Market Outlook 23 June11

 

Market Outlook

 

The daily candle chart of the Nifty shows a bullish "harami yose sen" (harami cross) formation, indicating a loss of selling momentum and the possibility of buying conviction if the bulls keep the spot prices largely above the closing levels. Traded volumes and open interest will assume significance on the way up as failure rates can be high in the coming days. The downward sloping trendline remains the nemesis of the bulls and as long as rallies occur below this trendline, they are corrective pullbacks alone. The Nifty (spot) must stay above the 5300 levels sustainably with volumes and open interest expansion to rally intraday on Wednesday. On the flip side, sustaining below the 5280 levels may trigger a fresh bout of declines.

 

Technical Calls

 

Buy Pantaloon Retail 286.00 target 295

Buy KEC Intl. 80.00 target 85

More

 

 

Momentum Calls

 

Buy Mind Tree 355.00 target 360

Buy Hexaware 67.00 target 70

More

 

Investment

 

Electrosteel Castings  Price: Rs  30 Target Price: Rs  37 Angel

`We maintain our positive stance on ECL`s initiatives of gradually venturing into steel making through its associate EIL, which is setting up a 2.2 million tons steel plant expected to commence production by early FY2013. Furthermore, the company`s backward integration initiatives through allocation of coking coal mines are expected to result in cost savingsfrom FY2013. The stock is currently trading at 5.9x FY2012E and 5.7x FY2013E EV/EBITDA. On P/BV basis, it is tradingat 0.5x each for FY2012E and FY2013E. We maintain our Buy rating an SOTP target price of Rs  37.`

 

 

Investment

 

SKP Securities has recommended `Buy` on EleconEngineering Company with a price target of Rs 111 as against the current market price (CMP) of Rs 67 in its report dated June 21, 2011. The broking house gave the following rationale:

Topline to grow with a CAGR of 21%…

> Elecon`s top line grew by 12.4% to Rs 11,845.4 million during FY11 vis-à-vis Rs 10,543.1 million last year. MHE and transmission equipment division contributed Rs 6,745.8 million and Rs 5,246.4 million respectively.

> We expect the revenue to grow by CAGR of 21% during the next two financial years led by huge opportunities in the user sector.

EBIDTA Margins are expected to remain stable…

> EBIDTA of the company has increased by 16.7% during the year from Rs  1,575 million to Rs 1,838.4 million. EBIDTA margins also improved by 120 bps to 15.5% during the year. Raw Material to sales improved by 250 bps to 66.6%.We expect the EBIDTA margins to remain stable at the same levels for FY12 and FY13.

> PAT increased by 32.9% from Rs 661.8 million to Rs 879.2 million during the year.

> PAT margin improved by 110 bps to 7.4% from 6.3% last year. We further expect it to grow with the CAGR of 21% during next two years.

Brownfield capex of Rs 1.3 billion…

> Elecon has planned a capex of Rs 1.3 billion during FY12 at its existing facilities at Vallabh Vidyanagar.

> Around 60% of the total capex will be spent upon increasing capacity for MHE division and the rest for gears. We expect the expansion to be completed within FY12.

> The Company incurred capex of Rs 540 million during FY11 of which Rs 240
million were spent towards MHE division.

Healthy order book of Rs 13.8 billion â€¦

> Elecon has the healthy order book position of Rs 13.8 billionas on Mar. 31, 2011 vis-a-vis Rs 9.2 billion last year. This order book excludes the orders from Brahamani Industries worth Rs 3.2 billion.

> MHE contributes orders worth Rs 10.6 billion and rest is from transmission equipment division.

> The Company booked orders worth Rs 1.5 billion during Q4FY11 of which MHE comprises Rs 2.9 billion and rest is from transmission equipment division.

Outlook & Recommendation

Elecon is expected to be the major beneficiary of theincremental focus of GOI on infrastructural sectors. At thecurrent market price of Rs 67, the stock is trading at a P/E of 6x and 4.8x of FY12 and FY13 earnings of Rs 11.2 and Rs 13.9. We recommend `Buy` rating onthe stock with a target price of Rs 111 (66% upside) in 15 months at the P/E of 8x on FY13 earnings.

