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Tuesday, September 05, 2006
Indian stok picks
Broking house, Citigroup is confident on Bajaj Auto and has maintained hold rating with price target of Rs 2956.
Citigroup report on Bajaj Auto:
Overall volumes in August up 11% YoY -driven by motorcycle sales (+ 21% YoY). 3 wheeler sales rose c15% YoY, which is below the YTD growth rate of 25%.
Growth rates to taper:
"We believe the strong 34% YTD growth rate in motorcycle sales exhibited thus far will taper over the next few months as the base becomes more demanding. Our FY07 forecasts assume 25% motorcycle volumes growth – which we believe BJAT will achieve."
Market share gains continue:
"BJAT has gained 200 bps market share over Apr – July 06 (currently at c33%) within the motorcycle segment. Its well-balanced product mix should enable BJAT to grow faster than the industry through FY07E."
New products on the anvil:
"Post the introduction of the Platina (100cc motorcycle) in Apr 06, BJAT will re-focus on the scooter segment, with the launch of the Kristal (expected launch in Sept 06), whilst the Blade will be launched in 1QCY07. BJAT also plans to enter the light commercial vehicle segment – it targets an early '09 launch for its product offering."
Retain Hold:
"We note that the two-wheeler segment is witnessing intense competition and a challenging cost environment. Higher petrol prices and rising interest rates accentuate our concerns. We maintain hold rating with target price of Rs 2956."
Source:-Moneycontrol
Maruti Udyog has target of Rs 990: Karvy Broking house, Karvy Stock Broking is of the view that Maruti Udyog has target of Rs 990.
Karvy report on Maruti Udyog:
August 2006:
"For the month of August Maruti's total volume sales up by 11.5% to 51,855 units (our estimate of 12% growth) as against 46,509 units, heavily backed by domestic sales which posted a growth of 16% to 48,063 units as against 41,519 units. The B Segment which constitutes 67% of total domestic volumes witnessed a growth 22% to 32,466 as against 26,558 in August 2005,with Alto averaging at 15,000 units. While the C segment witnessed a growth of 15%, Maruti 800 witnessed a de-growth of 9.3%. The export for the month was down by 25%."
Apr-Aug FY07:
"For the five month period, the total volume sales growth was registered at 14% to 243,211 units as against 213,131 units in Apr-Aug FY06, mainly driven by domestic sales growth of 17% to 228,600 units as against 195,816 units. The B segment which constitutes 67% of the total domestic sales, recorded a growth of 23% to 153.242 during the period against 125,048 units in Apr-Aug FY06. The C segment for the period witnessed a growth of 7% and M-800 was marginally down to 32,765 units."
Future Outlook:
"For FY07, we expect the company to post a total volume growth of 637,126 units a growth of 10%. The company would launch Swift diesel and is likely to be launched by October. The stock has target of Rs 990."
Source:-Moneycontrol
Bull's eye Recommendations :- 4th Sept Pantaloon Retail
Research: JM Morgan Stanley
Recommendation: Overweight
CMP: Rs 1,641 (Face Value Rs 10)
12-Month Price Target: Rs 2,050
PANTALOON Retail (PRIL) has laid down a capital expenditure plan of around $850 million for the period '07-10, and expects to fund 60% of the investments from internal accruals. PRIL plans to meet a part of the remaining fund requirement by diluting a few of its subsidiaries. Interestingly, the company expects the value of three of its subsidiaries – Home Solutions, Central and Future Media – to be around $0.5 billion, which is around 50% of its current market cap. PRIL expects to raise equity capital in at least these three subsidiaries over the next 12 months. PRIL is well-placed to capitalise on the huge growth opportunity in the organised retail space in India. Not only does the company have firstmover advantage, it also has strong brands under various formats; locked in its real estate at competitive rates; and is creating/monetising value created in its subsidiaries. In our view, PRIL remains the best way to play the retail story in India.
