RESEARCH CALLS: Shringar Cinemas

Brics PCG has given a 'buy' recommendation for Shringar Cinemas with a price target of Rs 92.

The company has posted a revenue growth of 45 per cent y-o-y at Rs 12.52 crore in Q2FY07 and, after turning around in the first quarter, has posted a net profit of Rs 2.66 crore, from a loss of Rs 40 lakh in the corresponding year-ago quarter.

The performance has been led by better occupancy levels and higher ticket prices. This together with lower costs has bolstered Shringar's operating profit margin to 14.7 per cent compared to 10 per cent in the previous period.

Brics PCG expects the company to continue on its turnaround path in FY07 with consolidated revenue growth of 68 per cent y-o-y to Rs 97.24 crore, yielding a net profit of Rs 6.1 crore.

In FY08, as the company operates with a larger base in terms of number of properties, a profit of Rs 16.5 crore is expected on revenues of Rs 196.9 crore. Shringar is currently quoting at 39.7 times and 14.9 times on FY07E and FY08E earnings.

Marico

Angel Broking has given 'hold' recommendation for Marico with a 12 month price target of Rs 574. The company reported healthy growth across business segments in Q2FY07.

Marico reported a sales growth of 37.5 per cent to Rs 378 crore. The domestic FMCG business grew by 20 per cent and international FMCG business by 57 per cent. Operating margin improved by 503 bps. EBIDTA witnessed a growth of 100 per cent to Rs 61 crore.

However, the increase in tax rate (on back of expiry of tax benefits at the manufacturing plants and one time previous tax liability of Rs 6.5crore) has impacted net margins by 20bps.

The net profits grew by 34 per cent to Rs 26 crore, reporting net margins of 6.9 per cent. The stock currently discounts its FY08E and FY09E earnings at 21.4 times and 18 times respectively.

While Marico's near term valuations look stretched the company is expected to report 20 per cent CAGR profits over FY06-09E and maintain RoE of 36 per cent.