Citigroup - Thermax, Vardhaman Textiles

Citigroup in their report on Thermax say,

Raising target price to Rs604 — We are raising our target price on the back of earnings revision of 2-13% over FY08E-10E. We now expect an EPS CAGR of 31% and ROEs of 35-40% over FY07-10. We maintain our target P/E of 20x FY09E.

Play on power and industrial capex — We think Thermax is in a sweet spot given: 1) India’s captive power capacity is set to grow by 63% in the next five years; and 2) Industrial capex is expected to grow 181% in FY06-10 driven by strong demand and peak capacity utilizations. Thermax remains one of our top picks in the Electrical Equipment and Engineering space.

Citigroup in their report on Vardhaman Textiles say,

Results below expectations — 4QFY07 revenues grew 9% YoY with yarn growing
at 12% and fabric at 10%, but earnings (before extra-ordinaries) declined 25%
YoY due to EBITDA pressures and high depreciation on back of new expansions.

Maintain Buy, but lowering target to Rs260 — We expect thrust on vertical integration, growth in thread business post de-merger to reduce dependence on yarn. Factoring this, higher ROEs (14%) vs. sector 11% and stock at compelling looking valuations of 6.5x FY08E P/E at 23% discount to sector – we maintain Buy (1L) with lower target of Rs260 on 8.4x FY08E P/E, at par with sector.