Analysts' Corner

Voltas & Marico

VOLTAS
Reco Price: Rs 155,
Target Price: Rs 250
Voltas and KION Group GmbH to set-up a JV—Voltas Materials Handling (VMH) for the development, manufacture, marketing, and servicing of forklift trucks and warehousing equipment. KION is a €3.5 billion revenue company, the second-largest player in industrial trucks globally and a leader in Europe, China, Eastern Europe, and South America. Voltas’s material handling operations to be integrated into the new JV. In FY10, Voltas recorded sales of Rs 124 crore from sales of forklift trucks and spares (sold 1,175 forklift trucks worth Rs 100 crore), equivalent to 2.6 per cent of FY10 consolidated revenues. Voltas will be used by VMH to focus on the Indian market with a product range that includes diesel/LPG and electric trucks with load capacities of 1.5 to 16 tonnes. Analysts give thumbs-up to the above JV. However, they await clarity from the management on Voltas’ share and further investments in the JV. Maintain buy.

— Emkay Research

MARICO
Reco price: Rs 131,
Target price: Rs 158
Analysts believe that Marico’s sale of its non-core edible-oil brand, Sweekar, to Cargill (for an undisclosed amount) would release resources for working capital and manpower for other brands, and improve profitability. Sweekar was a less-focused-on edible oil brand of Marico and brought in revenues of around Rs 200 crore (7 per cent of FY11 revenues). Its Ebitda margin came in the low single digits. In 3QFY11, Cargill acquired Rath from Agro Tech Foods at a price-to-sales ratio of 0.3x. Sweekar sells across the country, and commands a better brand recall and has more variants than Rath. Hence, Sweekar would have been sold within a price-to-sales range of 0.5x and 0.6x, implying a value of Rs110 crore to Rs130 crore. Higher raw material prices and keener competition are key risks. Maintain buy.

— Anand Rathi