Analysts' corner
NTPC, Talwalkars Better Value & Globus Spirits
NTPC
Reco price: Rs 183
Target price: Rs 199
NTPC may exit from two proposed projects in Orissa (1,600Mw each at Darlipali and Gajmara) due to delay in land acquisition. However, the company has not officially communicated in this regard with Orissa’s department of energy. The delay in getting land for projects may affect NTPC’s capacity addition plans of reaching 66,000Mw by 2017 from 36,014Mw currently. At the current market price, the stock is trading at a price/bookvalue of 1.9 times its FY2013 estimates. Maintain accumulate.
Angel Broking
TALWALKARS BETTER VALUE
Reco price: Rs 156
Target price: Rs 190
Talwalkars’ (TALW) has rolled out 19 gyms in nine months so far and expects to open another 16 gyms in the current quarter. The management also stated that a plan for rollout of clubs has been put on hold and it would retain focus on gym expansion. The management targets to turn free cash flow positive in FY14 as a large chunk of gym base would then be operating in the mature state and expansion through franchisees would gather pace. Roll out of HiFi gyms through the franchisee route will ensure deeper penetration without the concurrent capex needs. The company expects benefits of operating leverage to kick in considering the large share of fixed costs, which would help improve margins. IIFL has cut its estimates and now expect a 33 per cent EPS CAGR over FY12-14. Maintain buy.
IIFL
GLOBUS SPIRITS
Reco price: Rs 121
Target price: Rs 134
Globus Spirits (GSL) recently declared Q3’FY12 results. I treported net sales of Rs 152 crore, up 38 per cent yar-on-year (y-o-y). The operating margin for the quarter was 12.8 per cent, 450 basis points down y-o-y. This fall can be attributed to the 81.2 per cent increase in “other expenses” y-o-y. The net orofit for the quarter was reported at Rs 11.7 crore , up 3.3 per cent. Interest expense has risen largely due to capitalisation of new capacity and increase in working capital loans due to higher sales volumes. Increase in depreciation costs y-o-y is due to capitalisation of new capacity. Buy.
HDFC Securities