Opto Circuits (India)
Reco Price: Rs 265,
Target Price: Rs 280
Integration of the recently acquired Cardiac Sciences (CSCX), a loss-making entity, will act as an overhang on the stock. Opto Circuits (OPTC) has a successful track record of integrating and improving profitability of acquired companies. However, this time around, the ticket size is much bigger ($80-90 million) and the issues more serious (a warning letter from USFDA). OPTC has underperformed the Sensex by 11 per cent in the last three months. The overhang of CSCX’s integration will limit upside from current levels. Religare estimates a 23 per cent earnings CAGR over the next 2 to 3 years for Opto. Initiate coverage with hold.
—Religare Enterprises
Jubilant LifeSciences
Reco Price: Rs 303,
Target Price: Rs 352
Jubilant Life Sciences has an order book of nearly $1 billion and is poised to capture a bigger share of the market. The company has recently signed two multi-year contracts with leading US life sciences companies valued at $84 million. Demerger of its APP business would result in improved margin and return ratios for Jubilant as the PLSP segment has higher margins (21-22 per cent) and return ratios compared with APP. Expected launches of new products through customers in US and European region in API and Dosage forms in coming quarters are expected to benefit the company. Maintain buy .
—Fullerton Securities
Orbit Corporation
Reco Price: Rs 72,
Target Price: Rs 181
Orbit’s Mandwah project is likely to obtain 1 FSI and area to rise to 11 million sqft. The new Coastal Regulation Zone (CRZ) policy is also a positive for most of its projects. The brokerage expects H2FY11 to see better cash receivables than H1. Removal of curbs on development in CRZ-2, likely to be cleared for slum rehab and redevelopment projects would be beneficial for Orbit. Recent housing/home loan-related events should have minimal impact. While execution slowdown was attributed to the rains; management reiterated its intent to raise construction spend to Rs 180-200 crore for remaining fiscal, along with Rs 70 crore for acquisitions. Maintain Buy.
—Anand Rathi
Shriram EPC
Reco Price: Rs 190,
Target Price: NA
Shriram EPC’s (SEPC) majority of the order book comprises of inflows from the process and metallurgy segment (P&M) with municipal segment being the next significant contributor to the order backlog. As of Q2FY11, SEPC had a standalone order backlog of Rs 2,491 crore, the highest ever order backlog for the company (2 times its last one year revenues). Going forward, ICICI Securities expects the various associates and subsidiaries to add significant value. The key contribution will come in from Orient Green Power’s (SEPC holds 25.5 per cent stake) plans to add 800 MW of power generation capacity by 2013. Timely execution and commissioning of the same is highly critical for value creation in SEPC. Also, SEPC expects to execute 80 units of MW turbines in FY11 from the Leitner Shriram JV.
—ICICI Securities
