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India not an Emerging Market Favorite - UBS
Saturday, September 29, 2007

UBS Equity research is underweight on the prospects of Indian market compared to others globally. It has rated India at position 15 amongst 16 countries.
Rank of India across various parameters in the UBS Report are as follows, [1=Highest Score, 16=Lowest Score]
The sectors UBS is globally looking for are Banking, Telecom and Consumer Services and Goods.

Published by DalalStreet Business @ 6:09 PM  



Target Price of Reliance Capital Raised - Merill

Merill Lynch has raised the stock target price of Reliance Capital [R-Cap] to Rs 1850. R-Cap is expanding its distribution at a very rapid pace which could result in growth, ahead of Merill's estimates, remaining very strong through FY10 and possibly beyond. Based on FY10E sum of parts valuation, a value of Rs 2033/share, the target price for Mar'09 (18 months from now), a 36% upside. Hence, 12 month PO is Rs 1850.

By Dec'08, it is likely to have 10,000 touch points in retail in 1 year (v/s 4,000 now), 5,000 locations (v/s 700), 300,000 agents in life insurance (and 400 cities) and +1500 dealers.
Reliance Capital is likely to emerge amongst the top 3-4 players in the financial services segment. R-Cap is expected to report an EPS of Rs 41.16 for FY 08 and Rs 59.27 for FY09.

In a separate report, Merill Lynch's most preferred stocks are - BHEL, Bharti Airtel and Grasim Industries. While the least preferred are Hindalco, Tata Motors and Pantaloon Retail India Ltd.

Published by DalalStreet Business @ 12:57 PM  



Reliance Energy Surges Ahead on Powergrid Deal
Friday, September 28, 2007

Power Grid Corporation of India (PGCIL) selected Reliance Energy (REL) as a joint venture partner through international competitive bidding for setting up the transmission lines for the Parbati and Koldam hydro-electric projects in Himachal Pradesh and two projects under the Western Region System Strengthening Scheme-II (WRSS-II) in Maharashtra and Gujarat on a build, own, operate (BOO) basis.

These projects would entail an investment of about Rs 3,500 crore. The two companies would sign a letter of intent for the WRSS-II project and a shareholder agreement for a joint venture for the Parbati and Koldam projects soon, the reports added.

In a separate development, there was a wide spread rumor that Reliance Energy will file for a DRHP to raise $2 Billion for Reliance Power Ltd. REL may also bid for another Ultra mega Power Project.

REL also wants to hive off its EPC construction business, which fueled the rally ignoring Citigroups recommendation.

Published by DalalStreet Business @ 4:30 PM  



NSE Nifty + BSE Sensex scale new high
Thursday, September 27, 2007

Nifty opened 2.20 points higher and surged to strike an all time high of 5015.55, at the onset of the trading session boosted by strong demand for index pivotals. The market surged today as weak US economic data reinforced expectations for another interest rate cut from the Federal Reserve, following a steep half-point reduction to 4.75% last week.

Nifty took a little under ten months to advance 1000 points from 4,000 to 5,000. It had first hit the 4,000 mark on 1 December 2006.

BSE Sensex has crossed the 17,000 mark a new life time high and many fund managers are of the view that the Indian indices will continue to rise until the end of 2007. FIIs have poured in $3 Billion in the Indian equities until the 25th of this month.

Published by DalalStreet Business @ 1:09 PM  



Aggressively SELL Reliance Energy
Tuesday, September 25, 2007

Exclusive Live Coverage of EventsBreaking News: India's Largest FII, Citigroup has recommended a SELL on Reliance Energy and has categorized the stock in "Low Risk" category. Stock Price target is Rs 510.

RELE shares have rallied up 118% over the past 5 months on expectations of blue-sky scenarios through capacity additions, EPC order wins and the value of CBM blocks. Even with extreme blue-sky scenario of 1] additional 25,000MW capacity in 7 years, 2] execution of EPC orders of Rs800bn to be executed over 7 years with EBITDA margins of 15%, 3] no fuel supply risks, 4] no execution risks, 5] generous multiples for valuations, 6] and 20% premium to our existing value of RELE (ex-cash) yields only Rs1,183/share. Citi reiterates a Sell on stock.

