HOT! - Broker Updates - Mar 23 2011

Company	Actions
ABAN OFFSHORE	Target Px decreased to 665 by Prabhudas
ADANI ENTERPRISE	Target Px decreased to 645 by UBS
ADANI POWER LTD	Target Px decreased to 125 by Citi
ADHUNIK METALIKS	Target Px decreased to 156 by Equirus
APOLLO HOSPITALS	Target Px increased to 590 by JPMorga
ASHOK LEYLAND	Target Px decreased to 70 by IIFL
ASIAN PAINTS LTD	Target Px decreased to 2763 by Citi
BATA INDIA LTD	Coverage Initiated at Buy by Microsec C
BGR ENERGY SYS	Target Px decreased to 600 by JM Financ
BHARAT PETROL	Coverage Initiated at Buy by ICICIdirect
BHARTI AIRTEL	Target Px decreased to 420 by Goldman Sa
BHARTI AIRTEL	Upgraded to Outperform by Macquarie, TgP
BHUSHAN STEEL	Target Px increased to 435 by Alchemy Re
COAL INDIA LTD	Coverage Initiated at Outperform by Dai
DB CORP LTD	Coverage Initiated at Reduce by Elara Secu
DIVI LABS LTD	Upgraded to Buy by Karvy Stock Broking L
GAIL INDIA LTD	Target Px increased to 562 by Morgan St
GREAT OFFSHORE L	Target Px decreased to 320 by Prabhud
GUJARAT GAS CO	Downgraded to Neutral by Equirus Securi
HAVELLS INDIA	Coverage Initiated at Buy by Motilal Osw
HCL TECH LTD	Target Px increased to 550 by Motilal Osw
HINDALCO INDS	Target Px increased to 237 by Systematix
HINDUSTAN PETRO	Coverage Initiated at Buy by ICICIdire
HINDUSTAN ZINC	Target Px decreased to 145 by Fortune E
HT MEDIA LTD	Coverage Initiated at Reduce by Elara Sec
ICICI BANK LTD	Upgraded to Overwt/In-Line by Morgan St
IDEA CELLULAR	Target Px decreased to 77 by Goldman Sac
IDEA CELLULAR	Target Px increased to 46 by Macquarie
INDIAN OIL CORP	Coverage Initiated at Buy by ICICIdire
INFOSYS TECH LTD	Upgraded to Buy by Sushil Finance Con
INFOTECH ENT	Downgraded to Sell by IDBI Capital Market
JAGRAN PRAKASHAN	Coverage Initiated at Buy by Elara Se
JINDAL STEEL & P	Target Px decreased to 938 by Macquar
JSW STEEL LTD	Target Px decreased to 1350 by Ambit Cap
JYOTHY LABORATOR	Target Px decreased to 244 by ICICIdi
JYOTHY LABORATOR	Upgraded to Buy by Way2Wealth Brokers
JYOTI STRUCTURES	Coverage Initiated at Buy by Asit C M
KEC INTL LTD	Coverage Initiated at Buy by Asit C Mehta
KPIT CUMMINS INF	Coverage Initiated at Buy by MSFL Res
MONNET ISPAT & E	Target Px decreased to 602 by Alchemy
MPHASIS LTD	Target Px decreased to 450 by Motilal Oswa
MUNDRA PORT	Target Px decreased to 180 by UBS
NATIONAL ALUMIN	Target Px decreased to 81.25 by JPMorg
NATIONAL ALUMIN	Target Px decreased to 107.75 by Morga
NATIONAL ALUMIN	Target Px increased to 431 by Morgan S
OIL & NATURAL GA	Downgraded to Add by IIFL, TgPx
ORIENT PAPER	Target Px increased to 75 by Centrum Brok
PERSISTENT SYS	Upgraded to Overweight by HSBC, TgPx
PIDILITE INDS	Coverage Initiated at Buy by Shah Invest
PIDILITE INDS	Target Px increased to 165 by Batlivala
PRAKASH INDS LTD	Target Px decreased to 132 by Alchemy
PTC INDIA LTD	Coverage Initiated at Buy by Sharekhan L
RANBAXY LABS LTD	Target Px decreased to 425 by Elara S
RELIANCE COMMUNI	Target Px decreased to 115 by Goldman
RELIANCE COMMUNI	Target Px decreased to 122 by HSBC
RELIANCE INDS	Target Px decreased to 1212 by JM Financ
SESA GOA LTD	Coverage Initiated at Hold by Tata Securi
SHREE RENUKA SUG	Upgraded to Buy by JM Financial Insti
STEEL AUTHORITY	Target Px decreased to 140 by Alchemy
STRIDES ARCOLAB	Coverage Initiated at Buy by ICICIdire
SUZLON ENERGY	Upgraded to Buy by JM Financial Institut
SYNDICATE BANK	Target Px increased to 137 by ICICIdire
TATA COMMUNICATI	Upgraded to Buy by BNP Paribas Securi
TATA COMMUNICATI	Upgraded to Neutral by HSBC, TgPx
TITAN INDS LTD	Target Px increased to 3876 by Emkay Sh
TITAN INDS LTD	Target Px increased to 4923 by Standard
TITAN INDS LTD	Target Px decreased to 3762 by Emkay Sh
UNITECH LTD	Upgraded to Overweight by JPMorgan, TgPx
UNITED BREWERIES	Coverage Initiated at Outperform by C
VARDHMAN TEXTILE	Coverage Initiated at Add by ICICIdir

