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RESEARCH CALLS

Monday, October 22, 2007

PETRONET LNG
Broking firm: India Infoline
Recommendation: SELL
Reco Price: Rs 73.5
Target price: Rs 71
CMP: Rs 73.2

Petronet LNG’s financial performance in Q2FY08 were better than expectations. Net sales increased by 21.5 per cent to Rs 1670.5 crore driven by high volumes.

Operating profit and net profit jumped by 48 per cent and 76 per cent to Rs 214.3 crore and Rs 116 crore respectively due to lower overheads and decline in interest and depreciation costs.

The company has planned a foray into the power sector with a gas-based plant having a capacity of 1,200 MW and similar sized power plant at its Kochi terminal.

India Infoline feels that this does not augur well for the company's return ratios as the return on equity in the power sector is capped at 14 per cent. Moreover, the stock has seen a sharp run-up since April gaining 78 per cent and thus discounts most of the positives.

BHARATI SHIPYARD
Broking firm: Prabhudas Lilladher
Reco Price: Rs 603
Target price: Rs 778
CMP: Rs 630
Upside: 23.5 per cent

Bharati Shipyard (BSL) is likely to report a strong performance in Q2FY08 with y-o-y growth of 92 per cent and 72 per cent in revenues and profits. The company bagged an order of Rs 350 crore from Shipping Corporation of India taking its unexecuted order book position to Rs 3,827 crore and translating to an order book to sales ratio of 5.8 times its estimated sales in FY08.

The company recently announced a 50:50 joint venture with Apeejay group to set-up a 2,00,000 DWT shipyard on the eastern coast with an investment of about Rs 1,500-2,000 crore over the next two years and a potential of clocking annual revenues of Rs 4,000-4,500 crore at full capacity. At CMP, the stock trades at 17.5 times and 12 times its estimated FY08 and FY09 earnings.

PAGE INDUSTRIES
Broking firm: IL&FS
Target price: Rs 515
CMP: Rs 416
Upside: 24%

Page Industries is expected to clock a strong growth in revenues and net profits of 35 per cent and 50 per cent respectively between FY07-FY09.

The growth will be driven by the company's brand leadership in the premium and the mid-premium segment of the innerwear industry (Jockey brand), increased focus on the fast-growing women’s innerwear segment, expansion of its distribution network, and widening of its product portfolio including expansion into leisurewear and sleepwear.

With a strong pipeline of new and innovative products, Page Industries' market share in the men's and women's innerwear is likely to increase going forward.

The stock trades at 17 times and 13 times its FY08 and FY09 earnings, which is at a discount to other apparel and accessory brands. Further, its valuations do not capture its strong return ratios (RoCE and RoE of 91 per cent and 42 per cent respectively in FY07).

Posted by FR at 9:22 AM  

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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.