Analysts' corner: Gabriel

Anand Rathi Securities recommends a "buy" on Gabriel India. The report states that the management at Gabriel has targeted to attain a 30 per cent exports to gross sales in the next 3-5 years.

Further participation in Toyota Innova and Ford Fusion platform for domestic launch has opened export potential in the future. On the domestic front, addition of Hyundai Motors as a client will be a major upside, for which Gabriel is under consideration as major suppliers.

With the softening of global steel prices, domestic market has also shown a downward trend with prices correcting by almost 20 per cent as against the high of June 05 levels. If the recent trend in global iron ore prices are anything to go by, steel prices are expected to further go down in future.

This is expected to help ease pressure of high prices on coal and maintain the finished product prices. Gabriel which accounts for almost 50-53 per cent of cost from raw material would significantly impact its operating profits and the full effect would be felt in the second half of current year.

Nestle India

CLSA Research rates Nestle India as an "outperformer". The report states that the potential excise and income tax savings would ensure that Nestle's earnings grow by 17-20 per cent CAGR 2005-08. The report expects the fiscal savings in the first full year of operation, i.e. 2007 to be Rs 20-25 crore.

Further, the company's weighted average price increase of 3.5 per cent during 2005 has been the highest in the past six years, indicating the return of the pricing power, evidence of which has been seen nearly across the FMCG industry.

Among the last FMCG companies to go for the fiscal benefits, Nestle has laid a foundation stone for the new factory in Uttaranchal on 26 October. This makes Nestle one of the last FMCG companies to set-up manufacturing unit in the government notified backward areas to save on excise and income taxes for the next 10 years.

The company will spend Rs 100 crore to set-up this unit and will manufacture culinary products. It will be operational during H2 2006. Maggi noodles account for close to 15 per cent of company's total sales.

CCL Products

Brics PCG Research recommends a "buy" on CCL Products. The report states that the company has excellent and consistent return parameters like a margin of 27.4 per cent, ROE of 28.7 per cent and an ROCE of 32.7 per cent in spite of upswing in bean prices since FY02.

A hike in CCL's existing spray-dried coffee capacity from 5,000 tonnes to 6,500 tonnes at a cost of Rs 25 crore, together with a higher realisation of Rs 210-215 per kg (Rs 189 in FY05), will drive topline growth and provide volume benefits. CCL's margins will expand with the introduction of new products.

It has incurred a capex of Rs 65 crore for a 1,500-tonne freeze-dried plant, and Rs 10 crore towards a 3000-tonne liquid coffee plant. CCL expects 35-50 per cent margins for these products.

CCL plans to take its capacity to 20,000 tonnes in the next 3-5 years, at which it will be a Rs 500 crore company. By Q1 FY07, the capacity will rise to 10,000 tonnes. CCL is a well-established player in the global coffee contract manufacturing business.