Why Subsidiary + SOTP Valuation is Bad ?
Wednesday, January 30, 2008
In our post on how Analysts are Desperate to justify Stock price, we had written about number of stupid theories. Here is another one from an Analyst tracking the Retail Market in India and it is on Pantaloon Retail India Ltd.
Future Bazaar and Future Media: We no longer attribute any value to Future Bazaar and Future Media. We were earlier attributing Rs18/share and Rs 13 /share respectively. Our earlier valuations were based on the management indication for private placement in both these entities. However, the placement is yet to happen, and we see a fair chance of valuation basis being revised downwards. Additionally not enough disclosures are available from the management on these entities to enable us to have a valuation basis. Therefore we are conservatively not ascribing any value to these in our SOTP-based target price.
Stick to VALUE INVESTING. Once again go for SOTP valuation only if you are able to generate cash of the idle assets.
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Published by Webmaster @ 12:25 PM IST.
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Buy HCL Info - ABN Amro + Citi
Tuesday, January 29, 2008
ABN Amro and Citigroup Research have upgraded the stock of HCL Infosystems from Hold to BUY with aggressive price targets.HCL Infosystems' Q2FY08 results came in above our expectations - EBITDA at Rs1.12b was significantly ahead of our expectation (Rs944m). Revenues of Rs32.7b were in line with our expectation while margins surprised positively due to better margins in the PC business. The PC business delivered another strong quarter – revenue increased 43.5% yoy (our expectation: 32% yoy) to Rs8.75b and margin of 6.4% (ex. forex gains). Nokia business had an inline quarter with revenue growth of 4% yoy to Rs24b.
Increasing PC penetration, higher government and commercial IT spends, Robust telecom subscriber growth and System Integration deal flow improve prospects for top-line growth over FY07-10, while an improving business mix should help drive
margins.
ABN Amro expects HCL Infosystems to report an EPS of Rs 18.8 for FY08 and Rs 23.1 for FY09 and has set a target price of Rs 270. While Citi has set a target price of Rs 300.
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Published by Webmaster @ 12:05 AM IST.
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TVS Motors + Ashok Leyland - Lackluster
Monday, January 28, 2008
TVS Motors:Q3 results were predictably very poor, with net profit declining 49% YoY, and EBITDA declining 49% YoY and 24% QoQ. We are again revising down forecasts. With no change in fundamentals, we maintain our Sell rating on the stock. Q3 margins contracted to another low of 1.7% (down 145bps QoQ), compared to our estimate of 2.6%. We see continuation of muted trends, given the squeeze from competition, and delays in upcoming launches which could improve sales mix i.e. 125cc bike Flame.Valuations still look expensive for TVS Motors. We had put a SELL recommendation 6 months ago and now we don't recommend investors to take any fresh positions.
Ashok Leyland:
Q3 net profit at Rs 1.2bn (13% YoY) beat our estimates, but only due to gains from sale of shares in group concern. EBITDA declined 10% to Rs 1.7bn (in line with expectations), despite higher than estimated sales. Over the medium term, expect profits to be restricted by significantly higher fixed costs.
Margins at 9.2% were lower than estimates of 10%, illustrating the tough business environment. With competition intensifying, margins will remain muted. EPS estimates for FY08 and FY09 are largely unaltered, based on view that company's vehicle volumes will be flat this year, and rise 13% in FY09.
Ashok Leyland is expected to report an EPS of Rs 3.27 and Rs 3.61 for FY08 and FY09 respectively. Avoid this stock for the time being. Any upside maybe considered as an opportunity to Book Profits.
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Published by Webmaster @ 11:07 AM IST.
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Book Profits in Cipla - Citi + Merill
Friday, January 25, 2008
Cipla's 3Q net income (Rs2.1bn; 14% growth YoY) came in 8% ahead of consensus estimates driven by a significant 192% rise in technology income (Rs748mn vs. estimates of Rs450mn) which resulted in a 23.7% EBITDA margin for 3Q (vs. estimates 22%). Excluding technology income, Cipla's EBITDA margin was sharply lower to 18% (from 23% on YoY basis). Merill estimates 13.5% EPS CAGR (FY08-FY10E) for Cipla vs. over 20%+ sector EPS CAGR (FY08-10E). Cipla trades at 20.1x FY08E and 17.4x FY09E earnings, a +20% premium to its industry peers. On the back of uncertainty on sustainability of technology income, potential for margin improvement and lack of big ticket product visibility, Merill & Citi maintain a SELL recommendation on the stock.
