Indian stock market and companies daily report (March 28, 2012, Tuesday)

The Indian markets are expected to open flat to negative today tracing negative opening in most of the Asian bourses. Domestic markets gained ground in volatile trading session yesterday, as firm global cues amid signs that easy monetary policy would remain in place in the U.S. for some time underpinned sentiment. The upward move gained momentum in the afternoon session after media reports said that the government is not keen on chasing participatory notes, or derivative products that allow foreign investors to invest into Indian equities via tax havens like Mauritius under the new General Anti-Avoidance Rules targeting tax avoidance. Most of the Asian stocks also ended higher yesterday.Globally, most of the U.S. and European markets ended lower yesterday showing a lack of direction throughout much of the session. Disappointing economic data from the U.S. also weighed on the markets as the Conference Board’s confidence index fell to 70.2 in March from a revised 71.6 reading for February. A separate report
from S&P showed a continued drop in U.S. home prices in the month of January, with prices index falling by an annual rate of 3.8% compared to 4.1% drop in December. The markets will now closely watch out for U.S. GDP data for 4QCY2011 which is due to be released tomorrow.

Markets Today

The trend deciding level for the day is 17, 228/5,235 levels. If NIFTY trades above this level during the first half-an-hour of trade then we may witness a further rally up to 17,396 – 17,534/5,286 – 5,329 levels. However, if NIFTY trades below 17, 228/5,235 levels for the first half-an-hour of trade then it may correct up to 17,090 – 16,923/5,193 – 5,142 levels.

News Analysis

- L&T bags order worth Rs.1,700cr
- ITNL bags road BOT project worth Rs.651cr
- Sadbhav Engineering bags Rs.1,220cr project from NHAI
- Jagran group closes in on Nai Dunia buy

L&T bags order worth Rs.1,700cr

Larsen & Toubro (L&T) Metallurgical and Material Handling, part of L&T Construction, has won a contract worth Rs.1,700cr from Tata Steel for its new 6mn tonne per annum steel plant being set up at Kalinganagar in Odisha. As part of the greenfield steel plant, L&T is executing a slew of projects, like blast furnace, sinter plant, coke oven, balance of plant for steel melt shop, hot strip mill, utilities and construction works for other areas.

At the CMP of Rs.1,303, the stock is trading at PE of 18.4x FY2013E earnings,which is below the historical trading multiple for L&T. We have used the SOTP methodology to value the company to capture all its business initiatives and investments/stakes in different businesses. Ascribing separate values to its parent business on P/E basis and investments in subsidiaries on P/E, P/BV and mcap basis, our target price works out to Rs.1,607, which provides 23.3% upside from current levels. Hence, we maintain our Buy recommendation on the stock.

ITNL bags road BOT project worth Rs.651cr

IL&FS Transportation Networks Ltd. (ITNL) has bagged a road project worth Rs.650.8cr from Public Works Department, Rajasthan. The project involves development and operation of Sikar-Bikaner section in Rajasthan. The project, under PPP model, would be executed on DBFOT basis and involves grant of Rs.247.3cr. The project is on toll basis with a concession period of 25 years including construction period of two years. ITNL was the sole bidder for the project. We recommend Buy on the stock with an SOTP target price of Rs.235.

Sadbhav Engineering bags Rs.1,220cr project from NHAI

Sadbhav Engineering (SEL) has bagged a Rs.1,220cr order from NHAI for four-laning of the Solapur-Bijapur section of NH-13. The project would be executed on BOT (Toll) basis, under NHDP Phase-III. The concession period of the project is 20 years from the appointed date. We maintain our positive view on the stock; however, our target price is currently under review.

Jagran group closes in on Nai Dunia buy

According to news reports, the Jagran group that publishes the country’s most widely read Hindi newspaper, Dainik Jagran, is close to buying out Nai Dunia, the Indore-based Hindi daily promoted by Vinay Chhajlani. The deal size is expected to be around Rs.300cr. According to the Indian Readership Survey (IRS) Q4 report, Dainik Jagran has average issue readership of 16.41mn, making it the most read publication across the country, while Nai Dunia has average readership of 1.64mn. Currently the group publishes two editions in Madhya Pradesh and if the deal goes through Jagran would get an avenue to expand in Central India and particularly in Madhya Pradesh, where Nai Dunia is second largest read daily. At CMP, the stock trades at price to earnings multiple of 13.4x FY2013E. We maintain a Buy on the stock with a Target Price of Rs.137.

Economic and Political News

- 65% of government’s borrowing to be in 1HFY2013
- No subsidy for digitalization but implementation on track: Government
- Rs.2.73lakh cr of I-T dues locked up in disputes: Government

Corporate News

- REpower signs contract for supplying 54 turbines in Germany
- Patni gets Rio Tinto outsourcing order
- Gammon Infra bags Rs.935cr road project from NHA

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