Stock Views on SUN PHARMA, PETRONET LNG

DEUTSCHE BANK on PETRONET LNG

Deutsche Bank is reiterating the `Buy' rating on Petronet LNG, with a price target of 150. PLNG's greenfield 5 mmtpa LNG terminal at Kochi and its capacity expansion at Dahej are on track for completion within the next 30 months. This should increase its capacity from 10 mmtpa currently to 15 mmtpa in FY13 and 18 mmtpa by FY14. PLNG is evaluating further capacity expansion. Deutsche Bank estimates PLNG's EBITDA to rise at a CAGR of 28% over FY10-14, driving its RoE from 19% in FY10 to 28% in FY14. GAIL's evacuation pipeline connecting the Kochi terminal is expected to be commissioned in time for the start-up of Phase I of the terminal. The contract for a new jetty at Dahej has also been awarded and is expected to be completed by June 2013. PLNG is evaluating setting up a greenfield LNG terminal on the east coast of India as well as further expanding its existing Dahej terminal.

CITIGROUP  on SUN PHARMA

Citigroup maintains the `Hold' rating on Sun Pharma. Sun and MRK has formed a JV to tap the emerging markets with new combination drugs and formulations of incrementally innovative, branded generics. This is separate from Sun's current branded generics biz in these markets and upside appears a few years out. While Citigroup does not see any material impact on valuations in the near term, this is positive for the margin as it adds a revenue stream over the long term. The JV seeks to leverage MRK's front end in emerging markets, its strong regulatory expertise and clinical excellence as an innovator while Sun will bring in manufacturing and product development capabilities. However, in the absence of additional information, Citigroup is unable to quantify the incremental revenues and profitability for Sun. The target price Rs 480 is based on a sum-of-the-parts approach, valuing the base business using a P/E and ascribing an option value for its patent challenge pipeline. However, Sun deserves a premium, given its consistent track record, high profitability and return rations, as well as the potential upside from the deployment of idle cash in the business.