Analysts' Picks: Aban Offshore, Grasim, HDFC Bank, Hero Honda
Morgan Stanley has initiated coverage on Aban Offshore with an ‘overweight’ rating and price target of Rs 4,913. "We expect Aban to benefit from the surge in exploration activities globally.
Aban Offshore
CMP: Rs 3,784.80
Target Price: Rs 4,913
Morgan Stanley has initiated coverage on Aban Offshore with an ���overweight��� rating and price target of Rs 4,913. "We expect Aban to benefit from the surge in exploration activities globally. Exploration and production (E&P) activities are on an upswing amid current high energy prices.
E&P majors are facing an acute shortage of rigs because of which rig rates are scaling new highs," the investment bank said in a recent client note. The foreign broking house believes the Indian offshore rig company is best positioned to benefit from the buoyant demand for offshore rigs and rising day rates.
The ageing global offshore fleet is finding it difficult to service modern E&P needs and so newer assets will be in great demand, it said in the note. "We estimate Aban���s EBITDA to grow at CAGR (compounded annual growth rate) of 32% for FY2008-11 and expect net profits to quadruple over the same period," it added.
Grasim Industries
CMP: Rs 2,177.25
Target Price: NA
ICICI Securities has reiterated its ���buy��� rating on Grasim, while downgrading its earnings estimates for 2008-09 and 2009-10. The leading domestic brokerage has revised earnings downwards for the company after the latter announced Q4FY08 results.
It attributed a combination of factors such as poor VSF (viscose staple fibre) outlook for the next couple of quarters, increased cost pressures and limited pricing upside for the company���s cement business to the downward revision in earnings.
ICICI Securities, however, maintains hiving off of Grasim���s sponge-iron business at an attractive price is an encouraging development. This coupled with our positive outlook on the cement sector and an expected VSF volume turnaround Q3FY09 (third quarter of 2008-09) onwards would give a fillip to stock performance, it said in a client note on the company���s prospects.
ICICI Securities has assigned a fair value for the company at Rs 3,258 per share, as per its sum-of-the-part valuations.
HDFC Bank
CMP: Rs 1,207.55
Target Price: Rs 1,450
CITIGROUP has upgraded HDFC Bank to a ���buy��� from hold, while slashing its price target to Rs 1,450 from Rs 1,565 earlier. "The stock is 35% off its peak as on June 12. The operating business and outlook remain undampened and the pain of the (probably) mis-priced Centurion deal is in the past with the benefits lying in the future," the global investment bank said in a client note.
HDFC Bank is still not cheap, but the market usually is prepared to pay for quality in tough times, according to Citigroup. The note also says HDFC Bank is expected to trade in the 3-4x P/BV (price to book value) band over the longer term.
"We see the stock trading at the lower end of the band, as the bank would need to raise ROE (return on equity) from its currently low level, following its acquisition of Centurion Bank, and expected capital-raising from its parent," the note added.
Hero Honda
CMP: Rs 772.55
Target Price: Rs 925
Merrill Lynch has reiterated its ���buy��� rating on Hero Honda, citing strong medium-term growth prospects, but has cut the price target to Rs 925 from Rs 940. It said lowering of the price target is in line with our downward revision in EPS (earnings per share) forecasts.
This and the company���s disappointing Q1 results due to cricket sponsorship outgo could see stock correct its recent out-performance, the investment bank said in its client note. "Although part of annual marketing budget, the company���s outgo on account of the ICC cricket sponsorship amounting to Rs 320 million will be reflected in Q1 performance. We expect Q1 margins to disappoint at 11.7% (up 90 bps YoY on low base), but make up in subsequent quarters on lower marketing spend, as well as tax benefits from new unit from H2," said Merrill Lynch in the note.
Triveni Engg & Inds
CMP: Rs 95.50
Target Price: Rs 117
IL&FS Investsmart has initiated coverage on Triveni Engineering with a ���buy��� rating and a target price of Rs 117. A robust order book and healthy margins in the engineering business, and near bottoming out of sugar prices, is expected to bolster the company���s financial performance through FY07-09, the domestic brokerage said in a client note.
"During the same period, we expect Triveni���s EBITDA and earnings to increase by 45% and 96% CAGR, to Rs 4,686 million and Rs 2,624 million, respectively,"' it added.
