Analysts' corner

Opto Circuits, Crompton Greaves, Finolex Cables & Monnet Ispat

Opto Circuits
Reco price/date: Rs 108 / November 19
Current/Target price: Rs 110/Rs 256
Opto Circuits’ Q2FY13 results were way below expectations. Revenues grew just eight per cent y-o-y to Rs 608 crore mainly due to postponement of certain shipments from the medical equipment segment. This segment (80 per cent of revenues) saw a growth of just five per cent. Interventional segment (19 per cent of revenues), on the other hand, grew 23 per cent. Net profit de-grew four per cent to Rs 116 crore on account of higher depreciation, interest and tax provision. Analysts believe the Crisil rating suspense and renewed fears of stretched working capital cycle will weigh on the stock in the near term. Maintain 'Buy'.

ICICI Securities

Crompton Greaves
Reco price/date: Rs 111 / November 16
Current/Target price: Rs 111/Rs 131
Crompton Greaves (CG) is taking earnest efforts to make a transition from being an 'Indian corporation with an international business' to a 'Global corporation'. In the power business, while ongoing restructuring shall correct the cost structure and bring synergy benefits, the attempt in industrial business is for internationalisation and integration of drives with motors, and in the consumer business the attempt is for a complete rejuvenation. The road ahead is challenging. Analysts believe, the stock's performance would largely be driven by an improvement in overseas business, though standalone performance would protect downsides. Maintain 'Buy'.

Motilal Oswal Securities

Finolex Cables
Reco price/date: Rs 50 / November 19
Current/Target price: Rs 49.90/Rs 75
Finolex Cables Ltd (FCL) reported better than expected numbers with the top line growing by 17.4% year-on-year. The company witnessed strong growth coming from its electrical cables, communication cables and other segments which helped the topline grow. While electrical cables contributed 66 per cent to the gross sales, communication cables contributed six per cent, copper business 22 per cent and the rest was from others. The copper division however continues to remain under pressure and witnessed a de-growth on y-o-y and q-o-q basis. Execution of a large BSNL order during the quarter leads to higher utilisations & margin expansion. With strong growth from its main business segments we are positive on the long term growth prospects of the company. At the current market price the stock trades at 5.6 times and 4.7 times its FY13E and FY14E earnings per share. Maintain 'Buy'.

Nirmal Bang Research

Monnet Ispat
Reco price/date: Rs 289 / November 16
Current/Target price: Rs 291/Rs 344
For 2QFY2013, Monnet Ispat (MIL) reported a robust operating performance; however, its bottom-line declined by 7.3 per cent y-o-y mainly due to higher interest costs. MIL’s net sales grew by 19.3 per cent y-o-y to Rs 547 crore mainly due to increase in sales volumes of sponge iron (+15.4% y-o-y). Also, basic steel and power realisations grew by 30.7 per cent and 49 per cent y-o-y, respectively. Ebitda increases by 16.7 per cent y-o-y: Although net sales grew by 19.3 per cent y-o-y, MIL’s Ebitda increased by only 16.7 per cent y-o-y to Rs 139 crore mainly due to higher iron ore costs which grew by 8.2 per cent y-o-y to Rs 6,713/tonne. MIL is on the verge of a massive expansion in its steel business. The long-term stock performance will be determined by the timely expansion of the 1.5-mtpa steel plant and unlocking of value in Monnet Power, which is implementing the 1,050-Mw power project. Although there have been delays in the commencement of these projects, most of these projects would be backed by captive resources, thus ensuring robust profitability. Recommend ‘Buy’

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