RELE has re-rated every time a project has been announced. It was expected that RELE would capitalize on the opportunities thrown up by the passing of the Electricity Act 2003 (EA03). Projects were announced from time to time, but 4 years have passed and RELE continues to have only 941MW of generation capacity and distribution licenses in Mumbai and Delhi.

12-month target price for Reliance Energy of Rs510 is based on RELE (ex net cash) value of Rs229 and net cash value of Rs281 (1.1x FY07E Net Cash/FD Share). RELE (ex net cash) would comprise Mumbai business value of Rs117, other power assets value of Rs27, EPC Business value of Rs65 and Delhi distribution value of Rs20. At target price of Rs510, RELE (ex Delhi) would trade at a P/E multiple of 10.1x FY09E.

Dalal Street Recommendation: We have recommended our clients to BUY PUT OPTIONS.

Published by DalalStreet Business @ 12:14 PM  



IT stocks hit 52 low as rupee surges to 9 year high
Friday, September 21, 2007

Indian IT CompaniesA rising rupee has a negative impact on the margins of Indian IT companies who live on arbitrage with very little scope for innovation. More than 50% of their earnings are in dollar terms because of their dependence on US market.

In the case of IT stocks, the market has been looking only at the rising rupee since April 2007. The IT index has lost nearly 21% to 4310.38 from its all time high of 5,611.33 recorded on 19 February 2007. On the other hand, Indian Rupee extended gains to about 11% this year, making it Asia's best performing currency. Infosys , Satyam and TCS are the biggest losers in the IT pack.

Today, the rupee strengthened past 40 per dollar for the first time in more than nine years, after lower US interest rates brightened the outlook for high-yielding assets like the Indian currency.

Meanwhile, Indian Trade Minister Kamal Nath, has expressed his concerns on rising rupee and said that the government would look at steps to protect exporters.

Analysts feel that high crude oil prices, hovering around $80 per barrel, and Reserve Bank of India (RBI) intervention continue to be the key risk to a sustained appreciation of the Indian unit.

Our internal analysts are of the view that one can expect a re-rating of IT stocks downwards within the next couple of weeks as they come out with their half yearly results.

Published by DalalStreet Business @ 10:30 AM  



Sensex at Life High - 16,160
Wednesday, September 19, 2007

Big Bulls on the Street are partying as the Bombay Stock Exchange Index crossed 16,000 mark in early trade and is currently trading at an all time high of 16,167.

Bank and financial shares rose on the reckoning that the Fed move could put pressure on RBI to loosen its monetary policy. BSE Bankex touched an intra-day high of 8606.46 which is a record high for the index.

Major Gainers in the SENSEX are - ONGC, Maruti Suzuki India, HDFC Bank, HDFC and Tata Motors. Reliance Industries all hit an all time high of Rs 2,130 in intra-day trading.

Also read about what our corporate reporter has to say about Infosys Technologies' bid for Sage in the UK.

Published by DalalStreet Business @ 11:23 AM  



Gokaldas downgraded to SELL - Citi
Tuesday, September 18, 2007

Citigroup Research has downgraded Gokaldas Exports Ltd to SELL. Earnings estimates of Gokaldas Exports have also been revised downwards.

Significant slowdown in India's garment exports, rupee appreciation is the key concern said the report. 10%-19% downward revisions to FY08E-10E earnings to factor in this slowdown and stock's 25% run-up over last 3 months. Target price reduced to Rs237 based on 10x FY09E PE - implies 6% downside.

Given the stock's low free float (30%), we expect Blackstone's 20% open offer at Rs275/share to provide near-term support. Investors can tender their shares in the open offer.

Published by DalalStreet Business @ 12:40 PM  



ITC enters mass-market products
Monday, September 17, 2007

ITC wants to cash in on the big boom that is going to hit the organized retail market in India. After introducing Snacks and Biscuits, it will now venture into Shampoos and Soap market.

