Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Time to go on the front foot
Sensex valuations factoring in growth, inflation and current account deficit headwinds
Top Picks
Growth
High quality businesses
Deep Value
Since the past few months, a host of information flow has been suggesting
near-term execution hurdles to India's double-digit growth ambitions, and we expect
GDP growth to be closer to 8% in the near term. Secondly, the current account
deficit is expected to be as high as 3.5% of GDP in FY2011 and WPI inflation as
high as 7% pointing towards rupee depreciation in our view. The current market
correction can be attributed to an interplay between these two factors.
Even with GDP growth trajectory at 8-8.5%, the Sensex is looking reasonably valued
trading at 14.4x one-year forward EPS, 14% below its average P/E since April
2004. Also, going forward, we believe that an increase in policy reforms, faster
project clearances and further fiscal consolidation would hold the key for taking the
GDP growth rate beyond the 8-8.5% expectations. At the same time, gradual
monetary tightening coupled with rupee depreciation are expected to restore
equilibrium to the current imbalances reflected in low domestic savings, high current
account deficit and inflation. From a sectoral standpoint, in our view, post the
correction the banking and infrastructure sectors are especially cheaply valued.
Banking sector - CASA holds the key
The recent strong credit demand lends credence to our view that credit growth is
likely to be 19-20% in an 8-8.5% GDP growth environment. Moreover, bottom-line
growth is likely to be aided by moderating overall asset quality pressures. Net NPAs
for the sector have already declined from peaks of 1.15% in 3QFY2010 to 1.02%
in 3QFY2011. However, in line with our expectations, retail FD rates have risen to
8.5-9.5% recently and wholesale rates have moved from ~100bp lower to ~100bp
higher than the retail FD rates. Hence, we prefer banks with high CASA ratio and
expect the mid-size banks to underperform on the net interest income front from
4QFY2011 onwards. Post-correction, our top picks are Axis Bank and ICICI Bank,
on account of their strong deposit franchise and continued robust traction expected
in their earnings going forward.
Infrastructure sector - Execution to pick up
The infrastructure sector (ex-L&T) has underperformed the Sensex over the last twelve
months by 26-64% due to issues on the execution front. However, we believe that
the worst is over for most companies and we expect earnings momentum to pick up
going ahead on the back of strong order book. We are already witnessing some
signs of pick up in execution and earnings for some of the companies that have
announced their 3QFY2011results. At current levels, the stocks (ex-L&T) are trading
at attractive valuations of 3x to 5x FY2012E earnings after adjusting for embedded
value of their subsidiaries. From our universe, we have included IVRCL Infra and
NCC in our model portfolio with 6% weightage due to the relative comfort on the
execution front, healthy order book position and attractive valuations.
Right time to Buy
Sensex valuations factoring in growth, inflation and current
account deficit headwinds
The current market correction can be attributed to an interplay
between two factors - one, a lower Sensex PE on expectations of
50-100bp lower GDP growth and two, short-term FII outflows
on account of the high inflation and current account deficit in
India that could lead to rupee depreciation.
Looking at the first factor, since the past few months, a host of
information flow has been suggesting near-term execution
hurdles to India's double-digit growth ambitions and we expect
GDP growth to be closer to 8% in the near term. Due to this, in
terms of benchmark Sensex valuations, a target P/E multiple of
17x on FY2012E EPS is looking more reasonable now, translating
into a March 2012 Sensex target of 21,845. At present, the Sensex
is trading at 14.4x - a 14% discount to its 7-year average, leaving
reasonable upside from these levels.
Moreover, the current account deficit is expected to be as high
as 3.5% of GDP in FY2011 and WPI inflation as high as 7%.
Both these macro parameters point towards rupee depreciation
in our view, and once this short-term recalibration of the rupee
happens it should clear the immediate deterrents for fresh
FII inflows.
In fact, such a depreciation appears to offer the simplest road to
equilibrium to several of our current macro-economic woes. It
would also give an impetus to export growth (including
manufacturing exports) and shield the domestic manufacturers
facing the brunt of cheap imports (especially those priced in the
relatively undervalued Yuan). This would be consistent with
China's approach for leveraging its demographic dividend and
would provide the needed impetus to our GDP growth.
Secondly, the gap between savings and investments is also being
plugged by the high current account deficit at present. Reduction
in our current account deficit would also help normalise the
liquidity situation to an extent, as one of the missing sources of
money creation in this cycle so far has been increase in our
forex reserves.
