Stock views on Binani Cement, Kalpataru Power Transmission, Sunil Hitech Engineers

ULJK Securities on Sunil Hitech - Target Rs 282

 

ULJK Securities has initiated buy rating on Sunil Hitech Engineers with a price target of Rs 282 in its report.

The Planning Commission has targeted 78700 MW of capacity addition by 2012 out of which around 60000 MW will be thermal power, which is the key area of operations of Sunil Hitech Engineers (SHEL). SHEL is moving up in the value chain and is capable and prequalified for executing BOP works on an individual basis. SHEL is now prequalified to bid for a 500 MW BOP project.  SHEL enjoys a strong order book of about Rs. 2062 cr, which leads to a revenue visibility for next three years. SHEL has a good track record in project execution. SHEL having good execution capabilities and a robust order book, we see the stock has a potential upside with a very low downside risk at its current price of Rs 198. We have initiated a coverage on SHEL with a BUY recommendation for a target price of Rs 282, "says ULJK Securities research report.

Karvy Stock Broking on Kalpataru Power Transmission - Target Rs 1292

 

Karvy Stock Broking has given a buy rating on Kalpataru Power Transmission, with a price target of Rs 1292, in its report

"Though we incorporated above motioned revision in our earning estimates, we retain our valuation multiples for Kalpataru Power Transmission standalone as 16x on FY11 and 10x on FY11 for JMC projects. Therefore, we arrive at a target price of Rs 1332/share, marginally lower over previous target. However, owing to recent fall in stock price, we revise our rating on KPTL from Outperfomer to BUY. Currently KPTLconsolidated entity (along with JMC projects) is trading at 17x on FY10 and 12x on FY11 earnings. Effectively, our target price will be 15.5x on FY11 earnings".

"As the fund raising exercise is subject to shareholders approval, we have not factored the same in our model and its subsequent impact on price target. However, retaining the same valuation multiple, on account of the equity dilution from QIP issue, our target price would come down by 3% to Rs 1,292/share," says Karvy Stock Broking report.

Firstcall Research on Binani Cement - Target Rs 84

 

Firstcall Research has come out with a research report on Binani Cement. The firm has recommended buy in this particular scrip with a target price of Rs 84, in its report.

The report says, "At the current market price of Rs 69.85, the stock trades at a P/E of 4.27x and 3.76x for FY10E and FY11E respectively. On the basis of EV/EBDITA, the stock trades at 2.68x and 2.56x for FY10E and FY11E respectively. Price to Book Value of the stock is expected to be at 1.75 and 1.20 respectively for FY10E and FY11E."

"The Net sales of the company are expected to grow at a CAGR of 28% over 2008 to 2011E. BCL has CAPEX plans of Rs 1700 crore to be spent over the next 2-3 years which includes Greenfield expansion in Gujarat, Grinding unit in Mauritius, Expansion in China & mine development in Nimbri Chandawatan, Rajasthan. We recommend buy in this particular scrip with a target price of Rs.84.00. for medium to long term gains," according to Firstcall Research.

Stock views on Monnet Ispat, Federal Bank

Angel Securities on Federal Bank - Target Rs 342

Angel Securities is bullish on Federal Bank and has recommended buy rating on the stock with a target of Rs 342, in its research report.

"Federal Bank is an old, private sector bank with a large network of 669 branches, concentrated in semi-urban areas in the southern states. The Bank's strong Capital Adequacy, Operating Efficiency and technologically up-to-date network represent an attractive standalone franchise. The Bank's deposit base includes a niche, low-cost NRI deposit base that contributes a meaningful 16.5% of total deposits and gives it a distinguishing cost advantage over several of its peers. At the CMP, the stock is trading at attractive valuations of 0.8x FY2012E Adjusted Book Value (ABV) - similar to South Indian Bank, its closest peer, compared to a 5-year average premium of 15%. While lower leverage is leading to low RoEs at present, at the core RoA level, the bank's earnings quality is one of the best among peers. We recommend a Buy, assigning a multiple of 1.0x FY2012E ABV to arrive at a 12-month target price of Rs 342," Angel Securities research report.

 

Firstcall Research on Monnet Ispat - Target Rs 438

 

Firstcall Research is bullish on Monnet Ispat and has recommended buy rating on the stock with a target of Rs 438, in its research report.

"At the current market price of Rs 381.00, the stock is trading at 6.8 x FY10E and 6.0 x FY11E respectively. Price to Book Value of the stock is expected to be at 1.17 x and 0.98 x respectively for FY10E and FY11E. Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs.56.06 and Rs.63.52 respectively. Monnet Group has embarked upon a major investment program in the short term."

"More than USD 1.5 billion worth of investments have been lined up in various business segments. We expect that the company will keep its growth story in the coming quarters also. We recommend 'BUY' in this particular scrip with a target price of Rs 438 for Medium to Long term investment.

Stock views on Lupin, Adhunik Metaliks, Mahindra and Mahindra

Hem Securities on Mahindra and Mahindra - Target Rs 1360

 

Hem Securities is bullish on Mahindra & Mahindra and has recommended buy rating on the stock with a target of Rs 1360, in its research report.

"Mahindra & Mahindra has posted good results and is on the positive track. The tractor sales are expected to increase in the coming months as the production is going to increase. This will increase the demand and in turn will increase the sales of the company. Company's market share has been increasing from 44.70%, a year ago to 55.60% till the month of December, 2009. Exports by the company have seen a tremendous jump. Presently the company is running at a P/E multiple of 15.85x to its TTM (trailing twelve months) EPS of Rs 70.86. We recommend BUY on the stock with a medium-term time horizon with a price target of Rs 1,360," says Hem Securities research report.

 

 

Sunidhi Securities on Adhunik Metaliks - Target Rs 150

 

Sunidhi Securities & Finance has initiated a buy rating on Adhunik Metaliks with a price target of Rs 150 in its research report.

