Market Outlook
The markets opened on a bearish note and ended the session with mild changes even as the bulls failed to test the Nifty 5500 bullish pivot throughout the session. The traded volumes were lower as compared to the previous session, which is a negative indicator for the first session of the week. The indices have closed in the upper end of the intraday range as the bulls were able to offer support at lower levels. The intraday range specified for the Nifty between the 5525 / 5415 held as the Nifty trended within these levels, thereby validating our intraday levels. The coming session is likely to witness a resistance at the 5525 levels on advances. Support is likely at the 5440 levels below which the 5400 maybe tested.
Technical Calls
Buy Hawkins Cookers 1598.45 target 1620
Buy ONGC 268.00 target 275
Buy IRB Infra 175.70 target 180
Buy Yes Bank 294.00 target 310
Buy Tata Global Beverages 99.95 target 110
Buy DCB 62.00 target 70
Buy Punj Lloyd 70.00 target 80
Buy BPCL 615.00 target 630
Buy Coal
Buy IDEA 72.00 target 80
Momentum Calls
Buy Empire Industries 962.80 target 975
Buy Subex 65.65 target70
Buy GVK Power 22.10 target 30
Buy Delta Corp.99.00 target 105
Buy Sintex 183.35 target 190
Buy Dujodwala Products 40.05 target 45
Buy Exide Industries 156.25 target 165
Buy Alok Industries 28.05 target 32
Buy Dena Bank 91.55 target 100
Buy Himalya Int. 28.28 target 32
Investment
Shah Investors has recommended `Buy` on Adani Powerwith a price target of Rs 148 as against the current market price (CMP) of Rs 111 in its report dated Jun. 14, 2011. Thebroking house gave the following rationale:
Adani Power`s generation capacity to grow four-folds by FY15E
In FY12E, the company is expected to benefit from an increased generation from 4,620MW capacity coming on-stream during the year. This includes Mundra Project (four units, aggregating to 2,640MW) and Tiroda Project (Phase I & II aggregating to 1,980MW). By the end of FY15E, the company expects to operate a power generation portfolio of 10,560MW.
Key beneficiary of high power deficit in Western India
88% of Adani Power`s total planned capacity (9,240MW of 10,560MW) is being developed in Western region, which experiences highest power deficit in India. This is expected to benefit the company, as huge power generation shortfall may lead to a ready demand for its power produced.
Indirect control over coal assets through parent company AEL Adani Power is benefited from AEL`s interests in coal assets of-
> Bunyu coal mine,
> Linc Energy`s coal mine in Australia (with productioncapacity of 30MTPA which would eventually increase to 60MTPA)
> A coal purchase agreement with PT Bukit Asam (Indonesia`s state coal producer) for a minimum quantity of 35MTPA
Location advantages
Adani Power enjoys location advantage for most of its power projects as it derives benefits, such as, easy access to fuel & water and proximity to power deficit areas due to favourable location.
Power from 4,744MW capacity tied up under long-term PPAs
The company has secured power off take from majority ofcapacity at Mundra Project & Tiroda Project through PPAs for a period of 25 years. This places the company in a comfortable position, as, in the current scenario, power distribution companies are reluctant to contract for power purchases.
Play on merchant if capacities commission before time
Along with capacity available purely for merchant sales, the company can sell power on merchant basis from capacities tied under long term PPA, if these capacities commission before the start of a long-term PPA.
Investment
Motilal Oswal has recommended `Buy` on Sun TV Network with a pricetarget of Rs 400 as against the current market price(CMP) of Rs 307 in its reportdated June 03, 2011. Thebroking house gave the following rationale:
Risk-reward attractive post 40% stock price decline YTD:
> We upgrade Sun TV Network (SUNTV) from `Neutral` to `Buy` while retaining our price target of Rs 400 (15x FY13E EPS). The stock has declined by 40% YTD and by 20% in the last nine trading sessions given the political and regulatory concerns. We believe that risk-reward is compelling now - the upside/downside ratio based on our bull-case/bear-case target prices is 3.6x.
> Our scenario analysis points towards a bear-case target of RS 220 (11x bear case EPS of Rs 19.3) while our bull-casetarget is Rs 620 (19x bull-case EPS of RS 31.9). We acknowledge that the overhang relating to the Aircel-Maxis/Sun Direct-Astro deal could remain, as 2G-related investigations continue and any negative development implicating the Maran family can lead to further de-rating towards our bear-case target multiple range of 10-12x.
Business model can withstand political/regulatory headwinds
> SUN TV has a robust business model, with dominant market shares and high entry barriers across its markets, and remains almost indispensable for TV advertisers in
> While there have been investor concerns in the past related to director`s remuneration and likely negative cash flows in the group companies, core business resilience has historically remained strong despite these issues.
> Post our recent meeting with the management, we retain our earnings estimates and would like to highlight the following:
1. Potential cable network nationalization in Tamil Nadu has its own set of challenges, given the under-declaration issues.
2. SUN TV`s content superiority (extensive movie library + partnership-based ``slot`` sales model with content providers) as manifested in significantly high viewer ship share should ensure smooth transition even to a government-owned network in Tamil Nadu.
3. SUN TV`s business is well-diversified, with 50-60% of revenue coming from non-Tamil markets and 50% of revenue coming from non-GEC channels.
4. Blended ad-rate hike of 12-13% has already been implemented from April 2011, lending good visibility to near-term growth.
Upside/downside ratio based on our bull-case/bear-casetarget prices is 3.6x; `Buy`
The stock has declined by 40% YTD and by 20% in the last nine trading sessions. Risk-reward is compelling now - the upside/downside ratio based on our bull case/bear-case target prices is 3.6x. We upgrade SUNTV from `Neutral` to `Buy`while retaining our price target of Rs 400 (15x FY13E EPS).Our scenario analysis points towards a bear-case target of RS 220 (11x bear case EPS of Rs 19.3) while our bull-case targetis Rs 620 (19x bull-case EPS of Rs 31.9).
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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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