Looking at the anatomy of the inflation problem, there appear
three drivers for the same. First is the domestic supply-side
inflation (this is mainly crop-related inflation) that stands at 15.6%
yoy. Secondly, global commodity inflation (mainly crude and
metals) is also at elevated levels of 17.5%. Put together, these
articles have 29% weightage in the WPI and are contributing
61% to the current 8.4% headline inflation number. Inflation in
manufactured products (that can be seen as a proxy to demanddriven
inflation) stands at ~4.4%.
Looking at the second driver of inflation first, in our view the
domestic monetary policy has no role to play in tackling global
commodity inflation - it does not seem logical to reduce domestic
demand, while higher demand from other countries keeps the
prices of those commodities high in any case. The rising global
commodity prices create a problem for the domestic economy
as a whole, rather than creating adverse effects for different
population segments in an inequitable manner. The country needs
to find ways of meeting its global resource requirements more
sustainably, and beyond that remain policy-neutral to global
commodity inflation.
As far as the rest of the WPI inflation is concerned, evidently, it is
more supply-side than demand-side. But, as far as the domestic
supply-side inflation is concerned, internationally the central
banks have historically raised the policy rates amidst the scenario
of rising inflation even if economic growth is not so high, in
order to anchor demand-side inflation. This suggests the need
for further monetary tightening by the RBI.
But, looking at the natural tightening of broader interest rates in
the past few months due to low domestic savings, we believe
that any further increase in the interest rates needs to be gradual,
if the growth outlook is to be maintained. While the broader
retail FD rates rose from lows of ~7% to 8-8.5% in line with our
expectations, and are now moving up by a further 50-100bp,
we do not expect them to cross 9-9.5% levels in FY2012, and if
that does happen, it could lead to downsides to our 8-8.5%
GDP growth expectations.
In fact, the gap between primary and manufacturing inflation is
at one of the highest levels since 2005, suggesting relatively
moderate domestic demand. Hence, trying to curb domestic
demand by overly sharp policy measures could have negative
implications for not just top-line growth, but could exert further
margin pressures for the Indian corporates. Hence, post another
round of increase in the Repo rate to ~7% (6.5% at present), we
would expect further monetary tightening to be very gradual.
Overall, going forward, we believe that an increase in policy
reforms, faster project clearances and further fiscal consolidation
could take the GDP growth rate beyond the 8-8.5% expectations.
At the same time, gradual monetary tightening coupled with rupee
depreciation would restore equilibrium to current imbalances
reflected in low domestic savings, high current account deficit
and high inflation, also paving the way for further FII inflows
into the country. These policy triggers and macro variables are
the key ones to watch out for in 2011.
Also, in 2011, we believe that the markets will continue to closely
monitor near-term execution, especially in sectors or companies
with less-than-exemplary corporate governance or inherently
low-entry barriers. Hence, notwithstanding India's robust
long-term GDP growth outlook, sectoral strategies and
stock-picking will remain vital to overall healthy portfolio returns.
Even with a GDP growth trajectory of 8-8.5%, the Sensex is now
looking more reasonably valued, available at 14.4x one-year
forward EPS and14% below its average P/E since April 2004. In
terms of earnings yield too, the Sensex is close to its average
since April 2004 and if one looks at the period from April 2005
up to the Lehman crisis, the earnings yield was 240bp lower
than the bond yield as against 133bp lower at present. Moreover,
the Indian markets have underperformed other emerging markets
recently and the Sensex is now trading at lower valuations than
the Shanghai Composite, in spite of enjoying stronger structural
tailwinds. Our 17x target multiple translates into a Sensex target
of 21,845 by March 2012. However, once the markets start
looking at FY2013E numbers within the next few months, there
would be a corresponding upside in the Sensex targets as well.
Banking, Infra looking cheap post underperformance
Banking sector - CASA holds the key
Over the past one year, though infrastructure sector accounted
for 29% of incremental credit demand, excluding retail loans
and loans to the real estate sector, growth in the broad spectrum
of loan segments (comprising 64% of total non-food credit) was
also as high as 21.4%. This lends credence to our view that
credit growth is bound to occur in a strong GDP growth
environment and should stay in the 19-20% range i.e. credit
demand is unlikely to be a constraint in our under-penetrated
and fast-growing economy.
