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Brokerage house recommendations
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The following stocks have been recommended by ICICIdirect.com Research, Reliance Money, Religare Securities, Asit C Mehta, India Infoline brokerage houses. Investor should keep in mind their own investment risk profile and time horizon before investing in these stocks. Stockinvest.in has no opinion or liability on these stock recommendations.
Great Offshore
Current market price: Rs 450
Target price: Rs 728
Brokerage: ICICIdirect.com Research
Great Offshore (GOL) reported 39 per cent year-on-year (y-o-y) increase in standalone revenues at Rs 202.68 crore in Q1 FY09. However, the company had to book an exceptional forex loss (non-cash) of Rs 23.64 crore (gain of Rs 20.72 crore in corresponding quarter). This has resulted in net profit after extraordinary items declining by 78.6 per cent to Rs 12.01 crore.
GOL has been awarded a contract by ONGC to provide engineering services scheduled to be completed by the middle of CY10, at a contract value of Rs 234 crore. The ticket size of this contract is very significant, considering that the revenue from the engineering segment in FY08 was a modest Rs 25 crore. The order would enable the company to attain a better business positioning, going ahead.
GOL is expected to register revenue CAGR of 22.1 per cent over FY08-FY10E to Rs 1,112.82 crore on the back of the addition of new vessels to its fleet and a sustained strong day rate environment for offshore vessels. The company is trading at 6.1x FY10E earnings.
The stock has declined substantially due to the market correction and cancellation of its plans of acquiring a company having on order, two harsh environment drilling assets. The cancellation of the acquisition has no fundamental impact on GOL. However, the target price has been lowered by 13 per cent to Rs 728 in line with the reduction in FY10E earnings.
KLG Systel
Current market price: Rs 425
Target price: Rs 776
Brokerage: Reliance Money
The overall Q1 FY09 performance of KLG Systel (KSL) was in line with expectations, with a growth of 33.3 per cent y-o-y in revenues to Rs 57.5 crore and 50.3 per cent y-o-y in earnings to Rs 12.9 crore. Better margins in the power system segment led to an improvement of 340 basis points (bps) in operating margins to 39.3 per cent.
The recent capital infusion deal with Trans Pacific Group and IBM with its de-merged power system subsidiary, KLG Power will provide the necessary financial and strategic muscle to position itself in the global markets. With this, the power system products like SG 61 and Connect Gaia will get good long term support.
At the same time the SAP-based power system solution, ‘Vidushi’ is expected to enjoy good business traction in the Indian market. KSL’s consolidated net sales and net profits are expected to grow at a CAGR of 65 per cent and 43 per cent, respectively over FY08-FY10E.
The current valuations of 8.3x and 5.5x on FY09E and FY10E earnings and a EV/EBITDA of 4x on FY10E, make the stock an attractive long term investment. Maintain Buy with an 18-month SoTP price target of Rs 776.
Federal Bank
Current market price: Rs 212
Target price: Rs 273
Brokerage: Religare Securities
Federal Bank’s Q1 FY09 results were slightly above estimates, with net interest income (NII) growth of 47 per cent y-o-y, aided by the utilisation of funds raised from the rights issue in Q4 FY08 and strong asset growth.
Higher incremental credit/deposit ratio of around 140 per cent resulted in net interest margins improving by 31 bps sequentially to 3.8 per cent. Non interest income declined 8 per cent y-o-y on account of treasury losses and |
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