Indraprastha Gas - Conflicting Reports
Monday, July 30, 2007
Citigroup Research reiterates a BUY on Indraprastha Gas Ltd while Merrill Lynch has retained a SELL on the stock. So what do you do when their are such conflicting recommendations ? I was watching Wizzards of Dalal Street - Prashant Jain and believe in his theory.
- You have to model the company financials yourself.
- Then see what are the influencing factors that will affect the company in the next few quarters
- Once you have all the required data - Ask yourself what happens if this is the scenario or if that is the scenario and you have the answer in front of you. Mr. Jain took some bold decisions like exitting IT stocks before the Dot Com BUST in 2000 because his model told him something was not right and recommended a SELL
Steady CNG conversions driven by the rapid pace of private car conversions (c.3,000 per month), increasing PNG penetration, and geographical growth in newer areas (Greater Noida, Ghaziabad) would result in a 14% volume CAGR over FY07-10E. IGL's 1QFY08 net income of Rs384m was ahead of expectations and up an impressive 39% yoy. Adjusting FY08E and FY09E earnings by +3% and -1% respectively after factoring in FY07. Any increase in prices of the gas will be passed on to consumers.
Target price of Rs160 for IGL is based on DCF. DCF is used because it captures the value of the projects over their lifetime. IGL's near-term cash flow is affected by its aggressive expansion. Target P/CEPS of 8.2x FY09E is still at a small discount to current multiples of other gas utilities.
Merill Lynch Report:
The biggest risk to IGL is competition from likely new entrants like Reliance Industries (RIL). It as imminent. Competition from an aggressive player like RIL is a serious threat to IGL's volumes as well as super-normal margins. If gas cost rises gradually as expected it will worsen IGL's outlook. Merrill therefore maintains a Sell on IGL despite its encouraging 1Q result.
DalalStreet Research Analyst Views:
Merrill Report about selling this stock is purely based on RIL entering this segment. Reliance also entered the Telecom business under Mukesh Ambani but Bharti is till the PAN India leader. It is difficult to BUY Merrill's argument on "if RIL" enters this business. We endorse Citi's views.
Published by DalalStreet Business @ 11:19 PM
Newsflash - SBI Estimate and Target Price Revised Upwards
Citigroup Research has upped the target price of State Bank of India in a report released just a while ago to Rs 1,825. Citi has also upgraded the EPS earnings estimate to Rs 102.64 and Rs 121.18 for FY2008 and FY2009 respectively.SBI is India’s largest bank with around 20% market share in deposits and loans, 9,038 branches and more than 90m customers. Target price for SBI is Rs1,825 based on our EVA model, which captures the long-term value of the business and is a standard valuation measure for Citigroup's India Banking universe.
Citi has revised target price from Rs1,235 previously, as they now incorporate new earnings, lowered the risk-free rate to 8% (8.5% previously) in line with the market level, increased the valuation of its subsidiaries to Rs525 (Rs231 previously) as we
have moved valuation benchmarks to FY09E and we have factored in the Insurance and asset management business.
Federal Bank - Earnings Estimate and Target Price Upgraded:
Citi has also upgraded the earnings estimate and price target of Federal Bank as well. Federal's 1Q08 profits were up 67%yoy; pre provision profits were up 66%, ahead of estimates. Increased coverage levels (88%) with low net NPLs (>0.4%) provide comfort.
Federal Bank is expected to report a fully diluted EPS of Rs 40.58 and Rs 49.53 for FY2008 and FY2009. Raising estimates 11-17% for FY08-09E, target price to Rs 438 and target P/BV multiple to 1.7x FY09E (from 1.5x Sep 07) to reflect premium over average PSU banks.
Published by DalalStreet Business @ 1:18 PM
Engineers India Ltd - Review
Central government of India owns a 90.40% stake in Engineers India (EIL). EIL renders project consultancy and engineering services and also undertakes lumpsum turnkey (LSTK) projects. The company derives nearly 90% of its revenue from the oil and gas sector.Of the two segment in which it operates - consultancy and engineering and turnkey projects - the consultancy segment earns high margin, while the turnkey project division’s margin is low.
There has been a consistent improvement in the growth of the consultancy business. The business grew 5% in FY 2005, and 15% in FY 2006 and FY 2007. Also, margin continued to show improvement. The profit before interest and tax (PBIT) margin of this division improved from 28% in FY 2005 to 36% in FY 2007. EIL's consultancy revenue is expected to grow 20% and at least maintain the margin, going forward. This is in spite of the sharp rise in salaries effected in early 2007.
