BAJAJ ELECTRICALS
Reco price: Rs 178;
Target price: Rs 220
Bajaj Electricals (BJE) suffered a setback as R Ramakrishnan, executive director, resigned on February 20, 2012. He spent over 12 years in the company and guided it through restructuring over the past few years, besides several international tie-ups for its consumer business. Shekhar Bajaj, CMD, indicated day-to-day operations will remain unaffected as these are driven by six business unit heads. He also indicated he is active in the company management and will continue to guide on strategic matters. In terms of business, analysts believe the E&P division continues to hold the key to BJE’s valuation due to concerns over its lower order book/inflows and margin profile. Its consumer businesses will continue to report strong growth. Maintain buy.
Edelweiss Securities
INDIAN OVERSEAS BANK
Reco price: Rs 107;
Target price: NA
Indian Overseas Bank (IOB) is expected to receive capital infusion worth Rs 1,675 crore from the government of India and Rs 303 crore from Life Insurance Corporation (LIC). The bank will issue equity shares of up to 171,232,876 to the government and 30,937,467 to LIC against this capital infusion. The capital infusion will be at a fixed price of Rs 97.82 per equity share (including premium of Rs 87.82). The Tier-I ratio, which stands at a low 6.7 per cent (excluding nine months profits) as of Q3 FY12 is expected to be propelled on account of this capital infusion. Maintain neutral.
Angel Broking
GSFC
Reco price: Rs 419;
Target price: Rs 510
Analysts believe GSFC’s fertiliser and chemical businesses are both likely to maintain healthy profitability, belying the pessimism reflected in the stock’s five times Price/Earnings multiple. Net cash and quoted investments represent more than 30 per cent of market cap even as GSFC continues to generate substantial cash. Available funds may be used to finance a major Rs 7,000-crore expansion. Nevertheless, analysts draw comfort from the company’s creditable track record of value creation. GSFC trades well below valuations of Indian fertiliser peers and is also cheaper than international chemical industry peers, indicating investor pessimism with regard to its earnings outlook. Sustained strength in profits and cash flows could drive a re-rating in the stock. Initiate coverage with a BUY rating.
IIFL