These research reports give information and opinions on companies and industries. They are often filled with jargon, which we reluctantly inflict on readers. The following terms occur below: DCF= Discounted Cash Flow, EBITDA = Earnings Before Interest, Tax, Depreciation,Amortisation, EV = Enterprise Value, EPS = Earnings Per Share, PE = Price- Earnings, PAT/PBT = Profit After/ Before Tax,YoY = Year-on-Year.
Snapshots of Recommendations from Investment Houses:
ACC
Emkay Research recommends ACC: “ACC, with a total cement capacity of 19.91 million tonnes is the largest pan-India producer. Over the last six years, it has taken tremendous efforts in reducing power cost by investments in captive power. It has announced capacity expansion (by 0.90 million tonnes) with a 25 MW captive power plant at Lakheri and an expansion (1.18 million tonnes) with a 30 MW captive power plant at Bargarh. The company is looking to expand in Eastern & Southern regions to increase capacity to 25 million tonnes.
EBIDTA increased by 179.9% to Rs 468.5 crore while EBIDTA margins were up 14% to 29.4% driven by reduced power and fuel cost, which as a percentage of sales declined by 4.9-16.7%. PBT before extraordinary items increased by 309.3% to Rs 445.3 crore. At the current price of Rs 1,040, the stock trades at a PE multiple of 14.1 times 2006-7 EPS and 14.7 times 2007-8 EPS.
Going forward, we expect robust cement demand coupled with strong price scenario in calendar 2007. Pricing pressure is expected to build-up in the secondhalf of 2008. Looking at the strong positioning of ACC and expansion plans, we have a positive bias.
We maintain EPS estimates of Rs 73.7 for 2007 and Rs 70.5 for 2008. We maintain a target price at Rs 1,188, a potential upside of 15% from the current price of Rs 1,040.”
NTPC 
SSKI recommends NTPC despite a lower Q3 : “NTPC increased generation by “NTPC increased generation by “NTPC increased generation by 13.3% YoY to 49.3 billion units in Q3, 2006-7, driven by higher PLF for coal-based and gasbased plants. The capacity addition of 1,705MW at Rihand, Badarpur and Vidhyachal led to a rise of 12.2% YoY in units sold to 45.8 billion units.
NTPC’s Q3, 2006-7 results were lower than our estimates at net profit of Rs 1,740 crore (+24.7% YoY), on account of lower than estimated revenues (+21% YoY to Rs 8,030 crore). Operating margins improved 2.8% to 26.7% on higher PLF of existing plants and new capacity additions. We have downgraded our EPS estimates for 2006- 7 and 2007-8 by 3.7% and 3.3% respectively.
NTPC’s capacity additions are expected to drive 10% CAGR in EPS over 2006-8. We believe the stock is attractively valued. We maintain ‘Outperformer’ rating with our DCF-based price target of about Rs 156 per share.”
Apollo Tyres
IDBI Capital says Apollo Tyres will gain on the back of replace- ment demand: “ATL, the undisputed leader in the replacement market for commercial vehicle (CV) tyres is fully geared to benefit from the increasing replacement demand. Roads are emerging as an attractive mode of freight transport owing to improved connectivity. This will create demand in the replacement segment, where Apollo is a leader in CV tyres. The stock is trading at 15.8 times its annualised Q3, 2006-7 EPS of Rs 22.50.
Total revenues for Oct-Dec 2006 grew a strong 26% YoY to Rs 857.6 crore. What has given impetus to growth is that the CV sales for April-December 2006 rose by a whopping 37% YoY. In addition the whole CV segment gets an additional boost from the shift to multiple axle CVs, which require more tyres per vehicle.
The operating profits (EBIDTA) for October-December 2006 grew by 71% YoY to Rs 926.
The softening of raw material prices (natural rubber and crude oil) led to a steep surge in the operating margins (OPM). The margins expanded by 285 bps to 10.8%. Strong topline growth and a significant increase in the operating margins (OPM) also induced sharp bottom line growth. PAT for the quarter stood at Rs 35.1 crore, registering a rise of 113% YoY. The stock is now trading at 15.8 times annualised Q3, 2006-7 EPS of Rs 22.50.
Apollo Tyres’ Q3 2006-7 numbers have thus exceeded our expectations on profitability with the net profit increasing by a strong 113% YoY to Rs 35.1 crore.
The total revenues at Rs 857.6 crore were up 26% YoY. EBIDTA grew by a strong 71% YoY to Rs 92.6 crore. The operating margins (OPM) expanded by 2.85%. We maintain ‘Buy’.”
Himatsingka Seide
Finquest sees Himatsingka Seide continuing its growth impetus: “HSL’s retail business under the brand Atmosphere has been doing good business and has shown a topline of Rs 17 crore in Q3, 2006-7 and a PBT of around Rs 2.5 crore. The company is aggressively expanding these outlets in the domestic as well as the overseas markets. HSL currently has 11 stores and it will take the total tally of domestic outlets to 15 stores by 2007-8. In addition to the one overseas outlet planned in Dubai, HSL also plans to open outlets in Hong Kong, Singapore and Malaysia.
HSL had identified four potential target acquisitions. One of them has materialised. HSL has entered into a definitive agreement to acquire 70% stake in Giuseppe Bellora SpA, Italy. Though the deal value has not been revealed, Bellora generated revenues of about Rs 170 crore in 2006. This is a precursor to a string of brand acquisitions that the company has in its pipe line.
HSL’s bottom line has expanded by 26.1% YoY to Rs 15.1 crore as compared to Rs 12 crore in the corresponding quarter of 2005-6. This was on the back of a 22.4% YoY rise in fabric revenues and contribution from other income.
HSL has continued its growth impetus with a quarter of moderate growth on both topline and bottom line on an annual basis. We believe that as the company's new bed linen capacities come onstream HSL will enjoy higher growth.
However, we conservatively expect HSL to report consolidated EPS of Rs 6.50 and Rs 10.10 in 2006-7 and 2007-8 respectively. We maintain a ‘Buy’ with our DCFbased price target of Rs 168.”
