ViJiT
Vijith Pujari
STOCK UPDATE
3i Infotech
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs244
Current market price: Rs174
3i Infotech acquires G4 Soft
3i Infotech has acquired 100% stake in the Mumbai-based G4 Software Technologies (G4) that specialises in providing enterprise application integration services and solutions in the niche areas of payment and back office exception processing services.
G4 has staff strength of 50 people and annual revenues of around Rs8.4 crore (or $1.8 million). It broke even at the operating level during the last fiscal. The acquisition has been made for a consideration of $1.1 million, which amounts to valuation of around 0.6x G4's annual revenues. It is a relatively small acquisition and would not have any significant impact on our FY2007 and FY2008 estimates for 3i Infotech.
International Combustion (India)
Cluster: Cannonball
Recommendation: Buy
Price target: Rs519
Current market price: Rs302
Outsourcing card plays out
ICIL's key end users like steel, sugar, chemicals, non-ferrous metals, and mineral and mining sectors are on an expansion binge. This translates into a huge opportunity for the company's products like sizers, screeners and feeders. With its market leadership position and quality product offerings ICIL is well placed to capitalise on the opportunity. Besides this ICIL is leveraging its ties with overseas companies to increase exports/outsourcing, with exports earning 25% of its revenues in the next three years.
ICIL is currently trading at a price/earnings ratio of 6.4x its FY2008E earnings and 4.0x its FY2008E enterprise value/earnings before interest, depreciation, tax and amortisation. We maintain the Buy recommendation on the stock with a price target of Rs519.
Tata Tea
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,040
Current market price: Rs798
Analyst meet takeaways
We attended the analyst meet organised by Tata Tea Ltd (TTL) last week after the acquisition of Energy Brands Inc (EBI) by the company. Even though the recent acquisitions of TTL have helped the company transform itself into a splendid branded beverage play, we believe that the funding issues with regard to the latest acquisition (EBI) will act as an overhang on the stock in the short term.
In the analyst meet, the management of TTL indicated that EBI's revenues for CY2005 were at $175 million instead of $350 million as was stated earlier. This puts the valuation of EBI at 12.4x its CY2005 revenues against the earlier valuation of 6.2x.
Deepak Fertilisers & Petrochemicals Corporation
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs126
Current market price: Rs83
IPA plant begins production
Deepak Fertilisers and Petrochemicals Corporation Ltd (DFPCL) has commenced production at its Isopropyl Alcohol (IPA) plant at Taloja. Here are some key points pertaining to the plant.
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The plant has been commissioned with a total investment of Rs154 crore.
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The current market size of the product in India is about 65,000 tonne per annum (TPA) with a growth rate of about 6-7% per annum. DFPCL also plans to begin strategic exports this financial year.
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The project is unique as it will be a gateway for the company to enter a ready 100% import substitute market and will synergistically utilise the company's marketing and distribution channel for methanol across fast-growing sectors like pharmaceuticals, agrochemicals, organic chemicals, imaging chemicals and paints.
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It is in line with the company's three-pronged strategy of maximising the existing asset-base, expanding core competence and diversifying into new sunrise sectors.
Godrej Consumer Products
Cluster: Apple Green
Recommendation: Buy
Price target: Rs205
Current market price: Rs177
GCPL completes acquisition of Rapidol
Godrej Consumer Products Ltd (GCPL) today completed the acquisition of the South African business of Rapidol, UK as well as its subsidiary Rapidol International. As announced in July 2006 GCPL had entered into an agreement to acquire these entities subject to certain regulatory approvals. These acquisitions give GCPL distinct advantages of (1) ownership of strong ethnic hair colour brands in ten countries and Rapidol's existing manufacturing base in Pinetown (near Durban), South Africa; and (2) an opportunity to introduce some of its products, which would include other hair colour offerings and the FairGlow and Evita soap brands in the African continent.
Subros
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs370
Current market price: Rs214
Annual report review
We believe Subros is a strong play on India's growing passenger car segment. Going forward, a strong growth in the volumes of its major clients, MUL and TAMO, and its efforts to expand its portfolio by supplying to M&M will maintain the momentum in its earnings growth. Further a sharp revival in the sales of small cars, particularly those of MUL and TAMO (Subros is virtually the only supplier to these OEMs), would beef up the volume growth. We remain positive on the company's prospects and expect its earnings to grow at a healthy compounded annual growth rate of 32% over FY2006-08. At the current market price of Rs214, the stock is trading at compelling valuations of 9x FY2007 earnings per share and 5.9x FY2008 earnings. It is available at a huge discount to its peers. We maintain our Buy recommendation on the stock with a price target of Rs370.
