LARSEN & TOUBRO
Reco price/date: Rs 1,467/August 22
Current/target price: Rs 1,460/Rs 1,553
Larsen & Toubro (L&T)'s construction arm has bagged orders worth Rs 2,044 crore across various business segments so far this quarter. According to media reports, L&T is considering stake sales in some of its port, road, power and metro rail projects. This could be aimed at reducing the company's portfolio size, as well as generating funds to be used as equity in new projects. The stock is trading at 14.9 times the 2013-14 estimated earnings, after adjusting for investments, which is below L&T's historical trading multiple. Maintain 'accumulate'.
Angel Broking
RELIANCE POWER
Reco price/date: Rs 88/August 21
Current/target price: Rs 85/Rs 155
The Comptroller and Auditor General (CAG)'s report on coal block allocation and ultra-mega power projects is unlikely to take a toll, as CAG's key recommendation, reconsideration of Chhatrasal, has already been acted upon and reconfirmed by an empowered group of ministers. Also, Reliance power's coal blocks are the only blocks competitively bid in India. For the quarter ended June, the company reported net profit of Rs 240 crore, marginally below estimates, owing to lower plant availability resulting from low supply of domestic coal. The company is unlikely to be hit by current sector issues---fuel (captive control on supplies/cost), merchant rates (no merchant capacity), health of state electricity boards and no case-I bids (13,500-Mm power purchase agreements). Maintain 'buy'.
Emkay Global
ARSHIYA INTERNATIONAL
Reco price/date: Rs 133/August 22;
Current/target price: Rs 131/Rs 227
Arshiya International's consolidated net profit for the quarter ended June rose 47 per cent year-on-year to Rs 35 crore (10 per cent more than analysts' estimates), while revenue increased 54 per cent to Rs 342 crore, driven by strong growth across all business segments. Rise in the high-margin free trade and warehousing zones business and better asset utilisation across all verticals boosted growth in earnings before interest, tax, depreciation and amortisation to 72 per cent year-on-year (10 per cent more than analysts' estimates). However, net profit growth moderated on account of high capital charges on capacity commissioning and capital expenditure related debt levels. Analysts believe the lower multiples factor in business risk from high debt exposure and weak economic activities hitting profit. Maintain 'buy'.
Karvy Stock Broking