining to the retail and building sectors. However, the company is expecting to see good prospects from the hospitality, healthcare and education sectors. The company is aggressively pursuing business from infrastructure sector, especially government projects as it has received several orders from government for air conditioning various stadiums for the Commonwealth Games in 2010.

The company also undertakes water management and LEED (leadership in energy and environment design certification) consultancy for green buildings as a part of its after sales services. It has submitted bids for a number of such projects, that can be implemented in the coming months.

In the December quarter, the order inflow has seen a rise of 12%, while carry forward order book as of December 2008 has grown by a 52% compared to the same period last year.

RISKS

The company’s gross block has seen a compounded annual growth rate (CAGR) of 19% in the last four years, while the interest payment rose by 86% during the period. The interest cover ratio has, on the other hand, has declined in the last three quarters, from 33.2 in March 2008 to 10 in December 2008. This, in turn, has affected the company’s net profit in September and December quarters of FY09. Company exports to the west Asian region, where the construction activity has been slowing down. Moreover, growth in the exports would be dependent on the dollar’s strength against the local currency.

The liquidity crunch and economic downturn could affect the company’s project execution and top line.

TO SUM IT UP

Blue Star has a healthy carry-forward order book, slowing demand from the construction and retail sectors may impact the company’s top line. Moreover, the liquidity crunch can lead to delays in project executions. However, the company focuses to reap the benefits from the growth in infrastructure, health care and hospitality sectors. A healthy 60% CAGR of net cash from operations in the last four years and sustained dividend payouts during the period makes the company a value buy. Lower beta and high debt-to-equity ratio makes it a safer bet for risk-averse investors.

Beta: 0.52; Institutional Holding: 8.12%; Current dividend Yield: 5.22%; Current P/E 7.57 ; Current m-cap: Rs 1205 cr

Karvy Stock Broking Views on City Union Bank, Canara Bank, Lupin

Karvy on City Union Bank - Target of Rs 31
Karvy Stock Broking has recommended a buy rating on City Union Bank with a target price of Rs 31 in its research report. "In 3QFY09, we expect that the bank's net advances would grow by 29% (Y/Y) to Rs 51.6 billion and deposits would grow by 20% (Y/Y) to Rs 76 billion; we expect that the bank's NII would grow by 13% (Y/Y) to Rs 558 million; the bank's margin is expected to be under pressure due to higher costs of deposits. We estimate 21% (Y/Y) growth in bottomline to Rs 308 million. At current price, the stock quotes at 0.65x adjusted book value FY2010; we rate the stock as a BUY with a price target of Rs 31 at 1.45x adjusted book value FY2010," says Karvy's research report.

Karvy on Canara Bank - Target of Rs 278

Karvy Stock Broking has recommended a buy rating on Canara Bank with a target price of Rs 278 in its research report. "In 3QFY09, we expect the bank total business to grow by 23.7% (Y/Y) on the back of 28.3% growth in net advances and 20.5% growth in total deposits mobilization. We rate the stock as a BUY with a price target of Rs 278 at 1.25x adjusted book value FY2010," says Karvy's research report.

Karvy on Lupin - Target of Rs 875

Karvy Stock Broking has maintained its buy rating on Lupin with a target price of Rs 875 in its January 12, 2009 research report. "Profits for the quarter are expected to be higher by 19 % to Rs 1267 million. We maintain BUY on the stock with a price target of Rs 875 based on 14x FY 2010E," says Karvy's research report.

Stock views on Glodyne Technoserve, Axis Bank, United Phosphorous

India Infoline on Glodyne Technoserve - Target of Rs 350

India Infoline has recommended a buy rating on Glodyne Technoserve with a target price of Rs 350 in its research report. "With more than a decade long experience, strong technical expertise and hybrid onsite-remote model, Glodyne is poised to exploit the huge opportunity in the IMS space. Company has annual IMS contracts with majority of its 220 active clients."

"The Tech IMS segment revenues have witnessed robust CQGR of 21% over Q4 FY07-Q2 FY09. The segment’s revenue contribution has increased from 57% in Q1 FY08 to 76% in Q2 FY09. More importantly, with the creation of the remote infrastructure, the remote share in IMS delivery has risen sharply to 19-20% currently. These macro and micro segmental shifts are lending Glodyne a niche character apart from strengthening the overall business model. Buy, target of Rs 350," says India Infoline's research report.

KRChoksey on Axis Bank - Target of Rs 690

KRChoksey Research has recommended a buy rating on Axis Bank with a target price of Rs 690 in its research report. "AXIS Bank results for Q3FY09 have positively surprised the markets on back of higher other income. Q3FY09 net profit margins of the bank improved by 100 bps (q-o-q) to 16.8%. At current price of Rs 485.7 the stock is trading at 1.7x FY09E P/BV. We recommend a “BUY” on the stock with a medium term target price of Rs 690 giving an upside potential of 42% from current level," says KRChoksey's research report.

IIFL on United Phosphorous - Target of Rs 153

IIFL has recommended a buy rating on United Phosphorous with a target price of Rs 153 in its research report. "UPL’s management reiterated the strong demand outlook for agrochemicals across most geographic regions, during our recent meeting with the company. Despite constraints in working capital financing for farmers in some regions, demand for agrochemicals remains relatively unaffected, as it is a relatively small expense for most farmers."

"The company reiterated its focus on investment in in-house product registrations while continuing to scout for potential acquisitions. The Cerexagri acquisition’s restructuring is still going on, and should be fully completed by 2HFY10. We remain bullish on UPL’s earnings growth, driven by strong demand and margin expansion from restructuring of acquisitions. Buy, target of Rs 153," says IIFL's research report.

Stock Views on Pennar Industries, Nitin Fire Protection, Colgate Palmolive

IIFL on Colgate - Target of Rs 429

IIFL has recommended an add rating on Colgate Palmolive (India) with a target price of Rs 429 in its reserach report. "Colgate Palmolive India (CPI) is one of the few consumer-goods companies whose underlying volume growth has accelerated over the last few quarters, clocking 11.5%+ growth in FY09 to date. Minimal price increases, nondiscretionary nature of consumption in oral care and market share gains across the board in its product categories are the key factors driving growth. We expect strong growth to continue, on the back of constant product innovations, sustained brand promotion spends, and the non-discretionary nature of CPI’s products."

" We expect gross margins to expand by 70bps over FY09-11ii as prices of key raw materials such as Sorbitol and packaging materials decline. With reduction in media rates on the anvil, CPI’s advertising expenses would likely remain stable if not go down. CPI’s earnings will also get a boost from the reduction in tax rate as the company produces more out of its tax-free facility in Baddi. We raise our FY09-11 EPS estimates by 4.1-7.2% and TP to Rs 429 (from Rs 400). ADD," says IIFL's research report.

Karvy on Nitin Fire Protection - Target of Rs 239

Karvy Stock Broking has maintained its buy rating on Nitin Fire Protection Industries with a target of Rs 239 in its research report. "Nitin Fire Protection Industries (NFPIL) is expected to report strong set of numbers on YoY basis on back of its CNG cylinder plant that started operations during FY09. We expect the company to report revenue of Rs 698 million as against Rs 396 million, a strong YoY growth of 76%. However on QoQ basis, we expect a marginal growth of 5%, primarily on back of volume growth in CNG cylinder segment. We expect the company to report revenues of Rs 348 million from the fire fighting segment and Rs 350 million from the seamless cylinder business. We continue to maintain our BUY rating on the stock with the price target of Rs 239," says Karvy Stock Broking's research report.

