Market, Stock Views & Brokerage Recomendations
Buy BHEL: Prabhudas Lilladher
Broking house, Prabhudas Lilladher has recommended buy rating on Bharat Heavy Electricals, BHEL.
Prabhudas Lilladher report on Bharat Heavy Electricals:
We reiterate our BUY rating on BHEL, with a target price of Rs 2,633 (16x FY09E) implying a 18.9% upside from current levels. We expect BHEL to report earnings CAGR of 28% over FY07E-FY09E on the back of 27.8% revenue CAGR. At the CMP of Rs 2,255, the stock trades at 17.5x FY08E and 13.7x FY09E earnings of Rs 128.6 and Rs 164.6 respectively.
Current order backlog of Rs500bn represents nearly three years of sales based on our forecasts. As the market leader (market share of more than 60%) with significant cost advantages we believe BHEL will be a key beneficiary of increased investments in the sector. The reforms should result in more robust growth rates over the medium to long term for the company.
Highlights
We expect power orders to the tune of 35 – 40GW to be awarded over the next 24 – 36 months, totaling to Rs 150bn. We believe that BHEL would continue to garner an incremental 50% market share of these orders.
We believe that Chinese competition would not be a major area of concern to BHEL considering that BHEL manufactured equipment has a much longer life cycle.
Industry segment of the company has also shown substantial inflow of orders. The segment has depicted higher growth rates than the power segment with increasing margins.
The wage hike has taken effect from January 2007, however due to the incremental sales volumes and increasing turnover, BHEL would continue to show improvement in margins for the next few years.
=====================================================
Buy BEML; target of Rs 1352: HDFC Sec
Broking house, HDFC Securities has recommended buy rating on Bhart Earth Movers, BEML with a target of Rs 1352.
HDFC Securities report on Bhart Earth Movers
Huge growth potential from Metro Coaches
The company is modernizing and upgrading its Bangalore unit for the manufacture of metro coaches of international standards. It has entered into a joint venture with Rotem, South Korea, for the manufacture of critical aggregates, like bogie frames. It will also cater to global markets. The key driver would be the order flow from DMRC for its second phase, for which international bids have been sought. The order size could be around Rs. 15 bn for 312 coaches, to be made in two years from the date of the contract.
Healthy order book position
The company has a strong order book position of Rs. 21 bn spread over various segments, of which defence accounts for 55%. Its ‘Vision 2013’ aims to achieve Rs 50 bn during FY 2013-14, coinciding with its Golden Jubilee Year. We believe, there will be significant addition to the order book position, going forward, to accomplish this goal.
Venturing into Contract Mining
As a part of its diversification strategy, the company (45% partner) has tied up with Midwest Granites, India (46%) and Sumber Mitra Jaya, Indonesia (9%) for a contract mining JV. Its strategy is to garner mining work outsourced by CIL, NTPC and others.
Joint Venture in Brazil
BEML will invest Rs 1 bn in a 60:40 manufacturing joint venture in Brazil. It has signed an MoU with CCC (Compagnie Comercio E Construcoes) and plans to take over a factory outside Rio de Janeiro to manufacture rail wagons and coaches, mining & construction equipment and spares. This will help the company penetrate overseas markets. There is a growing demand in Brazilian and other South American markets, where mines are being expanded. There is also a market for wagons there. At the CMP of Rs. 1077, the stock is trading at 14.7x FY2008E EPS and 12.0x its FY2009E EPS. Thus, with a target P/E of 15x FY09E earnings, we are initiating coverage with a ‘BUY’ recommendation and a price target of Rs 1352 (an upside of 26.5%).
=====================================================
Buy Godrej Consumer; target of Rs 191: IL&FS
Broking house, IL&FS Investsmart is bullish on Godrej Consumer Products and has recommended buy rating on the stock with a target of Rs 191.