"Adhunik Metaliks is likely to post an EPS of Rs 11.5 in FY10 and Rs 16.0 in FY11. At the CMP of Rs 116, the share is trading at a P/E of 10.1x on FY10E and 7.3x on FY11E. We recommend BUY with a target of Rs 145 in the medium term. After a clear uptrend beginning from early-March to Aug' 09, the stock is in a sideways consolidation phase. The stock is expected to resume its uptrend after the breach of the important resistance zone of 126-128. A breach of this resistance zone should take the stock upwards to a minimum price target of Rs 150." says Sunidhi research report.

 

India Infoline  on Lupin - Target Rs 1650

 

India Infoline is bullish on Lupin and has recommended buy rating on the stock with a target of Rs 1650, in its research report.

"On the daily chart, Lupin has given an upside breakout, considered to be an important bullish signal. Last few sessions for the stock has been characterized by a sustain downtrend. However, the stock has managed to find support around the levels of Rs 1,447. On Monday, it staged a rally, closing well above day's open. The stock price has corrected from a recent peak of Rs 1,610 during February 2010 to a low of Rs 1,447. Since then, the stock has moved along with the support of its trendline. With other oscillators suggesting a positive formation, we expect the upside to continue. We recommend traders to buy the stock at current levels and on decline to levels of Rs 1580 for a short term target of Rs 1650. It is advisable to maintain a stop loss of Rs 1565," says India Infoline research report.

Stock views on Punjab National Bank, India Cements, Lupin

Motilal Oswal  on Lupin - Target Rs 1988

 

Motilal Oswal is bullish on Lupin and has recommended buy rating on the stock with a target of Rs 1988, in its research report.

"Lupin's underlying fundamentals are likely to improve gradually, led by an expanding US generics pipeline, niche/Para-IV opportunities in the US, strong performance from Suprax and a ramp-up in Antara revenues (branded products in US) and traction in formulation revenues from its European initiative. We expect Lupin's core operations (excluding one-off upsides) to post 16% revenue CAGR over FY10-12 led by 17% CAGR for the US business and 18% CAGR for the domestic formulations business."

"We believe Lupin is gaining critical mass in the US, and its European revenues should gradually ramp up from FY11. It has 86 ANDAs pending approval in the US, including filings for low-competition products in the oral contraceptives segment. The stock trades at 19.3x FY11E and 16.5x FY12E EPS with a sustained 30%+ RoE. Maintain Buy with a target price of Rs 1988 (18x FY12E EPS). Our estimates do not include one-time upsides for the company's FTF pipeline in the US," says Motilal Oswal research report.

Angel Sec on India Cements - Target Rs 138

 

Angel Securities is bullish on India Cements and has recommended buy rating on the stock with a target of Rs 138, in its research report.

"India Cements (INC) posted an 8.6% yoy growth in the Top-line during 4QFY2010 to Rs974cr. The revenue from the cement business stood at Rs920cr. The growth in the Top-line was primarily on account of a healthy 26.5% yoy increase in the sales volume, even as the realisation declined by 19.4% yoy to Rs2,488/tonne. On the operating front, the margins of the company declined by 941bp yoy to 15.2%, on account of a surge in the raw material and freight costs. The Net profit declined by 59.2% yoy to Rs38cr, primarily on account of a poor operating performance. We recommend a Buy on the stock," says Angel Securities research report.

P Lilladher on PNB - Target Rs 1194

 

Prabhudas Lilladher has recommended accumulate rating on Punjab National Bank with a target of Rs 1194, in its research report.

"At the CMP, Punjab National Bank is trading at 1.6x its FY11E ABV and 1.3x its FY12E ABV, which is at a premium to its other peers. We believe the valuations are likely to remain at a premium compared to peers as it is likely to deliver RoEs at~24% and RoAs at ~1.5% over FY10-12E which is likely to be the best in the sector. Its restructured book, which is 6.5% of the total advances, is on the higher side. This poses some risk to unforeseen slippages which remains the only foreseeable risk in this exceptionally well managed bank. We maintain our 'Accumulate' rating, with a price target of Rs 1194," says Prabhudas Lilladher research report.

StanChart’s IDR

Given the reasonable valuations and clean financials, investors can subscribe to StanChart's IDR

IDR details

Issue Size: $500 million - $700 million

Date: May 25-May 28


STANDARD Chartered has decided to raise funds from Indian stock market through Indian Depository Receipts (IDR). The bank has indicated that it will raise $500 million to $700 million through the issue, which will remain open from May 25, 2010 to May 28, 2010.

BUSINESS:

Standard Chartered is one of the oldest banks in the world. In fact, it was the first bank to start operations in many Asian countries and has a history of over 150 years in India. The bank earned over 90% of its profit before tax from Asia, Middle East and Africa in the financial year ended December 2009. Since it has limited presence in the Western Europe and North America, it was hardly affected by the sub-prime crisis.

   Its operations are divided into two main divisions — consumer bank and wholesale bank. The consumer bank is like any other retail bank offering products such as mortgages, personal loans and credit cards. In times, when financial crisis had completely eroded the assets of several multi-national banks, Standard Chartered boasts of a loan portfolio, which is 84% secured. The bank has achieved this feat by focusing more on secured lending like mortgages. However, increasing focus on secured lending can hamper its net interest margin (NIM), which already declined to 2.3% in 2009 from 2.5% in 2008. The management said that it will not increase the share of secured lending more.

   The bank has a strong liability side too, with as much as 53% of its deposits coming from low-cost current account and savings account deposits. In this respect, its performance is better than HDFC Bank, which is generally regarded as the best Indian bank. However, in terms of NIM, Standard Chartered's performance is not as encouraging as top Indian banks, which boast of a NIM of 3% or higher.

   In the wholesale banking division, it provides trade finance and products like currency options and structured finance to corporates located across geographies. The performance of this division is related to trade flows between economies. This division posted a growth of 28% and 36% in 2008 and 2009, respectively in its operating profit. It must be noted that the company reported this set of numbers, when the sub-prime crisis had wrecked havoc specifically in the western side of the globe. Such performance by wholesale banking division helped it in reporting growth in 2009, when consumer banking division actually registered a 22% fall in operating profit. Meanwhile, the bank grew its cost by only 4%, while its income rose by 9% giving it a cushion of 5%.

