Brokers calls - Patel Engineering and Lupin.

>> Wednesday, December 24, 2008

SBI Cap puts 'buy' on PEL

Patel Engineering
cmp: Rs 163

SBI Cap Securities has put a ‘buy’ on construction company Patel Engineering (PEL) as the broking firm believes that the stock is trading below its book value. It says the company has a land bank of 1127 acres in and around tier-1 cities valued at Rs 2,200 crore while the current market cap of PEL is Rs 9,720 lakh. With the intrinsic value of the real estate to be unlocked in with the stock, PEL’s current order book stands at Rs 8,090 crore after the addition of the Pranahita project.

The company had also received a Rs 700-crore irrigation order in September 2008 for the Krishna Delta system in Andhra Pradesh. The report says the broking outfit is bullish on the stock. “Assuming a full tax rate of 33% for FY09E and FY10E, the stock is trading at a Price/Earning multiple of 7.2 times its FY09E EPS of Rs 22.7 and 5.7 times its FY10E Earning Per Share (EPS) of Rs 28.6.

The stock is trading at a price to book value of 0.9 times its FY10 expected earnings. We expect net sales to increase to Rs 2,330 crore in FY09 E (from earlier Rs 2,280 crore) and Rs 2,830 crore in FY10E (from earlier Rs 2,691 crore),” says the report.

Sharekhan puts buy on Lupin

cmp: Rs 598
target price: Rs 840

Sharekhan has come out with a ‘buy’ on Lupin on account of its
differentiated business model with global dominance in certain products, focus on niche, less-commoditised products and geographically diversified presence in newer markets such as Japan and the US branded segment.

“These factors will drive sustained growth and call for premium valuations,” says the report. It adds that USFDA concerns are overdone as Lupin has already addressed USFDA’s queries on these inspectional observations and is hopeful of receiving a clearance soon. “Lupin’s issues with USFDA are not as serious as those of Caraco Pharmaceuticals/Sun Pharmaceuticals and Ranbaxy Laboratories, as Lupin continues to sell all its products in the US as well as receive product approvals from all its USFDA-approved facilities.

Hence, we reiterate our buy recommendation on the stock with a price target of Rs 840,” the report said. The broking house believes that concerns on the USFDA front are more than priced into the current stock price.