Motilal Oswal - Bharat Forge

Recommends Buy On Bharat Forge @ 326 With Target Price 347

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Motilal Oswal - Infotech Enterprises

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Motilal Oswal - Wipro

Recommends Buy On Wipro @ 369 With Target Price 437

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Dividend Yield - Oct 2005

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Motilal Oswal - Biocon

Recommends Buy On Biocon @ 495 With Target Price 520

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PBA Infrastructure - IPO

PBA Infrastructure
Narrow focus

The mainstay - road construction - is low margin and highly competitive and the presence in only state- Maharashtra- risky

PBA Infrastructure, incorporated as Prakash Building Associate Pvt Ltd in 1974, specialises in constructing roads. The company has envisaged that it will require Rs 32.12 crore to undertake road construction projects that is may bid for and bag. Of this, it plans to raise Rs 2.12 crore through internal accruals, Rs 10 crore will be earmarked as seed capital requirement for BOOT/BOT projects, Rs 10 crore for the purchase of machinery, and Rs 10.12 crore to enhance the working capital margin money.

Strengths

• Road development is the largest and the fastest growing infrastructure segment. The value of contracts executed by PBA Infrastructure in the last five years exceeded Rs 350 crore. The projects were spread across the entire country. Currently, the company has an order book of Rs 564.01 crore, including Rs 172.42-crore orders received by its joint venture???.
• The Mumbai-based company has a good track record in bagging and executing road projects in Maharashtra. In the current five year plan (10^th plan) 2002-07, the plan outlay of Maharashtra for road projects, at Rs 1869 crore, is second after Delhi. Therefore, the company is strategically placed to get and implement road projects coming up in the state.

Weaknesses

• Almost 90% of PBA Infrastructure's revenue comes from road projects, which are low margin and highly competitive.
• The balance sheet of the company is inadequate for taking up large projects.
• The company has considerable exposure to state-sponsored projects where credit risks are higher as compared to national-level and internationally financed projects. The significant business concentration in Maharashtra can pose a problem if the state's finances suffer.
• The experience of the company in executing BOT/BOOT projects, which is subject to uncertainty, is negligible. The BOOT project revenue led NOIDA Tool Bridge Company is yet to show profit even after four years of execution of the project.

Valuation

In FY 2005, PBA Infrastructure's sales stood at Rs 124.32 core and net profit Rs 6.58 crore. EPS on post-issue equity works out to Rs 4.9. The issue price of Rs 60 discounts this 12 times. Due to its over-dependence on low margin run-of-the mill road projects and small size, the company may not get higher discounting. However, construction stocks have seen speculative buying on news and rumours of order flows. PBA may also benefit from this on listing.

Bannari Amman Spinning Mills - IPO

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Bannari Amman Spinning Mills - IPO

Richly priced

Potential will be realised only after the completion of expansion and diversification

Bannari Amman Spinning Mills (BASM), part of the Rs 1200-crore Coimbatore-based Bannari Amman group, manufactures cotton yarn and fabric. Its 29,232 spindles manufacture cotton hosiery yarn in the count range of 20s and 40s and has a weaving unit with 28 looms. A wind-based 5-MW captive power plant meets its power requirement.

BASM plans to add 75,000 spindles to take the spinning capacity to 1,04,832 spindles and 60 looms to take the installed capacity to 88 looms. The capacity of the windmill is to be increased to 15.4 MW. Moreover, the company intends to set up a processing capacity of 30,000 metres per day and a home textile/ garment capacity of 8 lakh units. While the expansion in the processing capacity will be completed by April 2007, the other expansion and diversification are expected to be over by May 2006.

The expansion cost of around Rs 290 crore is proposed to be met partly by debt and equity. UTI Bank has sanctioned a term loan of Rs 175 crore under the Technology Upgradation Fund Scheme(TUFS). The remaining portion is to be financed by the present IPO and internal accruals.

Strengths

• BASM's focus on cotton is in tune with India's strength in this area of textiles. Lower cotton prices have improved the business environment.

• The increase in the capacity of the windmill plant from 14.80 million units to 41 million at a cost of Rs 50 crore will meet 68% of the total power requirement.

Weakness

• The post-quota regime has opened various opportunities for the domestic textile industry. However, exports form only 24% of the revenue of BASM. In fact, export contribution has come down by 11% year-on-year from Rs 19.07 crore in FY 2004 to Rs 16.90 crore in FY 2005.

