Stock Views on SINTEX INDUSTRIES, HAVELLS INDIA, ROLTA INDIA

CITIGROUP on ROLTA INDIA

Citigroup reiterates 'Buy' rating on Rolta India. Rolta is well on its way to transforming itself from a services-led approach to a solutions orientation. The early signs are visible with the IP (internet protocol)-led revenues in Q1 at about 16%. This journey will not be without hiccups - as a result, management has guided for revenue growth in FY11 of about 12-15% y-o-y, lower than that of previous years. If the company were to adopt IFRS starting April '11, then there will be two predominant additional charges to the P&L:

 

(1) Interest expense on FCCBs; and

(2) Markto-market charges on foreign currency loans.

 

While the MTM charges would be a function of the prevailing exchange rates, the interest on FCCBs would be about $6-7 m annually leading to an additional charge of about 300 million. The stock has underperformed the Indian market by about 36% YTD.The stock now trades at about 8x 12-month forward earnings.

UBS INVESTMENT on HAVELLS INDIA

UBS initiates coverage on Havells India with a 'Buy' rating and a price target of 465. Havells India is a leading Indian consumer electrical goods company. The company has demonstrated an ability to gain market share and imp rove profitability. Havells will continue its industryleading growth in India's electrical consumer durables sector. HVEL has a strong distribution network and its product strategy is aimed at capturing a larger share of distribution channels. UBS forecasts FY12-15 revenue CAGRs of 26% for lighting and 19% for durables. HVEL has succeeded in turning Sylvania around by cutting fixed costs, exiting unprofitable products and outsourcing manufacturing, resulting in 34 million in annual cost savings. Sylvania contributed 28% of consolidated EBITDA and 49% of consolidated revenue in H1FY11.

J P MORGAN on SINTEX INDUSTRIES

JP Morgan maintains the 'Overweight' rating on Sintex Industries with a price target of 237.5, which implies a 39% upside potential from current levels. Over the last five years, the bottom one-year forward P/E for Sintex has been 7.5x and it has traded at an average forward P/E of over 12x. Some recent concerns seem unfounded: 1) Slowdown on government orders: There have been concerns about a slowdown in government orders over the next two-three quarters. Sintex derives its government orders from multiple states and multiple agencies, mainly pertaining to education, health and mass housing, which are likely to remain sticky even in the event of a slowdown. Management has stated that operations continue on track and they are not witnessing a slowdown, 2) Promoters Selling: Management has denied this. Based on transaction data from Bloomberg, promoters purchased equity in July 2010 at 175- 185 per share.