Hindalco

Beta 1.15
Institutional Holding 28.2%
Dividend Yield 3.4%
P/E 3 M Cap Rs 8,945 cr.

Hindalco , after the acquisition of Novelis has become the largest value-added aluminium producer in the country. Its Indian operation has two main line of business — aluminium and copper. It owns bauxite mines and is fully integrated as far as production of aluminium is concerned. The company also produces other value added aluminium products, like, wheels, foils, extruded and rolled products among others in India. Its production capacity currently stands at around 4.5 lakh tonnes per annum of aluminium. Novelis is mainly an aluminium recycler and produces flat rolled products. In copper, the company makes profit from treatment and refining, and produces copper cathodes and rods mostly. Around 10% of the copper revenue comes from other by-products like gold, silver and sulphuric acid among others.

FINANCIAL

Hindalco's Novelis acquisition has strained its balance sheet and its profitability at least in the short term. The company recently restructured its debt through rights issue of Rs 5,000 crore, internal accruals and refinancing of old debt. After this restructuring, the net debt raised for Novelis acquisition has come down to $1 billion from the earlier $3 billion. However, the process leads to equity dilution and has thus dented its earning per share. Further, the performance of Novelis has been very dismal in recent times. Except for Jun '08 quarter, it has been making losses for most of the past quarters. For instance, it reported a loss of $78 million for the six months ended September '08 quarter. However, Hindalco’s Indian operation is doing well. Its cost of aluminium production is one of the lowest in the country. The company enjoys an overall operating margin of around 16-18% and 34% in aluminium business, which is the highest among its peers. The company has reduced its dividend payment ratio over last several years to around 8% of net profit, which is a concern for many investors.

GROWTH POTENTIAL

The company has a number of expansion plans especially in aluminium business. Its alumina plant in Muri was recently commissioned and this would almost double its capacity to two lakh tonnes. Similarly, the aluminium smelting capacity at Hirakud was increased 43% to 1.43 lakh tonnes. These capacity expansions would contribute to the top line in the nearterm. The company has also lined up longterm projects, which are at different stages of execution. For instance, environmental clearance for a three-million tonne mining capacity and detailed engineering plan has already been done for the Utkal Alumina projects. Other long-term projects that would drive the future growth include Aditya Aluminium, Mahan and Jharakhand Aluminium among others. Further, the recent fall in aluminium prices would have some positive impacts on the Novelis numbers, which has entered into fixed price contracts with some customers.

RISKS

The main source of risk comes from its Novelis acquisition, which has been making losses for last several quarters. It would take a while before the company reaps from the money spent in acquiring Novelis. And in the current down-turn this would be even more difficult. The leveraged balance sheet where interest has to be paid irrespective of sales would only add salt to the injury.

TO SUM IT UP

The current scenario seems to be very challenging for the company. The economic slowdown would definitely result in lower sales volume. In addition to it, the sharp decline in LME aluminium prices would drastically affect its top line growth in short-term. Further, the slowdown in developed countries would drastically affect the sales of its overseas subsidiary, Novelis. Last fiscal year, interest accounted for more than twothirds of the net profit on a consolidated basis. Even though the company has paid back some part of the longterm debt, we believe interest would significantly pull down the net profit considering the decline in top line growth and falling operating margin. It can be a good bet for patient and risk-loving investors.

Stock views on State Bank of India, Tata Tea

IIFL on State Bank of India - Target Rs 1777
"SBI’s focus on rapid network expansion and gaining market share has yielded results over the past two years. With 100% of its expansive branch network now linked to a common technology platform, a major constraint vis-à-vis new generation private banks is removed. The declining trend in ROE was arrested last year but the bank still lags other major government banks in this respect. Asset quality deteriorated last year and provisioning may remain high in the coming years."

"The six associate banks are in good shape and a consolidation would add value to the SBI Group. Despite the recent run-up in the stock price, valuations remain inexpensive at 1.2x core book. 'ADD' with a 12-month target of Rs 1777," says IIFL's research report.

Sharekhan on Tata Tea - Target Rs 939

"We believe with a net cash of Rs 755 crore (and a gross cash of Rs 2,963 crore as on March 31, 2009), the company is in good position to build organic as well as inorganic growth in the coming years. We broadly maintain our estimates for FY2010 and introduce FY2011 estimates through this note. At the current market price, the stock is trading at attractive valuations of 11.8x its FY2010E earnings of Rs 64.5 and 10.2x its FY2011E earnings of Rs 75.0 compared to some of the large-cap FMCG stocks. We maintain our Buy recommendation on the stock with the revised price target of Rs 939 (as we roll over our price target at 12.5x its FY2011E earnings),"

Stock Views on Allahabad Bank, Wipro, ICICI Bank

Maximus Securities on Allahabad Bank - Target Rs 105

"At the current price of Rs 75.50 the scrip discounts its estimated EPS of FY10 by 3.08x. The scrip is currently trading at a PE ratio of 4.39x and P/BV ratio of 0.68x which is at a discount of 45% and 10% to the industry average respectively. With the pick up in credit demand particularly in infrastructure and home loan segment, the business of the Bank is expected to grow at 20-21% in FY10. However NIM is likely to be affected with reduced lending rates which may affect the profitability of the Bank in the coming year. But the Banks target of 40% CASA ratio will help to maintain NIM at 2.75% at the end of FY10. With restructured accounts in the balance sheet, rise in NPAs remains a concern. However the fact that the Bank is adequately capitalized, provides cushion in case NPAs rise. We recommend a “BUY” on Allahabad Bank with a target price of Rs 105 and an investment horizon of one year," says Maximus Securities' report.

Sharekhan on ICICI Bank - Target Rs 781

"ICICI Bank’s loan book growth has decelerated sharply in the last three years with FY2009 marking the first instance of contraction in the loan book. The root cause of this decelerating trend in the loan book growth is the slowdown in the retail segment. The slowdown in the retail segment is partly due to the weakening demand and partly due to the management’s objective of re-balancing its loan portfolio following an uptick in delinquencies. At the current market price of Rs 733, the stock trades at 17x its FY2011E earnings per share (EPS) and 1.5x its FY2011E book value (BV). While we are maintaining our earnings estimates, we are revising our price target to Rs 781 based on our FY2011 estimates. We maintain our Hold recommendation on the stock,"

Bonanza on Wipro - Target Rs 500

"Wipro is the second largest IT service vendor in the Indian Market behind IBM. We expect the company to leverage its strong presence in India and continue to bag multiple contracts in the coming months, which would aid Wipro in reporting incremental revenues in the coming years. The company has bagged Six and a Half year contract worth Rs 1182 crore from Employee State Insurance Corporation. Order worth Rs 200 crore from LIC. Company bagged order from Unitech wireless executable over a period of Nine years for an undisclosed sum. Company has reported a growth of more than 28% in its topline for FY09."

"Going ahead, with orders form Indian Sector improving and Clients in US and Europe also seeking a reduction in cost and opting for out sourcing Company’s topline is expected to improve in the coming years and expansion of profit margins can also not be ruled out. At current market price the stock is trading at an earning multiple of 13.89 x for TTM EPS of 26.64. We recommend investor to gradually accumulate the scrip on dips near Rs 395 with a target of Rs 500 in the medium term," says Bonanza's report.

Stock Views on Godawari Power & Ispat, Divis Lab, Lupin

Karvy on Godawari Power & Ispat _ Ttarget Rs 128

"The stock is trading at 0.6x its FY09 & 0.55x its FY10 BV. We revise FY10 earning estimates by 6% on account of change in MAT rate. However, we retain our valuation of 0.8x FY10 BV and target price of Rs 128/share. However, due to recent correction in stock price, we revise our rating from out performer to 'BUY'," says Karvy Stock Broking's report.

Emkay Global on Lupin - Target Rs 980

"Since this is a sub-judice matter, it is difficult to take a call which way the judgment goes? However, by the spirit of the matter taken up by the EU authorities and chronology of events leading to out of court settlement raises an iota of doubt about the intention of settlement between innovator (Servier) and Lupin. At the moment, we can not estimate the exact loss; therefore impact on financials can not be assessed. In worst case scenario, this event will lead to one time charges, which could be as high as Rs 3.7 billion (10% of FY09 revenue). Hence, we continue to maintain our Buy rating with a target of Rs 980," says Emkay Global Financial Services' research report.

Sushil Finance on Divis Lab - Target Rs 1490

"In spite of the economic slowdown, DLL has managed to maintain its above average industry margins in FY09. DLL does expect some pressure on its Custom Chemical Synthesis Business (CSS) business but is banking on API sales of Levirecetam, lopamidol & nabumetone which will offset the slowdown in other businesses. Seeing the growth prospects & above industry average margins the stock deserves to trade at higher multiple. At the CMP of Rs.1160, the stock trades at 13.3x its FY11E earnings. It has recommended buy rating on the stocks, target of Rs 1490," says Sushil Finance's research report.

Stock Views on Orchid Chemicals, Crompton Greaves

Reliance Money on Orchid Chemicals - Target Rs 176

Reliance Money has recommended a buy rating on Orchid Chemicals and Pharmaceuticals with a target price of Rs 176 in its research report.

