India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Wednesday, January 02, 2008
Tuesday, January 01, 2008
Ranbaxy Labs, HDFC, NDTV
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs423
Strong triggers for an upgrade
Key points
- The management of Ranbaxy Laboratories (Ranbaxy) has been emphatic in stating that going forward, they will avail of atleast one exclusive product opportunity in the USA every year. While the opportunities for CY2009 and CY2010 have already been lined up, the management plans to announce the CY2008 opportunity in January 2008. The announcement of a product launch under exclusivity in CY2008 could lead to a significant earnings upgrade to Ranbaxy's current CY2008E earnings.
- While Ranbaxy has already announced its intention to de-merge and subsequently list its Novel Drug Discovery Research (NDDR) operations into a separate entity effective from January 1, 2008, the specific framework and other details of the de-merger are yet awaited. While the de-merger will unlock value of the discovery R&D assets, it will also enable the parent company to save about $20-25 million in expenses, which are incurred on NDDR projects annually from CY2008 onwards. This will boost the overall profitability of the core business.
- In a recent media interview, Malvinder Singh, Managing Director and CEO of Ranbaxy has indicated that 2008 will be a stronger year for Ranbaxy as compared with 2007, as the company will strive to focus on more profitable growth through expansion of margins. This would basically come with a more optimum geographic and product mix including niche product opportunities. In light of this, we look forward to a strong vision and guidance given by the management for CY2008 post the announcement of the CY2007 results in January 2008.
- With the acquisition of a significant stake in Zenotech Laboratories (Zenotech), Ranbaxy plans to market Zenotech's oncology and biopharmaceutical pipeline across emerging markets immediately and developed markets over the next two-three years using its strong global reach and regulatory expertise. We may see some revenues from these avenues to flow in from the second/third quarter of 2008.
- At the current market price of Rs423, Ranbaxy is available at 23.9x its CY2008E earnings. However, the announcement of the exclusive opportunity for 2008, the strong guidance provided by the management post CY2007 results and the disclosure of the NDDR de-merger details could lead to significant earnings upgrades and hence generate strong buying interest from investors in the near-term. For now, we reiterate our Buy recommendation on the stock with a price target of Rs500.
Housing Development Finance Corporation
Cluster: Evergreen
Recommendation: Buy
Price target: Rs3,362
Current market price: Rs2,919
Value unlocking to continue
Key points
- Housing Development Finance Corporation (HDFC) has agreed to sell 8.1 crore equity shares representing 7.2% of the paid-up equity capital of HDFC Standard Life Insurance Company (HDFC SLIC) to Standard Life of the UK. Consequent to the sale, Standard Life would hold 26% stake in HDFC SLIC, while HDFC will hold around 72.4% stake and the employees of HDFC and other group companies would hold the remaining 1.6% stake.
- The main highlight of the deal has been that both the parties, HDFC and Standard Life, have officially agreed that any further stake sale in HDFC SLIC between the two entities would be at a fair market value. This is a big positive for HDFC as current pricing methodology restricted HDFC from realising current market valuation for its stake sales in its insurance venture so far.
- HDFC SLIC has also unveiled plans of coming out with an initial public offer (IPO) before 2009 end, which we feel would further help HDFC in unlocking value in its subsidiaries.
VIEWPOINT
New Delhi Television
Promoters make open offer
With a slew of new channel launches in the second quarter of FY2008, NDTV stepped in the execution phase of its mega plans in the broadcasting space. It has recently launched four channels, the lifestyle channel NDTV Good Times, NDTV Arabia that caters to the news and infotainment market in the Middle East and north Africa, NDTV MetroNation, an English channel catering to Delhi and the national capital region (NCR) and Astro Awani Malaysia, a Bahasa language channel launched through its joint venture with Astro. These ventures are a testimony to NDTV's intention to be a major player not only in the Indian broadcasting arena but also other countries of Asian region.