Karvy on Pennar Industries - Target of Rs 33

Karvy Stock Broking has upgraded its rating on Pennar Industries from market performer to buy with a target of Rs 33 in its research report. "For Q3FY09, we expect Pennar Industries Ltd (PIL) to report net sales growth of 11% (YoY) and de growth of 7% (QoQ) to Rs 1598 million. We expect net profit to be around Rs 87.5 million, 13% lower (YoY) and 3% lower (QoQ)."

"We maintain our sales and earning estimates of PIL for FY09 and FY10. Based on earnings, we value PIL at Rs 30 per share (8x of FY10 EPS). To add to that, value from real estate holding, is estimated to be around Rs 3 per share. Hence we retain our target price of PIL at Rs 33 and upgrade our rating from Market performer to BUY due to recent fall in stock price. Currently, PIL is trading at EBITDA multiple of 6xFY09. Our target price also reflects an EBITDA multiple of 6x on FY10," says Karvy Stock Broking's research report.

Stock views on Omnitech Infosolutions, Allied Digital, Unitech

Emkay Global on Unitech - Target of Rs 79

Emkay Global Financial Services has recommended a buy rating on Unitech with a target price of Rs 79 in its research report. "Unitech plans to launch 10,000 residential units in the Rs 3-5 million category by next year in Gurgaon, Noida, Greater Noida, Kolkata, and Chennai at a total investment of Rs 25 billion. The company has no plans of launching any new luxury housing project in the near term and is looking to reduce the total number of luxury projects to about 7-8% of its total offering. Buy, target of Rs 79," says Emkay Global Financial Services' research report.

India Infoline on Allied Digital - Target of Rs 475

India Infoline has recommended a buy rating on Allied Digital Services with a target price of Rs 475 in its research report. "ADSL’s pan-India presence (at 132 locations), direct support model, established remote infrastructure and significant price competitiveness provides an edge against competition in the domestic IMS market. Its marquee clientele include large customers won from leading Indian offshore vendors."

"The recent En Pointe Global Services LLC (EPGS) acquisition would significantly increase international IMS revenues apart from driving domestic revenues through offshoring. Further, the SOC services are expected to register exceptional growth driven by increasing compliance requirements globally. We expect company’s IMS revenues to register 50% growth in FY10 and comprise 51% of total revenues against 29% in Q1 FY09. Buy, target of Rs 475," says India Infoline's research report.

India Infoline on Omnitech Infosolutions - Target of Rs 90

India Infoline has recommended a buy rating on Omnitech Infosolutions with a target price of Rs 90 in its research report. "Over the last decade, Omnitech has evolved from a third party services provider to a computer assembler to a system integrator to a diverse technology services provider. System integration (SI), which contributed 90.5% of revenues in FY03, currently forms 27.5% of the company. Driven by management’s focus and the underlying opportunity, high-growth high-margin services such as IMS, AMS, Testing and Disaster Recovery (all incubated over last five years) form majority 72.5% of revenues presently. Buy, target of Rs 90," says India Infoline's research report.

Stock views on Hero Honda, Axis Bank, ONGC

Reliance Money on Hero Honda - Target of Rs 900

Reliance Money has recommended a buy rating on Hero Honda Motors with a target price of Rs 900 in its research report. "Hero Honda Motors Ltd has posted a flattish growth in its sales volumes for the month of November 2008. The company reported a growth of 0.5% y-o-y to 289,426 vehicles as against 288,027. We recommend a BUY with a target price of Rs 900," says Reliance Money's research report.

Karvy on Axis Bank - Target of Rs 1000

Karvy Stock Broking has maintained its buy rating on Axis Bank with a target price of Rs 1000 in its research report. "In Q3FY09, we expect the bank would report 27.8% (Y-o-Y) growth in net interest income (NII) to Rs 9.6 billion mainly due to strong growth of 48.8% (Y-o-Y) in credit offtake; we assume around 53% (Y-o-Y) growth in deposits. At current price, the stock quotes at 1.93x FY2010 adjusted book value; we determine the bank's intrinsic worth at Rs 1,000 at 3.3x ABV FY2010; we reiterate the stock as a BUY with a price target of Rs 1,000," says Karvy's research report.

Karvy on ONGC - Target of Rs 1500

Karvy Stock Broking has maintained its buy rating on Oil and Natural Gas Corporation (ONGC) with a target price of Rs 1500 in its research report. "Despite the steep fall in in crude oil prices, ONGC's Q3FY09 results are expected to be much better on YoY basis due to the sharp fall in subsidy under recovery burden and the depreciation of rupee against dollar. Net realization, in rupee terms, is likely to be Rs 2,138 per barrel as against Rs 2,152 YoY. We maintain our BUY UY rating on the stock with target price of Rs 1,500," says Karvy's research report.

Stock Views on Hindustan Zinc, Everest Kanto Cylinder, Paper Products

Karvy on Hindustan Zinc - Target of Rs 830

Karvy Stock Broking has maintained its buy rating on Hindustan Zinc with a target price of Rs 830 in its research report. "Hindustan Zinc (HZL) has finally got a succor in the form of restoration of customs duty on import of zinc. Zinc imports will now attract five per cent customs duty. As the total surplus zinc in warehouses of London Metal Exchange (LME) had increased to a whopping 250,000 tonnes, the domestic industry was apprehensive of cheap arrivals in India."

"We have already reduced our sales realization estimate for HZL. Even if we take the current realization in our estimates for FY2010E i.e. Rs 70,100 / tonne and factor in lower corporate tax rate of 14% due to the tax benefits for the export oriented unit, the company would still report an EPS of Rs 74. Adjusted for the cash and cash equivalents of Rs 280 per share, the stock is trading at only 2x of its core EPS i.e. EPS excluding other income for FY2010E. We maintain our BUY rating on the stock with target price of Rs 830," says Karvy's research report.

SKP Securities on Everest Kanto - Target of Rs 180

SKP Securities has recommended a buy rating on Everest Kanto Cylinder (EKC) with a target of Rs 180 in its research report. "EKC has planned a capacity expansion of 2,05,000 cylinders including the capacity for 5000 jumbo cylinders, industrial cylinders at Gandhidham with an estimated capital expenditure of Rs 650 million. EKC has made an aggressive capital expenditure plan in China, through EKC Industries (Tianjin) Co. Ltd, the company’s wholly owned subsidiary in China."

"At the current market price of Rs 140, the stock is trading at a P/E of 10.47x and 8.57x of FY09E and FY10E earnings of Rs 13.37 and Rs 16.34 respectively. We recommend BUY rating on the stock with a target price of Rs 180/- (28% upside) in 15 months implying a P/E multiple of 11x of FY10E earnings," says SKP Securities' research report.

LKP Shares on Paper Products - Target of Rs 40

LKP Shares has recommended a buy rating on Paper Products (PPL) with a target of Rs 40 in its research report. "PPL would end CY’08 with a muted performance due to the forex loss and we expect the company to bounce back next fiscal and given the fact that PPL has a comfortable debt equity of 0.3x and is generating strong free cash flows we believe that the current market price offers a good investment opportunity at a price to book of 0.7 with a dividend yield of 6.7%. We recommend a BUY on PPL with a one-year price target of Rs 40," says LKP Shares' research report.

