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Buy Amtek Auto – Anand Rathi

admin — Mon, 14 Sep 2009 03:44:24 +0000

Amtek Auto
Reco Price: Rs 183
Current market price: Rs 183.85
Target price: Rs 254
Upside: 38%
Brokerage: Anand Rathi

The research house expects Amtek Auto to benefit from the relatively strong growth in automobile demand at home and the nascent recovery globally. Its amalgamation with five group companies would lead to integrated operations and greater efficiencies. Domestic auto demand has rebounded, and overseas markets, too, are showing signs of improvement. Amtek has a significant presence in the overseas markets through subsidiaries, which would boost revenue from its subsidiaries as well its joint ventures with leading global suppliers such as Magna and ARI. Given the secular growth in demand ahead, Amtek (ex-merger impact) to register a robust 50 per cent CAGR in earnings over FY09-12.

Amtek is amalgamating five group companies with itself, bringing all the forgings and castings units under the ‘Amtek Auto’ umbrella. This is expected to lead to better integration of operations, clearer efficiencies in sourcing and negotiations, and greater transparency in operations. Amtek Auto is valued at 15x FY11e earnings, which is a 25 per cent discount to the target PE multiple for Bharat Forge. The target price is Rs 254 (without considering the impact of its amalgamation with four other group entities).

Buy State Bank of India – Daiwa Securities

admin — Mon, 14 Sep 2009 03:42:09 +0000

State Bank of India
Reco Price: Rs 1,813
Current market price: Rs 1,918
Target price: Rs 2,109
Upside: 10%
Brokerage: Daiwa Securities

The broking house believes that one of State Bank of India’s (SBI) biggest advantages is the high interest spread on its bond portfolio. The incremental cost of funds for SBI has fallen by almost 210 bps over the past nine months, whereas the incremental yield on its government-bond portfolio has remained more or less the same. Currently, if SBI buys a 10-year government bond, then it is making an incremental interest spread of 200-250 bps, compared with a negative interest spread six months ago and a positive spread of around 10 bps nine months back.

SBI moved almost Rs 35,000 crore of short-term cash to statutory liquidity ratio (SLR) securities in 1Q FY10, and this is likely to have a positive impact and reflect in the NIM in the latter half of FY10. The re-pricing of high-cost deposits in November-December 2009 would also give the NIM a further boost. SBI has underperformed both the broader and Nifty banking indices over the past six months, but this trend will reverse over the next six months. The six-month target price is revised to Rs 2,109 from Rs 1,043, based on a target PBR of 1.5x on FY10 consolidated BVPS forecast and adding Rs160 per share for the life-insurance venture.

Buy MphasiS, target Rs 406: Parag Parikh

admin — Fri, 22 May 2009 14:02:09 +0000

Parag Parikh Financial Advisory Services has recommended a buy rating on MphasiS with price target of Rs 406 in its report dated May 21, 2009.

“With EPS at Rs 10.69, the company seems to be on its way to achieve an annual EPS in its fourth decile, with a conservative estimate at Rs 40.6. This brings the earnings multiple to around 7 times at CMP. We recommend a BUY at 10 times one year forward earnings with a target price of Rs 406,” says Parag Parikh Financial Advisory Services’ report.

Buy Man Industries, target Rs 66: Sharekhan Stock Tips

admin — Fri, 22 May 2009 14:00:21 +0000

Sharekhan has recommended a buy rating on Man Industries with price target of Rs 66 in its report dated May 21, 2009.
“Assuming a substantial discount to the average multiple, we have valued Man Industries taking the average of 5x one-year forward PE multiple and 2x one-year forward EV/EBIDTA multiple. In our valuations, we have not considered the value of its real estate portfolio as the realty business is at a very nascent stage. However, we have valued the real estate projects of the group at Rs103.4 crore (considering the group’s 58% stake in the projects) and if this value is included in our estimates the same could add about Rs 19 to the sum-of-the-parts valuations. We recommend a ‘Buy’ on the stock with a price target of Rs 66,” says Sharekhan’s report.

Kernex Microsystems – Stock Investments

admin — Fri, 22 May 2009 02:51:32 +0000

Kernex Microsystems is engaged into manufacturing of Networked Anti-Collision Devices (ACD) for Indian Railways and had installed over 2,500 kms. in Indian Railways since 04 – 05.

· These ACDs are supplied by the company to Railways, through Konkan Railways, under its exclusive Technology and Production Tie-up.

