BL Kashyap & Sons
| Emkay-Private Client Research has given a ‘buy’ recommendation for BL Kashyap & Sons with a 12-month price target of Rs 1,964. The company provides a one-stop shop solution, right from designing, project implementation and final construction of projects. |
| B L Kashyap’s core construction business contributes around 60 per cent to its revenues and residential and industrial projects together contribute 40 per cent. |
| With an order book of Rs 1,100 crore as on November executable over the next 18 months, Emkay expects revenue visibility to be strong over the next 18 months and has estimated topline to grow at a CAGR of 69 per cent over FY06-08, followed by net profits growing at a CAGR of 93 per cent. |
| ROCE and ROE are estimated to be 17 per cent and 19 per cent for FY07 and 23 per cent and 27 per cent for FY08 respectively. More importantly it is creditable to note that the company has recorded a 50 per cent CAGR in order book growth in the last 3 years starting FY05 onwards. |
| The company has two 100 per cent subsidiaries – BLK Furnishers and Soul Space Projects. BLK Furnishers will record a topline of Rs 110 crore in FY08 and Soul Space will be contributing Rs 60-65 crore in FY07 and will form 15-20 per cent of turnover from FY08 totaling Rs 260 crore. With an EPS CAGR growth of 93 per cent estimated over FY06-08 and an EV/EBIDTA of 13 times FY07 and 8 times FY08, the present valuation looks attractive. |
| Indoco Remedies |
| Angel Broking has recommended a ‘buy’ for Indoco Remedies with a 12-month target price of Rs 390. While a late entrant, the company has been focused on enhancing its presence in the exports market. |
| Contract manufacturing activities in the regulated markets (mainly Europe), would aid export growth of 42 per cent in FY06-08. With this the contribution of exports would increase from 16 per cent in FY06 to 21.4 per cent in FY08. In US, the company is looking at niche segments like – Dermatology and Opthalmic to scale up its business in the region. |
| Currently the company has 13 products under various stages of development. These products cumulatively have market size of $1.7 billion in US. The company is likely to maintain its growth momentum in domestic markets. New product launches in the lifestyle segment would aid company to outpace the industry growth. |
| For FY06-08, the domestic formulations are expected to grow at 17.0 per cent. A 27 per cent growth on the sales front and improvement on the operating margins – 177 bps improvement expected during FY06-08, would aid the company to post a net profit growth of 39 per cent during FY06-08. |
| At the current market price, the stock trades at 8 times FY07 and 5.7 times FY08 estimated earnings. Over the last one year the stock has significantly underperformed the broader indices. However, going forward a robust earnings growth is expected. |
| Mahindra & Mahindra |
| Sharekhan has given a ‘buy’ recommendation for Mahindra & Mahindra (M&M)with a price target of Rs 870 on the back of acquisitions and the company’s plans to enter the US markets. |
| The company appears to be well on its way to target sales of $1 billion for the Mahindra Systems and Technology group by 2010. M&M has acquired DGP Hinoday by buying out its existing shareholders – the DG Piramal group and India Private Equity Fund, Mauritius. |
| The residual stake of 34 per cent would continue to be with Hitachi Metals. DGP Hinoday is a market leader in castings and ferrites with sales of Rs243 crore. M&M has also filed an application with the German Federal Cartel office to acquire a majority stake in Schoeneweiss & Co, a forging company. |
| Schoeneweiss has an annual capacity of 50,000 tonne and a turnover of nearly $128 million. The company expects to receive the approval in a month. Schoeneweiss has a good presence in the European markets. M&M is planning to consolidate its various forgings businesses under one company. |
| It would transfer its ownership of the German forging company Jeco Holding and the UK-based business Stokes Forgings to its subsidiary Mahindra Forgings (in which M&M holds a 47 per cent stake). |
| M&M expects to maintain the strong volume growth momentum in the automotive sector in H2 at roughly the same pace as in the first half of the fiscal, i.e. around 14-15 per cent. Using the sum-of-parts model, M&M’s core business has been valued at Rs607 (14 times FY08 earnings) and its subsidiaries at Rs263. |
| JK Lakshmi Cement |
| ASK Raymond James & Associates has given a ‘buy’ recommendation for JK Lakshmi Cement with a target price of Rs 190. It has raised their PAT estimates by 14 per cent for FY07 and 16 per cent for FY08. |
| This rise is reflecting the substantial rise in realisations by 32 per cent Y-o-Y in FY07 and by a slower rate of 3 per cent Y-o-Y in FY08. Cement prices are on an up trend with prices rising across regions despite monsoons in Q2FY07. |
| The company posted 41 per cent Y-o-Y rise in revenues to Rs 350 crore, EBITDA grew by 139 per cent Y-o-Y to Rs 99 crore in H1FY07. PAT rose by 289 per cent to Rs 62.20 crore in 1H FY07. |
| The outlook for the sector continues to be buoyant with demand rising by 9.5-10 per cent Y-o-Y in FY07 and limited supply addition till early FY09, driving the prices. |
| The target price has been raised from Rs 180 based on FY08 EV/EBITDA of 6.8 times, PE of 7.8 times and an EV/tonne of $97 on fully diluted equity. |
| The company’s capex plans are on schedule and it expects to reach 3.5 million tonnes per annum by January 2007 and further to 4 million tonnes by March 2008. The company is adding 36 MW of the captive power plant, expected to be commissioned in Q1FY08 which would lead to a savings of Rs 2.40 per unit. |