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Shiv-Vani Oil & Gas Exp for Medium Term

Saturday, September 29, 2007

ICICI recommends investment in Shiv-Vani Oil & Gas Exp for medium term [3-6] months with a price target of Rs 403.

Shiv-Vani provides services to ONGC, OIL, RIL, and Cairns India for on-shore exploration services. The company provides the entire value added services from seismic data acquisition through drilling. The growth of the company is a function of increase in the number of onshore block on offer for exploration and production. Under the New Exploration Licensing Policy - VI (NELP), the central government has invited bids for 55 exploration blocks comprising 25 onshore, 6 shallow water blocks and 24 deepwater blocks (beyond 400 metres). Only 18% of the total sedimentary basinals area has been explored so far. Huge potential is yet to be explored. Shiv-Vani has a 50% market share and is set to be one of the primary beneficiaries of the increase in the number onshore blocks on offer.

Shiv-Vani is sitting on an order book position of Rs 3,200 crore. Of this, Rs 1,000 crore pertains to a company in Oman and is spread over 15 years. The remaining Rs 2,200 crore, to be executed over the next 2 to 2.5 years is around 8x CY06 consolidated revenue of Rs 276.78 crore.

The stock trades at 11.37x its diluted CY08E EPS of Rs 29.56.Its foray into the offshore business could lead to a re-rating on the counter. The stock will be an outperformer with price target of Rs 403 over a 6-month time frame.
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Published by Webmaster @ 12:23 PM IST.

Buy B L Kashyap - Sharekhan

Friday, September 28, 2007

B L Kashyap[BLK] has proven execution skills, reasonably large-scale of operations and an established customer base, BLK is well poised to ride the construction boom in the fast-growing industrial, residential, commercial and retail segments.

BLK's is our type of company because it focuses on providing contractual construction services to private sector clients and it has consciously avoided exposure to long duration infrastructure projects that are prone to delays and are much more capital intensive. Thus, it does not require regular infusion of funds through debt or equity dilution.

BLK has shown a healthy CAGR of 72.6% in its stand-alone revenues to Rs808 crore over the past three years. What's more, the strong order backlog of Rs2,100 crore (2.6x FY2007 revenues) provides a robust revenue growth outlook for the coming years. Expect BLK to report CAGR of 48.8% over FY2007-10.

Real Estate Arm: BLK has forayed into real estate development through its subsidiary SSP, which undertakes joint development projects with the existing owners of land. Currently, it is executing six projects with saleable area of 13.2lsf (SSP's share of around 8.5lsf) and also has rights for around 150-acre land in Bikaner, Rajasthan. Sharekhan value SSP at Rs580 crore.

At the current market price the stock trades at attractive valuations of 12.8x FY2009E and 9.3x FY2010E earnings (after adjusting for the value of its subsidiary: Rs554 per share). SSKI analysts recommends a Buy call on BLK with a price target of Rs2,850.
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Published by Webmaster @ 9:30 AM IST.

Merill Lynch Neutral on ITC

ITC's cigarette performance in Sept Quarter will not live up to market's expectations. ITC's volumes in Sept Quarter are expected to be down 3-4% y-o-y and volumes are lower than June Quarter as the later had the hit of higher prices for only 2 months. Secondly, it bears the full brunt of Uttar Pradesh tax of 32%. UP accounts for 6% of ITC's volumes and has not implemented VAT of 12.5%.

ITC's recent shampoo launch marks its entry in the household and personal care (HPC) category. The brand, Fiamma Di Wills has been launched in six SKUs and is priced in between HUL's Sunsilk and Clinic All Clear. We believe next in the pipeline are shampoo sachets and soaps. These events imply that ITC's FMCG losses (5% of EBIT) are unlikely to decline in the near future.

ITC is expected to report a fully diluted EPS of Rs 8.27 for FY08 and Rs 9.36 for FY09.

DalalStreet.Biz Recommendation:
We recommend our reader / investors to switch out of ITC into other growth stock.
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Published by Webmaster @ 1:01 AM IST.

Kotak Bullish on Pfizer India

Thursday, September 27, 2007

Kotak Equity research has reiterated a BUY on Pfizer India with a price target of Rs 965.

Pfizer has announced its quarterly results for Q3CY07, which is disappointing at the revenue level. Net sales fell 1.6% to Rs.1.76 bn from Rs.1.78 bn. Reported net profit was up 9.8% to Rs.308 mn as compared to Rs.281 mn. The pharma and consumer healthcare business fell 3.5% to Rs.1.58 bn. The animal healthcare business rose 18% to Rs.179 mn and income from clinical development services declined 38.1% to Rs.43 mn.

The company is targeting 14% compounded revenue growth (for continuing business) and a 500 bps expansion in EBITDA margin by CY10. New launches through the parent's portfolio as well as launch of patented products from CY08 onwards will be key revenue drivers. EBITDA margins are likely to improve from the existing 25% to about 30% by CY10 led by higher revenue growth, outsourcing of manufacturing and cost reductions in the distribution/supply chain areas.

Pfizer currently has 3.1 bn cash. It will receive 2.27 bn cash from sale of its Chandigarh property. Further 3.5 bn is expected from sale of its consumer health care business. In all it is likely to have Rs 10 bn in cash which translates to Rs 335 / share. At the current market price of Rs.720, the stock is trading at 14.5x CY07 and 12.1x CY08 earnings estimate. Kotak maintains BUY with a target price Rs.965.
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Published by Webmaster @ 11:23 AM IST.

