ICICI Securities has come out with third quarter earnings review for companies whose results are announced on Wednesday. The same are as follows:
1. Coal India
Report Price: Rs 348
Target Price: Rs 385
We align FY13E/FY14E earnings by 0.7 %/( 2.1%) on the back of cost alignments and lower e-auction volumes partially offset by better realizations. We increase our target price from Rs370/share to Rs385/share on the back of roll-forward of base year from FY14 to FY14E/15E average and earnings changes, valuing the company at 7x EV/EBITDA. Key risks to our call would be: i) slower -than-expected production growth, ii) implementation of the MMDR Bill, and iii) fall in e-auction realizations.
Report Price: Rs 147
Target Price: Rs 178
Maintain ADD with a revised target price of Rs178; utilization of cash to be the key issue ahead. While the volume trajectory has been reversed to some extent in Jan'13, it is difficult to foresee volumes of >26mnte for FY14 and any major pricing power in the interim. The key source of concern for investors currently is if the company utilizes its excess cash to buy stakes in other PSU companies. Assuming it doesn't, the stock at current levels offers good risk-reward, as the worse in terms of operational performance may now be behind us.
3. Power Grid Corporation of India
Report Price: Rs 110
Target Price: Rs 123
We expect PGCIL to dilute equity in FY14 to overcome the equity crunch for funding the relatively heavy capex in the forthcoming years (we model a 7.5% dilution @ Rs 100/share). However, we maintain our positive stance on the company as it is likely to witness an earnings CAGR of 16% (between FY12-15), RoE of ~15.9%, and valuations at 9.9x P/E and 1.5x P/BV (FY15) are not demanding. Given the recent 13% stock price decline and strong earnings show, we maintain ADD with a revised target price of Rs 123/share (from Rs 121).
4. Tata Steel
Report Price: Rs 376
Target Price: Rs 463
Rupee net debt has increased by Rs 28billion QoQ. The capex incurred for 9MFY13 is USD 2.1 billion.The company has already reached the lower end of the FY13E capex guidance in the first 9 months itself. Domestic volume expansion will help provide cash flow support to the management intention of commissioning the Orissa project, without improving the debt profile much; incremental asset sales remain a key hope factor. We currently maintain Buy on Tata Steel with a revised target price of Rs 463/share.
5. Bharat Petroleum Corporation (BPCL)
Report Price: Rs 402
Target Price: Rs 436
Incremental developments at Mozambique and upsides in oil reserves at Brazil offer long-term valuation triggers. The E&P business along with Bina refinery and other non-core investments constitute 68% of BPCL's valuation. Our SoTP-based value of Rs436/share implies 1.7x FY13E BV (factors core business value at Rs138/share, Bina refinery investment at Rs40/share and E&P/other investments at Rs258/share). Maintain ADD. Key risks: a) halt in diesel price hikes, b) higher-than-expected under-recoveries due to trends in crude prices or the INR/USD exchange rate.
6. Madras Cements
Report Price: Rs 242
Target Price: Rs 284
MCL is unlikely to undertake significant expansion in the near term, as it is operating at low utilization (67%). The company is likely to generate FCF of ~Rs 15 billion over FY13-15, hence the existing net debt of ~Rs 25 billion is likely to decline >50% by FY15. With lower-than-expected margins in Q3FY13, we cut our FY13E-15E EBITDA by 2-4%. Maintain Buy with a revised target price of Rs284/share (earlier: Rs275/share) based on 6x Dec'14E EV/E.
7. Eicher Motors
Report Price: Rs 2,671
Target Price: Rs 2,837
Strong visibility in CY14 for the RE business, and long-term triggers coupled with uncertainty for the CV business means that we maintain our ADD rating on the stock. We value EML at Rs 2,837 /share based on Dec'14E P/E of 17x for RE and 7x EV/EBITDA for VECV.
8. Prestige Estate Properties
Report Price: Rs 150
Target Price: Rs 190
Our FY14E NAV for Prestige stands at Rs190/share. The stock trades at FY14E P/E and P/BV of 18x and 2.1x respectively. We remain upbeat on the company's strong pre-sales and expect the cash flow profile to improve going forward. However, given the difficulty in surpassing the current momentum and the sharp squeeze in valuation, we maintain ADD.
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