Stock views on Punj Lloyd, Unichem Laboratories, Bharti Airtel

Sunidhi Securities on Punj Lloyd - Target of Rs 175

Sunidhi Securities & Finance has recommended a buy rating on Punj Lloyd with a target price of Rs 175 in its research report. "Increasing global spend on hydrocarbon, gas pipeline grid and infrastructure with well diversified robust order book with all round synergies give good visibility to revenue & profitability in the coming years. We recommend BUY with a target of Rs 175 in the medium term," says Sunidhi Securities & Finance's research report.

Karvy on Unichem Laboratories - Target of Rs 270

Karvy Stock Broking has maintained its buy rating on Unichem Laboratories with a target price of Rs 270 in its research report. "The company's net revenues for the quarter is going to grow by 10 % to Rs 1531 million. Profits for the quarter would move up by 63 % to Rs 246 million. The company's focus on profitable products has been a silver lining for the company with operating margins breaching the 20 % mark on a standalone basis. We marginally downgrade our earnings by 3 % to Rs 25.5 for FY 2009 and by 3.2 % to Rs 33.7 for FY 2010. We however maintain BUY and our price target of Rs 270 based on 8x FY 2010," says Karvy's research report.

Sharekhan on Bharti Airtel - Target of Rs 985

Sharekhan has maintained its buy rating on Bharti Airtel with a target of Rs 985 in its research report. "The latest deal in the telecom tower business, between Wireless Tata Teleservices (WTT; the tower company of Tata Teleservices) and Quippo Telecom, has positive implications for the valuations of tower business of Bharti Airtel. For Q3FY2009 we expect Bharti Airtel to report a revenue growth of 34.3% year on year (yoy) and 3.7% on a quarter on quarter (qoq) to Rs 9,350 crore. The mobile subscriber base is estimated to grow by 10.6% qoq to 85.7 million. The net profit is expected to grow by 29.5% yoy and 6.2% qoq to Rs 2,229.8 crore. We maintain our Buy call on the stock with a price target of Rs 985," says Sharekhan's research report.

Stock Views on Sun Pharma, ICICI Bank

Religare on ONGC - Target of Rs 891

Religare Hichens Harrison Research has recommended a buy rating on Oil and Natural Gas Corporation (ONGC) with a target price of Rs 891 in its research report. "Subsidy burden expected to lighten significantly in FY10 due to positive marketing margins from petrol and diesel. Opec production cuts to lend fillip to oil prices in near term. We have assumed net realisations of US$ 45/bbl for FY10; depreciating rupee would act as a cushion. BUY, target Rs 891," says Religare Hichens Harrison's research report.

Angel on ICICI Bank - Target of Rs 714


Angel Broking has maintained its buy rating on ICICI Bank with a target price of Rs 714 in its research report. "ICICI Bank has deferred sale of its holding in Firstsource Solutions, a Mumbai-based pure-play business process outsourcing (BPO) entity. The Bank along with its subsidiaries owns close to 27% in the BPO firm. The Bank is said to have initiated discussions with a few global private equity (PE) and strategic players to sell its stake valued at around Rs 660 crore."

"Industry sources indicate that PE players such as Warburg Pincus and Temasek were among some of the PEs interested parties. Firstsource, which provides business process management to global players in the Banking & Financial Services, Telecom, Media and Healthcare sectors employs close to 20,000 personnel and clocked Revenues of around Rs 1,500 crore and Net Profit of Rs 150 crore. We maintain a Buy on the stock, with a target price of Rs 714," says Angel's research report.

Religare on Sun Pharma - Target of Rs 1433

Religare Hichens Harrison Research has recommended a buy rating on Sun Pharmaceutical Industries with a target of Rs 1433 in its research report. "Superior business profile; earns EBITDA margins of 35% – the highest among peers. Limited exposure to high pressure US generics market (25% of base business). Base business earnings set to post 31% CAGR over FY08-FY10 driven by a strong operating performance across segments. Also stands to gain from one-time Para-IV opportunities in the US in FY09 and FY10. BUY, target of Rs 1433," says Religare Hichens Harrison's research report.

Stock views on Dishman Pharma, ONGC, Nitco

Karvy on Nitco - Target of Rs 114
Karvy Stock Broking has maintained its buy rating on Nitco with a target price of Rs 114 in its research report. "We are revising our sales estimates downward by 3% for FY09E from Rs 7,535 million to Rs 7,306 million and by 5.8% for FY10E from Rs 8,988 million to Rs 8,464 million. We are reducing our EBITDA margin estimates for FY09E and FY10E by 10bps and 30bps from our earlier estimates of 12.3% and 11.9% for FY09E and FY10E respectively. Accordingly we are reducing our net profit estimates by 5.8% and 7.6% to Rs 519 million and Rs 568 million for FY09E and FY10E respectively."

"Our revised EPS estimates stands at Rs 16.2 and Rs 17.7 for FY09E and FY10E respectively. Due to the above mentioned reasons, we are reducing our price target on the stock by 21% to Rs 114. We have valued the company's tile business and real estate business at Rs 71 (4x its FY10E EPS of Rs 17.7) and Rs 43 (30% discount to its NPV of Rs 62) respectively. We continue to maintain our BUY rating on the stock," says Karvy's research report

Angel on ONGC - Target of Rs 948

Angel Broking has maintained its buy rating on Oil and Natural Gas Corporation (ONGC) with a target price of Rs 948 in its research report. "ONGC has taken control of Imperial Energy Plc for £1.3bn (USD 1.9bn) after an overwhelming 96.8% of London-listed firm's total shareholders accepted its takeover offer. ONGC Videsh (OVL), the overseas arm of the state explorer ONGC, needed 90% shareholders to approve its deal, which will result in delisting of Imperial."

"Imperial will be delisted from the LSE after it “squeezes out” the remaining un-tendered shares by posting them cheques of the offer amount and telling the shareholders that these un-tendered shares were no longer valid. The deadline for the state-owned firm's £12.50 per share offer closed yesterday. Imperial would be the biggest overseas ever acquisition by OVL. ONGC would lend close to USD 1bn to fund the transaction at 5.96% interest rate. The entire acquisition and subsequent delisting may take two to three weeks. ONGC Chairman, R.S.Sharma owed the acquisition to the Government support, which has seen OVL in the past seven years increase its number of projects to 39 in 17 countries, from just a single project in Vietnam. We maintain Buy on the stock with a target price of Rs 948," says Angel's research report

Karvy on Dishman Pharma - Target of Rs 225

Karvy Stock Broking has maintained its buy rating on Dishman Pharmaceuticals & Chemicals with a target price of Rs 225 in its research report. "We reiterate our "BUY" rating on Dishman Pharmaceuticals and Chemicals (Dishman) on back of strong revenue traction from its highmargin Contract Research and Manufacturing services (CRAMS) business and Solvay's Vitamin D & Chemicals business with greater earnings visibility."

"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 5.9x on FY10E basis. We are downgrading our price target on back of compressed valuations by 11.1% to Rs 225 on 9.53x FY10E diluted EPS of Rs.23.6. We continue to rate the stock as a "BUY"," says Karvy's research report.

Stock Views on Reliance Communications, Mahindra and Mahindra, Sterlite Industries

Emkay Global on Sterlite Industries - Target of Rs 301

Emkay Global Financial Services has maintained its buy rating on Sterlite Industries (India) with a target of Rs 301 in its research report. "Despite the current slowdown, SIL’s expansion plans are on track and the management expects the plants to be operational within time and budget. On EV/EBITDA basis the stock is trading at 2.1x FY09E EV/EBITDA and at 2.5x FY10E EV/EBITDA; while on P/B basis the stock is trading at 0.6x FY09E book value and at 0.5x FY10E book value. We maintain BUY on the stock, with target price of Rs 301," says Emkay Global Financial Services' research report.


