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Brokerage Recommendations

Sunday, July 29, 2007

Godawari Power and Ispat
Reco price: Rs 184
Current market price: Rs 178
Broking firm: IL&FS Invest Smart

Godawari Power and Ispat the manufacturer of sponge iron and steel billets has announced the impressive Q1FY08 results. The company reported 61.5 per cent y-o-y growth in top line and 72.9 per cent y-o-y growth in bottom line. The growth has been driven primarily by higher volume and realisations.

During the same period the operating margins improved by 350 basis points to 20.0 per cent. Going forward, IL&FS expects the company to continue reporting robust growth during FY08-09.

The commissioning of phase-II capacities will drive the growth during FY08, while a significant savings from captive iron ore mines will provide fillip to revenue in FY09E. At Rs 184, the stock is valued at a P/E of 4.2 times and 2.6 times its estimated FY08 and FY09 earnings, respectively.

Orient paper & Industries
Reco price: Rs 463
Target price: Rs 560
Current market price: Rs 454
Broking firm: Emkay Share and Stock Broking

Orient Paper & Industries’ Q1FY08 net profit at Rs 44.6 crore is marginally below expectations primarily because of lower than expected profit of the paper division.

Revenues for the quarter grew by 13.4 per cent to Rs 293 crore driven by 20.5 per cent growth in revenues of cement division. The operating profit for the quarter grew by 45.6 per cent to Rs 77.7 crore driven by 55 per cent growth in EBIT of cement division.

With repayment of debt during the end of FY07 OPIL's interest charge for the quarter decline by a huge 40 per cent and hence its net profit for the quarter grew by a smart 73 per cent on y-o-y basis to Rs 44.6 crore.

The stock at recommended price trades 5.5 times its estimated FY08 earnings and 5.1 times its estimated FY09 earnings. Emkay believes the valuation for OPIL are undemanding and maintain “accumulate” rating on the stock.

ABG Shipyard
Reco price: Rs 508
Target price: Rs 600
Current market price: Rs 526
Broking firm: Angel Broking

ABG Shipyard recently secured an order from Essar Shipping & Logistics, Cyprus worth Rs 618 crore, this coupled with the acquisition of Vipul Shipyard and good financial results in Q1FY08, the Angel broking puts a buy on the stock.

For the Q1FY08 the company recorded topline growth of 23 per cent to Rs 203 crore. On the operating front, OPM increased by 97 basis point to 27 per cent. During the same period net profit grew by 24 per cent to Rs 33 crore.

ABG Shipyard has a order book of Rs 5,560 crore. The company’s existing order book is 4.9x its estimated FY08 revenues. At Rs 508 the stock traded at 13.5 times FY08E and 8.5 times FY09E on fully diluted earnings of Rs37.5 and Rs59.5, respectively.

Maruti Udyog
Reco price: Rs 841
Current market price: Rs 829
Broking firm: Edelweiss Securities

Edelweiss maintains “accumulate” on Maruti Udyog on the back of continued positive outlook on the passenger car industry. Maruti Udyog Ltd’s Q1FY08 net profit, at Rs 499 crore, was up 35.2 per cent on y-o-y basis from Rs 369 crore in Q1FY07.

During this period its EBITDA margin was steady, however up sharply on q-o-q basis by 220 basis points at 14.6 per cent, primarily due to improved product mix and a fall in other expenses by around 165 basis points.

The company is believed to benefit from the capacity ramp up at the new Manesar plant. On an estimated EPS of Rs 60.0 for FY08 and Rs 70.5 for FY09, the stock at recommended price is trading at 14.0 times FY08E and 11.9 times FY09E.

Suzlon Energy
Reco price: Rs 1,299
Current market price: Rs 1,304
Broking firm: Prabhudas Lilladher

The broking firm maintains “outperformer” on Suzlon Energy. The company for the Q1FY08, reported a consolidated net sales growth of 81.9 per cent on y-o-y basis to Rs 1,940 crore.

Operating margins were down to 7.2 per cent as compared to 17.4 per cent in the corresponding quarter last year due to various reasons such as rupee appreciation, higher employee costs and loss of 100 MW of sales.

During the same period net profit was lower by 80.3 per cent to Rs 18.9 crore. The company has an order book of Rs 13,500 crore. Prabhudas Lilladher revised earning estimates downward by 22 per cent for FY08 and by 17 per cent for FY09.

At the recommended price of Rs 1,299, the stock trades at 32.6 times FY08E and 21.0 times FY09E consolidated earnings of Rs 39.9 and Rs 61.8 respectively. The stock is expected to be under pressure for the next few months, however continue to be positive on the long-term potential of the company.

Posted by FR at 11:53 PM  

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IMPORTANT DISCLAIMER

Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.