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Andhra Bank is a mid-sized PSU bank with strong presence in southern India and a network of 1,930 distribution channels giving it an asset size of Rs 49,000 crore. The bank reported net interest margin (NIM) of 3.47% for Q1FY08, a slight decline due to pressure on cost of funds. The bank continues to sustain strong credit growth at 26% for the March 07 quarter and 27% for the June 08 quarter, and is expected to grow at 25% in FY08 with margins expected to be maintained. Its Q1FY08 net profit grew 21% y-o-y to Rs 141 crore on account of lower provision expenses. The bank's cost-to-income ratio has improved from 55% in FY06 to 50% in FY07. With net NPAs at 0.17% and robust credit growth, we believe the stock is available at attractive valuation of 1.2x its FY09E ABV and 7.1x its FY09E EPS.
Bartronics India (BIL), one of the first Automatic Identification and Data Capture (AIDC) solutions company, is leveraging its existing client base and expertise to move up the value chain and emerge as the largest end-to-end AIDC solutions provider in the country. 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. The stock is currently trading at 10.32x FY09E earnings and 6.23x FY09E EV/EBIDTA, which looks very attractive considering the sharp earnings growth. BIL is one of the first organized players to provide end-to-end AIDC solutions in India with more than 1,600 clients and five international distribution centers. Strong technical know-how has helped the company move up the value chain from bar code to RFID solutions and increase realization per client. The company has also diversified into the retail space considering the low penetration of organized retail, a sector that is clocking at 30% CAGR growth. Smart cards are expected to take the company into fifth gear with the South Asia's largest manufacturing facility. 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 stock is trading at 10.32x earnings and 6.23x EV/EBIDTA for FY09. We believe the valuations are attractive considering the changing business model, robust 73.2% earnings CAGR over FY07-09E, strong bargaining position in the smart cards segment and its ability to scale up AIDC segment. The stock is outperformer with a target price of Rs 338, an upside of 44%.
Bartronics India
CMP: 218
Target 1: 311
Target 2: 338
Current Quote of Bartronics India
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Sensex does a 2000-point jaunt again, hits a new high at 17361. Rupee scales a new 9-year high peak against Dollar. HDFC cuts floating rates on Housing loans by 50 basis points. RBI eases overseas investment and loan repayment norms. Slowing credit growth makes SBI drop its rights issue. Mukesh Ambani set to become richest Indian. Inflation drops to 5-year low of 3.23%. India wins Twenty20 cricket cup in a dramatic finish.
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