Buy Usha Martin - Edelweiss Capital

Usha Martin is the world's second largest wire rope manufacturer. The company is enhancing its backward integration by increasing the proportion of captive metallics (DRI+hot metal), captive coal mining (iron ore is already at 100% captive level) for its sponge iron unit, and maintaining its captive power usage in line with the enhanced capacity. The company is expanding its steel capacity by 2.25x to reach close to 1 mtpa in stages by end of FY09. To support its enhanced steel capacity and keep the operating costs under control, Usha Martin is adding DRI and hot metal/pig iron capacities of 200,000 tpa and 400,000 tpa, respectively, and setting up captive power plants of total 60 MW.

Coal from the company's coal mine is expected to be available from Q4FY08. Combined wire, strand, and wire rope capacity will increase from the current level of 225,400 tpa to 303,200 in stages in FY09. The proportion of value-added products such as oil tempered wires, bright bars, and TMT bars is also being enhanced, thereby, significantly enriching the company’s already diverse product mix. Considering the usage of its products across engineering, oil and gas, automotive, and construction sectors, Usha Martin is also a proxy play on the oil and gas and infrastructure sectors.

Led by the above capacity expansion cum backward integration project, the company's topline and bottomline are expected to increase at a CAGR of 20.9% and 43.8% respectively over FY07-10E. At CMP of INR 59, Usha Martin trades at P/E of 6.5x FY09E earnings, which is at a discount of about 30% to the sector average. Edelweiss recommends a BUY on the stock.
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Published by Webmaster @ 10:12 AM IST.

Petronet LNG running out of Gas - SELL

Wednesday, September 26, 2007

Globally LNG projects continue to be delayed, and prices continue to rise. Domestically produced gas in India are US$4.0-5.5/mmbtu, making LNG economics unfavorable esp. in light of ever increasing indigenous supply prospects.

In the current high price environment for LNG, the likelihood of Petronet entering into a long-term agreement anytime soon to secure supplies for its Dahej expansion and greenfield Kochi terminal appear unlikely. Spot volumes will continue to drive earnings in the near term (FY09-10E earnings increased by 11-12%); despite increasing domestic supplies, we build in high long-term utilizations driven by sustained growth in gas demand. Power plans, though interesting, are at a preliminary stage and completely contingent on competitive pricing for long-term LNG.

Petronet LNG stock is up 47% in 1 month, Citi analyst believes that the stock more than adequately reflects the high capacity utilizations (95%) that is assume in numbers in the longer term. Inherent structural challenges (increasing domestic supplies + globally high LNG prices) lend to believe that the risk is now more on the downside and warrants us to change recommendation. The DCF values are quite sensitive to capacity utilization - every 5% dip in utilization affects fair value by Rs6. As a consequence Citi downgrades the stock to Sell (3M) from Buy (1M) with TP of Rs78 on roll-forward.
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Published by Webmaster @ 12:54 PM IST.

Accumulate Nagarjuna Construction - HDFC Sec

Nagarjuna Constructions Corp Ltd [NCCL] has six verticals comprising of Buildings and Housing, Transportation, Water and Environment, Electricals, Irrigation and Real Estate. Three verticals, Buildings and Housing, Transportation and Water and Environment together constitute 75% of the order backlog as well as turnover of NCCL.

NCCL has a well-diversified order book position, which is currently Rs 75.2 bn. The average execution period is 2.5 years, spread over more than 90 projects. Out of total order book, about 10% are overseas orders. Read Dalal Street News on Orders Secured by NCCL.

NCCL consolidated its real estate initiatives under NCC Urban Infrastructure (80% subsidiary, with promoters of NCC having 20%).NCCL in joint venture with Tishman Speyer & ICICI Ventures is planning to develop township on 400 acres site in Tellapur, Hyderabad and NCCL has a 26% stake in this project.

NCC has set up a separate company, Nagarjuna Infrastructure Holdings (NIH), to primarily focus on BOT related infrastructure projects. NCCL has an excellent track record of delivery among its peers portraying a reflection of its superior execution ability. US based Equity Fund, Blackstone ventures has bought 12.5% stake in the company.

NCCL's foray into higher margin segments and the traction that its subsidiaries are expected to grow in the near future mean better visibility for revenues and profits going forward. On its fully diluted equity, it quotes about 18.5 - 19.5 times its FY09 earnings. HDFC recommends to accumulate NCCL in the Rs. 202 -224 band with an expected return of about 20% returns over the next 8-12 months.
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Published by Webmaster @ 1:57 AM IST.

SELL Educomp Solutions - High Risk

Tuesday, September 25, 2007

You are REading this first hereBreaking News:Citigroup in a research report has initiated coverage on Educomp Solutions with a AGGRESSIVE SELL rating and has categorized the stock in "HIGH RISK" vertical.

The crazy Indian market is ignoring expensive valuations and high risks in Educomp’s business model and aggressive accounting policy, in our view. We see 20% downside for the stock. Citi forecasts 102% revenue CAGR and 95% EPS CAGR over FY07-10 as Educomp penetrates beyond tier 1 & 2 cities. Stable margins as pressure in school ventures and the ICT business is countered by leverage in Smart_Class and MathGuru. There is high execution and regulatory risks in Edu-Infra and Edu-Manage.

