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Buy Solitaire Machine Tools Ltd

Monday, December 31, 2007

You are reading this first hereSolitaire Machine Tools Ltd - SMTL manufactures Precision Centerless Grinders in different ranges of 100 mm, 200 mm, 250 mm & 500 mm wheel width accounting for 93% of the total revenues.SMTL has two facilities located at Baroda with a total installed capacity of 56 machines p.a. Plant 1 manufactures No. 2 grinders (200 mm & 250 mm wheel width), while Plant 2 manufactures & assembles the grinders of 100 mm & 500 mm wheel width.


Auto Ancillary industries are the major clients of SMTL which account for more than 50% of the business. bearings companies account for another 30% of the business. The company has Licensing agreement with Bocca & Malandrone Sunebo S.p.A., Italy could turn out to be a trigger for growth in future. Capacity expansion, better utilisation & healthy order backlog to boost the turnover & improve the margins.

Valuation and Recommendation:
At the CMP, SMTL trades at 6.2xFY08E & 4.2xFY09E earnings. SMTL is expected to report a healthy turnover & PAT growth of 33.1% & 59.5% over FY07-09, on the back of capacity expansion, better capacity utlisation & healthy order backlog. SMTL is capable of achieving a topline of Rs. 200 mn to Rs. 225 mn & a PAT of Rs. 40 to Rs. 45 mn by FY10, which gives an EPS of Rs. 8.9 to Rs. 10. HDFC expects the stock to trade at Rs 60 within a year.

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Published by DalalStreet Business @ 12:43 PM IST. ,

BUY Shiv Vani Oil - Nirmal Bang Sec

Saturday, December 29, 2007

We initiated coverage on Shiv Vani Oil in September and the stock has went past our target price. Nirmal Bang Securities [Big Bull during the Dot Com Days] is now initiating coverage on the stock.

Shiv Vani has a strong order book of Rs 3150 crore and is expcted to strengthern by another Rs 4000 crore.Increase E&P Capital Expenditure to boost up demand for Oil field service providers.The Indian market size of Seismic services is estimated to be over Rs. 2000 Crores. and it is expected to grow by 50-60% once the NELP VII blocks will be awarded in early next year. Shiv Vani will be a major beneficiary in these contracts.

Shiv-Vani is the only Company in India to offer integrated solution for Coal Bed Methane (CBM) projects. Its Asset Owned Model enhances margins.

Valuation & Recommendation:
Expect Shiv‐Vani Oil & Gas Exploration services Ltd to report a CAGR of 39% in sales during the FY05 to FY10E on the back drop of strong order book position and unprecedented demand for oil field services followed by boom in oil & gas exploration sector. At CMP of Rs. 558 the stock is trading at 25x and 15.7x its FY08E and FY09E earnings. Nirmal Bang recommends a BUY with a target price of Rs 1191 in 12 months.

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Published by DalalStreet Business @ 10:05 AM IST. ,

BUY Gandhi Special Tubes for 6 Months

Thursday, December 27, 2007

We have received recommendations from several corneres including HDFC Securities Research on Gandhi Special Tubes. [A Midcap Steel Company].

Gandhi Special Tubes Ltd (GSTL) is a niche-player in the small diameter seamless and welded tubes segment. It also manufactures tubular components and has a presence in the wind power segment, automobile, general engineering and refrigeration.

The Indian Auto-components Industry is expected to grow at a CAGR of 16% over until 2011-12. GSTL primarily caters to fast growing industries like the automobile and general engineering industry.

GSTL operates in a very niche segment and has virtually no competitors in the small diameter seamless tube space, which contributes over 60% of its topline. Being a capitalintensive business, GSTL, is to a large extent insulated from threats by new competitors entering this segment, as the gestation period. GSTL has a list of reputable clients, which includes domestic companies like M&M and Maruti Udyog as well as multi-nationals like Bosch India and Daewoo.

GSTL is a Zero debt company and has invested Rs 40 crore in doubling its capacity. GSTL enjoys benefits of cheap captive power, as it owns 5 windmills. GSTL is expected to report net sales of Rs. 78 cr and Rs. 96 cr in FY08 (E) and FY09 (E) respectively. Respective EPS is expected to be Rs 23.1 and Rs 28.6. HDFC Sec and others recommend a buy at the CMP and to add on dips to Rs.178-189 band with a price target of Rs. 272 (9.5 times FY09 (E) EPS) in the next one-year.

