RESEARCH CALLS

Tanla Solutions

Angel Broking recommends a “Buy” on Tanla Solutions at a price of Rs 405 with a 12-month target price of Rs 605 per share, an upside of 49 per cent. At Rs 405, the stock is valued at 9.4 times its estimated FY09 earnings. Tanla Solutions is a telecom software company operating in niche businesses of aggregation, telecom products and provides offshore support to its clients.

All the three businesses have high margins ranging between 35-90 per cent and enables Tanla to offer end-to-end telecom solutions. In the aggregation business, the company has strong business ties with global operators such as Vodafone, O2, T-Mobile, Virgin, Orange and 3 (Hutchison). The company now plans to expand its geographic presence by entering markets such as Ireland and the US.

Gujarat State Petronet
Anand Rathi recommends a “Buy” on Gujrat State Petronet at a price of Rs 54, with a target price of Rs 75, an upside of 39 per cent. The stock is valued at 22 times its estimated FY08 earnings.

The company recently announced its FY07 results, which have been in line with the estimates of Anand Rathi. The company earns high operating margin, at over 80 per cent, and is expected to maintain the current levels of profitability over FY08, while margins are expected to improve to 83.1 per cent for FY09.

Lupin
ASK Securities recommends a “Buy” on Lupin at a price of Rs 725, with a target price of Rs 807, an upside of over 11 per cent. The stock is valued at 14.7 times its estimated FY09 earnings. Lupin has been going through a major change in its business model over the last few years driven by shift from active pharmaceutical ingredients (APIs) to formulations, and unregulated markets to regulated markets.

Apart from its geographical and vertical shift, product baskets with stronger intellectual property rights (IPRs) for ceftriaxone, cefdinir and perindopril have also been expanding. Lupin's new chemical entity (NCE) pipeline is also maturing with likely licensing of one of the lead candidates over the next 12-15 months. Thus, with a de-risked business model the company is expected to achieve sustained profitable growth over a long term.

Jagran Prakashan
Man Financial recommends a “Buy” on Jagran Prakashan at Rs 470, with a target price of Rs 543, denoting an upside potential of 16 per cent. At Rs 543, the stock is valued at 22.2 times its estimated FY09 earnings, which is at a 10 per cent discount to a national player like HT Media.

The company has increased its ad rates by 26 per cent effective from April 2007. Man Financial expects a 26.5 per cent CAGR in advertisements over FY07-FY09.

The company also added two new verticals, namely, outdoor advertisement and event management, which have started to add to its bottomline right from the first year of operation. Given the strong growth in advertisement, and reduction in newsprint prices, its operating margin is expected to increase significantly, from 19.6 per cent in FY07 to 23.3 per cent in FY08.

Lakshmi Machine Works
Emkay Share recommends a “Buy” on Lakshmi Machine Works at a price Rs 2,743 per share with a target price of Rs 3,510, an upside of 28 per cent. At Rs 2743, the stock is valued at 15 times its estimated FY08 earnings.

The company’s net sales in Q4FY07 grew 48 per cent y-o-y to Rs 582.1 crore led by a strong growth in the textile machinery division. The EBITDA margin increased by 220 bps y-o-y to 20.8 per cent mainly on account of an increase in realisations due to VAT implementation in Tamil Nadu. Net profit for the quarter declined by 21 per cent to Rs 68.6 crore due to the write-back of tax provision in the same quarter last year.

Euro Ceramics
Networth Stock Broking recommends a ‘Buy’ on Euro Ceramics at a price of Rs 146 with the target price of Rs 230 per share, an upside of 57 per cent. At Rs 230, the stock trades at 5.11 times and 4.06 times its consolidated FY08 and FY09 estimated earnings.

The company’s calcareous tile unit, targeted at the upper segment of the market, having an annual capacity of 45,000 tonne will go on-stream by July 2007. Its sanitary ware unit having a capacity of 11,000 tonne p.a. is expected to go on-stream in October 2007. Post expansion, the product portfolio of Euro will be fortified with higher margin products.