IL&FS Investsmart report on Godrej Consumer:
Better pricing power; Attractive valuations
Godrej Consumer Products (GCPL) is one of India’s leading players in the FMCG industry, operating mainly in soap and hair colour segments. During FY06-FY09E, GCPL’s sales and net profits are expected to increase by a CAGR of 24.0% and 24.8% respectively. GCPL’s net sales are estimated at Rs11.38bn in FY08 and Rs13.34bn in FY09 while net profits are estimated at Rs1.88bn and Rs2.36bn respectIvely.The stock is trading at a P/E multiple of 17.5x and 14x based on FY08 and FY09 earnings, respectively. It is one of the best bets in the FMCG sector as it is trading at a FY08E PEG of 0.5. We initiate our coverage on the stock with a ‘Buy’ rating.
Key Investment highlights:
Increasing market share in soaps:
GCPL has increased its market share in the soaps from 6.5% in FY04 to 9.2% in 9MFY07. We expect Godrej No.1 to continue driving the sales of the soaps division. We believe GCPL would be more aggressive in increasing prices, going forward; The division’s revenues are likely to grow at an 19.7% CAGR from FY06 to FY09E.
Hair colours on the growth path:
GCPL’s hair colour division is likely to register a 17.6% CAGR during FY06 and FY09E, supported by the company’s enhanced focus and better pricing power. The growth is likely to driven by the recent increase in product prices and higher growth in cream-based colours.
Synergies from acquisition of Keyline Brands (Keyline) and Rapidol:
GCPL would benefit from the synergies achieved from its acquisitions. Introduction of GCPL products, especially hair colour in the U.K. and S.A. markets, provides great opportunity for the company to drive growth in the international markets.
Valuations:
We expect GCPL to record EPS of Rs8.3 in FY08 and Rs10.4 in FY09. We expect ROCE of 68.8% and ROE of 78.8% in FY08. The stock is currently trading at a P/E multiple of 17.5x and 14x, based on FY08 and FY09 earnings respectively. We initiate a ‘Buy’ recommendation on the stock with a price target of Rs 191, an upside of 31% from the current levels.
=====================================================
Buy Bharti Airtel; target of Rs 980: Angel
Broking house, Angel Stock Broking is bullish on Bharti Airtel and has recommended buy rating on the stock with a 12 months target of Rs 980.
Angel Stock Broking report on Bharti Airtel:
Key Highlights
Stronger visibility of growth, aided by further favourable regulatory initiatives:
Bharti’s Airtel’s monthly subscriber additions have consistently improved in FY2007, with each month witnessing a higher number of additions than the previous month, with the exception of February 2007, which is in any case a shorter month. The TRAI move to cut the industry access deficit charge (ADC) by 38% in FY2008 is also another positive, which will drive increased minutes of use.
Upgrades in topline estimates:
We have upgraded our topline forecasts for Bharti for FY2007, FY2008 and FY2009 by 1.9%, 2.3% and 1.0% respectively, as the company’s reported ARPUs have fallen lesser than our estimates, as also stronger-than-anticipated performance of the other business segments, viz. Broadband & Telephone (B&T) and the Enterprise business.
Margin expansion stronger-than anticipated:
Bharti’s EBITDA margins have increased at a significantly faster-than-expected rate and in 9MFY2007, have soared to 39.7% (up 233bps YoY) on the back of strong operating leverage. We have raised our margin estimates for FY2007, FY2008 and FY2009 by 100bps, 290bps and 410bps respectively, leading to a strongly beneficial impact on the bottomline.
EPS upgrades:
For FY2007, FY2008 and FY2009, we have raised our EPS forecasts by 8.2%, 14.1% and 15.8% respectively on account of operating leverage benefits, leading to free cash flow generation earlier than expected.
Valuation
At the CMP, the stock trades at a P/E of 15.8x FY2009E EPS and an EV per subscriber of USD 342.6 on our FY2009E subscriber estimates. We maintain a ‘Buy’ on the stock with a revised 12-month target price of Rs 980.
=====================================================
Buy Aventis Pharma: ICICI Securities
Broking house, ICICI Securities is bullish on Aventis Pharma and has maintained buy rating on the stock.
ICICI Securities report on Aventis Pharma:
"Aventis Pharma registered 12% YoY decline in Q4CY06 recurring net profits to Rs 370 million, which was below our expectations. This was on account of lower-than-estimated EBITDA margin (which declined 796bps to 20.4% due to poor sales mix), rising staff costs (on account of larger field force) and higher other expenditure."
