Pick of the Week: Allied Digital

BUY BUY : ALLIED DIGITAL

Equity: 17.35 Cr, BSE Code : 532875, CMP : 819

BUY ALLIED DIGITAL FOR MEDIUM TERM @ 819 : 820 TGT 918 : 920

Allied Digital Services Ltd. (ADSL), a 12-year old Mumbai based company was established in 1995 as a private limited company and later became public limited in 2006. It is engaged in the business of providing a wide spectrum of IT solutions & services to a diverse customer base. ADSL is basically an IT Infrastructure Management and Technical Support Services outsourcing company. It has enabled global, large and medium enterprises and service providers to reduce their total cost of ownership using a combination of onsite and remote services. Its Security Operations Centre facility has state-of-the-art Physical Security Systems ranging from Biometric Access Control, Closed Circuit TV, Fire-detection and Suppression Systems. Mr. Nitin Shah is the chairman and managing director of the company.

ADSL, a Systems Integrator and IT Infrastructure Management Services Provider, operates across a network of 92 locations in 25 states across India with a team of about 1,250 employees country-wide During September 2007, the company announced the launch of Remote Management Services (RMS) consisting of Network Operations Centre (NOC) and Information Security Operation Centre (SOC) at the Millennium Business Park, a Software Technology Park at Mahape near Mumbai. These RMS are supported by Intel Inc, E-Cop, Singapore and HP. NOC comprises monitoring and management of a wide variety of devices & platforms and applications. The company plans to use a combination of industry standard remote monitoring & management systems (RMS), Managed Security Services (MSS) and 'Cheque Truncation Services' (CTS).

ADSL has also forged technology and strategic alliances with international leading companies like IBM, Microsoft, Intel, Unisys, CISCO Systems, Stone soft, Resilience and domestic outfits like NIIT, HP, etc. The company�s clientele includes leading corporate spanning across sectors like banking, finance, insurance manufacturing, services and retail. They include reputed names like Reliance, Pfizer, Thermax, Glaxo and Maruti from the manufacturing sector; ICICI Bank, SBI, BOI, HSBC, HDFC bank and others from the banking sector; TCS, NIIT, Syntel from the IT sector; Reliance Power, BHEL, GAIL, Tata Power, etc. from the power sector and Shoppers Stop and McDonalds from retail.

Sales and NP for year ended 07 - 08 were 297.3 Cr & 42.9 Cr. & Sales and NP for latest Quarter 82Cr & 12.4Cr. On YOY basis NP has increased by 87% & based on quartet latest it has increased by 60%

Multibagger: Ratnamani Metals & Tubes

Ratnamani Metals and Tubes
Recommendation: Buy
Price target: Rs1,110
Current market price: Rs770

Price target revised to Rs1,110

Result highlights

• For Q4FY2008 Ratnamani Metals & Tubes Ltd (RMTL) has reported a growth of 51.8% year on year (yoy) in its net sales to Rs231.5 crore. The sales are in line with our expectations.
• The company has reported a mark-to-market loss of Rs27.5 crore on foreign exchange (forex) derivatives for the quarter under review. Adjusting for the same, the operating profit grew by 53.8% to Rs59.4 crore. Thus, the operating profit margin (OPM) increased by 40 basis points.
• For the forex loss, the management maintains that the chances of incurring any loss on its positions are limited. In our view, this could be a risk to our profit estimates going forward.
• The interest expenses declined by 30.3% to Rs3.4 crore while the depreciation charge increased by 2.9% to Rs6.4 crore during the quarter.
• Consequently, the adjusted net profit grew by 81.1% to Rs31.6 crore. However, the reported net profit declined by 23.6% to Rs13.4 crore.
• The company has an order book of Rs650 crore of which Rs119 crore worth of orders are for exports.
• The board has declared a dividend of 70% and a sub-division of shares into five shares of face value of Rs2 each.
• We are introducing our FY2010 estimates for RMTL in this report and expect the company's revenues to grow at a compounded annual growth rate (CAGR) of 27.5% and profits to grow at a CAGR of 24.7% over FY2008-10. We have revised our FY2009E fully diluted earnings per share (FDEPS) mainly to factor in the impact of the 10% export duty levied by the government, which has lately been scrapped. Consequently, the impact would be felt only for one month and thereby we are revising our estimates to Rs138.7 per share.
• We believe that given the robust business outlook for RMTL, the latter's strong order book with increased capacity would drive its revenue growth going forward. The current valuations are compelling and we maintain our Buy recommendation on the stock with a revised price target of Rs1,110 (8x FY2009E EPS). At the current market price the stock trades at 5.6x and 4.5x its FY2009E and FY2010E earnings.