Tata Tea
Research: Enam Securities
Recommendation: Outperformer
CMP: Rs 819 (Face Value Rs 10)
12-Month Price Target: Rs 950
TATA Tea (TTL) announced its big-ticket acquisition of 30% stake in Glaceau, US, the maker of enhanced water products. This has provided a lateral leap to TTL from the black tea segment (growing at a benign 2%) to a vibrant, enhanced water market with an estimated annual growth rate of 25% through '05-10. In the initial stages, the management is keen on strengthening the US market reach of Glaceau, followed by geographical extension into other developed markets. Glaceau's debt-free status enhances its ability to pursue aggressive growth strategies. For TTL, this will provide a wider distribution reach for its Tetley brand in the US market. Enam expects Glaceau stake to be treated as a strategic investment and dividend payouts to be included as other income in TTL's consolidated financials. Gearing is likely to shoot up from 1.1 times in FY06 to an estimated 2.7 times in FY07E. Interest burden is likely to go up by Rs 250 crore in FY07.
Gokaldas Exports
Research: Citigroup
Recommendation: Buy
CMP: Rs 634 (Face Value Rs 10)
12-Month Price Target: Rs 800
CITIGROUP's target price of Rs 800 is based on 16.5 times P/E for FY07E earnings, a premium to the domestic industry average of 12 times FY07E P/E. The premium valuation is a function of Gokaldas' largest garment capacities, and expected earnings CAGR of 28% for FY06-08E. P/E captures the strong earnings growth potential and hence, is Citigroup's primary valuation tool. The stock is trading at a P/E of 10.6 times FY07E earnings, nearly on par with the domestic industry and at 0 39% premium to its global peers. With global reforms seeming to favour India since the removal of quotas, and with anti-surge measures on China, Citigroup expects this premium to continue. On an EV/sales basis, the stock is also trading at an attractive-looking valuation of 1.1 times FY07E EV/sales, a 30% discount to the domestic industry. Citigroup expects Gokaldas' changing product mix, which favours higher value-added garments like outerwear, to drive valuations to the sector average of 1.5 times EV/sales for FY07E.
Yes Bank
Research: ULJK Securities
Recommendation : Buy
CMP: Rs 90 (Face Value Rs 10)
12-Month Price Target: Rs 108
YES Bank's Q1 FY07 net profit grew 50% to Rs 16.9 crore from Rs 11.3 crore in Q1 FY06 due to ramp-up in advances and fee income, with nil NPAs. The bank is also aggressive in retail banking activities and branch expansion, which will boost its mobilisation of low-cost deposits. Its one-bank approach will continue to leverage the existing client relationships effectively by cross-selling a wide range of financial products and services. Yes bank may go in for a follow-on public offer, besides raising capital from tier-II instruments, which will help it to decrease interest expenses and to earn better yield on advances. Despite higher margin pressures and deterioration in operating efficiency due to expansion of the distribution network, ULJK expects earnings to grow 67% and 52% in the next two years, led by strong loan growth of 108% and rising fee income. The key challenge for Yes Bank is to build a deposit franchise, especially given the delay in its branch expansion plans. At the current market price, the stock trades at 26.84 times and 17.65 times its earnings for FY07E and FY08E respectively.
Hexaware Technologies
Research: Karvy Stock Broking
Recommendation: Buy
CMP: Rs 155 (Face Value Rs 2)
12-Month Price Target: Rs 190
HEXAWARE is well set to step up its growth in coming years due to various reasons like: (a) Client additions are picking up momentum and data points suggest it can only improve, (b) Loss of revenues from the domestic software centre of PeopleSoft is being restored, (c) PeopleSoft - ERP itself is experiencing good recovery on account of new version release, (d) Focus has been to grow the top client accounts by stepping up mining, (e) Infusion of capital by GAP will give it the leeway to fund capital expenditure. Besides, the forward valuations, after adjusting for cash, are extremely attractive. The stock has little downside, since the strategic investor GAP is at Rs 142. The stock is currently trading at a P/E of 14 times CY07E and 10.5 times CY08E. At present, the cash and bank is 20% of the stock price. Hence, if Karvy adjusts for it, the stock is trading at 11 times CY07 and 8 times CY08 earnings. In terms of m-cap/sales, it is one of the cheapest stocks in Karvy's coverage universe.
