Stock views on GODREJ PROPERTIES, NATIONAL ALUMINIUM, RANBAXY

CITIGROUP on RANBAXY

Ranbaxy reported sales, EBIDTA and PAT of $463 million, $53 million and $26 million in Q4 - lower than the expected on slow ramp-up in generic Aricept sales. Base biz was largely in line, with estimated sales and EBIDTA margin of about $438 million and about 8% respectively. Adjusted PBT was flat Q-o-Q, while adjusted PAT dipped about 35% on higher tax rate. Generic Aricept sales appear to be scaling up slower than the forecast, leading to a weaker than expected Q4. The margin trend is healthy, albeit slower than expected, and Citigroup sees steady improvement going forward. CY11 topline guidance is in line with the estimates. Citigroup estimates CY10 core margins at about 10%. It also monetised 3 FTFs: Valtrex, Aricept (launch) and Flomax (settlement). Citigroup has a target price of 700 for Ranbaxy, comprising 545 for the base generics business and 155 for the company's patent challenge pipeline. Citigroup values the core generics business at 2.4x March 12E recurring sales, which is at a 10% discount to the median of the band in which it has traded over the past eight-nine years. This discount is warranted given the uncertainty in its business following issues with the US FDA.

STANDARD CHARTERED on NATIONAL ALUMINIUM

Standard Chartered initiates coverage on National Aluminium Co (Nalco) with an `Underperform' rating and a price target of 266. Low visibility of Nalco's brownfield and greenfield expansion projects is a major concern. Although alumina capacity is slated to increase to 2.1 million tpa by FY12 and aluminium capacity has risen from 345,000 tonnes in FY08 to 460,000 tonnes in FY10, StanChart does not expect any significant addition to smelting capacity in the coming years. In the recent past, coal supply disruptions have impacted its sourcing mix. As a result, coal and fuel cost per unit of generated electricity has increased from 1.3/unit in FY08 to 1.78/unit in FY10. On the higher side, Nalco currently trades at 16.9x FY12E earnings and 10.4x FY12E EV/EBITDA. In comparison to both domestic and global peers, this looks too expensive. StanChart values the firm at EV/EBITDA of 6.0 to arrive at the price target of 266. At the price target, Nalco will trade at a P/B of 1.34x, which appears reasonable given RoE of 12.9% for FY12

IIFL on GODREJ PROPERTIES

IIFL recommends `Buy' rating on Godrej Properties Ltd. (GPL) with a target price of 675. GPL continues to focus on the mid-income segment for residential projects and highlighted that demand in this segment remains strong, despite rising interest rates. It has sold out Phase II of the Gurgaon project launched last month in January. Sales at the Ahmedabad project have also been brisk, with the company selling 1 million sq ft at Ahmedabad Phase III project within a month of launch. The company has sold 0.8 million sq ft across its ongoing projects in Q4 YTD, bringing total sales in YTD FY11 to 2.4 million sq ft. Note that GPL sold 1.6 million sq ft in FY10. The company indicated that it has not faced any major concerns in obtaining approvals for its Vikhroli project. The company said it is in discussions with a few Mumbai-based developers who are facing problems in meeting their FY11 debt repayments. The company expects to generate 400-450 crore cashflows in FY12 from sale of 1.1 million sq ft at Godrej Waterside. This would more than compensate for the 300 crore construction costs incurred for development of 0.75 million sq ft at Vikhroli. However, the company expects potential acquisitions to result in higher debt levels, going forward.