Analyst's corner

Era Infra Engineering & Syndicate Bank

Era Infra Engineering
Current price: Rs 230,
Fair value: Rs 272

Crisil Equities has assigned fundamental grade of 4/5 to Era Infra indicating ‘superior’ fundamentals. Era has a strong order book of Rs 10,700 crore (three times trailing 12 months revenues). It has also forayed into the BOT (build-operate-transfer) road space, which will give it steady cash flows during the life of the project. Crisil Equities expects Era’s revenues to grow at a two-year CAGR of 25 per cent to Rs 5,200 crore in 2011-12, while EPS is expected to register lower growth of 19.1 per cent to Rs 17.6 due to equity dilution on account of FCCB conversion. It has arrived at a fair value based on a P/E of 13 used to value the contracting business (Rs 228) and the DCF method to value BOT projects (Rs 44).

—Crisil Equities

Syndicate Bank
Reco Price: Rs 120,
Target Price: Rs 144

Syndicate Bank is in a consolidation phase where the business mix is set to grow at 16 per cent during FY10-12, supported by 16 per cent compounded growth in both advances and deposits. ICICI Direct anticipates incremental slippages to ebb from the second half of 2011-12, supporting bottomline growth. Better liability management will help the bank maintain net interest margin at around 3 per cent. Asset quality concerns will remain high in the coming three or four quarters. However, the bank’s improved focus on loan quality (internal and external rating system now adopted for loan appraisal) and high provision cover (74 per cent in 2009-10) reduces the balance sheet concern, going forward. Initiate coverage with strong buy.

—ICICI Direct