Wednesday, May 4, 2011

Analysts' corner Bse NSe Stock

Gujarat Gas Company, Corporation Bank & Sadbhav Engineering

Reco price: Rs 375,
Target price: Rs 481

Gujarat Gas Company Limited (GGCL) reported a year-on-year growth of 29 per cent in revenues at Rs 530 crore, primarily due to better realisation during the quarter. The results were more than the estimates, mainly on the back of higher volume growth across segments and better realisation in the industrial and CNG segment. During the quarter, gas sales volumes increased by 4.2 per cent YoY to 303mmscm. The company reported a net profit of Rs 73 crore, an increase of 17.3 per cent on a YoY basis. Higher cost of RLNG dragged down EBIDTA margin by 443 basis points to 20.6 per cent. Emkay research has upgraded its EPS estimates for CY11 and CY12 from Rs 22.4 to Rs 23.1 and from Rs 24.5 to Rs 26.4 respectively. In the long term , RLNG is expected to be a continuing feature in the company’s gas sourcing mix which will ease supply concerns of the company but it would face margin pressure due to high cost. However, change in the business mix would provide cushion to the profitability and margins. Maintain buy.

—Emkay Research

Reco price: Rs 580
Target price: Rs 718

Corporation Bank’s Q4FY11 earnings were mixed. A very strong credit growth of 37.4 per cent YoY and a lagging deposits growth of 25.9 per cent YoY led to margin pressure – NIMs fell 23 basis points QoQ to 2.48 per cent. This led to a NII growth of 29.2 per cent YoY. Other income was buoyed by strong recoveries from written-off accounts, while cost-income ratio was higher at 40.4 per cent as the bank provided Rs 75 crore for retired employees and Rs 55 crore for servings second pension optees in Q4 FY11. Maintain buy.

 —ICICI Securities

Reco price: Rs 143
Target price: Rs 173

Sadbhav Engineering registered a robust Q4 FY11 by clocking revenue growth of 129 per cent YoY at Rs 1,050 crore (highest ever quarterly rate) driven by an enhanced execution pace across its own in-house road projects. Despite a compression of 322 bps YoY in OPM to 8.7 per cent, owing to the changing revenue mix in favour of lower margin irrigation projects (EBIDTA at 6-8 per cent) and cost escalations on EPC work of Mumbai Nasik project, operating profits rose by 66.9 per cent YoY to Rs 91 crore. Maintain buy.

—Elara Capita        

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