Sharekhan on Mahindra and Mahindra - Target of Rs 565


Sharekhan has maintained its buy rating on Mahindra and Mahindra with a target of Rs 565 in its research report. "Mahindra & Mahindra’s (M&M) unit Punjab Tractors has entered into a memorandum of understanding with Sumitomo Corporation to sell its 14.04% stake in Swaraj Mazda Ltd (SML). We continue to value M&M on a sum-of-the-parts basis, valuing the core business at Rs 314 and the subsidiaries at Rs 251. We maintain our Buy recommendation on M&M’s stock with a price target of Rs 565," says Sharekhan's research report.


Prabhudas Lilladher on Reliance Communications - Target of Rs 367


Prabhudas Lilladher has recommended a buy rating on Reliance Communications with a target price of Rs 367 in its December 31, 2008 research report. "RCom announced the commercial launch of GSM services in 6k new towns in addition to 5k towns already under coverage in 8 existing GSM circles. GSM launch will help RCom not only garner incremental subscriber net additions but also help in gaining advantage of the roaming revenues. Moreover, FCCB MTM losses, leveraged balance sheet vis-à-vis Bharti and higher-than-anticipated treasury income for RCom, is reflected in the price. Buy, target of Rs 367," says Prabhudas Lilladher's research report.

Stock Views on Lanco Infratech, Bharti Airtel, Jubilant Organosys

Karvy on Jubilant Organosys - Target of Rs 220


Karvy Stock Broking has upgraded its rating on Jubilant Organosys from outperformer to buy with a target price of Rs 220 in its research report. "We maintain our positive outlook on the company from long term perspective considering CRAMS (Contract Research and Manufacturing services) industry dynamics and company's unique business model. We maintain our net revenues estimates at Rs 37.34 billion in FY09 and Rs 48.73 billion in FY10E and EBITDA margin estimates at 18.7% in FY09 and 18.9% in FY10E. On account of repayment of FCCBs, we have assumed existing equity of Rs 147.5 million outstanding shares for FY10 and hence earnings estimates are increasing by 13% to Rs 32.66. We have factored higher interest expense for FY10 on back of 42% premium payment on FCCB pending issue and increase in average debtor and inventory days due to tighter liquidity position prevailing in the market. We upgrade our price target by 10% to Rs 220 based on PE of 6.73x on FY10E basis. We upgrade the rating from "Outperformer" to "BUY" on account of earnings upgrade and steep fall in stock price by 34% since our last update," says Karvy's research report.


VCK Share on Bharti Airtel - Target of Rs 910


VCK Share and Stock Broking Services has maintained its buy rating on Bharti Airtel with a target price of Rs 910 in its research report. "We maintain our ‘BUY’ rating on the stock with target price at Rs 910. The global bidding in 3G auctions, highly competitive situation and falling ARPUs are the downside risks. With a market share of 25% and low debt-equity ratio, we are highly positive on the stock. Bharti is awaiting clarification on definition of development blocks for 2% reduction of USO levy and is confident of being the biggest beneficiary from the same by virtue of having the largest wireless network. The company continues to maintain its leadership position with strong earning visibility and excellent execution record. We believe that Bharti will continue to be the market leader with 25% market share by the end of FY10. We arrive at our Rs 910 target price for Bharti Airtel based on a combination of EV/EBITDA, P/E, P/CEPS, and P/BV analysis," says VCK Share and Stock Broking Services' research report.


Angel on Lanco Infratech - Target of Rs 320


Angel Broking has maintained its buy rating on Lanco Infratech with a target price of Rs 320 in its research report. "Hyderabad-based Lanco operates in three different businesses in the Infrastructure space, viz, Power, Real Estate and Construction & Engineering, Procurement and Construction. Recently, Lanco had bid for the Rs 18,000 crore ultra mega power project (UMPP) at Tilaiya in Jharkhand in competition with NTPC, Reliance Power and Tata Power. This move by Lanco is in line with its strategy to expand in the Power space and become the biggest independent private player. However, we do not believe that this should materially impact its Financials or Stock price in the short term. Based on the sum-of-the-parts (SOTP) methodology, we have arrived at a target price of Rs 320 and maintain a Buy on the stock," says Angel's research report.

Stock Views on Oriental Bank of Commerce, Roman Tarmat, TIL

LKP Shares on TIL - Target of Rs 200

LKP Shares has recommended a buy rating on TIL with a target of Rs 200 in its research report. "The Indo-US civil nuclear co-operation deal and the approval of the APDRP during the XI Plan should in our view boost the demand for products manufactured by TIL over the longer-term. During the first half of the current fiscal, TIL posted a 20% rise in revenues at Rs 4.5 billion (Rs 3.75 billion) and a 10% rise in net profit at Rs 148 million (Rs 135 million). Even assuming a 20% de-growth in revenues and a 20% de-growth in net profits during the second half of the current fiscal we believe that TIL is available at compelling valuations."


LKP Shares on Roman Tarmat - Target of Rs 40


LKP Shares has recommended a buy rating on Roman Tarmat with target of Rs 40 in its research report. "We believe that given the healthy reserves and book value the management despite a comfortable 60% stake could possibly look at a share buy-back which could act as a trigger. Additionally since RTL holds a four-acre property in Mumbai at a prime location in the western suburb, which is lying idle and could potentially fetch the company Rs 45 per share on outright sale or attractive lease income. With a 4% dividend yield we recommend a BUY on ROMAN TARMAT an exciting small cap pick with a one-year price target of Rs 40," says LKP Shares' research report.


Karvy on Oriental Bank of Commerce - Target of Rs 224


Karvy Stock Broking has maintained its buy rating on Oriental Bank of Commerce with a target price of Rs 224 in its research report."In a scenario of declining bond yield across tenures and OBC's high percentage (almost 40%) of investments in trading portfolios with a duration of 1.9 years and almost 1% of excess SLR would make the bank a major beneficiary."


"We estimate the bank would report RoAE of 13.2% and 13.3% in FY2009 and FY2010 respectively; RoAE lesser than estimated cost of equity (14.25%) would command lower price/adjusted book multiple for the bank. We estimate the bank fundamental worth at Rs 224 according to DDM valuation methodology. We reiterate our BUY rating with a target price of Rs224 at 0.86x adjusted book value FY2010," says Karvy's research report.

Stock Views on HDFC Bank, Shree Renuka, Lupin

Religare on Lupin - Target of 656

Religare Hichens Harrison Research has initiated an accumulate rating on Lupin with with a target price of Rs 656 in its research report. "We expect Lupin’s base business to witness an earnings CAGR of 21% over FY08- FY11. The stock is trading at 12.3x FY09E EPS of Rs 46.8 and 11x FY10E EPS of Rs 52.3. We have valued Lupin at 13x one-year forward earnings which is at a 20% premium to its peer group considering its relatively strong earnings profile. We initiate coverage with an Accumulate and a target price of Rs 656," says Religare Hichens Harrison's research report.

