TATA POWER LTD
Reco price/date: Rs 101.05/March 11;
Current/target price: Rs 97.90/Rs 83
Over the past two years, Tata Power has outperformed its peers, led by its regulated businesses providing high earnings visibility, while independent power producers were facing high earnings risk, led by fuel challenges. However, we expect losses of Mundra Ultra Mega Power Project to eat into the profits of its regulated businesses. This should disappoint investors. On the back of potential reforms announcements relating to SEB debt restructuring, clearances for captive coal blocks and coal pooling, we advice investors to switch into NHPC and KSK. The key risks to our view include sharp increase in Indonesian mines' production, sharp rise in imported coal prices and restructuring of CGPL's forex loans. Downgrade to Underperformer.
-Credit Suisse
DEVELOPMENT CREDIT BANK (DCB)
Reco price/date: Rs 44/March 12;
Current/target price: Rs 43.85/Rs 63
DCB has all the right ingredients for a scalable model. A stable top management, a non-unionized workforce, metro-centric branch network and high capital adequacy. These factors convince brokerage that DCB is potentially on the cusp of a high growth phase with an improving profitability profile. The recent credit rating upgrade by CRISIL validates its view about the bank. The brokerage models improvement in RoE from 10.7 per cent in FY13E to 15.3 per cent in FY15E. Based on price to book value it arrived at a fair value of Rs 63. The brokerage has Buy rating.
-Espirito Santo Securities
