Hem Securities Views on Gujarat Fluorochemicals, United Spirits, Aban Offshore

Buy Gujarat Fluorochemicals - Target of Rs 300

Hem Securities has recommended a buy rating on Gujarat Fluorochemicals with a price target of Rs 300 in its June 11, 2008 research report. "The company has been a pioneer in the refrigerant business and is has also diversified into the power generation and carbon credits. The chemical complex commissioned in Dahej will strengthen the cost competitiveness of the company by making it amongst the most integrated manufacturers of these products and add longevity to the company’s refrigeration business. The growing demand for PTFE is also expected to take the company on higher rungs of success. The company’s top line and bottom-line has grown with a CAGR of 61.41 % and 92.92 % re-spectively from FY05 to FY08, indicating the robust growth in its business."

"Presently, the stock is trading at Rs 195 which is 7.05 times to its earnings and 2.28 times to its book value. Keeping in view the robust opportunities in the industry, capacity expansion of the company and the growth rate of Gujarat Fluorochemicals, we initiate a ‘BUY’ signal on the stock with a price target of Rs 300 in the long term investment horizon, expecting an appreciation of 54% from the current price of Rs 195" says Hem's research report.

Buy United Spirits - Target of Rs 1803

Hem Securities has initiated a buy signal on United Spirits with a target price of Rs 1803 in its August 7, 2008 research report. "United Spirits Ltd has announced outstanding results for Q1FY09. The company being the largest spirits company in the country had posted good results for the year ended March 2008. The Net sales grew by 16.75 per cent to Rs 31663 million in FY08, while the bottom line stood at Rs 3210.60 million with net profit margins scaling up to 10.14 per cent versus 8.55 per cent clocked in the previous year."

"Presently, the stock is trading at Rs 1342 which is at 38.34 times to its earnings and 6.06 times to its book value of Rs 221.31. Since the stock seems to offer extremely good investment opportunities, we initiate a ‘BUY’ signal on the stock with a target price of Rs 1803 in medium to long term investment horizon expecting an appreciation of about 34 % from the current level of Rs 1342," says Hem's research report.

Buy Aban Offshore - Target of Rs 5555

Hem Securities has initiated a buy rating on Aban Offshore with a target price of Rs 5555 in its August 6, 2008 research report. "The company posted excellent financial figures for the quarter ended June 2008. The net sales for the company gone up by 93.52% to Rs 2469.51 million for the Q1FY09 as against the net sales of Rs 1276.13 million for the Q1FY08. The net profit for the company rose to Rs 715.10 million for the Q1FY09 in comparison to net profit of Rs 283.75 million for the Q1FY08 with the growth rate of 152.02%."

"We initiate a ‘BUY’ signal on the stock at the current levels with a target of Rs 5555 in the medium to long-term investment horizon with an appreciation of 120.25%," says Hem's research report.

Stock Views on LANCO INFRATECH, SATYAM COMPUTER, UNITECH, HERO HONDA

ICICI Securities on LANCO INFRATECH - TARGET PRICE: RS 564


BROKERAGE house ICICI Securities has maintained its ‘buy’ recommendation on Lanco Infratech with a price target of Rs 343, but has lowered earnings estimates for FY09 and FY10 by 34% and 42%, respectively, citing slowdown in the infrastructure space.


“Slowdown in realty has led to 15-20% downgrade in selling prices across projects and increased the cost of equity, cost of debt and cap rates 200 bps each, implying 43% downgrade in real estate NAV to Rs 22 billion or Rs 100/share,” said the ICICI Securities note to clients. “As per our funding analysis on Lanco (both debt and equity), we expect no funding risk for its upcoming power and realestate projects. Despite earnings downgrade, Lanco enjoys healthy growth in construction orderbook, discounted valuations of power portfolio, strong earnings momentum and robust business model,” the note added.


CLSA on SATYAM COMPUTER - TARGET PRICE: RS 430


BROKERAGE house CLSA has reaffirmed its ‘underperform’ rating on Satyam saying it does not expect any spectacular financial performance by the IT services major. “We continue to be surprised by the lack of any positive commentary or data points on demand even into mid-August, with only three months left before the next budgeting cycle,” the CLSA note to clients said.


According to CLSA, Satyam commented that in April, its “stretch target” for growth in FY09 would have been 30% year-on-year (guidance of 24-26% Y-o-Y). “But after the 1Q disappointment and continued demand uncertainty, this margin of safety has somewhat shrunk. Our revenue growth forecast is currently 27%. With no breakout performance (relative to peers) indicated by financials, we expect the stock to reflect sector sentiment hereon,” the note added.



