Karur Vysya Bank: Strong financials

ANALYSTS' CORNER

Kotak Securities initiating coverage on Karur Vysya Bank, recommends a 'Buy'. Deposits of the bank have grown at a CAGR of 17 per cent and credit at 23 per cent over the last four years. The balance sheet size of the bank was Rs 7900 crore in FY05.

KVB continues to tread on strong financials with net interest margin at three per cent, which rank well above industry standards. It has been paying 100 per cent dividend for the last two years.

KVB is amongst the old private sector banks having a network of more than 254 branches and a strong presence in south India. KVB ranks better than other old private sector banks on a P/ABV basis as well as on a RoA basis.

For FY06E, the report expects the bank to report net income of Rs 128 crore and for FY07E Rs 151 crore translating into EPS of Rs 71 and Rs 84, respectively.

Moreover, core banking solution (Flexcube) platform has also been implemented in 183 branches covering 94 per cent of the bank's business in FY05. The stock trades at 1.2x and 1.0x its FY06E & FY07E.

Infotech: Firm revenue potential

SSKI Securities, in its visit note to Infotech Enterprises, states that the company has core competence in the niche areas of geographical information systems (GIS), engineering design and related IT services.

It has bagged some significant deals over the past few months from Alstom ($50-52 million over the next five years) and KPN ($6 million over a period of 18 months). Infotech sees good revenue potential from the recently started design center for Hamilton Sundstrand.

In addition, the company has decent medium-term agreements from Pratt & Whitney, Tele Atlas NV and Bombardier. Revenue visibility has been improving on the back of the multi-year deals signed by the company over the past few months.

It has reported strong year-on-year revenue growth of 37 per cent in FY05 and 35 per cent in Q1 FY06. EPS has grown by 204 per cent year-on-year in FY05 and 105 per cent year-on-year in Q1 FY06.

The management remains confident of reporting 25-30 per cent revenue growth rate for the next couple of years. At Rs 358, the stock trades at 19.7x FY05 earnings of Rs 18.2 per share.

SAIL: Steady performance

Enam Securities rates SAIL as an 'Outperformer', relative to the sector. The report states that the company is well on track to report a steady performance for FY06.

Volume growth, cost savings, higher treasury income, lower interest costs and tax shield arising out of IISCO merger would result in moderate growth in FY06.

As an immediate outcome of IISCO merger with itself, SAIL will get tax savings worth Rs 300 crore during FY06 in lieu of Rs 900 crore worth of accumulated losses of IISCO. The company expects steel production to rise to 11.5 million tonne in FY06 from 10.65 million tonne in FY05.

Next year, the company targets produce of 12.3 million tonne of saleable steel. The company expects to grow at 6-7 per cent per annum in the long term. SAIL plans to raise its hot metal producing capacities from 13 million tonne to 19 million tonne by 2012-2013.