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Summary
of Contents
STOCK UPDATE
Genus Overseas Electronics
Cluster: Ugly
Duckling
Recommendation: Buy
Price target: Rs270
Current
market price: Rs204
A Rs75-crore order
from RSEB
Key points
-
With the
recent order win of Rs75 crore from the Rajasthan State
Electricity Board for the supply of single- and three-phase
electronic energy meters (EEMs), the order book of Genus Overseas
Electronics (Genus) has increased to Rs510 crore, which is
approximately 2.2x its FY2006 sales.
-
Genus is a
leading manufacturer of tamper-proof EEMs, the demand for which is
soaring because of the high transmission and distribution losses
of the state electricity boards.
-
We expect the
company's revenues to grow at a CAGR of 39% during FY2006-08 on
the back of the execution of its current order book.
-
The order flow
is expected to remain robust with the government's mission of
"Power to all by 2012", and focus on 100% metering and replacement
of old mechanical meters with EEMs fueling the growth.
Bajaj Auto
Cluster: Apple
Green
Recommendation: Buy
Price target: Rs3,300
Current
market price: Rs2,619
Pulsar 220cc
launched in Pune
Key points
-
Bajaj Auto Ltd
(BAL) has launched Pulsar 220 DTS-Fi in Pune. The national
roll-out would take place by February 2007. This premium segment
offering, priced at Rs84,000 (ex-showroom Pune), will be sold
through BAL's Probiking network.
-
BAL is looking
to reduce its dependence on the 100cc segment. The company has
plans to revitalise its Pulsar brand by launching its
upgraded versions and following the same up with the launch of a
200cc Pulsar model in Q4FY2007. This launch would be in
line with the management's strategy of focusing on the executive
and premium motorcycle segments, where profitability is higher as
compared with the entry segment.
-
BAL's
profitability was affected in Q2FY2007 due to the price reduction
of Platina, an entry-level model. The company derives a
large part of its profits from the entry segment. Though
subsequently the price of Platina has been increased twice,
the company's performance may not improve much in Q3FY2007 due to
the higher selling costs being incurred.
-
Though the
profit margins are likely to remain subdued for a couple of
quarters, the volume growth is expected to remain strong. The
management has claimed that the company is on its way to recording
its highest ever quarterly volume during the October-December
quarter.
-
At the current
market price of Rs2,619, the stock discounts its FY2008E earnings
by 17.3x and quotes at an enterprise value (EV)/earnings before
interest, depreciation, tax and amortisation (EBITDA) of 10.5x.
Based on our sum-of-parts valuation we maintain our Buy
recommendation on the stock with a price target of
Rs3,300. |
