M&M
Reco Price: Rs 760,
Target Price: Rs 783
Mahindra & Mahindra (M&M) has acquired 70 per cent stake in Ssangyong Motor for $463 million. These funds would be utilised towards paring down Ssangyong's high debt levels ($693 million as of Q3CY10). This acquisition will aid M&M in becoming a global UV player in the long term. Valuations seem attractive at 0.4x EV/sales. Ssangyong is expected to record revenues of $1.7 billion in CY10 (vs $850 million in CY09). Ssangyong has achieved positive EBITDA margins (2 per cent) over the last three quarters (vs. -18 per cent for CY09). With the new launch of Korando C, volume and profitability are expected to improve in CY11. M&M will benefit from access to existing engine and product platforms. Conversely, brokerages expect an expansion in Ssangyong's pipeline and lower R&D costs with Mahindra Research Valley coming on stream. M&M's global SUV will benefit from the wide distribution network of Ssangyong . Balance sheet and profit and loss impact on M&M minimal. Maintain hold.
—Enam Securities
Coal India
Reco price: Rs 320,
Target price: Rs 356
Coal India (CIL) reported a disappointing set of numbers for the September quarter. CIL reported a fall of 3.4 per cent and 35.7 per cent quarter-on-quarter (q-o-q)in net operating revenue and EBITDA . CIL's despatches for the quarter fell by 3 per cent to 98.7 million tonnes while realisations remained flat. Marred by sharp increase in employee cost (up 10 per cent q-o-q) and consumables cost (up 18 per cent q-o-q), CIL's EBITDA margin eroded by 1,020 bps q-o-q to 19.2 per cent. Currently, CIL is in talks to acquire three coal mines. Out of these , CIL has moved significantly ahead for Australia-based coal mines.CIL has envisaged an investment of Rs 6,000 crore for inorganic growth in FY11. Maintain buy.
—Prabhudas Lilladhar
JSW Energy
Reco price: Rs 111,
Target price: Rs 135
JSW Energy (JSWEL) will acquire 100 per cent equity stake in CIC Energy for $414 million . CIC Energy has rights to develop 2.6 billion tonnes of coal reserves in Botswana. JSWEL is currently dependant on imported coal as captive mines are not operational yet. Acquisition insures long-term fuel security and provides hedge against high imported coal prices. JSWEL expects coal productions from the mines to commence over next 3-5 years. Logistics is main challenge as 1,500 kilometre rail line (Trans Kalahari Rail Link) needs to be constructed through Botswana and Namibia to evacuate coal. CIC is a debt free company and has networth of $197 million and cash balance of $30 million as on August 30, 2010. CIC has completed exploration drilling in the field over the past few years.Maintain hold.
—Citi Investment Research & Analysis
Siemens
Reco price: Rs 787,
Target price: Rs 856
Siemens reported a strong set of Q4FY10 numbers, with revenue and PAT growth of 22 per cent and 54 per cent year-on-year respectively. The jump was primarily driven by strong contribution from the power transmission division. New orders for FY10 jumped 41 per cent y-o-y indicating strong revenue visibility. The company reported a closing order book of Rs 13,600 crore (up 32 per cent y-o-y) for September 2010. The power transmission division posted strong performance in Q4FY10 with 100 per cent y-o-y revenue growth. Maintain 'hold'
—Edelweiss Securities
