Stocks to buy Target 1 year.
NTPC CMP 171.85 RS Target 208 rs.
NTPC scores well as a defensive growth option. It has the lowest risk to funding amongst its peers, competitive cost of generation, RBI guarantee for payment realisation from its customers (financially-constrained SEBs) up to FY2016 and inexpensive valuations, to its clients.
The firm expects the companys net profit to grow at a compounded annual rate of 7.3% between FY2008 and FY2011E (estimated) on the back of a 30% growth in wholly-owned commercial generation capacity over this period.
Cairn India CMP 196.50 rs Target 276 rs
revised down the WTI crude oil price forecast by 6.3% for 2008. Our new forecast has the 2008 figure adjusted down to reflect the recent weakness in prices and the risk that slowing demand growth keeps prices in a range of $100-110/bbl (blue barrel), .
The firm has cut CY08E profit-after tax for the company by 7% and increased CY09E PAT by 1.8% after factoring in new crude oil price assumptions and INR/USD exchange rates. According to Macquarie, Cairn plans to use enhanced oil-recovery (EOR) techniques at its Rajasthan fields.
If successful, EOR may increase the recovery factor by 10-20%, or P2 reserves, by 309m barrels of oil equivalent(BOE) compared with 794m BOE currently, thus extending the production plateau, .
Cairn plans to drill 15 exploratory wells in CY08, most of them in the second half. We have assigned a premium of Rs 50 per share (around 18% of equity value) to Cairns strong track record in striking oil, the note added.
Lanco Infratech CMP 178.60 Rs Taget 250 Rs
The firm has cut its earnings per share(EPS) estimates for the stock by 10%/20%/19% to Rs 19/22.4/33.3 for FY09/10/11E to reflect a slowdown in project execution. It has also made of 10% discount to the power, engineering procurement and construction (EPC) business and infrastructure valuation for the company.
Around 90% of EPCs projects are internal, and we believe the future order inflow is thus at risk; we lower our order inflow estimates by 44% for FY09-11E, .
However, the impact on revenues is not substantial in initial years. We have not changed our margin for FY10/11, which we believe is conservative enough, the note said.
