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.

Motilal Oswal views on Simplex Infrastructure, Nagarjuna Construction, IVRCL Infrastructure

Motilal Oswal on Simplex Infra - Target Rs 512

Motilal Oswal has maintained its buy rating on Simplex Infrastructure, with price target of Rs 512, in its report.

"We believe that changing geographic mix has contributed to the improvement in working capital. Middle East has lower working capital cycle as compared to India; where the revenue proportion has increased to 29% in FY09 as against 16.9% in FY08. We believe that further improvement looks challenging. We expect FY10 EPS at Rs 34 (up 28%YoY) and FY11 EPS of Rs 43 (up 25%YoY). At CMP, the stock is trading at PER of 13.4xFY10 and 10.7xFY11. Maintain Buy with a price target of Rs 512/sh (based on 12x FY11 earnings)," says Motilal Oswal's report.


Motilal Oswal on Nagarjuna Construction - Target Rs 164

Motilal Oswal has maintained its buy rating on Nagarjuna Construction Company, (NCC) with price target of Rs 164, in its report.

"NCC's international business through its subsidiaries in Middle East has achieved critical scale. During FY09, international business revenue stood at Rs 5.9 billion (+243% YoY) and net profit at Rs 249 million (+183% YoY). Currently, international operations contribute 27% (Rs 33 billion including Dubai real estate project cost of Rs 9 billion) of the total order backlog (Rs 122 billion). During FY09, international order book has grown by 36%, while the domestic order book has declined by 1%. We expect NCC to reports earnings CAGR of 24% during FY09-11. Our SOTP based target price is Rs 164. Maintain Buy," says Motilal Oswal's report.

Motilal Oswal on IVRCL Infra - Target Rs 372

Motilal Oswal has maintained its buy rating on IVRCL Infrastructure, with price target of Rs 372, in its report.

"We expect earning CAGR of 15% during FY09-FY11E (27% assuming full tax rate for FY09). At CMP, the stock quotes at P/E of 19.1x FY10E and 16.2x FY11E. Maintain Buy with a price target of Rs 372/share. We have valued core business at Rs 317/share (14x FY11E EPS), BOT projects at Rs 31/share (P/B of 1.5x) and other subsidiaries at Rs 24/share (based on CMP)," says Motilal Oswal's report.

Simplex Infrastructure

Simplex Infrastructure is well-diversified across the construction space and it is reasonably valued too. However, there are some caveats which need to be looked at

OVER THE past one year, construction companies, especially in the midcap space, have been hammered on the bourses. The stocks have lost between 65-75% in value triggered by fears of slowing down of orders and also high interest costs affecting the profitability of the companies.

However, in the last one month, most stocks in the segment have gained 30-50%. The two stimulus packages announced by the government are likely to have a positive rub off on the sector. Mid-cap companies are also likely to gain, especially those with a diversified portfolio. Simplex Infrastructure fits the bill perfectly. The company looks undervalued compared to its peers and is a good buy for long-term investors.

BUSINESS

Simplex Infrastructure is an eighty-four-year-old company which started off with piling (ground engineering) operations in 1924. It has added various businesses and successfully diversified into industrial construction, building and housing, urban infrastructure, power, marine and transport (roads, railways and bridges).

The company was also planning to venture into oil rigs and real estate business in a big way. It entered into a two-year contract in mid 2007 with Oil India for leasing a 1,500 HP rig at $16,000 per day for on-shore exploration. However, with the fall in crude oil prices and consequent decline in the day rates and also the downturn in the real estate market, the company has held back the plans.

STRONG ORDER BASE

The company provides strong revenue visibility with an order backlog of Rs 10,600 crore; nearly three times its trailing four quarter revenues. Going forward, the company plans to focus on highgrowth segments like power, marine, railways, bridges and urban infrastructure. According to the company, it is pre-qualified for projects worth Rs 28,000 crore while Rs 7,000 worth of orders are in the L1 stage (short-listing pending after bidding). The company's strike rate is around 20%.

