04/04/2013

Buy Federal Bank Limited For Target Rs.510 

 

On the back of turmoil across the banking pivot, it corrected from 550+ level to 465 levels in the recent decline but the pace and percentage of decline was comparatively lower to majority of its peer group stocks.
* The decline has retraced it to neckline area of the previous consolidation range of 400-460 levels providing fresh buying  opportunity.
* One may buy the stock in dips around 480-484 levels with stop loss of 472 for target 510.

 Buy Cipla Limited (CIPLA) For Target Rs.410

 

 

Considering the prevailing choppy scenario, one should better stick with the defensive counters and Cipla is one of the best pharma counters.
* It has retraced to major support zone around 350 levels and started consolidating around that zone while sustaining above 200 EMA on the daily chart indicating  strength.
* One may buy around 485-490 levels with stops below 467 for targets close to 561.
 Buy Coal India Ltd For Target Rs.374 

Growth And Value ‘Coal’ition
We have initiated coverage on Coal India (CIL) with a Buy rating as we believe the street has given paramount importance to the government selling a part of its stake in the company, ignoring all the positives. After a stagnant performance over FY08-FY12, CIL’s coal production has picked up in FY13 and is expected to accelerate over FY14-FY15. We expect coal off-take CAGR of 5.6% over FY12- FY15E versus 2.6% CAGR attained over FY09-FY12. CIL has framed its fuel supply agreements (FSAs) in such a manner that it is most unlikely to attract a penalty for short-supply of coal due to the inclusion of force majeure clauses on factors like delay in land acquisition and getting forest and environmental clearances. CIL stock trades at an attractive valuation with EV/EBITDA multiple at 5.7x/4.1x FY14E/FY15E earnings, respectively, well below the average of 10.2x. We have set a TP of Rs374 (7.5x FY15E EV/EBITDA), which is 21% above CMP.
Stock trades below 2SD (two standard deviation) average across parameters: CIL stock trades at EV/EBITDA multiples of 5.7x/4.1x FY14E/FY15E earnings, respectively, much below the past 29 months’ (post listing) average of 10.2x. It trades below 2SD across parameters like P/E, EV/EBITDA and P/BV and it is at such a low multiple for the first time since its listing. Hence, we believe the CMP factors in all the negatives.
Earnings growth to be steady: We expect CAGRs of 8%/12%/13% in revenue/ EBITDA/PAT, respectively, over FY12-FY15E, driven by a 5.6% growth in volume and a 2.5% rise in realisation. We believe coal price hike is imminent given the pressure on costs following the sustained rise in diesel prices and its resultant impact on overall inflation. Cash reserves of CIL are likely to go up from Rs592bn at the end of FY12 to Rs1,054bn (54% of current market capitalisation) at the end of FY15E.
Meeting full supply under FSA to be difficult, but the pact favours CIL: The company needs to ramp up output to 584mt by FY17E, which implies a CAGR of 7.0% over FY15E-FY17E. CIL has not achieved this kind of growth in the past 10 years and hence it would be difficult for the company to achieve this output target. However, CIL has framed FSAs by including force majeure clauses on all possible causes of coal short-supply like delay on the part of the government to grant and renew mining leases including land acquisition, environmental and forest clearances, shortage of imported coal (no response to enquiries or logistics constraints) and law and order problem (largely pertaining to Maoists). As a result, there are remote chances of CIL attracting a penalty in case of short-supply of coal.
Accounting of over-burden removal adjustment (OBRA): We believe the accounting treatment of OBRA under Indian Generally Accepted Accounting Principles (GAAP) is fair as it limits the scope for any negative surprises in the later part of the coal extraction phase. However, as per the International Financial Reporting Standards (IFRS), OBRA should not be taken into account. Adopting a fair policy, we have treated OBRA as an expense and accumulated OBRA provision in the balance sheet has been considered as a long-term liability (treated as debt in EV/EBITDA target calculation)


Buy Nesco Ltd For Target Rs.1,133 


ompelling Valuations
At CMP of Rs.769 the stock trading at FY14E and FY5E,P/BV & P/E multiples of 2.5x and 2.0 & 12.1x and 10.1x,respectively. We have sum-of-The-Parts(Stop)valuation methodology to arrive at our target price. Excluding the Industrial Capital Good business (given its size and contribution to the overall financials), Bombay Exhibition Center (BEC) & IT Commercial has been valued Net Asset Value (NAV) basis to arrive at Fy15E based price target of Rs.1,133. Given the strong 47.3% upside potential, from current levels, we recommend BUY on Nesco Ltd.

 Buy Sanwaria Agro Oils Limited For Target Rs.32.00 


anwaria Agro Oils Limited engages in the extraction, processing, refining, and trading of soya seed and soya refined oil in India.
* The company’s net sales registered an 11.25% increase and stood at a record Rs. 3687.54 million from Rs. 3314.58 million
over the corresponding quarter last year.
* The company’s net profit registered a 109.63% increase and stood at a record Rs. 85.53 million from Rs. 40.80 million over
the corresponding quarter last year.
* Sanwaria Agro Oils has been ranked at 454th on the basis of Market Cap and also ranked at 472nd on the basis of Net Revenue
by Financial Express Magazine under FE 500 India's Finest Companies.
* Sanwaria Agro Oils Ltd is registered as ISO 14001:2004 Company for Environmental Management System & ISO 22000:2005
Company for Food Safety Management with HACCP as certified by Care Certification Private Limited.
* Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 16% over 2011 to 2014E respectively.

Investment Highlights
Results updates- Q3 FY13,
Sanwaria Agro Oils Ltd has treaded to its own manufacturing of Jar for packaging of Soya refined Oil, reported its financial results for the quarter ended 31 DEC, 2012. The Third quarters witness a healthy increase in overall sales as well as profitability of the company.
The company’s net profit jumps to Rs.85.53 million against Rs.40.80 million in the corresponding quarter ending of previous year, an increase of 109.63%. Revenue for the quarter increase 11.25% to Rs.3687.54 million from Rs.3314.58 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs 0.25 a share during the quarter, registering 109.63% increase over previous year period. Profit before interest, depreciation and tax is Rs.211.58 millions as against Rs.95.47 millions in the corresponding period of the previous year.

Outlook and Conclusion
* At the current market price of Rs.28.50, the stock P/E ratio is at 15.97 x FY13E and 11.84 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.1.78 and  Rs.2.41 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 9% and 16% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 12.43 x for FY13E and 9.84 x for FY14E.
* Price to Book Value of the stock is expected to be at 3.34 x and 2.60 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.32.00 for Medium to Long term investment.

 
copyright vikas parshuram samwatsare april 2013