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Recommendations
Tuesday, April 03, 2007
Research Calls
Bharti Airtel
Angel Broking recommends a "buy" on Bharti Airtel at Rs 776 with a 12-month target price of Rs 980. The stock trades at a price earnings ratio of 15.8 times estimated FY2009 earnings.
Angel has upgraded its topline forecasts for FY07, FY08 and FY09 by 1.9 per cent, 2.3 per cent and 1 per cent respectively, as the company's reported ARPU's have fallen lesser than estimates, as also stronger than anticipated performance of the other business segments viz Broadband and Telephone and enterprise business.
It has also raised its EPS forecasts by 8.2 per cent, 14.1 and 15.8 per cent respectively. Bharti Airtel's monthly subscriber additional have consistently improved in FY2007. The TRAI move to cut the industry access deficit charge (ADC) by 38 per cent in FY2008 is another positive, which will drive increased minutes of use.
The company’s EBITDA margins have increased at a significantly faster than expected rate and in 9 M FY2007, have soared to 39.7 per cent(up 233 bps y-o-y) on the back of strong operating leverage.
Gateway Distriparks
Sharekhan recommends a “buy” on Gateway Distriparks (GDL) at Rs 160, with a target price of Rs 250. The stock trades at 18.5 times and 13.2 times its expected FY07 and FY08 earnings respectively.
The company’s strategy to become an integrated player by entering into rail-based container movement business will tremendously improve its competitive position in the industry in the long run.
GDL recently formed a 51:49 joint venture with Container Corporation of India (Concor) through its subsidiary Gateway Rail to construct and operate a rail-linked double-stack container terminal at Garhi-Harsaru.
Further, it is also planning to enter the cold storage chain business, which is expected to add significant value to its business going ahead.
Tata Elxsi
Emkay Research recommends a “buy” on Tata Elxsi at Rs 284 with a target price of Rs 381. The stock trades at 12.8 times and 9.7 times its expected FY08 and FY09 earnings. The corresponding EV/EBITDA for the same period is 9.5 times and 7.2 times respectively.
Over the years, Tata Elxsi, has transformed itself from being a low margin system integration and support centric player to a high margin full lifecycle product design service provider.
It has also increased its presence in providing quality animation (2D and 3D), special effects, and gaming services to customers worldwide. The company’s sales and net profit are expected to grow at a compound rate of over 35 per cent and 40 per cent over FY04-FY06.
Balaji Telefilms
Anand Rathi recommends a “buy” on Balaji Telefilms at Rs 127 with a target price of Rs 160/190. The stock trades at a P/E multiple of about 10.8 times its estimated FY07 earnings.
Due to its leadership position, the company could benefit from the structural changes in the delivery model like DTH, IPTV and CAS.
Other upsides to the target price include its forays in the movies segment and focus on non-soap genres like reality shows, animation, ad films, low budget films, mythological programmes, etc.
BT is also focussing on increasing the share of regional languages in its overall content pie and has set up a subsidiary to produce serials for the middle east markets.
YOU CAN FIND ALL THE REPORTS ON THIS SITE
Prabhudas Lilladher - Reliance Communications
Going forward, we expect a 33% CAGR in revenue, following a 45% rise in the number of subscribers, and 34% and 40% CAGRs in EBITDA and PAT, respectively. At the CMP of Rs 420, the stock trades at a P/E of 21x FY08E earnings and at an EV/EBIDTA of 12.4x, based on the fully diluted equity.
"The stock appears more attractive on a sum-of-parts valuation as 13-15% of the present valuation is embedded in the Tower and Global parts of the business (listing of FLAG Telecom)."
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Sharekhan Investor's Eye dated April 03, 2007
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs344
GSK alliance strengthens discovery R&D focus
The new drug discovery research team of Ranbaxy Laboratories Limited (Ranbaxy) has achieved a significant milestone in its collaboration with GlaxoSmithKline (GSK). The steering committee, consisting of senior members from GSK's Center of Excellence for External Drug Discovery and Ranbaxy, has approved the candidate selection of a compound for respiratory inflammation.
