Emco: Order book strength

ANALYSTS' CORNER

Brics PCG Research recommends a "buy" on Emco. The report remains positive about the company's prospects. The company is expected to register a strong performance in the fourth quarter of the current financial year.

It may post 51 per cent growth in sales and 97 per cent growth in PAT on y-o-y basis to Rs 120 crore and Rs 6.15 crore, respectively.

This will help the scrip sustain the current upward momentum. Emco holds a strong order book of Rs 430 crore which will ensure sustained growth.

The report projects 47.4 per cent increase in sales to Rs 520 crore in the next financial year with 61.3 per cent rise in PAT to Rs 32.4 crore.

Any additional order booking during the next few months will provide an added fillip to its growth in 2006-07. The 10 million kva capacity addition and the setting up of a new small transformer plant at Jalgaon would enable the company to execute further orders.

The management is confident of registering over 50 per cent growth in sales in the next financial year.

Tata Motors: Volumes to grow

Merrill Lynch recommends a "buy" on Tata Motors. The report states that the structural demand drivers for the company are in place.

There has been a sharp earnings upgrade for each of the next two years and the stock is expected to be re-rated. There could be stronger volume growth in key operating segments as states implement the court ruling on ban on overloading of trucks and budgetary excise cut makes cars more affordable.

The stock trades at 14.8x FY07 and 12.0x FY08 consolidated EPS estimates. Over FY06-08E, the report now expects Tata Motors to deliver 28.3 per cent EPS CAGR, which is the fastest in the auto original equipment manufacturers space.

Stronger volumes growth is expected in trucks. The incremental demand could add about 22 per cent to annual truck sales. Cars, too, are showing a sharp uptrend. Budgetary excise cut should buoy sales of the Indica.

Kajaria Ceramics: Worst is over

Emkay Research recommends "accumulate" on Kajaria Ceramics. The report feels that the worst is almost over. The company has Rs 123 crore expansion programme.

Its third quarter FY06 results were subdued. It is expanding capacity by 8.4 million square metres, taking the total capacity to 26.4 million square metres.

The company also intends to raise around $30 million through an FCCB/GDR issue to fund further capacity addition, which is likely to go onstream by September 2007.

The third-quarter results fell short of overall expectations in terms of slower growth in revenues and profits due to stabilisation problems in the recent expansion for 4.2 million square metres at Sikandarabad.

Revenues grew by 16 per cent y-o-y, while PAT witnessed a decline of 18 per cent over the previous year due to higher depreciation and higher tax incidence.