Investors should note High valuations paid to acquire start-ups Edu-Infra and Edu-Manage; b) Reasons for exit taken by private equity firm just before IPO; and c) High regulatory risk in the K-12 business.

SELL with a target price of Rs 2,380, which is based on 35x FY09E fully diluted EPS, derived using the stock's historical trading band. Target multiple of 35x is at 20% premium to the stock's average historical valuation to factor in the company's stronger growth prospects. It is supported by valuation multiples of other educational services companies in the Asia Pacific region. Target multiple of 35x is at a premium to the average valuation for Indian IT companies.
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Published by Webmaster @ 4:09 PM IST.

Buy Yes Bank - Citi

Monday, September 24, 2007

Citigroup in a research report released just a while ago has initiated coverage on Yes Bank with a BUY recommendation and a price target of Rs 230.

Yes Bank is India's youngest private bank, has grown rapidly and profitably, and delivered strong stock returns. This is a Structural play given growing Indian banking opportunity, strong management and execution capability, scarcity value of new private banks; and 2) Cyclical play on easy liquidity, stable asset quality, continued economic growth. If the environment holds, Yes Bank should be a large beneficiary; else, it could be vulnerable.

Based on growth, track record, and positioning, Yes is a wholesale bank. It has excelled in corporate and advisory businesses, expanded focused asset book, and kept risks low. Its retail business, though still in the making, should add another leg to growth and returns.

Citi believes franchise and value enhancement will be driven by more balance in a) deposits - low cost retail from wholesale, b) fees – transaction banking and retail from advisory, and c) assets - more diversified mix from current mid market.

Yes Bank is expected to grow earnings by 56% and loans by 70% over FY07-10E, driving ROEs to a strong 17% in FY09E. Diluted EPS for FY08 is expected to be Rs 5.65 and for FY09 it is expected to be Rs 8.18.
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Published by Webmaster @ 4:22 PM IST.

Buy BOC India for Medium Term - IDBI

BOC India is the second largest industrial gas company in India. IDBI is recommending this stock based on the medium and long term technicals. CMP Rs 153.

After consolidating near 129 region, price with the current month rise has shown strong signs of bottoming out from its ongoing reaction phase. Adding more flavor to this recently launched rise was the news that BOC is likely to set up a Rs 2,400 million gas plant in Himachal Pradesh's Baddi industrial area. Further rise from here will bring back the prices at the site of the crucial
hurdle of 198, where it will complete small set of accumulation pattern. There are additional signals on the short-term charts that the corrective move in progress for the past few months appears to be completing. The stock has a formidable resistance at 198 levels but with momentum still in good shape another assault on the resistance is certain and the probability of it being overcome will be great if volume build up is also seen on the rise. One can consider this stock from a long-term perspective for rise to 280/379 and accumulate now and on dip down to 129.
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Published by Webmaster @ 10:47 AM IST.

Edelweiss initiates Coverage on DLF

Saturday, September 22, 2007

Exclusive UpdateEdelweiss has initiated coverage on DLF with a BUY rating and a price target per share of Rs 755 based on NAV model of analysis.

DLF is the leader in the Indian real estate industry in terms of developable area. Its land bank of 13,055 acres translates into 615 mn sq. ft. of saleable area spread across the country.

DLF has entered into tie-ups in related businesses with some of the best names in their respective industries. For its SEZ initiative, DLF has tied up with Nakheel, one of the leading property developers in the UAE; for hotels, it has a partnership with the Hilton Group; and for construction, it has tied up with the UK-based Laing O'Rourke Plc. DLF's SEZ and hotel businesses will start adding to its topline in the next 3-4 years; the value of these initiatives
is, however, not captured in current valuations.

Retail and commercial properties in India are currently capitalised at 9-10%. Recently, Ascendas India Trust listed its REIT-like structure on SGX-ST at a cap rate of 6.1% on FY08 net operating income. This will drive valuations of Indian Realty players going forward.

The NPV per share of the existing businesses at INR 649. Additionally, the SEZ initiative is expected to contribute an NPV of INR 104 and the construction and hotel businesses, INR 10 and INR 30, respectively. After adjusting the debt, the NAV per share is INR 755.

Earlier this month, Citi initiated coverage on DLF with a BUY rating and a target of Rs 725.
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Published by Webmaster @ 11:17 AM IST.

Citi bullish on Jubilant Organosys

Friday, September 21, 2007

We had broken the store about Jubilant Organosys deal with Syngenta earlier this week. Citi in a report releases just a while ago continues to be bullish on Jubilant after the Syngenta deal.

Jubilant's CRAMS business has got a shot in the arm in the form of a "multi-million" dollar 5-year contract with Syngenta to supply pyridines. Jubilant's CRAMS business has grown at 45% CAGR (excluding acquisitions) over FY05-07, and this contract further improves the likelihood that this growth trend would sustain.

Jubilant is a leading player in pyridines & recently raised its capacity by c24% to 42000 TPA. These are key intermediates used in multiple pharma & agrochem APIs. Jubilant has over 150 derivatives in its product basket that are used in c229 APIs & 17 agrochem products. With the expanded capacity, Jubilant becomes the global leader in pyridines.