Stock Picks and Recommendations

Stocks with Buy rating:

Mahindra & Mahindra
Current market price: Rs 545
Target price: Rs 725
Upside: 33.02%
Brokerage: Emkay
Recommendation: Buy

Brokers Poll 2008

Brokers Poll 2008

Silly Brokers and Predictions

Silly Brokers and Predictions

Broker Recommendations

Bharati Shipyard Reco price: Rs 579 Current price: Rs 589.90 Target price: Rs 798 Brokerage: Anand Rathi

The booming shipbuilding industry, along with government subsidy of 30 per cent for the industry has brought the sector to centre stage.

Globally, orderbooks for shipbuilders are pegged at an estimated $118.7 billion, and India has less than 1 per cent market share, since Indian shipbuilders can build vessels less than 100,000 DWT. Indian shipbuilders are therefore expanding capacities to grab a greater share of the pie.

Bharati Shipyard has planned a greenfield capacity in Mangalore to build six 60,000 DWT vessels, investing about Rs 450 crore. At full capacity, this capacity can generate a turnover of Rs 1400-1500 crore, according to Anand Rathi.

This facility would turn operational from Q2 FY08; however peak sales would come at full utilization in 2010. It has been awarded SEZ status; hence, it would benefit from the five-year tax holiday.

Overall, Bharati Shipyard scores well on the profitability front. The operating margin, at 18 per cent, is expected to be consistent (excluding the subsidy).

In offshore supply vessels and rigs, the operating margin is as high as 18.5 per cent whereas it is 17 per cent in the cargo segment. The company’s present order book amounts to Rs 4,000 crore, with the unexecuted portion to be around Rs 3,300 crore, providing a fair visibility of earnings.

The brokerage expects Bharati Shipyard’s bottom line to grow by 39 per cent in FY08 and 61 per cent in FY09. At Rs 579, the stock traded at 15 times estimated FY09 earnings, and the brokerage recommended a “buy” with a target price of Rs 798.

Housing Development & Infrastructure (HDIL) Reco price: Rs 609 Current price: Rs 626.55 Target price: Rs 760 Brokerage: PINC

HDIL has built huge competence in the niche of Slum Rehabilitation and Development. It has developed 2 million sq ft of rehabilitation housing area and another 5.5 million sq ft of slum rehabilitation development is underway.

The company has a land bank of nearly 112 million sq ft to be developed over the next five years. It now plans to foray into other geographies such as Kochi and Hyderabad.

Its land holding in the Mumbai Bandra Kurla Complex (1.1 million sq ft) has high monetising potential (approximately Rs 20,000 per sq ft).

Besides, the significant opportunity being presented by redevelopment of Dharavi and slums around the Mumbai airport, have the potential of propelling HDIL’s financial and operational parameters.

On the commercial real estate front, HDIL has focussed mainly on medium-sized projects targeted at financial and service sector companies. Currently, it has around 19 million sq ft of retail space under construction to be completed by FY12. It also has plans to build multiplexes, either as stand-alone structures or within malls.

