Indian GDP Inline with Expectations
Friday, November 30, 2007
The Indian GDP numbers for Q2 FY08 are out. It is up 8.9%. This was in line with expectations given the deceleration in manufacturing activity in the rate sensitive sectors. Given that banks have started lowering their lending and deposit rates and that inventory is getting cleared, we expect manufacturing activity to pick up in the coming months and are thus maintaining our full year estimate of 9.3%.Agriculture growth came in at 3.6% - given the good monsoon we expect trends to remain favorable. Overall industrial growth was 9.1%. While manufacturing activity decelerated from 12.7% last year to 8.6% currently, trends in construction (up 11.1%) as well as mining (7.7%) remained buoyant. Services growth remains in the double digit range but there has seen a slight deceleration in trade activities which could possibly be attributed to the strong rupee.
Looking ahead, while the investment side of the story appears intact, consumption has been a drag on industrial growth. Analysts are maintaining our 9.3% GDP estimate for FY08 given the likelihood of monetary easing next year coupled with likely favorable trends in both agriculture and services.
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Published by DalalStreet Business @ 1:58 PM IST.
Lehman Initiates Coverage on DLF
Thursday, November 29, 2007
Lehman Brothers Equity Research has initiated coverage on India's largest Real Estate company, DLF with an OVERWEIGHT rating. DLF is well poised to capitalise on the sector's bright prospects. Rapid asset turnover has the potential to drive its financial performance. Lehman expects DLF to maintain its leadership in the sector due to the size and quality of its landbank and strong position in the high margin commercial/retail segments.DLF's landbank which, both in size and quality, is ahead of its peers. Execution capabilities demonstrated in its landmark projects and relationships with leading retail brands and corporates. Large proportion of development in commercial/retail segments, which give high margins and could benefit from potential yield compression. DLF has the capability to capture 7% of the total housing market and 15% of the non-residential market.
Here is the Sum of the Parts Valuation of DLF as estimated by Lehman Brothers.
Existing landbank NAV Rs 658 / share
Terminal value - Rs 215
Intermediate NAV - Rs 239
Value/share - Rs 1,112
Target Price - Rs 1,171 Implied multiple to NAV is 1.63
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Published by DalalStreet Business @ 12:54 PM IST.
Kotak recommends Sunil Hit-Tech Engineers
Wednesday, November 28, 2007
Sunil Hi Tech Engineers Ltd (SHEL) is a niche player in the power sector that builds, maintains and refurbishes power plants. The company also sets up transmission and distribution (T&D) substations, control rooms and erects super structures for steel, cement, aluminum, refineries and gas-based plants.Almost 60% of the current power capacity is to be added in next five years. The Government has also planned ultra mega power projects (UMPP) with a capacity of at lest 4000 MW each. More than 90% of the revenues of SHEL are from the power sector while the balance comes from steel and other activities like manufacturing of pressure parts for boilers. Typically, BOP work consists of 40% of the total cost per MW of the power plant. SHEL has been awarded three hydropower plants for an American company, that is, Dodson-Lindblom.
SHEL formed a subsidiary to manufacture boiler pressure parts for power plants up to 500 MW. This business has the potential to scale up to Rs.1 bn in three years. The company has already made joint bid for the BOP work for the Mundra UMPP.
At the current price of Rs.276, the stock is trading at 11.7x FY08E earnings and 9.3x FY09E cash earnings. The stock is trading at 6.0x EV/EBIDTA multiple and 1.0x EV/sales multiple based on FY09E estimates. Kotak expects the company to report RoE of 17.2% in FY09E. Initiate a BUY recommendation with a price target of Rs.400
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Published by DalalStreet Business @ 9:50 AM IST.
BUY Graphite India - Indiainfoline
Tuesday, November 27, 2007
Indiainfoline has initiated coverage on Graphite India Ltd [GIL] with a BUY rating. Graphite electrode is an indispensable material used in the electric arc furnace steel. The average consumption of graphite electrodes is 2.3 kgs per ton of steel. Contract prices for electrodes have increased by 20% in the last two years driven by strong demand, tight supply and rising needle coke prices.GIL's consolidated revenues and profits have registered a CAGR of 40% and 45% respectively over FY05-07. The robust performance has been driven by proactive capacity expansion (from 40,000 mtpa to 70,000 mt pa).
