stock picks from ET

BUY  GREAT OFF SHORE &AEGIS LOGISTICS&SELL ABAN OFFSHORE
 
 
Aban Offshore
CMP: Rs 4684.15
Target Price: Rs 3,502

DSP Merrill Lynch has downgraded Aban Offshore to neutral from buy, citing expensive valuations. "Though we have upgraded our DCF-based fair value to Rs 3,502/share, the revised fair value is 25% below Aban's market price. It is also no longer the cheapest stock now.

It is more expensive than most US offshore drillers," the note said. "Our fair value calculation assumes its rig fleet size remains unchanged at 21, which is a conservative assumption in light of Aban's growth track record. In view of its large debt, there may however be no more acquisitions until end FY09," the note added.

Great Offshore
CMP: Rs 876.45
Target Price: Rs 1,195

Citigroup Global Markets has initiated coverage on Great Offshore with a buy rating and a price target of Rs 1,195. "The company has nearly tripled its total vessel fleet over the last 10 years to 40 currently, with another 2 under construction. Contribution from the new assets is the key driver of the 30% EPS CAGR (compounded annual growth rate) that we forecast over FY07-11(estimated)," the Citigroup note said.

"With utilisation at 90%+ for most assets, day rates should remain strong in the medium term. A large part of the fleet is locked into long-term contracts, providing comfort to our estimates. Sustained growth in earnings and improving margins would be share price drivers," the note added.

Aegis Logistics
CMP: Rs 214.35
Target Price: Rs 358

Prime Broking has initiated coverage on Aegis Logistics with a buy rating and a price target of Rs 358. "With the acquisition of Sealord Containers, Mumbai and a liquid terminal at Kochi Port, the consolidated capacity of Aegis would increase by 75% to 288,000 KL in FY08. It plans to roll out 18 gas stations by end-FY08 and 60 gas stations in FY09, thereby taking the total number of gas stations to 100," the note said.

"Aegis has acquired Hindustan Aegis LPG, the strategic intent is to increase Aegis' gas storage capacity, which will then be used to expand its auto gas retailing business. Based on the 3-tiered growth momentum, we expect Aegis to register 66% earnings CAGR over FY07-FY09E, on the back of 42% revenue CAGR."

GAIL
CMP: Rs 420.05
Target Price: Rs 527

ICICI Securities (I-Sec) has reaffirmed its buy rating on GAIL with a fair value price target of Rs 527. "GAIL is riding on a growth wave buoyed by its gas grid expansion plan to double the transportation capacity in the next five years. Implementation of the National Gas Grid, increased visibility of future gas supplies (recent finds in KG Basin, NEC-25, Cauvery, GS fields) and transmission volume growth augur well for the future profitability of the company," the note said