ONGC
Research: Edelweiss
Recommendation: Accumulate
CMP: Rs 1,203 (Face Value Rs 10)
12-Month Price Target: NA
EARNINGS of ONGC are positively correlated to increase in crude prices, as increasing proportion of international revenues (ONGC Videsh), which is deregulated, will lead to higher realisations on crude. On the other hand, the government's prevailing subsidy sharing formula suggests that the company will be shielded from a fall in crude prices. ONGC's realisation from domestic crude is only $45/bbl compared to the equivalent traded crude at $70/bbl, indicating the extent of downside protection. Edelweiss' sum-of-the-parts valuation under existing operating assumptions pegs the fair value at Rs 1,346 per share, compared to the current price of Rs 1,191. ONGC trades at an asset valuation of $4.1/boe of reserves, compared with the average of $14.8/boe for comparable global E&P companies. While 70% of the gap is explained by higher reserves/production ratio and government regulations (subsidy on crude, cap on natural gas prices), 30% or $3.2/boe appears unjustified, creating room for expansion in valuations over time. Potential triggers that will narrow the valuation gap include gradual deregulation, depreciation of the rupee and announcement of large discoveries.
# posted by YoIndian @ 10:47 PM
Gain for Amul
The Amul brand will soon become the sole representative of liquid milk in the cooperative sector in Gujarat. The dairy union members today unanimously approved the Gujarat Co-operative Milk Marketing Federation's (GCMMF) proposal to bring all 12 district co-operative milk unions under one common 'Amul' brand. GCMMF has also chalked out plans to bring all other products under one common brand over a period of time. Parthi Bhatol, chairman of GCMMF said: "All the members present today have decided to come under the common brand of Amul for liquid milk. Latest by mid-October all the unions will turn their brands for liquid milk to Amul." Local liquid milk brands include Sugam in Vadodara, Sumul in Surat, and Uttam in Ahmedabad, Vasudhara of Valsad, Gopala in Rajkot and Panchamrut in Panchmahals, all of which will now be sold as Amul. Currently, the GCMMF markets different dairy products under the brand names Amul and Sagar with Amul having the major stake. "Under one common umbrella, the market size of liquid milk will be Rs 2,000 crore," B M Vyas, MD of GCMMF. Currently, Amul has a sales turnover of Rs 1,000 crore whereas other brands contribute another Rs 1,000 crore in liquid milk segment. "We expect to garner a further 10-15% rise in this market with brand Amul in place," Bhatol said.
# posted by YoIndian @ 10:43 PM
IPO scam-tainted banks cannot expand for 3 years.
IPO scam-tainted banks cannot expand for 3 years. The Reserve Bank of India (RBI) is likely to continue with the three-year ban on branch expansion of banks tainted in the IPO allotment scam. The banks penalised earlier this year for violating know-your-customer norms during the IPO scam are ICICI Bank, HDFC Bank, Citibank, Standard Chartered Bank, Industrial Development Bank of India (IDBI), ING Vysya Bank, Vijaya Bank, Indian Overseas Bank (IOB), and Bharat Overseas Bank (being merged with Indian Overseas Bank). Since the RBI imposed the penalty, none of these banks has been allowed to open new branches. Some of the banks have made representations to the finance ministry, which is understood to have asked the RBI to review its decision a year from the date of imposition of the penalty. Sources said the involvement of these banks in the IPO scam and the subsequent penalty imposed on them might also affect their chances of acquiring any bank. "Even if the RBI changes its stance later, the branch expansion plans of these banks will go through stringent scrutiny by the central bank for three years," they said. The regulator's decision has scuppered the expansion plans of these banks, some of which had taken over new premises, employed staff, and bought computers. The banks were penalised for failing to adhere to established norms for granting loans against shares, and for initial public offers. The penalties ranged from Rs 5 lakh to Rs 25 lakh. Incidentally, three of the banks — ICICI Bank, Standard Chartered Bank and IDBI Bank — have formally shown interest in acquiring the Satara-based United Western Bank, which was put under a moratorium on September 2 for failure to infuse capital and resurrect its financials. Earlier, IOB was allowed to take over Bharat Overseas Bank. However, IOB's case was special given that it was one of the original shareholders of Bharat Overseas Bank.
# posted by YoIndian @ 10:42 PM
3i Infotech rose 1.73%, to Rs 167.90 on acquisition of G4 Software Technologies.
3i Infotech rose 1.73%, to Rs 167.90 on acquisition of G4 Software Technologies.
As many as 52,737 shares were traded on the BSE.