We recommend not to short, however, if you hold the stock you may exit and BUY some other Pharma company.
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Published by Webmaster @ 10:26 AM IST.
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ICICI + ENAM Sec + Lehman Buy List
Wednesday, January 23, 2008
Here is a BUY List from ENAM Securities Research and ICICI Securities.
ICICI Securities Research List:
Scrip + 12Mth Target Price + Expected Returns
Sobha Developers 1324 106
Balrampur Chini 116 73
Ashok Leyland Auto 55 72
Tata Tea 1050 66
Tata Steel 1090 62
3i Infotech Technology 180 62
MTNL 194 62
Sun Pharmaceutical 1553 61
Gateway Distripack 164 61
Bajaj Auto 3292 60
Glenmark Pharmaceutical 702 59
Reliance Communication 898 56
Sesa Goa 3989 52
Zee News 80 51
India Cement 300 49
Bank of Baroda 550 49
Ranbaxy 503 48
GAIL 600 47
ITC 270 47
Reliance Industries 3449 46
IDFC 250 41
Lehman Brothers Top 10 Picks in India Now:
1. ICICI Bank
2. Punjab National Bank
3. Tata Motors
4. L&T
5. Nagarjuna Construction
6. Infosys Technologies
7. Nicholas Piramal
8. Reliance Industries
9. NTPC
10. Unitech
You can also download TOP BUYs recommended by ENAM Securities at current levels.
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Published by Webmaster @ 12:52 PM IST.
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Satyam Strong Amongst Peers - CS
Satyam Computers continued with its winning momentum in Q3FY08 and also acquired Business / management consultancy firm - Bridge Consulting. Given the forecasts of a significant slowdown in the US economy in 2008, it appears that the market is worried about the growth of Indian IT companies. This could keep the near-term share performance in check. Companies themselves lack visibility, and hence it remains difficult to forecast FY3/09 numbers.With 9.4% QoQ volume growth, Satyam easily dwarfed the growths exhibited by Infosys and TCS. Satyam has managed to buck the trend of rising attrition - it has reduced attrition rates by 450 bp YoY.Management increased its full-year EBITDA margin drop guidance to 175-200 bp, from 175 bp earlier.
At 13x 12-month forward P/E (consensus based), Satyam is trading below historical average levels and is thus inexpensive. Satyam Computers is expected to report an EPS of Rs 25.29 for FY08 and Rs 30.41 for FY09. Credit Suisse maintains an OUTPERFORM rating with a price target of Rs 500.
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Published by Webmaster @ 9:23 AM IST.
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UBS on BHEL + Punj Lloyd + TCS + Petronet LNG
Thursday, January 17, 2008
UBS has changed recommendations on several stocks including BHEL, Punj Lloyd, TCS etc with the correction in their stock prices.
BHEL:
UBS upgraded BHEL from Neutral to Buy following the recent correction in stock price. Of the nearly 75,000MW of private-sector capacity proposed to be built by 2015, BHEL's potential target market is 43,000MW (72% of the yet to be ordered portion) Price Target of Rs3,030 is based on a DCF which assumes 20% mid-term (FY11-15E) growth, WACC of 11.2%, and terminal growth of 6%. At current levels, the stock trades at 18.3x FY10E versus 3-year CAGR of 36.4%.
Punj Lloyd:
UBS initiated coverage on Punj Lloyd with a BUY rating. Expect Sembawang E&C's EBITDA margins to increase from 0.9% in FY07 to 6.4% in FY09, as higher-margin orders come through. We expect consolidated EBITDA margins to improve from 8.0% in FY07 to 10.3% in FY09. This drives an EPS CAGR of 60% over FY07-09E.
Punj Lloyd's core contracting business at Rs660 per share, implying a one-year forward EPS of 28x. This represents a 30% premium to the mid-cap engineering and construction (E&C) companies and a 20% discount to L&T. Value the Pipavav shipyard at Rs27 per share and the real estate business at Rs9 per share.UBS recommends a BUY with a Target Price of Rs 696.