The new shampoo brand will be a part of its two year old, super premium range of personal care products, Essenza di Wills. But unlike Essenza that was available at ITC hotels and Wills Lifestyle stores, Fiama di Wills shampoos will be stocked at retail stores across India. The product will be available at Rs 99 for a 200 mili litre (ml) bottle. The shampoo market is crowded with multiple players and variants. The competition is cut-throat, in this segment. Hindustan Unilever is the market leader and also has a dedicated Social networking site, SunsilkGangofGirls, which helps them develop new customer base and continuously improve on their product lines.

We have reliably learnt that Fiama di Wills, the company may also foray in soaps market.

Published by DalalStreet Business @ 11:24 AM  



Tata Motors' subsidiary HV Axles + HV Transmission IPO
Saturday, September 15, 2007

Exclusive Live Coverage of EventsBreaking News:
The management of Tata Motors have indicated that they will unlock the value of its subsidiaries - HV Transmissions Ltd and HV Axles Ltd through an IPO or sale to outside party.

After the London Investors Conference, Citi still maintains a BUY - Low Risk with a target price of Rs 1029 on the stock.

Management guided to a modest revival in truck sales into 2HFY08E, implying that overall sales for the fiscal should be flat, or register modest growth. Truck operators' profitability remains healthy, despite the rise in interest rates. Freight rates also continue to remain stable.

Rs80bn will be deployed over the next 3 years to launch new platforms in passenger cars and trucks. The small car remains on schedule and will be launched in mid-CY08 (1HFY09E). Management stated that TAMO will start the process of demerging its subsidiaries by end FY08E - with HV Transmissions and HV Axles being the businesses to be initially listed.

12-month target price of Rs1,029 is based on a sum-of-parts valuation methodology. Tata Motors' core business at Rs 827 / share, which is based on 9.2x FY08E EBITDA. The subsidiaries are valued at Rs201 / share.

Published by DalalStreet Business @ 1:55 PM  



Bartronics an Outperformer - ICICI
Friday, September 14, 2007

During the August Market Crash, we had recommended to HOLD Bartronics Stock at Rs 175. The stock since then has swiftly moved up to Rs 250. ICICI Research has initiated coverage on Bartronics with a price target of Rs 335, potential upside of 38% from current levels.

Bartronics India Ltd (BIL), one of the first Automatic Identification and Data Capture (AIDC) solutions company. It is investing more than Rs 270 crore
into a new 80-million smart cards manufacturing facility, that would make it one of the biggest players in South Asia and enable revenue growth by 130% CAGR over FY07-09E. Having an order book for more than 100 million smart cards over next two years is expected to generate 3.5x FY07 revenues from this segment alone.

The Indian Retail Growth story is intact and BIL has tied up with Intel and designed products and solutions for point of sales having starting price from Rs 32,000 onwards. These products are more than 20% cheaper to ones used by the industry currently and also more complex, which gives the retailers like Reliance, Big Bazaar, Subhiksha and others a huge advantage.

Currently, the stock is trading at 10.32x FY09E earnings and 6.23x FY09E EV/EBIDTA, which is very attractive. Most of the global players are trading between 15-28x FY09E earnings. Using this method, the stock can be valued at Rs 340, 15x FY09E diluted EPS of Rs 22.66.

Published by DalalStreet Business @ 12:33 PM  



Pantaloon Retail Target Price Upgraded
Thursday, September 13, 2007

Exclusive CoverageYou are Reading this First Here: Citigroup Research just a while ago upgraded India's number one retailer - Pantaloon Retail India's stock price target to Rs 626 from Rs 545. This upgrade is the outcome of London Investor conference on India.

Kishore Biyani and the Sr. Management of Pantaloon has indicated value unlocking exercise in its subsidiaries over the next three months, with the listing of Future Capital and private placements of Future Bazaar and Future Media. Future Capital will list within the next 3 months. Pantaloon expects a valuation of Rs25bn-30bn, while Citi values this at Rs18.6bn. Future Capital now has 75 retail locations and management expects a credit book of US$1.5-2bn by FY11, while assets under management are about US$1.2bn.

