Mid Term Stock Picks to Buy - August 2, 2010

Posted by admin in Companies, Mid Term Picks on Aug 1st, 2010 | no responses

Here are a few medium term stock investment options recommended by Broking house IDBI Capital for mid-term.

BHEL

RECOMMENDATION: BUY
Market Price: Rs 2,438.9
Target Price: Rs 2,853
BHEL has an order book of Rs 1,43,800 crore (4.2x FY10 revenues). It plans to diversify into other growth segments such as HV transmission, BoP, nuclear power and renewables. Project execution will improve with capacity expansion to 20 GW from 15 GW. BHEL can take over domestic and Chinese competition due to economies of scale, brownfield expansion and its prequalification for supercritical bulk tenders.

Everest Kanto Cylinder

RECOMMENDATION: BUY
Market Price: Rs 117
Target Price: Rs 176
EKC is expected to be a major beneficiary of the growing natural gas vehicle market particularly in India. The offtake of CNG and industrial cylinders is expected to once again pickup due to increased demand. Also margins should head northwards as the high cost inventory will be depleted by H1FY11. Consequently, EKC is on track to witness a CAGR of 25% in topline and 68% in bottomline during FY10-12.

HCC

RECOMMENDATION: BUY
Market Price: Rs 130
Target Price: Rs 232
After two years of lull in the core construction business, we expect a revival in execution over FY10-12E. The funding of BOT projects remains a concern. Listing of Lavasa is a key trigger as it will resolve parent’s balance sheet issues and infuse capital. With real estate and BOT contributing 64% to our target price, HCC’s stock performance will continue to be driven by its subsidiaries.

PowerGrid Corporation

RECOMMENDATION: BUY
Market Price: Rs 100
Target Price: Rs 109
The company may achieve 94% of 11th Plan target capex (Rs 55,000 crore), considering 60% capex associated with generation projects. Consequently, with limited headroom on debt-equity of 1.6x, growth necessitates equity dilution. The company plans to raise nearly Rs 8,000 crore in FPO, including 50% fresh equity issue. We estimate core earnings at 22% CAGR over FY10-12E, enabling a 15% earnings growth.