Thursday, August 23, 2007
CMP: Rs 767.95
Target price: Rs 980
CLSA has maintained its ‘buy’ rating on Maruti Udyog with a price target of Rs 980, citing reasonable visibility of volume growth as a key trigger.
“The key concerns in investors’ mindset regarding Maruti from an FY09 perspective are domestic volume growth after a slew of competitive car launches and sustainability of margins post increase in exports as a percentage of sales.
Our scenario analysis throws up a worst-case value of Rs 750 and a best-case value of Rs 1,050 for Maruti on FY09 basis,” the CLSA note to clients said. “Our estimates assume 10% domestic volume growth, 1 lakh units of export volumes and a 100 bps year-on-year margin decline in FY09, resulting in an EPS of Rs 74.4.
In our view, Maruti is the only auto stock that offers reasonable visibility of volume growth till FY10 on the back of rising exports,” the note added.
CMP: Rs 252.10
Target price: Rs 285
Citigroup Global Markets has retained its ‘buy’ rating on Gokaldas Exports with a price target of Rs 285 after the Blackstone Group’s decision to buy a 50.1% stake in the company.
“Prima facie, we believe that the open offer at a 20% premium from current levels provides a good upside. While the company is unlikely to witness any major operational impact, the fact that promoters have sold a significant stake does raise some concerns,” the Citigroup note to clients said.
“With Gokaldas’ large capacity, good relationships with global brands and healthy order-book position, we believe the company is well positioned for growth. Its strategy to focus on outerwear, enrich its wide product range and expand customer base should lead to a lower-risk business model,” the note added.
CMP: Rs 306.20
Target price: Rs 388
Prabhudas Lilladher has retained its ‘outperformer’ rating on crane manufacturer Action Construction Equipment with a price target of Rs 388.
“The infrastructure spending in the country is projected to grow from current 4.5% of GDP to 8% by FY12,” the Prabhudas note to clients said.
“ACE supplies to more than 5,000 customers, and last year 70% of its sales were to infrastructure sector and the remaining to engineering companies. ACE would be one of the major beneficiaries of this industrial capex and infrastructure spending,” the note added.
CMP: Rs 138.90
target price: Rs 163
Motilal Oswal Securities has initiated coverage on Cairn India with a ‘buy’ rating and a price target of Rs 163 based on sum-of-the-parts valuation.
“Resolution of the pipeline issue will enable monetisation of Cairn’s largest and most promising asset — Rajasthan block — by 2HCY09 (second half of 2009),” the Motilal Oswal note to clients said.
“Though, there still remains several uncertainties on cess, pricing and crude offtake, we believe these will not hamper the initial oil delivery schedules. Successful development of Rajasthan block, which will catapult Cairn into bigger league, will be the key driver to its performance in our view,” the note added.
CMP: Rs 533.05
Target price: Rs 575
Morgan Stanley has upgraded its rating on Mindtree Consulting to ‘equal-weight’ from underweight, but lowered the price target for the stock to Rs 575 from Rs 625.
“In our view, MindTree is among the more promising mid-sized offshore IT services companies and offers some compelling business positives including a high-quality management team and good employee brand equity,” the Morgan Stanley note to clients said.
“We have always thought that growth expectations by the street were high for this stock and consequently valuations were rich. The stock is down nearly 30% in the past three months, and while we still do not view valuations as attractive, we do not see them as overly excessive either,” the note added.
Wednesday, August 22, 2007
IPO is priced between Rs 55 - Rs 65, and will close on 24 August 2007.
The money raised through this IPO will be invested in a plant at Chitradurga in Karnataka. The 9-mega watts (MW) wind farm plant will cost Rs 49.5 crore plant. The company has acquired 125.23 acres land for this purpose.
The company is restricted to only Tamil Nadu and Karnataka because of limited funds. But with time, it aims to move to other states as well.
The company sells ready-to-buy wind farm projects to corporates as well as electricity to corporates and state government.
