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Prabhudas Lilladher
Sobha Developers (Accumulate)
CMP: Rs 321
Target: Rs 348
With Sobha's strategy of releasing additional area at the existing launches as well as with new launches lined up, we expect sales growth of 28 per cent to 4.2 million sq.ft in FY13. The company has a near-term pipeline of over 5 million sq.ft of launches. Sobha's gross asset value stands at Rs 5000 crore. From this, we deduct its net debt of Rs 1,170 crore to give us a net asset value of Rs 3,820 crore which translates to Rs 390/share. To arrive at our target price, we have factored in a 20 per cent discount to the company's real estate NAV which gives us a value of Rs 312.
To this, we are adding the value of the contract business which translates to a target price of Rs 348. We maintain ‘Accumulate'.
Edelweiss
Zuari Ind (Buy)
CMP: Rs 177
Target: Rs 238
Zuari Industries (Zuari) has demerged its agri-related businesses into Zuari Holdings (ZHL). The company will continue to hold 30 per cent in ZHL and the balance will be distributed to existing Zuari share holders in 1:1 ratio, with April 10 as the record date.
Post demerger, we arrive at a target price of Rs 466/share for ZHL, based on 8x FY13E P/E. On the other hand, we arrive at SOTP value of Rs 238/share for Zuari, even after assuming 60 per cent holding company discount for the investment book, assuming 50 per cent holding company discount for the 30 per cent stake of Zuari in ZHL and assigning 4x P/E for core earnings on FY13E basis. Maintain ‘BUY' on Zuari.
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