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

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Market Updates 22 June11

 

Market Outlook

 

The indices have closed in the lower end of the intraday range as the bulls were unable to offer support at all levels throughout the session. The intraday range specified for the Nifty between the 5410 / 5300 was violated as the Nifty took support at the 5195 levels, thereby exceeding our intraday levels on the downside. The coming session is likely to witness resistance at the 5330 levels on advances. Support is likely at the 5185 levels below which the 5150 level maybe tested. The wide range is due to the high base effect of Wednesday's range. The bullish pivot for the session is likely at the 5300 levels above which the Nifty must stay throughout the session. The bearish pivot is at the 5270 levels below which declines may occur. Traders must watch these levels for signs of trend determination in the coming session. These are signs of weakness. The downward sloping trendline remains the nemesis of the bulls and as long as rallies occur below this trendline, they are corrective pullbacks alone. The Nifty (spot) must stay above the 5300 levels sustainably with volumes and open interest expansion to rally intraday on Tuesday. On the flip side, sustaining below the 5270 levels may trigger a fresh bout of declines.

 

Technical Calls

 

Buy EIH 83.00 target 90

Buy Autoline Industries 128.00 target 135

More

 

Momentum Calls

 

Buy Glenmark Pharma 296.00 target 305

Buy Cadila HC 900.00 target 910

More

 

Investment

 

Bajaj Capital has recommended `Buy` on Bharti Airtel with a price target of Rs 450 as against the current market price(CMP) of Rs 380.35 in its report dated June 18, 2011. The broking house gave the following rationale:

India is the world`s fastest growing mobile telecom services market
India is the fastest growing wireless market in the world and has the second largest mobile services connections after China.  In India, the customer base of the mobile telecom service providers increased by 20.2 million in March 2011, taking the total number of mobile subscriptions to more than 811.6 million. This includes 66.3% urban and 33.7% rural subscribers. The total telecom customer base has increased to 846.3 million and the overall tele-density in the country has reached 70.9. The industry is expected to reach a size of Rs 3,449.21 billion by 2012 at a growth rate of over 26%. India is expected to have 1.16 billion mobile subscribers by 2013 and it is expected to overtake China.

3G services to be a growth driver
Bharti Airtel had bagged 3G spectrums in 13 out of the 22 telecom circles through an auction held last year, for Rs 122.95 billion. These 13 circles have 65-70% of the company`s 2G subscriber base. The company has already launched 3G services in many cities. The initial response has been overwhelming and Airtel is the market leader with 3 million 3G customers out of the total 9 million users of this service. The company plans to offer services like video call, live streamingof video, high speed internet, mobile TV etc. in the beginning. This service, a premium offering is expected to stabilize the company`s ARPU (Average Revenue Per User) though the voice telephony and SMS are being provided by the company at prices that are at par with 2G.  The nonvoice revenue contributes 12% to the total revenues in India, compared to 25-30% in developed markets and it is expected to grow in the years going forward. For Bharti Airtel, the share of value addedrevenues in the total revenues increased to 15.0% in Q4FY11 compared to 13.8% in Q3FY11. 3G services would further increase the Value Added Services (VAS) share in mobilityrevenue. The company plans to generate one fourth of its sales from non voice revenues over the next two or three years. This shift to non-voice and also non-SMS revenues is already visible as SMS services that used to contribute ¾th to the non voice revenue a year back, just contributes 1/4th now.

Conclusion
India is the fastest growing telecom market in the world. The mobile subscriber base of Bharti Airtel in India is growing at a scorching pace of 3 million subscribers per month. The company also has the largest number of active customers (92%) among all mobile telecom operators. The company is all set to exploit the 3G opportunity in India, as it launches these premium services across all 13 circles that it had bagged in the auction. This is expected to accelerate the increase in company`s non voice revenue. Bharti`s Africa operations have been stabilizing with subscribers growing steadily and its market share in the continent improving. The company is also focusing on rural customers. While one out of every 5 subscriber nationally is a Airtel customer, in case of rural customers this ratio is one out of four. 3G, Africa operations and the rural markets in India are going to be the growthdrivers for the company going ahead. The mobile rates have already reached rock bottom with the new players running out of steam.  This presents acquisition opportunities for Bharti in the near future. The expected broadband revolution is set to boost the revenues of the company`s telemedia services arm, going further. Though Bharti`s ARPU`s have been declining, they are expected to stabilize at the present levels. Bharti Airtel has a market capitalization of Rs 1,444.391 billion. and is trading at a share price of Rs. 380.35. The consolidated TTM EPS is Rs. 15.6 translating into a TTM PE of 24.5. The price to book value stands at 3.0. The stock is an attractive buy considering the growth prospects of the industry as well as the company.

