Analysts' corner

RESEARCH CALLS

Upside: 22.9%

JSW's expansion plans are ahead of schedule and strong demand is likely to lead to higher capacity utilisation. India Infoline expects the company's steel output to register a compounded average growth rate (CAGR) of 28.3 per cent over FY07-FY10 from 2.6 tonne per annum to 5.6 tonne per annum.

JSW's crude steel making capacity is expected to be 10 tonne per annum by 2010 from current 3.8 tonne per annum. The company is also increasing its upstream capacities, cushioning it from any downturn in the industry.

Also, its operating margins are expected to expand in FY09 led by higher realisations from value-added products and increased usage of captive resources. JSW's consistent focus on value-added products would lead to higher price realisations for the company in the next three years.

Besides, JSW's captive coke and power plants are expected to be fully operational in FY09 leading to better margins. At Rs 961, the stock trades at 10.1 times and 7.1 times on consolidated EPS of Rs 94.8 in FY08 and Rs 136.1 in FY09, respectively.

Godawari Power & Ispat
Broking firm: Motilal Oswal
Reco Price: RS 263
Target Price: Rs 380
CMP: Rs 290.5
Upside: 31%

Godawari Power and Ispat Ltd. (GPIL) has nearly doubled capacity of sponge iron to 495,000 tpa and that of steel billets to 400,000 tpa. Captive power capacity too has increased from 28MW to 53MW. They are likely to benefit from current strong prices of steel products and sponge iron.

GPIL is also setting up a 0.6 mtpa pelletisation plant to utilise iron ore fines, required for sponge iron production. This will bring down raw material costs substantially and improve the margins. GPIL has been allotted both iron ore (reserves of 15m tons) and non-coking coal mines (reserves of 63m tons) to meet its requirement of raw materials which will bring down costs and insulate earnings from input price risk.

Besides this, the benefit of carbon credits (Rs 10.8 crore) and sales tax benefit (Rs 240 crore) will prop up the bottomline. At recommoneded price the stock trades at a PE multiple of 5.5 times FY09E.

Aftek
Broking firm: Networth Stock Broking
Reco Price: Rs 70
Target Price: Rs 100
CMP: Rs 69.6
Upside: 43%

Aftek, a seasoned player in software product engineering has more than 100 active intellectual properties to its credit. It commands a premium in its billing rates and has increased its revenue per employee. The non-linear model of the company and its subsidiaries enable it to beat the rising rupee.

The company's investments into its subsidiaries, Arexera, Seekport and Digihome will transform the company into the league of royalty-bearing product companies. At the recommonded price of Rs 70, the stock is trading at a PE multiple of 6.7 times and 4.9 times its FY08E and FY09E earnings.

The broking firm believes that despite strong fundamentals, Aftek is valued at 50 per cent discount to its nearest competitor. Besides, Aftek's cash reserves is a huge strength for expansions in future. The company's cash on its books stands at Rs 33 per share. At a P/BV of 1.0, the stock is undervalued. Valuing the company at 7-times its FY09 likely EPS of Rs 14.4, gives it a price target of Rs 100.

Salora International
Broking firm: Parag Parikh Financial Advisory
Reco Price: Rs 218
Target Price: Rs 312
CMP: Rs 234
Upside: 33%

Salora International has transformed itself from a manufacturer of colour television parts to a distributor of telecom and infocom products deriving 85 per cent of revenues and 90 per cent of earnings before interest and tax from the latter. The company enjoys excellent relationships with its vendors such as Sony Ericssion, BenQ and Acer and has managed to build a strong distribution network of 30 offices touching over 25,000 retailers.

As a result, it is mulling the idea of retailing the products. The company's turnover, which grew 50 per cent in FY07 to Rs 887 crore, is poised to cross Rs 1,000 crore and jump by another 40 per cent in FY08. However, the stock is still valued in terms of its legacy business. Moreover, the stock's valuation of 7.2 times for estimated earnings for FY09 is much less than its peers- Redington India (13.7 times) & HCL Infosystems (9.4 times).

NCL Industries
Broking firm: IL&FS Investsmart
Reco Price: RS 55
Target Price: Rs 120
CMP: Rs 59
Upside: 103%

South India-based NCL Industries (NCL) is well-poised to capitalise on the emerging opportunities in the southern cement market. Cement demand in south India is likely to grow at a CAGR of over 10 per cent between FY07-11.

During FY08, NCL, one of the leading cement manufacturers in the region, augmented its cement capacities from 0.297 million tonnes per anum to 0. 63 million tonnes per anum. It is expected to further expand its capacity by 1.32 million within a year. Thus it is likely to emerge as a key beneficiary.

Further its pre-fab business is expected to grow at over 30 per cent annually for the next three years. As a result, the company's revenues and profits are expected to grow at an annual rate of 36 per cent and 31 per cent between FY07-10. The stock trades at 4.5 times and 4 times its estimated earnings for FY08 and FY09 estimated earnings respectively.

Vishal Retail
Broking firm: Religare Securities
Reco Price: Rs 697
Target Price: Rs 1018
CMP: Rs 695
Upside: 46%

Vishal Retail has 70 stores, out of which 80 per cent are located in Tier-II and Tier-III cities and is a strong player in high margin apparel space with focus on private labels. This has been partly responsible in improving margins and profitability. It has aggressive plans to add 200 more stores and five million square feet between FY07-11 taking the total area to 6.2 million square feet.

Indian organised retail is expected to grow 25-30 per cent between FY07-11 to $60 billion. However, Vishal's revenues and profits are expected to grow at 77 per cent and 81 per cent between FY07-11 respectively. Though not directly comparable, Vishal trades at 15 times its estimated earnings for FY09, which is at a significant discount to Pantaloon (44 times) and Shoppers' Stop (41 times). CMP: Current market price as on November 30 (BSE)