Indian Stock Market News and Analysis

Large & Safe Stocks for Growth and Income: > Dr Reddy > Tata Steel > Tata Motors > ICICI (not bottomed yet) > Rel Capital
Small to Mid Size Good Bets for Growth: > RPL > Bartronics > Revathi > VIP > Godawari > Supreme Indus > Yuken > RNRL >
High Risk + High Reward Bets (a bit risky): > Gontermann > Shri Bhawani > Goldstone Tele > Western India
PS: I OWN MANY OF THE STOCKS ABOVE, OR HAVE MANY ON MY LIST TO BUY ON A DIP
KKP =20
algae ginger wrote: > hi folks, > =20 > Please suggest stocks that you would be comfortable recommending for a > Buy today, with a Buy and Hold mentality over the Long Term (defined as > 2-3-4-5 years): > > Name? > Timeframe? > Why? > Buy Price Point? > > Thanks. > > My suggestion on the same: > =20 > =20 > Neeraj Marathe wrote > Name: Usha Martin Ltd. > Time frame-4 years > Buy Price point- CMP > =20 > =20 > regards > > =20 > > > GRASIM (BUY; TP Rs3558). 3. BHUSHAN STEEL (Downgrade to Sell; TP > > Rs914) > > > > > > > > > > > > I totally agree with L&T…..Just realized the Book to Bill > > ratio (order > > > backlog to current bill ratio) for FY07, 08E, 09E. Just > > unbelievable. > > > Buy this one on any and every dip, and forget about it. It is a > > huge > > > Power/Construction Sector play until 2010. SIPping for initial > > > investment would make it worth your while. > > > > > > KKP > > > > > > > > > accurate equipments wrote: > > > > > >> > > >> > > >> *1. L&T: Downgrade to Neutral with the target price of Rs2,557* > > >> - We downgrade our rating on L&T (LT IN; Mkt Cap USD18b, CMP > > Rs2,589, > > >> Buy) to Neutral. The company’s business fundamentals continue > > to be > > >> robust - during our recent interaction, the management reiterated > > >> guidance of 25-30% growth in order intake and revenues, and > > stable to > > >> marginally higher E&C margins in FY08. Its subsidiaries also=20 > offer > > >> significant value-unlocking opportunities. However, we=20 > believe that > > >> current valuations factor in most of the positives and the stock > > >> offers limited upside potential from current levels. > > >> > > >> - Current market price is higher than our SOTP-based price > > target: Our > > >> SOTP-based price target for L&T is Rs2,557 (22x FY09E core=20 > business > > >> earnings) as against the current market price of Rs2,589. > > Adjusting > > >> for the value of L&T IDPL (Rs154/share) and Ultratech Cemco > > >> (Rs36/share), L&T quotes at 28.4x FY08E and 22.5x FY09E EPS. Our > > >> SOTP-based price target factors in (1) 29% net profit CAGR during > > >> FY07-09, and (2) continued 20%+ growth beyond FY09. This leaves > > little > > >> room for disappointments - possible delays in project awards, > > >> execution, etc. > > >> > > >> - Even at our best-case EPS estimates, the stock upside is > > limited: > > >> Our best-case EPS estimates (consolidated) stand at Rs89.8=20 > for FY08 > > >> (v/s our current estimate of Rs84.4) and Rs122 for FY09 (v/s our > > >> current estimate of Rs106.8). Based on the best-case scenario, we > > >> arrive at a target price of Rs2,906 - an upside of just 12.5%. > > Also, > > >> L&T derives 55% of revenues from the infrastructure segment,=20 > where > > >> significant valuation premium (currently 38-58%) vis-=E0-vis othe= r > > >> construction companies appears difficult to justify. > > >> > > >> - Sizeable capex program could impact return ratios: To > > increase the > > >> share of manufacturing business, L&T has announced a sizeable > > capex > > >> program, which could impact return ratios till the new businesses > > >> mature. L&T has a capex plan of Rs25b during FY08 and FY09=20 > for the > > >> standalone business, and intends to invest Rs8-10b per year=20 > in its > > >> subsidiaries (L&T IDPL, L&T Finance, L&T Infrastructure=20 > Finance and > > >> L&T International FZE), Rs20b in the shipbuilding business, and > > Rs6b > > >> in the power equipment business. > > >> > > >> * * > > >> > > >> > > >> *2. GRASIM: Core businesses witnessing strong upcycle; Buy with > > target > > >> price of Rs3,558 * > > >> - Both of Grasim’s (GRASIM IN; Mkt Cap USD6.6b, CMP 2,936, Buy) > > core > > >> businesses (cement and VSF) are witnessing strong business=20 > upcycle. > > >> The performance of its sponge iron and chemicals businesses=20 > is also > > >> set to improve. We estimate EPS at Rs281.7 for FY08 and=20 > Rs274.7 for > > >> FY09. Our SOTP-based