Unity Infraprojects (Unity) posted strong set of numbers in Q4 FY08, with revenue and earnings increasing 77.2 per cent and 180.7 per cent year-on-year (YoY) to Rs 317.32 crore and Rs 20.2 crore, respectively.
The company recorded a stable core EBDITA margin of 11.4 per cent as compared to 11.5 per cent in the same period last year. The core margin is expected to improve to 12.8 per cent in FY09 and to 13.1 per cent in FY10 as the company focuses on new segments (micro tunneling, urban infrastructure) and large value added projects.
At present, Unity has one micro tunneling order from Municipal Corporation of Greater Mumbai, amounting to Rs 28.3 crore.
Unity currently has an order book of Rs 3,100 crore with roughly 90 per cent covered by cost escalation clauses and scheduled for completion over the next 30 months. These orders are well diversified among segments and geographies. The company has now trained its sights on build-operate-transfer projects as well. With an established presence in civil engineering, irrigation and transportation along with realty, Unity is successfully diversifying its business model. At Rs 360, Unity discounts its FY09E and FY10E earnings by 6.2x and 4.2x respectively. The SOTP-based target price for the stock is Rs 887.
PVR
Reco price: Rs 177
Current market price: Rs 179.30
Target price: Rs 288
Upside: 60.6%
Brokerage: Kotak Securities
PVR has recently added to its screen presence, with the opening of its four-screen property at Chandigarh. This is in addition to the activation of screens in its Mumbai and Gurgaon properties; taking its overall screen count to 101, across 14 cities.
In addition to diversifying the revenue model, PVR's entry into film production through it's wholly owned subsidiary-PVR Pictures, strengthens its bargaining power and will help the theatre chain operator to improve its profitability.
PVR remains a preferred exposure to the exhibition space, given reasonable project execution thus far, its competitive positioning and emerging scale in its new initiatives - movie production, and food and beverage retailing.
The company is expected to deliver a CAGR of 41 per cent in revenue and 74 per cent in earnings over FY07-09E. At Rs 177, the stock is trading at 13.5x FY09E earnings. The brokerage expects a weak movie pipeline during the first half of CY08 to impact financials in Q1FY09, while expecting a pick up in occupancy from Q2. The brokerage has retained a Buy with a price target of Rs 288 as compared to Rs 340 earlier.
Chennai Petroleum Corporation
Reco price: Rs 275
Current market price: Rs 291.95
Target price: Rs 398
Upside: 36.3%
Brokerage: Prime Broking
Chennai Petroleum Corporation (CPCL) owns and operates two refineries with a combined capacity of 10.5 million metric tonnes per annum (mmtpa). Its Manali refinery (9.5 mmtpa) is one of the most complex refineries in India with fuel, lube, wax and petrochemical feedstock production facilities.
With a higher complexity configuration (nelson complexity index of 7), CPCL is able to produce a higher percentage of light and middle distillates (as much as 70 per cent) and lower percentage of heavy distillates using lower cost, heavier and sourer crude oils.
In Q4 FY08, CPCL posted record gross refinery margins (GRMs) of $ 9.9/bbl (FY08 GRMs at $ 8.5/bbl), higher than the Singapore Benchmark GRMs of $ 7.0/bbl.
The company is undertaking various upgradation and expansion projects to be commissioned by FY12, with a total cost of around Rs 5,500 crore. CPCL's debt/equity ratio of 0.5-0.7x, and cash from operations of at least Rs 900 crore per annum, should enable it to fund the aforesaid capex comfortably.
Based on an average of the fair values suggested by DCF (Rs 403) and P/BV (Rs 393) valuation models, the 15-month price target for the stock is Rs 398. For valuation, the brokerage has assumed a conservative GRM of $ 6.0/bbl over FY09-10E, which is close to CPCL's last 5-year quarterly median GRMs of $5.8/bbl.
Jaiprakash Associates
Reco price: Rs 173
Current market price: Rs 170.5
Target price: Rs 390
Upside: 28.7%
Brokerage: Sharekhan
Jaiprakash Associates' (JPA) subsidiary, Jaypee Infratech has achieved financial closure for the Rs 6,000 crore Taj Expressway project. The company has renamed the project as Yamuna Expressway project. Of the estimated cost, ICICI Bank and JPA will provide Rs 3,200 crore and Rs 1,000 crore, respectively, while the remaining Rs 1,800 crore will be provided through real estate sales. The Rs 1,000 crore to be infused by JPA is for a 98 per cent equity stake in Jaypee Infratech.
The land acquisition of the entire 165 km of land required for the construction of the expressway between Noida and Agra has been transferred to Jaypee Infratech.
JPA is also entitled to 6,250 acres of land for the real estate development (amounting to 400 million square feet). The company will be receiving land parcels of 1,250 acres each, spread across Noida, Dhankur, Mirzapur, Tappal and Agra over the next two-three years.
The company has so far received 1,080 acre at an average rate of Rs 33 lakh per acre of land in Noida. The company has already received about Rs 400 crore on pre-sales of 3.7 million square feet of Noida land. At the current market price, the stock is trading at 29x FY09E and 23x FY10E earnings. The SOTP-based price target for the stock is Rs 390.
KPIT Cummins Infosystems
Reco price: Rs 64
Current market price: Rs 66.35
Target price: Rs 75
Upside: 13.0%
Brokerage: Reliance Money
SKPIT Cummins Infosystems (KPIT Cummins) has acquired substantial part Mechanical Design Services business of Harita TVS Technologies (Harita), a TVS group company, in an all cash deal for an undisclosed amount.
Through the acquisition, KPIT Cummins will get direct access of more than 20 customers of Harita TVS across North America, Europe and India and will further strengthen its strong hold in the auto electronics space (23 per cent of FY08 revenues).
With this acquisition, KPIT expects a revenue accretion of Rs 15 crore for FY09E. KPIT Cummins has already got strong presence in the Europe and Japanese markets through its acquisitions of CG Smith in 2006.
The integration process of Harita with KPIT Cummins has already started and full integration is expected to complete in the next three months. At Rs 64, KPIT Cummins stock trades at a P/E of 9x FY09E and 7x FY10E earnings. The brokerage continues to maintain a Hold rating on the stock with a target price of Rs 75.
(Current market price as on July 3, 2008)
