SHIV-VANI OIL
Reco price: Rs 399,
Target price: Rs 444
Shiv-Vani Oil & Gas Exploration Services (SVOG) could witness value unlocking, owing to significant capex demand, driven by estimated minimum work programme (MWP) requirements of $3.5-billion for onshore Nelp blocks along with sizeable coal bed methane (CBM) blocks potential. SVOG is best placed to milk the domestic onshore E&P capex drive in the long term. The stock trades at 4.6 times FY12E EV/Ebitda, which is at significant discount to global onshore services peers despite their weaker profitability matrices. The company is expected to report free cashflow worth Rs 360 crore in 2010-11. Maintain buy.
— Reliance Securities
BLUE STAR
Reco price: Rs 430,
Target price: Rs 513
Blue Star’s demand outlook remains firm from sectors such as hotels, hospitals, educational institutions, etc. The demand of the Information Technology (IT) sector is yet to recover, but the level of enquiries have improved. Large IT companies have resumed spending, reinforcing management’s belief of a broadbased recovery in the near-to-medium term. Management has reiterated focus on non-commercial sectors such as infrastructure, power and industries. It expects contribution to increase from 20 to 40 per cent over the next three to four years. Pressure on operating margins to id to remain until 2011-12 attributed to high raw material costs and low margin orders in current order book. Room air-conditioners market is set to grow at a robust 30 per cent compound annual growth rate over the next three to four years.Company to increase presence in high growth residential market, but will continue to be a small player (about 5 per cent market share). Maintain Accumulate.
— Emkay Global Financial Services
KPIT CUMMINS INFOSYSTEMS
Reco price: Rs 136,
Target price: Rs 164
KPIT Cummins Infosystems is riding on the recovery of its anchor vertical — manufacturing. Brokerages expect the company to post a revenue compound annual growth rate (CAGR) of 21.7 terms (rupee terms) over 2009-10 to 2012-13, with Ebitda and net profit expected to grow at a CAGR of 14.4 per cent and 20.2 per cent, respectively. Analysts believe KPIT will witness revenue growth once the global automobile sector returns to higher growth, manufacturing vertical increasingly starts spending on discretionary IT services to go-to-market and drive cost efficiencies and the top-client, Cummins, returns to secular robust growth. Initiate Coverage with Buy.
— Angel Broking
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PUNJAB CHEMICALS & CROP PROTECTION
Fair Value: Rs 126,
Current Price: Rs 115
Crisil Equities has assigned fundamental grade of 1/5 to Punjab Chemicals and Crop Protection (Punjab Chemicals), indicating poor fundamentals. Punjab Chemicals, borrowed heavily to fund its overseas acquisitions, which increased its debt-equity ratio from 1.5x in 2004-05 to 5.3x in 2008-09 and further to 13.0x in 2009-10. The latter was also due to a loss of profit resulting from the fire at the company’s Chandigarh plant in 2009-10. While the company’s performance is likely to improve and return to profitability by 2012-13, given the high leverage analysts expect, financial and liquidity position will continue to remain under stress. Crisil Equities expects Punjab Chemicals’ revenues to grow at a three-year compound annual growth rate of 17 per cent to Rs 920 crore in 2011-12, while EPS is expected to improve to Rs 12.7 in 2012-13 from negative Rs 77.9 in 2009-10.
— Crisil Equities