Recently, the company has also incorporated a wholly-owned subsidiary known as HDIL Entertainment for its multiplex business, which could provide value unlocking going forward.

PINC expects HDIL’s net sales to grow by 76 per cent to Rs 2,120 crore in FY08 and by 80 per cent to Rs 3820 crore in FY09. At Rs 609, the stock traded at 7.5 times estimated FY09 earnings.

Kirloskar Electric Company Reco price: Rs 262 Current price: Rs 270.70 Target price: Rs 361 Brokerage: IndiaInfoline

Kirloskar Electric underwent a turnaround in FY06 via restructuring, transfer of certain assets and liabilities to a subsidiary and relocation of manufacturing facility.

The company’s new transformer unit in Mysore is likely to help capitalise on robust demand expected over the next five years. Average realizations for transformers and motors divisions, which contribute majority of the revenues, witnessed an improvement of 45.6 per cent and 32 per cent respectively in FY07.

Strong demand arising out of government and private sector capex should further improve Kirloskar Electric’s realizations. IndiaInfoline expects the company to witness a strong revenue growth at a compounded annual rate of 38 per cent between FY07 and FY09, owing to the sharp focus on core operations.

The growth in the bottom line is expected to outdo the top line growth at a compounded annual rate of 53 per cent over FY07-FY09, as a result of improving margins due to higher realizations.

At Rs 262, the stock traded at 14.6 times and 10.9 times estimated FY08 and FY09 earning per share of Rs 18 and Rs 24.1, respectively. IndiaInfoline recommends a “buy” with a one year price target of Rs 361, an upside of 38 per cent.

Analysts corner

Bombay Rayon Fashions Reco price: Rs 210 CMP: Rs 206.15 Target price: Rs 325 Broking firm: Antique Stock Broking

Bombay Rayon Fashions Limited (BRFL), the biggest manufacturer of shirts in India has emerged as one of the fastest growing garment companies in the Indian textile industry.

The company is increasing its garments capacity by 2.25 times to 45 mn pieces per annum and its fabric capacity by 2.4 times to 120 mn meters p.a by Q3FY09.

Post expansion, the contribution of garments would increase to 70 per cent of the total revenues as against 40 per cent in FY07.

Further, the company's foray into the export markets (UK and USA) has been remarkable with exports rising from Rs 3.99 crore to Rs 213.4 crore in last three years. The stock trades at 7.7 times its estimated earnings for FY09.

Voltas Reco price: Rs 125 CMP: Rs 130.4 Target price: Rs 203 (September 2008) Broking firm: Prime Broking

Voltas Limited, the engineering arm of the Tata Group, has grown at a strong pace in the last four years between FY04-FY07, with revenue CAGR of 24 per cent and earnings CAGR of 60 per cent.

The company is expected to continue its strong growth trajectory driven by its Electro-mechanical products and services segment (EMPS) (contributing 56 per cent of FY07 revenues) and Engineering products and services segment (EPS) (contributing 18 per cent).

While the former is expected to benefit from the infrastructure boom in West Asia and India, the latter's high growth will be driven by substantial capital investments in sectors such as automobiles, engineering, steel and retail.

At Rs 130, the stock is valued at 22 times and 16.3 times its estimated earnings for FY08 and FY09 respectively.

Deccan Chronicle Reco price: Rs 217 CMP: Rs 225 Target price: Rs 330 Broking firm: Emkay Shares

Deccan Chronicle has highly automated printing facilities and operate with very less manpower, resulting in significant operating efficiencies and robust profitability.

The company has beaten its competitor THE HINDU in terms of circulation (over 300,000) in just 2 years from the launch of Chennai edition. Further it plans to unlock value from its wholly owned subsidiaries namely ODYSSEY (retailing subsidiary) and Sieger Solutions (engaged in the business of selling advertisement space in Deccan Chronicle and internet advertising).

The given target price does not factor in the value of subsidiaries, which leaves further headroom for an upside. The stock trades at 18.3 times and 13.6 times for FY08E and FY09E respectively.

Asian Paints Reco price: Rs 928 CMP: Rs 935 Target price: Rs 1200 Broking firm: Khandwala Securities

Asian Paints (APL) will be the prime beneficiary of the 13-15 per cent growth in paint industry and its revenues are expected to grow at 17 per cent, while earnings would grow at 22 per cent over the period of next three years.

