Analysts’ picks

HPCL
CMP: Rs 295.75
Target price: Rs 375

Kotak Securities has maintained its 'outperform' rating on HPCL with a price target of Rs 375, saying the strong financial performance in FY07 is likely to set the stage for a better performance this financial year.
"We currently assume that the government will follow the same system for distribution of underrecoveries as it has done in FY07," the Kotak note to clients said. The brokerage feels the stock is attractively valued at 6.5% dividend yield and a price earnings ratio of 5.3 times estimated FY08 earnings. "However, we will have to wait for more clarity on vital issues of oil bonds and share of upstream companies; these variables can swing earnings of R&M companies dramatically," the note added.

IOC
CMP: Rs 465.25
target price: Rs 450

UBS has retained its 'reduce 2' rating on IOC with a price target of Rs 450, saying the operating profit for FY07 was boosted by oil bonds. "With under-recoveries continuing unabated, IOC's finances depend on ad-hoc oil bond issuance and a contribution from upstream companies," the UBS note to clients said. "In the event of a fall in crude prices or rupee appreciation, we think the benefit is unlikely to be passed on to downstream companies in the medium term as the oil bonds amount might be reduced," the note added.


Gokaldas Exports
CMP: Rs 219.65
target price: Rs 260

Motilal Oswal has retained its buy rating on textile major Gokaldas Exports but lowered price target to Rs 260 and also slashed earnings estimates. "Management has indicated that they have a robust order book for 1QFY08 (April-June) of around Rs 250 crore and expects revenues to grow at 15% for next few years," the Motilal Oswal note to clients said. "Despite limited risks, the sharp appreciation in the rupee will impact earnings. We are lowering our PAT estimates for Gokaldas for FY08 and FY09 by 18.7% to Rs 74.7 crore and 18.3% to Rs 88 crore, respectively, to reflect the negative impact from the appreciating rupee," the note added

Nagarjuna Const
CMP: rs 171.30
Target price: Rs 174

Macquarie Securities has maintained its 'neutral' rating on Nagarjuna Construction with a price target of Rs 174, saying the impending equity dilution could affect earnings growth in its core business. "Upside from investments in recently awarded BOT and real estate projects is uncertain, given the lack of clarity on demand and pricing," the Macquarie note to clients said. "Plans for the recently awarded Machilipatnam port project could undergo changes with possible relocation of project site. We would like to wait for more clarity on demand and pricing before imputing a positive net present value to the project," the note added.


Unitech
CMP: Rs 568.50
Target price: Rs 430

Citigroup Global Markets has retained its sell rating on Unitech saying the current stock price already reflects potential upsides. "As per industry, the transaction activity has slowed significantly - volumes sold over a quarter last year are now sold over 9-10 months; property prices are stagnating given affordability issues, while some pockets in North have seen declines; and project delays are on the rise," the Citigroup note to clients said.

"While bonus will improve liquidity and Unitech's scale, and we think low-risk-high return model deserves 10% premium, with stock already trading at 50% premium to our NAV of Rs 391/share, upside looks priced in and valuations do not leave any margin for error from potential execution delays," the note added.