Analysts' corner

State Bank of India, Mahindra and Mahindra, BGR Energy, NMDC

STATE BANK OF INDIA
Reco price/date: Rs 2,047/Jun 3;
Current/target price: Rs 2,069.7/Rs 2,640
We maintain our positive stance on SBI as we feel that foreign capital inflows would sustain in FY14 amid persistent liquidity push from developed economies. Banks being a proxy to economy would be the key beneficiaries. Further, higher loan recoveries and upgradations going forward would off-set any negative surprises from slippages. At the current market price, SBI stock trades at 1.3 xs FY14E book value and 1.8x FY14E adjusted book value. The stock can see a 29 per cent upside from current levels. Maintain Buy.

-Nirmal Bang Institutional Equities

MAHINDRA AND MAHINDRA
Reco price/date: Rs 968/June 3;
Current/target price: Rs 973.35/Rs 1,150
IN view of the utility vehicle growth tapering, we lower our revenue and EPS estimates by three per cent each for FY15E. Based on 8xFY15E EV/EBIDTA, we value M&M's standalone business at Rs 820 (from Rs 836 earlier). Based on 7xEV/EBIDTA, we value Mahindra Vehicle Manufacturers Ltd at Rs 67 and post 20 per cent Hold Co discount, we value subsidiary at Rs 263 a share (from Rs 247 earlier). Thus sum-of-the-parts based target price comes at Rs 1,150 a share, primarily on account of increasing value of its subsidiary supported by their improved financial performance. Maintain Buy.

-KArvy Stock Broking

BGR ENERGY
Reco price/date: Rs 177/June 3;
Current/target price: Rs 169.5/Rs 159
BGR Energy Systems (BGRL) reported revenue of Rs 1,060 crore (6.6% de-growth year-on-year ) with EBITDA margin of 13 per cent (yoy increase of 109 basis points) and PAT of Rs 53.8 crore (de-growth of 19.8 per cent yoy). Revenue growth continued to remain weak due to execution delays across key projects. During the quarter, order book at Rs 11,000 crore declined by 19 per cent compared to December quarter. The management expects order inflow prospects to improve. But given the continued uncertainty, risk of delays involved in power projects and intense competition for limited orders available in the market, we expect the order inflow pace to be relatively muted. Also, EBITDA margin is expected to trend downwards in FY14E due to higher proportion of relatively low margin BTG contracts. With interest cost of Rs 220 crore (FY15) expected to remain at elevated levels due to reliance on debt to fund the expanded working capital, we expect PAT to fall at an annualised rate of six per cent during FY13-15. Maintain Sell.

-Spark Capital

NMDC
Reco price/date: Rs 117.6/May 31;
Current/target price: Rs 117.45/Rs 170
The brokerage believes volumes will improve in FY14E and pricing will stabilise. After a tough year in logistics, it saw better volume performance from NMDC in FY14E on account of various logistical improvements undertaken in FY13 in Chhattisgarh, commencement of forward e-auction in Karnataka and rationalisation of prices (particularly lumps) in line with domestic market conditions. Pricing has been maintained flat for the last two months (May and June) and domestic demand supply situation remains in NMDC's favour. Current prices stand at Rs 2,610 a tonne for fines and Rs 4,600 a tonne for lumps. The capex on mining expansions and the setting up of steel and pellet plants in Karnataka continue, albeit at a slow pace and capex guidance stands at Rs 2,700 crore for FY14. Maintain Buy.

-Centrum Broking