FINANCIALS

In the trailing four quarters, net sales leaped by 70%, while growth in operating profit and net profit trailed at 61% and 65%, respectively. In the December '08 quarter, we expect the company to report 45% growth in revenues to Rs 1019.2 crore. Operating profit margins are expected to decline marginally by about 40 basis points to 9.6%. About 92% of its contracts are on a variable basis and any savings in costs are likely to be passed on to customers. Net profit is expected to grow at a slower 30% to Rs 28.5 crore due to higher fixed costs (read interest and depreciation) and taxes.

KEY CONCERNS

Investors need to keep a watch on future order inflows, which could get affected due to the economic slowdown and credit crunch. Also, the buildings and housing segment that constitute 28% of the total order book, could witness some pressure.

Another concern is the relatively high debt to equity ratio of over 1 in FY '08, which is expected to rise further to 1.5 by the end of FY '09. The company has raised Rs 220 crore through issue of 5.5 million warrants in FY ‘08, which are convertible into equity at Rs 401 per share by end of FY '09. With the stock currently trading at Rs 172, cancellation of conversion cannot be ruled out, in which case debt and interest costs could rise further.

The company also has a poor interest coverage ratio of around two in FY '08 as compared to over 3-3.5 times for IVRCL and Nagarjuna Construction. The company's operating cash flow has been negative for three financial years prior to FY '08. Cash flow may come under pressure due to the economic slowdown, delays in the projects/payments and higher interest costs.

VALUATION

At its current price, the stock is trading at around 6.4 times its earning for trailing four quarters ending September ‘08. This is much lower than the valuations of its nearest peers namely Nagarjuna Construction (7.9 times). It trades at 5.6 times and 3.8 times its estimated earnings for FY '09 and FY '10 (diluted) respectively. This provides an attractive opportunity for investors to accumulate stocks at dips.

Stock Views on Crompton Greaves, Madhucon Projects, Great Offshore

SKP Securities on Great Offshore - Target Rs 454

SKP Securities has recommended a buy rating on Great Offshore, with a price target of Rs 454, in its report dated.


"GOL has forayed in to port management and single point mooring operations by acquiring 100% equity stake in two Hydrabad based companies KEI-RSOS Maritime Ltd. (KEI) and Rajamahendri Shipping & Oilfield Services Ltd (RSOS) with purchase consideration of Rs 1.6 billion. At the current market price of Rs 360, the stock is trading at a P/BV of 1.16x and 0.95x of FY10E and FY11E book value of Rs 310 and Rs 378 respectively. We recommend 'BUY' rating on the stock with a target price of Rs 454/- (26% upside) in 12 months implying a P/BV multiple of 1.2x of FY11E book value," says SKP Securities' report.


Angel Broking on Madhucon Projects - Target Rs 246

Angel Broking has recommended a buy rating on Madhucon Projects, with price target of Rs 246, in its report .


"Madhucon Projects stock has outperformed the BSE Sensex significantly (by 25.2%) in CY2009 YTD, which is in line with our expectation as the stock had slipped into a deep undervaluation zone. We have increased our Target Price for the stock on the back of the following factors, viz.

1) Better demand outlook: Post election verdict there has been a positive change in economic outlook and the concerns hovering over Infrastructure Sector have been put to rest; and
2) Increasing our Target Multiple: We have valued MPL's core Construction business at a P/E of 6x FY2011E (discount to historical average and to peers like IVRCL Infra, Nagarjuna Construction, etc.) from 4x earlier on account of improved Earnings visibility and re-rating of the sector. We recommend a Buy on the stock with a SOTP Target Price of Rs 246, at which level the stock would trade at 1.3x FY2011E P/BV (discount to its peers). It may be noted here that we have not factored in any potential upside from MPL's Coal and Power ventures," says Angel Broking's report.

Angel Broking on Crompton Greaves - Target Rs 306

Angel Broking has recommended an accumulate rating on Crompton Greaves, with price target of Rs 306, in its report.

