Year: 2007

Breaking News:
The management of Tata Motors have indicated that they will unlock the value of its subsidiaries – HV Transmissions Ltd and HV Axles Ltd through an IPO or sale to outside party.

After the London Investors Conference, Citi still maintains a BUY – Low Risk with a target price of Rs 1029 on the stock.

Management guided to a modest revival in truck sales into 2HFY08E, implying that overall sales for the fiscal should be flat, or register modest growth. Truck operators’ profitability remains healthy, despite the rise in interest rates. Freight rates also continue to remain stable.

Rs80bn will be deployed over the next 3 years to launch new platforms in passenger cars and trucks. The small car remains on schedule and will be launched in mid-CY08 (1HFY09E). Management stated that TAMO will start the process of demerging its subsidiaries by end FY08E – with HV Transmissions and HV Axles being the businesses to be initially listed.

12-month target price of Rs1,029 is based on a sum-of-parts valuation methodology. Tata Motors’ core business at Rs 827 / share, which is based on 9.2x FY08E EBITDA. The subsidiaries are valued at Rs201 / share.

During the August Market Crash, we had recommended to HOLD Bartronics Stock at Rs 175. The stock since then has swiftly moved up to Rs 250. ICICI Research has initiated coverage on Bartronics with a price target of Rs 335, potential upside of 38% from current levels.

Bartronics India Ltd (BIL), one of the first Automatic Identification and Data Capture (AIDC) solutions company. It is investing more than Rs 270 crore
into a new 80-million smart cards manufacturing facility, that would make it one of the biggest players in South Asia and enable revenue growth by 130% CAGR over FY07-09E. Having an order book for more than 100 million smart cards over next two years is expected to generate 3.5x FY07 revenues from this segment alone.

The Indian Retail Growth story is intact and BIL has tied up with Intel and designed products and solutions for point of sales having starting price from Rs 32,000 onwards. These products are more than 20% cheaper to ones used by the industry currently and also more complex, which gives the retailers like Reliance, Big Bazaar, Subhiksha and others a huge advantage.

Currently, the stock is trading at 10.32x FY09E earnings and 6.23x FY09E EV/EBIDTA, which is very attractive. Most of the global players are trading between 15-28x FY09E earnings. Using this method, the stock can be valued at Rs 340, 15x FY09E diluted EPS of Rs 22.66.