Analysts' Picks: ONGC, Aban Offshore, GMR Infrastructure, Unitech

ONGC

Research: Citigroup

CMP: Rs 1138

Target price: Rs 910

Citigroup has rated ONGC a 'sell', with a price target of Rs 910, citing lower crude prices and lack of clarity on fuel subsidy burden. "Weak to moderate crude prices have started hurting ONGC, despite lower subsidy sharing, as realisations on JV (joint venture) and international crude suffer," the foreign brokerage said in a report.

Continuing losses on cooking fuels should ensure continuance of the subsidy-sharing mechanism in FY10 and cap upside even if crude recovers to higher levels," Citi said. "Despite talk of deregulation, we feel that even if petrol and diesel prices are partly deregulated, LPG and kerosene would continue to be loss-making, implying a subsidy burden on ONGC,"it added.

Aban Offshore

Research: Macquarie

CMP: Rs 1068

Target price: Rs 605

Macquarie has raised its price target on Aban to Rs 605 from Rs 315 while reiterating its 'underperform' rating after the company's net profit beat estimates, despite falling. The hike in price target is in the wake of the company's plans to raise capital through share issue. "The proposed equity raising has reduced the perceived risk from high gearing. Although the earnings impact can be estimated only after the issue price is known, we view this as positive for Aban, as it will bring its gearing to 2 times from 5 times," the investment bank said in a re-port. Macquarie is still concerned about the earnings outlook of the company. "We believe Aban will find it difficult to secure new con-tracts for its eight idle rigs. We remain concerned about worsening jack-up market fundamentals that will make it difficult for Aban to contract its idle rigs," it added.

GMR Infrastructure

Research: Enam

CMP: Rs 131.85

Target price: Rs 171

Enam Securities has maintained its 'outperformer' rating on GMR Infrastructure, relative to the sector, with a price target of Rs 171, post its June quarter earnings. "We maintain our SOTP (sum-of-the-part) of Rs 171 (operational assets Rs 86, assets under development Rs 47, planned projects Rs 25, cash Rs 13). However, the value of planned projects (Rs 25) is contingent on successful fund raising and is the key downside risk to our price target," the brokerage said in a report. Enam estimates the company' earnings per share for 2009-10 at Rs 1.7 against Rs 1.5 in 2008-09. In 2010-11, GMR's EPS is estimated at Rs 0.9.

Unitech

Research: ICICI

CMP: Rs 85.95

Target price: Rs 73

ICICI Securities has downgraded its rating on Unitech to a 'sell' from hold, with a price target of Rs 73, citing expensive valuations. "We raise FY10E NAV (net asset value) to Rs 23,800 crore or Rs 91/share from Rs 12,600 crore, or Rs 66/share, owing to pick-up in volumes (revival in mid-income housing), 150 bps reduction in WACC (weighted average cost of capital) to 14.6% from 16.1% and decrease in net debt by Rs 4000 crore (the company raised Rs 5,400 crore from QIPs and warrants)," the brokerage said in a report. "However, we believe these positives are factored in the current stock price," it said.