New order inflow to the domestic consultancy and engineering division stood at Rs 900 crore in FY 2007 (Rs 485 crore in FY 2006). Export consultancy & engineering orders stood at Rs 68 crore in FY 2007 (Rs 325 crore in FY 2006). New-order flow from the international markets was exceptionally large in FY 2006 due to receipt of two big orders in that year. A Rs 250-crore backlog will be executed in FY 2008 and beyond. The company expects two big export orders to come by December 2007.
Recently, EIL received a Rs 900-crore contract from IOC for another refinery in Panipat. This will contribute Rs 250 crore to topline and the same margin earned in its previous contract in FY 2008.
EIL is expected to register net sales and net profit of Rs 835.60 crore and Rs 198.50 crore in FY 2008. The turnkey-project revenue is expected to be Rs 250 crore (up from Rs 82 crore in FY 2007) and consultancy business to grow 20% in FY 2008. This gives an EPS of Rs 35.3. At the current market price of Rs 478 (52-week high/low: Rs 610/ Rs 405), the scrip is available at a P/E of only 13.6 times its FY 2008 earning. With more than Rs 1000-crore liquid funds (Rs 178 per share) and strong order book, both for consultancy as well as turnkey projects.
Published by DalalStreet Business @ 10:19 AM
Ranbaxy + Wockhardt + Nicholas Piramal - Analysis
Sunday, July 29, 2007
Ranbaxy Labs, Wockhardt and Nicholas Piramal have had a good quarter which has led their stocks to be upgraded by Citigroup.Ranbaxy Labs:
As the settlement of the Valtrex patent litigation with GSK comes as a much needed catalyst for the stock. Ranbaxy has been out of favour on the bourses despite a steady improvement in fundamentals. However, with earnings momentum likely to remain strong & valuations looking attractive at 17.6x CY08E earnings, expect a re-rating over the next 6-12 months.
The street is ignoring Ranbaxy's improving business profile reflected in: a) rising share of high margin emerging market sales; b) tie-ups to enhance pipeline in niches like biogenerics, oncology & peptides; c) integration & rapid scale up of Terapia; d) robust growth in base US business.
Buy with a target price of Rs505/share, 35% upside potential from current levels. The stock price now factors in most negatives.
Wockhardt:
Sales up 53% and PAT up 61%, driven by partial consolidation of the recently acquired Negma Lerads business. EBITDA margin of 24% (up 238bps YoY) is higher by c270bps due to capitalization of some R&D cost that was expensed in 2QCY06. Adjusted PAT was up 43% YoY. US formulations are up 50% YoY with 5 launches in 2Q; Healthy double-digit growth in Germany as 3 launches offset the pricing pressure in the market; Steady growth in UK & India.
Wockhardt continues to combine organic and inorganic growth drivers optimally. The stock has been out of favor for some time. Wockhardt as Buy/Low Risk (1L) with a target price of Rs529. Wockhardt as an emerging global bio-generics company with strong earnings growth potential over the long term. The company has had several disappointments over the past 2 years - especially related to its US market initiatives. However, with most of these being addressed, one can expect improving fundamentals and earnings growth to once again drive good upside over the long term. At 16xJune'08E earnings, Wockhardt has a price target
of Rs529/share.
Nicholas Piramal India Ltd [NPIL]:
NPIL not only maintained FY08 guidance but also disclosed several qualitative positives related to the CRAMS franchise. Citi raises target price to Rs345/share and recommend using the post-results decline as an opportunity to buy the best Indian play on innovator CRAMS.
1Q results were weak as PAT fell 19% YoY despite 16% sales growth. EBIDTA margins fell 296bps to 13.8%. Besides 41% sales growth, 1Q had fresh evidence of the traction in NPIL's CRAMS foray: a) 3 new clients & more business from Pfizer at Morpeth; b) 2 contracts shifted from Avecia to India; c) 1 big API deal across Digwal & UK; d) 10% staff reduction in Avecia & Morepeth.
Raising target price - to Rs345/share as we roll forward our valuation to September 2008E earnings and maintain NPIL as one of Citi's top sector picks.
Published by DalalStreet Business @ 2:11 PM
SELL Mastek - Merill Lynch
Saturday, July 28, 2007
Merill Lynch has downgraded India's IT Service Provider - Mastek to a SELL. Order intake push-out for two quarters and growing attrition, suggests competitive headwind. Post a 19% EBIT level miss this quarter Merill cut estimates by 8% and 4% for FY08 & FY09. Though at 9x FY08E PE, Merill sees more potential downside given subdued FY07-09 EPS CAGR forecast of 12%.Merill Lynch's top picks in Small Cap IT are Rolta and Firstsource. Target Price for Rolta is Rs540 is set at 14x FY09e PE at 7% discount to target multiple for Infotech Enterprises. For Firstsource, Target Price of Rs105 is at 22x FY09E PE at a PEG of 0.9 and current FY08 PE of 25x.
