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Friday, February 24, 2006

Sharekhan Investor's Eye

Esab India
Cluster: Vulture’s Pick
Recommendation: Buy
Price target: Rs575
Current market price: Rs480

Price target revised to Rs575

Result highlights

  • ESAB India's (ESAB's) Q4CY2005 net profit of Rs8.3 crore is in line with our expectations. The net sales for the quarter stood at Rs59.4 crore registering a growth of 17.5% driven by a very healthy 19.2% growth in the revenues of the consumables division. The revenues of the equipment division also recorded an impressive growth of 10.7%.
  • However the operating profit margins (OPMs) for the quarter have declined by 460 basis points on account of the overall increase in all the expenditure heads. The raw material cost as a percentage of sales has increased from 51.5% to 53%. The other expenditure as a percentage of sales has increased from 14.5% to 15.1%. The employee cost has also increased by 23% during the quarter. Consequently the operating profit for the quarter was down 8.3%.
  • The earnings before interest and tax (EBIT) margins of the consumables division declined by 280 basis points and the EBIT margins of the equipment division declined by 890 basis points.
  • With a 12% decline in the depreciation, the net profit for the quarter was up 16.6% and stood at Rs8.3 crore. The company has declared a special dividend of 260% and on the face value of the share of Rs10 the same works out to Rs26 per share. At the current market price (CMP) of Rs480 the dividend yield works out to a handsome 5.4%.

Bajaj Auto
Cluster: Apple Green
Recommendation: Buy
Price target: Rs3,200
Current market price: Rs2,622

Price target revised to Rs3,200
We are upgrading our earnings estimates on Bajaj Auto on the back of a strong operational performance in Q3FY2006 and the expected success of its new launches. We maintain our BUY recommendation on the stock and are revising the price target to Rs3,200.