House Chitter Chatter - May 28 2007

SSKI maintains OUTPERFORMER on BHEL as they believe valuations are
attractive.

Kotak PCG recommends HOLD on Suzlon Energy with a target of Rs 1500. In
their report, they say at the EPS estimate of Rs.49.2 in FY08 and Rs.66.1 in FY09, the stock is trading at 28x and 21x FY08 and FY09 estimates, respectively. The impact on the revenues of Suzlon from the acquisition would be marginal in FY08. Suzlon deserves to be re-rated because it is in the forefront of technology in wind power. The company also has an edge over other wind power majors in terms of control over wind power components like gear box (which is currently facing a supply crunch). The stock had a very sharp re-rating on Friday, rising 22% in a single day itself.
Kotak retains their HOLD rating on the stock with an enhanced price target of Rs.1500.

Kotak PCG recommends BUY on BHEL, Bhel's audited results are close to the provisional results it had earlier reported for FY07. For the quarter, the company has reported a 33% rise in earnings. Bhel continues to focus on its growth
strategy and endeavors to maintain its dominant market share in
installing power generation capacity in India. The company has doubled
its turnover over the last three years and plans to reach US$10 bn by
2011-12 from US$4.25 bn currently. The record date fixed for the purpose
of 1:1 bonus is June 1, 2007. Kotak reiterates the BUY call with a price target of Rs.2850.

ENAM puts UNDERPERFORMER on Suzlon Energy with a target of Rs.1100

CLSA maintains UNDERPERFORM on ITC with a target of Rs.150


Kotak Institutional in their report on ITC say "ITC reported 24.5% net sales growth, 15.9% EBITDA growth and 14.7% PAT growth during 4QFY07 against our expectation of 8.9%, 16.9% and 11.5% respectively. ITC retained growth momentum across businesses—cigarettes, FMCG, hotels etc reporting high double-digit revenue growth. However, EBITDA growth lagged the sales growth due to faster revenue growth in low margin agri-commodity business. We believe that a robustbusiness environment (both in urban and rural markets) will likely help ITC in maintaining cigarette volumes despite a hefty 20-24% price hike being taken to recover the higher incidence of excise (increased by 6%) and introduction of VAT at 12.5%. Several state governments have issued the notification for levy of 12.5% VAT on cigarettes. We retain our OP rating on the stock with DCF based target price of Rs215/share."

Kotak Institutional maintains Outperform rating on the Mothersun Sumi with our SOTP target price unchanged at Rs120. This is based on a DCF value of Rs107 for MSSL
stand-alone and Rs13 for value in key subsidiaries at 12X contribution to FY08 EPS.

Kotak Insitutional maintains Outperformer on IPCA with a target price of 800, and say "We expect net profit growth of 20% for the next two years, on the back of
18% revenue growth. Focus is on branded sales (emerging economies) and a low cost
structure—maintain OP."

Kotak Institutional recommends Inline on HDFC and retain IL rating with target price of Rs1,550.

Kotak Institutional on Suzlon Energy say "Suzlon Energy has announced a cooperation agreement with Areva to end the bidding war. As per agreement Areva would vote along with Suzlon (providing voting control) while Areva gets option to exit after one year. Accelerated volume growth, integration of complementary product portfolio and R&D and component availability for Repower would provide synergy benefits. We estimate that Repower acquisition is marginally value destructive but strategic benefits such as European presence and offshore technology overweighs such concerns. Deferred payment structure moderates near term impact on Suzlon's balance sheet and creates window of opportunity to complete the committed capital expenditure before payouts to Martifer and Areva. We maintain our outperform
rating on the stock on back of (a) increasing government support for renewable energy across the globe and (b) Suzlon's positioning to leverage those opportunities to gain further market share. Sharp 19% appreciation has led to attainment of our price target of Rs1,390/share, however, we believe that there would be further upside when we reset our target price on FY2009 basis. Key catalysts would be (a) capacity expansion plan, (b) visibility of synergies and consolidation of stake in Repower (c) order inflows building visibility for FY2009 and FY2010. Key risk for this deal includes the fact that the price of Areva's exit is not fixed and another bidder may queer the pitch of Suzlon."

Kotak Inst have a target price of 420 for Indiainfoline

Kotak Inst have a target of 400 for ABG Shipyard