NSE Bulk Deal Watch
01-JAN-2008,RAJESHEXPO,Rajesh Exports Ltd.,CITIGROUP GLOBAL MARKETS MAURITIUS PVT. LTD.,BUY,220825,894.16,-
01-JAN-2008,ASSAMCO,Assam Company Limited,RELIANCE CAPITAL PARTNERS,SELL,1942703,56.88,-
01-JAN-2008,GLFL,Gujarat Lease Fin Ltd,GUJARAT INDUSTRIAL INVESTMENT CORPORATION LTD,SELL,152500,20.30,-
01-JAN-2008,HINDOILEXP,Hind. Oil Exploration ,HARDY OIL AND GAS LIMITED,SELL,770000,162.98,-
01-JAN-2008,PTC,PTC India Limited,PRUDENTIAL ICICI MUTUAL FUND,SELL,960000,159.85,-
01-JAN-2008,VIVIMEDLAB,Vivimed Labs Limited,MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. SVB,SELL,300000,150.00,-
Market Close: Cautious start but its mid caps time !
The year 2008 started on flat note, the markets across Asia and Europe were closed on account of New Year. Indian indices started the New Year day with modest gains but the indices could not sustain the gains and immediately fell into negative region with marinal pull back. The first day of year was not so attractive for the investors with no triggers from global markets. Throughout the day indices traded in choppy manner, some level of profit taking was seen at mid trades. Major support to the indices came in from realty stocks as the segment index gained by 310 points. Late session was too volatile with no clear direction; indices hovered on both the regions but value buying at lows helped the indices to recover and ended on a flat note. Interest was much seen in mid and small caps. Both the indices hit all time and out performed the front line indices. Selling was seen in Technology and Capital Goods. FMCG, Power, Realty and PSU?s stocks cheer the day.
India?s largest private sector power company, Reliance Energy was the top gainer, made all time and closed up by 6.83%. The buying interest was largely due to forth coming IPO of Reliance Power where REL hold 50% stake in this company. India?s largest cigarette manufacturer ITC surged up by 3.63% and the stock hit all time, due to ITC's subsidiary Fortune Park Hotels plans to invest around Rs 130 cr in 3-4 hotels in Bangalore, Coimbatore and Kolkata.
Sensex closed up by 94 points at 20300.711. It was helped up by gains in NTPC (256.8,+6 percent), ITC (217.6,+6 percent), Rel Energy (2279,+6 percent), Tata Motors (763.05,+4 percent) and Grasim (3762.3999,+4 percent). Restricting the gains are Wipro (515.6,-3 percent), Infosys (1749.7,-3 percent), TCS (1053.65,-2 percent), RIL (2847.1001,-2 percent) and Cipla (211.65,-2 percent).
Adhunik Metals was locked on upper circuit after the news that it is looking to set up 1.1 mn tones of integrated steel plant in West Bengal and invest Rs 7,200 cr in next 4 years. They are also looking to diversify into cement and planning to set up 1 mn tones capacity. It has signed the MoU with West Bengal Government; it will be coming in the group company which does not matter for the listed company. The main trigger is that expansion plans are on curve of getting completed in next quarter itself and from next quarter Adhunik will have 4.5 lak tone capacity available. As far as power is concerned 17 MW is running and another 17 MW is coming by next quarter itself so combining will fiche about 34 mega watt of captive power plant in the steel business. Adhunik supplies specialized steel & value added steel components to industries such as Automobiles, Power, and Defense and Engineering companies. The valuation looks attractive considering its transformation to a fully integrated steel player. We believe primarily growth will be driven by higher realization as a result of rolled products ( rolled from outside rolling companies, as its own rolling mill is likely to come in FY08.
UCO Bank's shares surged on news of merger. The Kolkata based public sector bank is looking at merging itself with another bank in the next three months to boost its business. UCO Bank plans to merge with a smaller or a similar sized bank by March to attain size. It won?t acquire any banks, but will merge with some other banks in three months. UCO Bank officials could not be immediately reached for comment. The merger will boost the banks total business size to 2 trillion rupees from 1.23 trillion rupees as per the source news. The merger certainly helps to grow inorganically which helps to bring fast growth to the business. This also helps to face completion from private and MNC banks which are growing faster than PSU banks. On hopes of merger the stock closed up by 20%.
Technically Speaking: It was choppy session for complete day before closing, Sensex traded on both the sides with no clear direction and ended with small gains. Sensex touched intraday high of 20,395 and low of 20,220. Overall breadth was in favor of Advances, where the Advances stood at 2415, while Declines at 447. The turnover was pretty good at Rs 6021 cr.
