Research Calls: Taj GVK Hotels and Resorts

Emkay (Private Client Research) recommends a Buy Taj GVK Hotels and Resorts at Rs 196 with a price target of Rs 250. At Rs 196, the stock trades at 19 times and 14 times its estimated FY07 and FY08 earnings.

With Taj GVK's predominant presence in Hyderabad and expansion of operations in Chandigarh, Chennai and Bangalore where the ARR's and occupancies are expected to remain strong, Emkay expects the company to register good growth over the next few years.

The company however registered a lacklustre growth year on year in the third quarter of FY07 primarily due to decline in occupancy rates in Hyderabad from 84 per cent to 78 per cent during the quarter though average room rate (ARR) improved by around 23 per cent.

Operating margins came under pressure due to lower occupancies and a significant increase in staff cost. The company has proposed a capital expenditure of Rs 400 crore over the next three years to add new properties and expand in some of its current properties.

It plans to add atleast one property in each financial year till 2009-10 which will result in an increase in the room capacity from the current 684 rooms to 1834 rooms by 2009-10.

Taj GVK Hotels and Resorts is a joint venture between Indian hotels and the GVK group with the former holding 25.5 per cent in the company, which is a market leader in Hyderabad and Chandigarh with consolidated room strength of 534 and 150 respectively.

Infrastructure Development Finance Corporation (IDFC)

BRICS Private Client Group recommends a Sell Infrastructure Development Finance Corporation (IDFC) at Rs 110 as it feels that there is a limited upside of 5 per cent from Rs 110 as it has risen by 50 per cent in he past five weeks.

In a sum of parts valuation, the standalone entity trades at 2.5 times estimated FY09 book value. With strong domain expertise and an established brand, IDFC is well positioned to capitalise on the burgeoning oppurtunities in infrastructure asset management.

However a key concern remains declining net interest margins though net interest income growth is strong, its inability to scale up fee income ( which declined by 13 per cent year-on-year in 9M FY07) any further to substitute the current high contribution of treasury and proprietary investments.

However the positive aspect about the company is its asset management business as well as its investment in the National Stock exchange.

Madhucon Projects

Angel Broking recommends a Buy on Madhucon projects at Rs 277 with a 12 month price target at Rs 351. At Rs 277, the stock trades (net of BOT and real estate projects) at 12.3 times and 7.3 times its estimated FY2008 and FY2009 earnings respectively.

Madhucon derives 99 per cent of its revenues from roads and irrigation sector which are expected to see huge investments. While investments in road sector are expected to increase at a CAGR of 24 per cent, another key positive is Andhra Pradesh's proposed investment in 5 years.

This macro-environment will boost the the company's current order book of Rs 4400 crore and also expand the top line. Moreover its order book to sales ratio of 12.9 times its FY2006 revenue looks extremely comfortable and is executable over a period of the next 3 years.

Angel expects the company to post revenue CAGR of 68.3 per cent and a net profit CAGR of 58.8 per cent over a period of FY2007-FY2009.

Madhucon enjoys better operating margins than its peers due to large Build-Own-Operate (BOT) projects, sub-contracting low value added work and owned equipment for construction. The company has a land bank of 9 acres in Kukatpally, Andhra Pradesh and is expected to develop an area of 2.2 million sq feet over a period of the next 4 years.

Siemens

Networth Stock broking recommends accumulating Siemens at Rs 1162 with a price target of Rs 1250. At Rs1162 , the stock trades at 23.49 times estimated FY08 earnings.

During the December 2006 quarter, net sales rose 91.1 per cent year on year to Rs 1626.9 crore. Strong growth in revenues was mainly driven by power, industrial solution and services and building technologies while healthcare and other services showed a lacklustre performance.

The other business segments like information and communication, automation and drive, automotive and transport registered a marginal decline in their revenues. Operating profit grew 66.8 per cent to Rs 116.95 crore and net profit doubled to Rs 98.1 crore.

Operating margin continued to remain under pressure dipping by 105 basis points due to higher material cost. Order inflow rose 23 per cent due to a major repeat order from the power division of Qatar. Order book to sales at the end of Q1FY07 stood at 2.4 times its 12 months trailing revenue.

Networth expects the company's consolidated revenue and net profit to grow at a CAGR of 37 per cent and over 40 per cent respectively in the next two years.