Indian Hotels Company
Cluster: Apple Green
Recommendation: Buy
Price target: Rs175
Current market price: Rs139
Another acquisition
Key points
- Indian Hotels Company Ltd has acquired Hotel Campton Place, San Francisco through its 100% US subsidiary company. The acquisition would be made at a cost of US$60 million (including estimated transaction costs).
- Indian Hotels will acquire Hotel Campton Place in partnership with financial investors. The sale purchase agreement was signed on April 02, 2007 and the transaction closure is scheduled for April 30, 2007. The structure of the deal is yet to be disclosed.
- At the current market price of Rs139 Indian Hotels is quoting at a price/earnings ratio (PER) of 22.5x FY2007E consolidated earnings per share (EPS) of Rs6.2. We maintain our Buy recommendation on the stock with a price target of Rs175.
Bharat Heavy Electricals
Cluster: Apple Green
Recommendation: Buy
Price target: Rs2,650
Current market price: Rs2,254
Targeting $10 billion turnover
Result highlights
- At Rs2,385 crore the FY2007 net profit of Bharat Heavy Electricals Ltd (BHEL) grew by 42% and the same is in line with our estimates. The turnover for FY2007 grew by 29% to Rs18,702 crore.
- Order inflows during the year grew by a whopping 88% to Rs35,633 crore. In the power business, BHEL secured orders worth Rs27,722 crore and in the industry sector, it secured the highest order ever worth Rs6,008 crore during the year. The order backlog at the end of March 31, 2007 stood at Rs55,000 crore, which is around 3x its FY2007 sales.
- In the international business, BHEL secured export orders of Rs1,903 crore during the year in comparison with an average yearly order book of Rs1,275 crore in the last five years.
- At the current levels, the stock is trading at 18.0x its FY2008E earnings and 10.7x its FY2008E earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a price target of Rs2,650.
Bulls take charge: Sensex closes 169 pts up
Market made a good start and surged to higher levels as the day proceeded. The bulls once again took charge of the reins; a day after bloodshed was witnessed on Dalal Street. Index pivotals proved their might as stocks like HLL, Bhel, Infosys, ONGC and Reliance held strong on Tuesday, with major gains.
Short-covering by speculators along with emergence of buying by funds at lower levels, helped the Sensex to recover part of yesterday's losses. Firm Asian market cues and stronger rupee boosted market sentiment. In the latter part of the day Midcap and Smallcap also traded higher.
Sensex closed for the day up 1.36 per cent or 169.21 points at 12,624.58. Nifty closed at 3,690.65; up 1.57 per cent. BSE Midcap index closed at 5,236 up 27 points or 0.52 per cent while the BSE Smallcap index ended at 6,313; up 19.58 points or 0.31 per cent.
All BSE sectoral indices closed in green. Oil and gas stocks closed higher at 1.86 per cent. ONGC and Reliance were the major gainers on the Sensex throughout the day.
Reliance Industries gained momentum on the back of huge volumes. The scrip recorded volumes of over 14, 00,000 shares on the NSE. Reliance shut shop at Rs 1,341 up 2.11 per cent and ONGC rose 1.63 per cent at Rs 841. Also, GAIL touched an intraday high of Rs 277 and an intraday low of Rs 266, and recorded volumes of 3,02,379 shares in the day. The scrip ended at Rs 279 up 4.85 per cent on the NSE.
IT stocks also drove markets higher, with Wipro up 4.58 per cent closing at Rs 534; Satyam up 2.78 per cent at Rs 458 and Infosys up 2.22 per cent at Rs 1,963.
Wipro Ltd, India's third-largest software services exporter announced that it had invested Rs 37.5 crore to expand its facility in the western city of Pune.
Satyam Computer Services Ltd said that the company earned the top spot in two categories in the 2007 Investor Relations Global Rankings by MZ Consult.
OBC which rose 5.58 per cent at Rs 177; Jet Airways up 4.84 per cent at Rs 632 and Bhel up 4.68 per cent at Rs 2,255 were among the top gainers on the Nifty. The top losers were Cipla, Bajaj Auto and HDFC.