At CMP Rs80, GIL trades at ~50% discount to global peers and ~25% discount to the domestic competitor HEG (core business) on FY08 P/E. One-year target price of Rs114 implying 42% upside is based on a P/E multiple of 9x on fully diluted FY09E EPS of Rs12.6
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Published by DalalStreet Business @ 8:57 PM IST.
BUY Colgate - Citi + Merill Lynch
Colgate's business has demonstrated strong growth over the 8 quarters, with sales growing in excess of 15%. It has gained share in rural areas through its "Cibaca" brand. Colgate has recently increased its focus on other personal care products (hand wash, shower gels), which though currently coming off a small base, set the tone for the next growth opportunity.With major capital expenditure behind it, and incremental tax and excise savings from its new plants, cash generation is likely to accelerate.Over the next two years, Merill forecasts Colgate's sales to grow 15% led by 10-11% of volume growth. We expect EBITDA margins to expand ~30-40bp p.a driven primarily by internal efficiencies.
Merill Lynch expects Colgate to report an EPS of Rs 18.06 and Rs 20.86 for FY08 and FY09 respectively. Merill has set a target of Rs 500 on Colgate. Citi has set a more conservative target of Rs 485 on Colgate.
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Published by DalalStreet Business @ 10:34 AM IST.
Mukesh Ambani's Move to Checkmate Chevron
Monday, November 26, 2007
Are you worried about sky rocketing fuel prices ? You wouldn't be, if you are a shareholder of RIL. Mukesh Ambani's intelligent move to bring in Chevron was one of the cleverest moves to create wealth for RIL shareholders. RIL is a cash rich company and it could have gone solo for the Reliance Petroleum Ltd [RPL] project, instead in the usual Ambani style it is creating wealth on others money :-)RIL held 75% and Chevron held 5% in RPL, remaining 20% is being held by others. RIL has acquired the shares at various prices with effective purchase price around Rs 20. It sold 4.01% stake in RPL at Rs 4023 crore thus making a profit of Rs 3662 crore for RIL shareholders.
Now according to IPO offering for Chevron, the latter has an option to increase the stake upto 29% in RPL by April-2009. Chevron would also be eligible for 5% discount on refining done at RPL. If Chevron does not exercise its option to increase its stake to 29% by the stipulated period, RIL will buy back Chevron's 225 mn shares (5% stake) at Rs60, Chevron's initial purchase price.
Based on the last traded price of RPL (Rs 210), Chevron would have to pay Rs226 bn (US$5.7 bn) to RIL for the additional 24% stake (1.08 bn shares). Chevron's total acquisition cost for 29% equity stake in RPL would be Rs240 bn which is very close to the entire project cost of Rs 270 bn.
RIL has effectively invested Rs67.5 bn [Rs 6750 crore or $1.68 bn] in RPL for its 75% stake. After the 4.01% stake sale [Read beginning of article], its effective investment in RPL is 27.3 bn [Rs 2730 crore] for its 71% stake.
Hats off to Mukesh's intelligent moves to create wealth for RIL shareholders :-) Questions and Comments are welcome.
Labels: Reliance-Chevron-Insider-View
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Published by DalalStreet Business @ 11:27 AM IST.
UBS on BHEL and DLF
Friday, November 23, 2007
As per estimates, the global equipment supply situation is expected to remain tight in the short to medium term. Global manufacturers such as Alstom have upgraded their global capacity addition estimates. There is a 28% deficit between target and MW under construction/commissioned for the XI Plan with 92% of this gap of 21,783MW in thermal capacity addition in India.UBS upgrades BHEL's earnings estimate to Rs 66.66 and Rs 94.7 for FY08 and 09 respectively. UBS also upgrades the target price of BHEL to Rs 3030. However the stock has been downgraded to NEUTRAL from BUY recommendation. Citi has a price Target of Rs 2,960 on BHEL.