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Published by DalalStreet Business @ 11:30 AM IST. ,

Accumulate Jindal Saw - Religare

Wednesday, December 26, 2007

The Jindal group is planning to simplify the holding structure in its group companies, as a result of which we will see massive restructuring in the investment holding of all the group companies including Jindal SAW.

The exact structure of the restructuring scheme is still not known but any formal announcement on this front would be a key trigger for the stock in near future. The current market value of Jindal SAW's investments is Rs22bn. Jindal Saw holds shares of group companies like Nalwa Sons, Jindal Stainless, JSW Steel, Jindal Steel & Power. Apart from these holdings its also holds 94% in Hexa securities, which holds shares in group companies like JSW Steel, Jindal Stainless, Jindal Steel & Power.

Its investments in group companies are valued at Rs195/share and its core pipe business at Rs856/shares, which implies a core business P/E of 10.0x 2-year forward earnings. Religare recommends a target price of Rs 1051 with an ACCUMULATE rating.

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Published by DalalStreet Business @ 2:13 PM IST. ,

BUY Sagar Cement - HDFC Sec

Monday, December 24, 2007

Sagar Cements Limited (SCL) is a Andhra based cement manufacturer in India. SCL is well on track to shed its status of a mini plant due to the huge capacity expansion planned, which could be in place before end of FY08. SCL would incur the lowest average capital cost per tonne as compared to its peers. It would incur about Rs. 1,430 per tonne on its new kiln as compared to the average capital cost of Rs. 1,600-2,300 per tonne. Private Equity player Blackstone Ventures has bought 7% stake in the company in March 2007.

SCL has a well-established network in the South, especially in Andhra Pradesh. It does its business through a wide network of 25 wholesalers and 575 dealers.Demand for cement in the South is on its way up due to setting up of new industries, roads, SEZs, malls, residential complexes, etc. and till FY2011, the demand supply situation is expected to remain favourable.

SCL could register a revenue growth of 22% in FY08, a whooping 128% in FY09 and 35% in FY10. The operating margins could be in the range of 28-31% with healthy PAT margins of about 15-17%. SCL could end with a standalone EPS of Rs. 61.62 and for FY09 and a consolidated EPS of Rs. 63.8. It is currently quoting at 5.2 times its FY09 (E) earnings. HDFC recommends to buy the stock at the current price and add the stock in the Rs. 260-280 band for a period of 3-4 quarters with a target of Rs. 492.

In a separate development, HDFC Securities has put a Target price of Rs 400 on Sunil Hitech Engineering which we initiated coverage when the stock was Rs 270.

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Published by DalalStreet Business @ 11:20 AM IST. ,

Capital Goods Likely Outperformers

Friday, December 21, 2007

All companies have shown tremendous price performance, on absolute levels and relative to the BSE Sensex. In the Capital Goods sector, L&T topped the list, up 178% from last year, followed by Punj Lloyd, Thermax, Voltas and BHEL, all registering growth in excess of 100%. In short-term, correction in the stocks was expected and going forward expect the fundamentals for the sector to remain robust in the coming quarters. The correction is only paving the way for potential upside.

Except for Cummins India, All the stocks covered in this article are OUTPERFORMERS. Here is a list of stocks one can consider BUYING for the next 12 months with their target price.

ABB India - Rs 1,812
BHEL - Rs 3,150
BEML - Rs 1,850
Crompton Greaves - Rs 475
Cummins Inda - Rs 410
L&T - Rs 4,900
Punj Lloyd - Rs 630
Siemens India - Rs 2,300
Suzlon Energy - Rs 2,300
Thermax - Rs 1,050

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Published by DalalStreet Business @ 12:53 PM IST. ,

Multibagger Share Recommendations

Thursday, December 20, 2007

By readers demand here are some possible multi baggers. DalalStreet.Biz Analysts neither have studied not second the opinions, but this is just the grapevine that we have got from market.

