Hold Reliance Capital, NCC: ICICIdirect.com

ICICIdirect.com research report

Reliance Capital

"Reliance Capital, consolidated PAT came at Rs 181 crore, not comparable YoY due to AMC stake sale income in Q2FY13. Life insurance reported a strong profit of Rs 136 crore due to transfer of surplus done in half year while 48 percent share of life insurance profit added to consolidated PAT. General insurance remained positive & AMC’s stable profitability trend of Rs 67 crore contributed fairly to consolidated performance. Equity MTM in standalone remains minimal around Rs 20 crore. Profit from core businesses continues to improve with no one-offs estimated in FY14. Hence, we expect profit of Rs 521 crore in FY14E and growing further to Rs 629 crore in FY15E. Stability in consolidated profits is now becoming normal with rising contribution from improving life insurance business. At CMP, it trades at 0.8x FY15E BV. We maintain our SoTP TP of Rs 375 on FY14E. Recommend HOLD. Upside risks remain with unfolding of banking licence."

NCC

"NCC’s Q2FY14 results were above our expectation mainly due to higher other income though execution and margin were below our expectation. On the positive side, the order inflow remained healthy at ~Rs 3700 crore during Q2FY14 (Rs 4744 crore in H1FY14). However, we continue to remain wary of high debt levels as it continued to await some development on the asset sale. Hence, we believe NCC’s re-rating hinges on meaningful proceeds from asset stake sale and maintain our HOLD recommendation with a target price of Rs 27/share. We also note that should NCC close this deal at 1x P/BV and use the proceeds to reduce its debt by the same amount, our target price would get upgraded by Rs 5/share."

"While a challenging macro environment and slower execution led by a stretched balance sheet are keeping its financial performance dismal, we believe NCC’s valuation hinges on de-leveraging the balance sheet through possible stake sale in NCC. Hence, we maintain our HOLD recommendation with a revised target price of Rs 27/share (rolled over our construction business valuation to FY15E). We also highlight that should NCC close this deal at 1x P/BV and use the proceeds to reduce its debt by the same amount, our target price would increase to Rs 32/share," says ICICIdirect.com research report.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Read More