Brokerage Recomendations

Buy Aban Offshore, target Rs 3450: Goldman Sachs
Though the asset infusion is likely to be earnings accretive immediately on deployment, we will await the funding details before adjusting our estimates. We retain our 12-m TP of Rs3,450 for Aban based on DCF of its normalized day rates, assuming long-term ROCE of 9% for global drillers.


Buy Cairn India, target Rs 192: Goldman Sachs
We value Cairn India on the NAV methodology based on sum of the DCF valuations of Rajasthan, Ravva, Cambay Basin producing assets, and valuation of Barmer Hill potential and gas find in KG Basin at EV/boe of US$6.0 and US$2.0, respectively. We have raised our earnings estimates by 7%-129% for 2007E-2010E (barring 2009E) based on higher peak production and higher crude price forecasts. The valuation may appear expensive on near-term multiples as monetization of the core Rajasthan asset would start only in mid-2009E. We have not included any value for exploration potential in the frontier basin at Ganga Valley.



Buy Maruti Udyog: IDBI Capital
Maruti Udyog Ltd. (MUL) is India’s largest passenger vehicle manufacturer with a market share of 51%. It is a key player in the compact car segment with a market share of 59%. With its dominant position in the compact car segment, MUL is in a strong position to take advantage of the on-going boom in the Indian passenger car segment.
Going forward, we believe the company’s acknowledged strength like widespread sales and service network, consistent high customer satisfaction record, reliable quality, trust and goodwill associated with the Maruti brand and a complete range of products will ensure that in spite of being the market leader, the company will grow faster than the market. The stock is currently trading at 12.5x its annualized Q1FY08 EPS of Rs.69.17.



Buy Subex Azure, target Rs 725: Merrill Lynch
We expect the stock to correct on likely negative sentiment. With risk to guidance behind and likely strong growth rate a head, we recommend buying on any correction. We retain our target price of Rs 725, which is at 16x FY09E and supported by DCF value of Rs 736. We reiterate our Buy rating. Risks are single vertical focus and high share of non annuity revenues.



Buy Bharti Airtel, target Rs 1082: CLSA
CLSA is bullish on Bharti Airtel and has maintained buy rating on the stock with target price of Rs 1082, potential of 27%



Buy Welspun Gujarat, target Rs 420: HDFC Sec
WGSRL’s business is set to grow at a robust pace over the next two to three years. The company has planned a capex in step with the growing demand. Tighter focus on costs and a steady growth in volumes will be the focus of the company. WGSRL’s leadership position in each of its businesses, combined with the steady demand from derived industries augurs well for the company’s growth. The change in product mix is expected to drive sustained profitability and further growth in the future.
The revenues and profits of WGSRL are expected to grow at a CAGR of 37.7% and 76% between FY07-10E. The stock currently trades at a huge discount to its fair value as per DCF basis. We expect it to re-rate positively and when coupled with the underlying earnings growth, should deliver significant out-performance to investors in the long term. We, therefore, maintain our Strong BUY recommendation on the stock with a target price of Rs. 420 (upside of 59%).




Buy Subex Azure, target Rs 760: UBS Investment
We have revised our price target to Rs760 to reflect the revenue miss and potential downside to consolidated estimates. Our revised price target is based on combination of DCF and EV/EBITDA multiple valuations. While our forecast doesn’t include Syndesis, it is trading at FY08E PE of 13.1x and FY09E PE of 10.1x on combined entity basis.



Buy Satyam Computer, target Rs 572: P-Sec
The stock is trading at historically low of 16.7x FY08P EPS and 13.2x FY09P EPS. We remain confident of strong underlying fundamentals and reiterate our BUY stance with a price target of 572.



Buy Zee Entertainment, target Rs 400: Merrill Lynch
Re-iterate buy on Zee as it remains our preferred media name, set to capitalize on the opportunity across content-to-conduit. Our Price objective of Rs400 is at 30x 1-yr forward PER 14% discount to current multiples & 4% discount to Indian media average.



Buy Satyam Computer, target Rs 538: Sharekhan
At the current market price the stock trades at 17.2x FY2008 and 14.4x FY2009 earning estimates. We maintain Buy call on the stock with a target price of Rs538.



Buy Sical Logistics: Edelweiss
We expect SICAL to register revenues of RS 8.1 billion and 9.2 billion, and net profit of RS 665 million and 780 million in FY08E and FY09E, respectively. Excluding the service business, we have evaluated SICAL’s infra assets at NPV and arrived at a value of RS 152 per share. We have included SICAL Multimodal and Rail transport, PSA SICAL Tuticorin terminal, and SICAL Distriparks in the valuation. Adjusting for Rs 152/share for these projects, SICAL’s standalone business trades attractively at 6.3x and 5.3x our FY08E and FY09E estimates, respectively.



BHEL a market outperformer, target Rs 2056: P Lilladher
We believe that BHEL would continue to receive orders with Power Ministry looking to allocate orders worth 21GW in the next 6 months. Also, as BHEL undertakes its capacity expansion, going ahead execution of projects would be much faster than expected. We maintain Outperformer with a target price of Rs 2056.



Buy Aban Offshore, target Rs 3650: Emkay
With the recent events of higher than expected day rates for contracts and acquisition of Semi-submersible Bulford, we are in a process of upgrading our earnings estimates for ABAN by 8-10% for FY2009 and 5-6% for FY2010. We maintain our Buy recommendation on the stock and looking to upgrade our price target for the stock to Rs3650 i.e. a potential upside of 20%.



Buy United Phos, target Rs 425: UBS Investment
UPL has underperformed for over 18 months and trades at a 15-20% discount to other generics and to its historic multiples. We believe successful integration of new acquisitions will drive outperformance. Our price target of Rs425 includes Rs392 as a DCF of standalone UPL, and Rs33 for UPL’s holding in Advanta.