PVR reported impressive FY08 numbers with consolidated revenue growing by 49.7 per cent to Rs 265.9 crore and earnings growing by a whopping 112.2 per cent to Rs 21.6 crore.
During the year, the company added 16 new screens, taking its total screen count to 84. It plans to scale up total screen count to 125 by FY09. For FY09, PVR Pictures is expected to release four movies under co-production viz. Jaane Tu Ya Jaane Na, Contract, Mere Khwabon Mein Jo Aaye and Ghost Ghost Na Raha.
In February 2008, the company entered into a 51:49 joint venture with Major Cineplex Group, a leading film exhibition and retail entertainment company based in Thailand.
The JV would set-up bowling alleys, karaoke centres, ice skating rinks and gaming zones. The company's revenue and profit are expected to grow at 48 per cent and 70 per cent CAGR respectively over FY07-10E. At Rs 174, PVR is trading at 12.7x FY09 and 8.4x FY10 earnings. The company's valuations are expected to be re-rated as it aggressively scales-up its new ventures.
India Glycols
Reco price:Rs 285
Current market price: Rs 273.75
Target price: Rs 535
Upside: 95.43%
Brokerage: Pinc Research
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India Glycols (IGL) is one of the leading manufacturers of glycols and ethylene oxide (EO) derivatives, which cater primarily to industries like textiles, agrochemicals, oil and gas, detergents and paints. Currently, its business can broadly be segregated into chemicals, alcohol and other products (guar gum and industrial gases).
In December 2007, it acquired Shakumbari Sugar and Allied Industries for Rs 47 crore, which will give it flexibility in making ethanol through molasses or sugarcane depending on their price cycles. It is one of the few companies, globally, to produce EO/Mono-ethylene Glycol (MEG) via the organic route.
MEG as a key product accounted for about 51 per cent within chemicals, and about 41 per cent of total gross sales in FY08. The largest consumer of MEG in India is the polyester fibre sector (about 70 per cent). Reduction in custom duty (from 10 per cent to 7.5 per cent) on polyester in Union Budget 2007-08 has brought prices at par with cotton.
IGL is expanding its MEG capacity by 20 per cent to 600 tonne per day, which will be completed by June 2008. Expansions in the polyester industry (Indo Rama, JBF and Reliance Industries) will ensure offtake of IGL's incremental capacity. At Rs 285, IGL is ruling EV/EBIDTA of 2.3x and P/E of 2.7x FY10E earnings. Maintain Buy with a price target of Rs 535 (12-month investment horizon)
Tata Tea
Reco price: Rs 779
Current market price:Rs 816.30
Target price: Rs 970
Upside: 18.83%
Brokerage: Sharekhan
Tata Tea has launched Himalayan mineral water in Q4 FY08 (a brand of Mount Everest Mineral Water in which Tata Tea has a 31.73 per cent stake) in its new avatar.
The bottled water market in India is estimated at over Rs 1,500 crore and is growing at a stupendous rate of 25 per cent YoY. For FY08, Tata Tea's revenue grew 9.1 per cent YoY to Rs 4,392.3 crore.
Adverse impact on account of forex translation and transfer of north India plantation operations impacted the overall growth. The sale of investment held in Energy Brand Inc resulted in the exceptional income of Rs 1,607.52 crore for FY08. Consequently, Tata Tea posted a net profit of Rs 1,542.6 crore for FY08 as against Rs 443.4 crore in FY07.
The company's hefty reserves together with the management's intention to look for acquisitions in the domestic and global non-alcoholic beverage market will ensure inorganic growth in the future. At Rs 777.3, the stock trades at 10.7x FY10E earnings. Maintain Buy with the sum-of-the-parts price target of Rs 970.
Motherson Sumi Systems
Reco price: Rs 85
Current market price: Rs 83.75
Target price: Rs 111
Upside: 32.54%
Brokerage: Angel Broking
Motherson Sumi Systems (MSSL) is a leader in wire harnessing, controlling over 65 per cent of the domestic passenger vehicle market.
The company is now focusing on the supply of higher level assemblies and modules as the margins in this segment are comparatively higher. MSSL entered into a 49:51 joint venture (JV) with Calsonic Kansei Corporation in FY08 to meet the growing needs of the automotive manufacturers in India.
The JV will avail advantages of the strong synergies between the two players, as Calsonic Kansei will provide the product and manufacturing technology, which will be supported by the company's high performance development/production engineering in the fields of polymer molding and tool making.
For FY08, MSSL clocked 32.8 per cent year-on-year growth in consolidated revenue to Rs 2,028 crore. The company reported 37.3 per cent YoY growth in earnings to Rs 177.9 crore (including extra ordinary income of Rs 24 crore, owing to profit on sale of land) during the year.
MSSL is expected to grow at a CAGR of around 18-20 per cent over the next two years. At Rs 85, the stock is trading at 15.8x FY09E and 13.4x FY10E consolidated earnings (fully diluted). Maintain Buy with a target price of Rs 111.
Glenmark Pharmaceuticals
Reco price: Rs 657
Current market price: Rs 646.45
Target price: Rs 938
Upside: 45.10%
Brokerage: ICICI Securities
As part of the re-organisation, Glenmark spun out its non-branded generics international business into a separate company, Glenmark Generics (GGL) effective April 1, 2008.
The company plans to raise about Rs 2,000 crore in FY09 by diluting 25-30 per cent stake in GGL (by way of an IPO) and thereby fund its ambitious growth and acquisitions in the US and EU generics markets.
Glenmark's international generic business has risen 42x in the past five years from a modest base of about $7 million in FY03. Performance in the dosage-form market in the US is exemplary, with $140 million revenues (with estimated EBITDA margin of 38 per cent and NPM of 34 per cent in FY08) catapulting the company into the big-league of the top-4 from India.
The company has an impressive pipeline of 13 compounds, with three new chemical entities (NCE) in phase II.
Glenmark has beaten its FY08 guidance by 2 per cent and raised PAT guidance for FY09 by 8 per cent to $210 million and FY10 by 15 per cent to $282 million, driven by the base generics business.
The stock is currently trading at a P/E of 16x FY10E earnings on a consolidated basis. The fair value for the stock is Rs 938, representing potential upside of 45 per cent over the next 18 months.
Current market price as on June 5, 2008.