PSU power equipment major Bharat Heavy Electricals Ltd (Bhel) announced that its net profit rose 42 per cent in FY 2007 at Rs 2385 crore from Rs 1679 crore in FY 2006, as per provisional figures. The provisional turnover rose 28.7 per cent in FY-2007 to Rs 18702 crore from Rs 14525 crore than a year ago. Bhel was the top-gainer on BSE.
The BSE cash turnover was Rs 2881 crore and the NSE cash turnover was at Rs 6729 crore. The total market wide turnover was at Rs 32961 crore.
Bulk Deals to Watch
03-APR-2007,ANANTRAJ,Anant Raj Industries Limi,MORGAN STANLEY DEAN WITTER MAURITIUS CO. LTD,BUY,135000,1074.96,-
03-APR-2007,GRANULES,Granules India Limited,CITIGROUP GLOBAL MARKETS MAURITIUS PRIVATE LIMITED,BUY,205000,109.32,-
03-APR-2007,IVRCLINFRA,IVRCL Infra & Proj Ltd,MERRILL LYNCH CAPITAL MARKETS ESPANA S.A. SVB,BUY,840000,252.32,-
03-APR-2007,RENUKA,Shree Renuka Sugars Limit,MORGAN STANLEY AND CO INTERNATIONAL LIMITED A/C MORGAN STANL,BUY,125000,470.25,-
03-APR-2007,SAKHTISUG,Sakthi Sugars Ltd.,MORGAN STANLEY AND CO INTERNATIONAL LIMITED A/C MORGAN STANL,BUY,350000,101.47,-
03-APR-2007,SAKHTISUG,Sakthi Sugars Ltd.,MORGAN STANLEY DEAN WITTER MAURITIUS CO. LTD,BUY,250000,105.00,-
03-APR-2007,SAKHTISUG,Sakthi Sugars Ltd.,CARLSON INVESTMENT MANAGERS.,SELL,700000,101.07,-
Market recovers some lost ground
After witnessing a huge crash yesterday that wiped out almost 1.4 lakh crore of investors’ wealth, the market began the trading session on a positive note. The Sensex opened with a positive gap of 49 points at 12504 and moved up on buying in select heavyweight and information technology stocks. After an initial upmove to 12584 the Sensex eased on profit taking in Cipla, SBI, Bajaj Auto and select front-line stocks. The Sensex touched the day's low at 12482, down 176 points from the day's high. Short covering and the emergence of buying at lower levels saw the Sensex recover in the afternoon. The major support came from stocks like BHEL, NTPC, Wipro, Hero Honda and some information technology stocks that propelled the Sensex to an intra-day high of 12658. The Sensex closed the session at 12625 with gains of 169 points. The Nifty ended the session at 3691, up 57 points.
The breadth of the market was positive. Of the 2,514 stocks traded on the BSE, 1,382 stocks advanced, 1,047 stocks declined and 85 stocks ended unchanged. Among the sectoral indices the BSE PSU Index gained 2.16% at 5797 followed by the BSE IT Index (up 2.02% at 4767), the BSE Oil & Gas Index (up 1.86% at 6287) and the BSE CD Index (up 1.63% at 3505).
Most of the heavyweights ended at higher levels. Among the blue chips BHEL shot up by 4.66% at Rs2,255, NTPC soared 4.58% at Rs154, Hero Honda advanced 3.05% at Rs657, Satyam Computers added 2.78% at Rs459, Grasim gained 2.42% at Rs2,104, Infosys advanced 2.22% at Rs1,964 and Reliance Industries was up 2.11% at Rs1,341. Among the laggards Cipla, HDFC, Bajaj Auto, SBI and ICICI Bank closed with marginal losses.
Public sector units were in the limelight and closed with substantial gains. Oriental Bank of Commerce vaulted 5.81% at Rs178, Bank of India soared 5.58% at Rs163, GAIL surged 4.77% at Rs279 and Dena Bank advanced by 4.29% at Rs34. Dredging Corporation, SAIL, Bharat Electrical and Corporation Bank gained 2-4% each.
Over 1.50 crore IFCI shares changed hands on the BSE followed by Power Finance Corporation (52.32 lakh shares), Rana Sugars (50.30 lakh shares), Sakthi Sugars (41.06 lakh shares) and Reliance Petroleum (29.86 lakh shares).
