Analysts' corner

Coal India, IDFC, Voltas & Sarda Energy & Minerals

COAL INDIA
Reco price/date: Rs 305/March 18
Current/target price: Rs 298/Rs 320
Various media have reported a likely 10 per cent stake sale in Coal India (CIL) via the OFS route. The reports suggest the stake sale could possibly be in tranches and an EGoM would take the final call. The bull argument on CIL is that given the possible stake sale, there could be large coal price increases. In analysts’ view, while a small price increase (five per cent) is likely given the cost increases, large price increases may not be possible, given the weak economy. The interim dividend was disappointing, and it remains to be seen if the final dividend is large. Underweight.

—JP Morgan Asia Pacific Equity Research

IDFC
Reco price/date: Rs 152/March 20;
Current/target price: Rs 136/Rs 190
Post the correction in IDFC’s stock price, the valuation at 1.4 times book and 9 times earnings is inexpensive. This is despite the company registering steady improvement in operational parameters, with improvement in spreads, controlled operating expense and steady provisioning. As the company continues to deliver steady growth in loans and earnings (20 per cent CAGR), analysts expect the stock to re-rate from current levels. At the current valuation, it is trading at a 37 per cent discount to its historical average and at a 20-25 per cent discount to corporate private banks.  Maintain Outperform.

—Credit Suisse

VOLTAS
Reco price/date: Rs 85/March 18;
Current/target price: Rs 76/Rs 115
The bulk of Voltas’ new orders in the domestic market continue to come from the Industrial segment and IT/ITES sector. Its diversified portfolio is aiding domestic orders. The management expects international ordering to pick up in the second half of the calendar year and the faster-than-market growth in the consumer segment to continue. Valuations, at 10.4 times FY14 estimated earnings might have become attractive. Analysts continue to believe the worst might be behind us, given that the provisions on cost overruns on the Sidra project have already been accounted for.  Accumulate.

—Prabhudas Lilladher Research

SARDA ENERGY & MINERALS
Reco price/date: Rs 108/March 20;
Current/target price: Rs 100/Rs 178
CARE Equity Research has assigned a fundamental grade of 3 to the equity shares of Sarda Energy & Minerals, indicating ‘good fundamentals’. The company has taken steps to improve its efficiency by setting up a 0.6 mtpa iron pellet plant, a coal washery at its operational coal mine and fly ash brick manufacturing facilities for waste management, which has helped reduce cost and improve margins. In an attempt to diversify and also be further self-sufficient in terms of raw materials, the company has entered into power and natural resources businesses through its various subsidiaries and joint ventures.

—CARE Equity Research