Advice For Gujarat Gas Company
For CY2008-10, we estimate the company’s Operating Revenue to post a CAGR of 13.7% to Rs 1,681 crore on the back of the expected 7.0% CAGR in Volumes and higher Realizations (due to increase in gas cost and Rupee depreciation). This Volume growth factors the dismal trend in PMT volumes and delays in tying up new sources. Further, during CY2008-10, we expect Gujarat Gas’ OPM to expand by 180bp to 20% on the back of an increase in Realizations and higher scale of operations. On the PAT front, we expect PAT to increase to Rs 205 crore at a CAGR of 12.9% over CY2008-10."
At the current price of Rs 268, the stock is trading at 10.3x CY2009E and 8.5x CY2010E Earnings. However, due to the company’s inability to tie up new sources, a pre-requisite for its growth plan, we have lowered our Target P/E multiple for the stock. We ascribe a P/E multiple of 10x (12x earlier) on CY2010E EPS of Rs 31.7, which gives a revised Target Price of Rs 317 (Rs 340), translating into an upside of 18.3%. Thus, we maintain a Buy on the stock.
Advice For SBI
The results for banks are much better than what we were expecting , we are utilizing this rally to exit at higher levels. But going forward, for longer time we are bullish on banks especially the PSU banks like SBI, PNB and Bank of Baroda, so we would wait for lower levels to again re-enter these stocks.