Bajaj Hindusthan
Reco price: Rs 116
Target price: Rs 95
Centrum Research views the merger of Bajaj Hindusthan Sugar and Industries (BHSIL) with Bajaj Hindusthan (BHL) as negative for the former's shareholders on account of EPS dilution (BHSIL is a loss-making subsidiary). The merger, which will see the outstanding shares of BHL increase 3.1 per cent, and result in 12.1 per cent and 2.6 per cent decline in diluted EPS for FY11 and FY12 to Rs 3.9 and Rs 9.2, respectively, on account of sharing all losses of BHSIL by BHL. The research house does not see any significant synergies, as before merger also both companies were under the same management control. It believes the merger is a pure paper exercise and would not result in any sizeable benefits to the existing shareholders of BHL. Maintain Sell .
— Centrum Research
Jumbo Bag
Current price: Rs 34
Fair value: Rs 35
Chennai-based Jumbo is a mid-sized player in the FIBC (flexible intermediate bulk containers) industry. Despite its well-established presence in FIBC industry (13-15 per cent growth rate), Jumbo's profitability remains vulnerable to volatility in exchange rates and raw material prices because of inherently low PAT margins of 2.0-2.5 per cent (which dipped to 1.0 per cent in 2009-10). CRISIL expects Jumbo's revenues to grow to Rs 110 crore in 2012-13 at a two-year CAGR of 19 per cent; EPS to increase from Rs 0.8 in 2009-10 to Rs 3.6 in 2012-13. Using the Discounted Cash Flow method, CRISIL has arrived at a one-year fair value of Rs 35 a share, which indicates the current price is 'aligned' with its fair value. It has assigned a fundamental grade of 2/5 (indicating 'moderate' fundamentals) and valuation grade of 3/5 to Jumbo Bag.
— CRISIL Equities
