Citigroup upgrades Gammon India to BUY
Friday, January 26, 2007
Citigroup Research has upgraded Gammon India Ltd to BUY with a price target of Rs 461, 20% upside from current levels.Citi's target price is based on a P/E of 19x FY08E (from 17x CY07E), a premium to Nagarjuna's 16x and a discount to L&T's 23x. Gammon's portfolio of projects has been significantly enhanced to 13 from 7.
Gammon ended 2Q FY07 with a strong order backlog of Rs80bn (4.0x FY07E sales), comprising 30-35% low-margin transportation orders, 30-35% high-margin power orders, and medium-margin orders making up the balance. Citi expects order inflow momentum to remain strong with an order booking CAGR of 14% over FY06-09E.
Citi expects an EPS CAGR of 42% over FY06 -09 (FY06A annualized for 12 months), supported by a sales CAGR of 45% and stable EBITDA margins of 9.0 - 9.5% over FY06-09E. Citi's research expects an EPS of Rs 18.06 and Rs 27.49 for FY08 and FY09.
Published by DalalStreet Business @ 7:49 PM
Castrol, India Cement, BOI - Investment Update by ABN Amro
Wednesday, January 24, 2007
ABN Amro's investment views on the following stocks after quarterly results.
India Cements: IC
IC's results were exactly in line with our expectations. The macro environment for the cement business in India (and South India) remains positive on volumes and pricing, and the real threat (if any) to pricing seems clearly from 2HFY09. IC is contemplating a greenfield capacity in North India to address growth beyond FY09. It remains the cheapest stock on all key parameters in the top-five cement companies. We continue to like the stock and re-iterate Buy. Sales growth of 36% driven by 28% realisation growth and 7% volume growth.
Bank of India: BOI
Net profit increased 78% yoy, led by a 47.6% increase in pre-provision operating income. However, there has been a slippage in three large accounts, leading to an increase in provisioning; hence, the improvement in asset quality is not significant compared to the recent past. Tax rate was lower at 21.5% in 3QFY07, vs 26.4% a year ago. Maintain Buy rating. BOI trades at 9.5x FY08F earnings and 1.5x FY08F adjusted book, after writing off 100% pre-tax net NPAs. Our estimates include equity dilution of 100m shares in FY08.
Castrol India:
Castrol has maintained its bottom line despite large spikes in base oil prices. This proves the strength of brand and raises earning growth potential as base oil prices weaken and volumes grow. Reommended to Buy and with a target price of Rs300.
Castrol's 2007 EPS is expected to grow 40% to Rs16.20, giving a return on equity of 46%. Earnings are likely to grow 64% over 2007-09 on the back of lower base oil prices and volume growth. We believe a potential share price trigger is a decline in LOBS prices, which we expect to come through by 2Q07. Meanwhile, the 2007F dividend yield of 4.7% should provide downside support.
Tags: Dalal Street, Bank of India, India Cements, Indian Stocks
Published by DalalStreet Business @ 12:39 PM
Madhucon Projects - Investment Recommendation - Motilal Oswal
Thursday, January 18, 2007
Motilal Oswal has initiated coverage on Madhucon Projects with a BUY rating and a Target price of RS 387. CMP Rs 311.
Madhucon is mainly into infrastructure projects and is likely to be a major beneficiary of huge spending in Roads and Irrigation projects. The road sector is likely to see an investment of Rs2,200b through FY2012. Further, the Andhra Pradesh (AP) government will spend Rs260b on irrigation projects through FY2010. Madhucon will be a major beneficiary of this, given its timely completion of more than 350km of Golden Quadrilateral and proven ability in irrigation projects.
Healthy Margins: Madhucon's margins are superior to its peers. Madhucon's 14% TTM EBITDA margin is above the average peer group margin of 10%. The main reasons for Madhucon's superior margins are: (1) big-ticket orders enabling overhead efficiencies, (2) own mines for aggregates (25% of road project cost), and (3) sub-contracting of only low-value activities. Madhucon will maintain at least 13% EBITDA margin going forward.
Order Books: Madhucon has a strong revenue visibility with an order book of about Rs42.9b (10x TTM revenue) - 68% road projects (both direct and BOT), 25% irrigation projects, and balance real estate and railway projects. Only 65% execution through FY 2009E may happen, implying potential upside.
Motilal Oswal expects an EPS os Rs 11.9, Rs 19.9 and Rs 31.9 on sales of Rs 547 crore, Rs 985 crore and Rs 1477 crore for Fy07, 08 and 09 respectively.
Tags: Dalal Street, Madhucon Projects, Infrastructure Stocks, Emerging Market
Published by DalalStreet Business @ 5:46 AM
Hindustan Zinc to outperform - Macquaire
Macquaire in its latest research report after analyzing the results of Hindustan Zinc's Q3 performance has put a BUY recommendation on the stock with a 12 month price target of Rs 1160. HZL is one of the best mining assets, and huge possibility to add more reserves – is trading below its NPV of Rs 804 and is one of the cheapest on this basis among its global peers.
Q3 results are not in-line with market expectations but analysts are bullish that HZL will meet their expectations for the full year. Analysts expects an EPS of Rs108 for FY07, which is 8% higher than consensus. The company has already posted EPS of Rs86 in the first three quarters and shall easily surpass expectation, as zinc prices – even after three cuts in a month are near the forecast price of US$3,800/tonne.
12-month price target: Rs1,160.00 based on a PER methodology.
