Indo Tech Transformers

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Tax Planning 2006

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Rico Auto - Sharekhan

Rico Auto
Cluster: Emerging Star
Recommendation: Book profit
Current market price: Rs95

Book profit

Result highlights

• The Q3FY2006 results of Rico Auto are much below our expectations on both stand-alone and consolidated bases.
• The stand-alone net sales grew by 10.8% year on year (yoy) to Rs169.4 crore. The revenue growth in the domestic market was affected by the lower offtake from Tata Cummins, Hero Honda Motors and Honda Motorcycles & Scooters India Ltd (HMSI). The export revenues grew by 180% in M9FY2006.
• Despite a fall in the raw material cost the operating profit margin (OPM) declined by 160 basis points yoy to 11.5% due to an increase in the other expenses and staff cost. The growth in the stand-alone net profit was flat at Rs6.89 crore.
• Adjusting for the payment to Ford USA for the discontinuation of a Rs1.1-crore agreement with the American company, the net profit has reported a growth of 10% yoy.
• The consolidated net sales increased by 12.4% yoy to Rs195 crore during the quarter. The consolidated OPM is stable at 14.7%. The consolidated net profit increased by 8.7% yoy to Rs11.3 crore.
• We have downgraded the consolidated earnings per share (EPS) estimates for FY2006 by 20% from Rs4.7 to Rs3.7 and that for FY2007 from Rs6.2 to Rs5.0. At the current market price of Rs95, the stock is trading at 26x its FY2006E EPS and 19x its FY2007E EPS. We recommend booking profit at the current levels.

Chamatkar Multibaggers

DATE	SCRIP CODE	SCRIP	EQUITY PRICE Rs.	APPROX. Holding Period	Target PRICE Rs.
8 Feb 2006	513228	Pennar Ind	12.51	12 Month	50
7 Feb 2006		Century Textiles	330	12 Month	600
6 Feb 2006	506991	Noble Explochem	53	12 Month	125
6 Feb 2006	530059	Mah Sh Ummed Mills	380	12 Month	2000
6 Feb 2006	521180	Super Spinning	405	12 Month	700
6 Feb 2006		MRF	2820	6 Month	5000