COMPARISON:

The bank reported a return on assets (RoA) of 0.8% in 2009, which is at par with its peers in other parts of globe. However, Indian banks clocked an average RoA of 1% in fiscal year ended March 2009. So compared to domestic banks, Standard Chartered's performance is sub par.

   It posted a profit growth of 4% year-onyear in 2009. Compared to international banks, this looks much better since their bottomlines bore the brunt of toxic assets. However, compared to Indian banks, Standard Chartered grew at a much lower rate. Prior to 2008, the bank's performance is much better than even Indian banks. This shows that the bank has a much better track record. It's capital adequacy ratio (CAR) stood at 16.5% at the end of 2009. At this level, its CAR is at par with top Indian banks and show that the bank has sufficient capital base to grow.

VALUATION:

The bank is yet to announce the price range at the time this article went to the press. Back on the envelope calculations show the price per IDR is expected to be in the range of Rs 98 to Rs 137. Retail investors will get a discount of 5% on the issue price. Ten IDRs are equivalent to one share. As per the company's information, earning per share stood at Rs 77 in FY2009. Given that, IDR will be trading at a price-to-earning (P/E) multiple of 12.7-17.7. Its international peers are trading at an average P/E of 14. Top public sector Indian banks are trading at an average P/E of 11, while top private banks are trading at an average P/E of 24. The valuation of IDR seem to be reasonable given the multiples at which the stocks of its domestic and international peers are trading. Given the reasonable valuations and clean financials, investors can subscribe to this IDR.

 

Stock views on Patel Engineering, L&T

Angel Sec on L&T - Target Rs 1809

 

Angel Securities has recommended accumulate rating on Larsen & Toubro, L&T with a target of Rs 1809, in its research report.

"L&T has always traded at a premium to Sensex valuations, and has outperformed the Sensex on a consistent basis, given its  strong operating cash flows, superior return ratios (in excess of 20%) and  excellent capital efficiency. In recent times (over the last 6 months), the stock's  performance has been subdued, given poor quarterly performances and rich  valuations that provided limited scope for disappointment. However, going ahead, we believe that L&T would outperform on the back of: 1) Strong  quarterly numbers, resulting in the fading away of market concerns over  execution, 2) Robust order book, 3) Recent underperformance giving an entry  opportunity for long-term investors, and 4) 18% Earnings CAGR expected over  FY2010-12E. Hence, we maintain an Accumulate on the stock, with a revised target price of Rs 1809 (Rs1,761 earlier). We have used the SOTP methodology and have valued L&T's Parent business at 20x FY2012E Earnings  and its subsidiaries/investments at Rs 383 per share," says Angel Securities research report.

 

 

PINC  on Patel Engineering - Target Rs 544: PINC

 

PINC Research is bullish on Patel Engineering and has recommended buy rating on the stock with a target of Rs 544, in its research report.

"Patel Engineering's (PEL) consolidated Q4FY10 results were a mixed bag with above-than-expected sales growth at 24.1% while EBITDA margin was lower-than-expected at 12.6%. A lower than expected depreciation and higher than expected interest cost netted PAT inline with expectation at Rs719mn. Given the better topline performance of 25.3% growth for FY10 and a healthy order book of Rs 100 billion (up 38% YoY), we upgrade our topline by 5.5% for FY11 and by 6% for FY12, leading to 3.8% upgrade in PAT for FY11 and 7.9% for FY12 respectively. We value the core business at 13x FY11E EPS of Rs 28.7; Road BOT at Rs 12.4; Real estate projects at Rs 55.4; land bank at Rs 67.1; and the power venture at Rs 35.7. We reiterate our 'BUY' recommendation on the stock with a target price of Rs 544," says PINC Research report.

JK Lakshmi Cement

JK Lakshmi Cement's performance for the March 10 quarter was adversely affected by a rise in other expenditure, which, on a per tonne, rose 42.9% Y-o-Y to Rs 499.5. JK Lakshmi Cement is focused on the northern region. Senior company officials highlighted that the company had purchased clinkers from external sources.

   As a result, the company's operating profit margin declined 755 basis points Y-o-Y to 23.2% in the quarter under review, while its net sales rose 21.1% to Rs 441.3 crore. The results were declared after the close of trading on Monday. And on Tuesday, the stock declined 1.6% to Rs 64.8. Moreover, over the past three months, the stock has under-performed the broader market. It has declined 11.2% during this period compared to a 1.3% rise in the Sensex.

   The company's realisations were broadly flat on a Y-o-Y basis at Rs 3,134 per tonne in the fourth quarter. And according to senior company officials, while prices have improved on a sequential basis, they were still flat on a Y-o-Y basis. In contrast, in southern and western regions, players grappled with a fall in realisations on a per tonne basis in the fourth quarter.

   Meanwhile, the company's total cement sales volume grew nearly 21% to 14.08 lakh tonne in the quarter under review, helped by expanded capacities brought on stream earlier. To the company credit, it attempted to offset the difficult operating environment with its power & fuel costs that declined nearly 9% on a per tonne basis in the quarter. Nevertheless, the company's net profit after tax (PAT) also declined 32.7% Y-o-Y to Rs 70.1 crore in the fourth quarter.

   Going forward, demand in the North is expected to remain strong in the medium-term, given government funded infrastructure projects, coupled with a rising demand from the housing sector. Also, the company's ability to keep a check on operational costs, going forward, would be key. At Rs 64.8, the stock trades at just 3.3 times on a trailing four-quarter basis and appears reasonable valued.

