Wednesday, March 10, 2010

Stock Idea: Pennar Industries CMP 31

Business transformation, financial restructuring and productivity coupled with general buoyancy in Indian economy leads to impressive turnaround Transformation from commodity play to niche engineering as value added products ratio enhanced from 20% in early part of decade to 70% in FY09 and expected 80% in FY11 Riding big on Railways expansion of Rs 2,500 bn in the current five year plan; Pennar aims to increase revenue share from Railways to 30% by FY11 from 24% in FY09
Pennar has diversified exposure to various industries like auto, railway, building products, pollution control, white goods, road safety, electrical and fabricated products Enjoy strong relationship with Tata Motor, Ashok Leyland, TVS, ICF, BEML, L&T, ABB, Thermax, BHEL, Alstom Power, HCC and IVRCL.
Robust revenue and EBITDA CAGR of 41% and 96% in last six years; EBITDA margin consistently improved from meager 1.4% in FY02 to 11.6% in FY09, and further to 13.7% during 1HFY10 Financial position dramatically improved as D/E ratio enhanced from 13.3x in FY05 to 0.6x in FY09
Gradually enhancing metal capacity in verticals like heavy engineering without pressurizing the balance sheet as major expansion funded by internal accruals High margin pre-engineered building systems is new growth driver; 90% subsidiary Pennar Engineering Building System (PEBS) has technical know-how agreement with NCI Building Systems, USA, one of the world’s largest pre-engineered building solution providers with sales of $967 mn in CY09 (Nov)
Stock currently trades at just 1.3x cash profit during FY10-12 Completed Buyback of 3,125,000 equity share (~2.5% of capital) at a price of ~ Rs 25/share, likely to improve sentiment and reduce float from market.
Valuation
PIL is trading at P/E and EV/EBITDA of 4.4x and 2.9x on FY12 estimated earnings respectively. We believe the market would recognize PIL’s transformation into an engineering company with consistent increase in cash profits and result in re-rating of the stock. We recommend ‘BUY’ with SOTP TP of Rs 95 (206% upside from CMP), where we value standalone
business at Rs 81 (7.0x FY12 EV/EBITDA – inline with 4-year average multiple of 6.8x) and Rs 14/share for PEBS.
Source: Internet (Valenotes)

Intraday Trading Calls for 10th March

Indian Stock Market may open flat to positive and remains highly volatile for the day today. A flat Positive closing expected.
Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME

TRIGGER

PRICE

TARGET 1

TARGET 2

SASKEN COMM.

Buy Above

178.65

184.25

190.00

Sell Below

175.40

171.35

167.00

KPIT CUMMINS

Buy Above

130.00

133.55

137.00

Sell Below

127.75

124.25

120.00

PURVANKARA

Buy Above

103.80

108.20

114.00

Sell Below

101.60

98.30

95.00

PRITHVI INFO

Buy Above

72.75

76.25

80.00

Sell Below

71.35

68.15

65.00

WHIRLPOOL INDIA

Buy Above

172.70

177.45

182.00

Sell Below

170.00

165.35

160.00

ATLANTA

Buy Above

200.00

206.70

214.00

Sell Below

197.05

191.45

186.00

BRFL

Buy Above

210.80

216.75

224.00

Sell Below

207.50

202.10

196.00

GOOD LUCK

Disclaimer

The information in this publication is provided by http://www.moneybazzar.blogspot.com/ is intended for use for Readers & Traders . Every effort is made to provide accurate information, but http://www.moneybazzar.blogspot.com/ cannot guarantee the accuracy of the information or of the market analysis. This is a newsletter and is for informational purposes only. It is not a solicitation or offer to buy or sell futures. There is a high risk of loss in trading futures. You should not trade with money that you cannot afford to lose. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this newsletter. The past performance of any trading system or methodology is not necessarily indicative of future results.



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