Reliance Industries clocked a turnover of Rs112 crore on the BSE followed by Renuka Sugar (Rs110 crore), India Bulls (Rs68 crore), BHEL (Rs67 crore) and Kotak Bank (Rs67 crore).
Sensex climbs nearly 170 points
The market, which suddenly regained its touch in the early-afternoon session of trade, stood firm even in the latter part of the day, as buying continued at the higher levels. All sectoral indices on BSE settled with gains, and shares from the IT sector led the uptrend followed by PSUs, Metals and FMCGs.
The 30-share BSE Sensex rose 169.21 points (1.36%), to end at 12,624.58. The benchmark index had opened higher, at 12,503.75, as buying resumed after a sharp 617-point plunge on Monday. The benchmark Sensex marched ahead, struck an intra-day high of 12,657.75 in the late-afternoon session of trade, on the back of sporadic purchasing. The Sensex’s intraday low was 12,481.86.
The S&P CNX Nifty was up 57.05 points (1.57%), to end at 3,690.65.
The decision taken on Mint Street was expected to inflict the carnage on Dalal Street on Monday. What raised a few eyebrows was its severity. The Sensex shed 617 points, its second-biggest, single-day loss, ever, to close at 12,455. The benchmark index had plunged 826 points (6.76%), to close at 11,391, it's biggest ever, following heavy selling by FIIs, retail investors and a weakness in global markets on 18 May 2006.
On Friday, in a move that surprised many, the Reserve Bank of India (RBI), just a few blocks away from the Bombay Stock Exchange, raised two key policy rates. The attempt was to squeeze money out of the economy that policy-makers felt was the reason why prices were spiralling out of control, and something that the government is trying hard to rein in.
The RBI had lifted its short-term lending rate by 25 basis points to 7.75%, its highest in nearly 4-½ years, after trading ended on Friday (30 March). The central bank also raised the cash reserve ratio (CRR), the proportion of cash banks have to hold with the central bank on deposit, by half a percentage point to 6.5% in two stages, to siphon out Rs 15500 crore from the banking system.
The move had triggered panic over the weekend. Investors realised that with less money in the system, the cost of funds will go up. For corporates, going forward, their profitability could get dented. Which is why, traders hit the sell button on Monday and the Sensex opened 260 points lower than its previous close. Throughout the day, the Sensex lost ground and finally closed just a wee bit above its intra-day low of 12,425. The crash left investors poorer by Rs 1.42 lakh crore.
Market players feel the hike in interest rates could immediately affect sectors like automobiles, banking and real estate, since demand for these depend on bank loans and other such lending agencies.
The BSE cash turnover was Rs 2881 crore, while the NSE's F&O turnover was at Rs 23350.93 crore. The total market-wide turnover was at Rs 32961.21 crore.
The market-breadth was positive on BSE. Against 1,368 shares that had advanced, 1,079 declined and just 95 scrips had remained unchanged. Buying in smallcap and mid-cap counters kept the breadth on a strong footing.
The BSE Mid-Cap Index ended at 5,236.36, up 27 points (0.52%) for the day. The BSE Small-Cap Index ended at 6,313.64, up 20 points (0.31%) for the day.
Among the 30-Sensex pack, 23 advanced and only 7 declined.
PSU power equipment major Bhel spurted 4.85% to Rs 2258, after its net profit rose 42% in FY 2007, to Rs 2385 crore from Rs 1679 crore in FY 2006, as per provisional figures. The provisional turnover rose 28.7% in FY-2007 to Rs 18702 crore from Rs 14525 crore than a year ago. Bhel was the top-gainer. Riding on an all-time high order inflow, power equipment supplier Bharat Heavy Electricals today announced a target of 10 billion dollars (about Rs 44,000 crores) turnover by 2011-12.
"Our fresh order inflows have swelled by a whopping 88 per cent in 2006-07 to Rs 35,633 crores up from Rs 18,938 crores in the previous year. We have doubled the turnover in the last three years. Our next target is to reach 10 billion dollars by 2011-12," Bhel Chairman & Managing Director Ashok K Puri said.
