APOLLO HOSPITALS
Reco Price: Rs 519,
Target Price: Rs 600
Apollo Hospitals Enterprise’s (APHS) aggressive expansion in tier–II/III cities and emerging models like Reach will be key driver for growth. The company plans to add about 2,500 beds at a total investment of Rs 1,300 crore, which will contribute 25-30 per cent of incremental revenue growth. Apollo with lower level of leverage and positive operating cash flows, is fully funded for this capacity expansion. Mature hospitals are expected to post 17 per cent CAGR growth over FY11-13. APHS’ pharmacy operations will stabilise as more pharmacies mature and will be accretive to operating profits by FY12. Potential upsides from divestment (including stake dilution) will be potentially accretive to overall valuations.
Initiate coverage with BUY.
— Edelweiss Securities
EXIDE INDUSTRIES
Reco Price: Rs 172,
Target Price: Rs 180
Exide reported a 18.6 per cent growth in its top-line at Rs 1,130 crore in Q2FY11, mainly led by strong 15-16 per cent volume growth in the automotive segment. The reported profit for the quarter was higher at Rs 210 crore on account of gain of Rs 46.3 crore on transfer of the leasehold land. Inadequate production capacity for 4-wheeler batteries restricted volume available for the more profitable replacement market, leading to a 420 basis points year-on-year erosion in Ebitda margin at 21.8 per cent. The brokerage expects better times ahead on account of new capacity and higher sourcing from its own smelters. The current valuation seems attractive given the strong balance sheet.
Maintain Accumulate.
— Prabhudas Lilladhar
SINTEX INDUSTRIES
Reco Price: Rs 434,
Target Price: Rs 520
Sintex Industries posted strong topline growth of 29 per cent and 56 per cent growth in net profit over last year. The monolithic business revenue grew 108 per cent, while other domestic plastic businesses clocked 20-50 per cent growth. IIFL has raised its FY12 earnings estimates by 11.1 per cent. Concerns such as high working-capital remain. The company’s profit growth was boosted thanks to 462 per cent growth in other income, despite a 69.2 per cent rise in interest costs and a higher tax rate. Growth in foreign subsidiaries and recovery in textiles business should expand profitability through operating leverage.
Maintain Add.
— IIFL
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PUNJ LLYOD
Reco Price: Rs 134.14,
Target Price: Rs 111
Of Punj Llyod’s total order backlog of Rs 25,600 crore, 39 per cent is due to delayed Libyan orders. Order cancellations in Q1FY11 implied that despite inflows of Rs 3,280 crore, backlog is down from Rs 27,800 crore (in FY10). Recent top and middle management departures coupled with deterioration in working capital intensity/ client advances are some key concerns. If arbitration proceedings against ONGC fail, the company will have to write off Rs 310 crore (Rs 9 per share). Certain portion of the Libyan projects being handled by Punj Lloyd have started moving, with advances coming in and running bills getting submitted. The company hopes to book some revenues from these orders in 2QFY11. The Sembawang portion of orders totalling Rs 5,900 crore is now under re-design and will start moving only in 4QFY11.
Maintain Sell.
— Citi