Analysts' corner

Apollo Hospitals, Cummins India, Madhucon Projects & JM Financial

APOLLO HOSPITALS
Reco price: Rs 625
Target price: Rs 715
Apollo Hospitals remains Citigroup's preferred choice in Indian healthcare delivery, given its national footprint, rising scale and healthy balance sheet after the recent fund raising. Having gained scale, it appears well-placed to absorb the initial losses on new hospitals and grow profitably. Potential value unlocking in non-core operations (retail pharmacies, healthcare BPO) and property assets could act as catalysts over the medium term. Citigroup has raised its target price to Rs 715/share . Maintain buy.

—Citigroup

CUMMINS INDIA
Reco price: Rs 358.15
Target price: NA
Cummins management mentioned that the quarter ending December is likely to see further correction in channel inventory, resulting in a muted top line growth. Though this is due to seasonality, the management stated the slowdown is likely to be more severe this year. It also stated it is due to this that it lowered its FY12 guidance to 5-10 per cent from 10-15 per cent following the Q3FY12 results. As a result, utilisations are also low at close to 14 engines per day versus the average of 18-20 till the second quarter. Though a weaker rupee is beneficial for exports and may result in short-term currency gains, the management stated this may not be sustainable, as export prices may be renegotiated at the end of the quarter. On competition, it acknowledged that some of its global peers operating in India are very aggressive in pricing. Maintain sell.

—Goldman Sachs

MADHUCON PROJECTS
Reco price: Rs 49
Target price: Rs 88
Madhucon Projects (MPL) has bagged an EPC contract worth Rs 422 crore from Bharat Coking Coal, Dhanbad. The scope of work involves hiring of HEMM, including surface miner for removal of OB, extraction and transportation of coal. The project is to be completed in 84 months from the date of acceptance. With this order, MPL's outstanding order book stands at Rs 6,500 crore (3.6 times FY2011 revenue), which provides good revenue visibility. Analysts believe key triggers to watch out should be pick-up in execution in the development business and raising money for it. However, these plans would fructify somewhere in FY13 only, and will be based on the market conditions prevailing then. Hence, analysts believe, till then, the stock would be a sector performer and real value would be created only on unlocking at the subsidiary level. Maintain buy.

—Angel Broking

JM FINANCIAL
Current market price: Rs 15 (on 24th Nov)
Fair value: Rs 36 JM Financial is an integrated capital market player with business interests in investment banking, equity broking, lending, asset management and alternative asset management. Its broking business continues to be impacted by competition, low-retail participation and declining broking yields. Although it has a healthy investment banking deal pipeline, execution is a challenge. Strong balance sheet continues to fuel securities' funding and other businesses. AMC business is expected to show lacklustre performance. Though the market environment is expected to remain subdued in the near term, analysts are positive on the financial services industry, given an under-penetrated market and strong macro-economic outlook, and JM Financial's strong position in this industry. Hence, Crisil Research maintains a fundamental grade of 4/5. Given the lull in capital markets, revenue is expected to grow at a CAGR of six per cent to Rs 950 crore during FY11-13. Net profit to remain subdued at Rs 160 crore in FY13.

—Crisil Research