Electrosteel Castings  (ECL)

• CMP: Rs 55/ TP: Rs 72/ Upside: 32%
• Rationale: ECL is venturing into steel-making through its subsidiary Electrosteel Integrated (EIL), which is setting up a 2.2 million ton steel plant expected to be commissioned by FY2012E. Further, ECL plans to list EIL to raise ~Rs 3 billion, which is likely to unlock value for ECL. EIL has already filed the DRHP and IPO is expected over the next one month. ECL`s backward integration initiatives through allocation of coking coal mines are expected to result in expansion of EBITDA Margin by 1,304bp over FY2009-12E. The company is also awaiting final environmental clearance for its iron ore mine, which will further lower costs, but has not been factored in its estimates.  It recommends `Buy` on the stock, valuing the core business at 8x FY2012E FDEPS and its investments in the steel business at 1x Book Value.

Finolex Cables

• CMP: Rs.59/ TP: Rs.85/ Upside: 44%
• Rationale: Finolex Cables is poised for a strong growth over the next few years, owing to entry in the verticals of high tension (HT) and extra high voltage (EHV) cables and market share expansion in the existing low tension (LT) cables segment.  The rapid ramp up of production at the Roorkee plant has already started delivering results. The company has further increased the capacity at this plant by 50%. The proximity to the growing North Indian markets and tax benefits from this plant are expected to boost the turnaround of the company. Company`s derivatives losses are expected to decline going ahead. By FY2012, these losses are estimated to decline to Rs 240 million from Rs 760 million in FY2010. Angel believes attractive valuations of 6.2x FY2012E EPS and 1.1x FY2012E BV provides a good entry point for investors. It has valued the stock at 9x FY2012E EPS which result into target price of Rs 85.

JK Tyre & Industries

• CMP: Rs.185/ TP: Rs.237/ Upside: 28%
• Rationale: Given the shortage of radial tyres in the Trucks & Buses Segment, the company is set to fully utilize its enhanced capacity, and that too at higher realizations (70% of India`s total truck/bus radial tyre production), driving strong earnings growth and improving RoEs.  Further, the Tornel acquisition turned  profitable in FY2010, aided by the restructuring exercise implemented by the company. The stock is available at attractive valuations of 3.9x FY2012E EPS and hence it recommends Buy. At its target price of Rs 237, the stock would trade at 5x, 3.3x and 0.8x FY12E EPS, EV/EBITDA and P/BV, respectively.

Taj GVK Hotels

• CMP: Rs 163/ TP: Rs 240/ Upside: 47%
• Rationale: Robust growth in foreign tourist arrivals (9.8% growth during January to July 2010 v/s -7.6% in the corresponding period last year) and increased domestic tourist activity is enabling hoteliers to foresee promising outlook going ahead.  Signs of improving demand are visible with occupancy rates improving substantially to ~64-65% in 1QFY2011 and Average Room Rates (ARR) expected to rise by 10-15% since October 2010. Considering the revival in demand happening in business destinations like Hyderabad and Chennai, where TAJGVK has presence, we expect the company to be a significant beneficiary in the coming quarters. Moreover, in comparison to its peers, the  stock trades at attractive valuations of Rs 10 million FY2012E EV/Room and 13.4x FY2012E EPS. Assigning a target PE multiple of 20x, it recommends a Buy on the stock with a target price of Rs 240.

Anant Raj Industries

• Current Market Price: Rs 138/ Target Price: Rs 178/ Upside: 29%
• Rationale: Almost all of ARIL`s land bank (872 acres) is exclusively located in the NCR within 50km of Delhi, with approximately 525 acres in Delhi. This land bank has been acquired at an historical average cost of Rs300/sq ft. It expects ARIL`s residential projects to drive its near-term operational visibility and help register Rs 6 billion profit over the next three years. ARIL recently launched tworesidential projects in NCR; Kapashera (0.28mn sq. ft.) and Manesar (1mn sq. ft.) for Rs 5,000/sq. ft. and Rs 2,500/sq. ft., respectively. Management has indicated that it has entirely sold Kapashera project and ~50% of Manesar project. Further, it expects ARIL`s Manesar and Kirti Nagar properties to reach their peak occupancy levels in 6��”9 months as leasing activity improves coupled with five hotels getting operational by FY2011E. Consequently, we expect ARIL to report rental income of Rs201cr in FY2012E as compared to Rs 490 million reported in FY2010. ARIL is trading at a 34% discount to its NAV. The stock is trading at 10.0x FY2012E EPS and 1.0x FY2012E P/BV and hence it maintains a `Buy` on stock with a target price of Rs178 (15% discount to its one-year forward NAV).

