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Nirmal Bang
Reliance Infra (Buy)
CMP: Rs 468.90
Target: Rs 724
Reliance Infrastructure's standalone earnings beat our estimates as well as Bloomberg estimates — up 191 per cent at Rs 495 crore, primarily driven by strong traction in the engineering, procurement and construction (EPC) segment. On consolidated basis, earnings remained flat at Rs 360 crore because of lower margin in EPC segment (versus standalone) and loss in infrastructure segment. Looking at recent positive developments (like renewal of Mumbai power discom licence and the recent tariff hike by its Delhi electricity distribution unit), strong EPC order book of Rs 24,000 crore which has started driving revenue growth and also commissioning of six road projects, Mumbai metro-rail project (phase 1) and a power transmission project in the next six months apart from attractive valuation, we retain our ‘Buy'.
Motilal Oswal
ONGC (Buy)
CMP: Rs 271
Target: Rs 334
We are revising our earnings-per-share estimate for fiscal year 2012 and fiscal 2013 (FY12/FY13). We have revised our long-term exchange rate assumption for second half of FY12/FY13 long-term to Rs 49/46/45 a dollar from Rs 45/44/44 a dollar. Increase in FY12 estimates is primarily led by the reported numbers for second quarter of FY12, partially negated by reduction in the production estimates of ONGC Videsh Ltd. Decline in FY13 estimate is primarily due to higher subsidy led by change in the exchange rate. The stock trades at 8.7x FY12E EPS of Rs 31.8, EV/boe (1P) of 6.4x, 50 per cent discount to global peers and has a implied dividend yield of 3.5 per cent. Our current SOTP-based target price for ONGC is Rs 334 (reduced from earlier target of Rs 345 due to higher subsidy, led by change in exchange rate assumption).
Tulip Telecom (Buy)
CMP: Rs 150
Target: Rs 185
Tulip Telecom's second quarter FY12 PAT increased 11.6 per cent YoY and 12.8 per cent QoQ to Rs 87 crore (estimate put it at Rs 87.3 crore). Capex incurred in first half of FY12 was Rs 285 crore on standalone basis and an additional Rs 100 crore for the Tulip data centre business. FY12 capex is expected to be Rs 700 crore. During second quarter of FY12, the data centre subsidiary reported EBITDA loss of Rs 1.6 crore, taking the total EBITDA loss to Rs 3 crore during the first half of FY12. We are upgrading FY12 earnings by 6 per cent due to lower depreciation and interest cost but largely flat FY13 numbers. The stock trades at FY12 P/E of 6.8x and EV/EBITDA of 5.1x. Maintain ‘BUY' with a revised price target of Rs 185a share (Rs 200 earlier) based on DCF (5x FY13 EV/EBITDA).
Bonanza
Glenmark Pharma (Accumulate)
CMP: Rs 319
Target: Rs 360
Glenmark Pharma Ltd, an integrated pharma player, is expected to maintain its growth momentum driven by a strong product portfolio in branded and generic businesses. The launch of niche and first-to-file products in the US and strong growth prospective in local market would help it to improve its performance in near term. Significant presence in emerging markets coupled with revival of the business in some region of semi-regulated market will strengthen its margins going forward.
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