Munjal Auto: Eyeing four-wheeler segment

ANALYSTS' CORNER

Dimensional Research recommends a "buy on declines" for Munjal Auto. The report states the company derives almost 99 per cent of its revenues from Hero Honda, the player with a dominant market share of 42.3 per cent (YTD FY06) in the domestic two-wheelers segment.

The company supplies nearly 75-80 per cent of Hero Honda's requirements in all the high end motorcycles and 100 per cent in case of scooters. The company has started supplying sheet metal components to General Motors India.

This can be considered to be an important breakthrough for the company into the lucrative four-wheeler segment and will pave the way for the company to reduce its overdependence on Hero Honda.

Exports also offer immense potential for future growth to the company and the management is confident of making a foray in the lucrative exports market in the near future. The scrip trades at 12.5x FY06E and 10.9x FY07E.

Gammon India: Pan Indian presence

Fortis Securities, initiating coverage on Gammon India, rates the stock as an "outperformer". It states that the company is a well diversified construction company having a pan India presence. It is one of the early entrants in infrastructure privatisation business having already bagged five BOT projects.

It is estimated that investment in infrastructure would amount to Rs 3,91,900 crore over FY04-07E, which would translate to orders worth Rs 2,62,300 crore for construction companies. Infrastructure is both a driver as well as magnet for investment. In order to sustain a GDP growth of seven per cent over the next decade, impetus on infrastructure is inevitable.

Government and nodal agencies like NHAI, NHPC, NEEPCO are on the threshold of releasing work orders, the absolute size and scale of which will make this sector post robust growth. The company is also safeguarding core business by risk mitigation and private financing. The stock trades at a P/E of 20.7x 2007E.

International Combustion: New range of portfolios

Pioneer Intermediaries recommends a "buy" on International Combustion. Its visit note states that as a result of the numerous technical partnerships, the company's product portfolio now includes vibratory screens/feeders of varying sizes targeted at the mining, cement and sugar industries; gear boxes for heavy engineering and earthmoving equipment and spares for the above equipment.

The company's performance was impacted during the recessionary years of 1997-02, resulting in loss-making performances during the period. However, the surging industrial activity and ensuing capacity expansions, led to a turnaround since FY02.

The company is at an inflection point, and is poised to encash on the upswing in industrial capex cycle. It has potential to scale up its operations on back of present product portfolio coupled with its new range of gearboxes.

The company had started operations in 1936 as a 100 per cent subsidiary of International Combustion Holdings, UK and went public in 1974.