Petronet LNG:
Petronet LNG reported a net profit of Rs 1.31bn for the current quarter (up 54% yoy &13% qoq) despite recording a marginal increase in sales and volumes processed on a yoy basis. The company recorded an EBITDA of Rs 2.32 bn an increase of 34% on a yoy basis. Other income for the company also recorded an increase of 36%.
The company is expected to report an EPS of Rs 6.81 and Rs 7.81 for FY09 and FY10 respectively.On the basis of DCF valuations, UBS recommends a SELL on petronet LNg with a target price of Rs 92
TCS:
TCS reported 3QFY08 revenues of Rs59.2bn (UBSe: Rs60.2bn), up 5.0% q-o-q and net profits of Rs13.3bn (UBSe: Rs13.1bn), up 6.7% q-o-q. EBITDA margins improved 40bps to 26.7%. Results are broadly in-line while the volume growth of 4% q-o-q is a disappointment.
TCS signed 9 large contracts in the quarter with cumulative contract value of 1.9bn USD. Further TCS is pursuing 25+ large contracts each of size >US$50mn USD most of which are expected to close over the next 3-6 months.
The stock price of TCS to remain sluggish in near term on the back of lacklustre volume growth at both TCS & Infosys in 3QFY08 and growing concerns on the US economy. However, from a period of next 12 months in view, UBS expects TCS to report an EPS of Rs 60 for FY09 and has set a target price of Rs 1,300.
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Published by Webmaster @ 11:54 PM IST.
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Exide Industries - Powering Your Portfolio
Wednesday, January 16, 2008
The company expects to benefit from decline in lead price in LME to US$2,532/t in Dec07 from a peak rate of US$3,666/t in Oct07 from Jan08 onwards.The company expects its average cost lead to be benchmarked to around US$2,500/t in Q4FY08E, which is 21% lower than its average benchmark cost of US$3,200/t.Q3FY08 PAT at Rs552mn, is up 58% y-o-y, about 8% below our estimate. The company absorbed the impact of 115% y-o-y increase in lead cost and improved its EBITDA margin by 20bp y-o-y to 15.1% thanks to pricing power. Key reason for lower than estimated profit are (1) Delay in benefit from lead price decline since early Dec07 and (2) change in product mix in favour of OEM sales.
Sum of the Parts Valuation:
SOTP valuation is based on: (1) core lead acid battery business at 16.5x FY09E EPS of Rs5.7 equals Rs94 and (2) 50% stake in ING Vysya life at 17x FY09E NBAP equals Rs17/sh. Exide is expected to report an EPS of Rs 3.82 for FY09 and Rs 5.15 for FY10. Merill Lynch recommends a BUY with a Taregt Price of Rs 110 / share.
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Published by Webmaster @ 12:24 PM IST.
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ABG Shipyard - Smooth Sailing
Tuesday, January 15, 2008
On the recommendations of Citi, we first initiated coverage on ABG Shipyard 6 months ago. Now Merill Lynch has put a BUY rating on the stock with huge potential for upside. ABG Shipyard is expanding from being a manufacturer of small vessels to vessels of all categories. Order backlog at 7.5x FY08E sales, ten fold jump in capacity by FY12E to drive 63% EPS CAGR in FY07-10E. The stock, trading at 6.6x FY10E EV/EBITDA is attractive relative to peers.Merill Lynch thinks that - the Govt. may extend a subsidy scheme which is being discussed; but not confirmed; b) ABG's gets SEZ status for its upcoming shipyard at Dahej providing it substantial tax benefits; and c) Manages to acquire Western India Shipyard that Is still awaiting regulatory approvals.
ABG's EPS likely to grow at 83% in FY09E and 60% in FY10E driven by 80%+ sales growth and increase in EBITDA margin. Company has reported 570bp y-o-y jump in EBITDA margin in 9MFY08 to 24%. Expect EBITDA margin to jump further to 26.2% by FY10E led by over 55% jump in vessel pricing in FY08E. The company expects to report EPS of Rs 62.15 and Rs 99.47 for FY09 & FY10. Merill has set a target price of Rs 1350.