DLF Ltd:
DLF sold stakes in 69msf of mid income home projects in Chennai, Bangalore, Indore, Kochi, Panchkula to a set of private equity investors. In addition to the one-time cash flow of Rs16.75bn and the profits earned to the extent of their stake in the projects, DLF would earn project management fees (PMC) of 7% of sales, and land acquisition fees. DLF will also open India's first Luxury Mall in Delhi - DLF Emporio.
Price target of Rs 975 is based on 10% premium to the 12m forward NAV. Of this, residential is 27%, commercial 52%, retail 15%, hotels 3% and Bidadi 3%. At a 15% premium to NAV, the price target would be Rs1,020. UBS Maintains a NEUTRAL rating on the stock.
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Published by DalalStreet Business @ 3:06 PM IST.
Lehman Coverage on Godrej + Marico + Dabur +Asian Paints
Thursday, November 22, 2007
Lehman Brothers, was the first one to Downgrade the Indian IT companies and we were the first one to report it here. Lehman has now come up with recommendations on the Indian FMCG space.They have recommendations on Asian Paints, Dabur India, Marico Ltd and Godrej Consumer products Ltd.
Godrej Consumer Products Ltd - Overweight: GCPL
Expect steady earnings growth going forward, we believe the stock is attractively valued. Expect its international business to grow at a healthy rate on the back of organic and inorganic initiatives.
Concerns about loss of market share in the hair colour segment are overdone and have been factored into the price. GCPL,s current valuations are the most attractive in our Indian consumer portfolio and we believe that the risk-reward balance is favourable. Lehman expects Godrej to report an EPS of Rs 6.50 and Rs 7.70 for FY08 and 09 respectively. At the current market price of INR132.85, the stock is trading at a P/E multiple of 17.3x FY09E. 12-month target price is INR155, implying potential upside of 17% from current levels.
Asian Paints Ltd - Overweight:
Strong leadership position in the domestic decorative paints segment. It enjoys several key competitive advantages, which we believe will enable it to grow faster than the industry in the long term. Consensus estimates from other analysts is not factoring in a fast growth trajectory for the company and their earnings estimate is about 15% lower than Lehman's.
Among the companies in our coverage, Asian Paints is likely to be most leveraged to rupee appreciation since prices of key raw materials are import parity led.
At the current market price of INR1,000.95, the stock trades at a P/E of 19.0x FY09E EPS of INR52.8. The paint industry is on a secular growth path, and given the competitive advantages enjoyed by Asian Paints, it is expected to be the biggest beneficiary of this growth. It is likely to continue to perform better than the industry, and, hence, the premium, compared to its peers, is justified, in our view, and it is likely to be maintained. 12-month price target of INR1,309 is based on a P/E multiple of 22x on rolling four quarters EPS of INR 59.5, representing 31% potential upside.
Marico Limited - Overweight:
Anticipate a strong growth path for Marico's domestic business, driven by momentum in the hair care and edible oil businesses. "Kaya Retail" is now profitable and likely to add substantially at the operating level in a couple of years.
Marico has time and again demonstrated its ability to successfully counter competition, especially in the coconut hair oil business with strong presence of Parachute brand. Marico has been rapidly expanding its international footprint through a judicious mix o f organic and inorganic initiatives. This has resulted in a significant ramp up in the international business division’s revenue in the last three years.
The company would continue to be on a faster growth trajectory as compared to other stocks in the coverage and thus merits a higher multiple. Lehman has valued the stock on a P/E of 22x on rolling four quarters earnings with a 12 month target price of Rs 86.
Dabur India - Underweight
Dabur India is likely to register slower volume and earnings growth compared to its peers largely due to its very fragmented product portfolio.
While the company has a significant presence in several key segments, such as oral care and hair care, it has yet to attain a leadership position in any of these categories. The consumer health division, which traditionally has been the mainstay of the company, has witnessed stagnation in growth in the past few years.
