Bharat Electronics, Dishman Pharmaceuticals, Dish TV & GSFC
Bharat Electronics
Reco Price: Rs 1,662,
Target Price: Rs 2,200
Bharat Electronics (BEL) will be a major beneficiary of rising electronic spending for modernisation of India’s armed forces. The order traction remains strong, with the current book at Rs 16400 crore and is expected to rise to Rs 18000–19000 crore by the fiscal-end. The robust project pipeline would help sustain the order book over the next 2–3 years. BEL’s Q3 performance was largely in line and analysts expect Q4 to be a strong quarter which could act as a share price trigger in the near term. BEL reported Q3FY11 revenues of Rs 1370 crore, up 11 per cent YoY. EBIT margins came in at 14 per cent, down from 22 per cent last year. Strong cash generation and a solid cash balance provide adequate downside support. Maintain buy.
— Religare Institutional Research
Dishman Pharmaceuticals
Reco Price: Rs 102,
Target Price: Rs 123
Dishman Pharmaceuticals (Dishman) reported lower-than-expected results for 3QFY2011 impacted by the poor performance of Carbogen Amcis, currency movement and rising material costs. The management expects revenues to remain flat, margins to remain under pressure owing to which net profit would decline in FY2011. Going forward, excluding Carbogen Amcis, the company has guided a 15 per cent top-line growth for FY2012. The research house has lowered its estimates due to the slower-than-expected recovery in the CRAMS segment as well as the time lag required for restructuring of Carbogen Amcis. Management expects a flat performance in FY2011 on the top-line front, with a decline in net profit as margins are expected to be under pressure. However, we expect net sales and net profit to come in at Rs 1,045 crore and Rs 77.3 crore respectively, in FY2012. However, the stock has corrected and at current levels factors in most of the negatives. Maintain buy.
— Angel Broking
Dish TV
Reco Price: Rs 59,
Target Price: Rs 77
Dish TV is set to tap most of the exponential growth in the Indian Pay TV market (akin to telecom growth), led by rising affluence and regulatory push to digitalisation. India is evolving towards direct-to-home (DTH) as digital cable has failed to rise up to the challenge owing to poor funding and execution, and last mile concerns. Dish TV, after making a head start backed by the first-mover advantage, has been able to maintain its incremental market share as it has aggressively invested in subscriber acquisition. In our view, Dish TV will turn free cash flow positive positive in FY13 and net profit positive in FY14, with its revenues growing 3x through FY11E-15E. Our target price assumes an upside of 31 per cent from the current levels – a further upside of 27 per cent (Rs16/share) exists if the licence fee is reduced to 6 per cent as proposed. The DCF based target price assumes an EV/sub/ARPU of 40 times FY13E, in line with global peers. Initiate with buy.
— ICICI Securities
GSFC
Reco price: Rs 335,
Target price: Rs 530
Higher caprolactam and lower benzene prices have improved spread (contribution margin) increased from $1,260/mt in January 2010 to $1,850/mt by Dec 2010. Caprolactam prices increased further by 25% to $3,480 / mt till February 2011 (over Q3FY11 average price at $ 2,790/mt). With benzene prices up by 20% to $1,150 / mt (over Q3FY11 average of US$ 960 /mt), this spread has further increased to US$ 2,330 /mt against Q3FY11 average of US$ 1,830 / mt Feb’2011 The current all time high caprolactam prices are unlikely to sustain. It has a buy recommendation on the stock with price target of Rs 530, implying 51% upside. The stock trades at compelling valuations of FY12E P/E of 5x and EV/EBITDA of 2x. Further P/BV of 0.9x (FY12E) estimated book value of Rs 390 a share and per share investment value of Rs 120 protects downside risk.
— Emkay Global
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