Disclaimer: The stocks recommended above are picked up at random from research reports of broking houses. Investors are advised to use their judgement before acting on these recommendations. ET does not associate itself with the choices.
CMP: Rs 3,784.80
Target Price: Rs 4,913
Morgan Stanley has initiated coverage on Aban Offshore with an ���overweight��� rating and price target of Rs 4,913. "We expect Aban to benefit from the surge in exploration activities globally. Exploration and production (E&P) activities are on an upswing amid current high energy prices.
E&P majors are facing an acute shortage of rigs because of which rig rates are scaling new highs," the investment bank said in a recent client note. The foreign broking house believes the Indian offshore rig company is best positioned to benefit from the buoyant demand for offshore rigs and rising day rates.
The ageing global offshore fleet is finding it difficult to service modern E&P needs and so newer assets will be in great demand, it said in the note. "We estimate Aban���s EBITDA to grow at CAGR (compounded annual growth rate) of 32% for FY2008-11 and expect net profits to quadruple over the same period," it added.
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Grasim Industries
CMP: Rs 2,177.25
Target Price: NA
ICICI Securities has reiterated its ���buy��� rating on Grasim, while downgrading its earnings estimates for 2008-09 and 2009-10. The leading domestic brokerage has revised earnings downwards for the company after the latter announced Q4FY08 results.
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It attributed a combination of factors such as poor VSF (viscose staple fibre) outlook for the next couple of quarters, increased cost pressures and limited pricing upside for the company���s cement business to the downward revision in earnings.
ICICI Securities, however, maintains hiving off of Grasim���s sponge-iron business at an attractive price is an encouraging development. This coupled with our positive outlook on the cement sector and an expected VSF volume turnaround Q3FY09 (third quarter of 2008-09) onwards would give a fillip to stock performance, it said in a client note on the company���s prospects.
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ICICI Securities has assigned a fair value for the company at Rs 3,258 per share, as per its sum-of-the-part valuations.
HDFC Bank
CMP: Rs 1,207.55
Target Price: Rs 1,450
CITIGROUP has upgraded HDFC Bank to a ���buy��� from hold, while slashing its price target to Rs 1,450 from Rs 1,565 earlier. "The stock is 35% off its peak as on June 12. The operating business and outlook remain undampened and the pain of the (probably) mis-priced Centurion deal is in the past with the benefits lying in the future," the global investment bank said in a client note.
HDFC Bank is still not cheap, but the market usually is prepared to pay for quality in tough times, according to Citigroup. The note also says HDFC Bank is expected to trade in the 3-4x P/BV (price to book value) band over the longer term.
"We see the stock trading at the lower end of the band, as the bank would need to raise ROE (return on equity) from its currently low level, following its acquisition of Centurion Bank, and expected capital-raising from its parent," the note added.
Hero Honda
CMP: Rs 772.55
Target Price: Rs 925
Merrill Lynch has reiterated its ���buy��� rating on Hero Honda, citing strong medium-term growth prospects, but has cut the price target to Rs 925 from Rs 940. It said lowering of the price target is in line with our downward revision in EPS (earnings per share) forecasts.
This and the company���s disappointing Q1 results due to cricket sponsorship outgo could see stock correct its recent out-performance, the investment bank said in its client note. "Although part of annual marketing budget, the company���s outgo on account of the ICC cricket sponsorship amounting to Rs 320 million will be reflected in Q1 performance. We expect Q1 margins to disappoint at 11.7% (up 90 bps YoY on low base), but make up in subsequent quarters on lower marketing spend, as well as tax benefits from new unit from H2," said Merrill Lynch in the note.
Triveni Engg & Inds
CMP: Rs 95.50
Target Price: Rs 117
IL&FS Investsmart has initiated coverage on Triveni Engineering with a ���buy��� rating and a target price of Rs 117. A robust order book and healthy margins in the engineering business, and near bottoming out of sugar prices, is expected to bolster the company���s financial performance through FY07-09, the domestic brokerage said in a client note.
"During the same period, we expect Triveni���s EBITDA and earnings to increase by 45% and 96% CAGR, to Rs 4,686 million and Rs 2,624 million, respectively,"' it added.
Disclaimer: The stocks recommended above are picked up at random from research reports of broking houses. Investors are advised to use their judgement before acting on these recommendations. ET does not associate itself with the choices.
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