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Published by Webmaster @ 7:07 PM IST.
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Forgotten Hero Honda - Back on Track
With the Indian markets becoming expensive, really especially the SENSEX stocks, Analysts are scrambling to find out new winners. DSP Merill Lynch has upgraded Hero Honda Ltd from neutral to BUY.After a sharp decline last fiscal, expect margins to reverse trend and increase
140bps over FY07-10 to 13.2%, driven by (1) control over selling expenses, (2) operating leverage on improved volumes, and (3) shift in sales mix to pricier bikes. We believe this would surprise consensus, leading to forecast upgrades.Bajaj Auto may not be able to compete directly with Hero Honda in the premium bike segments.
Upgrading Hero Honda to Buy from Neutral, driven by (1) sharp revision of EPS forecasts, 4.5% in FY08, 11.7% in FY09 and 12.4% in FY10, and (2) attractive valuations. Target price of Rs 880 is based on 8.5x estimated 1-year forward EV/EBITDA, a 10% growth premium to existing multiples.
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Published by Webmaster @ 6:57 PM IST.
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Sintex + Unitech Outperformers - SSKI
Monday, January 14, 2008
SSKI equity research has an outperformer recommendation on Sintex Industries and Unitech Ltd.Sintex Industries
Sintex Industries (Sintex) has taken another big stride. With established credentials in various unexplored but difficult to penetrate product categories, focus is now on making it big in the composites space.Sintex has acquired four companies in Europe and USA to attain scale in the composites space. The acquisitions, with estimated payback period of 3-4 years, would be highly value
accretive.
Scalability in domestic businesses remains impressive. Auto components, electrical accessories, telecom infrastructure and rural social infrastructure spaces - where Sintex offers customized products - too are ripe for explosive growth.
Valuation and Recommendation:
We first recommended Sintex in October-2006. The company is expected to grow at a 150% CAGR over FY08-10E. Upgrading FY09 and FY10 earnings estimates by 10 and 54% respectively to factor in the recent acquisitions. Sintex is expected to report a fully diluted EPS of Rs 24.8 for FY09 and Rs 44.8 for FY10. Target price for the stock is Rs 871.
Unitech Ltd:
Unitech is a formidable real estate player with a saleable area of 689 msf and a pannational, pan-segment presence. Unitech has recently added ~235m sq. ft of land to its bank of ~453m sq. ft - up 51% yoy. One of the new projects marks Unitech's entry into the large and lucrative SRS market of Mumbai. Also, Unitech has acquired a 7m sq. ft residential project in prime location of Chennai, a 103-acre hotel site in Goa, and land parcels in Kolkata and Greater Noida.
Unitech may opt to list a REIT type business trust on the Singapore Exchange. The listing will result into creation and strengthening of funding vehicles, acceleration of cash flows into the company, unlocking value in rental assets and gains on carried interest in Unitech Corporate Parks. Most significantly, the lease capitalization rates would get compressed from 10% to ~7%, which implies 40% higher realizations on rental assets.
Sum of the Parts Valuation of Unitech.
Residential - Rs 353 / share
Office Space - Rs 106
Retail - Rs 111
Hotel - Rs 31
SRA + Redevelopment - Rs 81
SEZ - Rs 33
This amounts to a valuation of Rs 697 / share. However, the 12 month stock price target according to SSKI is 25% premium to NAV at Rs 871.
Our analyst recommends no premium on the stock [Residential real estate is Unitech's major source of income which will have slower growth rates in the next 4-6 quarters] and recommends a 12 month price target of Rs 697.
Earlier Coverage of Unitech in 2006.
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Published by Webmaster @ 1:25 PM IST.
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Buy Strides Arcolab - NJ Unit Closed
Thursday, January 10, 2008
Kotak has come up with a BUY recommendation on Strides Acrolab. Strides Arcolab has shut down its loss making manufacturing operation for OTC and neutraceutical in New Jersey, USA. The facility manufactures soft gelatin, used as a protective layer in medicines and food supplements. This is a rational step as the plant was incurring huge losses due to high manufacturing costs, capacity utilization and regulatory issues.Stride's most profitable business by segment, namely, sterile injectables is being strengthened by a capex of US$140 mn in new manufacturing and expansion activities in Brazil (completed), Poland (will be completed in 2008) and new complex in India for oncology and hormone products and additional sterile capacities (Phase- I in December 2007 and phase-II in August 2008).
