Monday, May 26, 2014




27/05/2014
Buy Aban Offshore Ltd. For Target 767.00 - GEPLCapital LtdBuy Aban Offshore Ltd. For Target 767.00

Aban Offshore Limited (AOL) was established in 1986 when Indian entrepreneurs were encouraged to provide offshore drilling services to the Oil and Natural Gas Corporation Ltd. (ONGC) to meet the growing needs of a vibrant economy. AOL launched its first contract drilling service to the ONGC in 1987 with two modern jack-up drilling rigs acquired from the USA. It is now ventured into international waters as one of its five rigs is doing work for an Iranian oil company. The group has also ventured into construction, offshore and onshore drilling, wind energy and power generation, Information Technology enabled services, hotels and resorts, tea plantations and in marketing.
Investment Rationale
Renewed contracts:  A ray of hope Aban has recently secured a contract for the deploymet of DD5 (Deep Driller 5). The approximate revenue expected from DD5 is around Rs 385crs. Aban ICE has bagged a 3year contract from ONGC at reasonable rates & its operation started during the quarter of Q3FY14 which would help boost the revenue & in turn improve the company’s profitability.
Exceptional performance in the previous quarters:  Aban has performed exceptionally well in the previous quarter results. Q3FY14 it delivered a very good set of numbers. It’s EBITDA levels improved from Rs. 487.7 crores in Q3FY13 to Rs 559.6 crores in Q3FY14. PAT of the company improved significantly from Rs 31.8 crores in Q3FY13 to 80.3 crores in Q3FY14.
Strong performance expected in the coming quarters: The management of the company expects the demand of rigs to improve even further. Hence in the improving scenario the contracts are due for renewal in FY15 & the renewal is expected to take place at higher day rates which would be beneficial for the company. Hence the high day rates & recent debt refinance could help improve the company’s financials and deliver growth.
Valuation: At CMP of `688 the stock is trading at 7.07x & 6.71x it’s FY15E & FY16E EPS which we believe is attractive. We attach an exit P/E multiple of 7.5x it’s FY16E EPS of `102.5 per share. Based on our valuation we arrive at the target price of `767 with a BUY rating & a potential upside of 11.5%.
  Buy Marico Ltd  For Target 285.00 - Firstcall Research LtdBuy Marico Ltd For Target 285.00



Marico Ltd, maker of Parachute and Saffola cooking oil, reported March quarter results with 7.36% rise in sales whereas overall volumes grew by 6%.
* The Company has reported net profit after tax, Minority Interest and Share of Profit / (loss) of Associates of Rs. 887.71 mn for the quarter ended 31st March 2014 as compared to Rs. 838.64 mn in Q4 FY13.
* EBDITA of Marico has also grown by 28% in Q4 FY14 over the corresponding quarter of the previous year. EBDITA stands at Rs. 1671.14 mn against Rs. 1304.53 mn in Q4 FY13.
* Profit Before Tax also rose by 9.25% YOY at Rs. 1388.15 mn compared to Rs. 1270.63 mn in same period previous year.
* Marico’s International FMCG Business comprised about 25% of the Marico total revenues at Rs. 2600 mn in Q4 FY14.
* Marico markets well-known brands such as Parachute, Saffola, Hair & Care, Nihar,Shanti, Mediker, Revive, Manjal, Setwet, Zatak, Livon, Fiancée, HairCode, Caivil, Black Chic, Code 10, Ingwe, XMen,L’Ovite and Thuan Phat.
* Marico has 40 lacs retail outlets services by its nationwide distribution network comprising 4 Regional Offices, 32 carrying & forwarding agents (CFAs) and about 5000 distributors and stockists.
* Other Income of the company rose by 26% from Rs. 101.68 mn in Q4 FY13 to Rs. 128.43 mn in the current March quarter.
* Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 13% over 2013 to 2016E respectively.

OUTLOOK AND CONCLUSION
* At the current market price of Rs.230.25, the stock P/E ratio is at 27.76 x FY15E and 26.28 x FY16E respectively.
* Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs. 8.29 and Rs.8.76 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 7% and 13% over 2013 to 2016E respectively.
* On the basis of EV/EBITDA, the stock trades at 16.98 x for FY15E and 16.05 x for FY16E.
* Price to Book Value of the stock is expected to be at 9.55 x and 8.14 x respectively for FY15E and FY16E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.285.00 for Medium to Long term investment.
  Buy GSPL For Target 91 - LKP Securities LtdBuy GSPL For Target 91


GSPL’s operating profit of Rs2bn was marginally lower than our estimate of Rs2.1bn due to lower volume and lower transmission tariff. Transmission tariff decreased by 6.3% qoq to Rs1.21/scm (yoy -31.5%), which was marginally lower than our estimate of Rs1.25/scm. GSPL’s volumes for the quarter declined by 6.3% yoy to 20.8mmscmd (qoq +0.4%) as against our expectation of 21mmscmd. The fall in gas transmission volume is due to falling gas production from KG D6. Consequently, GSPL’s revenue for the quarter declined by 35.8% yoy to Rs2.3bn. Operating cost for the quarter decreased by 5% yoy to Rs306mn. Resultant, GSPL’s operating profit decreased by 38.8% on annual basis while on sequential basis it was down by 2.8% to Rs2bn. Net profit at Rs915mn was in line with our estimate.
We maintain our BUY rating on the stock with a revised target price of Rs91. At the CMP, the stock is trading at 9x and 4.1x FY16e EPS and EBITDA respectively.

Valuation and view
We believe that GSPL’s transmission in the near future would be under pressure on account of lower domestic gas production. However, we note that LNG capacities scheduled to come up by early FY16 would give much needed fillip to GSPL’s gas volumes. Further, doubling of domestic gas price could lead to increase in domestic production from current and marginal gas fields.
We value GSPL on DCF basis given the long term earnings visibility and arrive at a fair value of Rs91 per share. We have used WACC of 11.5% and terminal growth rate of 2% for DCF valuation. We maintain our BUY rating on the stock with a revised target price of Rs91. At the CMP, the stock is trading at 9x and 4.1x FY16e EPS and EBITDA respectively.
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