Published by DalalStreet Business @ 1:49 PM
Buy ITC - Solid Results - JP Morgan and Citi
Friday, July 27, 2007
JP Morgan and Citigroup have upgraded ITC to a BUY previously from hold with a price target of Rs 195.After 40% underperformance over the last 12 months, risk-reward looks favorable. Investors are focusing too much on cigarette volumes; we estimate that even if volumes were to decline by 5%, cigarette EBIT would increase 8% in FY08. ITC's price hikes are heavily loaded in favor of its mid segment brands (~65% of volumes)
Target price increase to Rs195 from Rs130 reflects 1) rolling forward target P/E from FY08E to FY09E, given that we are approaching mid FY08E and expect valuations to start reflecting FY09E; 2) increase target multiple from 15x to 20x, toward the higher end of historical trading bands.
ITC Q1 Profit stands at Rs 783 crore up from Rs 652 crore a year ago [Up 20.2%]. Sales up from Rs 2850 crore to Rs 3325 crore.
Published by DalalStreet Business @ 10:30 AM
Buy Electrochem - HDFC Sec
Wednesday, July 25, 2007
HDFC Securities Research team has put a BUY Recommendation on Electrochem India with a potential upside of 50% in 15-18 months.
The core business of Electrotherm India Ltd (EIL) includes manufacturing induction furnaces required by the steel & forging industry (employing electric furnace route and not blast furnace route) and project engineering. EIL has taken initiatives to integrate forward by manufacturing major categories of steel including construction, structure/ alloy and stainless steel. EIL has set up a sponge iron unit in Kutch as a part of its backward integration measure to manufacture steel of all grades. To reduce its power cost, EIL has also setup a 30MW power unit in Kutch. The company had implemented a show case steel plant in Kutch, Gujarat.
Valuation and Recommendation:
EIL's sales to grow at a CAGR of 41.4% over the next two-year period. The EBIDTA margins are likely to remain in the range of 14-15%. The EPS growth could be of 37% CAGR over the next two periods. We have assigned combined valuation of engineering and steel industry to EIL and expect it to command an P/E ratio of 9.5x in FY09 (E). The stock is currently available at a P/E ratio of 5.5x FY09 (E) earnings of Rs 89.2. HDFC recommends Electrochm India Limited as a compelling BUY with a price target of Rs 847 in the next 12-15 months.
Published by DalalStreet Business @ 12:42 PM
Buy Orchid + Unichem - Sharekhan Research
Tuesday, July 24, 2007
Sharekhan Equity Research is bullish on the prospects of Unichem Laboratoriess and Orchid Pharma. Sharekhan has a BUY recommendation with a price target of Rs 360 and Rs 375 respectively.Unichem Laboratories:
For Q1FY2008 Unichem Labor atories (Unichem) has reported a sales growth of 12.1% to Rs153.5 crore, which is lower than expectation of Rs165 crore. The growth was subdued largely due to a sharp 18.8% decline in the company's exports on account of the appreciation of the rupee.
Unichem's strong brand building efforts, the continued momentum in its power brands and therapy focused marketing initiatives have caused the domestic formulation business to perform in the quarter. The revenues from this segment grew by an impressive 20.9% to Rs126.8 crore.
Unichem's operating profit margin (OPM) expanded by 80 basis points to 22.4% in the quarter. The management has also indicated that such a high growth rate for this business might not be sustainable going forward. The company expects the growth to moderate in Q2FY2008, due to DPCO-related price cuts imposed on its largest brand Ampoxin towards the end of Q1FY2008. However, a conservative 11.5% growth in this business in FY2008E is doable and remain optimistic about the company's ability to beat estimates.
At the current market price of Rs245, Unichem is trading at 8.6x its estimated FY2008 earnings. BuyUnichem, with a price target of Rs 360.
Orchid Pharmaceuticals:
Orchids top line grew by 18.1% year on year (yoy) to Rs238.2 crore in Q1FY2008. The top line growth was above estimates of Rs223.2 crore. Orchids operating profit margin (OPM) expanded by 110 basis points to 29.9% in Q1FY2008. On the other hand, the rising R&D costs (due to FTF filings) and increasing staff costs adversely impacted the margins. On a like-to-like basis (excluding the Rs10 crore incremental cost incurred on FTF filings), the margin expansion would have been even more robust at 530 basis points to 34.1%. Consequently, the operating profit grew by 22.8% to Rs71.2 crore in Q1FY2008.
