Nestle, Indraprastha Gas, IOC, CBoP, Gokaldas

ENAM recommends OUTPERFORMER on Nestle

We believe Nestlé India has a significant intrinsic value (~Rs 2056 per share) and value unlocking will unfold in stages on successful introduction of brands / products from its parent¿s global portfolio and an improvement in its existing portfolio¿s reach and affordability in the rural markets. At CMP (Rs.1143) Nestlé India is currently trading at P/E of 24x CY08E and EV/EBITDA of 14x CY08E, close to its long-term one-year forward valuations. Given the growth momentum and EBITDA margin (pre provisions) expansion in Q1CY07, we believe the company has the potential to positively surprise consensus growth expectations in the interim term. We maintain sector Outperformer rating on the stock.


ISEC recommends BUY on Indraprastha Gas

IGL reported impressive 35% YoY growth in Q4FY07 recurring net income to Rs401mn, the best ever quarterly performance. Recurring net income was 11% higher than our estimates on the back of higherthan- expected volumes and margins. The company's growth prospects are bright based on accelerated conversion of private vehicles to CNG and incremental demand of 1,000 CNG buses due to Commonwealth Games in '10. Valuations are attractive as the stock has fallen 14.1% YoY and has underperformed the BSE-200 45% in the past one year. Maintain BUY.

ISEC on Indian Oil Corporation

Indian Oil (IOC) reported recurring net income of Rs29bn in Q4FY07 as against Rs8bn in Q4FY06. The impressive 262.5% YoY growth was post pro-rata adjustment of oil bonds worth Rs65.7bn issued to IOC in Q4FY06 for full FY06. However, reported net income at Rs16.1bn was down 60.1% YoY. Overall, fall in crude prices reduced gross underrecoveries, which, along with the surprise increase in subsidy relief through upstream sharing and oil boosted IOC¿s performance. Further, the healthy outlook on refining margins and expected reforms on cooking fuel subsidies is a key positive for IOC. Added drivers include the impact of the company¿s petrochemicals business (paraxylene, PTA) and the upside from oil & gas finds from IOC¿s E&P assets. The stock rose 13.2% QoQ, outperforming the Sensex 7.7% QoQ based on the benign subsidy sharing scheme implemented by the Government. The stock is currently trading at FY07 P/E of 8.3x.

ENAM on Centurion Bank of Punjab

Our FY08 numbers take into account the LKB merger, Bank of Muscat preferential allotment and a part of warrants conversion by Sabre Capital. This will keep the reported ROE low, but the ROA will likely be maintained at 0.8%. Given that valuations at 3.6x FY09E are rich, the stock may underperform in the short term. However, along with the strong growth prospects and high execution capability, the bank is also a strong takeover candidate post 2009. Hence, valuations are
likely to remain high in the coming years. Maintaining our sector Outperformer rating on the stock.

ENAM on Indraprastha Gas

In our view, market is largely ignoring IGL¿s business franchise, itsability to manage the costs and seems to be concerned on the impactregulations. However, at current valuations (9.8x FY08E EPS), theconcerns seem to be overdone, making it one of the mostinexpensive stock in oil & gas universe. We maintain our sectorOutperformer rating on the stock.

Merrill Lynch on Gokaldas Exports

Valuations at 10x FY08E PER, look undemanding, being at the lowest end of thehistoric PE band (12-15x). However, with expectations of an earnings slowdown inFY08, these multiples may just about be right, for now. We note that impendinglabor reforms and the big domestic opportunity remain as key long term growthdrivers for Gokaldas. However, in the absence of any near term triggers and theoverhanging concern on Re appreciation, we maintain our Neutral rating