Recommendation: Buy
CMP = Rs 100
Price target: Rs 135
- Alphageo India Ltd (AIL) has reported a net loss of Rs 31 lakh for Q3FY2006 against our expectations. The net loss was a result of a higher-than-expected interest outgo of Rs 69 lakh during the quarter.
- The interest charge in turn was higher on account of the Rs30 crore debt that the company has taken to set up its two 3-D seismic survey crews. The revenues for the quarter stood at Rs160 lakh, down 77% over last year. The results are not comparable on a year-on-year (y-o-y) basis, as the two 2-D crews did not operate in the third quarter. Consequently the company did only data analysis job during the quarter.
- Till November 2005, severe weather conditions prevailed in Arunachal Pradesh and Mizoram, where AIL is executing two contracts for Oil India Ltd (OIL) and Oil and Natural Gas Corporation (ONGC) respectively. Since then, the company has resumed operations on the ONGC contract. However work on the OIL contract has not resumed yet, as OIL has postponed the operations in Arunachal Pradesh.
- AIL has bagged an order worth Rs 4 crore from HOEC for a 2-D contract. The crew that was to work on the OIL contract will now commence survey for the HOEC contract. The company intends to finish the survey by the end of this fiscal.
- The fourth quarter will see all the company crews (ie two 2-D crews and the two new 3-D crews) in full operation. Hence its revenues would increase from Q4FY2006 onwards. I believe that the revenues and earnings would begin to grow exponentially on a y-o-y basis from Q1FY2007.
Associated Cement Companies (ACC)
Recommendation: BuyCMP = Rs 547
Price target: Rs 600
- It is currently trading at 18x its FY2006 earnings and continue to be bullish.
- I am tempted to revise our price target for ACC to Rs600 and maintain my positive stance on the company, primarily due to the strong cement demand in the western region, improving pricing of cement on the back of a favourable demand-supply scenario and the capacity expansion plan proposed by the company.
Balmer Lawrie & Company
Recommendation: BuyCMP = Rs 575
Price target: Rs 600
- The management of Balmer Lawrie and Co is quite optimistic about the company's future growth prospects. I am tempted to revise the price target for the stock to Rs 600. The new price target is 10.3x the company's FY2008E earnings.
