Saturday, 4 October 2008

Analysts' picks: NTPC

CMP: Rs 171.85
Target price: Rs 208

Goldman Sachs Research has initiated coverage on the stock with a ‘buy’ rating, saying NTPC’s business model entails a high degree of earnings visibility with core business consistently yielding 20% plus return on equity (RoE).

“NTPC scores well as a defensive growth option. It has the lowest risk to funding amongst its peers, competitive cost of generation, RBI guarantee for payment realisation from its customers (financially-constrained SEBs) up to FY2016 and inexpensive valuations,” said Goldman Sachs Research in a note to its clients.

The firm expects the company’s net profit to grow at a compounded annual rate of 7.3% between FY2008 and FY2011E (estimated) on the back of a 30% growth in wholly-owned commercial generation capacity over this period.

“Net income growth would rise progressively over the next three years, as we expect around 45% of the 7,760MW of commercial capacity addition over this period only in FY2011E,” the note said.

Source: EconomicTimes

Analysts' pick: Reliance Petroleum

Reliance Petroleum
CMP: Rs 143.40
Target price: Rs 115

Brics Securities has downgraded its rating on the stock from neutral to ‘underperform’ saying it sees no margin of safety at the current price.

“We are lowering our FY09-12(estimated) EPS estimates for RPL after factoring in lower GRM (gross refining margins) and a weaker rupee. Our forecast for lower GRMs is based on the deteriorating outlook for the global oil refining industry,” said the broking house in a note to its clients.

The outfit has revised its GRM estimates downwards on the back of worsening fundamentals for the oil refining industry due to large capacity additions, weakening demand growth and increasing complexity of new refineries.

“These factors will result in lower capacity utilisation for refineries and reduce the advantage enjoyed by complex refiners. FY09E earnings are also negatively affected by lowering of our throughput estimates by 19.5% to 7.6 mmt (million metric tonne) due to a later start-up than our expectation,” the note added.

Source: EconomicTimes

Global meltdown weighs heavy

Sensex ends 529 points lower after crashing to a low of 12,526 during intra-day trades.

A sell-off in Asian markets followed by that in the European markets sent the Sensex tumbling over 580 points for the day. The market opened in the red at

12,900, down 156 points, tracking a sharp fall in the US and Asian indices and touched the day's low of 12,473 on relentless selling in metal, oil & gas and consumer durable (CD) stocks. The metal index closed 7% down, as investors turned negative on the sector amid fears of global credit squeeze. Sensex finally closed with a loss of 4.05% or 529 points at 12,526 and Nifty shed 132 points to close at 3,818.

The market breadth was extremely negative. Of the 2,644 stocks traded on the BSE, 1,924 stocks declined, whereas 669 stocks advanced. Fifty one stocks ended unchanged. All the sectoral indices were battered. Among the major losers, the BSE Metal lost 7.01%, BSE Oil & Gas dropped 5.74%, BSE CD shed 4.24%, BSE Bankex declined by 3.88% and BSE Teck fell 3.39%.

Of the 30 stocks of the Sensex only three closed in the green. Among the major losers Tata Steel plummeted by 10.22% at Rs393.80, ICICI Bank tanked by 8.51% at Rs504.50, Sterlite Industries dropped 7.84% at Rs395.75 and Reliance Industries slumped 7.84% at Rs1760. Tata Power crumbled by 6.13% at Rs888.50, HDFC shed 5.57% at Rs2081.55 and Reliance Infrastructure slipped 5.15% at Rs741.25. Larsen & Toubro at Rs1,158.45, Infosys Technologies at Rs1,390.95, Bharti Airtel at Rs756.45, Reliance Communications at Rs333.20, DLF at Rs336.40, Tata Motors at Rs756.45 and Tata Motors at Rs330.70 shed over 2-4% each.

Metal stocks lost heavily. Jindal Steel tumbled by 11.37% at Rs1,151.20, JSW Steel shed 9.68% at Rs410.65, Sterlite Industries lost 7.84% at Rs395.75 and Sesa Goa declined by 7.44% at Rs108.20. The Oil counters too bore the brunt and fell sharply. Aban Offshore, Cairn India, Gail India, Reliance Natural Resources Ltd (RNRL), Essar Oil, Reliance Petroleum Ltd (RPL), ONGC and OIL shed over 2-7% each.

