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Apollo Tyres, Sujana Metal favourite picks

Street Cues

BS Reporter  |  Mumbai 

Sujana Metal Product, Voltamp Transformers, Apollo Tyres and Kesoram Industries (KIL) are the favourite picks of brokerage houses HDFC Securities and India Infoline.
HDFC Securities sees a good upside for Sujana Metal and has recommended a 'hold' on it.
"The tower division of the company continues to contribute higher revenues than the steel division, and contributes more than 75 per cent of the total profits. In the third quarter of 2006-07, the combined sales of Sujana Metal were up 32 per cent to Rs 230.2 crore compared with Rs174.3 crore in the previous year quarter.The sales of Sujana Steel were not included in the quarterly sales as the amalgamation process was underway," said the broker firm.
Based on the nine-month earnings of the financial year, SMPL can achieve a sales estimate of Rs 1186.4 crore and the profit after tax of Rs 56.3 crore for the FY07.
Voltamp Transformers is another stock that the broking firm has recommended the investors to hold.
According to the brokerage, VTL has exceeded our estimates of net sales in FY07 by Rs 22 crore. In FY08, revenues are expected to be higher by 27 per cent to Rs 512.9 crore. Operating margins are likely to improve further, though marginally, owing to higher material cost. The company is confident of mitigating the upward pressure on material prices owing to excellent relationship with suppliers and decent payment track record. "We expect VTL to achieve operating margins of 15.4 per cent and a net profit of Rs 52.23 crore. Besides, tax outgo is likely to decline to 35 per cent in the current financial year against 38 per cent in FY07," said the research report of HDFC Securities.
Mumbai-based broking firm India Infoline maintains a 'buy' rating on Apollo Tyres (ATL).
"ATL's operating margin for full year has gone up by 90 bps to 9.4 per cent, and we expect it to further rise to 9.7 per cent in FY08 and 9.9 per cent in FY09. ATL's sales volumes increased 7 per cent in the fourth quarter against previous year quarter and 9 per cent year-on-year. Capacity utilisation for the full year was at 95 per cent," the brokerage said.
It further said the volume growth was expected to be around 7.5 per cent for the next two years as major capacities are coming in the second half of FY09. Improved performance is expected in PCR segment and moderate growth is expected in the CV segment. The broking firm revised the EPS estimates of ATL 31.2 for FY08 against the earlier estimate of 27. "We expect tyre companies to improve volumes and not to get affected due to slowdown in automobile sales, " said India Infoline's research report.
Another favourite stock of India Infoline is Kesoram Industries (KIL).
According to its research report, KIL increased its cement capacity from 2.9 million tonne to 4.55 million tonne in the last quarter of FY07, leading to increase in despatches by 18.2 per cent to 1.03 miliion tonne. KIL is expected to fully benefit from the recent capacity addition, it said. "We expect cement prices to be flat in FY08 with marginal increases and expect prices to fall in FY09, the brokerage said in its note on the company.

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First Published: Sun, May 06 2007. 00:00 IST
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