Jindal saw, stock tip

Emkay assigns buy to Jindal Saw; target Rs 941
MUMBAI: Emkay Global Financial services has maintained ‘buy’ on Jindal SAW for a revised target price of Rs 941. The company’s Apr-Jun 2008 results were inline with the brokerage expectations. Jindal Saw has reported 34.76 per cent growth in net sales from Indian operations on year on year basis. In Apr-Jun 2008, the company reported net turnover of Rs 1,017.5 Out of the total net revenue in Apr-Jun 2008, 59 per cent was from exports and 41 per cent was from sale in India. EBITDA margin of the company during the quarter expanded by 337 basis points on y-o-y basis and thus stood at a firm level of 15.9 per cent. The improvement in the margin is attributed to the selling off of low margin US operation. But in the coming quarter, the margin is expected to be at a lower level of around 14.5 per cent primarily on account of lower margin contributed by fixed price contracts on DI pipes. The substantial rise in prices of coal is expected to impact the margins on DI pipes. Net profit remained strong at Rs 70.2 crore with profit after tax margin of 6.9 per cent. The profit after tax margin declined against Jan-Mar 2008 on account of higher financial expenses of Rs 55 crore. It included Rs 12 crore of translation losses on FCCB and Rs 17-18 crore of losses on options and forward contracts. Jindal SAW has a strong order book of USD 1.12 billion which includes over 55 per cent of exports orders. These orders are to be executed by April/May 2009. Out of the total USD 1.12 billion, USD 760 million are of large diameter pipes, USD 170 million are of DI Pipes and USD 160 million are of Seamless pipes. The capital expenditure plans are running as per schedule. Installation of PQF mill and other equipments in Seamless plant will be completed by September/October 2008. The commercial production in power plant began in phases. The additional 200,000 MTPA of LSAW and 350,000 MTPA of HSAW facilities are expected to start trail run in 2008. The company is incurring a total of USD 200 million on these plans for which the funds are already tied up. The management has not given any update on new businesses. As per previous guidance, the company expects Rs 100 crore of revenue from waterways business and from Jindal Water Infrastructure, the management expects to execute orders upto Rs 325 crore in this year. Emkay believes that the new ventures would strengthen the topline and bottomline and earning per share of Jindal Saw. The new businesses would diversify its business model by de-risking it from raw material price volatility and currency volatility. Currently Emkay has not included any contribution from the new ventures in their estimates. Emkay has already factored in, the impact of rise in important raw material prices like coal, iron ore, etc in their estimates for CY08E and CY09E. On the basis of CY08E and CY09E revised earnings per share of Rs 48.5 and Rs 79.1, the scrip is trading at an attractive PE multiple of 11.6x and 7.1x respectively. The target price includes Rs 145 per share as value of quoted investment (at 50% discount to its market value) and Rs 796. At their target price, the scrip discounts CY09E EPS of Rs 79 by 11.9x.

Bank of India

Macquarie maintains ‘outperform’ on Bank of India

CMP: Rs 290.70 ( 8th Aug 08 )
Target Price: Rs 336

Macquarie believes that Bank of India’s strong results show its relative resilience among government-owned banks to the tough macro environment. The bank remains its top pick among state-owned banks and the broking house maintains ‘outperform’ rating with a revised target price of Rs 336 from the previous Rs 299. It says that the key earnings surprise was strong growth in fees to 58% Y-o-Y driving the 49% Y-o-Y growth in non-interest income. It infers that the bank has been aggressively pushing for fees business, focusing on products such as letters of credit and guarantees.

Aegis logistics - stock BUY

KR Choksey Shares & Securities assigns ‘buy’ on Aegis Logistics

CMP: Rs 171.60 ( 8th Aug 08 )

Target Price: Rs 207

KR Choksey Shares & Securities has assigned a ‘buy’ on Aegis Logistics with a one-year price target of Rs 207, citing growing domestic consumption of the company’s services. Aegis Logistics mainly concentrates on port handling of liquid petroleum or chemicals and gas storage and distribution. “Given the growing domestic consumption of petroleum and gas in the recent years, Aegis Logistics (ALL) is well placed to grab the increasing opportunities in this sector. As a result of favourable cost, economics of auto gas over petrol and the increasing new entrants of LPG variants of cars in the market, the company is all set to scale up auto gas stations from the current 22 to 100 in the next two years,” the report said.

Mahindra and Mahindra , stock tips

Edelweiss Capital's ‘buy’ rating on Mahindra & Mahindra

CMP: Rs 574.20 ( 8th Aug 08 )

Target Price: Rs na

Edelweiss Capital has initiated coverage on Mahindra & Mahindra (M&M) with a ‘buy’ rating. The brokerage expects the operating divisions of M&M to perform well over the medium term, in terms of growth and profitability. “We expect significant expansion in M&M’s addressable market through its entry into the passenger car. The company has significant value embedded in its investments, covering information technology Tech Mahindra), real estate & infrastructure (Mahindra Gesco), hospitality (Mahindra Holidays), financial services (Mahindra & Mahindra Financial Services), and auto-component (Mahindra Ugine Steel and Mahindra Forgings) sectors,” the report said.

YES Bank - stock tip

IDBI Capital maintains ‘buy’ rating on YES Bank

CMP: Rs 138.35 ( 8th Aug 08 )
Target Price: na
IDBI Capital has maintained a ‘buy’ rating on YES Bank, on expectations of higher growth happen. The brokerage expects the Bank to log strong income growth in the long term. Despite mark-to-market (MTM) depreciation, net provisions have been lower owing to reversals equivalent to MTM depreciation done on investment provisions, the IDBI report noted. The bank has increased its lending and deposit rates recently. The PLR has been raised by 150 bps to 17% while the card rates for deposits have undergone changes in various maturities from 50-75 bps. “We expect the PLR change to immediately have a beneficial impact on the bank’s earnings while the full impact of deposit rate hike should be expected in FY10,” the report said. IDBI has revised net profits for FY09 and FY10 to Rs 2,927 million and Rs 4,394 million, respectively.