2007 | Dalal Street

Zylog Systems – Review and Recommendation

July 24, 20071 min read

Zylog Systems is promoted by first generation entrepreneurs Sudarshan Venkatraman and Ramanujam Sesharathnam. It is a global services provider with major focus on application development and integration including web application, web services, application integration, business Intelligence, data warehousing and mobile and wireless applications; enterprise infrastructure management and quality assurance & testing.

Zylog is a very small company 1/15th the size of Infosys. The company has business concentrations in the same verticals as Infosys does.

Current Offer:
36,00,000 Equity shares within the price band of Rs 330 to Rs 350 aggregating mere Rs 126 crore.
Fully Diluted Equity Post IPO = 1.65 Crore Equity Shares of Rs 10 each.

Valuations:
At the price band of Rs 330 – Rs 350, FY 2007 EPS (on post-issue equity) of Rs 33.2 is discounted 9.9-10.5 times.

The stock looks reasonably valued and leaves good scope for appreciation. Since the issue is very small, Investors who are lucky and have chances of allotment can blindly subscribe to the IPO. Even the fate of Rs 100,000 application will be decided by lottery. The stock will be easily listed upwards of Rs 525 as the Grey Market Premium is upwards of Rs 150.
Good Luck!!!

Breaking Corporate India Earnings News

ABG Shipyad + RPG Cables Orders

July 24, 20071 min read

ABG Shipyard has secured a major order for construction of 12 vessels of approximately 32,000 DWT, for a total price of US $ 360 million (Rs 1460 crore) from Precious Shipping, Thailand, as a part of its ship acquisition programme.

RPG Cables has received an order for supply of PIJF cables from Mahanagar Telephone Nigam (MTNL). The total value of the order is Rs 33.31 crore and this is required to be completed by November, 2007.

Economy, Markets and Macro Views

Reliance hints of fertiliser foray

July 24, 20071 min read

Mukesh Ambani managed Reliance Industries Ltd [RIL] is planning to build the biggest greenfield fertilizer capacity in the country. The company has submitted a proposal to the fertiliser ministry to set up a manufacturing plant of global scale, up to four million tonnes.

RIL has proposed to use some of the Krishna-Godavari gas as feedstock bought at market prices. The company has been facing a huge backlash from fertiliser and power companies over the gas price it is offering them. Now, plans are afoot to take up the challenge by becoming a fertiliser player itself.

The scrip hit a high of Rs 1,932 today, 24 July 2007, also its all-time high.

Breaking Corporate India Earnings News

Modern Dairies 1:1 bonus

July 24, 20071 min read

At its upper circuit limit, the scrip touched its all-time high.

The dairy products maker announced a liberal bonus of 1:1 after market hours yesterday, 23 July 2007.

The scrip had touched a low of Rs 49.05 so far during the day. Its 52-week low was Rs 15 on 20 November 2006. At the current price of Rs 49.05, the scrip trades at a PE multiple of 15.67, based on the year ended March 2007 EPS of Rs 3.13.

The Modern Dairies scrip had gained 70.36% in the one month to 20 July 2007 versus the Sensex’s 7.35% gain. It added 101.13% in the past three months against the Sensex’s 12% return.

Breaking Corporate India Earnings News

Satyam Computer plans for South Africa

July 24, 20071 min read

Satyam Computer Services has announced strategic initiatives to strengthen its presence in South Africa.

The company is banking on a sizable number of contracts emanating from South Africa in the coming years and sees potential in providing IT solutions to the banking & financial, energy & utilities and government sectors.

As part of its global strategy, the company has also recruited and trained 50 South African technical graduates in the last one year. The first batch of 20 has been successfully deployed in projects in South Africa. Essentially an employment and skilled enablement program supporting the RSA’s BEEC, the company plans to hire almost 200 more local technical graduates, train them in India and bring them back to South Africa to associate with various customer projects.

Currently, the company serves 6 of the largest firms in the country, employs over 120 technical resources at customer locations and has offices in Johannesburg and Cape Town.

Equity Research

Buy Orchid + Unichem – Sharekhan Research

July 24, 20072 min read

Sharekhan Equity Research is bullish on the prospects of Unichem Laboratoriess and Orchid Pharma. Sharekhan has a BUY recommendation with a price target of Rs 360 and Rs 375 respectively.

Unichem Laboratories:
For Q1FY2008 Unichem Labor atories (Unichem) has reported a sales growth of 12.1% to Rs153.5 crore, which is lower than expectation of Rs165 crore. The growth was subdued largely due to a sharp 18.8% decline in the company’s exports on account of the appreciation of the rupee.

Unichem’s strong brand building efforts, the continued momentum in its power brands and therapy focused marketing initiatives have caused the domestic formulation business to perform in the quarter. The revenues from this segment grew by an impressive 20.9% to Rs126.8 crore.

Unichem’s operating profit margin (OPM) expanded by 80 basis points to 22.4% in the quarter. The management has also indicated that such a high growth rate for this business might not be sustainable going forward. The company expects the growth to moderate in Q2FY2008, due to DPCO-related price cuts imposed on its largest brand Ampoxin towards the end of Q1FY2008. However, a conservative 11.5% growth in this business in FY2008E is doable and remain optimistic about the company’s ability to beat estimates.

At the current market price of Rs245, Unichem is trading at 8.6x its estimated FY2008 earnings. BuyUnichem, with a price target of Rs 360.

Orchid Pharmaceuticals:
Orchids top line grew by 18.1% year on year (yoy) to Rs238.2 crore in Q1FY2008. The top line growth was above estimates of Rs223.2 crore. Orchids operating profit margin (OPM) expanded by 110 basis points to 29.9% in Q1FY2008. On the other hand, the rising R&D costs (due to FTF filings) and increasing staff costs adversely impacted the margins. On a like-to-like basis (excluding the Rs10 crore incremental cost incurred on FTF filings), the margin expansion would have been even more robust at 530 basis points to 34.1%. Consequently, the operating profit grew by 22.8% to Rs71.2 crore in Q1FY2008.

At the current market price of Rs234, Orchid is quoting at 9.9x its estimated FY2009 earnings, on a fully diluted basis. In view of the bright prospects for the company, Sharekhan retains positive stance on the stock and maintain a Buy call with a price target of Rs 375.

Kotak has a price target of Rs 300 on Orchid Pharmaceuticals.

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