HSBC Securities on UNITECH - TARGET PRICE: RS 158


HSBC Securities has retained its ‘underweight’ rating on Unitech with a price target of Rs 158, as it feels further returns from current levels could be limited in the absence of any catalysts. The brokerage feels property prices will have to come down if demand has to pick up. “Residential segment occupies around 79% of the total saleable area and roughly 46% of the gross asset value. Within the residential space, a few cities hold a large exposure, exposing Unitech to absorption and price risk in these markets,” the HSBC note to clients said.


“Agra and Varanasi would contribute around 35% of Unitech’s total retail development. Since these cities are currently too small to absorb such a large supply of retail space, we remain sceptical on the company’s retail plans in these two cities, the note added.


INDIA Infoline on HERO HONDA - TARGET PRICE: RS 785.10


INDIA Infoline has recommended a ‘sell’ on Hero Honda, as it feels high interest rates could affect the company’s sales. “Although, Hero Honda (HHL) has been outperforming in the past 4-5 months, as Bajaj Auto pulled out of the 100-cc segment and TVS delayed the launch of kFlamem, we expect the industry concerns to catch up with HHL too, in near to medium term,” the brokerage said in a note to clients. In order to improve asset quality and address problem of rising delinquencies, some key banks have discontinued or slowed down their auto loan business at the dealer end. With 60% of two-wheeler sales being financed, this move has seriously impacted industry fortunes.

KRChoksey views on PVR, DLF, Unitech

Buy PVR

KRChoksey Research has recommended a buy rating on PVR in its August 4, 2008 research report. "Net sales for the Q1FY09 were up by 10% Y-o-Y to Rs 60.2 crore. The growth of 10% was mainly driven by F&B income ( 10% Y-o-Y to Rs12.4 crore) and Advertisement & Royalty income (Y-o-Y 62% to Rs 9.0 crore)."

"At CMP of Rs 173, the stock is trading at 21.9x TTM EPS of Rs 7.9. We recommend investors to BUY the stock, with our price target under review," says KRChoksey's research report.


Buy DLF, target of Rs 615

KRChoksey Research has recommended a buy rating on DLF with a target price of Rs 615 in its August 4, 2008 research report. "Sales grew 24% y-o-y to Rs 3,810.6 crore in Q1FY09. There was a 12% decline in q-o-q sales due to the seasonal effect as sales in Q1 are historically sluggish. Operating margins were lower by 1020 basis points y-o-y on account of revenue from middle income segment. Net Profit was Rs 1,864 crore, a growth of 23% y-o-y but 14% lower on a q-o-q basis."

"We believe DLF’s strong balance sheet and its robust business model makes it one of the best investments in Indian Real Estate. We recommend a BUY with a target price of Rs 615. At the target price the stock would be valued at 12.1x FY09E EPS of Rs 50.65, implying an upside potential of 19.4%," says KRChoksey's research report.


Buy Unitech, target of Rs 191

KRChoksey Research has recommended a buy rating on Unitech with a target price of Rs 191 in its July 31, 2008 research report. "Top-line was mainly driven by sales from the residential properties which accounted for 70% of revenue. Sales in Q1FY09 were Rs 1,031.67 crore, an increase of 19.2% on a y-o-y and a decrease of 11.1% on q-o-q basis."

"We recommend a BUY with a target price of Rs 191. At the target price the stock would be valued at 14.05x FY09E EPS of Rs 13.59, implying an upside potential of 16.5%," says KRChoksey.

Stock views on RELIANCE COMM, BANK OF INDIA, AEGIS LOGISTICS, M&M, YES BANK

CITIGROUP on RELIANCE COMM

TARGET PRICE: RS 530

CITIGROUP has downgraded Reliance Communications to ‘hold’, citing subdued first quarter and falling capital productivity. Its new target is Rs 530. Essentially, it has cut its FY09-10E EBITDA estimates by 13% and EPS by 14-18% to reflect a host of factors. Chief among them are lower revenue per minute in-line with peers, lower elasticity, staggered rollout of GSM and higher net debt. It notes that the company registered a weak first quarter EBITDA, as wireless was hit by continued lack of elasticity. It expects this trend of low CDMA elasticity to continue to dominate RCOM’s rations till GSM launch. It also says that the company’s $5.5 billion capex (FY09) and $4 billion (FY10) would lead to a net debt of Rs 170 billion in end-2009 (Rs 130 billion on June-2008). It signs off saying no triggers in the near term. “RCOM’s wholehearted participation in wireless growth is contingent on consumer mix change through the GSM foray, key for rerating, but some time away and not without risks,” said Citi in a note to its clients.