Jubilant as one of the superior Indian outsourcing plays, given its integrated presence across the pharma & chemicals value chain. The company is expected to report an EPs of Rs 17.57 and Rs 22.52 for FY08 and FY09 respectively. Citi reiterates a BUY with a price target of Rs 387.
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Published by Webmaster @ 12:14 PM IST.

Overweight on Rajesh Exports - Morgan Stanley

In a research report released just a while ago, Morgan Stanley[MS] is bullish on the prospects of Rajesh Exports Ltd. MS has initiated coverage with a overweight on Rajesh Exports with a price target of Rs 1,051.

Bangalore based Rajesh Exports is the largest exporter of jewellery from India and now wants to shift its business mix towards the three higher-margin businesses of diamond jewellery, private label jewellery, and Retail Jewellery market in India.

The company is at an inflection point from where its three pronged growth strategy will lead to higher margins and earnings. We believe this growth is not fully captured in the stock price given that at current price the stock trades at 12.9 times F2009e earnings and at an attractive implied PEG of 0.60x.

12-month price target of Rs1051 implies 24.9x F2008e earnings and 15.9x F2009e earnings. The company is well poised to achieve good earnings growth for the next few years based on favourable industry macro factors and its three-pronged growth strategy. The company has changed its focus from revenue growth to margin expansion.

You can send your comments and suggestions to feedback @ dalalstreet.biz
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Published by Webmaster @ 10:00 AM IST.

Clutch Auto + Bharat Forge to Outperform - ICICI

Thursday, September 20, 2007

ICICI has revised the ratings for Clutch Auto Ltd and Bharat Forge Ltd to outperform.

Clutch Auto Ltd: [CAL]
CAL had decided on exports as a major thrust area, had to focus on domestic market due to the delay in exports orders and integration of clutch business acquired from Pioneer Inc into its business model. However, by focusing on the domestic market where volumes were rising at robust pace, the company managed to meet revenue and profit estimates for FY07.

Domestic volume was subdued in the first quarter, which is expected to pick up in coming quarters supporting volume and value growth. The company is trying to enter into A and B segment vehicles.During the quarter, the company acquired the assets of Gurukripa Founders & Engineers (GKF). GKF is engaged in the production of castings used in clutch manufacturing. It is now in the process of augmenting its capacity to 1,200 tonne per month from 750 tonne.

At the current price of Rs 105, the stock trades at 4.1x its FY08E EPS. ICICI remains bullish on the company and maintain earnings estimates for FY08 [Rs 25 EPS]. Reiterate outperformer rating on the stock with a price target to Rs 205.

Bharat Forge Ltd: [BFL]
BFL reported a 18.1% growth in revenue during Q1FY08, strongly backed by a 31.5% growth in exports. It reported net sales of Rs 496.9 crore against Rs 420.6 crore in the corresponding quarter the previous year. Exports to Europe was key growth driver and sales doubled to Rs 93.3 crore. However, a slowdown in demand from the commercial vehicle segment in the US and an appreciation of the rupee against dollar, restricted revenue growth from the US to only 4.3%.

The company has been successful in implementing a hedge policy and had dollarized its loan profile to gain benefit from dollar depreciation. This strategy helped it to record a one-time foreign exchange gain of Rs 33.3 crore on its loan portfolio. The company managed to mitigate the impact of higher interest and depreciation provision by reporting a 129.4% growth in other income, supporting bottom line growth of 15.8% to Rs 64.8 crore against a decline of 5% in EBITDA.

Going forward, higher capacity utilization and increasing focus on European and Asia-Pacific countries, where demand is rising, would mitigate the impact of de-growth in the USA. At the current price of Rs 282, the stock is trading at 18.1x and 13.1x its consolidated FY08E and FY09E EPS of Rs 15 and Rs 20.7 respectively. ICICI reiterates an outperformer rating with a price target of Rs 416.
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Published by Webmaster @ 10:43 AM IST.

Indian Hotels + Glenmark Pharma - Citi Bullish

Wednesday, September 19, 2007

Indian Hotels [Taj Group] acquired 10% stake in Orient Hotels in the US. Citigroup's US lodging analyst forecasts revenue growth of 18% to US$603m and healthy EPS growth of 30% to US$1.40 for CY2007E, on REVPAR growth of 8.5% and occupancy of 62%.

The acquisition ties-in with the company's strategy to grow overseas. While it looks to form an alliance and leverage on OEH's luxury brand and global network, OEH's management board has denied interest in entering into strategic discussions with Indian Hotels. If this alliance goes through, it would help the company diversify and manage downturn in India (86% of revenues) better. However, this large investment could dampen return ratios and stock sentiment in the near term. Citi maintains a BUY on Indian Hotels with a price target of Rs 187.


Meeting with the management of Glenmark Pharmaceuticals indicates that the next few months would be critical on the R&D front. It is awaiting the US FDA's response on Oglemilast, even as it continues outlicensing discussions on GRC-6211. Besides, 2 more NCEs are set to enter the clinic over the next 2 months. Citi reiterates Glenmark as the best innovative R&D play in Indian pharma. Glenmark reiterated that it will conclude 2 R&D deals by end FY08. Glenmark is expected to report an EPS of Rs 20.27 and Rs 25.42 for FY2008 and FY2009 respectively. Citi has a BUY rating on Glenmark with a price objective of Rs 427.
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Published by Webmaster @ 11:49 AM IST.