Kotak expects a partly diluted EPS (assuming part conversion of FCCBs in 2008) of Rs.5.9 and Rs.21.1 for CY07 and CY08, respectively. Kotak maintains a BUY with DCF-based one-year target price of Rs.400. We recommend existing investors to HOLD and can add between Rs 225 to Rs 250 levels or whenever the market corrects.
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Published by Webmaster @ 2:09 PM IST.
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Conflicting Views on Cairn India
Analysts covering Cairn Energy in India have different views about its earnings for the next 12 months. Kotak analysts are not so bullish on the prospects of the company while CLSA analysts have upgraded the target price. herei s what they both have to say,
Kotak on Cairn India:
Cairn has submitted a revised production plan for the Mangala oil field to the DGH with a revised peak production at 125,000 b/d compared to 96,000 b/d in the initial plan. The revision is on expected lines.
Higher oil production plan from Mangala field and higher normalized crude price. We have revised our EPS estimates for CY2008-2010E to Rs1.9, Rs15 and Rs41, respectively, from Rs1.6, Rs11.4 and Rs34.5, respectively. Revised 12-month DCF-based 12-month target price is Rs160 (Rs145 previously) reflecting the higher normalized crude price and roll-forward of DCF. Kotak maintains a SELL on the stock at Rs 250+ levels.
CLSA on Cairn India:
The upstream development and the pipeline project on track, expect greater clarity on Cairn's Rajasthan block development parameters over the next couple of months. Apart from pinning down the exact first-oil date, a 20% peak production upgrade and a Mangala reserve upgrade also appear likely. CLSA upgraded 2009-15 EPS estimates by 11-20% and stock target price by 8% to Rs298/share to build these in.
The rising cashflow stability post the production upgrade also builds confidence towards an eventual re-rating to the full going concern fair value estimate of Rs347/share (+38%). Maintain BUY.
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Published by Webmaster @ 10:03 AM IST.
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Strong BUY HDIL - I-Sec
Tuesday, January 08, 2008
I-Sec has initiated coverage on Mumbai's real Estate Developer HDIL with a Strong BUY Rating. On the back of strong project pipeline and imminent upsides from GVK Slum Rehabilitation Scheme (SRS) and upcoming special economic zones (SEZs). HDIL has presence across all key segments – residential, commercial, retail, SEZs and particularly SRS. Presence in prime Mumbai property market adds to the advantage. HDIL has development pipeline of ~120mn sqft (excluding GVK SRS and SEZs).HDIL has considerable land in Vasai-Virar and intends developing a multi-product SEZ across ~5,000 acres (~2,500 acres in phase I) that would include industrial development, IT/ITES parks, residential townships and other commercial developments. Also, HDIL is developing a multi-service SEZ in Bhayander across 600 acres (~450 acres in phase I). Both projects will be developed over the next 9-12 years. Based on potential development of >300mn sqft requiring an investment of ~Rs594bn.
HDIL is executing ~120mn sqft of saleable area in the next 5-7 years (37 projects). 23 projects with 42.7mn sqft developable area are ongoing. Of the total land bank, ~95mn sqft (79%) fall within Mumbai Metropolitan Region and ~5.6mn sqft (5%) under SRS.
HDIL is developing/rehabilitating 276 acres of slum land adjacent to Mumbai airport where it and could generate ~7.5mn sqft saleable space, and ~31mn sqft of transferable development rights (TDRs) through rehab.
Sum of The Parts Valuation of HDIL:
SEZ Projects Rs 891/share
Airport Slum Rehab Project Rs 503 / share
Other Projects Rs 667 / share
HDIL NAV estimate of Rs444bn or Rs 2,076 / share which is the target price set by ICICI Securities.
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Published by Webmaster @ 8:49 PM IST.