MACQUARIE on BANK OF INDIA

TARGET PRICE: RS 336

MACQUARIE believes that Bank of India’s strong results show its relative resilience among government-owned banks to the tough macro environment. The bank remains its top pick among state-owned banks and the broking house maintains ‘outperform’ rating with a revised target price of Rs 336 from the previous Rs 299. It says that the key earnings surprise was strong growth in fees to 58% Y-o-Y driving the 49% Y-o-Y growth in non-interest income. It infers that the bank has been aggressively pushing for fees business, focusing on products such as letters of credit and guarantees.

KR CHOKSEY on AEGIS LOGISTICS

TARGET PRICE: RS 207

KR CHOKSEY Shares & Securities has assigned a ‘buy’ on Aegis Logistics with a one-year price target of Rs 207, citing growing domestic consumption of the company’s services. Aegis Logistics mainly concentrates on port handling of liquid petroleum or chemicals and gas storage and distribution. “Given the growing domestic consumption of petroleum and gas in the recent years, Aegis Logistics (ALL) is well placed to grab the increasing opportunities in this sector. As a result of favourable cost, economics of auto gas over petrol and the increasing new entrants of LPG variants of cars in the market, the company is all set to scale up auto gas stations from the current 22 to 100 in the next two years,” the report said.

EDELWEISS Capital on M&M

EDELWEISS Capital has initiated coverage on Mahindra & Mahindra (M&M) with a ‘buy’ rating. The brokerage expects the operating divisions of M&M to perform well over the medium term, in terms of growth and profitability. “We expect significant expansion in M&M’s addressable market through its entry into the passenger car. The company has significant value embedded in its investments, covering information technology (Tech Mahindra), real estate & infrastructure (Mahindra Gesco), hospitality (Mahindra Holidays), financial services (Mahindra & Mahindra Financial Services), and auto-component (Mahindra Ugine Steel and Mahindra Forgings) sectors,” the report said.

IDBI Capital on YES BANK

IDBI Capital has maintained a ‘buy’ rating on YES Bank, on expectations of higher growth. happen. The brokerage expects the bank to log strong income growth in the long term. Despite mark-to-market (MTM) depreciation, net provisions have been lower owing to reversals equivalent to MTM depreciation done on investment provisions, the IDBI report noted. The bank has increased its lending and deposit rates recently.

Take Your PICK: Part III - SMALLCAP STOCKS

IPCA Laboratories (CMP: Rs 540): The company’s focus on branded formulations business and emerging economies is expected to be its key growth driver. New products launches in domestic and UK markets coupled with supplies to new emerging economies and US markets should lead to a compounded annual growth rate (CAGR) of 17% in revenues and 22% in profits over next two years. It is expected to clock an earning per share (EPS) of Rs 69.7 and Rs 82.6 for FY09 and FY10, respectively. Currently, the stock is trading at 7.5x FY09 and 6.2x FY10 earning estimates.

Numeric Power Systems (CMP: Rs 601): The company, a leading manufacturer of uninterrupted power supply (UPS) systems and power conditioners in India, commands 60% share in IT and 82% share of the ATMs. The strong demand for company’s products (India has peak power deficit of 16.6%), increased focus on high margin equipment servicing and significant international presence make NPSL a fast-growing multinational in the power management solutions. The stock is attractively valued at 6.5x FY09 EPS of Rs 94.2.

Indian Overseas Bank (CMP: Rs 91): The company is a leading South Indiabased bank with a strong balance sheet. IOB has a healthy current and savings account (CASA) ratio of 33.5% and strong return ratios, with a return on assets (RoA) and return on earnings (RoE) of 1.3% and 28%, respectively. The net profit for FY09E and FY10E is expected to be Rs 12.42 billion and Rs 13.91 billion, respectively, resulting in an EPS of Rs 22.8 and Rs 25.5 for FY09E and FY10E, respectively.

LIC Housing Finance (CMP: Rs 306): The company is expected to continue to benefit from the growing demand for housing. A lower mortgage/GDP ratio of 6% offers huge potential. The company expects 22% year-on-year (yoy) business growth to Rs 268 billion and 20% yoy growth in net profit to Rs 4.61 billion for FY09. Improving asset quality and strong return ratios augur well for LICHF.

