BHEL
Reco price: Rs 1,939
Target price: Rs 2,596
BHEL claims to garner 50 per cent market share in 12th Five-Year Plan ordering so far. The Chinese players’ share in this market has fallen from 29 per cent in the 11th Five-Year Plan to 23 per cent in the 12th Five-Year Plan. Though analysts remain positive about BHEL’s ability to maintain market leadership amid aggressive competition, they are a little sceptical about its claims of garnering 50 per cent of the total orders for 97,096MW of utility sets awarded under the 12th Five-Year Plan so far. That is because many power utility set orders are still pending or disputed. Concerns on growth slowdown overdone, book-to-bill ratio to remain attractive at 3:1 times till FY13. The news of BHEL’s follow-on public offer has added to concerns regarding the competition from Chinese players and the slowdown, thereby resulting in stickiness in its price at the lower levels. Maintain buy.
—Sharekhan
YES BANK
Reco price: Rs 266
Target Price: Rs 335
YES Bank started its operations with a focus on corporate and institutional business, but since then it has been gradually shifting its stance towards retail. The bank’s growing focus towards increasing low cost CASA deposits (led by rapid branch expansion) will lead to expansion in valuation multiples going forward. Added to this, the government’s thrust on agriculture and infrastructure sector in the Union Budget 2010-11 is positive for the bank. We estimate YES Bank to report an EPS CAGR of 32.6 per cent over FY10-FY13E driven by robust business growth, lower credit costs and stable fee income. ABV is estimated to grow at 22.9 per cent CAGR during the same period. Our price target of Rs 335.3 per share implies an upside of 26.2 per cent.
—Aditya Birla Money
POWER GRID CORPORATION OF INDIA
Reco price: Rs 103
Target price: Rs 120
CERC has approved setting up of nine high speed transmission corridors at a cost of Rs 58,100 crore that significantly improves the company’s business. Nine high speed transmission corridors to route 42GW capacity, being set up by IPPs, will accelerate spending and drive the company’s topline going forward. In FY11 fixed asset capitalization was Rs 7,400 crore, up Rs 3,600 crore YoY, far higher than historical averages of Rs 3,300 crore. The Company’s regulated asset base is expected to almost double from Rs 11,300 crore at March 2010 to Rs 20,300 crore by FY13, resulting in increased regulatory returns. The stock is currently trading at EV/Ebitda multiple of 10.2 times on FY12 Ebitda and 2.0x its FY’12 book value of Rs 50.7. Maintain buy.
—Karvy Stock Broking
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CADILA HEALTHCARE
Reco price: Rs 900
Target price: Rs 1,025
Cadila will acquire the assets of Nesher Pharmaceuticals (US-based generic company) for $ 60 million. Nesher is the generic division of KV Pharma. The purchase includes Nesher’s existing and pipeline ANDAs, certain manufacturing facilities and R&D lab. Cadila will also assume certain liabilities. The agreement also includes supply of certain products of KV Pharma by Cadila. For FY11, KV’s generics business had total assets worth $53.6million. The total liabilities were $2.5 million. Net revenues for FY11 were $8.7 million primarily due to re-launch of potassium chloride capsules. Maintain buy.
—JM Financial