We recommend a ``BUY`` on the stock with an investment horizon of 12 months and target price of Rs. 450.

 

 

 

Investment

 

KJMC has recommended `Hold` on Bajaj Corp with a pricetarget of Rs 124 as against the current market price (CMP) of Rs 114 in its report dated June 21, 2011. The broking housegave the following rationale:

Quarterly Result Analysis
                                   
>For Q4FY11, the netrevenue of the company grew by 28% at Rs 1098.4 million compared to Rs 860.9 million proceeding year samequarter. It recorded a healthy volume growth of 21% for thequarter. 

>The EBITDA margins have drop down to 28.0% from 38.7% on yoy basis because of high raw material and advertisement expenditure. EBITDA recorded a degrowth of 8% at Rs 307.7 million 

>Reported PAT degree by 2% at Rs 268.9 million mainly because of one time write off expenditure of Rs 63.3 million.

>For FY11, the net revenue of the company grew by 21.8% at Rs 3586.7 million compared to Rs 2945.6 million in FY10. The average volume growth during FY11 came in at 14.9%. 

>EBITDA margins decreased by 290 bps at 30.2%, majorly on account of high input cost. Adjusted PAT grew by 19.0% at Rs 998.6 million while adjusted PAT margins stood at 27.8% compared to 28.5% in FY10. 

>The board of directors has recommended a dividend of Rs 1.90/share at 190% of face value of Re 1/share.

Outlook & Valuation

We expect ADHO, the flagship product of the company to perform well in FY12, however 8.5% price increase taken by the company can negatively affect its volume. Moreover, themanagement is bullish on crude oil prices which can have cascading impact on LLP prices. In the light of rising input cost the management may resort to further increase in price which will significantly dampen the volume growth. In FY12E, we expect revenue growth to be at 18.2% contributed by 9% volume growth and 8.5% realization growth. 

We expect adj. EPS to remain flat in FY12E at Rs 6.9 compared to adj. EPS of Rs 6.8 in FY11.We have valued the company on DCF basis and raise our target price to Rs 124 from our earlier target price of Rs 116. 

We recommend to `Hold` the stock with target price of Rs 124 which is 9% above the CMP of Rs 114. The target price is 16.8 FY12E EPS.

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

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Market Updates 21st June11

 

Market Outlook

 

Technically, the domestic markets are precariously poised as the Nifty is perched on the threshold of a medium term ascending trendline support (5300 level) , below which the bears are likely to emerge with daggers drawn. The coming week is likely to witness a range of 5625 on the upside as long as the Nifty stays above the bullish pivot at the 5450 mark. In case of declines, the Nifty is likely to test a level of 5200 as long as the bears keep the Nifty below the 5400 levels. The possibility of a draw down is higher than the probability of a rally, therefore, fresh long positions in the leveraged segment should be avoided. Focus on capital protection. Our view is cautiously bullish and it will be better not to focus on the Nifty to trade (positional) but buy the stock specific which are attractive at the lower level will give the handsome return if market gets the reversal and 5,252 level should be watched very carefully

 

Technical Calls

 

Buy Coal India 395.00  Target 405

Buy Jyothy Lab 216.65 Target 225

More

 

 

Momentum Calls

 

Buy GVK Power 21.00 Target 26

Buy Max India 177.50 Target 185

More

 

 

Investment

 

Carborundum Universal SMC Global

Investment rationale:

> On a consolidated basis, the company has announced a capex of Rs 1.50 billion for the current fiscal. The company is going ahead as scheduled in executing them. The company is seeing strong growth coming back in Australia and growth in US has picked up after some three quarters. The company expects growth trend to continue.

> The company is in the process of finalizing three joint ventures (JVs) for its proposed renewable energy material manufacturing plants. The company would announce two of the three joint ventures in a couple of months. The JVs would be established in its own 25-acre central government-approved renewable energy SEZ (special economic zone) in Kochi, Kerala.

> The order intake continues to be strong. The company isexpecting this year to be as good as last year in terms of growth. The management is very confident of more than 15-17% top line growth going forward with margins at least being protected. 

