Stock Views on CIPLA, Gujarat State Petronet, Praj Industries, Jaiprakash Associates,

BRICS Securities on CIPLA

BRICS Securities has initiated coverage on Cipla with a ‘buy’ rating. The brokerage expects Cipla to maintain its leadership position in the Indian formulation market in coming quarters. “Thirdquarter results came in as a positive surprise. Revenue (up 22% Y-o-Y) was in line and recurring net profits (up 28% Y-o-Y) were above our expectations, led by falling raw material prices. This, coupled with growing presence in export markets, should enable the company to report a 16% earnings growth in the next fiscal,” a Brics Securities report said. Amidst concerns like reclusive management and volatile past earnings, Cipla’s continues to perform well. The company is the top-most player in this segment, and has a strong portfolio in the chronic therapy segment. Given its strong domestic share and continued strength in overseas generics business, we recommend a buy on the stock, the report added.

BNP Paribas on GUJARAT STATE PETRO

BNP Paribas has assigned a ‘buy’ rating on Gujarat State Petronet on expectations of an upside in gas transmission volumes and higher return on capital employed (RoCE) as a result of new new tariff regulations. “We believe that GSPL is a long-term play on rising natural gas supplies, with the next fiscal (FY11) being the inflexion year. We expect Gujarat State Petronet’s gas volumes to increase 26.8% between FY08 and FY11 driven by its contracts with RIL and Torrent Power,” a BNP Paribas report said. Petroleum and Natural Gas Regulatory Board’s (PNGRB) new tariff regulations prescribe a pre-tax RoCE of 18.2% for gas transmission utilities. Factoring in the impact of these regulations into our estimates, we expect adjusted pre-tax RoCE to improve to 21.6% in the next fiscal, the report added.

Indiabulls Securities on JAIPRAKASH ASSO

Indiabulls Securities has downgraded Jaiprakash Associates with a ‘sell’ rating, citing weak business environment and highly-leveraged business module. Around 80% of the company’s sales come from businesses that have been adversely impacted by the credit crunch. “The cement, construction, real estate, and hotels segments are facing strong headwinds, as demand has slowed down tremendously and credit availability remains weak. We believe the situation is not likely to improve in the near-to-medium term,” a report said. Considering the current balance sheet position of the company and the funding arrangement related to ongoing expansion plans, the brokerage expects the debtto-equity ratio to increase in coming quarters. Meanwhile, the possibility of further negative news flow cannot be ruled out in coming quarters, especially with regard to real estate, cement, and construction sectors, the report added.

Finquest Securities on PRAJ INDUSTRIES

Finquest Securities believes that Praj Industries could immensely benefit from the mandate adopted by EU Parliament of 10% bio-fuels blending in all transport fuels by 2020. Such a move by the European Union will entail additional 12-14 billion litres capacity for ethanol, a Finquest report said. The brokerage has rated Praj Industries an ‘outperformer’. “The US has preponed its renewable fuel targets of 11 billion gallons from 2012 to 2009. This move is expected to support capacity build-ups. We expect net revenue to grow by 10% in FY10 as a result of the demand from European Union and the US,” the report added. Amongst key negatives, the order book of Praj Industries declined by 19% Q-o-Q, due to delay in decision-making and credit problems at the clients end as well as some previous orders turning non-executable.

Stock Views on Indian Hotels, Tata Motors, Praj Industries, Infosys

INDIA Infoline on Indian Hotels - TARGET PRICE: RS 85

INDIA Infoline has maintained its ‘market performer’ rating on Indian Hotels Co with a reduced price target of Rs 85. The brokerage house expects the company’s volume expansion to come from its new properties and a stable revenue growth over the medium-term with the commissioning of its Ginger brand. “Since the company now operates in all major price points, it is cushioned against an adverse affect of a weakness in luxury market room rentals or any localised downturn,” the India Infoline note to clients said. “We expect the company to witness sales and earnings CAGR (compounded annual growth rate) of 15.1% and 26.6% respectively over the next two years. Valuations appear reasonable, with price to earning of 10.8 times and EV(enterprise value)/EBIDTA of 6.8 on FY10 (estimated) earnings,” it added.

HDFC Securities on Tata Motors - TARGET PRICE: RS 454

HDFC Securities has maintained its ‘sell’ rating on the stock with a revised target price of Rs.454 (from Rs.431 earlier). The brokerage believes due to uncertainties looming over the company’s Nano project at Singur and 24-35% equity dilution would cap the upside in the stock. Also the Jaguar-Land Rover (JLR) acquisition would continue to be an overhang on Tata Motors’ stock, the note added. “We are revising our earnings per share estimate upwards by 9% (Rs.29.9 earlier) mainly on account of lower equity dilution by reducing the amount of funds raised through the equity route. We value the company on an SOTP basis with the core business valued at Rs 293 per share and subsidiaries at Rs 161 per share,” the note to clients said

ULJK Group on Praj Industries - TARGET PRICE: RS 277

ULJK Group has assigned an ‘accumulate’ rating to Praj Industries as it expects the company to benefit from its operational presence in all major ethanol-producing countries. The firm believes that fuel ethanol production is seeing an uptrend on the back of the increase in crude oil prices and the company possesses process technology for the different types of feedstock for ethanol production. “We expect the order book to grow at a CAGR of approximately 37%, backed by the increase in demand for fuel ethanol, the note said. “The revenue of the company is expected to grow at a CAGR of approximately 31% during the period FY08-FY10 (estimated). The company is expected to deliver a net profit of Rs 1,694 million in FY09(estimated) and Rs 2268 million in FY10 (estimated), a CAGR of approximately 22%,” the note added.

Edelweiss Securities on Infosys - Rating: Accumulate

Broking firm Edelweiss Securities has maintained its ‘accumulate’ rating on the stock as it believes that the company’s recent acquisition of the Axon group would bolster the company’s presence in the consulting space. “The deal is earnings per share (EPS) neutral on standalone basis in FY09 (estimated), but EPS accretion in FY10 (estimated) depends on Axon’s growth and margin trajectory. Incorporating the financial impact of this acquisition, the stock trades at 16.5 times and 13.9 times FY09 and FY10 earnings respectively,” the note said. However, according to the brokerage firm, slowdown in US, significant increase in the salary hikes and attrition rate, reduction in the number of H1B visas granted by US, and incremental appreciation of rupee against US dollar, euro and GBP remain key concerns for the company.