Bharat Forge: going global

ANALYSTS' CORNER

Edelweiss Securities maintains its "value buy" on Bharat Forge. The report states that the company's Q2 FY06 numbers were in line with expectations. On a standalone basis, revenues increased by 30 per cent y-o-y to Rs 380 crore. Net profits increased 37 per cent y-o-y to Rs 51.8 crore.

This was driven by 36 per cent growth in exports and 26.5 per cent growth in domestic sales. The company continues to impressively execute its globalisation strategy, acquiring the manufacturing capacities of Imatra Klista AB Sweden along with its wholly owned subsidiary, Scottish Stampings, (together called as Imatra Forging Group) in an all cash deal in the current quarter.

This follows the acquisition of assets of Federal Forge in the US, a quarter ago. Bharat Forge also completed the dual shore manufacturing model and now has the capability to supply all key components from at least two locations. The stock trades at a P/E of 23.3x and 17.7x on FY06E and FY07E.

Federal Bank: higher deposit growth

Prabhudas Lilladhar recommends a "buy" on Federal Bank. The company has reported higher growth in deposits, at 25 per cent, to Rs 16,035 crore and moderate growth in advances, at 16 per cent, to Rs 9437 crore in Q2 FY06.

The report believes that the higher deposits growth is due to the lower base and will be moderated by the year-end to 20 per cent. Still, given the strong credit off-take across banks, growth in advances appears to be subdued. Interest income from investments has gone up.

On the other hand, higher deposits have resulted in higher interest expenses. This has resulted in net interest income remaining flat, at Rs 133.9 crore, with only 0.3 per cent growth in Q2 FY06. For the year, the report expects net interest income to grow 13 per cent, to Rs 568 crore.

Moreover, moderate NPA provisions and absence of investment depreciation have resulted in a mammoth 1598 per cent swing in net profit to Rs 54.2 crore in Q2 FY06. The stock trades at 1.3x FY07E adjusted book value.

Coromandel Fertilizers: meeting expectations

Motilal Oswal Securities maintains it/s "buy" on Coromandel Fertilizers. The report states that Q2 FY06 results were ahead of expectations with strong revenue growth backed by strong volume offtake. Net sales, at Rs 700 crore, were up 44.9 per cent y-o-y, buoyed by strong growth in volumes.

Low offtake in Q1 FY06 due to delayed monsoon spilled over into Q2, thus boosting volumes. EBITDA grew 26.7 per cent to Rs 573 m. Other income, at Rs 3.8 crore, increased by 104 per cent and the company had an extraordinary income of Rs seven crore (net of income tax) on account of interest on income tax refund.

The company is looking to integrate backwards by entering into a JV in Africa to secure supply of phosphoric acid and another JV for ammonia production.

The company also said that its business contract with Foskor is progressing well and its stake could potentially increase to 20 per cent. The stock trades at 9x FY06.