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 Shree Cement, Tata Motors, Larsen & Toubro, Reliance Power

BNP Paribas on RELIANCE POWER

BNP Paribas has reiterated its ‘reduce’ rating on Reliance Power while lowering its price target from the earlier Rs 136 to Rs 105, as it feels that the company does not have any operating income and there is a likelihood of some projects getting delayed. “The company currently has no operating income and only generates interest on the cash it raised in its IPO last year,” says a report. BNP Paribas also feels that Reliance Power’s Sasan and Chitrangi projects could get delayed, as Tata Power has filed a petition in the Delhi High Court. It estimates an upside of Rs 15 per share to the target price, if RPL’s gas dispute with RIL is resolved at $5.20/ mmbtu. “We also estimate an upside of Rs 37 per share, if RPL is able to execute both Sasan and Chitrangi projects,” it adds.

Motilal Oswal on LARSEN & TOUBRO

Motilal Oswal has maintained a ‘neutral’ rating on Larsen & Toubro while lowering its capex guidance for the company. It feels that going forward, there are increased possibilities of execution delays. “Standalone capex guidance for FY09 has been reduced to Rs 15 billion now, from earlier Rs 20 billion,” says a report. “During 1HFY09, the capex stood at Rs 8 billion, indicating that 2HFY09 capex has been cut sharply,” it added. The brokerage also feels that while there have been no meaningful delays till date, there is a probability of execution challenges for segments like metals/minerals (8-9% of order book), airports (9-11%+) and real estate (6%). It expects L&T to report consolidated EPS of Rs 52.6 per share for FY09 (up 34% Y-o-Y), Rs 57.4 per share in FY10 (up 9% Y-o-Y) and Rs 60.8 per share in FY11 (up 6% Y-o-Y).

HDFC Securities on TATA MOTORS

HDFC Securities has maintained its ‘sell’ rating on Tata Motors due to various factors, including demand slowdown, lack of credit financing and failure of the company’s rights issue. “The demand is slowing down drastically. Lack of credit financing, coupled with high interest rates are forcing customers to postpone purchases hitting among others Tata Motors,” says a report. To align production with demand, the company had temporarily shut down its Jamshedpur, Pune and Lucknow plants, it adds. The brokerage also feels that the failure of the rights issue has reflected badly on Tata Motor’s credibility and ability to raise money on its own. We believe the JLR acquisition will continue to be an overhang on Tata Motors’ stock, it says. The profitability of Tata Motor’s subsidiaries in Q2 FY09 was also very disappointing, it notes

India Infoline on SHREE CEMENT

India Infoline has retained its ‘add’ rating on Shree Cement with a target price of Rs 587 on expectations of higher volume and lower decline in cement prices. “The company has nine mtpa cement production capacity and plans to increase it to 10 mtpa by mid-FY10,” says a report. The company also plans to set up a 35MW WHR-based and around 40MW petcoke-fired power plant, it adds. The company, according to the report, recorded strong volume growth (>30% Y-o-Y) in the quarter ended December 2008 that enabled it to offer bigger discounts than its peers. The company is expanding its cement capacity by adding another line (Unit VII) at Ras — scheduled to start production by mid-FY10, says the report. The company is trading at EV/tonne of $41 and does not reflect the company’s

Stock views on Tata Power, ICICI Bank, Siemens India,

MERILL Lynch on RELIANCE INDUSTRIES

MERILL Lynch has cut its price objective on Reliance Industries (RIL) by 15% from Rs 1,825 to Rs 1,555 based on sum of the parts valuation. However, it continues to retain its ‘buy’ on the stock. The brokerage says that the cut is due to cut in the value of its refining business and value of its investment in RPL. The former has been cut by 56% to Rs 168 per share and the latter by 39% to Rs 137 per share. “We have steeply cut Singapore complex refining margins forecast for financial year (FY) 2010 and 2011 (expected). Consequently, refining margins of Reliance Industries (RIL) and refining subsidiary Reliance Petroleum (RPL), too, have been steeply cut,” the report said. The cut is relatively modest assuming a weaker rupee, it adds. RIL’s presence in E&P and petrochemicals also helped dilute impact of refining margin cut on RIL. The report says that the key risks include failure in the retail business, and changes in government policies like withdrawal of the tax holiday which may have a direct impact on the business, cash flow and profit, among other things.


Enam Securities on SIEMENS INDIA

Enam Securities has put an ‘underperformer’ on Siemens India on lower-than-expected results and poor performance by its subsidiaries. The brokerage says that Siemens’ continuing engineering businesses — power, industry and transportation are showing signs of slowing. The IT business is unlikely to create value for the shareholders. “We are revising our earnings estimates downward by 31% to Rs 18.5 to account for slowing business traction. We downgrade the stock to sector underperformer,” the report says. It adds that the management of the company has hinted at delays in contract finalisation and contract renegotiations at lower prices by customers due to the decline in commodity prices. The management believes that the power division will be a key growth driver, driven by strong growth in domestic market and huge opportunity in the Middle East. “Going forward, the management would be focusing on the quality and profitability of order rather than size and volume of the project,” says the report.


BNP Paribas Securities on ICICI BANK


BNP Paribas Securities has maintained its ‘buy’ rating on ICICI Banks on account of bank’s strategy of consciously slowing down on growth in riskier categories. The brokerage house says, “Our analysis of incremental advances — broken into mortgage, non-collateralised retail and corporate loans — vis-`-vis the incremental gross nonperforming loans (NPLs) additions indicates that bank’s strategy of consciously slowing down on growth in riskier categories has started yielding results.” It expects a slowdown in rate of growth of non-collateralised NPLs over the next two quarters, although in absolute terms, incremental NPLs will continue in the Rs 3-4-billion-perquarter range as at present. The brokerage says that the bank trades at one time its financial year 2010 (expected) book value at its target price of Rs 620. “We use a three-stage residual income valuation to arrive at our core bank target price of Rs 475 and a sum-of-the-parts approach to arrive at Rs 145 per share for subsidiaries. Our aggregate target price for ICICI Bank is Rs 620.”


Indiabulls on TATA POWER


Indiabulls has upgraded its rating on private power sector major Tata Power from ‘hold’ to ‘buy’. The brokerage is upbeat about the company’s future on the back of its upcoming projects. It believes that the existing power generation and distribution businesses and stable revenue-generating subsidiaries provide stability to the company. “Based on our SOTP valuation, we have arrived at a target price of Rs 872. It says that stock price has corrected sharply since our last quarterly report, and it is undervalued at the current market price. It, however, adds that the company may find it difficult to finance its other expansion plans. But due to its experienced management team, it is expected to tide over the current crisis. It adds that any delay in completion of the Maithon and Mundra power projects would adversely affect company’s rating