Prabhudas Lilladher on Shree Renuka - Target of Rs 89

Prabhudas Lilladher has recommended a buy rating on Shree Renuka Sugars with a target of Rs 89 in its research report. "Shree Renuka Sugars (SRSL) has shown CAGR of 50% in revenues and 125% in net profit over 2001-2007. It has been comparatively more beneficial as compared to its peers due to higher recovery of sugar and ability to export. We expect 11.9% growth in topline in FY2008-09 and 46.9% in FY2009-10. We also expect bottom-line to grow by 86.9% and 47.4% in FY2008-09 and FY2009-10, respectively, giving an EPS of Rs 8.5 and Rs 12.4 in FY2008-09 and FY2009-10, respectively, Buy, target of Rs 89," says Prabhudas Lilladher's report.

Sharekhan on HDFC Bank - Target of Rs 1482

Sharekhan has maintained its buy rating on HDFC Bank with a target of Rs 1482 in its research report. "Fitch, the international rating agency, has assigned a “AAA” rating to the bank’s lower Tier-II bonds with Crisil assigning a “AAA” rating to the upper Tier-II bonds. The capital mobilisation of Rs 1,728 crore through bond issuance should be able to fund HDFC Bank’s growth up to FY2010. At the current market price of Rs 973, HDFC Bank trades at 14.5x FY2009E earnings per share, 5.8x FY2009E pre-provisioning profit and 2.2x FY2009E book value. We maintain our Buy recommendation on the stock with price target of Rs 1,482 for the stock," says Sharekhan's research report.

Stock Views on Emco, Bharat Forge, Apollo Tyres

Sharekhan on Apollo Tyres - Target of Rs 45

Sharekhan has maintained its buy rating on Apollo Tyres with a target of Rs 45 in its research report. "The company’s performance may get affected by the demand slowdown and fluctuating raw material prices, but in the long run, the company is likely to benefit from the strong growth opportunities and its leadership position in the market. At the current market price of Rs 19, the stock discounts its FY2010E earnings by 4.2x and quotes at an enterprise value/earnings before interest, tax, depreciation and amortisation of 2.9x. We maintain our Buy recommendation on the stock with a price target of Rs 45," says Sharekhan's research report.


KRChoksey on Bharat Forge - Target of Rs 118


KRChoksey Research has recommended a buy rating on Bharat Forge with a target of Rs 118 in its research report. "Q4FY09 is expected to be better than Q3FY09 as, non-auto business from Mundhwa Plant is expected to contribute the top line with 10-15% utilization rate and auto sales are expected to get some respite. Further in FY10, non-auto segment is expected to contribute revenue to the tune of Rs 500 crore and this would be a growth driver for the company. At the CMP of Rs 87, the stock is trading at 5.3x FY10E EPS of Rs 16.4. We recommend a BUY on the stock with a target price of Rs 118, implying an upside potential of 35.6% from current levels," says KRChoksey's research report.


Anagram on Emco - Target of Rs 68


Anagram Research has recommended a buy rating on Emco with a target of Rs 68 in its research report. "We remain positive on EMCO’s electrical equipment and projects businesses and the three verticals in the power sector i.e., utilities, equipment, and EPC, it is likely to benefit significantly from the strong macro environment in the power sector. Also we view EMCO’s entry into the South African market to be positive. While there would be a certain lead time before this business scales up, we believe geographic diversification increases the revenue visibility substantially for the company. EMCO is entering into coal trading business as it has recently acquired 37.35% stake in Indonesian mines. We expect this new business venture to substantially boost revenue going forward."

"EMCO enjoy 1.3X order book to sales ratio, which are best among its peers. EMCO has highest manufacturing capacity of around 20,000 MVA. Stock had corrected more than 90% from its 52 week high and its is trading nearly 52 week low. At CMP, stock trades at 2.7x and 2.08x FY09 and FY10 earnings with an EPS of RS 14.34 and 18.69 respectively. We recommended BUY rating with the target of 68," says Anagram's research report.

Stock Views on Tamil Newsprint, Bajaj Hindusthan, Piramal Healthcare

Angel Broking on Piramal Healthcare - Target of Rs 340

Angel Broking has maintained its buy rating on Piramal Healthcare with a target price of Rs 340 in its research report. "Piramal Healthcare and Minrad International Inc., a provider of generic inhalation anaesthetic, jointly announced that they have signed a definitive merger agreement for Piramal to acquire Minrad. Under the terms of the agreement, Minrad will merge with a newly incorporated wholly-owned subsidiary of Piramal. If the merger is completed, stockholders of Minrad will receive USD 0.12 per share in cash. In connection with the merger agreement, Piramal has also agreed to acquire Minrad’s 8% Senior Secured Convertible Notes from the note holders."

"Total consideration for the merger and acquisition of the notes, in cash plus the assumption of debt, will be approximately USD 40 million. The transaction is conditioned upon approval by Minrad’s stockholders and other customary closing conditions. It is not subject to any financing contingency and is expected to close in the first quarter of 2009. The company expects it to be marginally EPS accretive from FY2010 onwards. We believe this acquisition would help the company to scale up its Inhaled anaesthetic product portfolio and build a global presence in critical care segment. We maintain a Buy on the stock with a target price of Rs 340," says Angel's research report.


Karvy Stock Broking on Bajaj Hindusthan- Target of Rs 85


Karvy Stock Broking has maintained its buy rating on Bajaj Hindusthan with a target price of Rs 85 in its research report. "For Q4FY08 (standalone), Bajaj Hindustan Ltd (BHL) reported marginal revenue increase of 7.1% YoY (QoQ increase of 1%) to Rs 4.63 billion, 9.9% lower than our estimates of Rs 5.1 billion. We have revised our cane cost from Rs 132 to Rs 140 per quintal for FY09 and assumed cane cost Rs 145 per quintal in FY10."

"We have revised our sugar realization estimates from Rs 16.9 per kg to Rs 19.5 per kg in FY09 and assumed Rs 20.5 per kg in FY10. We have changed FCCB (Rs 5.3 billion) accounting from equity to debt considering significant deference between CMP and conversion price of Rs 465 per share. We have changed our valuation from EV/ Ton of Rs 0.31 to 0.8xBV (book value) due to high leverage (2.8X) and low earnings over next two years makes. We maintain BUY with target price of Rs 85 (previous Rs 140)," says Karvy's research report.


Karvy Stock Broking on Tamil Newsprint - Target of Rs 96


Karvy Stock Broking has recommended a buy rating on Tamil Nadu Newsprint and Papers with a target of Rs 96 in its research report. "The topline and bottom line of TNPL are expected to grow at CAGR of 15.6% and 14% to Rs 14,494 million and Rs 1,663 million in FY11E respectively over FY08. Moving ahead, we expect the capacity expansion in pulp & paper production and favorable industry dynamics will keep the growth momentum of the company. In addition to that, TNPL is better placed than its global as well as domestic peers in terms of gross profit margin and return ratios. We estimate ROCE for FY09, FY10 and FY11 will improve from 14% in FY08 to 15.2%, 16.7% and 18% respectively. The ROE for FY09, FY10 and FY11 is estimated about 17.4%, 18% and 18.5% respectively."

"The stock is currently trading at P/E of 4x on FY09E EPS of Rs 17.2, 3.4x on FY10E EPS of Rs 20.4 and 3x on FY11E EPS of Rs 24. Hence, we believe TNPL deserves better valuation on account of attractive dividend yield and improving fundamentals going ahead. Hence, we recommend a BUY on the stock with a target price of Rs 96 based on 4x on FY11E earnings with one year investment perspective," says Karvy Stock Broking's research report.

