ICICI Direct is bullish on GVK Power and Indian Hotels. In an interview with CNBC-TV18, Pankaj Pandey, Head – Research at ICICI Direct says GVK Power is expected to see an improvement across major business verticals apart from the power segment. He says the company is expected to save Rs 7 crore every quarter once they shift to Tata Power. “So we are quite positive on the stock and we have a target price of about Rs 54 on the counter,” Pandey says. 

On Indian Hotels, he says the occupancy levels have gone up 50-60% in this quarter. He expects the FY11 occupancy levels of the company to surge 7%. He sees Indian Hotels adding 1,200 rooms in FY10 and a further 1500 rooms in FY11. “We have a target price of Rs 104 on the stock,” he says.
ICICI Direct however has an 'underperformer' rating on Varun Shipping.
Here is a verbatim transcript:
On GVK Power:
I think with the kind of quarterly results that we have seen, the company is doing pretty well in terms of its overall business segments and in terms of EBITDA margins, in terms of topline growth. Especially in the power segment, the company now has an operating capacity of 901 megawatts. Earlier they were struggling in the power segment. Now this segment has come up pretty well.
We are expecting out of this 901 megawatt about 138 megawatts to be sold under the merchant power route. So in terms of overall numbers, going forward, we are expecting from FY09 to FY11, we are expecting 4.3 times jump in topline, and about 2.7 times jump in profitability.
In terms of airport numbers, we are seeing a good amount of growth especially because of the fact that in FY09 we have seen a 9% de-growth in terms of passenger traffic, and in this particular quarter we are seeing about 9% growth. So, in that sense, the business is picking up and in terms of airport as well the cost rationalisation the company could be saving to the tune of about Rs 7 crore a quarter once they shift to Tata Power.
So we are quite positive on the stock and we have a target price of about Rs 54 on the counter.
On Varun Shipping:
In terms of Varun Shipping if you exclude the sale of a tanker, I think the numbers would look pretty bad especially the company would have reported a loss. In terms of its total fleet size, which is about 20, about 10 are LPG carriers and about three are in crude carriers. On a year on year basis, we are not seeing significant improvement in terms of day tanker rates, which is because of increased supply as well as subdued market conditions.
So in that sense we really do not expect really bright earnings going forward for the company. We have an ‘underperformer’ rating on the stock and have a target price of Rs 48 on the counter.
On Indian Hotels:
On Indian Hotels we have a target price of Rs 104. What we have seen in this particular quarter is that the occupancy levels have gone up from 50-60%. Going forward, we expect FY11 the occupancy levels would still improve by another 700 basis points. On the ARR front, we do not expect much of an improvement in this particular year, but in FY11 we expect about 4% improvement.
Coupled with that, in terms of expansion plans the company would be adding about 1200 rooms in this particular year and another 1500 rooms in the next year. So that will take the volume total to about 13% odd. Going forward, we think the situation is improving for the hotel industry as a whole. That is why it is a hit for us.
Disclosure: It is safe to assume that my clients or myself could be holding positions in the stocks that we have spoken about today.