At the current market price of Rs234, Orchid is quoting at 9.9x its estimated FY2009 earnings, on a fully diluted basis. In view of the bright prospects for the company, Sharekhan retains positive stance on the stock and maintain a Buy call with a price target of Rs 375.
Kotak has a price target of Rs 300 on Orchid Pharmaceuticals.
Published by DalalStreet Business @ 10:27 AM
SELL Ultratech + Ambuja Cement - Citi
Monday, July 23, 2007
Breaking News:Citigroup Research has downgraded Ultratech Cement [ULTC] to a SELL with a Price Target of Rs 730 potential downside of 26% from current levels.
UltraTech reported net sales at Rs13.5bn (+17% yoy) on the back of higher domestic realizations (+11% yoy). Production costs rose 11% yoy, due to a 22% jump in coal prices. EBITDA margins were flat yoy (32%) but increased 250bps qoq. PAT came in higher than expected at Rs2.6bn.
Costs came in at Rs9.2bn, largely due to an increase in raw material expenses; +27% yoy on a per tonne basis. Freight costs per tonne increased 10% yoy. Other income doubled to Rs269m. While the sector enjoys pricing power in the near term, the company agrees with that FY09 is likely to see a supply surplus causing pricing pressures. Citi recommends selling into strength.
ULTC as Sell/Medium Risk (3M) with a target price of Rs730. ULTC has been hard hit by higher costs recently, particularly for coal and freight. ULTC should benefit from lower costs
due to the captive power capacity due by FY09, but this is unlikely to help compensate for the 8% yoy price decline. Citi expects a YoY profit decline in FY09. At target price of Rs730, ULTC would trade at an FY09E P/E of 11.4x.
Ambuja Cements:
Citi has also downgraded Ambuja Cements to a SELL. Ambuja Cements adjusted PAT was Rs4.04bn, 23% higher yoy but 5% below our expectations. Reported PAT was Rs8.8bn, including Rs2.2bn as profit from sale of stake in Ambuja Cement India Pvt Ltd and Rs2.6bn from sale of land.
Ambuja Cements [ACL] is a Sell/Medium Risk (3M) with a target price of Rs103. The stock is expensive for the following reasons: (1) limited visibility on cement pricing moving up as a result of uncertainties arising from unfavorable government measures in CY07; (2) a 20% yoy expected decline in CY08E earnings as large capacities are expected domestically, particularly in North India; and (3) the risk to exports, as substantial new cement capacity is coming up in the Middle East.
Target price at Rs103 based on a 10% discount to the historical seven-year average of 8.4x.
Published by DalalStreet Business @ 10:06 AM
Tata Tea Downgraded by Citi
Friday, July 20, 2007
Citigroup Research downgraded the price target of Tata Tea Ltd after a disappointing quarter. Consolidated EBITDA margins declined by 340bps due to high advertising and promotional expenses. Tata Tea's consolidated revenues grew by 28% driven primarily by its Eight O’ Clock acquisition and strong branded sales in its domestic business, which grew 18%. Profitability was, however, hit due to a higher tax rate and higher interest charges. Net profit declined 3.5% to Rs44.5mCutting FY08E and FY09E earnings estimates by 15.5% and 3.5% to reflect lower than expected 1QFY08 results. Citi reduced EBITDA margin assumptions building in higher ad-spend for Tetley. Consequently, to reflect lower earnings, Citi has cut target price to Rs1045 (Rs1150 earlier) retaining our target P/E multiple of 15x mid-FY09E earnings .
Send your comments and suggestions to "feedback AT DalalStreet.Biz"
Published by DalalStreet Business @ 9:35 AM
Power Finance an Undeperformer - Kotak Securities
Tuesday, July 17, 2007
Power Finance Corporation's [PFC] first quarter results look terrific at a glance but when you look at the finer details you will see that other income contributed to a large portion of the bottom line.Kotak Securities has an Underperformer rating on the stock with a price target of Rs 125. CMP of PFC is Rs 195.
PFC has reported stable spread of 1.9% in 1Q08 and 4Q07. PFC's ALM position seems comfortable in the near term. riable rate loans (with three-year reset) from FY2005 will be re-priced about 2-3% higher in FY2008; About 61% of PFC's assets are floating as compared to 16% of its liabilities. This will help the company in a rising interest rate scenario.
PFC's tax rate in 1Q07 was higher at 41% on account of prior period income tax demand. Consequently, reported PAT was subdued in that period. The 1Q08 effective tax rate was 32% in line with long-term trends.