"It is pertinent to note here that during April 2005 - June 2009, CGL traded at an average discount of about 48% to the forward rolling P/E of ABB primarily due to the technological gaps and superior growth for ABB. Currently also, CGL is quoting at a hefty discount of 43-44% to ABB. However, we believe that such a high 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 (15.6% CAGR for CGL as compared to 3.6% CAGR for ABB over the next two years) and higher average RoEs of 28-29% for CGL as against 21-22% for ABB. Nonetheless, some discount would continue to persist due to the relative advantage of access to the parental technology, which ABB posses. We assign CGL a Target P/E multiple of 15x and Initiate Coverage on the stock, with an Accumulate recommendation and Target Price of Rs 306," says Angel Broking's report.

Stock views on KEC International, Nagarjuna Construction, Gujarat State Petronet

LKP Shares on Gujarat State Petronet - Target Rs 42

LKP Shares has recommended a buy rating on Gujarat State Petronet (GSPL) with a price target of Rs 42 in its research report.

"GSPL reported net sales of Rs 110.6 crore, up 6.2% year on year (YoY). Its operating profit of Rs 101.6 crore was up by 4.6% YoY," LKP said in its report.

"Higher staff and O&M expenses reduced the profit margin by 128 bps. Net profit growth of 10% YoY for Q309 was driven by good realizations, a growth of 51% YoY. Fixed capacity utilization charges — take-or-pay clause — were triggered on some of the contracts in this quarter, which led to increase in realizations."

"As per the priority set out by the new gas utilization policy, other sectors have been listed out prior to Refineries in the order of gas supply. This, we believe, shall lead to further delay of gas flowing from GSPL’s network to RIL’s refinery at Jamnagar to Q3’10. Also, many contracts are renewed at the higher tariff price starting January 1’09, which shall bolster the revenue earnings of the company. We recommend a BUY on the stock with a price target of Rs 42 for a medium term horizon," the research report said.


Angel Broking on Nagarjuna Construction - Target Rs 96


Angel Broking has maintained its buy rating on Nagarjuna Construction Co. with a target price of Rs 96 in its research report.

"The Government of Andhra Pradesh has cancelled order worth Rs 1,000 crore awarded to Nagarjuna Construction Company (NCC). The cancelled order was for Andhra Pradesh International Centre project, a multi-utility complex at the AP Bhavan premises in New Delhi and was proposed to be taken up through the PPP mode on a Build-Operate-Transfer basis. The work order scope envisaged to set up an international convention centre, guesthouse, residential quarters, hostel and dormitory facilities for government use, and service apartments on 19.84 acres at AP Bhavan. The order was canceled citing failure to execute the development agreement (DA) as well as licence agreement (LA) even after expiry of the 75-day deadline. NCC consortium also failed to submit performance security of Rs 100 crore before the execution of DA and LA."


"The consortium was also required to pay Rs 25 crore towards project development expenses but had paid only Rs 5 crore even after timeline extension by 60 days. As per the order agreement the developer was required to pay an annual minimum guarantee amount of Rs 45 crore during the first 10 years from commercial operation, Rs 60 crore during the next 10 years and Rs 75 crore during the last 10 years of the 30-year licence period. The order cancellation takes the outstanding order book of NCC to Rs 12,131crore which is 3.5x its FY2008 revenues. We maintain a Buy on the stock with a target price of Rs 96," says Angel Broking's research report.

IIFL on KEC International - Target Rs 160

IIFL has recommended an add rating on KEC International with a price target of Rs 160 in its research report.

"In our recent meeting with KEC International, management said it expects the company to achieve stable revenue growth in FY10 on the back of the current order book and likely order inflows from Middle East and Africa. However, increasing competition-especially in the domestic market-could play spoilsport for both new project wins and EBITDA margins. We estimate FY10-11 EBITDA margins at 9%, against management expectation of 10%."

"The company would continue to have forex gains/losses on mobilisation advances for international projects, as these are not hedged. Management hinted at a possible change in accounting policy for amortisation of reserves created due to the merger of RPG Transmission and NITEL in FY08. This change would result in 9M FY09 profits being lower by Rs 90 million. We incorporate this accounting change in our current estimates resulting FY09-10ii earnings estimates being lower by 8%. Add, price target of Rs 160," says IIFL's research report.

