Bharati Shipyard: Sailing smooth

ANALYSTS' CORNER

Prabhudas Lilladher maintains a "buy" on Bharati Shipyard. The report says the company announced successful completion of its zero-coupon convertible bonds and has raised $85 million in two tranches.

The proceeds will be utilised to expand at Goa and fund the proposed greenfield expansion at Mangalore or Vijaydurg. The capacity will go on-stream around June 2008 and incremental benefits will start flowing in within 12 months from the date of starting construction.

The report adds that it will attain optimum utilisation by FY 2010, when it will generate further revenue of over Rs 2,000 crore. The company's shipyard at Goa is very small contributing less than 10 per cent of its turnover.

The company has recently acquired an adjoining plot to expand this yard. The expansion will take 15-18 months for completion, and thereafter it will be a little over double its existing size.

Pantaloon: Scaling up the space

Motilal Oswal Securities recommends a "buy" on Pantaloon Retail. The report says the company has a strong entrepreneurial culture, which has allowed it to scale up rapidly.

The Pantaloon management has major growth plans and the report expects the company's total retail space to grow to more than 80 lakh sq ft by the end of FY 2008, a CAGR of 60 per cent (FY05-FY08). Hyper expansion plans will further strengthen the company's position.

The report expects the growth momentum to accelerate over the next three years driven by expansion in retail space. Its revenues are expected to grow at a CAGR of 64 per cent through FY05-FY08 and earnings may grow at a CAGR of 69 per cent during the same period.

Pantaloon is the largest Indian organised retailer with almost 21 lakh sq ft of retail space under its belt. It is present in almost all categories and its stores span different delivery formats, from departmental stores to hypermarkets and speciality stores. The stock trades at 30.4x FY07E EPS.

Trent: Aiming at hyper growth

Motilal Oswal Securities recommends a "buy" on Trent. The report says although the company is a late entrant it is catching up.

The company is now planning to accelerate its growth momentum by doubling its stores from 19 to 36 over the next three years. It opened its first hypermarket, Star India Bazaar, in October 2005.

A large portion of the company's growth will come on the strength of its hypermarket venture. High private label share gives high gross margins.

Trent has adopted a largely private label-driven strategy, different from its peers. Private label sales account for almost 70 per cent of its total sales.

This has resulted in higher gross margins. However, the company's significant investments in brand building have kept overall EBITDA margin under check.

The report expects this trend to change with higher contribution from food and grocery, and hypermarket reducing its gross margins, while advertising and promotion expenses as proportion of sales would also reduce. The stock trades at 29x FY07E EPS.