The counter has been range-bound from late June till earlier August. The stock fluctuated between Rs 139-150 from 30 June till 8 August. From Rs 146.10 on 8 August, it rose to Rs 170.40 by 25 August, only to slip to Rs 165 by 4 September 2006.
At the current market price of Rs 167.90, 3i Infotech trades at 10.40 times its Q1 June 2006 annualized EPS of Rs 16.10.
3i Infotech has acquired G4 Software Technologies (India). G4 is a niche company with Rs 8.4 crore annual revenue and with a around 50 employees specialising in payment services, back office exception processing solutions and business process integration services. The consulting and payment services of G4 compliments with the company's banking offerings and offers significant scope for IT consulting. Moreover, one of G4's services, BEEP, can be used with the company's mutual fund products for reconciliation and also for other businesses with high volumes like credit cards, PDC factory and other BPO areas, which the company plans to target in the near future.
In July, 3i Infotech acquired a majority stake in Delta Services (India), a Mumbai-based BPO.
In June, Allied Insurance, Maldives, has chosen the 3i Infotech's insurance offering, Premia, to automate operations, increase service levels and enhance market share. Similarly, the company's lending solution 'Kastle' has been chosen by Credit Guarantee Corporation, Malaysia, a leading development financial institution in that country for its business operations.
In April, 3i Infotech acquired Datacons, a Bangalore-based software products company, which offers niche products for the mutual funds segment for Rs 40 crore.
Earlier in April, the company successfully completed the roll out of Integrated Insurance Management Solution at 192 offices of Oriental Insurance Company, and the re-branding of its banking solutions under the 'Kastle TM' brand.
Over the years, 3i Infotech (earlier ICICI Infotech) has transformed from the back office of ICICI Bank to a software products-cum-services company focused on the banking, financial services and insurance field. It is the largest selling ERP after SAP and Oracle.
3i Infotech consolidated its operations with three recent acquisitions and is planning a special thrust on consultancy and managed services across verticals it currently operates in, with a focus on eGovernment projects. The company has shown a remarkable acquisitions-led growth. Till date, 3i Infotech has acquired about 14 companies, including SDG Software, a player in anti-money laundering space, Data Cons, a BPO player and Delta Technologies in the last year itself.
While the company has managed to successfully integrate them, the effort is directed to take a wider range of products to the market, including offer of business process outsourcing services, particularly to the domestic market.
3i Infotech registered a consolidated net profit growth of 107% to Rs 21.35 crore (Rs 10.30 crore) for Q1 June 2006. Net sales rose 45% to Rs 128.46 crore (Rs 88.48 crore).
# posted by YoIndian @ 10:25 PM
Reliance Petroleum advanced 3.06%, to Rs 67.45 on a high volume, extending its recent rally.
Reliance Petroleum advanced 3.06%, to Rs 67.45 on a high volume, extending its recent rally. The counter saw 32.35 lakh shares being transacted on BSE, compared to a two-week average volume of 13.43 lakh shares. On 31 August, RPL clocked a volume of 32.61 lakh shares and 42.91 lakh shares on 01 September. The stock has steadily advanced in the past. From Rs 60 on 09 August, it rose to Rs 65.45 by 04 September 2006, as buying continued. The rally materialised on the back of rising volumes. RPL was incorporated as a 100% subsidiary of Reliance Industries (RIL) in October 2005 to set up a grassroot petroleum refinery and polypropylene (PP) plant in the special economic zone (SEZ) at Jamnagar. This new refinery, located adjacent to the existing refinery and petrochemical complex of RIL, will comprise secondary processing facilities to maximise the quantity of value-added products such as alkylates, diesel, aviation turbine fuel, and polypropylene. The refinery will be even more complex compared with RIL's existing refinery, processing lower quality crude and earning better margin. RPL's new refinery in Jamnagar will have a capacity of 5,80,000 barrels per day (bpd) and a polypropylene unit with a capacity of 9,00,000 tonnes per annum. The estimated cost of the project is $6 billion, or Rs 27,000 crore, and is expected to commence production only in December 2008. Chevron Corporation had picked up a 5% stake in RPL for $ 300 million. Chevron said it also has rights to increase its stake to 29%. RIL shareholding in RPL has come down to 75% after the IPO. Total foreign holding is 2.78% while that of Institutions is 6.35%. Public hold 6.98% stake in RPL.
# posted by YoIndian @ 10:24 PM
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