Research Calls: Madhucon Projects

Emkay Private Client Research recommends a "Buy" on Madhucon Projects at Rs 287 with a target price of Rs 368. The stock trades at 12 times its estimated FY08 earnings.

During the December 2006 quarter, the company's revenues rose 19 per cent year on year (y-o-y) to Rs 120.5 crore while operating margins improved by 80 basis points to 15.8 per cent.

Segments like roads and BOT (build-operate-transfer) projects led to strong growht in revenues while irrigation revenues were dissapointing as the Pollavaram lift canal did not materialise due to non environmental clearance.

Madhucon's order book to sales ratio of 12.8 times its FY06 sales"�much higher than peers"�acts as key positive. It has currently four BOT projects and has recently bagged a very big order of 129 km stretch, amounting to Rs 820 crore in Madurai-Tuticorn in Tamil Nadu.

Madhucon looks all set to take advantage of the BOT oppurtunity being unleashed by the NHAI and has identified seven out of eight BOT projects in the Madras-Kolkata stretch and few road projects for the purpose of bidding.

Among new initiatives, the company is looking at entering the coal mining arena abroad and is also planning to do EPC jobs for power projects. Looking ahead, MPL's 100 per cent equipment strategy should help it earn better earnings.

Prithvi Information Solutions

Angel Broking recommends a "Buy" om Prithvi Information Solutions at Rs 359 with a 15 month target price of Rs 580. The stock trades at a P/E of 5.8 times and 4.6 times its estimated FY08 and FY09 earnings.

In the December quarter, Prithvi reported an impressive 17.3 per cent quarter on quarter and a whopping 71.1 per cent year on year growth in revenues mainly due to robust growth in technology outsourcing, business intelligence, network solutions and the KPO segment.

While operating margin soared on a y-o-y basis by 370 basis points, over the quarter, it were flat, up by just one basis point mainly on account of higher selling, general and administrative expenses which rose to 14.1 per cent of sales.

However net profit grew just 5.5 per cent q-o-q due to a forex loss of Rs 5.1 crore during the quarter.

A key upside of the company is its strong order book of 29.5 crore worth of contracts either in progress or signed. Increased revenue visibility thus provides a strong medium term growth prospects.

While currently, the US market comprises as much of 99.6 per cent of the company's revenues, there are indications that by FY08, the Middle Eastern region could also become a strong growth driver.

Angel expects the company to clock a compound annualised growth rates of 36.4 per cent and 38.1 per cent in revenues and net profits respectively between FY06 and FY09.

Jet Airways

Networth Stock Broking recommends a "Hold: on Jet Airways at Rs 784.35. The stock is trades at EV/Sales of 1.8 times estimated FY08 earnings which is in line with multiples enjoyed by its international peers.

The Q3 FY07 performance for the full srvice airline was better than expectations. While the operating revenues grew 30.9 per cent year on year (y-o-y) to Rs 1935 crore, revenue per passenger improved by 12.3 per cent to Rs 6420.

The load factor on the domestic front showed a significant improvement to around 70 per cent on account of the peak season from the month of October but remains lower as compared to last years levels due to high capacity addition of around 20 per cent on the domestic routes by the company.

The load factor on the international routes has improved by 67.6 per cent. While introduction of new routes meant that international revenues nearly doubled to Rs 445.5 crore y-o-y, cargo revenues increased by 84 per cent and 22 per cent y-o-y and quarter on quarter (q-o-q) respectively.

Decline in fuel expenses led to improvement in operating margins to 15.93 per cent. Overall while Jet Airways has emerged as the market leader in the domestic arena in the past two years, competition has taken a toll on market share and domestic yields.

However the company's international operations represent a long term growth oppurtunity and the commencement of its flights to the US from August 2007 holds the key to profitability.