| Jet Airways, one of India's leading full service carriers, is likely to report strong growth, aided by continued growth in passenger traffic, expanded fleet, and launch of international routes. |
| During FY07-FY09, IL&FS Investsmart expects Jet's net revenues to increase at 35 per cent compound average growth rate (CAGR), from Rs 7,058crore to Rs12,936 crore. |
| The merger and acquisition (M&A) activities in Q1 FY08 brought consolidation in domestic aviation, enabling airlines to focus on profitability rather than predatory pricing techniques. In this scenario, Jet, with its superior services offered at relatively higher rates, is likely to maintain its yields and competitive edge. |
| The brokerage expects strong growth in air traffic for Jet, due to streamlining of its European and North-American operations, rising passenger load factors, and effective utilisation of its pan-India network for connecting international sectors. Jet's international revenues are likely to increase from Rs1,357 crore in FY07 to Rs 5,644 crore in FY09. |
| In addition, during the next 15 months, Jet is likely to add 18 new aircrafts. This is likely to bring in synergy of operations, especially in the light of increased traffic from India to major international destinations and vice-versa. |
| Jet trades at an enterprise value to earnings before interest, tax, depreciation, amortisation and rentals multiple (EV/EBITDAR) of 10.2 times estimated FY09 numbers. The brokerage has not factored in the valuations of Jetlite which is expected to start contributing by FY09, and hence believes that the stock should be re-rated. |
| Moreover, Jet's international business, currently in an investment phase, would provide significant traction from FY10. The brokerage puts a "buy" rating with a target price of Rs 1,450, at an EV/EBITDAR of 12 times FY09 estimates. |
| ELECTROSTEEL CASTINGS Reco price: Rs 82 Current market price: Rs 86.40 Target price: 107 Upside: 30.5 % Brokerage: Angel Broking |
| Electrosteel Castings is a complete water infrastructure company providing end-to-end solutions in water supply & sewerage application systems. |
| Angel Broking believes that capacity expansion for ductile iron pipes and backward integration into achieving self-sufficiency of key inputs like coking coal and iron ore are the key drivers of growth for Electrosteel going ahead. |
| The brokerage expects Electrosteel to record a 30 per cent CAGR in its bottom line over FY07-10. At Rs82, Electrosteel traded at a price-book value multiple (P/BV) of 1.4 times estimated FY10 book value. |
| However, excluding Electrosteel's 48.5 per cent investment in Lanco Ferro, the stock is available at P/BV of 1.3 times estimated FY10 book value. Angel has valued Electrosteel's 48.5 per cent stake in Lanco Ferro at Rs 4 a share at current market capitalisation after giving 25 per cent discount. |
| The brokerage values Electrosteel's business at Rs 103 a share at which it would command a P/BV of 1.8 times. The brokerage recommends a "buy" on Electrosteel with a 12-month target price of Rs 107. |
| STONE INDIA Reco price: Rs 175 Current market price: Rs 175.45 Target price: NA Brokerage: India Infoline |
| Stone India is the largest manufacturer and supplier of high quality brake systems, train lighting alternators and pantographs for the railroad industry. The company manufactures high-end mechanical and electrical products for railway rolling stock applications. Railways account for about 90 per cent of its revenues where it supplies a full range of braking systems. |
| The company has recently entered into technical tie-ups with global companies such as Sumitomo Electric Industries of Japan for air springs, US-based Wabtec Corporation for air dryers, and Italian manufacturer Poli Construzione Materiali Trazione SpA for advanced disc brake system and components for high speed coaches and locomotives. |
| Indian Railways plans to replace mechanical suspension systems with pneumatic systems and install air springs in high speed trains, where Stone India is one of the market leaders. |
| The increased budget allocation to railways too, would mean bigger order book for the company, to cater to which, it is setting up a greenfield unit at an investment of Rs 18 crore in Himachal Pradesh to manufacture locomotive air dryers. This plant is expected to be operational by March 2008. The unit will have a capacity to produce 3,000 air dryers, 1,200 passenger air brake systems, 200 disc brake systems, 1,000 alternators and 800 investors a year. |
| The company is also looking to tap demand from SAARC, Asian and African countries, where the product realisations are significantly higher. Although the brokerage does not give a target price valuation, it recommends a "buy" on Stone India with a long term view. |
| RADHA MADHAV CORPORATION Reco price: Rs 120 Current market price: Rs 134.30 Target price: NA Brokerage: Edelweiss |
| Radha Madhav Corporation manufactures various packaging and printing polymer-based films catering to a diverse clientele. It is the only manufacturer of modified atmospheric packaging film in India (40 per cent cheaper than imports) which is used in a wide variety of food and bulk pharmaceutical packaging. |
| The company had raised Rs 20 crore through an IPO in December 2005 to set up a new specialised film facility at Daman. The facility is now fully operational and has resulted in expansion of the company's top line and bottom line by 129 per cent and 316 per cent y-o-y, respectively, in H1 FY08. |
| The company now plans to enter the higher margin non bulk pharma packaging space, for which it is setting up new facilities in Daman and Uttaranchal. The total capex for the project is Rs 225 crore. |
| Edelweiss expects the pharma packaging venture to contribute almost 53 per cent to its overall revenues by FY10 which is likely to be a re-rating catalyst for the stock. |
| Radha Madhav is expected to report a top line and bottom line CAGR of 84 per cent and 126 per cent, respectively, over FY07-10 on the back of its new specialty films facility and pharma packaging venture. |
| At Rs 120, the stock traded at a significant discount to comparables, trading at a price-earnings multiple of 7.9 times estimated FY09 and 5.8 times estimated FY10 fully diluted earnings. Edelweiss recommends a "buy". |
| Current market price on BSE as on December 28, 2007 |
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