Stock Picks

Max India
CMP: Rs 238.25
Target Price: Rs 316

SSKI Securities has ‘initiated’ coverage on Max India with a price target of Rs 316. “Having formidable presence in insurance and healthcare, two of the fastest-growing sectors, Max India (Max) is an unique play on India’s economic prosperity. We expect the buoyant economy to provide a strong growth momentum to the hitherto underserved/
underpenetrated life insurance and healthcare sectors,” the SSKI note to clients said. “The life insurance venture, armed by industry’s most productive agency force, is set to reclaim market share led by a multi-channel distribution approach and an enhanced ULIP portfolio. With hospital beds likely to double in the next 4-5 years, superior margins (20-22%) and a strong brand, healthcare business too is a robust model,” the note added.

BBHL
CMP: Rs 89.15
Target Price: Rs 120

Prabhudas Lilladher has ‘initiated’ coverage on Gujarat-based Bhagwati Banquets & Hotels (BBHL), an organised player in high-end catering for conferences, weddings, parties and social gatherings. “The company has established a 3-star hotel with banquet facility in Ahmedabad and also manages three elite clubs and a revolving restaurant in the city. In addition to these, BBH has also started supplying corporate lunch packs in Ahmedabad,” the Prabhudas note to clients said. The brokerage estimates an earnings per share of Rs 3.3 in FY08 and Rs 4.3 in FY09. “It has also started catering services in Mumbai and plans to expand its business into other major cities in the country. We expect the company, led by its ambitious expansion plans, to report 49% CAGR in net sales and 45% CAGR in net profit over the next three years,” the note added.

SBI
CMP: Rs 2,317.40
Target Price: Rs 2,750

Merrill Lynch has raised its price target on State Bank of India (SBI) to Rs 2,750 from Rs 2,500 while retaining its ‘buy’ rating on the banking behemoth. “We believe the risk-return is likely to remain very positive even post rights, and SBI would have the requisite capital to capitalise on the growth opportunities,” the Merrill note to clients said. According to the brokerage, the bank currently trades at a price of 1.4 times estimated book value for FY10. “We believe SBI can trade up to 1.5x FY10 book (post rights issue), given an earnings growth of +23% in FY09-10, RoE(return on equity) of +15.5%, upside in asset quality, visible upswing in non-interest income and low-interest risk. Further, with Tier I to be +10%, the bank would be very well positioned to capitalise on growth opportunities,” the note added.

Bharat Forge
CMP: Rs 326.70
Target Price: Rs 270

Morgan Stanley has reiterated its ‘underweight’ rating on Bharat Forge and lowered its Target Price for the stock to Rs 270 from Rs 290. “We continue to believe the stock is subject to near-term pain, given its exposure to the North American heavy vehicles and domestic commercial vehicles markets, as well as margin pressure from the appreciating rupee. Relatively poor performance of its overseas subsidiaries should continue to be an overhang on BHFC’s consolidated performance,” the Morgan Stanley note to clients said. The brokerage has trimmed its estimated EPS for the company by 17% to Rs 12.84 and 9.8% to Rs 14.49 for FY08 and FY09, respectively. “What could make us more positive on the stock is a stronger turnaround in Chinese joint venture operations, signs that growth in Europe and in the engine components segment is sustainable, and improved performance from the overseas subsidiaries,” the note added