Citigroup Global Markets assigns ‘hold’ rating to Areva

Areva T&D India
cmp: Rs 1526.10
target price: Rs 1,809

Citigroup Global Markets has assigned a ���hold��� rating to Areva saying despite the company���s strong fundamentals, the stock is fairly priced.

���The stock trades at a P/E multiple of 19.7 times 2009 (estimated) earnings and provides limited upside to our target price of Rs 1,809. Our target price is based on a P/E multiple of 23 times December 2009 set at a 9.5% premium to historical average P/E multiples and in line with ABB,��� the Citigroup note to clients said.

Citigroup expects Areva���s earnings per share to grow at a compounded annual rate of 32% over 2007-10 (estimated), with a return of equity of around 40%. In comparison, ABB���s EPS is expected to grow at a compounded annual rate of 25% with a RoE of roughly 30%. However, Citigroup feels that Areva does not merit a premium vis-��-vis ABB, given the latter���s superior leverage and free cash flow profile.