Stock Views on Godawari Power & Ispat, Divis Lab, Lupin

Karvy on Godawari Power & Ispat _ Ttarget Rs 128

"The stock is trading at 0.6x its FY09 & 0.55x its FY10 BV. We revise FY10 earning estimates by 6% on account of change in MAT rate. However, we retain our valuation of 0.8x FY10 BV and target price of Rs 128/share. However, due to recent correction in stock price, we revise our rating from out performer to 'BUY'," says Karvy Stock Broking's report.

Emkay Global on Lupin - Target Rs 980

"Since this is a sub-judice matter, it is difficult to take a call which way the judgment goes? However, by the spirit of the matter taken up by the EU authorities and chronology of events leading to out of court settlement raises an iota of doubt about the intention of settlement between innovator (Servier) and Lupin. At the moment, we can not estimate the exact loss; therefore impact on financials can not be assessed. In worst case scenario, this event will lead to one time charges, which could be as high as Rs 3.7 billion (10% of FY09 revenue). Hence, we continue to maintain our Buy rating with a target of Rs 980," says Emkay Global Financial Services' research report.

Sushil Finance on Divis Lab - Target Rs 1490

"In spite of the economic slowdown, DLL has managed to maintain its above average industry margins in FY09. DLL does expect some pressure on its Custom Chemical Synthesis Business (CSS) business but is banking on API sales of Levirecetam, lopamidol & nabumetone which will offset the slowdown in other businesses. Seeing the growth prospects & above industry average margins the stock deserves to trade at higher multiple. At the CMP of Rs.1160, the stock trades at 13.3x its FY11E earnings. It has recommended buy rating on the stocks, target of Rs 1490," says Sushil Finance's research report.

Stock views on Divis Labs, South Indian Bank, Tata Tea

Hem Securities on Divis Labs - Target Rs 1370

Hem Securities has initiated a buy rating on Divi's Laboratories with a target price of Rs 1370 in its research report.


"Being a pioneer in the API and CRAMS segment, Divi’s Laboratories has posted tremendous growth over the past few years. With the leadership in dextromethorphan, phenyleffrine, nabumetone and lopamidol, the com-pany is expected to witness surge in its business. Further, with almost completion of massive capex, the company is expected to continue to post excellent financial performance on the back of its successful entry into the high margin nutraceuticals segment. In wake of the growth of the phar-maceutical sector, Divi’s Laboratories Ltd seems to be extremely attrac-tive investment opportunity."


"Presently, the stock is trading at Rs 1088.60 which is at 16.92 times to its earnings and 5.68 times to its book value of Rs 191.72. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with a target price of Rs 1370 in medium to long term investment horizon ex-pecting an appreciation of about 26% from the current level of Rs 1088.60", says Hem Securities' report

FinQuest Securities on South Indian Bank - Target Rs 120

FinQuest Securities has recommended a buy rating on South Indian Bank, with price target of Rs 120, in its report.

"South Indian Bank is trading at an attractive valuation of 0.7x FY10E ABV. Peer banks like KTK Bank, KVB etc continue to trade at 1x FY10 ABV, although operational parameters are comparable with SIB. We therefore believe that SIB’s valuations will catch up with peer banks. Our target price of Rs 120 for the stock (based on DDM model) discounts 1x FY10E ABV. We recommend Buy on the stock," says FinQuest Securities' report.

KRChoksey on Tata Tea - Target Rs 859

KRChoksey has maintained its buy rating on Tata Tea, with price target of Rs 859, in its report.

"More than 70% revenues and 80% of EBIT come from tea business, which is likely to face margin pressure in FY10 as tea prices are likely to remain firm on account of decline in production by 5%. However, with company planning to leverage its tea & coffee brands in other beverage products would help it to diversify and become a complete beverage company. The company plans to focus on six key geographies - Great Britain and Africa, Europe and Middle East, the U.S., Canada and South America, South Asia and Asia Pacific, innovation and distribution going ahead to integrate the business, take advantage of economies of scale. Its recent launch T!ON - an active drink made from fruit juice, tea extracts and ginseng in Chennai has been performing well. At CMP of Rs 728, we maintain our ‘BUY’ recommendation on Tata Tea with a target price of Rs 859, which gives it an upside potential of 18%. At the CMP, the stock is trading at 5.1x FY10E earnings of Rs 143.8," says KRChoksey's report.

Karvy Stock Views on Defensive Healthcare / Pharma - Part I - Dishman Pharma, Divis Labs, Wockhardt

Dishman Pharma - Target of Rs 310

Karvy Stock Broking has upgraded its rating on Dishman Pharmaceuticals & Chemicals to buy with a target of Rs 310 in its October 16, 2008 research report. "We expect revenues and earnings to grow at a CAGR of 31.4% and 27% from FY08 to FY10E driven primarily from the high margin CRAMS segment. We maintain our long term positive outlook on the company. Currently the stock is quoting at 12.5x FY 09E and 9.7x FY 10E. On account of contraction in valuations we revise our price target downwards by 18 % to Rs 310 based on P/E of 13.1.x FY10E. On account of price correction we upgrade our rating to BUY with a price target of Rs 310," says Karvy Stock Broking's research report.

Divis Labs - Target of Rs 1415

Karvy Stock Broking has upgraded its rating on Divis Laboratories to buy with a price target of Rs 1415 in its October 16, 2008 research report. "The net revenues of the company set to exhibit 25.7% CAGR growth from FY08 to FY10E on account of continued revenue traction. The earnings are expected to grow at a CAGR of 28.1% from FY08 to FY10E which is estimated at Rs 68.3 in FY09E and Rs 88.4 in FY10E. On account of recent price correction due to fall in markets the company is available at attractive valuations. We upgrade our rating to BUY with a price target of Rs 1415 based on a PE of 16x FY10E basis," says Karvy Stock Broking's research report.

