LUMAX INDUSTRIES
Reco price: Rs 269,
Target price: NA
Lumax Industries (LUMX) has 60 per cent market share in the automobile lighting space with 80 per cent of its volumes sold to major auto OEMs. Despite strong demand from the higher margin after market segment, the company consciously seeks to first address OEM demand in order to better manage its relationship with this customer segment. While there are a few other players in the automotive lighting business, Lumax is the only company catering to all vehicle segments and enjoying a strong relationship with OEMs. With its five manufacturing facilities running at high utilisation levels, Lumax is setting up capacities at three more locations. Lumax’s expansion drive will help it tap into the strong demand.
— Religare Institutional Research
PETRONET LNG
Reco price: Rs 116,
Target price: Rs 140
Although India’s domestic gas supply is expected to post 16 per cent CAGR over FY10-14, the country is still expected to be gas deficient . India’s gas deficit and LNG availability at reasonable prices will help Petronet to post volumes of 12 per cent CAGR to 12.5 mmtpa (50 mmscmd) by FY14. Since inception, Petronet has been increasing re-gasification charges by 5 per cent every year to ensure 16 per cent RoE considering only long-term contracts. Increasing re-gas charges, high-margin short-term contracts should ensure 25 per cent RoE by FY12. Petronet's new 5mmtpa (20mmscmd) Kochi terminal is expected to be commissioned by the end of FY12, leading to a 50 per cent increase in capacity to 15mmtpa. Analysts expect Petronet to post 21 per cent net profit growth over FY10-14, led by higher volumes at Dahej and start-up of the Kochi terminal in 2012. Near term positives are the continued flat KGD6 gas production and implementation of proposed gas price pooling . Initiate coverage with Buy.
— Motilal Oswal Securities
RALLIS INDIA
Reco price: Rs 1,288,
Target price: NA
Rallis India (RAIL) has acquired 53.5 per cent stake in Bangalore-based seeds research company, Metahelix Life Sciences (MLS) for Rs 99.5 crore. Going ahead, RAIL would be infusing an additional Rs 25 crore and increase its stake to 59 per cent, valuing the company at 2.0x FY2012E revenues of Rs 100 crore , which is in line with its peers in the seed business Advanta (1.6x) and Kaveri Seeds (2.4x). RAIL plans to acquire the balance 41 per cent over the next five years. Given the strong cash position, the company would be funding the acquisition through the same.There exists huge opportunity in the Rs 6,500 crore worth seed industry with the acquisition of MLS. The acquisition will augment RAIL’s top-line and bottom-line going ahead. Maintain Neutral.
— Angel Broking
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PLASTIBLENDS INDIA
Fair value: Rs 230,
Current market price: Rs 178
Crisil Equities has assigned a fundamental grade of 3/5 to Plastiblends India Ltd, indicating good fundamentals. Plastiblends is a leading manufacturer of masterbatches with a market share of 13-14 per cent. The company is expected to benefit from healthy growth in FMCG and retail which is expected to increase the consumption of plastics thereby driving demand for masterbatches. However its margins are vulnerable to fluctuations in raw material costs, mainly polymers which is a derivative of crude oil. Crisil Equities expects revenues of Plastiblends to grow at a two-year CAGR of 22 per cent to Rs 310 crore in FY12, while EPS is expected to double from Rs 15.9 in FY10 to Rs 30.5 in FY12.
— Crisil Equities