Satyam, Ranbaxy, Bharat Forge, Bombay Dyeing

Satyam computer
CMP: Rs 354.65
Target price: Rs 500

Merrill Lynch has maintained its buy rating on Satyam Computer, while downgrading its price Target to Rs 500 from Rs 550, after the company suggested bullish outlook next quarter.

“Next quarter could see a 180 basis point margin expansion as wage hike gets further absorbed and RSU (restricted stock unit) charge decreases, implying 11.6% qoq (quarter on quarter) EPS growth,” the investment bank said.
“However, due to higher SG&A (selling general & administration expenses) than earlier envisaged and acquisition related costs (acquired a consulting firm for $35m this quarter), Satyam has guided to a 175bps to 200bps margin decline, up from 175bps earlier,” Merrill added.

Ranbaxy
CMP: Rs 340.60
Target price: Rs 505

Citigroup has maintained its buy rating on Ranbaxy, with a price Target of Rs 505, citing strong earnings guidance for calendar year 2008.

“A strong FTF (file-to-file) pipeline, tie-ups to augment its product pipeline and leverage its strong front end and efforts to move to a more capital efficient model make us positive on Ranbaxy’s short as well as long-term prospects,” the investment bank said. “We believe the stock price now factors in most negatives like difficult global market dynamics, manufacturing related issues with the FDA, slowdown in product approvals, and loss of the Pravastatin 80mg opportunity,” it added.


Bharat Forge
CMP: Rs 284
Target price: NA

ICICI Securities has reiterated its buy rating on Bharat Forge citing accelerated earnings growth over the next couple of years. “Post a muted FY08E (estimate), we expect accelerated revenue and net profit CAGR (compounded annual growth rate) of 14.1% and 28.4%, respectively over FY08E-11E (net profit CAGR of 21.5% over FY07-11E),” the brokerage said.

Such expectations are based on improved outlook for business from India and the US, new long-term contracts moving into commercial production stage, initiatives in the non-automotive space, and margin improvement, it said.


Bombay Dyeing
CMP: Rs 734.20
Target price: Rs 1,500

Motilal Oswal Securities has reiterated its buy rating on Bombay Dyeing, with a price Target of Rs1,500, while valuing the real estate business at Rs1,400 per share and textile business at Rs1,00 per share. “The capital value of Bombay Dyeing’s erstwhile textile plants in Mumbai, located at Dadar and Worli, has witnessed an unprecedented jump over past two years due to sharp appreciation of rentals in Mumbai and drop in capitalisation rates for commercial properties in India,” the brokerage said. Motilal Oswal expects the company’s textile business to turnaround in 2008-09, enabled by its ongoing restructuring exercise.


Nagarjuna Cons
CMP: Rs 396
Target price: Rs 257.20

Prabhudas Lilladher has upgraded rating for Nagarjuna to buy (from outperformer), while raising price Target to Rs396 per share, after a recent meeting with the company. “Given the strong order book and potential, both growth in order book and its composition as well as margin expansion, we have valued the core construction business at 26 times FY09E (estimated) earnings (against 17x previously), which is a 25% premium to its peers.

The premium is on account of faster diversification into newer value accretive segments,” the brokerage said. “Our one-year forward discounted cash flow value works out to Rs 360/share for the core business. We have a value of Rs17/share for the build, operate, transfer portfolio and a value of Rs 28/share for real estate ventures by NCC Urban Infra and Rs 37/share for the Telapur Township project,” it added.