Stock Views on RANBAXY, ADANI POWER

CITIGROUP on ADANI POWER

Citigroup maintain Buy rating on Adani Power. Adani Power's (1) pre PPA merchant sales could be to a lesser quantum (3-6 months); (2) capacity ramp-up could be slower than earlier; and (3) coal prices would be higher than expected. However, the company is building a solid business model that can deliver 20-25% RoE over next five years. To factor in: (1) delay of two months across all future power plants; (2) imposition of MAT, which is NPV negative but EPS neutral; (2) Mahanadi Coalfields coal price hike by 90-100/tonne; and (4) higher auxiliary consumption in initial years. This is factor in sudden changes in outlooks for companies. For Adani Power Citigroup have a balanced weightage of 50:50% between DCF: P/BV leading us to take the average of Rs110 (from DCF) and Rs140 (from P/BV) to arrive at a target price of Rs125. Citigroup estimates suggest if ADE sticks to its Bunyu production schedule, Adani Power can weather Coal India shortages in FY12E using Bunyu coal. From FY13-14E company will need 12.3-16.3mn tons to run Mundra/ Tiroda I&II. Similarly, the company will need 6.3- 10.6million tonnes in FY14E-15E for Tiroda III and Kawai.

HSBC on RANBAXY

HSBC retain their Overweight rating on Ranbaxy and haven't changed their estimates post last quarter results. Mylan, a competing generic filer in Lipitor, has filed a court action against the US' Food and Drug Administration (FDA) regarding its inability to take a decision on Ranbaxy's ANDA filing which blocks other generics. The complaint requests the court to a) declare the FDA's failure to make a public decision or other determination concerning whether Ranbaxy's generic contains unreliable data or information and thereby clear regulatory status on the ANDA filing; b) enjoin the FDA from approving any ANDA if it contains unreliable data; and c) extinguish any exclusivity grant and approve Mylan's filing should the ANDA be unreliable. Ranbaxy has set the generic Lipitor launch with Pfizer for November this year. The FDA's course of action concerning approval of Ranbaxy's generic atorvastatin is unlikely to be affected by such litigation. The outcome on Ranbaxy's ANDA will be clearer in the latter half of this year. HSBC value the generic Lipitor opportunity at INR60 per share.