Strides Arcolabs

Strides Arcolabs

Strides Arcolab

Strides Arcolab

Strides Arcolab

Strides Arcolab

Strides Arcolabs

Strides Arcolabs

Strides Arcolab

Investors with medium-term perspective can consider buying Strides Arcolab stock.

The structural down trend that commenced in February 2007 at Rs 396, appears to have halted around Rs 60. The stock is in a nascent intermediate term uptrend since then that has yielded almost two-fold gains.

The stock has not succumbed to the correction witnessed in the market over the last two weeks and the recent uptrend has been backed by good volumes during the advancing weeks. It is currently holding well above its 50 and 200 day moving averages and both daily and weekly momentum indicators are showing strength.

In medium-term, Strides Arcolab stock has the potential to move up to Rs 205 where the key resistance is pegged.

Medium-term investor can buy with the stop at Rs 118. Short-term traders can buy with a target of Rs 163 and stop at Rs 139.

via BL

Strides Arcolab

Strides Arcolab

Stocks you can pick up this week

Videsh Sanchar Nigam
Research: ICICI Securities (June 8, ’07)
Rating: Sell
CMP: Rs 451.15 (Face Value Rs 10)

Tariff pressure, coupled with declining market share in the voice segment, will affect VSNL’s domestic operations. The company’s international operations and new initiatives in the retail segment will continue to hamper profits in the near to medium term. ICICI Securities initiates its coverage on VSNL with a ‘sell’ rating and estimates that though its international presence and retail venture may provide impetus to the topline, it will hamper margins in the medium term. Competitive pressures, coupled with a decline in tariff, also will dent VSNL’s margins. Although the company has taken some initiatives on cost management, EBITDA margins could improve marginally from 12.2% during FY07 to 14% during FY09. Higher debt to fund capex on account of low profitability and high interest will keep the free cash flow under pressure.

ITC
Research: CLSA (June 7, ’07)
Rating: Underperform
CMP: Rs 150.70 (Face Value Re 1)

Itc has underperformed the market by 6% over the past 10 days following news that Uttar Pradesh (UP) is levying higher tax on cigarettes. The 32.5% trade tax levied by UP is not a big cause of concern as it merely raises the weighted average value-added tax (VAT) from 12.5% earlier to 13.7%. However, this raises doubts about whether other states will follow suit. While this is unlikely, given the spirit of the VAT regime, there is potential for more negative news. UP is one of the few states that has still has not joined the VAT regime. This regime was introduced to ensure a unified tax regime across states However, states always enjoy the power to change the tax rate on individual product categories in an asynchronous manner. UP’s example may embolden some of the rogue states to follow suit and raise taxes on tobacco. Hence, the worst may not be over for ITC.

NIIT
Research: Citigroup (June 7, ’07)
Rating: Buy
CMP: Rs 892.80 (Face Value Rs 10 )

The upswing in the domestic retail training business remains intact. NIIT’s quarterly result was lifted by strong growth in China. The company has raised fees for most of its courses — CATS by 8-15%, 3-year GNIIT by 18% and ANIIT by ~15%. The recently launched NetworkLABS has received good response and the company plans to roll this out in large cities during this fiscal. NIIT expanded its capacity by 18% during FY07 and expects to further expand capacity by 10-12% over the next two years. This capacity expansion supports Citigroup’s thesis of industry upturn as NIIT has expanded its capacity for the first time in the 4-5 years. The company looks well-positioned to benefit from growing concerns over the supply of talent. In this context, Citigroup expects strong business momentum in the retail training business in India.

Glenmark Pharmaceuticals
Research: HDFC Securities (June 6, ’07)
Rating: Buy
CMP: Rs 675.70 (Face Value Rs 2)

HDFC Securities expects the company to achieve remarkable growth in revenue and net income in coming years due to a strong research pipeline, which will fetch it high returns from out-licensing deals. At the end of FY07, the company had 13 products in the US market and 36 ANDAs pending approval. These will help sustain its growth in the US market. With acquisitions expected in central and eastern Europe, revenues will start flowing in from FY08. The changing business mix will also help improve its margins, going forward. Based on an estimated EPS of Rs 39.2 for FY08 and Rs 50.3 for FY09, the stock currently trades at a forward P/E of 17.4x and 13.6x, respectively. Looking at the company’s capabilities and strong business prospects, the stock is cheaply valued, as per HDFC Securities.