Dishman Pharma

• CMP: Rs 198/ TP: Rs 279/ Upside: 41%
• Rationale: Dishman has incurred organic capex of Rs 3 billion in the last three years towards expansion of existing facilities at its Bavla unit and building the China and HPAPI facilities. Post all these facilities coming on-stream FY2011E onwards, Dishman would strengthen its ties with the global innovators leading to stable revenue flow over the long run. Further, revenues from the Abbott-Solvay contract, which constituted 13% of FY2010 Sales, have also started normalizing. Also, the Carbogen Amics (41% of FY2010 sales) is expected to witness an uptrend in FY2011. Overall, the company has guided towards 20% growth in Top-line for FY2011E.  Dishman is currently trading at attractivevaluations of 9.2x FY2012E earnings. It has valued the company at 13x FY2012E earnings resulting into a target price of Rs 279.

IVRCL Infra

• CMP: Rs.158/ TP: Rs.216/ Upside: 37%
• Rationale: IVRCL has a robust order book of Rs 232.75 billion (4.3x FY2010 revenues) which lends revenue visibility. Robust order booking over last few quarters has ensured that its dependence on AP orders have come down significantly (from 28% to current 17%). IVRCL had issues on the execution front due to its high AP exposure and now with decline in that we are expecting the company to back on the growth trajectory.  IVRC Asset has started tolling Jalandhar-Amritsar road in May`10 and Chennai water project has also started. In FY2011, all its old BOT projects would start generating revenues to fund its future investments. Management has given guidance of increase in revenues from these BOT projects once fully operational to Rs 14million day. IVRC Assets would be requiring equity infusion of Rs 13- 14 billion over the next 3 years and is also planning to raise money. It believes that value unlocking at the subsidiary level will act as a near term catalyst.  It has valued IVRCL on SOTP basis. Its core Construction business is valued at a P/E of 14x FY2012E EPS of Rs11.6 (Rs162/share), whereas its stake in subsidiaries IVR Prime (Rs37/share) and Hindustan Dorr-Oliver (Rs17/share) has been valued on a Mcap basis, post assigning a 30% holding company discount. At the CMP of Rs 158, the stock is trading at a P/E of 13.7x FY2012E EPS and 1.8x FY2012E P/BV on standalone basis and adjusting for its subsidiaries at P/E of 9.0x FY2012E EPS and 1.2x FY2012E P/BV which it believes is at reasonable valuations.  Therefore, on the back of the company`s excellent execution track record, robust order book to Sales ratio and comfortable valuations, it maintains a `Buy` on the stock with a target price of Rs 216.

Jagran Prakashan

• CMP: Rs 133/ TP: Rs 154/ Upside: 16%
• Rationale: Jagran continues to post steady growth in revenues, primarily aided by advertisement revenues (management reiterates its guidance of ~18% growth in FY2011), owing to its strong foothold in the Hindi-belt (Dainik Jagran, India’s no.1 daily), rising color ad-inventory (management has indicated a color ad inventory of ~50%), and absorption of ad-rate hikes (~8-9%).  For FY2011E, we expect operating margins to marginally dip on the back of the 8-10% rise in newsprint costs and increasing competitive intensity with the entry of DB Corp in Jharkhand (cover prices cut in Jharkhand from Rs 4 to Rs 2). However, strong ad-revenue growth, cost curtailment measures and improving profitability in the nascent businesses of i-Next/City Plus and OOH/event management are likely to protect any sharp decline in margins. Hence, it estimates the company`s operating margins to remain stable at 30% levels in FY2012E. JPL acquired the print business from Mid-Day Multimedia and it believes that JPL`s combined offerings are likely to boost its advertising revenues due to the bundling effect. While it has not factored in the deal in JPL`s numbers, it believes the deal is likely to be earnings accretive by ~2��”3% in FY2011E. Moreover, with Blackstone`s recent investment of Rs 2.25 billion and a wider portfolio, it believes that JPL is well poised to benefit from the steady growth in print media. Meanwhile, the underperformance of the stock and attractive valuations (at current levels, the stock trades at 17x FY2012E EPS) provides good entry point for investors. It values JPL at 20x FY2012E EPS of 7.7.

