Stock views on Bharati Shipyard, Nitin Fire Protection, GAIL India

BNP Paribas on GAIL INDIA

BNP Paribas has initiated coverage on GAIL India with a ‘reduce’ rating, as it expects gas transmission prices to fall thereby affecting the company’s core business segments. “We initiate research coverage on GAIL India with reduce rating to factor in a steep decline in profitability of GAIL’s petrochemicals, LPG and liquid hydrocarbons (LPG/LHC) segments in the wake of a cyclical downturn,” says a brokerage report. These business segments together accounted for 51.8% of GAIL’s FY08 EBITDA, adds the report. BNP Paribas expects EBITDA of petrochemicals and LPG/LHC segments to decline by 50.5% and 10.7%, respectively, in FY08-10. The bearish outlook is also based on the fact that the Petroleum and Natural Gas Regulatory Board (PNGRB) has proposed to use the depreciated asset value of GAIL’s existing pipelines to determine tariffs. Gas transmission tariffs will likely fall on new regulation, notes the report. The brokerage also feels that RIL’s ongoing legal dispute over the supply and pricing of gas could delay the onset of gas supplies beyond its estimate of April 2009.


Karvy Stock Broking on NITIN FIRE PROTECTION

Karvy Stock Broking has maintained a ‘buy’ rating on Nitin Fire Protection even while lowering the target price by 33.60% to Rs 239. “We are downgrading our earnings estimates by 4% and 11.5% for FY09 and FY10, respectively. We expect the company’s fire protection safety and security business to be impacted on account of slowdown in the construction sector and corporate capex plans,” says a report. The brokerage has also lowered its revenue estimates from the company’s high pressure cylinder business on account of lowerthan-expected capacity utilisation at the Vizag plant. “We are reducing our sales estimates for the cylinder business by 8.1% and 15% to Rs 1,508 million and Rs 2,036 million for FY09E and FY10E, respectively,” says the report. On consolidated basis, Karvy has lowered its sales estimates by 5.5% for FY09E and 12.6% for FY10E.


Prabhudas Lilladher on BHARATI SHIPYARD

Prabhudas Lilladher has retained a ‘buy’ rating on Bharati Shipyard after the company’s wholly-owned subsidiaries lent Rs 2-2.5 billion to Great Offshore’s promoters against a pledge of 14% equity. According to the brokerage, although there would not be any P/L implication on the company, as the interest rate on the loaned amount is at commercial terms, Bharati Shipyard “would have to leverage further in order to fund its capex”.