Stock views on Nagarjuna Construction, Prism Cement, Crompton Greaves

IndiaInfoline on Nagarjuna Construction - Target Rs 185

IndiaInfoline research is bullish on Nagarjuna Construction with a target of Rs 185, in its research report.

"Nagarjuna Constructions continues to be in an uptrend after breaking out from consolidation between range of Rs145-180 from first week of November 2009. The momentum indicator RSI is exhibiting positive movement suggesting further upside in the near term. Moreover, volumes have also picked up substantially as the stock breached the upper end of the consolidation range mentioned above. Keeping in mind the above mentioned technical parameters, we recommend traders to buy the stock in the range of Rs173-177 with a stop loss of Rs169 for a target of Rs 185, says IndiaInfoline research report.

Hem Securities on Prism Cement - Target Rs 70

Hem Securities is bullish on Prism Cement and has recommended buy rating on the stock with a target of Rs 70, in its research report.

“The company enjoys cost competitiveness due to modern plant, lower overheads, operational efficiencies and logistics management. It is ideally positioned with a strong brand name in the high potential markets of UP, MP and Bihar. The company would sustain its industry leading profitability due to focus on high net cement realisation zone, flexible product and distribution mix (trade and non trade) and lower total delivered cost. Major expansion plan initiated by the company would enhance growth in coming years. In wake of such growth, Prism Cement Ltd seems to be extremely attractive investment opportunity.”

“Presently, the stock is trading at Rs 50.40 which is at 7.47 times to its TTM (Trailing twelve months) earnings and 1.92 times to its book value of Rs 26.25. Since the stock offers good opportunity, we initiate a ‘BUY’ signal on the stock with a target price of Rs 70 in long term investment horizon expecting an appreciation of about 39% from the current level of Rs 50.40.”

Angel Broking on Crompton Greaves - Target Rs 525

Angel Broking has come out with a research report on Crompton Greaves. The research firm has upgraded the stock from accumulate to buy, with a 15-month target price of Rs 525.

"We have been maintaining positive stance on Crompton Greaves (CGL) right from initiating coverage report dated June 12, 2009, citing its unjustifiably huge valuation gap with peers ABB and Areva T&D. Now we introduce our FY2012 estimates, and expect the company to register a top-line and bottom-line CAGR of 12.1% and 19.8%, respectively, during FY2009-12E. We upgrade the stock from accumulate to buy, with a 15-month Target Price of Rs 525", says Angel Broking.

Stock views on Yes Bank, Sobha Developers, Crompton Greaves

Motilal Oswal on Yes Bank - Target Rs 327

Motilal Oswal is bullish on Yes Bank and has recommended buy rating on the stock with a target of Rs 327, in its reports.

“Despite 76% CAGR in assets over FY06-09, Yes Bank's market share is a mere 0.55% as of September 2009. Rapid branch network expansion, acquisition of new customers and deepening of existing customer relationships would help ensure that its asset growth remains higher than industry. With likely capital raising in next one year (we have factored in USD 235 million at Rs 250 per share), tier-I CAR would improve to ~12% and support asset growth over the next 2-3 years. We expect loan CAGR of 37% and PAT CAGR of ~32% over FY09-12.”

“We expect RoA of 1.5%+ and RoE of 17%+ over the next three years, despite equity dilution. Given the superior return ratios, superlative growth and a competent management, we believe Yes Bank deserves premium valuations. The stock trades at 2.3x FY11E BV and 15.7x FY11E EPS. We initiate coverage with a Buy recommendation and a target price of Rs 327 (3x FY11E BV).”

