Stock vews on Suzlon, Dishman Pharma, 3i infotech

Prabhudas Lilladher on Suzlon - Target Rs 113

Prabhudas Lilladher has maintained its accumulate rating on Suzlon Energy with a target price of Rs 113 in its research report.

"Suzlon Wind (excl. Hansen & REPower) de-grew by 44%% YoY to Rs 11.6 billion in Q1FY10 as it sold only 123MW as against 338MW in Q1FY09. Since Suzlon is actively looking to sell in part or the entire stake in Hansen, we have done a SOTP, wherein we have assigned a value of Rs 23 per share (20% discount to market price) for its entire Hansen stake. Also, the target P/E of 10x FY11E earnings for the consolidated entity (Suzlon Wind and REPower) gives us a target price of Rs 113. We maintain an ‘Accumulate’ on decline rating," says P Lilladher's research report.


Reliance Money on Dishman Pharma - Target Rs 221

Reliance Money has maintained its buy rating on Dishman Pharmaceuticals & Chemicals Ltd with a price target of Rs 221 in its report.

"Dishman Pharmaceuticals reported below expected revenues by declaring 4% fall to Rs 2281 million primarily due to lower take-off of Eprosartan (which normally contributes around 17% of total revenue) by Solvay as it was undergoing a inventory rationalization (that resulted in 40% fall in Dishman’s domestic CRAMS operation).With a stronger operational and financial outlook, we maintain our positive stance on Dishman."


Sushil Finance on 3i infotech - Target Rs 116

Sushil Finance has recommended a buy rating on 3i infotech with a target of Rs 116 in its report.

"Given the current uncertain and challenging environment, 3i infotech has delivered a muted performance during Q1FY10. However, the Company is much better placed as compared to many of its peers and it has a good business balance in terms of geographical spread & portfolio of offerings. The recent acquisition of JP Morgan Treasury Services’ National Retail Lockbox Business (NRLB) by its subsidiary, Regulus Group is also a strategic move and expected to help 3i achieve operational efficiencies and drive value within its Transaction Services Revenue chain."

Stock Views on Infosys, Punj Lloyd, Suzlon Energy

CLSA on INFOSYS

Infosys reported its lowest y-o-y revenue and volume growth in the decade, but its highest margin in six years. The stock has outperformed the markets 16% YTD as the Satyam debacle has shifted investor preference to India’s corporate governance stars, where Infosys enjoys iconic status. With currency providing all of the margin upside in Q3, and like to like pricing down 1.8% q-to-q in December ‘08, volume recovery will come after margin headwinds, the latter beginning in the March ‘09 quarter itself, as per Infosys’ guidance. Six-year high EBITDA margins of 35% were backed by double digit INR/USD depreciation, which negated headwinds from lower utilisation and cross currency effects. CLSA expects pricing to weaken further ahead as more negotiations reach a decisive stage. Every 1% of pricing cuts 70 bps from EBITDA. With cost metrics touching all-time lows in overhead line items, it is debatable if Infosys has any more juice to squeeze out of its operations. CLSA’s call that margins are more and sooner at risk, compared to the recovery hope in volumes, drives the earnings 6% below consensus for FY10. This limits absolute upsides for the stock, and from here to the full year guidance in April.

BNP Paribas on PUNJ LLYOD

The company has disclosed new orders of approximately Rs 1,880 crore in 3QFY09, down 56% y-o-y. Additionally, international orders declined 57% y-o-y. BNP estimates a decline of 22.4% y-o-y for new orders in FY10. There is also further evidence of a global slowdown in the petrochemical industry. Their FY09E and FY10E EPS estimates have declined by 9% and 41%, respectively, due to lower order inflow assumptions. SABIC has terminated its contract with Punj Lloyd (Punj) and is seeking liquidation of the performance bond and advance payment bond for a total of GBP28.5m. Punj may incur additional cash charges of GBP28.5m (Rs 210 crore) if SABIC succeeds in its claims. BNP has not included this claim in the estimates; however, now it includes the provision for a Rs 300-crore loss (before tax) that should have been included in the FY08 results. This loss reduces the FY09E EPS estimate by 55%.

