Grasim Industries
Cluster: Apple Green
Recommendation: Hold
Price target: Rs1,458
Current market price: Rs1,462
Issue with L&T likely to be resolved
As per media reports, Grasim Industries (Grasim), a flagship company of Aditya Birla group, and Larsen & Toubro (L&T) are close to settling their seven-year-old legal dispute over Grasim’s 0.66% stake in L&T and L&T’s 11.5% stake in UltraTech Cement, a Birla group firm. The issue has been lingering on for long with L&T claiming that Grasim must transfer its 0.66% stake to L&T Employee’s trust fund at a predetermined rate, while Grasim contending to make the sale at the current prevailing price.
At the current market price of Rs1,462, Grasim’s stock trades at a price/earnings (PE) of 8.6x and 8.8x FY2009 and FY2010 earnings estimate respectively and an enterprise value (EV)/earning before interest, tax, depreciation and amortisation (EBITDA) of 5.4x and EV/tonne of just $72 on FY2009 capacity. On account of high valuations and a sharp run in the stock price in the recent times, with the current market price being higher than our price target, we advice our investors to partially book profits on the stock while we maintain our Hold recommendation.
VIEWPOINT
Apollo Tyres
Buy-back plan indicates possible curtailment in capex plans
The board of Apollo Tyres has approved the proposal to buy back equity shares of the company at a price not exceeding Rs25 per share. The shares will be bought back from the open market and a maximum amount of Rs122 crore (10% of its paid-up capital and free reserves) has been earmarked for the purpose.
MUTUAL FUND: INDUSTRY UPDATE
Equity funds outperform markets
The total AUMs of the equity MFs stood at Rs115,648 crore in February 2009, down by 3.9% from the January 2009 AUM. On adjusting for the net inflows, the decline stood at 3.7%. This was better than the market fall of approximately 5.7%.
Click here to read report: Investor's Eye
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