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MRO-TEK
Cluster: Apple Green
Recommendation: Book out
Current market price: Rs67
Book out
MRO TEK is a cash rich company and does not have any significant requirement for capital expenditure in the coming years. Consequently, the dividend policy is likely to remain liberal that would result in a decent dividend yield at the current level. However, the inability of the company to grow in the robust demand environment would continue to act as a drag on the stock's valuation. We advise booking out of the stock.
Sundaram Clayton
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,550
Current market price: Rs1,040
Annual report review
The key takeaways from the latest Sundaram Clayton Ltd's (SCL) annual report are mentioned below.
- Good performance in FY2006: SCL delivered a strong performance as its top line rose by 17.3% to Rs629.3 crore in FY2006 as both the die-casting and brakes divisions rendered good performances. The net profits for the year marked an increase of 39.8% to Rs74.5 crore in FY2006.
- Improving operating metrics: The company continued to generate strong cash flows, while the return ratios also marked an improvement during the year as the return on capital employed (ROCE) improved to 27.8% as compared with 26.7% last year while the return on net worth (RONW) grew to 23.7% as against 21.9% last year.
- Both divisions perform well: The brakes division performed well in FY2006 and the outlook remains bullish with the implementation of the norms such as IS 1852-2001 and the implementation of the anti-lock braking systems (ABS). The revenues from sourcing to WABCO are also expected to rise in the coming years. The die-casting division also showed a remarkable volume growth and the exports prospects for the division are quite bright.
- Capex: For FY2007, SCL has lined up a capital expenditure (capex) of Rs49 crore for the brakes division and that of Rs75 crore for the die-casting division.
- Reiterate Buy: At the current market price (adjusted for value of investments) the stock trades at 11.1x FY2008E earnings and 9.2x FY2008 earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a price target of Rs1,550