Dena Bank

THE buzz in the banking industry on a likely consolidation among state-owned banks, after a meeting between finance minister Pranab Mukherjee and PSU bank chiefs, appears to have been the driver for the rise in stock price of Dena Bank. The scrip has gained 31% in November 2009 compared to just 6% gained by the Nifty, with the market viewing the bank as a potential acquisition target for one of the large state-owned banks.

Despite the recent upsurge in price, the stock still remains one of the cheapest banking stocks in terms of valuations. The Dena Bank stock is trading at a price-to-book value (P/BV) ratio of 1.1. Most of the banks are trading at a much higher price than their book values. In fact, top state-owned banks such as State Bank of India, Punjab National Bank, Bank of India and Bank of Baroda are trading at an average valuation of roughly two times their book value. However, Dena Bank, historically, has traded at much lower valuations.

What is disconcerting is the huge fluctuations in Dena Bank’s performance from quarter-to-quarter. For instance, in the past four quarters, the year-onyear growth in profit ranged from 68%, at best in the June 2009 quarter, to 0% in the March 2009 quarter. In fact, on other parameters, the bank’s performance has been better than many of its peers. For instance, in FY09, it posted a net interest margin (NIM) of 2.9%. Even in earlier financial years, its NIM hovered close to 3%, which is considered as a benchmark in the banking industry.

The bank posted a return on assets (RoA) of 1.02% in FY09, which is roughly close to the banking industry average. It reported a capital adequacy ratio of 11.6% at the end of September 2009 which is in line with regulatory norms.

At around 1% of its net advances, its net non-performing assets or bad loans’ asset quality is satisfactory, if not the best in the industry. In a nutshell, the bank’s performance on the basis of these parameters is not a cause for concern. However, its growth rate is one of the lowest in the industry. In the past five financial years, its profit has not even doubled, which makes it one of the slowest-growing banks.

From a strategic investor’s perspective, Dena Bank can offer value with a branch network of 1,120 branches. But from retail investor’s point of view, it seems that, at current levels, the price has factored in synergies of consolidation, to an extent, which makes the current rise in price speculative.

Bank of India

Profile

Like all PSU banks the stress at Bank of India (BOI) also has been towards the retail sector and as a result the share of bulk deposits or corporate deposits is just 20 per cent, while rest is all retail deposits. International business of the bank contributes 17 per cent of the total business.
Current Account and Savings Account (CASA) ratio as of March 31, 2009 stood at 31 per cent, down from 40 per cent 2 years ago, which implies that the higher interest offered during the credit crisis has worked for the bank, and most of the new funds have gone into term deposits.
Currently, the bank is looking for partners for its venture into the asset management business.

Fundamental Performance

The bank has, over the years, done well to cut down on high non-performing assets (NPAs) of yesteryears. Its current net NPAs stand at 0.44 per cent of the total assets while its capital adequacy ratio stands at 13.01 per cent, up from 11.75 per cent 2 years ago. On the profitability front, it has also improved upon its wayward ways —for the past three years, the bank has been able to boost its bottom-line by 62.45 per cent annually.
Though its dividend payout ratio is not something to brag about, still BOI has been a regular dividend paying company for the past 10 years.

Stock Performance

The believer of this bank’s stock has been rewarded handsomely over the past 5 years. The stock has compounded the investors money at more than 50 per cent per year.
Currently, the stock is trading at a dividend yield of 2.03 per cent, well above its 5-year median yield of 1.71. BOI is about 1/4th the size of the PSU banking giant State Bank of India (SBI), but valuation-wise the stock is trading at a 50 per cent discount to SBI. Its price to earning (PE) ratio is 6.84 while that of SBI is 13. But comparing this with the stock’s own historic level, it is currently trading at 21 per cent below its 5-year median PE.

History

Bank of India was set up in 1906 in Mumbai. Starting off with a single branch, it now has over 3,000 branches all across India. It was nationalised in 1969.

Stock views on Bank of India, Gillette India, Wipro

KRChoksey on Bank of India - Target Rs 390

KRChoksey has recommended a buy rating on Bank of India with a price target of Rs 390, in its report. "We reiterate our Buy on Bank of India and increase our price target to Rs 390. We believe the recent underperformance of the stock provides an attractive entry point for investors given our expectation of earnings rebound in FY11 on back of pickup in net interest margins, higher fee income and lower credit costs," says KRChoksey's report.