ScripCode Scrip Name Curr. Price Holding Period Target Price


These are purely speculative :-)

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Published by DalalStreet Business @ 10:06 PM IST. ,

IDBI Recommends Alpa Laboratories

Wednesday, December 19, 2007

Alpa Laboratories is a domestic pharma company involved in the manufacturing and marketing of formulations. Its product portfolio contains ethical drugs, OTC drugs as well as veterinary products. It is a WHO-GMP and ISO 9001:2000 Certified company with a total built up area of 1,10,000 sq.ft.

Alpa Laboratories Ltd. has entered with couple of international companies to expands its product portfolio distribution on global level. The recent of the deals is appointment of Vhermann Pharmaceuticals of Philippines as a distributor for its products already registered in Philippines.Alpa has also appointed Tinez Pharmaceuticals Ltd. of Nigeria to distribute its products in Nigeria.

Bihar Government has allocated thirteen locations for setting up Generic Drugs Retail Outlets. Company expects to notch up revenue of around Rs.80m and bottomline at Rs.20 mn. This development was under the initiative of State Health Society.

Alpa has garnered sales of Rs.449m, which is better by 49% on YoY basis. EBITDA has also increased by 48% YoY at Rs.416m where the margin has also improved by 100bps due to relatively low rise in the overall cost. Capex of the company by the end of this quarter was Rs.194m. Its bottomline has increased by 83% YoY due to low depreciation. The stock is currently trading 9x its annualized Q2FY08 EPS of Rs.4.9.

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Published by DalalStreet Business @ 11:54 AM IST. ,

Top Picks from Sharekhan

Monday, December 17, 2007

Company Name CMP* Price Target Upside (%)
Aban Offshore 5017 5420 8.03
Axis (UTI) Bank 994 1054 6.03
Balaji Telefilms 348 427 22.70
BHEL 2561 3289 28.42
Grasim 3733 3950 5.81
Indo Tech Transformer 678 725 6.93
Maruti Suzuki 1042 1230 18.04
Mahindra & Mahindra 791 900 13.78
State Bank of India 2406 2680 11.38
Crompton 399 464 16.29

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Published by DalalStreet Business @ 10:23 AM IST. ,

CLSA Recommends to Fly Jet Airways

Friday, December 14, 2007

Jet Airways has had a strong month in Nov-07 in the domestic and international markets with significant improvement in load factors over 2QFY08. With the holiday season resulting in strong demand, expect December-January to be better than Oct-Nov.

During Nov-07, Jet achieved a load factor of 74.4% in the domestic market, 810bps higher than in 2QFY08.

In 3QFY08 expect both the SBUs to break even at Ebitda level. However, Jet will report net losses during 3QFY08 with increase in interest and depreciation costs. This does not take into account any gains on forex. Oil prices over $90 / barrel is putting pressure on the bottomline. Aviation Ministry's demand to refund difference of Oil surcharge is just an eye wash and a political gimmick played by the Minister Praful Patel and will not impact Jet Airways.

Jet's middle east routes appear to be attractive. Plans to fly to US west coast via Shanghai are likely to be delayed due to delays in agreements between the two governments.

Jet Airways is expetc to report a net loss of 183 crore in FY09 and a net profit of Rs 669 crores in FY2010. CLSA is upgrading price target to Rs1,400, based on 7.6xFY10CL EV/ Ebitdar.

DalalStreet Recommendation:
Only high risk investors can look at this recommendation from CLSA. Investors who bought Jet Airways in IPO can consider exiting once the stock rises to higher levels.

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Published by DalalStreet Business @ 10:00 AM IST. ,

ENAM recommends Shriram Transport Finance

Thursday, December 13, 2007

ENAM has initiated coverage on Shriram Transport Finance with a BUY Rating. Shriram Transport Finance Company Ltd. (STFCL) is one of the fastest growing NBFC with an estimated market share of 20-25% in the pre-owned CV financing business and a total AUM of Rs 148bn (Sep-07). The company has 391 branches and 6,318 employees and enjoys one of the largest networks among NBFCs.

STFCL is also moving towards vertical integration by increasingly offering the entire spectrum of products to its customers besides truck financing. Increasing tie-ups with small financiers will help STFCL improve its market share and ensure rapid growth in its loan book.

Expect disbursement growth to remain healthy at ~42% CAGR till FY10, with margins sustaining at 8-9% and asset quality remaining robust. We estimate net profit growth at 52% CAGR during FY07-FY10.