· Railways Board, after review of ACD Pilot Project in North Frontier Railways, set by the company, declared it to be completed, commissioned and proved to be successful. According to Railway Safety Plan, ACD Systems will be deployed in the entire Indian Railway Network by 2013 and survey over 10,000 kms is in progress.

· Railway Minister Lalu Prasad Yadav has cleared deploying thee ACDs under Railway Safety Plan, in its 08 – 09 budget. This was pending for quite a long time, which finally saw light of the day.

· The total outlay by Railways on these ACDs, till 2013 – 14 is estimated to be about Rs.3,500 crores, taking cost escalation and design changes into consideration and for about 56,000 kms., covering all routes of Indian Railways. So, annual flow of orders to the company, could be about Rs.400 crores.

· For FY 07, total income of the company was at Rs.29.68 crores, of which Rs.6.90 crores came via bank interest and provisions written back. Due to this, EPS for the year, was at Rs.5.61. The income of Rs.21.80 crores from its core business is purely of maintenance of ACDs supplied earlier by the company, which is about 15% annually, of cost of equipment.

· Even in first nine months of FY 08, total operational income of about Rs.15 crores is purely from AMC of ACDs supplied by the company to Railways, earlier. Even this activity would give an EPS of about Rs.5 to the company.

· The present paid-up equity of the company is at Rs.12.50 crores, which got raised due to 1 bonus share, issued on every 10 shares held, by the company. Of this, promoters holding is 58% while 42% is held by the public.

· The EBITDA margin of the company on these ACDs are over 40% and costs about 35% to 40% against similar devices, if imported. Also, any supply of ACDs gives an assured AMC of 15%, every year, to the company, on equipments supplied. ACDs supplied by the company in 05 – 06 is enabling the company to earn an AMC revenue of Rs.20 crores, annually, by which EPS of about Rs.5 is being earned.

· Once this supply will start to Railways, the performance of the company, would come in new orbit with EBITDA in excess of Rs.50 crores, depending upon the quantum of order flow from Railways. Even bottomline could be close to Rs.25 crores, giving an EPS of Rs.20 as the company has least interest and depreciation burden.

· The company is also aiming to capture the major segments of medium to light density Rail routes in developing countries, as the ACD system is efficiently suited and cost effective. The company is hopeful of securing ACD orders from countries like Egypt, South Africa, Brazil, Argentina, Venezuela, Indonesia, Cambodia and Vietnam.

· Even continuous upgradation keep happening in ACDs as R&D is the main focus of the company. This would keep demand of improved version products in place, which shall assure continuous and assured business to the company.

· The company also makes Advanced Railway Signal Systems, for which major trust has been given by Railways in its recent budget. This could be another area of growth for the company.

· The company is also developing “Multi Section Digital Axle Counter” in collaboration with Altpro, Zerob, Croatia and Indian Railways has requirement of about Rs.600 crores, in the next five year for this product.

· The company also makes Auto Driving Devices for Metro Railway, which would be developed once Indian Market for the same is developed.

· The company is a debt free company and Rs.99 crores, raised by the company from IPO is still available with the company.

· With expectation of these Railway orders, working of the company would improve sharply from FY 09. Since the sector enjoys a very high PE multiple, share had potential to cross Rs.500 mark in the next 10 – 12 months. Long term prospects are extremely bright.

· Share at Rs.220 is a safe bet which can give a return of 100% in the next 12 months and a consistent return of 40% to 50%, annualized, over the next 2 – 3 years.

Stock Advice On Camson Bio Technologies Ltd

admin — Wed, 13 May 2009 16:53:07 +0000

Company and Industry: Camson Bio Technologies Ltd is in the Floriculture industry.

CMP and PE Ratio: Rs. 28.75 with a PE ratio of 3.62

Industry and Stock Outlook : Positive for long term

Financial Analysis:

* Camson Bio Tech has shown robust revenue growth in the last five years. During the same period the operating margin, gross margin and net profit margin for the company has also increased significantly. For the first nine months of FY 09, the company has clocked a turnover of Rs. 42 crores with a bottomline of 8.16 Crores. Thus, we can expect a lower PE in the future as the current PE is based on FY 08 EPS. * The company has a decent balance sheet. The equity share capital has been expanding over years, which is natural for any growing company. In my opinion the management has bought new funds to good use as indicated by the revenue growth. The debt equity ratio of the company is also very low at 0.07. This gives room for the company to leverage itself for more funds in the future.

