Brokerage Platter: Everest Kanto and more
Motilal Oswal has put a ‘buy’ call on Everest Kanto Ltd with a price target of Rs 279. Ispat Industries has breached its intermediate resistance at Rs 18 and continues to sustain above that level.
By INDIATIMES NEWS NETWORK |
MUMBAI: Motilal Oswal has put a ‘buy’ call on Everest Kanto Ltd with a price target of Rs 279. The brokerage has valued the stock 20 times 2008-09 (Apr-Mar) estimate to arrive at the target price.
At current levels, the stock is trading 23.6 times 2007-08 estimate and 16.2 times 2008-09 estimate, the brokerage says in a Sep 6 report.
Everest Kanto is expected to see 43 per cent compounded annual growth rate in revenue and 42 per cent growth in profit after tax through 2009-2010.
The earnings per share on CAGR basis is seen slightly lower at 40 per cent due to 5 per cent equity dilution.
The company's scalable, de-risked business model coupled with high earnings visibility rule out any significant valuation de-rating.
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“We believe our estimates are fairly conservative and there is room for positive surprises. For instance, the company expects to commission its first China unit in December 2007. However, we have considered commercial production only in April 2008. Likewise, economies of scale could lead to upside in our margin assumptions,” the Motilal Oswal report says.At 12:19 pm on BSE, the Everest Kanto share was at Rs 234.50, up 0.32 per cent from Tuesday.
Ispat Industries
MUMBAI: Ispat Industries has breached its intermediate resistance at Rs 18 and continues to sustain above that level. The substantial increase in volume along with the price indicates that the bulls are clearly committed to the stock.
The stock has clearly entered into a fresh bullish trajectory after a prolonged accumulation. Buy this stock aggressively between Rs 18 -Rs 19.50. We expect the stock to reach a target of Rs 26-30 in the medium term. Keep a stop- loss of Rs 16.20, says Anand Rathi Securities in a report dated Sep 12.
At 12:14 pm on BSE, the Ispat Industries share was at Rs 19.20, up 3.5 per cent over Tuesday’s close. Total traded quantity was 94,36,728, against the two-week average of 1,27,70,261 shares. A week ago, the stock was at Rs 18.75 and month earlier Rs 13.89.
Tanla Solutions
CMP: Rs 482.65
Target price: Rs 706
HDFC Securities has initiated coverage on Tanla Solutions with a ‘buy’ recommendation on account of the company’s presence in the mobile transaction business. According to the brokerage, Tanla Solutions’ revenue is estimated to grow at a CAGR of 72% between FY07 and FY09. “Servicing content providers will help Tanla to catch up with the rapid technological changes in the content delivery business.
This is a major business for Tanla and helps it to get more content providers on its network,” says the report. Moreover, the company is expected to spend Rs 220 million in FY08 on R&D. “We believe that the company would grow at a CAGR of 59% in FY07-09E at net levels. This gives us a target price of Rs 706 for the stock --Rs 646 for the core business and Rs 60 for its non-core business (interest and dividend incomes),” said the brokerage in a note to its client.
Spice Comm
CMP: Rs 55
Citigroup has initiated coverage on Spice Communications with a ‘buy’ recommendation as the telecom entity is in the process of ramping up coverage in Punjab and Karnataka. “Moreover, we believe its suitability as an M&A target provides the icing on the cake,” adds the report. Access to 900 MHz and its small footprint make it an attractive and probably the only M&A candidate, explains the foreign brokerage. “New spectrum rules may dilute M&A prospects a bit, but on the flip side provides a chance to enter new circles, though constrained by size and management bandwidth,” it adds.
However, the report adds that while new circle rollouts are possible if new spectrum norms are accepted by the department of telecom (DoT), Spice will remain constrained by its balance sheet size as well as management bandwidth. Citigroup has set a 12-month price target at Rs 70 per share. Incidentally, the price target includes a 15% M&A premium. We believe that the scope for merger/acquisition between Spice and other telcos such as Idea, RCOM and Aircel still exists, says Citigroup.
CMP: Rs 482.65
Target price: Rs 706
HDFC Securities has initiated coverage on Tanla Solutions with a ‘buy’ recommendation on account of the company’s presence in the mobile transaction business. According to the brokerage, Tanla Solutions’ revenue is estimated to grow at a CAGR of 72% between FY07 and FY09. “Servicing content providers will help Tanla to catch up with the rapid technological changes in the content delivery business.
This is a major business for Tanla and helps it to get more content providers on its network,” says the report. Moreover, the company is expected to spend Rs 220 million in FY08 on R&D. “We believe that the company would grow at a CAGR of 59% in FY07-09E at net levels. This gives us a target price of Rs 706 for the stock --Rs 646 for the core business and Rs 60 for its non-core business (interest and dividend incomes),” said the brokerage in a note to its client.
Spice Comm
CMP: Rs 55
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Target price: Rs 70 Citigroup has initiated coverage on Spice Communications with a ‘buy’ recommendation as the telecom entity is in the process of ramping up coverage in Punjab and Karnataka. “Moreover, we believe its suitability as an M&A target provides the icing on the cake,” adds the report. Access to 900 MHz and its small footprint make it an attractive and probably the only M&A candidate, explains the foreign brokerage. “New spectrum rules may dilute M&A prospects a bit, but on the flip side provides a chance to enter new circles, though constrained by size and management bandwidth,” it adds.
However, the report adds that while new circle rollouts are possible if new spectrum norms are accepted by the department of telecom (DoT), Spice will remain constrained by its balance sheet size as well as management bandwidth. Citigroup has set a 12-month price target at Rs 70 per share. Incidentally, the price target includes a 15% M&A premium. We believe that the scope for merger/acquisition between Spice and other telcos such as Idea, RCOM and Aircel still exists, says Citigroup.
Mindtree Consulting
CMP: Rs 582.75
Target price: Rs 556
Religare has initiated coverage on Mindtree Consulting with a ‘sell’ recommendation as it feels that operational risks are raising concerns and valuations are expensive. While Mindtree has been one of the fastest growing mid-tier Indian IT services company, growth has slowed down significantly in FY07 and is further expected to slow down in FY08 due to rupee appreciation, says the report.
“Risks to growth is significant as more than 65% of the revenues come from development projects which are highly dependant on the discretionary IT spend of clients. In the event of an economic slowdown in the US, discretionary IT spends would be curtailed,” adds the report. However, the report adds that the estimates do not factor in any large deals that the company might win that could fuel higher-than-expected earnings growth.
IOB
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CMP: Rs 138.15 Target price: Rs 150
Angel Broking has recommended a ‘buy’ on Indian Overseas Bank with a 12-month price target of Rs 150. “IOB remains in a ‘sweet spot’ with its superior return ratios, consistently high net interest margins, better operating efficiency and higher leverage. Going ahead, with the government’s holding at 61%, IOB would be an active candidate in the consolidation process in the PSU banking space,” says the report. Meanwhile, the brokerage has valued the bank at a 10% discount to fair value to factor in its geographical concentration.
The report has also factored in positives like well-managed assets and liabilities to drive earnings, a significantly derisked investment book and strong operating performance. Further, IOB is well-placed on the capital adequacy ratio (CAR) front. “For FY07, the bank reported CAR of 13.27% of which Tier I comprised 8.2%. Post implementing Basel II, management expects CAR would stand at 12%. IOB has to comply with Basel II guidelines by FY08 due to its overseas branch network. We do not expect the bank to dilute its equity in the near term,” adds the report.
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