Consensus is building in an optimistic margin scenario, while near-term earnings are likely to disappoint. In terms of earnings growth (a 16.5% CAGR from FY07-10E), the trajectory is going to be lower than that of Asia Paints and Marico, according to our estimates. 12-month price target of INR 96 is based on a P/E multiple of 20x on rolling four quarters EPS of INR 4.8.
Labels: India-FMCG-Stocks
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Published by DalalStreet Business @ 2:17 PM IST.
ICSA India - Initiating Coverage - 5Paisa
Wednesday, November 21, 2007
5Paisa/Indiainfoline has initiated coverage on ICSA India Ltd with a BUY Rating. ICSA, offers products and solutions for power, oil and gas and the water segment, has developed products and solutions to arrest losses during transmission. Apart from conventional products, it developed Intelligent Cathodic Protection solutions (iCAP), Intelligent Automatic Meter Reading (IAMR), Intelligent Automatic Water Reading solution (IAWR) and street light monitoring control systems.
With the introduction of newer and better products, expect the company's operating margin to expand. This will be supported by patents for three of its products, which could lead to improved realizations. We expect operating margins to sustain at 26%, an improvement of 140 bps by FY09E over FY07.
ICSA's revenues and profits have registered high growth of 293.2% and 297.6% CAGR over FY05-07. ICSA is a proxy on the growth opportunities in the power sector. Expect ICSA's revenues and profits to witness 75.6% and 81.5% CAGR over FY07-09 respectively. At the current price, the stock trades at 12.5x and 8.3x its FY08E and FY09E EPS of Rs25 and Rs37.6 respectively. Indiainfoline recommends BUY with a one-year price target of Rs451, an upside of 44.7%.
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Published by DalalStreet Business @ 11:53 AM IST.
BUY Shree Ganesh Forging Ltd - HDFC
Tuesday, November 20, 2007
HDFC Securities is bullish on the prospects of Shree Ganesh Forgings Ltd [SGFL]. They recommend to Buy at CMP & add on declines in the price band of Rs. 95-100.
SGFL manufactures a wide range of forgings including flanges & fittings catering mainly to industries like Oil & Gas, Petrochemical & Pharmaceutical, which together account for almost 75% of the total revenues. Through the recent 100% acquisition of profitable companies viz; Hertecant (European manufacturer of flanges & fittings), & ELFE, France, SGFL's sales & PAT could improve significantly & improve its overall global presence. SGFL is in the process of doubling its forging capacities from 11,000 MT to 22,800 MT at the existing location at Pawne, Navi Mumbai, by installing two new forging press lines of 2,500- MT press & 4,000- MT press, & an addition of 48 Automated CNC robotic machining lines, which will increase the machining capacity by 300%. SGFL's sales & PAT have grown at a CAGR of 33.3% & 65.4% respectively over the last five years and we expect this robust growth trend to continue going forward. The consolidated sales & PAT are expected to grow at a CAGR of 79% & 181.6% respectively over FY07-09.
At the CMP, SGFL trades at 8.7xFY08E & 6.4xFY09E consolidated EPS. SGFL has the potential to trade at 8.5xFY09E EPS (consolidated), which gives us a target price of Rs. 157. Buy the stock at the current price & add it on declines in the price band of Rs. 95-100 to earn an appreciation of 32.5% from the current levels over the next three to four quarters.
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Published by DalalStreet Business @ 1:02 AM IST.
BUY Everest Kanto - Citi
Monday, November 19, 2007
Citigroup Research has re-initiated coverage on Everest Kanto Cylinders with a BUY rating on the back of new expansion plans announced by the company.Besides the Dubai expansion (recently commenced) and China greenfield plant (to start next Quarter),EKC plans to: (1) expand the Gandhidham facility (0.2m industrial cyl/yr), (2) set up a greenfield plant at Kandla SEZ (0.3m CNG cyl/yr), and de-bottleneck Tarapur. Total capex envisaged is c.US$50m. The company has recently raised ~US$57m through an FCCB and private placement. All these expansions are positive as they diversify two key risks - RM supplies and the China market.
