Broker alert: Increasing debt load weighs on DLF; time to sell the stock

Midway into the earnings season, Firstpost tries to cut down the clutter and make life easier by offering a snapshot of stocks that are currently in play. Here is the list.

•ICICI Securities continues to remain bearish on DLF and maintains a “sell” rating with a price target of Rs 183 per share. It is currently quoting at Rs 228 per share. As per ICICI, it was operationally the worst quarter for DLF in the past two years. Sales came in at 1.3 million square feet compared with the average quarterly sales run rate of 2.6 million square feet. “We see clear signs of strain on the company’s operational performance, led by adverse macro-economic conditions and supply-side pressures in the National Capital Region market”, said ICICI in its report. Also, an increase in debt levels will continue to stretch its balance sheet. For the September quarter, net profit fell 11 percent owing to higher interest costs.

•Prabhudas Lilladher is bullish on Apollo Tyres and maintains its “accumulate” rating with a price target of Rs 66 per share. The stock’s current price is Rs 61.25, which reflects growth of almost 8 percent. The brokerage expects Apollos’s margins to improve in subsequent quarters. While revenues are expected to grow 28.5 percent for the year ending March 2012, the fall in net profit is expected to be lower - 6 percent - compared with the 38 percent fall at the end of March 2011.

For the September-ended quarter, the company reported better-than-expected numbers as both sales and net profit rose north of 45 percent owing to a robust performance by its European business. Consequently, its stock was up 3.6 percent on Friday compared with the 0.53 percent gain in the BSE Auto index.

•Religare Research continues to maintain its “buy’ rating on Hindalco Industries, while reducing its target price to Rs 200 per share from its earlier target of Rs 240 per share. “We cut our earnings estimates to factor in lower aluminium prices, higher coal/input costs and decline in Novelis’ earnings, and maintain ‘buy’ on strong growth prospects led by capacity expansions.”

On a standalone basis, it reported a 7 percent growth in sales and 15.8 percent growth in net profits for the September-ended quarter. The stock has been a laggard as it sunk almost 45 percent over the past one year compared with a 17.1 percent fall in the Sensex.

•KR Choksey is bullish on Reliance Infrastructure, and has a price target of Rs 635 per share vis-a-vis its current price of Rs 453.45 per share, reflecting growth of 40 pe cent. According to the report, a strong order book of Rs 24,33o crore and expected strong cash flow from verticals like the Metro, roads in the near future were some of the reasons given for their recommendation. Over the past one year, the stock dipped 56.7 percent. In contrast, the Sensex fell 17 percent.