Nagarjuna Construction Company (NCC)

• CMP: Rs.160/ TP: Rs.201/ Upside: 26%
• Rationale: NCC, with its diversified presence, is well placed for benefit from the current construction boom in the country, especially in the transportation segment.  Angel believes that diversification was one of the prime reasons for NCC`s performance on the earnings front (29% earnings growth) vis-Ã -vis its peers during FY2010. This has also led to strong order booking - clocked ~40% growth in FY2010. Over the last few years, NCC has invested in BOT assets and it believes the time has come for reaping the benefits of the same. NCC has a portfolio of 5 BOT road projects with one BOT project already operational with the remaining expected to be operational in FY2011. NCC has not won any BOT projects in recent times and stayed away from fierce competition. Therefore, it believes that NCC is better placed than its peers to win projects from NHAI, as it benefits more from financial closure regulations than its peers do.  It has valued NCC on SOTP basis. Its core construction business is valued at a P/E of 14x FY2012E EPS of Rs9.8 (Rs138/share), whereas its international subsidiaries at P/E of 10x (Rs24/share) and other ventures (road, real estate and power) has been valued on 1.5x P/BV basis (Rs39/share). At the CMP of Rs 160, the stock is trading at a P/E of 16.3x FY2012E EPS and 1.6x FY2012E P/BV on standalone basis and adjusting for its subsidiaries at P/E of 9.9x FY2012E EPS and 1.0x FY2012E P/BV which it believes is at reasonable valuations. Given attractive valuations following the recent correction in the stock price owing to short-term concerns and robust order book, it believes it provides an opportunity to Buy the stock., it maintains a Buy on the stock with a target price of Rs 201.

Axis Bank

• Current market price (CMP): Rs 1,380/ target price (TP): Rs 1,688/ Upside: 22%
• Rationale: The Bank has expanded its network at 33% CAGR since FY2005, doubling its CASA market share to 4.0% by FY2010 (20bp yoy increase in FY2010). Angel Broking expects the bank to continue market share gains of 30-50bp every year driven by strong branch expansion.  Fee income contribution across a spectrum of services has been a meaningful 2% of assets (almost twice the level in PSBs) over FY2007-10.  The bank`s high credit growth was backed by strong low-cost deposit growth, rather than chasing risky loans using  high-cost deposits.  Moreover, with the improving economic outlook and reducing corporate leverage, NPA concerns are receding and could provide upside to our earnings estimates (which still factor NPA provisions at 0.5% of assets in FY2011E vs. an average of 0.4% over FY2006-10). The stock is trading at attractive valuations of 2.6x FY2012E P/ABV. Hence, it maintains a `Buy` on the stock with a target price of Rs1,688 (at 3.2x FY2012E P/ABV).

ICICI Bank

• CMP: Rs 1,000/ TP: Rs 1,211/ Upside: 21%
• Rationale: The bank is well-positioned to gain market share on the back of substantial branch expansion from 955 in 3QFY2008 to 2016 in 1QFY2011 as well as strong capital adequacy at 20.2% (Tier-I at 14.0%).  Net interest margins of the bank are expected to sustain on the back of increase in CASA ratio to 42.1% in 1QFY2011 from 29% in FY2009. On the back of an improving economic environment, NPA losses are expected to start declining. The bank has also done lower restructuring of loans than PSU banks (7% of Net Worth v/s 40%+ for most PSU Banks). As a result, broking firm expects NPA provisions /assets to decline sharply to 0.5% by FY2012E (from 1.2% in FY2010). The stock is trading at attractivevaluations of 1.9x FY2012E P/ABV. Hence, it maintains a `Buy` on the stock with a target price of Rs1,211 valuing the core bank at 2.5x FY2012E P/ABV and assigning a value of Rs260 for its subsidiaries.