3i Infotech
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs244
Current market price: Rs174
3i Infotech acquires G4 Soft
3i Infotech has acquired 100% stake in the Mumbai-based G4 Software Technologies (G4) that specialises in providing enterprise application integration services and solutions in the niche areas of payment and back office exception processing services.
G4 has staff strength of 50 people and annual revenues of around Rs8.4 crore (or $1.8 million). It broke even at the operating level during the last fiscal. The acquisition has been made for a consideration of $1.1 million, which amounts to valuation of around 0.6x G4's annual revenues. It is a relatively small acquisition and would not have any significant impact on our FY2007 and FY2008 estimates for 3i Infotech.
International Combustion (India)
Cluster: Cannonball
Recommendation: Buy
Price target: Rs519
Current market price: Rs302
Outsourcing card plays out
ICIL's key end users like steel, sugar, chemicals, non-ferrous metals, and mineral and mining sectors are on an expansion binge. This translates into a huge opportunity for the company's products like sizers, screeners and feeders. With its market leadership position and quality product offerings ICIL is well placed to capitalise on the opportunity. Besides this ICIL is leveraging its ties with overseas companies to increase exports/outsourcing, with exports earning 25% of its revenues in the next three years.
ICIL is currently trading at a price/earnings ratio of 6.4x its FY2008E earnings and 4.0x its FY2008E enterprise value/earnings before interest, depreciation, tax and amortisation. We maintain the Buy recommendation on the stock with a price target of Rs519.
Tata Tea
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,040
Current market price: Rs798
Analyst meet takeaways
We attended the analyst meet organised by Tata Tea Ltd (TTL) last week after the acquisition of Energy Brands Inc (EBI) by the company. Even though the recent acquisitions of TTL have helped the company transform itself into a splendid branded beverage play, we believe that the funding issues with regard to the latest acquisition (EBI) will act as an overhang on the stock in the short term.
In the analyst meet, the management of TTL indicated that EBI's revenues for CY2005 were at $175 million instead of $350 million as was stated earlier. This puts the valuation of EBI at 12.4x its CY2005 revenues against the earlier valuation of 6.2x.
Deepak Fertilisers & Petrochemicals Corporation
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs126
Current market price: Rs83
IPA plant begins production
Deepak Fertilisers and Petrochemicals Corporation Ltd (DFPCL) has commenced production at its Isopropyl Alcohol (IPA) plant at Taloja. Here are some key points pertaining to the plant.
*
The plant has been commissioned with a total investment of Rs154 crore.
*
The current market size of the product in India is about 65,000 tonne per annum (TPA) with a growth rate of about 6-7% per annum. DFPCL also plans to begin strategic exports this financial year.
*
The project is unique as it will be a gateway for the company to enter a ready 100% import substitute market and will synergistically utilise the company's marketing and distribution channel for methanol across fast-growing sectors like pharmaceuticals, agrochemicals, organic chemicals, imaging chemicals and paints.
*
It is in line with the company's three-pronged strategy of maximising the existing asset-base, expanding core competence and diversifying into new sunrise sectors.
Godrej Consumer Products
Cluster: Apple Green
Recommendation: Buy
Price target: Rs205
Current market price: Rs177
GCPL completes acquisition of Rapidol
Godrej Consumer Products Ltd (GCPL) today completed the acquisition of the South African business of Rapidol, UK as well as its subsidiary Rapidol International. As announced in July 2006 GCPL had entered into an agreement to acquire these entities subject to certain regulatory approvals. These acquisitions give GCPL distinct advantages of (1) ownership of strong ethnic hair colour brands in ten countries and Rapidol's existing manufacturing base in Pinetown (near Durban), South Africa; and (2) an opportunity to introduce some of its products, which would include other hair colour offerings and the FairGlow and Evita soap brands in the African continent.
Subros
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs370
Current market price: Rs214
Annual report review
We believe Subros is a strong play on India's growing passenger car segment. Going forward, a strong growth in the volumes of its major clients, MUL and TAMO, and its efforts to expand its portfolio by supplying to M&M will maintain the momentum in its earnings growth. Further a sharp revival in the sales of small cars, particularly those of MUL and TAMO (Subros is virtually the only supplier to these OEMs), would beef up the volume growth. We remain positive on the company's prospects and expect its earnings to grow at a healthy compounded annual growth rate of 32% over FY2006-08. At the current market price of Rs214, the stock is trading at compelling valuations of 9x FY2007 earnings per share and 5.9x FY2008 earnings. It is available at a huge discount to its peers. We maintain our Buy recommendation on the stock with a price target of Rs370.
