KEC International: Bulge in order book

ANALYSTS' CORNER

Edelweiss Securities in its visit note states that the order book of KEC International currently stands at Rs 2,500 crore, with Rs 17 crore from international business and the rest from domestic market. Its average execution time is around 24 months.

The report adds, "Distribution orders are around 20 per cent of the order book and the rest are for power transmission. Distribution margins are marginally lower than power transmission. KEC is still not actively looking at gas pipeline laying and telecom tower erection as business opportunities, despite enquiries in case of the latter and similar business dynamics. As it ventures more into rural electrification programmes, the distinction between its sub-station and power tower business gets blurred on a project-to-project basis. KEC has de-risked its business profile over the last four years since it went into a loss in FY02. Combined with RPG Transmission, the group has around 103,000 MT of capacity. It expects order accretion to be strong given that in FY06, rural electrification orders are slated to kick in."

Chennai Petroleum: Outperformer

Enam Securities rates Chennai Petroleum as a sector outperformer. In a visit note, the research firm states that refinery operations are stable, operating close to capacity.

The company's expanded capacity of 10.5 mtpa along with its downstream processing facilities (new hydro cracker and revamped FCCU) has been operating at over 95 per cent capacity utilisation for more than six months.

The report adds, "During FY06, CPCL expects to process 10.2 mtpa of crude, implying a 14 per cent growth in throughput over FY05 (8.9 mtpa) and an effective capacity utilisation of about 97 per cent for the year. Refining margins remain robust, although taking a breather in August. Domestic refining margins maintain their uptrend in line with high regional product-crude spreads. In August, regional margins have taken a breather, however with global refining dynamics getting tighter we view this as a correction, ahead of strong winter margins."

Balkrishna Industries: Nifty performer

Tower Capital & Securities, initiating coverage on Balkrishna Industries, recommends a buy. The company is among the top ten manufacturers in the niche off-highway tyre market that has a size of $7.75 billion.

Its tyre division's (accounting for 75 per cent of revenue) core forte apart from manufacturing at significantly lower cost, lies in its product range comprising more than 1,500 stock keeping units and ability to deliver in odd and small lots.

Over the last five years, the company recognised a structural shift in the global off-highway tyre market and has put in place a global scale capacity, expanded its footprint to more than 75 countries to leverage maximum out of the outsourcing potential.

While, it derives around half of its sales from western Europe, it is now building up and enhancing its presence in eastern Europe, Middle East and northern African markets for organic growth of its existing product portfolio. The stock trades at a P/E of 16.4x FY06E and 11.5x FY07E.