Pick of the Week: Adlabs Films

BUY ADLABS FILMS

Equity: 23.06 Cr, BSE Code: 532399, CMP: 522.55

MEDIUM TERM @ 520 to 522 TGT 565 to 570

Adlabs is India leading film-processing firm, with nearly 70% of the Hindi-movies market, processing almost all of top- and mid-budget films. Adlabs set up India's first IMAX dome theatre in 2001, and subsequently took advantage of the tax exemptions for multiplexes and the shift in consumer preference towards watching movies in a multiplex. It has embarked on a massive multiplex rampup plan. It currently has 107 screens, spread over 24 cities, and a capacity of 31,000+ seats. The company aims to reach 315 screens and nearly 100,000 seats by March 2009. The expansion is being done through a combination of long-term leases with mall operators, acquisition of smaller multiplex chains (Rave, 23 screens) and conversion of existing single-screen halls (100+ screens) to multiplexes. Under the leasing model, Adlabs will pay a fixed rent to owners, while booking revenue and profit/loss.

Adlabs also has 45 FM radio licenses and the company has already started over 33 stations.

In FY07, Adlabs entered the film-production and distribution business. The company is targeting production of six to eight mid-to-high-budget movies annually. To minimize risk in this business, Adlabs is working on a minimum collection basis through sale of rights, such as satellite/overseas/music/DVD before release and has an experienced management team. In the film-distribution front, Adlabs will release close to 20-25 movies each year, with significant presence in distribution of Hollywood movies (Spiderman 3 in 2007) in India, and Indian movies abroad.

Adlabs' aggressive growth in multiplexes will dampen its near-term profitability. Meanwhile, competition from other multiplex players is rising and costs, such as rentals and power and fuel, are also impacting margins. The movie-production and distribution business is also attracting a lot of players and this has raised the cost of creative talent and finished content. Sales and NP for year ended 07-08 were 254.6 Cr & 45.9 Cr. On YOY basis NP has increased by 51 % Dividend during year ended 07-08 was 50 %

Pick of the Week: Voltas

BUY BUY BUY VOLTAS

Equity : 33.09 Cr, BSE Code : 500575, CMP : 144.40


BUY VOLTAS FOR MEDIUM TERM @ 144.40 / 145 TGT 165 / 168

Voltas Limited, a part of the TATA conglomerate, was incorporated in 1954. The collaboration of Tata Sons Ltd. with a Swiss firm Volkart Brothers formed Voltas in 1951. It is India's premier airconditioning and engineering service providers. Its operations are organized into four independent business specific clusters viz, Electro-Mechanical Projects & Services, Unitary cooling products for comfort & commercial use, Engineering Agency & Services and others.

Voltas is also actively engaged in the procurement and marketing of air conditioners, textile machinery, machine tools, mining and construction equipment and industrial chemicals. Its factories are located at Thane (Maharashtra), Dadra and Sanathnagar (Andhra-Pradesh). Its offices cover all metros and other major Indian cities. Its overseas offices are located in Abu Dhabi (UAE), Hong Kong and Singapore. It has technical collaborations with international companies like Hitachi (Japan), Standard Refrigeration (USA), Dunham Bush (USA), Hercules (USA), Mitsubishi (Japan) etc. It has six subsidiaries and five joint ventures.

The company has recently bagged Rs 2.60 billion contract from Emirates Central Cooling Systems Corporation for the construction of a cooling plant at the Dubai International Financial Centre. Under the contract, the company will complete civil, mechanical, electrical and plumbing works in addition to the construction of the 66,000 refrigeration ton district cooling plant. The project is expected to be completed in 15 months. This is among one of the large contract that has been awarded to company and is expected to add to the growth of top line and bottom line for the company.

The company in spite of rise in input cost has not hike the price of its air � conditioners. Steel, copper and aluminum contribute 70% to the input cost and due to the rise in cost of these inputs by 4% - 5% the sales revenues of the AC manufacturers in India have been affected. The company is planning to meet this rise in cost through high volume growth. The domestic room AC market has been estimated at 2 million during the financial year ending March 2008.The company commands 17% of the domestic market share in room ACs, which it plans to increase to 20% by next year which will help company in driving its volume growth.

The company with diversified business model and wide range of product line which is directly related to the economic growth is expected to drive its growth as economic growth is going ahead on strong platform and with more and more urbanization and changing demographics the demand for products like air � conditioners, construction equipments, refrigeration equipment, water coolers, freezers etc. are witnessing huge growth. Therefore, company is expected to capitalize its future growth through grabbing these opportunities.

The company has emerged from being a consumer appliance company operating in highly competitive arena to one that has expertise in the niche engineering area of electro mechanical projects and services. This, we believe has the potential to take the company on to a high growth trajectory in the future.