Escorts an Outperformer - ICICI Research

Tuesday, September 18, 2007

ICICI Equity Research has a BUY with an outperform rating on Escorts Limited with a price target of Rs 180.

The poor performance of the tractor segment dampened revenue and profit growth. Going forward, tractors' sales is expected to pick up, expanding the company's top line. The company also has auto ancillary component unit, which contributes around 4-5% to total revenues, but is running at losses. Escorts also manufacture railway equipment, which contribute 6-7% to revenues and reported PBIT of Rs 4.2 crore during the quarter under review.

Construction Equipment Business - Hidden Gem
Escorts operates this business segment under a separate 100% subsidiary company called ECEL and is planning to unlock the value of investments in the next 8-10 months. The construction business is valued at Rs 735 crore and core tractor and equipment business at Rs 636 crore, while the market capitalization of Escorts Ltd is around Rs 785 plus crore. This means at current price, the construction business is available almost free of cost.

A sum-of-the parts (SOTP) valuation gives is a target price of Rs 181.At the current price, the stock is available at attractive valuations of 9.4x consolidated FY08E EPS of Rs 10.9 and 14.7x standalone FY08E EPS of Rs 7.

Related Research Report:
Tata Motors to Unlock Value of its Subsidiaries.
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Published by Webmaster @ 9:42 AM IST.

TN Petro + Mercator Lines Short Term Trading Calls

Monday, September 17, 2007

Reliance Money is recommending Mercator Lines Ltd [MLL] for short term trading. The buoyancy in dry bulk rates and low one time charges profits are expected to bounce back in FY08. The net profit is likely to be over Rs 250 crs for FY08E as against Rs 135 crs for FY07. FY09E will also see improvement, as the dry bulk cargo will be operational for the full year plus the additional chartered tonnage co will add to its
portfolio.

At the current market price of Rs 66, the stock is trading at 7x FY08E EPS of Rs 9 and 6x FY09E EPS, respectively. RMoney expect MLL to trade at 8x FY08E and expect the stock can rise with a target price of Rs.85 in the short term.

ABN Amro Stock Research is recommending TN Petro Products Ltd for short term trading gains with a price target of Rs 28.

TPL plans to set up a Coal based power plant to reduce energy costs. Singapore subsidiary to invest 51% in petrochemical plant. Subsidiary SEPC has necessary approvals for implementation of Power Project. TPL has given a price breakout on a daily and weekly basis and the breakout has been accompanied with strong volumes signifying greater strength in the scrip.
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Published by Webmaster @ 9:13 AM IST.

Alstom Projects India to Outperform Infrastructure Sector

Saturday, September 15, 2007

Infrastructure in IndiaAlstom projects India Ltd [APIL] involved in EPC work will outperform the sector. BUY with a Target price of Rs 1,079.

India planning a huge capex for power generation, we frame a bullish outlook for APIL and expect it to post earnings CAGR of 43% FY07-10E. APIL will outperform on strong incremental order flow triggers. The current order book is over Rs 30bn (>2.4XFY07 revenues). APIL will to continue to post better margins and foresee the company's RoCE & RoE improving substantially. APIL can leverage on its parent's global leadership in integrated and hydroelectric power projects. With India set to enter a strong power generation capex cycle, this will be its key strength.

We all know the Record response Power Grid IPO received. We also know that India will spend massively in producing Electrical energy and hence stocks involved in building such mega projects will have excellent growth. A Price Objective of Rs1,079 (+38.7%) for Alstom Projects India Ltd, assigning it an exit multiple of 34X & 22X for FY09E & FY10E, respectively. Similar discounting has been assigned to Siemens and ABB stocks as well.
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Published by Webmaster @ 6:13 PM IST.

HPCL, BPCL Downgraded

Friday, September 14, 2007

Kotak securities has downgraded HPCL and BPCL to In-Line from Outperform on the grounds of Political uncertainty and high crude oil prices.

The press has been reporting a possible price increase on auto fuels but the current difficult phase of the coalition politics precludes a price increase. Also, if the government were to fall or call for early elections, it may not be in a position to issue oil bonds to the downstream oil companies including BPCL and HPCL. It is still possible to make money in these stocks based on short-term trading opportunities but ratings and earnings estimates have largely lost meaning in the current environment, said the report.

Dalal Street Research Analyst recommends to stay away from PSU Oil Distribution and Marketing companies and the only stock he is optimistic in Oil and Gas is Reliance Industries Ltd. [We don't recommend RNRL to value investors, however who have got it for FREE can switch to RIL]
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Published by Webmaster @ 9:57 AM IST.

Satyam Computers an Outperformer

Thursday, September 13, 2007

Kotak Securities is bullish on the prospects of Satyam Computers and maintains an Outperformer rating on the Stock with a price target of Rs 570.

Satyam to deliver significant outperformance on its FY2008 revenue (40% versus its guidance of 35.5% for FY2008) and EPS guidance (Rs25.3 versus guidance of Rs24.5). Expect Satyam to significantly outperform its Sep '07 quarter guidance of 6% qoq revenue growth. Satyam will deliver the highest revenue growth rate for Satyam in Tier 1 coverage list.