"Orchid Chemicals & Pharmaceuticals (Orchid) is an integrated pharmaceutical company with core competencies in the cephalosporin injectable space and that too in regulated markets of US. Having an established strong base in US cephalosporin segment, the company is now spreading its wings to other regulated markets like Europe and Canada. Further the company is progressing well in the non-penicilin, noncephalosporin (NPNC) and drug discovery front."
"Orchid is currently trading at an attractive valuation of 5x it FY11 EPS its FY11 EV/ EBITDA. Further looking at the robust earning opportunities in the pipeline and debt reduction comitment, we recommend a 'BUY' rating on Orchid with a target price of Rs 176 (8x FY11E)," says Reliance Money's research report.

Sharekhan on Crompton Greaves - Target Rs 308

"We like Crompton Greaves for its consistent performance at the operating level. Moreover, its ability to improve its working capital management in a tough environment (most other companies have indicated a stretched working capital cycle) is quite impressive. We reiterate our bullish stance on the company and maintain our Buy recommendation on the stock. At the current market price the stock is discounting its FY2010 and FY2011 earnings estimates by 16.3x and 14.8x respectively, target of Rs 308," says

Stock Views on Sadbhav Engineering, Tata Tea, ITC

Angel Broking on Sadbhav Engineering - Target Rs 774

Angel Broking has recommended a buy rating on Sadbhav Engineering, with price target of Rs 774, in its report.

"We value Sadbhav Engineering on a SOTP basis to capture the long-term value creation from its BOT Segment. Considering a CAGR of 22.1% in the top-line over FY2009-11E (on the back of a strong Order Book), cooling commodity prices (leading to an improvement in the Margins), rolling over to FY2011 numbers and re-rating of the assigned P/E (10x in place of the 8x assigned earlier, on the back of an overall re-rating of the Sector), we are upgrading the stock to a 'Buy' from 'Neutral', with a SOTP target price of Rs 774, implying a potential upside of 19% from its current levels. Our SOTP target price is achieved by assigning a P/E multiple of 10x on its FY2011E Earnings of Rs 62.1 and by valuing its BOT Project of Rs 200 crore at Rs 153/share (at an implied P/BV of 1x)," says Angel Broking's report.

Sharekhan on Tata Tea - Target Rs 853

Sharekhan has recommended a buy rating on Tata Tea with a target price of Rs 853 in its research report.

"Tata Tea’s Q4FY2009 numbers (derived from FY2009 and M9FY2009 numbers) are below our expectations. The top line grew by 9.4% year on year (yoy) to Rs 1,226.1 crore in Q4FY2009, which is below our expectation of Rs 1,319.7 crore for the quarter. At the current market price the stock trades at 8.7x FY2010E earnings per share of Rs 64.0. We shall revisit our estimates for FY2010 and introduce FY2011 estimates after our interaction with the management. We maintain our 'Buy' recommendation on the stock, target of Rs 853," says Sharekhan's research report.

Nirmal Bang on ITC - Target Rs 250

Nirmal Bang has recommended a buy rating on ITC with a target price of Rs 250 in its research report.

"At the CMP , the stock is currently trading at a PE of 17.1x FY10E & 14.6x FY11E, which looks quite attractive when compared to the peers in the industry. The FMCG segment as a whole trades at an Average PE of around 24x earnings. ITC historically has traded in the PE range of 21x to 27x with an average PE of around 24x.We recommend a 'BUY' rating on the stock with a Price target of 250 per share (PE of 22x FY10E) an upside of 29% over a period of one year," says Nirmal Bang's research report.

Stock views on JK Lakshmi Cement, Bartronics India, Zensar Technologies

Angel Broking on JK Lakshmi Cement - Target Rs 145

Angel Broking has recommended a buy rating on JK Lakshmi Cement (JKL) with a target price of Rs 145 in its reports.

"JK Lakshmi Cement, a JK Group company, is an established cement player in North India. The company is increasing its cement as well captive power capacity. Cost savings on account of the decline in input costs, additional captive power and strategic tie up to source power would help the company maintain its margins amidst downturn. At Rs 100, JKL is trading at an EV/tonne of USD 47/tonne on FY2011 capacity, which we believe is attractive. We initiate coverage on the stock, with a 'Buy' recommendation and a target price of Rs 145, "says Angel Broking's research report.

Angel Broking on Bartronics India - Target Rs 235

Angel Broking has recommended a buy rating on Bartronics India with a target of Rs 235 in its report.

"Bartronics India (BIL) enjoys a pre-eminent position in the Indian AIDC segment and has also grown this business globally in countries like Malaysia and the US. The company is also the only Smart Cards manufacturer in India and this segment is expected to surge on demand from the Telecom, Banking and Government sectors."

"The company through bagging the Rs 5,000 crore 'Aapke Dwar' order has also opened up a new avenue for growth in e-governance. We expect BIL to record CAGRs of 39.6% and 34.7% in Top-line and Bottom-line, respectively over FY2009-11E. At the CMP, the stock trades at 3.2x FY2011E EPS. We recommend a 'Buy' on the stock with a target price of Rs 235," says Angel Broking's research report.

Sunidhi Securities on Zensar Tech - Target Rs 175

Sunidhi Securities & Finance has recommended a buy rating on Zensar Technologies with price target of Rs 175 in its report

"Zensar Technologies would be fully committed to the domestic market with its focus on key segments of government, education, media & entertainment, healthcare and logistics in India, launching new offerings and partnerships to service the sectors. Its growth plans for India will build help triple its size in India making this a Rs 100 crore territory in three years from Rs 35 crore at present. We recommend 'BUY' with a target of Rs 175 in the medium term," says Sunidhi Securities & Finance's research report.

Stock views on Ratnamani Metals, Tata Tea, Cummins India Limited

Bonanza on Cummins - Target Rs 300

Bonanza has recommended long term investors to stay invested in Cummins. Fresh entries can be made only on dips, near Rs 230 level for a target of Rs 300.

"Cummins India Limited (CIL) is a 51 percent subsidiary of Cummins Inc. USA, the world’s largest independent diesel engine designer and manufacturer above 200 HP. CIL is India’s leading manufacturer of diesel engines with a range from 15 hp to 2365 hp, serving the Power Generation, Industrial and Automotive Markets. In Engine segment exports that were about Rs 1300 Crore in FY 09 can fall to Rs.900-1000Crore in FY10. About 30%-35% to growth is expected in domestic business, as there is robust demand for power, railways (largely from new Metro stations coming up at metro cities), reality and construction, increased oil exploration, defense, marine, ports etc. Turnaround in Commercial Vehicles, to also boost sales of Cummins."


Sharekhan on Tata Tea - Target Rs 939

Sharekhan has maintained its buy rating on Tata Tea with a target price of Rs 939 in its research report.

"We believe with a net cash of Rs 755 crore (and a gross cash of Rs 2,963 crore as on March 31, 2009), the company is in good position to build organic as well as inorganic growth in the coming years. We broadly maintain our estimates for FY2010 and introduce FY2011 estimates through this note. At the current market price, the stock is trading at attractive valuations of 11.8x its FY2010E earnings of Rs 64.5 and 10.2x its FY2011E earnings of Rs 75.0 compared to some of the large-cap FMCG stocks. We maintain our Buy recommendation on the stock with the revised price target of Rs 939 (as we roll over our price target at 12.5x its FY2011E earnings)," says Sharekhan's research report.


Sharekhan on Ratnamani Metals - Target Rs 118

Sharekhan has maintained its buy rating on Ratnamani Metals and Tubes with a target price of Rs 118 in its research report.

" We have revised downwards our EPS estimates for FY2010 and FY2011to Rs 19.8 and Rs 23.7 mainly on account of
(1) Lowering volume growth;
(2) Lower realisations; and
(3) A lower OPM.

The business environment for RMTL is challenging given the slowing capital expenditure in oil & gas sector, the key user industry for the company’s products. However, the company also has specialty products in its portfolio of offering, which are consumed in high-growth sectors like power. We feel, RMTL should be able to report a CAGR of 14.3% and 10.5% in its revenues and profit respectively over FY2009-11E. The key risk to our call would be a significantly lower order inflow going forward. However, at the current market price the stock is trading at an attractive valuation of 3.3x its FY2011 earnings. We maintain Buy rating on the stock with a price target of Rs 118 (5x FY2011E)," says Sharekhan's research report.

Stock Views on Crompton Greaves, Madhucon Projects, Great Offshore

SKP Securities on Great Offshore - Target Rs 454

SKP Securities has recommended a buy rating on Great Offshore, with a price target of Rs 454, in its report dated.


"GOL has forayed in to port management and single point mooring operations by acquiring 100% equity stake in two Hydrabad based companies KEI-RSOS Maritime Ltd. (KEI) and Rajamahendri Shipping & Oilfield Services Ltd (RSOS) with purchase consideration of Rs 1.6 billion. At the current market price of Rs 360, the stock is trading at a P/BV of 1.16x and 0.95x of FY10E and FY11E book value of Rs 310 and Rs 378 respectively. We recommend 'BUY' rating on the stock with a target price of Rs 454/- (26% upside) in 12 months implying a P/BV multiple of 1.2x of FY11E book value," says SKP Securities' report.


