Asit C Mehta picks Indo Tech; target Rs 6125 Jun, 2008, 1327 hrs IST, ECONOMICTIMES.COM
MUMBAI: Asit C Mehta has revised the target price of Indo Tech to Rs 612 from Rs 663, which is equivalent to a P/E multiple of 12 times to its FY10E EPS. For the fiscal ending March 31, the company reported net sales growth of 22 per cent to Rs 189.86 crore, while net profit grew by 49 per cent to Rs. 39.02 crore. On the back of higher realisations and raw material cost management, operating margins for the year improved to 29.7 per cent compared with 24.3 per cent during 2006-07. In volume terms, the company sold 2718 MVA of transformers, against 2300 MVA in 2006-07, a growth of 18 per cent. During the year, realisation per MVA, grew from Rs 0.67 million to Rs. 0.69 million. For the full year, sales to SEBs accounted for 80 per cent (84% in FY07), while industrial customers accounted for 20 per cent (16% in FY07) of the sales. For Jan-Mar 2007-08, Indo Tech reported net sales of Rs 47.02 crore, which was lower by 17 per cent compared with Jan-Mar 2006-07. Net profit for the quarter was Rs 9.67 crore, lower by 6 per cent compared with Jan-Mar 2006-07. Operating margin for the quarter improved to 31 per cent from 27.1 per cent during Jan-Mar 2006-07. In volume terms, the company sold 688 MVA of transformers, compared with 738 MVA in Jan-Mar 2006-07. Lower volumes for the quarter are attributable to, a part of manpower at the old power transformers plant being deployed for training and synchronizing the operations at the green field- 4000 MVA power transformers facility. Realisations for the quarter were at Rs 0.68 million per MVA compared with Rs 0.77 million during Jan-Mar 2006-07. The company has current order backlog of around Rs. 159 crore (2030 MVA) compared with orders worth Rs 180 crore (2315 MVA) at the end of Oct-Dec 2007-08. According to the company, around Rs 40-50 crore worth of orders from various SEBs are expected to be finalized during next two months. Current order backlog which is less than the order backlog at the end of earlier quarter is pointing at a slower order intake during Jan-Mar 2007-08. Based on the orders that the company has bid for, it expects the order intake to pickup by the end of the current calendar year. While the brokerage maintains their sales and profitability projections for the company, they have reduced their target P/E multiple for Indo Tech to 12 from 13. While the brokerage expects demand for transformers to remain strong over medium to long term, they have reduced their target P/E multiple to account for company’s lower order book, due to project delays being witnessed in the sector.
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SPICE MOBILE : A MULTI-BAGGER!!
The Spice-Idea deal, if concluded, will help Spice Mobiles and Cellebrum to extend their reach not only in India but also in other markets where Telekom Malaysia has a presence
New Delhi: Three-way merger talks between the promoters of Indian mobile phone service firms Idea Cellular Ltd, Spice Communications Ltd, and Telekom Malaysia International Bhd (TMI), Spice’s international partner, are firming up pending a three-year deal for buying handsets from Spice Mobiles Ltd and software services Cellebrum Technologies Ltd, said a person close to the discussions.
Both Spice Mobiles and Cellebrum Technologies are primarily owned by the family of B.K. Modi. Modi, a New Delhi businessman, is the controlling shareholder in Spice Communications.
Telekom Malaysia has accepted the 2:1 ratio for Spice (Communications) and Idea shares in the merged entity at Rs77 and Rs150 per share respectively, but there is no final agreement on the issue.
Valuations of all the three companies has been done and agreement on other products is to be done,” this person said, asking not to be identified since a deal is not final.
Mint reported on Thursday that Telekom Malaysia is looking to own 20% stake in the Idea Cellular-Spice Communications merged entity and is willing to invest $1.6 billion (Rs6,864 crore) in the new company.
The merger envisages a buyout by Idea Cellular of some 40% equity owned by the Modis in Spice Communications. According to this person, the Modis want a three-year agreement with the Idea Cellular-Spice Communications merged entity as also Telekom Malaysia for procurement of mobile handsets and value-added service offerings.
The agreement, if concluded, will help Spice Mobiles and Cellebrum to extend their reach not only in India but also in other markets where Telekom Malaysia has a presence.
Sanjeev Aga, managing director of Idea Cellular, declined to comment.
Calls to Telekom Malaysia’s chief financial officer Yusof Annuar Yaacob were not returned.
The Spice Communications networks in Punjab and Karnataka, with a combined customer base of some 4.5 million customers, offer Idea Cellular, which is not present in hese two states, is a strategic fit.
Spice Mobiles – a compelling BUY
Near Term Target Rs 40/-
Contributed by Parelkar in www.moneycontrol.com
Spice Mobile phones made its entry two years ago in the Indian market targeting the entry-level handset segment. Debuting with handsets targeted at the entry-level segment, today, the brand is growing rapidly and has a bouquet of offerings targeting entry, mid & premium segments. Spice Mobiles Ltd has heralded a new chapter in the history of Indian mobile telephony by launching the first ever DUAL MODE PHONES this year.
The erstwhile name of the company is Modi Olivetti, and the company was originally into computer hardware business. In mid 2007, the name of the company has been changed to Spice Mobile in order to reflect the new found thrust which is business of mobiles.
With rapid consumerism sweeping the country, India has emerged as the second largest mobile handset market, poised for explosive growth. In a report by Gartner, India has been hailed as the next big mobile handset market by 2009. It is forecasted that China and India alone would account for nearly 60% of the global demand, with the Indian market surpassing China in 2009.
If one takes balance sheets of Spice Telecom and Spice Mobiles and reads between the lines, Spice Telecom definitely looks very attractive. Spice Communication is in the green because of one time sale of Tower business. However, the deal with Idea has put the stock price on fire.
The top line and bottom line of Spice Telecom has been growing at a handsome rate. The company has been regularly paying dividends. The company is eyeing Rs 1000 crore sales for the current fiscal (against Current Rs 400 crores), which it is well poised to achieve with a slew of initiatives and launches. The management of the company is very dynamic and capable of achieving the target.
What makes the Spice Telecom more interesting and definitely very attractive is the three year agreement which B K Modi is going to sign with Idea/ Telekom Malaysia for sales of its mobiles. The agreement, if concluded, will help Spice Mobiles to extend their reach not only in India but also in other markets where Telekom Malaysia has a presence. It is expected these products will be sold as hot cakes in the price sensitive markets where Telkom Malaysia is present. In most of these circles or locations, the Spice Mobiles will be packaged along with the services being offered by these two telcom majors.
The EPS of the stock is Rs 2.52/- The P/E at a market price of Rs 19.50 is 7.67. One should remember that the face value of the stock is Rs 3.00/- The stock is traded in both BSE and NSE. The 52 week low and high is NSE has been Rs 18 and Rs 37 respectively.
The downside risk of the stock price is very less. We recommend a BUY with a near term target of RS 40/- It definitely makes sense for any kind of investor to take exposure to the stock of Spice Telecom.
But if the rumors of the talks with Japanese major are true, then the price may higher levels.
We you all Happy and Risk free investing!
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