Stock Views on CIPLA, Gujarat State Petronet, Praj Industries, Jaiprakash Associates,

BRICS Securities on CIPLA

BRICS Securities has initiated coverage on Cipla with a ‘buy’ rating. The brokerage expects Cipla to maintain its leadership position in the Indian formulation market in coming quarters. “Thirdquarter results came in as a positive surprise. Revenue (up 22% Y-o-Y) was in line and recurring net profits (up 28% Y-o-Y) were above our expectations, led by falling raw material prices. This, coupled with growing presence in export markets, should enable the company to report a 16% earnings growth in the next fiscal,” a Brics Securities report said. Amidst concerns like reclusive management and volatile past earnings, Cipla’s continues to perform well. The company is the top-most player in this segment, and has a strong portfolio in the chronic therapy segment. Given its strong domestic share and continued strength in overseas generics business, we recommend a buy on the stock, the report added.

BNP Paribas on GUJARAT STATE PETRO

BNP Paribas has assigned a ‘buy’ rating on Gujarat State Petronet on expectations of an upside in gas transmission volumes and higher return on capital employed (RoCE) as a result of new new tariff regulations. “We believe that GSPL is a long-term play on rising natural gas supplies, with the next fiscal (FY11) being the inflexion year. We expect Gujarat State Petronet’s gas volumes to increase 26.8% between FY08 and FY11 driven by its contracts with RIL and Torrent Power,” a BNP Paribas report said. Petroleum and Natural Gas Regulatory Board’s (PNGRB) new tariff regulations prescribe a pre-tax RoCE of 18.2% for gas transmission utilities. Factoring in the impact of these regulations into our estimates, we expect adjusted pre-tax RoCE to improve to 21.6% in the next fiscal, the report added.

Indiabulls Securities on JAIPRAKASH ASSO

Indiabulls Securities has downgraded Jaiprakash Associates with a ‘sell’ rating, citing weak business environment and highly-leveraged business module. Around 80% of the company’s sales come from businesses that have been adversely impacted by the credit crunch. “The cement, construction, real estate, and hotels segments are facing strong headwinds, as demand has slowed down tremendously and credit availability remains weak. We believe the situation is not likely to improve in the near-to-medium term,” a report said. Considering the current balance sheet position of the company and the funding arrangement related to ongoing expansion plans, the brokerage expects the debtto-equity ratio to increase in coming quarters. Meanwhile, the possibility of further negative news flow cannot be ruled out in coming quarters, especially with regard to real estate, cement, and construction sectors, the report added.

Finquest Securities on PRAJ INDUSTRIES

Finquest Securities believes that Praj Industries could immensely benefit from the mandate adopted by EU Parliament of 10% bio-fuels blending in all transport fuels by 2020. Such a move by the European Union will entail additional 12-14 billion litres capacity for ethanol, a Finquest report said. The brokerage has rated Praj Industries an ‘outperformer’. “The US has preponed its renewable fuel targets of 11 billion gallons from 2012 to 2009. This move is expected to support capacity build-ups. We expect net revenue to grow by 10% in FY10 as a result of the demand from European Union and the US,” the report added. Amongst key negatives, the order book of Praj Industries declined by 19% Q-o-Q, due to delay in decision-making and credit problems at the clients end as well as some previous orders turning non-executable.