HDFC Securities on Gillette India - Target Rs 1036-1080

HDFC Securities has recommended a buy rating on Gillette India with a a price target of Rs 1,036-1,080 in its research report.

"Looking at its future growth potential we feel, GIL could also trade at 24-25x FY June 10E EPS, which gives us a price target of Rs. 1,036-1,080. Hence we recommend investors to buy this scrip at the current price & average it on dips in the price band of Rs. 800-860 for the above mentioned price target over the next two to three quarters," says HDFC Securities' report.


IIFL on Wipro - Target Rs 600

IIFL has recommended a buy rating on Wipro with a target price of Rs 600 in research report.

"Wipro has outperformed TCS and Infosys in the past one month as well as YTD. Wipro’s continued outperformance over its peers reflects improved operational performance, cost optimisation efforts yielding results, and recent order wins translating into better revenue visibility. Wipro has won a number of new deals from BPO, Fosters, GE, Unitech Wireless, Lavasa etc. These deals address investor concerns on revenues from technology and telecom divisions. We expect Wipro to trade on a par with Infosys, implying a further 5-10% outperformance. BUY, target of Rs 600," says IIFL's research report.

Stock Views on Bank Of India, PNB, Orchid Chemicals

KRChoksey on Bank Of India - Target Rs 380

KRChoksey has recommended a buy rating on Bank Of India with a target price of Rs 380 in its research report.

"Bank of India’s operational results were broadly in line with our expectations with headline profit numbers increasing 4% y-o-y to Rs 584.3 crores. Net Interest Income came under pressure as bank remained cautious on increasing advances (yoy advances growth up 23% yoy and 2.1% sequentially). We recommend a 'Buy' on Bank of India with a target of Rs 380," says KRChoksey's research report.


KRChoksey on PNB - Target Rs 780

KRChoksey has maintained its buy rating on Punjab National Bank with a target price of Rs 780 in its research report.

"PNB reported better than expected headline profit at Rs 832 crore (up 62.4% y-o-y) on back of higher trading gains. Net Interest Income held up better compared to peers as the bank was able to withstand margin pressures better. We maintain a 'Buy' on PNB with a target of Rs 780," says KRChoksey's research report.

Angel Broking on Orchid Chemicals - Target Rs 110

Angel Broking has maintained its buy rating on Orchid Chemicals and Pharmaceuticals with a target price of Rs 110 in its research report.

"For 1QFY2010, Orchid’s net sales increased 8% to Rs 305.8 crore (Rs 282.6 crore) driven by launch of the high-Margin Tazo-Pip in Europe. At current levels, the stock is trading at 6.1x FY2011E Adjusted Earnings and 1.3x FY2011E EV/Sales which we believe adequately factors in the concerns on the debt front and delays in getting approval for its high-Margin products. We maintain a 'Buy' on the stock, with a target price of Rs 110," says Angel's research report.

Bank of Baroda

Bank of Baroda is likely to emerge as a much stronger player. Investors can invest in the stock with a long-term perspective

Beta: 1.06
Institutional holding: 38.0%
Current dividend yield: 2.9%
Current P/E: 6.5
Current m-cap: Rs 10,035.6 cr

WITH A network of over 2,800 branches across the country, Bank of Baroda (BoB) is one of the largest public sector banks in India. The bank has been growing rapidly in the last few years, and it closed FY '08 with 46 branches in abroad—a mark that very few banks have achieved. BoB's wide base has helped it to tap all the resources-in rural, semi urban and the metro markets-to grow its balance sheet and revenues. BoB's international advances grew by more than 30% in FY '08, as a result of its wide presence in overseas markets.

BUSINESS

BoB's balance sheet has grown at a compounded average growth rate (CAGR) of 25.9% per annum in '06-'08. And, in terms of the growth trajectory, BoB has joined the fray of the top PSU banks, like, Punjab National Bank (PNB) and Bank of India (BoI).