Tuesday, August 21, 2007
Reco price: Rs 79
Market price: Rs 74.60
Target price: Rs 97
Broking firm: Man Financial
Man Financial put a “buy” on Firstsource Solutions, a pure play business process outsourcing (BPO) vendor. The company has delivered strong performance in the past and has a focused approach in key business verticals balanced across geographies. Due to the blended offshore-onsite mix, Firstsource enjoys a natural hedge which its competitors with an India-based delivery model may lack.
The company boasts of an attractive clientele, and has a privileged access to its stakeholder Metavante’s business. Further, the company is eyeing acquisitions in overseas markets. Man Financial expects Firstsource’s revenues, EBITDA and net profit to grow at a compounded rate of 39, 41 and 46 per cent over FY07-09E. At the target price of Rs 97, Firstsource is valued at 21.6 times estimated FY09 earnings.
Reco price: Rs 660
Market price: Rs 630
Broking firm: Prabhudas Lilladher
Rated “outperformer”, Hero Honda’s results were a dampener as its profits declined y-o-y over FY07. Rising commodity prices, mounting competition and cost hikes to usher in new-engine-technology products created margin pressures for the company. Prabhudas Lilladher believes that slowed down sales will gain momentum in the coming festival season again to a double-digit growth.
Further, in spite of major upheavals in the industry, the company has been able to maintain its market leadership with a 41.4 per cent share in the last three years. At Rs 660, the stock traded at 13.8 times and 10 times estimated FY08 and FY09 earnings per share of Rs 47.8 and Rs 66.2, respectively.
Jindal Drilling Industries
Reco price: Rs 754
Target price: Rs 1,056
Market price: Rs 755
Broking firm: Religare
Jindal Drilling Industries offers good prospects as new rigs are being acquired and its pricing environment changes for better. The company offers varied services to oil exploration and production majors including offshore drilling, directional drilling and mud logging and derives 85 per cent of revenues from offshore drilling.
The company has plans to acquire new-build jack-up rigs through its Singapore-based subsidiaries for $35 million. These new rigs will start operation from the fourth quarter of FY09, and the company has already entered into a contract with ONGC for one rig at $148,000 a day for five years.
Due to strong crude prices which fuel higher price realisations in rigs and adding to the number of rigs, Religare expects Jindal Drilling’s net sales increase at a 56 per cent CAGR over the next two years. At Rs 754, the stock is valued at 46.3 and 29.7 times estimated FY08 and FY09 earnings, respectively.
Reco price: Rs 275
Target price: Rs 416
Market price: Rs 263.60
Broking firm: Emkay Shares
Bharat Forge delivered a strong export growth in the quarter ended June 2007 at about 32 per cent y-o-y despite the rising rupee. Further, even though the domestic commercial vehicle industry, which is the key growth driver for Bharat Forge-- remained subdued during the quarter, the company’s domestic revenue grew 9 per cent y-o-y.
Exports to European Union markets almost doubled to Rs 93.3 crore compared to Rs 46.9 crore in the corresponding quarter previous year. On the other hand, US exports grew by 4.3 per cent y-o-y to Rs 122.3 crore, and Asia Pacific market witnessed growth of 37 per cent y-o-y to Rs 8.1 crore. Following a slowdown in the US business, the management expects a recovery in early 2008.
Going forward, Bharat Forge also expects a revival in its Chinese operations with further inventory corrections. The stock currently trades at 17 times and 12 times estimated FY08 and FY09 earnings respectively.
Reco price: Rs 368
Market price: Rs 352.20
Broking firm: Edelweiss
Edelweiss upgraded its rating on Ranbaxy from “accumulate” to “buy” as it foresees the branded generics segment’s contribution to the company’s revenues increasing significantly. Being a high margin business, branded generics business is a lucrative area.
Further, with the announcement of settlement of patent litigation for Valtrex, Edelweiss believes there is a higher possibility of similar announcements for monetising another Para IV opportunity in CY08. The stock has underperformed the healthcare index by more than 12 per cent over the last one year.
This was primarily driven by the issues in approval of facilities at Paonta Sahib and the USFDA raid on the company’s offices in the US. Due to these, Edelweiss believes that all the adverse news are already factored in the price and there is limited downside to the stock going forward. At Rs 368, the stock traded at 17.6 times estimated FY08 earnings.
