Year: 2007

Indo Borax and Chemicals Ltd. (IBCL), is in the business of manufacturing inorganic chemicals like boric acid, borax and 2 new value-added products – eco borax and glaze bore.

Falling prices of its main raw material – imported boron ore – due to the appreciating Rupee and new mines opening up in East European countries could help IBCL boost its EBIDTA margins. IBCL caters to diversified fast growing user industries like glass, ceramics, pharmaceutical, electroplating, leather, etc, each of which is on a high growth path. IBCL has raised prices of all its products by 15-25% since Oct 01, 2007. This could push its revenues and margins significantly from 2HFY08 onwards. (more…)

Morgan Stanley has taken the lead to re-rate JP Associates shedding the conservative valuations it enjoyed. They have changed 12 month target price to Rs 1,461 and earnings estimate for FY08 and FY09 are Rs 22.7 and Rs 29.2.

The company reported F2Q08 results in line with estimates, with revenue and net profit growing 11% and 16%, respectively, led mainly by the cement business. Expect construction and real estate to pick up the growth mantle as cement starts to struggle in F2009 . Also incorporated a 7.4% dilution due to the conversion of the second tranche of FCCBs (euro-denominated) issued by Jaiprakash, which results in our EPS numbers for F2008 and F2009 moving up by only 9.1% and 1.8%, respectively, despite increases in net profit forecasts of 12.9% and 9.1%

Sum of Parts Valuation of JP Associates,

• Construction Business – Rs 395
• Cement – Rs 435
• Power – Rs 197
• Hotels – Rs 13
• Taj Expressway – Rs 394
• Jaypee Greens – Rs 28

On the back of value in its sum of the parts, which includes option value for full development of Taj Expressway implies upside of 47% from current levels.

DSP Merill Lynch also said, raised Price Objective to Rs1,530 from Rs985 based on the value creation across businesses.

Allahabad Bank’s profit growth of 14% Y-o-Y at INR 2.4 bn in Q2FY08 was ahead of expectations. However, this growth was buoyed by lower tax provisioning (10%) and higher treasury gains (INR 359 mn). Core business performance remained muted with merely 17% Y-o-Y growth in advances and lower-than-expected growth in net interest income at 13% Y-o-Y. The bank’s pre-provisioning operating profit grew by 23% supported by strong treasury gains and a 40.9% growth in the trading income yoy.

The operating expenses grew by a moderate 11.1% yoy which helped the bank in reporting a better operating profit growth of 23.2% yoy. The core operating profit growth was at 19.3% yoy but declined by 13% sequentially. The asset quality remained stable on a sequential basis with the net non-performing asset (NPA) at 0.75% as in September 2007.

At the current market price of Rs95, the stock is quoting at 4.4x its FY2009E EPS, 2.8x PPP and 0.9x BV. One can BUY the stock with a price target of Rs125 and can also hold for long term.

Sona Koyo Steering Systems (Sona Koyo) declared another set of good numbers with an 18.8% growth in revenues at INR 1.65 bn in Q2FY08. EBITDA stood at INR 177 mn, up 33% Y-o-Y, with EBITDA margins improving 110bps Y-o-Y and 20bps Q-o-Q. The company’s net profit for the quarter stood at INR 87.9 mn, up 38.2% Y-o-Y.

Capex for its greenfield plants at Singur and Uttaranchal is on track; the company expects them to come on stream by H2FY09E. It is also setting up a third plant at Bawal, Haryana, as part of its recent 49:51 JV with JTEKT, called JTEKT Sona Automotive India.

The company has shifted its focus towards the more profitable European markets, and deferred some export orders to the US. Valuations for Sona Koyo are still attractive given its healthy topline growth with improving margins. At CMP of INR 44, the stock is trading at a P/E of 11.5 and 8.8 on our EPS estimate of INR 3.8 and INR 4.9 for FY08 and FY09, respectively.

Existing investors can hold and add on market corrections.