"The top line grew 14% to Rs2.2bn due to 9% rise in domestic sales on the back of strong performance by its core brands while exports, which declined in the past four quarters, grew 25% YoY to Rs 636 million on a low base. Potential upside from rich products portfolio outsourced by the company’s parent, Sanofi-Aventis (world’s third largest pharma company), and a strong position in the domestic market would help drive growth going forward. At present, the stock trades at CY07E P/E of 13.7x. Maintain BUY."
====================================================
Don’t buy Unitech at current levels
Ketan Karani of Kotak Securities is of the view that one should not buy Unitech at current levels.
Karani told CNBC-TV18, “We had a sell on Unitech at Rs 550, we are not that negative at Unitech as of date but we had sell at Rs 550 and we are not recommending a buy on Unitech as of date. There are two things which we should know from Unitech, the prices under its area of domain operations like Gurgoan are softening to some extent and the SEZ which they are planning in West Bengal at around 35000 acre SEZ would come under a cloud with the recent happenings in West Bengal. So these two things would definitely go negative against Unitech currently. Having said that the property stocks are making a rebound to some extent."
He further added, "But as far as Unitech is concern there would be other better opportunities available in the other sectoral companies rather than Unitech, which is a dominantly northern India, focus company and in both the areas where it plans to operate the prices are softening to some extent. Whereas Unitech Corporate Park, which is the subsidiary, listed in London, the last quarter results were definitely more from the point of view of transfer of projects to that company. So we believe that it would not be a buy at the current levels, but it’s one of the largest company listed in this country in this space. But we continue to be cautious and negative on the stock as of date.”
=====================================================
ACC will be a better stock to get in
Ketan Karani of Kotak Securities is of the view that from an investment angle Associated Cement Companies, ACC would definitely be a better stock to get in.
Karani told CNBC-TV18, “Cement has been in the news for almost all the wrong reasons and definitely since the January 2, since the import duty was zeroed on the cement imports, since then the entire cement sector has been in a negative trajectory. Recently, after the budget, the stocks have come down and are consolidating at current levels, if you look at the ground realities, the cement prices have not come down anywhere, that is a fact of life. We have done check on some of the sectors within the city of Bombay and other cities outside the state of Maharashtra also, which suggests that cement price have not come down anywhere and that is the positive sign as far as cement industry is concerned but what we see possibly is that there might be the thing, which is holding these stocks back or is not letting them participate them in the rally is that there is a possibility or a fear is there that some sort of a control might come on because it is leading to the inflation in a big way. So there needs to be a solution to this sector’s profitability as well as the requirement for controlling inflation but the fact is that the cement prices have not come down anywhere. So we do not see anything negative as far as the profitability or the profits are concerned for the immediate two-three quarters but having said that, the fear is that any sort of a control or any sort of pressure would be negative for this sector.”
He further added, “If you look at ACC in particular, the company has recently announced that it is going to increase the capacity from 20 million to 28 million in the next three year. They are putting 4,000 crore worth of investments and the growth of this country cannot be done without cements and steel and everybody has to be mature enough to see that the growth of the country is there and not only profit taking happens at one point of time. So amicable solution would be the best and that would lead the stock definitely higher from current levels.”
“Otherwise, at current levels, we see this stagnation phase continuing for sometime. But having said that, the stocks definitely would see profits and profitability growth going up at least in this quarter or probably next quarter unless and until the prices come down and as of date, the prices have not come down in reality anywhere. Even excise duty hike has been passed on; we would like to say that the price rise has been even higher to some extent in some areas than the excise duty rise. So definitely this looks a sector, which one should look at, a contrarian view would definitely be advisable at this level but going all out and investing in cement stocks at this level would not be a great thing to do but if someone is holding it from an investment angle definitely, cement stocks, particularly ACC would definitely be a better stock to be in.”
=====================================================
Hold Man Industries
Ketan Karani of Kotak Securities is of the view that one can hold Man Industries from long term investment perspective.
