J Kumar Infra Projects

A relatively smaller sized construction company, J Kumar Infra Projects is expected to grow by over 50 per cent annually, over the next two years. This is primarily given its healthy order book of Rs 1,300 crore, which is over three times its 2008-09 revenues.

The order book is expected to further improve as the company has already bid for about Rs 3,000 crore worth of projects. The company has adiversified portfolio given that it undertakes construction work for transport, irrigation, pilling, bridges, airport runways and buildings. Notably, the company mostly undertakes projects of government agencies, where investments are higher and are less affected by economic slowdown. Also, as majority of its revenues come from Maharashtra is organised into telecom software products, services and automotive, industrial and utility business. Though software products were the key contributor to its topline accounting for 40 per cent historically, currently services contribute almost 95 per cent to the topline.

The company has been able to improve its margins in 2008-09 to 23.5 per cent from 14 per cent in 2007-08, on the back of a 22 per cent growth in revenues and lower selling and administrative costs. However, the cut in R&D expenditure of communications companies has dented revenues as well as margins in the current fiscal. For the 9 months ending December 2009, sales were down 21 per cent while operating profits were down 37 per cent with margins at 17.6 per cent. How the margins move going ahead will depend on the pace of pickup in IT spending of communications companies.

The company is, however, bullish and is betting on the pickup in demand for handsets (increasing subscriber base and use of smart phones, especially in the emerging markets) and semiconductors. Sasken is also diversifying its presence post its acquisition of Ingenient Technologies, an embedded multimedia software solution provider, in the December quarter. At Rs 178, the stock is trading at 6.5 times 2010-11 estimated earnings of Rs 27 and looks attractive.

Sasken Communication

The company is a key player in providing network solutions including technology research and development for existing telecom players. Recently, it got an order from Inmarsat, which operates a global satellite network and offers mobile communications services, to design and bring into pre-production next generation of handsets, a first-of-its-kind order for an Indian company.

However, it is fighting to remain competitive, like its other IT cousins. The management has slashed 5 management positions to 3, with existing managers doing double duty. They are also in the process of trimming the workforce. Sasken has also filed a petition in court asking for approval to restructure its businesses so that it can remove unproductive assets from its balance-sheet, and create a contingency fund for worst-case scenarios.

In the 9 months of FY09 it’s profits stood at Rs 24.2 crore, up by 35 per cent y-o-y. Its efforts to control costs are showing results in the operating margins, which stood at 19 per cent compared to 14 per cent in Q2 FY09. Current prices have taken into account short-term risks plaguing the company. Compared to its historic valuation levels it is trading at a 27 per cent discount.

Stock Views on Glenmark Pharma, Sasken Communication, Larsen & Toubro

KRChoksey on Glenmark Pharma - Target Rs 252

KRChoksey has maintained its buy rating on Glenmark Pharma with a price target of Rs 252.2 in its report.

"The topline of the company has shown a decline of 10% y-o-y to Rs 491.1 crore whereas on q-o-q basis the company reported a decline of 11%. The fall in sales was due to absence of licensing income during the quarter as compared to Rs 61.0 crore in the corresponding pervious period. Excluding licensing income, the base business declined by 4%. Dip in the base business is due to factors like fewer ANDA approval, destocking in the regions like Latin America & Russia, currency impact in Latin America & Russia and price erosion of Glyptal. Going forward, we expect the revenues to improve on back of improved performance from Glenmark generics, specialty formulation and Indian formulation business."

"We maintain our optimistic view on the company supported by the consolidation from the acquisitions (like Actavis), revenue contribution from the new launches and increasing number of approvals from USFDA which would strengthen the earnings visibility of the company, Buy, target of Rs 252.2," says KRChoksey's report.

Angel Broking on Sasken Communication - Target Rs 127

Angel Broking has recommended a buy rating on Sasken Communication, with price target of Rs 127, in its report.

"Going ahead, we expect Sasken to record 8.5% and 22.6% CAGRs in its Top-line and Bottom-line, respectively, over FY2009-11E (excluding one-time items). Sasken continues to struggle to cope with the difficult business environment, and its key segment, Network Equipment Manufacturers, remains in consolidation mode. The medium-term outlook remains hazy for Sasken even as a recovery is anticipated in 2HFY2010. While the business prospects in the medium-term are a little subdued, we believe current valuations at just 3.3x FY2011E EPS adequately factor this in. We upgrade the stock to Buy from Neutral with a Target Price of Rs 127, implying a P/E of 4x FY2011E EPS," says Angel Broking's report.

Indiabulls Securities on Larsen & Toubro - Target Rs 1621

Indiabulls Securities has recommended a hold rating on Larsen and Toubro, with price target of Rs 1621, in its report.

"Larsen & Toubro is currently trading at a forward (FY10) P/E of 28.8x. Our fair value estimate of Rs 1,621, based on the Sum-of-the-Parts (SOTP) methodology, factors in all the major positives and thus, provides limited upside potential from the current market price. Thus, we change our rating to Hold," says Indiabulls Securities' report.

Stock views on Sasken Communication, GAIL, Patel Engg,

Angel on Sasken Communication, target of Rs 127

"Going ahead, we expect Sasken to record 8.5% and 22.6% CAGRs in its Top-line and Bottom-line, respectively, over FY2009-11E (excluding one-time items). Sasken continues to struggle to cope with the difficult business environment, and its key segment, Network Equipment Manufacturers, remains in consolidation mode. The medium-term outlook remains hazy for Sasken even as a recovery is anticipated in 2HFY2010. While the business prospects in the medium-term are a little subdued, we believe current valuations at just 3.3x FY2011E EPS adequately factor this in. We upgrade the stock to Buy from Neutral with a Target Price of Rs 127, implying a P/E of 4x FY2011E EPS," says Angel Broking's report.

Hem Securities on GAIL, target of Rs 340

"GAIL has come up with promising results for FY09. Petrochemicals contributed 11% in Sales. The petrochemical realizations are expected to be better in the future. Liquid Hydrocarbons added 19% to the Gross margins. GAIL has set a target of transmitting 94.8 MMSCMD of natural gas from domestic sources and through LNG route during FY 2009-10 under the Annual Memorandum of Understanding signed with Ministry of Petroleum and Natural Gas for performance targets for the Financial Year 2009-10."

"During the FY 2009-10, to achieve the Excellence in performance, the Company has also targeted for Gas Marketing target of around 83.2 MMSCMD. The MoU also provides for an ‘Excellent’ production target of 400 TMT of Polymers (HDPE & LLDPE - High-Density Polyethylene & Linear Low- Density Polyethylene) and 1,260 TMT of Liquid Hydrocarbons. Presently, the company is running at a P/E multiple of 13.02x to its FY09 EPS of Rs 22.28. Based on the increase in the Gas sales and LPG transmission, we recommend 'BUY' on the stock with a medium term price target of Rs 340," says Hem Securities' report.

Angel Broking on Patel Engg, target of Rs 545

We have valued Patel Engineering on SOTP methodology. We have assigned its Core Construction business a PE of 12x FY2011E EPS of Rs 36.8. Its Real Estate arm has been valued at a huge discount, using the NAV method, at Rs 103/share. In the recent past, the stock had witnessed a sharp appreciation, in line with its construction peers. We believe that, at the current levels, PE is available at reasonable valuations. At Rs 429, the stock is trading at 11.6x its FY2011E EPS of Rs 36.8, on a consolidated basis without considering its real estate venture. We recommend a Buy on the stock, with a Target Price of Rs 545," says Angel Broking's report.