Syndicate Bank: Strong credit growth

ANALYSTS' CORNER

Brics PCG Research recommends a "buy" on Syndicate Bank. The report states that the bank has a network of over 1,800 branches. The current government holding in the bank stands at 66.5 per cent.

Strong growth in credit would result in better NII growth. Margins are expected to remain at healthy level. Its investment portfolio is hedged against the interest rate risk with more than 70 per cent of investments in the HTM category. Its asset quality is expected to improve on the back of low incremental slippage ratio and better provisioning policy.

Moreover, operating costs as a percentage of total assets would start tapering off from FY07 as more business would be covered under CBS. The bank is well placed to meet the increased CAR norms.

The RBI norms relating to the inclusion of hybrid securities under tier I capital would decide about the fresh issue of equity shares. One of the concerns for the bank could be delay in implementation of CBS, which would result in higher operating costs.

Apar Industries: Operating profit, PAT up

Brics PCG Research recommends a "buy" on Apar Industries. The company has shown good business performance in H1 FY06, also reflected through quarterly results. Net sales for Q2 FY06 were at Rs 284 crore, showing a 24 per cent y-o-y growth. Operating profit was up 50.5 per cent to Rs 19.2 crore, while PAT was at Rs 7.6 crore, up by 14.9 per cent.

For H1 FY06, net sales were at Rs 554 crore, a growth of 17 per cent. Operating profit grew by 9.8 per cent to Rs 30.8 crore, while PAT was up by 40.8 per cent to Rs 13.9 crore. The conductors division showed a healthy growth in revenues and has turned profitable with the new orders for the current year booked with better margins.

These new orders are booked with the hedging for the increase in raw material prices. Majority of them are placed on variable cost basis, instead of the earlier fixed price model. Transformer and speciality oils division had a modest growth of 17 per cent and contributed 58.38 per cent of the total PBIT.

Jain Irrigations: Meeting expectations

SSKI Securities rates Jain Irrigation Systems as an "outperformer". The company's numbers are as per expectations. It has posted a 30 per cent y-o-y rise in sales to Rs 157.1 crore for Q2 FY06. It has been aided by 72 per cent growth in the MISIS business and 176 per cent growth in PE pipes.

However, change in product mix (higher contribution from low margin pipes business) and higher polymer prices, owing to crude oil prices touching $70 per barrel in the quarter led to an EBITDA margin contraction of 133 bps to 15.9 per cent.

With other non-operating expenses remaining unchanged, PAT has almost doubled to Rs eight crore. MISIS business has grown significantly on account of Andhra Pradesh government projects gaining momentum.

The report expects Gujarat and Maharashtra governments' irrigation projects to kick-start in the subsequent quarters.The stock trades at 11.1x FY07E earnings.