Saregama India: New strategies

ANALYSTS' CORNER

Domestic securities firm Sharekhan has recommended a `buy' on media and entertainment firm Saregama India. The firm notes that Saregama India has been going through trying times in the recent past. With competition from radio and MP3 and increasing losses from piracy, the company has been in the red in the last 3 years.

However, the company witnessed a turnaround in FY05. With the induction of a new chief executive officer, the company is undertaking new strategies, which could take it towards a new path.

According to a report, the publishing business of Saregama will be the main driver of future growth. Sharekhan is bullish on the ring tone market. Revenues from this segment is expected to take Saregama on a new growth trajectory.

Sharekhan expects the company to report a consolidated net profit of Rs 19.3 crore in FY07 compared with Rs 2.5 crore in FY05. The price target is Rs 225. The stock currently rules at Rs 184 levels.

Gateway Distriparks: Keeping the faith

CLSA Asia-Pacific notes that Gateway Distriparks (GDL) is an attractive play on growing international trade to and fro from India and its improving ports infrastructure. It's a market leader in the CFS (container freight station) market which is a critical element for international trade.

The management has a proven track record and with a consistent growth in market share driving 47 per cent CAGR growth in revenues and a 142 per cent CAGR growth in profits in FY05.

CLSA notes that GDL has decided to expand beyond Mumbai market and to that effect, has recently acquired a CFS at Chennai, nearly completed the construction of a CFS at Vizag and developed an ICD (inland container depot) in Haryana. The ICD at Haryana has already broken even and meaningful contribution from these three units will start from FY06.

Additionally, the company is aggressively looking at inorganic growth opportunities and possibility of tying up with shipping lines to set up CFSs.

Though the stock has appreciated by 177 per cent since its IPO, CLSA believes that the price does not factor in multi-year high growth phase the company will experience.

Possibility of getting into the lucrative rail freight market, once Concor's monopoly is ended, remains an additional upside, notes the report. The stock currently trades at Rs 199.45.