Analysts' corner

RESEARCH CALLS

Upside: 74.1%

Bihar Tubes (BTL) has clocked a 35 per cent y-o-y growth in revenues for Q3FY08 to Rs 67.56 crore. Rising realisations and a focus on the high-margin pre-galvanised pipe segment has resulted in a significant improvement in the PBITD margin to 13 per cent in Q3FY08 as compared to 8.8 per cent in the same period last year. The strong operational performance has supported a substantial 126 per cent rise in net profit to Rs 4.52 crore.

BTL is expected to perform well on the back of its planned product forays, inorganic growth strategy (currently acquiring Bangalore-based Shri Lakshmi Metal Udhyog) and strong marketing network. The company has plans to enter into high-diameter pipes as well as tubes and pipes catering to the oil & gas segment. The company holds an order book of Rs 50 crore as on December 2007.

Considering the strong order pipeline and expected improvement in the margins on account of declining zinc prices, the brokerage maintains a price target of Rs 242. At the target price, the stock discounts its FY09E EPS of Rs 29.7 by 8.1 times.

Coromandel Fertilisers
Reco price: Rs 120
Current market price: Rs 130
Target price: Rs 180
Brokerage: Pinc Research
Upside: 38.4%

Coromandel Fertilisers (CFL ) is setting up a Gypsum block plant which will substantially raise the realisations of gypsum. It is also setting up a 450,000 mtpa complex fertiliser plant at Kakinada at a capex of Rs 60 crore; the project is likely to be commissioned in FY10.

Besides, its phosphoric acid plant in Tunisia in a JV with GSFC and GCT will be operational by FY10. The JV will provide a permanent source of phosphoric acid and will fulfill its requirement for complex fertiliser. CFL's tie-ups for key raw materials, merger of Godavari Fertilisers and increase in revenue from the pesticide division will help strengthen its position in the southern market.

Considering these factors, the consolidated net sales is expected to grow by 15 per cent to Rs 4,460 crore and 6 per cent to Rs 4,710 crore in FY09 and FY10 respectively. Net profit is likely to be Rs 270 crore in FY09 and Rs 290 crore in FY10. This will lead to a consolidated EPS of Rs 19.5 in FY09 and Rs 20.8 in FY10.

At the recommended price of Rs 120, CFL trades at a P/E of 6.4 times and EV/EBIDTA of 5.1x, discounting its FY10E consolidated numbers. The strong execution capability and persistent performance should give it higher valuation to its peers in the industry. The brokerage recommends the stock with a 12-month price target of Rs180.

Elder Pharma
Reco price: Rs 396
Current market price: Rs 390
Target price: Rs 535
Brokerage: Emkay Share
Upside: 37%

Elder Pharma is among the largest in-licensing players with a strong product portfolio. Elder chose the in-licencing model over manufacturing of generic versions of patented molecules, which has helped it build high credibility in the international space. The company expects more in-licensing deals going ahead to enhance product portfolio and drive growth.

The recent acquisitions of NeutraHealth and Biomeda are strategic decisions to increase its global reach and the benefits of these initiatives will be seen over the next two to three years. The brokerage expects total exports to grow at CAGR 69.4 per cent over FY07-FY10E. Moreover, these acquisitions have created additional CRAMs opportunity for the company.

Also, Elder is on its way to generating substantial cost savings by shifting its manufacturing activities to tax-free zones of Uttaranchal and Himachal Pradesh. The company's operating margin is expected to improve by 200 basis points from 17.4 per cent in FY07 to 19.4 per cent in FY10E.

The company is estimated to report strong growth in revenues at CAGR of 27 per cent and net profit growth at CAGR of 34 per cent during FY07-FY10E. At the recommended price, the stock discounts its FY09E EPS of Rs 44.6 by 8.8 times and looks attractive for long-term investment.

IndiaBulls Real Estate
Reco price: Rs 631
Current market price: Rs 646
Target price: Rs 890
Brokerage: Motilal Oswal
Upside: 38%

India Bulls Real Estate plans to increase its presence in high profit segments like commercial offices, retail and SEZs, which have high yield per acre. The brokerage estimates total development volumes to increase from 3.6 msf in FY08 to 8.1 msf in FY10 and 23.9 msf in FY17. The company with its fully paid strategically located land bank of 224 msf, is well placed to leverage on the huge opportunities across verticals in the real estate sector.

Emerging as a key player in retail, India Bulls Real Estate plans to develop 30 large format malls across India by FY10, making it one of the largest mall developers in India. The company has acquired 63.9 per cent stake in Piramyd Retail, which gives it ready access to 42 stores, 35 wholesale formats and 7 lifestyle retail formats across the country.

Piramyd acquisition also provides India Bulls Real Estate with a platform to accelerate roll-out of its cash and carry business. India Bulls Real Estate is currently working on several initiatives such as, Raigarh SEZ, wholesale formats and multiplexes, power plants and Dharavi rehabilitation.

Though these developments have not been factored in, values from these businesses can be significant. The brokerage expects a 490 per cent revenue CAGR and 393 per cent earnings CAGR over FY07-10. The brokerage has put a buy rating with a target price of Rs 890 based on FY09 NAV estimate.

NTPC
Reco price: Rs NA
Current market price: Rs 203
Target price: Rs 280
Brokerage: ICICI Direct
Upside: 38%

NTPC saw a 9 per cent y-o-y growth in revenue to Rs 9,330.80 crore in Q3FY08. This includes Rs 756.40 crore in income tax recoverables from customers compared to Rs 389 crore in corresponding quarter the previous year. Its generation increased by 2.9 per cent y-o-y to 50.7 billion units in Q3FY08 driven by higher PLF (93.2%) for its coal-based power plants.

Moreover, the new capacity addition of 2,200 MW in FY07 and 500 MW in Vindhyachal power plant capacity addition in 9MFY08 led to an overall rise of 4.2 per cent y-o-y in units sold to 47.7 billion units during the quarter. Operating margins increased to 31.8 per cent from 30.9 per cent. A sharp rise in margins was largely on account of lower fuel cost.

Going forward, The company has targeted an increase in its capacity to 50,004 MW by the end of FY12 and further to 75,000 MW by FY17. Main plant orders have been placed and work has already commenced for 13,360 MW capacity.

This aggressive expansion, coupled with its high PLF is expected to drive earnings at a 20.16 per cent CAGR FY06-09E and improve RoE to 14.30 per cent from the regulated 14 per cent. The brokerage rates the stock as an outperformer with the target price of Rs 280.