The turnaround actually started becoming visible in the FY '06, when for the first time in the current decade the balance sheet expanded by close to 20%. Since, FY '06, the bank's loan book has been increasing at a rate in excess of 25%, but the deposits have been growing at a bit slower rate. This has helped it in improving the credit-deposit ratio i.e. a higher portion of deposits is extended as advances.

However, BoB's net interest margin (NIM) has been under pressure as it has come down from 3.4% in FY '05 to 2.9% in FY '08. One may get an impression that this has happened because the bank has not been able to pass on the increase in cost of deposit to its customers. However, this is because the bank had to step up its deposit mobilisation in the last two years in order to maintain high credit growth. This resulted in higher interest payments on account of higher deposits, thereby, compressing the net interest income, which ultimately led to fall in NIM. This shows that there was a trade off between BoB's shrinking NIM and growth in its advances. And, it has paid off, as the bank's profit grew at a CAGR of 30.8% in last three financial years.

The non-interest part of BoB's revenue has not been growing as fast as the fund-based revenue. The bank needs to improve its performance on this parameter. In the six months ending September '08, the bank's profit has grown by 16.5% on a year-on-year basis, propelled by 32.5% growth in its advances. It must be noted that the growth in advances took place in a sluggish business environment.

The NIM was also under pressure in the first half of the current financial period. This is visible as the interest expenses grew by a higher percentage than interest income. However, BoB rationalised its other expenses, and this helped in boosting its profit growth.

The asset quality is very high as the net NPAs formed just 0.43% of net advances at the end of September '08 quarter and on this count the bank's performance is as good as a top private bank. Its capital adequacy ratio stands at 13% and it shows that it is well capitalised.

VALUATION

The stock is trading at a multiple of 6.5 times the trailing twelve months' earnings. The low valuations do not justify the earnings growth, which is much higher. Moreover, the stock is trading at a discount to its book value (Rs 301 per share). A fundamentally sound stock, trading at less than its book value, is often the first to rise when the market starts moving up. Investors are advised to invest in the stock with long-term horizon.

Stock views on Excel Crop Care, Bank of India, HDFC, Rolta

BNP Paribas on ROLTA

BNP Paribas Securities has maintained its ‘buy’ rating on Rolta and price target of Rs 220, after its acquisition of Piocon, a move that is expected to generate revenues of $100 million over the next three to four years. “While the deal size itself is small and is unlikely to have an immediate material financial impact on Rolta, we are impressed by the company’s current strategic direction,” the foreign bank said in a report. “We remain positive on Rolta because the company stands out within its peer group with its niche market leadership, defensive-end market exposure, and high-revenue visibility,” it added.


Kotak Securities on HDFC

Kotak Securities’ private client research has downgraded HDFC to ‘accumulate’ from buy while trimming its price target to Rs 1,908 from Rs 2,061 earlier, citing the recent slowdown in housing loan demand. “We also believe that HDFC’s disbursement growth is likely to slow down during H2FY09 and FY10 moreover due to present unfavourable macro-economic conditions,” the broking house said in a note, after meeting the management. “Of late, retail demand for real estate that has slowed down significantly is largely on the back of a combined ef-fect of high real estate prices and higher interest rate. This has impacted the real estate affordability for retail consumers. Correction in property prices would be essential to boost real estate demand going forward,” it added.


India Infoline on BANK OF INDIA

India Infoline has upgraded Bank of India’s rating to ‘add’, citing higher earnings visibility and relative stability in turbulent times. “Bank of India is confident of maintaining high-quality earnings growth with a strong focus on key operating ratios. BoI expects loan growth of 24% in FY09, driven by strong demand for rupee funds by domestic corporates,” the broking outfit said. “The cut in deposit rates, along with a BPLR cut, should enable it to keep its net interest margins intact. Its AFS investment portfolio would benefit from falling bond yields, and we expect its fee income to grow in sync with loan growth,” it added.


LKP Shares on EXCEL CROP CARE


LKP Shares has rated Excel Crop Care a ‘buy’, with a 12-month price target of Rs 180. “We expect ECCL to grow its revenues and profits at a CAGR (compounded annual growth rate) of 43% and 26% over FY07-09 and the stock trading at 3 times FY09E (estimated) earnings, with a dividend yield of 6% is a good bet in the agrochemical space,” the broking house said in a client note. “We believe that the farm loan waiver would raise the farmers’ ability to purchase agrochemicals, which coupled with growing food needs and expectations of higher productivity from crops would push the demand for agrochemicals in India,” it added.

