Target-A-Year

Bartronics India

CMP: 218
Target 1: 311
Target 2: 338

Current Quote of Bartronics India

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.

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AIDC segment – First mover advantage

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.

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Changing gears with smartcards

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.

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Strong earnings growth - Outperformer

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%.

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Target-A-Year

Tanla Solutions

CMP: 601
Target 1: 940
Target 2: 1030

Current Quote of Tanla Solutions

Tanla Solutions is an outperformer with a price target of Rs 940.

Tanlan is expected to clock revenues of Rs 410 crore in 2007-08 (Apr-Mar) and Rs 620 crore in 2008-09. At the current market price of Rs 601, the stock trades at 19.7 times the 2007-08 estimate earnings per share of Rs 31.1 and at 13 times 2008-09 estimate earnings per share of Rs 47.2. The target price is quite achievable if we factor in the contribution from Ireland and its been believed that this stock is on a path of re-rating.

The company has forayed into Ireland. "Tanla has tied up with all the Irish operators which include 3, O2, Vodafone and Meteor. The total addressable market for Tanla is around Rs 1,000 crore. Revenues would start flowing in from second quarter of 2007-08. The margins in Ireland will be at par with the company level as there is no major capex involved here.

Tanla's US subsidiary has begun operations and revenues are likely to flow in three months. It is also looking for acquisitions there.

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Target-A-Year

IDBI Bank

CMP: Rs 141
Target 1: 191
Target 2: 211

Current Quote of IDBI

IDBI Bank has transformed itself from a development financial institution (DFI) to an active participant in the booming banking and financial services space.

The amalgamation of United Western Bank with IDBI Bank has given the latter the much-needed branch network to enhance its retail presence. This, coupled with unlocking of value in its investments, is expected to lead to a surge in earnings. Expert expects earnings to witness a CAGR of 19% over FY07-09E to Rs 885 crore. IDBI Bank has a huge investment portfolio of quoted and unquoted equity stocks. It can unlock the value from these stocks and boost its profitability.

The value of the quoted and unquoted equity book is Rs 52 per share of IDBI Bank. The bank is expected to improve its core business gradually with net interest margins (NIMs) expanding from 0.48% in FY06 to 0.74% in FY07 and further to 1.07% by FY09E. At the current price around of Rs 130, the stock is trading at 1.3 its FY09E adjusted book value (ABV) and 10.6x its FY09E EPS of Rs 12.2. Based on a theoretical book value multiple of 0.9x its FY09E ABV, the value of its core banking business comes to Rs 87 per share. Its huge investment portfolio is valued at Rs 52 per share and subsidiaries at Rs 17 per share.


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Target-A-Year

Parsvnath Developers

CMP: 317
Target 1: 510
Target 2: 625

Current Quote of Parsvnath Developers

For the real estate sector per se only those investors who have higher risk appetite and a long-term horizon should enter this sector because there are lot of good prospects and side by side there are lot of problems also with the sector with the interest rates going up, the land bank valuation going here and there. So unless and until you have a higher risk appetite and a long-term horizon you should not enter this sector."

Parsvnath Developers is in strong footing with presence in both residential and commercial sector. They have the contracts with DMRC (Delhi Metro Development) of the stations, malls, they are coming up with multiplexes, they are into SEZ at Gurgoan, now they have announced a roll out license for mobile telephony. All these speak well for Parsvnath and if the investor has a long-term view, one can certainly enter into this stock.

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Target-A-Year

KLG Systel

CMP: 470
Target 1: 790
Target 2: 830

Current Quote of KLG Systel


KLG Systel has announced that on Aug 27, 2007 the Company has acquired 51% stake in Atlantis Lab Pvt Ltd, a dedicated engineering solutions Company. Atlantis will become a subsidiary of the Company post acquisition. The company valued Atlantis for Rs.24 crores and 51% stake would cost KLG about Rs. 12.4 crores. Atlantis is a dedicated engineering services company having presence at Chennai, Bangalore and Pune. Atlantis was incorporated in 2001 and within short time-span of operations it has good marquee clientele. The company provides mechanical design solutions to worldwide manufacturers such as GE, Whirlpool, Atlas Copco, TATA Motors, John Deere, Schneider Electric and Cummins, etc. Atlantis Lab's current service offerings include product design, design automation, design simulation tool, design data migration, and PDM/PLM solutions for the growing automobile, aerospace, Industrial machinery and Heavy Engineering markets.

