Research Calls: Union Bank of India

Karvy Stock Broking recommends a 'buy' on Union Bank of India. The report states that a union of favorable factors like high capex cycle across industries, higher credit offtake, smaller investment portfolios, hedged interest rate risk, reduced provisioning, better asset quality and bigger balance sheet size would warrant higher valuation multiple for Union Bank. The bank has undertaken effective efforts, which would result in strong performance in the future.

The banking industry has been witnessing high growth in credit offtake due to significant progress in manufacturing and service sectors.

Across several industries, capital expenditure cycle is rising and capex cycle's crest is widening sustaining the credit growth. The bank is focusing on higher yield credit in mid-size companies and agriculture to protect its net interest margin. The bank's investment portfolio is largely hedged.

Sona Koyo

Brics PCG Research recommends a 'buy' on Sona Koyo. The company is the largest manufacturer of steering systems in India, with an about 50 per cent market share by volumes (35 per cent by value). It caters to leading OEMs including Maruti Udyog, Hyundai, M&M, Tata Motors, General Motors and Toyota.

It supplies a wide product range including hydraulic power steering systems, manual rack and piston steering systems. It has de-risked its revenue model by diversifying its customer base and reducing its over-dependence on Maruti, whose contribution to revenues has been brought down to 53 per cent in FY05 from 95 per cent in FY99.

The report states that the company has adopted two distinct approaches to boost its export revenues. It is aiming to become an integral part of Koyo's global supply chain and is trying to tap niche players in non-passenger car segments, such as off-highway vehicles.

i-flex Solutions

Motilal Oswal Securities maintains its 'buy' on i-flex Solutions. The report is positive on the impact of the Oracle association on the company's products, while the proposed Oracle Fusion platform would benefit its services business.

The stake acquisition by Oracle would help i-flex gain a marketing advantage over its competitors and enhance its brand equity, in addition to giving it access to Oracle's research capabilities, better client prospects and possibly better pricing power.

At present, 17 of the top 20 global banks are Oracle customers. Also, there are 8,500 financial institutions currently being serviced by Oracle, which would now be accessible to i-flex. Oracle has a strong marketing and sales force that could now be used to market i-flex's products and solutions.

Product architecture, which was expecting a re-design in order to stay ahead of competitors, would benefit from Oracle's R&D expertise.

Bharat Electronics

Parag Parikh Financial Advisory Services rates Bharat Electronics as 'market outperformer.' This public sector undertaking is the largest manufacturer and supplier of wireless and satellite communications systems, electronic warfare systems and other telecom and electronic equipment to the defense sector, which contributes 87 per cent of its revenue.

In collaboration with the Indian Space Research Organisation, the company has played a major role in India's missile programme. Most of the electronic sub-assembly components for Akash, Dhruv and Trishul, have been provided for the company.

It is also playing a big role in civilian telecom electronics sector and has developed the electronic voting machines used in the recent elections, which were also exported. It has also launched the Simputor as well as the set-top boxes, in collaboration with small and private players for cable and DTH.

Raymond

Brics PCG recommends a 'hold' on Raymond. During Q2FY06, Raymond's net revenue was up by 3.2 per cent y-o-y to Rs 350 crore. Operating profit grew 18 per cent to Rs 55 crore. Operating profit margin improved to 15.70 per cent from 13.70 per cent last year. Net profit was up by 15 per cent to Rs 36.80 crore.

The report adds that Scissors Engineering Products, a 100 per cent subsidiary of Raymond, has acquired controlling stake in Ring Plus Aqua, which is engaged in the manufacturing starter ring gears and integral shaft bearings.