• BASM claims that it will be an integrated unit after the current expansion. But the weaving unit has a capacity to consume only 3,500 kg of the 45,000 kg of yarn that will be produced by the spinning unit. This means only 8% of the yarn produced will be used in the next stage and the remaining sold in the market.

• At present, BASM exports only yarn. Though the specialised fabric it produces is not exported, the company intends to participate in international trade fairs in future.

Valuation

BASM made a net profit of Rs 11.53 crore on sales of Rs 72.17 crore in FY 2005. EPS on post- IPO equity works out to Rs 7.3. The shares are being offered in a band of Rs 115 to Rs 135 at a P/E of 16 to 18 times against the sector TTM P/E of 13.5. Till the projects are commissioned and expected benefits materialise, the market price may not sustain above the offer price even at the lower band.

Motilal Oswal - Banking

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GIPCL - FPO

Way2Wealth recommends SUBSCRIBE on GIPCL

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Sharekhan - Investor Eye

ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs650
Current market price: Rs525

Earnings momentum sustained 

Result highlights

• ICICI Bank reported a strong 39.2% year on year (y o y) and a 12.0% quarter-on-quarter (q-o-q) growth in its net interest income (NII) on the back of a strong growth in its advances.
• The strong growth momentum in the bank's fee income continued—during the quarter the fee income grew by a strong 31.0% yoy.
• The operating profit for Q2FY2006 grew by 38.9% yoy to Rs1,044.1 crore. Notably the core operating profit grew by an even stronger 40.3% yoy.
• The bank's board has given an approval for raising approximately Rs8,000 crore from the Indian as well as the overseas markets to fund the bank's growth and for the capitalisation of the bank's subsidiaries. We expect the issue to boost the FY2006E book value of the bank to Rs250 per share. However, the return on equity will take a marginal hit for a couple of years.
• We maintain our Buy recommendation on the stock with a price target of Rs650.

Sintex Industries 
Cluster: Apple Green
Recommendation: Buy
Price target: Under Review
Current market price: Rs129

Wait and watch 

Result highlights

• Sintex Industries Ltd's (SIL) revenues grew by a robust 35.4% in Q2FY2006 to Rs178.4 crore on the back of the strong performance of both the Textile and the Plastic divisions. 
• The Plastic division reported a year-on-year (y-o-y) revenue growth of 31.5% in the quarter to Rs124.4 crore. The margins improved yoy by 140 basis points to 12.5%. 
• The Textile division's performance was good with a 46.7% growth in the revenues to Rs57.0 crore. The sales to Canclini (a joint venture) continued its growth momentum. 
• The fall in the operating margins at 17.8% in the quarter, down by only 40 basis points, was mainly triggered by the realisation pressure in the textile business. 
• The profit after tax (PAT) growth was robust at 119.6% in the quarter to Rs16.3 crore, driven by the strong performance in both the businesses and the higher other income in the quarter at Rs6.0 crore. 
• The earnings for the quarter stood at Rs1.8 per share, in line with our estimates.
• SIL's board has approved a proposal of sub-division of one equity share of Rs10 paid-up into 5 equity shares of Rs2 each. The stock exchange has affected the stock split with effect from October 10, 2005.
• The stock is reasonably valued at a PER of 14.0X FY2007E (considering the equity dilution of 13.8%) and EV/Ebidta of 7.7X FY2007E- considering that all the possible organic growth triggers are factored in our earnings estimates of FY2007E.

 

Tata Tea 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,040
Current market price: Rs798

Too small a size 

Tata Tea's (TTL) subsidiary, Tetley US Holdings Ltd, has bought two US-based companies Good Earth Corporation (GEC) and FMALI Herb Inc (FHI). GEC owns the Good Earth brand, which is licenced to FMALI Herb Inc. GEC has a turnover of approximately $16 million (Rs70 crore) and the deal size is expected to be at two times the revenues at $32 million (Rs140 crore).

Motilal Oswal Reports

ICICI Bank

Mastek

Control Print

Crompton Greaves

TCS

Bharti Televentures

Motilal Oswal - Ranbaxy

Motilal Oswal Recommends Sell On Ranbaxy Labarotories @ 458

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Motilal Oswal - GIPCL - FPO

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Motilal Oswal - Infosys

Motilal Oswal Recommends Buy On Infosys @ 2684 With Target Price 2930

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