Management expects 10-15% dilution in the media & e-tailing subsidiaries through private equity placement. Management indicates a base valuation of US$50mn for Future Media and US$70mn for Future Bazaar. Future media has bought the on-screen media rights all of INOX Leisure screens for the next 30 months.

Pantaloon's management is clearly shifting its focus from the top line towards margins and ROE. SOTP based price target to Rs626 (from Rs545 earlier), incorporating the value of Future Bazaar and Future Media, as well as rolling forward our target 30x P/E multiple for core Pantaloon to mid FY09E. Pantaloon Retail is expected to post diluted EPS of Rs 13.05 and Rs 16.51 for FY08 and FY09 respectively.

Published by DalalStreet Business @ 4:55 PM  



Indian Energy Conference

Key notes from the energy / oil / gas conference held in New Delhi.

The demand-supply gap in gas is likely to narrow sharply in the next few years. India's energy mix looks set to change toward being more gas dependent, albeit marginally. Increasing gas supplies should lead to a quantum jump in cities under the CGD umbrella.
The evolving regulatory environment should facilitate growth in the sector.

We see that India's dependence on oil is set to fall to 29% in the next 2 decades while dependence on Gas and Nuclear Energy will increase.

In fact, India's expected dependence at 6% on Nuclear Energy in 2030 is higher than the global average of 5%. Estimated total gas demand in the economy to increase to ~280mmscmd by FY12E (~180 currently), while new and existing domestic supplies would increase to ~150mmscmd.

Apart from this, India will also lay 8,400 Kms of Gas pipeline at an estimated cost of $ 6 Billion. Most of this will be undertaken by GAIL and RIL.

If you are holding RIL, then just hold the stock tight for few more years or maybe another decade :-)

Published by DalalStreet Business @ 4:01 PM  



Unitech - First Real Estate Stock in Index

Unitech Ltd, will be included in National Stock Exchanges benchmark - S&P CNX NIFTY from the 5th of October.

Unitech is the first Real Estate stock to enter the Index beating India's premier realty developer DLF. Unitech was up 7% at Rs 280.

The news has triggered all the Real Estate stocks. Akruti, OMAXE, Orbit and Ansal are the leading gainers from the space.

Published by DalalStreet Business @ 2:36 PM  



Bajaj Auto Riding Strong on XCD-125CC
Wednesday, September 12, 2007

Bajaj Auto launched 125-cc 'XCD' at a price of Rs 41,000.The product is aimed at upgrading entry-level segment customers to 125-cc bikes from existing 100-cc bikes. Bajaj plans to manufacture 20,000 units of the new product, ramping it upto 50,000 units by November 2007. Bajaj Auto has a margin of Rs 3,000 / bike. Hero Honda's Super Splendor is the only bike in this segment and is priced at Rs 44,000.

The launch of 'XCD 125' to stem the decline in Bajaj's motorcycle volumes and
improve market share for Bajaj. We had reported that Bajaj recorded a 22% yoy decline in domestic motorcycle sales on a year-to-date basis.The success of the bike is critical to Bajaj as it shifts its focus towards high-end bikes.

Kotak retains outperform rating on the company with a price target of Rs 2,750.

Published by DalalStreet Business @ 1:50 PM  



Reliance Gas + IPCL Merger

The government appears set to approve Reliance Industries' pricing formula for the gas it plans to produce from July next year from KG basin with minor changes. The empowered Group of Ministers (eGoM), which had its third meeting today morning, was near unanimous on the need to honour the government's commitment to allow marketing and price freedom to investors in oil and gas, reports suggest. The eGoM has left the final decision on RIL's gas pricing to External Affairs Minister Pranab Mukherjee.

