Karvy views on Tata Steel, Kalpataru Power, Indraprastha Gas

Karvy on Tata Steel - Target of Rs 270
Karvy Stock Broking has maintained its buy rating on Tata Steel with price target of Rs 270 in its research report.

"Tata Steel's Corus and other subsidiaries have reported EBIDTA of Rs 28.6 billion during Q3FY2009, which is 26% and 65% lower on YoY and QoQ respectively. Though the numbers are better than consensus estimates, the higher than expected EBITDA was mainly on account of undisclosed amount of hedging gains. EBITDA margins fell 350 bps YoY to 8.6%."
"We are revising our earnings estimate for FY2009 and FY2010. Earlier, we had factored in a 10% fall in steel prices and a 15% fall in raw material prices over FY2009 price level. Our revised estimates take into account a 25% fall in steel price a 20% fall in raw material price. As a result, our APAT estimate for FY2010 comes to Rs 48 billion, which is 30% lower than the previous estimate. Accordingly, our revised price target for the stock comes to Rs 270. We maintain our BUY rating," says Karvy Stock Broking's research report.


Karvy on Kalpataru Power - Target of Rs 284

Karvy Stock Broking has upgraded its rating on Kalpataru Power Transmission from market performer to buy with a price target of Rs 284 in its research report.

"Kalpataru Power Transmission (KPTL) announced on 4th March 2009, that the company has bagged orders worth Rs 3.73 billion from Power Grid Corporation of India (PGCIL) for supplying power transmission equipment in India. This is followed by a large order worth USD 250 million (Rs 12 billion) from Ministry of Energy and Water, Kuwait during January 2009. Including the new order from PGCIL, total order book of KPTL (standalone) is Rs 48 billion (including L1) with an average execution period of 22 months. The latest project secured from PGCIL is expected to commence from March 2009 and scheduled to be completed within 27 months. Hence, we expect partial revenue to be booked in FY10 and remaining in FY11."
"We maintain our revenue and earnings estimates and retain our price target of Rs 284, based on 4.5x FY10 earnings. However, owing to recent price correction, we upgrade our rating from Market performer to BUY," says Karvy Stock Broking's research report.


Karvy on Indraprastha Gas - Target of Rs 155

Karvy Stock Broking has maintained its buy rating on Indraprastha Gas with a target price of Rs 155 in its research report.


"IGL's Q3FY2009 results were depressed due to the provision of Rs 175 million made for a disputed demand from the gas supplier, which might have adversely affected the stock price performance. However, the future growth prospects for IGL appears bright driven by increased conversion of private four-wheelers to CNG, acceleration in the conversion of light commercial vehicles (LCVs) to CNG and a sustained growth in piped natural gas (PNG) customers.

At current levels, the stock quotes at a P/E of 6.7x FY2010E EPS of Rs 15.1 and 2.8x EV/EBIDTA of FY2010E. We continue to value the stock based on one year forward EV/EBIDTA multiple of 5x with target price of Rs 155. We believe that the 5x multiple captures the concerns over the sustainability of margins," says Karvy Stock Broking's research report.