Allied Digital Services
Reco Price: Rs 177,
Target Price: Rs 326
Allied Digital Services Ltd (ADSL) is well poised to capture increasing penetration of remote infrastructure management services (Rims). ADSL’s management has indicated that growth will accelerate through both organic and inorganic routes as expansion in the Rims space will be the top priority for the company in the coming year. ADSL’s strategic alliances (Intel, Lenovo, etc) will help it build global footprints. On the other hand, ramping up newer areas of growth like cloud computing, VDI, mobile mobility service and green data centre will be at the forefront of the management’s priorities. Analysts remain positive on the long-term sustainability of the company’s business model, with incremental thrust from the management on the high-margin Rims business and a gradual decline in the low-margin segments.
Maintain Buy.
— Sharekhan
Prakash Industries
Reco Price: Rs 108,
Target Price: NA
Prakash Industries (PIL) is currently focused on increasing its presence in power (project of 625-Mw power plant underway) at a capex of Rs 2,500 crore. Currently, PIL has 0.6mn tpa of DRI kiln, which is used captively in steel melting shop. The company plans to raise DRI capacity to 1.2mn tpa and billet capacity to 1.0mn tpa by 2012-13. The company primarily consumes billets captively in 0.75 mn tpa rolling facility in Raipur (0.45mn tpa wire rods, 0.15mn tpa TMT and structurals mill each). PIL has also been allotted two more coal mines with reserves of 96mnt and two iron ore mines with reserves of 85mnt. At CMP, the stock is trading at 3.0 times EV/Ebitda and 4.4 times P/E on 2009-10 basis.
— Pinc
Sun TV
Reco Price: Rs 518,
Target Price: Rs 625
Sun TV is a market leader in three of the four markets it operates in: Tamil Nadu (60 per cent), Karnataka and Andhra Pradesh ( both 40 per cent), while it ranks second in Kerala (26 per cent as against 30 per cent for Asianet). With a strong presence across the South, it has high bargaining power besides being indispensible to advertisers and content producers. Sun’s sponsored content model allows it to offload content-risk, unlike national GECs, and partial (1/3) ownership of ad inventory boosts returns. Analysts expect an upside of 19 per cent from current levels. At 24 times FY12 the stock isn’t cheap, but RoEs of 29 per cent (Zee 15 per cent), and 75 per cent margins (Zee 29 per cent), and a 26 per cent EPS CAGR over FY10-13 (Zee 9 per cent) make a strong case (Zee trades at 22x FY12).
Initiate with buy.
— Religare Institutional Research
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Dhunseri Petrochem and Tea
Fair value: Rs 236,
Current market price: Rs 190
Crisil Equities has assigned fundamental grade 3/5 to Dhunseri Petrochem and Tea Ltd (Dhunseri), indicating good fundamentals. Dhunseri, which is expanding its polyethylene terephthalate (PET) capacity four-fold to 830,000 Mtpa by 2013-14, is well positioned to benefit from an expected increase in domestic and global PET demand. The company could benefit from its move to relinquish its export-oriented unit status to capitalise on the domestic market. However, the risks involved in the execution of Dhunseri’s large capacity expansions in Haldia (India) and Egypt remain a key challenge for the company. Crisil Equities expects Dhunseri’s revenues to grow at a two-year CAGR of 9 per cent and adjusted EPS is expected to increase from Rs 20.9 in 2009-10 to Rs 22.7 in 2011-12.
— Crisil Equities