Satyam's SAP practice has been a major contributor to its strong growth (CQGR of 12% over the past four quarters in the package implementation area—SAP has grown faster than the overall PI business). Satyam's Engineering Services practice has been among the fastest growing service lines for the company (a CQGR of 14.3% over the past four quarters vs. company average of 9.3%) over the past 12 months.

Kotak values Satyam at Rs570 on absolute DCF valuation methodology. This translates into 22.5XFY2008E and 18.1XFY2009E earnings. Satyam is currently trading at 16.9XFY2008E and 13.6XFY2009E EPS, a 25% discount to Infosys and 15% lower than its historical average.

In a separate development, Sr. Fund Manager, Prashant Jain has totally sold TCS and Wipro in HDFC Equity Fund.
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Published by Webmaster @ 12:22 PM IST.

Buy Numeric Power Systems

Wednesday, September 12, 2007

In FY07, Numeric Power Systems Ltd [NPSL] added 45 sales and service centers, thereby taking the total tally to 201 by March 2007. The company has a highly efficient service team, all of whom are personally trained by NPSL. They provide 24x7 technical support to all important customers/projects. The company has over 600 factory-trained engineers for this important function of customer care.

NPSL has developed partnerships with three major professional IT, sales and distribution companies. The sales through the entire network channel have grown 60% over last year. The revenues of Numeric to grow at 17.6% CAGR for the next two years. More importantly, the net profit is expected to grow at 33.2% CAGR for the next two years, that is, from FY07 to FY09E.

NPSL is expected it to report an EPS of Rs.58.1 in FY08E, moving up to Rs.71.6 in FY09E. The current market price of Rs 440 discounts FY09E earnings at 6.1, which is very attractive due to the clear growth prospects of the company, going forward. We remain positive and maintain BUY on Numeric Power Systems with target price of Rs.615, which provides an upside potential of 40%.
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Published by Webmaster @ 5:42 PM IST.

Buy HDIL - Religare

Religare has initiated coverage on Mumbai based Realty firm HDIL with a BUY recommendation and a target price of Rs 694.

HDIL has presence in Residential, Commercial, Retail and Slum Rehabilitation. It is a very well established brand especially in Residential and Commercial. HDIL has a land bank of 116 million sft. HDIL's average cost of land acquisition is Rs 113.9 / sft [excludes post-ipo purchase of Land] while that of DLF is over Rs 300 / sft.

At the CMP of Rs 535 HDIL trades at P/E of 13.3 on FY08E EPS of Rs 40.2 and 7.3 on FY09E EPS of Rs 72.7. Using the NAV valuation approach, Religare analyst arrives at a stock price of Rs 694 / share. HIL currently quotes at 0.8x one year forward NAV which is relatively cheaper than DLF [1.3x] and Unitech [1.1x]. There is a potential upside of 30% in the stock.

Religare has also recommended a BUY on Parsvnath Developers Ltd. Parsvnath quotes at mere 0.6x one year forward NAV.
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Published by Webmaster @ 12:23 PM IST.

Hindustan Zinc + Sterlite Upgraded by Citi

Tuesday, September 11, 2007

We had reported last month that Citigroup has initiated coverage on Hindustan Zinc Ltd [HZL] with a price target of Rs 1155. Today Citigroup has revised the target to Rs 1194.

Zinc forecasts have been maintained for FY09E & FY10E. HZL is an integrated producer that offers exposure to the robust outlook for zinc and lead. It is among the lowest-cost producers globally. Target price of Rs1,194 is arrived at by applying a P/E of 10x to FY09E earnings. This appears justified as zinc has the most robust outlook among base metals and considers the re-rating enjoyed by metal stocks in India and globally. Macquarie Research had an OUTPERFORM rating on Hindustan Zinc in Jan-2007.

Citi has also upgraded the target price of Sterlite Industries to Rs 949 from Rs 910 the back of global commodity price forecast revisions. The expected purchase of the balance government stake in HZL and Balco, and buoyant zinc and lead outlook, should lead to 39% EPS growth in FY09E.
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Published by Webmaster @ 11:17 AM IST.

Accumulate Prism Cement - HDFC Sec

Monday, September 10, 2007

Prism Cement Limited [PCL] is an ISO 9001:2000 certified company promoted by Rajan Raheja Group. PCL manufactures and markets Portland Pozzollana Cement (PPC) with the brand name 'Champion' and full range of Ordinary Portland cement (OPC) of 33, 43 and 53 Grades.

PCL has planned to undertake a massive expansion plan, wherein PCL has envisioned a Brownfield expansion at Satna of 2 mtpa Clinker expected to come on stream by 2010. This would offer locational advantage, as the demand is very strong in North and growing at a good rate. For the last quarter ended June 07, PCL witnessed another high in its operating margins recording 50.6%, best in the industry. PCL’s Satna plant is at a prime location, near to well-known thermal plants like NTPC, MPSEB, IFFCO, Hindalco, etc. which provides a rich source of fly ash used in manufacturing of PPC.

Key demand drivers include big surge in real estate build-out for housing & commercial purposes by developers such as DLF, Unitech, Parsvanath, Omaxe etc., Commonwealth Games 2010 related Capex, Major scale-up in Hydro power and Infra Capex across North & Central India.