Maruti Suzuki

• CMP: Rs 1,272/ TP: Rs 1,394/ Upside: 10%
• Rationale: Given India`s low car penetration (12 per 1,000 v/s 21 per 1,000 in China) and with PPP-based per capita estimated  to approach the empirically-observed inflection point for car demand of USD 5,000 over the next 4-5 years, Angel expects 15.2% CAGR in domestic volumes over FY2010-12E.  Maruti has a sizeable competitive advantage over foreign entrants due to its widespread distribution network (2,767 service and 681 sales outlets).  Moreover, with Suzuki Japan making Maruti a manufacturing hub for small cars, to cater to increasing global demand caused by rising fuel prices and stricter emission standards, we estimate 7.2% CAGR in export volumes over FY2010-12E. The company, through de-bottlenecking, would be able to manufacture around 1.1 lakh units per month from 2HFY2011E thereby reducing the uncertainty of capacity constraints to a certain extent. Further, we believe that, the recent hike in royalty payment would be passed by the company to certain extent with a price hike.  At the CMP, the stock is trading at attractive valuation (13.1x FY2012E earnings). At its target price of Rs 1,394, Maruti would trade at 14.4x FY2012E (15% discount to our Sensex target multiple).

Reliance Industries (RIL)

• CMP: Rs.926/ TP: Rs.1,260/ Upside: 36%
• Rationale: RIL`s stock price has borne the brunt of negative news flows on account of slower ramp-up of KG Basin gas, subdued refining and petrochemical margins and concerns over the redeployment of the cash flows. However, Angel believes that the current price has discounted the worst case scenario and there is potential upside for the stock from the current levels.  It expects RIL`s profitability to register 34% CAGR over FY2010-12E driven by improvement in refining margins coupled with ramp up of oil and gas production at the KG Basin. Moreover, increase in the share of E&P in the profit matrix will in turn reduce exposure to cyclical segments. It expects the company`s foray in the newer ventures (such as shale gas, broadband and power) along with discovery and monetization of its upstream portfolio to keep it on high-growth orbit going ahead. Moreover, the same is also likely to resolve the concerns over the redeployment of the cash flows. On the valuation front, the stock is relatively under-valued trading at 1.6x FY2012E P/BV. Hence, it maintains a Buy on RIL, with a target price of Rs1,260, translating into an upside of 36.1% from current levels.

Tech Mahindra

• CMP: Rs 700/ TP: Rs 950/ Upside: 36%
• Rationale: The company is currently seeing strong traction and pursuing some large transformational deals in North America (average size of these deals range from USD 25 million-75 million for a period of five years). Thus, Angel believes the company`s growth will be led by strong volume ramp ups, with key deals in the pipeline despite the price cut taken in the BT deal for assured volumes.  Sustained volume traction from non-BT clients (CQGR of 7.5% in last eight quarters) continues to provide revenue growth momentum, margin improvement, geographical diversification and reduced client concentration to the company. Positive news flow from Satyam in the form of client retention, new deal wins and favorable settlement with Upaid provides comfort on future business prospects. It has valued Tech Mahindra on an SOTP basis, valuing Tech Mahindra (excluding Satyam) at 13x, at a 40% discount to Infosys target multiple of 21x and valued Satyam`s stake at Rs 259 a share based on a market cap basis by applying a 30% holding company discount to arrive at a target price of Rs950. Thus we continue to maintain its `Buy` recommendationon the stock.

• Indian Overseas Bank (IOB): Buy above Rs 137 for target of Rs 140-144 and stop loss of Rs 134.
• LIC Housing Finance: Sell below Rs 1,190 for target of Rs 1,170-1,160 and stop loss of Rs 1,210.
• Tata Steel: Sell around Rs 578 for target of Rs 570-566 and stop loss of Rs 585.10.

