Analysts corner

Punj Lloyd
Current price: Rs 263
Target: Rs 296
Date: June 19

Alchemy has a put a buy on Punj Lloyd with a target of Rs 296. The key investment rationale is the global capex in the energy and infrastructure sectors especially from the Gulf Cooperation Council states which are flush with cash.

Punj Lloyd’s revenues are expected to register 46 per cent FY07-09E growing from Rs 51 bn in FY07 to Rs 108 bn in FY09E, primarily driven by strong order inflows after the acquisition of SEC and Simon Carves.

The acquisitions have also helped the company become main contractor for new complex jobs in large projects like the pipeline project in Libya. Its EBIDTA margin (excluding other income) is expected to improve from 7.3% in FY07 to 9.1% in FY09E.

Network 18 Fincap
Current price: Rs 499
Target: Rs 651
Date: June 20

Sharekhan recommends a buy on Network 18 which runs business channels CNBC-TV18 and Awaaz and general news channels CNN-IBN and IBN 7.

With the digitalisation of cable and advent of DTH platform, the subscription revenues would substantially boost the profitability of the group.

Web properties such as moneycontrol.com, poweryourtrade.com and yatra.com among others, covering the news, e-transaction, travel, recruitment, shopping and e-ticketing genres will also add tremendous value, feels the research firm.

To tap into the opportunities the company has built up a cash pile which include Rs 200 crorethrough a QIP and proposes to raise a similar amount through a rights issue of partly convertible preferential shares.

Jet Airways
Current price: Rs 812
Target: Rs 998
Date: June 19

ICICI Securities has put a buy on Jet Airways with a target of Rs 998. The research firm has revised Jet Airways’ earnings upwards, on the back of a lower cost structure for US routes and alignment of ATF prices corresponding to crude price of $68-70/Bbl. The improving load factor trend is also likely to boost international earnings on the back of increasing product acceptance.

Further, with the culmination of two mega consolidations in the domestic circuit, the sector will witness the return of pricing power, says the equity research company.

On EV/sales multiple and greater chances of an early turnaround, we find Jet’s acquisition of Air Sahara (now JetLite) relatively cheaper as compared to Kingfisher’s (KF) valuation of Air Deccan (AD). Together with JetLite, it values Jet Airways at Rs 998 representing about 22% upside to the CMP.

IPCA Laboratories Ltd
Current price : RS 695
Target: RS 800
Date: June 20

Kotak Securities has given a buy call on IPCA Laboratories with a target of Rs 800. The research firm’s optimism on the stock is a result of the USFDA approval for hydroxychloroquine sulfate tablets (200 mg strength) with annual sales of $50 mn in the US.

The company's marketing partner Ranbaxy Pharmaceuticals Inc, US will commercialise this product in the US market utilising its marketing expertise and distribution network.

After this approval, the company now has three products for marketing under the company's alliance with Ranbaxy after Furosemide and Atenolol tablets. Ipca is one of the largest producers of API hydroxychloroquine sulfate in the world and holds its DMFs in various countries.

Sharon Biomedicine
Current price: Rs 257
Target: Rs 375
Date: June 18

Antique Stockbroking has put a buy on Sharon Biomedicine, a manufacturer of API and intermediates.

By backward integrating and providing a complete package of product development from raw materials to the final formulations, Sharon is filing DMF’s, building up its R&D facility and designing expansions as per USFDA norms.

All this would help it be an integrated pharmaceutical company in a scenario favouring CRAMS businesses. The change from a bulk drug manufacturer to a high end formulation provider is helping push up its margins.

ONGC
Current price: 912
Target: Rs 1025
Date: June 19

CLSA has put a buy on ONGC with a price target of Rs 1025. The impending 16% legacy gas price increase for ONGC from Q2FY08 is a mixed bag, feels the research firm.

While it positively impacts earnings, it also delays gas price deregulation till FY10 diluting the value of this embedded option. The price target has factored in higher gas price (positive), stronger rupee (negative), stronger crude (positive) and higher and longer subsidy sharing (negative).

The resultant effects cancel each other in FY08-09CL but will be positive if the rupee depreciates or the subsidy sharing for FY08 reverts back to the norm.

Indian Hotels
Current price: Rs 143
Target: Rs 187
Date: June 20

Citigroup Research has recommended the Indian Hotels stock on the back of strong results and growth prospects with a target of Rs 187. Standalone Q4FY07 revenues and net profit grew 42% and 71% respectively YoY, while FY07 consolidated revenues grew 37% YoY and net profit grew 49% YoY.

Though the numbers were strong they were below expectations due to a higher interest and depreciation cost on account of amalgamation of five subsidiaries/associate companies and acquisition of Taj Boston in Q4FY07 and lower-than-expected consolidated margins because of higher than anticipated proportion of revenues from overseas properties.

While the EBITDA margins increased 640 bps YoY, on a consolidated basis FY07 EBITDA margins expanded 80 bps YoY. Growth in revenue and profit was supported by strong occupancies of 73% and a healthy 28% increase in ARRs for FY07.

The company plans to add five hotels to its portfolio in FY08 – two new hotels at Bangalore (ITPL) and Chennai (Mount Road) and three management contracts for hotels in Vijayawada, Trivandrum and Langkawi (Malaysia).

In addition, the company plans to increase the number of 'Ginger' hotels to 30 by March 2009, up from eight at present.