Asian Paints, which has 26 per cent overall market share plans has doubled its capacity at Sriperumbudur plant to 50,000 KL per annum in order to strengthen its hold further. It is also adding a polymer plant at the same location.

APL’s international business which contributes 18 per cent of its revenues is expected to grow annually at 20 per cent over the next three years and is expected to be a major growth driver.

The stock trades at 26.7 times and 21.25 times respectively for FY08 and FY09 estimated earnings respectively.

Analysts' Corner

Welspun India Target price: NA Reco price: Rs 60 Current price: Rs 61.85 Broking firm: IL&FS

Welspun India reported robust results for Q1FY08 despite various odds arising from rupee appreciation and rising cotton prices.

The company’s topline grew by 33 per cent, while PAT grew by 22 per YoY during the quarter. Operating margins (excluding a reversal of provision of Rs 18 crore) was higher than expected. Better realisation in the sheeting fabric, and DEPB benefits enabled Welspun to maintain margins. Utilisation in sheeting fabrics is expected to rise further with higher volume growth during the latter half of the year and further integration of operation with Christy, the company is expected to continue the growth momentum. The stock at recommended price is attractively valued at 6.5 times FY08EPS.

Great Offshore Target price: Rs 984 Current price: Rs 794 Broking firm: India Infoline

Great Offshore (GOL) is India’s most integrated offshore oilfield services provider offering a variety of services to upstream oil and gas producers to carry out offshore E&P activities. With huge opportunities in the domestic upstream sector, GOL is increasing its fleet size from 39 currently to 42 by FY10. Also, the company has plans to enter the offshore construction space in a big manner. The company is expected to witness 29.8 per cent CAGR in revenues and 41.2 per cent CAGR in PAT between FY07 and FY09. Being one of the largest and most diversified players in the Indian offshore industry, the stock price of the company should command higher valuations compared to its domestic peers. India Infoline puts a target price of Rs 984 per share, which is based on estimated 14 times FY09 earnings of Rs 70.3 per share

Lanco Infratech Target price: Rs 369 Current price: Rs 276 Broking firm: Emkay Share

Lanco Infratech (LITL) has 518MW of power projects in operation and 9,035MW in various stages of development. It is also executing two toll-based BOT projects and developing three real estate projects. The company enjoys higher operating profit margins by being an integrated player executing its own projects. This ensures that savings in construction and procurement is captured within its own operations. LITL’s consolidated revenue is expected to grow at 126 per cent CAGR over FY07-09E to Rs 81.7 billion. The company is also expected to show 23-25 per cent of EBITDA margins. The net profit (after deducting the minorities interest) would grow to Rs 5.3 billion, a CAGR of 68 per cent, over the same period. Based on SOTP, the target price works out to Rs 369 per share. At the recommended price, the stock trades at 10.7 times its estimated consolidated FY09E EPS of Rs 24.2.

MIC Electronics Target price: NA Broking firm: Edelweiss Reco price: Rs 367 Current price: Rs 362

The emerging scope for LED (light emitting diodes) applications globally will benefit MIC and it will emerge as a leader in the LED display and lighting space over the next three to five years. Edelweiss expects to see re-rating of the stock on the back of large order additions and their successful execution. Its media division is expected to grow at a CAGR of 70 per cent over FY07-09E to Rs 230.5 crore which will drive total revenue CAGR of 17 per cent to Rs 330.2 crore in FY09E. Overall, net profit is likely to see an increase at a 44 per cent CAGR. The stock trades at 15.3 times and 11.1 times its FY08 and FY09 estimated earnings.

Gujarat Industries Power Company Target price: Rs 95 Current price: Rs 60 Broking firm: Angel broking

Gujarat Industries Power Company (GIPCL) is well placed to derive benefits from the favourable power sector dynamics. It trades at an attractive 0.7 times estimated FY2009 price to book value while most of its peers trade at 1.5-2 times estimated FY2009 price to book value. Further, the company has its own captive mines, which would ensure high Plant Load Factor (PLF) for its ongoing expansion programmes as well. At recommended price, the stock trades at 6.3 times estimated FY2008 and 6.1 times estimated FY2009 earnings of Rs 9.8 and Rs10.2 respectively. With 18-month target price of Rs 95 per share, Angel Broking puts a buy recommendation on the stock.