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Credit Suisse Recommendations for 2008 in India
Monday, January 07, 2008
Indian Markets have entered into an era of Conflicting valuations. Credit Suisse [CS] continues to be bullish on Capital Goods while HDFC and Citi have bearish to Neutral views on the same. Anyway, here is CS's theme for 2008.Category + Weightage + Rating + Preferred Picks
Private Sector banks 10.0 UW Prefer HDFC Bank and Axis Bank
NBFC 6.0 UW UW stock brokers
Real estate 6.0 OW Buy Sobha and Parsvnath
Public sector banks 5.0 OW Buy SBI, PNB, BOB
Industrials 17.0 OW Buy L&T, BHEL, Thermax, Punj Lloyd
Energy 15.0 UW Buy GAIL; Neutral Reliance and ONGC
Information technology 14.0 OW Buy Infosys, Satyam, Mindtree
Consumer staples 8.0 OW Buy HUL, ITC, United Spirits
Consumer discretionary 5.0 OW Buy Hero Honda, Educomp, Everonn
Materials 5.0 UW Neutral Tata Steel
Health care 4.0 OW Buy Lupin, Sun Pharma, Dr Reddy's
Telecoms 3.0 UW UW Bharti
Utilities 2.0 UW Reliance Energy
Investors are recommended to research thoroughly the stocks they are BUYING [Read or Search on our site and we have very likely covered these stocks] as markets will be very volatile in the weeks leading to Historical Budge of the Union of India.
Should you need any Research Reports and Advise send an e-mail on the stock to feedback AT DalalStreet.Biz and we will try to cover as many as possible.
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Published by Webmaster @ 11:06 PM IST.
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Buy Panacea Biotec - DSPML
Panacea announced WHO pre-qualification for their pediatric combination vaccines Easy Four (DTP+Hib) and Ecovac (DTP+Hep B) which implies global acceptability of these vaccines by various UN procuring agencies. Expect approval for the crucial pentavalent vaccine (EasyFive) as well to be in place shortly. The combined demand of all combination pediatric vaccines worldwide was US$600mn in 2005 and is estimated to grow up to US$1.6bn by 2012.Driven by combination and IPV vaccines as well as robust 14%+ domestic formulations growth, we expect Panacea to deliver EPS growth of 44% in FY09E and 26% in FY10E. Overall, we estimate 35% EPS CAGR (FY08E-10E) on the back of 23% revenue CAGR (FY08-10E).
Likely EPS triggers are as follows,
- Likely progress on Anthrax vaccine tender award of 25 mn doses for the US Govt. stock piling program (US$250mn market size; Not in MLe)
- Supply of combination vaccines to other markets like CIS and Latam
- Possible US/EU acquisition/collaboration for pharma/vaccines
- Launch of IPV vaccine in early 2008
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Published by Webmaster @ 8:12 AM IST.
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Apollo Tyres Stock Punctured - IDFC SSKI
IDFC SSKI in a report punctured the hopes of Apollo Tyres stock. The tyre industry is more of a commodity play with limited pricing power for players despite >90% capacity utilization. Though select players have hiked prices by ~1% in December 2007 in the replacement market to counter rising raw material prices, MRF's non-participation raises doubts on sustainability of the price hike and rules out future increases.SSKI recommends investing in tyre companies at PER of 8-9x with target valuations of 11-12x (both 2- year forward valuations). At 13.8x FY09E and 12.3x FY10E consolidated earnings, and 6.1x FY09E and 5.3x FY10E consolidated EV/EBIDTA, the stock appears fully priced at Rs 57. Given that there is currently no case for any material upside to growth estimates an UNDERPERFORMER rating is assigned to the stock.
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Published by Webmaster @ 7:56 AM IST.
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Book Profits in Religare - Citi
Sunday, January 06, 2008
Citi in a research report released minutes ago has recommended a SELL on Religare. Religare is India's fastest growing, most aggressive and leveraged retail brokerage entity. The stock is up 280% from its IPO price; currently trading at 30x FY09E EPS.India's equity markets have grown rapidly in both retail and institutional volumes. Trading volumes have expanded rapidly (+150% yoy) and have exceeded growth in market capitalization. While economic growth continues to be strong, and expect structural growth in retail volumes, the recent rapid pace of growth suggests near-term volatility.
