Three Stocks Worth Buying Now: Amar Ambani Of IIFL

GSPL – Call Success & Update
Reco Price Rs95, Previous Target Price Rs115, New Target Price Rs128

In a call update released on June 27, 2014 we had extended our target on GSPL to Rs105. In our Q2 FY15 result update released on November 10, 2014 we raised our target price to Rs115. The stock surpassed our target in today’s trading session. We remain positive on the growth prospects of the company and advise investors to hold on to the stock for a revised target of Rs128.

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Tata Communications: Compelling data play – BUY
CMP Rs414, Target Rs520, Upside 26.1%

We met Tata Communications (Tcom) to understand the ongoing transformation from traditional voice business to that driven by data services which accounted for 44% of total Q2 revenues and ~78% of core business EBIDTA. Data has unsurprisingly a better margin profile along with ~13-14% constant currency revenue cagr in contrast to voice which would have at best high single digit margins. Within data, network services (~64% of data revenues) offer traditional connectivity services like VPN while managed services houses faster growing areas like data centres, payment solutions (ATM business). Tcom believes margins have sufficient headroom to expand; for instance, ex-new services like ATMs, data margins would be in the 25% bracket from current ~20%. With US$250-300mn capex being the upper end of annual spending and most of the voice capex (for new cable builds) behind, leverage is at its peak. Neotel divestment to Vodacom remains on track though Tcom gave no definite timel! ine for its completion. We remain confident of strong data-led growth and margin upsides especially after FY16 which should support the rerating story already underway. Rework our estimates and reiterate our long-held BUY with revised 9-12mth target of Rs520. Slower growth and lack of margin traction in data business remain key risks to our bullish reco.

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Oil India Ltd: Oiled for growth – BUY
CMP Rs545, Target Rs700, Upside 28.4%

Oil India has grossly underperformed the broader markets in the past three months with a fall of 14.5% as compared to a Nifty return of 1.8%. Key issues dragging the stock price were 1) lower than expected gas price hike, 2) muted production profile and 3) uncertainty over subsidy sharing mechanism. We believe the concerns are overdone and see multiple tailwinds ahead which are enumerated below. We retain our BUY rating with a price target of Rs700.

• Gross under recoveries to reduce
• Clarity on subsidy sharing pattern should come eventually
• Domestic production should see a steady uptick
• Overseas production to gather momentum in the near future
• Gas price hike value accretive
• Valuations attractive

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