Stock Views on Idea Cellular, Country Club, Mphasis, Nagarjuna Construction

Prabhudas Lilladher on Idea Cellular - Target of Rs 94


Prabhudas Lilladher has initiated an accumulate rating on Idea Cellular with a target of Rs 94 in its September 19, 2008 research report. " We initiate coverage on Idea cellular with an accumulate rating and a DCF based target price of Rs 94 (WACC=13%, Terminal growth rate=3%). Idea cellular is in the early stage of wireless coverage and at least 3-4 years away from attaining maturity. Further, new rollouts are currently gestation businesses (with around 10-12 quarters away from breaking even). Hence, we have used DCF as our prime tool to capture the true potential of the business," says Prabhudas Lilladher research report.


Prabhudas Lilladher on Country Club - Target of Rs 797



Prabhudas Lilladher has maintained its buy rating on Country Club (India) (CCIL) with a target of Rs 797 in its September 20, 2008 research report. "CCIL’s aggressive expansion plans in terms of acquiring properties and offering comprehensive range of products to its clients has helped the company to grow at CAGR of 210.8% over last three years to Rs 3.18 billion in FY08. At the CMP of Rs 270, the stock trades at 4.5x FY09E and 2.7x FY10E earnings."

"We believe that CCIL should trade at a premium to the current valuations, given its strong revenue and profit growth. We maintain BUY rating on the stock with a target price of Rs 797 (8x FY10E)," says Prabhudas Lilladher's research report.


Emkay Global on Mphasis - Target of Rs 240


Emkay Global Financial Services has maintained its buy rating on Mphasis with a price target of Rs 240 in its December 1, 2008 research report. "Mphasis reported revenues of Rs 3282 million, with operating margins at 26.5%, up by 530 bps V/s September’08 quarter, highest in the company's reporting history for Oct ’08. Net profits for October '08 came in at Rs 754 million helped by translation gains as well as tax credits (effective tax rate for the month at <1%).">Angel on Nagarjuna Construction - Target of Rs 96


Angel Broking has maintained its buy rating on Nagarjuna Construction Company with a target price of Rs 96 in its December 2, 2008 research report. "Nagarjuna Construction Company (NCC), a diversified infrastructure player has bagged six orders aggregating to Rs 484 crore. The orders secured are related to construction of buildings at various regions across the country spanning construction works related from 5 star Hotels to Educational institutions. The order sizes vary from Rs 36 crore to Rs 121 crore and are to be executed over a period varying between 12 months to 21 months. With accretion of these orders, the outstanding order book of NCC stands at Rs 13,440 crore which is 3.9x FY2008 revenues. We maintain a Buy on the stock, with a target price of Rs 96," says Angel's research report.

Stock Views on Jubilant Organosys, Nagarjuna Construction, IOB, Axis Bank

Emkay Global on Jubilant Organosys - Target Rs 224


Emkay Global Financial Services has maintained its buy rating on Jubilant Organosys with a target of Rs 224 in its December 8, 2008 research report. "The stock price of Jubilant has come down by 31% in the last one month and has underperformed both- the Sensex as well as BSE healthcare index. We expect robust growth opportunities in outsourcing to be the key growth driver for the company. Being the largest CRAMS company in India, Jubilant is likely to capture a major share of the global outsourcing opportunity."


Prabhudas Lilladher on Nagarjuna Construction - Target Rs 90


Prabhudas Lilladher has upgraded its rating on Nagarjuna Construction Co from accumulate to buy with a target of Rs 90 in its December 4, 2008 research report. "The stock has also seen steep correction from its yearly highs and a robust order book along with lower interest and commodity rates makes it attractive at current levels. The company is also now expected to limit on road BOTs reducing business risk. We upgrade our rating from Accumulate to BUY, target of Rs 90," says Prabhudas Lilladher's research report.


