Analysts’ picks

PYRAMID SAIMIRA THEATRE Reco price: Rs 417 Target price: Rs 736 Current market price: Rs 420 Upside: 75.23% Brokerage: IL&FS Investsmart

Pyramid Saimira Theatre (PSTL), a leading exhibitor based in South India is expected to emerge as India’s largest fully integrated media company with business interests in production, distribution and exhibition.

PSTL has successfully demonstrated its ability to enhance revenues and realise operating efficiencies while ramping up at a fast pace. The company’s revenues and net profit are expected to record a CAGR of 151 per cent and 254 per cent respectively through FY07-09E. IL&FS Investsmart has put a BUY recommendation with a target price of Rs 736.

The stock at the recommended price of Rs 417 is valued at PE multiple of 18 times FY08 and 9 times FY09E estimated earnings.

GMR INFRASTRUCTURE Reco price: Rs 235 Target price: Rs 358 Current market price: Rs 236 Upside: 51.7% Brokerage: Emkay Share and Stock Brokers

GMR Infrastructure has recently announced the placement of 165.23 million shares at a price of Rs 240 to QIB's. The company has raised Rs 396.6 crore through the issue and would result in the equity base being expanded by 9.08 per cent post dilution.

The funds raised from this issue would be utilised for capital expenditure of its various projects. The fair value for GMR Infrastructure is based on the DCF value for each of the projects.

Though the equity dilution does not in any way change the fair value of the company, the per share value stands reduced on account of the increase in the equity capital. We revise our target price to Rs 358. The target price is based on the embedded value of each of the projects.

VARUN SHIPPING Reco price: Rs 87 Target price: Rs 106 Current market price: Rs 83 Upside: 27.7% Brokerage: Angel Broking

Varun Shipping is one of the safest bets in the shipping industry, given higher stability in its revenues. Further, Varun Shipping has been consistently declaring dividends over the past many years.

The company is expanding its asset base and business operations in the offshore support services segment to explore newer opportunities in energy. Varun Shipping had allocated $400 million for expansion of fleet. Of this, it spent $320 million in the last one year with the addition of five vessels.

Most of the vessels acquired over the last 3-4 quarters are expected to contribute fully to the revenue 2HFY2008 onwards. At recommended price of Rs 87, Varun Shipping is trading at 5.8 times and 5.3 times FY2009 and FY2010 estimated earnings. The brokerage puts a buy recommendation with a 12-month target price of Rs 106.

HERO HONDA Reco price: Rs 702 Target price: Rs 745 Current market price: Rs 693 Upside: 7.5% Brokerage: Religare

According to the brokerage, Hero Honda is aggressively capturing market share in economy and premium segment. This is further expected to improve its market share to 18 per cent in the near term in the premium segment.

Also, on the back of attaining high degree of localisation of components and with the expectation that prices of nickel, aluminium will remain soft, EBIDTA margins are expected to improve.

Further, the company has indicated that it has lined up its new product and variant launches for motorcycle and scooters till FY10.

The brokerage house has increased its revenue and margin estimates on the back of recent developments in the company. With the revised estimates, the target has been raised to Rs 745. At the recommended price the stock is valued at 15.4 times FY08 and 13.7 times FY09 estimated earnings.

CORE PROJECTS AND TECHNOLOGIES Reco price: 400 Target price: NA Current market price: 412 Upside: NA Brokerage: ICICIdirect

Core Projects and Technologies a pure IT company with interests in verticals such as education, logistics and healthcare, is set to capitalise on the education boom across the globe with its strong product portfolio.

The company has successfully acquired seven companies in the past two financial years across various verticals and products. This has helped the company triple its revenues in FY07 with the acquired companies contributing more than 65 per cent to revenues (Rs 194 crore) and net profit (Rs 33.37 crore).

The company’s inorganic growth strategy has helped it to penetrate newer geographies and cross-sell products and solutions to new clients. The company is expected to continue to grow inorganically and acquire companies having strong products in the US and UK.

Core Projects has signed an agreement with the CHL at NASA’s space centre for delivering educational content exclusively to the Asia-Pacific region.

The company has also signed a MOU with IL&FS and the Indira Gandhi National Open University (IGNOU) to create education content. At the recommended price of Rs 400, the stock trades at 55 times FY08 and 29.3 times FY09 estimated earnings.