Angel Broking on Madhucon Projects - Target Rs 246

Angel Broking has recommended a buy rating on Madhucon Projects, with price target of Rs 246, in its report .


"Madhucon Projects stock has outperformed the BSE Sensex significantly (by 25.2%) in CY2009 YTD, which is in line with our expectation as the stock had slipped into a deep undervaluation zone. We have increased our Target Price for the stock on the back of the following factors, viz.

1) Better demand outlook: Post election verdict there has been a positive change in economic outlook and the concerns hovering over Infrastructure Sector have been put to rest; and
2) Increasing our Target Multiple: We have valued MPL's core Construction business at a P/E of 6x FY2011E (discount to historical average and to peers like IVRCL Infra, Nagarjuna Construction, etc.) from 4x earlier on account of improved Earnings visibility and re-rating of the sector. We recommend a Buy on the stock with a SOTP Target Price of Rs 246, at which level the stock would trade at 1.3x FY2011E P/BV (discount to its peers). It may be noted here that we have not factored in any potential upside from MPL's Coal and Power ventures," says Angel Broking's report.

Angel Broking on Crompton Greaves - Target Rs 306

Angel Broking has recommended an accumulate rating on Crompton Greaves, with price target of Rs 306, in its report.

"It is pertinent to note here that during April 2005 - June 2009, CGL traded at an average discount of about 48% to the forward rolling P/E of ABB primarily due to the technological gaps and superior growth for ABB. Currently also, CGL is quoting at a hefty discount of 43-44% to ABB. However, we believe that such a high gap is unwarranted and going ahead it would narrow down as CGL has been bridging the technological gaps through various acquisitions."

"The gap would also narrow down on the back of superior Earnings growth (15.6% CAGR for CGL as compared to 3.6% CAGR for ABB over the next two years) and higher average RoEs of 28-29% for CGL as against 21-22% for ABB. Nonetheless, some discount would continue to persist due to the relative advantage of access to the parental technology, which ABB posses. We assign CGL a Target P/E multiple of 15x and Initiate Coverage on the stock, with an Accumulate recommendation and Target Price of Rs 306," says Angel Broking's report.

Stock Views on Uflex, Orient Paper & Industries, Sun Pharmaceutical Industries

Sharekhan on Sun Pharma - Target Rs 1498

Sharekhan has maintained its buy rating on Sun Pharmaceutical Industries with a price target of Rs 1498 in its report.


"Caraco Pharmaceuticals (Caraco), Sun Pharmaceuticals (Sun)’s US subsidiary, reported its FY2009 results on June 15, 2009. Caraco’s FY2009 sales declined by 3.8% to USD 337.2 million largely due to a 10.8% decline in its manufactured product (manufactured and sold by Caraco) segment and a flattish performance by its distributed product (manufactured by Sun and distributed by Caraco) segment. On Caraco’s present status with the US Food and Drug Administration (USFDA), the Veterans Administration (an agency to US government) has not renewed the contracts for the products sourced from Sun. At the current market price of Rs 1,297, Sun is valued at 14.5x FY2010E and 13.8x FY2011E fully diluted earnings. We maintain our Buy recommendation on the stock with a price target of Rs 1,498," says Sharekhan's report.


Emkay Global on Orient Paper - Target Rs 66

Emkay Global Financial Services is bullish on Orient Paper & Industries (OPIL) and has recommended a buy rating on the stock with a target price of Rs 66 in its June 16, 2009 report. Orient Paper Q4FY09 pre exceptional net profit of Rs 629 million is above our estimates (Rs 500 million) driven by better than expected cement realizations. Net revenues grew by 23.3% yoy to Rs 4.67 billion driven by 20.9% revenue growth for cement division while the same for Paper division grewby 51.4% yoy."

"We expect OPIL cost structure to witness significant transition with company expected to commission 50 MW of thermal captive power plant. Volume boost from cement capacity expansion to 5 mtpa by Q2FY2010 shall further fuel operating performance and improve cost structure with operating leverage coming in to play. We are upgrading our earnings estimate for FY10E by 12.4% to Rs 13.5 and are introducing our FY11E earnings at Rs14.4. At the CMP, the stock is trading at undemanding 4.1x FY10E earnings. We continue to remain bullish on OPIL transition to mid size efficient cement player. Value of non cement business (Rs 6/share) and investments (Rs 2.2/share) provide significant margin of safety. Maintain our 'BUY' rating on the stock with a revised price target of Rs 66," says Emkay Global Financial Services' research report.


Sunidhi Securities on Uflex - Target Rs 100

Sunidhi Securities & Finance has recommended a buy rating on Uflex, with a price target of Rs 100, in its report dated.


"In-spite of the rapid growth achieved by the Indian packaging industry in the past few years, the per capita consumption of packaging paper/board and plastics packaging in India is still very low at around USD 15 against the world average of around USD 100. It provides the real 'opportunity factor' available in the Indian market. At the CMP of Rs 76, the share is trading at a P/E of 2.6 on FY09E and 2.4 on FY10E. We recommend 'BUY' with a target of Rs 100 in the medium term," says Sunidhi Securities & Finance's report

Stock views on Everest Industries, Jagran Prakashan, Jubilant Organosys

Sunidhi Securities on Everest Inds - Target Rs 125

Sunidhi Securities & Finance has recommended a buy rating on Everest Industries, with price target of Rs 125, in its report dated.


"Everest Industries’s service & production capability, initiatives towards further expand the product range and the market, offer of more choices and solutions to its customers coupled with the sturdy growth rate in demand give strong revenue visibility in the coming years. At the CMP of Rs 90, the share is trading at a P/E of 4 on FY10E and 3.5 on FY11E. We recommend 'BUY' with a target of Rs 125 in the medium term," says Sunidhi Securities & Finance's report.


Angel Broking on Jagran Prakashan - Target Rs 89

Angel Broking has upgraded its buy rating on Jagran Prakashan, with price target of Rs 89, in its report dated.

"We re-iterate Jagran as our top pick in the print media space and remain positive on its future outlook owing to its dominant position in the Hindi Belt (has recently launched a National daily in Delhi), increasing colour ad inventory, ability to attract high amount of local advertising and better traction in new initiatives (I-Next, City Plus, Yahoo Portal, OOH and Event Management). Moreover, we estimate the company’s 1QFY2010 results to reflect additional growth due to the Election spend. At Rs 78, the stock is trading at 15.7x FY2011E Earnings of Rs 4.9. We upgrade the stock to a Buy with a revised Target Price of Rs 89 (Rs 80)," says Angel Broking's report.

Karvy Stock Broking on Jubilant Organosys - Target Rs 215

Karvy Stock Broking has recommended a buy rating on Jubilant Organosys, with price target of Rs 215, in its report .

"The company will incur a capex of Rs 2.5 billion in FY 2010E and Rs 2 billion in FY 2011E. Investment of Rs 1 billion would be in APIs and Rs 1.6 billion in proprietary products and exclusive synthesis. We maintain our FY 2010E estimates as the guidance is in line with our forecast. We introduce FY 2011E estimates and roll over our price target to FY 2011E. The stock is currently quoting at PE of 7.8x FY 2010E and 6.2x FY 2011E and EV/EBDITA of 7.4x FY 2010E and 6.3x FY 2011E. This is mainly on account of the high leverage in the company's books. We rate the stock as a 'BUY' with a price target of Rs 215 based on 8x FY 2011E," says Karvy Stock Broking's report.

Stock views on Opto Circuits, Gateway Distriparks, Welspun Gujarat Stahl Roh

IIFL on Opto Circuits - Target Rs 216

IIFL has maintained its buy rating on Opto Circuits with a price target of Rs 216 in its report.

"Opto Circuits continued its growth momentum in 4QFY09, with topline and EBITDA up 77% and 105% YoY, respectively. On a QoQ basis, topline growth of 1% was marginally below our projection, but a 425bps jump in margin led to EBITDA significantly surpassing our estimates at Rs 705 million (up 16% QoQ). We estimate FY09 organic topline and bottomline growth of about 40% and believe the company will maintain the momentum in FY10 as well. The added growth opportunities from Criticare will likely bolster organic growth. We continue to believe in the large global opportunity in medical devices. We raise our FY10 and FY11 earnings estimates by 1-3%, our target price to Rs 216, and maintain 'BUY' rating," says IIFL's report

SKP Securities on Gateway Distriparks - Target Rs 135

SKP Securities has recommended a buy rating on Gateway Distriparks with a target price of Rs 135 in its report.


"Gateway Distriparks Ltd (GDL), a leading provider of port related logistics support services in India, promoted by three business groups based in Singapore and a business group in India. GDL operates container freight station on a pan India basis with strategic locations at JNPT, Chennai, Vizag and Kochi and ICDs located at Garhi Harsaru and Ludhiana. This presence enables it to cater to the West coast traffic, demand from the Northern hinterlands as well as the east coast traffic. We believe that GDL Ltd is the strongest player in CFS business, led by its strong presence and continuing growth momentum. We expect GDL to post revenue at CAGR of 18% aided largely by higher growth coming from its rail business and new ICDs capacity addition. At current market price of Rs. 92.5/-, the stock is trading at a P/E of 10.2x of FY 11E earnings and EV/EBITDA of 5.5x of FY11E. We hereby initiate coverage on GDL Ltd. and recommend buy rating with a target price of Rs 135/- (46% upside) in 12 months," says SKP Securities' report.

