Research Calls: India Cements

ASK Raymond James recommends a "Buy" on India Cements at Rs 242 with a target of Rs 285. The stock trades at 13.6 times and 11.8 times its estimated FY07 and FY08 earnings respectively and the corresponding EV/EBIDTA ratios of 10.4 times and 8.7 times.

Strong demand growth in the first nine months of 2007 have prompted ASK Raymond James to revise the net profit estimates for FY07 upward by about 3 per cent to Rs 390 crore from the earlier estimate of Rs 380 crore, and the estimated earnings for FY08 are revised upward by 5 per cent to Rs 450 crore.

The company recorded a ten fold growth in the net profit year on year to Rs 79.8 crore, which was in line with the expectations, while the revenues grew about 50 per cent to Rs 470 crore in December 2006 quarter.

Due to large developments in the infrastructure and construction sectors, the demand for cement grew at 16.8 per cent year on year for April-December 2006, along with overall stability in prices of cement.

Lupin

IL&FS Investsmart recommends a "Buy" on Lupin at Rs 575, with a target of Rs 646, implying an upside of 12.3 per cent.

The stock trades at 22 times and 15.1 times its estimated FY07 and FY08 earnings respectively with corresponding EV/EBIDTA ratios of 17.3 times and 12.3 times.

While the sales in the past quarter were driven mainly by the rise of 105 per cent in the sales of suprax, the launch of generic cefdinir capsules, with a market size of $543 million a year, is expected to fuel growth in FY08. Lupin is the only generic company to win a USFDA approval to launch the product.

In December 2006 quarter, the company's revenues grew 15.5 per cent year on year at Rs 490 crore, while its net profit jumped 26.8 per cent to Rs 56 crore, led by a 31 per cent increase in formulation sales. Operating margin improved by 260 basis points year on year, and 30 basis points quarter on quarter.

Paradyne Infotech

Emkay Shares and Stock Brokers recommends a "Buy" on Paradyne infotech at Rs 104 with a target Rs 150. The stock trades at 8.3 times and 5.6 times its estimated FY07 and FY08 earnings respectively.

The company's December 2006 performance has been impressive with revenues growing by 60 per cent year-on-year (y-o-y) and 14.5 per cent quarter on quarter (q-o-q) to Rs 34.5 crore.

Operating profit margins have also expanded by around 600 basis points y-o-y to 15 per cent for Q3 FY07, mainly due to increasing contribution from software services and infrastructure services revenue.

The company has developed a web-based credit appraisal and rating tool (CART) for SIDBI which will be used by all major nationalised banks, which enables quick appraisal and rating of SME credit proposals.

Paradyne has also joined hands with SAP, a global leader in Enterprise solutions, which would enable it to service emerging and dynamic businesses. The company's proposal of offering its HR solution ("HRWork") on SaaS (Software as a service) model would greatly enhance its business synergies with PSU's.

Omax Auto

BRICS PCG research recommends a "Buy" on Omax Auto at Rs 93 with a target of Rs 126. The stock trades at a P/E of 8.4 times and 7.4 times estimated FY07 and FY08 earnings respectively.

Omax Auto' December 2006 quarter profitability have exceeded expectations with operating profit margins expanding by 250 basis points. This could improve over the next few quarters due to cost control measures introduced by the company.

The company's net sales grew 14.6 per cent y-o-y and 6.4 per cent q-o-q, led by higher than expected offtake by overseas clients. The company's exports have increased significantly by 77 per cent y-o-y in the first nine months of FY07 and are expected to drive revenues in the medium term.

Omax has set up a mini-steel plant through its subsidiary, Omax Steels, to introduce backward integration and reduce raw material costs. A key trigger in the future is the new production facility for Tata Motors which the company is setting up at Lucknow to manufacture the chassis for light, medium and heavy commercial vehicles.

UTI Bank

Edelweiss recommends a "Buy" on UTI Bank at Rs 500. UTI reported higher than expected December 2006 quarter results with net profit growing by 40 per cent year on year to Rs 184 crore.

While advances grew 66 per cent, the bank continued to maintain a very low gross NPA ratio of 1.2 per cent. The overall quality of loan portfolio also remains healthy with 82 per cent of corporate advances with a rating of 'A' and above.

Surprisingly CASA ratio declined to 37 per cent ( as compared to 40 per cent in September 2006) despite deposits growing at a robust 49 per cent. Moreover, net interest margins improved by 8 basis points to 3 per cent sequentially.

Capital adequacy as of December 2006 stood at 11.8 per cent with its tier-1 capital at 6.96 per cent. The bank is estimated to deliver a CAGR of 25 per cent in earnings from FY06 to FY09. The stock trades at 4.1 times and 3.5 times estimated FY07 and FY08 estimated book value respectively.