JP Morgan on SUZLON ENERGY

JP Morgan remains `Neutral’ on Suzlon Energy with a March 10 price target of Rs 80. Suzlon’s recent initiatives provide breathing space to tide over the funds crunch:

1) sale of 10% stake in Hansen Transmission - estimated cash inflow of Rs 520 crore;
2) securing a six-month payment window from Martifer for acquiring the latter’s 22.4% stake in REpower; and
3) the sale of a 17.1% stake in SE Forge to IDFC, bringing in Rs 400 crore.

With these measures, Suzlon will end FY09 with net consolidated DER (debt equity ratio) of 0.83x and net debt to EBITDA of 4.3x. In FY10E, Suzlon would end with consolidated DER of 0.81x and net debt to EBITDA of 4.3x. Suzlon has loan repayment of Rs 1,100 crore for the remainder of FY09, Rs 1,000 crore in FY10 and another Rs 1,000 crore in FY11. As operating cash flows may be insufficient for these repayments, Suzlon may have to borrow afresh. October ‘08 OB, at 2,505 MW, is not sufficient to meet FY10 volume estimate of 2,950 MW. Additional orders are necessary to meet FY10 estimates. There have been considerable delays in securing orders due to weak sentiment for renewable energy investments, coupled with a possible quality perception of Suzlon’s products. The key risk is further earnings cuts if strong order flows, necessary to lend credence to FY10 and FY11 earnings estimates, do not materialise. The FY10 estimates have seen a marginal upward revision of 2.6% due to the translation of REpower earnings at a higher Rs/ of Rs 64, compared to Rs 56 used previously.

Stock views on Sunil Hitech Engineers, Suzlon, GSK Pharma

Angel Broking on Sunil Hitech - Target Rs 11

Angel Broking has a buy recommendation on Sunil Hitech with target price of Rs 111 in its research report.

"Sunil Hitech Engineers (SHEL), enjoys a strong order book position of Rs 1,298 crore or 4x its FY2008 revenue. This strong order book position provides high revenue visibility for the company over the next two years. Over FY2008-10E, we expect SHEL's net revenue to clock a CAGR of 45% on a robust order book size of Rs 1,298 crore. We expect the company's operating profits to post a CAGR of 37% to Rs 92.4 crore during the mentioned period. Going ahead, we expect the company to post 23% CAGR in net profit on the back of better operational performance and decline in Interest rates. We initiate coverage on the stock, with a Buy recommendation and Target Price of Rs 111, implying an upside of around 76% from current levels," says Angel Broking's research report.

IIFL on Suzlon - Target Rs 50

IIFL has maintained its add rating on Suzlon with a target price of Rs 50 in its research report. "REPower (73.71% owned by Suzlon) has won the largest contract in the offshore wind energy space so far a Euro 2 billion framework contract from RWE Innogy. This contract reinforces REPower’s strength in the offshore market and enhances visibility for its offshore business. However, with installation of its machines scheduled to commence from CY11, we expect no material impact of this contract in the short term, ADD, target of Rs 50," says IIFL's research report

IIFL on GSK Pharma - Target Rs 1265

IIFL has maintained its add rating on Glaxo Smithkline Pharma with a price target to Rs 1265 in its research report. "Glaxo’s 4QCY08 results were marginally below our expectations, mainly on lower EBIDTA margin, which declined 175 bps YoY and 869 bps QoQ to 28.4%. Revenues came in line with our expectation at Rs 3,685 million, up 8.7% YoY but down 19.4% QoQ (the December quarter has been historically weak for Glaxo). For the full year CY08, revenues grew 10.1% on like-to-like basis and adjusted net profit grew 12.1%. We believe that new product launches under patent protection will help Glaxo maintain its growth rates in the foreseeable future.

Glaxo has a lean asset base, with most of manufacturing being outsourced. Hence, the company also stands to gain from falling prices of intermediates and APIs. This, we believe, will help the company maintain its EBITDA margin at CY08 levels, even in the event of a slowdown in the domestic market. We maintain our ADD recommendation and raise our price target to Rs 1265," says IIFL's research report.