Stocks you can pick up this week

M&M
CMP: Rs 731
TARGET PRICE: Rs 1,030

HSBC Securities has retained its ‘overweight’ rating on M&M with a 12-month price target of Rs 1,030. “M&M has overcome input cost pressures through a combination of factors: production in tax-free zones in H2FY06; benefits from consolidation in the tractor industry; greater contribution from diesel generator sales; the transfer of the light commercial vehicle business to a separate JV called Mahindra International; an increase in returns to scale and economies of scale after diversification into the auto parts business; and bargaining harder for raw material procurement,” the HSBC note to clients said.

Great Offshore
CMP: Rs 568.40
TARGET PRICE: RS 644

Ask Raymond James has rated Great Offshore a ‘buy’ with a 12-month price target of Rs 644. “Offshore explorations services industry is in for an exciting outlook over next 5-10 years, citing the recently concluded NELP VI round wherein 24 deepwater and 10 shallow water blocks were awarded (out of total 55 blocks),” the ASK note to clients said.

“With diversified nature of fleet, largest fleet size, most of the terms committed till FY10 (estimated), 35% CAGR in earnings for FY07-10E (27% for FY07- 09E) and low financial leverage, we believe that the stock is available at a very good risk reward ratio,” the note added.


ICRA
CMP: Unlisted
RECOMMENDATION: Subscribe to the IPO

HDFC Securities has recommended subscribing to the initial public offering by Icra. “At a price band of Rs 275 – Rs 330, the stock is offered at 15.2 times – 18.2 times FY07 fully diluted EPS,” the HDFC note to clients said. “Given the steady economic growth, visibility in revenues on account of consolidation and widening of services, one could see continued growth in topline and bottomline of the company.

The new segments like the information technology services and outsourcing services could bring in large contracts from the IT sector, thus giving a thrust to margins going forward apart from diversifying revenue streams,” the note said, adding that any move in future by Moody’s to hike its stake in the company from the current 28.1% (post-issue) could be a further trigger.

GMR Infra
CMP: Rs 373.60
TARGET PRICE: Rs 502

MotilaL Oswal Securities has initiated coverage on GMR Infrastructure with a ‘buy’ rating. “GMR Infrastructure has a portfolio of 11 SPVs (special purpose vehicles) with a combination of fixed (annuity-based road project), fixed and volume driven (power and airports portfolio) and pure volume-driven businesses (toll-based road project),” the Motilal note to clients said.

“Based on the net asset value of the SPVs and the cash balance as on March 2007, we arrive at a net present value estimate of Rs 16,600 crore, translating into a price target of Rs502/share (an upside of 35.2%). Of this, airports account for 78% of the valuation, roads 4.6%, power 7.4% and cash balance 9.6%,” the note added.

Tayo Rolls
CMP: Rs 133.05
TARGET PRICE: Rs 220

Anand Rathi Securities has rated Tayo Rolls as a ‘buy’ with a price target of Rs 220. “Tayo Rolls exports around 30% of the rolls to developed markets like Europe and USA, where due to high cost, quite a few such facilities are being closed down and company is exploiting the opportunity being a high quality roll maker. Company’s clients list includes players like — Posco, Corus, Thyssen, China Steel, SSAB etc,” the Anand Rathi note to clients said.

According to the brokerage, Tayo’s exports to Europe are set to rise following the acquisition of Corus Steel by Tata Steel. “For the March 2007, company is likely to report EPS of Rs 20-21, there by discounting this earnings by just 6 times, which is very attractive for a Tata company with high growth potential,” the note added.