ULJK Securities on Welspun Guj - Target Rs 295

ULJK Securities has maintained its buy rating on Welspun Gujarat Stahl Roh with a target of Rs 295 in its report.



“Welspun Gujarat Stahl Rohren Ltd (WGSRL) is one of the biggest SAW pipe companies in Asia and one of the top 3 companies in the world with regard to the completion of challenging and extremely critical projects. For the annual year ended FY2009A, WGSRL recorded 43.7% growth in Net Sales. Net Sales for the year stood at Rs 57,395.2 million. The net profit was down by 37.3% to Rs 2,135.1 million when compared with FY 2008A. The company plans to demerge Plate cum Coil mill into a 100% subsidiary. WGSRL will own 100% of this demerged entity. We retain Buy with a target price of Rs 295 per share. At this price, the stock will discount FY2010E earnings by 14 times," says ULJK Securities' research report.

Stock views on Gujarat Industries Power Co, Opto Circuits, Sesa Goa

IIFL on GIPCL - Target Rs 130

IIFL has maintained its buy rating on Gujarat Industries Power Co. (GIPCL), with 12-month price target of Rs 130, in its report.

"GIPCL’s proposed 250MW expansion has been delayed, and now the management expects to commission unit-1 in 3QFY10ii as against 1QFY10ii, which is reflected in our forecasts. At CMP, GIPCL is trading at 0.9x FY10ii BV and 10x FY10ii P/E. We maintain 'BUY', with 12-month price target of Rs 130," says IIFL's research report.


Karvy Stock Broking on Opto Circuits - Target Rs 243

Karvy Stock Broking has maintained its buy rating on Opto Circuits, with price target of Rs 243, in its report.


"We maintain our consolidated net sales and net profit estimates for FY10 of Rs 11,140 million and Rs 2,492 million respectively. Although, the company has reported EBITDA margin expansion of 235 basis points in FY09 to 31.7% over previous year, but we maintain our EBITDA margin estimates for FY10 at 28.5%. This will be on account of increase in raw material and administration & marketing cost. The stock is currently trading at a P/E of 12.5x on FY09E EPS of Rs 12.8, and 10.5x on FY10E EPS of Rs 15.2. We maintain our 'BUY' rating on the stock with price target of Rs 243 on 16x FY10E estimated earnings," says Karvy Stock Broking's report.


Reliance Money Sesa Goa - Target Rs 263

Reliance Money has recommended a buy rating on Sesa Goa, with price target of Rs 263, in its report.

"At CMP, the scrip is quoting at an EV/EBIDTA of 1.2x FY11E earnings (Revised Estimate). Considering the rightful canalizing of the cash available yielding better return over what it used to earlier and the improved pricing power due to enhanced volume at disposal, we would like to attribute a better multiple than we had put in our earlier estimates. We recommend a Buy with a price target of Rs 263 at which the scrip will quote at an EV/EBIDTA of 2x," says Reliance Money's report.

Stock views on Divis Labs, South Indian Bank, Tata Tea

Hem Securities on Divis Labs - Target Rs 1370

Hem Securities has initiated a buy rating on Divi's Laboratories with a target price of Rs 1370 in its research report.


"Being a pioneer in the API and CRAMS segment, Divi’s Laboratories has posted tremendous growth over the past few years. With the leadership in dextromethorphan, phenyleffrine, nabumetone and lopamidol, the com-pany is expected to witness surge in its business. Further, with almost completion of massive capex, the company is expected to continue to post excellent financial performance on the back of its successful entry into the high margin nutraceuticals segment. In wake of the growth of the phar-maceutical sector, Divi’s Laboratories Ltd seems to be extremely attrac-tive investment opportunity."


"Presently, the stock is trading at Rs 1088.60 which is at 16.92 times to its earnings and 5.68 times to its book value of Rs 191.72. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with a target price of Rs 1370 in medium to long term investment horizon ex-pecting an appreciation of about 26% from the current level of Rs 1088.60", says Hem Securities' report

FinQuest Securities on South Indian Bank - Target Rs 120

FinQuest Securities has recommended a buy rating on South Indian Bank, with price target of Rs 120, in its report.

"South Indian Bank is trading at an attractive valuation of 0.7x FY10E ABV. Peer banks like KTK Bank, KVB etc continue to trade at 1x FY10 ABV, although operational parameters are comparable with SIB. We therefore believe that SIB’s valuations will catch up with peer banks. Our target price of Rs 120 for the stock (based on DDM model) discounts 1x FY10E ABV. We recommend Buy on the stock," says FinQuest Securities' report.

KRChoksey on Tata Tea - Target Rs 859

KRChoksey has maintained its buy rating on Tata Tea, with price target of Rs 859, in its report.

"More than 70% revenues and 80% of EBIT come from tea business, which is likely to face margin pressure in FY10 as tea prices are likely to remain firm on account of decline in production by 5%. However, with company planning to leverage its tea & coffee brands in other beverage products would help it to diversify and become a complete beverage company. The company plans to focus on six key geographies - Great Britain and Africa, Europe and Middle East, the U.S., Canada and South America, South Asia and Asia Pacific, innovation and distribution going ahead to integrate the business, take advantage of economies of scale. Its recent launch T!ON - an active drink made from fruit juice, tea extracts and ginseng in Chennai has been performing well. At CMP of Rs 728, we maintain our ‘BUY’ recommendation on Tata Tea with a target price of Rs 859, which gives it an upside potential of 18%. At the CMP, the stock is trading at 5.1x FY10E earnings of Rs 143.8," says KRChoksey's report.

Stock views on KEC International, Wipro, Infosys

Angel Broking on KEC International - Target Rs 477

Angel Broking has recommended a buy rating on KEC International with a price target of Rs 477 in its research report.

"KEC International (KEC) is a global player in the Power Transmission and Distribution (T&D) network. KEC, which recently enjoyed a good inflow of domestic orders primarily from Power Grid Corporation (PGCIL), is well poised to bag more orders from the domestic markets. Further, KEC derives close to 63% of its revenue from its overseas operations and is expected to clock good growth in this space as well. Thus, KEC is set on a high growth path on the back of healthy order book position, stable Margins (registered in spite of a volatile commodity and currency markets) and diversification into the Railways and Telecom Segments, where the government is set make substantial investments. At Rs 373, the stock is trading at 10.2x FY2010E and 7.8x FY2011E Earnings. We initiate coverage on the stock with a buy recommendation and target price of Rs 477,” says Angel Broking's research report.

PINC Research on Wipro - Target Rs 420

PINC Research has recommended a buy rating on Wipro, with price target of Rs 420, in its report.

"We upgrade our estimates on Wipro from HOLD to BUY recommendation with a target price of Rs 420, an upside of 11%. The stability in pricing in these challenging environment has helped the company to gain a competitive edge over its peers. They are also eyeing the emerging markets for the much needed volume growth. The management believes that the number of ramp downs in projects have seen a significant decline which are positive signs for posting a single digit growth in FY10," says PINC's research report.

PINC Research Infosys - Target Rs 1950

PINC Research has upgraded its rating on Infosys Technologies from sell to buy, with price target of Rs 1950, in its report.

"We upgrade our rating on Infosys from 'SELL' to 'BUY' with a target price of Rs 1,950, an upside of 12%. We believe that the worst is over for USA, which accounts for 60% of the revenues for the major Indian IT vendors. The signs of recovery will help Infosys to post muted single digit growth in terms of revenues. The management also believes that things are improving from their clients’ end which will provide them the much needed volume growth," says PINC's research report.

Stock views on KEC International, AIA Engineering, City Union Bank

Sushil Finance on City Union Bk, target of Rs 32
Key strengths of the Bank are high margins of +3.0%, one of the lowest opex ratio of 38%,well-capitalized with CAR of 12.5% (supported by very high percentage of Tier-I capital of +10%), High CD Ratio of 69%, strong business growth of +30% over FY07-09, Low AFS portfolio of around 20% and high sustainable ROE of 19% supported by high ROA of 1.4%. Key weakness is very low CASA of 19% and lower NPA coverage ratio of 40%. The stock is currently trading at 1.1x FY10E ABV and 5.3x FY10E Earnings with a sustainable ROE of 19%, Buy, " says Sushil Finance's research report.
Sushil Finance on AIA Engineering; target of Rs 315

AIA has a manufacturing capacity of 165,000 TPA and it had plans to expand another 100,000 TPA capacity, preferably a SEZ, to manufacture high chrome mill internals. AIA would be benefited by both replacement and capex led demand in cement, mining and power utilities across the domestic and international markets. AIA generates 75% of its revenues from replacement demand. At CMP of Rs 240, the stock is available at 11.3x its FY11E EPS of Rs. 21.2 & 2.1x its FY11E ABV. 'Buy' with a target price of Rs 315," says Sushil Finance's research report

Angel Broking on KEC International, target of Rs 477

KEC International (KEC) is a global player in the Power Transmission and Distribution (T&D) network. KEC, which recently enjoyed a good inflow of domestic orders primarily from Power Grid Corporation (PGCIL), is well poised to bag more orders from the domestic markets. Further, KEC derives close to 63% of its revenue from its overseas operations and is expected to clock good growth in this space as well. Thus, KEC is set on a high growth path on the back of healthy order book position, stable Margins (registered in spite of a volatile commodity and currency markets) and diversification into the Railways and Telecom Segments, where the government is set make substantial investments. At Rs 373, the stock is trading at 10.2x FY2010E and 7.8x FY2011E Earnings. We initiate coverage on the stock with a buy recommendation and target price of Rs 477,” says Angel Broking's research report.

