Punjab National Bank
Reco Price: Rs 1,171,
Target Price: Rs 1,341
Punjab National Bank (PNB), which achieved total business of Rs 5,00,000 crore till December 31, 2010, is targeting business worth Rs 10,00,000 crore by CY2013. Over FY2006-10, the bank’s business posted a 22.4 per cent compounded annual growth rate compared to industry’s growth of 20.9 per cent CAGR over the same period. Post the recent correction, at the current market price, the stock is trading at 1.6 times 2011-12 Adjusted book value of Rs 745. Maintain Accumulate
—Angel Broking
JSW Energy
Reco Price: Rs 94,
Target Price: Rs 86
JSW Energy (JSWEL) has high exposure to rising international coal prices and the recent CIC Energy acquisition is unlikely to address the fuel concern in the medium term. Further, it faces increased execution-related concerns for some key projects such as Barmer. While project delays are hampering the capacity addition schedule, the existing projects would face the pain of rising coal prices (which rose 28 per cent in past two months) and falling merchant realisations coupled with lower utilisation for merchant-dedicated capacity. The size of investment in CIC acquisition (close to half a billion dollar coupled with $2-3 billion ensuing capex) considerably reduces JSWEL’s ability to make any further acquisition in short run to address fuel risk. Brokerages have cut FY11-13 earnings 10-13 per cent and reduce target price from Rs105/share to Rs 86/share. Maintain sell
—ICICI Securities
Gujarat State Fertilizers & Chemicals
Reco Price: Rs 334,
Target Price: Rs 357
Gujarat State Fertilizers & Chemicals (GSFC) got 17 per cent revenues from DAP in 2009-10. In industrial products segment, caprolactam contributed 50 per cent of the total revenues in 2009-10. Brokerages expect DAP revenue to grow at CAGR of 5 per cent during FY10-FY12 on the back of introduction of NBS policy by the government. Caprolactam revenue is expected grow at CAGR of 15 per cent due to increase in prices. After NBS policy, margins from the fertilizers segment had improved for the company. During the H1FY11, revenue has increased 13 per cent compared to H1FY10, whereas Ebit margin improved from 6 per cent to 18 per cent in the similar period. Analysts expect the Ebit contribution to increase from 46 per cent in 2009-10 to 54 per cent in 2011-12. GSFC’s revenue is expected to grow at CAGR of 8 per cent over FY10-12. However, PAT is expected to increase at a CAGR of 36 per cent during 2010-11 and 2011-12 on account of improvement in margin for both fertilizers and industrial products segment. Initiate coverage with accumulate
—Asit C Mehta
Confidence Petroleum India
Fair Value: Rs 19,
Current Price: Rs 17
Crisil Equities has assigned a fundamental grade of 3/5 to Confidence Petroleum India (Confidence), indicating good fundamentals. Confidence is well positioned to benefit from an expected increase in auto LPG demand. Its LPG cylinder manufacturing and bottling businesses are also expected to benefit from the government’s thrust to increase the LPG penetration in India. However, the timely execution of Confidence’s expansion plans for the ALDS remains a key challenge. Confidence is looking to raise funds through FCCB and any delay in this will affect the company’s growth plans. For 2012-13, Crisil Equities expects Confidence’s revenues to grow at a three-year CAGR of 38 per cent to Rs 1,450 crore and adjusted EPS to increase to Rs 3.7 from Rs 1.1 in 2009-10.
—Crisil Equities
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