Religare is primarily a retail brokerage, driven by its large and growing margin finance book and a substantial distribution expansion; it is among larger brokerages with a 4%+ market share. Religare is diversifying into consumer financing, insurance and asset management, which should enhance its product offerings, offer synergies and scale.
Citi expects FY07-10E EPS CAGR of 90%, weighted towards retail brokerage and margin finance, and supported by its newer business initiatives. While capital markets sensitivity will remain high, it should moderate with increasing revenue diversification.
Religare is expected to report an EPS of Rs 23.31 for FY09 and Rs 29.70 for FY10. Citi recommends a SELL with a Target price of Rs 515. We recommend you to Book Profits if you HOLD the stock. Shorting is not recommended at current levels.
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Published by Webmaster @ 11:48 AM IST.
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XPRO India - Multibagger Recommendation
Friday, January 04, 2008
XPRO India Ltd. is a part of S.K. Birla Group and is a diversified company involved in the manufacture of BOPP Films, Coextruded Plastic Sheets, Coextruded Cast Plastic Film, Thermoformed Components, Refrigerator Liners, Thermoset Moulding Powders and Synthetic Resins.The company has its manufacturing operations located at Faridabad, Greater Noida, Ranjangaon (Pune) and Barjora (West Bengal). The company had relocated its manufacturing plant located at Kandivali, Mumbai to Ranjangaon, Pune.
The company owns land at Kandivali and has entered into an agreement with a builder for the development of that land. Though the company has not spelt out the details of the land bank or the terms of the agreement with the builder in either its Annual Report or the company's website, and believe any positive surprises there could significant rerating of the stock.
The promoter group has recently been allotted Equity Shares and Convertible Warrants at Rs 41.50, signifying confidence of the promoters in the future of the company.
Recommendation:
The company has been a consistent dividend payer. The Cash Profit for FY 06-07 was Rs 12.41 crores leading to a Cash EPS of Rs 11.80. The stock therefore trades at roughly 4 times its Cash EPS of FY 06-07. Moreover with a Book Value of over Rs 100, manufacturing operations at 4 places and consistent dividend track record, the stock looks undervalued at its current price.
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Published by Webmaster @ 11:19 AM IST.
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Book Profits in Canara Bank
Thursday, January 03, 2008
ABN Amro in a report released minutes ago has advised to Book Profits in Canara Bank as the bank struggles with lower operating margins than its peers. Poor core fee income and rising loan loss provisions are unlikely to help the bank’s cause.Can Bank will witness a higher increase than its peers in the average cost of interest-bearing liabilities in FY08 from FY07. The small proportion of low-cost deposits is also a key reason for the relatively high cost of Can Bank funds. We expect low-cost deposit ratios to fall to 30.4% by March 2008 from 31.5% in March 2007.
Can Bank will have the lowest ROAs (average over FY08-10) among its peers at 0.83%. As leverage falls due to expected equity dilution in FY09, we believe ROEs will remain under pressure. We expect Can Bank’s ROEs to average 13.0% over FY08-10, among the lowest in its peer group.
Its weak core earnings do not warrant valuations in line with its peers and that the stock needs to trade at a discount. ABN Amro has downgraded to Sell, from Hold, with a target price of Rs326.1 However, just book profits if you own the stock as we are in a non-stop non-sense Bull Market :-)
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Published by Webmaster @ 10:29 PM IST.
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IT Company Results Expecations + Multibaggers
Anlaysts on the street are still in love with lost love - Indian IT Companies. Here is the consensus estimates. Kindly note that the future of these stocks will depend on the Guidance for the next quarter and year.Infosys Technologies:
Results will be announced on Jan-11th.
Consensus Estimate for Q3FY08- Revenues of 4331.4 cr 5.5%[qoq] 18.5[YoY] Net Profit of Rs 1172.8 EPS of Rs 20.50 and OPM of 31.8%
Wipro:
Consensus Estimate for Q3FY08- Revenues of 5319.4 cr 12.5%[QoQ] 34.2%[YoY] Net Profit of Rs 867 crore. EPS of Rs 4.8 OPM of 22.1%
TCS:
Consensus Estimate for Q3FY08- Revenues of 6012.4 cr 6.6%[QoQ] 23.7%[YoY] Net Profit of Rs 1312 crore. EPS of Rs 13.4 and OPM of 24.4%
Satyam Computers:
Consensus Estimate for Q3FY08- Revenues of 2152 cr 6.0%[QoQ] 29.6%[YoY] Net Profit of Rs 432 crore. EPS of Rs 6.3 and OPM of 21.7%
Here is a List of latest Multibaggers. Kindly research before you BUY them.
