Year: 2007

HSBC Global Research in a report has said that it is overweight on Jyoti Structures Limited with a price target of Rs 254.

The stock corrected 10% in last week’s trading. This fall should be taken as an opportunity to buy the stock. HSBC is positive for the following reasons.

• Strong order backlog of INR23bn which is 2.3x of FY07 sales
• Based on current order backlog and buoyancy in the power transmission line, expect sales CAGR of 30% for the period of FY07-FY10e
• Expect EBITDA margin to improve on improved execution and expect EPSCAGR of 35% for the period
• Q1 FY08 results confirms our forecast with sales growth of 34% and EPS growth of49% y-o-y due to improvement in EBITDA margins

The new target price – INR254 is the mid-point of DCF fair value INR201 and PE multiple based fair value of INR307. You can send comments and suggestions to feedback @ dalalstreet.biz

Citigroup Research has recommended an Exit on India’s premier pharmaceuticals company Cipla. Citi’s target price is Rs 191 a modest 11% over CMP of Rs 171.

Cipla indicated that its PAT may be lower in FY08 due to rupee appreciation, higher cost of imports from China and pricing pressures. Cipla plans to incur capex of around Rs9.5bn over FY08-09 primarily on its facilities in Sikkim, Goa and Indore. With profitability under pressure this will take a heavy toll on return ratios.

Guidance of 10-12% sales growth and lower profits in FY08; tie up for 125 products across 10 partners in the US/ 94 ANDAs filed and expects to file 20-25 in FY08. Cipla is a steadily growing company, thus P/E based valuation is the right tool for the company. Target price of Rs191 is based on 20x June 08E earnings. Historically, the stock has traded at 15-30x forward earnings. Although Cipla is an Indian pharma major, Citi believe it should trade at a marginal discount to peers in the sector, justified by the lower value addition to the business.

Update on Aug-29th:
Citi has downgraded the target price of Cipla to Rs 165 and also revised EPS estimates for FY08 to Rs 7.93 a fall of 7.7%.

HDFC Securities which advised a BUY on Bartronics India Ltd [BIL] at Rs 98 is asking its investors to HOLD the stock at Rs 175 levels or BUY additional quantity in the price range of Rs 121 to Rs 143.

Bartronics reported sales of Rs. 25.43 cr in Q1FY08 vs. Rs. 12.27 cr in the corresponding quarter last year. This jump of 107% can be attributed to the doubling of sales in the AIDC segment. AIDC sales mainly comprise of Barcoding and the RFID (Radio Frequency Identification) business. This quarter, RFID sales contributed about 35% topline and the remaining 65% of revenue was from the traditional barcoding business.

EBITDA margins have remained in the same range y-o-y, where as sequentially they have dropped by 720 basis points. This is because in Q4FY07, RFID contributed 52% to net sales vis-a-vis 35% in this quarter. Thus, a fluctuation of margins may be observed quarter on quarter, but the margins on a whole year basis could remain steady in the 25% – 28% range. About 40% of BIL’s revenue this quarter was through exports. The strengthening of the Indian Rupee vis-a-vis the dollar does not impact BIL’s performance significantly because BIL has a natural hedge as it currently imports the chips and hardware.

As of June 2007, BIL is an almost debt free company except for a term loan of Rs. 5 cr and working capital loans of about Rs. 11 cr from the Bank of Baroda.