Religare assigns buy to ITC for Rs 220 target

Religare Capital Markets has valued the ITC stock on a SOTP basis and has a 'buy' rating with a target price of Rs 220.


ITC has reported losses of Rs 120 crore in other FMCG business in Q1FY09. In the hotels business, ITC expects growth in the mid-teens. This growth will come form higher ARRs since occupancy levels are expected to remain stagnant at 65 per cent. Margins for paper and paperboards will improve. ITC current trading at a P/E of 18 times and 15.2 times and an EV/EBITDA of 12.1 times and 10.1 times its FY09E and FY10E earnings respectively. The stock is currently trading at Rs 174.

The ban on smoking in public places has been in place in India since November 2001, when it was enforced by the Supreme Court. The new enforced from October 2, 2008 merely extends coverage of the ban to private offices, hotels, pubs and airports. About 70 per cent of the cigarettes sold in India are loose and used in non-public places. The volume of cigarettes smoked in hotels and private offices is miniscule and thus, the new smoking ban is unlikely to have a material impact on ITC's cigarette volumes.

ITC hiked cigarette prices by 5-15 per cent in August 2008. The hike covered 60 per cent of its total portfolio with a weighted average price increase of 6 per cent.

The brokerage expects a 3 per cent volume de-growth in Q2FY09 in line with that in Q1FY09.

Source: EconomicTimes

Merrill Lynch puts 'buy' on Reliance Inds

Reliance Inds
cmp: Rs 1,649.60
target price: Rs 2,910

Merrill Lynch has retained its “buy” rating on the stock, saying it expects the 2-year earnings per share (EPS) CAGR in FY08-FY10E to be 40%. “RIL has one of the strongest earnings growth in our global universe.

KG D6 oil and gas and RPL refinery will be main earnings drivers. RIL’s valuation is compelling now at 8.5 times on FY10E EPS and PEG of 0.21 times,” said Merrill Lynch in a note to its clients.

According to Merrill Lynch, positive news flow on exploration and production (E&P) in terms of discoveries and reserves accretion is likely to continue for the company. “RIL is scheduled to drill in at least three highly prospective blocks (KG D6, KG D9 and Mahanadi D4) in the next 12 months,” said the Merrill note.

Source: EconomicTimes

LKP Research puts 'buy' on Plastiblends

Plastiblends
cmp: Rs 122.05
target price: rs 220

LKP Research has initiated a coverage on the stock with a “buy” rating, saying it expects a 25% compound annual growth rate(CAGR) growth in net profits over the next three years for the company, driven by a 27% growth in revenues over the same period.

According to the brokerage, despite being a small-cap company with a market capitalisation of only Rs 900 million, Plastiblends has not tapped the capital market since its IPO in the early nineties and given its strong balance sheet and robust cash flows.

It does not expect any equity dilution by the company, going forward, as it would be able to fund its expansion plans comfortably through internal accruals.

“Given the scalability of the business and the return on investments(RoI), we believe that PIL is well placed to achieve critical mass in master batches during the next three years and the stock trading at three times FY11E (estimated) with a dividend yield of 5% is an exciting small-cap pick,” said LKP in its note to its clients.

Source: EconomicTimes

Goldman Sachs puts 'sell' on Reliance Power

Reliance Power
cmp: Rs 137.55
target price: Rs 115

Goldman Sachs Global Investment Research has initiated coverage on the stock with a “sell” rating, saying the current market price does not fully reflect the risks entailed in the timely execution and profitability of the company’s 28.2GW capacity addition plan.

“Back-ended capacity addition entails high risks on account of execution, fuel security, funding and realised tariffs — all of which can significantly alter forecast profitability and cash flows,” said Goldman Sacs in a note to its clients. According to the firm, the company’s projects aggregating 2,900 MW capacity (excluding hydro) has not achieved a single milestone.

Therefore, the stock has a 25% potential downside from its current market price. However, the firm believes, as projects achieve various milestones, the target price for the stock would rise. “When commissioned, the company’s target capacity addition (including hydro) would have a healthy fuel mix and geographic spread to meet both base-load and peak-load power requirements across regions.

Source: EconomicTimes

Economic meltdown will hit realty sector hard

The deadly global financial slowdown will have a very deep impact on the realty sector in India, which is already fighting a desperate battle.

Realty sector watchers are of the view that the slowdown will carry a double edge impact to it. One, as big-ticket banks, financial institutions and companies are pruning their staff, the market will lose some of the possible buyers of new houses.

And, secondly, the affluent NRI community will have second thoughts about property purchases here in India.

According to an official of Assocham, it is most unlikely that companies in India will start hiring people in a big way in the next one year or so. It goes without saying that it will impact the realty sector and it won’t find many buyers for high-end apartments.

P K Jain, vice president of PNB Housing Finance Limited, feels that the ripple effect of the US financial crisis is going to hit the Indian market as well. “We were expecting good times for it during this season between Diwali and New Year. Now we are not so sure about that,” he says.

Source: EconomicTimes

Good time to slowly start buying

On Friday, while the ticker tape blinkered in red, certified financial planner Gaurav Mashruwala was working the phone all day, reassuring his clients.

His advice : If there is no change in your fund requirements in the immediate future, then just sit tight.

However, if you are in one of two situations, you should get out of the falling markets, says Mashruwala.

First, if you have an outstanding loan. You don’t need to be losing money while simultaneously paying high interest rates.

The second, if you have speculated in penny stocks, it is time to cut your losses and jump if your’e lucky.

Satyam banned from offshoring work with World Bank: Report

Software major Satyam Computer Services has reportedly been banned from doing any off-shore work with the World Bank after forensic experts and bank investigators discovered that spy software was covertly installed on workstations inside the bank's Washington headquarters, allegedly by one or more contractors from Satyam Computer Services.

According to a FOX News report, apart from Satyam, two IP intrusions have been reported from China, and there have been six intrusions in all.

Investigators say that the software, which operates through a method known as keystroke logging, enabled every character typed on a keyboard to be transmitted to a still-unknown location via the Internet.

Upon its discovery, bank officials shut off the data link between Washington and Chennai, where Satyam has long operated the bank's sole offshore computer center responsible for all of the bank's financial and human resources information.

"I want them off the premises now," World Bank President Robert Zoellick reportedly told his deputies. But at the urging of CIO De Poerck, Satyam employees remained at the bank as recently as October 1 while it engaged in "knowledge transfer" with two new India-based contractors.

Source: EconomicTimes