Stock views on NTPC, Bank of India, Inox Leisure

Ambit Capital on INOX LEISURE

AMBIT Capital has downgraded its rating on Inox Leisure from ‘buy’ to ‘sell’ citing disappointing quarterly numbers as one of the reasons. “Despite strong performance of key movies during the quarter, the company reported poor numbers that were way below our estimates. In our opinion, the company has failed to capitalise on an otherwise strong content supply,” said a brokerage note to clients. The brokerage says that it expects company’s earnings to be under pressure for some time. “Weak macro environment has taken a toll on the occupancies. Moreover, supply of content and screen space is not likely to improve in the forthcoming quarters. Consequently, we expect Inox to report a muted topline growth, going forward,” the note added.


Centrum Broking on BANK OF INDIA

Domestic brokerage house Centrum Broking has maintained its ‘buy’ rating on Bank of India, but lowered target price to Rs 330. According to brokerage’s estimates, the stock is trading at 0.9 times FY10 (estimated) adjusted book value. “We believe BoI would continue to command premium versus its peer PSU banks, primarily due to its strong returns ratios, better asset quality and higher profitability,” a Centrum note to clients said. BoI’s profit after tax for the quarter ended December rose 70% Y-o-Y to Rs 870 crore. “BoI continues to witness strong financial performance on the back of steady Net interest income (NII) and strong non-interest income growth and lower opex. We have raised our PAT estimates for FY09 by 29% and for FY10 by about 28% factoring in higher NII and other income growth.


Goldman Sachs on NTPC

Goldman Sachs has maintained its ‘buy’ rating on NTPC, saying that Central Electricity Regulatory Commission’s final tariff norms for FY10-14 are neutral to positive for NTPC’s earnings outlook, relative to the draft norms announced in September 2008. “We maintain that effective tax rate and economic life of projects are critical

Angel Broking views on Bank stocks - Punjab National Bank, Union Bank, Oriental Bank of Commerce, Bank Of India

Union Bank - Target of Rs 194


Angel Broking has recommended a buy rating Union Bank of India with a target of Rs 194 in its November 21, 2008 research report. "We believe UNBK is amongst the more profitable, efficient and competitive PSU Banks. We have a positive outlook on the bank due to traction in CASA deposit growth driven by large branch expansion plans as well as cost-efficient operations. We expect the Bank to deliver 12% CAGR in Net Profit and 24% RoE over FY2008-10E."


"At Rs 144, the stock is trading at 4.2x FY2010E EPS of Rs 34.3 and 0.9x FY2010E ABV of Rs 161.9. The stock has been trading at a median one-year forward P/ABV multiple of 1.1x since April 2002. We value the stock at 1.2x FY2010E ABV to arrive at a 12-month Target Price of Rs 194, implying an upside of 35%. We recommend a Buy on the stock," says Angel Broking's research report.


PNB - Target of Rs 625


Angel Broking has recommended a buy rating on Punjab National Bank (PNB) with a target of Rs 625 in its November 21, 2008 research report. "We believe PNB is amongst the more profitable and competitive PSBs, with relatively moderate Earnings growth and strong RoE prospects. We have a positive outlook on the Bank due to its superior CASA ratio and high core income component in Earnings, tempered by relatively moderate growth momentum. We expect the bank to deliver about 21% RoE over FY2008-10E and maintain high RoEs relative to peers over the longer term as well, underpinning higher valuation multiples."


"At Rs 451, the stock is trading at 4.9x FY2010E EPS of Rs 92.5 and 0.9x FY2010E Adjusted Book Value (ABV) of Rs 480.4. We value the stock at 1.3x FY2010E ABV to arrive at a 12-month Target Price of Rs 625,implying an upside of 39%. We recommend a Buy on the stock," says Angel Broking's research report.


