Friday, January 7, 2011

Analysts' corner Bse Nse Stock

Religare Enterprises
Fair Value: Rs 470,
Current Price: Rs 464

Crisil Equities has assigned fundamental grade of 4/5 to Religare Enterprises (Religare) indicating superior fundamentals. Religare is establishing itself as a global financial services player, offering emerging market focused investment banking services and global asset management products. It has quickly scaled up its international business through opportunistic acquisitions. Religare holds a strong financial position with a low gearing of 2.1x in 2009-10. Crisil Equities expects Religare’s revenues to grow at a two-year compound annual growth rate (CAGR) of 51 per cent to Rs 3,500 crore in 2011-12. EPS is expected to be Rs 0.9 in 2010-11 and Rs 18.9 in 2011-12.

—Crisil Equities

Union Bank of India
Reco Price: Rs 341,
Target Price: Rs 391 
During September quarter, Union Bank of India posted strong growth in net interest income of 78 per cent y-o-y while operating profit (excluding treasury gains) grew by 59 per cent y-o-y. Loan loss provisioning dampened the net profit declining 40 per cent y-o-y as the bank provided for one off slippages of Rs 419 crore on account of agri loan relief waiver scheme and Rs 300 crore on account of three accounts that turned non performing assets. The management has revised its deposit growth guidance by 200bps down to 20 per cent and RoAA to 1.17 per cent from 1.25 per cent earlier. However, it is confident of achieving 25 per cent credit growth in this financial year. The management is targeting 3.1 per cent NIM for 2010-11, a 39 bps y-o-y margin improvement during 2010-11. Analysts expect a better December quarter for the bank primarily on the back of strong volume growth, healthy fee income growth and lower loan loss provisioning which will boost its profitability. Maintain buy.

—KR Choksey

Jindal Saw
Reco Price: Rs 195,
Target Price: Rs 291

Jindal Saw (JSL) has inked a 30 years iron ore mining lease agreement with the Rajasthan Government. The mines are estimated to have reserves of 180 mt and are expected to boost the Ebitda margins of the company’s ductile iron (DI) pipes by Rs 5,600/mt (Rs 3,500/mt for iron ore) via backward integration. The company is in the process of setting up a beneficiation plant at a capex of Rs 160 crore to improve the mine’s average iron ore content from 45 per cent to 66 per cent. The DI plant will utilise 0.6 mmtpa by 2012-13, which will enhance JSL’s Ebitda run rate by Rs 300 crore by 2011-12 end. The company has also guided for an overall Ebitda margin of 22 per cent. Upgrade to buy from hold.

—Edelweiss Securities Limited

Prism Cement
Reco Price: Rs 52,
Target Price: Rs 66

Robust demand and superior realization to benefit from the next cement up-cycle by leveraging on its recently concluded capex taking its capacity to 6.6 mn tonnes. Significant ease in input cost (2012-13 onwards) will boost margins. Captive coal mine and reduced power tariff rates (power surplus due to estimated 17,000 Mw), to cause quantum leap in profitability in a scenario of increasing input cost. Acquisition of RMC and TBK business with ROCE’s of over 15 per cent would provide a strategic route to market for cement business whose extensive network can be used to further nurture RMC & TBK businesses. Maintain buy.

—ENAM Securities Direct

Praj Industries
Reco Price: Rs 87,
Target Price: Rs 116

Praj Industries has entered into a strategic partnership with the US-based Qteros for accelerated development and commercialisation of process development package (PDP) for cellulose-based ethanol. The CBP platform based on the Q Microbe delivers an ethanol production process that is efficient, flexible and scalable . By choosing this technology partner, Praj has taken another step towards commercial exploitation of its work done so far on second-generation biofuels. However, there will not be immediate gains from this strategic tie-up and the company may have to face significant headwinds before the tie-up bears fruit. The stock is a buy as revival in demand from US and South East Asia, better demand in India and non-ethanol initiatives like waste water treatment and customised engineering will keep the company on a high growth path over the next 3-5 years. Maintain buy.

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