STEEL AUTHORITY OF INDIA LTD
Reco price: Rs 110
Target price: Rs 130
Steel Authority of India (SAIL) has fallen 40 per cent in this year to date (underperforming most of its peers and the Sensex by 20 per cent), due to declining steel prices globally; sluggish domestic demand; delays in expansion, input costs and plans to issue and sell equity. At the current price, SAIL offers good value with domestic exposure, modernisation and continued iron ore security (100 per cent). Key catalysts are improving domestic demand and quarterlies. Major downside risks include lower volumes, higher coking coal prices and forex trends. After having been cautious on SAIL for over two years, Citigroup has upgraded from hold to buy.
—Citigroup
BGR ENERGY
Reco price: Rs 361
Target price: Rs 404
BGR Energy (BGR) has bagged L1 status in turbine-generator (TG) amid aggressive pricing adopted by the other players. BGR will bag five sets of 800 Mw, while BHEL and L&T-MHI will receive two sets each. According to the company, this order is valued at Rs 3,600 crore, which translates into net sales realisation of Rs 90 lakh. The current TG pricing is 30 per cent lower than the 660 MW bulk tender of NTPC in October 2010. Though BGR has bagged a critical mass in TG, the profitability will remain under pressure. The NTPC bulk tender orders would come as a big relief for the company, as it faces a lack of new large orders and declining revenue visibility. While these orders will provide the much-needed revenue visibility, we believe the profitability will remain under pressure, given the aggressive bidding. Maintain hold.
—Edelweiss Securities
DISH TV
Reco price: Rs 76
Target price: Rs 96
The Tamil Nadu (TN) government has imposed a 30 per cent e-tax on the DTH operators, 25 per cent on IPL and raised it from 15 to 30 per cent on cinema tickets. The move has come after the TN government launched its MSO, Arasu to take on the Sun TV's promoter, unlisted MSO Sumangali TV, and Sun Direct (DTH arm) who enjoy monopoly in the state. Maximum impact would be on Sun Direct, as it has an 80-85 per cent subscriber market share. Other operators would also get impacted. While TN is not a big market for Dish TV, yet a 30 per cent tax would negatively impact the Ebitda. The analysts have raised their e-tax assumption for Dish TV by 80-130 basis points (bps) for FY12-13. The management has indicated the e-tax would be five per cent. Maintain accumulate.
—Emkay Global Financial Services
LIC HOUSING FINANCE
Reco price: Rs 212
Target price: Rs 240
LIC Housing Finance reported a strong 32 per cent year-on-year (y-o-y) growth in the loan book in Q1FY12. During the quarter, the developer loan portfolio declined by four per cent y-o-y to Rs 4,000 crore. Its net interest margin (NIM) stood at 2.8 per cent, down 25 bps y-o-y. The NIM contracted during the quarter on account of lower yield on advances, coupled with higher cost of funds. Its net profit grew by 21 per cent y-o-y to Rs 256 crore. The net NPAs stood unchanged at 0.4 per cent. The management has indicated the asset quality will improve on the back of better recoveries and lower NPAs. A strong brand equity with a wide marketing network and buoyant demand for housing loans would support its growth. The margins would remain under pressure, led by a higher interest rate regime. At the current market price, the stock is trading at 1.9 times of the estimated book value of FY12. Maintain buy.
—Bonanza Research
