Analysts' corner

Larsen & Toubro, IDBI Bank, MCX & Den Networks

VINAYAK CHATTERJEE
Reco price/date: Rs 1,267/June 7
Current/target price: Rs 1,276/Rs 1,553
L&T Infrastructure Development Project Ltd, a subsidiary of Larsen & Toubro Ltd, has emerged as the successful bidder to develop two contiguous road projects of 484 km at a cost of Rs 4,800 crore. The road projects are part of National Highway (NH) 6, which connects Surat to Kolkata. NH 6 passes through states such as Orissa, Chhattisgarh, Maharashtra and Gujarat. The concession period is 20 years, including 30 months for construction. The company’s stock is trading at 16.6 times FY14 estimated earnings and 2.4 times FY14 estimated book value on a stand-alone basis. Buy.

Angel Broking

IDBI BANK
Reco price/date: Rs 89/June 7
Current/target price: Rs 89/Rs 141
Analysts expect IDBI Bank Ltd’s focus on prudent credit growth and net interest margin protection would enhance the bank’s profitability and earnings growth. For a strong re-rating, however, asset quality needs improvement, they believe. Anand Rathi Research values the stand-alone bank at Rs 118 (0.8 times first half FY13 estimated adjusted book value). They price the investments at book value (after a 20 per cent holding-company discount) of Rs 23. Slower than expected economic growth could impact loan growth, credit quality and remains the key risk. Maintain Buy.

Anand Rathi Research

MULTI COMMODITY EXCHANGE
Reco price/date: Rs 995/June 6
Current/target price: Rs 1,040/Rs 1,580
Multi Commodity Exchange (MCX)’s FY12 net profits were up 71 per cent year-on-year, though slightly below analysts’ estimates , largely on account of transfer of member penalties to a separate investor protection fund (regulator driven). Excluding the above, earnings were largely in line with analysts’ estimates. MCX has increased its dividend payout ratio to 50 per cent for FY12, but has not changed its dividend policy yet. Citigroup has maintained its turnover estimates,but revised earnings marginally (down by two-three per cent for FY13-14) to account for higher dividend payouts. Analysts believe valuations are attractive at 14 times FY13 estimated earnings. Maintain Buy.

Citigroup

DEN NETWORKS
Reco price/date: Rs 93/June 7
Current/target price: Rs 95/Rs 142
Analysts expect Den Networks Ltd to benefit from cable digitalisation given its strong presence in Delhi National Capital Region and Uttar Pradesh. After implementing cable digitisation in the first two phases, analysts expect Den’s revenues to grow 1.4 times and Ebit (earnings before interest and taxes) to jump three-fold over FY12-14, led by a three-times jump in subscription revenue, partially offset by reduction in carriage revenue. Analysts forecast margins to expand from nine per cent to 17 per cent over the next two years, led by operating leverage. Margins are likely to expand further after the third and fourth phases of cable digitisation. Any delay in implementation can be a key risk to our valuation. Maintain Buy.

Antique Stock Broking