Citi adjusts FY08E earnings by 3% and significantly revise FY09-10E by 18-33%. The new Target Price of Rs 437 implies 40% upside from current levels and is based on 22x Sep-09E earnings, well supported by 47% EPS CAGR over FY07-10E. Kotak has maintained a HOLD recommendation with target Price being achiveed at Rs 311.
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Published by DalalStreet Business @ 11:51 AM IST.
Buy Gitanjali Gems - Morgan Stanley
Saturday, November 17, 2007
Morgan Stanley has initiated coverage on Gitanjali Gems Ltd with an Overweight rating. The company is a pioneer in branded jewellery in India and is leveraging its brand equity to drive growth in the retail market through increased outlets and distribution.The market is underestimating the value of the company's real estate business. The standalone jewellery valuation looks cheap at 9x F09E earnings, given the 80%+ growth (F06-F07) in the branded jewellery business.
MS expects jewellery retail and exports to grow by 46% and 40% at the top line and by 78% and 43% at the operating profit level over F07-F10. Expect Gitanjali to deliver strong 51% growth in earnings in F2007-10 on the back of growth in its branded retail jewellery and jewellery exports.
On sum-of-parts valuation and MS arrives at a target price of Rs547, valuing the jewellery business at Rs417/share and the real estate business at Rs130/share. The company is expected to report an EPS of Rs 19.74, 28.38 and 35.78 for FY08,09 and 2010 respectively.
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Published by DalalStreet Business @ 11:29 PM IST.
Satyam Preferred Pick - CLSA + Macquarie
Thursday, November 15, 2007
Tier-I Labor Arbitrage Software vendor, Satyam Computers Ltd still remains a top pick amongst research houses, particularly, CLSA and Macquarie. With two quarters remaining in the current fiscal year, expect tier-1 IT firms to finish the fiscal on a strong note. Satyam has progressively revised its FY08 US-dollar-terms revenue growth guidance from 29% at the start of the fiscal year, to 35% after 1Q FY3/08 and 42% after 2Q FY3/08. Both the houses have set a price target of Rs 550.
Satyam is currently trading at 16x FY08 earnings and 14x FY09 earnings. EPS is expected to grow 24% from FY08E to FY13E, implying a PEG of 0.66. Assuming the rupee to be at 36.5 to the US dollar for FY09 and accounted for the STPI tax benefit going away in FY10. Macquarie and CLSA reiterate Outperform rating on the stock.
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Published by DalalStreet Business @ 11:21 PM IST.
Indian Steel Companies Report - ENAM
Tuesday, November 13, 2007
Taking into scenario the Asian factors, ENAM after conducting an exclusive study in China, has rated the leading Indian Steel manufacturers - SAIL, Tata Steel, Jindal Steel & Power and JSW Steel Ltd.
Steel Authority of India Ltd:
Sizable presence and domestic leadership. Captive 2.9 bn tonnes iron ore reserves, scalable and integrated. Capacity: To rise from 12mn to 24+mn tonnes in FY11 through internal growth and acquisitions. Cost competitiveness: Captive resources (iron ore, coal) and modernization. The company enjoys attractive valuations, Iron Ore reserves are valued at Rs 276 / share and Steel Business is valued at Rs 133 / share. Taking the debt factor of Rs 27.7 / share, the company's stock is valued at Rs 437 / share and ENAM recommends an out performer rating on the stock.
Tata Steel:
Equity raising and capacity expansion are the key to future success of Tata Steel. Higher interest costs on bridge debt financing. Tax inefficiencies for one of the SPVs (Tata Steel Asia). Corus (>50% of op profits) to face margin pressure on rising costs of iron ore, coking coal and freight. Improving margin by enhancing integrated operations in India Corus synergy gains/ reducing the high operating leverage.
Tata's Steels Mines are valued at Rs 361 / share, while its steel making business is valued at Rs 1,142 / share. Debt component of the company is too high at Rs 517 / share thus taking the effective sum of the parts valuation of Tata Steel to Rs 941 / share. ENAM maintains a NEUTRAL rating on the stock.
