20/10/2016
🔹CITI ON HIND ZINC:
Maintain buy, target at `290
2Q EBITDA fell 17% YoY on lower volumes and higher costs despite higher zinc/lead/silver prices
HZL continues to maintain higher mined metal production in FY17 vs. FY16
Continue to be bullish on zinc driven by a compelling mine closure story
Estimate FY17 dividend at `10/sh (~60% payout)
Positives: valuation correlation with zinc LME is ~84%, strong dividend yield, cash support
🔹CS ON HIND ZINC:
Mainatin outperform, target at `270
2Q17 beat on lower costs; new dividend policy suggests 2-3% yield
Output ramp-up progressing as per plan; Mined metal prodn grew 51% QoQ
HZL reiterated full year guidance of higher mined-metal prodn for FY17 vs. FY16
With $3.8bn of cash (24% of market cap), HZL's balance sheet remains robust
🔹CLSA ON HPCL:
Upgrade to outperform from sell, raise target to `480 from `390
Annual report reveals that return ratios rose to 11-year highs in FY16
FCF turned negative, net debt rose due to adverse move in working capital, rising capex
While leverage ratios are higher than peers, it has shown best market share defence to competition
Share of marketing in profits will remain the highest for HPCL
Raise FY17CL EPS by 11%, well positioned to play on growing Indian oil marketing segment
🔹BOFA ON SHRIRAM TRANSPORT:
Maintain buy, target at `1475
Strong growth momentum not reflected in valuations
Monsoons have been good in CY16 after 3 years; momentum continues in CV space
Believe STFC can deliver 20% loan CAGR and 35%+ net profit CAGR over FY16-19
RoA/RoE is likely to improve from 1.8%/12% in FY16 to 3.0%/20% in FY19, respectively
Believe margins may rise further by ~15bp over next 2 years, as re-pricing of bonds gathers pace
🔹JPM ON ONGC:
Maintain Neutral, raise target to `275 from `235
ONGC’s +25% stock price rally from Aug 16 driven by improving costs, cess calculation clarity
Increase FY17-19 consol EPS est by 12-19% driven by benefits from 26% stake acquisition in Vankor
Build in $55 oil price for FY18-19; stock call from here is mostly dependent on outlook for crude
Believe disappointment in the upcoming OPEC meet would flow through to the stock price
Within Resources: expect COAL India to outperform ONGC over the next few months
🔹CS ON IPCA LABS:
Downgrade to neutral from outperform, target at `640
Risk-reward is not favourable as In best case, potential upside is 7%
Downside could be 15% in case of 1-year delay in plant resolution
With GBP depreciation (15% since 1Q17), there is additional risk of 8% to FY18E EPS
Steady-state margins now lower at 18% given Africa malaria tender biz is more competitive
EPS could be `37, if US plant resolution delayed, price erosion in Africa is high; Stock worth: `530
🔹MS ON RBL BANK:
Maintain equal-weight, raise target to `300 from `280
Core revenues 11% above est via better-than-expected margins and fee income
Loan growth and asset quality trends strong; Equal-weight rating on valuation
Raise EPS estimates 11% for F17 and 3% for F18 owing to Q217 revenue beat
Valuation at 2.4xF18e book appears fair in the context of 13-14% RoE