Karvy Stock Broking on Indian Overseas Bank (IOB) - Target Rs 144


Karvy Stock Broking has maintained its buy rating on Indian Overseas Bank (IOB) with a target price of Rs 144 in its December 8, 2008 research report. "We are revising downward Indian Overseas Bank's earning estimates by 4.2% to Rs 11.7 billion in FY10 due to pressure on margin, reduced other income (mainly due to relatively negligible treasury income) and higher credit cost. Based on our revised estimates, we reduce our IOB's earning estimates by 4.2% Rs 11.7 billion in FY10 and revise downward our target price by 12.4% to Rs 144; we re-iterate our BUY rating with a target price of Rs144. Based on our target price the stock would trade at 1.52x adjusted book value FY10," says Karvy's research report.


ULJK Securities on Axis Bank - Target of Rs 596


ULJK Securities has recommended a buy rating on Axis Bank with a target of Rs 596 in its December 2, 2008 research report. "Axis Bank has been able to sustain a high growth in its loan book since the last five years and the Bank is able to maintain the same growth during H1FY09. The return ratios of the Bank are among one of the highest in the industry. Looking at its exponential growth prospects and the valuation, we believe the stock provides an investment opportunity for a decent return in the medium to long term. At our target price, Axis Bank will trade at a P/BV of 1.9x on the FY09E book value of Rs 277 and a P/BV of 1.6 on the FY10E book value of Rs 319, Buy," says ULJK Securities' research report.

Emkay Global Views on Aban Offshore, Infosys, Nagarjuna Construction

Aban Offshore - Target of Rs 3868

Emkay Global Financial Services has recommended a buy rating on Aban Offshore, with a price target of Rs 3868, in its report dated September 16, 2008.

"At current levels, Aban is discounting its FY2010E earnings by 5.1X, which is a significant 24% discount to the valuations commanded by global drilling majors. However, we believe that Aban’s valuation does not adequately capture Aban’s steeper earnings growth of 123% CAGR (even after the earnings downgrade) as compared to 17% CAGR for its global peers and its superlative RoE of 48% as compared to 24% for global peers. At 5.1X FY2010E earnings, Aban’s valuations are extremely compelling and it more than adequately factors possible softening in Jack up day rates. We continue to believe that the global offshore drilling industry fundamentals are still robust and believe that Aban is the best pick among domestic players. We maintain our BUY recommendation on the stock with a revised price target of Rs 3868 (earlier target of Rs 5400)," says Emkay Global Financial Services' research report.

Infosys - Target of Rs 1836

Emkay Global Financial Services has recommended a hold rating on Infosys Technologies with a target of Rs 1836 in its September 12, 2008 research report."Although the rapid appreciation of the USD V/s the GBP and Euro would impact Infosys’s USD term revenue growth (we estimate that Infosys’s FY09 revenue growth guidance of 19-21% YoY growth could be negatively impacted by 250 bps and Infosys could report USD revenue growth of 18.3% V/s our estimates of 20.8% currently). However Infosys’s earnings estimates could still be upgraded by 4.9% and 4.5% for FY09 and FY10 respectively to Rs 107.2 and Rs 122.6 (if we were to base the estimates at Rs 45/USD for FY09 and Rs 44/USD for FY10 respectively)," says Emkay Global's research report.

Nagarjuna Construction - Target of Rs 154

Angel Broking has maintained its buy rating on Nagarjuna Construction Company with a target of Rs 154 in its September 16, 2008 research report. "Nagarjuna Construction Company (NCC) is on track to emerge as a diversified infra heavyweight with SPVs and Real Estate accounting for 20% of our sum-of-the-parts (SOTP) target price. It is also diversifying into the Metals, Oil and Gas and Power sectors. At Rs113, the stock is trading at valuations of 7.7x FY2010E EPS of Rs 9.5 post adjusting for the BOT projects and Real Estate, which is attractive in view of the good order book position (Rs 14,500 cr) and positive outlook on the Infrastructure sector. We have arrived at a SOTP target price of Rs 154 valuing NCC's core construction business at Rs 114 (12 x FY2010E EPS), BOT business at Rs 18.7 and Real Estate arm at Rs 20.6. We maintain a buy on the stock, with a revised 12-month target price of Rs 154," says to Angel Broking report.