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Thursday, November 27, 2008

Analysts Views & Recommendations

Analyst's views and recommendations for trading on IDEA CELLULAR, INDIABULLS REAL, VOLTAS, SPICEJET, ARIES AGRO.

IDEA CELLULAR
CMP: RS 44.15
TARGET PRICE: RS 56

Citigroup has maintained its ‘hold’ rating on Idea Cellular while cutting its price target to Rs 56 from Rs 70 in line with an earnings downgrade for financial years 2009 to 2011 by 1-3%. “Relatively weaker balance sheet compared to its larger peers reduces the funding flexibility in a tougher macro environment, thus constraining the valuation multiples,” the investment bank said in a report. “Estimated net debt of Rs 49 billion (or Rs 4,900 crore) as of end-FY09 (Rs 3,200 crore as of September, ‘08) is under control though net debt/EBITDA (earnings before interest taxation depreciation and amortisation) will be 2.3-2.4 times in FY10-11E. While this will moderate Idea’s bidding intensity, on the flip side, its balance sheet is most vulnerable to 3G bidding risk,” Citi added.


INDIABULLS REAL
CMP: RS 87.05
TARGET PRICE: RS 170
ICICI Securities has initiated coverage on Indiabulls Real Estate with a ‘buy’ rating, with a price target of Rs 170 on grounds the company is well capitalised to ride the current downturn in the realty sector. “IBREL has sold stake in its company and in properties to raise Rs 5,300 crore in the past two years. Its balance sheet is robust (debt Rs 2.5 billion, cash Rs 3,400 crore) to tied through the current downturn and capitalise on opportunities,” the broking company said in a recent report. “We estimate FY09E NAV (net asset value) to be Rs 8,800 crore, or Rs 341/share (target price Rs 170/share assuming 50% discount to NAV). Given the execution risks, we expect the stock to trade on its balance sheet strength (cash per share Rs 122, FY08 BV/share Rs 171) rather than the potential of the project pipeline,” it added.


VOLTAS
CMP: RS 52.45
TARGET PRICE: 57

Kotak Securities’ private client research has maintained its ‘accumulate’ rating on Voltas while trimming the price target to Rs 57 from Rs 70. “We are downgrading our earnings and target price for Voltas in view of deteriorating fundamentals in its major user industries,” the retail broking firm said, referring to slowdown in Dubai property market and declining investments of South India-based tex-tile makers. “Close to 81% of the order backlog of Rs 5,600 crore is from the Middle East (realty) market. Out of this, the order book from Dubai constituted just Rs 1.5 billion. Voltas indicated that they had anticipated a sharp slowdown in the Dubai market since a year earlier and had been consciously reducing exposure in the Dubai property market,” it said. The slackening of the consumer durables business, including water coolers window and split ACs, is also expected to weigh down Voltas’ revenue growth, Kotak said.

SPICEJET
CMP: RS 12.55
TARGET PRICE: RS 16

Karvy Stockbroking has maintained an ‘outperformer’ rating on SpiceJet, with a price target of Rs 16 in the wake of a fall in aviation fuel prices. “Lower ATF prices would lead to fall in airfares and that in turn would stimulate air travel. ATF prices are down by almost 40% from their peak in August 2008. ATF prices have come down to near October 2007 levels but the current airfares are still around 30% higher than airfares prevailing during October 2007,” the broking firm said in a report. “However, the general slowdown in the economy is expected to play its role and therefore, even though we expect the passenger traffic to improve, it would still be lower on YoY basis. On the other hand, we expect the average fares to remain higher by around 30% on YoY basis,” it added.


ARIES AGRO
CMP: RS 46.95
TARGET PRICE: RS 75

LKP Shares has recommended a ‘buy’ on Aries Agro, with a 12-month price target of Rs 75 on expectations that net profits would grow 65% and revenues would increase 42%, compounded over the next two years. The company posted a 23% drop in net profit in the first half of 2008-09, led by a 4% drop in operating profit margins to 20.5%, according to the broking firm. “Aries took a price increase during the end of the first quarter and another one during the second quarter, which we believe should enable the company to arrest the decline in margins during the second half of the current fiscal,” LKP said in a report. The outfit estimates Aries’ earnings per share for 2008-09 at Rs 9.24, as against Rs 8.79 in 2007-08. In 2009-10, its EPS is estimated at Rs 16.93.

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