 

Stock views on SAIL, CROMPTON GREAVES, PERSISTENT SYSTEMS

PERSISTENT SYSTEMS

HSBC initiates `Overweight' rating on Persistent Systems with a target price of Rs 500, based on 13 times PE FY12E EPS. Persistent, a recently listed company focussed on offshore product development (OPD), is well positioned to benefit from the expected growth in next-generation technologies such as cloud computing, enterprise mobility and collaboration tools. The company has delivered industry-leading top line growth over the last five years and HSBC conservatively assumes 23% annual sales growth over the next three years. Persistent's clients include 37 companies with revenues in excess of $1 billion. HSBC expects Persistent's market share of the Indian OPD market to grow from about 13% in '09 to about 15% by''13. The outlook is also bright for its startup clients, judging by the upbeat mood of the US venture capital market. HSBC forecasts FY11-13 CAGR of 23% for revenue, 26% for EBIT and 18% for EPS. As earnings growth continues to surprise, HSBC believes the stock should re-rate and trade at a premium to its peers.

CROMPTON GREAVES


CLSA maintains `Outperform' rating on Crompton Greaves. Crompton's Q4 adjusted net profit at Rs 270 crore, up 39% Y-o-Y, is significantly higher than the estimates. The revenue growth at 2% was however below the estimates. Crompton has made two acquisitions in the last two months, which would complement its existing business. Domestic business continues to do well. Crompton's Q4 standalone revenue registered a growth of 19% Y-o-Y which was in-line with the expectations. The rupee's appreciation against the Euro would have also amplified the decline in revenues. Crompton has made two acquisitions over the last two months: Power Technology Solutions (March) and three small businesses of Nelco on a slump sale basis. Both these acquisitions are aimed at improving its automation and services offering. Crompton continues to be the best performing stock in India's power T&D (transmission and distribution) space. It still trades at a 40-45% discount to its competitors, ABB and Areva, on FY12 PE basis. With its superior operating performance and improved product and services offering, CLSA expects the valuation gap to narrow.

SAIL


Citigroup upgrades the rating of Steel Authority of India to `Hold' with a target price of Rs 234. SAIL has risen 75% in the past 12 months but has underperformed Tata Steel/JSW Steel. SAIL has 100% captive iron ore, but only 5% coking coal. Based on flat steel prices, rising trend in coal prices, and SAIL's sluggish volume growth until FY12, Citigroup does not expect Sensex outperformance. SAIL has the advantage of a largely Indian exposure. The new target multiple is higher than SAIL's 3-year average but lower than the highs of 7-9x. At a targer price of Rs234, it would trade 11.9x June11 PE. Citigroup is raising PAT by 2-36% for FY10-12. The rise in estimates is largely due to a revision in HR coil dollar price estimates by 10-29%, domestic price trends and 2-4% increase in volumes versus earlier. The government has approved a 20% equity sale in two tranches of 10% each. Each time, 5% will be through FPO and 5% through sale of government holding. On completion, share capital will rise to Rs 4,540 crore and government stake will fall to 69% from 86%.

MUNDRA Port and Special Economic Zone’s (MPSEZ)

 

 

MPSEZ Trades At Nearly 41.7 Times On A Trailing Four-Quarter Basis

 

MUNDRA Port and Special Economic Zone's (MPSEZ) volume of cargo traffic handled grew by nearly a 10% Y-o-Y to 10.5 million tonne in the March '10 quarter, which was broadly lower than a 13.7% Y-o-Y growth in the company's cargo traffic during the first three quarters of FY10.

   Analysts point out to a low base effect in the first three quarters of FY09, due to the global economic crisis, which resulted in a stronger pick-up during the corresponding period in FY10.

   However, during the fourth quarter of FY10, the company benefited from a tight check on operational costs, and that helped its standalone operating profit margin improve by 170 basis points Y-o-Y to 59.9%. The company's total operational income in the quarter under review also grew by 47.8% Y-o-Y to Rs 420.5 crore.

   And despite the improved performance, the stock declined 1.85% to Rs 701.1 on Monday, given the broad selloff witnessed on the Street. However, over the past three months, the stock has gained 2.6%, broadly in tune with the rise in the Sensex.

   MPSEZ benefited from a broad revival in the domestic and external trade in the fourth quarter, with India's exports that improved 33.5% Y-o-Y in dollar terms, while imports surged 55.3%. As a result, the volume of minerals and allied products handled by MPSEZ amounted to 0.84 million tonne in the fourth quarter, a jump of 78.7% Yo-Y, coupled with a 29.6% rise in volume of vegetable oil and chemicals.

   An improved operational performance helped the company's profit after tax grow by 27.1% Y-o-Y to Rs 192.2 crore in the quarter under review. The company has announced a stock split and that should help improve liquidity in the stock, going forward.

   However, the underlying concern is the current crisis in the European region and its potential to adversely impact India's external trade over the next few quarters, which, in turn, could have an impact on the volume of traffic at Indian ports. MPSEZ trades at nearly 41.7 times on a consolidated basis on a trailing four-quarter basis and is expensive.

 

Ansal Buildwell

Ansal Buildwell recently came out with its financial numbers for the quarter ended March of 2010. In fact, sales have been marginally down to about Rs 31.5 crore, but the company has registered a profit after tax of about Rs 2.6 crore as against the loss of Rs 1 crore for the same period last year. This is a Delhi based company operating primarily in Gurgaon. In fact, Ansal Buildwell is responsible for development of a large part of Sushant Lok II and Sushant Lok III in Gurgaon.

The company is currently doing row houses in independent floors in Sushant Lok III. There was a decision by the Haryana government about two years back which allowed registration of independent floors in Gurgaon. That decision came as a big benefit for Ansal Buildwell since it was involved mainly in independent houses and independent floors in Gurgaon. So that has been a big business booster for this company. If you look at full year numbers for this company for FY10, sales are up by about 3% to Rs 125 crore. Profit after tax (PAT) is up by close to 50% to about Rs 10 crore, EPS is about Rs 13.25. So at the current price of Rs 80, the stock is traded at a price to earnings multiple of about Rs 6 and the good part about the company is that the company has got land which is available in the books at the historical rates.

