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| STOCK UPDATE Aditya Birla Nuvo
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,050
Current market price: Rs951 Bullishness continues We continue to like the strong positioning that Aditya Birla Nuvo's businesses enjoy in their respective fields. The company is amongst the top five players in the insurance, asset management, telecommunications (telecom; Idea Cellular-the fastest growing telecom company; the third in ranking) and apparels (Madura Garments with its marquee brands, consistent and resilient growth, and profitable set-up) businesses. Given its presence in diverse businesses, we value Aditya Birla Nuvo on an SOTP basis, assigning a piecemeal value to each of its businesses and then adjusting the same with the company's consolidated debt to arrive at a price target. Thus, our price target for the stock is Rs1,050 and we maintain our Buy rating on the stock.
Provogue India
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs35
Current market price: Rs16 Price target revised to Rs35 The event - Provogue India shares get re-listed on the exchanges with demerged status -
Provogue India (Provogue)'s shares that had got temporarily suspended from trading for the demerger process got listed today on the bourses at Rs17 per share. -
As per the scheme of demerger every shareholder holding 1 share of Provogue has received 1 share of Prozone Capital Shopping Centers Ltd (PCSCL; face value Rs2). The face value of Provogue shares has got reduced from Rs2 to Rs1. -
The capital structure for both, Provogue (the demerged entity that got listed today which now only holds the core retail business) and PCSCL (which will hold all the real estate business and assets) has been illustrated below in a table. -
Shares of PCSCL will get relisted after it files for the same, which may take one to three months. Our fair value for Prozone works out to Rs27 per share. -
Based on the auditor's statement, Rs207 crore of the net book value of approximately Rs714 crore has been transferred into the demerged entity (PCSCL). Thus the pre acquisition based on this statement works out in a ratio of 29% (207/714) for PCSCL and 71% for Provogue. Post restructuring, our revised target price for Provogue is Rs35; Maintain Buy: Post restructuring Provogue now holds only the core retail assets that include brand sales- Provogue along with export sales, ie those which were part of standalone financials. Thus our standalone financials and estimates for Provogue remain intact. We expect a decline in FY2012 profits while we expect FY2013 to witness strong recovery with a 26% growth in earnings. Valuing branded business and the export business of Provogue with a blended price earning ratio (PER) at 10x FY2013, we arrive at a target price of Rs35 for Provogue. Thus our revised target price for Provogue now stands at Rs35 and we maintain our Buy rating.
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