Weekly Stock Recommendations

IDFC
CMP: Rs 131.80
Target price: Rs 162
Morgan Stanley has maintained its ‘overweight’ rating on IDFC, but increased its price target for the stock from Rs 130 to Rs 162. “

Strong infrastructure spending should enable IDFC to book healthy revenues across businesses – lending, syndication, investment banking products, private equity and proprietary trading,” the Morgan Stanley note to clients said.

“While valuations appear full – 25.3 times F2008(estimated) earnings and 3.1 times book – in line with private banks, private equity (PE) and proprietary investments are not contributing significantly to earnings but provide almost 40% of value. Hence, core valuations are lower and could rise, given strong earnings growth expectations,” the note added.

TVS Motor
CMP: Rs 60.90
Target price: na
Motilal Oswal Securities has maintained its ‘neutral’ rating on TVS Motor, saying its performance for the latest quarter has been below expectations. “In the motorcycles segment, in particular, sales have been impacted by higher interest costs and stringent norms being followed by retail financiers,” the Motilal note to clients said.

“TVS is working on putting a strong product portfolio in place, which is likely to drive growth going forward. However, pressure on margins remains a concern,” the note added. Motilal has forecast an earnings per share of Rs 7.3 and Rs 8.7 for the company for FY08 and FY09, respectively.


Nava Bharat
CMP: Rs 180.80
Target price: Rs 268
Religare has initiated coverage on Nava Bharat Ventures with a ‘buy’ rating and a price target of Rs 268. Nava Bharat Ventures has realigned its business strategy towards the rapidly growing power sector. Power generation capacity is being ramped up from 125 MW to 237 MW by FY09. Also, a 1,050 MW power plant is to be set up by 2010-11, with power purchase agreements secured for 75% of the power generated.

According to Religare, the highly volatile ferro alloy business has been derisked by power sales since the company can close down its ferro alloy operations in times of fluctuating prices and sell power instead. Religare has forecast an earnings per share of Rs 21.1 and Rs 27.8 for the company for FY08 and FY09, respectively.

Deepak Fertilisers
CMP: Rs 90.55
Target price: Rs 123
Emkay Share and Stock Brokers has maintained its ‘buy’ recommendation on Deepak Fertilisers & Petrochemicals with a price target of Rs 123. “Deepak Fertilisers & Petrochemicals is expected to be one of the key beneficiaries from the commissioning of Dahej Uran Pipeline (DUPL), a gas pipeline which will increase the availability of LNG for the DFPCL along with other players in the region,” the Emkay note to clients said.

“DFPCL at present suffers from lower operating levels at its DNA plant (capacity utilisation 71%), methanol plant (64% capacity utilisation) and ANP plant (24% capacity utilisation) due to inadequate gas availability,” the note added.


LIC HsG Finance
CMP: Rs 206.40
Target price: Rs 246
SBI Cap Securities has initiated coverage on LIC Housing Finance with a ‘buy‘ rating and a 12-month price target of Rs 246.

“The (mortgage) industry offers a great potential for growth given Indian demographics and LIC housing finance would be able to reap benefits with its marketing network and enhanced operational set-up,” the SBI Cap Securities note to clients said. SBI Cap has forecast an earnings per share of Rs 33.7 and Rs 39.8 for the company for FY08 and FY09, respectively.