The company has been a consistent dividend payer for the past five-six years. In fact, last year also, which was considered a difficult year for most real estate companies, the company managed to make a profit after tax of about Rs 6.5 crore and paid a dividend also last year. Given all these factors, the stock looks undervalued even though there maybe a few concerns. The major concern is with regard to information sharing and information decimation by the management.

That seems to be a larger concern as to transparency and information sharing with the shareholders is what I believe is lacking in this company. We have seen that in a number of smallcap and midcap companies, once management becomes forthcoming and they are willing to share the future plans with the shareholders in a transparent manner, many of these stocks undergo rerating. So once you go to Gurgaon and see the work which is happening there being done by Ansal Buildwell, it makes you happy. However, there is not complete information about the future plans of the company and other details with regard to land bank available with the shareholders. At the current market price, the negatives seems pretty much factored in the stock price.

 

 

OCL INDIA

 

Cement Biz In The East Rings In Higher Profits; Steel Industry Revival Drives Refractory Biz

 

OCL INDIA, a leading player cement manufacturer in the eastern region, has gained from strong demand conditions in the region in the March 2010 quarter. Government-funded infrastructure and rural housing projects have been major contributors to OCL's performance.

   As a result, the company's cement realisations improved by nearly 21.7% to Rs 4427.7 per tonne in the quarter under review, while its despatches were slightly higher on a y-o-y basis at 0.86 million tonne. Improved realisations in the eastern region were in broad contrast to the situation in southern and western regions in the March 10 quarter. Apart from the cement business, OCL's refractory business contributed 17.7% to segment sales in the fourth quarter. The company also benefited from a revival in the steel sector, key user industry.

   Meanwhile, improved performance in both the divisions helped OCL India's operating profit margin improve by 840 basis points y-o-y to 29.8% in the fourth quarter, while its total operating income also rose 20.2% to Rs 426.5 crore. The results were declared on Monday and over the past two trading days, the stock rose nearly 6.4% to close at Rs 138.9 on Tuesday and it is not too far from its 52-week high of Rs 144.35 reached in January 2010.

   OCL's strong fourth-quarter realisations also helped it offset higher operational costs. For instance, its power & fuel costs rose 22.1% y-o-y to Rs 636.9 per tonne, while other expenditure rose 23.6% on a per tonne basis. In its refractory division also, segment result (profit before tax and interest) rose 59.6% in the fourth quarter. OCL India's net profit also more than doubled to Rs 55.4 crore in the quarter.

   Going forward, OCL is expected to continue to benefit from strong demand conditions in both the cement and refractory division. Also, Dalmia Cement (Bharat), which has a 45.4% stake in OCL, as per the restructuring announced earlier, had transferred its stake to Dalmia Bharat Enterprises and its subsidiaries. OCL India trades at just 4.7 times on a trailing fourquarter basis and is a value buy.

 

Voith Paper

 

A: This is a paper company. It makes the products which are used for paper manufacturing. It is a 74% subsidiary of Voith Group of Germany. Now Voith Group has got worldwide sales of close to 5 billion euros and employees about more than 40,000 people and about 200 locations all across the world. Now it is said that one-third of world's paper production is carried out in machines which is made by Voith Paper. So it is a fairly large company specialized in the paper sector.

Coming to the Indian subsidiary, Voith Paper Fabric make industrial feel which are used for paper manufacturing. The primary customers for this company are the paper and cement sector. Now if you look at the financials of the company for FY09, the company achieved sales of about Rs 47 crore made a profit after tax of about Rs 7.11 crore. In the first six months, in fact the financial year for the company ends in the month of September upto March 2010, the company has managed sales of about Rs 26 crore, which is up by about 5% over the same period last year. The profit after tax is up by close to 38% to about Rs 4 crore.

If you look at the valuations of the company, at the current market price, the marketcap of the company is just about Rs 80-81 crore. It is a totally debt free company having cash in hand of close to Rs 42 crore which makes the enterprise value of the company at just about Rs 40 crore. So you have a multinational company available at enterprise value of Rs 40 crore. There are various possibilities which exist in this company. One is that in case Voith decides to expand their operations in India, they may introduce a number of other products for the Indian market which will definitely scale up the business of Voith Paper.

The other opportunity for the shareholders exists in the form of a possible delisting. In case the management decides to delist the share, it can lead to value accretion for the shareholders of the company. Now if these things do not happen, you still have a company which is growing at the reasonable rate and available at very attractive valuation of about enterprise value of just about Rs 40 crore and making a profit after tax of about Rs 8 crore every year and also paying dividends for the past 12 years, last year they paid a dividend of 40%.

So under the first scenario, in case they want to scale up the operations or in case they decide on the delisting then you may have big value created in Voith Paper. In the second scenario, the company decides to go the way they have been going for the past couple of years, grow at about 8-10-12% every year, you still have a company available at an enterprise value of Rs 40 crore and making profit after tax of about Rs 7-8 crore and also paying dividends on a regular basis. So that downside from these levels look extremely restricted upside would depend a lot upon the future course of action which the management wants to do with the company.

 

Piramal Glass

 

Low Manufacturing Costs, Strong Client Base To Help Co Increase Gain Market Share

 

MUMBAI-BASED Glass Company Piramal Glass operates in pharmaceuticals, cosmetics & perfumery, specialty food & beverage (SF&B) segment in India, US and Sri Lanka. In March 2010 quarter, the company's net profit turned positive on account of the turnaround of its US subsidiary, which has generated cash profit. The stock has managed to put up with the bearish trends in the market and gained 3% while the market was in the red in the past one week. A couple of mutual funds have been bullish on the stock, and their shareholding in the stock in March quarter has gone up as against the December 2009 quarter.