Stock views on Federal Bank, Blue Star, ABG Shipyard

Sushil Finance on Blue Star, target of Rs 385

During FY09, Blue Star’s net sales increased by 15% YoY to Rs 25689.5 million. Its EBIDTA increased by 16% at Rs 2725.8 million, while the EBIDTA margins decreased by 100 bps to 10.6%. It’s APAT increased by 22.8% to Rs 1803.1 million. Its EPS for the year stood at Rs 20. BSL has declared a dividend of 180% during FY09. At the CMP of Rs 298, the stock trades at 11.3x its FY11E earnings and 0.7x FY11E BV. Buy with target of Rs 385," says Sushil Finance's report.

Prabhudas Lilladher on ABG Shipyard, target of Rs 230

"Although ABG’s debt increased from Rs 12 billion in Q3FY09 to Rs 15 billion in Q4FY09, the overall finance charge declined from Rs 513 million in Q3FY09 to Rs 302 million in Q4FY09. Besides a change in the accounting policy, LC and bank guarantee charges were lower in the quarter. The company also converted certain working capital loans to commercial paper, thereby leading to a decrease in the average borrowing cost. ABG’s net profits increased by 12.8% YoY and QoQ on account of this saving. ABG currently trades at a PER of 8.9x FY10 and 6.3x FY11 (ex-subsidy). We expect the company’s profits (ex-subsidy) to grow at 16.2% CAGR over the next two years. We maintain our ‘Accumulate’ rating on the stock, with target price of Rs 230," says Prabhudas Lilladher's report.

FinQuest Sec on Federal Bank; target of Rs 300

"Federal Bank is Kerala based bank having a network of 617 branches and business size of INR 550 billion (FY09). The bank is targeting a business of INR 1000 billion by FY11. SME and retail account for 65% of the loan book resulting in higher yield on loans. The bank had raised INR 21 billion via rights issue in FY08. Currently, Federal Bank is trading at 0.9x FY10 and 0.8x FY11 ABV. We have a target price of Rs 300 (1x FY11 ABV) and Buy recommendation on the stock," says FinQuest Securities' report.

Sushil Finance views on Assam Company, Shiv-Vani Oil, Shanthi Gears

Sushil Finance on Assam Company, target of Rs 21

"ACL is one of the leading producers of the most exquisite, high-quality, premium tea. The Company operates through 17 tea estates and gardens with planted area of about 8644.2 hectares on a grant area of 14663.8 hectares. The average yield per hectare stands at 1983 kgs. The Company manufactures around 17 mn kgs of tea and being a bulk manufacturer, 95% of the operations are undertaken through B2B route. The company also has invested in Austin Exploration Ltd., a company having interest in oil & gas blocks in Australia and USA. The company is expected to deliver very decent earnings growth from oil and gas segment. The stock currently trades at 11x its FY10E fully diluted equity earnings and 1.0x BV. Buy the stock with target of Rs 65," says Sushil Finance's report.

Sushil Finance on Shiv-Vani Oil, target of Rs 380

Shiv-Vani has incurred a capex of about Rs 9 billion during FY09, of which, Rs 7.7 billion were expensed to add 11 short rigs, taking the total number of rigs to 40. At the CMP of Rs 303, the stock currently trades at 6.6x FY11E earnings and 1.1x ABV of FY11E. Buy the stock with target of Rs 380," says Sushil Finance's report.

Sushil Finance on Shanthi Gears, target of Rs 65

"On back of the tough business environment, Shanthi has taken measures to revamp and restructure the entire operational and organizational structure, which may lead to scaling down of plant operations, cutting back its personnel and administration costs and a re-look at all the contracts. Shanthi has moderated its capital expenditure plans and may spend only Rs 250-300 million in FY 10. Shanthi has the highest margins in the peer group and the return ratios are also considerably high. Capital intensity in its Business is not very high leading to high cash generation. At CMP of Rs 46, the stock is trading at a valuation of 1.4x its FY11E ABV & 8.4x FY11E Earnings. Buy the stock with target of Rs 65," says Sushil Finance's report.

Stock views on Jindal Steel, Zicom, Maharashtra Seamless

IIFL on Jindal Steel, target of Rs 2884

"Jindal Steel and Power (JSPL) is expanding its power generation capacity from 1,333MW to 5,000MW by FY13ii. We believe that given the sustained peak power deficit in India and resultant high power prices (which are up 125% since FY04), its strategy to sell power through short-term PPAs will pay off handsomely, like the 1,000MW plant of its subsidiary Jindal Power (PAT of 15bn, RoE of 93% in FY09, the first year of operations). We forecast consolidated earnings will register a CAGR of 11% through FY12ii, despite weak steel prices, aided by 21% CAGR growth in power business profit. A unique revenue model (vertical integration + opportunistic sale of power) and visibility on expansion makes JSPL a good play on peak power deficit, Add," says IIFL's reports.

Sushil Finance on Zicom, target of Rs 145

"Zicom has got strong software capabilities relating to the security business. It has also integrated all the multiple security applications into one coordinated hardware and software package. The company has secured various Government projects including Mumbai City Surveillance, Bangalore City Surveillance, Kolkata Metro, Mumbai Western Railway. During 9MFY09, the Company has delivered a decent performance. Its consolidated revenues, EBITDA and net profit after minority interest stood at Rs. 2,719.1 million, Rs. 353 million & Rs. 134.1 million respectively. It has posted an EPS of Rs. 10.6 for the period under review. The stock currently trades at 7.2x its FY10E earnings and 1.0x FY10E BV. 'Buy' the stock with target of Rs 145," says Sushil Finance's report.
Sushil Finance on Maharashtra Seamless, target of Rs 335

"Maharashtra Seamless Ltd. (MSL) is one of the largest manufacturers of seamless tubes with a production capacity of 350 000 tons MSL also manufactures ERW pipes. The total unexecuted Order Book of the Company as at Mar. ‘09 stands at Rs 5,700 million, to be executable over the next one year. The company has net cash of around Rs. 5,000 million in its books. The company plans to productively use the cash partly to fund its capacity expansion plans & to meet its working capital requirements over the next 2 years. At the current market price the company is trading at 7 4x its FY09EPS of Rs 36 and 1 4x. Buy the stock with target of Rs 335," says Sushil Finance's report.

Stock views on Tata Chemicals, Tata Steel, Sun TV

Fairwealth Sec on Tata Chemicals, target Rs 330

"The company has plans to invest Rs 250 crores in Capex this year. Of this, Rs 50 crore would go into setting up a customised fertiliser plant in the Barbala plant in Uttar Pradesh in 2010. Rest of it would be utilized general maintenance work While margins might get impacted for overseas Operations (Soda Ash Busines), Indian Operations are expected to run smoothly for the company. We give company a buy on strong Balance Sheet and revenue visibility in the long term. We give stock a buy with a target price of 330 over a period 6 months to 1 year," says Fairwealth Securities' report.

KRChoksey on Tata Steel, target of Rs 467

The company has guided a growth of 20-25% for its Indian operations, with a thrust on infrastructure in the upcoming budget. The domestic demand is expected to remain robust. Steel prices have started moving upwards due to restocking. The demand in Europe is also showing some revival, however clarity on demand is expected by Q2FY10.Going forward we expect the company to perform better due to better realizations, cost saving measures at Corus & better performance from Indian operations.

At current CMP of Rs 397 stock is trading at forward FY10 PE of 8.4 and FY11 PE of 4.9 . Forward EV/EBITDA stands at 7 for FY10. We recommend a 'BUY' on the stock with a one year target price of Rs 467," says KRChoksey's research report.

KRChoksey on Sun TV, target of Rs 294

Sun TV Network is currently trading at 26.2x its FY09 EPS of Rs 9.4, which is premium to its peer and deserve the premium valuation because of its unique business model (time slot model), highest operating margin as compared to its peers, strong balance sheet which has an cash position of Rs 400 crore. We believe company has a better placed than its peers because of its less dependent of advertising on national front and strong movie pipeline for FY10. Thus, we recommend a “BUY” on the stock with a target price of Rs 294, which represents a potential upside of 20%," says KRChoksey's research report.

