BHEL
Reco price: Rs 307;
Target price: Rs 243
BHEL, L&T and BGR were the three qualified bidders for the boiler component of NTPC’s 660Mw x 11 bulk tender. BHEL emerged L2 with a read-out bid of Rs16 million/Mw. It would be awarded four units of 660Mw each (2,640Mw) provided it matches BGR’s bid. Order size for BHEL is likely to be Rs 3,700 crore. The company had bagged orders worth 2,520 Mw from the power sector during the nine month period of FY12, and the current order wins would take its order inflow to 5,160Mw in FY12 so far. BHEL’s order book stood at Rs 1.46 lakh crore as of December 2011. Analysts believe the current bids are clearly aggressive and would drive a margin dilution for BHEL. Analysts expect a muted 5.6 per cent earnings growth over FY11-13, with 15.1 per cent earnings growth in FY12 and 3.1 per cent earnings decline in FY13. Further, outlook on order flows remain very weak, which also impairs earnings visibility beyond FY13. Maintain underperformer.
IDFC Securities
JINDAL STEEL & POWER
Reco price: Rs 595;
Target price: Rs 671
Jindal Steel & Power Ltd (JSPL) has been investing heavily in the past two years. The standalone power capacities are expected to be operational by Q1 of FY13, followed by the 1.6 mtpa steel plant at Angul in hailf year of FY13. In FY13, earnings growth for the consolidated entity is expected to be 11.3 per cent, led by a jump in contribution from JSPL’s standalone power plants and superior product mix. The company’s earnings would surge 54.8 per cent y-o-y in FY14, led by contribution from the 1.6 mtpa Angul steel plant, higher PLF’s for the standalone power capacities and higher consumption of sponge iron. IIFL has used sum-of-the-parts (SoTP) valuation method to value the company. Maintain buy.
IIFL
CADILA HEALTHCARE
Reco price: Rs 692;
Target price: Rs 751
Cadila Healthcare’s (Cadila) stock price correction of 17 per cent in the last six months is unwarranted. Going ahead, analysts expect pick-up in the domestic business including Zydus Wellness (ZWL), which should help the company boost margins. The Moraiya facility is expected to be cleared in H2FY13, leading to a flow of product approvals for the company. Overall, analysts estimate Cadila’s revenues and net profit to clock a compounded growth of 16.3 per cent and 29.3 per cent, respectively, over FY12-14. Initiate coverage with accumulate.
Pinc Research