Catalyst: Strong earnings growth, high cash flow and sustainability of higher profits.
Outperform maintained: Given the bullish view on zinc prices in FY08 and expected 50% volume growth in FY09, Macquaire estimates sustained high profitability.
Tags: Dalal Street, Metal Stocks, Invest India, Emerging Market
Published by DalalStreet Business @ 2:34 AM
Goldman Sachs upgrades RIL to BUY
Saturday, January 13, 2007
Goldman Sachs which has initiated coverage on India's laregst company, Reliance Industries Ltd has upgraded it to BUY from Neutral with a 12 month price target of Rs 1660.
They value Reliance on sum-of-the parts methodology based on peak cycle valuation of 5.5X FY2008E (March) EBITDA for refining, near-peak cycle valuation of 6.0X FY2008E EBITDA for the petrochemical business, and DCF for the E&P and organized retail ventures to arrive at our target price of Rs1,660.
The sum of parts valuation of Reliance Industries's individual business segments are valued as follows.
Chemicals - Rs 244
Refining - Rs 256
Investments - Rs 181
Reliance Petroleum Value - Rs 169
Reliance Retail - Rs 154
E&P Existing - Rs 61
E&P New - Rs 595
E&P probably means exploration and production.
Goldman expects fully diluted EPS of Rs79, Rs76 and Rs101 for FY07, 08 and 09 ending in March.
Tags: Dalal Street, Goldman Sachs, Reliance Industries, Emerging Markets
Published by DalalStreet Business @ 4:00 PM
Citi recommends BUY on Bharti Airtel and Reliance Communications
Sunday, January 07, 2007
Citigroup wireless research group in its report is extremely bullish on the Indian wireless growth story. It has pegged the Indian mobile phone subscriber tele-density at 27% at the end of March-2009. It is not now that Citigroup has turned bullish on the Indian wireless space, but right from May-2006, its Asian Telecom head was very optimistic about Bharti Airtel Ltd.
Bharti Airtel Ltd: Buy/Low Risk (1L) with a target price of Rs750
According to Citi research, it estimates an FY06 - 09E EPS CAGR of 46.5% or more than double that of the broader market report and expects EPS of Rs 20.7, Rs 30.3 and Rs 37.5 for the FY ending March in 2007, 2008 and 2009 respectively. Valuations adjusted for growth (EV/EBITDA of 11.8x FY08E) still look reasonable. 12-month forward target price of Rs750 (previously Rs600) is based on DCF, which suggests a fair value of Rs749 as of March 2008 (rolled forward from March 2007). This is based on WACC of 10.8%, terminal growth rate of 3.5% and beta of 0.9 (implying a terminal EV/EBITDA multiple of 8.0x).
Additionally, most regulatory concerns are behind us and 3G recommendations, though discomforting, cannot derail the growth path, in our view. The strategic shareholding of SingTel, which the company has increased over time, leaves us comfortable with execution issues and new initiatives (such as electronic recharge, vendor tie-ups or a One Alliance partnership).
Reliance Communications Ltd: Buy/Medium Risk (1M) with a target price of Rs570.
According to Citi research, it estimates an FY06 - 09E EBITDA CAGR of 63.4% and expects EPS of Rs 13.7, Rs 20.8 and Rs 28.8 for the FY ending March in 2007, 2008 and 2009 respectively. RCOM’s 12-month target price of Rs570 is based on 11.2x FY09E EV/EBITDA, similar to the implied target EV/EBITDA for Bharti based on our DCF estimate.
RCOM’s valuation multiples are likely to closely track Bharti’s due to the liquidity overflow from the latter, notwithstanding the risk of technology transition. In addition, the risks associated with technology shift to GSM may get significantly mitigated in case RCOM makes a successful bid for Hutch Essar, besides according it a clear market leadership. As a secondary valuation methodology, we apply a target P/E of 27.5x FY08E for a fair value of Rs570.
Tags: Dalal Street, Telecom India, Emerging Market, Telecom Stocks
Published by DalalStreet Business @ 9:57 AM
HDFC - Aggressive BUY List
Saturday, January 06, 2007
Here is a list of stock in the aggressive BUY list of HDFC securities.
Stock and their Target Prices are as mentioned below.
Ratnamani Metals 630
Punj Lloyd 1430
Dr. Reddys Labs 1000
AMTEK AUTO 400
WOCKHARDT 540
SKF INDIA 400
RANBAXY LABS. 525
BHEL 2975
Larsen & Toubro 1760
BAJAJ AUTO 3100
Tags: Dalal Street, Invest India, Stock Recommendation, Stock Research
Published by DalalStreet Business @ 11:43 PM
Citigroup bullish on Aban Offshore and Maruti
We had already put a BUY recommendation of Aban Offshore when the price was Rs 1080 and it reached Rs 1700. Citigroup in its research report has put a similar target of Rs 1700 due to Aban's bid for Sinvest.
Maruti reported stronger than expected sales in Dec-2006. Citi has revised its 12-month targetto Rs1,107 is based on 15x P/CEPS FY08E. Citi expects the cash earnings CAGR of c19.5% for FY06-08E. Maruti is now well positioned to emerge as Suzuki's regional manufacturing hub over the longer term, which we view as a significantly positive because it would enable MUL to reduce its dependence on the local market.
Tags: Dalal Street, Indian Stocks, Share Market, Emerging Market
Published by DalalStreet Business @ 12:05 AM