Edelweiss on Sobha Developers - Target Rs 316

Edelweiss has initiated coverage on Sobha Developers with a Buy rating and a fair value of Rs 316 per share - implying an upside of 29%.A report released on December 31 said: "We value Sobha based on DCF value of cash flow from ongoing projects (9.4 mn sq ft) and forthcoming projects – to be launched over FY10-14 (13.6 mn sq ft) and value of its balance land reserves (134 mn sq ft) land. We expect Sobha to generate INR 43.6 bn net cash from its ongoing and forthcoming projects, and value the same at INR 10.7 bn. We value the balance land reserves on land bank valuation at INR 27.5 bn, taking the total EV at INR 41.0 bn and a fair equity value of INR 30.9 bn. Consequently, we initiate coverage on the stock with a BUY and rate it Sector Performer on a relative return basis."

Angel Securities on Crompton Greaves - Target Rs 525

Angel Securities has upgraded the rating on Crompton Greaves from Accumulate to Buy with a target price of Rs 525 - an upside of over 20%.A report released on January 4 said: "We have been maintaining our positive stance on Crompton Greaves (CGL) right from our initiating coverage report dated June 12, 2009, citing its unjustifiably huge valuation gap with peers ABB and Areva T&D. Now we introduce our FY2012 estimates, and expect the company to register a topline and Bottomline CAGR of 12.1% and 19.8%, respectively, during FY2009-12E."At the CMP, the stock is quoting at 18.8x and 16.2x FY2011E and FY2012E EPS, respectively, which we believe is attractive compared to its peers ABB and Areva T&D (which are quoting at 24.9x and 21.5x CY2011E EPS, respectively).

We believe that such a high valuation gap is unwarranted and going ahead it would narrow down as CGL has been bridging the technological gaps through various acquisitions. The gap would also narrow down on the back of superior earnings growth and higher average RoEs for CGL as against its peers. We assign CGL a Target P/E multiple of 20x and upgrade the stock from Accumulate to Buy with a 15-month Target Price of Rs 525."

Stock Views on Areva TD, ONGC, Aditya Birla Nuvo, Ultratech Cement, Allied Digital

CITIGROUP on AREVA T&D INDIA - TARGET PRICE: RS 1,809

CITIGROUP Global Markets has assigned a ‘hold’ rating to Areva saying despite the company’s strong fundamentals, the stock is fairly priced. “The stock trades at a P/E multiple of 19.7 times 2009 (estimated) earnings and provides limited upside to our target price of Rs 1,809. Our target price is based on a P/E multiple of 23 times December 2009 set at a 9.5% premium to historical average P/E multiples and in line with ABB,” the Citigroup note to clients said. Citigroup expects Areva’s earnings per share to grow at a compounded annual rate of 32% over 2007-10 (estimated), with a return of equity of around 40%. In comparison, ABB’s EPS is expected to grow at a compounded annual rate of 25% with a RoE of roughly 30%.


MACQUARIE Research on ONGC - TARGET PRICE: RS 995

MACQUARIE Research Equities has given a ‘neutral’ rating to ONGC, as it feels that attractive valuations are offset by lack of earnings growth. “ONGC is trading at undemanding valuations of 7.7 times FY3/09 (estimated), but it also lacks growth, as a corresponding rise in subsidy burden wipes out a bulk of its gain from a rise in oil price re-alisations,” the Macquarie note to clients said. Earlier this week, ONGC Videsh (OVL), the wholly-owned subsidiary of ONGC, had an-nounced a recommended preconditional cash offer to acquire Imperial Energy Corp, an oil E&P (exploration and production) company with assets in Russia and Kazakhstan for £1.4 billion.

Sharekhan on ADITYA BIRLA NUVO - TARGET PRICE: RS 2,035

BROKERAGE firm Sharekhan maintained its ‘buy’ rating on Aditya Birla Nuvo even though it feels that the firm may have overpaid for its acquisition of Apollo Sindhoori Capital investments Ltd. “We believe ABN has paid substantial premium for the buy, considering the valuations at which the listed peers are trading and the bleak near-term outlook for the broking industry. Nevertheless, the acquisition provides ABN entry into broking business and may hold value in the long term,” the Sharekhan note said. “We remain positive on ABN on account of its presence across diversified businesses. In the near term, the stock would have the trigger on account of the insurance bill that is expected to allow higher foreign direct investment in the sector,” it added.

