Analysts' corner

Bank of India
Reco price: Rs 280
Target price: Rs 348

Bank of India’s profit fell 47.2 per cent year-on-year (y-o-y), mainly due to subdued core income growth, deflated non-interest income and sharp spike in provisioning for non-performing assets (NPAs). The loan book grew 17.9 per cent y-o-y, slightly above the industry’s 16.7 per cent. Net interest income grew 8.3 per cent y-o-y, with net interest margin declining 41 basis points (bps) y-o-y to 2.6 per cent. The share of current accounts-savings accounts (Casa) in overall deposits declined 96 bps quarter-on-quarter (q-o-q) to 31.5 per cent. The sharp 70.7 per cent drop in trading profits and a slower 11.4 per cent y-o-y fee income growth led to a 7.9 per cent y-o-y decline in non-interest income. This was partially offset by the 70 per cent growth in recoveries for the quarter. The stock trades at 1.1x estimated FY11 book and 0.9x FY12 book. Maintain sell.

— Anand Rathi Research

GKB Ophthalmics
Current price: Rs 59.7
Fair price: Rs 52

GKB Ophthalmics (GKB) is an established player in the organised ophthalmic lens manufacturing industry in India. The company derives over 90 per cent of its revenues from the developed markets of Europe, US and West Asia. It manufactures basic single-vision glass lenses and has an installed capacity of 12,000 glass lenses per day. The global ophthalmic lens industry was sized at a billion lenses in 2009, and has clocked a three-four per cent volume growth over the last three years. Crisil Equities expects a similar growth rate for the industry, driven by an increase in the ageing population, awareness about vision correction and replacement demand. Crisil Equities has used the sum of the parts method to value GKB. Crisil Equities has used the discounted cash flow method to separately value GKB (standalone) at Rs 26 a share and GKB’s 38 per cent stake in GKB Vision at Rs 26 a share.

— Crisil Equities

Siemens India
Reco price: Rs 708
Target price: Rs 542

Ebitda (earning before interest, taxes, depreciation and amortisation) margin stood at 12.9 per cent in the March 2010 quarter and, adjusting for a forex loss of Rs 70 crore, margin stood at 16 per cent. However, this high margin is mainly due to high-yield historical projects, which are likely to be over soon. The margins are expected to stabilise at 11.5 per cent in 2010-11 and 2011-12. The management said there are pricing pressures in the projects business due to intense competition. Order inflow in the present quarter stood at Rs 2,240 crore and the order book stood at Rs 13,450 crore. The management said, though there was a good repeat demand in the automation and drives business, solution industry remains soft currently. The stock is trading at 27x September 2011 and 26x September 2012 earnings. Maintain under-perform.

— Macquarie Research

Chambal Fertilisers
current price: Rs 62
fair price: Rs 60

Chambal Fertilisers Q4FY10 (fourth quarter of financial year 2009-10) results were below estimates. Revenues declined 16 per cent y-o-y to Rs 720 crore due to a sharp fall in trading and shipping revenues. While Ebitda margins came at 23 per cent and adjusted profit after tax (PAT) inched just three per cent on y-o-y. In FY10, the company could not benefit from the import parity price (IPP) -linked subsidies on urea due to a production break-down at its urea plant. However, the brokerage maintains a positive view on the company since IPP-linked subsidies will benefit it in FY11 and it remains one of the biggest beneficiaries from any policy changes in urea. Maintain hold.

— Emkay Research