Ranbaxy laboratories
Reco price: Rs 309
Current market price: Rs 272.40
Target Price: Rs 423
Upside: 55.29%
Brokerage: Kotak Securities
Ranbaxy Laboratories will focus on monetisation of Para-IV ANDAs with 18-20 first-to-file products with market size of around $26 billion valued at innovator prices. The settlement with Pfizer for Lipitor and Caduet has improved the revenue visibility in 2011 and 2012. It provides certainty regarding the timing of the entry of a generic version of Lipitor in US and other geographies.
Through this settlement, Ranbaxy is expected to make net profit of over $1 billion during the 180-days exclusivity period. The USFDA had issued two warning letters to Ranbaxy and an import alert for generic drugs produced at the company’s Dewas and Paonta Sahib plants in India. The FDA Import Alert covers more than 30 different generic drug products. The brokerage expects a 10 per cent de-growth in the US business in FY08 and FY09.
The management has reiterated that the deal with Daiichi Sankyo is binding, final and is progressing as per schedule. Emerging and developed markets constitute about 54 per cent and 39 per cent of global sales, respectively.
For FY09, the expected revenue growth is 7.1 per cent to Rs 8,020 crore and net profit growth is 52.1 per cent to Rs 960 crore. At Rs 309, the stock is trading at 23.9x FY08 and 15.7x FY09 earning estimates. The brokerage has reduced the price target to Rs.423 (from Rs.550 earlier).
Ashok Leyland
Reco price: Rs 30
Current market price: Rs 27.50
Target Price: NA
Brokerage: Edelweiss Securities
Ashok Leyland (ALL) had planned a capex of around Rs 4,000 crore over a period of 3-4 years, of which Rs 800 crore has already been spent. The company is also looking to raise Rs 900 crore in rupee loans. The company has drawn balance $180 million of its contracted $270 million of ECBs from last year.
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The debt-equity ratio is 0.4, and gives the company leeway to raise more debt in future. The company has increased its annual capacity from 85,000 units to 1,35,000 units, which will increase further to 1,85,000 units by Q2 FY10E, when the Uttarakhand plant is commissioned.
The company’s joint venture with Nissan is expected to commence production on schedule in December 2010 and likely to deliver annual sales of 1 lakh units in three years and 2 lakh in five years. The project seeks investments Rs 2,400 crore over a period of three years, and will be funded equally through debt and equity.
While the recent slowdown in industrial activity has affected the goods medium and heavy commercial vehicles (M&HCV) sales, the company expects sales to pick up in H2 FY09. In FY09, goods M&HCV sales are expected to be 60,000 (down 1.2 per cent year-to-date). The company has around 3,000-4,000 bus orders on hand, and it expects moderate growth in this segment.
NIIT Ltd
Reco price: Rs 63
Current market price: Rs 52.75
Target Price: Rs 132
Upside: 150.24%
Brokerage: Emkay Global Financial Services
NIIT’s “retail IT training” business will gain with the registrations for the ‘Bhavishya Jyoti Scholarship-08’. This segment will also do well with the demand for ‘IT as a career’ still buoyant, with expected revenue growth of 28.4 per cent and margin improvement of around 70 bps y-o-y to 21.2 per cent.
NIIT’s “school” business expects revenues to flow from the implementation of the AP government school order (around 2,005 schools) in the coming days. The ‘eGuru’ - interactive learning’s offering product (running in 25 schools now) will have a full fledged launch in October’08, which will offer cross-sell opportunities in around 1,100 private schools and will eventually grow to around 15,000-20,000 schools in the next 3 years. In NIIT’s “corporate training” business, custom content development budgets in the US have remained under pressure along with corporate training budgets seeing a greater shift towards e-learning and training outsourcing. The “school” and “corporate training” businesses are expected to garner 30 per cent and 4 per cent in terms of revenue growth and margins of 14.6 per cent and 3.8 per cent, respectively in the same breath for FY09.
The company’s other segment of new businesses is also growing rapidly. At Rs 63, the stock is trading at 11.6x FY09E with EPS target of Rs 5.4.
Info Edge India
Reco price: Rs 633
Current market price: Rs 631.25
Target Price: Rs 775
Upside: 22.77%
Brokerage: ICICI Securities
The demand for Indian IT services can be under pressure in the aftermath of a slowdown in the US BFSI segment resulting in a slowdown in the IT/ITeS recruitment market.
Even in non-IT recruitment markets, recruitment growth can be restricted with a slew of new infrastructure and real-estate projects being delayed. In this scenario, the brokerage expects Info Edge’s naukri.com to grow at 23 per cent for FY09E (earlier estimate of 36 per cent).
The company is better positioned to tackle any slowdown on account of its diversified product portfolio, including education and matrimony portals and its real-estate portals (relatively under-penetrated).
The company’s innovative product launches, experienced management team and strong execution track record will keep Info Edge in a comfortable position against any possible slowdown. The company has cash surplus of over Rs 300 crore in its books.
The company’s revenue, EBITDA and PAT is expected to grow at 30 per cent, 32 per cent and 26 per cent (earlier estimates of 38 per cent, 41 per cent & 34 per cent) respectively, over FY08-11E. The brokerage feels that naukri.com can revive better growth post 2-3 quarters, but in the short term, it will be tough. It has revised the stock’s target price to Rs 775 (earlier Rs 1,225).
NTPC
Reco price: Rs 182
Current market price: Rs 174.10
Target Price: Rs 140
Downside: 19.59%
Brokerage: India Infoline
NTPC is executing 22.2GW capacity addition through 22 projects and targets to add at least 20.4GW capacity by FY12. Of the 22.2GW, 18.5GW is planned on standalone basis, while the balance is through the Joint Venture (JV) route. Of the standalone projects, NTPC targets to commission 16.6GW capacity by FY12.
The company will face time overruns in the case of 5.7GW due to slippages (about 28 per cent of NTPC’s proposed capacity additions by FY12). On the JV front, all the projects are likely to be commissioned on time.
NTPC’s capacity addition plans are back-ended, with almost 15GW (74 per cent) of the proposed addition scheduled for completion by FY11 and FY12. The company plans to add 11.9GW capacity through FY09-11, but this will result in a modest earnings growth of 9.7 per cent CAGR through FY08-11.
NTPC can no longer be considered a defensive stock with its beta exceeding well over 1 and on FY11 basis, its earnings yield of 5.9 per cent is significantly below that of G-Secss. The brokerage feels that the company’s near-term earnings visibility warrants a premium to intrinsic value, but also figures that the current valuations are expensive. Maintain Sell.
Current market price as on September 19, 2008.