Prabhudas Lilladher

Pantaloon Retail (Buy)

CMP: Rs 281

Target: Rs 337

While there has been moderation in SSS growth from the peak, we expect it to recover following the festive season. Pantaloon intends to add around 1 m sq.ft in 1QFY12. Pantaloon has booked around 9 m sq.ft of retail space for expansion. This can turn out to be a significant competitive advantage given the shortage of quality retail space. Monetisation of stake in non-retail businesses and positive policy action from Government on FDI in multi-brand retail can act as key triggers for share price. We maintain ‘BUY', with a revised SOTP-based one year target price of Rs 337. Our SOTP does not factor in the value from non–retail businesses.

Dolat Capital

Karur Vysya Bank (Buy)

CMP: Rs 365

Target: Rs 504

For FY11-13, we expect KVB's total business to grow 27 per cent CAGR. We assume the deposit and credit book to expand 27 per cent and 28 per cent respectively over the corresponding period. We estimate margins to drift down by 16 basis points to 3 per cent in FY12 and subsequently by 10 basis points to 2.9 per cent in FY13. The bank would report RoAA and RoAE of 1.5-1.55 per cent and around 20.5 per cent respectively. At current market price, it quotes at 1.7x and 1.5x ABV FY12 and FY13 respectively. We reiterate our Buy rating on the stock with a price target of Rs 504 at 2x ABV FY13.

Nirmal Bang

Sesa Goa (Hold)

CMP: Rs 213

Target: Rs 207

As anticipated in our report ‘Iron ore mining suspension in Chitradurga likely' dated August 22, 2011, the Supreme Court has ordered suspension of mining in this district of Karnataka. We expect the suspension to last until December 31, 2011, which would result in 5 per cent and 3 per cent cut in EBITDA and PAT estimates, respectively, for FY12. We revise our target price on the stock downwards from Rs 214 to Rs 207. However, the stock has corrected 23 per cent since our Sell rating as against an 11 per cent drop in the Sensex. We believe the stock has already factored in a major portion of the negative news and is currently trading at a discount of 30 and 38 per cent. In view of the ample drop in valuation, we are upgrading the stock from Sell to Hold with a 1 per cent upside from the CMP.

JSW Steel (Sell)

CMP: Rs 649

Target: Rs 570

The Supreme Court has suspended iron ore mining in Chitradurga and Tumkur districts of Karnataka based on environmental degradation report of the Central Empowered Committee (CEC). The apex court has indicated 25 m of iron ore inventory is available in the state, comprising 11 m high grade and 14 m low grade. It has asked for the quantum of inventory available for release and modalities of sale and transportation by September 2, 2011. JSW Steel's management has maintained 80 per cent capacity utilisation guidance for FY12 on the back of available inventory. We are maintaining our estimates as we had already estimated lower production, delay in releasing iron ore inventory and hurdles in continuing supply from Bailadila mines. We are retaining our Sell rating with a target price of Rs 570.

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