Jindal Steel and Power:
Iron ore & thermal coal reserves used in steel & power. Profitable and rapidly growing business ( 75% of FY07 EBIT). Steel expansion: 2.5 mtpa steel capacity already in place; volumes to nearly triple in two years from current level.
Power Business:
Hugely profitable business – (25% of FY07 EBIT). Power capacity to increase nearly four times from current 340 MW through subsidiary; setting up 1,000 MW mega thermal power project using captive coal. High ROE business (~30% ROE) , merchant power plant outside the purview of regulated returns.
Valuations of Jindal Steel & Power:
Recent spike in valuations discounts upside on access to huge 20 bn iron ore resources of Bolivia. We recommend to wait for clarity on the outcome of the Bolivian deal. Expensive valuations; reiterate sector Underperformer rating with a target price of Rs 6,096
JSW Steel Ltd
Set to grow from 3.8 mtpa to 10 mtpa by FY11. Diversified product mix: Long products capacity & acquisition of plate mill in USA. Capacity expansion at capital cost of ~USD 540/ tonne. Total project cost – Rs 171bn. Timely commissioning of facilities holds the key.
Financial risks, arising out of leverage would offset valuation upside, until project execution milestones are reached. Valuations already capture near term upsides. Recommendation changed to Sector Underperformer rating with a target price of Rs 741
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Published by DalalStreet Business @ 4:54 PM IST.
Long Term BUY - Patel Engineering
Monday, November 12, 2007
Indiainfoline is recommending a BUY on Patel Engineering Ltd [PEL]. The company enjoys 22% market-share in Hydro Power construction in India. The company has an order book of Rs 5,400 crore. Though majority of the power sector investments in India will be Nuclear fuel based, hydro power will also see some investments and their are only handful of players in the segment.
PEL owns a land bank of 1200 acres in Hyderabad, Mumbai, Bangalore, Chennai and Panvel. It now plans to unlock the value of this land bank through its fully owned subsidiary, PRL. The land bank is valued at Rs 3,000 crore.
PEL is expected to grow at 33.3% CAGR between FY07-09. Adjusted for real estate and one annuity project, the stock trades at a P/E of 9x on FY09 earnings and EV/EBIDTA of 6.3.Indiainfoline recommends a BUY with a target price of Rs 1,017.
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Published by DalalStreet Business @ 11:24 AM IST.
Are we in a 10-12% market correction ?
Friday, November 09, 2007
It's Diwali weekend and I received this report by Morgan Stanley marked high priority. Here is the interesting part of the report.
I have modified the chart to suit the requirements of this article. The market has been through nine corrections over the past four years. Eight of these have been "V" shaped recoveries including the latest one. The average fall has lasted 15 days with an average correction of 15% accompanied with rising volatility. Subsequent rallies have measured an average return of 36%.I guess we are. However, the story of returns may not be true every time. So be careful before over stretching yourself. Your thoughts are welcome.
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Published by DalalStreet Business @ 11:46 AM IST.
Glenmark Pharma subsidiary listing
Thursday, November 08, 2007
Divi's Labs, is a hot favorite for fund managers in Reliance and HDFC Funds. Citigroup and CLSA are optimistic on the performance of Glenmark post separation of specialty and generics business. Glenmark also unveiled a plan to structure its branded & generic businesses as separate entities, with the latter to be listed separately. The restructuring would serve Glenmark well over the long term, given the growing traction & completely diverse natures of the 2 businesses.Citigroup in its report has raised FY08, FY09 and FY10 base business EPS estimates by 16%, 10% and 15% respectively, as Glenmark raised guidance materially on the back of growing traction in key markets. It has set a new stock target price of Rs 632. Citi expects the EPS to be 21.96 and 25.04 for FY08 and FY09 respectively. CLSA has set a target price of Rs 585 on the Glenmark stock. While DSP Merrill Lynch has a neutral view on the stock.
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Published by DalalStreet Business @ 8:17 PM IST.
