STOCK UPDATE
Sintex
Industries
Cluster: Apple
Green
Recommendation: Book Profit
Current market price:
Rs185
A whopping return of
1,581%
As we said the upside from the organic
growth of core business of Sintex is already factored in the stock's
current price. Also it is not clear when the company shall make its
next acquisition. Hence in view of our growing discomfort with
regard to the company's inorganic growth plan and the risk of the
unknown, we recommend investors to book profit at the current
levels. Having said that, we do not wish to take away from the
stock's impressive performance while under our coverage-it has given
mind-blowing returns of 1,581% since it was recommended on August
14, 2003 at Rs11!!!
Solectron Centum
Electronics
Cluster: Emerging
Star
Recommendation: Hold
Price target: Rs215
Current
market price: Rs169
Management sounds optimistic
Solectron
Centum Electronics reported a robust revenue growth of 97.6% to
Rs83.3 crore in spite of the weak performance from the component
business. The service business primarily contributed to the growth
with a ten-fold jump in the revenues to Rs51.3 crore. The growth
opportunity is huge in the EMS business and the management expects
the service business to maintain its growth momentum. To tap the
same, it has invested substantially in expanding the manufacturing
capacities. What's more heartening is the fact that the component
business is forecast to revive in the current fiscal, on the back of
renewed demand from C-MAC and the government organisations in the
domestic market.
At the current market price the scrip trade
at 19.1x FY2007 and 16.8x FY2008 estimated earnings. Despite the
optimistic outlook highlighted in the annual report, we maintain our
hold recommendation on the stock. The decision to upgrade the rating
will depend on distinct signs of the revival of growth in the
component business (like the commencement of the Rs35-crore
high-margin government order and an increase in demand in the demand
for components from
C-Mac).