* The company has also been generating positive operating cash flow for the last two years. This is another healthy sign. Positive operating cash flow allows the company to fund its working capital and expansion through internal accurals. The last two years have also seen good capital expenditure incurred by the company. This should translate into higher revenue growth for the company in the future.

* The book value per share for Camson, as on 31st March 2008 was Rs. 26.07. Thus, Camson is just trading marginally above its book value. This coupled with good financial growth and a low PE makes Camson an attractive bet for long term.

Business Analysis and Growth Drivers:

* Camson Bio Technologies mainly derives its revenue from sale of seeds and agricultural products. In my opinion both of these are areas of high growth in the long term. Thus, I am personally very bulish on the business of the company.

* Camson has launched, fresh vegetables and fruits under its brand “Camson Zero Residue Vegetables and Fruits”. Camson “Zero Residue” products are safe food without any pesticide residue in them. In my opinion this segment will be a major growth driver for the company in the future. With increased health awareness, these products should be successful in Indian as well as International markets.

* Camson is also in the production of huge variety of hybrid seeds. These privide excellend and high quality end products and the market for hybrid seeds and products should expand in a big way in the near future, fuelling the company’s topline.

In all the government stresson agroculture will be the biggest growth driver for the company. Any political party coming to power has to lay stress on agriculture if India has to grow at over 10% in the long term. This will surely boost the business of companies like Camson Bio Technologies Ltd.

Stock Advice On Greaves Cotton

admin — Fri, 01 May 2009 15:40:16 +0000

About The Company

Greaves Cotton Limited, established in 1859, is one of India’s leading and well-diversified engineering companies. It manufactures a wide range of industrial products to meet the requirement of core sectors in India and abroad. The company’s core competencies are in Diesel/Petrol engines, Gensets, Agro Equipments and Construction Equipments.About The Results

Greaves Cotton has posted disappointing results for third quarter, ending 31st March 09, with sales falling to Rs.262 crores against Rs.339 crores of corresponding quarter in the previous year. If we look to the total income of Rs.888 crores for nine months ending March 09, it is less than 30% for the quarter.

Situation on the profitability front is more precarious as its EBITDA fell to Rs.19.68 crores for the quarter against Rs.38.56 crores. Even this is less than 28% of Rs.70.57 crores, earned for 9 month ending 31st March 09. With sharp decline in interest and tax during the quarter, still PAT for the quarter is just at Rs.14.37 crores against Rs.30.46 crores. This is exactly 33.60% of nine month PAT of Rs.42.75 crores.

EPS of the company for 9 month is at Rs.8.75 which is likely to be at Rs.11.50 for the year ending 30th June 09. The current price of Rs.84 discounts it by about 7 times. In the present scenario, Cummins India is ruling at Rs.208 which discounts it FY 09 EPS of Rs.23, by about 9 times. This company has topline of close to Rs.3,000 crores, per annum.

About The Stock

The falling trend of profitability suggest that an exit at this point of time is essential to avoid further loss.

Stock Advice On Renuka Suagr Ltd

admin — Fri, 01 May 2009 15:37:06 +0000

About The Company
Sri Renuka Sugar has been engaged in sugar industries from several years and has significant ratio in the market. The stock has been the captain and most preferred stock in sugar industry in the capital market. Among the investor the stock has been much fancied in the domestic market.

About The Results

Renuka Sugar has posted net profit of Rs.33.20 crores on total income of Rs.443 crore for second quarter ending 31st March 09, on consolidated basis. These results either look bad or flat when we compare it with the results of corresponding quarter, in the previous year, as PAT was at Rs.32 crores on total income of Rs.561 crores. So, a drop in the topline of 21% and rise in PAT by just 3.75%.

However, we call these results as very good. This is because, there is an increase in stock and inventory of Rs.336 crores during the quarter, while for 6 months ending it has risen by Rs.578 crores, which were risen by Rs.174 crores and Rs.274 crores, respectively for the respective period in the previous year. Inspite of lower crushing of sugarcane in this season, we have seen such a steep rise in the inventory, on which, there is unrealized gain of about Rs.140 crores, which will get booked and realized in the next two quarters.