CLSA on ULTRATECH CEMENT - TARGET PRICE: RS 791

CLSA has resumed coverage on UltraTech Cement with a ‘buy’ rating and price target of Rs 791. It feels that while domestic prices should drop over the next 9-18 months due to an adverse demandsupply regime, UltraTech’s improving sales mix should keep blended realisations flat over FY08-11CL. “EBIDTA margin is set to fall due to higher cost but it will be the most moderate decline. Its 9% volume CAGR over FY08-11CL should help drive a 4% cash-earnings CAGR. At 5.8 times price/cash flow, downside is limited,” said the CLSA note.

Alchemy Share on ALLIED DIGITAL - TARGET PRICE: RS 1050

Alchemy Share and Stock Brokers has rated Mahashtra Seamless a ‘buy’with a price target of Rs 873. “With increasing activity E&P (exploration & production) in the oil & gas sector in India, demand for seamless pipes is expected to rise over 10% in the next five years. MSL, being the leader, the company will be the major beneficiary of this demand,” the Alchemy note to clients said. “Further, implementation of city gas distribution network (CGD) in 200 cities as planned by Gail will improve the outlook for ERW pipes. MSL, being one the two key players in ERW segment, is set to benefit from increased demand,” the note added.

Stock Views on Larsen Toubro, Container Corp Of India, Areva TD, HCL Technologis, Ansal Properties

MORGAN STANLEY on LARSEN & TOUBRO - RATING: OVERWEIGHT


MORGAN Stanley believes that fears of the impact of a slowdown in the capex cycle in India on Larsen & Toubro (L&T) are exaggerated. It expects L&T to gain market share during the slowdown, so the risk-to-growth estimates will remain low. Morgan Stanley believes L&T is the lowest risk play in the sector and strongly recommends buying into any weakness. However, despite the upgrade, Morgan Stanley estimates a CAGR of 25% for L&T’s standalone earnings over FY08-10E against 57% over FY06-08E. L&T will be cushioned from the slowdown due to its propensity to gain market share in slowdowns, its entry into newer verticals and its exposure to the Middle East. On a bottom-up basis, healthy capex trends in verticals (E&P and metals) further increase the company’s ability to weather the slowdown.


JP MORGAN on CONTAINER CORP OF INDIA - RATING: OVERWEIGHT


JP Morgan has assigned an ‘overweight’ rating on Container Corporation of India (Concor) with a March ’09 price target of Rs 1,010. The price target implies a 16% potential share price upside from current levels. Concor is India’s largest railway container freight operator with an over 90% market share. By that estimate, Concor will have an earnings CAGR of 16% over FY08-10 driven by growth in containerised cargo traffic. Given sustained growth in India’s foreign trade, JP Morgan expects container traffic to grow at 14% over FY08-10E. It expects Concor to be a key beneficiary of this growth, given its unparalleled infrastructure network with 58 inland container depots (ICDs) and over 150 rakes and established customer relationship. The company’s revenue growth is likely to accelerate to 18% CAGR over FY08-10E (versus 10% in FY08), given a sharp increase in customer tariffs. The March ’09 price target is based on discounted cash flows (DCF) and implies 13x oneyear forward P/E on FY10E EPS (which is at a 10% discount to its average historical three-year multiple). The multiple looks justified, given rising competition and moderation in earnings growth. Downside risks to the price target and view are a challenging macro environment, given high crude oil prices and rising inflation, which can slow down India’s foreign trade; and a sharper-than-expected increase in competitive intensity.


