Granules India (GRANUL)
Current Price: Rs 90
Target Price: Rs 150
Potential Upside: 67% Time Frame: 12 mths
Its US market strategy is on course and it received first ANDA approval for the anti diabetic, Metformin. The company plans to file for 4-5 more ANDAs in FY07. For Europe the company has recently entered into an agreement with Pharma Match.
With the commissioning of its tablet making plant in early 2007, Granules will become an integrated player. It has also done backward integration recently to lower the cost.
At the current price of Rs 95, the stock is trading 8.6x the FY07E EPS of Rs 11 and 3.73x the FY08E EPS of Rs 25.46.
PTC (POWTRA)
Current Price: Rs 57 Target Price: Rs 95
Potential Upside: 66% Time Frame: 12 mths
PTC is diversifying its business by entering into more stable long-term contracts with power producers and buyers. Currently short-term contracts account for 80% of its traded volume.
Many industrial consumers have set up captive power plants for their own use. PTC is trying to tap excess power from this source and trade it.
At the current price of Rs 57, the stock trades at 9.70 x FY09 earnings and at an EV to EBIDTA of 3.54x.
Birla Power (BIRYAM)
Current Price: Rs 34 Target Price: Rs 55
Potential Upside: 62% Time Frame: 12 mths
Birla Power is foraying in manufacture of higher range KVA gensets, which would enable it to cater to high-value institutional customers and export demand.
It is setting up a new plant for manufacturing LPG/CNG gensets, inverters, engines and acoustic hoods in Uttaranchal. This would reduce its dependence on traded products and boost margins. The plant will be located in Uttaranchal and will enjoy tax exemptions for five years.
At current price of Rs 34, the stock trades at 6.37x FY08E earnings and 3.30x on an EV/EBITDA basis.
JK Cement (JKCEME)
Current Price: Rs 184 Target Price: Rs 293
Potential Upside: 59% Time Frame: 12 mths
JK Cement's high operating cost is set to decline in 2007 when its ongoing capex on captive power plant is complete in April 2007 whereby it would save around Rs 76 crore in FY08 onwards.
On an EV/tonne basis, JK Cement is quoting at $87.41 per tonne, which is the lowest compared to the deals that have happened recently ($150-$200 per tonne). At the target price, the stock would be valued at an EV/tonne of $117, which is still at a considerable discount to the market.
Banswara Syntex (BANSYN)
Current Price: Rs 74 Target Price: Rs 110
Potential Upside: 49% Time Frame: 12 mths
Savings in power cost to the tune of Rs 16.7 crore on account of installation of a new 18MW power plant to boost bottom line. Focus on valued-added products like fabrics and garments
to improve operating margin from 12.4% in FY06 to 16.2% in FY08E.
Strong improvement in margins would enable the company to report a 76% CAGR in net profit over FY06-FY08E from Rs 9.26 crore to Rs 28.82 crore. The stock is available at 3.4x its FY08E earnings of Rs 21.93.
Kale Consultants (KALCON)
Current Price: Rs 123 Target Price: Rs 173
Potential Upside: 41% Time Frame: 12 mths
Kale's earnings visibility over the next 4-5 years is strong as the company's addressable order book is Rs 360 crore for the period. Moreover the strategic shift from a licensing model to a transaction based one gives it more sustainable revenues.
We expect Kale to record an EPS of Rs 12.85 for FY09E. We have valued the company using the DCF methodology, which gives us a price target of Rs 173, an upside of 41% from the current levels.
Rolta India (ROLIND)
Current Price: Rs 261 Target Price: Rs 328
Potential Upside: 26% Time Frame: 12 mths
Rolta India is on a strong footing to capture the opportunities arising out of investments to the tune of $350 billion in the infrastructure space and is increasing its headcount by 66% with a capex of Rs150 crore per year for the next two years to meet this opportunity.
The stock trades at a P/E of 9.5x its FY08E. We have assigned a conservative multiple of 12x based on its historical valuations. At the target multiple the stock would trade at Rs 328 giving us an upside of 26%.
Sangam India (SANIND)
Current Price: Rs 95 Target Price: Rs 120
Potential Upside: 26% Time Frame: 12 mths
Capacity expansion of PV yarn and PV fabrics and its entry into cotton yarn to de-risk business to drive sales CAGR of 46% over FY06-FY08E to Rs 745.58 crore from Rs 346.78 crore.
Improvement in operating margin from 17.2% in FY06 to 19.5% in FY08E to enable the company post robust Net Profit CAGR of 54% over FY06-FY08E to Rs 58.72 crore from Rs 24.78 crore. The stock currently is quoting at 6.2x its FY08E earnings of Rs 15.1 and we expect it to quote at a P/E of 8x its FY08E earnings.