PCL will hold a 74% stake and the Australian group will hold the rest in proposed Insurance joint venture. One could look at accumulating Prism Cement in the Rs 53-61 band for 30-40% gain in a year's time.
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Published by Webmaster @ 10:34 AM IST.

Riddhi Siddhi Gluco Biols - BUY

Thursday, September 06, 2007

Riddhi Siddhi Gluco Biols, India's largest cornstarch producer, is well-positioned to capitalize on the current consumption-led boom in the economy, which should see a spurt in demand for cornstarch and its derivatives.

The company reported a modest growth in quarter ended June 30, 2007 (Q1FY08), following a major fire at its plant in in Gokak (Karnataka) in May 2007, which forced it to suspend starch production. Revenues grew 3.95% y-o-y to Rs 68.28 crore, while net profit increased 11.9% to Rs 4.7 crore. EBIDTA margin improved by 82 bps to 17%. The management expects normal production to start by the end of September at the Gokak plant, which is currently running at around 50% capacity.

At the current price of Rs 270, the stock trades at a P/E of 8.28x its FY08E EPS of Rs 32.61. On an EV/ EBIDTA basis, the stock is available at a multiple of 6.19x FY08E earnings. ICICI values the stock at a P/E multiple of 11x its FY08E earnings with a price target of Rs 358.
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Published by Webmaster @ 7:03 PM IST.

Midcap Buy International Travel House - ICICI

International Travel House (ITH) continued to benefit from the huge growth in the travel and tourism Industry. The business growth was on account of higher commissions in the travel segment and increased fleet of cars in the transport segment. ITH's car rental business is also doing extremely well. ITH is considering foray into online Travel Booking space.

Net sales grew 16.42% to Rs 18.93 crore in the quarter ended June 2007 as against Rs 16.26 crore during the previous quarter last fiscal, while net profit jumped 49.13% to Rs 2.58 crore as against Rs 1.73 crore.

At the current price of Rs 152, the stock trades at a P/E of 10.31x its FY08E EPS of Rs 14.75. On an EV/ EBIDTA basis, the stock is available at 3.65x FY08E earnings. ICICI values the stock at a P/E multiple of 15x its FY08E earnings with a price target of Rs 221 and maintain OUTPERFORMER rating on the stock.
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Published by Webmaster @ 1:19 PM IST.

Buy IDFC - Deutsche Bank

Wednesday, September 05, 2007

Deutsche Bank has initiated coverage on IDFC, India's only listed infrastructure financing company with a Price Target of Rs 150.

IDFC's fee incomes will grow aggressively at an estimated CAGR of 66% during FY07-FY10E, and from 17% of total income in FY07 to 33% in FY10E. Fees are expected to rise from 17% of total income in FY07 to 33% in FY10E. Ramp-up of the principal investment business provides added equity upside potential.

Since it is not realistically possible to improve the RoE of the lending business to beyond 18-19% because of the expected spread compression, IDFC has been deliberately allocating more capital and management time to the other forms of serving the same infrastructure finance objective. These are principal investments, private equity, project equity and investment banking. Globally, infrastructure lending has progressed in this direction.

IDFC currently has $670mn FUM under private equity. One fund of $220mn is already fully deployed. Of the next proposed fund of $450mn, 35% is already committed, and should be 65-70% committed by June 2008. IDFC holds investments through PE in Bharti Airtel, NTPC, Indraprastha Gas, ONGC, etc

Sum of Parts Valuation of IDFC:
Value from Infrastructure Financing Rs120
Value form SSKI Rs 7.2
Value from NSE and ARCIL stake RS 7.0
Value from IDFC Private Equity Rs 8.3
Value from IDFC Project Equity Rs 5.1
Value from gains on listed investments Rs 3.0

Here is Citigroup's Research Report on IDFC.
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Published by Webmaster @ 1:03 PM IST.

Allcargo + CONCOR + Gateway Logistics Update

Kotak Sec Research is bullish on the prospects of Indian Lgistics Sector and Stocks. Here are some noteworthy points from the Logistics Conference Centrum - 2007.

Indian ports handled 6 mn TEUs in FY07. Container traffic may touch 30 mn TEUs by 2016.Currently, 68% of the cargo that can be containerized is being containerized. With growing awareness of the benefits of containerization this will go up to the international standards of 75% to 80%.

Rail transportation is cheaper than road.For handling 20 mn TEUs, we need 190 trains per day as against 40 trains currently. Dedicated expressway connectivity to the port needed. We need 4-5 hub ports with 16 mtrs draft.

Kotak believes that the growth in the Indian economy and increasing penetration of containerization would lead to faster growth in the handling of containers in the country. Currently, we handle about 6 mn TEUs. If we are to handle 30 mn TEUs, it calls for huge growth in opportunities for logistics service providers. Thus, positive on the logistics stocks.

Allcargo Global Logistics will report EPS of Rs.56.5 and Rs.70.8 in CY07E and CY08E, respectively. At Rs.889, the stock trades at 12.6x CY08E earnings. Kotak maintains BUY on Allcargo with a price target of Rs.1346, which provides 52% upside potential.

Gateway Distriparks Ltd [GDL] will report EPS of Rs.8.2 and Rs.10.7 in FY08E and FY09E, respectively. At Rs.132, the stock trades at 12.3x FY09E earnings. Kotak maintains BUY on GDL with a price target of Rs.180, which provides 37% upside
potential.

