Amtek: strong financials

ANALYSTS' CORNER

Kotak Securities recommends a buy on Amtek India. The report states that the company has a strong presence in the engine components space with the focus on manufacture of castings like cylinder heads and blocks. This is a niche segment, but one which has strong pricing power.

This, coupled with a client list boasting of domestic auto giants like MUL and M&M, has ensured strong financials. At the heart of the company's success is its strong EBIDTA growth, which the report expects to sustain.

Two factors will drive EBIDTA growth, rise in existing castings business volumes and the SigmaCast UK deal. It is growth in the existing castings business that will largely lead to EBIDTA growth. Strong domestic and export revenues are expected from top-rung clients like MUL, M&M, New Holland Tractors, John Deere, ITL and Carraro Transmissions.

The company meets 70 per cent of MUL's requirements, the rest supplied by competitors like DCM Engineering and Ennore Foundries. The stock trades at 11x and 9x earnings for FY06E and FY07E.

Godrej Cons: robust run

ASK Raymond James report states that a double-digit growth for Godrej Consumer Products would not be an issue over the next couple of years. Its soaps business is set for over 15 per cent sustainable growth. The company has about 8.5 per cent share of the Rs 4,200 crore toilet soaps market.

The management expects the soap market to clock a 5 per cent per annum growth going forward. In hair colour category, the growth is expected to outpace soaps. With about 40 per cent share of the Rs 330 crore hair colour market, Godrej straddles the entire segment in India.

The company's volume share is much higher owing to its low priced strategy, as compared to its MNC peers. The company expects the market itself to grow at 15 per cent per annum for the next 2-3 years.

The report expects a 18-20 per cent CAGR in this segment backed by new brand introduction and value-for-money strategy.

CCL Products: strong demand growth

Prabhudas Lilladhar has recommended a buy on CCL Products India. The company is a well-known instant coffee processor and supplier to over 30 countries of a wide range of coffees of various grades/qualities.

The report adds that the company is now seeing strong growth in demand for its products as global coffee consumption is on the rise, particularly in Europe and the CIS countries (15-20 per cent). This makes up 76 per cent of its revenues. In order to make the most of the opportunity, the company is doubling capacity to 10,000 tpa.

This facility, which goes on-stream by end FY06, will help it move up the value chain towards higher-margin value-added products such as freeze-dried coffee and freeze-concentrated liquid coffee. The plant will be the first of its kind in India. Operating margins are expected to expand by 290 bps over the next two years to 16.4 per cent.