Bharat Electronics (Rs 1,154): The company is the premier defence contractor for the government. Over the years, the company has developed several competencies in the area of defence electronics. It is expected to benefit from the defence offset clause that the government mandates for import of defence equipment above Rs 3 billion. The order backlog is comfortable at Rs 94.5 billion and equivalent to over two years of FY08 revenues. The modernisation of the Indian defence sector is expected to throw significant opportunities for BEL.

Source: Kotak Securities

Take Your PICK: Part II - MID CAP STOCKS

GSK Consumer (CMP: Rs 620): The company has a leadership position in the malted beverages space, strong set of core brands (Horlicks & Boost) and rich parentage (new launches from global portfolio). These are expected to help GSK sustain robust growth. Moreover, surplus cash and investments of Rs 400 crore coupled with attractive valuations make it one of the best value plays in the consumer domain.

PVR (CMP: Rs 174): The company’s superior management bandwidth, integrated business model and strong set of properties (in terms of location) make it the most preferred play in the movie exhibition space. Moreover, its entry into new allied businesses such as food courts and bowling alleys coupled with recent dilution in its movie production business is likely to lead to re-rating of the stock.

Bartronics India (CMP: Rs 179): The company operates in the automatic identification and data capture (AIDC) solutions segment and is set to leverage the strong growth expected in the retail sector. It is the only smart cards manufacturer in India and this segment is expected to surge on strong demand from the telecom, banking and government sectors. In the wake of strong growth prospects of the company, the stock offers great value.

Jain Irrigation (CMP: Rs 464): The company is a proxy play on the increasing government focus on agriculture and micro irrigation and the booming infrastructure in the country. It would also benefit from the acquisitions it made over the last couple of years, which will be in addition to the company’s organic growth initiatives. Thus, the long-term prospects of the company are robust.

Piramal Healthcare (CMP: Rs 310): The company is an early entrant into the CRAMS space. Over the last couple of years, it has consolidated its presence in the segment, which now contributes 50% of its overall revenues. Considering its robust pipeline, the company is expected to post robust growth in the years to come.

This article is fron the research house of Angel Broking

Take Your PICK: Part I - LARGECAP STOCKS

Divis Laboratories (CMP: Rs 1,393): An established player in the generic active pharma ingredient (API) space and leader among Indian contract research and manufacturing services (CRAMS) players, the company has attained market leadership in several key products. It has 20 of the top 25 innovator companies as its client in CRAMS segment. It recently commissioned a nutraceutical facility for the $1 billion global market, which has high entry barrier in the form of complex chemistry skills.

Sun Pharma (CMP: Rs 1,414): With strong earnings visibility and industry-leading earnings before interest, taxation, depreciation and amortisation (EBITDA) margins, Sun Pharmaceuticals has one of the best business models among the peers. The company’s business in the US is also maturing, with windfall gains expected from 180 days exclusivities apart from a healthy product pipeline.

Aban Offshore (CMP: Rs 2,695): The largest offshore rig operator in India, the company is ideally placed to capitalise on exploration and production (E&P) boom. It renewed contracts with ONGC at a sizeable premium, boosting its top-line visibility. It will deliver four jack-up drilling rigs in FY09 and is set to expand its fleet to 21 vessels. The addition of drill ships will reduce dependence on jack-up rig operations and attract premium rates due to low availability.

Tata Steel (CMP: Rs 618): It is the world’s sixth largest steel company. In India, it has just raised its crude-steel capacity from 5 million tonnes per annum (tpa) to 6.8 million tpa, of which 60% is rolled into flat products and the rest sold as long products. It also sells ferro alloys, tubes, bearings and some mineral products. TSL India’s raw material security and operating efficiencies put it among the lowest-cost producers globally. Its focus on high-value products and branding helps it earn high EBITDA margins of 40%. It should benefit from the likely rise in domestic prices in August this year.

Reliance Industries (CMP: Rs 2,147): The company has interests in E&P, refining, petrochemicals, textiles, telecom, electricity, financial services and infrastructure. Its petrochemicals business is vertically integrated with an output of around 11 million tons. It also operates India’s largest and most complex refinery with a capacity of 33 million tons. It is expected to start RPL and KG Basin production from Q3 FY09, which is expected to drive growth for the company. Also, it plans to invest $7.5 billion on semiconductor and polysilicon facilities at Jamnagar. Looking at higher crude prices and strong gross refining margin (GRM), this company has strong future prospects.

This research is made by Religare Securities