> The Company continued to pursue a `grow our market` strategy by addressing all tiers of the market at their respective price points by an appropriate combination of brand and product. Long term market power was enhanced by strengthening the core segments and near adjacencies.

> In the consolidated results, the company reported net profit after minority interest of Rs 494.3 million in the quarter ended March 2011 as against Rs 324.3 million during the previousquarter ended March 2010. Sales reported to Rs 4.33 billion in the quarter ended March 2011 as against 3.51 billion during the previous quarter ended March 2010.

 

Investment

 

JBF Industries SMC Global

Investment rationale:

> JBF Industries has decided to set up a new polyethylene terephthalate (PET) facility in Geel, Belgium, which would be ready by 2014. The plant, which would have a capacity of 3,90,000 tons a year, would be adjacent to BP`s existing purified terephthalic acid (PTA) plant. The new plant, combined with JBF`s expertise in global PET business, will provide for a sustainable and competitive manufacturing base in Europe. It will also reinforce the company`s long-term strategic commitment to its customers.

> The company is also planning for PTA capacity of 1.12 million MT at Mangalore SEZ and is waiting for the environmental clearance. Capex for this facility is to the tune of USD 700 million. This facility is expected to start commercial operations from 2014. 

> The company expects expansion of chips capacity at RAK to 0.43 million MT and film capacity enhancement of 36000 MT, which would be completed by December 2011. By the end of June 2011 chips capacity in India will increase to 0.623 million MT. On the back of capacity addition, the revenue is expected to cross Rs 70 billion in FY12.

> The chips realization per kilo gram has increased by 36.4% to Rs 82.13 for the quarter ended March 2011 and 20% to Rs 66.36 for year ended March 2011. The realization of POY and specialty yarn has inched up by 32.5% and 15.3% to Rs 99.63 a kg and 81.74 a kg in quarter and year ended March 11 respectively. Film realizations surged by 97% to Rs 182.15 inquarter and 67% to Rs 150.14 for year ended March 11.

> For the year ended March 11, the consolidated total income from operations inched up by 31% to Rs 64.87 billion and net profit zoomed up by 2.86 times to Rs 5.46 billion. OPM improved by 530 bps to 14.8% in period under review.

 

 

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

 

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Market Outlook 20th June11

 

Market Outlook

 

The market will take cues from the global markets and is  expected to open on a flat note on Monday. Trade short inNifty below 5,380 levels else around 5,400, with stop loss placed at 5,420, targeting 5,330-5,300 levels.We expect markets to consolidate at current levels. Valuations are now reasonable and very much building in a slowdown in corporate profits. We continue to favor IT, private banks, media and FMCG sector. Given the interest rate sensitivity, we remain selective in auto. There are near-term concerns for the capital goods/infrastructure sector, but over a longer timeframe, we remain positive on the sector. We remain negative on the cement sector. Market may witness some range bound movements in coming sessions with higher volatility

 

Technical Calls

 

Buy Reliance Broadcast 75.20 target 85

Buy Bank of Mah. 56.30 target 65

Buy Century Textiles 359.00 target 365

Buy IFCI 47.80 target 50

Buy Talwalkars Better 241.15 target 255

Buy LIC Hsg. Fin. 226.00 target 235

Buy Raymond 386.60 target 395

Buy Simplex 298.50 target 305

Buy Edelweiss Capital 33.8 target  40

Buy ENIL 272.00 target 280

Buy Maruti Suzuki 1193.15 target 1200

 

Momentum Calls

 

Buy Religare 465.00 target 475

Buy Hindustan Copper 275.00 target 285

Buy Gulf Oil 90.00 target 95

Buy Tata Steel 553.15 target 560

Buy Time Techno 66.00 target 70

Buy GSK Pharma 2455.05 target 2465

Buy Clutch Auto 53.50 target 60

Buy HUL 320.00 target 325

Buy Granules India 87.00 target 90

 

 

 

Investment

 

KR Choksey has maintained `Buy` on Infrastructure Development Finance Company (IDFC) with aprice target of Rs 192 as against the current market price (CMP) of Rs 120 in its report dated Jun. 16, 2011. The broking house gave the following rationale:

Operating income up 21% y-o-y and 5% q-o-q:

Net interest income grew strongly by 50% y-o-y mainly driven by strong loan growth at 50% y-o-y, stable spreads and sequential sharp uptick in NII from treasury. Lending business contributed 76% of operating income during the quarter, whereas the share for non-interest income`s has declined from 30% in Q3FY11 to 23% on the back of lower capital gains, subdued fee income from asset management businesses. Total non-interest income decreased 46% y-o-y to Rs 1.52 billion due to lower capital gains. We expect Net interestincome to grow 26% CAGR over FY11-13E driven by strongloan growth comprising of infrastructure segment. 

