Stock Recomendations

Motherson Sumi

Enam Securities in its report on Motherson Sumi, upgrades the stock to "outperformer" relative to the sector. The company enjoys a 65 per cent market share in wiring harnesses business which currently accounts for 69 per cent of consolidated sales and remains the cash cow in the overall business portfolio.

In the past two three years the company has forayed into areas like polymers and rubber/metal components, which now account for 31 per cent of sales. The company is transitioning from being a supplier of components to modules/sub-assemblies.

Motherson Sumi has built capabilities in design, tooling, testing and logistics to leverage this trend and now offers one-stop solutions to OEMs' requirements.

The company enjoys clients like Maruti, Hyundai, Daimler Chrysler, Bajaj and Tata motors. It is also supplying Instrument panel modules and bumpers to Ford and has recently commenced supplies to Honda for its Civic model.

Sumitomo has identified India as a "focused frontier" where they expect growth and will invest further. India is likely to emerge as a significant sourcing base over the coming years.

Kesoram Industries

Pioneer Intermediaries recommends a Buy on Kesoram Industries with a one year target of Rs 540. The company wil incur a capex of Rs 490 crore in its cement and tyres division, of which Rs 425 crore will go to fund cement capacity expansion and balance towards de-bottelenecking tyre capacity by 15 to 20 per cent.

Uptrend in cement cycle coinciding with the expansion of capacity at an opportune time, positive outlook for tyre division and improving is likely to result in high visibility and robust earnings going forward.

Kesoram Industries is focusing on cement and tyre segments, which contribute around 85 per cent to topline and almost 100 per cent to bottomline. The company plans to sell its heavy chemical business. Management's intention to focus only on cement and tyres is an added positive.

In June 06 quarter, the revenues increased 24 per cent y-o-y to Rs 480 crore and net profits jumped by a stunning 437 per cent to Rs 63.4 crore. At the market price of Rs 481, the stock trades at 10.9 times its FY07 earnings.

Kesoram Industries, a member of B K Birla group, is a diversified company having presence in cement, tyres/tubes, rayon, heavy chemicals and spun pipes. It started manufacturing rayon in 1959, cement in 1969 and tyres in 1992. It has established brands like Birla Shakti Cement and Birla Tyres, respectively.

Bharat Electronics

Sharekhan recommends a Buy on Bharat Electronics (BEL) with a price target of Rs 1525. The healthy increase in the capital outlay of the defence budget and the government's efforts to reduce dependence on imports for critical equipment and security systems has increased the size of the addressable market for the defence equipment manufacturers.

With its wide range of product portfolio, R&D capabilities and a proven track record, BEL is well poised to capitalise effectively tap the same. BEL has taken steps to improve its market share in the civilian market, specially the fast-growing broadband access equipment and telecom segments.

It has bagged some prestigious large civilian contracts recently including the Rs 500-crore order from MTNL. It is expanding its reach also in export markets and has set an aggressive revenue target of $ 24 million in FY07 against $ 13.7 million in FY06.

With the recent modernisation and expansion of its manufacturing facilities as well as its technical capabilities, BEL is actively looking at tapping the huge opportunity in the contract manufacturing service space.

The revenues and earnings are estimated to grow at a CAGR of 16.4 per cent and 14.1 per cent respectively over FY06-08

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