Brokerage Recomendations

Kesoram an Outperformer, tgt Rs 650: Anand Rathi
The CMP of Rs 541, the stock trades at FY08 and FY09 estimated 􀂾 P/E of 7.2x and 6.7x respectively.
EV/EBITDA of 5.7x and 5.4x respectively. EV/ton of USD 84 and USD 91 respectively (cement division). Based on the quick estimates, we arrive at a fair value of Rs 650. At the fair price, the stock would trade at a P/E of 8x FY09E and EV/EBITDA of 6.2x. We rate the stock an OUTPERFORMER, with a target price of Rs 650. Risk & Concerns Delay in commencement of planned capacities owing to project execution risk.
With the bulk of incremental capacities coming on stream by FY10, utilization levels are expected to fall. This would bring down cement prices, squeezing earnings of cement companies. A spurt in prices of rubber, the key raw material for tyres, would hit the profitability of the division. Imports of cheaper tyre remain a threat to the tyre industry.




Buy Sasken Communication, target Rs 495: Motilal Oswal
While ongoing consolidation in the telecom sector would keep growth muted in FY08, we expect Sasken’s strong positioning in the sector to help it capture significant deal flows post FY08. We expect product business to pick up in 2HFY08 with greater royalty revenue from new launches. The stock has corrected sharply over the last 2 months, falling nearly 77% from it 52 week high of Rs624, currently trading at 15.6x FY09E estimates. We maintain buy with a reduced target price of Rs495, an upside of 40% from current levels.



Buy RIL, target Rs 2118: Merrill Lynch
Merrill Lynch is bullish on Reliance Industries (RIL) and has maintained buy rating on the stock with target price of Rs 2118.



Buy Aban Offshore, target Rs 3530: Citigroup
Our target price for Aban of Rs3530 is based on 8x fully evolved consolidated earnings, which we expect to be achieved by FY10E, discounted back by one year. The target multiple is in line with global peers as we believe that Aban should trade in line with these companies. Although it is smaller in size, it has a long and good track record in the offshore space and of managing new acquisitions and deploying them. As a cross-check, the stock would trade at a price/cash earnings of 6x FY10E on our target price, in line with the target multiples of global peers.



Buy Hindustan Unilever, target Rs 254: Citigroup
HUL's fairly steady stream of earnings makes P/E a good tool to value the stock. Our target price of Rs254 is based on what we think is a conservative multiple of 27x 2008E P/E, at the mid-end of the stock's historical trading band of 20-35x, over the past 8 years. We choose mid-end as we expect a re-rating for the stock given that its operating parameters are improving. We do not use a top-end multiple, as competitive intensity has increased over last few years and the environment in which HUL operates is not as conducive as before. At 27x P/E, HUL would trade at a 40% premium to the Sensex. The company has historically enjoyed more than a 100% premium to the Sensex owing to its high capital-efficiency ratios and consistent earnings growth.
However, we do not expect the stock to re-trace to its historical high premium, given that the company now operates in a different competitive landscape, with higher competitive intensity and a lower margin profile. On EV/EBITDA, we believe the stock should trade at 24x 2008E EV/EBITDA, which gives a fair value of close to Rs250. The stock's trading band has been 20-30x over the past three years.



Buy Kirloskar Oil Engines; target of Rs 524: Bajaj Capital
On the basis of our research, we feel that this is a good stock to buy at the current market price of Rs. 317.95. If everything goes well, the price is likely to appreciate to Rs 524, within 12-18 months, translating into a gain of about 65%.



Accumulate Syndicate Bank, says KJMC
During F.Y 06-07, Syndicate bank witnessed robust business growth of 45%, however, margins remained under pressure due to significant rise in cost of deposits. During Q1 FY 08, bank registered reasonable business growth as well as profitability. However we believe that bank needs to focus on generating other income and also increase CASA deposits to control rising cost of deposits. Bank has aggressive plans to raise capital including a FPO during this fiscal year to fund business growth and also meet capital adequacy requirements.
Bank has expressed its willingness to grow inorganically if appropriate opportunity is available. At CMP of Rs.86, bank's stock is trading at P/E of 6.2x and P/Adj BV of 1.4x on F.Y 07 EPS and Adj BV respectively. Amongst PSU banks, Syndicate bank's stock is available at lowest valuations after Allahabad bank. Bank's stock has underperformed Bankex as well as Nifty. However, considering banks potential to leverage on its scale of operations, improving performance and future plans, we recommend, "Accumulate" on the stock.



Buy Ranbaxy Labs, target Rs 492: Merrill Lynch
We recommend a Buy with a PO of Rs492/share implying potential upside of 18%. Our recommendation is driven by a forecast robust 27% EPS CAGR (CY06- 08E) given higher visibility in scale-up of international operations and US products/R&D milestone upsides. Our PO includes Rs30/sh for Lipitor’s early entry into the US. Risks to our PO: regulatory delays in product launches, litigation risks, higher than expected US generic pricing pressure, prolonged FDA manufacturing issues and EU healthcare reform pressure.



