Company: BGR Energy
Broking House: Goldman Sachs
Rating: Buy Price Target: Rs 874
BGR signed two agreements with Hitachi for manufacturing boiler-turbine-generator sets for power plants in India. The total investment in these projects will be Rs 4,000 crore (BGR’s share at Rs 3,200 crore) and would create a capacity for 4,000 MW per annum. The spending would mean an equity commitment of Rs 960 crore, spread over 3 years — which shouldn’t be a problem for the firm. The impact of the move will kick in 3 years down the line — when production starts. BGR is trading at 14.8 times its estimated FY12 earnings, says Goldman. This still leaves a substantial upside because the-re is a significant discount as compared to peer firms such as BHEL and L&T.
Company: Cairn India
Broking House: Merrill Lynch
Rating: Buy Price Target: Rs 385
The brokerage expects the government of India to start taking its share of petroleum profits from the Rajasthan block by 2014, against the earlier expectation of 2012. The brokerage has therefore raised the profit estimate for the company by 18-28 per cent for 2012-2013 to $1.8-2 billion.
Cairn India is at the cusp of a strong growth phase in volumes and earnings, the brokerage feels. The change in schedule for the government’s profit share is because of higher costs, the broker says. The capex for the block has risen to 4.68 billion vs the $4-4.3 billion that the company had said earlier.
Company: Reliance Industries
Broking House: Morgan Stanley
Rating: Equal-weight Price Target: Rs 1,118
Last week, RIL announced its third joint venture in the shale oil space. It has committed an investment of $392 million in a Marcellus shale project. RIL has paid a price of $1.1/barrel of oil equivalent, versus $1.6-1.77/barrel of oil equivalent it had paid for the two earlier deals. Post this deal, RIL now has estimated resource base of 11.9 trillion cubic feet in the shale gas space. The increasing exposure of RIL to the exploration and production business is a positive, says Morgan Stanley. This is because earnings here are not as volatile as the traditional business of petroleum refining and petroche-micals, the brokerage says.
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