Analysts' corner

Maharashtra Seamless
Reco Price: Rs 378,
Target Price: Rs 420

The company is leader in seamless pipe, with 50 per cent market share. It provides greater revenue visibility as the company will benefit from ongoing investments in oil & gas and power generation sectors, which help in strong volume growth. Near-term visibility is further increased by a strong order book of about Rs 500 crore. Its Romanian plant is nearing completion, which will take total seamless capacity to 550,000 mtpa by 4Q 2010-11. Besides, continued pricing power and possible integration will help maintain steady margins. Brokerage expects margins to stay well over 20 per cent over the next two years. Strong balance sheet and sufficient liquidity provide downside protection. Maintain Buy .

—Reliance Securities

Transformers & Rectifiers India
Reco Price: Rs 325,
Target Price: Rs 620

The company will be selling around 15,000 MVA of transformers in 2010-11 and around 18,500 MVA of transformers in 2011-12, which will translate into a compound annual growth rate of 26.8 per cent during FY10-12. It has signed a MOU with a leading global manufacturer of 765 KV transformers for the purpose of manufacturing and supplying transformers to Power Grid Corporation. Under this MOU, 30 per cent of the orders would be executed by the company. This is a very positive move by the company, as brokerage expects the 765 Kv transformers demand to outpace the demand for other lower Kv transformers. The estimated orders to be disbursed by PGCIL from this tenders is Rs 1200 crores. Maintain Buy. 

—KRC Choksey

Diamond Power Infrastructure
Reco Price: Rs 209,
Target price: NA

The company is an integrated player having presence in cables and transformers. After its recent expansion, the company developed in house capabilities which to the extent of over 80 per cent for the projects. In October 2010, the company entered into an agreement with Skoda (India) and Schaltech Automation for the execution of contracts up to 400 Kv space. The JV already bid for one 440Kv T&D project and emerged as the second lowest bidder. The company is aggressively looking for more opportunities in this space. Besides, its expansion of capacity to 12,500 MVA is expected to be complete by Q1FY2012 and should boost its manufacturing capability in the power transformer segment. On consolidated basis the company is expecting a turnover of Rs 1,400 crore in 2010-11, implying a year-on-year growth of 55 per cent. Maintain Buy.

—Sharekhan

Electrosteel Castings
Fair Value: Rs 58,
Current Price: Rs 41

Crisil Equities has assigned fundamental grade of 4/5 to Electrosteel Castings, indicating superior fundamentals. Electrosteel has leadership (60 per cent market share) in the domestic ductile iron (DI) pipe market. The DI pipe industry is expected to benefit from the increase in allocation for water supply and sanitation infrastructure development under the 11th Five Year Plan (2007-12). Additionally, Crisil expect Electrosteel's global presence to partially offset competitive pressure owing to overcapacity in the domestic market. Crisil Equities expects Electrosteel's standalone revenues to grow at a three-year CAGR of 5 per cent to Rs 1760 crore in 2012-13. Adjusted PAT is estimated to decline in FY10-12 to Rs 110 crore billion but improve to Rs 150 crore in FY13 due to benefits from captive mines.

—Crisil Equities