Puri also announced an investment of Rs 3,200 crores to augment its capacity for supplying equipment for up to 15,000 Mw annually. The company is already in the process of increasing the capacity from 6,000 Mw to 10,000 Mw.
Powered by Bhel, the BSE Capital Goods Index advanced 1.1%, at 8,718.07.
NTPC advanced 4.41% to Rs 153.80, as 14.42 lakh shares changed hands in the counter on BSE. Hero Honda advanced 3.39% to Rs 661.
The BSE IT Index gained 2% at 4,766.97. Wipro advanced 3.42% to Rs 536, after investing Rs 375 crore at the Pune facility, ramping up capacity from 6,300 to 17,000 seats. The facility focusses on developing solutions for banking, insurance, and telecom industries.
Infosys Technologies advanced 2.33% to Rs 1966, while TCS rose 1.28% to Rs 1204 and Satyam Computers moved 2.62% higher, at Rs 458.
Tata Steel rose 1.16% to Rs 429, after completing its £6.2 billion (US$12 billion) acquisition of Corus Group. Tata Steel paid 608 pence per ordinary share in cash. The new expanded entity will have a pro forma crude steel production of 27 million tonnes in 2007, and will be the world's fifth-largest steel producer, employing 84,000 personnel across four continents.
Tata Steel on Monday said crude steel production of the company for the year 2006-07, crossed 5 million tonnes. Tata Steel said in a statement that production of hot metal touched 5.55 million tonnes, crude steel at 5.05 million tonnes and saleable steel at 4.93 million tonnes.
The BSE Metal Index closed at 8,219.63 (up 1.08%). SAIL (+ 3.35%), Sesa Goa (+ 2.12%) and Nalco (+ 1.74%) advanced for the day.
Tata Motors gained 1.16% to Rs 677, after saying on Monday vehicle sales in March rose 11% to 62,779 units from 56,406 units a year earlier. Sales of commercial vehicles rose 13% to 30,720 units -- its highest monthly sales to date -- from 27,289 units, while sales of cars and utility vehicles rose 14% to 25,760 units, also the highest monthly sales. Exports fell 3% to 6,299 units from 6,508 units. Vehicle sales in the fiscal year to March 2007, rose 28% to 579,378 units from 454,345 units in the previous year.
Index heavyweight Reliance Industries (RIL) gained 1.90% to Rs 1338.50, on a volume of 8.41 lakh shares. The heavyweight scrip had advanced from a low of Rs 1309.55, to a high of Rs 1346. The BSE Oil and Gas Index surged 1.9%, to 6,287.21. GAIL (up 5.15%), ONGC (up 1.70%), and Chennai Petroleum (up 1.3%) were the other gainers.
Bharat Electronics rose 3.13% to Rs 1502, after the state-run enterprise for defence equipments reported a 22% rise in profit before tax for 2006/07, as per provisional figures. The company announced the provisional figures on Monday (2 April). Bharat Electronics reported profit-before-tax of Rs 1040 crore on provisional revenues of Rs 3960 crore. Exports during the year were at Rs 50.33 crore. The company, which manufactures defence electronics equipment, estimates its order-book position at Rs 9100 crore (as on 1 April 2007).
Bharat Earth Movers (BEML) dropped 5% to Rs 1008, after the company on Monday reported a mere 10% growth in profit-before-tax for FY 2007, with provisional results recording an all-time high turnover of Rs 2600 crore, a growth of 18% over the corresponding figure last year. BEML's profit-before-tax of Rs 315 crore recorded a growth of 10% over that of last year. The export sales stand at Rs 110.05 crore, BEML informed.
Clariant Chemicals India plunged 9.32% to Rs 285.90, after the stock turned ex-dividend today. The company had declared a whopping dividend of Rs 18 per share.
Pitti Laminations jumped 9.27% to Rs 65.40, as its board of directors will consider an issue of 2.40 lakh equity shares, at Rs 120 a piece, for promoters, on 11 April 2007.