Moreover, along with 20% credit growth, bottom-line growth
would be further aided by moderating overall asset quality
pressures. Net NPAs for the sector have come down from the
peak of 1.15% in 3QFY2010 to 1.02% in 3QFY2011. In
3QFY2011, only 12 out of 39 listed banks registered an increase
in Net NPA ratio v/s 25 banks witnessing an increase in
3QFY2010. The private banks have especially witnessed a
substantial decline in Net NPAs as well as provisioning expenses
over the mentioned period.
In line with our expectations, retail FD rates have risen to
8.5-9.5% recently and the wholesale rates have moved from
~100bp lower to ~100bp higher than the retail FD rates. We
continue to see ~`1lakh cr of incremental funding shortfall in
the banking sector in FY2012 and FY2013, even after factoring
in high savings allocation to deposits, 20% credit growth and
sustained fiscal consolidation, implying a moderate upward bias
to broader interest rates, even after the release of government
balances with the RBI.
Data from the last cycle indicates that the banking stocks gave
negative returns, on an absolute basis, when the interest rates
were falling post the Lehman crisis. On the other hand, the
banking sector gave handsome returns during the upcycle from
2003, even though the interest rates were rising in conjunction
with strong GDP growth. However, on a relative basis, given the
rising interest rates, we prefer banks with a high CASA ratio and
lower-duration investment book. In our view, the simplest indicator
of adverse interest re-pricing mismatch in a bank is the extent to
which its investments (HTM and AFS) exceed its CASA deposits,
given that both these are the predominant fixed rate assets and
liabilities, and for most banks, floating rate loans are ~60-70%
of total loans. Further, compounding an adverse mismatch can
be a higher proportion of wholesale deposits and higher duration
of investment book.
Generally, we expect the mid-sized banks to underperform on
the net interest income front from 4QFY2011, and expect stock
returns to reflect the same even post the sharp correction in their
prices. Taking into account stronger deposit franchises, continued
robust traction expected in their earnings going forward as well
as attractive valuations post-correction, our top picks are Axis
Bank and ICICI Bank.
Infrastructure sector - Execution to pick up
The sector has underperformed over the last twelve months
relative to the BSE Sensex, barring L&T which has performed
broadly in line with the Sensex. As against 11% return generated
by the Sensex over the last one year, most construction stocks
have logged negative returns and underperformed in the range
of 26-64%.
This underperformance was on the back of issues on execution
front - delays on financial closure (FC), environment clearance
issue, slowdown in order inflow and land acquisition related
problems - and resultant slow down on earnings front. However,
we believe that the worst is over for most companies on the
execution front and we expect earnings momentum to pick up
going ahead on the back of strong order book. We are already
witnessing some signs of pick up in execution and earnings for
few companies which have announced results so far.
Currently, markets are also wary about slow down on the order
inflow front over the recent months which might impact the
revenue growth going ahead. However, we believe that current
order book of our coverage universe is strong enough to provide
revenue visibility over the next couple of years. Further, with some
recent projects getting conditional clearance from environment
ministry we believe that things have started to ease up on this
end. Also, our recent interaction with different parties (contractors,
lenders and NHAI) in the road segment indicate signs of pick up
and NHAI has asked for financial bids for projects worth
~`50,000cr - which indicate that these orders can be expected
to flow over the next 3-6 months. Hence, we believe that the
current lull in order awarding (especially road segment) is
temporary in nature.
At current levels, the stocks (excluding L&T) are trading at attractive
valuations - available at 3-5x FY2012E earnings - adjusting for
their embedded value. From our universe, we have included
IVRCL Infra and NCC in our model portfolio with 6% weightage,
due to the relative comfort on the execution front, healthy order
book position and attractive valuations. At `74, IVRCL is trading
at just 4.2x its FY2012E earnings after adjusting for embedded
value of its subsidiaries, as against a fair multiple of 10x in our
view that gives a target price of `129. Further, our target price
factors in IVRCL Assets on current market cap basis, which implies
just 0.5x FY2010 P/BV and further assigned 25% holding
company discount. Therefore, we believe that this limits downside
to our target price due to reduction in embedded values. Similarly,
at `104, NCC is trading at 5.3x to its FY2012E earnings after
adjusting for embedded value vs. our target price of `164.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Time to go on the front foot
Sensex valuations factoring in growth, inflation and current account deficit headwinds
Top Picks
Growth
High quality businesses
Deep Value
Since the past few months, a host of information flow has been suggesting
near-term execution hurdles to India's double-digit growth ambitions, and we expect
GDP growth to be closer to 8% in the near term. Secondly, the current account
deficit is expected to be as high as 3.5% of GDP in FY2011 and WPI inflation as
high as 7% pointing towards rupee depreciation in our view. The current market
correction can be attributed to an interplay between these two factors.