Strides Acrolab
Research: Kotak Securities (June 6, ’07)
Rating: Buy
CMP: Rs 329.55 (Face Value Rs 10)

Strides Acrolab (SAL) is engaged in the manufacture of ethical pharmaceuticals products, over-the-counter products and neutraceuticals. Its products include soft-gel and hard-gel capsules, tablets and dry and wet injectables. Kotak Securities initiates coverage with a ‘buy’ rating and estimates that revenues will grow by 25% in FY08, led by export growth. Operating margin is expected to improve by 370 bps due to improved product flow and higher capacity utilisation. The company has capex plans of about $30 million over the next two years. SAL’s focus on the HIV AIDS, TB and malaria businesses, its big product pipeline in soft-gel capsules and capacity expansion plans are its key growth triggers.

Aban Offshore
Research: Merrill Lynch (June 6, ’07)
Rating: Buy
CMP: Rs 2842.25 (Face Value Rs 2)

Merrill Lynch forecasts that Aban’s earnings will jump 18x in FY07-FY10E, driven by an expanding rig fleet and rising day rates. There may be upside risk to day rates and therefore, to earnings and valuation. The global rig market is in the midst of a recovery since ’04. The drivers are high oil prices, rising exploration budgets and no major additions to an ageing fleet. Rig utilisation rate has risen to 90% and day rates are at record levels. New rigs are being built, but incremental demand will still be twice the new supply up to ’08. Merrill Lynch expects Aban’s EPS to surge to Rs 499 in FY10E from Rs 27 in FY07E. Expansion of the rig fleet from eight to 20 by FY09E will be one of the company’s earnings drivers. The other triggers will be rising day rates on existing rigs under new contracts and on new high quality rigs being added to the fleet. An income tax holiday enjoyed by its Singapore-based subsidiary ASPL, will also boost earnings. All new rigs are in ASPL.

Gail
Research: ASK Securities (June 5, ’07)
Rating: Buy
CMP: Rs 294 (Face Value Rs 10)

The domestic natural gas supply scenario is expected to improve (more than 240 mmscmd) over the next three-five years. Gail has already entered into MoUs with RIL and ONGC for marketing and supply of natural gas. Gail’s pipeline business is a cash cow for the company. Citing the improving gas supply scenario, Gail has announced a Rs 18,000-crore capex to increase its pipeline capacity from the current 130 mmscmd to 360 mmscmd in 4-5 years. Cash flows from new pipelines are expected to contribute around Rs 65/share to Gail’s fair value, making it an attractive long-term bet. Funding the pipeline capex will not be an issue for Gail, considering its low 0.1x debt-to-equity ratio. Even after factoring this capex (0.1x debt/equity for FY09E), Gail will be comfortably placed to finance its additional capex (around Rs 7,000 crore) for the proposed Assam gas cracker complex (Rs 5,600 crore capex) and exploration and production (E&P) over the next five years.

Kotak - Strides Arcolab, NIIT Ltd, Riddhi Siddhi Gluco Biols

Kotak - Strides Arcolab, NIIT Ltd, Riddhi Siddhi Gluco Biols

IDBI Capital - Strides Arcolab

Download here

Indiainfoline Updates

Biocon Limited: Not rated

Biocon Limited (Biocon), established in 1978, started as a manufacturer and exporter of enzyme. The company gradually shifted focus to a life science driven generic company with fermentation technology. Biocon is again going through a transition phase from being a generic company to a discovery led life science company. Statins sales to the US & Europe would be a major growth driver in the short term, while immunosuppresants, non-injectable insulin, Monoclonal Antibodies (MABs) and custom research will be Biocon’s drivers in the longer run.

However it will take some time for Biocon’s key growth drivers to start delivering. Sharp growth in immunosuppreants would be triggered when key patents expire in US/ Europe in FY08-10. Oral insulin is a big opportunity for Biocon but competition from established players may be higher than expected. Non-injectable insulin, a potential blockbuster is at least three years away from a potential launch. Biocon’s head & neck cancer molecule – BioMAB-EGFR has been launched successfully but it will take some time to realize the full potential of the market.