The stock quotes at 10.6x FY10E earnings and 2.4x FY10E BV. Given its leadership position in pre-owned truck financing business, strong growth momentum and sustainable RoE of ~25%, expect the stock to trade at 15x FY10E earnings and 3.5x FY10E BV within a year, leading to a price target of Rs 468

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Published by DalalStreet Business @ 1:26 PM IST. ,

Citi bullish on Deccan Chronicle + Jagran Prakashan

Wednesday, December 12, 2007

Citigroup has initiated coverage on Deccan Chronicle and Jagarn Prakashan with a BUY Rating. DCHL publishes the fourth-largest selling English newspaper in India and has leadership in the state of Andhra Pradesh. After Chennai, DCHL will expand into the Bangalore market, which will give it a strong foothold in South India.

DCHL is the most leveraged play on Indian print media. Its superior business model rests on: heavy advertising skew which should be sustainable as advertising revenues grow at a 25% 3-yr CAGR; strong profitability (>2x that of listed peers) due to a lean fixed-cost base; and exposure to the English print market, which has higher ad yields.

Citi values DCHL at 22x FY09E EPS, which is a premium to regional peers but at a 20% discount to Indian peers and recommends a target price of Rs 286 / share.

Jagran publishes Hindi-language Dainik Jagran, India's largest daily on average readership (17.1m, IRS 2007 R1) and circulation (2.3m, ABC JJ 2006), and has a leadership position in Uttar Pradesh. With 31 editions across 12 Hindi-speaking states along with newly launched newspaper formats I-Next and City Plus.

Citi forecasts a 28% CAGR (FY07-10E) in advertising revenues driven by a strong macro environment, shift in advertising from black and white to color, and increasing demand for regional advertising.

Citi recommends with a target price of Rs810 (30x FY09E EPS). Target is at a multiple premium to those its peers DCHL and HTML[Hindustan Times] owing to Jagran's higher earnings CAGR of 45% in FY07-10E, clean balance sheet and strong leadership positions in key markets.

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Published by DalalStreet Business @ 2:18 PM IST. ,

Zee Entertainment + Sun TV Upgraded

India's Media Giant Zee Entertainment and South Indian controversial media company Sun TV have been upgraded by brokerage houses.

Zee Entertainment Ltd:
Zee Entertainment overtook Star Plus (Rupert Murdoch's flagship channel) during prime time for the week ended November 25 2007. Zee Entertainment's flagship channel's ratings during prime time of 42%, (higher than 30% across time bands) will reflect in its ad revenues in H2FY08. The fall in TRPs during the 10 pm slot last month was primarily due to the end of its reality show Saregama which ended on October 07. Zee owns the property and will start a new season in mid-2008.

Zee's flagship channel is the leader between 7:30 to 10 pm prime time slots. In fact Zee's market share within the prime time is relatively higher at 56% compared to an overall market share of 30% in September 07 (23% in March 07. With Zee no longer involved in the domestic cricket broadcast rights, the sports channels will have a marginal loss in FY08.

Zee Entertainment is expected to report an earnings of Rs 9.03 and Rs 12.04 for FY08 and FY09 respectively. Deutsche sets a 12 Month target price of INR 430 values the company at c35x 1-year forward earnings (03/09E). This price multiple is justified given its c48% net income CAGR over a three-year period FY07E-09E driven by strong advertising revenue growth.

Also bear in Mind, Merill Lynch sets a Target price of Rs 400 on Zee Entertainment while, Kotak retains an underperform rating on the stock of Zee Entertainment with a revised target price of Rs 270.

Sun TV Network Ltd:
Sun TV has entered into a tie-up America's largest Cable Operator, Comcast (with a reach of 23mn homes out of c100mn US television homes). This is in addition to the tie-up that Sun TV has with Echostar (a direct broadband service platform). Projected subscribers from the US market stands out at 340,000 and this could potentially touch 500,000 subscribers in FY09 providing an upside to earnings estimates.

The broadcast operations will receive a monthly subscription of INR25 per home per month for every DTH subscriber. Maintaining domestic subscription revenues at INR2.1bn for FY09. This tie-up will enable Sun TV to price its content at INR25 per home per month from other DTH operators i.e. Tata Sky, Dish TV, Reliance Big DTH and Bharti.

