Bajaj Hindusthan: On expansion drive

ANALYSTS' CORNER

Prabhudas Lilladher rates Bajaj Hindusthan as an 'outperformer'. The report states that the company is planning for a $500-million investment in Brazil in the next six months.

It is believed to be looking for an acquisition having its presence in both the sugar and the ethanol businesses. The world's largest sugar producing country, Brazil is believed to help the company widen its presence, apart from its dominant position in the domestic market. It has initiated steps for setting up a subsidiary and aims to be amongst the top two world sugar producers in the next couple of years.

A part of the proposed investment is expected to be funded through unutilised money raised through GDR/FCCB, and the balance through debt and internal accruals, the details of which are yet not available. The company has laid out aggressive expansion plan through greenfield and brownfield expansion, and is also open for acquisitions locally.

Chennai Petroleum: Poor Q4 showing

Edelweiss Capital recommends to 'reduce' exposure to Chennai Petroleum. The report states that the company's Q4 FY06 results were lower than expectations due to lower regional refining margins. It reported 84 per cent y-o-y fall in profits. Lower regional refining margins and discounts to oil marketing companies more than negated the inventory gains for the quarter.

However, higher product prices led to 25 per cent y-o-y increase in revenues. It posted 26.3 per cent y-o-y and 0.7 per cent q-o-q growth in revenues owing to higher crude and product prices.

A slight dip in the crude throughput was also responsible for lower revenues in the quarter. Its Q4 crude throughput, at 2.55 MMT, was lower by 2.4 per cent y-o-y. The stock trades at about 7.7x FY07E and 10.0x FY08E earnings, respectively.

Asian Paints: Good domestic business

Enam Securities has a 'neutral' rating on Asian Paints. The report states that during Q4 FY06, on a consolidated basis, the company reported net sales of Rs 760 crore (up 23 per cent y-o-y) and a PAT of Rs 46.5 crore.

EBIDTA margin of the domestic business has been maintained at 14 per cent y-o-y, although it declined on a sequential basis (down from 15.2 per cent in Q3), due to higher operating costs.

The domestic operations of the company have exhibited strong performance and continue to be the growth engine of its overall business. The sales of decorative paints grew at about 25 per cent during the quarter.

Sales of industrials remained robust and posted a growth of about 18 per cent, led by automotive paints division. The company's chemicals business, however, showed a marginal fall of 2.5 per cent during the quarter. The strong performance in the domestic business has partially mitigated the lower profitability in the international business.