Analysts' corner

Larsen & Toubro, National Aluminium Co, BGR Energy & Everest Kanto Cylinder

LARSEN & TOUBRO
Reco price/date: Rs 1,561.80/September 27
Current/target price: Rs 1,595/Rs 1,721
Larsen & Toubro (L&T) Construction has secured new orders worth Rs 1,241 crore across various business segments in the month of September 2012. The Buildings & Factories IC has bagged new orders worth Rs 697 crore for the construction of residential towers, cement plants and factory structures across the country. In the Railways Business sector, the Company has won orders aggregating Rs 544 crore from Rail Vikas Nigam Limited (RVNL). The scope of work includes Railway electrification works between Guntakal–Raichur–Wadi stations of South Central Railway and another order for railway construction, track work, signaling and telecommunication in the Lucknow and Izatnagar divisions of North Eastern Railway. Accumulate

Angel Broking

NATIONAL ALUMINIUM CO
Reco price/date: Rs 51/September 26
Current/target price: Rs 51/Rs 52
Analysts expect margin improvement on back of lower cost and higher alumina sales. The company has and Rs 4,160 crore cash.Analysts expect Net sales to register CAGR of 8.9 per cent and earnings CAGR of 20.8 per cent during F12-F14.The stock trades at 12.5/10.4 times F13/14 estimated EPS. Key Upside risks are higher than expected aluminium realisation, higher than expected volume and better coal availability. Initiate coverage with the ADD rating

SBIcap Securities

BGR ENERGY
Reco price/date: Rs 274/September 27
Current/target price: Rs 277/Rs 203
Analysts forecast diminishing revenue visibility from the high margin BOP business together with a low margin NTPC bulk order booking to drive a 460 basis points contraction in EBITDA margins over FY12-14. A committed investment in the JV amidst a bleak ordering outlook should see RoEs falling from 22 per cent in FY12 to 14 per cent in FY14. Analysts do not expect investment in the BTG JV to be value accretive for BGR and assign it a negative value. Analysts value BGR on a DCF methodology and arrive at a value of Rs 203 per share, implying 26 per cent downside from current levels. Initiate coverage with a Sell rating

Espirito Santo Securities

EVEREST KANTO CYLINDER
Reco price/date: Rs 26/September 12
Current/target price: Rs 34/Rs 38
CRISIL Research revises Everest Kanto fundamental grade to 2/5 from 3/5 due to (a) lower-than-expected demand for CNG cylinders in India because of limited gas availability, b) closure of the Iran market, c) under-utilised capacity d) stretched working capital, and e) liquidity issues on $35 million FCCB repayment due in October 2012. Return ratios are expected to remain muted in the short to medium term. However, the long-term prospects of CNG market are expected to be positive due to the product’s inherent advantage. CRISIL Research has lowered revenue estimates by 15 per cent to Rs 620 crore for FY13 and by nine per cent to Rs 710 crore for FY14. EPS is expected to be Rs 1.3 in FY14.

CRISIL Research