Fw: Investor's Eye: Update - GCPL (Management interaction note); Viewpoint - Elecon Engineering (Capex revival to drive growth in future)

Investor's Eye [December 30, 2010]  Sharekhan www.sharekhan.com Summary of Contents STOCK UPDATE  Godrej Consumer Products Cluster: Apple Green Recommendation: Hold Price target: Rs443 Current market price: Rs389 Management interaction note The recovery in the sales growth of the domestic soap segment, the sustenance of the strong growth in the domestic household insecticide business and the good revenue growth in the recent international acquisitions provide visibility of a better performance in the coming quarters. We maintain our earnings estimates for FY2011 and FY2012, and will review the same after the announcement of the Q3FY2011 results. At the current market price the stock trades at 27.9x its FY2011E earnings per share (EPS) of Rs13.9 and 21.1x its FY2012E EPS of Rs18.4. We maintain our Hold recommendation on the stock with a price target of Rs443. VIEWPOINT  Elecon Engineering Company  Capex revival to drive growth in future We recently met the management of Elecon Engineering Company (Elecon) and visited the company?s manufacturing plant at Vallabh Vidyanagar in Gujarat. The company is a leading manufacturer of material handling equipment (MHE) and industrial gears.  While the company is having a diversified clientele portfolio and sector exposure, the demand for the majority of its products is heavily reliant on the industrial capital expenditure (capex) cycle. Consequently, the company had witnessed a slowdown in order booking during FY2010. However, with the uptick in the capex cycle, the company is witnessing a very good demand for its products in the current fiscal.  The revival in the capex cycle has augured well for the company and would drive a 20-25% growth in the company?s business in FY2011. Its entry into the BoP segment would boost its order inflow, though more clarity is needed on the venture. The restructuring of its loan portfolio helped in reducing its debt cost in H1FY2011; however, the mobilisation of term loans to finance its Benzler-Radicon acquisition would increase the company?s interest cost towards the end of FY2011. Trading at 8.1x on consensus estimate, the Elecon stock is offering a 15-20% discount to its peers like TRF and TIL. We currently don?t have any rating on the stock.   Click here to read report: Investor's Eye   Regards, The Sharekhan Research Team myaccount@sharekhan.com  Manage your newsletter subscriptions