Stable lending spread q-o-q:

Core lending spread remained stable at 2.2% indicating return of reasonable pricing power. With diversification of liability franchise and targeting better yield on asset side, we expect IDFC to sustain core lending spread at 2.3-2.4% going forward. 

Operating leverage playing out:

Operating expenses declined 22% q-o-q mainly due to upfront provisioning for bonus in previous quarters against year-end provisioning in Q4FY10. Cost to income ratio decreased 460 bps to 21.1bps sequentially; however, the management has guided us that cost to income ratio is likely to remain stable around 20-22% on the back of higher operating leverage going forward. 

Loan book growth strong at 51% y-o-y:

Gross approvals and gross disbursement increased 40% y-o-y and 106% y-o-y mainly on the back of infrastructure financing space. Loan book grew 50% y-o-y and 4% q-o-q to Rs 36,304 cr driven by power and transportation sector which contributes 77% of total outstanding disbursement. In terms of product based distribution, project loans and corporate contribute 89% of outstanding disbursement, which upticks the loan book expansion. The management is targeting 3 balance growth over next three-four years, majority of growth would be front loaded. We believe current capital base coupled with internal accruals would be sufficient to support this strong asset growth.

Valuation & Recommendation:

IDFC performed strongly on lending side but disappointing on fee based businesses during the quarter. Strong loan growth, reasonable pricing power, relatively stable spreads were keyhighlights of the quarter. However, continuous disappointing performance from  loan related fee and institutional broking businesses are cause of concern to us. We have cut earnings estimate 6% and 9% for FY12 and FY13 respectively factoring lower fee incomes and capital gains. We have also reduced our target price from Rs 206 to Rs 192 due to earnings downgrade. Unique business model, strong earnings growth outlook coupled with favourable risk-reward offers compelling investment opportunity in medium term. At Rs 120, the stock is trading 10.6 FY12 earnings and 1.5 FY12BV. Hence, we maintain our `Buy` rating on the stock with a target price of Rs 192 (Potential upside 60%).   

 

 

Investment

Firstcall Research has recommended `Buy` on TechMahindra with a price targetof Rs 778 as against thecurrent market price (CMP) of Rs 688.9 in its report dated June 16, 2011. The broking house gave the following rationale:

Tech Mahindra reported a phenomenal rise in consolidated net sales for the quarter ended Mar. 31, 2011. During the quarter, the sales of the company increased 6.61% to Rs 12,615.30 million from Rs 11,832.90 million in the same quarter previous year. Net profit for the quarter declined 59.39% to Rs 921.90 million, while total income for the quarter rose 2.87% to Rs 12,932.80 million, when compared with the prior year period. Company posted earnings of Rs 7.32 a share during thequarter, registering 60.56% decline over prior year period. It has recommended dividend of 40% (i.e. Rs 4 per equity share of Rs 10 each), for the financial year ended Mar. 31, 2011, subject to approval by members of the Company. 

The company announced its plans to set up BPO operations in Philippines. The company recently signed a multi-million dollar deal, as one of the preferred BPO partners for strategic outsourcing with a leading full-service telecommunications company in the Philippines. Further, the telecom firmannounced the inauguration of its development centre in Bonn, Germany. The state-of-the art facility located in Sirius Business Park, encompasses fully-equipped infrastructure to service clients in Germany as well as Central Europe.

CanvasM, VAS subsidiary of Tech Mahindra (Q,N,C,F)* and part of the Mahindra Group, announced the launch of its unique service ``Saral Rozgar`` in strategic partnership with Rashtriya Rozgar Mission. CanvasM specializes  in developing and deploying utility VAS solutions, applications and platforms for organizations globally. Saral as the name suggests, is a bouquet of easy-to-use utility services, accessible through a reachable medium such as voice.