Stock Views on Deepak Fertilizer, Piramal Healthcare, Reliance Comm

Prabhudas Lilladher on Deepak Fertilizer - Target of Rs 80

Prabhudas Lilladher has recommended an accumulate rating on Deepak Fertilizers and Petrochemicals Coprn with a target price of Rs 80 in its research report. "In Q3FY09, prices in the industrial chemical segments have fallen by 15- 20% except Isopropyl Alcohol (IPA), where price has dipped by 40% QoQ. Southward industrial chemical prices have been set-off by the fallen raw material prices. Hence, margins are sustainable. During the quarter, methanol price has been dipped by 50%. Hence, DFPCL has traded in Q3FY09 with negligible amount of manufacturing. We recommend “Accumulate” the stock with target price of Rs 80," says Prabhudas Lilladher's research report.

Sharekhan on Piramal Healthcare - Target of Rs 434

Sharekhan has maintained its buy rating on Piramal Healthcare with a target of Rs 434 in its research report. "Piramal Healthcare (Piramal) has announced the acquisition of US-based Minrad International, Inc. (Minrad) by way of a definitive merger agreement signed between the two companies. With strong global relationships, world-class infrastructure and proven capabilities in research, Piramal is one of the best plays in the contract research and manufacturing segment. Further, its strong presence in the domestic market provides a solid bedrock for its other business initiatives."

"With the strong traction expected across businesses, we maintain our positive outlook on Piramal. We maintain our Buy recommendation on the stock with a price target of Rs 434," says Sharekhan's research report


Indiabulls Securities on Reliance Comm - Target of Rs 324


Indiabulls Securities Research has upgraded its rating on Reliance Communications to buy with a target price of Rs 324 in its research report. "Reliance Communications Ltd. (RCOM)’s net sales grew 5.9% qoq to Rs 55.4 billion on the back of healthier global revenues and better operational metrics (MOU and ARR) in the mobile services. We have valued RCOM by using SOTP and have arrived at a target price of Rs 324."

"Our target price implies an 11xFY10E EPS, reflecting a nearly 42% discount to our valuation for Bharti (target price of Rs 1,056). Although we believe that RCOM will continue to trade at a discount to Bharti due to the latter’s above-average financial metrics (2-year EPS CAGR of 24%, ROE of 32%), the current discounts are steeper-than-warranted. Based on a 50% upside to our valuation, we upgrade our rating on the stock to Buy," says Indiabulls Securities' research report.

Stock Views on Nitin Fire Protection, Indoco Remedies, Reliance Industries

Karvy on Nitin Fire Protection - Target of Rs 239
Karvy Stock Broking has maintained its buy rating on Nitin Fire Protection Industries with a target of Rs 239. "On consolidated basis, we are lowering our sales estimates by 5.5% for FY09E and 12.6% for FY10E. We expect the company to achieve EBITDA margin of 20.6% and 21.5% as against our earlier estimates of 21.7% and 21.8% for FY09 and FY10 respectively. We expect the company to report net profits of Rs 402 million (lowered by 4%) and Rs 502 million (lowered by 11.5%) for FY09E and FY10E respectively. Our revised EPS estimates stands at Rs 31.9 for FY09E and Rs 39.8 for FY10E. Due to lowering of our EPS estimates and lowering of our PE multiple (on account of lowering of growth estimates) we are lowering our price target by 33.6% to Rs 239."


"CNG as a fuel is cost effective to the individual user and from the government's perspective it's an environmental friendly fuel. Hence we believe CNG industry would continue to grow even during adverse economic situation. We continue to maintain our BUY rating on the stock," says Karvy Stock Broking's research report.


Karvy on Indoco Remedies - Target of Rs 185


Karvy Stock Broking has recommended a buy rating on Indoco Remedies with a target price of Rs 185 in research report. "We have downgraded our revenues and earnings on back of dismal performance by the domestic formulations business on back of implementation of strong credit control measures. We have downgraded our revenues from Rs 4.4 billion to Rs 3.9 billion. We downgrade our EPS by 24 % to Rs 37.3 for FY 2009 and introduce or FY 2010 nos at Rs 48.5. Currently the stock is quoting at 3.4x FY 2009E and 2.6x FY 2010E. We rate the stock as a BUY with a price target of Rs 185 based on 3.8x FY 2010E," says Karvy's research report.


Angel on Reliance Industries - Target of Rs 1880

Angel Broking has maintained its buy rating on Reliance Industries with a target price of Rs 1880 in its December 12, 2008 research report. "In an unusual development, the government on Thursday withdrew its affidavit in the Bombay High Court, wherein it had asserted RIL cannot sell its Krishna-Godavari basin gas to anyone without its approval to the pricing formula. The withdrawal came following insistence by RNRL counsel, Ram Jethmalani, to cross examine the government on the issue. Hearing the case, Justice J N Patel suggested that the government could withdraw its affidavit and simply assist the court through a written submission."

"In its affidavit filed last month, the government had also said that RIL could not sell KG basin gas at a price less than $4.20 per million British Thermal Units. “Sale of gas at a price less than $4.20 per mmBtu is not envisaged as per the Empowered Group of Ministers' decision taken in accordance with the Production Sharing Contract (between the government and RIL),'' Ministry of Petroleum and Natural Gas under Secretary S M Sundaram had said in the affidavit. Last week, the court summoned the official in the Petroleum Ministry for the purpose of cross examination in the ongoing case over gas supply. We maintain a Buy on RIL, with a target price of Rs 1,880," says Angel's research report

Stock Views on Kalpataru Power, Nestle, Greaves Cotton

LKP Shares on Greaves Cotton - Target of Rs 125

LKP Shares has recommended a buy rating on Greaves Cotton with a target price of Rs 125 in its December 13, 2008 research report. "Recent measures by the RBI should improve vehicle financing especially since Greaves now is present in the four-wheeler sub one-ton category of commercial vehicles, which could help mitigate the negative growth being witnessed in the 3-wheeler segment. With a debt-equity ratio of 0.13 and having already completed all its capital expenditure programs through internal accruals and having cash per share of Rs 15. We recommend a BUY with a one-year price target of Rs 125," says LKP Shares' research report.


Mansukh Securities on Nestle - Target of Rs 1700

Mansukh Securities and Finance has recommended a buy rating on Nestle India with a target price of Rs 1700 in its December 12, 2008 research report. "Nestle India belongs to the set of the companies having high cash and low debt. As the company is into food processing industry, we believe it is set to grow in coming quarters keeping in view the product launches, falling inflation, favourable demand scenario and improved concentration on distribution. Based on DCF valuation, assuming a 11.02% WACC and a 6.5% terminal growth, we have arrived at a fair value estimate of Rs 1700. We assign BUY rating on the counter," says Mansukh Securities and Finance's research report.


Karvy on Kalpataru Power - Target of Rs 403

Karvy Stock Broking has recommended a buy rating on Kalpataru Power Transmission with a target price of Rs 403 in its December 15, 2008 research report. "A consortium of Kalpataru Power Transmission and Zangas bagged an Rs 2400 million worth gas pipeline contract of GAIL. We are revising our earning multiple from 8x to 5x, in line with the weighted average P/E multiple of peer over FY09 earnings. Hence, we value KPTL standalone at Rs 347 that is 5 x its FY10E earnings. We value JMC projects, its 52% subsidiary, at Rs55/share, based on 5x FY10E earnings. Hence, we arrive at a target price of Rs 403 for KPTL (consolidated). However, during last one month stock price of KPTL witnessed stiff correction of 40%; which we feel is overdone. Moreover, at the current price, dividend yield of KPTL is around 3%. Hence, factoring in newly won two projects, we remain positive on the stock with a target price of Rs 403 and rate it a BUY," says Karvy's research report.