CITIGROUP on AREVA T&D - RATING: HOLD


CITIGROUP has initiated a ‘hold’ recommendation on Areva T&D India with a target price of Rs 1,809. Areva T&D’s EPS has witnessed a CAGR of 117% over CY04-07 and expanded return on equity (RoE) from 11.4% to 46.5%, aided by a focus on higher-margin national grid/selected orders for the Accelerated Power Development and Reform Programme (APDRP) and growth off a lower base. Further, the company’s EPS is expected to witness a CAGR of 32% over CY07-10E, versus that of ABB at 25%, with higher RoEs of ~40% versus ABB at ~30%. Discussions with the management suggest that any foray into the nuclear power equipment business in India will be through a separate entity. Globally, Areva is at No 3 after ABB and Siemens in power T&D. ABB has historically been the market leader in India. However, Areva T&D India has edged past ABB in H1 CY08 with a market share of 22.4% vs 19% for ABB and 12% for Siemens. These are strong end markets and low-cost manufacturing centres. Areva T&D Global has a clear strategy of making these two countries global sourcing hubs. Currently, exports contribute 14% to Areva T&D India’s sales and are expected to jump to 25% by CY12E. The stock trades at a P/E of 19.7x CY09E and provides limited upside to the target price of Rs 1,809. The target price is based on a P/E of 23x December ’09 set at a 9.5% premium to historical average P/Es and is in line with that of ABB’s. Order inflow momentum, execution and commodity price movements can drive share price movements.


INDIABULLS SECURITIES on HCL TECHNOLOGIES - RATING: BUY


INDIABULLS Securities has maintained its ‘buy’ rating on the stock because the company witnessed a strong deal inflow during Q4 ’08 ($310 million) and signed a total contract worth $1 billion during the year. HCL Technologies reported strong results for the quarter and the year ended June ’08. Its topline recorded a sequential growth of 11.5% to Rs 2,170 crore, driven by an appreciating dollar and a modest volume growth. EBITDA margin increased by 117 bps q-o-q to 23.4%, led by an improved operational efficiency and a decrease in the cost of revenue, which helped offset the increase in SG&A expenses. Although in a weak macro-economic environment, pricing will continue to remain under pressure, Indiabulls expects the company’s revenues to grow at ~21.4% in dollar terms for FY09, driven by volumes. Besides, gain from the appreciating dollar against the rupee will also help improve revenues to grow at 27.2% in rupee terms for FY09E. Despite a slowdown, the US remained the highest revenue contributor and showed a decent growth throughout the year. Besides, the company steadily improved its utilisation rate from 69.2% in Q1 ’08 to 73.9% in Q4 ’08, which helped improve margins. Despite having stable fundamentals, the stock is trading at a discount of 29% to the average industry multiple. Moreover, valuation gives a fair value of Rs 316. The stock has an upside of around 37%.


MACQUARIE on ANSAL PROPERTIES - RATING: NEUTRAL


ANSAL Property and Infrastructure (APIL)’s leverage ratios are stretched. Its net debt-to-equity ratio (incorporating the impact of outstanding land payments) stands at 165%. This does not include any impact of off-balance sheet financing. APIL’s stretched balance sheet and the general scenario of tight liquidity are primary concerns. Macquarie has a limited visibility on sources of capital which will be used to generate profits from this land bank. Investors are unlikely to (and should not) attribute any value to profits earned over and above the replacement cost of the land bank. Macquarie has cut its NAV estimates to reflect this change in opinion. Its ~240 million sq ft of land in North India provides APIL the scale to enjoy preferred supplier relationships. Margins are likely to be supported by the low average cost of land acquisition (Rs 121/sq ft). Projects in North India account for 100% of APIL’s NAV and land bank. This concentrated land bank limits its ability to focus elsewhere if this market experiences a slowdown. North India has seen rapid price rises and even more rapid project launches in the past 2-3 years. Incrementally, this scenario is likely to be exacerbated by a surge in secondary market supply, as speculators try to exit properties bought in the past two years. The target price of Rs 100 based on a 25% discount on NAV remains unchanged. APIL is trading at a 24% discount to liquidation value and below its book value. This provides downside support. Nevertheless, Macquarie has downgraded the stock to ‘neutral’ from ‘outperform’ as the stock lacks triggers, which may keep the share price at depressed levels.