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Buy EMCO – Sharekhan

admin — Sun, 13 Sep 2009 11:23:14 +0000

EMCO
Reco Price: Rs 95
Target price: Rs 115
Upside: 26%
Brokerage: Sharekhan

In FY2009, Emco booked Rs 7.96 crore of loss in forex, adjusting for which the company’s operating performance was better. The transformers division reported 1.9 per cent increase in volumes during the year while the realisation dropped by 2.2 per cent y-o-y on account of a fall in commodity prices.Recently, CESC has acquired 50 per cent stake in Dhariwal Infrastructure that is setting up a 600 MW power plant. Taking this deal as a benchmark, Emco should have been able to garner close to Rs 350-400 crore for its subsidiary Emco Energy.

Emco has currently invested Rs 43.5 crore in the subsidiary. If this is true, Emco could actually partially pay off of its debt on books easing the company’s financial cost and boosting its profits. Assuming the repayment of the advanced amount, earnings for the stand-alone entity could increase by 5-10 per cent.

The brokerage has upgraded earnings estimates by 4.4 per cent to Rs 11 in FY2010. Further, it has not factored in any cash flow from the sale of the plant, which would be an upside to current estimates. Emco is fast emerging as a strong end-to-end solution provider in the power transmission and distribution (T&D) space in the country. It feels the order inflow for the company would remain robust with the spending in power T&D space expected to remain buoyant.

The company is expected to report a CAGR of 17.3 per cent and 19.4 per cent in the turnover and the net profits respectively over FY2009-11. At the recommended price of Rs 95, the stock trades at 8.6 times and 7.4 times FY2010 and FY2011 estimated EPS respectively.

Buy HDFC Bank, target of Rs 1,139: Sharekhan

admin — Fri, 24 Apr 2009 16:18:54 +0000

Sharekhan has maintained its buy rating on HDFC Bank with a price target of Rs 1,139 in its April 23, 2009 research report.

“HDFC Bank reported a healthy set of numbers for Q4FY2009. While the top line growth moderated, a robust non-interest income growth lead to a healthy bottom line (in line with our expectations). In Q4FY2009, HDFC Bank reported a net profit of Rs 630.9 crore (in line with our estimate), indicating a growth of 33.9% year on year (yoy), mainly driven by a higher than expected treasury gains. The operating expenses grew by 26.6% yoy to Rs 1,396.2 crore, but were lower by 4.4% sequentially, led by a 13.4% q-o-q decline in the employee expenses. We maintain our Buy recommendation on the stock, price target of Rs 1,139,” says Sharekhan’s research report.

Buy Zee News, target of Rs 55: Sharekhan

admin — Fri, 24 Apr 2009 16:16:17 +0000

Sharekhan has maintained its buy rating on Zee News with a price target of Rs 55 in its April 23, 2009 research report.

“The Q4FY2009 revenues and operating profit of Zee News is in line with our
expectations. However, due to a higher than expected interest cost, the net
profit is below our estimate of Rs 11.3 crore. The net operating revenues for the quarter increased by 22.4% year on year (yoy) with the existing channel portfolio delivering a 4.2% year-on-year (y-o-y) growth in revenues on a relatively higher base (Q4FY2008 revenues defied the seasonality aspect and were even higher than Q3FY2008, despite the fact that Q3 is seasonally the best quarter during a year). Thus, we upgrade our call on the stock to buy and maintain our price target of Rs 55,” says Sharekhan’s research report.

Buy BASF India, target of Rs 270: Sharekhan

admin — Fri, 17 Apr 2009 12:24:56 +0000

Sharekhan has maintained its buy rating on BASF India with a price target of Rs 270 in its april 16, 2009 research report.

“BASF India’s standalone Q4FY2009 performance is in line with our expectation. The net profit for the quarter has come in at Rs 5.5 crore, up by 24.3% year on year (yoy), as compared with our estimate of Rs 5.6 crore for the quarter. However, the net sales for the quarter grew by a paltry 3.4% yoy to Rs202.2 crore, which is well below our expectation.”

“We would revise our earnings estimates once more clarity emerges after the release of the annual report of the company and after discussion with the
management. Meanwhile we expect the company to continue its stable performance and record double-digit earnings growth in the current fiscal. Consequently, considering the company’s steady performance, strong return ratios and high dividend pay-out, and the rerating potential of the stock, we maintain our Buy recommendation on BASF India with a revised price target of Rs 270 per share,” says Sharekhan’s research report.

Hold Reliance, target of Rs 1,816: Sharekhan

admin — Thu, 16 Apr 2009 11:25:07 +0000

Sharekhan has downgraded its rating on Reliance Industries to hold with a price target of Rs 1,816 in its April 15, 2009 research report.

“With the commencement of gas production from the Krishna Godavari (KG) D-6 block, Reliance Industries Ltd (RIL) will now start monetising its investment in the exploration business. In spite of further capital expenditure (development of the KG D-6 block) over the next few years, the upstream business would generate significant free cashflows in the coming years.”

