Apollo Tyres, BLS International among stock recommendations from Anand Rathi

July 6, 2009: The Sensex tumbled 6.98 percent intraday by around 1054.47 points, as investors went on a selling spree following the Government not coming out with any significantly positive news on the reforms and divestment fronts when it presented the Union Budget. The Index however closed down 869.65 points, or 5.8 percent to 14,043.40.

    • One of the world’s largest visa, passport and consular outsourcing services provider for governments and their diplomatic missions worldwide.
    • BLS International reported a strong set of numbers in 1QFY18. Revenue grew by 57%, EBITDA grew by 468% with margins expanding 1605bps at 26% on y-o-y.

The asset-light model, coupled with a key focus on further expanding its margins, has helped BLS to deliver strong all-around performance

In FY2017-18E, several foreign mission tenders are likely to be submitted and BLS is prequalified to bid for these global tenders in the pipeline

We expect BLS revenue to grow at CAGR of 36% between FY17-19 led by strong growth from e-Punjab project and Spain along with new contract wins and strong pipeline.

At CMP the stock is trading at 22x FY18E and 19.7x FY19E. We initiate our coverage on BLS International ltd. with “BUY” recommendation and target price of Rs.310 per share.

Deepak Nitrite

 CMP   232                                            Target   264

    • DNL is one of the leading global players for several niche chemical products used in – Colorants, Petrochemicals, Agrochemicals, Rubber, Pharmaceuticals, Paper, Textile
    • DNL has recently increased its focus on adding high value products. (Greenfield expansion plan at Dahej, Gujarat for manufacturing phenol (2, 00,000 ton/year) and acetone (1, 20,000 T/year).
    • With the completion of its Phenol project, the top line for the company is expected to almost get doubled by FY-19E.
    • Also, due to India’s heavy dependence on the imports due to lack of domestic production capacity and imposition of around 7.5% cumulative anti dumping duties, the macro scenarios for the domestic market looks promising for the company.
    • At CMP, the stock is trading 27x time FY18E and 11.3x FY19E earnings. We recommend BUY on Deepak Nitrite Limited with a target price of Rs.264 per share.

Apollo Tyres

CMP   248                                            Target   317

    • Coming quarters are expected to see a combination of lower rubber prices and re-stocking in Apollo Tyres’ India business, leading to revenue acceleration and a higher margin

    • we expect profitability to improve sequentially given a 12% drop in the price of rubber. While the Hungary plant is expected to be a drag on EBIT in the next two quarters, management expects stability from Q4 FY18.

    • The company’s plan to expand the Q1 FY18 capacity of the Chennai plant (of 8,000 tyres a day) to around 12,000 is expected to drive revenue growth in FY18 and FY19.Also, the Hungary plant, which manufactures car tyres, is expected to be ramped up to 16,000 tyres a day by FY19

    • According to the company, this plant would be more profitable than the one in the Netherlands, and thus be margin accretive from FY19.

    • We expect revenue to clock a 13% CAGR over FY17-19 .With this, we expect the FY19 margin to come in at 14%, an 80bp expansion y/y.
  • With higher interest costs and depreciation, we expect earnings to register a 10% CAGR, leading to an EPS of `26.1. We recommend a Buy at a price target of Rs.366 (14x FY19e EPS).
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