Research Calls

Allahabad bank

Finquest recommends a "buy" on Allahabad bank at a price of Rs 90 with a twelve month target price of Rs 120. Allahabad bank is one of the oldest PSU banks with a large network of over 2000 branches and 149 extension counters catering to a diverse socio-economic client base.

The bank is thus well placed to leverage this facet in its drive towards expansion of business volumes. The banks credit to deposit ratio has significantly improved from 49 per cent in FY2002 to 60 per cent in FY2006.

The banks core business growth is expected to be robust in the next three years with advances and deposits estimated to grow at 28.3per cent and 19.8 per cent CAGR between FY2006-09E.

In the past two to three years the bank has streamlined its operations and brought down the Non Performing Asset level from 10.7 per cent in FY2002 to 0.8 per cent in FY2006.

This trend is expected to continue with Finquest estimating this ratio to further decline to 0.4 per cent by FY2009E. At Rs 90, the stock is trading at a P/E ratio of 5.7 and 4.6 times expected FY2007 and FY2008 earnings

Raipur alloys and Steel Ltd.

Networth Stock Broking has recommended a "buy" on Raipur alloys and steel ltd at a price of Rs 140 with a one year price target of Rs 200. RASL, an integrated steel plant located in Raipur is a part of the Sarda group. The company had received board approval in September 2006 for merger with two other group companies, CECL and Raipur gas.

The merger is expected to bring synergies to RASL in the form of captive power and coal.The Moreover the rights possesed over 6 iron ore and 2 coal mines could prove to be a significant element in cost saving in future.

Among the measures to increase operational efficiencies includes a 600000 MT pelletisation plant which would be set up by April'08.The company has also announced an ambitious expansion plan to ramp up both sponge iron and Steel ingot capacity.

Significant triggers include prospective development of MIDC land at Raipur and the revenue increments due to carbon credits earned.

At Rs 140, the stock trades at a P/E ratio of 9.3 times and 5.6 times estimated FY07 and FY08 earnings. The corresponding EV/EBITDA ratios are at 7.4 and 5.1 times estimated FY07 and FY08 earnings.

Essel Propack

ASK India Equity Research recommends a "buy" on Essel propack at a price of Rs 79 with a target price of Rs 98.

Essel Propack is the largest speciality packaging company in the world manufacturing laminated and seamless tubes catering to the oral care, cosmetics, personal care, pharmaceutical, food and industrial sectors.

It has a presence in 13 countries and in the past five years has been in the news for several transnational acquisitions.

With the increasing prospects of outsourcing design and manufacturing in medical devices in the US, Tactx medical, which Essel acquired could benefit with its strong research team. While the business plans over plastic tubes and speciality packaging are on track, the management continues to work towards achieving breakeven at Arista,UK which was acquired in August,2004.

According to ASK, Essel has the strongest leverage to improvement in margins and asset efficiency. Significant margin improvements could come from lamitubes, plastic and specialty packaging segments.

Though there are still concerns on execution regarding new initiatives, there remains value in the stock at the price considered. At Rs 79 the stock trades at a P/E ratio of 12.5 and 10.6 times estimated CY06 and CY07 earnings. The P/E ratio for estimated CY08 earnings stands at 8.1 times.

SREI Infrastructure Finance

Emkay Shares and Stock brokers recommend a "buy" on SREI Infrastructure Finance Ltd at a price of Rs 49 with a target price of Rs 70. SREI has a 30 per cent share in the infrastructure related equipment financing market with a network of 43 branches/offices spread equally across India.

The company which focuses on mostly small and medium enterprises has over the years turned itself into a one stop shop for all kinds of needs of its customers. This has enabled it to restrict the net NPA's to near zero levels despite serving what is considered a relatively riskier segment.

Also despite the constraints of being an NBFC, SREI has successfully been able to protect its NIM at 4.5 per cent plus levels. The company would benefit from the current infrastructure boom and according to Emkay research could witness its leasing assets book grow by 38.2 per cent CAGR over FY2006-09E.

At the target price of Rs 70, the stock would trade at 6.5 times its estimated FY2009 earnings.At a price of Rs 49, the stock trades at 6.5 times and 4.5 times its estimated its estimated FY08 and FY2009 earnings respectively.