Hindalco

• Recommendation: Buy
• Market Price: Rs 180
• Target Price: Rs 200
• The company is in a major capex mode and we expect an increase of 60% Y-o-Y and 110% Y-o-Y in the time-weighted capacity for alumina and aluminium, respectively in FY13E. The stock trades at 6.2x EV/ EBITDA and 9.6x P/E, both on FY12E basis.

IDFC

• Recommendation: Buy
• Market Price: Rs 184.60
• Target Price: Rs 215
• The stock currently quotes at 2.5x and 2.2x our FY11E/FY12E ABVPS estimates of Rs 75 and Rs 85, respectively. Our estimates and valuations do not capture the considerable upside that IDFC can potentially generate from any incremental exits (from the PE funds). We have a target price of Rs 215.

Polaris Software

• Recommendation: Buy
• Market Price: Rs 172
• Target Price: Rs 225
• Our target price implies a PE multiple of 11x on FY12E EPS. The stock is currently trading at 9.0x and 8.7x on FY11E and FY12E EPS, respectively. Valuations appear cheap v/s the midcap universe (8-12x), given the robust growth expectation and a PE re-rating from hereon is warranted.

Jagran Prakashan

• Recommendation: Buy
• Market Price: Rs 134
• Target Price: Rs 155
• We expect JPL with its numero uno position, in the biggest Hindi market of UP, to witness higher ad revenue growth, going forward. Over FY10-FY12E, we expect JPL’s earnings to grow at 16% CAGR. We maintain BUY on the stock with a target price of Rs 155

Castrol

• Recommendation: Buy
• Market Price: Rs 520
• Target Price: Rs 575
• If weakness in crude prices persists, it could benefit Castrol as base oil pricing is linked to crude oil pricing. We estimate for a Rs 1 litre decline in input costs, Castrol could gain 7% on pre-tax earnings. It trades at P/E multiple of 21x. and EV/EBIDTA multiple of 14x on CY11 earnings estimate.

Fintech

• Recommendation: Buy
• Last Close: Rs 1,403.5
• Target: Rs 1,440
• Stop Loss: Rs 1,378
• On Tuesday, the stock of Financial Technology witnessed a breakout of the rounding bottom pattern. The volume was comparatively higher.
• The stock is expected to move up to Rs 1,440. Maintain a stoploss of Rs 1,378 for a long position.

BGR Energy

• Recommendation: Buy
• Last Close: Rs 1,038
• Target: Rs 1,090
• Stop Loss: Rs 1,018
• Accumulate on dips from a short-term perspective. The structure looks positive, as the stock has given a fresh breakout above the Rs 1,024 level after consolidation. The technical indicators and oscillators are positive, indicating momentum in the near term.

Jindal Steel

• Recommendation: Buy
• Last Close: Rs 706.3
• Target: Rs 725
• Stop Loss: Rs 692
• JSPL has been in a range-bound movement for past two weeks, which has formed a ‘Flag’ pattern. On Tuesday, the stock has given a close above the crucial resistance of Rs 707, a decisive move above Rs 714 would lead to Rs 725.

Mercator Lines

• Recommendation: Buy
• Last Close: Rs 52.20
• Target: Rs 58
• Stop Loss: Rs 49
• Mercator Lines has being in corrective downward trend for past two weeks, it has bounced back and trades above its weekly long leg Doji pattern.
• The first resistance is placed at Rs 55.50, if crossed will lead to Rs 58.

Dabur

• Last Close: Rs 215.95
• Target: Rs 222
• Stop Loss: Rs 212
• Dabur has been moving in a narrow range forming a triangle pattern. On Tuesday the stock witnessed breakout of the triangle pattern.
• The stock is expected to move up to Rs 222, maintain a stop loss of Rs 212 for a long position.

