Stocks you can pick this week

Hindustan Zinc
CMP: Rs 806.50
Target price: Rs 1,160

Macquarie Securities has retained its ‘outperform’ rating on Hindustan Zinc with a 12-month price target of Rs 1,160 following the company’s strong third-quarter numbers. “Given the bullish view on zinc prices in FY08 and expected 50% volume growth in FY09, we estimate sustained high profitability.

We expect earnings upgrades to drive the stock price,” the Macquarie note to clients said. “HZL — with one of the best mining assets, and huge possibility to add more reserves — is trading below its NPV (net present value) of Rs 804 and is one of the cheapest on this basis among its global peers,” the note added.

Reliance Industries
CMP: Rs 1,340.10
Target price: Rs 1,660

Goldman Sachs has upgraded its rating on Reliance Industries to ‘buy’ from ‘neutral’, saying the company’s new exploration and production (E&P) and organised retail ventures are of materially higher value than the market is currently factoring in.

“In our view, the current price factors in the company’s estimated total capex of $8 billion for these new ventures till FY2010E, but is not giving full value to the potential upside this expansionary capex could bring to the stock,” the Goldman note to clients said.

HCC
CMP: Rs 159.75
Target price: Rs 198

HSBC Securities has rated Hindustan Construction Company as ‘overweight’, with a price target of Rs 198. “Our valuation is based on sum-of-the-parts method, with the real estate business contributing 30% to total value,” the HSBC note to clients said.
“HCC is in a sweet spot, with the core construction business on a growth trajectory, driven by infrastructure investments.

To add to this, its foray into real estate would provide added value to the overall company,” the HSBC note to clients said. “

We expect HCC’s core earnings to record a CAGR of 41% over FY06-08(estimated), driven by 27% revenue CAGR (compounded annual growth rate) over the same period, and stable margin,” the note added.

Reliance Comm
CMP: Rs 433.75
Target price: Rs 508

JM Morgan Stanley Securities has raised its target price for Reliance Communications to Rs 508 from Rs 435, citing higher net subscriber additions, average realisations per unit, and higher data revenue. Between FY06-09, the brokerage expects the company’s operating profit to rise 69.3% 157.5%, respectively per year. Morgan Stanley is bullish on the telecommunications sector as a whole.

“Indian wireless penetration has risen 81% last year and is only 13% so far, versus China at 34%. Stable regulation, innovative products, increased capex by operators and falling equipment prices are key growth drivers,” the Morgan Stanley note to clients said.