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Analyst's corner

NHPC, ESCORTS, ADHUNIK METALIKS, NOVARTIS INDIA

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Reco Price: Rs30, Target Price: Rs30

NHPC is likely to add 1.5 GW of generation capacity in the XIth Plan period (FY07-12) as against the company’s target of 5.3 GW. Such slippages would weigh high on NHPC’s FY11-13 earnings. Recent flash floods in Leh affected progress of the Nimoo-Bazgo plant and have derailed the company’s capacity addition programme. Despite the underperformance to broader markets and reasonable valuations—FY12 estimated core book trading at times times—significant re-rating is expected only in case of execution surprises and possible changes in regulations (the latter can improve core return on equity further). NHPC trades at a reasonable 1.2 times 2011-12 BV. Maintain reduce. 

—IIFL

ESCORTS
Reco Price: Rs194, Target Price: Rs212

has a capacity of 98,000 units per annum, which gives it sufficient leeway despite robust demand. It intends to enter the farm application space (harvesters, tillers) for which it has signed six MoUs. The company has recently launched backhoe loaders and has got a positive response. In the railway division, the company has new product lines approved by the railway board. However, the core brake equipments sub-segment has been impacted by increased competition. The management has successfully turned around the core tractor business. Also, the construction space is likely to add value. At a P/E of 10 times its 2010-11 (year ending September) estimated earnings, the stock trades at a considerable discount to its peers. Maintain buy.

—Edelweiss Securities

ADHUNIK METALIKS
Reco Price: Rs110, Target Price: Rs137

Adhunik Metaliks' (AML) consolidated PAT for the June 2010 quarter rose three times year-on-year due to doubling of iron ore, manganese ore prices and 17 per cent higher steel prices. Volumes increased across products. AML is expected to deliver strong earnings growth over three-four years due to a three-pronged strategy. A Rs460 crore capex over two years to increase sponge iron ore capacity by 100,000 tpa and 45 MW captive power plant, the expected start of captive iron mines, and 10-15 per cent annual volume growth will fuel earnings growth. Similar earnings growth is likely beyond 2011-12 as contributions from ANPR and Suleipat kick in. Its consolidated EPS is seen at Rs20.8 in 2011-12. The stock trades at an attractive PE of 5.4 times its estimated 2011-12 earnings. Maintain buy.

—Motilal Oswal Securities

NOVARTIS INDIA
Reco Price: NA, Target Price: Rs750

Novartis India's Swiss parent’s may acquire remaining stake in Alcon by end-2010. Its parent has got UAFDA approval for Menveo. The medicine was approved for active immunization and to prevent invasive meningococcal disease. The company is planning to enter into consumer health care and generics.Net Sales and PAT of the company are expected to grow at a CAGR of 9 per cent and 10 per cent over 2009 to 2012E respectively. Brokerages expect that the company will maintain its growth story in the coming quarters. Maintain buy.

—Firstcall

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Analyst's corner

NHPC, ESCORTS, ADHUNIK METALIKS, NOVARTIS INDIA

NHPC is likely to add 1.5 GW of generation capacity in the XIth Plan period (FY07-12) as against the company’s target of 5.3 GW. Such slippages would weigh high on NHPC’s FY11-13 earnings. Recent flash floods in Leh affected progress of the Nimoo-Bazgo plant and have derailed the company’s capacity addition programme. Despite the underperformance to broader markets and reasonable valuations—FY12 estimated core book trading at times times—significant re-rating is expected only in case of execution surprises and possible changes in regulations (the latter can improve core return on equity further). NHPC trades at a reasonable 1.2 times 2011-12 BV. Maintain reduce.

NHPC
Reco Price: Rs30, Target Price: Rs30

NHPC is likely to add 1.5 GW of generation capacity in the XIth Plan period (FY07-12) as against the company’s target of 5.3 GW. Such slippages would weigh high on NHPC’s FY11-13 earnings. Recent flash floods in Leh affected progress of the Nimoo-Bazgo plant and have derailed the company’s capacity addition programme. Despite the underperformance to broader markets and reasonable valuations—FY12 estimated core book trading at times times—significant re-rating is expected only in case of execution surprises and possible changes in regulations (the latter can improve core return on equity further). NHPC trades at a reasonable 1.2 times 2011-12 BV. Maintain reduce. 

—IIFL

ESCORTS
Reco Price: Rs194, Target Price: Rs212

Escorts has a capacity of 98,000 units per annum, which gives it sufficient leeway despite robust demand. It intends to enter the farm application space (harvesters, tillers) for which it has signed six MoUs. The company has recently launched backhoe loaders and has got a positive response. In the railway division, the company has new product lines approved by the railway board. However, the core brake equipments sub-segment has been impacted by increased competition. The management has successfully turned around the core tractor business. Also, the construction space is likely to add value. At a P/E of 10 times its 2010-11 (year ending September) estimated earnings, the stock trades at a considerable discount to its peers. Maintain buy.

—Edelweiss Securities

ADHUNIK METALIKS
Reco Price: Rs110, Target Price: Rs137

Adhunik Metaliks\' (AML) consolidated PAT for the June 2010 quarter rose three times year-on-year due to doubling of iron ore, manganese ore prices and 17 per cent higher steel prices. Volumes increased across products. AML is expected to deliver strong earnings growth over three-four years due to a three-pronged strategy. A Rs460 crore capex over two years to increase sponge iron ore capacity by 100,000 tpa and 45 MW captive power plant, the expected start of captive iron mines, and 10-15 per cent annual volume growth will fuel earnings growth. Similar earnings growth is likely beyond 2011-12 as contributions from ANPR and Suleipat kick in. Its consolidated EPS is seen at Rs20.8 in 2011-12. The stock trades at an attractive PE of 5.4 times its estimated 2011-12 earnings. Maintain buy.

—Motilal Oswal Securities

NOVARTIS INDIA
Reco Price: NA, Target Price: Rs750

Novartis India\'s Swiss parent’s may acquire remaining stake in Alcon by end-2010. Its parent has got UAFDA approval for Menveo. The medicine was approved for active immunization and to prevent invasive meningococcal disease. The company is planning to enter into consumer health care and generics.Net Sales and PAT of the company are expected to grow at a CAGR of 9 per cent and 10 per cent over 2009 to 2012E respectively. Brokerages expect that the company will maintain its growth story in the coming quarters. Maintain buy.

—Firstcall

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