Bank Of India - Target of Rs 317


Angel Broking has recommended a buy rating on Bank Of India with a target price of Rs 317 in its November 21, 2008 research report. "We are positive on Bank of India (BOI) due to its balanced funding mix, moderate operating costs, efficient capital management and high core fee income. Consistent improvement in operating leverage and relatively higher resilience in NIMs have led to improvement in core RoE. Hence, we value the stock at 1.3x FY2010E ABV (above its median P/ABV of 1.0x since April 2002) to arrive at a 12-month target price of Rs 317. We recommend a Buy on the stock," says Angel's research report.



Oriental Bank - Target of Rs 192


Angel Broking has recommended a buy rating on Oriental Bank of Commerce with a 12-month target price of Rs 192 in its November 21, 2008 research report. "Oriental Bank of Commerce's (OBC) sustainable RoAs are low on account of its weak Deposit mix and low Fee income. On account of reduced sustainable RoAs due to substantial NIM compression and moderate growth outlook on NII and Fee Income front, we value the stock at 0.7x FY2010E ABV, below the median one-year forward P/ABV multiple of 1.1x at which it has traded since April 2002."


"Nonetheless, at Rs 137, the stock is trading at cheap valuations of 3.9x FY2010E EPS of Rs 35.7 and 0.5x FY2010E Adjusted Book Value (ABV) of Rs 273.7. Hence, we recommend a Buy on the stock, with a 12-month Target Price of Rs 192, translating into an upside of 39%," says Angel Broking's research report.

Emkay Global on Piramal Life, Bank of India, Deepak Fertilizers

Piramal Life - Target Rs 270

Emkay Global Financial Services has recommended a buy rating on Piramal Life Sciences with a target price of Rs 270 in its September 1, 2008 research report. “Piramal Life Sciences Limited (PLSL), the demerged R&D entity of Piramal Healthcare (PIHC) began operations a decade ago. PLSL today boasts of a world class drug discovery facility, a strong pipeline of 15 molecules (half of them in Phase I and Phase II) and in-licensing agreements with global innovator companies like Eli Lilly, Merck and Pierre Fabre Laboratories. Our risk adjusted DCF based NPV is Rs 270 per share. From the infrastructure view, the company is a value play. The replacement cost of its R&D facility is 50% of its current Enterprise Value (EV). PLSL trades at a significant discount to its only comparable competitor, SPARC. Despite having a stronger pipeline of 15 molecules as against 8 for SPARC, PLSL trades at a significant discount (80%) to SPARC's market cap. We initiate coverage on the stock with a buy rating and a DCF based target price of Rs 270,” says Emkay Global Financial Services' research report

Bank of India- Target Rs 340

Emkay Global Financial Services has recommended a buy rating on Bank of India with price target of Rs 340, in its report dated October 23, 2008. "Bank of India (BOI) has reported a net profit of Rs 7.6 billion for Q2FY09, far ahead of our expectations. The stock currently trades at valuations of 4.7 x FY10E EPS and 1.0x FY10E ABV, with an FY10 ROE of 24%. We maintain BUY rating on the stock with a price target of Rs 340," says Emkay Global Financial Services' report.

Deepak Fertilizers - Target Rs 64

Emkay Global Financial Services has recommended a buy rating on Deepak Fertilizers with price target of Rs 64, in its report dated October 24, 2008. "Deepak Fertilizers and Chemicals reported strong performance in Q2FY09 on back of higher margins in Chemicals Segment (up 550 bps yoy) and good performance in Fertilizer Segment (EBIT of Rs 95 million against loss of Rs 15 million). We maintain our BUY rating with 25% upside," says Emkay Global Financial Services' report.

Arihant Capital Markets Views on Smallcap Banking Sector

INDIAN BANK

Although the banking sector has seen huge corrections in the market but Indian Bank remains one of the shining stars in the small cap space. A healthy level of CASA ratio reflects that the bank is less dependent on bulk deposits and has a high fee based income. The bank also has a healthy NIM of 3.2% and low level of net non performing assets.

Bank Of India

Bank Of India (BOI) has become a good bet among the PSU Banks. The bank has a sound balance sheet, and a good CASA ratio of 34%. Even the FII holdings are very low., just around 16%. Bank of India’s growth in aggregate business is reflected in its healthy NIM of 3.3%. The net non performing assets also stand at just 0.52%.