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Published by Webmaster @ 9:08 AM IST.
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Varun Shipping + Ahluwalia Contracts - Initiating Coverage
Wednesday, January 02, 2008
SBI Caps has initiated coverage on Varun Shipping and Ahluwalia Contracts with a BUY recommendation.Varun Shipping:
Varun Shipping Ltd. (VSL) is the largest hydrocarbon shipping company is a serious player in the area of shipping energy in the country. Given its prominent presence in this niche segment, where charter rates are less volatile, coupled with its fleet expansion and foray into the lucrative offshore segment, we expect Varun to register 15% revenue CAGR over FY07-FY10.
Varun has increased its presence in the lucrative offshore segment by acquiring 2 high-end Anchor Handling Tug Supply (AHTS). The company executed a $320 million capex over the last two years in which it expanded its fleet size from 14 vessels in FY05 to 20 in Q2FY08. Another $80 million capex is in the pipeline to be executed by end of FY08.
Despite the cyclical nature of its business, Varun has one of the best dividend paying track records in the industry. It has been paying dividends consistently for the last 23 years. Using NAV, EV/EBITDA, P/B and P/E as valuation tools we assign a target price of for the stock which is a 39% upside from the CMP.
Ahluwalia Contracts: ACIL
ACIL's order book position has been growing robustly with the growth witnessed in the civil construction space. The order book position has increased from Rs7.8bn in FY05 to the current order book position of about Rs31.4bn.
Our Newsdesk had reported that the company has bagged one of the largest housing construction contracts in the country - the Residential Complex for Commonwealth Games 2010.
The company had been operating at an EBIDTA margin of 9.6% in FY06 which improved to 10.4% in FY07. The demand - supply situation is in favor of ACIL with large number of construction projects and a limited number of players to execute them. The operating margins is expected to improve further led by the pricing power to 11.9% and 12.8% in FY08E and FY09E respectively.
At the CMP of Rs339, the stock is trading at a P/E multiple of 40.5x its FY08E EPS of Rs8.4 and 25.1x its FY09E EPS of Rs13.6. On an EV / EBIDTA basis, the stock is trading at 18.7x FY08E and 12.0x FY09E respectively. SBI recommends a BUY and value the stock at 35x its FY09E EPS of Rs13.6, arriving at a price target of Rs476, an appreciation of 39%.
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Published by Webmaster @ 3:03 PM IST.
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Buy Carol Info Services
Tuesday, January 01, 2008
Carol Info Services Limited (CISL) is a subsidiary of Khorakiwala Holdings and Investments Private Limited. Pursuant to a scheme of arrangement, the pharmaceutical business of the Company was demerged into Wockhardt Limited with effect from January 01, 2000. CISL, formerly known as Wockhardt Life Sciences Ltd is currently engaged in contract manufacturing in the nutrition industry. Its plant in Lalru, Punjab manufactures neutraceutical and other milk-based products for Wockhardt Ltd.CISL is an asset rich; almost debt free company with a property portfolio that
generates substantial rent income (Rs. 6.63 cr in FY07) and it has an investment portfolio whose value unlocking could lead to a potential upside for CISL.
CISL has investment in Real Estate at bandra Kurla Complex. Value per share of CISL is Rs 22 / share. CISL holds 67,50,000 shares (Rs. 10 FV, 9% of pre-ipo equity) of Wockhardt Hospitals Ltd (WHL) for an investment value of Rs. 5 cr. This investment translates to Rs 25.7 per share value for CISL.
The Sum of the Parts valuation model (SOTP) to arrive at the target price of CISL under two models – the Discount Market Price model and the Earnings capitalization Model. Under the DMP model the fair share price of CISL is Rs. 144.5. HDFC Maintains a BUY with a Target price of Rs 144.5
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Published by Webmaster @ 9:27 AM IST.
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