Sun TV is expected to report an EPS of Rs 10.8 and Rs 13.5 for FY08 and FY09 respectively. At earnings multiple of 35x FY09E earnings estimates, a target price of Rs 500 is set on the stock over the next 12 months.

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Published by DalalStreet Business @ 8:29 AM IST. ,

Citi Maintains BUY on United Phosphorous

Tuesday, December 11, 2007

United Phsophorous Ltd [UPL] indicated that it was on course to complete the restructuring and integration of Cerexagri's French operations by the end of FY08. Besides, it intends to start this process in Spain in the next quarter. With the restructuring of US operations already complete, we expect material upside to reflect in financials from 4QFY08 and act as a key catalyst for the stock.

UPL remains upbeat on its seeds business, Advanta (49% holding), due to low penetration of hybrid seeds in India and better buying ability of farmers on back of the recent buoyancy in food prices.

Nufarm has announced that the US$2.6bn conditional takeover proposal by ChemChina has fallen through. This could bring Nufarm back into play as a potential target. In such a scenario, UPL could be one of the main bidders, especially given that it is well placed on the balance sheet front following its recent US$475m fund raising.

UPL reiterated its guidance of 15-20% top-line growth (organic) and FY09E EBIDTA margins of 22-23%. UPL is expected to report an EPS of Rs 33.8 and Rs 49.1 for FY08 and FY09 respectively. Citi sets a price target of Rs 460/share is based on 16x FY09E (16xSept'08E earlier) earnings. FY09 estimates reflect the true earnings power of UPL.

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Published by DalalStreet Business @ 11:21 AM IST. ,

Capex Boom for Thermax Ltd

Monday, December 10, 2007

Deutshce Bank has initiated coverage on Thermax with a Buy rating. Thermax is a direct play on India's strong industrial capex boom and increasing investments in the water & environment domains. This global energy and environment engineering company as positioned to ride the booming Indian energy and infra sector with a wide array of power, environment and water-treatment solutions. A strong order book of USD 800mn as on Sep 30, 2007, re-emphasizes the company's strong earnings growth potential (+37% CAGR) over FY07-10.

The company's turnover has grown at a CAGR of 42% while its bottom line has tripled over the past three years. We see revenue CAGR of 33% (FY0-FY10E) with key contribution from the strong industrial capex cycle across industries and increasing investments in the water and environment domains in India and abroad.

Rapid urbanization has led to rising sewage generation, creating robust demand for sewage-treatment plants. Thermax's presence in chemicals makes it a complete solution provider. We expect revenue 40% CAGR (FY07-10) in the segmental business with chemicals (resins) contributing significantly starting in FY09.

Expect longer-term upside potential from large project wins and accelerated focus on water & environment to lead to a 37% earnings CAGR (FY07-10E) with 55%+ ROCE. On this basis, Deutsche Analyst assigns a PEG multiple of 0.9x, yielding a target PE multiple of 33x. On FY09E consolidated EPS of INR 33, and arrive at a target price of INR 1,080.

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Published by DalalStreet Business @ 11:45 AM IST. ,

BUY Patels Airtemp India

Saturday, December 08, 2007

Patels Airtemp India, which manufactures heat exchangers, pressure vessels, industrial fans and blowers and other heattransfer-technology products, would benefit from the ongoing boom in its user industries such as oil and gas, refineries, power, cement, and fertilisers. The heating, ventilation and air conditioning (HVAC) business, where the company undertakes turnkey projects and manufactures HVAC equipment is also expected to benefit from the ongoing retail boom.

The company has a healthy order book of Rs45 crore, out of which Rs40 crore is executable over the next six months.expect new order booking of~Rs70 crore in FY2008, which should increase to ~Rs120 crore by FY2009, while the momentum is expected to continue considering the current buoyancy in its user industries.

Expect a strong improvement in its return ratios going forward on the back of improved margins and no major capex requirement in the next two years. We estimate the topline to grow at a compounded annual growth rate (CAGR) of 49.1% and the bottomline to grow at a CAGR of 72.7% between FY2007-09.

At the current market price, the stock discounts its FY2009E earnings by 5.9x and quotes at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.5x. Sharekhan recommends a BUY with a Target price of Rs 135.

