Thursday, July 9, 2009

Buy Larsen, Tata Steel and Tulip Telecom

Larsen & Toubro
Broking House: Edelweiss
Current Price: Rs 1,607.70

Engineering major Larsen & Toubro’s management is bullish on power, oil & gas, infra sectors, which it considers to be growth drivers. The company maintains a guidance of 25-35 per cent YoY growth in order accretion in FY10E, driven by the oil and gas (O&G), power and infrastructure verticals, especially from public sector companies. In infrastructure, L&T is looking at opportunities in the roads, railways and water sectors. L&T has a capex plan of Rs 1,500 crore-Rs 2,000 crore in FY10E. The broking house feels L&T is a default India infrastructure play, with pick-up in government spending and recommends a ‘hold’ position.

Tata Steel
Broking House: Emkay Research
Current Price: Rs 438.30

Tata Steel has reported below estimate results with net sales standing at Rs 26,430 crore, down 26.7 per cent. The company has posted a adjusted net loss at Rs 1,040 crore (yoy profit Rs 1,520 crore) as it had to bear a restructuring cost of Rs 4,090 crore. As per the management, the prices in Europe have bottomed out and there may be technical restocking which may push up the prices. At the same time, Corus is also taking various measures to reduce cost of production. The outlook on Indian operations is optimistic and management has guided for 20-25 per cent volume growth in FY10 and the broking house maintains a “hold”.

Tulip Telecom
Broking House: Angel Broking
Current Price: Rs 897.95

Tulip Telecom Ltd is a data telecom service and IT solutions provider. The company has recorded a 12.8 per cent yoy growth in its Q4FY09 topline, while sequential growth came in at 5.9 per cent. In the IP VPN business, a key growth driver for the company was the increase in bandwidth requirements of its customers, and the business saw strong growth in demand from the media, telecom, the government and manufacturing sectors. The total number of connects grew by an excellent 71.2 per cent yoy and by over 14 per cent qoq, to cross the two lakh figure. Going ahead, the broking house expects Tulip to record CAGRs of 21.6 per cent and 16.7 per cent in its topline and bottomline, respectively, over FY2009-11 and recommends “accumulate” position.