NIIT (NIIT)
Current Price: Rs 512 Target Price: Rs 614
Potential Upside: 20% Time Frame: 18-24 mths
NIIT is seeing strong traction in its existing business lines and is expected to derive synergistic benefits from its recent acquisition of Element K. The company has also entered new complimentary business lines, which could add significant value over time.
The stock currently trades at Rs 512, which discounts FY08E EPS of Rs 35.3 by 14.4x. We rate the stock an Outperformer with a price target of Rs 614 over the next 18 to 24 months.
Reliance Capital (RELCAP)
Current Price: Rs 621 Target Price: Rs 730
Potential Upside: 15.55% Time Frame: 12 mths
Huge opportunity to book unrealised gains on equity book.The unrealised gains on FY06 quoted equity portfolio comes to Rs 2598 crore, which equals Rs 106 per share of RCL.
Significant value accretion from subsidiaries. Its general and life insurance business is expected to more than double each year and AMC business generating huge profits. RCL is expected to launch its stock broking business very soon under brand name "Reliance Money" in a big way. At current price of Rs 610, the stock is available at 2.7x its FY08E BV and 26.4x its FY08E EPS of Rs 22.7.
Shree Cements (SHRCEM)
Current Price: Rs 1,431 Target Price: Rs 1650
Potential Upside: 15% Time Frame: 12 mths
Shree Cements is further ramping up capacity by 1.2 mtpa after the recent expansion of 1.2 mtpa.The new capacity will become operational by Sept 2007.
The company has the highest EBIDTA margins in the cement industry, which is expected to show strong growth on account of favourable pricing environment in the northern region.
We value the stock at a 15% discount to ACC and Gujarat Ambuja's EV/tonne ($ 245), which works out to US$208 for Shree Cement.
Centurion Bank of Punjab (CENBN)
Current Price: Rs 31 Target Price: –
Potential Upside: – Time Frame: 12 mths
Despite lower CASA at 33%, the bank has maintained its net interest margin (NIM) of 4.7%. We expect NIMs to remain firm above 4%. Net profit rose 49% y-o-y in Q2FY07 to Rs 31.2 crore and FY06 net profit stood at Rs. 87.80 crore.
Asset quality has been improving consistently. Net NPAs declined to 1.3% from 2.6% in Q2FY06. We expect net NPAs to remain between 1.2% to 1.3% during the next couple of years. At the current price of Rs.30, the stock trades at 3x its FY08E ABV post merger.
Current Price: Rs 90
Target Price: Rs 150
Potential Upside: 67% Time Frame: 12 mths
Its US market strategy is on course and it received first ANDA approval for the anti diabetic, Metformin. The company plans to file for 4-5 more ANDAs in FY07. For Europe the company has recently entered into an agreement with Pharma Match.
With the commissioning of its tablet making plant in early 2007, Granules will become an integrated player. It has also done backward integration recently to lower the cost.
At the current price of Rs 95, the stock is trading 8.6x the FY07E EPS of Rs 11 and 3.73x the FY08E EPS of Rs 25.46.
PTC (POWTRA)
Current Price: Rs 57 Target Price: Rs 95
Potential Upside: 66% Time Frame: 12 mths
PTC is diversifying its business by entering into more stable long-term contracts with power producers and buyers. Currently short-term contracts account for 80% of its traded volume.
Many industrial consumers have set up captive power plants for their own use. PTC is trying to tap excess power from this source and trade it.
At the current price of Rs 57, the stock trades at 9.70 x FY09 earnings and at an EV to EBIDTA of 3.54x.
Birla Power (BIRYAM)
Current Price: Rs 34 Target Price: Rs 55
Potential Upside: 62% Time Frame: 12 mths
Birla Power is foraying in manufacture of higher range KVA gensets, which would enable it to cater to high-value institutional customers and export demand.
It is setting up a new plant for manufacturing LPG/CNG gensets, inverters, engines and acoustic hoods in Uttaranchal. This would reduce its dependence on traded products and boost margins. The plant will be located in Uttaranchal and will enjoy tax exemptions for five years.
At current price of Rs 34, the stock trades at 6.37x FY08E earnings and 3.30x on an EV/EBITDA basis.
JK Cement (JKCEME)
Current Price: Rs 184 Target Price: Rs 293
Potential Upside: 59% Time Frame: 12 mths
JK Cement's high operating cost is set to decline in 2007 when its ongoing capex on captive power plant is complete in April 2007 whereby it would save around Rs 76 crore in FY08 onwards.
On an EV/tonne basis, JK Cement is quoting at $87.41 per tonne, which is the lowest compared to the deals that have happened recently ($150-$200 per tonne). At the target price, the stock would be valued at an EV/tonne of $117, which is still at a considerable discount to the market.