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Published by DalalStreet Business @ 11:55 AM IST. ,

SELL Grasim Industries - Citi

Friday, December 07, 2007

Breaking NewsCitigroup in a research report released just a while ago has recommended investors to SELL Grasim Industries Ltd with a medium Risk Rating.

In an effort to rationalize capacity, Grasim is selling its 53.63% stake in Shree Digvijay Cement (SDC) to Cimpor of Portugal. Even after the sale of this standalone 1.07m tpa plant in Gujarat, Grasim+UltraTech will have ~6m tpa of capacity in that state. Grasim has sold the SDC plant in Gujarat to rationalize its portfolio. This is an old, standalone plant with relatively lower margins (~19% in 1H FY08) and limited scope for expansion.

While higher prices in both cement and VSF could continue for the short term, we expect margin pressures due to costs in both divisions; a surge in FY09 capacity could impact cement prices adversely.

Grasim's EPS is expected to decline from Rs 210 for FY08 to Rs 192 in FY09 and Rs 180 in FY2010. Grasim is valued on on EV/EBITDA, a common metric used for cement companies. Citi has set a target price of Rs 2,700 is based on 6.5x FY09E EV/EBITDA, a 10% premium to the stock's seven-year mean of 5.9x. The downturn in cement in FY09E is expected to be partly offset by other businesses, which should perform well in FY09E-10E.

Dalal Street Anlays recommend investors holding the stock to book profits. Speculators with very high risk appetite can go short only when the technicals indicate a downturn.

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Published by DalalStreet Business @ 12:23 PM IST. ,

SSKI Upgrdes JK Cement

Thursday, December 06, 2007

JK Cement is expanding its capacity by 3.5 million metric tonne (MMT) through a greenfield plant at Karnataka, which will be accompanied by a 50-megawatt (MW)
power plant at the site. The capital expenditure (capex) programme is in progress and the plant is expected to be commissioned by FY2009 end. This will augment the capacity of the company by 70% in FY2010 and will drive the volumes of the company going ahead.

JK Cement's capex on captive power plants (CPPs) is progressing well. The company has already commissioned a 20MW pet coke based power plant and has replaced its 10MW turbine. It has partially implemented the 13MW waste heat recovery plant and expects the plant to get fully operational by FY2008 end. This will help the company save Rs 200 per tonne on power consumption.

JK Cement's Q2 results were much above our expectations. The topline grew by a healthy 33% year on year (yoy) to Rs356 crore on the back of a blended volume growth of 12% yoy and a realisation growth of 17% yoy to Rs3,597 per tonne. Lower tax provision of 13% during the quarter made the profit after tax (PAT) grow by a whopping 142% yoy to Rs72.7 crore. The PAT growth was much ahead of expectations.

The stock is trading at at 10x its earnings and 6.6x its EV/EBITDA on FY2009 earnings estimate. It commands an EV per tonne of USD 84, which is lower than the benchmark asset valuation of USD 100-115 per tonne. Considering the cheap asset valuations, SSKI maintains Buy recommendation on the stock with an upgraded price target of Rs 330 per share

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Published by DalalStreet Business @ 11:37 AM IST. ,

Book profits in KPIT Cummins Infosystems

Indiainfoline research has recommended a BOOK profits / Exit KPIT after their recent management meeting. Most of the company's clients are planning to marginally increase or maintain IT budgets in CY08 with higher offshore spending. Company expects revenues from Cummins (Top client contributing 40%) to grow in high single digits in Q3 and Q4 of FY08. Revenues from Cummins have registered a strong growth of 7.8% in Q1 and 10.6% in Q2 in rupee terms. However, company expects Cummin's revenue share to decline to 25% by 2010.

KPIT recently became the only Indian IT company to secure me mbership of JasPar (Japan Automotive Software Platform Architecture). Business Objects was recently acquired by SAP. KPIT, on its part, intends to leverage its expertise around the BO products towards establishing a strong relationship with SAP.

KPIT might actually struggle to meet its earnings guidance for the year given the headwinds to margins. This can be a big negative for the stock, which has gone up sharply by 27% in the last few trading days. Indiainfoline has set a short-term target of Rs 126 on KPIT until Mahc-2008.