Stock Views on Sintex Industries, Tata Steel, Indiabulls Real Estate

Motilal Oswal on Indiabulls Real Estate

Motilal Oswal has recommended a buy rating on Indiabulls Real Estate in its research report. "Management has indicated that they would re-evaluate all their development plans and adopt a risk-averse development strategy. IBREL will focus on pre-sales ahead of commencing development, at least to the extent of the construction cost, as a risk-mitigation strategy."

"We have revised our NAV for IBREL to Rs 294 per share, to account for: (1) delay and postponement in development of retail and commercial projects, (2) lower rental assumption for Mumbai projects to Rs 225/sf per month from Rs 275/sf per month, (3) increased cap rates for Mumbai’s commercial office properties to 12% v/s 11% earlier, and (4) lower net cash. The stock is trading at 48% discount to our current NAV estimate of Rs 294 per share. Buy," says Motilal Oswal's research report


Indiabulls Securities on Tata Steel - Target of Rs 255

Indiabulls Securities Research has upgraded its rating on Tata Steel from hold to buy with a target price of Rs 255 in its research report. "We have downgraded our estimates for Tata Steel Limited to account for the greater-than-expected downturn in the global economy and the subsequent fall in steel prices. However, its stock has fallen by around 60% since our last quarterly report. At its current market price (CMP), we believe the market is more than factoring in the negative macroeconomic news and is ignoring the long-term potential of the Company. Our DCF based target price of Rs 255. Hence, we upgrade our rating on the stock from Hold to Buy," says Indiabulls Securities' research report.


Angel on Sintex Industries - Target of Rs 230

Angel Broking has initiated an accumulate rating on Sintex Industries with a 12-month target price of Rs 230 in its research report. "Sintex Industries (Sintex) is a market leader in the manufacture and sale of value added plastics and textile-based products. Sintex intends to leverage its established brand name to increase its Revenues and Profits going ahead. Moreover, an excellent Order Book lends high Revenue visibility to its Monolithic Business Division. The company is reputed for its acumen to recognise and enter new and evolving businesses. Sintex's growth plans are adequately funded and we believe it is wellplaced to achieve its targets on schedule. The company’s Monolithic and Prefab business put together have a strong order book of Rs 1,600 crore. On a conservative basis, we estimate the company's Top-Line and Bottom-Line to post CAGR of 32.6% and 36.3% over FY2008-10E, respectively."

"We Initiate Coverage on the stock with an Accumulate recommendation and 12-month target price of Rs 230, which translates into a Target P/E of 8x FY2010E Adjusted EPS. It may also be noted that we have not converted the FCCBs issued by the company and the warrants to promoters into Equity on account of the current adverse market conditions. We have calculated interest that would be paid out on FCCBs every year until maturity at YTM and have accordingly adjusted Net Profit of the company and calculated Adjusted EPS thereof," says Angel's research report.

KRChoksey views on Gujarat Gas, Unitech, 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.


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.


Gujarat Gas Co - 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.

Stock Views on Kalpataru Power, BHEL, Rallis India

Reliance Money on Kalpataru Power - Target of Rs 325

Reliance Money has recommended a buy rating on Kalpataru Power Transmission with a target of Rs 325 in its December 16, 2008 research report. "KPTL has a diversified business portfolio on a consolidated basis. We believe the performance of transmission segment will improve on the back of PGCIL's planned expenditure for grid expansion and rural electrification program. Almost 45% of KPTL's order book is fixed priced, which will help the company in improving margin on the back easing of raw material prices. The order book to FY09E revenues stands at 1.9x, which gives future visibility of revenue. Out of the total order book 40% orders are from international players. We recommend a BUY on the stock with a revised target price of Rs 325," says Reliance Money's research report.


Emkay Global on BHEL - Target of Rs 1520

Emkay Global Financial Services has maintained its buy rating on Bharat Heavy Electricals (BHEL) with a target of Rs 1520 in its November 12, 2008 research report. "Over the recent past BHEL stock has outperformed significantly. It outperformed Sensex by 22.1% over past 3 months and 12.3% over past 1 month. Similarly it has outperformed BSE Capital goods index by 20.2% over past 3 months and by 10.7% over past 1 month. Decent Q1 and Q2FY2009 numbers and significant drop in commodity prices can be attributed to this performance."

"Our earnings estimate for BHEL stands at Rs 73 for FY2009 and Rs 94 for FY2010. The stock trades at 18.7X its FY2009 and 14.6X its FY2010 earnings. Over a longer term we remain positive on BHEL and maintain our BUY with price target of Rs 1520. However we believe that near term order slowdown will impact stock performance," says Emkay Global Financial Services' research report.

Emkay Global on Rallis India - Target of Rs 518

Emkay Global Financial Services has recommended a buy rating on Rallis India with a target of Rs 518 in its November 12, 2008 research report. "The company has shown a consistent growth in the past with improvement in the EBITDA margins, increased number of new launches, improving operational efficiency and increased thrust on exports. We believe that EBITDA margins of 15.5% will be sustainable in future with less pressure from raw material cost due to overall fall in the commodity prices."

"We expect EPS of Rs 52 and Rs 64.8 for FY09E and FY10E. The company also has ‘hidden assets’ like excess land bank and a minority stake in Advinus, one of the finest pharma research organizations in India. Based on this, we are revising our price target to Rs 518 (from Rs 550 earlier) which is 8XFY10E earnings with a BUY rating," says Emkay Global Financial Services' research report.

Stock Views on TCS, Bharti Airtel, HDFC, IOC

Anand Rathi on TCS - Target of Rs 650

Anand Rathi Securities has recommended a buy rating on Tata Consultancy Services, TCS with a target price of Rs 650 in its November 17, 2008 research report. "TCS added 51 clients (gross) in 2QFY09, taking total active clients to 920. 1H09 saw TCS close 16 deals vis-à-vis 14 deals in 1H08. It is currently in pursuit of 20 deals. Its share of revenue from fixed-price projects is the highest of its peers (43.9% of TTM revenue). Efficient execution of these projects, along with decreasing share of domestic business, augurs well for TCS’ profitability. TCS trades at 8.8x FY09 and 9.9x FY10 estimated earnings."

"We rate it a Buy with a target price of Rs 650 at a target PE multiple of 10x its one-year forward earnings. At our target price, it would trade at 7.4x EV/EBITDA our one-year forward estimates. Our DCF valuations for TCS assume an 8.5% risk-free rate, a 6% risk premium and a 3% terminal growth rate. The DCF-based fair value, after taking estimated growth till FY10 and 10% growth during FY10-15, is Rs 645," says Anand Rathi's research report.

IIFL on Bharti Airtel, Idea Cellular

IIFL has recommended to buy Bharti Airtel with a target of Rs 877 and Idea Cellular with a target of Rs 72, add Reliance Communications (RCOM) with a target of Rs 360, sell Tata Communications with a target of Rs 335 and MTNL with a target of Rs 85.