The only visibility in the near term is the continued growth momentum in the custom research space, which has witnessed revenue CAGR of 52% over FY01-06. Custom research projects are gaining increasing traction and are likely to maintain the current growth rate. At Rs358, the stock is trading at 20.9x H1 FY07 annualized earnings. We feel there is little downside to the stock from here but upsides could be capped unless key growth drivers start delivering earlier than expected.

Strides Arcolab Limited: Not rated

Strides Arcolab Limited (STAR) is one of India’s leading integrated manufacturers and exporter of finished pharmaceutical dosage forms with focus on niche molecules, which are difficult to manufacture or clinically difficult to prove efficacy. The company has significant presence in soft gels (18% of revenue) and sterile & immunosuppressant (32-35% of revenue). Semi-solids, another focus area, which could emerge as a significant growth driver for the company forms 10% of revenue. Finished dosage accounts for over 95% of the revenue for the company.

STAR has adopted a partnership model strategy for the regulated markets where it shares upsides and risks with its partners whereas it has set up its own front end for the semi regulated markets. STAR has 13 manufacturing facilities globally. The management has guided towards a 30% plus topline growth for CY06 and CY07 driven by increasing contribution from the regulated markets particularly America and Asia Pacific. Operating margins would start heading northwards as contribution from regulated markets increases. STAR is going through a consolidation phase post a series of acquisitions in 2006, full impact of which would be visible post H2 CY07. At Rs302, the stock is trading at 30.4x Q3 CY06 annualized EPS of Rs9.9.

Opto Circuits (India) Limited: Maintain BUY

Opto Circuits (India) Ltd (OCIL)’s operations for the core business and EuroCor are progressing in line with expectations. While the core business is expected to record 30% plus revenue CAGR to Rs2bn over FY06-08, EuroCor is on track to expand its geographical coverage to 36 countries by end 2006. However, net margins for EuroCor may be subdued in the short term on account of heavy advertising and promotional expenditure. OCIL has indicated that its products have started gaining preference with cardiologists who attended various seminars, conferences and live workshops conducted by the company. Appointment of Dr. O’Neill on board is likely to expedite the process for USFDA approval, but it is still 18-24 months away.

The management indicated that they would look at acquisitions, which could be a good strategic fit over the longer term and available at the right price. We believe OCIL would consolidate operations of EuroCor in the near term and focus on increasing penetration in key geographies. OCIL is also looking at conducting certain low-end manufacturing operations for EuroCor in India. As OCIL is under 100% EOU till 2009-10, tax outgo on those operations will be nil, which will again cut cost and boost margins.

We are confident that OCIL will witness revenue CAGR of 63% to Rs3.7bn over FY06-08. We estimate EuroCor to contribute at least 30% to the total revenue and profitability by FY08. The core business is also witnessing continuous demand for its products from the international markets. We firmly believe that the company is on track to witness earnings CAGR of 61.1% to Rs1bn over FY06-08. At Rs300, the stock is trading at 28.8x FY07E EPS of Rs10.4 and 18.4x FY08E EPS of Rs16.3. We maintain BUY with a target price of Rs326, from a 12-month perspective.

Bal Pharma Limited: Not rated

Bal Pharma Ltd. (BPL), a mid sized pharma company focused on the domestic and semi-regulated markets is jointly promoted by Mr. Ghevarchand Surana of Micro Labs Group, which has a turnover of over Rs.3bn, ranked No.20 in the Indian Pharma Industry and the Siroya family, a multi-million dollar non-resident group based in Dubai.

Bal Pharma clocked revenue of Rs746mn and PAT of Rs29mn for FY06. The management aims to clock revenue of Rs3-3.5bn over the next 4-5 years. For FY07 & FY08, the management has given a revenue guidance of Rs1bn and Rs1.35bn and profitability guidance of Rs60mn and Rs110mn respectively. At Rs39, the stock is trading at 6.8x FY07E and 3.7x FY08E.

Download here