All Asian markets were trading with gains, expcept Malaysia (down 0.05%). All European markets had advanced. The Nikkei average climbed 1.27%, as investors returned to shares of Advantest Corp., Honda Motor Co and other stocks, hit by the previous session's sell-off. The Nikkei climbed 215.64 points, to 17,244.05, recouping some of its 1.5% loss of Monday. The broad TOPIX index was up 1.30%, at 1,704.32.
The Hang Seng Index was up 0.97%.
US stocks ended higher on Monday, as a $26-billion buyout deal for credit card processor, First Data Corp., fueled optimism about valuations, countering worries about weak factory activity and turmoil in the housing market. The Dow Jones industrial average was up 27.95 points, or 0.23%, at 12,382.30. The Standard & Poor's 500 Index was up 3.69 points, or 0.26%, at 1,424.55. The Nasdaq Composite Index was up 0.62 points, or 0.03%, at 2,422.26.
Volumes were muted, when the Sensex had tumbled 617 points on Monday (2 April 2007) due to a surprise interest rate increase, rattling investors. The volume of 16.3 crore shares on BSE, on Monday, was much lower than the average daily volume of 21.85 crore shares during March 2007 and 31.31 crore shares during February 2007.
Lack of buying may keep the market sluggish in the near term. Institutional investors may remain on the sidelines ahead of the earnings season, which Infosys flags off by reporting Q4 numbers on 13 April 2007. Traders/operators may start building positions in individual stocks, based on expectations of Q4 results.
Oil prices dropped on profit-taking, as a volatile market appraised the continuing Britain-Iran standoff and the latest kidnappings in Nigeria. Light, sweet crude for May delivery fell 39 cents to $65.55 a barrel in electronic trading on the New York Mercantile Exchange. Prices had risen consistently since 15 British sailors and marines were detained on 23 March 2007, by Iran for allegedly entering its waters.
The cumulative value of India’s exports for April-February 2007, was $ 109126.78 million ($ 109 billion) or Rs.495347.28 crore against $ 88760.40 million ($ 88.7 billion) or Rs 393157.16 crore during the same period last year, a growth of 22.95%, according to the provisional data for merchandise exports available from Directorate General of Commercial Intelligence & Statistics (DGCI&S). Exports during February 2007, were valued at $ 9701.71 million (Rs 42841.09 crore) during February 2007, compared with $ 7834.49 million (Rs.34729.43 Crore) in February 2006.
The cumulative value of India’s imports during April-February 2007, was $ 164985.32 million (Rs 748440.60 crore), which was higher than imports at $ 126336.01 million (Rs.558992.18 crore) during April- February 2006. Imports during February 2007, were valued at $ 14362.69 million (Rs 63423.19 crore) compared with $ 11040.09 million (Rs.48939.50 Crore) in February 2006.
Crude oil imports were valued at $ 4061.40 million in February 2007, compared with $ 4109.96 million in the corresponding period last year, thus registering a negative growth of 1.18%. Crude oil imports during April- February 2007, were valued at $ 52673.46 million, which was 32.52% higher than crude oil imports of $ 39748.35 million in the corresponding period last year.
Non-oil imports were estimated at $ 10301.29 million during February 2007, which was 39.77% higher than growth on non-oil imports of $ 7370.07 million in February 2006. Non-oil imports during April-February, 2007 were valued at $ 112311.85 million, which was 25.67% higher than the level of such imports valued at $ 89370.42 million in April- February 2006. The trade deficit for April-February, 2007 was estimated at $ 55858.54 million, which was higher than the deficit of $ 37575.61 million during April- February 2006.
The major trigger for the market is FY 2008 (year ending 31 March 2008) guidance by IT bellwether Infosys, which will unveil its FY 2008 guidance along with Q4 March 2007 results, on 13 April 2007. In a recent pre-guidance report on Infosys, Merrill Lynch placed a short-term 'sell' on the Sensex heavyweight expecting a conservative guidance from the company due to an uncertain US economic outlook, the appreciation of the rupee versus the dollar and other client-specific issues. Merill Lynch expects Infosys to give an EPS growth guidance in the early 20s.
Australia's central bank meets today, with economists and traders predicting it will raise the benchmark interest rate either this week or next month to stem inflation
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