IDFC Current price: Rs 124.5 Target price: Rs 155 Broking firm: Prabhudas Lilladher

IDFC is emerging as one of the key beneficiaries of the infrastructure financing opportunity in the country. The company has exposure to some of the high growth sectors such as energy, transportation, telecom and information & technology. Along with robust growth in lending business, the asset management business currently manages a corpus of $650 million and is expected to grow 4 times over FY07-09E to $3 billion post the deal with Citigroup, Blackstone and IIFC.

IDFC has recently raised Rs 2,100 crore through a QIP, reducing the leverage to a comfortable level of 2.95 times. This leads to an increase in lending capability to a single borrower and leaves more room for expansion going ahead. Its lending business is valued at Rs 112 per share, which is 3 times its FY09EP/BV. While it’s non-lending businesses contribute Rs 42.2 to the valuation. The broker re-iterates ‘Outperformer’ rating based on the sum of part valuation target price of Rs 155.

Punjab National Bank Broking firm: ICICI Direct Target Price: Rs 647 Current price: Rs 497

PNB has got an extensive branch net work of 4,563 branches, with 50 per cent in rural areas giving it an unparalleled advantage of higher CASA (at 46 per cent) and consequent lower cost of funds. ICICI Direct expects that PNB will be able to sustain its net interest margins (NIMs) at 3.75 per cent levels, higher than its peers. Further net NPAs are expected to stay at 0.7–0.9 per cent levels and return on assets and return on equities are expected to rise from 1 per cent in FY07 to 1.1 per cent levels in FY09 with return on equity (RoE) improving from 15.6 per cent to 17.4 per cent. PNB is trading at 1.2x its estimated FY09E ABV which is quite attractive.

MindTree Consulting Target price: Rs 510 Current price: Rs 579 Broking firm: SSKI

MindTree Consulting (MindTree), a mid-sized Information & Technolofy (IT) and Research & Development services company, has strong management bandwidth. It services marquee clients like Volvo, AIG, LSILogic, United Technologies, Symantec, Avis and Unilever. However, a high share of development services in revenues creates a project-based business profile, which lowers sales productivity, hurts utilisation and leads to poor client mining. Thus, contrary to street expectations of an expansion, the company is expected to show declining margins by 170 basis point over FY07-09 due to rupee appreciation and salary inflation. The management has cut its FY08 earnings guidance after the first quarter FY08 results, but SSKI expects further risk to consensus estimates for FY09. While the stock price has fallen 23 per cent in just one month, further downside is likely at valuations of 19.8 times estimated FY09 earnings (19.2 times for Infosys). Considering these factors, the stock is rated as underperformer with a downward price target of Rs 510 per share

SSKI Recommendations

SSKI has come out with its earning estimates on the construction sector for the quarter ended June' 07-08. According to the report Gammon India PAT is seen up 34.4% at Rs 21.4 crore (Rs 214 million) versus Rs 15.9 crore (Rs 159 million), YoY.

During the same quarters its net sales are seen up 25% at Rs 523.2crore (Rs 5232 million) as against Rs 418.5 crore (Rs 4185 million) in the corresponding quarter previous year. It's EBDITA stood at Rs 445 million as against Rs 317 million in the corresponding quarter previous year.

SSKI has come out with its earning estimates on the construction sector for the quarter ended June' 07. According to the report HCC PAT is seen up 9.3% at Rs 27.5 crore (Rs 275 million) versus Rs 25.1 crore (Rs251millionYoY

During the same quarters its net sales are seen up 18 % at Rs 677.6 crore (Rs 6776 million) as against Rs 574.3 crore (Rs 5743 million) in the corresponding quarter previous year.

It's EBDITA stood at Rs 610 million as against Rs 461 million in the corresponding quarter previous year.


SSKI has come out with its earning estimates on the auto sector for the quarter ended June' 07. According to the report Maruti Udyog's PAT is seen down 5.1% at Rs 350.8 crore (Rs 3508 million) versus Rs 369.6 crore (Rs 3696 million), YoY.

During the same quarters its net sales are seen up 23.4% at Rs 3855.4 crore (Rs 38554 million) as against Rs 3125.5 crore (Rs 31255 million) in the corresponding quarter previous year.

