Analysts' corner

ITC, Balrampur Chini & Indraprastha Gas

ITC
Reco price/date: Rs 293/April 15;
Current/target price: Rs 300/Rs 340
There are concerns about ITC delaying cigarette price increases, despite the excise duty rise having taken place over 40 days back. However, analysts believe the delay is to do with the increased importance of state budgets, which came in late March. However, the company has enough stock in the market, likely from older manufactured inventory. Another concern is that volumes could face significant decline, as this is a consecutive year of price increases. The expectation analysts have for FY12-14 is also for flat volumes. Cigarette volumes have also become more inelastic to price increases in the past seven-eight years. Maintain outperform.

- Credit Suisse

BALRAMPUR CHINI
Reco price/date: Rs 49/April 13;
Current/target price: Rs 49/Rs 61
The oil marketing companies (OMCs) have agreed to a base price of Rs 34 a litre for ethanol against Rs 27 a litre to fulfil five per cent compulsory blending requirement set by the Government of India. The base price of Rs 34 a litre is 26 per cent higher than what the sugar mills were being offered till now and will significantly improve the profitability of sugar companies. Analysts believe profitability of Balrampur Chini will increase by 30 per cent for FY14 after this revision in ethanol price. The decision to offer more for ethanol followed the decision to abolish levy quota for sugar year (SY) 2013 and SY14 crushing seasons and abolition of release mechanism provide a further breather to the company. Maintain buy.

- Centrum Research

INDRAPRASTHA GAS
Reco price/date: Rs 284/April 15;
Current/target price: Rs 299/Rs 350
Analysts believe regulatory risk is reducing for Indraprastha Gas Ltd and hence would not affect the company's revenue model; regulatory risk had a high weightage on the stock's valuation multiples over the past 12 months. The outlook for IGL's volume and earnings growth remains intact. At 10 times FY14 estimated earnings per share, valuations are at 50 per cent discount to regional peers. Lowering of regulatory risk presents a strong case for this gap to narrow. Upgrade to buy.

- IIFL