Citigroup Global buys 16 lakh shares @ Rs 264.5/sh
HSBC Fin buys 1.53 cr shares @ Rs 47.87 (1% stake)
Johann sells 1.38 cr shares @ Rs 48/sh
Citigroup Global sells 2.7 lakh shares @ Rs 557.4/sh
Sonata Inv buys 30.6 lakh shares @ Rs 58.1/sh
HSBC Fin sells 36.43 lakh shares @ Rs 58/sh
Fin Brains Sec buys 1.15 lakh shares @ Rs 575.8/sh
Mavi Impex buys 1 lakh shares @ Rs 56.8/sh
Orient Paper & Ind
Central India Ind buys 1 lakh shares @ Rs 425/sh
Citi Group Global Markets Mauritius sells 1 lakh shares @ Rs 425/sh
Deutsche Sec Mauritius buys 16 lakh shares @ Rs 314/sh (5% stake)
Deutsche Bank London GDR sells 16 lakh shares @ Rs 314/sh
Religare Sec buys 53 thousand shares @ Rs 75.7/sh
Investrick Sec buys 4.7 lakh shares @ Rs 85.45/sh
Alosha Vanijya sells 1.67 lakh shares @ Rs 85.45
Mavi Inv sells 10 lakh shares @ Rs 5.2/sh
Thursday, August 16, 2007
Monday, August 13, 2007
Target price: NA
Reco price: Rs 60
Current price: Rs 61.85
Broking firm: IL&FS
Welspun India reported robust results for Q1FY08 despite various odds arising from rupee appreciation and rising cotton prices.
The company’s topline grew by 33 per cent, while PAT grew by 22 per YoY during the quarter. Operating margins (excluding a reversal of provision of Rs 18 crore) was higher than expected. Better realisation in the sheeting fabric, and DEPB benefits enabled Welspun to maintain margins. Utilisation in sheeting fabrics is expected to rise further with higher volume growth during the latter half of the year and further integration of operation with Christy, the company is expected to continue the growth momentum. The stock at recommended price is attractively valued at 6.5 times FY08EPS.
Target price: Rs 984
Current price: Rs 794
Broking firm: India Infoline
Great Offshore (GOL) is India’s most integrated offshore oilfield services provider offering a variety of services to upstream oil and gas producers to carry out offshore E&P activities. With huge opportunities in the domestic upstream sector, GOL is increasing its fleet size from 39 currently to 42 by FY10. Also, the company has plans to enter the offshore construction space in a big manner. The company is expected to witness 29.8 per cent CAGR in revenues and 41.2 per cent CAGR in PAT between FY07 and FY09. Being one of the largest and most diversified players in the Indian offshore industry, the stock price of the company should command higher valuations compared to its domestic peers. India Infoline puts a target price of Rs 984 per share, which is based on estimated 14 times FY09 earnings of Rs 70.3 per share
Target price: Rs 369
Current price: Rs 276
Broking firm: Emkay Share
Lanco Infratech (LITL) has 518MW of power projects in operation and 9,035MW in various stages of development. It is also executing two toll-based BOT projects and developing three real estate projects. The company enjoys higher operating profit margins by being an integrated player executing its own projects. This ensures that savings in construction and procurement is captured within its own operations. LITL’s consolidated revenue is expected to grow at 126 per cent CAGR over FY07-09E to Rs 81.7 billion. The company is also expected to show 23-25 per cent of EBITDA margins. The net profit (after deducting the minorities interest) would grow to Rs 5.3 billion, a CAGR of 68 per cent, over the same period. Based on SOTP, the target price works out to Rs 369 per share. At the recommended price, the stock trades at 10.7 times its estimated consolidated FY09E EPS of Rs 24.2.