Even with GDP growth trajectory at 8-8.5%, the Sensex is looking reasonably valued
trading at 14.4x one-year forward EPS, 14% below its average P/E since April
2004. Also, going forward, we believe that an increase in policy reforms, faster
project clearances and further fiscal consolidation would hold the key for taking the
GDP growth rate beyond the 8-8.5% expectations. At the same time, gradual
monetary tightening coupled with rupee depreciation are expected to restore
equilibrium to the current imbalances reflected in low domestic savings, high current
account deficit and inflation. From a sectoral standpoint, in our view, post the
correction the banking and infrastructure sectors are especially cheaply valued.
Banking sector - CASA holds the key
The recent strong credit demand lends credence to our view that credit growth is
likely to be 19-20% in an 8-8.5% GDP growth environment. Moreover, bottom-line
growth is likely to be aided by moderating overall asset quality pressures. Net NPAs
for the sector have already declined from peaks of 1.15% in 3QFY2010 to 1.02%
in 3QFY2011. However, in line with our expectations, retail FD rates have risen to
8.5-9.5% recently and wholesale rates have moved from ~100bp lower to ~100bp
higher than the retail FD rates. Hence, we prefer banks with high CASA ratio and
expect the mid-size banks to underperform on the net interest income front from
4QFY2011 onwards. Post-correction, our top picks are Axis Bank and ICICI Bank,
on account of their strong deposit franchise and continued robust traction expected
in their earnings going forward.
Infrastructure sector - Execution to pick up
The infrastructure sector (ex-L&T) has underperformed the Sensex over the last twelve
months by 26-64% due to issues on the execution front. However, we believe that
the worst is over for most companies and we expect earnings momentum to pick up
going ahead on the back of strong order book. We are already witnessing some
signs of pick up in execution and earnings for some of the companies that have
announced their 3QFY2011results. At current levels, the stocks (ex-L&T) are trading
at attractive valuations of 3x to 5x FY2012E earnings after adjusting for embedded
value of their subsidiaries. From our universe, we have included IVRCL Infra and
NCC in our model portfolio with 6% weightage due to the relative comfort on the
execution front, healthy order book position and attractive valuations.
Right time to Buy
Sensex valuations factoring in growth, inflation and current
account deficit headwinds
The current market correction can be attributed to an interplay
between two factors - one, a lower Sensex PE on expectations of
50-100bp lower GDP growth and two, short-term FII outflows
on account of the high inflation and current account deficit in
India that could lead to rupee depreciation.
Looking at the first factor, since the past few months, a host of
information flow has been suggesting near-term execution
hurdles to India's double-digit growth ambitions and we expect
GDP growth to be closer to 8% in the near term. Due to this, in
terms of benchmark Sensex valuations, a target P/E multiple of
17x on FY2012E EPS is looking more reasonable now, translating
into a March 2012 Sensex target of 21,845. At present, the Sensex
is trading at 14.4x - a 14% discount to its 7-year average, leaving
reasonable upside from these levels.
Moreover, the current account deficit is expected to be as high
as 3.5% of GDP in FY2011 and WPI inflation as high as 7%.
Both these macro parameters point towards rupee depreciation
in our view, and once this short-term recalibration of the rupee
happens it should clear the immediate deterrents for fresh
FII inflows.
In fact, such a depreciation appears to offer the simplest road to
equilibrium to several of our current macro-economic woes. It
would also give an impetus to export growth (including
manufacturing exports) and shield the domestic manufacturers
facing the brunt of cheap imports (especially those priced in the
relatively undervalued Yuan). This would be consistent with
China's approach for leveraging its demographic dividend and
would provide the needed impetus to our GDP growth.
Secondly, the gap between savings and investments is also being
plugged by the high current account deficit at present. Reduction
in our current account deficit would also help normalise the
liquidity situation to an extent, as one of the missing sources of
money creation in this cycle so far has been increase in our
forex reserves.
