Fairval

Notes on Indian equities, sectors and economy

ABN – A good long term buy

Posted by fairval on May 13, 2007

Aditya Birla Nuvo remains a good long term buy – with its telecom, insurance, BPO and garment businesses continually adding value.

A recent report by Enam puts ABN’s value at Rs 1376. I reckon the value is higher – at around Rs 1500. Some of the assumptions in the Enam are quite conservative, hence the difference. For ex, the BPO business is value at Rs 1100 crore, where this could be worth atleast Rs 1500 crore or more. No BPO transaction as occurred at less than 2x sales. The BPO – Transworks revenue run rate is currently around Rs 1600 crore, so even at 1x sales this is Rs 1600 crore. At 2x sales, it is around Rs 3000 crore.

The insurance business is valued at 15x NBAP. ICICI Pru thinks it is worth 50-60x NBAP. 15x is decidedly conservative.

The telecom business is valued at $379 per sub (how do analysts get such funny nos?). This again can be easily given $450-500 per sub.

Overall, the scrip remains a good buy. Tho it will be exposed to market fluctations like any growth stock. Close to Rs 1000 – just snap it.

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