Analysts' picks: Jet Airways, Gammon India, Satyam Computer, Pratibha Industries

Jet Airways
cmp: Rs 548.65
target price: Rs 765

Citi has maintained a 'sell' rating on Jet Airways with a price target of Rs 765 after factoring in the competitive domestic aviation sector, the infancy of the company's international operations and the acquisition of Air Sahara. Citi feels while Jet arguably has superior growth opportunities to most of the global full service carriers, it has still to demonstrate its ability to deliver robust and consistent earnings over time and strong sustainable market share in the face of aggressive competition. However, the company's 'market position within the domestic market is fairly well entrenched, and its international operations are proceeding at a satisfactory pace', says the brokerage. It further feels that any 'faster than anticipated capacity rationalisation in the domestic airline industry' and 'a sustained decline in ATF prices' can provide upside risks to its recommendation and target price. 'A faster than anticipated ramp up, greater than forecast profitability of international operations and rapid restructuring and turnaround of Jet Lite' can also provide further upside.

Gammon India
cmp: Rs 395.55
target price: Rs 461

Morgan Stanley has maintained its 'overweight' rating on Gammon India while marginally reducing its price target to Rs 461 from the earlier Rs 471. The foreign brokerage's price target is based on a sum of the parts and factors in the core construction business (Rs 246/share) based on its residual income model, Gammon Infrastructure Projects (GIPL) share value (Rs 202/share) based on the IPO price, and Gammon's investment in Sadbhav Engineering (Rs 14/share). Morgan Stanley has also reduced its PAT estimates for F2008E and F2009E by 27-30%, taking into account the higher marginal tax rate of 34% instead of the reduced tax rate (under section 80 IA) that was used by Gammon. While the GIPL issue closed at Rs 167 per share, the brokerage 'believes that the listing price of the stock might be an important driver'.

Satyam Computer
cmp: Rs 411.05
target price: Rs 463

Indiabulls has maintained a 'buy' rating on Satyam Computer Services after the company's EBITDA margin, topline and the utilisation rate improved in the third quarter. According to the report, the software major's EBITDA margin improved by 164 basis points (bps) for Q3FY08 to 21.5% driven by higher utilisation rate, steadily increasing offshore contribution and 2.3% QoQ (quarter-on-quarter) increase in offshore billing rates. The company's topline also grew at 8.10% QoQ on account of offshore volumes growing at 12% and rise in offshore & onsite billing rates by 227 bps and 236 bps respectively, adds the report. The brokerage feels the company can maintain volume growth in Q4FY08 and FY09 through larger revenue contribution from retail, transport & logistic segments and manufacturing segment as it continues to diversify. Meanwhile, the utilisation rate of Satyam improved to 78.2% from 76.4% in Q2FY08 for offshore (including trainees), despite aggressive hiring.

Pratibha Industries
cmp: Rs 293.35
target price: Rs 490

PINC has maintained a 'buy' on Pratibha Industries as it feels that a 'strong order book and revenues from the pipe manufacturing business' would enable the company 'to capitalise on the burgeoning opportunities in the infrastructure sector'. The brokerage has also set an 18-month price target of Rs 490 for the stock. The brokerage has also factored in the execution delays for some projects (Ulhasnagar water supply project) while revising its operating profit margin (OPM) estimates downwards due to steep increase in key raw material prices

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