Investor's Eye: Update - BEL (New order wins likely to boost the order position); Viewpoint - Koutons Retail (New product and category launches to boost revenue); MF - Sharekhan's top equity fund picks
Bharat Electronics Cluster: Apple Green Recommendation: Hold Price target: Rs2,144 Current market price: Rs2,066
New order wins likely to boost the order position
Bharat Electronics Ltd (BEL)?s order book has increased substantially to Rs16,780 crore till date FY2010 versus Rs10,386 crore as on March 31, 2009. This was largely due to Rs4,280 crore order (34% of the current order book) from Indian Air Force for the supply of additional 750 Akash medium-range surface to air missiles. The order intake in FY2010 has also improved considerably to Rs9,774 crore versus Rs5,424 crore in FY2009.
We do not see any business challenges for BEL in the near to medium term on account of the following: (1) a healthy order book, which provides strong revenue visibility; and (2) lower capital expenditure and working capital requirement. However, the potential long-term competition emerging from opening up of the sector for private participation is a key risk to the company.
The intact business fundamentals and the expected new order wins could act as a trigger for the stock. However, we highlight here that lack of corporate announcement by the company remains a concern and makes it difficult to value the new orders. At the current market price, the stock trades at 16.5x FY2011 and 14.7x FY2012 earnings estimates. BEL is a cash-rich company with cash per share of Rs330 in FY2009. On an adjusted earnings (adjusted for cash) basis, the company trades at 12.7x FY2011E and 10x FY2012E. We maintain our Hold recommendation and price target of Rs2,144.
VIEWPOINT
Koutons Retail India
New product and category launches to boost revenue Koutons Retail is an integrated apparel manufacturing and retail company in India. Positioned as a value retailer selling high-quality fashionable clothing at affordable prices, the company targets lower to middle income group. Koutons Retail operates through its four brands namely: Koutons, Charlie Outlaw, Les Femme and Koutons Junior. Its flagship brand Koutons offers a wide array of men?s apparel ranging from formal to casual including party wear and targets men between the age group of 22-45 years. To cater to the needs of the fashion conscious youth, Koutons Retail recently re-launched its brand Charlie as Charlie Outlaw, which offers casual apparel for males between the age group of 14-25 years. Koutons Retail, which predominantly targeted the male population in the past, has now also diversified into manufacturing and retailing apparel for women and children through its brands Les Femme and Koutons Junior respectively. The Koutons brand is sold through around 1,360 outlets located throughout India spread across about 1.3 million square feet.
MUTUAL GAINS
Sharekhan's top equity fund picks
We have identified the best equity-oriented schemes available in the market today based on the following 5 parameters: the past performance as indicated by the one, two and three year returns, the Sharpe ratio and Information ratio.
Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.
Information Ratio is one of the most important tools in active fund management. It is the ratio of active return (the return over the index return) to active risk annualized. A higher Information Ratio indicates better fund manger.
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