Blue Star, Ruchi Soya, Simplex Infra, Kalyani Steel, Pyramid Saimira

Blue Star
CMP: Rs 535
Target price: Rs 593
Kotak Securities has a ‘buy’ rating on the central air-conditioning systems major Blue Star, as it feels it will report handsome earnings growth over the next two years (CAGR of 78% between FY07 and FY09). The company being in a position to offer the best requirement for central as well as commercial refrigeration equipment enabling it to maintain a leading market position in this segment, remains one of the key reasons for its bullishness.

The brokerage also feels that the stock is a play on structural themes like IT/ITeS and retail. However, the brokerage warns that appreciation in the rupee and slowdown in IT/ITeS services remain key concerns. Kotak calculates that at the current price, BSL is trading at 25.1x and 19.3 times FY08 and FY09 earnings, respectively, and on a forward EV/EBITDA basis, the stock is trading 12.6 times.

Ruchi Soya
CMP: Rs 144
Target price: Rs 193
KR Choksey Securities has reiterated its ‘strong buy’ recommendation on Ruchi Soya Industries (RSIL) and revised upwards its estimates and target price. “We strongly believe RSIL is grossly undervalued considering the various growth drivers of its existing business and new ventures,” the brokerage said in a note to its clients. It says that its belief in the growth prospects of the company is substantiated by the fact that the management of RSIL is increasing its stake in the company by way of a preferential allotment.

It estimates that India has one of the lowest per capita consumption of oil in the world, but rising income levels, emanating from general economic growth, is leading to an increase in consumption which should augur well for the company. Taking into consideration the consistently high growth in branded revenues, sustainable revenue
visibility and improvement in profitability, the brokerage believes RSIL deserves the valuation of an FMCG company.

Simplex Infra
CMP: Rs 692
Target price: Rs 754
Ambit Capital has a ‘buy’ rating on Simplex Infra on the basis that the company’s two recent equity issues would lead to an increased net worth and reduced financial leverage. “The risk of high debt-to-equity would now take a back seat, as it would come down from 2.5 times in FY07 to 0.7 times in FY08E.

The reduction in financial leverage would lead to a reduction in the extremely high interest payments and thus increasing earnings for the company on a net level,” the brokerage feels. Considering the robust order book position (of Rs 8,100 crore), improved debt-to-equity levels and improved working capital position, Ambit has remodeled its numbers for FY08E and FY09E, with an increase of 10.8% and 22.8% in net earnings for two years.

Kalyani Steels
CMP: Rs 499
Target price: Rs 771
Prime Broking says ‘it’s a no-brainer’ to figure out that the Pune-based company is a strong ‘buy’, based on the company’s expected growth in its core business and highly attractive valuations. The brokerage estimates that the company plans to expand its capacity at Hospet by 75% to 0.3m metric tonnes in FY08 at an outlay of Rs 300 crore, implying a 28% volume CAGR(compounded annual growth rate).

It says that KSL directly and through its 100% subsidiaries has substantial investments in group companies — Bharat Forge, Bharat Utilities and Hikal. At current market prices, the value of the KSL’s investment portfolio works out to Rs 633 per share, which is around 20% higher than the company’s current stock price. “Applying a holding discount of 30%, we have arrived at an investment value of Rs 443 per share,” the brokerage said.

Pyramid Saimira
CMP: Rs Rs 484
Target price: Rs 630
India Infoline says that investors should ‘buy’ the stock on declines as it could be a good long-term bet. The brokerage says that the com-pany, engaged in distribution and exhibition of films, plans to enter into movie making business with plans to make 40 movies in five lan-guages by FY09.

“We expect the subsidiaries of PSTL, Pyramid Saimira Production and Singapore-based Pyramid Saimira Entertainment to witness huge growth in coming quarters,” India Infoline said. The company’s capex plans also include development of 200 malls and 175 multiplex with around 2,000 screens by FY10. Recently, PSTL acquired Texas-based FunAsia an existing theatre and radio network in Chicago and Houston

Deepak Fertilizers, Simplex Infra, Syndicate Bank

Deepak Fertilizers, Simplex Infra, Syndicate Bank

Indiainfoline - Simplex Infrastructures Ltd.

Simplex Infrastructures Ltd.

BUY

CMP: Rs400

Simplex Infrastructures Ltd (SIL) is a 82-year contracting company with a profit making track record since inception. The reveals the quality of management and its focus on consistent bottomline generation. The company has also had the same auditor, ‘Price Waterhouse’, since the year 1947 when the Mundhras’
took charge, which could be seen as an indication of healthy accounting practices.

Well diversified with Rs47bn order book SIL’s order book is a well diversified one with no vertical accounting for more than 30% of the company’s turnover. The order book/FY06 sales at 3.5x offers visibility given the average execution period of 1.5 years. Backed by a healthy order book and an estimated order intake/execution of 1.7x in FY07, we expect
SIL to witness a CAGR of 45.4% in topline during FY06-08.

Big plans for the overseas market SIL earns close to 10% of its total revenues from work overseas and plans to increase this proportion to 40% in the next four years, in order to diversify geographically as well. It also expects margins to be higher by 100-200bps overseas. The company is presently executing orders in Doha, West Indies and Bahrain and has presence in many other countries too.

Targeting new verticals SIL is planning a foray into road BOTs, mainly for annuity projects. It will also work on the feasibility of BOT/EPC projects in power T&D, power generation, ports, railways, real estate development and industrial construction, in its bid
to become a US$1bn company in the next five years.

The company raised close to Rs1bn through a preferential allotment to Chrys Capital and plans for another GDR/FCCB worth US$200mn, not factored into our workings, to meet its future fund requirements.

The SIL stock is trading at a P/E of 15.5x FY08E earnings. These are attractive valuations for a company expected to witness a CAGR of 63.2% during FY06-08. The market capitalization is at 0.3x its order
book, which is low and leaves scope for an increase. We recommend a BUY with a one-year price target of Rs459.

Edelweiss - Simplex

Dwonload here