   The company's performance on the bourses over a long tenure has been improving consistently. For instance, in the past three months, the stock gave 21% returns and over six months it has been an outperformer with its stock price almost doubling whereas the Sensex was flat during that same period. On an annual performance basis also, the stock outperformed the benchmark index, Sensex that gained 45% as against the 354% jump in Piramal Glass's stock price.
Piramal Glass's net sales increased 8% in the quarter ended March 31, 2010 at Rs 284 crore as compared to Rs 262 crore in the same quarter last year. As a conscious effort, the company is focusing on increasing the share of high-margin premium segment within the cosmetic and perfumery (C&P) segment. Its operating profit margins have also surged to 23% from 9.6%. It is also shifting capacity from pharmaceutical division to the C&P segment to further improve profitability. As a result pharmaceutical and SF&B division degrew by 14% and 22%, respectively as against a 68% growth registered in C&P division in March quarter. The company expects to increase the overall share of C&P in total sales by 400 basis points from the existing 43% in a span of two years. Besides it also anticipates further saving in cost in its US plant.

At the current book value of Rs 31 per share and the current market price of Rs 96, it is trading at a price-to-book value of 3 times. With a net profit of Rs 12 crore for the current quarter, the company is set on a growth trajectory. Moreover, low manufacturing cost and a strong client base will help the company to further gain market share in the C&P segment.

Stock views on Cadila Healthcare, Titan Industries, JSW Steel

Prabhudas Lilladher  on JSW Steel - Target Rs 1431

 

Prabhudas Lilladher has recommended accumulate rating on JSW Steel with a target of Rs 1431, in its research report.

"JSW Steel reported profit of Rs 7.2 billion, ahead of our expectation of Rs 5.9 billion, primarily on account of a one-time gain on translation of foreign currency loans (Rs 960 m) and lower-than-expected tax rate and interest cost. Net revenue grew by 12.6% QoQ to Rs 51.7 billion (expectation of Rs 51.9 billion) on the back of 5.6% rise in realisation (Rs 33,994 v/s Rs 32,194 per tonne) and 6.7% volume growth. Higher rise in realisations, relative to increase in the iron ore cost, increased the EBITDA by 18% QoQ to Rs 12.9 billion (EBITDA per tonne of Rs 8,506 v/s Rs 7,668 QoQ), almost in-line with our expectation of Rs 13.4 billion. Pre-exceptional profit (adjusted for gain on translation) grew by 46% QoQ to Rs 6.4 billion. The performance was above our expectation on the back of lower-than-expected interest cost (Rs 1.94 billion against ours at Rs 2.27 billion) and lower-than-expected tax rate (24% against ours at 30%). Tax rate reduced on account of reduction in surcharge.

"At CMP, stock trades at P/E of 12.1x and 8.1x FY11E and FY12E, while on EV/EBITDA, it trades at 8.x and 5.5x FY11E and FY12E, respectively. We maintain our 'Accumulate' rating on the stock on the back of improved earnings quality associated with higher raw material integration and hassle-free superior volume growth, attractive returns on capital and better shaped balance sheet."

India Infoline  on Titan Industries - Target Rs 2270

 

India Infoline is bullish on Titan Industries and has recommended buy rating on the stock with target of Rs 2270, in its research report.

"Titan Industries has rallied smartly from a low of Rs 1,861 in April 2010 to the present levels. Despite the ongoing volatility in the market, the stock has managed to hold on to the support of its short-term trendline. On the daily charts, it has formed a pattern of a higher bottom. It is considered as the initial sign of a bottoming out process in the short term. The daily RSI is already in strong buy mode, indicating that the prices are set to rally from the current levels."

"A sustained move past the Rs 2,195 levels will see the stock heading towards the levels of Rs 2,250-2,270 in the medium term. We recommend high risk traders to buy the stock between Rs 2,180-2,195 levels for an initial target of Rs 2,270 with a stop loss of Rs 2,165," says India Infoline research report.

 

 

Angel Securities  on Cadila Healthcare - Target Rs 634

 

Angel Securities is bullish on Cadila Healthcare and has recommended buy rating on the stock with a target of Rs 634, in its research report.

"Cadila Healthcare (Cadila), one of the most diversified Pharma companies in our coverage universe, continued its strong performance and reported good set of numbers for 4QFY2010 driven by the Export Formulation Segment, viz. the US and Europe. On the Domestic Formulation front, the company hired 600 sales force during FY2010 to increase the penetration-led growth in the market and is now targeting 15% growth. For FY2011E, the company has guided for USD 1 billion on the Top-line front, implying a growth of 27-28% with OPM improvement of 100bp from current levels of 19.5%. We recommend a Buy on the stock," says Angel Securities research report.

Stock views on Crompton Greaves, Jindal Steel, Indoco Remedies

Karvy Stock Broking on Indoco Remedies - Target Rs 480

 

Karvy Stock Broking is bullish on Indoco Remedies and has recommended buy rating on the stock with a target of Rs 480, in its research report.

 

"We upgrade our FY11 revenue estimates by 4.9% to Rs 4,743 million on account of better revenue traction in the high margin DF space and uptake in the EF space. We have incorporated FY12 numbers and roll over our target price based on FY12 EPS. Improvement in revenue traction, EBITDA margins and strong earnings growth of 30% plus in FY11E and FY12E coupled with improving return ratios make the stock an attractive investment opportunity. We upgrade our rating on the stock from market performer to BUY with a price target of Rs 480 based on 8x FY12E."

 

India Infoline on Jindal Steel - Target Rs 720

 

India Infoline is bullish on Jindal Steel & Power and has recommended buy rating on the stock with a target of Rs 720, in its research report.

"On the daily chart, Jindal Steel & Power has been moving in a range of Rs 725-690 from the first week of March 2010. On number of occasions, the stock has bounced back from the lower band of this trading range. In fact, daily candlestick chart suggests formation of multiple bottoms around the levels of Rs 690-695. On Tuesday, the stock attempted to breakout past the top of this trading range. We expect the stock to continue its recent uptrend and attempt the levels of Rs 750-755. The daily momentum indicators like RSI and MACD are exhibiting positive divergences. We recommend traders to buy the stock at current levels and on declines up to the levels of Rs 720 with a stop loss of Rs 708 for an initial target of Rs 755,"says India Infoline research report.

