Stock views on OBEROI REALTY, IDEA, VOLTAS

NOMURA on VOLTAS

Nomura reaffirms the `Buy' rating on Voltas, which will benefit significantly from a pick-up in capex cycle due to the nature of its businesses and its strong competitive position. As per the latest management business outlook, the current year is going to be a mixed bag, with the projects businesses (EMP) coming under pressure but the engineering and unitary cooling products businesses doing quite well. Management expects the pick-up in project business to be gradual. Organised manufacturing, a prime driver of corporate capex, registered flat to negative capex growth in FY09 and FY10. However, rising capacity utilisation in several industries is likely to result in a pick-up in capex activity. Nomura revises the price target to 271.9, from 285, following a change in FY12E EPS to 13.91, from 14.94. The revision is due to a delay in the capex cycle and a resultant cut in forecast revenue growth for the engineering products and services businesses.

BANK OF AMERICA on IDEA

Bank of America's fundamental `Underperform' rating on Idea stays unchanged despite M&A speculation. A potential sale of a controlling stake in Idea could fetch up to 35% valuation premium from current levels, on EV/EBITDA, using the Hutch-Vodafone deal as a benchmark. This implies a potential deal price of up to 115/share for Idea. However, Bank of America thinks returns for minority shareholders will likely be unexciting after factoring non-compete fee at 25% of deal price and assuming that those shares that may not get accepted in a potential open offer, trade at the price target of 65/share. Bank of America believes Idea is likely to have many potential suitors for three key reasons: 1) strong brand presence reflected in its pan-India wireless revenue market share of about 12% versus subscriber market share of about 11%; 2) access to 900 MHz frequency; nearly 50% of Idea's spectrum is in the 900 MHz band; 3) comfort with accounting and organisational practices.

JP MORGAN on OBEROI REALTY

JP Morgan initiates coverage of Oberoi Realty with `Overweight' rating and March '12 price target of 320. Oberoi Realty is well positioned as a pure play in Mumbai's high-end residential and commercial real estate. The company's portfolio of about 20 msf comprises mainly city centric developments that are largely monetisable over the next five-six years. This, in turn, gives us high confidence on its valuation estimates. Oberoi Realty is one of the few developers that was able to navigate the previous cycle well by buying bulk of its land when it was cheap (pre-2005) and raising cash (2007) well before the crisis, thereby remaining net cash all through the downturn. With its recent IPO, the company now has healthy cash on book ( 15 billion). This along with a growing rental portfolio (5.9 msf by FY14) and healthy operating cash flows ( 13 billion over FY 11/12) gives it strategic flexibility to pursue growth over and beyond the current portfolio.