Stock Views on Tata Motors, Infosys Technologies, Balrampur Chini Mills, Aban Offshore

INDIABULLS on TATA MOTORS

INDIABULLS has downgraded Tata Motors from hold to ‘sell’ after the company reported a decline in sales volume over the past few quarters. The broking house expects this trend to continue in the coming quarters, “given the slowdown in the economy, the cautious lending environment and a significant decline in consumer spending.” Indiabulls feels that the biggest challenge for Tata Motors currently is to turn around its Jaguar Land Rover (JLR) business, for which it raised a bridge loan of $3 billion. “Given the tight liquidity scenario and bleak capital markets, Tata Motors is likely to roll over its bridge loan, thereby adding to the company’s finance cost,” says the report. Further, JLR’s sales volume is trending downwards, and given the current economic conditions in the US and Europe, we do not expect volumes to recover in the near term, it adds.

Prabhudas Lilladher on INFOSYS TECH

Prabhudas Lilladher has a ‘reduce’ rating on Infosys Technologies as it feels that the outlook for the company and the software industry is quite weak in the near-term. “While we expect Infosys to perform better than most other players in the industry, we rate the stock ‘reduce’ with a target of Rs 1,246,” says the report. With a difficult FY10E and full-tax FY11E, the two-year earnings CAGR (FY09-11) for the company is unlikely to be over 10-15%, it adds. According to the broking house, the company’s pricing power in fresh contracts would remain under pressure as “pricing behaviour by competition has turned aggressive in new contracts.” While Infosys has seen some weakness in the BFSI domain in the recent past, the outfit expects this weakness to “spread to retail and possibly the manufacturing domains as well.” Of the various service lines, Enterprise Solutions may be worst affected over the next few quarters, according to the management, it adds. The broking house is also expecting another reduction in US dollar guidance by Infosys.

PINC Research on BALRAMPUR CHINI

PINC has downgraded its rating on Balrampur Chini Mills to ‘sell’ as it feels that lower cane crushing would impact the company’s profitability. “Although we remain confident about Balrampur Chini Mills’ business model & efficiency levels and are positive about the turnaround in the sector, we believe that lower cane crushing in FY09 would impact its return ratios (assuming cane price of Rs 140/quintal),” says the report. The outfit expects the company’s revenues for FY09 to rise by 12% to Rs 1,650 crore, aided by higher sugar revenues. “Revenues from sugar sales should grow 12% to Rs 1270 crore as a result of inventory liquidation and higher sugar prices. OPM should dip by 90bps to 21.3% in FY09 on the back of higher cane costs at Rs 140/quintal,” it says. The report, however, does add that if cane prices are maintained at last year’s SAP of Rs 125/quintal, the target price works out to Rs 38 based on FY09E profits of Rs 160 crore.

Ambit Capital on ABAN OFFSHORE

Ambit Capital has maintained a ‘buy’ on Aban Offshore with a revised target price of Rs 1,603 (earlier Rs 1,566), implying an upside of 143% from the current levels. The upward revision comes after the company announced contract renewal of its jack-up ‘Deep-Driller-IV’ (DD-IV) in continuation of expiry of its current contract in December 2008. According to the report, the renewal is for a period of six months and is part of the two six-month options built into the agreement