SAIL
| KR Choksey Research recommends a �buy� on Steel Authority of India (SAIL) at a price of Rs 103, as it expects that rise in prices of steel internationally will lead to improved realisations for the company. |
| Globally, steel prices have risen about 7-8 per cent over the last couple of months and are expected to remain strong following healthy demand in Asia, Europe and the US. |
| SAIL is the largest integrated steel company in India, with a hot metal production of about 15 million ton and a market share of 25 per cent. It operates four integrated steel plants and three special steel plants in the country. |
| Further, it also has its own captive iron ore, dolomite and limestone miles. It now plans to increase its hot metal production capacity from the existing 14.6 million ton to 23 million ton a year by 2012. |
| In addition, to meet the increased power requirement due to augmented capacity, it plans to set up two power plants of 500 mw each in two separate joint ventures with NTPC at Bhilai and with Damodar Valley in Jharkhand. At the price of Rs 103, the stock is valued at about 8 times its trailing twelve month earnings. |
| Shasun Chemicals |
| Angel Broking recommends a �buy� on Shasun Chemicals at a price of Rs 101, with an 18-month target of Rs 145. Shasun Chemicals is a generic drug-maker with a small foray in active pharmaceutical ingredients (APIs) and plans to enter the formulations exports, especially in regulated markets of Europe and the US. |
| The company has forged an alliance to market 22 products of Glenmark Pharmaceuticals and Alpharma, and expects a United States Food and Drug Administration (USFDA) approval of its facilities in order to launch its products by the first half of FY08. |
| In FY07, the company acquired assets of Rhodia�s custom synthesis business along with some proprietary technologies. The assets included USFDA and Medicines and Healthcare Regulatory Agency, UK (MHRA) approved contract manufacturing and custom synthesis manufacturing units, and technologies like hydrolytic kinetic resolution (HKR), aromatic bond formation (ABF) and trifluoro methylation. |
| This business clocks sales of �40 million (approximately Rs 343 crore) and has a pipeline of around 14 products in advanced stages of clinical trials and about 20 products in the preclinical phase. |
| The company is expected to grow at a compound rate of 45.1 per cent and 24.3 per cent in sales and net profit over FY06-FY09. At Rs 101, the stock is valued at 8.8 times and 7 times its expected FY08 and FY09 earnings respectively. |
| KPIT Cummins Infosystems Emkay Private Client Research recommends a hold on KPIT Cummins Infosystems at a price of Rs 114 with a target price of Rs 144. |
| Despite the negative impact of the appreciating rupee and lower billing days, EBITDA (earnings before interest, tax and depreciation) margin for the quarter has marginally declined by 30 basis points to 15.2 per cent. |
| On the other hand, lower effective tax rate of 3.2 per cent, on accounts of deferred tax assets, resulted a 10 per cent growth in the net profit to Rs 137.23 million. |
| Overall the December quarter proved to be quite a mixed bag. In revenue terms there was decent growth, however rupee appreciation and lower number of billing hours dampened the growth in the rupee term. |
| However a strong positive has been the company's ability to maintain its margins. Going forward strong medium term growth drivers are discerned from the strong ramp up in the non-Cummins Star customers accounts and improved performance from the acquired companies. |
| Emkay expects KPIT Cummins revenue and profit to grow at a CAGR of 37 per cent and 46 per cent to Rs 4,682 million and Rs 6006 million and Rs 535 million and Rs 698 million respectively. |
| KPIT Cummins trades at a P/E of 14.6 times estimated FY08 earnings. Adjusted for the recently concluded bonus issue and stock split, at the target price of Rs 144, the stock is valued at 15.5 times for estimated FY08 earnings. |