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May 21, 2012, 08.45 AM IST
This week’s 'Know Your Investment', Pankaj Pandey, Head-Research, ICICI Direct, helps investors make the right decisions.
Back home, the BSE Sensex recovered from its lowest intraday level since January 9 to gain on Friday after stronger-than-expected earnings from State Bank of India relieved concerns about non-performing assets and credit growth in the lending sector.
Stocks pared early session losses which were triggered by continued weakness in the rupee which hit a new life low in the session.
Analysts said the gains on Friday would prove temporary, and that concerns about global markets, as well as about India's economic and fiscal challenges would soon dominate trade.
In this week's 'Know Your Investment', Pankaj Pandey, Head-Research, ICICI Direct, helps investors make the right decisions on thier stock investments.
Below are the answers to the stock queries investors had posted on the moneycontrol.com Facebook page.
Puneet Kshatriya: What is your six-month target for NTPC ?
Pandya: Given the environment with respect to the power sector we believe NTPC is favorably placed in terms of fuel security (to maintain 80%+ PLFs for coal based power plants) but lower PAF due to muted coal production (resulting in under-recovery of fixed charges), capacity slippages and back down by SEBs are key risks for the company. At the CMP of Rs 147 the stock is trading at 1.7x which is historically low. Given if incremental reforms starts happening in the sector and NTPC ramps up its own capacity in the 12th plan timely, we believe the stock will be re-rated. However over a period of 6 months one can expect levels of Rs 160-170 on the stock. And any deep correction should be an opportunity to buy.
Singh Bhupendra: What is your call on Bharti Airtel ?
Pandya: Airtel continues to be our top pick in the telecom sector with marquee subscriber quality. The African operations have also started to meaningful improvement from last quarter onwards. It would be generating free cash flow in excess of Rs 10000 crore each year which would be used to repay the debt. Led by improving operational performance and reduction in interest outgo on account of debt repayment, we expect the EPS to double to Rs 22.7 by FY14E from FY12 EPS of Rs 11.2. We have a buy rating on the stock with a target price is at Rs 420.
RIL: The Singapore GRM's have remained steady over the past months at ~US$6-8 per barrel and expected to remain around current levels. Also petrochemicals division is expected to remain stable. However, gas production from KG basin has been a concern for RIL and would be important to watch out for in the future. Triggers will be approval from government for further capex. Recommend hold at 11.4x FY12 EPS of Rs 61.
IOC: Government policy on subsidy sharing and prices hike in petroleum products would be key determinant for the stock. We believe price hike in petroleum products like diesel & petrol after the ongoing Budget session could act as a trigger for the stock. At current valuation of 7.9 x FY13E EPS of Rs 34 & 1.1x FY13E BVPS of Rs 254.1, we recommend a BUY rating on the stock with a price target of Rs 350 (Rs 50 per dollar, Brent Crude $115 per bbl)
Anoop Srivastava: What is your view on the sugar sector?
Pandya: With the expected production of 26 million tonnes in 2011-12, sugarcane arrears have crossed more than Rs 9000 crore, which has compelled government to allow more than ~3 million tonnes of export in the current year. The continuous challenge industry countenance is regulations in terms of mandatory levy quota, arbitrary sugarcane pricing and fixed free sale quota every month.
Though, long term growth of the industry depends on how and when government let loose some of these control, but next season certainly looks brighter than current on the back of expected drop in sugar production. We believe investors can look to invest in Balrampur Chini at the current levels. However it is very important to exit these stocks at the right time with the 20-30% return in 12-18 months.
Akash Nandgaokar: What is your target on Infosys ?
Pandya: Infosys revenue growth continues to be driven by consulting and system integration (C&SI) services, which are generally lumpy relative to infrastructure management and Application maintenance services. Noticeably, C&SI together constituted 31.2% (USD 2.2 billion) of FY12 revenues vs. 23.4% ($ 0.7 billion) in FY07 and implies that the company is better placed to capture the revival in the demand. The stock is attractively valued and is a BUY with a target price of Rs 2720
Tushar Mehta: Which is the Best Dark Horse stock one can invest for better returns from a two-year perspective?
Pandya: Bank of Baroda
Tags: NTPC, Bharti Airtel, Indian Oil Corporation, Reliance Industries, Balrampur Chini, Infosys, Bank of Baroda, IDFC, Cairn India, Alembic Pharma, Unitech, ICICI Bank, Axis Bank, Shipping Corporation of India, IDBI Bank, Adani Enterprises, Bharat Heavy Electricals
Action in NTPC
Jun 18 2013, 22:39
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Jun 18 2013, 22:39
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