Rationale for the acquisition:

Worldwide the Engineering Services market is making great strides. The recent NASSCOM BOOZ Allen Hamilton study of international trends in Engineering Services Outsourcing markets, predicts that by 2020, 25 to 30 percent of the projected $225 billion global offshore engineering services market could belong to India. This acquisition will enhance the company's service offerings, geographical presence which would increase its' addressable pie in the growing offshore engineering service market. The company derives its revenues from domestic markets with this acquisition the company will have access to North America and European market. The company is planning to expand its infrastructure capacity for 1000 at its head quarters in Gurgaon.

Future Plan:

The relationship will provide KLG Systel an opportunity to go to the ESO (Engineering Service Outsourcing) markets faster and widen its reach to the 3 design hubs at Chennai, Pune and Bangalore. Atlantis Lab already has a strong base in these cities. KLG plans to increase capacity at the newly acquired subsidiary to 1000 design & analysis seats by the end of year 2008 from existing 150 seats. The new subsidiary plans to focus on Automotive, Aerospace, Industrial Machinery. Heavy Engineering, Ship Building, Power and Process verticals where there is a strong demand for Product Design and Product Life Cycle solutions and services. The new subsidiary plans to offer a state of the art design solution and services like FEA (finite element analysis) / FEM in static, vibration, crash, impact, CFD (computational fluid dynamics), NVH (noise vibration harshness), BIW weld fixtures, Mold Flow analysis, Reverse Engineering, Electronics & Navigation systems, Technical Documentation, NC path generation, Plant Design, Plant stress analysis etc. This design centre will have an ultra modern RPD (rapid prototyping) and testing facilities for the industry, providing Company's clients to carry out live prototyping and testing of the designs being delivered. Currently there are very few design centers in the world, which offer a complete solution from design to prototyping and testing. The company is also planning to set up ODC (Offshore Design Centers) for its global and Indian clients, which will help the company to deliver value in terms of improvement in productivity with cost efficiency to its clients.

Business Overview:

KLG has been engaged in life cycle solutions and power system solutions. It offers knowledge solutions to oil & gas, process, power, metal, manufacturing and infrastructure sectors by providing a unique mix of domain expertise, software solutions, consultancy and training. Its technology partners are AutoDesk, COADE, IBM, Invensys, Microsoft, Oracle, Primavera, SAP and Unigraphics. Building on the deep power domain expertise and its relentless R&D, KLG has developed a solution that empowers consumers to manage their electricity consumption. This unique web based solution has been named as http://www.connectgaia.com/ which makes it possible for users to View, Visualize, Measure, Optimise and Manage the Energy Consumption in their Domestic, Commercial, Industrial, Government and Semi-Government establishments.

Valuation:

The outlook is distinctly positive especially with India's booming economy and development of new markets for Company's products. The Central Govt. is targeting to add a generation capacity of up to 70,000 MW in the 11th Plan, while it has also asked the states to bring down transmission and distribution losses to 15 per cent by 2010 from about 40 per cent now. KLG proposes to tie up with state electricity Companies to provide software solutions developed by it. The company's patented software solutions - Vidushi & SG61 will certainly help the electricity generating and distribution utilities to control transmission and distribution losses. Company's focus on brand building will enhance its presence in critical markets and add value to the Company's fundamentals. There is a vast scope of automation for mass production and Power System Solutions to control distribution and transmission losses in our country. I believe that there is a vast scope for improvement in its earnings and price appreciation as a result of increase in profitability. It is expected that revenue and profit will grow at 61.5% and 81% CAGR respectively over FY2007-10 period. The stock is currently traded at ~22x FY2007 earnings. The stock is certainly a outperformer with target price of Rs. 830.

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Target-A-Year

ICICI Bank
CMP: Rs 881

Target 1: Rs 1,275
Target 2: Rs 1,305

Current Quote of ICICI

There is a strong chance or shall I say psychological sentiment in the market that may drive this stock under pressure in the near term. but I believe the stock, trading at 1.5 times FY08E adjusted book (after deducting value of subsidiaries; 1.1x FY09 adjusted book) could trade at 1.8-2.0 times adjusted book one-year forward (FY09 estimated), given the improved visibility of earnings are likely to be seen in the coming quarters, estimated earnings growth of +35% in FY09E, and rising value of its subsidiaries.

ICICI Bank appears to be a long term story with an aggressive growth strategy that would now focus on the country's poor on the one end and overseas operations on the other, apart from the traditional segments like urban retail and corporate banking. Over the next two years, the bank should be able to achieve an asset growth of 28 per cent and profits some 35 per cent, according to estimates.