Target price: NA
Broking firm: Edelweiss
Reco price: Rs 367
Current price: Rs 362
The emerging scope for LED (light emitting diodes) applications globally will benefit MIC and it will emerge as a leader in the LED display and lighting space over the next three to five years. Edelweiss expects to see re-rating of the stock on the back of large order additions and their successful execution. Its media division is expected to grow at a CAGR of 70 per cent over FY07-09E to Rs 230.5 crore which will drive total revenue CAGR of 17 per cent to Rs 330.2 crore in FY09E. Overall, net profit is likely to see an increase at a 44 per cent CAGR. The stock trades at 15.3 times and 11.1 times its FY08 and FY09 estimated earnings.
Gujarat Industries Power Company
Target price: Rs 95
Current price: Rs 60
Broking firm: Angel broking
Gujarat Industries Power Company (GIPCL) is well placed to derive benefits from the favourable power sector dynamics. It trades at an attractive 0.7 times estimated FY2009 price to book value while most of its peers trade at 1.5-2 times estimated FY2009 price to book value. Further, the company has its own captive mines, which would ensure high Plant Load Factor (PLF) for its ongoing expansion programmes as well. At recommended price, the stock trades at 6.3 times estimated FY2008 and 6.1 times estimated FY2009 earnings of Rs 9.8 and Rs10.2 respectively. With 18-month target price of Rs 95 per share, Angel Broking puts a buy recommendation on the stock.
Current price: Rs 124.5
Target price: Rs 155
Broking firm: Prabhudas Lilladher
IDFC is emerging as one of the key beneficiaries of the infrastructure financing opportunity in the country. The company has exposure to some of the high growth sectors such as energy, transportation, telecom and information & technology. Along with robust growth in lending business, the asset management business currently manages a corpus of $650 million and is expected to grow 4 times over FY07-09E to $3 billion post the deal with Citigroup, Blackstone and IIFC.
IDFC has recently raised Rs 2,100 crore through a QIP, reducing the leverage to a comfortable level of 2.95 times. This leads to an increase in lending capability to a single borrower and leaves more room for expansion going ahead. Its lending business is valued at Rs 112 per share, which is 3 times its FY09EP/BV. While it’s non-lending businesses contribute Rs 42.2 to the valuation. The broker re-iterates ‘Outperformer’ rating based on the sum of part valuation target price of Rs 155.
Punjab National Bank
Broking firm: ICICI Direct
Target Price: Rs 647
Current price: Rs 497
PNB has got an extensive branch net work of 4,563 branches, with 50 per cent in rural areas giving it an unparalleled advantage of higher CASA (at 46 per cent) and consequent lower cost of funds. ICICI Direct expects that PNB will be able to sustain its net interest margins (NIMs) at 3.75 per cent levels, higher than its peers. Further net NPAs are expected to stay at 0.7–0.9 per cent levels and return on assets and return on equities are expected to rise from 1 per cent in FY07 to 1.1 per cent levels in FY09 with return on equity (RoE) improving from 15.6 per cent to 17.4 per cent. PNB is trading at 1.2x its estimated FY09E ABV which is quite attractive.
Target price: Rs 510
Current price: Rs 579
Broking firm: SSKI
MindTree Consulting (MindTree), a mid-sized Information & Technolofy (IT) and Research & Development services company, has strong management bandwidth. It services marquee clients like Volvo, AIG, LSILogic, United Technologies, Symantec, Avis and Unilever. However, a high share of development services in revenues creates a project-based business profile, which lowers sales productivity, hurts utilisation and leads to poor client mining. Thus, contrary to street expectations of an expansion, the company is expected to show declining margins by 170 basis point over FY07-09 due to rupee appreciation and salary inflation. The management has cut its FY08 earnings guidance after the first quarter FY08 results, but SSKI expects further risk to consensus estimates for FY09. While the stock price has fallen 23 per cent in just one month, further downside is likely at valuations of 19.8 times estimated FY09 earnings (19.2 times for Infosys). Considering these factors, the stock is rated as underperformer with a downward price target of Rs 510 per share.
The 29.8 lakh share issue will open on 20 Aug 2007 and close on 23 Aug 2007.
The money would be used to expand its business in organic and inorganic terms.
The company plans to grow its investment banking, private equity and distribution of third-party financial products. Broking and related services contribute 85-86% of its revenues.