SSKI has come out with its earning estimates on the construction sector for the quarter ended June' 07-08. According to the report L&T PAT is seen up 20.7% at Rs 244 crore (Rs 2440 million) versus Rs 202.1 crore (Rs 2021 million), YoY.

During the same quarters its net sales are seen up 22% at Rs 4241.8crore (Rs 42418 million) as against Rs 3476.9 crore (Rs 34769 million) in the corresponding quarter previous year.

It's EBDITA stood at Rs 3606 million as against Rs 2890 million in the corresponding quarter previous year.

SSKI has come out with its earning estimates on the auto sector for the quarter ended June' 07. According to the report Mahindra and Mahindra's PAT is seen up 0.1% at Rs 205.9 crore (Rs 2059 million) versus Rs 205.7 crore (Rs 2057 million), YoY.

During the same quarters its net sales are seen up 11.7% at Rs 2498.3 crore (Rs 24983 million) as against Rs 2236.3 crore (Rs 22363 million) in the corresponding quarter previous year.

SSKI Securities has come out with its earning estimates on the Textiles sector for the quarter ended June' 07. According to the report Vardhman Textiles PAT is seen down 9.6% at Rs 33.8 crore (Rs 338 million) versus Rs 37.4 crore (Rs 374 million), YoY.

During the same quarters its net sales are seen up 14.3% at Rs 543.5 crore (Rs 5435 million) as against Rs 475.5 crore (Rs 4755 million) in the corresponding quarter previous year.

SSKI Securities has come out with its earning estimates on the Textiles sector for the quarter ended June' 07. According to the report Gokaldas Exports PAT is seen up 14.1% at Rs 15.4 crore (Rs 154 million) versus Rs 13.5 crore (Rs 135 million), YoY.

During the same quarters its net sales are seen up 21% at Rs 268.2 crore (Rs 2682 million) as against Rs 221.6 crore (Rs 2216 million) in the corresponding quarter previous year.


SSKI has come out with its earning estimates on the auto sector for the quarter ended June' 07. According to the report Hero Honda Motors PAT is seen down 25.1% at Rs 178.1 crore (Rs 1781 million) versus Rs 237.7 crore (Rs 2377 million), YoY.

During the same quarters its net sales are seen up 4% at Rs 2458.6 crore (Rs million) as against Rs 2364.4 crore (Rs 23644 million) in the corresponding quarter previous year.

Analysts' corner

Tayo Rolls
Current Price: Rs 186
Target: Rs 300

Antique Stock Broking has given a strong buy for this Tata group company which is the largest integrated (makes its own pig iron) manufacturer of rolls in India. With steel industry estimated to grow at 10% till 2012, TRL's revenues are expected to grow at a CAGR of 25- 30% till FY10.

The company has been regularly increasing its capacities and plans to take it up to 18,000 TPA by 2010 from the current 13500 TPA. Exports will get a further boost post TISCO's acquisition of Corus as it plans to supply rolls to all nine plants of Corus across Europe.

BASF India
Current price: Rs 269
Target: Rs 300

Sharekhan has put a buy on BASF India with a price target of Rs 300 from the current price of Rs 273. On the back of decent numbers in Q4, 2007, the company is expanding its capacities in key products like expandable polystyrene and polymer dispersion to cater to the consumption boom in its user sectors of white goods, home furnishings, paper and construction.

Further, it also has access to the wide product portfolio of its parent company to add to its existing line up in its three divisions—agriculture, performance products and plastics. Considering its growth prospects, the research firm believes that the company is trading at attractive valuations of 13.3x FY2007 earnings and 9.5x FY2008E earnings.

JK Lakshmi Cement
Current Price: Rs 107
Target: Rs 129

SBICAP Securities is bullish on JK Lakshmi Cement (JKL) and believes that at current levels there is an upside of 20%. The recommendation is based on the robust growth in the earnings driven by savings in power cost and various other initiatives, cheaper valuations and an improved balance sheet.

The stock, research firm believes, is trading at hefty discount to its peers and deserves a rerating. The company is expanding cement production capacity by 1.2mn tonnes by the Oct'08 including split grinding unit of 1.1mn tonnes capacity which will result in savings of Rs 24mn on PAT level or addition of Rs 0.4 in the EPS for FY09E.

