Target Price: Rs 2,076
ICICI Securities has initiated coverage on the Mumbai-based real estate player, HDIL, with a ‘strong’ buy. The recommendation is based on the company’s ‘immense potential’ based on its strong project pipeline and imminent upsides from the GVK Slum Rehabilitation Scheme (SRS) and upcoming special economic zones (SEZs). HDIL has presence across all key segments — residential, commercial, retail, SEZs and particularly SRS. Presence in the prime Mumbai property market adds to its advantage. HDIL has development pipeline of approximately 120 million sq ft (excluding GVK SRS and SEZs). “HDIL is trading at a significant 45% discount to our NAV estimate of Rs 444 billion (Rs 44,400) or Rs 2,076 per share. Based on our financial year (FY) 2008 expected (E), FY09E and FY10E EPS estimate of Rs 39.4, Rs 67.6 and Rs 92.2, it trades at a price-to-earning multiple of 28.9, 16.9 and 12.4 times, respectively. We expect revenue and earnings CAGR of 56% and 53% respectively over the next three years,” the brokerage said in a note to clients. Over the next three years, profit margins are expected to remain high in the range of 43-47%, as it is using completion method of accounting, which leads to higher margins getting booked in the coming years on the projects currently under execution.
Target price: NA
CLSA is positive on Exide Industries, as it feels the company has strong growth potential in the retail market. The French broking house says that the rights issue will ensure sufficient funds for its growth plan and investments in the insurance venture without any increase in debt. It feels that acquisition of a lead smelter in Maharashtra will help in key sourcing of raw material in the medium term. Describing it as its top picks in the mid-cap universe, it has valued Exide’s stake in ING Vysya Life at Rs 16 per share, based on FY09 estimates and net of this, the stock is trading at 16.5 times FY 2009 . “With pick up in retail sales, Exide’s volume growth will remain strong for the next two years. In FY07, while sales grew 35%, volume growth was 20%. Revenue growth is ahead of volume growth due to higher lead prices,” the brokerage said in a note. Exide has submarine battery orders till March 2009 and this would enable it to maintain its margins even in an environment of high lead prices. Exide is one of the five companies globally with capability to make batteries for both Russian and German submarines. It, however, maintains that a sharp increase in lead price remains the key risk for the company.
Target price: NA
Macquarie Research has termed Karuturi Networks as an ’emerging leader’ based on the potential for huge international demand for fresh cut flowers. It feels that the growth of an organised retail industry in India (which is currently in a nascent stage of development) may lead to strong growth potential for cut-rose producers.
The stock is currently trading at 18 times trailing 12 months EPS based on historical earnings. The global supply-demand mismatch is considered to be positive for rose producers. Rise in per capita income and strong demand during festivals and Valentine’s Day are fuelling huge flower consumption in India. “The Indian floriculture sector is estimated to expand 40% each year (significantly higher than the global average) and almost 85% of the demand is estimated to be from roses,” said the brokerage in its note to clients. On the downside, it says that any major epidemic or failure of monsoons may affect production of roses. Also an international ban on imports from India/Ethiopia due to the outbreak of an epidemic or political instability could affect growth in revenue.
Target price: Rs 513
Merrill Lynch says investors should ‘buy’ the stock as Panacea’s increased revenue visibility due to recent doubling of vaccine capacity (to 2 million doses) will drive growth. According to the brokerage, the stock is at a significant 25-30% discount to the sector average and valuations are attractive at 12 times FY09E and 9.5 times FY10E EPS. It says that the company has got WHOnod for two vaccines and may get pentavalent approval shortly. The combined demand of all combination pediatric vaccines worldwide was $600 million in 2005 and is estimated to grow up to $1.6 billion by 2012.
Sumedha Fiscal-Going For Broking
BSE 530419; CMP Rs 22
-Sumedha Fiscal Services is a member stock broker of the NSE-Capital Market and FNO segments.
-At Rs 14 crore of market capitalisation, Sumedha is perhaps the cheapest broking outfit quoting on the BSE.
-Sumedha had marginal profits of Rs 85 lakh in FY07, and has exceeded that figure in the First Half of FY08 with after tax profits of Rs 85 lakh.
-At present, apart from its Calcutta office, the firm runs 8 other branch offices across the length and breadth of the country.
-The Promoters who happen to be Chartered Accountants, hold 53 per cent of the Rs 6.6 crore Equity, with another 7 shareholding 16 per cent of the Equity.
-Equity ownership is concenterated in a few hands, and stock supply is likely to come in from small shareholders.
-Sumedha Fiscal came onto the Dividend list in FY07 with a 5 per cent dividend pay-out and with better business growth should raise this pay-out in FY08.
-Sumedha Fiscal is currently empanelled with most of the FIs, MFs, Banks and Corporate Groups which implies the scalability of business and growth in the coming years.
-With increased focus on arranging corporate finance, IPO management and Advisory Services, the corporate seems willing to broaden the Revenue stream.
-Almondz Securities, JRG, Khandwala, LKP Merchant and larger brokers like MOST and Edelweiss are getting rich valuation on the bourses, reflecting strong business conditions.
-There seems little reason to believe that Sumedha will not be able to scale up and grow its business in the coming years and from a price of Rs 22, there would seem to be little downside but for a major reversal in the Equity markets.