Sales and NP for year ended 06 � 07 were 3044.54 Cr & 187.82Cr. Sales and NP for latest Quarter 842.11Cr & 55.41Cr. On YOY basis NP has increased by 45 % �Dividend during year ended 06�07 was 135%

Multibagger: Anu's Lab and SEL Mfg (Intraday)

Circuit Breaker stocks for Monday

(1) Buy Anus Lab (532981)

CMP: 339.40, Stoploss : 332

Intraday target Rs. 365.00

(2) BUY BSE/NSE SEL Mfg. (532886)

CMP: 571.85 Stoploss: 560.00,

Intraday target Rs. 620.00

Pick of the Week: ASIAN ELECTRONICS

FOR MEDIUM TERM BUY

ASIAN ELECTRONIC

Equity: 14.94 Cr, BSE Code : 503940, CMP : 111.95

BUY ASIAN ELECTRONIC @ 111.95 Target Rs. : 140.00

Asian electronic was incorporated in 1963; earlier company was in the manufacturing of components like resistor and Capacitor. Till 1980 Asian electronic was a small player with poor track record and accumulated losses and Labor losses. At present Asian electronic Limited (AEL) is involved in design, manufacturing and marketing of energy efficient products and specializing in lighting solution. AEL has two segment (A) Manufacturing and operating lease of energy Products division and (B) Lighting division.

Under the Energy efficient Products it has (A)(1) Energy saving companies (ESCO) (A)(2) Sales and Maintenance contract. Lighting constitute of (1) ESCO and Retrofit (2) Conventional fitting products.

AEL has it.s manufacturing facility at Nasik (Maharashtra), Silvasa and Chennai, with world class facility and able to meet international standard. Across globe it is known for it�s product and services. AEL is offering elegant, efficient and high quality Luminaries for use with T8/T5 FTLs, CFLs, MV, SV, HID, lamp for all possible application in the domestic, corporate, Industrial, Down Lighting, Floodlighting, Landscaping segment and for special purpose like in the pharmaceutical Industry.

AEL's nationwide presence and strategic international partnerships is making its mark in the Lighting world. AEL has recently added new high growth business segment i.e. manufacturing equipment for converting waste plastic into hydrocarbon and in turn producing power from it. AEL�s unique technology to convert waste plastic into energy (plastic2power) has a capability to address the global issue of waste plastic handling. �AEL has huge order book of around Rs4400 crore, to be executed over two years. A bulk of these order are of ESCO from the various state electricity Board (SEB) and power Utilities.

Sales and NP for year ended were 366.6 Cr & 66.6 Cr. Sales and NP for latest Quarter 44.4 Cr & 4 Cr. Due to poor results in one quarter, and due to extremely weak market sentiments, this scrip has nearly collapsed. One can buy this scrip from long term point of view for good appreciation.

Pick of the Week: Lanco Infratech

IN PAST WHENEVER WE HAD RECOMMENDED LANCO INFRATECH, IT HAS GIVEN YOU GOOD GOOD GAINS!!!

ONCE AGAIN WE ARE RECOMMENDING IT

BUY LANCO INFRATECH

Equity: 222.36 Cr, BSE Code: 532778, CMP : 487.65

BUY LANCO INFRA @ 487: 488 TGT 525 : 530

LANCO Infratech Ltd (LITL), one of the fastest growing corporate entities in India, has more than two decades of experience operating in the core sectors of Power Generation, Power Trading, Construction & EPC, Infrastructure and Property Development. As of now, the operating capacity of LANCO�s power projects stands at 518 MW and on the pipeline are a number of power projects to generate a total capacity of 15,000 MW by 2015. With a proven record in integrated infrastructure development, LANCO constructs, develops and operates projects in power, roads and other infrastructure. The construction and EPC wing has so far executed Rs 2,000 crore worth projects and has an order book worth more than Rs 7,500 crore. Notably nearly all the construction and EPC works are done for LANCO's power and infrastructure projects.

The construction industry is vast and complex, calling for specialization in different sectors. It also calls for enormous skills to master the intricacies of the works in the field. LANCO Infratech Ltd (LITL), established in 1993, is one of the few companies which have developed the art of developing diverse projects and managing them. LITL, the holding company of LANCO for Power, Realty and Infrastructure sectors, intends to leverage its expertise and experience to exploit opportunities in this emerging sector by developing large infrastructure projects in highways, ports, bridges and SEZs. As part of streamlining its expanding operations, two divisions have been created to oversee and execute Infrastructure and EPC works. The two divisions are: Infrastructure & Construction Division and EPC Division. LANCO�s proven expertise in power encompasses conventional as well as non-conventional sources of energy such as gas, coal, biomass, hydro and wind. Currently generating 518 MW of power in six operational independent power projects, LANCO plans to have an installed capacity of more than 4000 MW by 2010. Sales and NP for year ended 06 � 07 were 541.7Cr & 73.1Cr. Sales and NP for latest Quarter 382.2Cr & 38.9Cr. On YOY basis NP has increased by 648% & based on quarter latest its increased by 92%