Valuation:

At the current market price of Rs.688.90, the stock is trading at 10.52 x FY12E and 9.52 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.65.45 and Rs.72.33 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 9% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 7.13 x for FY12E and 6.48 x for FY13E. Price to Book Value of the stock is expected to be  at 2.24 x and 1.81 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend `Buy` in this particular scrip with a target price of Rs.778 for medium tolong term investment. 

 

 

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Disclaimer : This report is for the personal information of the authorized recipient and does not construe to be any investment, legal or taxation advice to you. And not soliciting any action based upon it. The report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon such. We or any of its affiliates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report

 

 

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Market Outlook 17th Jun11

 

Market Outlook

 

The markets opened on a nervous note and ended the session with losses as the bulls failed to keep the Nifty above the 5510 bullish pivot throughout the session. The benchmark indices ended with approx 1 % losses at close. The traded volumes were lower as compared to the previous session, which is a routine indicator for a downtick session. The indices have closed in the lower end of the intraday range as the bulls were unable to offer support at higher levels. The intraday range specified for the Nifty between the 5525 / 5450 was breached marginally as the Nifty tested the 5439 levels, thereby mildly exceeding our intraday levels on the downside. The coming session is likely to witness resistance at the 5490 levels on advances. Support is likely at the 5400 levels below which the 5375 level maybe tested.

 

Technical Calls

 

Buy Bombay Dyeing 367.00 target 375

Buy GVK Power & Infra 22.30 target 30

Buy ING Vysya 335.000 target 340

Buy BGR Energy 496.50 target 500

Buy Everonn 541.00 target 550

Buy Shriram Transport 634.00 target 645

Buy ONGC 268.00 target 275

 

Momentum Calls

 

Buy KPIT 170.00 target 175

Buy Hindustan Zinc 133.70 target 140

Buy SPIC 29.00 target 35

Buy Sterlite Ind. 162.00 target 170

Buy Provogue 39.10 target 45

Buy ITC 194.00 target 205

Buy Time Techno 65.00 target 70

 

 

Investment

 

Sintex Industries: BUY, TP-Rs 240 (25% upside) PINC

What`s the theme?
Sintex has a diversified business model marked by low volatility in sales, profit and cash flows. It is a market leader in the Monolithic and Prefab segment.

What will move the stock?
We like Sintex primarily because of: - The Monolithic and Prefab segments are expected to grow at 25% and 27% CAGR over FY11-FY13E respectively. The acquired overseas and domestic subsidiaries are likely to show operational improvement with 300bps increase in margin to 12.2% in FY13e vs. FY10. We expect the company to emerge cash flow positive in FY12-FY13e through better management.

Where are we stacked versus consensus?
Our earnings estimates (EPS) for FY12 and FY13 are Rs 20.2 and Rs 23.6 respectively. Our FY12 earnings estimate is 1.5% higher than consensus estimate of Rs 19.9. We have a `BUY` recommendation on the stock with a target price of Rs 240, which discounts FY12E earnings by 12x.

What will challenge our target price?
Execution risks in the Monolithic and Prefab segments
Fluctuation in raw material prices denting margin
Delay in improvement of subsidiaries

 

 

Investment

 

Phoenix Mills: BUY, TP-Rs 238 (19% upside) PINC

What`s the theme?
PHNX`s key project, High Street Phoenix (HSP), is now fully operational and is likely to generate rental income of Rs 2-2.2billion in FY12E. In addition, rental income would accrue from renewal of 0.15 msf in HSP.

What will move the stock?
We see the following near-term triggers for the stock: (1) Commencement of three Market City Projects in Q1 & Q2 FY12; (2) Commencement of the first phase of Shangri-La Hotel in Q2FY12; (3) HSP-Phase IV (0.25 msf) - although this provides a strong delta to the company`s valuation, it may add significant upside if PHNX manages to secure hospitality FSI (5x).

Where are we stacked versus onsensus?
Our EPS estimates for FY12 and FY13 are Rs 14.3 and Rs 15.8 respectively. Our FY12 earnings estimate is 40% higher than consensus estimate of Rs 10.2. We have a `BUY` recommendation on the stock with a target price of Rs 238, which discounts FY12E gross NAV by 20%.

What will challenge our target price?
Slowdown in execution in Market City projects and extending free rental periods may hamper profitability of the holding company; economic slowdown may affect revenue from Market City and HSP.

 

 

 

 

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