Stock views on Orchid Chemicals, Glodyne Technoserve, Unitech

Sharekhan on Orchid Chemicals, target of Rs 163

"The approval and launch of Tazo-Pip in the USA and the resumption of supplies to Europe would act as major triggers for the stock in the near term, whereas the reduction in the debt levels and interest costs would drive the stock in the medium to long term. At the current market price of Rs 94, Orchid is discounting its FY2011E earnings by 5.8x. We maintain our Buy recommendation on the stock with a price target of Rs 163," says Sharekhan's report.

Reliance Money on Glodyne Techno, target of Rs 575

Glodyne Technoserve continues to leap forward with impressive financial performance, we estimate an EPS CAGR of 33% over FY09-11E. At CMP of Rs 488, stock trades at 5X FY10E earning and 4x FY11E. We continue to remain positive on long term sustainability of Glodyne’s business model and recommend 'BUY' with a 12-month target price of Rs 575. At our target pricestock will be valued at 5x FY11E," says Reliance Money's report.

KRChoksey on Unitech, target of Rs 110

"The successful QIP’s has brought positive triggers in the stock. We expect Unitech would be able to launch 35 million sq ft in next 2 years. The company plans to launch 40 projects at aggressive price points on which they have received a good response. We expect Unitech to reduce its debt by 35% to Rs 5,070 crore by the end of FY10 from the existing debt of Rs 7,800 crore., which will bring down its D/E from 1.6X to 0.5x. Based on our funding analysis, we believe that the funds raised from QIPs and other initiatives (asset sale, Telenor deal, warrants to be issued to promoters, etc) would be sufficient to fund its planned projects. We thus belive that the funding woes for the company are more or less over in short to mid term. At CMP of Rs.84 we maintain our ‘BUY’ recommendation on the stock with a target price of Rs 110, which gives it an upside potential of 29.4%. At the CMP of Rs 84, the stock is trading at 20.3x FY10E earnings of Rs 4.2," says KRChoksey's report.

Stock views on Sasken Communication, GAIL, Patel Engg,

Angel on Sasken Communication, target of Rs 127

"Going ahead, we expect Sasken to record 8.5% and 22.6% CAGRs in its Top-line and Bottom-line, respectively, over FY2009-11E (excluding one-time items). Sasken continues to struggle to cope with the difficult business environment, and its key segment, Network Equipment Manufacturers, remains in consolidation mode. The medium-term outlook remains hazy for Sasken even as a recovery is anticipated in 2HFY2010. While the business prospects in the medium-term are a little subdued, we believe current valuations at just 3.3x FY2011E EPS adequately factor this in. We upgrade the stock to Buy from Neutral with a Target Price of Rs 127, implying a P/E of 4x FY2011E EPS," says Angel Broking's report.

Hem Securities on GAIL, target of Rs 340

"GAIL has come up with promising results for FY09. Petrochemicals contributed 11% in Sales. The petrochemical realizations are expected to be better in the future. Liquid Hydrocarbons added 19% to the Gross margins. GAIL has set a target of transmitting 94.8 MMSCMD of natural gas from domestic sources and through LNG route during FY 2009-10 under the Annual Memorandum of Understanding signed with Ministry of Petroleum and Natural Gas for performance targets for the Financial Year 2009-10."

"During the FY 2009-10, to achieve the Excellence in performance, the Company has also targeted for Gas Marketing target of around 83.2 MMSCMD. The MoU also provides for an ‘Excellent’ production target of 400 TMT of Polymers (HDPE & LLDPE - High-Density Polyethylene & Linear Low- Density Polyethylene) and 1,260 TMT of Liquid Hydrocarbons. Presently, the company is running at a P/E multiple of 13.02x to its FY09 EPS of Rs 22.28. Based on the increase in the Gas sales and LPG transmission, we recommend 'BUY' on the stock with a medium term price target of Rs 340," says Hem Securities' report.

Angel Broking on Patel Engg, target of Rs 545

We have valued Patel Engineering on SOTP methodology. We have assigned its Core Construction business a PE of 12x FY2011E EPS of Rs 36.8. Its Real Estate arm has been valued at a huge discount, using the NAV method, at Rs 103/share. In the recent past, the stock had witnessed a sharp appreciation, in line with its construction peers. We believe that, at the current levels, PE is available at reasonable valuations. At Rs 429, the stock is trading at 11.6x its FY2011E EPS of Rs 36.8, on a consolidated basis without considering its real estate venture. We recommend a Buy on the stock, with a Target Price of Rs 545," says Angel Broking's report.

Stock views on BPCL, Bharti Airtel, Glenmark Pharma

Indiabulls Securities on BPCL, target of Rs 526

"With crude oil prices hovering at around $ 70 per barrel levels, we expect the under-recoveries for PDS kerosene and domestic LPG to escalate further. However, the recent price hike in petrol and diesel prices should provide some respite to the Company. At its current market price the stock trades at a forward P/E of 8.6x and 8.3x for FY10E and FY11E, respectively. We have revised our estimates to consider the recent developments in the sector. Based on our valuation, we have arrived at a target fair value of Rs 526, which provides an upside potential of 15.9% from the CMP. Thus, we upgrade our rating for the stock to Buy," says Indiabulls Securities' research report.

IIFL on Bharti Airtel, target of Rs 866

"In our view, the Bharti–MTN deal is driven more by strategic considerations than by synergies. In a world where giants such as Apple and Google are invading the telco space, size will be key. Nevertheless, an analysis of savings / synergy opportunities in the proposed Bharti–MTN deal suggests that Bharti can have a gain of almost USD 3 billion. Our key assumptions are based on measures attributable to Bharti’s involvement, over and above MTN’s own cost reduction measures. These include estimates of opex and capex savings in MTN and capex savings in Bharti. We consider opex savings in Bharti attributable to this deal unlikely. The proposed deal (as the terms stand now) is not significantly earnings dilutive for Bharti even without considering synergies. Hence, we are in no hurry to reduce our TP (Rs 866); we retain 'BUY', " says IIFL's research report.

KRChoksey on Glenmark Pharma; target of Rs 252

"The topline of the company has shown a decline of 10% y-o-y to Rs 491.1 crore whereas on q-o-q basis the company reported a decline of 11%. The fall in sales was due to absence of licensing income during the quarter as compared to Rs 61.0 crore in the corresponding pervious period. Excluding licensing income, the base business declined by 4%. Dip in the base business is due to factors like fewer ANDA approval, destocking in the regions like Latin America & Russia, currency impact in Latin America & Russia and price erosion of Glyptal. Going forward, we expect the revenues to improve on back of improved performance from Glenmark generics, specialty formulation and Indian formulation business."

"We maintain our optimistic view on the company supported by the consolidation from the acquisitions (like Actavis), revenue contribution from the new launches and increasing number of approvals from USFDA which would strengthen the earnings visibility of the company, Buy, target of Rs 252.2," says KRChoksey's report.

Stock views on HCL Technologies, Lanco Infratech, Glenmark Pharma

Credit Suisse on Glenmark Pharma

Credit Suisse has retained its ‘outperform’ rating on Glenmark Pharma, saying widespread investors’ unhappiness over a last moment guidance change, weak cash flows and R&D provide an opportunity to buy the stock. “The sharp drop in P/E suggests complete disbelief in estimates: the market may be implying Rs 10 FY10 (estimated) EPS, down 33% year-onyear. This ignores continued healthy growth in India and the US (together 60% of sales and 70% of Ebitda), and potential cuts in selling, general and administrative (SG&A) expenses as inefficiencies in ‘other’ markets are addressed,” the Credit Suisse note to clients said.

ICICI Securities on Lanco Infratech

ICICI Securities has retained its ‘buy’ rating on Lanco Infratech, citing visible growth in the company’s EPC order book, discounted valuations for the power portfolio and robust business model. “We expect both projects(Rajpura, Dhopave) to achieve financial closure in the next 12 months, leading to healthy addition in Lanco’s power portfolio. We estimate Lanco’s operational power capacity at 2,000 mw in the next 15 months and do not anticipate any cashflow concerns for the ongoing power projects,” the note to clients said.

Centrum Broking on HCL Technologies

Centrum Broking has assigned a ‘reduce’ to HCL Technologies, citing pressure on medium-term earnings due to recent acquisitions, and hedging losses. “HCL Tech bagged deals amounting to $1 billion in Q2FY09. However, the deals are unlikely to make a significant impact on revenues as they have a component of free transitioning,” the Centrum note to clients said.

Dishman Pharma

This is the second stock in our coverage of Pharma Sector. Dishman Pharmaceuticals is engaged in the business of synthetic chemistry research. It has organized the business in two streams: QUATs (quarternary ammonium compounds) & APIs (Marketable Molecules or MM Segment), and Contract Research and Manufacturing (CRAM).

In October 2007, the Company acquired the fine chemicals, vitamin D and vitamin D analogues businesses of Solvay Pharmaceuticals BV (Solvay), based in the Netherlands. Currently, it has a contract manufacturing agreement with Solvay for developing three of its products. If these products materialize, then it would translate into a Rs 30-60 crore of additional profit for the company. According to BRICS Securities this means an addition of 14 to 15 per cent boost to the estimated FY11 profits.

