Buy Bharati Shipyard; target of Rs 525

Bullish on Bharati Shipyard and has recommended buy rating on the stock with a target of Rs 525.

Buy: Announces New Order Win; Earnings Visibility Remains Strong

What's new - Bharati Shipyard has announced that it has won an order for the construction and supply of two platform supply vessels from UP Offshore (Bahamas) Ltd. The contract is the first of its kind for an Indian company from South America and reiterates Bharati’s strong presence in the global offshore supply vessel segment.

Order book at ~6x FY07E sales - The total contract value is US$43m with expected delivery in July and November 2009. Bharati’s order book now stands at c.Rs30bn, with the unexecuted portion at c.Rs24bn, providing a cover of ~6x FY07E sales, lending strong visibility to earnings over the next 2-3 years.

Awaiting clarity on earnings impact - There is a potential upside risk to our FY09E numbers as we are currently not factoring in the impact of the recent new order wins. We await further clarity on the integration following the recent acquisition of Swan Hunter’s equipment and the resultant time and cost savings to the Mangalore project. FY08E earnings are unlikely to be impacted.

Maintain Buy/Medium risk - We believe fundamentals for Indian shipbuilders remain strong, driven by: (1) the robust E&P cycle ensuring strong demand in the OSV segment; and (2) the continued tightness in the global shipbuilding sector. Bharati's Mangalore project is well-timed to capture the upswing in the shipbuilding cycle and should benefit from the recent equipment acquisition. Reiterate Buy/Medium risk with a target price of Rs 525.

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Buy Reliance Comm; target of Rs 491

Recommend short-term buy rating on Reliance Communications with a target of Rs 491.

Chart pattern - Reliance Communications has seen a “Bullish” breakout fromHead-and-Shoulder Pattern. The construction of “H&S” is – Left Shoulder @ 386(Low of 5 March 2007), Head @ 371 (low of 16 March 2007), Right Shoulder @389 (Low of 2 April 2007). Breakout at Neckline was at 425.

Price objective - The minimum price objective has been calculated using the“Maximum Depth” technique. “Maximum depth” is the distance between theNeckline (437) and Head (371); i.e., 437-371=66. Adding 66 to the breakout pointat the neckline at 425 gives us the minimum price objective of 491 [425+66=491].

Moving averages - Price are trading above the 10dma (427), 20dma (420),50dma (426).The moving average crossover looks bullish. The 10dma has cut the 20dma & 50dma from below.

Target Price - Stop Loss Price - Target price 491, Stop loss 427 (10dma).

Recommendation - Short-Term Buy (1B) with Target Price of 491 and Stop loss Price of 427.

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Buy Union Bank; target of Rs 125

Bullish on Union Bank of India and has recommended buy rating on the stock with a target of Rs 125.

Upgrade to Buy post stock price correction

Upgrading Union Bank to Buy/ Low Risk (1L) from Sell (3L) as current valuation is at 0.9x FY08E book value, following a 21% correction from its peak. Maintain target price and estimates.

Tougher environment hurts growth; profits remain on course

The higher interest rate scenario in the Indian banking sector will be a drag on growth, lead to higher provisioning on loans and bonds. However, it should be supportive of margins and profitability, with asset quality declining but not damaging.

Managing growth and profitability, better

Union Bank bounced back in 3Q07 – with a strong profit performance, and a healthy growth and margin mix. We see management more focused and committed to manage this equation than in the past, where profitability was sacrificed for growth. Limited funding flexibility, and slightly higher share of wholesale funding is a constraint

Amongst most profitable, but finely balanced on capita

Union generates one of the highest ROE’s amongst Government banks, has significant fee income momentum, and is ahead of peers on technology. Its relatively finely balanced capital position is an offset, though prudent management – which we see evidence of - could well support higher valuations.

Maintain target price, valuations in-line with peers

We maintain our target price of Rs 125 based on our EVA model and value the bank in-line with the Government banks.