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Summary
of Contents
PULSE TRACK
STOCK UPDATE
Sundaram
Clayton
Cluster: Apple
Green
Recommendation: Buy
Price target:
Rs1,550
Current market price: Rs925
Going strong
Result highlights
-
Sundaram Clayton Ltd's (SCL) Q1FY2007 net sales
for the quarter rose by 32% to Rs189.9 crore and the growth is
higher than our expectations. Both the brake and die-casting
divisions delivered a strong performance during the quarter.
-
The operating profit grew by 41.8% to Rs27.8
crore as the operating profit margin (OPM) improved by 100 basis
points year on year (yoy) to 14.6%. A price hike is already due
from its original equipment maker (OEM) customers and hence we
expect the margins to improve further in the subsequent quarters.
-
The other income for the quarter stood at Rs7.1
crore against Rs11.8 crore last year due to a lower dividend
income realisation. However, the same is expected to be realised
in the second quarter. Consequently the net profit grew by 5.1% to
Rs18 crore.
-
The value of SCL's total investment in group
companies works out to Rs1,040 per share. While computing SCL's
value, we have assumed a 75% discount to the company's total
investment. After adjusting for this, the SCL stock is currently
trading at around 8.4x its stand-alone FY2008E earnings and around
6.7x its stand-alone FY2008E earnings before interest,
depreciation, tax and amortisation (EBIDTA). We maintain our Buy
recommendation on the stock with a price target of Rs1,550.
WS Industries
India
Cluster: Vulture's
Pick
Recommendation: Buy
Price target: Rs112
Current
market price: Rs45
Q1FY2007 results marred by cost
pressures
Result highlights
-
The Q1FY2007 results of WS Industries (WSI) are
below our expectations, primarily because of higher-than-expected
power and fuel cost, and interest charge. The revenue for the
quarter grew by 15.5% to Rs39.41 crore, driven by an order backlog
of Rs120 crore.
-
The operating profit rose by 34.3% to Rs4.66
crore as the operating profit margin (OPM) expanded by 170 basis
points to 11.8%. The improvement in the OPM could have been more
but for the increase in the power and fuel cost, which as a
percentage of sales increased by 270 basis points to 18.8%. On an
absolute basis, the power and fuel cost went up by 34.3%.
-
The interest charge for the quarter rose by 30%
and depreciation also rose by 18.8%. Hence owing to the pressures
of higher costs, WSI's the net profit for the quarter grew by only
49.2% to Rs1.6 crore.
-
Going forward, WSI's OPM is expected to improve
significantly, given the recently expanded capacity for
high-margin hollow core insulators and the implementation of the
price variation clause for the low-margin suspension
insulators.
-
WSI is currently sitting on a strong order
backlog of Rs120 crore. The order backlog should improve further,
considering the strong investments that are in the pipeline for
the transmission and distribution (T&D) sector.
VIEWPOINT
Great Eastern
Shipping
Demerger on the cards
again
After deciding not to proceed with the de-merger
process on August 3, 2006, GE Shipping has now decided to apply to
the Hon'ble Bombay High Court for seeking an extension of the
timeline for the effective date of the de-merger scheme. The
approval of the High Court had automatically lapsed on August 02,
2006 following which the company, in a press release, stated that
the demerger plans for its offshore division had failed.
INDUSTRY UPDATE
AUM
rises in line with market trend
The assets under management
(AUMs) for equity funds increased by 0.6% to Rs105,060 crore in July
2006. The rise was in line with the general upward movement seen in
the equity markets. |