BSE Bulk Deals to Watch
1/1/2008 523277 G V FILMS LT BNP PARIBAS ARBITAGE GDR S 4500000 12.63
1/1/2008 526717 GOPALA POLYP IDBI LTD S 100000 13.94 1/1/2008 532160 GUJ ST FN CO GSFC STAFF CO OP CREDIT SOC S 175000 30.60
1/1/2008 523218 KILBURN OFFI IDBI LTD S 50000 15.34
1/1/2008 532660 VIVIMED LABS MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. S.V. S 300000 150.00
1/1/2008 508933 WELSPUN SYNE IDBI LTD S 500000 14.63
31/12/2007 500141 FERRO ALLO C CORNELL CORPORATION S 1800000 42.67 31/12/2007 500142 FGP LIMITED JMP SECURITIES PVT. LTD. S 60000 16.01
Insider Trading - SEBI proposes consultative paper
In order to curtail incidents of insider trading, capital market regulator SEBI on Tuesday floated a consultative paper, whereby insiders would not be able to buy and sell the company's securities within a period of six months. Insiders would have to surrender any profit made by buying and selling company securities in six months, according to SEBI's proposed regulations on Short Swing Profit.
The proposed regulation is based on a similar rule in the US, which requires 10% owners, directors and officers of a company to give up any profit realised from any purchase and sale, or any sale and purchase, of any equity security of the company within a six-month period.
According to SEBI, the regulation would help prevent company insiders, who have greater access to price sensitive company information, from taking advantage of information for the purpose of making short-term profits, called as short swing profit. Additionally, it would align the long term objectives of company insiders with the company shareholders.
SEBI has proposed the “Last In First Out” (LIFO) method for determining the six month period between buy and sell trades by company insiders.
The short swing rule would automatically get invoked once two things are established. First is the fact of being an insider or a designated insider. And second, the fact that the same securities were bought and sold within six months of each other.
The intent of the person would be immaterial. Merely the fact of the trade will be sufficient to take action. Where there is a delay, interest may be payable by such insider to the company.
SEBI has proposed certain exemptions, such as transactions approved by a regulatory authority, employee benefit plans, bona fide gifts and inheritances, mergers and acquisitions etc. Certain securities may also be considered as exempt altogether.
The regulator invited comments from the public on the consultative paper particularly with regard to coverage of persons in the definition of designated insider, method of calculating the dates of purchase and sale and classes of exemptions.
Reliance Power - ICRA assigns 4/5 Rating
Leading credit rating agency, ICRA assigned IPO Grade 4, indicating above average fundamentals, to the proposed initial public offering of Reliance Power (RPower), a subsidiary of Reliance Energy. ICRA assigns IPO grading on a scale of IPO Grade 5 to IPO Grade 1, with Grade 5 indicating strong fundamentals and Grade 1 indicating poor fundamentals.
The IPO Grade 4 assigned by ICRA reflects the benefits arising out of being a part of the Reliance Anil Dhirubhai Ambani Group which has considerable experience across the value chain in the power sector and the expected cost competitiveness of most of the power projects in relation to the markets it proposes to serve, which when combined with spiraling energy deficits and the groups plans of maintaining a judicious mix of long term PPAs and short term trading, should result in strong earnings growth in the long term.
Further, the IPO proceeds would enable the company to tie up the equity funding for the first tranche of projects that it has identified. The grading also reflects the prospects for the power generation business in the country with increasing regulatory clarity, gradual emergence of a market for trading in power and improvement in financial position of some of the utilities in the state sector.
The grading is however constrained by the implementation risks inherent in project implementation of the scale and magnitude being envisaged by RPower, uncertainty on issues related to gas and the ability of the company to maintain the desired levels of all operating parameters, especially in case of the competitively bid projects, apart from executing the projects without cost overruns.
The company would also be subject to technology risks arising out of the fact that for some of its plants, which are based on Super Critical Technology, the BTG would be primarily imported and these are yet to be proven in Indian conditions, even though they have an operating history internationally. However these risks are partly mitigated due the significant financial strength enjoyed by the promoter group, along with demonstrated execution capabilities. Also, as a strategy to mitigate the financing risk, RPower has taken in principle sanctions for rupee debt facilities of Rs 179.4 billion and foreign currency denominated debt facilities of USD 542 million, which constitute more than 87% of total debt requirement for identified projects.
Shares of Reliance Energy gained Rs 144.4, or 6.76%, to settle at Rs 2,279. The total volume of shares traded was 1,396,980 at the BSE.
Subscribe to:
Posts (Atom)