RESEARCH CALLS: Punj Lloyd

Networth Stock Broking recommends a "buy" on Punj Lloyd at a price of Rs 150 with a 12-month target of Rs 210. Punj Lloyd is one of the leading engineering, procurement and construction (EPC) players in pipeline, tankages, process plants, civil and power plants.

The company's order backlog stood at Rs 14,400 crore by the end of December 2006 quarter, which was 236 per cent higher than that in the same period in FY06. The total order backlog is over 4 times its revenues for the first nine months of FY07.

Further, about 40 per cent of Punj Lloyd's revenues come from overseas projects, thus diversifying the company's geographical base. The overseas contribution to revenues is expected to increase in the coming years due to the acquisition of Sembawang Engineers and Construction and a joint venture with Khalid Bin Bandar Bin Sultan.

The stock is valued at a price-earnings multiple of 14.8 times and 10.8 times its expected FY08 and FY09 earning per share of Rs 10.2 and Rs 13.9 respectively.

Hindustan Zinc

HDFC Securities rates Hindustan Zinc as "outperformer" at a price of Rs 619 with a target price of Rs 750. The stock has corrected by 40 per cent from its high of Rs 1020 in November 2006 due to a decline in London Metal Exchange (LME) prices of zinc, which corrected by 30 per cent from a high of $4619 a ton. Now, zinc prices are expected to surge again, along with a rise in volumes.

The company's volumes are expected to grow at a compound rate of 25 per cent in the next two years to over 5.6 lakh ton. Further, the company is expected to commission a fresh capacity of about 2.65 lakh ton in first quarter FY09, which in turn would increase its profit from an estimated Rs 354 crore in FY08 to about Rs 417 crore in FY09.

The stock trades at a price-earning multiple of 6.3 times its expected FY09 earning per share of Rs 98.7. HDFC Securities considers this a low valuation as the company expects strong cash flows and its monopoly in the domestic market.

Tech Mahindra

ASK Raymond James puts a buy recommendation on Tech Mahindra at CMP Rs 1433 with 1 year target price of Rs 1815. At current market price the stock is trading at a PE multiple of 30.9 times its estimated FY07 earnings and 23 times to its FY08 earnings.

The report has forecasted a revenue growth of 45 per cent annually and a 38 per cent annual growth in net profit over the year 2007-9. The investment in the stock highlights Tech Mahindra's established client relation ship in the overseas telecom market. In addition to this, Tech Mahindra's entry into newer geographis and sourcing of new clients will help company in achieving the desired growth.

Bharati Shipyard

Angel Broking recommends buy on Bharati Shipyard at market price of Rs 346 with a one year target price of Rs 466, offering upside of 34.68 per cent. At current market price the stock is trading at a price multiple of 7.9 times to its FY08 earnings of Rs 43.7 per share. while on the FY09 earnings of Rs 63.2 per share the stock is trading at price earning multiple of 5.5 times.

In terms of revenue, Bharati is expected to grow at 94.7 per cent in FY08 and 36.9 in FY09. Baharati's expansion of the existing capacity and higher order book of Rs 2330.2 crore have been factors for the investment in the stock.

The company is also expected to benefit from the growing Indian shipbuilding industry. As per the report, the Indian shipbuilding industry, which accounts for 0.4 per cent of the global order book is expected to increase at 15 per cent by 2020.

Zensar Technology

Networth Broking recommends investors to accumulate Zensar Technology stock at current market price with target price of Rs 290 per share offering an upside of 24 per cent from the current levels. Zenstar's revenue has grown at 23 per cent annually from FY02 to FY06 and is expected to grow by 40 per cent per annum from FY06 to FY08.

The company is expected to benefit from its increasing focus on high-end jobs like consulting, ERP and embedded software, which will help in higher pricing and consequently improved margins. At current market price the stock is trading at price earning multiple of 10.3 times to its FY07 earnings of Rs 22.8 per share and 6.3 times to its FY08 earnings of Rs 34.1 per share.