Jindal Steel & Power : CMP: Rs.2,339 / MBP: Rs.2,350
Jindal Steel and Power (JSP) is the largest coal-based sponge iron producer in India and is fully vertically integrated from iron ore and noncoking coal mines to steel production
JSP produces steel through electric arc furnace (EAF) route and uses captive production of sponge iron and hot metal as raw materials rather
than expensive steel scrap
In 4QFY08, Jindal Steel & Power's adjusted PAT increased 136% YoY to Rs.4.8bn, above our estimate of Rs.3.1bn, due to higher EBITDA margin and lower tax rate
The company has secured Bolivian iron ore mining exploration license in April 2008 and is expecting a mining license in the next three months
The company is setting up 5,320MW power plant at coal pit head in Chhattisgarh, Orissa & Jharkhand and total coal reserves of ~1,040m tons in India
We are upgrading our consolidated EPS estimate to Rs.184.8 (+5.6%) for FY09 to factor in lower tax rate of 23% (earlier 30%), as percent
guidance for steel business
We expect an EPS CAGR of 89% over FY08-FY10 due to 46% CAGR volume growth in steel business and full ramp-up of 1,000MW power project
Stock is trading PE of 7.7x FY10E and EV/EBITDA of 5.5x FY10E, which is attractive in view of strong momentum of earnings growth for the next five years. Reiterate
BuyCMP: Current Market Price
Sun Pharma : CMP: Rs.1,403 / MBP: Rs.1,415
Sun Pharma's 4QFY08 performance was much above the estimates. Total Income grew by 129% to Rs.12.57 bn. PAT grew by 241% to Rs.7225mn. YoY Total Income was up by 47% at Rs.35 bn and PAT by 92% at Rs.15bn
Taro's termination of merger agreement with Sun Pharma leaves Sun with gains on existing investment and potential termination fee (US$15m)
Sun pharma has potential to reap upside from Effexor XR non-AB rated tablets for which FDA approval and launch is expected by Q3 2009
The Stock is valued at 19.5X FY08E on fully diluted basis. While current valuations appear rich, they do not fully factor in the ramp-up in US, the expected value unlocking by leveraging acquired companies (Taro, Able Labs & Valeant) and incremental upsides from its Para-IV
pipeline. Q4FY08 results have positively surprised, which could raise earning estimates going forward
ICICI Bank : CMP: Rs.789 / MBP: Rs.812
ICICI Bank's PAT grew 39% YoY in 4QFY08 to Rs.11.5bn (v/s our estimate of Rs.9.3bn), mainly on account of lower opex due to rationalization of staff costs during FY08 as well as lower taxes due to strong treasury profits
The slowdown in retail has been offset by strong growth in international loan book (up 96% YoY), which accounts for 21.2% of advances v/s 12.5% a year ago
The bank has been focusing on growing its housing finance business through its housing finance subsidiary ICICI Home Finance (IHF) during the year. IHF's home loan portfolio has grown strongly at 55% from Rs.43bn in FY07 to Rs.67bn in FY08
We expect a gradual increase in margins over the next couple of years on account of (1) slower balance sheet growth and (2) strong CASA growth and falling costs of funds
We believe core earnings would show strong traction from FY09. However, rising NPAs continue to worry us and we do not foresee any significant improvement in asset quality over the next couple of quarters
We expect earnings CAGR of 25% over FY08-10E on the back of 18% CAGR in loans. Maintain Buy with a price target of Rs. 1,150 an upside of 47%
We expect EPS to be Rs.47 in FY09 and Rs.58 in FY10. The stock currently trades at 16.6x FY09E EPS and 1.1x FY09E BV. (Based on its adjusted book value of its subsidiaries)
(Motilal Oswal)
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