GE Shipping: Leveraging exploration boom

ANALYSTS' CORNER

Emkay Research recommends "accumulate" on GE Shipping. The report states that at current levels the stock is poised to unlock value from the de-merger of its offshore business.

The objection raised from its key client ONGC (forming 80 per cent of offshore business) has delayed the de-merger process by over a quarter.

However, concerns of declining shipping freight rates and increase in global tonnage would make the business scenario more challenging in the near future.

The offshore division of GE Shipping provides support services to upstream companies carrying out offshore exploration and production activities. With its 33 offshore vessels, the company provides various services from drilling to logistics, covering most of the needs of offshore business activities.

Demand for platform supply vessels, anchor handlers and offshore supply vessels is likely to improve as the exploration activities mount up. The report foresees good business potential in this particular segment in the near future.

Rico Auto:Strengthening product portfolio

Brics PCG recommends a "buy" on Rico Auto. The report states that the company is a leading aluminum and ferrous auto component manufacturer.

It has a strong presence in the two-wheeler (about 70 per cent of revenues) and passenger car (about 17 per cent) segments.

It manufactures more than 200 varieties of products, mainly comprising clutch assemblies, brake panels, wheel hubs, crank cases for two-wheelers, oil pumps, oil pump assemblies, brake drums and flywheels for passenger cars and trucks.

It has two manufacturing facilities, with a total capacity of producing 36,000 TPA of aluminum foundry and 40,000 TPA of ferrous foundry.

The company has two wholly-owned subsidiaries (located in the US and the UK) and a 50 per cent joint venture in Manesar with FCC of Japan. It is a critical component supplier to Hero Honda and Maruti Udyog, the market leaders in their respective product segments.

Kotak Mahindra Bank: Strong earnings

JM Morgan Stanley, in its report on Kotak Mahindra Bank, states that the bank has reported very strong earnings at Rs 518 crore for Q4 FY06. A large part of this gain was driven by the one-time gain of Rs 387 crore booked on the sale of the Hutch stake.

Apart from this one-off item, profit was up 104 per cent y-o-y, marginally lower than expectations. Among key businesses, its earnings grew by 50 per cent, securities earnings by 85 per cent and Kotak Mahindra capital by 329 per cent.

The report commends the bank for its earnings record and valuations at 27x FY07E earnings are full. Loan growth remained buoyant at 58 per cent.

NIMs continued buoyant at close to five per cent, which resulted in net interest income growth of 18 per cent sequentially, while earning assets (loan + treasury assets) rose 14 per cent.