Citigroup Downgrades Indian IT Space
Wednesday, November 07, 2007
A month after Lehman Brothers downgraded Indian IT companies, Citigroup Analyst gathered the courage and downgraded the earnings target. We had also said that a downgrade was necessary which has come a bit too late.Here are the new Target prices for Infosys, Wipro, TCS, Satyam as set by Citigroup.
Infosys Technologies - Rs 2190
TCS - Rs 1290
Wipro - Rs 565
Satyam - Rs 565
HCL Tech - Rs 365
i-Flex - Rs 1570
Patni - Rs 475
Mphasis - Rs 360
Hexaware - Rs 122
Sasken - Rs 372
KPIT - Rs 140
If you want the entire report, drop me a line to feedback AT dalalstreet dot biz with code 982.
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Published by DalalStreet Business @ 10:04 AM IST.
Pantaloon Retail India - Reports
Tuesday, November 06, 2007
Pantaloon Retail (PRIL), the largest and the fastest growing retail play in India, has best anticipated the Indian retail revolution.It has reported strong revenue growth of 80% at Rs10.9bn, EBITDA of Rs956m and PAT of Rs297m during Q1FY08 (double the adjusted profits for Q1FY07). PRIL now reaches out to 6m sq. ft. of retail space spanning across 32 Pantaloons Outlet, 68 Big Bazaar, 98 Food Bazaar, 4 Home Town outlets. PRIL surprises on the positive on EBITDA margins, which expanded by 190bp at 8.8% in Q1FY08. With cost structures stabilizing and back ended investments beginning to reap results, PRIL has witnessed margin expansion after 4 quarters.
Sum of Parts Valuation of PRIL by SSKI:
Standalone Retail Operations - Rs 462
Home Solutions Rs 66
Future Logistics Rs 18
Future Media Rs 28
Future Capital Rs 74
Future bazaar Rs 24
Future Ventures Rs 29
SSKI has set a target price of Rs 700 on PRIL with an OUTPERFORMER rating. UBS Research has set a more conservative target price of Rs 615 while Macquarie research just a while ago upgraded the stock to a BUY with a target price of Rs 750.
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Published by DalalStreet Business @ 11:38 AM IST.
Reliance Petroleum Bubble - Book Profits
Monday, November 05, 2007
Reliance Petroleum implies an asset value of $4,129/complex-bpd - 2.4x those of its US-peers and a 50-70% premium to even the most expensive refinery new-build quotes in the market ($2,500). While such a premium recognizes its superior earnings potential because of lower capital costs and taxes, even on earnings-based multiples RPL appears fully priced relative to its peergroup at 10.9x P/CE and tax-benefit-adjusted 9.9 EV/Ebitda calculated on FY10 estimate.CLSA in its research report said, RPL trades at a further 20-50% premium to these multiples calculated on our top-of-consensus FY10 estimate. DCF-based fair value estimate for RPL is Rs158/share but the market is likely to look at alternate methods like earnings multiples, replacement costs, asset valuations, and M&A benchmarks. Depending on the framework chosen, CLSA finds a wide-range of "fair-values" at Rs103-233/share but even the highest estimate implies a 14% downside. Target price of Rs195/share is based on an average of the earnings-multiples and replacement cost benchmarks.
Book profits only if you hold the stock. Do not short as the markets are volatile and expected to remain so.
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Published by DalalStreet Business @ 11:09 AM IST.
Strong Occupancy at Kamat Hotels - BUY
Sunday, November 04, 2007
Kamat Hotel posted surprising results for the quarter ended Sep 30, 2007 with 377% growth in bottomline. Topline saw a growth of 54% to 33 crore as against 21 crore last year. Kamat Hotel posted excellent numbers in a limp quarter for hospitality sector due to high occupancy rates in its Mumbai hotels and was able to keep average room rates(ARR) for the quarter above previous full year average approx by Rs 1000 on the back of firm demand. Company was also able to improve its operating margins by 488 basis points by improving on other operating costs by 276 bps and controlling employee cost by 173 bps.Kamat Hotel was able post a 54% increase in topline at 33.14 crore. This increase was propelled by an increase of aprrox Rs 1000 in ARR over the full previous year average and occupancies remaining strong in the range of 80% in a slack quarter. Kamat Hotel also benefits due to the presence of its hotels in Mumbai which attracts around 24% of the India’s inflow of tourists.
