SESA GOA
Reco price/date: Rs 177/ June 20
Current/target price: Rs 182.50/Rs 230
Sesa Goa’s annual report for 2011-12 indicates the company’s management is cautiously optimistic on the iron ore market. Sesa Goa has already faced multiple headwinds like iron ore production as well as export bans in Karnataka, logistics issues in Goa and declining iron ore prices. Although the analyst remains negative on iron ore prices and does not foresee any resolution of the above issues, taking into consideration the combined merged entity ie Sesa-Sterlite valuation (a major portion of the valuation is driven by Cairn India and Hindustan Zinc), the stock is assigned a buy rating. Maintain buy.
Nirmal Bang Institutional Equities
PUNJAB NATIONAL BANK
Reco price/date: Rs 760/ June 19
Current/target price: Rs 754.40/Rs 964
In FY12, Punjab National Bank’s core operating profits grew 18 per cent, led by healthy growth in business and fee income. Net interest margins (NIM) contracted by just 10 basis points despite higher slippages and tight liquidity conditions, depicting PNB’s strong asset-liability management capabilities. The management has reiterated its net interest margin guidance of 3.5 per cent plus, going forward. Analysts estimate 17 per cent CAGR growth in net interest income over FY13-14. Superior NIMs and healthy fee income growth would enable PNB to absorb the impact of asset quality shocks, they added. Despite factoring in higher credit costs, RoA would remain healthy at around 1.1 per cent and RoE at around 19 per cent over FY13-14. Maintain buy.
Motilal Oswal Securities
TORRENT PHARMACEUTICALS
Reco price/date: Rs 598/ June 20
Current/target price: Rs 598 / Rs 620
In spite of a favourable acute vs. chronic therapeutic sales mix (of Rs 35:65), Torrent’s domestic formulations segment has underperformed peers in the past 12 months. The segment contributes 35 per cent of the company’s top line and Rs 60 per cent of its Ebitda. A product-wise analysis reveals major growth pressures in several key brands, which, including their line extensions, account for over 25 per cent of the company’s domestic sales. We also identify adverse trends in each of Torrent’s other key markets – the US, Brazil and Germany – making us pessimistic about the near-to-medium term prospects for the company. We marginally revise our estimates and lower our FY13E and FY14E EPS by one per cent and three per cent, respectively. With a modest 10 per cent FY12-FY14E PAT CAGR we believe the stock will underperform peers over the next 12 months. Valuing the stock at 12x FY14E EPS, we arrive at a target price of Rs 620. Maintain reduce.
Spark Capital
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BHEL
Reco price/date: Rs 214/ June 18
Current/target price: Rs 215.10/Rs 202
BHEL reiterated its original order intake guidance of 12-14Gw, against the dismal 2.8Gw reported in FY12. Against the management’s guidance, we have assumed an order intake of 7.5 GW, assuming the total expected orders in the country to be 13Gw. Even as managing the fixed cost base remains a critical factor for BHEL’s profitably, a sharp fall in revenue visibility could lead to an actual decline in revenues from FY14E-FY15E onwards. We also remained concerned on BHEL’s profitability for industrial business, given limited business pipeline and sustained pricing pressure. Also, we do not foresee any material contribution from the non-thermal revenue base (power T&D, locomotives, oil & gas products) over the next two-three years. The stock currently trades at a P/E of 8.6x its FY13E & FY14E earnings respectively. In the absence of any material price trigger and falling RoEs beyond FY14E owing to profitability concerns, we maintain sector performer rating. Maintain hold.
Edelweiss Research