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Published by DalalStreet Business @ 10:19 AM IST. ,

BUY HCL Infosystems - Citi

Tuesday, December 04, 2007

HCL Infosystems Welcome PartyAfter a long time we have a BUY call on a front line IT stock. Citi has inititated coverage on HCL Infosystems [HCLI] with a BUY rating. HCL Infosystems is a HCL group company mainly focused on hardware and systems integration business. HCLI is a play on government and domestic industry tech spending.

HCL's primary product offering is personal computers - both desktop and laptops - to the consumer and commercial markets. The consumer market consists of retail buyers including SOHO (Small Office/Home Offices) and small-scale enterprises, while the commercial market consists of government, education sector and corporate sectors across various industry verticals. It plans to target newer verticals such as retail, healthcare, media and entertainment, railways, and ports/airports. Management expects to see faster growth in system integration with a longterm target of 50% of revenues coming from its system integration business.

HCLI's office automation business primarily comprises of distribution of Nokia GSM handsets in India. It is also one of two other players that provide L-3 servicing of Nokia handsets across several cities in India. The company also has rights for distribution of other lifestyle products, such as iPod (and accessories), DISHTV (DTH product of Essel group), Kodak digital-still cameras, etc.

Sum of Tthe Parts Valuation:
Margins will grow at a 25% CAGR, on our estimates. Hardware business is valued at Rs184 (12x EV/EBIT); the Nokia business Rs107 (probability weighted 5.5x EV/EBIT); and cash Rs14. Citi sets a target price of Rs 305 on the stock.

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Published by DalalStreet Business @ 12:10 PM IST. ,

EIH to Underperform in Hotel Boom - Citi

Monday, December 03, 2007

Heightened economic activity in India and the busy Travel season may not cheer the lobbies of Oberoi groups EIH Hotels according to Citigroup analysts.

Smart investors who are holding to the stock can Book-Profits as the stock is likely to underperform in the near term. The stock now trades at a 27% premium to the hotel sector, post a 43% 3-month move, outperforming the hotel sector (10%) and market (13%).

EIH's core revenues –growing strongly– are concentrated in Delhi, Mumbai, Bangalore (c82% of room revenues). However, it still lacks presence in upcoming growth markets like Chennai, Pune, Hyderabad, which could risk longer-term growth. The company has planned 6 new hotels in India, Hotels planned in Dubai, Maldives and Cambodia, Luxury train – JV with Indian Railways and Govt. of Rajasthan, and Luxury Nile Cruiser in Egypt.The company owns several real estate assets in Pune, Kolkata, Agra and Bhubneshwar, which it could potentially sell to fund its capex plans.

Fully Diluted EPS is expected to be Rs 6.48, Rs 7.71 and Rs 7.44 for FY08, 09 and 10 respectively. Citi has set a Target Price of Rs 146 on the stock and recommends to book profits.

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Published by DalalStreet Business @ 11:07 AM IST. ,

Max India to Outperform - SSKI

SSKI has initiated coverage on Max India with an OUTPERFORMER rating. The company has presence in insurance and healthcare, two of the fastest growing sectors. The life insurance venture, armed by industry's most productive agency force, is set to reclaim market share led by a multi-channel distribution approach and an enhanced ULIP portfolio. With hospital beds likely doubling in the next 4-5 years, superior margins (20-22%) and a strong brand, healthcare business (MHC) too is a robust model.

Max New York Life Insurance [MYNL]: YTD FY08, market share has bounced back to 6.7%. Predominantly an agency-driven model, MNYL has the industry's most productive agency force. At 18x FY10E NBAP and adding Embedded Value to it, SKKI values MNYL at Rs230/ share of Max, assuming 50% promoter ownership and 10% holding company discount.

Healthcare Franchisee Business: Max is well placed to participate in this opportunity. The business has broken even in FY08 and profitability will continue to improve as operational capacity is doubled to 1,223 beds by FY11 and operating margins touch 20-22%.

Sum of The Parts Valuation:
Max New York Life Insurance - Rs 230 / share
Max Healthcare - Rs 36 / share
Plastics Business - Rs 20 / share
Cash + Investmnets - Rs 30 / share

SSKI sets a Target Price of Rs 316 / share and an OUTPERFORMER RATING on the stock.

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Published by DalalStreet Business @ 10:02 AM IST. ,