Container Corporation of India [Concor] will report EPS of Rs.126.7 and Rs.149.3 in FY08E and FY09E, respectively. At Rs.2214, the stock trades at 14.8x FY09E earnings. Kotak maintains BUY on Concor with a price target of Rs.3000, which provides 36% upside potential.
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Published by Webmaster @ 12:02 PM IST.

Buy United Phosphorus - UBS Securities

Exclusive: UBS Investment Research has initiated coverage on United Phosphorus Ltd [UPL] with a BUY recommendation and a price target of Rs 425.

UPL is emerging as a strong global agrisciences major with its recent acquisition of Cerexagri's crop protection business and Advanta's seed business. Following the acquisitions, UPL is the 3rd largest generic crop chemical and 12th largest crop protection company globally.

UPL has grown revenues at a 28% CAGR and net income at a 36% CAGR over FY04-07, through value accretive acquisitions. Other large generic companies such as Nufarm and MA Industries have adopted similar routes. Cerexagri, accounting for c30% of revenues, will be the primary earnings driver over the next two years. Integration of Cerexagri and continued strong growth in Europe and the rest of the world will drive a 30% revenue CAGR over FY07-09, EBITDA margins to expand from 21.3% to 21.8%, and interest costs to decline, driving a 35% CAGR in net income. Advanta is modelled separately and added to UPL's share to net income.

UPL has underperformed for over 18 months and trades at a 15-20% discount to other generics and to its historic multiples. Successful integration of new acquisitions will drive outperformance. Target of Rs425 includes Rs392 as a DCF of standalone UPL, and Rs33 for UPL's holding in Advanta.

DalalStreet Analyst Comments:
We back the views of UBS and believe UPL has worthy of investment for value investors.
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Published by Webmaster @ 9:55 AM IST.

Accumulate Crompton Greaves - HDFC Sec

Tuesday, September 04, 2007

Crompton Greaves (CGL) is mainly concentrating in Power Systems, Industrial Systems and Consumer Products and Digital business. CGL is engaged in manufacture, distribution and sale of electrical and electronic equipment/systems.

Positive Triggers
CGL could end FY08 with an EPS of Rs. 10.5 – 11.25. Though the stock looks steeply valued at the current market price, one could accumulate the stock in the Rs. 270-310 band for a period of 2-4 quarters.
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Published by Webmaster @ 7:11 PM IST.

Ratings and Target Prices of - All the Banks in India

Here is the chart of Ratings and Target stocks prices for all the banks in India. Courtesy SSKI Securities report on Indian banks.
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Published by Webmaster @ 1:03 PM IST.

ENAM Neutral on Tata Steel

ENAM India Research has maintained a neutral rating on the prospects of Tata Steel with a price target of Rs 657 because of the short term challenges the company is facing rather than the long term gains.
Robust demand growth, driven by strong consumption in China and other EMs. Large Chinese capacity addition to replace old capacities and also for local consumptions. Iron ore - Spot iron of prices currently 50% higher than current contract prices. Expected to rise significantly next
year. Coking coal - prices are expected to move higher next year.

Key risks include financial leverage and low operating margin. Thus maintain a NEUTRAL rating on the stock.
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Published by Webmaster @ 12:35 PM IST.

Tata Metaliks - Short Term Buy

Monday, September 03, 2007

Citigroup Technical Research has put a short term BUY recommendation on Tata Metalik with a target price of Rs 164. CMP Rs 147.

Tata Metalik has seen a bullish breakout from a "Triangle" pattern. Construction of triangle is T#1 Upper Boundary and T#2 Lower Boundary. Prices have closed above the breakout level (T#1) at 136; breakout was supported with rise in volume

The minimum price objective has been calculated using the "maximum depth" technique. Maximum depth within the triangle is distance between # 152 (P1) and # 124 (P2), 152-124=28. Adding 28 to the breakout level at 136 gives us a minimum price objective of 164 [28+136].

Short-term Buy (1B) with target price of 164 and stop loss price of 134 (on a daily closing basis)
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Published by Webmaster @ 11:27 AM IST.

Buy Areva T&D - Prabudas Lilladher

Saturday, September 01, 2007

Prabhudas Lilladher [PL] initiate coverage on Areva T&D with "Outperformer" rating and a target price of Rs 1855 (30x CY08 earnings), implying a 17% upside potential.

Areva T&D is the third largest transmission and distribution player globally with a significant presence in the Indian T&D space. Areva currently has an order book of Rs 24.2bn, 1.8x its CY06 sales, providing visibility of earnings for next few years. The company has won the first ever 765 kV substation order from NTPC, being the only fully integrated 765kV substation supplier in the country.

For the period FY07 to FY09, PL expect CAGR of 57.7% in net profit on the back of revenue CAGR of 24.7%. At the CMP of Rs 1,590, the stock is available at 36.8x and 25.7x CY07E and CY08E earnings of Rs 43.1 and Rs 61.8 respectively. Areva enjoys attractive return ratios with RoE at 46.1% and RoCE at 47.5%. PL initiates coverage on Areva T&D with an "Outperformer" rating and a target price of Rs 1855 (30x CY08 earnings), implying an upside of 17% from current levels.
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Published by Webmaster @ 12:14 AM IST.