 

India Infoline on Crompton Greaves - Target Rs 300

 

India Infoline is bullish on Crompton Greaves and has recommended buy rating on the stock with a target of Rs 268, in its research report.

"Crompton Greaves has rallied smartly from the recent low of Rs224 in to the present levels. On the daily charts, it has formed a pattern of a higher bottom. It is considered as the initial sign of a bottoming out process in the short term. The daily RSI is already in strong buy mode, indicating that the prices are set to rally from the current levels. Any move past the levels of Rs 280, could see the stock attempting the levels of Rs 300 in the short-term. We recommend a buy at current levels with a stop loss of Rs 268," says India Infoline research report.

Stock views on PTC India, Tata Steel, IVRCL Infrastructure and Projects

HDFC Securities on IVRCL Infra - Target Rs 372

 

HDFC Securities is bullish on IVRCL Infrastructure and Projects and has recommended buy rating on the stock with a target of Rs 372, in its research report.

"IVRCL Infrastructure and Projects, engaged in execution of EPC and turnkey projects across various infrastructure segments, reported a strong order inflow of over Rs100 bn YTD. The current order book stands at Rs 220 billion (4.3x last 12 months revenue) and offers decent revenue visibility going ahead. However, IVRCL's performance was subdued in 3QFY10 due to the delay in payment from the Government of AP leading to slower execution. But we feel this will no longer be the case as the company has reduced its exposure to AP and the uptick in cement consumption in AP shows a pick up in construction activities. We are retaining our BUY call on the stock with a target price of Rs 372," says HDFC Securities research report.

KRChoksey on Tata Steel - Target Rs 718

 

KRChoksey is bullish on Tata Steel and has recommended buy rating on the stock with a target of Rs 718, in its research report.

"Steel prices have gone up globally during January and therefore we expect EBITDA per tonne in European operations to improve further during Q4FY10 with raw material cost remaining on the lower side. Tata Steel has guided for fall in production in Q4 vs Q3 on account of mothballing of TCP and planned maintenance shutdown on BF No. 7 Ijmuiden, however deliveries are expected to improve as company is focusing on inventory reduction. Corus will be partially mothballing TCP plant by the end of February 2010, which will help minimize cost even further as TCP contributed significantly to losses during first nine months. We believe that restructuring initiatives undertaken by the company in Corus combined with expected improvement in realizations led by cost push will help Corus post healthy EBITDA during FY11E."

"As iron ore and coking coal contracts for 2010 are expected at almost 30-40% higher levels than last year, global steel prices are expected to move up led by cost push. Indian operations with complete backward integration in iron ore and 55-60% in coking coal will see further margin expansion during FY11E as cost increase will remain on the lower side. We value the company at FY11E EV/EBITDA multiple of 7x, deriving our one year target price of Rs 718 (Rs 632 earlier) and recommend BUY rating on the stock," says KRChoksey research report.

Networth Stock Broking on PTC India - Target Rs 146

 

Networth Stock Broking has come out with a research report on PTC India. The firm has recommended buy on the stock with a target price of Rs 146.

The report says, "PTC India is in the process of transforming from just power trader to an integrated player in the power space. The company has expanded its horizon by making its presence into the entire value chain of the power like financing, fuel-intermediation, power tolling, power generation and exchange. We believe this would help PTC to de-risk its business model and improve visibility & certainty to earnings."

"PTC has more than 50% market share in power trading in India. As per LTT (Long-term Trading) PPAs and PSAs signed by the company, we expect volumes to grow at a CAGR of 30% over next 3 years (FY09-FY12E). We believe that PTC's long term goal to change revenue mix of LTT:STT to 70:30 from 47:53 will bring more visibility and sustainability to the revenues," according to Networth report.

 

The report also says, "PTC has pioneered in power trading industry with its first mover advantage and continuous innovative initiatives. We believe that the diversification in entire value chain of power would de-risk its business model and substantially support its core business. We recommend buy on the stock with a TP of Rs 146."

Stock views on ABB, Bharat Petroleum Corporation, CESC

Angel Securities on CESC - Target Rs 460

 

Angel Securities is bullish on CESC and has recommended buy rating on the stock with a target of Rs 460, in its research report.

"CESC recorded a 2.1% yoy growth in net sales to Rs770cr in 4QFY2010, aided by a 1.7% yoy increase in the sales volume. The growth in the Top-line is expected to be aided by a higher tariff of Rs4.57/unit charged by the company in 4QFY2010 (Rs3.91/unit in 4QFY2009) in the regulated area. During FY2010, the Top-line grew by 8% to Rs 3,351 crore. The company's OPM improved by 409bp yoy to 26% during the quarter, aided by a substantial reduction in other expenses. The net profit rose by 6.4% yoy to Rs 100 crore during the quarter. The stock trades at a P/E of 7.4x and at a P/BV of 1.0x, according to its FY2012E estimates. We maintain our Buy recommendation," says Angel Securities research report.

India Infoline on BPCL - Target Rs 543

 

India Infoline is bullish on Bharat Petroleum Corporation, BPCL has recommended buy rating on the stock with target of Rs 543, in its research report.

"BPCL is pointing to continued strength in the weeks to come as it has broken a downward-sloping trend line. A detailed study of the daily chart shows that the stock has corrected from the high of Rs595 in February 2010 to touch a low of Rs 488 this week. On Friday, the stock staged a smart breakout past the downward sloping trendline. This bullish breakout signals the end of the intermediate downtrend, which is further verified with the buy signal in the RSI."

"In the chart, it is observed that the stock price is trending sideways or lower at the start of the week, shaping lower troughs while the RSI oscillator is forming higher troughs, resulting in positive divergence on Friday. A sustained rally past the levels of Rs 520 could see the stock attempting target of Rs 543. It is advised to maintain a stop loss of Rs 505," says India Infoline research report.

