NRB Bearings: Growth push

ANALYSTS' CORNER

Emkay Private Client Research recommends a "buy" on NRB Bearings. The report states that the company is a compelling value and growth play within the domestic bearings sector. It enjoys good product delivery capabilities and strong skill sets developed by it over a time.

Aided by the continued strong growth both in the domestic and export markets, the report expects NRB to record a healthy ROCE and RONW of 29 per cent and 27 per cent respectively for FY07E with net profits estimated to grow at a CAGR of 24 per cent over the next three years (FY06-FY08E).

The stock trades at 12x FY07E and 9x FY08E, while on a cash P/E basis valuations look more attractive at 9x FY07E and 7x FY08E. The report adds that domestic business and export growth visibility looks strong.

The company is a tier-one supplier to large domestic OEMs such as Tata Motors, Maruti, Ashok Leyland, Mahindra & Mahindra, Force Motors, Bajaj Auto and LML.

Jain Irrigation: Right business mix

CLSA recommends a "buy" on Jain Irrigation. The company delivered a 175 per cent earnings growth in FY06 with strong performance from each of its business segments.

The micro-irrigation business was the key driver, though, making up 55 per cent of the gross Ebidta increase.

The report expects the pattern to continue as more states are announcing projects and the central government has sharpened its investment focus on micro-irrigation.

With Ebidta margins expected to remain stable on the back of a favourable change in business mix, the company is expected to nearly treble earnings over three years.

The profit growth in FY06 was led by strong growth in micro-irrigation (75 per cent revenue growth) and strong traction in all its other businesses. Its revenues grew by 40 per cent yoy. Ebitda margins also expanded 220 bps to 16.1 per cent allowing the company to grow profits to Rs 61.6 crore in FY06.

Shree Cement: Capacity gains

Anand Rathi Securities recommends a "buy" on Shree Cement. The low supply in the north would favuor producers till FY09. The northern region constitutes more than 85 per cent of Shree Cement's current supplies with the balance going to western UP (central).

North is estimated to remain supply deficit till Q1 FY09 as material capacity expansions come on stream only by mid Q4 FY08.

Till then the region is expected to operate at around 90 per cent utilisation rates leading to higher cement prices. Capacity expansion and higher blending is expected to spearhead volume growth.

The company has embarked upon a capacity expansion with an aim to be a 10 million tonne player by 2010. By Q3 FY08, the company will have a cement grinding capacity of over nine million tonne.

Backed by the availability of additional capacity and increase in sales of blended cement, the company's targeted sales growth of 38 per cent CAGR between FY06 and FY09 is the highest in the region.