Despite the accelerated growth if anyone is complaining it is because ICICI Bank has been knocking at the capital market more often than its peers thus earnings a lower return on equity (ROE). Much to the dismay of analysts, ICICI Bank raised roughly Rs 10,000 crore (Rs 100 billion) over the past three years.

The pertinent question is whether ICICI Financial Services' current valuations would be sustained when the company goes for listing about 12-24 months from now. Otherwise, investors may not realize the value made out to be built into the stock. The answer to this question is most likely!

My advice to retailers is that if you can involve money for at least 6 months horizon, do invest in it, you'll get reward. For short term players, downside risk is lower, but you may find a better opportunity to get in. The target price for this stock is 1305.

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Target-A-Year

Bharat Forge Limited (BFL)

Current Market price: 260
Target 1: 379
Target 2: 410

Current Quote of Bharat Forge

BFL reported 17.7% rise in net sales with strong 21.3% rise in net profit for the quarter ended 4FY07. For FY07, net sales grew 18.2% in line with projected revenues and net profit by 6.4%. On consolidated basis, BFL reported 38.4% rise in net sales and 16% rise in net profit. Improving performance of subsidiaries supported the excellent performance on consolidated basis. Earning estimates are pretty positive for coming years on the back improving performance in domestic market, increasing utilization of domestic as well as acquired companies, improvement in Chinese operations and increasing contribution from non-automotive business (high value, high margin business) post capex.

FY07 Key highlights (Standalone)

Net sales spur 18.2%

BGL reported 18.2% rise in net sales to Rs1, 864.4 crore on the back of strong 21.7% increase in sales from domestic market to Rs1, 269.2 crore. Exports grew 14.6% to Rs751.3 crore. Domestic forging capacity utilization improved marginally to 76% (73%) and machining capacity is at 84%.

EBITDA margins improved

Improvement in raw material to sales ratio helped BFL to improve EBITDA margins 40 bps to 25.1%. EBITDA improved 20% to Rs 467.6 crore.

Net profit up 16.4%

The company has raised funds through FCCB and GDR to finance its acquisition and expansion project. Unutilized funds have been parked in fixed deposits and other short term investments, which generated other income of Rs 69.6 crore in full year, up 52.3%. Higher other incomes and savings in effective tax rate at 33% (34.3%) despite higher depreciation due to capital expenditure supported 16.4% rise in net profit to Rs 245.3 crore, translating into EPS of Rs10.8.

Q4FY07 performance highlights

• The 30.1% rise in domestic sales brought 17.7% rises in net sales for the period. Exports were subdued reporting marginal growth of 4.6%
• Improvement in raw material costs helped mitigate the impact of higher operational costs, EBITDA margins remained flat at 24%
• Other income improved 54% to Rs22.2 crore, however, borrowings resulted into higher interest outgo, up 50.9%
• Lower effective tax rate of 33.8%, aided net profit expansion by 21.3%, net margins improved 40 bps to 12.5%

Consolidated FY07 performance highlights

• Net sales surged 38.4% to Rs 4,178.3 crore from Rs 3,018.9 crore; revenues crossed $1 billion mark
• Higher raw material and staff costs brought EBITDA margins under pressure, dipped 200 bps to 15.2%
• BFL accounted extraordinary expenses of Rs 12.1 crore of which Rs 6.8 crore was towards reversal of export incentives and Rs 5.4 crore establishment expenses for Chinese operations
• Higher interest charges and depreciation provisions due to ongoing capex, mitigated the positive impact of higher other income, net profit margin declined to 6.8% from 8.3%. Net profit grew 16% to Rs 291.4 crore, translating into consolidated EPS of Rs 13.1. Adjusting for above mentioned extraordinary expenses, net profit grew 16.3%.
• Revenues from subsidiary companies other than Chinese joint venture – FAW Bharat Forge, soared 49.6% to Rs 2,155.2 crore. EBITDA margins were at 9.4% as against 10.1%, due to higher operating expenses
• Comparatively lower effective tax of 34% as against 43.8%, helped net profit of subsidiary companies to rise 50.4% to Rs 65.6 crore
• Chinese operations were operating at 40% of their capacity utilization and reported loss of Rs16.4 crore on revenue of around Rs 162.7 crore

Valuations

At CMP of Rs 260, the stock is trading at 31.1x and 21.7x its standalone FY08E and FY09E EPS and 22x and 15.9x its FY08E and FY09E consolidated EPS. Higher domestic capacity utilization, turnaround in various global operations and improving contribution from high margin non auto component business are key growth triggers for the company. The stock is an Outperformer with target price of Rs 410 (20x con.FY09E EPS).