Banswara Syntex (BANSYN)
Current Price: Rs 74 Target Price: Rs 110
Potential Upside: 49% Time Frame: 12 mths
Savings in power cost to the tune of Rs 16.7 crore on account of installation of a new 18MW power plant to boost bottom line. Focus on valued-added products like fabrics and garments
to improve operating margin from 12.4% in FY06 to 16.2% in FY08E.
Strong improvement in margins would enable the company to report a 76% CAGR in net profit over FY06-FY08E from Rs 9.26 crore to Rs 28.82 crore. The stock is available at 3.4x its FY08E earnings of Rs 21.93.
Kale Consultants (KALCON)
Current Price: Rs 123 Target Price: Rs 173
Potential Upside: 41% Time Frame: 12 mths
Kale's earnings visibility over the next 4-5 years is strong as the company's addressable order book is Rs 360 crore for the period. Moreover the strategic shift from a licensing model to a transaction based one gives it more sustainable revenues.
We expect Kale to record an EPS of Rs 12.85 for FY09E. We have valued the company using the DCF methodology, which gives us a price target of Rs 173, an upside of 41% from the current levels.
Rolta India (ROLIND)
Current Price: Rs 261 Target Price: Rs 328
Potential Upside: 26% Time Frame: 12 mths
Rolta India is on a strong footing to capture the opportunities arising out of investments to the tune of $350 billion in the infrastructure space and is increasing its headcount by 66% with a capex of Rs150 crore per year for the next two years to meet this opportunity.
The stock trades at a P/E of 9.5x its FY08E. We have assigned a conservative multiple of 12x based on its historical valuations. At the target multiple the stock would trade at Rs 328 giving us an upside of 26%.
Sangam India (SANIND)
Current Price: Rs 95 Target Price: Rs 120
Potential Upside: 26% Time Frame: 12 mths
Capacity expansion of PV yarn and PV fabrics and its entry into cotton yarn to de-risk business to drive sales CAGR of 46% over FY06-FY08E to Rs 745.58 crore from Rs 346.78 crore.
Improvement in operating margin from 17.2% in FY06 to 19.5% in FY08E to enable the company post robust Net Profit CAGR of 54% over FY06-FY08E to Rs 58.72 crore from Rs 24.78 crore. The stock currently is quoting at 6.2x its FY08E earnings of Rs 15.1 and we expect it to quote at a P/E of 8x its FY08E earnings.
NIIT (NIIT)
Current Price: Rs 512 Target Price: Rs 614
Potential Upside: 20% Time Frame: 18-24 mths
NIIT is seeing strong traction in its existing business lines and is expected to derive synergistic benefits from its recent acquisition of Element K. The company has also entered new complimentary business lines, which could add significant value over time.
The stock currently trades at Rs 512, which discounts FY08E EPS of Rs 35.3 by 14.4x. We rate the stock an Outperformer with a price target of Rs 614 over the next 18 to 24 months.
Reliance Capital (RELCAP)
Current Price: Rs 621 Target Price: Rs 730
Potential Upside: 15.55% Time Frame: 12 mths
Huge opportunity to book unrealised gains on equity book.The unrealised gains on FY06 quoted equity portfolio comes to Rs 2598 crore, which equals Rs 106 per share of RCL.
Significant value accretion from subsidiaries. Its general and life insurance business is expected to more than double each year and AMC business generating huge profits. RCL is expected to launch its stock broking business very soon under brand name "Reliance Money" in a big way. At current price of Rs 610, the stock is available at 2.7x its FY08E BV and 26.4x its FY08E EPS of Rs 22.7.
Shree Cements (SHRCEM)
Current Price: Rs 1,431 Target Price: Rs 1650
Potential Upside: 15% Time Frame: 12 mths
Shree Cements is further ramping up capacity by 1.2 mtpa after the recent expansion of 1.2 mtpa.The new capacity will become operational by Sept 2007.
The company has the highest EBIDTA margins in the cement industry, which is expected to show strong growth on account of favourable pricing environment in the northern region.
We value the stock at a 15% discount to ACC and Gujarat Ambuja's EV/tonne ($ 245), which works out to US$208 for Shree Cement.
Centurion Bank of Punjab (CENBN)
Current Price: Rs 31 Target Price: –
Potential Upside: – Time Frame: 12 mths
Despite lower CASA at 33%, the bank has maintained its net interest margin (NIM) of 4.7%. We expect NIMs to remain firm above 4%. Net profit rose 49% y-o-y in Q2FY07 to Rs 31.2 crore and FY06 net profit stood at Rs. 87.80 crore.
Asset quality has been improving consistently. Net NPAs declined to 1.3% from 2.6% in Q2FY06. We expect net NPAs to remain between 1.2% to 1.3% during the next couple of years. At the current price of Rs.30, the stock trades at 3x its FY08E ABV post merger.
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