Looking at the anatomy of the inflation problem, there appear
three drivers for the same. First is the domestic supply-side
inflation (this is mainly crop-related inflation) that stands at 15.6%
yoy. Secondly, global commodity inflation (mainly crude and
metals) is also at elevated levels of 17.5%. Put together, these
articles have 29% weightage in the WPI and are contributing
61% to the current 8.4% headline inflation number. Inflation in
manufactured products (that can be seen as a proxy to demanddriven
inflation) stands at ~4.4%.
Looking at the second driver of inflation first, in our view the
domestic monetary policy has no role to play in tackling global
commodity inflation - it does not seem logical to reduce domestic
demand, while higher demand from other countries keeps the
prices of those commodities high in any case. The rising global
commodity prices create a problem for the domestic economy
as a whole, rather than creating adverse effects for different
population segments in an inequitable manner. The country needs
to find ways of meeting its global resource requirements more
sustainably, and beyond that remain policy-neutral to global
commodity inflation.
As far as the rest of the WPI inflation is concerned, evidently, it is
more supply-side than demand-side. But, as far as the domestic
supply-side inflation is concerned, internationally the central
banks have historically raised the policy rates amidst the scenario
of rising inflation even if economic growth is not so high, in
order to anchor demand-side inflation. This suggests the need
for further monetary tightening by the RBI.
But, looking at the natural tightening of broader interest rates in
the past few months due to low domestic savings, we believe
that any further increase in the interest rates needs to be gradual,
if the growth outlook is to be maintained. While the broader
retail FD rates rose from lows of ~7% to 8-8.5% in line with our
expectations, and are now moving up by a further 50-100bp,
we do not expect them to cross 9-9.5% levels in FY2012, and if
that does happen, it could lead to downsides to our 8-8.5%
GDP growth expectations.
In fact, the gap between primary and manufacturing inflation is
at one of the highest levels since 2005, suggesting relatively
moderate domestic demand. Hence, trying to curb domestic
demand by overly sharp policy measures could have negative
implications for not just top-line growth, but could exert further
margin pressures for the Indian corporates. Hence, post another
round of increase in the Repo rate to ~7% (6.5% at present), we
would expect further monetary tightening to be very gradual.
Overall, going forward, we believe that an increase in policy
reforms, faster project clearances and further fiscal consolidation
could take the GDP growth rate beyond the 8-8.5% expectations.
At the same time, gradual monetary tightening coupled with rupee
depreciation would restore equilibrium to current imbalances
reflected in low domestic savings, high current account deficit
and high inflation, also paving the way for further FII inflows
into the country. These policy triggers and macro variables are
the key ones to watch out for in 2011.
Also, in 2011, we believe that the markets will continue to closely
monitor near-term execution, especially in sectors or companies
with less-than-exemplary corporate governance or inherently
low-entry barriers. Hence, notwithstanding India's robust
long-term GDP growth outlook, sectoral strategies and
stock-picking will remain vital to overall healthy portfolio returns.
Even with a GDP growth trajectory of 8-8.5%, the Sensex is now
looking more reasonably valued, available at 14.4x one-year
forward EPS and14% below its average P/E since April 2004. In
terms of earnings yield too, the Sensex is close to its average
since April 2004 and if one looks at the period from April 2005
up to the Lehman crisis, the earnings yield was 240bp lower
than the bond yield as against 133bp lower at present. Moreover,
the Indian markets have underperformed other emerging markets
recently and the Sensex is now trading at lower valuations than
the Shanghai Composite, in spite of enjoying stronger structural
tailwinds. Our 17x target multiple translates into a Sensex target
of 21,845 by March 2012. However, once the markets start
looking at FY2013E numbers within the next few months, there
would be a corresponding upside in the Sensex targets as well.
Banking, Infra looking cheap post underperformance
Banking sector - CASA holds the key
Over the past one year, though infrastructure sector accounted
for 29% of incremental credit demand, excluding retail loans
and loans to the real estate sector, growth in the broad spectrum
of loan segments (comprising 64% of total non-food credit) was
also as high as 21.4%. This lends credence to our view that
credit growth is bound to occur in a strong GDP growth
environment and should stay in the 19-20% range i.e. credit
demand is unlikely to be a constraint in our under-penetrated
and fast-growing economy.
Moreover, along with 20% credit growth, bottom-line growth
would be further aided by moderating overall asset quality
pressures. Net NPAs for the sector have come down from the
peak of 1.15% in 3QFY2010 to 1.02% in 3QFY2011. In
3QFY2011, only 12 out of 39 listed banks registered an increase
in Net NPA ratio v/s 25 banks witnessing an increase in
3QFY2010. The private banks have especially witnessed a
substantial decline in Net NPAs as well as provisioning expenses
over the mentioned period.
In line with our expectations, retail FD rates have risen to
8.5-9.5% recently and the wholesale rates have moved from
~100bp lower to ~100bp higher than the retail FD rates. We
continue to see ~`1lakh cr of incremental funding shortfall in
the banking sector in FY2012 and FY2013, even after factoring
in high savings allocation to deposits, 20% credit growth and
sustained fiscal consolidation, implying a moderate upward bias
to broader interest rates, even after the release of government
balances with the RBI.
Data from the last cycle indicates that the banking stocks gave
negative returns, on an absolute basis, when the interest rates
were falling post the Lehman crisis. On the other hand, the
banking sector gave handsome returns during the upcycle from
2003, even though the interest rates were rising in conjunction
with strong GDP growth. However, on a relative basis, given the
rising interest rates, we prefer banks with a high CASA ratio and
lower-duration investment book. In our view, the simplest indicator
of adverse interest re-pricing mismatch in a bank is the extent to
which its investments (HTM and AFS) exceed its CASA deposits,
given that both these are the predominant fixed rate assets and
liabilities, and for most banks, floating rate loans are ~60-70%
of total loans. Further, compounding an adverse mismatch can
be a higher proportion of wholesale deposits and higher duration
of investment book.
Generally, we expect the mid-sized banks to underperform on
the net interest income front from 4QFY2011, and expect stock
returns to reflect the same even post the sharp correction in their
prices. Taking into account stronger deposit franchises, continued
robust traction expected in their earnings going forward as well
as attractive valuations post-correction, our top picks are Axis
Bank and ICICI Bank.
Infrastructure sector - Execution to pick up
The sector has underperformed over the last twelve months
relative to the BSE Sensex, barring L&T which has performed
broadly in line with the Sensex. As against 11% return generated
by the Sensex over the last one year, most construction stocks
have logged negative returns and underperformed in the range
of 26-64%.
This underperformance was on the back of issues on execution
front - delays on financial closure (FC), environment clearance
issue, slowdown in order inflow and land acquisition related
problems - and resultant slow down on earnings front. However,
we believe that the worst is over for most companies on the
execution front and we expect earnings momentum to pick up
going ahead on the back of strong order book. We are already
witnessing some signs of pick up in execution and earnings for
few companies which have announced results so far.
Currently, markets are also wary about slow down on the order
inflow front over the recent months which might impact the
revenue growth going ahead. However, we believe that current
order book of our coverage universe is strong enough to provide
revenue visibility over the next couple of years. Further, with some
recent projects getting conditional clearance from environment
ministry we believe that things have started to ease up on this
end. Also, our recent interaction with different parties (contractors,
lenders and NHAI) in the road segment indicate signs of pick up
and NHAI has asked for financial bids for projects worth
~`50,000cr - which indicate that these orders can be expected
to flow over the next 3-6 months. Hence, we believe that the
current lull in order awarding (especially road segment) is
temporary in nature.
At current levels, the stocks (excluding L&T) are trading at attractive
valuations - available at 3-5x FY2012E earnings - adjusting for
their embedded value. From our universe, we have included
IVRCL Infra and NCC in our model portfolio with 6% weightage,
due to the relative comfort on the execution front, healthy order
book position and attractive valuations. At `74, IVRCL is trading
at just 4.2x its FY2012E earnings after adjusting for embedded
value of its subsidiaries, as against a fair multiple of 10x in our
view that gives a target price of `129. Further, our target price
factors in IVRCL Assets on current market cap basis, which implies
just 0.5x FY2010 P/BV and further assigned 25% holding
company discount. Therefore, we believe that this limits downside
to our target price due to reduction in embedded values. Similarly,
at `104, NCC is trading at 5.3x to its FY2012E earnings after
adjusting for embedded value vs. our target price of `164.
No comments:
Post a Comment