Karvy views on Ambuja Cements, Andhra Bank, Bank of India, Shree Cements, PVR

Buy PVR, target of Rs 260

Karvy Stock Broking has maintained its buy rating on PVR with a revised target price of Rs 260 in its August 8, 2008 research report. "PVR declared its 1Q FY09 results which were above our expectations. Net sales grew by 10.4% YoY as against our estimates of a 0.4% in 1Q FY09. This was majorly on account of higher than expected income from advertising and royalty. The net profit for 1Q FY09 declined by 35.3% YoY and grew by 43.7% QoQ as against our expectations of a decline of 61.7% YoY and decline of 14.8% QoQ."

"Considering the foray of PVR into new and promising businesses of production & distribution and lifestyle entertainment and subsequent de-risking of the exhibition business we believe that PVR will emerge as one of the better and stronger players in the multiplex industry. We have valued PVR at 13x FY10E earnings and 1.1x FY2010 sales. Subsequently, we have increased our price estimate on the company from Rs 230 to Rs 260 maintaining our BUY rating on the stock at current levels," says Karvy's research report.

Buy Shree Cements, target of Rs 733

Karvy Stock Broking has recommended a buy rating on Shree Cements with a target price of Rs 733 in its July 16, 2008 research report. "We expect net sales for the quarter ended June'08 would increase by 44.1% yoy to Rs 6.13bn driven by 26.6% growth in despatches and 11.2% growth in realization."

"SCL is currently trading at PER of 5.6x and EV/EBIDTA multiple of 3.3x on FY10E earnings. We had valued the ICL on 4x FY10E EV/EBIDTA and rate the company as BUY with price target of Rs 733," says Karvy's research report.

Buy Bank of India, target Rs 443

Karvy research has maintained buy rating on Bank of India with target price of Rs 443 in its July 17, 2008 report. "In 1st Q FY09, BoI's advances and deposits are expected to grow at 35% and 32% (Y-o-Y); the volume-led growth would result into 32% (Y-o-Y) jump in NII to Rs 12.5 billion. Estimated 24% growth in total other income on the back of fee-income growth and cost containment would lead to 36% growth in operating profit before provisions. Strain on net interest margin, significant de-growth treasury income and higher investment depreciation provisions of Rs 850 million would result in the bank's bottomline grow by 25% (Y-o-Y) to Rs 3.96 billion. The current stock price discounts FY2010 adjusted book value at 0.97x; we rate the stock as a BUY with a price target of Rs 443 at 1.88x adjusted book value FY2010" according to Karvy report.

Buy Andhra Bank, target Rs 108

Karvy research has maintained buy rating on Andhra Bank with target prie of Rs 108 in its July 17, 2008 report. "In 1st Q FY09, we assume that the Andhra Bank's advances and deposits would grow by 24% and 26.3% (Y-o-Y). The bank's net interest income (NII) would grow marginally by 2.5% (Y-o-Y) to Rs 3.7 billion and operating profit before provisions would grow by 6.3% (Y-o-Y) to Rs 2.37 billion. Higher depreciation provisions on investments of Rs 550 million would led to 18.8% (Y-o-Y) decline in net profit to 1.14 billion. Strain on net interest margin would be due to lower CASA share, higher cost of funds and lower yield on advances. We expect healthy growth in total fee income but treasury income could report degrowth. Total net income is expected to grow by 5.6% (Y-o-Y) to Rs 5.0 billion. At current market price, the stock is available at 0.65x ABV FY2010; we rate the stock as a BUY with a price target of Rs 108 at 1.34x adjusted book value FY2010" according to Karvy report.

Ambuja Cements an outperformer

Karvy Stock Broking has rated Ambuja Cements as an outperformer with a target price of Rs 101 in its July 16, 2008 research report. "For the quarter ending June 08, we expect the net sales would go up by 6.6% yoy to Rs 15.6 billion. Volume has shown a muted growth of 1.4% to 4.44 million tones due to export ban. Average realization would go up by 5.2% to Rs 3517 per tones."

"At the current market price of Rs 79 the company is trading at PER multiple of 10.2x and EV/EBIDTA multiple of 6.1x on CY09E earnings. We had valued the company on EV/EBIDTA multiple of 7.5x and rate the company as an outperformer with price target of Rs 101," says Karvy's research report.

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.