The 1.25 crore share offer would open on 21 August 2007 and close on 24 August 2007.
The proceed would be deployed to expand wind power generation capacity, buy equipment, foreclose lease accounts with banks.
It currently supplies wind power to a state utility and a few companies in the Karnataka.
Thursday, August 2, 2007
A Nasdaq stock symbol specifying that the stock has no voting rights
A type of chart developed by the Japanese in the 1870s that uses a series of vertical lines to illustrate general levels of supply and demand for certain assets. Thick lines are drawn when the price of the underlying asset breaks above the previous high price and is interpreted as an increase in demand for the asset. Thin lines are used to represent increased supply when the price falls below the previous low.
A philosophy that recognizes improvement in productivity as a gradual and methodical process. Kaizen is a Japanese term that literally means "change for the better". The concept of Kaizen encompasses a wide scope of ideas it involves making the work environment more efficient and effective by creating a team atmosphere, improving everyday procedures, ensuring employee satisfaction and making a job more fulfilling, less tiring and safer.
Slang term for Australian stocks, it refers mostly to the stocks on the All Ordinaries index, which is composed of 280 of the most active Australian companies.
Used in regression analysis, Kappa represents the ratio of the dollar price change in the price of an option to a 1% change in the expected price volatility.
Katie Couric Clause
A slang term for a proposed new Securities and Exchange Commission rule, formally known as the Executive Compensation and Related Party Disclosure, that would require publicly traded companies to disclose not only the salaries of their top five executives, but also those of top earning non-executives, including actors, directors and TV news anchors.
The term refers to former "Today Show" host Katie Couric, who became CBS's highest paid newscaster in April 2006, with a reported salary of US$15 million over five years. As of April 2006, this proposed rule has not been approved by the SEC.
A contract between a parent company and its subsidiary to maintain solvency and financial backing throughout the term set in the agreement.
A Japanese term describing a loose conglomeration of firms sharing one or more common denominators. The companies don't necessarily need to own equity in each other.
A volatility based 'envelope' indicator that measures the movement of stocks in relation to an upper and lower moving-average band.
A defined-benefit plan or defined-contributio n plan established by a self-employed individual for him/herself and his/her employees.
In currencies, this is the abbreviation for the Kenyan Shilling.
Key Performance Indicators - KPI
A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as "key success indicators (KSI)"
Key Person Insurance
A type of life insurance policy that a company purchases on the life of the company's key executive.
Of course there are fund managers and market analysts who will say there's nothing fundamentally wrong with the India story, its economic growth engine won't be derailed, so invest for the long-term and stay invested, and all that have been said umpteen number of times.
But as one top official at a domestic broking house said, "after such falls, it pains tremendously when you get your portfolio statement and find that you are down about 10% for no fault of yours".
So, if you believe cash is king, sell now. Get out of market and stay in cash. As the index nears new peaks, one should be cautious and on their toes. "At the first signs of jitters, (sell out) and be in cash," said Ashu Madan, national head-retail equity, Religare Securities. "One shouldn’t be a passive investor when indices are at all-time highs," Madan added.
If some of your stocks have done well, book profit and stay in cash, said Arun Kejriwal, director, KRIS, an investment research and advisory firm. "However, if your stocks have not done well and you believe it could do well, stay invested and keep a strict stop loss. In the worst situation, if your stocks fall below your pre-fixed level, then exit. It's time to take calculated risks," Kejriwal added.
But if you are used to looking at your portfolio only occasionally and jitters like the current ones do not matter much because you are invested for two, three, four years or more, then just ignore the market crash.
Now for those who trade on technical charts. Technically, the Nifty, currently at 4,343, is unlikely to show any major up move unless it goes past 4,500-4,550 level, chartists said. "On the downside, the Nifty (Aug) Futures have a very good support at 4,180-4,122 region," said Gurudatta Dhanokar, technical analyst at Almondz Global Securities.
On Wednesday, Nifty August Futures closed at 4,288. But, lately leading indices have been showing a zig zag pattern, a rare movement involving highs and lows. A zig zag movement more often than not lead to trend reversal, chartists warned.