| Summary of Contents
STOCK UPDATE ITC
Recommendation: Hold
Price target: Rs369
Current market price: Rs363 Book partial profit, downgraded to Hold Key points -
Despite the churn away from the consumer goods stocks, ITC has appreciated by close to 17% in the past five weeks and vindicated our strong preference for the stock over the other FMCG stocks. -
Though we maintain our structurally positive view on ITC (historically, it was one of the few stocks that did better than the benchmark index in the bullish phase of 2004-08 as well as the bearish phase of 2009-14). However, the recent upsurge provides a tactical opportunity to take some profit off the table. -
Hence, we advise investors to book partial profit in the stock and wait for a better opportunity to re-enter it. ITC is currently trading at 27.9x its FY2015E EPS of Rs13.0. We downgrade our rating on the stock from Buy to Hold but maintain the price target at Rs369. Jaiprakash Associates
Recommendation: Reduce
Price target: Rs42
Current market price: Rs49 Asset monetisation factored over optimistically; downgrade to Reduce Key points -
JP Associates Ltd (JAL) executed three deals in the cement and power divisions at an aggregate value of Rs15,000 crore, which is likely to help the company in reducing its overall consolidated debt to Rs48,000 crore, which still remains high. -
JAL's high leverage has dragged its consolidated and stand-alone entities, eating up 68% and 80% of the EBITDA for FY2013 and M9FY2014 respectively. The management has achieved its targeted debt reduction for FY2014 and will be further require to deleverage its balance sheet to improve its operational performance. -
Our sum-of-the-parts (SOTP)-based valuation for JAL had already factored a Rs10,000 crore valuation for the two power projects, while there is no material impact of the Bokaro Jaypee cement joint venture sale on the valuation. Hence, our price target for JAL remains unchanged at Rs42. As the stock has rallied to over 20% in the past 20 days, we see the current run-up in the stock as an opportunity to exit. Consequently, we downgrade the stock to Reduce. Further, monetisation of assets at a higher than expected valuation is the key risk to our rating.
SECTOR UPDATE Oil & Gas EC objection led weakness is an opportunity Key points -
The Election Commission's decision to stall the gas price hike and leave the final notification on the wisdom of the new government post the general elections adversely impact the sentiments and earnings of oil and gas upstream companies. -
With gas prices at $8 per mmBtu, the earnings of Reliance Industries Ltd (RIL), Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) would have been higher by 10%, 17% and 20% respectively. However, most analysts (including us) were not factoring in the high gas prices and the development does not require us to revise our earnings estimates. Moreover, there is a good probability that the new government (Congress or BJP-led) would go ahead with a hike in the gas prices as per the Rangarajan committee's recommendation (which has been widely debated across political parties). -
Hence, we retain our positive stance on OIL (Buy; price target: Rs605) and RIL (Buy; price target: Rs1,010) and see the near-term weakness as an opportunity to accumulate them.
Click here to read report: Investor's Eye | | | Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article. | |
No comments:
Post a Comment