Over 1.23 crore shares of Cals Refineries changed hands on the BSE followed by RNRL (1.04 crore shares), IFCI (0.67 crore shares), Chambal Fertlisers and Chemicals (0.51 crore shares) and RPL (0.49 crore shares).

Source: Sharekhan

Tatas pull out of Singur; to look at Nano relocation

'Extremely painful’: Mr Ratan Tata, Chairman of the Tata Group, addressing a press conference after meeting the Chief Minister of West Bengal, Mr Buddhadeb Bhattacharjee, in Kolkata on Friday. —

Tata Motors on Friday took the “extremely painful” decision to pull its Nano project out of Singur in West Bengal. The company’s decision was prompted by the “heightened level of agitation and hostility by the Opposition parties led by Ms Mamata Banerjee.”

Addressing newspersons after a meeting with the West Bengal Chief Minister, Mr Buddhadeb Bhattacharjee, the Chairman of the Tata Group, Mr Ratan Tata, said there had been considerable agitation at the project site since end-August. The company’s staff, vendors and contractors had been being intimidated and assaulted.

“Through the last two years, we have faced enormous disruptions, intimidations and there have been instances of assault. The safety of our contractors, vendors and workers is my responsibility,” Mr Tata said.

“You cannot run a plant with police protection, you cannot run a plant when bombs are being thrown, you cannot run a plant when workers are being intimidated,” he said, adding that the company was forced to take a decision to move the project out of West Bengal in the absence of a congenial environment in the State.

“I am extremely pained. The decision has shattered many dreams that we had. But we are doing what we are doing because we think that it right,” he said. Asked if he would reconsider his decision if Ms Banerjee withdrew her agitation forthwith, he said: “It is not good for someone to vacillate back and forth.”


Mr Tata declined to divulge where the Nano project — along with the ancillary companies — would be relocated. He only said there were offers from 3-4 State Governments and the company would soon take a call on relocating the Nano project as the company had a deadline to meet and keep promises made to the public. The company would accommodate those people who had been provided skills training here in the relocated Nano plant.

Asked if competitors were behind those opposing the Nano project, Mr Tata said that, given the scale of the agitation, “it makes me wonder where the logistics and arrangements have come from.”

Mr Tata reiterated time and again his faith on the State Government’s policies to facilitate industrialisation and said West Bengal was a “terrific State” and had the potential and people to develop and prosper. “West Bengal needs investments, infrastructure and jobs for its people.” Agitations, fasts and rallies were not congenial to investments, he added.

The State Government said the main Opposition party had played a destructive role in pursuit of its own political interests.

Ms Mamata Banerjee dubbed the Tatas’ decision as a “political game plan” of the State Government and the Tatas. She demanded that the land acquired for the project should now be returned to the farmers.

Source: Hindu Business Line

Maruti Suzuki has target of Rs 725: V Sharma

VK Sharma of Anagram Stock Broking is of the view that Maruti Suzuki has target of Rs 725.

Sharma told CNBC-TV18, "It’s the most competitive industry in the cars segment because of early Indianization of all its things. Also the fact that the raw material price which have been a worry for this sector, they have shown some respite, steel prices have come down 27% from their highs. This price reduction in raw material will not have an immediate impact because companies tend to source their raw materials quite in advance, from that perspective probably from the next quarter onwards we could see this getting into the bottom line."

He further added, "Maruti Suzuki also plans to double its exports in the current year and also the new model; A-Star would be introduced this month, which overall makes the company look quite good as compared to other stocks in this segment. Because uncertainty lies ahead, my target is not more than Rs 725 on the stock."

Source: Moneycontrol

Accumulate Kotak Bank at Rs 550-490: Manghnani

Anil Manghnani of Modern Shares & Stock Brokers is of the opinion that one can accumulate Kotak Mahindra Bank between Rs 550-490.

