Emkay picks: Aban Offshore, Ratnamani Metals, Lloyd Electric
Emkay Share and Stock Brokers has maintained ‘buy’ on Aban Offshore with a revised price target of Rs 5,330.
By ET Online |
MUMBAI: Emkay Share and Stock Brokers has maintained ���buy��� on Aban Offshore with a revised price target of Rs 5,330. Over last few years, a near 100 per cent utilisation for offshore and a fairly long gestation period for new built rigs has created a critical bottleneck and constraining the ability of E&P companies globally to exploit known reserves or find new ones.
As a result, day rates for deepwater rigs in the Gulf of Mexico are now hovering around $6,00,000 a day. Emkay believes that day rates for such rigs would continue to remain firm with upward bias. With 35 per cent of its revenues expected to be derived from deepwater segment in 2008-09 the brokerage believes that Aban Offshore is likely to be beneficiary of this uptrend in day rates for deepwater assets.
Also, Aban has one deepwater semisubmersible rig, Bulford Dolphin, currently under refurbishment to get contracted. Emkay expects this rig to fetch very handsome day rate. Emkay believes that offshore oilfield service���s industry fundamentals remain compelling and Aban is the best play to drive the strong demand for offshore rigs and continued uptrend in day rates.
Aban is currently trading at 8.4X its FY2009 earnings and 5.9X its FY2010 earnings. The price target is based on 10X Aban���s FY2010 EPS of Rs 533.
The earning per share estimates for Aban stands at Rs 376 for 2008-09 and Rs 533 for 2009-10. Aban is currently trading at 8.4X its FY2009 earnings and 5.9X its 2009-10 earnings. With the global offshore rig market continuing to witness rig shortage on account of long gestation period for new assets, the day rates for rigs in the medium term to long term could witness further upside.
Aban still has one contract to be tied up in the standalone entity and three fresh contracts for its new generation premium Jack ups rigs, is in a sweet spot. Emkay believes that offshore oilfield service���s industry fundamentals remain compelling and Aban is the best play to drive the strong demand for offshore rigs and continued uptrend in day rates.
As a result, day rates for deepwater rigs in the Gulf of Mexico are now hovering around $6,00,000 a day. Emkay believes that day rates for such rigs would continue to remain firm with upward bias. With 35 per cent of its revenues expected to be derived from deepwater segment in 2008-09 the brokerage believes that Aban Offshore is likely to be beneficiary of this uptrend in day rates for deepwater assets.
Also, Aban has one deepwater semisubmersible rig, Bulford Dolphin, currently under refurbishment to get contracted. Emkay expects this rig to fetch very handsome day rate. Emkay believes that offshore oilfield service���s industry fundamentals remain compelling and Aban is the best play to drive the strong demand for offshore rigs and continued uptrend in day rates.
Aban is currently trading at 8.4X its FY2009 earnings and 5.9X its FY2010 earnings. The price target is based on 10X Aban���s FY2010 EPS of Rs 533.
The earning per share estimates for Aban stands at Rs 376 for 2008-09 and Rs 533 for 2009-10. Aban is currently trading at 8.4X its FY2009 earnings and 5.9X its 2009-10 earnings. With the global offshore rig market continuing to witness rig shortage on account of long gestation period for new assets, the day rates for rigs in the medium term to long term could witness further upside.
Aban still has one contract to be tied up in the standalone entity and three fresh contracts for its new generation premium Jack ups rigs, is in a sweet spot. Emkay believes that offshore oilfield service���s industry fundamentals remain compelling and Aban is the best play to drive the strong demand for offshore rigs and continued uptrend in day rates.
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Ratnamani Metals and Tubes
Emkay has maintained ���buy��� on the stock with a one year forward target price of Rs 1,200. The company has declared its Jan-Mar 2007-08 results which is marginally below the brokerage expectations on account of mark to market derivative losses booked by the company.
The company reported audited annual results for 2007-08 during which it witnessed a topline of Rs 845.1 crore (with Y-o-Y growth of 48%) as against Rs 839 crore (with Y-o-Y growth of 47%) estimated by Emkay. The EBITDA margin of the company during the year was at 21.3 per cent which was above the brokerage expected level of 20.8 per cent.
During 2007-08 the net profit of the company was Rs 90.03 crore, thus reported year on year growth of 40 per cent which was below their estimated growth of 50 per cent. The reason behind the same was mark to market losses on forex derivatives to extent of Rs 27.5 crore booked by the company.
With this the company reported fully diluted EPS of Rs 95.2 as against their estimated level of Rs 102. The order book position of the company is at a healthy level of Rs 650 crore with execution period of 6-8 months. Emkay expects the company���s topline and bottomline to grow at a CAGR of 30 per cent and 31.8 per cent respectively during FY08A- 10E.
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Emkay has maintained their financial estimates for FY09E and FY10E. On the basis of FY09E and FY10E EPS of Rs 133 and Rs 165.6, the scrip is currently trading at an attractive P/E of 5.9x and 4.7x respectively. At the target price the scrip discounts FY09E EPS by 9x.Lloyd Electric and Engineering
Emkay has initiated ���buy��� on the stock for a price target of Rs 142. The company is a market leader in the domestic AC coil segment and is likely to continue its upward march over the next few years. A buoyant demand scenario for the AC coil segment combined with Lloyd���s foray into the AC contract manufacturing segment has helped boost its earnings.
Lloyd has ventured into contract manufacturing of ACs, AC equipment for metro rails, etc three years back. In a bid to widen its geographical presence, the company recently acquired Luvata Czech, one of the top five coil manufacturers in the free coil market in Europe. The acquisition presents dual benefits of expanding Lloyd���s existing product range and also outsourcing of a few of Luvata���s manufacturing processes to its domestic plant.
The company is planning to invest Rs 20-30 crore per annum for the next three years in order to expand its production capacity. Given the strong growth prospects for Lloyd, Emkay expects the standalone revenues, EBITDA and profit after tax to grow at a CAGR of 27 per cent, 30 per cent and 33.2 per cent respectively during FY08A-10E.
At the market price of Rs 98, the scrip trades at 4.5xFY09E and 3.3xFY10E earnings respectively, this is at a discount to its peers. At the target price, the scrip trades at a one year forward P/E of 6.5x.
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