STERLITE TECHNOLOGIES
Reco Price: Rs 100,
Target Price: Rs 130
Sterlite Technologies (STL) is well poised to leverage strong demand traction in power and telecom sectors. Demand for transmission equipment such as power conductors is set to witness a quantum leap over the medium term. Demand for optical fibre cables is correlated to telephony and internet penetration in an economy. STL is amongst the few fully integrated manufacturers of power conductors and fibre optic cables across the world. This aids STL to maintain operating profit margins in a competitive and inflationary economic environment. STL’s current order book stands at Rs 2,600 crore; 70 per cent of which comes from the transmission segment alone. Healthy order book, proven execution capabilities and marquee clientele will translate into revenue growth in the near term. Maintain buy.
—IIFL
TECH MAHINDRA
Reco Price: Rs 806.6,
Target Price: Rs 710
Satyam trades at 14 times 2011-12 estimated earnings. Its 2011-12 margins are estimated to be below 19 per cent and revenues are pegged at $1.1 billion and $1.2 billion in 2009-10 and 2010-11, respectively. Tech Mahindra trades at 10.7 times 2010-11 and 9.4 times 2011-12 consolidated EPS. Tech Mahindra's organic business still carries higher domain (telecom) and client concentration (BT) risk. Given the risks and challenges at BT, Tech Mahindra will continue to struggle in the near term. Maintain Sell.
—Citi
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BGR ENERGY
Reco Price: Rs 771,
Target Price: NA
The Rs 3,100 crore Mettur power project is BGR’s first large EPC contract. The company has already achieved significant milestones, with drum lifting (February) and condenser fabrication (2010) completed as per schedule. BGR has already received 80-85 per cent of BTG (boiler, turbine and generator) equipment from Dongfang Electric, China, for executing the contract. This eliminates the risk of delayed execution to a large extent. Moreover, BGR has already started working towards the transmission network. This ensures revenue visibility in the next two years. The joint venture with Hitachi assures superior quality of equipment for the future projects. BGR’s order pipeline is very strong, though it expects order inflows only from September 2010. The stock is trading at 19.2 times its 2010-11 estimated earnings. Maintain buy.
—Edelweiss Securities
APTECH
Current price: Rs 165.20,
Fair value: Rs 198
Crisil Equities has assigned fundamental grade 3/5 to Aptech indicating ‘good’ fundamentals. Aptech is a career education company in the vocational training segment focused on the training needs of individuals and institutions. The company is expected to benefit from its leadership position in the animation and multimedia training segment, and growth in the international retail training business. Further, IPO of BJB Career Education Company, China will unlock value for Aptech, which has a 22.4 per cent stake in it. Crisil expects Aptech’s revenues to grow at a three-year CAGR of 13.5 per cent to Rs 310 crore in 2012-13, while EPS is expected to increase to Rs 7.9 from a reported loss in 2009-10. On the sum-of-the-parts method, Aptech's one-year fair value works out to Rs 198 per share.
—Crisil Equities