Manghnani told CNBC-TV18, "If any fall maybe because there is only a 20% limit is to what FIIs can buy in PSU banks that’s why there is not so damage in the fact that they are trying to exit pretty much everything. But still I would say any rally in this market will be led by the PSU banks but since they haven’t corrected maybe the upside seems to be limited at least from the trading point of view for this month. We have gone with Kotak again; with the market making new lows. Probably in the banking sector; the private banking ICICI Bank is the only worrying; one that continues to make new lows whereas the other three whether HDFC Bank, Axis Bank and Kotak are not cracking as fast as ICICI Bank. So probably they are still safer banks to trade in. I think Rs 550-490 is a broad range to accumulate Kotak in this fall with a target of Rs 618 and in a bigger move if there is a sharp bounce to about Rs 708 with a stoploss below Rs 485."

Source: Moneycontrol

JP Associates can test Rs 140-150: Baliga

Ambareesh Baliga of Karvy Stock Broking is of the view that Jaiprakash Associates can test Rs 140-150.

Baliga told CNBC-TV18, "A bounce back could possibly take Jaiprakash Associates to Rs 140-150 levels but I do not think we will ever see at least in the near future price of over Rs 200-250. But when we are talking of realty stocks quite a few of infrastructure stocks, I will not say JP Associates as a clear infrastructure stock as they have realty, power and cement. But there is a difference between the infrastructure stocks and the realty stocks because infrastructure stocks have an upper hand because our economy is infrastructure starved. We can also argue that we have a housing starved economy also but housing starved area is basically the low cost housing where most of our players are not interested. The area where they are operating we have an oversupply whereas there is low supply as far as the low cost housing is concerned."

Source: Moneycontrol

Buy Cairn India at lower levels: Bose

Technical Analyst, Rajat K Bose is of the view that one can buy Cairn India at lower levels. Unless Rs 185 is broken at lower levels, one will see some buying interest coming back as it has lot of support there, he added.

Bose told CNBC-TV18, "Cairn India has got a lot of support between Rs 196-185 kind of level unless Rs 185 is broken at lower levels, you will see some buying interest coming back. On the other hand, unless it actually moves above Rs 220 decisively, you won’t see much of a rise here as well. So at lower levels, you may think of buying it again. Since you have on the one hand, the oil-marketing companies on the other hand, Cairn India now I would say if you have to go long focus on oil-marketing companies rather than Cairn India because I feel until November 4, oil would not be showing much of a strength."

Source: MoneyControl

Market is in very cautious mood

Technical analyst, Vishwas Agarwal while commenting on the market said, ``Market is in very cautious mood, people are facing lot of panic fall which is not from their side but from FII selling pressure. The domestic investors and mutual fund are losing trust and conviction in the equity markets both for trading and investments.``

``This scene has developed due to the US fiancial market crisis, as US companies own part of our equity. It is very unfair that stakeholders in one country are ruling the entire world equity markets. I feel this will not continue for a long time, in India. FIIs are holding 15% to 25% stake of our equity where we are owning 75% stake and they are making the rules,`` said Agarwal.

Agarwal further added, ``In this situation our corporate performance is not so bad as market is showing. Indian stock markets mainly behave on sentiments rather than fundamentals. I will not suggest buying or selling stocks, but will still believe happy days will be back.``

Source: - MyIris

Buy Bharati Shipyard; tgt Rs 351: P Lilladher

Prabhudas Lilladher has recommended a buy rating on Bharati Shipyard, with price target of Rs 351, in its report dated September 25, 2008.

"On account of the company's capex progressing at a slower than expected pace, we are reducing revenue estimates by 17% and 19% for FY09 and FY10, respectively and PAT estimates by 12% and 14%, respectively. However, at CMP, the company's valuations look attractive at 5.2x FY09 and 3.7x FY10 with subsidy and 8.5x FY09 and 5.7x FY10 without subsidy. We rate the stock BUY with a price target of Rs 351," says Prabhudas Lilladher's report.