Wockhardt - Target of Rs 200

Karvy Stock Broking has recommended a buy rating on Wockhardt with a target of Rs 200 in its October 15, 2008 research report. "Net revenues are expected to grow by 27% to Rs 9.4 billion. Profits for the quarter are expected to be down by 20 % at Rs 870 million. At fully diluted equity at current price the stock is quoting at 7.7x CY08E and 5.4x CY09E. On a multiple of 7x CY09 the stock would be valued at Rs 200. We rate the stock as a BUY," says Karvy Stock Broking's research report.

Religare Views on Axis Bank, Divis Labs, Deepak Fertilizers, PSL, Gujarat Industries Power

Buy Gujarat Industries Power Co, Target Rs 123

Religare Research has maintained its buy rating on Gujarat Industries Power Company with a target price of Rs 123 in its August 6, 2008 research report. "The company's revenue at Rs 2,624.5 million was above our estimate by 31.4% due to higher fuel prices for its gas based power plants at Baroda. The higher fuel cost being a pass-through increased the revenue by 22% YoY. The EBITDA of the company at Rs 554.5 million was down 21.4% YoY mainly due to the additional O&M expenditure incurred during the planned annual shutdown of its 250MW lignite based plant at Surat. The net profit of the company was also below our expectation by 8% at Rs 224.9 million, showing a negative growth of 40.5% YoY due to additional O&M expenditure and lower other income."

"We are revising our estimates to incorporate the higher fuel cost which is a pass-through and the delay in commissioning for its SLPP II project. The stock is currently trading at 1x its FY09 and FY10 book value, a considerable discount to its peers. We have revised our DCF assumptions for the risk-free rates to 9.3% from the earlier 8.4% to reflect the current interest rate scenario. Based on the weighted average of the DCF and P/BV methods, we arrive at the target price of 112 down from our earlier target price 123 maintaining our Buy recommendation," says Religare's research report.


Buy PSL, Target of Rs 500

Religare Research has maintained its buy rating on PSL with a target price of Rs 500 in its July 16, 2008 research report."Net sales increased by 59% YoY to Rs 6.5 billion on the back of strong volume growth (+32.8%) and Rs 600 million of additional revenue contribution from the sale of pipe manufacturing mill to the US subsidiary. EBITDA increased by 46.2% YoY and 24% QoQ to Rs 594 million. EBITDA margins expanded by 180bps QoQ to 9.1%. Adjusted PAT increased by 52% YoY and 41.1% QoQ to Rs 260 million. Adj. PAT margins expanded by 120 bps QoQ to 4%."

"At the CMP of 310, the stock trades at 9.0x FY09E diluted earnings. We maintain our Buy recommendation on the stock target of Rs 500," says Religare's research report.

Buy Deepak Fertilizers, target of Rs 183

Religare has maintained its buy rating on Deepak Fertilizers and Petrochemicals Corp with a price target of Rs 183 in its June 10, 2008 research report. "The company is expanding its diluted nitric acid capacity to 1,350MT/day from 900MT/day by June 2009 with a total investment of Rs 1.1 billion. This is expected to elevate its market share from 48% to 58%, while boosting the production of nitro phosphates and ammonium nitrate. The company has started to procure."

"0.2–0.3mmscmd of LNG from GAIL through its Dahej-Uran pipeline, which is expected to increase plant capacity utilisation. It also expects gas supply from the Reliance KG-basin to commence shortly. This apart, Ishanya will lend an added dimension to profitability. We maintain our Buy recommendation on the stock with a price target of Rs 183," says Religare's research report.

Buy Divis Labs, target of Rs 1833

Religare has maintained its buy rating on Divis Laboratories with a target price of Rs 1833 in its June 10, 2008 research report. "Divi's remains our preferred pick in the Indian CRAMS space, given its healthy relationship with top innovators amid a growing outsourcing trend. Through its focus on high-margin CCS, the company's EBITDA margin will remain amongst the highest in the CRAMS segment. Further, as Divi's emerges from its heavy capex phase, we expect return ratios to improve significantly. We estimate a PAT CAGR of 28% to Rs 6bn over FY08-FY10, and maintain Buy with a target price of Rs 1,833," says Religare's research report.

Buy Axis Bank, target of Rs 805

Religare Research has maintained its buy rating on Axis Bank with a revised target price of Rs 805 in its July 16, 2008 research report. "Axis Bank's Q1FY09 results have surpassed our estimates primarily on the strength of higher loan growth and robust non-interest income. NII expanded 93% YoY to Rs 8.1 billion, driven by increased asset growth as advances and deposits swelled 48% and 46% respectively. In another key positive, fee income surged 80% YoY during the quarter to Rs 4.8 billion, aiding net profit growth of 89% to Rs 3.3 billion.""The management expects to maintain the robust business growth momentum in the coming months. However, the weakening asset quality remains a concern. We have revisited our estimates for fee-based income to incorporate the strong growth during the quarter, while raising our estimate for provisioning expenses in FY09 and FY10 on account of higher non-performing assets and depreciation on investments. On a net basis, these changes have no impact on our profit targets. In light of the increased market risk, we have raised our DDM valuation assumptions for risk free rate to 9.1% and beta factor to 1.2. This gives us a revised target price of Rs 805 from Rs 984. We maintain a Buy on the stock," says Religare's research report.