Dabur India
Current Price: Rs 100.85
Target: Rs 120

Macquarie Research recommends a “buy” on Dabur India, at a price of Rs 99.60, with a 12-month target of Rs 120, denoting an upside of 20 per cent. Dabur India has achieved a niche positioning of being a premium player in herbal personal care products. Its brand portfolio includes ayurvedic hair care, oral care, and health supplement products, which deliver high margins to the company.

The company has delivered a consistent earnings growth of 20-50 per cent over the past five years. Macquarie expects Dabur India to maintain its sales momentum at a compounded rate of 17 per cent annually over the next three years. The stock is valued at 17 times its estimated FY08 earnings, which is at a 20 per cent discount to its Indian consumer goods sector peers.

Marico
Price Rs 56
Target Price Rs 69

Emkay Share and Stock Brokers has recommended a buy on stock of Marico on the the back of growth in its well established core business, increasing presence in the broader “wellness and beauty” platform, rising international business and continued pursuit of newer avenues for growth-both organic and inorganic.

Emkay expects revenue growth to be at a CAGR of 17.5 per cent in FY2007-09E period and earnings growth at CAGR of 26.5 per cent, which is higher than industry earnings growth. At a recommonded price Marico is trading at PER of 18.9 times FY2009E earnings and EV/ EBIDTA of 11.7X FY2009E.

Dishman Pharma
Current Price: Rs 291
Target: Rs 360

Karvy Stock Broking puts a “buy” recommendation on Dishman Pharma at the price of Rs 288, with a target price of Rs 360. The company had acquired Carbogen Amcis of Switzerland in August 2006, for $74.5 million.

Further, it has set up a QUATs facility in China. Add to this, its diverse customer base, the technology transfer model, and strengthening international presence is expected to boost the company’s performance with greater revenue and earnings momentum. The stock is valued at 15 times its expected FY09 earnings.

Buying stocks that your broker says you should? You might just lose

Have you lately bought an existing stock or IPO on your broker’s recommendation and then seen its price fall substantially some time later? Well, chances are that your stock broker may have offered you the recommendation just before he wanted to sell out his own position on the same stock. Surprised? Read on.

Most stock brokers, other than buying and selling stocks for their clients, also buy and sell stocks on their own account. At times, they might decide to build positions in a not-so-great stock and then start recommending it around. First, they go to their bigger clients (mutual funds, foreign investors, high networth individuals, etc) and make a sales pitch for that stock. Selling the stock to their bigger clients helps them jig up its price. Till this point, the recommendation on a particular stock goes exclusively to their bigger clients. Along with bidding up the price of the stock, the brokers make commissions on the way as well for buying stock for their clients.

In the next phase, the recommendation through newspapers and television channels reaches the so called ‘small investor’. Influenced by the recommendations, he starts buying up. And when this happens, it is time for the brokerage house and its bigger clients to sell the stock to those who want to buy. The broker now makes money on two counts: a) by charging you a commission for buying stock b) by selling out on the proprietary position it has built up. So, the small investor is the sucker in the entire game.

For a broker, it makes sense that investors keep buying and selling all the time. No broker has ever made money with an investor holding on to his stock investments.

As Adam Smith (not to be confused with Adam Smith the famous economist) writes in The Money Game, “They could put you in some stock that would go up ten times, but then they would starve to death, they only get commissions when you buy and sell. So they keep you moving.”

Logically, the retail investor should be able to figure out the goings on after a while. But, that does not seem to be the case.

As Smith writes, “…the investors who really follow the market, the ones who call up all the time, ninety percent of them really don’t care whether they make money or not….If they make a little money, they’re happy, if they lose a little money, they’re not too unhappy. What they want to do is to call you up. They want to say, ‘How’s my stock? Is it up? Is it down? What about the earnings? What about the merger? What’s going on? And they want to do this every day, they want a friend, they want someone on the telephone, they want to be a part of what’s going on.”

And to all the questions investors have, brokers always seem to have an answer. Very few brokers seem to be in the habit of saying ‘I don’t know’.

The IPO game, though, works a little differently. Most brokerages also have investment banking divisions, which help bring these IPOs to the market. Technically, there are supposed to be Chinese walls between the brokerage and the investment banking decisions. But, that is rarely the case.