The company has also made huge import of raw sugar, estimated to be close to 40 lakh bags, on which, it is likely to make a PBT of Rs.150 crores. In sugar segment, the company had an EBIT of Rs.20.60 crores for March 09 quarter on income of Rs.294 crores while same were at Rs.10.30 crores on Rs.159 crores in the corresponding quarter of previous year. Cogeneration contributed an EBIT of Rs.38 crores and distillery of Rs.12.90 crores for the quarter, which have risen by about 22%. These divisions had almost flat bottomlines, from other sugar companies, whereas it has risen here.

About The Stock

Sugar is itself on the lime light due to already hike in price and further expectation of rising price graph. The company as a individual is progressive and good. The stock has the potential enough to be part one investor’s portfolio.It could be titled as investor’s stock.

Stock Advice On YES Bank

admin — Sun, 26 Apr 2009 04:30:08 +0000

Yes Bank has posted good results for Q4 with total income rising to Rs.656 crores against Rs.494 crores in the corresponding quarter of the previous year. PAT for the quarter is at Rs.80.11 crores against Rs.64.50 crores, resulting in an EPS of Rs.2.70 for Q4, against Rs.2.18 of the corresponding quarter of the previous year.

On an annualized basis, the performance of the bank has been quite exemplary with total income at Rs.2,438 crores against Rs.1,665 crores of FY 08 while EPS for FY 09 touched in double digit at Rs.10.25 against Rs.7 of FY 08. It has been feared that NPAs of bank will rise, due to defaults and slowdown, but, this has not seen happening adversely in case of the bank. Net NPA of the Bank, as at 31-03-09, has been at 0.33%, while gross NPA is at 0.68% with capital adequacy ratio of 16.63%. Even, average return on assets has been at 1.52% on annualized basis.
Share touched its 52 week low of Rs.41, on 9th March 09, when all the private sector banking stocks took a beating. Since then, it has been going up and now ruling at Rs.77, which discounts its historic earnings by less than 8 times. It is certain to see growth from bank, even in FY 10 and an EPS of Rs.12 is most likely, which discounts the current price by about 6.50 times. Those who have 6 months view can expect the share price to move in three digits. Price behaviour of this stock remind us of old price movement pattern of HDFC Bank, about 12 years back, which has now become a private sector giant. This Bank also has all such ingredients to grow big in the long run.

Stock Advice On Bajaj Hindusthan Ltd.

admin — Sun, 26 Apr 2009 04:27:44 +0000

About The Company

Bajaj Hindusthan being the company headed by the most reputed BAJAJ group.The stock has been fairly fancied among the investors in the capital market. The financial results need to be studied with care before making any fresh position in this stock.

About The Results

Bajaj Hindusthan has posted its Q2 results for March 09 which has really disappointed or can be termed as flat. Optically it looks good, which is due to reversal of forex losses of Rs.83.66 crores provided earlier and now credited back to profit & loss account. On total income of Rs.516 crores,( including other income of Rs.91.07, which largely consist of forex gain referred above) PBT is at Rs.118.18 crores while PAT is at 81.39 crores. If we exclude this forex gain, PBT would have been at Rs.35.15 crores.

However major disappointment is from its sugar and distillery segment. The company, as at 30-09-08, had a closing stock of 35.56 lakh bags of sugar, valued at Rs.16.25 per kg., at Rs.578 crores. It is learnt that the company had crushed 64 lakh tonnes of sugarcane in the current season and has produced 57 lakh bags of sugar with a recovery of 8.9%. Part of opening stock, out of 35.56 lakh bags, were sold in Q1 and remaining quantity got sold in Q2. In Q1 average sugar realization was at Rs.17.75 per kg. while it was at Rs.20.60 per kg. in Q2. So, sugar segment earned an EBIT of about Rs.4.35 per kg. But this is not reflected in the results as its sugar segment had an income of Rs.408 crores and EBIT of just Rs.30.50 crores. Even distillery for Q2 had a turnover of Rs.38.63 crores and negative EBIT of Rs.1.19 crores which is surprising.

Considering overall results, the company being the largest sugar mill in the country with a capacity of 96,000 TCD, has really disappointed.

Major Drawbacks

1. Since, inventory of lower cost is now being replaced with higher cost, increase in stock, of Rs.338 crores for 6 months ending March 09 is also not very encouraging.

2. Rising interest cost also remains an area of concern.

About The Stock

The performance of the company is not suggesting to make any additional or fresh position in this counter at least before the results for the upcoming quarters gets better.