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Target-A-Year

Banswara Syntex

Current Market price: 49.40
Target 1: 102
Target 2: 118

Current Quote of Banswara Syntex

BSL's top line growth :

BSL witnessed a top line expansion of 13.6% YoY and 24.3%QoQ to Rs 1.1 billion as compared to Rs 947 million in the corresponding quarter last year. The Top Line reported by the company was less than our expectation by 11%. The company's garmenting and cotton yarn capacities commenced operations in Q2FY2007 and are contributing positively to the company's revenues. BSL's expansions are still on going and the company will be able to expand its top line at CAGR of17.1% (FY2007-09E) to report a top line of Rs 5.2 billion in FY2009E.

Margins come under pressure with higher input costs:

BSL's OPM declined by 440 bps on a sequential basis to 10% on account of higher raw material costs and power and fuel cost. With the company moving up the value chain into garmenting the staff cost has been on the rise as well. The company's OPM's should improve with the captive thermal power plant commencing operations from Q1FY2008.Estimate that the company should report OPM's of 15.6% and 16.6%in FY2008E and FY2009E respectively.

Profits decline as margins fall:

BSL's bottom line declined by 31.7%YoY and 18.4% sequentially to Rs 29 million inQ4FY2007. This was mainly on account of decline in OPM by 440bps sequentially. On account of the poor performance in this quarter the company has fallen short of our estimates by 15% for the FY2007.

FY2007 Results:

BSL has reported a top line of Rs 3.8 billion in FY2007 as against Rs 3.2 billion in FY2006 witnessing a growth of 20.7%YoY. The growth in company's revenues was driven by new cotton yarn and trouser facilities kicking in from Q2FY2007. The company's OPM for FY2007 expanded by 230 bps to 13.7% as compared to 11.3% in FY2006 mainly on account of fall in raw material prices as the oil prices took a breather. Driven by top line and OPM expansion the company's bottom line grew by 71.4%YoY to Rs 149 million. This was much lower than our estimate of Rs 172 million. This translates into an annualized EPS of Rs 11.2; the stock is thus trading at 5.6x trailing earnings.

Valuation:

BSL has witnessed a robust bottom line growth of 71.4%YoY driven by some of its expansions commencing operations. The company's forward integration in to garments and diversification into cotton yarn will start yielding results going forward. Further, with its captive thermal power plant commencing operations in Q1FY2008 the company will be able to improve its operating margins further. The company will witness a top Line and bottom line CAGR (FY2007-09E) of 34.3% and 56.4% respectively. My expectations and research is strongly in favour of buying this stock with mentioned targets and time-frame.

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Target-A-Year

UTV Software

Current Market price: 452
Target 1: 670
Target 2: 730
Current Quote of UTV Software

UTV Software has reported a revenue growth of 7% at Rs 560 million, EBITDA growth of 162% at Rs 118m and PAT growth of 165% at Rs91m. The growth comes on the back of 20% growth in the television business (content and airtime sales) and Rs 208 million of revenues contributed by interactive business (including recently acquired gaming companies – Ignition, UK and Indiagames). Filmed entertainment business has reported revenues of Rs101m in Q1FY08 (63% decline), as UTV is yet to monetize its recently released movies (Life in a Metro, The Namesake and I Think I love my wife). UTV is emerging into an exciting media model with presence in filmed entertainment, gaming, broadcasting, television content, animations etc. With a view to fund its filmed entertainment operations, UTV has raised USD 70m through AIM listing (valuing the entity at over USD300m) and has lined up 8-10 release a year including co-productions with likes of M Shyamalan, Will Smith, Mira Nair, etc.

UTV's broadcast operations is expected to go underway in August, as UTV launches its youth based GEC – Bindass (in JV with Astro Broadcast), and builds up team for its planned variety and specialty channels. UTV is also scouting for strategic tie ups for its various broadcast channel. UTV has charted out aggressive growth plans in each of the business segments and UTV's fund raising plans in each of the operations would open up opportunity of value unlocking. UTV is attractively valued at current market capitalization of ~USD300m. As per my expectation this pick is an outperformer and will tend to benefit shareholders in long run.

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