Ramsarup Inds: Future bright

ANALYSTS' CORNER

SKP Research has rated Ramsarup Industries Ltd a 'buy' with a target price of Rs 184 at 6x FY08E earnings of Rs 30.76 over a 12-month period. Ramsarup Industries is modernising and expanding its wire division and manufacturing facility of TMT bars.

These initiatives are expected to lead to a sharp increase in revenue and profit. The company has a healthy order booking totalling Rs 200 crore, of which they have an order booking of Rs 27 crore for export.

The company is registered with PGCIL and with almost all the SEBs that automatically qualifies it for their bidding process.

A group company has initiated the process of backward integration by setting up an integrated steel plant, which will help it overcome the problem of price fluctuations of steel, its major raw material.

The company is currently trading at 5.65x FY07E earnings of Rs 14.36 and 2.64x FY08E earnings of Rs 30.76. A major part of the expansion would become operational from FY08 beginning and as such company would post superior profits from thereon.

AP Paper: Development plan boost

Emkay Shares has given a 'buy' recommendation on Andhra Pradesh Paper Mills (APPM) with a price target of Rs 224. APPM is ready to reap the benefit from its ongoing Rs 635 crore mill development programme started in Q1FY05.

It will enable the company to double its EBIDTA margins to around 26.2 per cent by FY08E. Sharp margins expansion will result in CAGR growth of 38 per cent in PAT from FY05 to FY08E as against sales growth of 15.2 per cent and improved return ratios - RoCE of 13.7 per cent and RoE of 15.1 per cent. At current price, the stock trades at 6x EPS of Rs 21.5 in FY07E and 4.6x EPS of Rs 28 in FY08E.

CCL Products: Shining Q4

Brics PCG recommends buy on CCL Products. CCL has posted better-than-expected results for Q4FY06 as the company registered a net profit of Rs 39.13 crore on sales of Rs 150 crore. This implies 32.1 per cent growth in net profit.

Further, the EBITDA margin for FY06 improved by 200 bps to 29.4 per cent. Margins during Q4FY06, however, declined 60 bps due to lower sales of instant coffee and a hike in raw material cost.

CCL reported a modest 11.9 per cent rise in volumes in FY06, held back by capacity constraints. CCL is also building a 3,000 MT capacity for liquid coffee (to be marketed in Japan), which is expected to be go onstream by FY07-end.

Thus, the planned capacity additions will help boost the company's performance in FY07.