Actionable ideas
Hindalco (BUY, CMP Rs178, target Rs220)Hindalco is on a massive expansion plan in its aluminium business with capacities increasing 3x over the next 3-4 years.Acquisition of Novelis gives Hindalco an instant access to world class technology for rolled products. We have valuedHindalco based on EV/EBITDA multiple on aluminium and copper business as also for Novelis. The stock is trading at adiscount to its peers, i.e. NALCO and MALCO. We expect the stock to consolidate in the near term and may gain as itscapacities start production. On a sum of parts valuation method, we recommend a buy with a target price of Rs220.
BPCL (Accumulate, CMP Rs364, Target Rs500)The stock rallied to a high of Rs560 in early January 2007. However, the ensuing swift correction in the markets has seenthe stock declining sharply to a low of Rs353 levels. The stock has taken support at its 200-DMA for the past few sessions.The current decline has been accompanied with abysmal volumes suggesting that the current pullback should beconsidered as a pullback with long term supports of Rs330-350 range. This argument is valid as long as the stock sustainsabove the Rs300 levels. Investors should accumulate the stock at current levels and on declines for medium to long termtarget of Rs500.Among the major bulks on Friday, Citigroup sold 2.7 lac shares of Aurobindo Pharma at an average price of Rs299 andICICI Prudential offloaded 2.5 lac shares of Madhucon Projects at an average price of Rs700.
Other stocks to watch out for: Sterlite, IOC and HCL Tech.
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