RESEARCH CALLS: Suryalakshmi Cotton Mills

Karvy Stock Broking has revised the target price of Suryalakshmi Cotton Mills to Rs 107 from Rs 167. For Q1FY07, Suryalakshmi posted sales of Rs 30 crore, down 45 per cent year-on-year and a net loss of Rs 5.79 crore.

This sharp fall in revenues is attributed to the labour strike in the factory for nearly one month and lower realisation in denim prices. The strike has resulted in a delay of its ongoing expansion plans.

In view of these developments, the company would not be able to achieve good financials. The stock trades at 7.0x and 3.3x for FY07E and FY08E respectively.

Orient Paper

BRICS PCG research recommends a buy on Orient Paper & Industries (OPIL) at Rs 413 with a target price of Rs 858. OPIL derives 60 per cent of revenues from cement, which is witnessing an uptrend due to a demand-supply mismatch.

Additionally, improved paper prices on account of a greater focus on education and literacy programmes will further boost revenues from the paper segment.

The company is a strong player in the fast-growing tissue paper segment and is planning to ramp up capacity by 20,000 TPA. OPIL is a leading manufacturer of ceiling fans and one of the largest suppliers to Walmart.

The company is now actively considering the divestment of its Orissa plant, which is likely to result in substantial unlocking of value

Sundaram Clayton

Sharekhan recommends a buy on Sundaram Clayton (SCL) at Rs 925 with a target price of Rs 1,550. In Q1 FY07, the company's net sales growth of 32 per cent at Rs 189.9 crore was higher than our expectations.

The operating profit grew by 41.8 per cent to Rs 27.8 crore and margin (OPM) improved by 100 basis points y-o-y to 14.6 per cent. The value of SCL's total investment in group companies works out to Rs 1,040 per share.

After adjusting for 75 per cent discount to the company's total investment, the stock trades at around 8.4x its stand-alone FY2008E earnings.

Coromandel Fertilisers

Pioneer Intermediaries (PINC Research) has upgraded Coromandel Fertilisers from hold to buy at Rs 65. The company posted a 183 per cent jump in sales to Rs 360 crore in Q1 FY07 y-o-y.

However, operating profit increased at a lower pace of 81 per cent to Rs 33.9 crore due to higher ammonia prices ($365/mt), increase in staff costs on account of wage revision and a spurt in other expenditure by 27 per cent. Net profit increased by only 25 per cent to Rs 12.4 crore. With a satisfactory monsoon in 2006 and an increase in acreage of kharif crops, CFL is expected to do well in FY07.

The company's initiatives like tie-ups with phosphoric acid manufacturers, buy-out of controlling stakes in Ficom Organics and a formulations plant in J&K will further strengthen its position.