PFC is expected to report an EPS of Rs 11.2 for FY2008 and Rs 12.8 for FY2009. Dalal Street Analyst advises Investors to Book Profits at CMP of Rs 198 as the stock looks expensive.
Published by DalalStreet Business @ 12:07 PM
Citi Upgrades Corporation Bank Target Price
Citigroup just a while ago upgraded Corporation Bank to a BUY and also revised its target price upwards to Rs 455 from Rs 379. The reason for the upgrade is the solid performance in Q1-08; profits are up 23% – well ahead of 3% growth expectations. Balance-sheet driven NII expansion, fee growth and reduced bond portfolio charges (sharp base effect) drive profits up 23%.Management foresees about 20% growth, which should alleviate recent funding pressures and support its above-industry capital cushion. Corp Bank is expected to report a fully diluted EPS of Rs 45.53 and Rs 55.44 for FY2008 and FY2009 respectively.
EVA-based target price of Rs455 is premised on a risk free rate of 8%, industry average margins of 230bps and higher than industry long-term capital ratio of 6.5% vs 6% average. Citi is also benchmarking target price on a 1.3x FY09E P/BV multiple (FY08E earlier), which is in-line with industry average target multiple.
Published by DalalStreet Business @ 11:56 AM
Buy Nitin Fire Protection - Kotak Research
Monday, July 16, 2007
Kotak Securities has put a BUY recommendation on Nitin Fire and Industries. Nitin Fire Protection Industries Ltd (NFPIL) is India's leading player in the fire protection, safety, security and intelligent building management systems.The company is setting up a 500,000 cylinders per annum capacity plant to manufacture high-pressure seamless gas cylinders for both industrial and CNG applications at its Visakhapatnam SEZ. Traditionally, the demand for cylinders grew in India due to industrial, medical fire fighting and beverages segment. Going forward, we expect major growth in demand for cylinders to come from the automobile segment. The use of CNG as an auto fuel is also rising at a rapid pace in neighboring countries like Iran, Pakistan, and Malaysia among others.
The Indian fire protection industry, as a whole, is approximately valued at Rs.20 bn. It is expected to record double-digit growth rates in future. At the current price of Rs.431, the stock is trading at very attractive valuations of 10.5x FY09E earnings and 8.8x FY09E cash earnings. The stock is available at 7.9x EV/EBIDTA multiple and 1.5x EV/sales multiple based on FY09E estimates. Kotak expects the company to report RoE of 34.4% in FY09E. Kotak Sec initiates a BUY recommendation on NFPIL with a price target of Rs.650 over a 12-month horizon, based on the DCF method of valuation.
Published by DalalStreet Business @ 11:08 AM
BUY Chennai Petroleum - Citi
Thursday, July 12, 2007
Citigroup in a report released a while ago has maintained BUY rating on Chennai Petroleum Corp Ltd [CPCL] with target price of Rs 360.
Citi maintained Buy/Low Risk (1L) rating on CPCL with a target price of Rs 360. CPCL looks well positioned to capitalize on the sustained upturn in refining margins. In this context, CPCL's capacity expansion by 40% (up from 7.5MTPA to 10.5MTPA) and increased complexity appear timely.
Citi raised FY08-09 estimates by 19- 25% on the back of sustained strength in the refining cycle and reduced chances of subsidy burden. Introducing FY10E. The new target of Rs 360 is based on EV/EBITDA of 5.5x mid-FY09E, at the high end of its historical trading range but at a meaningful discount to peers (6.0-7.0x). Dividend yield of 5.6% provides downside support.
Published by DalalStreet Business @ 8:44 PM
Buy Fortis Healthcare - Citigroup
Wednesday, July 11, 2007
Citigroup Research in a report released just a while ago has put a BUY recommendation on Fortis Healthcare with a price target of Rs 100.Fortis Healthcare is a Ranbaxy group company. Fortis has fallen 24% since its listing in May-07. We at Dalal Street Business had an Avoid recommendation on the IPO. However, we believe that the company is in a sunrise business and one may start accumulating the stock in small lots.
Citi believes inadequate health care infrastructure and limited government investment provide significant opportunities for the private sector. Fortis has scaled up through organic and inorganic measures, and has built a strong brand equity in North India. Fortis' focus on super-specialty care bodes well for the company. Fortis will enter a high-growth phase over the next few years (a 53% EBIDTA CAGR over FY07-10E), led by improving efficiencies in existing hospitals and rapid expansion. It also has an aggressive acquisition track record.
Fortis is expected to report a fully diluted EPS of Rs -2.18 for FY08 and Rs 0.60 for FY09.