In the CRAMs space it also has a joint venture with AstraZeneca. It is working on 14 drugs for the company. The substantial nature of this assignment can be gauged from the fact that in FY09 it has assigned another plant to meet the requirement thereof. Moreover, large MNC pharma companies have expressed interest in entering into manufacturing contracts going forward for its other plants. At the end of last quarter, the company came up with a plan to invest in Rs 35 crore for additional facilities in Bavla. The additional investments strengthen its commitment to becoming a serious player in the CRAM space.

By the middle of 2009 both its new plant at Bavla and in China will get commissioned, which will add to better visibility of the company in terms of earnings.

Likewise, the recent agreement with Europe-based Polpharma for co-operative and joint API development will also ensures additional contract research and manufacturing business flow for Dishman’s new facilities.

The bottom-line of the company is all set for some improvement as capacity utilization rises. EBITDA margin is likely to expand 600bps in FY09 as low yielding QUATs business reduces to 17% of sales in FY09E from 21% in FY08. Additionally, shifting operations of CarbogenAmcis to India will add an estimated 350bps to margins. BRICS Securities estimate that margin of 24% to sustain over the forecasted period as capacity utilization improves to 80% in FY11E from 65% in FY09E.

Valuation

Ever since it got listed on the bourses (April, 2004), till October 2008, Dishman traded between 25x to 15x forward earnings – often trading at higher-than-peer multiples on back of predictable growth. It currently trades at 5.6x FY10E – a steep discount to its historical trading range, 45% discount to the market, and 45% discount to peers like Divi’s Laboratories and Piramal Healthcare. This leaves quite a lot of room for potential upside in the near term, as the markets get corrected from the lower levels.

CRISIL

Bank loan rating, customised research products and growing international advisory business has benefited Crisil. Tightening international liquidity acts as a windfall gain

CRISIL is the market leader in research, rating and advisory businesses. It has posted impressive results for 2008 (it follows Jan-Dec FY). Its performance got a fillip from the Reserve Bank of India (RBI) too, because as per one of its directive, companies borrowing more than Rs 10 crore from the banks have to be rated. Investors can consider an exposure in the stock for the long term.

BUSINESS:

Crisil’s business can be broadly divided in three segments:

• Research,
• Rating and
• Advisory.

Crisil Research provides products related to research on several industries. The last few years witnessed a large number of new entrants in different industries thus boosting the company’s research business.

It has also tapped the market of outsourced research through its subsidiary, Irevna, which provides support to financial institutions worldwide. Crisil Rating is the largest agency in its business in India. It rates a wide spectrum of organisations, like insurance companies, mutual funds, state government, urban bodies, small and medium enterprises (SME) and non banking financial companies (NBFC).

Crisil Risk and Infrastructure Solutions take care of the advisory part of the business. It acts as an advisor to various agencies on policy, infrastructure and energy. The financial institutions have realised the importance of adequate measures to ascertain and manage risk. Crisil has tried to tap this market by providing risk solutions in the form of risk management services, consulting and software products.

Crisil is the market leader in its business segments. Its market share in bank loan rating is 50%, while its share in other bonds stands at 65%-70%. Even in research space, it is the biggest player as it offers reports across wide spectrum of industries. The sector expertise and the subject knowledge help it in factoring a premium in pricing.


FINANCIALS:

For the year ending December 2008, Crisil’s total income increased 30.5%, while profit after tax grew by 68% over last year. Another interesting trend was that the manufacturing companies are again using bond ratings to raise finance through debt. This is because the liquidity in the international market has been squeezed making the route of external commercial borrowings and foreign currency convertible bond extremely tough.

Corporate India did not do all that well in 2008, however, the performance of Crisil’s research business was unfazed. This is because the company has a large base of subscription-based products. Moreover, it released timely reports on current issues like the impact of global meltdown in India. Similarly, advisory business also continued to do well. Despite rising government deficit, the company’s domestic advisory business was not affected as most of the projects are in urban areas, where the funds are committed for long term. The company has seen growing proportion of international business and projects with agencies like Asian Development Bank.

In the short run, the company is expected to face headwinds in the form of lesser outsourced business for Irevna due to global financial crisis. Moreover, the retail loan market is witnessing slowdown thereby impacting the securitisation, which in turn has affected the structured finance business. However, in the long term the outsourced research part of business is expected to do well especially after the dust settles down around the ownership of financial institutions worldwide.

VALUATION:

The stock is trading at a price to earning multiple of 12.1 times. The earning growth has been much higher than the valuation. This shows that the stock is available at attractive valuations. Moreover, its nearest competitor ICRA is trading at a P/E of 13.1 times. Crisil’s stock is available at lower valuation despite of being the market leader in the industry, which further shows that the market is not factoring the fundamentals entirely into the price.

Stock views on ICICI Bank, Pantaloon Retail, Axis Bank

Karvy Stock Broking on Axis Bank - Target of Rs 829

Karvy Stock Broking has maintained its buy rating on Axis Bank with a target price of Rs 829 in its research report.

"We have revised our Axis Bank earning estimates after a visit to the bank's senior management; we expect that the bank's credit growth would moderate to 31.5% (Y/Y) to Rs 1,146 billion from our earlier credit book estimate of Rs 1,226 billion in FY10. Net interest margin is estimated to shrink by 30 bps to 2.57% in FY10.The bank's core fee income growth momentum is expected to come down to 28% (Y/Y) in FY10 from 70% in FY08 and 50% in 9MFY09. The bank's management did not provide with any guidance or estimates on non-performing assets front; we expect 152% (Y/Y) rise in gross NPA in FY10 to Rs 21.5 billion and increased credit cost to 1.3% in FY10 from 0.71% in FY08 and 1.1% 9MFY09."

"We increase our earning estimates for FY09 by 5.0% to Rs 17.7 billion and reduce for FY10 by 9.6% to Rs 15.5 billion and reduce our target price by 29% to Rs 629 per share.We estimate the bank to record RoAE of 18.8% and 14.4% in FY09 and FY10 respectively. We re-iterate our BUY rating on the stock with a target price of Rs 629 at 2.2x adjusted book value FY10," says Karvy Stock Broking's research report.


Angel Broking on Pantaloon Retail - Target of Rs 439


Angel Broking has maintained its buy rating on Pantaloon Retail with a target price of Rs 439 in its research report.


"We are bullish on the long-term growth prospects of the Retail Sector despite the ongoing slowdown in the economy. Our Top Pick PRIL is the largest player in the Indian Retail Sector. We are positive on PRIL as it has been able to maintain its growth (YTD) at a healthy 31% on a Standalone basis and 34% on a consolidated basis despite the slowdown. We believe that PRIL Standalone would be able to meet our FY2009 and FY2010 Net Sales estimates of Rs 6,894 crore and Rs 8,492 crore, respectively. We estimate PRIL Standalone to clock Net Profit of Rs 154.6 crore and Rs 217.8 crore in FY2009 and FY2010, respectively.


On the bourses, the PRIL stock has witnessed significant correction in the past few months and is currently trading at attractive valuations and provides favourable risk-reward for the investors. We have valued PRIL's stake in FCH, HSRIL and Future Bazaar at Rs 33, Rs 13 and Rs 20, respectively. We maintain a Buy on the stock, with SOTP target price of Rs 439, translating into an upside of 73% from current levels," says Angel Broking's research report.


Sharekhan on ICICI Bank - Target of Rs 805

Sharekhan has maintained its buy rating on ICICI Bank with a price target of Rs 805 in its research report.

"As part of its strategy of focusing on capital preservation and improving asset quality, the bank does not intend to grow its balance sheet aggressively in the coming fiscal. It expects a balance sheet growth in mid single digits for FY2010, with the loan mix likely to shift further away from the retail segment."

"In view of the management, the pressure on the margins is likely to persist till H1FY2010 as the loan mix shifts away from the high yielding retail segment and a larger chunk of the wholesale deposits gets re-priced during the September-December 2009 period, paving the way for some margin expansion during H2FY2010."

"Despite the various concerns over the bank’s asset quality, its international business and the lack of triggers in the near term, we believe that the current valuations of the stock more than reflect the potential risks to the earnings. We maintain our Buy recommendation on the stock with a price target of Rs 805," says Sharekhan's research report.

Stock views on Navneet Publications, Dr Reddys Labs, Gujarat NRE Coke, Mphasis

Sharekhan on Navneet Publications - Target of Rs 59

Sharekhan has recommended a buy rating on Navneet Publications with a price target of Rs 59 in its research report.

"With the growth in publication business moderating, Navneet Publications India (Navneet) has been banking on stationery business to drive its top line growth. As a result, the revenues from the stationery business are expected to grow by 57% in FY2009 to Rs 214 crore. This is also reflected in the revenue contribution from the stationery business that has increased from 34% in FY2007 to 44% now. For Q4FY2009, we expect Navneet’s top line to grow by a robust 33.8% year on year (yoy) driven by a strong performance of its stationery business. We maintain our Buy recommendation on the stock with a price target of Rs 59," says Sharekhan's research report.

Angel Broking on Dr Reddys Labs - Target of Rs 581

Angel Broking has maintained its buy rating on Dr Reddys Laboratories with a target price of Rs 581 in its research report.