Karani told CNBC-TV18, "We do not track the pipe sector in a very big way. But definitely the sector has been in news from the point of oil discoveries and oil requirement worldwide. As oil is again boiling upto 64 the demand for oil related activities and pipes form a very important part of the industry. What Man Industries got was a Rs 1000 crore order from a US company and which is one of the largest order received. It is expanding its ajar capacities by adding 3 new lines. So, we see this kind of sector moving in tandem with the demand from oil and oil related activities."
He further added, "We believe it’s a good stock to hold on from a long term investment point of view. But the movement of oil price will decide somewhere the price earnings multiple for this stock, which is quite low compare to other midcaps stocks. So if one has bought stocks Rs 192 the prospects for this company as what the management has said and documents available are definitely better ones."
=====================================================
Stay away from sugar sector
Ketan Karani of Kotak Securities is of the view that one can stay away from sugar sector.
Karani told CNBC-TV18, "We continue to be negative on sugar. If one looks at the sugar scenario worldwide, eight out of ten countries are going to have best sugar production ever. The sugar is absolutely in glut worldwide and I do not think anything would be construed as, which will be rallying point for sugar prices in this country. So definitely, advise would be to exit only. A small Rs 10-20 bounce would not be doing any justice to the investor’s portfolio, it is important that one gets out and invest his money wisely.
He further added, "Even the recent news that some export has been allowed is not going to help all these companies in a very big way and if one looks at the prices, in international market, did come down after the incentives announced by the government of India or probably the incentives, which are going to come up. So definitely this move might only help some of the port base or southern-based sugar companies, rather than companies which we are discussing. So absolutely on an advisory point of view, sugar is untouchable. So we should remain away from that sector."
=====================================================
Hold IFCI: Karani
Ketan Karani of Kotak Securities is of the view that one should hold IFCI.
Karani told CNBC-TV18, “IFCI has been seeing very sweet and positive news for itself. During the Budget also it got some relief. The thing that they are going to be inducting a strategic partner would augur well for the company in the long run definitely. The partner would be coming at a better price than what has been valued at as of date also which is probable understanding that we have. The investor would be definitely being advised to hold on and wait for better gains and better prices.”
He further added, “But having said that the stock has run up from Rs 25-26 to about Rs 33-34 very fast, stock could consolidate to some extent. But definitely its worth waiting for the full price to be discovered in this stock. As a lot of its other assets which are written off are coming up for re-auction, renewing, we recently heard that some of the steel assets are being put on auction and the money would be issue by IFCI once they are sold. So definitely news is positive for the stock. The strategic investor, which could be a very strong point for IFCI in the longer run also, so this investor is advised to stay in the stock. Adding on to this, I don’t know at what price he would add on but the stock has definitely run up and would be advice to hold on.”
=====================================================
Mkts end in green, but experts advise wait & watch
It was yet another day of sluggish trade wherein the markets opened on a flat note and proceeded to trade rangebound amid extreme volatility. It was a quite day despite being F&O expiry date but gained some momentum during the late trade due to buying interest seen in the FMCG, Capital goods and IT stocks, however the banking, auto and metal stocks remained under pressure through the day and consequ managed to shut shop in green after three consecutive decline.
On Thursday, the Sensex gained 0.74%, or 95.32 points to close at 12979.66, while the Nifty was up 37 points, or 0.98% to close at 3798.1. About 1547 shares have advanced, 918 shares declined, and 69 shares remained unchanged.
The short-term volatility, according to Ajay Bagga, Chief Executive Officer, Lotus India AMC, is here to stay and believes, "earnings will really be the trigger now for whichever way the market moves." Going ahead, the key global cue according to him would be the US economy's slowdown. "Oil has become a very big factor," he said hinting at the eastern Afghanistan concerns over the amount of troops on the Pakistan border. Concerns over Iran acting irresponsibly can create volatility and translate into the other markets as well.
Bagga predicts "some more liquidity in the market" by next week as the government payment starts getting cleared, but wasn't sure whether that would translate into more money coming into the equity markets. According to Bagga, "this has been a market which has been moved more by the global cues rather than any domestic participation." He advises a "wait and watch" approach to see whether the markets will look for global cues.
As far as Sajiv Dhawan of JV Capital Services is concerned, "there is still a lot of nervousness, lot of caution; markets are slightly volatile over the intra-day period." He doesn't see the "bullish flavour" that has been missing for the last couple of weeks returning in a hurry, as everyone is now looking at macro and more fundamental issues, which may have been ignored by them a few months back.
