Alphageo India
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs270
Current market price: Rs202
Bags Rs60-crore contract from ONGC
Alphageo India has bagged a 3D (three-dimensional) survey contract worth Rs60 crore from Oil & Natural Gas Corporation (ONGC). With this order in hand, the company is likely to opt out of the low-margin 2D (two-dimensional) survey order of Oil India Ltd (OIL) which is worth around Rs20 crore. Thus, the effective increase in the order backlog works out to Rs40 crore.
ITC
Cluster: Apple Green
Recommendation: Buy
Price target: Rs200
Current market price: Rs142
VAT on cigarettes
Key points
- ITC has been underperforming the market for quite some time owing to fears of the implementation of the value added tax (VAT). We believe the stock would continue to underperform till clarity emerges on how VAT would be implemented and how the subsequent price hike would affect the company's volumes.
- Historical data shows that whenever there has been a price hike in the range of 10-12%, cigarette volumes have dipped. We believe that a 12.5% VAT may result in a 8-10% price hike across segments. Consequently, we may see lower growth or no growth in volumes in 2008.
- We believe that with VAT getting implemented, our earnings per share (EPS) estimate for FY2008 would change by 9% from Rs8.8 to Rs8, which is still a 9.6% growth over the FY2007 EPS. At the current market price of Rs142, the stock is quoting at 17.7x its FY2008E EPS and 10.7x FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a revised price target of Rs200.
Lupin
Cluster: Apple Green
Recommendation: Buy
Price target: Rs670
Current market price: Rs570
Building momentum in EU business
Lupin, together with its French Regulatory agent Venipharm, has received the marketing approval for generic Cefpodoxime Proxetil 100mg tablets in France. Cefpodoxime Proxetil is a cephalosporin antibiotic used to treat a variety of bacterial infections. Lupin's Cefpodoxime Proxetil tablets would be the generic equivalent of Sanofi-Aventis's Orelox tablets. The sales of Orelox tablets in France are close to 75 million euros as per IMS. The patent on Sanofi's Orelox is due to expire in August 2007 in France.
MUTUAL FUND: INDUSTRY UPDATE
Weak global sentiment weighs on equity AUMs
The AUM for equity funds declined by 6.4% to Rs137,412 crore in February 2007. The fall in the AUM was largely due to the market meltdown seen towards the end of the month.
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