Analysts' corner

Reliance Industries, BOSCH, Welspun Corporation & Rainbow Papers

RELIANCE INDUSTRIES
Reco price/date: Rs 816/August 17
Current/target price: Rs 814/Rs 906
Refining margins have soared recently by $2/barrel due to unplanned large outrages in refineries. While analysts expect moderation in refining margins as capacities come back, in the long term, they continue to remain positive as they believe capacity closures will keep net capacity addition at 1.9 million barrels per day (mbpd), lower than 2.3 mbpd demand surge. Edelweiss estimates Reliance Industries Ltd (RIL) to report Q2FY13 GRMs at $8.5-9.0/barrel. Its FY13 base case assumes GRMs of $8.5 per barrel. Analysts like RIL due to its high refining complexity, large planned capex in refining and petchem and earnings growth from investment in shale gas. Maintain buy.

Edelweiss Securities

BOSCH
Reco Price/date: Rs 8,681/August 16
Current/Targetprice: Rs 8,800/NA
While the analyst remains positive on the long-term prospects of BOSCH due to its technological leadership and strong and diversified product portfolio; he, however, expects the near-term environment to remain challenging for the company given the slowdown in the commercial vehicles and tractor industry. He has revised downwards his earnings estimates to factor in the slowdown in the automotive sector and weak exports demand coupled with margin pressure due to unfavourable currency movement. As per him, at Rs 8,681, BOSCH is fairly valued trading at 19.9 times CY2013 estimated earnings. Maintain Neutral.

Angel broking

WELSPUN CORPORATION
Reco price/date: Rs 102/August 20
Current/target price: Rs 99/Rs 115
The Research house remains bearish on the global pipes market and the depressed Indian market. They believe most orders will have lower margins and consequently, they lower their margin assumption by 10-15 percent. Resulting from cut in margin assumptions, their FY13/14 earnings estimates are lowered by 21-24 percent. They also cut their Gordon growth-based valuation multiple from seven times to 6.5 times FY14 estimates to incorporate the perceived risk associated with pledging promoter shares (promoters have pledged 36 percent of their holdings).Hence, reduce valuation to Rs 115 from earlier Rs 165. Their biggest concern on the stock remains demand growth and lack of investor confidence on corporate governance. Neutral.

HSBC Global Research

RAINBOW PAPERS
Reco price/date: Rs 72/August 16
Current price/fair value: Rs 77/Rs 67
Rainbow Papers’s Q1FY13 results were in line with expectations. Rainbow’s new capacity for value-added paper products is now expected to be operational by Q3FY13-end as the commissioning of the captive 20 Mw power plant was delayed by two quarters. Higher trading activity resulted in revenues increasing by 110.7 per cent year-on-year to Rs 222 crore. Higher realisation and stable raw material costs helped the Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin from manufacturing to improve 170 basis points y-o-y to 21.7 per cent. Adjusted net profit increased 76.6 per cent y-o-y to Rs 17 crore. CRISIL Research has revised the revenue and profitability estimates for FY13 downwards to factor in the delay in commissioning of new capacity.

CRISIL Research