As Andy Kessler writes in Wall Street Meat, in reference to a particular IPO, “The burning question was where to price the stock. There is always tension in an investment banking firm when it comes to pricing IPOs. The banker who is charging a 7% fee to do the IPO wants the deal priced as high as possible.”

If an investment bank is handling an IPO, then its brokerage division usually writes out a positive recommendation on the stock. Given this scenario, brokerage analysts write research reports that their investment banking clients would like investors to read, which may or may not give the real picture. This ensures that this client and other clients keep coming back to the brokerage. Nobody likes firms whose analysts give negative coverage to a company and this can lead to the investment banking business going to other firms.

Like Mitch Zacks points out in his book, Ahead of the Market, “Hell hath no fury like a CEO who has lost several million dollars due to some smart-aleck analyst. You can bet that for the next several years - and perhaps for as long as that CEO is in power - that the aggrieved company is not going to do any business where the pessimistic analyst works (and it’s also possible that the analyst will be fired). While most investors may forget about the sell recommendation in a couple of months, corporate management tends to have a much longer memory. When you lose several million dollars worth of stock options - as the CEO of a downgraded firm will attest - you tend to take it very personally.”

A negative recommendation also has an impact on the portfolio that the brokerage firm has built on its own account. A sell recommendation can also have an impact on the portfolio that the stock brokerage has built up on its own account. So, you rarely get a sell recommendation on any stock from a brokerage house.

As Adam Smith points out in his book, The Money Game, “And take selling. You think they tell you when to sell? Never. First they sell themselves, then you watch the stock going down day after day, you can’t get them on the phone, finally you get them, they say, ‘While the outlook near term is uncertain, long term holdings need not be disturbed.’

“That means, ‘I sold last Tuesday, Charlie, and I forgot you were still in that dog.’ You know how long the long term they talk about is? Five hundred years. May be seven hundred years. But whatever happens, they make it, coming and going. You make money, they take those commissions. You lose money, they take commissions. You leave your account alone, they call you up and tout you, they don’t make money when it’s sitting still.”

DNA

Suzlon upgraded to NEUTRAL and more..

Merrill Lynch has put a BUY on Suzlon Energy as they feel that risk of bidding war over RE power has been alleviated. They have a target of 1500

Macquarie upgrades ICICI Bank to buy with a 12 month target of 1103

Macquarie also upgrades HDFC to buy with a 12 month target of 2060

Macquarie however put a underperfomer on SBI with a target of 1192

Macquarie says BUY Kotak Mahindra with a 12 month target of 646

Brokers bullish on Tata motors, Birla Corp, India cement

Sharekhan has kept buy rating on Tata motors; with a target of Rs 1075.

SSKI has maintained outperformer rating on Jain irrigation.

Motilal oswal has maintained buy rating on Birla Corp; with a target of Rs 495.

Motilal oswal has maintained buy rating on India cement; with a target of Rs 280.

Karvy upgraded Jubilant Organosys to outperformer rating; with a target of Rs 296.

Anandrathi has kept buy rating on Technocraft Ind; with a target of Rs 150.

Networth has maintained buy rating on Grasim Ind; with a target of Rs 2922.

Brokers bullish on FAG Bearing, India Cement, Aegis Logist

Emkay pcr has kept buy rating on on FAG Bearing.

Networth has kept buy rating on India Cement; with a target of Rs 285

Karvy has kept buy rating on Aegis Logistic; with a target of Rs 206.

Brics pcg has kept buy rating on PVR; with a target of Rs 342.

DSP Merrill Lynch has kept buy rating on Reliance Communications; with a target of Rs 580.

CLSA has kept underperformer rating on Suzlon Energy; with a target of Rs 1220.

Citigroup has downgraded Tata Power to hold rating; with a target of Rs 648

Brokers bullish on Bharti Airtel, KS Oils, RIL

Sharekhan has puted buy rating on Bharti Airtel; with a target of Rs 780

Prabhudas Lilladher has kept buy rating on KS Oils

Prabhudas Lilladher has kept outperfomer rating on Monnet ispat

Prabhudas Lilladher has kept outperfomer rating Tech mahindra; with a target of Rs 1900

Glodman Sachs has kept buy rating on RIL; with a target of Rs 1660

Edelweiss has maintained sell rating on Praj Industries