Manning the citadel

PENNY WISE

- P/E (12 months)

13.52x

 Operating profit increased by 92.5 per cent to Rs 15.8 crore, while operating margin dipped to 13 per cent from 16.3 per cent. Raw material expenditure shot up and the company attributes it to the increase in steel prices due to erratic supply. Net profit was up 80.5 per cent to Rs 7.2 crore.  On an annualised EPS of Rs 15.24, the stock trades at a P/E of 13.52x. This compares well with its peers, Welspun and Saw Pipes, which trade at 12.9x and 14x, respectively.  However, during FY05, Man Industries posted a 42 per cent decline in operating profit to Rs 42.5 crore and a 54 per cent dip in net profit to Rs 18.3 crore. This is attributed to supply disruptions and delays in certain domestic projects. There was a sharp increase in raw material expenses and staff costs. Sales increased by 23 per cent to Rs 510 crore during FY05.  Analysts point out that at present customer approvals are better in case of Welspun and Saw Pipes, even as Man Industries is catching up well.  

RESEARCH CALLS

JK Corporation (outperformer)
Fortis Securities rates JK Corporation as an 'outperformer'. The report states that the company has earmarked a capex of Rs 40 crore to streamline its manufacturing process.

The expansion would be funded partly by promoters and partly through internal accruals without any debt component. The planned expansion is in line with the company's aim to gain market share. It is planning to float an SPV to set up a power plant of 36 mw near its plant in Rajasthan by December 2006 for Rs 140 crore.

The plant will meet the company's entire power requirement and help it reduce power costs by Re 1/kwh. This will not only reduce the production cost of the company but will ensure efficient production. The stock is trading at a P/E of 10.7x FY06E, 18.3 x FY07E and 9.6x FY08E.

Centurion Bank (buy)
Prabhudas Lilladher recommends a 'buy' on Centurion Bank. The report states that the swap ratio for the merger of Centurion Bank and Bank of Punjab has been fixed at 4:9 (four shares of Bank of Punjab to nine shares of Centurion Bank).

While Centurion Bank is strong in south and west, Bank of Punjab is strong in north. While the former is strong in the retail segment, the later is strong in the SME segment.

Both the banks have young and non-unionised manpower and modern technology platform. Centurion Bank's stock trades at 9.2x FY08E EPS of Rs 2 and 2.4x FY08E adjusted book value of Rs 8. Given its successful turnaround and strong growth prospects, Prabhudas Lilladher believes that the bank deserves a higher premium.