BofA initiates Essar Ports with a 'Buy'; shares up 20%

NEW DELHI: Bank of America has initiated coverage on Essar Ports with a ‘Buy’ with a target price of Rs 89, citing 1.8 times increase in port capacity, higher earnings and volume growth and better return ratios by FY14.

“We expect the consolidated net revenue of Essar Ports Ltd to reach Rs 1760 crore by FY14 while consolidated net profit is estimated to touch Rs 350 crore by FY14 - implying an estimated 126 per cent growth (cumulative average growth rate) during FY11-14,” said Bank of America in note on Friday.

At 12:00 p.m., shares of Essar Ports were at Rs 80.4, up 20 per cent.

Earlier in the month, Essar Ports Ltd reported a net profit of Rs 40 crore for the quarter ended September 30, 2011, aided by increase in cargo handling charges.

Deepak Mohoni, Director, trendwatchindia.com

Essar Ports Ltd will benefit from the market rally which has begun. Volatility is generally seen higher for newly listed stocks and Essar Ports is being one of them.

So this could be something traders could catch on the upside, but at the moment I think it’s best to stick with the very short term because the volatility could be high in either direction.