Meanwhile, RIL board of directors fixed 12 October 2007 as the record date for the purpose of determining the shareholders of Indian Petrochemicals Corporation (IPCL) who will be entitled to receive equity shares RIL in terms of the scheme of amalgamation. RIL will issue its 1 equity share of Rs 10 each for every 5 equity shares of the IPCL held on record date.

Reliance Industries stock hit a life time high crossing Rs 2,000 and is currently traded at Rs 2,015.

Published by DalalStreet Business @ 1:21 PM  



Buy Tanla Solutions - HDFC Research
Tuesday, September 11, 2007

Tanla Solutions Ltd [TSL] offers network billing and delivery, content management, content delivery and m-commerce transactions. TSL's revenues are expected to grow at 72% between FY07-09E.

TSL has aggressively invested in R&D and is focused in developing newer products in FY 2008. It is expected to spend Rs 220 million for FY08 in R&D. Non voice revenues are expected to grow YoY across all the telecom markets in the world.

TSL would grow at a CAGR of 59% in FY07-09E at net levels and have a terminal growth of 3% for DCF calculations. This gives a target price of Rs 706 for the stock, Rs 646 for the core business and Rs 60 for its non-core business. TSL trades at 14.4x and 9.35x its FY08E and FY09E earnings of Rs 31.18 and Rs 48.15 respectively. Hence one can assign a PE Multiple of 24.8 for FY08E and 15.1 for FY09E on core business.

Published by DalalStreet Business @ 11:01 AM  



Citi initiates BUY on DLF
Monday, September 10, 2007

DLF remains committed to an aggressive execution schedule – seeks to deliver 16m and 23m sq ft of completed assets over the current and next year, with ~50m sq ft under construction. DLF management dismissed perceptions that it has low cost land bank. It clarified that about 40m sq ft (7% of land bank) is historic with an average cost of Rs275psf - the rest, about 575m sq ft, has been acquired in the last 3-4 years; effective cost slightly higher at Rs350psf.

DLF sees itself well leveraged to the strong commercial/retail asset environment; 50-55% of its assets are in this space, it has over 12m sq ft in preleased commitments on its books, with 42m sq ft of space under execution. DLF has an aggressive launch schedule in the mid-income housing space, spread across various cities in the country.

Target price of Rs.725 is based on a 25% premium to an estimated core NAV of Rs530, and Rs62 for other asset holdings and new JV businesses (Rs45/share for the existing 4.6m sq.ft leased assets and 7.2m sq.ft plot, and Rs17/share for DLF's share in construction and hotel JVs. DLF is a medium Risk BUY.

Published by DalalStreet Business @ 10:47 AM  



Buy Salzer Electronics - HDFC Sec
Thursday, September 06, 2007

HDFC Securities has put a BUY recommendation on Salzer Electronics Ltd [SZEL] with a price Target of Rs 150. CMP Rs 114.

Electrical equipment industry has been growing at a very rapid pace. SZEL's products are mainly electrical panel accessories & mostly generate revenues from power segment. L&T Capital, an investment arm of engineering giant L&T recently acquired 14.95% stake in SZEL. Collaborations with German & Canadian companies have helped SZEL to establish a niche position in rotary switches & toroidal transformer business respectively. SZEL has increased focus on its modular switches business, which has a huge potential & has set up a unit at Himachal Pradesh for manufacturing these switches.

SZEL's revenue & net profits to grow at a CAGR of 38% & 58.3% respectively over the next two years. The EBITDA margins are likely to increase to 16.2% in FY08 & 16.6% in FY09 from 15.2% in FY07. Its PAT margins are expected to improve significantly to 6.7% in FY08 & 7.3% in FY09 from 5.5% in FY07. At the current price, the scrip trades at 13.1xFY08E EPS & 9xFY09E EPS. Investors could look at making a small entry at the current levels & add on dips to Rs.95 with a one-year price target of Rs 150.

Published by DalalStreet Business @ 12:32 PM  



UBS Upgrades ITC to Buy from Neutral
Wednesday, September 05, 2007

UBS Securities has upgraded the stock of ITC to Buy from Neutral with a price target of Rs 200.

