ORG Informatics
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs184
Current market price: Rs105
Price target revised to Rs184
Result highlights
- ORG Informatics' performance was below expectations in Q4FY2007. Its revenues grew by 17% to Rs70.4 crore, below our expectations. The revenue growth was dented partly by the slippage of some revenues to Q1FY2008.
- The operating profit margin (OPM) declined sharply to 1.3% (as against 9.5% in the nine months ended December 2006) due to the cumulative impact of the higher contribution from low-margin hardware supply part of the MTNL order, expenses related to integration and restructuring of the recently acquired entities (United Technologies and DGIT) and a one-time write-off (around Rs1.3 crore related to provision for bad debts and stock adjustments).
- However, the steep jump in the other income and the write-back of tax provisions enabled the company to post a relatively higher growth of 24.7% in its consolidated earnings to Rs5.3 crore.
- On the full year basis, the consolidated revenues and earnings grew by 97.6% to Rs306.6 crore and 113.7% to Rs17.3 crore. The OPM declined by 110 basis points to 7.6% in FY2007.
- In terms of the outlook, the management expects to maintain the growth momentum on the back of a healthy order pipeline and the expected improvement in its margins as the high-margin maintenance revenues kick in from the MTNL contract. Moreover, the company would continue to actively scout for inorganic opportunities and has got the board approval to raise up to $30 million for the same.
- We have revised downwards the earnings estimate of FY2008 by 2.6% to factor in a higher tax rate. We maintain our Buy call on the stock with a price target of Rs184.
Transport Corporation of India
Cluster: Cannonball
Recommendation: Buy
Price target: Rs100
Current market price: Rs88
Price target revised to Rs100
Result highlights
- In Q4FY2007 the overall revenues of Transport Corporation of India (TCI) grew by 18.9% year on year (yoy) to Rs292.6 crore on the back of the better performance of both the XPS and the SCM division.
- The earnings before interest and tax (EBIT) of the company grew by 61% to Rs15.7 crore yoy whereas the margin improved by 300 basis points to 10% in the quarter, driven by the SCM division's margin of 12%.
- The interest cost doubled to Rs3.12 crore from Rs1.7 crore last year whereas the depreciation provision stood flat on a sequential basis at Rs5.45 crore but increased by 41% yoy, as the company added assets in the form of warehouses and trucks.
- On the back of a better performance at the operating level, the net profit more than doubled to Rs9.42 crore.
- As we have mentioned in our earlier update, TCI has drawn up a capital expenditure (capex) plan of Rs440 crore for the next two to three years. The funds would be utilised for buying ships, expanding the warehouses and augmenting its truck fleet.
- The company is also in the process of forming a 50:50 joint venture with Scan Trans Holding, Denmark to conduct shipping business. It is in the initial stages of forming the joint venture and we will update you on the same once we get more information.
- The company has identified four properties covering a total area of 12.5 acre for development. The value of these properties taken together translates into Rs26 per share on diluted equity. We believe this provides significant cushion to the company's stock price.
- At the current price of Rs88 per share, the stock is trading at 14.7x its FY2009 earnings estimate. Considering the bullish outlook for the company, we are upgrading our target price to Rs100 per share.