Despite institutional inflows from FIIs and selling by domestic fund flows, Dhawan thinks "there is still lot of confusion globally and there is still enough negative voices out in the markets," to make investors nervous enought to go and stick with long positions.
=====================================================
Infosys Technologies has support at Rs 1970
Rahul Mohindar of Viratechindia is of the view that Infosys Technologies has support at Rs 1970.
Mohindar told CNBC-TV18, "There are couples of stocks where we still see the longer term trend intact despite the kind of correction we have seen. Majority of the IT stocks whether one looks at the gambit of midcap stocks, whether Mphasis or Rolta, one looks at the frontlines like TCS or Infosys, I think the long term trends are very much intact despite all the fears going around. But just to put some levels into perspective, we have got tremendous support at about Rs 1970 on Infosys, unless we close below those levels I don’t think we have reasons to panic. If one looks at stock like TCS, in fact any uptrend line that you draw fits in within the zone of Rs 1200-1170."
He further added, "So all these points are offering a lot of long term support and we are seeing the confidence in IT stocks at lower levels. The fall in this case has been mostly on the back of declining volume, so IT really looks like a space we would watch very carefully. Even for that matter telecom looks interesting where out top pick remains Bharti Airtel. We have been pointing out that above Rs 780 is where the major breakout comes in. I won’t be hesitant even going in for a longer term trade for a target of about Rs 850-860."
=====================================================
Balrampur Chini looks like a medium term play
Rahul Mohindar of Viratechindia is of the view that Balrampur Chini Mills looks like a medium term play.
Mohindar told CNBC-TV18, "Sugar as a space we have been looking at in terms of a buying opportunity, so I definitely see the kind of buoyancy in this entire sector. Sakthi Sugars has been kind of springing up over the last 2-3 trading sessions and I would expect that possibly this could go on for another couple of sessions. We expect the short to medium term to be quite good."
He further added, "But again looking at the kind of sudden upmoves it has made, the stoploss in such a stock are going to be high. So, keeping that in mind and keeping in mind that technically there has been a lot more bottoming out that Bajaj Hindustan or Balrampur has done, I would still look at those stocks in the sector, but it looks like a short to medium term play. Somewhere down the line one is going to get a 15-20% appreciation even in these stocks."
=====================================================
Exit Sobha Developers on rise
Rahul Mohindar of Viratechindia is of the view that one can exit Sobha Developers on rise.
Mohindar told CNBC-TV18, " If one looks at the current price, the kind of surged we have seen today, another Rs 30-40 is what we could possibly see in the short term. But possibly I would use the rally to move out of the stock, we would recommend an exit on an upmove. Our outlook on the space is negative and both with a short to medium term outlook it clearly seems to be that there is still much more damage to come."
=====================================================
Buy Ashok Leyland at Rs 34-35
Rahul Mohindar of Viratechindia is of the view that one can buy Ashok Leyland at Rs 34-35.
Mohindar told CNBC-TV18, "Broadly all the four wheeler, autos still look negative to us and that’s negative with the short term perspective. There is not too much of downside left. If one looks at Tata Motors today at Rs 710-720, we are looking at not too much downside, maybe one is looking at good support coming in at Rs 650-660. But keeping these levels in mind, I would definitely not short these stocks to make money in the short term but look at them testing their supports, giving us some consolidation formations and actually looking at an entry on a move down."
He further added, "Ashok Leyland is a definite short term buy at about Rs 35-34, I don’t see a downside much lower than that. Really the focus in these auto counters has to be towards the upside."
=====================================================
Hold Bajaj Hindustan with stoploss of Rs 155
Rahul Mohindar of Viratechindia is of the view that one can hold Bajaj Hindustan with stoploss of Rs 155.
Mohindar told CNBC-TV18, "Those who missed out getting in, possibly one would utilize today’s correction to get in to sugar stocks. We like sugar for a short to medium term again. Bajaj Hindustan has been a stock which we have been recommending and with Rs 155 stoploss, it is a good investment at these levels."
