Weekly Review: January 23, 2010

Markets witness profit booking

After remaining subdued for the past several weeks, the Indian markets witnessed profit booking during the current week of trade, with both the benchmark indices, the BSE Sensex and the NSE Nifty, ending lower by 4.0% and 4.1%, respectively. The BSE Mid- and Small- Cap indices were also at the receiving end, losing 3.8% and 3.4%, respectively. The US President, Barack Obama's proposed new restrictions to limit the size and the risk taken by large banks weighed heavily on the global market sentiment, including that in India. On the sectoral front, all the major sectoral indices ended in the red, with the BSE Realty index losing the maximum of 8%.

Dishman Pharma - Initiating Coverage

Dishman would now reap benefits of Organic capex incurred in the last three years and with the Abbott-Solvay contract also expected to normalise post completion of the acquisition in 4QFY2010E. Thus, overall the company is estimated to report CAGR of 23.5% and 35.5% in Top-line and Bottom-line respectively, over FY2010-12E. We Initiate Coverage on the stock with an Accumulate recommendation and 15-month Target Price of Rs311.

GSPL - Company Update

We expect the GSPL stock to get re-rated on the back of improving availability of gas and increasing probability of the GSEDS tax not likely to get implemented. Also, current valuations are building in an over pessimistic scenario with regards to Transmission Tariffs. At 1.7x FY2012E Price/Adj Book Value, we believe the stock provides an attractive entry level for investors. Hence, we maintain a Buy on the stock, with a 15-month Target Price of Rs121.

Aqua Logistics (ALL) - IPO Note

ALL is primarily engaged in freight forwarding services with agents to provide end-to-end solution to its clients. At the lower price band, the IPO is available at 13.4x FY2012E EPS, which is in line with Allcargo, but at a premium to GDL on our estimated FY2012E EPS. We believe ALL should trade at a discount to Allcargo and GDL given that these players have a proven track record, diversified portfolio of services and stronger balance sheets. Hence, we recommend an Avoid on the IPO.