"Dr Reddy’s (DRL) has announced realigning its Global Generics strategy to focus on certain key geographies and to gradually exit some of the very small distributor driven markets. The markets that DRL proposes to exit overall contribute less than 1% to its Top-line. In addition to the US, India, Russia and CIS nations and Germany operations which already large contribute a substantial approx 90% (for 9 months December 2008) of the Global Generics revenues, the company will continue operations in 10-15 markets wherein its finished dosages sales are growing significantly. The move represents the company’s renewed focus to consolidate and grow in its key geographies. We maintain a Buy on the stock, with a target price of Rs 581," says Angel Broking's research report.

ULJK Securities on Gujarat NRE Coke - Target of Rs 37

ULJK Securities has recommended a buy rating on Gujarat NRE Coke with a target price of Rs 37 in its research report.

"Gujarat NRE Coke Ltd (GNCL) is the largest independent producer of metallurgical coke in India, having a coke manufacturing capacity of 1 Mtpa, which is getting increased to 1.25 Mtpa by March 2009. It is also the only Indian company to have acquired captive coking coal mines outside India. GNCL has already started the mining in Australian mines and is expected to produce around 1 million MT of coking coal for FY09E and slowly scale up to over 7 million MT by 2013E."

"We have valued Gujarat NRE Coke on the EV/EBITDA based methodology.The stock is presently trading at an EV of 2.4 (x) FY10E EBITDA. We have given a target EV of 3.5 (x) FY10E EBITDA and recommend a buy of Gujarat NRE Coke with a target price of Rs 37," says ULJK Securities' report.

Hem Securities on Mphasis - Target of Rs 238

Hem Securities has maintained its buy rating on Mphasis with a target of Rs 238 in its research report.

"Mphasis Limited has registered a robust growth rate over past few years. As discussed with the Company Management, we expect Applications Services and Infrastructure Technology Outsourcing to drive growth in the future. The company share is trading at a low PE of around 6.0X. We expect the company to outperform in the future and we reiterate “BUY” on the stock with a target of Rs 238," says Hem Securities' report.

Motilal Oswal Views on Tata Consultancy Services, IVRCL Infrastructure, Reliance Infra

Motilal Oswal on Reliance Infra - Target of Rs 1785

Motilal Oswal has maintained its buy rating on Reliance Infrastructure with a target price of Rs 1785 in its research report.

"We expect Reliance Infrastructure to report net profit of Rs 10.5 billion (up 58.9% YoY) in FY09, Rs 9.9 billion in FY10 (down 5.4% YoY) and Rs 10 billion in FY11 (up 1.9% YoY). The stock quotes at PER of 10.5x FY09E, 11.1x FY10E and 10.9x FY11E. We arrive at a target price of Rs 785/share, comprising of: Power business Rs 90/share, Delhi business Rs 34/share, EPC business Rs 49/share, Cash and cash equivalent Rs 251/share and holding in Reliance Power Rs 361/share (20% holding company discount). Maintain Buy," says Motilal Oswal's research report.


Motilal Oswal on TCS - Target of Rs 750


Motilal Oswal has maintained its buy rating on Tata Consultancy Services with a target price of Rs 750 in its research report.

"We have revised our estimates to factor in project cancellations, adverse cross currency impact and revised INR/USD assumptions. Our INR/USD assumptions for FY10 have changed from Rs 45.6 to Rs 49.6. We model 3% volume growth and 6% pricing decline for TCS in FY10. USD revenues including CGSL are expected to rise 0.7% in FY10 (down 2.4% ex-CGSL). We cut our FY10 EPS by 6.3% to Rs 52.9 (from Rs 56.5 earlier). Stock trades at 9x FY10E earnings. Maintain 'Buy' with a target price of Rs 550 (upside of 16%)," says Motilal Oswal's research report.


Motilal Oswal on IVRCL Infrastructure - Target of Rs 184


Motilal Oswal has maintained its buy rating on IVRCL Infrastructure and Projects with a price target of Rs 184 in its research report.

"We expect IVRCL to report net profit of Rs 2.2 billion in FY09 (up 6% YoY) and Rs 2.5 billion in FY10 (up 16% YoY). The stock is trading at 7x FY09 and 6x FY10E. Maintain Buy with a price target of Rs 154/share (36.3% upside). We have valued the core business at Rs 123/share (7xFY10 earnings, 15% discount to industry average, to factor in lower tax rates due to 80IA benefits being considered), BOT projects at Rs 20/share (book value) and other subsidiaries at Rs 11/share (based on the CMP)," says Motilal Oswal's research report.

Stock views on South Indian Bank, Dabur India, Bank Of Baroda

ULJK Securities on Bank Of Baroda - Target of Rs 384


ULJK Securities has recommended a buy rating on Bank Of Baroda with a target price of Rs 384 in its research report.

"Bank of Baroda has posted a positive improvement in its return ratios driven by robust growth in the top line particularly non interest income. Asset quality of the bank also improved and the Gross NPA level now stands at 1.5%. Improvement in ROA will lead to an improvement in ROE, which we believe result in re rating for the stock. Looking at its sustainable growth prospect and attractive valuation, We recommend “BUY” on the stock with a target price of Rs 384 for a medium to long term horizon," says ULJK Securities' research report.


Bonanza on South Indian Bank - Target of Rs 55


Bonanza has recommended a buy rating on South Indian Bank with a price target of Rs 55 in its research report.

"South Indian bank is mid-sized private sector bank. It serves niche market of NRIs and their families in India. SIB is growing at brisk pace. The bank has shown decent performance. Its profits have grown very well, from Rs 8.7 crore in FY 2005 to Rs 153.39 crore in FY 2008, a growth of 260% compounded. It has also shown very good improvement in Assets quality. Its Net NPA stand at 0.4% presently, down from 3.81% in FY 2005.It is likely to report an EPS of Rs 16.8 in FY 09. Investors can buy at CMP Rs 46 for a target of Rs 55 i.e. PE of 3.3," says Bonanza's research report.


IIFL on Dabur India - Target of Rs 111


IIFL has maintained its buy rating on Dabur India with target price of Rs 111 in its research report.

"Dabur has put its beauty and wellness retail venture ‘new-u’ on the block. The company has mandated Grant Thornton to find a buyer for the retail chain. We had anticipated this move by the management, given the poor response to the chain, weak positioning and the overall operating environment, which has turned extremely tough for retailers. This is a move in the right direction, though finding a buyer may not be easy in the current environment. Retail losses will no longer be a drag on overall profitability. Accumulated losses on the venture add up to Rs 220 million over an investment of Rs 416 million over the past two years. We reiterate 'BUY' with target price of Rs 111," says IIFL's research report.

Stock views on Bajaj Auto, JSW Steel, Marico

IIFL on Bajaj Auto - Target of Rs 670

IIFL has recommended a buy rating on Bajaj Auto with a target price of Rs 670 in its research report.

"After two years of declining volumes, Bajaj Auto is poised for profitable growth, on the back of a series of model launches in the high-margin 125cc+ segment. We believe strong margin expansion aided by volume growth in this class of bikes will drive a re-rating in the stock. The stock is trading at a PE of 9x on FY10ii—a 30% discount to Hero Honda, which is trading at 12.8x. We value the stock at 11x FY10ii and rate it a BUY with a target price of Rs 670," says IIFL's research report.

Karvy on JSW Steel - Target of Rs 834

Karvy Stock Broking has maintained its buy rating on JSW Steel with target price of Rs 834 in its research report.

"JSW Steel, India's third-biggest producer, is on target to achieve robust sales volume growth during Q4FY2009. It is likely to sell 1.2 million tonnes of steel as against 0.7 million tonnes during Q3FY2009. However, it is to be noted that the YoY sales volume is likely to be flat."
"We believe that the sales volume growth could help the company in posting EBIDTA growth on QoQ in absolute terms, but the EBIDTA margin of 15% is expected to be under pressure due to the lower price realization. In our opinion, the current rally in JSW Steel and other steel stocks is driven by the strong sales volume growth during Q4FY2009. We maintain our BUY rating on the stock with target price of Rs 834," says Karvy Stock Broking's research report.

IIFL on Marico - Target of Rs 80

IIFL has recommended a buy rating on Marico with a target price of Rs 80 in its research report.

"The recent hike in minimum support price (MSP) for copra by the government has given rise to concerns on Marico’s margin outlook for FY10. Historical evidence leads us to believe that the MSP hike will not alter copra price dynamics. NAFED (National Agriculture Marketing Federation), the nodal procurement agency for copra, has in the past not been as effective in supporting copra prices."

"Perishable nature of copra as well as the dearth of funds has compounded the problem of NAFED being not an end-user itself (unlike FCI), necessitating liquidation of copra inventory in the market within four months of procurement. Importantly, copra demand, over 50% of which comes from edible coconut oil, has fallen this year as consumers switch to cheaper options such as palm oil, creating downward pressure on copra prices. Copra prices are likely to rule 7-8% lower in FY10 (YoY) benefiting Marico, supporting a 110 bps gross margin expansion in FY10, in our estimate. BUY with a target price of Rs 80," says IIFL's research report.