Research Calls: McNally Bharat Engineering Company Ltd

SKP Research recommends a "Buy" on McNally Bharat Engineering Company Ltd at a price of Rs 146.25 with a target price of Rs 210. The stock trades at 10.3 times and 6.8 times its FY08 and FY09 expected earnings respectively.

The EV/EBITDA ratios for FY07 and FY08 are 12.37 and 6.93 times. McNally Bharat, which has interests in the areas of bulk material handling, ash handling, coal and mineral benefaction, water management, port handling, road construction and related activities, has a strong order position of Rs 680 crore to be executed over the next 18 months period apart from orders worth Rs 1916 crore under consideration.

The different areas of operations help the company to diversify the portfolio of projects and reduce the risk of concentration into a particular field. Large investments in the infrastructure sector over the next decade provides a promising fundamental base for the company's growth.

ONGC

Motilal Oswal recommends a "Buy" on ONGC at a price of Rs 877 with a target price of Rs 967. The stock is valued at over 9.9 times and 10.7 times its expected FY07 and FY08 earnings.

The corresponding EV/EBITDA ratio is 4.8 times each for its estimated FY07 and FY08 earnings. The company's recent discoveries in the KG basin, the increase in production by approximately 70 per cent for gas and about 33 per cent for oil at the Panna-Mukta-Tapti consortium and the growth emanating from its 30 per cent stake in Cairn Energy's Rajasthan block are the rationale for the invesment in the company.

Meanwhile its its 100 per cent subsidiary, ONGC Videsh Limited (OVL), is expected to record a 43 per cent CAGR in net profit during FY07-09, raising its share in ONGC's consolidated profits from 5.6 per cent in FY06 to 16.3 per cent by FY09.

Large reserve accretions from about five global discoveries are expected to be declared in the next 12 to 30 months by OVL along with commencement of operations at Sakhalin and Sudan in the near term.

Kewal Kiran Clothing Ltd

FINQUEST recommends a "Buy" on Kewal Kiran Clothing (KKCL) at a price Rs 217 with a target price of Rs 278. The stock trades at 12.7 and 9.8 times its estimated FY07 and FY08 earnings respectively.

FINQUEST expects Kewal Kiran's bottomline to witness a CAGR of 53 per cent FY2006-FY2008E. The company, which is a significant player in the men apparel's segment with brands like "Killer", "Lawman", "Easies" and "Integriti" plans to tap the branded women and kids wear segment as a de-risking strategy.

It is also doubling its apparel manufacturing capacity from 2 mn pieces to 4 mn pieces with an investment of Rs 67 crore. In addition to expansion of its present distribution reach, Kewal Kiran is adding a new distribution channel comprising of 'K lounge' stores.

KKCL is well positioned to capture the opportunity in the domestic apparel market thanks to healthy growth of organised retail and the textile and apparel segment.

RPG Transmission

Emkay - Private Client Research recommends a "Buy" on RPG Transmission at a price of Rs 196 with a revised target price of Rs 223 from the earlier Rs 205. The stock trades at 8.7 times its estimated FY08 earnings.

RPG Transmission has secured two orders worth Rs 193 crore from Power Grid Corporation of India to be completed by FY09 taking its order book position at a healthy Rs 450 crore. These orders reaffirm RPG transmission's ability to undertake large-scale EPC projects in power transmission segment.

Emkay expects at least 30-35 per cent execution of the revenue to be booked in FY08E and margins to improve by 30-50 basis points. This trend is expected to continue with the company participating in all the big size high margin T&D projects.