STOCK UPDATE
Bharat Heavy
Electricals
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs2,650
Current market price: Rs2,247
Employees dissatisfied
According
to newspaper reports, some 9,000 executives of the public sector
unit Bharat Heavy Electricals Ltd (BHEL) are reportedly unhappy with
what they call a measly 4% performance-based incentive they got for
FY2006. These executives are hence returning the amount that was
electronically transferred to their banks by BHEL. To further show
their dissent, these executives across 14 units are boycotting the
golden jubilee celebrations slated for August 29,
2006.
Navneet Publications
(India)
Cluster: Emerging
Star
Recommendation: Buy
Price target: Rs362
Current
market price: Rs290
Annual report review
The
management of Navneet has reiterated in the annual report that the
growth over the next couple of years would be led by the changes in
the syllabus in the states of Gujarat and Maharashtra. In the
stationery segment, the company will focus on the domestic market
and will leverage on its brand for selling non-paper stationery
products. The operating margins are likely to improve on the back of
a better sales mix. In addition to the fundamental factors, the
reasonably attractive dividend yield and the enhanced liquidity
(through stock split) should limit any downside risk in the
stock.
At the current market price of Rs290 Navneet trades
at 10x FY2008E earnings per share of Rs29 and 5.8x FY2008E
enterprise value/earnings before interest, depreciation, tax and
amortisation. We maintain a Buy on Navneet with a price target of
Rs362.
Cipla
Cluster:
Cannonball
Recommendation: Buy
Price target:
Rs300
Current market price: Rs246
Annual report review
Cipla has
reported a strong all-round performance with a robust growth in the
domestic and export sales. The lower excise duty, an improving
product mix and a leaner cost structure have led to the company's
margins springing back above the 20% level in FY2006. We expect the
growth momentum to continue in the upcoming quarters, led by the
ramp-up in the sales of Finasteride and Sertraline in the US
markets. A favourable change in the sales mix driven by the
high-margin formulation exports is expected to provide a further
boost to Cipla's margins. Given the unique partnership model for the
US generics market and the strong growth traction of the company, we
maintain our positive outlook on Cipla.
At the current
market price of Rs246, the company is trading at 20.4x its estimated
FY2008 earnings. We reiterate our Buy recommendation on Cipla,
retaining our price target of
Rs300.
