Analysts' corner

Jaiprakash Associates, Shriram City Union Finance, Infotech Enterprises & Global Offshore

Jaiprakash Associates
Reco price/date: Rs 76/19th July
Current/target price: Rs 77/Rs 88
According to media reports, CRH, the $13.7-billion Irish building materials group, has entered the fray to buy Jaiprakash Associates (JAL)'s cement plants in Gujarat (4.8 million tonnes per annum, or mtpa) and Andhra Pradesh (five mtpa). This follows the company's discussions with AV Birla Group being stuck due to issues such as differences over valuation. If the deal materialises, it is expected to fetch JAL Rs 8,000-9,000 crore and help the company reduce its consolidated debt of about Rs 45,000 crore. CRH, which had forayed into India by acquiring a 50 per cent stake in Hyderabad-based cement producer My Home Industries in 2008, has an installed capacity of 4.2 mtpa and is keen to expand in India. Buy.

Angel Broking

Shriram City Union Finance
Reco price/date: Rs 750/17th July
Current/target price: Rs 750/Rs 940
Generally, the market is not favourable to multi-product non-banking financial companies (NBFCs), owing to risk of competition from banks. But NBFCs with sustainable high return ratios and good asset qualities trade at valuations almost similar to those of banks. Analysts believe Shriram City Union Finance, with its track record of high asset quality, high growth and superior return ratios, would re-rate over time and the current trailing valuations would roll over to the next year. The trailing valuation in 2011-12 is at a discount to the last nine-year median valuation, which offers a margin of safety. Initiate coverage with accumulate.

MOSL

Infotech Enterprises
Reco price/date: Rs 181/19th July
Current/target price: Rs 182/Rs 205
Infotech Enterprises (Infotech)'s results in the first quarter of 2012-13 were disappointing, as the revenue of $84.3 million was lower than Edelweiss' estimate of $86.0 million. The earnings before interest, tax, depreciation and amortisation margin fell 110 basis points to 18.7 per cent, owing to wage increases implemented during the quarter. However, at Rs 64 crore, the net profit was higher than estimates, primarily due to lower foreign exchange losses. Though the growth in revenue has been sluggish over the past three quarters (the management indicated 14 per cent revenue growth in constant currency for 2012-13), analysts are confident of an improvement in its margin and expect revenue momentum to pick up, owing to impressive client addition over the past four quarters. Maintain Buy.

Edelweiss Securities

Global Offshore
Reco price/date: Rs 75/19th July
Current/target price: Rs 76/ Rs 105
Global Offshore Services (GOL) sold a 31 per cent stake in its wholly-owned Dutch subsidiary Global Offshore Services BV (GOSBV) for $13.87 million. Subsequently, the company also made changes in its fleet, selling its platform support vessel (PSV) MV Makalu and acquiring a second hand anchor handling tug-cum-supply vessel. GOL has also signed contracts to acquire two PSVs, to be delivered in 2013. On the fleet chartering strategy front, the company continues to prefer long-term contracts to spot contracts, which provide GOL better revenue visibility. Analysts value the stock at a 40 per cent discount to estimated global average price-to-book value for 2013 and ascribe a multiple of 0.65 times the 2013-14 estimated price-to-book value. Maintain Buy.

ICICI Direct