By the last quarter two new hotel management properties will get added at Sindhudurg and Aurangabad. Also Orchid Heritage Fort, Pune is expected to go live with business very soon.
At the current price of Rs 194, the stock trades at P/E of 10.9x FY08E EPS of Rs 17.74 and at its historical lowest of 8.48x FY09E EPS of Rs 22.88. At a price to book value of 1.13 FY09E, Kamat Hotel is at extremely attractive levels. ICICI maintains OUTPERFORMER rating with a revised price target of Rs 245, 10.7x FY09E.
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Published by DalalStreet Business @ 8:24 AM IST.
Vinati Organics Small Cap Recommendations
Saturday, November 03, 2007
Here is a few small cap recommendations being made on the fundamentals as well as growth prospects of companies with good management and which are quoting at decent PE multiples.
Vinati Organics:
Vinati Organics Ltd (VOL) has been operating in the chemical manufacturing industry since 1992 and has successfully implemented technology available to only few in the world. VOL primarily produces IBB (Iso Butyl Benzene) and ATBS (2-Acrylamido 2 Methylpropanesulfonic Acid). Its manufacturing facilities are located at Mahad and Lote Parshuram, Maharashtra.
In Q2FY08, VOL has reported net sales of Rs. 37.21 vs Rs. 18.67, clocking a growth of 99.3% y-o-y. The growth in topline is mainly on account of higher production of IBB and increased demand of ATBS, both in terms of volume and value. IBB accounted for about 75% of topline and ATBS the rest. The production in terms of volume was about 870 MT for ATBS and 3,000 MT of IBB, of which exports to BASF, USA accounted for close to 1,300 MT. VOL has reported an 898.3% jump in EPS y-o-y, to Rs. 6.83 in Q2FY08. On a half yearly basis, VOL has an EPS of Rs. 9.8, surpassing even FY07 EPS of Rs. 5.34.
VOL could achieve a sales target of Rs. 138.50 cr and an EPS of Rs. 20.33 in FY08(E). VOL is currently quoting at 6.8 times FY08 (E) EPS. Existing investors can look at adding to existing positions at current levels for a price target of Rs. 180 (CB) by the end of this financial year, while fresh investors could wait for corrections up to Rs.120 [CUM Bonus] to take fresh exposure.
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Published by DalalStreet Business @ 8:04 AM IST.
Jai Hind Projects, Initiating Coverage
Thursday, November 01, 2007
SBI Cap Securities has initiated coverage on Jai Hind Projects Ltd [JPL]. JPL operates as an engineering, procurement and construction (EPC) company. The company is involved in the construction and laying of onshore and horizontal directional drilling (HDD) pipelines, urban infrastructure development projects like construction of water systems, gas distribution projects and other environmental projects, corrosion protection services and engineering & turnkey projects.
JPL has an order backlog worth Rs.2142.4 mn as on FY07, which is 179.4% higher than FY06. Average ticket size has improved to Rs.235 mn, from Rs.125 mn in FY06. In order to support big ticket size projects, JPL has planned capital expenditure of Rs.400 million in span of two years. JPL is planning to enter into global EPC contracts for which it has tied up with Thiess of Australia, Naftogaz of Ukraine.
Valuations and Target for JPLThe company is likely to report a growth in revenue of CAGR of 73% over the next two years. The margin is expected to improve by 21 basis points (bps) in FY08E and 50 bps in FY09E,. At the
CMP of Rs.147, JPL trades at a P/E of 14.28x and 9.34x its FY08E and FY09E EPS of Rs.10.31 and Rs.15.77, respectively. On an EV/EBITDA basis the stock trades at 6.53x and 4.59x, our FY08E and FY09E earnings, respectively. Buy the stock with a 12 months price target of Rs.237 based on P/Eof 15X FY09E valuations.
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Published by DalalStreet Business @ 8:51 AM IST.