Coal India, Cipla, Anant Raj Industries & Heidelberg Cement
Coal India
Reco Price: Rs 333,
Target Price: Rs 395
Coal India (CIL)’s coal price hike announced in end-Feb 2011 should impact 32 per cent of its total volumes (excluding e-auction and washed coal). Analysts now expect an overall yoy realisation increase of 20 per cent in FY12 (versus 10 per cent earlier). The timing and the quantum of the hike have surpassed market expectations. The new structure implies 14 per cent hike (constant volumes) in overall realizations – while analysts incorporate 20 per cent assuming higher e-auction/washed coal prices (on global trends). While relaxed pollution norms/project approvals are likely, benefits should come only by FY13 – with a lag effect for subsequent approvals. Besides production, evacuation of coal is an issue. Production volumes are expected to be 431mt in FY11 (flat yoy) and 447mt in FY12 (up 4 per cent yoy). Citigroup has raised FY12 net profit estimate by 20 per cent to incorporate higher prices and higher wage expenses. It has also hiked target price to Rs 395 from Rs 350.
—Citigroup
Cipla
Reco Price: Rs 306,
Target Price: Rs 342
Cipla’s FY11 performance was adversely affected by a stronger rupee, lower licensing revenues and high set-up costs in the new Indore facility. The low base, combined with the ramp-up at Indore, sets the stage for a pick-up in growth in FY12— IIFL expects a 20 per cent-plus earnings growth in FY12 and FY13. The business is expected to bottom out in the current quarter and IIFL has reduced its EPS estimate for FY11 by 5 per cent, but has maintained its estimate for FY12 while raising that for FY13 by 7 per cent. There could be further potential upsides from the possible Pfizer deal and combination-inhaler launches in Europe. Analysts expect the pressure of adverse rupee movement and a high licensing revenue base to ease in FY12. Management projects the Indore facility will account for 10 per cent of FY12 revenues, which results in a 25 per cent increase if added to the international formulations business.The low pace of growth in the domestic business remains a key concern. Upgrade the stock to Add.
—IIFL
Anant Raj Industries
Reco Price: Rs 73,
Target Price: Rs 130
Anant Raj Industries (ARCP), which historically focused on commercial leases, has now moved towards residential projects which will help it grow earnings by 35 per cent CAGR during FY11-13. Analysts are positive on the company as rental revenue is estimated to increase by 60 per cent YoY in FY11 to Rs 80 crore and Rs120 crore in FY12 on operation of Kirtinagar mall by April’11 and Tricolour Hotel on NH8. Further, it has started to earn residential revenue and expects to launch over 3 msf in FY12. It expects to complete 2.85msf of IT space by FY13. Delay in leasing Manesar IT park, Kirtinagar mall,and Rai IT park may dent profitability. Initiate coverage with Buy.
—Pinc Research
Heidelberg Cement
Current price: Rs 34,Target price: Rs 44
Heidelberg Cement India (HCIL) has cement capacity of 3.07 mn TPA. With the improvement in the pricing scenario as well as cost reduction, operating profit/tonne for HCIL is expected to improve by 43.5 per cent. Major markets for HCIL saw price rises since the beginning of CY11. This increase in prices has been due to curtailed production and pricing discipline followed by cement manufacturers. Analysts believe cement prices across all regions will increase further due to demand improvement as the January-to-May period remains a busy season for various construction activities. With the recovery in cement prices as well as the reduction in energy cost, operating profit per tonne is expected to improve by 43.5 per cent from Rs 364 to Rs 525. Maintain Buy.
—Reliance Securities
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