India Infoline on ABB - Target Rs 855

 

India Infoline is bullish on ABB and has recommended buy rating on the stock with a target of Rs 855, in its research report.

Since last few months, ABB has made 100-day DMA to be its most important support level. In March 2009 it made a base around this moving average and then staged an impressive rally of 12% in two weeks (from a base of Rs775 to a high of Rs875). In yesterday's session, the stock stabilized again around its 100-day DMA against the weaker trend in the broader indices, emphasizing our belief that it remains a critical support level. Keeping in mind, the above mentioned evidences, we recommend high risk traders to buy the stock with a stop loss of Rs 800 for a target of Rs 855 and Rs 860,"says India Infoline research report

Indian Overseas Bank (IOB)

 

 

High NPA and slow business growth have crippled the performance of IOB. Investors should sell the stock

 

The fiscal 2010 was a tough time for Indian Overseas Bank (IOB). And the latest results for the March 2010 quarter too did not provide any respite for the bank. This was the third straight quarter, in which the bank's profit fell on an year-on-year basis.

   For the investors of IOB, this is a bad news as the bank was known for being a stable player earlier. In the first nine fiscal years of the current decade, the bank's loan-book grew by an average rate of 23% per year. Similarly, net non-performing assets (NPA) formed an average 0.9% of net advances from FY05-09. Its average net interest margin (NIM) stood at 3.8% in the first nine years of this decade. NIM is a measure of spread between lending rate and deposit rate. In a nutshell, IOB was one of the banks that had maintained a steady rate of growth while maintaining a good check on the quality of its operations. However, the bank was unable to continue the good run in FY10.

   The bank's NPA kept on rising throughout the year. At the beginning of FY10, its NPA stood at 1.3%, which rose to touch 2.5% at the end of the year. In contrast, most of the other banks improved their asset quality during the year, thanks to improved economic condition. Moreover, at current levels, its NPAs are one of the highest in the banking industry.

   When a bank's NPA rise, its business growth takes a back seat. This is because in such a situation bank has to first take stock of its worsening asset quality. The same thing has happened to IOB as well. The advances growth has fallen from 24% in FY09 to 6.6% in FY10.

   At a time, when its NPA are much higher than its peers, its provision coverage is much lesser. The Reserve Bank of India (RBI) had advised banks to maintain a minimum provision coverage ratio of 70%. At present, its coverage ratio at 54% is well short of the minimum advised by RBI. This shows that the bank will have to provide more in the coming quarters. This will affect its profit growth adversely going forward.

   Besides, the bank's operating expenses kept on increasing even though its business growth was lower. Its expenses grew by 31% in FY10, which has led to a substantial jump in its cost income from 43.5% in previous year to 57.2% in FY10.

   The only parameter on which the bank's performance is satisfactory is the share of low-cost current account and savings account (CASA) deposits. The share of such deposits improved from 30.3% in FY09 to 32.6% in FY10. In lines with industry, the bank managed to improve its CASA share. Moreover, its CASA share is as per industry's standards. It's NIM stood at 2.7%, which is a little lower than its own records. However, given the industry benchmark of 3%, its
NIM seems to be satisfactory.

VALUATION:

The bank's stock is trading at close to 7 times its earnings. More importantly, it is trading much below its book value. Its stock price is Rs 92 per share, while the book value stands at Rs 112 per share. So it is one of the few banking stocks, which are trading at a discount to their book value. But it doesn't mean that investors should take exposure to it for the simple reason that its NPAs are high. It will take six months to a year for the bank to repair its asset quality. Till then, its profitability will be affected due to slow business growth and high provisions. It makes sense for investors to sell this stock at the moment because no upward movement is expected in a year's time.

 

Stock views on Dena Bank, Axis Bank, Sesa Goa

Emkay Global Financial Services  on Sesa Goa - Target Rs 550

Emkay Global Financial Services has maintained its buy rating on Sesa Goa, with price target of Rs 550, in its report. The stock closed at Rs 441.65.

"At the CMP of Rs 456, Sesa Goa is trading at 8.1x FY11E EPS of Rs 56.5 and at 7.5x FY12E EPS of Rs 60.6. On EV/EBITDA basis, the stock is trading at 4.6x FY11E EV/EBITDA and at 3.6x FY12E EV/EBITDA; while on P/B basis, the stock is trading at 3.3x FY11E book value and at 2.1x FY12E book balue. We maintain BUY on the stock with target price of Rs 550 (5x FY12E EV/EBITDA)," says Emkay Global Financial Services report.

 

 

Angel Securities on Axis Bank - Target Rs 1459

 

Angel Securities is bullish on Axis Bank and has recommended buy rating on the stock with a target of Rs 1459, in its research report.

"Axis Bank reported a strong Net Profit growth of 31.5% yoy, which was ahead of our expectations, on the back of lower-than-estimated provisions for NPAs. The core business growth recorded a strong improvement, with advances and deposits growth of 27.9% and 20.4%, respectively. The other key positive from the result was a sequential CASA improvement, reasonable non-interest income growth and continued retail network expansion. We maintain a Buy on the stock."

IndiaInfoline on Dena Bank - Target Rs 90

 

IndiaInfoline is bullish on Dena Bank and has recommended buy rating on the stock with a target of Rs 90, in its research report.

"Dena Bank is pointing to continued strength in the weeks to come as it has broken a downward-sloping trend line since early-April 2010, A detailed study of the daily chart shows that the stock has corrected from the high of Rs 85 in June 2009 to touch a low of Rs 76.90 this week. On Tuesday, the stock staged a smart breakout past the downward sloping trendline. This bullish breakout signals the end of the intermediate downtrend. The position of the short-term oscillators also indicates that the stock has formed an intermediate bottom. A sustained rally past the levels of Rs 82 could see the stock attempting a new peak for April 2010. We recommend buying the stock at current levels and on any declines to Rs 79 levels for short term target of Rs 90. Traders should maintain a stop loss of Rs 76 on all long positions," says IndiaInfoline report.