Analysts' corner

PTC india, LIC Housing Finance, Eimco Elecon (India), Nava Bharat Ventures

PTC india
Reco price: Rs 119,
Target price: Rs 136

PTC India Financial Services (PFS), a subsidiary of PTC India, has been given the infrastructure financial company (IFC) status by the Reserve Bank of India (RBI). RBI had earlier classified non-banking financial companies (NBFCs) under three categories — asset finance companies, loan companies and investment companies. Recently, RBI introduced a fourth category of NBFCs — IFCs. Post this development, PFS would be allowed to have a higher exposure to lending and investment to a single borrower or a group of borrowers. Further, PFS would have better access to resources as the exposure limit for banks funding to IFCs has been improved. At Rs119, PTC India is trading at 23.5x FY2011E and at 18.2x FY2012E earnings. Maintain buy with a sum of the parts fair value of Rs 136.
— Angel Broking

 

LIC Housing Finance
Reco price: Rs 1,218,
Target price: Rs 1,020

LIC Housing Finance (LICHF), with loan portfolio of around $8 billion, enjoys a healthy nine per cent plus market share in mortgage business. Improving economic environment and a pick-up in real estate activities have enabled the company to report 40 per cent plus CAGR (compound annual growth rate) in sanctions and around 30 per cent CAGR in loans over FY07-10. However, increasing competition in mortgage space, low loan to value ratio and challenging interest environment is likely to drag profitability.

Healthy loan CAGR in the past, improvement in market share and returns ratio and exemplary margin maintenance despite volatility in interest rate scenario have all contributed towards significant stock outperformance. The stock currently trades at its peak valuation of 2.8x 1 year forward book (average of 1.2x). Maintain sell.

— IIFL

Eimco Elecon (India)
Current market price: Rs 298,
Fair value: Rs 314

Crisil Equities has assigned a fundamental grade of 4/5 to Eimco Elecon (India). The grade indicates that the company’s fundamentals are ‘superior’ relative to other listed equity securities in India.

The fundamental grade reflects Eimco Elecon’s leadership position in the Indian underground mining equipments market. It stands to benefit from increasing focus on underground mining to meet coal shortage along with an expected increase in coal prices globally. Further, the launch of new products in underground mining, and entry into the open cast and construction equipments space would drive growth. However, the grade is constrained by Eimco Elecon’s dependence on a single client, Coal India, which contributes nearly 88 per cent to the company’s revenues. At Rs 314, the implied P/E (price to earnings ratio) is 8.7 its estimated FY12 estimated earnings.

— Crisil Equities

Nava Bharat Ventures
Current market price: Rs 353,
Target price: Rs 433

Nava Bharat Ventures (NVB) is a diversified company with business interest in power, ferro alloys, sugar and mining. The continuous shift of focus towards merchant power business from ferro alloys business will provide stability to its revenues. Its international foray through coal mining and power generation projects in Zambia and coal mining in Indonesia will lead next phase of growth. Ferro alloys business will continue to be operated as an opportunistic case scenario with operating margins guiding the production numbers. Sugar segment along with its byproducts will perform well, as realisations improve after significant decline in prices earlier this year. However improving power supply scenario in India, will continue to put pressure on it power segment margins. At Rs 353, the company trades at 7.9x its FY11E EPS of Rs 44.6. Maintain buy. 

—Asit C Mehta