Praj Industries Stock Analysis

• Praj is a leading global ethanol technology and process solutions provider. Praj is a global Indian company that offers innovative solutions to significantly add value in bio-ethanol, bio-diesel, brewery plants, industrial processes and water and wastewater treatment systems for customers, worldwide. Praj is a knowledge based company with expertise and experience in Bioprocesses and engineering.
• Praj has one of the largest resource bases in the industry with over 450 references across all five continents
• Praj has entered into a research partnership with Novozymes that provides enzymes to biofuel industry.
• Got Cleantech award for 2010
• Recently formed Energy Agri Solutions group

Source: Sakshi Business News - by V.S.R. Sastry, Firstcall India Equity Advisors

Jyoti Structures Stock Analysis

• Jyoti Structures is a popular transmission and distribution projects company
• Jyoti Structures is mostly immune to currency fluctuations as  most of its operations are domestic
• Raised funds of Rs 400 crore through QIP route
• In two years Jyoti Structures i expected to post a CAGR growth of 13% in Net Sales and 15% in Net Profits

Source: Sakshi Business News - by V.S.R. Sastry, Firstcall India Equity Advisors

1 Return on Assets (RoA)

RoA shows us how much a company has earned on each rupee value of its assets. Usually, it is calculated by dividing a company’s net profit by its total assets. Sometimes, however, operating income is used instead of net income. The value of ROA, therefore, depends on the choice between net and operating income. A higher ROA means better profitability and vice-versa.

2 Return on capital (RoC)

Also known as return on capital employed (RoCE), it is the ratio of a company’s earnings to its capital. The ‘capital’ used to calculate this ratio includes both debt and equity capital. The measure of earning would be operating profit less taxes, not net profit. This is because net profit is shared only by equityholders, whereas operating profit is shared by both debt and equity suppliers. It is always desirable to have a high RoCE as it is one of the most important measures of the efficiency of a company’s capital investments.

3 Return on equity (RoE)

RoE is the ratio of a company’s earnings to its capital. However, unlike RoC, the ‘capital’ used here is just equity capital. Net profit is used as a measure of return.

RoE analysis. Although it is desirable to have a high RoE, one should check the reasons behind a high figure. To wit, we usually break RoE into three variables, though some may like to break it even further. These are net profit margin, asset turnover and financial leverage. An increase in any of these three variables beefs up the RoE. Note that while high net profit margin and asset turnover are positive for a company, higher financial leverage (or the amount of debt in a company’s overall capital structure) increases the risk. Therefore, high RoE due to high financial leverage calls for caution.

Coromandel International

• Recommendation: Buy
• Market Price: Rs 552.65
• Target Price: Rs 651
• Phosphatic and complex fertilisers manufacturer, Coromandel International will likely benefit the most on introduction of nutrient-based subsidy policy. The company’s FY12 EPS of Rs 46.5 discounts the CMP 11.90 times.

BEML

• Recommendation: Buy
• Market Price: Rs 1,061
• Target Price: Rs 1,275
• BEML, with businesses in earth moving equipment, heavy-duty vehicles, railway and defence, is poised to do well in coming quarters. The company’s 2012 EPS of Rs 85 discounts the CMP of RS 1061, 12.50 times. We assign a multiple of 15 and arrive at a target price of Rs 1275.

Uflex

• Recommendation: Buy
• Market Price: Rs 170
• Target Price: Rs 195
• Uflex, India’s largest flexible packaging company with raw material conversion cost that is nearly half of global peers, is increasing capacities in markets like Mexico and Egypt. Net Sales and PAT are expected to grow at 13% CAGR and 16%, respectively, over 2009 to 2012.

BHEL

• Recommendation: Buy
• Market Price: Rs 2,397.70
• Target Price: Rs 2,700
• BHEL’s order book of Rs 1,50,000 crore is more than 4.5 times FY10 sales. The stock is available at 17.8 times FY12 EPS of Rs 135, which is way below its 5-year average P/E of 33. Investors can accumulate BHEL at lower end of the price band.

GE Shipping

• Recommendation: Buy
• Market Price: Rs 308
• Target Price: Rs 360
• GE Shipping with leadership status in the sector, strong fundamentals, value unlocking through listing of its wholly-owned subsidiary and strong ROE makes it cheap at 5.2 times its FY12 EPS of Rs 59. It’s trading over 4% over the past one month.

Source: Economic Times