Published by DalalStreet Business @ 12:40 PM
Buy TNPL + PTC - ICICI Research
ICICI Bank's Stock Research team has put a BUY recommendation on Tamilandu Newsprint Ltd [TNPL] and Power Trading Corporation India [PTC].Tamilnadu Newsprint Ltd:
TNPL could increase its average realisation by 8.65% to Rs 35,092 per tonne of paper. This was achieved by reducing newsprint production by 46% to 2,950 tonnes and increased production of copier by 23% to 44,407 tonnes. TNPL added another 7.5 MW of wind power bringing it to 37.5MW. Mill Development Plan Phase-I is underway as per schedule. It is expected to come on stream in August 2007. The backward integration initiatives taken in phase-I would give a saving of Rs 2250 per tonne and is expected to add Rs 45 crore to the bottom line.
TNPL is trading at a P/E multiple of 5.51x its FY08E EPS of Rs 16.87. These valuations extremely attractive for a company that is likely to record earnings growth of 36% during FY07-FY08E. Moreover, with an EV/EBIDTA at 5.09x in FY08E, current valuations are even more attractive. TNPL is an out performer with a price target of Rs 135 over the next 12 to 15 months.
Power Trading Corporation:
During FY07, PTC has entered into long-term power purchase agreements (PPAs) for six projects aggregating a capacity of 3,144 MW, and power sale agreements (PSAs) for another six projects aggregating a capacity of 2,314 MW. The cumulative capacity tied up through PPAs stands at 6676.3 MW and on sale through PSAs/MOUs for sale stands at 5286.5 MW.
The company has also entered into MoUs for another 35 projects totaling to a capacity of 16,703 MW. The PPA and PSA for these are still being negotiated. Development of new businesses gained further momentum with several advisory cum-transaction agreements being structured. PTC’s advisory service, which commenced in the previous year, has an order book of Rs 3 crore
At the current market price of Rs 57, the stock is trading at 10.05x its FY09 earnings, 5.50x on FY09 EV/EBITDA and 2.33x FY09 P/BV. The company’s increased focus on highgrowth, high-margin long-term trading should help it sustain growth. Buy PTC with a price target of Rs 95.
Published by DalalStreet Business @ 12:23 PM
BUY Tech Mahindra - Citigroup
Monday, July 09, 2007
Citigroup in a research report released just a while ago has put a BUY recommendation Tech Mahindra with a price target of Rs 1920.TechM is the largest Indian IT services player in the TSP space. IT spend by TSPs is expected to remain robust – and TechM should be a prime beneficiary given its strong relationships with the likes of BT (which owns 31% of the company) and AT&T.
Target FY09E P/E multiple of 21x represents a 10% premium to our fair-value multiple for Satyam – which Citi believes is justified by TechM's 32% recurring EPS CAGR over FY07-FY10E (vs. 20% for Satyam).With superior growth prospects, TechM should continue to trade at a premium to more diversified players like Satyam / HCL Tech and i-Flex.
Tech Mahindra is likely to report a fully diluted EPS of Rs 63.55 and Rs 91.23 for FY08 and FY09 respectively.
If you would like to read the entire report drop a line to feedback @ dalalstreet.biz
Published by DalalStreet Business @ 11:49 PM
Buy Amtek India+ Auto - Citigroup
Citigroup in an exclusive research report released just a while ago on Indian Auto sector has a BUY on Amtek Auto and Amtek India. They are neutral on Bharat Forge Ltd.
Our internal research analyst had recommended Amtek Auto a year ago. Citigroup has put a BUY recommendation Amtek Auto Ltd with a price target of Rs 521 up from Rs 458. Amtek Auto is expected to report fully diluted EPS of Rs 29.05 and Rs 34.76 for FY08 and FY09 respectively. Target price of Rs521 is based on 15x FY09E fully diluted EPS estimates. The current multiple is well supported by earnings CAGR of 25% over FY07E-09E.
Citi has also put a BUY-1M on Amtek India [Amtek Auto group company] with a price target of Rs 221. Amtek India is expected to report fully diluted EPS of Rs 13.32 and Rs 18.46 for FY08 and FY09 respectively. Citi forecasts consolidated fully diluted earnings to grow at 38% CAGR over FY07E-09E driven by top-line growth and moderate expansion in margins.
Target price of Rs221 for Amtek India, implying c30% upside from current levels, is based on 12x FY09E EPS estimate of Rs18.5 (fully diluted). Target price implies a one-year forward P/E of 16.6x on our FY08E EPS, c30% premium to current levels, which we believe is well supported by strong earnings CAGR over the next two years.
