Analysts' corner: Allahabad Bank

Brics PCG Research recommends a "hold" on Allahabad Bank. The report states that a drop in interest yield on advances and investments and a rise in interest cost on deposits has led to a decline in the bank's net interest margin (NIM).

The NIM had fallen to 3.05 per cent at the end of H1 FY06 and is expected to remain at this level. The bank aims to increase the total advances by more than 30 per cent during FY06, with an enhanced focus on its retail, agricultural and SME portfolios.

It expects its agricultural portfolio to grow at a rate of around 30 per cent. The yield on advances has dropped 34 bps to 8.62 per cent. The management expects gross and net NPAs to decline significantly from the current levels of around five per cent and one per cent respectively.

The growth in deposits has been at a lower rate during the current fiscal as the bank has funded the increase in credit through the proceeds of a public issue and tier-II bonds.

 Ind-Swift Lab

Anand Rathi Securities reiterates its "buy" call for Ind Swift Lab. The report expects decent share price appreciation from current levels in one year and two year time frame.

In short-term, profit growth will come from volumes, while in long-term it will be driven by margin expansion by targeting regulated markets.

The company has reported an impressive performance in the first half of FY06. Sales were up 80 per cent at Rs 160.25 crore and net profit was up 85 per cent at Rs 18.31 crore, which is in line with the performance witnessed for FY05, while maintaining its performance in operational efficiency.

The company has started showing signs of a steady roll over of its business model from a API manufacture to a contract manufacturing & research oriented pharma company, with focus on complex molecules.

With commissioning of two new manufacturing facilities recently, the immediate growth will come from increased volumes in complex and high potential APIs targeted at un-regulated or semi-regulated markets.

Talbros Automotive

Brics PCG Research recommends a "buy" on Talbros Automotive. The report states that the company is said to be in the initial stages of talks for setting up distribution networks in the US and Europe.

The company intends to increase its presence in both these markets as it foresees great potential for the forging business. It may opt for a technical tie-up or a joint venture or choose to acquire a forging unit abroad.

The cost of the future expansion or acquisition is expected to be met by internal accruals and borrowings. It may consider raising funds through a term loan, the preferential issue of shares and debentures, bonds and debts in Indian rupee and foreign currency.

The company is a leading domestic manufacturer of gaskets of different shapes and sizes for the auto and other industries. It sells gaskets under the brand names Dyna Seal and Talbros.

To sustain its earnings growth rate, it is also foraying into the forging business where it will deal in lower-end products like hammer forging and upset forging.