valuation of Rs3,558 indicates an upside > > of 21%. > > >> We reiterate Buy. > > >> > > >> - Cement - timely capacity addition to drive growth: With > > inflation > > >> waning, we see signs of attenuation of state intervention in=20 > cement > > >> pricing. Demand-supply remains in the industry’s favor, and > > given the > > >> strong demand drivers and possible delays in new capacity > > additions, > > >> the upturn in the cement cycle could be prolonged. Grasim’s=20 > timely > > >> capacity addition would help drive volume growth, and cost=20 > cutting > > >> would enhance competitiveness. > > >> > > >> - VSF - momentum likely to continue: Given the increasing > > preference > > >> for comfort (cellulosic) fabrics, the outlook for the VSF > > industry is > > >> positive. ICAC estimates that cotton consumption would outstrip > > >> production, leading to strong cotton prices. This in turn would > > mean > > >> favorable prices for VSF as well. For Indian players, the > > abolition of > > >> quotas is a further positive. Being the largest producer of=20 > VSF in > > >> India and the second largest in the world, Grasim is a key > > beneficiary. > > >> > > >> - Other businesses - performance to improve: Grasim’s sponge iron > > >> business has suffered due to inadequate gas supplies while its > > >> chemicals business was adversely impacted by a breakdown in its > > >> captive power plant. While the commencement of the Dahej-Dabhol > > >> pipeline in December 2007 should result in adequate gas > > availability, > > >> normalcy has been restored at its captive power plant. We > > expect these > > >> businesses to report improved performance in FY08. > > >> > > >> > > >> > > >> > > >> *3. BHUSHAN STEEL: Upgrading the target price to Rs914, > > Downgrading to > > >> Sell * > > >> - The stock price of Bhushan Steel (BHUS IN; Mkt Cap USD1b, CMP > > Rs938, > > >> Buy) has appreciated 43% in the last one week (up 71% since our > > report > > >> dated 10 May 2007). We are revising our target price from=20 > Rs713 to > > >> Rs914. However, as the current market price is higher than our > > revised > > >> target price, we downgrade the stock to Sell. > > >> > > >> *Event update* > > >> - Bhushan Steel has signed an MoU with L&T and Paulwurth for the > > >> supply of a 2.5mtpa blast furnace worth Rs12b. This is part=20 > of its > > >> next phase of expansion in Orissa to increase capacity from=20 > 1.9mtpa > > >> (in March 2009) to ~4mtpa by the end of 2011. The total cost of > > the > > >> expansion project is ~Rs40b and the company is yet to achieve > > >> financial closure for the same. We believe its aggressiveness in > > >> placing the order for the blast furnace (which has the longest > > lead > > >> time) is to ensure a continuous stream of projects and growth. > > This is > > >> significant in view of the large capex being planned by the steel > > >> industry in India to double production in the next five years, > > which > > >> is resulting in the quality equipment suppliers getting fully > > booked. > > >> > > >> - The company currently has a capacity of 1mtpa cold rolled and > > >> galvanized products, which are produced from HRC. Increase in HRC > > >> prices increases the company’s raw material cost, which it is > > >> generally able to pass on to the end users. Prices of steel > > products > > >> have started moving up in the last fortnight due to global > > shortage of > > >> metallic. Therefore, the prices of HRC have moved up ahead of=20 > the > > >> movement in prices of galvanized steel. SAIL has increased the > > prices > > >> of HRC by Rs800 per ton w.e.f. September 1 while the prices of > > >> galvanized sheet were left unchanged to compete with Chinese > > suppliers > > >> (Chinese suppliers of galvanized sheet are at an advantage due to > > >> differential duty on HRC exports). > > >> > > >> - We expect EBITDA margins to improve substantially from 16.4% > > in FY07 > > >> to 36.2% in FY10 (at HRC price of Rs25,000 per ton) due to=20 > backward > > >> integration. We are revising our target price upward to Rs914 > > (earlier > > >> Rs713), based on EV/EBITDA of 3.5x FY10E, discounted backward > > 20%. As > > >> the current market price is higher than our revised target > > price, we > > >> downgrade the stock to Sell. > > >> > > >> > > >> > > >> > > >> > > >> > > >> > > >> — > > >> > > >> > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >