Recommendation: Buy
CMP = Rs 887
Price target: Rs 1,000
- Reliance Industries Ltd (RIL) reported a 15.1% decline in its net profit for Q3FY2006 due to a 50-day shut-down at its Jamnagar refinery and a lower other income.
- With the company setting up new capacities, the petrochemical business is expected to continue the healthy performance. RIL has commenced the test production from its oil block in Yemen. The company indicated the existing reserve estimates for gas at its various fields.
- At the current market price of Rs887, RIL’s stock is quoting at a PER of 13.3x its FY2007E EPS. I maintain Buy recommendation on the stock with a price target of Rs 1,000.
Sanghvi Movers
Recommendation: BuyCMP = Rs 636
Price target: Rs 800
- In Q3FY2006 revenues of Sanghvi Movers Ltd (SML) grew by 131.6% to Rs44.7 crore during the quarter, driven by the better utilisation of its assets and the ongoing capacity expansion exercise. Driven by the better utilisation of its assets and operating leverage, the operating profit grew by 144% to Rs29.9 crore.
- SML's Rs161-crore capacity expansion plan for FY2006 is on track. The company added Rs45 crore worth of cranes in Q3FY2006, thereby implementing in M9FY2006 Rs120 crore worth of the Rs161-crore expansion plan for FY2006.
- The stock trades at 4.7x FY2007E cash earnings per share (EPS). We are raising our price target to Rs800.
Satyam Computer Services
Recommendation: BuyCMP = Rs 743
Price target: Rs 820
- Satyam Computer Services announced a growth of 9.6% quarter on quarter (qoq) and of 39.4% year on year (yoy) in its consolidated revenues to Rs 1,265 crore during the third quarter. The consolidated revenues were ahead of our expectations of Rs1,255 crore.
- Unlike some of its peers, the company has effectively managed the foreign exchange (forex) fluctuations and reported a net forex gain of Rs2.4 crore in Q3FY2006 as compared with a gain of Rs2.8 crore in Q2FY2006 and a huge loss of Rs23.1 crore in Q3FY2005. Consequently, the other income stood at Rs33 core as compared with Rs31.6 crore in Q2FY2006 and Rs2 crore in Q3FY2005.
- Satyam has revised upwards the annual growth guidance once again. The consolidated revenues are estimated at Rs4,780-4,786 crore (as against Rs4,700-4,718 crore earlier) and earnings are projected at Rs30.31-30.36 per share (up from Rs29.12-29.23 per share).
- I maintain Buy call on Satyam with the price target of Rs820 per share.
Shree Cement
Recommendation: BuyCMP = Rs 538
Price target: Rs 585
- The company recorded on operating profit of Rs751 per tonne of cement in Q3FY2006, the highest in the industry till date. The net sales during the quarter grew by 7.4% to Rs144.3 crore driven by an 8.7% improvement in the cement realisations.
- A 7.4% top line growth and an 840-basis-point improvement in the OPM resulted in a 38% improvement in the operating profit for the quarter.
- With a 28% reduction in the interest cost, a 29% decrease in the depreciation cost and a lower tax rate, the pre-exceptional net profit for the quarter jumped by a staggering 138% to Rs39.2 crore. The reported net profit figure stands at Rs28 crore.
