Buy Lanco Infratech; target of Rs 45: Emkay

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Buy Lanco Infratech; target of Rs 45: Emkay

Emkay Global Financial Services is bullish on Lanco Infratech and has recommended buy rating on the stock with a target price of Rs 45 in its June 2, 2011 research report.

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RELATED NEWS Buy City Union Bank; target of Rs 59: LKP Accumulate Unity Infra; target of Rs 88: Unicon Investment Sell Crompton Greaves; target of Rs 235: Aditya Birla Money ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Lanco Infratech See messages about Lanco Infratech Lanco Infratech BSE | NSE 30/05/12 Are Mutual Funds betting on Lanco Infratech?

Emkay Global Financial Services is bullish on Lanco Infratech and has recommended buy rating on the stock with a target price of Rs 45 in its June 2, 2011 research report.

"Lanco Infratech's PAT of Rs 171mn was way below est. due to (1) higher inter-seg elimination again (60%), (2) Udupi still an associate (26%) and (3) lower construction margins 12.8%. We seek clarity on (1) negative other income of Rs 352mn,(2) basis of recognition of Amarkantak II's Haryana supplies and (3) merchant tariffs of Rs 4.2/unit vs mgmt figure of Rs 4.7/unit. Factor in higher elimination (55%), delay in Udupi COD (Oct 11) - cut EPS by 13/10% in FY12E/13E. Key triggers - Anpara and Udupi COD, Consistent profit reporting from Griffin. Maintain relative preference on valuations (1.1XFY13E book). Key concerns - dependence on domestic coal, Kondapalli III gas, downside in merchant prices (factored Rs 4/unit)."

"At CMP of Rs 34/share the stock is trading at 1.1xFY13E book and 8.2xFY13E earnings and an implied long term merchant tariff of Rs 3.2/unit. We continue to prefer Lanco relatively over other private utilities with a revised price target of Rs 45/share. But highlight (1) dependence on domestic coal, (2) ambiguities on gas supplies for Kondapalli III and (3) merchant price assumption of Rs 4/unit for FY12E/13E, has a downside risk," says Emkay Global Financial Services research report.

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