Nitco Tiles: Buoyed by marble import license

ANALYSTS' CORNER

Stratcap Securities, in its report on Nitco Tiles, states that higher ceiling on marble import is expected to add significantly to topline and bottomline.

The company is the only one among the prominent players in the flooring industry that has a presence in marble segment. Rough marble blocks are under special import license (SIL).

Allotment of import license to the company of rough marble blocks of 12,816 tonne for FY06 (535 per cent increase) would significantly improve the performance, as marble enjoys the highest PBDIT margins amongst all the segments where it operates.

The company's imports of vitrified/porcelain tiles from FCL., China, have been exempted from anti-dumping duty, while custom duty on finished products has been reduced to 6.45 per cent.

Since China is the lowest cost manufacturer of tiles in the world, importing vitrified/porcelain tiles (rather than manufacturing in India) provides the company tremendous competitive advantage in terms of pricing. Moreover, capacity expansion is expected to drive volumes.

Gitanjali Gems: Exports on rise

Prabhudas Lilladher recommends a "buy" on Gitanjali Gems. The report states the global jewellery market size is approximately at $70-80 billion annually.

India exports gems and jewellery worth $17 billion, of which about $12 billion is in diamonds (60 per cent of the world diamond market, 80 per cent in carats and 92 per cent by volume).

The domestic jewellery market is worth about $22 billion (with a 20 per cent CAGR). Of this, only three per cent is branded jewellery.

For the past two years, the branded jewellery market has been growing at over 100 per cent a year and is expected to grow at more than 50 per cent.

For Gitanjali Gems, at present 80 per cent of revenue comes from exports of diamond and 10 per cent each from exports of jewellery and from retailing jewellery in the home market.

At the PAT level, the company's retail business enjoys the highest margins (12-15 per cent), followed by jewellery exports, where margins are 10-12 per cent and by diamond exports, where margins are significantly lower (1.5-2 per cent).

Sundaram Clayton: Awaits demerger

Sharekhan recommends a "buy" on Sundaram Clayton. The report states the company would benefit from the buoyancy in the country's commercial vehicle (CV) industry.

The shift from hydraulic brakes to air brakes expected in the CV industry augurs well for the company. Wabco, holding a 39.17 per cent stake in the company, is scouting for a low-cost producer of brakes in India.

Sundaram Clayton would be the ideal choice. The report expects it to become a major sourcing hub for Wabco and meet its global requirements of brakes and machined castings.

Such an arrangement would increase its business opportunities significantly. The much-awaited demerger of Sundaram Clayton is about to take place, according to the report.

A demerger would enhance the business focus of both the divisions and lead to the unlocking of the value of the company's investments in group companies.