Alfa Laval: Good offer

The parent company has hiked its open offer price from Rs 875 to Rs 1,300 to mop up 25.89 per cent.

When Alfa Laval had made its open offer in February 2007, there was little reason for shareholders to accept the 4.5 per cent premium to the prevailing share price that the parent was offering. Now that the parent has hiked its open offer price from Rs 875 to Rs 1,300, it surely indicates its seriousness to mop up 25.89 per cent.

This revised open offer is at about 22 times estimated CY07 earnings, while the stock trades at Rs 1,230. Other MNC stocks (though not strictly in the same product portfolio) like Cummins India trade at 20 times estimated FY08 earnings. The Swedish parent's stake will go up to 89.99 per cent in case the open offer succeeds completely.

Alfa Laval, a manufacturer of plants for alcohol, ethanol and dairies benefited from the current boom across user industries such as beverages, industrial applications as well as the demand for more ethanol plants in the last quarter. Its operating profit grew 13.5 per cent y-o-y to Rs 31.9 crore in the March 2007 quarter, while net sales grew 10.85 per cent to Rs 157 crore.

Its operating profit margin also improved 50 basis points y-o-y to 20.3 per cent in the last quarter. Alfa Laval's user industries, especially ethanol, are on a growth path and the company should do well in the next few years. The uncertainty is that if the parent were to delist Alfa Laval India at a later date, then the offer price could be higher. However, the current offer price factors in the company's prospects over the medium term and investors could consider tendering their stock.

CRISIL: Robust show

CRISIL reported an improved performance in the March 2007 quarter helped by a strong performance across in its divisions like rating, advisory, and research and information services. As a result, the company's consolidated operating profit grew an impressive 172.2 per cent y-o-y to Rs 27.5 crore in Q1 CY07, compared with 66 per cent growth in income from operations to Rs 89.3 crore.

Its operating profit margin also improved a staggering 1,200 basis points y-o-y to 30.8 per cent in the last quarter. It was no surprise that the stock is an outperformer in the market over the past three months - it has gained 10 per cent during this period, compared with a more or less flat Sensex. In CY06, the company's operating margin was marginally lower on a y-o-y basis at 28.05 per cent.

Meanwhile, in its key ratings division, segment profit grew a whopping 270.3 per cent y-o-y in the March 2007 quarter, thanks to strong demand from the financial sector, which is seeing 25-28 per cent growth in credit, fund services and SME ratings. Now that the regulator has introduced compulsory rating of public issues, the company will get more diversified. In its advisory services too, segment profit grew 145 per cent y-o-y in the last quarter. The stock trades at a steep 60 times CY06 earnings, given the strong growth prospects.