BNP Paribas maintains 'buy' rating on Shiv-Vani Oil & Gas
BNP Paribas maintains ‘buy’ rating on Shiv-Vani Oil & Gas, while reducing the target price from Rs 800 to Rs 522 on higher borrowing costs and multiple contractions.
RESEARCH: BNP PARIBAS
RATING: BUY
CMP: RS 393
BNP Paribas maintains ���buy��� rating on Shiv-Vani Oil & Gas, while reducing the target price from Rs 800 to Rs 522 on higher borrowing costs and multiple contractions. The company���s global peers trade at a forward P/E of 10.5x, compared to Shiv-Vani���s 8.4x (based on FY10 EPS estimates).
Global peers are likely to expand at 23% from FY08-FY 10, while Shiv-Vani is set to grow 58%. BNP Paribas believes oil service companies will continue to see strength in their core businesses, despite weak sentiment surrounding crude. Shiv-Vani���s receivables rose by 158% to Rs 276 crore, which comprised 48% of its FY08 revenue. Since over 85% of Shiv-Vani���s revenue comes from ONGC, this raises concerns on the company���s working capital management. BNP Paribas believes Shiv-Vani will need to raise cash to fund its working capital needs in the near term and hence, will see an increase in its cost of borrowing.
RATING: BUY
CMP: RS 393
BNP Paribas maintains ���buy��� rating on Shiv-Vani Oil & Gas, while reducing the target price from Rs 800 to Rs 522 on higher borrowing costs and multiple contractions. The company���s global peers trade at a forward P/E of 10.5x, compared to Shiv-Vani���s 8.4x (based on FY10 EPS estimates).
Global peers are likely to expand at 23% from FY08-FY 10, while Shiv-Vani is set to grow 58%. BNP Paribas believes oil service companies will continue to see strength in their core businesses, despite weak sentiment surrounding crude. Shiv-Vani���s receivables rose by 158% to Rs 276 crore, which comprised 48% of its FY08 revenue. Since over 85% of Shiv-Vani���s revenue comes from ONGC, this raises concerns on the company���s working capital management. BNP Paribas believes Shiv-Vani will need to raise cash to fund its working capital needs in the near term and hence, will see an increase in its cost of borrowing.
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