SAIL
Reco Price: Rs 187,
Target Price: Rs 258
The IISCO (Burnpur) steel plant of 2 mtpa has been delayed from June 2011 to December 2011, due to the hard rock formations encountered at the convertor area. Other ancillary facilities like coke oven, blast furnace and sinter plant are on track for completion in June 2011 and may cater to the inefficient plants of Durgapur and Bokaro. The Salem steel plant is expected to be commissioned during Q3FY11. Potential JV with Posco to decide scope of Bokaro expansion. If the JV plan is dropped, SAIL might set up an unit at Bokaro or source slabs from Durgapur steel plant. SAIL is targeting volume growth of 4-5 per cent during FY11-13 through debottlenecking of the existing capacities.
Maintain buy.
— Edelweiss
FORTIS HEALTHCARE
Reco Price: Rs 161,
Target Price: Rs 206
Fortis Healthcare (Fortis) is on track to achieve a 6,000+ installed bed capacity by FY13 as 8 new hospitals go on stream. This should drive 41 per cent compounded growth in its revenues and 75 per cent earnings growth over FY10-13. The backing of well-funded promoters and a strong balance sheet is a plus and it is also willing to adopt novel models to reduce resource intensity in its future expansion. However, subdued return ratios, limited track record of executing greenfield hospitals and pending integration of hospitals acquired from Wockhardt are key risks to monitor. The addition of 2,000 greenfield beds will hit Fortis’ margins by 160 basis points over FY10-13 but improve sharply thereon.
Initiating coverage with outperformer.
— IDFC
SUNDARAM FASTENERS
Reco Price: Rs 65,
Target Price: Rs 105
Sundram Fasteners’ September quarter revenue grew 40 per cent, driven by 36 per cent rise in domestic revenues and 55 per cent rise in exports. Exports in rupee terms would have been higher but for the forex appreciation during the quarter. Operating margins have been depressed by appreciation of the rupee and higher raw material costs. Core Ebitda growth is muted at 18 per cent. Interest costs have been lowered by a forex gain of Rs 3.7 crore, accounting for 40 per cent of the swing in profit before tax. A lower tax rate at 29 per cent versus 32 per cent aided a 64 per cent profit growth. Its Chinese and UK subsidairies have broken even during this period. Subsidiary profits were higher than analysts’ estimates.
Maintain buy.
— Motilal Oswal Securities