Sell Areva T&D India; target of Rs 286: Angel Broking

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Sell Areva T&D India; target of Rs 286: Angel Broking

Angel Broking is bearish on Areva T&D India and has recommended sell rating on the stock with a target of Rs 286 in its November 9, 2010 research report.

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Angel Broking is bearish on Areva T&D India and has recommended sell rating on the stock with a target of Rs 286 in its November 9, 2010 research report.

"Areva T&D (Areva) 3QCY2010 results were significantly ahead of our estimates. Revenues registered 40% yoy growth to Rs 1048 crore, while PAT surged by over 181% yoy to Rs 63 crore. We had estimated sales and PAT at Rs 864crore and Rs 32 crore, respectively. Going forward, the pricing scenario continues to be grim on account of increased competition and relaxation of pre-qualification norms by PGCIL. We maintain our Sell recommendation on the stock."

"Despite the price erosion of 10-15% in the T&D segment, Areva managed to register 40% yoy rise in revenues to Rs 1048 crore backed by strong growth in volumes. EBDITA margins for the quarter also expanded by 425bp to 12.7% on the back of lower staff cost and other expenses. Other expenditure also included the reversal of mark-to-market losses on forex derivatives of ~Rs 10 crore booked earlier. Consequently, net profit posted a sharp jump of 181% to Rs 63 crore."

"Acquisition of Areva's global T&D business by Alstom & Scheidner continues to play on the stock. The Alstom & Scheidner combine had previously made an open offer at a price of Rs 295.3, which was subsequently withdrawn during 2QCY2010 pending the clearance from SEBI. Post the clearances received from SAT, the same offer will now remain open between November 6 -25, 2010. Management continues to maintain cautious outlook given the pricing pressures, especially in the T&D segment on account of increased competition from foreign JV's and relaxation of pre-qualification norms by PGCIL. At the CMP of Rs 293, the stock trades at 30x CY2011E EPS. We maintain a Sell on the stock with a target of Rs 286," says Angel Broking research report.

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