Research Calls

Bharat Petroleum Corporation

Recommendation: Buy at Rs 292

Inquire India Equity Research

In an update, Inquire India has re-iterated its buy recommendation on Bharat Petroleum at Rs 292. The scrip is trading at 7.7x FY03 estimated earnings of Rs 37.8 per share. Business fundamentals remain strong, with gross refining margins at $2.8 per barrel and blended marketing margins doubling from what they were under the APM regime. The company is expected to save Rs 40 crore in crude costs because of its negotiations with ONGC. Still, divestment remains the key trigger for the stock.

Polaris Software

Recommendation: Underperform at Rs 219

CLSA Securities

Disappointing first-quarter results amid nervous markets and no short-term upward trigger in sight has prompted CLSA Securities to downgrade Polaris Software to under-performer at Rs 219. It expects a decline of 17 per cent in its valuations to Rs 181.

A high on-site revenue component and de-growth in the Citigroup account in the last quarter are concerns. Besides, while the benefits of the merger with Orbitech will take some time to be reflected in the financial performance of the company, merger related extra-ordinary costs will dent bottomline in the short term.

Gujarat Gas Company

Recommendation: Hold at Rs 502

Pioneer Intermediaries

Pioneer Intermediaries has recommended a hold on Gujarat Gas at Rs 502, with a 12-month price target of Rs 534. The stock is trading at 10x CY02 estimates, compared with its median P/E of between 13 and 18 of the past four years.

However, Gujarat Gas might no longer continue to enjoy the high trading multiples of the past, as consolidated margins are expected to dip sharply from 26.9 per cent in CY01 to 15.7 per cent in CY03. The slump in margins will be largely due to purchase of high-cost gas. Suppliers like GSPC have already hiked their prices while a price rise by Gas Authority of India (GAIL) is also expected in the near future.

Colgate-Pamolive

Recommendation: Sell at Rs 136

Edelweiss Capital

Edelweiss Capital is bearish on Colgate-Pamolive (India) at Rs 136, with a price target of Rs 120. Colgate has a recorded a 14.5 per cent dip in revenues during the first quarter this fiscal. Volumes in the oral-care category continue to stagnate and this is unlikely to change in the next two quarters.

The 19 per cent improvement in bottomline is primarily due to a 23.7 per cent cut in advertising expenditure. The scrip is currently trading at 24.2x CY03 earnings estimate and is due to be re-rated downwards, reflecting its status as a cash cow rather than a growth story.

Satyam Computers

Recommendation: buy at Rs 218

CLSA Securities

CLSA Securites is bullish on Satyam Computers at Rs 218, with a price target of Rs 266. Press reports about the DCA (Department of Company Affairs) investigation against Satyam has impacted sentiment towards the stock, which seems to be clearly overdone. Its first-quarter results were in line with company guidance but below market expectations. At 13x FY03 estimated earnings of Rs 16.5 per share, the downside is very limited.