He further added, "With a focus on short to medium term that’s where the action will come in. Sakthi Sugars, I don’t think it would really be on the top of our list, but Bajaj Hindustan followed Balrampur Chini at these levels wouldn’t mind investing with a strict stoploss."
=====================================================
Stocks to watch: HLL, Bharti Airtel
It was yet another day of sluggish trade wherein the markets opened on a flat note and proceeded to trade rangebound amid extreme volatility. Buying interest was seen in the FMCG, capital goods and IT stocks, however the banking, auto and metal stocks remained under pressure through the day.
Among stocks to watch, technical analyst Rahul Modindar sounds positive about HLL and Bharti Airtel.
Here’s how technical analyst Rahul Mohindar views different stocks across the board:
On HLL:
Lever is definitely going to be moving up and our sense is that the stock would actually move to about Rs 225 on the short to medium term basis. We would recommend holding on to the stock with a Rs 190 stoploss and there is no harm if you take even a trading buy at these levels.
On Wockhardt, Ranbaxy:
The stock we actually like in pharma is Wockhardt and possibly there we are looking at about a 20% upside within three-six months timeframe.
But when we look at stocks like Ranbaxy, we don’t seem to see the same buoyancy or the same kind of breakouts on that. I think a stock like Ranbaxy is moving up almost from a four-five year low at Rs 300 and bouncing up. But we still don’t see the kind of volume it needs for a major long-term breakout.
On Bajaj Hindustan, Sakthi Sugars:
Bajaj Hindustan has been a stock, which we have been recommending and talking about. Rs 155 stop loss is a good investment at these levels. With a focus on short to medium term, that’s where the action will come in.
I don’t think Sakthi Sugars would really be on the top of our list, but yes, we won’t mind investing in Bajaj Hindustan followed Balrampur Chini at these levels with a strict stop loss.
On Ashok Leyland and Tata Motors:
Tata Motors moved through 2006-07 through a range of about 1000 on the upper side and 650 on the lower side. So if you look at it today, at Rs 710-720, we are looking at not too much downside and maybe a good support coming in at Rs 650-660.
But keeping these levels in mind, I would definitely not short these stocks to make money in the short term but look at them testing their supports, giving us some consolidation formations. I would actually look at an entry on a move down.
So be it Ashok Leyland, that’s a definite short term buy at about Rs 35-34, I don’t see a downside much lower than that.
On Sobha Developers:
I would possibly use the rally to move out of the stock. We would recommend an exit on an upmove. Our outlook on the space is negative and both with a short to medium term outlook, it clearly seems to be that there is still much more damage to come.
On Infosys:
Just to put some levels into perspective, we have got tremendous support at about Rs 1970 on Infosys. Unless we close below those levels, I don’t think we have reasons to panic.
On Bharti Airtel:
Our top pick in telecom remains Bharti Airtel. We have been pointing out that above Rs 780 is where the major breakout comes in. I won’t be hesitant even going in for a longer term trade for a target of about Rs 850-860.
=====================================================
Wockhardt has 20% upside
Rahul Mohindar of Viratechindia is of the view that Wockhardt has 20% upside within 3-6 months timeframe.
Mohindar told CNBC-TV18, "Pharma looks defensive and looking at the charts we don’t see a long term breakout coming in. The stock we actually like in pharma is Wockhardt and possibly there we are looking at about a 20% upside within a 3-6 month timeframe.
He further added, "When we look at stocks like Ranbaxy, we don’t seem to see the same buoyancy or the same kind of breakouts on that. I think a stock like this is moving up almost from a 4-5 year low at Rs 300 and bouncing up. But we still don’t see the kind of volume it needs for a major long term breakout."
=====================================================
Hold HLL with stoploss of Rs 190
Rahul Mohindar of Viratechindia is of the view that one can hold Hindustan Lever, HLL with stoploss of Rs 190.
Mohindar told CNBC-TV18, "HLL is definitely going to be moving up and our sense is that the stock would actually move to about Rs 225 on the short to medium term. We would recommend holding on to the stock with a Rs 190 stoploss and there is no harm if one takes even a trading buy at these levels. We certainly see that this is going to be a positive despite the different market situation."
=====================================================
Read More...
Summary only...
