Microsec

Indian Hotels (Buy)

CMP: Rs 58.80

Target: Rs 81

Indian Hotels Company Ltd (IHCL) and its subsidiaries collectively known as Taj Hotels Resorts and Palaces is one of Asia's largest and finest hotel company, with an inventory of 13,629 rooms and 115 hotels across India and internationally. With its active capacity addition in rooms and hotels, solid entry barriers in luxury segment, improved occupancy rates, amplifying hotel tariffs and focus on boosting up the cash flows, we see Indian Hotels to grow at a CAGR of 10.28 per cent in terms of revenue and margins improving substantially by 160 bps for the next five years. We followed Discounted Cash Flow (DCF) approach to value the company.

Daiwa Capital

Bhushan Steel (Outperform)

CMP: Rs 457.30

Target: Rs 467

We believe the stock’s 43 per cent outperformance versus the Sensex in the past six months limits the upside potential from the current share price, and hence we downgrade our rating to Outperform from Buy. Our new six-month target price of Rs 467 (from Rs 451) is based on a 7.0x FY13E EV/ EBITDA (earnings before interest, taxes, depreciation, and amortisation) multiple (in line with its past-one-year average), reflecting a slight reduction in our FY13E net debt. Further, the stock is trading at a 1.2x PBR for FY13E, at a premium to its trough PBR of 0.7x during the 2008-09 global financial crisis. Nonetheless, we still see scope for the stock to outperform the market as we believe its catalysts remain intact.

(This article was published on June 25, 2012)
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