Brokerage Recomendations

Buy Subex Azure, target Rs 583: Way2Wealth
Strong growth in Revenues and earnings: Subex Azure has been growingat a CAGR of 71% & 62% over FY2005-07 in terms of Revenue and PAT.We expect company to grow at a CAGR of 53% & 68% over FY2007-09 interms of Revenue & PAT. Valuation: Considering the company's niche product business model,strong order pipeline, marquee customer base and an expected toplineand bottomline CAGR growth of 53% and 68% over FY2007-09E wediscount the FY2009E EPS at a P/Ex of 15 which yields a target price of Rs 583, an upside of about 38% from the current price, in 12 months. Weinitiate coverage on stock with Buy recommendation.



Buy Pantaloon, target Rs 615: UBS Investment
UBS Investment is bullish on Pantaloon and has maintained buy rating on the stock with target price of Rs 615.



Buy Action Constrction Equipment, tgt Rs 443: ULJK Group
ULJK Group is bullish on Action Construction Equipment and has maintained buy rating on the stock with target price of Rs 443.
ACE commands ~ 85% market share in their core offerings of mobile cranes, mobile tower cranes and fixed tower cranes. The new foray in Forklift trucks and loaders are also promising segments and offer good margins. As the company derives 50-60% of their business through repeat orders and robust investments in infrastructure sector the revenue of the company will show a sustained growth rate of ~ 44% annually for the next couple of years. The company has expanded its turnover at 87% CAGR and has outperformed its sector growth rate of 30% (2002-07). The emphasis of the Indian Government for rapid infrastructure development to achieve a GDP growth of 8.5% in real terms has underlined good prospects for the infrastructure & construction equipment sector. We believe that the company has potential to absorb the opportunities provided by the industry and will grow at 44% annually for the next couple of years. We estimate the earnings of the company to grow at 53.3% CAGR till FY 2009E registering EPS of 17.5 and 26.1 in FY 2008E and FY 2009E respectively.



Credit Suisse neutral on Tata Power
We value the company on a sum-of-the-parts valuation to arrive at a fair value of Rs 777. This is close to the current market price of the company and hence we initiate with a NEUTRAL rating.



Buy Reliance Capital, target Rs 1850: Merrill Lynch
Valuing consumer on “free book” while comparing with other NBFCs. The valuations we have assigned to R-Cap for its consumer foray are based on a multiple of 1.5x FY10E “free” net worth (or 2.0x FY09E). In contrast, other players (NBFCs) are trading at 2-2.5x ‘forecast’ book – even if they are required to raise capital. Our target valuations for R-Cap represent a target multiple of 1.6x FY09E ‘forecast’ BV and 1.0x FY10E ‘forecast’ book. Hence, there is still some buffer in these valuations if the company continues to deliver on the growth momentum. The upper end of the valuation for R-Cap could extend to Rs2157 if we were to: a) capture the additional Rs73/share arising from the book value of its investments as detailed above; and b) assign a value of 1.8x “free” book or 1.2x forecast FY10E book which is more comparable to valuations commanded by many other NBFCs (though still at a 15-20% discount to them).



Hold Dena Bank: KJMC
Dena bank has posted decent financials during F.Y 06-07 with decent credit and deposit growth along with significant improvement in asset quality. FII limit in the stock is still 15% (below permissible limit of 20%). At CMP of Rs.65, stock is trading at P/E of 9.5x on FY07 EPS and P/Adj B.V of 2.2x on FY07 Adj BVPS. Dena Bank's stock has outperformed Bankex since past 3 months and registered a stock return of 94% (12m). Considering the growth momentum, improved financial performance and banking sector outlook, we believe that bank will continue generating decent returns for the shareholders riding on higher growth trajectory. We recommend "Hold" on the stock for long term investors and "accumulate" on any fall.



HDFC Sec maintains buy on KEC International
Despite a strong movement in the stock price of 69%+ since our coverage on Dec’06, we continue to remain positive on KEC due to better visibility of order inflows, impressive earnings momentum, and aggressive business policy. Strong capex pipeline of PGCIL and buoyant T&D capex in key markets including Kazakhstan, Afghanistan and some African nations, has provided immense business opportunities for KEC, which we expect to continue.
KEC currently trades at a PE multiple of 17X & 13X its FY08E & FY09 earnings, respectively. We continue to maintain our BUY rating for KEC with a Price Objective of Rs 705 (+21%), at which the stock trades at 20X & 15X its FY08E & FY09E earnings. KEC is currently trading at 10-15% discount when compared to its close peers, Jyoti & Kalpataru.



Buy Kirloskar Electric, target Rs 361: India Infoline
Demand arising out of investments planned by government and corporates over the next five years, should reap benefits for the company. Improving realizations leading to margin expansion should help bottom line witness 53.3% CAGR over FY07-09E. At the current price the stock trades at 14.6x and 10.9x FY08E and FY09E EPS of Rs18 and Rs24.1 respectively. We recommend BUY with a one-year price target of Rs361, an upside of 38%.



Buy Indo Tech; target of Rs 730: P-Sec
Indo Tech transformer is currently trading at a discount to its peers (11.4x FY09P earnings). With the company expected to witness robust growth, the discount will narrow down going forward. Transmission companies are trading at a premium to transformer companies, we expect transformer companies to command higher P/E multiple going ahead.
With more than 115,000 MVA capacity to be added annually in transformer, we believe Indo Tech is well placed to take advantage of the opportunity. At Rs 524 the stock is trading at 15.5x FY08P and 11.4x FY09P. We recommend Buy with a one-year price target of Rs 730 (x 16 FY09P). An upside of 39% from current levels.



Buy Hindustan Unilever, target Rs 280: Sharekhan
This is not the first time in the year that HUL has increased its prices. The price increase vindicates our view that the company is regaining its pricing power which coupled with the strong volume growth should help it report a good growth in its earnings. At the current market price of Rs218, the stock is quoting at 25.6x its CY2007E EPS of Rs 8.5 and 22.8x its CY2008E EPS of Rs9.6. We maintain our Buy recommendation on the stock with a price target of Rs 280.



Buy Bank of India, target Rs 325: Sharekhan
At the current market price of Rs260, the stock is quoting at 7.8x its FY2009E earnings per share, 3.8x pre-provisioning profit and 1.5x FY2009E book value. Considering the strong interest of investors in the domestic financial sector, PSBs remain very attractive mainly due to their low valuations and high RoE. We continue to like BOI for the above-mentioned reasons, and the fact that it is the only top performing mid sized PSB bank where foreign institutional investment (FII) headroom is still available (BoI's current FII holding is around 17%, whereas the RBI ceiling for FII holding is 20%). We maintain our Buy recommendation on the stock with a revised price target of Rs325.



Buy BL Kashyap, target Rs 2850: Sharekhan
BLK's stand-alone earnings are estimated to grow at a CAGR of over 48% over the three-year period FY2007-10. Given its business model (no exposure to capital intensive infrastructure projects, hence strong cash inflows), there is limited risk of equity dilution and the growth in its earnings would get fully reflected in its earnings per share. At the current market price the stock trades at attractive valuations of 12.8x FY2009 and 9.3x FY2010 estimated earnings (after adjusting for the value of its subsidiary Rs554 per share). We recommend a Buy call on BLK with a price target of Rs2,850 (15x FY2010 estimated earnings discounted backwards by one year plus the value of its real estate subsidiary).



Buy Lloyd Electric & Engg, target Rs 238: Angel Broking
At the CMP of Rs184, the stock trades at 10.9x and 7.7x FY2008E and FY2009E EPS of Rs16.9 and Rs23.8. The stock is available at 1.1x FY2009E P/BV. We expect RoEs of the company to be at 18% in FY2008 and 16.3% in FY2009, the latter appearing depressed on account of the cash infusion by the promoters in lieu of the conversion of warrants into equity. We initiate coverage on the stock with a Buy recommendation and 12-month Target Price of Rs238, at which the stock would trade at 10x FY2009E earnings. Based on our DCF valuation, wherein we have discounted the future cash flows by 13.2% (WACC), assumed Cost of Equity at 14.8% and assigned a terminal multiple of 4x FY2012 FCF, we have arrived at a value of Rs243 per share.



Buy Tata Elxsi, target Rs 387: Networth
At the current market price of Rs 293, the stock is trading at a PE of 17.3x its FY07 EPS of Rs 16.82 and 14.1x its FY08 EPS of Rs 20.68 and 9.9x its FY09 EPS of Rs.29.4. The company has fuelled its growth organically out of its own internal accruals. The company has no plans to dilute its equity. We have observed that the company is trading at a discount to its peers by a reasonable margin and we expect a re-rating of the valuations for its niche space offerings. We maintain a buy with one year price target of Rs 387, an upside of 33% from the current levels.



Glaxo Smithkline a market performer: Prabhudas Lilladher
We expect the operating margin to improve further to 33.9% in CY09, as the company will have only pharma business. We expect GSK’s net profit (before EO) items to grow by 14% CAGR over next 3 years due to the improvement in the operating margins. We have revised our estimates downwards by 3% and 6% for CY07 and CY08 respectively in view of the divestment of fine chemicals business. Our revised EPS estimates for CY07 and CY08 are Rs 50.4 and Rs 55.9 respectively (against our earlier estimates of Rs 52.0 and Rs 59.7). GSK occupies the leading position in the domestic pharma market.
However, it is likely to have lower sales growth in CY07 and CY08 due to the divestment of its AHC and Fine chemicals businesses. The sales growth is likely to pick up from CY09 onwards due to the in-licensing opportunities and the introduction of new products. The company’s net profit is likely to grow by 14% CAGR over next three years. At the CMP of Rs 1,123, the stock trades at 22.3x CY07 and 20.1x CY08 earnings respectively. We have revised our rating from outperformer to market performer for the scrip due to lower growth.



Union Bank an outperformer, target Rs 185: Karvy
Downward pressure on margin due to the particular event would be negligible. We expect that in FY2008-09, the bank would report RoAA and RoAE of 1.0% and 22% respectively. We have valued the bank on Gordon growth model (GGM) assuming 7.0% of growth and cost of equity of 14.6%, we determine that the bank's intrinsic worth is Rs 185 per share (1.6x FY2009 adjusted book value). We reiterate our Out Performer rating on the stock with a target price of Rs 185.



UBS Investment neutral on Wipro, target Rs 550
While we see this as a reflection of strong demand scenario for offshore services sector, its margin profile (lower than IT Services average), makes us cautious on Wipro. Our price target of Rs550 is based on medium-term growth of 22%, terminal growth of 3% and WACC of 13%.



Maintains equal weight rating on Pantaloon Retail:M Stanley
While we believe the longterm structural growth story in PRIL is intact, increased capital requirements driven by organizational build up costs and subsequent higher financial costs in an increasing interest rate scenario are likely to adversely impact the company in the near term.



Buy HUL, target Rs 235: CLSA
CLSA is bullish on HUL and has maintained outperformer rating on the stock with target price of Rs 235.