Emkay's outlook on 5 stocks post result

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Emkay's outlook on 5 stocks post result

Emkay Global Financial Services has come out with a report on results updates of companies like Transformers & Rectifiers, M&M Financial Services, Sesa Goa, Ballarpur Industries and ACC.

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RELATED NEWS Buy IDBI Bank; target of Rs 196: Unicon Investment Buy Power Finance; target of Rs 262: Firstcall Research Buy Piramal Glass; target of Rs 220: Emkay ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about Transformers See messages about Transformers Transformers BSE | NSE 29/05/12 Are Mutual Funds betting on Transformers? Other Stocks in this news Mahindra & Mahindra Financial Services | Sesa Goa | Ballarpur Industries | ACC |

Emkay Global Financial Services has come out with a report on results updates of companies like Transformers & Rectifiers , M&M Financial Services , Sesa Goa , Ballarpur Industries and ACC .

Transformers and Rectifiers India : We believe that the company will witness pressure on its margins for few more quarters due to its strategy of submitting 400kv/765kv bids at a very low margin in order to gain foothold in the market. However, (1)with the company entering into big league of transformer manufacturers (Crompton greaves, ABB, Areva and Siemens) and (2) a capacity to deliver across ranges of transformers the stock is a due for a re rating in its valuations.

We upgrade our recommendation from Accumulate to Buy At the CMP of Rs282/share, TRIL is trading at 6.1x FY13E earnings, 3.2x FY13E EV/EBITDA and 0.9x FY13E book value of Rs318/share. Large transformers players currently trade in the range of 9-21x one year forward EV/EBITDA. We believe that TRIL is unlikely to trade those multiples on account of TRIL being standalone transformer player whereas others are full fledged service providers in the T&D sector. However, we believe that TRIL should be trading at a premium to the standalone transformer universe. We assign 5x EV/EBITDA to FY13E earnings (10% premium to transformers universe) and revise our PT upwards to Rs352/share (earlier Rs315/share)

M&M Financial Services : We have just marginally tweaked our numbers for FY12E/13E downwards by 1-2%. We believe that any spread contraction over next two quarters (then we expect them to plateau out) will be compensated by lower credit costs. We expect MMFS to do average RoEs of 23.5% over FY12-13E. Retain BUY rating on the stock with TP of Rs870.

Sesa Goa : At the CMP of RS 327, the stock is trading at 5x its FY13E EPS and 2.3x FY12E EV/ EBITDA. On SOTP basis, we value the iron ore business 4.5xFY13EV/ EBITDA and apply 20% discount to the attributable CAIRN India value to arrive at a target price of Rs 353/ share. We maintain HOLD rating on the stock.

Ballarpur Industries : We expect pulp prices to remain at elevated level and due to company's dependency on imported pulp (approx 38% of pulp is imported) we expect margin expansion is unlikely in near future. However it is increasing its pulp capacity by 120,000 mt in FY12 and by 170,000 mt in FY13. We are reducing our FY11/ FY12E estimates by 12% / 12% to Rs 3.0 and Rs 4.5. With introduction of FY13E estimates (Rs 5.2) we roll over our price target to FY13 and maintain target of Rs 42 (based on 8x FY13 estimates). With recent increase in stock price, we are downgrading our reco from BUY to Accumulate.

ACC : Though cement prices have been hiked across all regions, we continue to believe that sustainability of cement prices remains uncertain in medium/long term as the cement demand growth FY11YTD ~5% has now emerged as bigger concern than the overcapacity in the system. Further we remain concerned on the cost pressure as the 30% coal price hike taken by CIL is yet to reflect in ACC's numbers. Moreover ACC's valuation at PER of 17.8X, 14.7X PER ex cash on books & EV/ton of USD130, provides little upside from current levels. Downgrade rating from ACCUMULATE to HOLD, with price target of Rs1140 (Rs1035 earlier-We have based our new target on ACC on average of CY11E&CY12E numbers as compared to only CY11E numbers earlier).

FIIs holding more than 30% in Indian cos

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