Emakay Research puts a buy on Varun Shipping

RESEARCH CALLS

Varun Shipping Ltd (VSCL) is the no 2 player of the world in the mid sized LPG carriers with capacity of 0.35m cbm and market share of 14 per cent; while it commands 76 per cent market share in LPG carrier market in India.

The company has a very strong relationship with the Indian oil PSUs like ONGC, BPCL, HPCL, IOC and the largest private player Reliance Industries Ltd. VSCL also has international customers like BP Group, Mitsubishi Group and Trafigura Group.

VSCL now plans to leverage on its existing customers in hydrocarbon sector by aggressively expanding its portfolio in crude oil tankers and offshore vessels.

The company has completed its Rs 10 billion expansion program adding five ships (four LPG and one crude oil tanker).

The company has aggressive plans to capitalise on its existing relations with its Indian and international customers by expanding its fleet portfolio.

VSCL has a very strong operating margin of 60.3 per cent for FY06 which is expected to move up by 300 basis points in FY09E. At CMP of Rs 79.65, the scrip is available at 4.9FY08E earnings and 2.7XFY08E cash earnings.

Emkay Research has given a buy rating on the scrip with a target price of Rs 113. At 5.6 per cent dividend yield, the scrip is available at attractive levels for investments based on dividend yields.

UTI Securities puts a buy on Sterlite Industries

Operating Revenues for the Q4 were up 118 per cent driven by higher copper sales volume and higher realisations per ton. Copper cathode production rose to 75 kt or 60 per cent during Q4 while the copper rod production was up 24 percent at 46 kt.

Tc/Rc margins have als o been ruling firm during the quarter, which helped the company improve its operating margins substantially by 780 bps to 14.3 per cent. As a result, operating profit grew 382 per cent to Rs.3.6 billion.

PAT for the quarter was Rs 2.4 billion as against a loss of Rs 393 million for the corresponding quarter. Net profit margin also improved to 9.6 percent on the back of a strong growth in operating performance. Net profit for the year consequently grew 380 per cent to Rs 5.1 billion.

The operating margin improved 230 bps while net margin grew by a whopping 410 bps during FY06. The company is valued at a earnings multiple of 12x of FY08 earnings estimates at Rs.132. Its majority holdings in two subsidiaries viz. Hindustan Zinc and Balco are valued at an earnings multiple of 13x and 12.5x to Rs.388 and Rs.73 respectively. The sum of parts valuation for the company's share is placed at Rs.593.

UTI Securities has put a buy rating on the stock with a 12-18 months' target at Rs.593 "� an upside of 40 per cent from the current level.