Peninsula Land (PLL), a Mumbai focused development company, is now diversifying to other cities in southern and western India.
The company is currently working on five projects in Mumbai, totaling about four million square feet. Three SEZs in Goa are in the pipeline; one of which is a gem and jewellery SEZ, while the other two are biotech SEZs (one biotech SEZ has been notified, while the other two have been approved but are yet to be notified).
The company is about to commence construction of the SEZ cum IT Park and a township in Pune along with the township and a residential project in Nashik. These projects are expected to complete over the span of next two-five years.
The company has raised about Rs 200 crore for its realty fund domestically and has further plans to raise funds from abroad, which will enable the company to invest in a larger number of projects.
Lehman Brothers has agreed to co-invest with PLL and will chip in Rs 500 crore for the same. The total investment to be made in land acquisition over the next two years is likely to exceed Rs 2,000 crore. The company's earnings are expected to grow at 123 per cent CAGR over the next two years. Maintain Buy with target price of Rs 129.
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Mercator Lines
Reco price: Rs 104
Current market price: Rs 112.85
Target price: Rs 160
Upside: 41.78%
Brokerage: Religare Securities
Mercator Lines (MLL) offers sea borne transportation services that include transportation of crude oil besides providing dredging services.
The company is expanding and has recently purchased its fourth dredger and its third VLCC (very large crude carrier). It has already deployed this new dredger with the Dredging Corporation of India at day rates of $ 25,000.
This apart, MLL has acquired coal mines in Indonesia and Mozambique, to mine and transport coal, thus providing a holistic logistical solution.
During FY08, fleet expansion coupled with a robust day rate environment led to a 30 per cent y-o-y increase in the company's consolidated net revenue to Rs 1,450 crore and a 143 per cent rise in earnings to Rs 330 crore.
Continued build-up of a young and modern fleet, deployed at attractive day rates, to bolster revenues and profitability is expected in the coming years as well. The stock is trading at a P/E of 4.5x, P/BV of 1x and an EV/EBITDA of 3.6x on FY10E earnings. The NAV-based and P/E-based valuations both yield a target of Rs 160.
BEML
Reco price: Rs 1,077
Current market price: Rs 1,091.25
Target price: Rs 1,303
Upside: 19.4%
Brokerage: Asit C. Mehta
BEML has a diversified business model with presence in areas like construction and mining equipment, defence equipment and railway and metro rolling stocks.
BEML is currently the only player with manufacturing facility for metro coaches in India. After the recent success of metro rail transportation in Delhi, cities such as Mumbai, Bangalore, Hyderabad, Ahmedabad, Chennai and Cochin are considering metro rail transportation.
To cater to the growing demand from this segment, BEML is planning to expand its metro coaches' capacity to 190 units per annum (pa) from 150 units pa by the end of December 2008. BEML's order book position at the end of FY08 was Rs 3,795 crore, which is equivalent to 1.2 times its turnover in FY08.
While these factors will result in BEML's revenues to grow at a CAGR of 18 per cent over FY08-10E, the company's net profits are expected to grow at a CAGR of 14 per cent during the same period, after considering the increase in wage bill (sixth pay commission recommendation) and rise in raw-material prices. At Rs 1,077, the stock trades at a PE multiple of 17.2x based on its FY09E earnings. Recommend Buy with a target price of Rs 1,303.
Bajaj Auto
Reco price: Rs 596
Current market price: Rs 599.6
Target price: Rs 992
Upside: 65.44%
Brokerage: Motilal Oswal Securities
Bajaj Auto (BAL) is expected to register volume growth of six per cent in motorcycles, 20 per cent in scooters, and five per cent in three-wheelers, which would effectively result in a 14.4 per cent growth in the total income.
The main growth drivers would be: (1) continued improvement in product mix towards the executive and premium models (2) higher production at Uttaranchal plant - up from 2.75 lakh units in FY08 to 5 lakh units in FY09 - where BAL has excise duty and income tax benefits (BAL will also manufacture the more profitable XCD at this plant in FY09 in addition to the Platina) and (3) improved realisations due to the recent 1-2 per cent increase in prices to combat higher input costs.
BAL has acquired 24.45 per cent stake in KTM Power Sports AG (KTM) through its fully owned subsidiary, Bajaj Auto International Holdings BV for Rs 570 crore. KTM is the second largest European motorcycle maker, and a worldwide leading manufacturer of power sports vehicles.
KTM bikes are likely to be introduced in India in the next 3-4 months through BAL's ProBiking showrooms.
Though the domestic volume growth for the two-wheeler industry looks challenging, export volume growth (volumes have increased at a 46 per cent CAGR over FY05-08), new product launches, and excise and tax benefits would lead to a 19 per cent growth in earnings for BAL in FY09. The stock trades at attractive levels of 8.7x FY09E earnings and the target price for the stock is Rs 992.
Emami
Reco price: Rs 280
Current market price: Rs 291.1
Target price: Rs 398
Upside: 36.72%
Brokerage: Anand Rathi
Emami is an established niche player in India's FMCG sector operating chiefly in hair care, skin care and pain-relieving products segments. It owns power brands like Navratna Tel, Boroplus antiseptic cream, Fast relief, and Fair & Handsome. Emami has recently made a foray into real estate.
For this, the company has floated Emami Realty Private, a 100 per cent subsidiary and has identified 16 real estate projects (IT/ITES parks, commercial and residential development). The move into real estate would help it deploy excess cash on its balance sheet and utilise the core expertise held by the promoters' in real estate.
Considering the expected launch of new products, variants and brand extensions, the company would be able to show strong revenue growth of 20 per cent CAGR from FY08-11E; while the lower ad spend should drive earnings at a 25 per cent CAGR during the same period.
At Rs 280 and FY10E earnings, the stock trades at P/E and EV/EBITDA of 12.3x and 9.6x, respectively. The DCF of the FMCG business yields a value of Rs 371 and the NAV of the realty business at a 30 per cent discount gives a value of Rs 27, collectively amounting to Rs 398.
(Current market price as on May 29, 2008)