IIFL's report on Telecom sector:

As expected the 3G & BWA auctions information memo carries some unexpected twists it permits foreign companies to bid within the 74% FDI ceiling and simultaneously permits incumbents to own 26% in another bidding entity creating the possibility that foreign companies and incumbents may associate through this route. No separate 3G spectrum charges will be levied but 2G spectrum charges will apply on 2G and 3G revenues creating a possible incentive for incumbent GSM operators to liberate and return excess 2G spectrum by migrating traffic to 3G and thus lowering spectrum charges. The 3G auctions will be for the 2100MHz band and for fewer blocks than expected and will commence on 16th January 2009. The government is expected to wrap up the entire process by February 2009. The document is very detailed and professionally organised which indicates the governments desire to ensure timely completion of the entire process.

Sharekhan on HDFC - Target of Rs 2805

Sharekhan has maintained its buy rating on Housing Development Finance Corporation (HDFC) with a target price of Rs 2805 in its research report. "We believe, HDFC is among the better-diversified players in the Indian financial services space with leadership position in mortgage market and strong presence in other financial services (life insurance, asset management and banking). Operationally, HDFC’s fund mobilisation abilities and operational efficiency should help maintain healthy earnings momentum in a tough operating environment. We maintain our Buy recommendation on the stock with a price target of Rs 2,805," says Sharekhan's research report.


Indiabulls Securities on IOC - Target of Rs 479


Indiabulls Securities Research has upgraded its rating on Indian Oil Corporation (IOC) to buy with a target price of Rs 479 in its research report. "With global oil prices at their peak in Q2’09, Indian Oil Corporation Limited (IOC) reported a net loss of Rs 70.5 billion as it was unable to pass the full effect of the price increase because of government controls. We have revised our estimates to incorporate the effect of the recent fall in the crude prices and the depreciating rupee. Based on our relative valuation, we have arrived at a target price of Rs 479, which provides an upside potential of 17%. Thus, we have upgraded our rating on the stock to Buy," says Indiabulls Securities' research report.

Views on IVRCL Infra

KRChoksey IVRCL Infra - Target of Rs 198:

KRChoksey Research has recommended a buy rating on IVRCL Infrastructure, with price target of Rs 198, in its report. "At the CMP, IVRCL is trading at 7.8x TTM EPS of Rs 17.8 and 8.8x FY09E EPS of Rs 15.6. We anticipate slowdown in order inflow and an increase in interest expense, which will impact the revenue and net profit margins of the company. We have reduced our EPS estimates for FY09 and FY10 by 10% & 9.8% respectively. We therefore downgrade our target price from Rs 381 to Rs 198, maintaining a BUY rating, with an upside potential of 41.4%," says KRChoksey's research report.


Motilal Oswal on IVRCL Infra

Motilal Oswal has maintained its buy rating on IVRCL Infrastructure and Projects in its research report. "Strong revenue growth during 1HFY09 was partially aided by benefits accrued on account of price variation clauses. For FY09 management has guided for revenue growth of 35-40% YoY and EBITDA margin of 9.5-9.9% (earlier at 10%). It also indicated that incremental debt requirement during FY09 will be limited to Rs 1.5-2 billion (existing debt Rs 14.5 billion). The net working capital stands at Rs 23 billion as at September 2008 compared with Rs 19.7 billion at end-FY08. Loans and advances currently stand at Rs 4 billion, including Rs 2.6 billion to IVR Prime."

"We expect IVRCL to report net profit of Rs 2.3 billion in FY09 (up 10% YoY) and Rs 3.2 billion in FY10 (up 37% YoY). The stock is trading at 7.6x FY09E earnings and 5.5x FY10E earnings. Maintain Buy," says Motilal Oswal's research report.

Indiabulls Securities on IVRCL Infra

Indiabulls Securities Research has maintained its buy rating on IVRCL Infrastructure and Projects in its research report . "IVRCL’s standalone revenue increased by 65.1% yoy to Rs 11,366 million. Net profit soared 62% yoy to Rs 571 million during the quarter. Our SOTP-based fair value estimate stands reduced to Rs 178 due to the challenging macroeconomic environment. However, we believe that the stock has corrected significantly in the recent past and is trading at an attractive valuation. Our fair value estimate reflects a potential upside of 28% over the current market price. Hence, we maintain our Buy rating on the stock," says Indiabulls Securities' research report.

Stock views on Repro India, Everonn Systems, Sobha Developers, Wipro

LKP Shares on Repro India
LKP Shares has maintained its buy rating on Repro India in its research report. "Q2-FY’09 witnessed revenue growth of 43% yoy and EBIDTA grew 48% yoy led by exports, which accounted for 64% of Q2 revenues. Repro had earmarked Rs 145 million out of its IPO proceeds to fund its SEZ and this SEZ at Surat would be fully operational during Q4 of the current fiscal for which Repro has taken an additional foreign currency loan of USD 7 million of which USD 5.5 million has already been expended."

"We estimate revenues of Rs 350 million from the SEZ during this fiscal and Rs 800 million next fiscal. Repro trading at 3xFY’10E earnings is held 73% by the Promoters and 7% by Institutional Investors. We re-iterate BUY on the stock," says LKP Shares' research report.

HDFC Securities on Everonn Systems

HDFC Securities has maintained its buy rating on Everonn Systems India in its research report. "Everonn’s Q2FY09 standalone revenues jumped 49% YoY. We expect Everonn to record revenue CAGR of 63.3% and PAT CAGR of 61.5% over FY08 to FY10E, making it the second fastest growing company under our coverage. We believe that Everonn’s revenue mix will shift towards the high margin ViTELS segment, thereby improving overall profitability and ROCE."

"In FY08, ViTELS segment contributed 41% to overall revenues and 50% to EBITDA. Considering the market scenario, converting the warrants at Rs 720 per share will be a concern going forward. However, the company has Rs 800 million as cash on its books as on Q2FY09. Considering the growth prospects of the company we maintain our ‘BUY’ rating on the stock," says HDFC Securities' research report.


Emkay Global on Sobha Developers - Target of Rs 155


Emkay Global Financial Services has maintained its buy rating on Sobha Developers with a target of Rs 155 in its research report. "Net revenues decreased by 9.3% YoY to Rs 3.0 billion. PAT decreased by 13.0% YoY to Rs 490 million. We are revising our NAV estimates to Rs 367 / share (previous Rs 973), due to a) increase in cost of funds b) delay in projects c) factoring current net debt d) decrease in average realisations and rentals from commercial properties and e) increase in cap rate. We however maintain our BUY rating on the stock with target price of Rs 155 (earlier Rs 554) based on 60% discount to NAV and 2x EV / EBITDA of its contractual income," says Emkay Global Financial Services' research report.

Anand Rathi on Wipro - Target of Rs 325

Anand Rathi Securities has recommended a buy rating on Wipro with a target price of Rs 325 in its research report. "Wipro has built considerable scale in the IMS space (largest practice among Indian IT companies) and has been able to build on the leads. Wipro has undertaken several initiatives, such as hiring at a slower pace and focusing on internal processes, which have resulted in revenue growth overtaking volume growth. Wipro trades at 9.6x FY09 and 10.8x FY10 estimated earnings."

"We rate it a Buy with a target price of Rs 325 at a target PE multiple of 11.8x its one-year forward earnings. At our target price, the stock would trade at 7.6x EV/EBITDA our one-year forward estimates. Our DCF valuation for Wipro assumes an 8.5% risk-free rate, a 6% risk premium and a 3% terminal growth rate. The DCF-based fair value, after taking estimated growth till FY10 and 11% growth during FY10-15, is Rs 320," says Anand Rathi's research report.