“We are rolling over the price target to the average of the FY2010 and FY2011 earnings. Consequently, we are revising upwards our price target for RIL to Rs 1,816 per share. In the last three months, the price of RIL stock has increased by 50%, outperforming the BSE-30 Sensitive Index, which has moved up by 21% during the same period. We are downgrading the stock to Hold rating. As the market price is close to our price target we recommend partial booking of profits (and waiting for a better entry point). Moreover, the recent weakness in refining margins and the stronger than expected rupee are the key risks to our earnings estimates and valuations,” says Sharekhan’s research report.

Buy ITC, target of Rs 206: Sharekhan

admin — Wed, 15 Apr 2009 12:06:16 +0000

Sharekhan has maintained its buy rating on ITC with a price target of Rs 206 in its April 13, 2009 research report.

“We expect ITC’s cigarette realisation to rise by 5-6% in FY2010 as a result of the price hikes implemented by the company and the change in its volume mix. Despite the government’s efforts to curb the consumption of tobacco and tobacco products, historically the cigarette volumes of the company have been relatively inelastic to price increases. However, the key thing to watch out for in the coming quarters is the performance of the non-cigarette FMCG business in terms of the sales growth and the quantum of loss. At the current market price the stock trades at 21.2x its FY2009E earnings of Rs 8.8 and 18.2x its FY2010E earnings of Rs 10.3. We maintain our Buy recommendation on the stock with the price target of Rs 206,” says Sharekhan’s research report.

Hold Larsen & Toubro: Sharekhan

admin — Wed, 15 Apr 2009 12:02:27 +0000

Sharekhan has maintained its hold rating on Larsen & Toubro in its April 13, 2009 research report.

“Larsen & Toubro (L&T) has lost the bid for the troubled software company, Satyam Computer Services (Satyam). Tech Mahindra, which has emerged as the top bidder with an offer of Rs 58 per share, will pay Rs 1,757 crore for a 31% stake in Satyam. Media reports indicate that L&T had made a final offer of Rs 49.50 for per share of Satyam. L&T holds an 11.5% stake in Satyam which had been acquired at an average price of around Rs 80 per share. At the current market price, the stock is trading at 12.7x its FY2010E consolidated earnings. The key overhang relating to the Satyam issue has now been cleared which ought to improve the sentiments towards the stock. We maintain our Hold rating on the stock with the price target under review,” says Sharekhan’s research report.

Buy Piramal Healthcare, target of Rs 358: Sharekhan

admin — Tue, 07 Apr 2009 03:56:19 +0000

Sharekhan has maintained its buy rating on Piramal Healthcare with a price target of Rs 358 in its April 02, 2009 research report.

“In an effort to reduce costs and restructure its assets in a more efficient manner, Piramal Healthcare (Piramal) has decided to shut down its custom manufacturing facility at Huddersfield, UK (a part of Avecia) and consolidate its custom manufacturing operations at its other sites at Ennore (near Chennai), Digwal (near Ahmedabad) and Morpeth, UK. Even though the closure of the UK site would lead to a onetime hit in the FY2009 financials of the company, the move is in the long-term interest of the company, as it would result in the elimination of redundancies, cost savings, efficiency in operations and an overall improvement in profitability.”

“With a presence across the entire contract research and manufacturing services (CRAMS) value chain, strong customer relationships and a favourable operating environment characterised by increased outsourcing, we expect Piramal’s custom manufacturing business to perform robustly in the future. We maintain our Buy recommendation on the stock with a price target of Rs 358, ” says Sharekhan’s research report.

Buy Shree Cement, target of Rs 825: Sharekhan

admin — Mon, 06 Apr 2009 12:42:38 +0000

Sharekhan has maintained its buy rating on Shree Cement with a price target of Rs 825 in its April 02, 2009 research report.

“Shree Cement has commissioned clinker manufacturing Unit VII of 1MMT capacity at Bangur City, Ras in Pali district of Rajasthan at a capital investment of Rs 200 crore. In order to account for higher realisation and better than expected volumes, we are upgrading our earnings estimates for FY2009 and FY2010. The net profit for FY2009 and FY2010 is revised upwards by 4.3% and 11.6% to Rs 479.9 crore and Rs 291 crore respectively. We have been bullish on cement sector since the past four months with Shree Cement as one of our top picks. The stock has appreciated by over 45% since our last update on January 30, 2009. We maintain our Buy call on the stock with a revised 12-month price target of Rs 825 (EV/tonne of USD 70 on expanded capacity),” says Sharekhan’s research report.

Hold Maruti Suzuki India: Sharekhan

admin — Mon, 06 Apr 2009 12:35:43 +0000

Sharekhan has maintained its hold rating on Maruti Suzuki India in its April 2, 2009 research report.

“In the last couple of months, the demand has received a boost on the back of the significant discounts being offered by the company, the easing of the liquidity crisis and attractive schemes from some banks, such as State Bank of India. There has been a growth in demand also because of the government’s stimulus packages and the implementation of the Sixth Pay Commission’s recommendations. Moreover, export volumes have been pretty good on back of the launch and increased volumes of A-Star. In view of the strong numbers of the last two months, we are raising our FY2009 earnings estimate by 1.4% to Rs 47.6 per share but fine-tuning our FY2010 earnings estimate to Rs 58.2 per share.”

“We believe Maruti Suzuki is better placed than its peers in the passenger car segment and expect it to maintain its leadership as well as healthy operating performance going ahead. Consequently, we maintain our Hold recommendation on the stock but put the price target under review,” says Sharekhan’s research report