Analysts' corner

Dr. Reddy`s, Hindalco Industries, Indraprastha Gas & ITD Cementation

DR. REDDY'S
Reco price/date: Rs 1,826/January 3;
Current/target price: Rs 1,881/Rs 2,150
Analysts continue to stay positive on Dr. Reddy’s given the strong increase in Metoprolol market share to 15 per cent versus two per cent currently, expectation of approval of Vidaza generic in the current quarter and rupee depreciation benefits kicking in FY14. Analysts expect Metoprolol sales $60 million annualised contribution with margins of 90 per cent. Management is confident of at least one limited competition approval in the US in the March 2013 quarter. The December quarter results are expected to be sequentially flattish given flattish US sales. However, the March quarter is expected to be 25 per cent higher than December with higher contribution of Metoprolol, generic Vidaza, favourable currency and Propecia 1 MG. Maintain outperform.

Credit Suisse

HINDALCO INDUSTRIES
Reco price/date: Rs 134/January 3;
Current/target price: Rs 134/NA
Hindalco Industries’s copper (Cu) and Novelis businesses will continue to do well, while the domestic aluminium (Al) business should derive benefits from the Mahan smelter commissioning in first quarter of FY14. With 100 kt of incremental production in Novelis, analysts expect $1.2 billion of Ebitda from the subsidiary in FY14 even as the Cu business provides stable returns. However, profitability of domestic Al operations is likely to remain muted given Mahan/Utkal start-up costs in FY14. A bulk of the FY14 domestic capex of Rs 8,000 crore will be for the Aditya Al project (Rs 5,000 crore) expected to commence in FY15. Maintain Hold.

Religare Institutional Research

INDRAPRASTHA GAS
Reco price/date: Rs 251/January 3;
Current/target price: Rs 254/Rs 320
The ongoing legal conflict on authorisation of a regulatory body for CGD (City Gas Distribution) entities between PNGRB and Indraprastha Gas (IGL) post-tariff cut, has hit IGL’s valuation severely in the last three quarters. Currently trading at 11 times FY14 estimated earnings as against historical band of 17-18 times and immediate peer Gujarat Gas trading at 15 times, analysts see rerating potential in the stock. This valuation gap is unwarranted as the regulatory uncertainties are not as grave as it has been priced in. Analysts believe earnings are unlikely to take a major hit, even though the apex court goes in favor of PNGRB. Maintain Buy.

Karvy Stock Broking

ITD CEMENTATION
Reco price/date: Rs 249/January 3;
Current/target price: Rs 254/Rs 334
The JV of ITD Cementation with its parent company, ITD, has bagged an order of Rs 546 crore from Delhi Metro Rail Corporation (DMRC) which is scheduled to be completed in 30 months. This project includes construction of a 9,035m long elevated metro track along with eight elevated stations. It also includes architectural finishing, water supply, sanitary installation and drainage works. The JV is also expected to bag one more order from DMRC for tunneling and station building, which is estimated to be worth Rs 725 crore. Additionally, ITD Cementation (standalone) is also expecting an order worth Rs 115 crore in Ghaziabad for the construction of flyovers with scheduled completion in 15 months. All the projects will get mobilised from February 2013. Upgrade to Buy.

Angel Broking