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Summary of Contents
SHAREKHAN SPECIAL
Make money, come bull
or bear
Time and again
Sharekhan has apprised you of the benefits of investing in high
dividend-yield stocks (refer to the annexure). In a falling market
like this (the BSE Sensex, the bellwether index, has corrected by
more than 25% from its all-time high of 12,671) it becomes all the
more beneficial to invest in such stocks as the downside to their
price is limited by the dividend yield.
The
vulnerables
Although we
are a firm believer of the great Indian growth story (much about
which has already been said and written by us as well as by others)
and we believe that the good times for India have just started, we
would also like to be a little cautious in such volatile times. We
have screened a few stocks (in the BSE 500 Index), which have not
corrected as much as the BSE Sensex over the last one month and in
which FIIs have substantially hiked their stake over the last six
months. The growth story in many of these stocks must be kicking and
alive, but they may fall prey to the selling by FIIs, in case the
next round comes!!
VIEWPOINT
Simplex
Infrastructures
Not as simple as it appears
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Simplex Infrastructures' order backlog stands
at Rs4,253 crore, which is 3.2x its FY2006 revenues and provides a
strong visibility to its earnings for the coming years. The order
backlog has grown at a strong compounded annual growth rate (CAGR)
of 67.8% in the FY2003-06 period from Rs900 crore to Rs4,253
crore.
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SIL is entering new verticals to maintain the
growth momentum. It plans to take up the construction of
hydroelectric plants within the power vertical. Plans are also
afoot to expand the industry vertical by taking projects in the
oil & gas and mining sectors.
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Based on back-of-envelope calculations, SIL is
expected to double its profit after tax (PAT) in the FY2006-08
period from Rs41.6 crore in FY2006 to Rs93.1 crore in FY2008E. The
stock trades at 13.8x FY2008E earnings, and its valuation are
expensive as compared to Larsen & Toubro, a Rs25,000 crore
market cap company, which trades at just 15.8x FY2008E
consolidated earnings. Even, its peer group companies (of similar
size) like Nagarjuna Construction (7.8x), Hindustan Construction
Company (12.5x) and IVRCL (8.2x) are available at cheaper
valuation compared with SIL with similar earnings
growth.
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