Published by DalalStreet Business @ 11:30 PM
Saregama to Outperform - ICICI Sec
Friday, July 06, 2007
ICICI Securities expects Saregama to once again dominate the Indian music industry and replicate its dominant performance which it showed for decades. Given the robust growth in the high margin business like publishing and home video coupled with effectively utilization of the music library ICICI expects Saregama to command improved valuations given its high earnings visibility. At the current price of Rs 302, the stock at a P/E of 21.15x FY08E EPS of Rs14.28 and 16.77x FY09E EPS of Rs 18.01. ICICI rates the stock as an OUTPERFORMER with a price target of Rs 405, 22.5x FY09E.
The company is expected to report an EPS of Rs 14.28 for FY08 and Rs 18.01 for FY09. You can download and read the entire report. [PDF]
Published by DalalStreet Business @ 3:42 PM
BUY Container Corporation - Kotak Securities
Thursday, July 05, 2007
Kotak Sec research group has put a BUY on Container Corporation of India Limited [CONCOR] with a price target of Rs 3,000. Potential upside of 35% from current levels.
Container traffic expected to touch 20 mn TEUs by 2015:
In FY07, Indian ports handled 5.4 mn TEUs as against 4.6 mn TEUs in FY06, thereby recording strong YoY growth of 17.1%.
Headroom for raising traffic till rail freight corridor becomes operational:
Currently, Concor runs approximately 16 to 17 trains in a day. On an average, it runs two trains to Mundra port, one to Pipavav and the remaining between JNPT and Delhi ICD. It is expected to go up to 22 and ultimately to a maximum of 25 trains per day on the current network of Indian railways.
Foray into end-to-end logistics services:
Concor has successfully forayed into offering end-to-end logistics solutions to its customers for domestic cargo. The company has tied up with various service providers like road transporters and coastal shipping companies to offer the entire gamut of logistics services.
Cold chain project:
Concor has already commenced commercial operations of its cold chain project in a phased manner. The entire cold chain project is being carried out under a wholly owned subsidiary named Fresh and Healthy Enterprises Ltd, incorporated in February 2006.
Auto carrier project:
Concor is moving ahead with its auto transportation project. The company has developed a special design of wagons to carry cars across the country on the Indian Railway network, primarily to bring down the cost incurred on transportation.
Financials of Container Corporation of India Limited:
Kotak maintains earnings estimates for FY08 and expect Concor to report net sales of Rs.38.3 bn, EBIDTA margin of 30.3% and PAT of Rs.8.2 bn, thereby translating into an EPS of Rs.126.7 and CEPS of Rs.144.3.
In FY09, Kotak expects Concor to report net sales of Rs.45.3 bn, that is, sales growth of 18.3%, EBIDTA margins of 30.0% and PAT of Rs.9.7 bn, that is, YoY growth of 17.9%, thereby translating into an EPS of Rs.149.3 and CEPS of Rs.169.9.
Published by DalalStreet Business @ 7:38 PM
Morgan Stanley Underweight on GMR Infrastructure
Morgan Stanley is underweight on GMR Infrastructure. Research firm continue to believe that the company has one of the best long-term stories in the infrastructure development sector in India but is underweight on GMR in the Short to Medium Term.
GMR handed over contracts on both the construction and operations side (advertisement at Delhi and duty free at Hyderabad) in the quarter. The market is focused on the potential value creation from the monetization of a 45 acre (5.9 million sq ft) hospitality district at Delhi Airport. GMR expects to finalize the developer for this land parcel by September 2007.
Valuations remain high; Morgan Stanley retains Underweight call on the company due to lack of earnings visibility and doubts over consistency of maintaining the same.
Published by DalalStreet Business @ 12:49 AM
Indian Banks - Results Expectations
The results expectations for quarter ended June-30th from Indian Banking sector according to Citgroup research is as follows.
The top consistent performers are likely to be,
Punjab National Bank is expected to report Rs 405 crore Net Profit for Q12008. 10% increase YoY and 71% increase on QoQ basis.
Bank of Baroda is expected to report Rs 270 crore Net Profit for Q12008. 66% increase YoY and 10% increase on QoQ basis.
State Bank of India is expected to report Rs 1163 crore Net Profit for Q12008. 46% increase YoY and 22% decrease on QoQ basis.
The scenario is quite negative when it comes to private sector banks. All of them are likely to underperform compared to quarter ending March-2007.
ICICI Bank is expected to report Rs 696 crore Net Profit for Q12008. 12% increase YoY and 16% decrease on QoQ basis.
HDFC Bank is expected to report Rs 320 crore Net Profit for Q12008. 33% increase YoY and 9% decrease on QoQ basis.