ITC's cigarette volumes is expected to be down by 4.4% in FY08, previous forecast a 6.5% fall. With strength in consumer spending, cigarette volumes held up well in Q1, despite imposition of a 12.5% VAT rate and a 33.5% trade tax in UP. Expect volumes to stabilise in Q2 and to recover in Q3. ITC's multiple price points in its cigarette portfolio has allowed the business to move the consumer across segments rather than lose volumes. Filter cigarettes have held volumes better than the non-filter variety. This has improved the revenue mix.

ITC's FMCG business is driving strong growth in the non-tobacco segments. Losses have stabilised and look set to decline. The hotel and paperboard businesses are recording strong growth and are expanding capacity.

Raised FY08 EPS forecast to Rs8.4 (+9%), and FY09E EPS to Rs9.9 (+13%). The increase reflects a rebound in cigarette volumes. New price target is benchmarked at 20x FY09E earnings, the mid-point of ITC's valuation band.

Published by DalalStreet Business @ 1:04 PM  



Citi Upgrades Punj Lloyd Target Price
Tuesday, September 04, 2007

Breaking News: Citigroup Research has upgraded the stock of Punj Lloyd with a target price of Rs 353 from Rs 305 earlier target.

Raised target price to Rs353 earnings estimates are revised by 14-16% over FY08E-10E on the back of (1) 73% YoY sales and 101% YoY PAT growth in 1QFY08; (2) 22% higher sales growth on faster execution of orders and 50bps higher margins in Punj (ex Semb); (3) Dilution because of the recent equity placement and promoter warrants.

L&T's order backlog is 2.7x that of Punj + Semb but (1) its market is 7.5x and (2) is 32% more expensive than Punj. Citi expects this valuation and market capitalization gap to narrow as we forecast Punj Lloyd will start delivering earnings growth at a pace superior to L&T over the next 3 years.

Punj Lloyd is perhaps the only mid cap E&C company that could leapfrog into the next level which is occupied by L&T with its diversified skill sets. The first sign that Punj Lloyd can actually deliver on its potential came when the company reported 4QFY07 PAT of Rs889mn which was 59% ahead of CIR estimates.

Target price of Rs353 is based on a target P/E multiple of 23x FY09E, which is well supported by earnings CAGR of 44% over FY07-10E and RoEs expanding from 18% in FY08E to 21% in FY10E. Target multiple is at a discount to that of L&T.

Published by DalalStreet Business @ 1:31 PM  



Buy Adhunik Metaliks - ICICI Direct
Monday, September 03, 2007

ICICI Direct has recommended a BUY on Adhunik Metaliks with a price target of Rs 90 within 3 Months.

AML is implementing a capex programme that would change its business profile from a secondary steel manufacturer to an integrated steel player with linkages across the entire value chain from critical raw materials such as iron ore and coal to value added steel products. The company is executing an expansion plan that would almost double its capacity from 250,000 tpa to 440,000 tpa by 2008. The company is integrating backwards with captive ownership of critical raw materials, viz. iron ore and coal mines which would enable it to withstand pricing pressures and face competition better compared to its peers.

The company reported a top line of Rs 735.76 crore and bottom line of Rs 77.48. In Q1FY08, sales grew 21.86% y-o-y to Rs 208.12 crore, while bottom line grew 14.22% to Rs 17.75 crore. During the quarter under review, the company acquired Orissa Manganese & Minerals Pvt Ltd as a 100% subsidiary, which has mining rights with reserves of 15 million tonnes for manganese ore and 35 million tonnes for iron ore. The integration and acquisition of mines would drive the company’s top line at a CAGR of over 40.70% during FY06-09E to Rs 1,180.37 crore and bottom line at a CAGR of around 59.58% to Rs 137.00 crore.

At the current price of Rs 76, the stock is trading at 6x the FY09E EPS. The stock has the potential to touch Rs 90, an upside of 20%. Another research analyst, tracking this stock expects a price of Rs 95- Rs 105 on conservative basis.

Published by DalalStreet Business @ 2:28 PM