Analyst's corner

Dr Reddy's Lab, Aban Offshore, CESC & Tata Tea

DR REDDY’S LAB
Reco Price: Rs1,456,
Target Price: Rs1,775

Dr Reddy's Laboratories' (DRL) scale up in the current opportunities (Lotrel, Tacrolimus) is commendable despite being a late entrant. The company's market share is on par with other big players. The Omeprazole ramp up will happen post commencement of tie-up with a major retail chain in October. DRL has a promising pipeline of near term limited competition opportunities (Arixtra, Accolate, Exelon, Prevacid and Zyprexa) expected to pan out over the next two years. While maintaining its price target, Karvy has downgraded the stock from buy to Outperformer.

—Karvy Stock Broking

ABAN OFFSHORE
Reco Price: Rs860,
Target Price: Rs947

Currently, only two vessels out of Aban Offshore's fleet of 19 are idle and under marketing while the remaining 14 assets are already deployed, while three have secured contracts for deployment. This provides stable earnings visibility over the next two years. Aban has also provided for the loss of Aban Pearl and also for Petrojack bankruptcy. This means the recent setbacks have been factored in the stock price. High debt levels are the single biggest concern for Aban Offshore. However, as operating performance improves, debt-equity ratio is likely to moderate. Maintain buy .

—ICICI Direct

CESC
Reco Price: Rs401,
Target Price: Rs498

CESC’s parent power business with 1,225-mw of generation capacity and T&D circles of Kolkata and Howrah continues to grow at a steady clip with 2009-10 profit at Rs430 crore up 6 per cent. Citi expects bottom line compounded growth to be 7 per cent over 2010-13 driven by benign regulatory norms. With the commissioning of the 250MW budge, CESC has increased generation capacity by 25 per cent plus. The Haldia project is set to start construction in September and CoD is expected in September 2013. CESC’s retailing business had a recurring cash loss of Rs250 crore in 2009-10 vis-à-vis management guidance of Rs200 crore. The retailing business continues to be a major drag on CESC. Maintain buy.

—Citi

TATA TEA
Reco Price: Rs122,
Target Price: Rs131

The normal monsoon in June-September will boost the demand for consumer goods from rural as well as urban India. This would help Tata Tea in improving its sales volume growth of branded tea and sustain its leadership position. The proposed joint venture with PepsiCo would offer products in the non-carbonated beverages space and would later diversify into food products. In the international markets (including US, Canada and UK), the company is looking to introduce innovative tea and coffee products. Also, the company is scouting for acquisitions to enhance its global portfolio and global footprints. Sharekhan expects the positive impact of declining raw tea prices to be realised in the second half of 2010-11. Maintain Hold.

—Sharekhan