Analysts' corner

RESEARCH CALLS

Bombay Rayon Fashions
Reco price: Rs 210
CMP: Rs 206.15
Target price: Rs 325
Broking firm: Antique Stock Broking

Bombay Rayon Fashions Limited (BRFL), the biggest manufacturer of shirts in India has emerged as one of the fastest growing garment companies in the Indian textile industry.

The company is increasing its garments capacity by 2.25 times to 45 mn pieces per annum and its fabric capacity by 2.4 times to 120 mn meters p.a by Q3FY09.

Post expansion, the contribution of garments would increase to 70 per cent of the total revenues as against 40 per cent in FY07.

Further, the company's foray into the export markets (UK and USA) has been remarkable with exports rising from Rs 3.99 crore to Rs 213.4 crore in last three years. The stock trades at 7.7 times its estimated earnings for FY09.

Voltas
Reco price: Rs 125
CMP: Rs 130.4
Target price: Rs 203 (September 2008)
Broking firm: Prime Broking

Voltas Limited, the engineering arm of the Tata Group, has grown at a strong pace in the last four years between FY04-FY07, with revenue CAGR of 24 per cent and earnings CAGR of 60 per cent.

The company is expected to continue its strong growth trajectory driven by its Electro-mechanical products and services segment (EMPS) (contributing 56 per cent of FY07 revenues) and Engineering products and services segment (EPS) (contributing 18 per cent).

While the former is expected to benefit from the infrastructure boom in West Asia and India, the latter's high growth will be driven by substantial capital investments in sectors such as automobiles, engineering, steel and retail.

At Rs 130, the stock is valued at 22 times and 16.3 times its estimated earnings for FY08 and FY09 respectively.

Deccan Chronicle
Reco price: Rs 217
CMP: Rs 225
Target price: Rs 330
Broking firm: Emkay Shares

Deccan Chronicle has highly automated printing facilities and operate with very less manpower, resulting in significant operating efficiencies and robust profitability.

The company has beaten its competitor THE HINDU in terms of circulation (over 300,000) in just 2 years from the launch of Chennai edition. Further it plans to unlock value from its wholly owned subsidiaries namely ODYSSEY (retailing subsidiary) and Sieger Solutions (engaged in the business of selling advertisement space in Deccan Chronicle and internet advertising).

The given target price does not factor in the value of subsidiaries, which leaves further headroom for an upside. The stock trades at 18.3 times and 13.6 times for FY08E and FY09E respectively.

Asian Paints
Reco price: Rs 928
CMP: Rs 935
Target price: Rs 1200
Broking firm: Khandwala Securities

Asian Paints (APL) will be the prime beneficiary of the 13-15 per cent growth in paint industry and its revenues are expected to grow at 17 per cent, while earnings would grow at 22 per cent over the period of next three years.

Asian Paints, which has 26 per cent overall market share plans has doubled its capacity at Sriperumbudur plant to 50,000 KL per annum in order to strengthen its hold further. It is also adding a polymer plant at the same location.

APL's international business which contributes 18 per cent of its revenues is expected to grow annually at 20 per cent over the next three years and is expected to be a major growth driver.

The stock trades at 26.7 times and 21.25 times respectively for FY08 and FY09 estimated earnings respectively.