Recommendation: Buy
CMP = Rs 467
Price target: Rs 500
- Punjab National Bank's (PNB) net interest income (NII) grew by 17.3% year on year (yoy) to Rs1,207.4 crore for Q3FY2006 on the back of a strong growth of 31% yoy in the advances.
- The adjusted operating profit excluding the treasury income grew by a strong 26.5% yoy to Rs562.3 crore.
- At the current market price of Rs467, the stock is quoting at 7.2x its FY2007E EPS and 1.3x its FY2007E adjusted book value. I reiterate buy recommendation on the stock with a price target of Rs500.
Ranbaxy Laboratories
Recommendation: BuyCMP = Rs 381
Price target: Rs 600
- The net sales of Ranbaxy Laboratories for Q4CY2005 were up 8.2% quarter on quarter (qoq) to Rs1,387.7 crore due to a 25% qoq growth in its US formulation revenues. On a year-on-year (y-o-y) basis however the net sales were down 1.2%.
- The price erosion in the US markets continues but the non-US markets have shown a significant growth. The R&D expense and litigation costs are expected to stabilise in CY2006, resulting in higher margins.
- The company guidance for CY2006 is an 18% increase in sales and a 16% rise in the earnings before interest, depreciation, tax and amortisation (EBIDTA) margin.
- At the current market price of Rs381, the stock is trading at 26.3x CY2006 earnings estimate. I maintain Buy recommendation on Ranbaxy with the price target of Rs600.
Orient Paper and Industries
Recommendation: BuyCMP = Rs 250
Price target: Rs 335
- Orient Paper and Industries Limited (OPIL) recorded revenues of Rs207.7 crore in Q3FY2006, a growth of 19.5% year on year (yoy), aided by the cement as well as paper divisions. The cement and paper divisions registered a top line growth of 28.1% and 8.1% respectively.
- The operating profit, however, increased by 112.2% to Rs24.3 crore due to margin expansion. The profit before tax (PBT) during the quarter increased by 425% to Rs9.8 crore yoy.
- OPIL trades at 10.5x its FY2007 earnings and FY2007 enterprise value/earnings before interest, depreciation, tax and amortisation (EV/EBIDTA) of 7.8x. At the current market price, the cement business of the company is valued at US$59 per tonne, which is the cheapest in the cement sector. I maintain sum-of-part valuation target of Rs335.
Ratnamani Metals and Tubes
Recommendation: BuyCMP = Rs 333
Price target: Rs 375
- The Q3FY2006 results of Ratnamani Metals and Tubes Ltd (RMTL) are above our expectations. Its revenues grew by 121.9% to Rs118.5 crore over last year. The massive growth in the top line was achieved on the back of a strong order book.
- RMTL has reported a net profit of Rs20.9 crore for M9FY2006 as compared with our FY2006 estimate of Rs24.5 crore. Given the company's robust order book position, we are upgrading our FY2006 and FY2007 estimates.
- The stock trades at 11.3x the FY2006 and 8.3x the FY2007 earnings estimates. We maintain our Buy recommendation on the stock with the price target of Rs375.
