GAIL
Reco price: Rs 421
Target price: Rs 516
GAIL has delayed its pipeline projects worth Rs 3,000 crore due to problems in acquiring land. However, it has sought the environment ministry's help in resolving the issue. The company informed its Dadri-Bawana-Nangal project would be delayed by six months, and the Dahej-Vijaipur project by five months, if the land acquisition issue was not resolved quickly. The government has proposed a new land acquisition bill, which promises higher compensation and rehabilitation to those whose land is acquired. Maintain buy.
— Angel Broking
LIC HOUSING FINANCE
Reco price: Rs 208
Target price: Rs 287
LIC Housing Finance (LICHF), the number two housing finance company in India, has had a tough time recently. A loan graft case in November 2010 and teaser rate loans (July 2009-March 2011) hurt growth and margins. But the company, which generates most of its business from retail mortgages, has made a fresh start by rebuilding its higher-margin project loans business (which had slowed after the graft case) and converting the teaser loans (which have made it difficult to pass on the higher funding costs to customers) to floating rate from July 2012. Analysts think margins have bottomed and should improve as growth picks. LICHF is one of the most conservative mortgage lenders, helping it maintain low credit costs at 10-15 basis points in a strong growth market.
— HSBC Equities
JAIPRAKASH POWER VENTURES
Reco price: Rs 32
Target Price: Rs 46
Jaiprakash Power Ventures has 47 per cent underperformance versus the BSE Sensex over three years. It has 1,700 Mw of hydel projects without fuel supply risk. Also, it has 3,300 Mw of case two projects and 70 per cent of the Bina project with fuel cost pass-through; the Nigrie project has a captive mine. All these factors make analysts bullish on the stock. Citigroup has cut target price to factor in the 10-25 per cent estimated EPS cut over FY12-20 on project delays, higher coal cost and lower PLF. Maintain buy.
— Citigroup
REC
Reco price: Rs 173
Target price: Rs 215
REC is a leading power financing company. It has come out with a good set of numbers in Q1FY12. Its loan book grew 24 per cent y-o-y during the quarter, despite a challenging macroeconomic situation. The recent sanction of a pipeline and the government's proposed capital expenditure plan in the coming years would be a driving force towards the betterment of REC. Its IFC status would help raise cheaper funds to maintain margins in a higher interest rate scenario. At current market price, the stock is trading at a forward earnings multiple of 5.7 times for FY12. Accumulate.
— Bonanza Portfolio