Source: Moneycontrol

Accumulate ABG Shipyard; tgt Rs 367: P Lilladher

Prabhudas Lilladher has recommended a buy rating on ABG Shipyard, with price target of Rs 367, in its report dated September 25, 2008.

"The company is expected to report an EPS growth of 49.7% CAGR over FY09 and FY10. On the basis of P/E, the stock trades at 7.8x FY09 and 4.9x FY10 with subsidy and 10.4x FY09 and 6.2x FY10 without subsidy. On account of the reduction in estimates we are reducing our target price to Rs 367. This is based on 9x FY09 and 5.6x FY10. We rate the stock Accumulate," says Prabhudas Lilladher's research report

Source: Moneycontrol

Buy Cadila Healthcare, target of Rs 422: Emkay Global

Emkay Global Financial Services has recommended a buy rating on Cadila Healthcare with a target of Rs 422 in its September 30, 2008 research report. "At CMP of Rs 310, the stock is available at discounts (30%) to its peers like Lupin, Biocon and Piramal Healthcare. Moreover, it has been investing significantly on its NCE research (Rs 516 million in FY08), for which it is not getting any value. Adjusting the NCE expenditures, the stock is trading at 9.2x FY10E EPS of Rs 33.8. We initiate our coverage with a "BUY" rating at a target price of Rs 422 (upside of 36%)," says Emkay Global Financial Services' research report.

Source: MoneyControl

Reduce HCL Tech, target of Rs 235: IIFL

IIFL has recommended a reduce rating on HCL Technologies with a 12 month target of Rs 235 in its September 29, 2008 research report. "We expect HCL Tech’s offer of 650p/share for Axon to elicit a counterbid from Infosys. Should this trigger a bidding war, it could significantly increase the premium over the initial price. Recent acquisitions of Corus by Tata and of Repower by Suzlon happened at 35-45% premiums over initial bid prices."

"At Axon’s median 1-year-forward PER, the eventual winner-Infosys or HCL Tech would have to offer 720p, or 20% more than the initial bid. At the initial price, we estimated the acquisition was just about earnings-neutral for Infosys. However, with the price likely to be higher now, the acquisition would likely be earnings dilutive for both the firms, Reduce, 12 month target of Rs 235," says IIFL's research report.

Source: MoneyControl

Buy Aban Offshore; tgt Rs 3868: Emkay Global

Emkay Global Financial Services has maintained its buy rating on Aban Offshore, with a price target of Rs 3868, in its report dated October 3, 2008.

"Although the day rate for DD3 at $ 167000 is lower than our expectation of $ 180000, keeping in mind the long term nature of the contract we believe it’s a fair day rate. At current levels, Aban is discounting its FY2010E earnings by 4.2X, which is a significant discount to the valuations commanded by global drilling majors. However, we believe that Aban’s valuation does not adequately capture Aban’s steeper earnings growth of 123% CAGR as compared to 17% CAGR for its global peers and its superlative RoE of 48% as compared to 24% for global peers. At 4.2X FY2010E earnings, Aban’s valuations are extremely compelling and it more than adequately factors possible softening in Jack up day rates. We continue to believe that the global offshore drilling industry fundamentals are still robust and believe that Aban is the best pick among domestic players. We maintain our BUY recommendation on the stock with a price target of Rs 3868," says Emkay Global Financial Services' report.

Source: MoneyControl

India witnesses unforeseen liquidity tightening: Emkay

According to Emkay Global Financial Services' report, Indian money markets have seen unprecedented tightening of liquidity over last one month. The average daily repo injection over last three weeks has been in excess Rs 600 billion (Rs 822 billion for week ended October 3,2008), highest ever in last eight years.

Emkay Global Financial Services' report:

Indian money markets have seen unprecedented tightening of liquidity over last one month. The average daily repo injection over last three weeks has been in excess Rs 600 billion (Rs 822 billion for week ended October 3,2008), highest ever in last eight years. The yields and spreads on corporate bonds have touched their high over similar period. Even companies with strong parentage like National Housing Board (100% sub of RBI) has recently raised money at rates in excess of 12%+.

Source: Moneycontrol

DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. The author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and that you confirm the facts on your own before making important investment commitments.