R Comm, Bharti Airtel, Idea outperformer: Macquarie
Bharti continued to lead in terms of subscriber addition, with net adds of 2.05m subscribers in August. This compares with 2.06m subs added in July, 1.96m in June and 1.85m in May. Bharti's total subscriber base now stands at 46.8m (up 4.6% MoM and 82.5% YoY growth). With another strong month, Bharti improved its GSM market share to 32.7% in Aug-07 from 32.6% in Jul-07.
Idea Cellular witnessed a flat MoM addition, with net adds of 0.87m subs in Aug-07 compared to 0.88m in Jul-07 and 0.86m in Jun-07. Idea’s subs base now stands at 17.9m (up 5.1% MoM and 83.6% YoY). Record performance in Andhra Pradesh and Kerala helped the numbers for Idea for the month.
Vodafone Essar also posted flat MoM net additions adding 1.68m subs. This compares with net adds of 1.69m subscribers in Jul-07 and 1.54m in Jun-07. Vodafone again added more subscribers than any other operator in the 16 circles in which Vodafone has a presence (in its addressable market). Its subscriber base now stands at 34.1m (up 5.2% MoM and 76% YoY).
BSNL registered an improvement in performance, with August net adds of 0.73m subscribers. This compares with 0.56m added in July and 0.43 in June. BSNL’s subs base now stands at 29.7m (up 2.5% MoM and 48.1% YoY).
Spice Communication’s pace of subscriber additions continued to slow. Its net additions for August fell to 0.11m. This compares with net adds of 0.12m in July, 0.16m in June, 0.19m in May, 0.09m in April and 0.15m in March. We believe the strong performance in the previous months was more of an exception and unlikely to be repeated.
Aircel (Maxis) had a strong month, adding 0.46m subscribers primarily due to record net additions in the Bihar circle. Aircel’s total subscriber base now stands at 7.62m (up 6.4% MoM and 111.6% YoY).
We expect the subscriber additions run-rate to accelerate further in the coming months. We reiterate our Outperform ratings on RCOM, Bharti Airtel and Idea Cellular. RCOM is our top pick in the Macquarie Asia Pac telecom universe.



Buy Zee Ent, target Rs 354: Citigroup
We are valuing Zee on a P/E multiple. We believe that P/E is the appropriate valuation methodology, given Zee's stable earnings stream and low capital intensity of the business. We use a 30x P/E multiple which returns a value of Rs354 per share. Our 30x target multiple is at the higher end of the historical trading average, which we believe is warranted given that fundamentals are looking up as channel ratings are improving. Our target multiple of 30x factors in: a) an improving EPS growth profile due to a pickup in advertising and pay revenues; b) higher ROE and free cash flow profile of Zee on account of demerger of distribution businesses; and c) maintaining a relative premium to the Sensex.



Buy Nava Bharat Vent, tgt Rs 262: India Capital Mkt
Valuation & Recommendation SOTP valuation indicates a 45% upside At the current market price of Rs 178 NBVL is trading at 6.9x FY08E earnings of Rs 25.9 and 4.9x FY09E earnings of Rs 36.3. With robust expansion plans in the power segment and expected revenue CAGR of 33% over the next 2 years, we are extremely positive on growth visibility. As per SOTP valuation – (based on FY 2009 earnings estimate), we recommend a buy with target price of Rs 262.



Buy Ranbaxy Labs, target Rs 500: Sharekhan
Ranbaxy has been fighting Pfizer Inc, the innovator of the world's largest selling drug, Lipitor, in several countries across the world. The unfavourable ruling received in Canada has come as a major setback to Ranbaxy in its battle for launching generic Lipitor in various markets across the world. However, we remain optimistic on the company's ability to receive a favourable ruling on all the four patents in its appeal in Canada. At the current market price of Rs417, the stock is trading at 23.6x its CY2008E earnings. We maintain our Buy recommendation on the stock with a price target of Rs500.



Buy Vesuvius India, target Rs 250: Anand Rathi
So broad demand potential and outlook for refractories is very attrcative. Company is performing very well and growing steadily, with rising demand from steel industry. The Dec'06 results appears poor due to exceptional write offs of past bed debts to the extent of Rs 8.7 Crs. In current year company is doing well and we expect company to improve performance further in second half, as per industry trend, when demand for its products remains high. With improving capacity utilization, margins are likely to go up further. Stock is available at less then 10X for '08 earnings, which looks very attractive for a hitech MNC company, in growth phase. BUY.



Buy KLG Systel, target Rs 657: India Capital Market
KLG anticipates tremendous potential in this product, to an extent of expecting revenue’s from this single product outmatching its existing total revenue from other product & services. Valuations KLG currently trades at P/E multiple of 32 & EV/EBIDTA multiple of 15.18 on FY07 earnings. With an upward potential of more than 36%, we set a target price of Rs 657, recommending a BUY.