UTi/Axis Bank is expected to report Rs 165 crore Net Profit for Q12008. 37% increase YoY and 22% decrease on QoQ basis.
Published by DalalStreet Business @ 12:26 AM
Buy Maruti Udyog - Citi
Monday, July 02, 2007
Citigroup Research just a while ago recommended a BUY on Maruti Udyog Ltd with a price target of Rs 945.Domestic sales rose c26% YoY, buoyed by the sharp growth in the key sub-compact segment. The company sold 59,917 vehicles in June an increase of 0.9% over May-07. Maruti is expected to do well for the rest of the year. Citi rates the stock as a Low Risk BUY. 12-month target price of Rs945 is based on 11x P/CEPS FY09E. The multiple compares favorably with the cash earnings CAGR of c16.3% over FY07E-09E.
Published by DalalStreet Business @ 7:06 PM
Buy Mahindra and Mahindra - Citigroup
Strong UV sales (+34% YoY), offset weak growth within the tractor segment. UV sales across product segments were strong, with both Scorpio and non-Scorpio volumes up 32% and 35% respectively. Export initiatives within the auto sector continue - growth was strong at +89% YoY, albeit off a modest base.
The initial response to the Logan has been fairly positive - especially given that the Logan was launched in only 11 cities. Management plans to expand capacity from 90 vehicles/day to 180 vehicles / day over the next two months.
Citi maintains a BUY on Mahindra and Mahindra with a price target of Rs 1032 which is based on sum of parts valuation. M&M's core business at Rs 543 / share. M&M's listed subsidiaries (Rs402 / share), Auto component business (Rs57 /share) and M&M's investments in other subsidiaries (including Mahindra Holidays at Rs30 /share).
Published by DalalStreet Business @ 5:13 PM
LIC Housing Finance - Long Term Buy
LIC Housing Finance (LICHFL) is one of the largest housing finance companies in India. It possesses one of the industry’s most extensive marketing networks in India and Dubai with thousands of direct sales agents.LICHFL reported robust income from operations, with disbursals growing 23% and net interest margin (NIM) sustaining at 2.45% in the March 2007 quarter over the March 2006 quarter. The company more than doubled (up 115%) the profit after tax (PAT) to Rs 89.14 crore, supported mainly by the strong NII growth and net performing asset (NPA) recoveries, surpassing market expectation. It sanctioned Rs 2479 crore and disbursed Rs 1755 crore — a growth of 72% and 23%, respectively, in the quarter.
LICHFL sanctioned Rs 6105 crore and disbursed Rs 5121 crore in the year ended March 2007 — a growth of 19% & 5%, respectively, over FY 2006. The company’s total income increased 25%, Rs 1583.25 crore. Net profit was up 34% to Rs 279.14 crore in the year.
The gross NPA ratio stood at 2.58% end March 2007 as against 3.41% end March 2006. Net NPAs were 1.26% as against 1.80%. The company has declared a total dividend of 80% (including 50% interim dividend already paid). The outstanding mortgage portfolio was Rs 17563 crore end March 2007 as against Rs 14867 crore end March 2006 — a growth of 18%.
LICHFL has taken a number of growth initiatives. The company recently launched a fixed deposit scheme to raise resources from individual depositors. It has increased its corporate tie-ups with reputed organisations in the country for granting loans to their employees. The total business coming out of such tie-ups accounted for around 33% of the total retail business in FY 2007 — up from 25% in FY 2006.
LICHFL identified certain areas of priority in FY 2007. It has delivered on it to a considerable extent. The company has been able to reduce both the gross and net NPAs significantly. It had undertaken lots of efforts on marketing, resulting in encouraging sanction and disbursement numbers in the March 2007 quarter (Q4).
LICHFL has targeted loan disbursals of Rs 6000 crore in FY 2008 — a growth of 17%, compared with a growth of just 5% in FY 2007. In view of the strong performance achieved in the March 2007 quarter and the management’s confidence and marketing initiatives already taken, such ramp-up in disbursals is achievable. However, on a conservative basis, the company si expected to report EPS of Rs 36.1 in FY 2008.
LIC holds a 40.5% equity stake in the company. There are good chances of LIC exiting from the business in the long run as housing finance is not its core business, nor does it offer any significant synergy. Moreover, in the hands of any other focused and aggressive player, the company can grow much faster. There is also lots of interest in the housing finance business in India due to the enticing growth potential.
Considering this, the current price of Rs 200, which is near the FY 2007 book value of Rs 180 and gives FY 2008 forward P/E of just 5.5 and dividend yield of 4.4%, offers great value. BUY this stock for Long Term.
Published by DalalStreet Business @ 12:58 PM
