Hem Securities recommends a `BUY` on Areva (Q, N,C,F)* T&D India

Hem Securities recommends a `BUY` on Areva (Q, N,C,F)* T&D India


Hem Securities recommended a `BUY` on Areva T&D India. ( CMPat BSE: Rs
1550, Target Price: Rs 1820 ).

The company is planning to acquire VEI Power Distribution. The
analysts` at Hem Securities say that through this acquisition, Areva
T&D will strengthen its presence on the worldwide distribution market
and acquire leadership positions in Italy and Malaysia for this
segment. This acquisition will provide competitive advantage to Areva
and will increase its market share in world market.

The company has also entered into a joint venture (JV) with the
Russian firm, United Company Rusual. This JV will be supplier for
turnkey projects, electrical equipment and services in the T&D fields
for UC Rusal`s plant and is expected to receive orders of about USD
500 million in the next five years.

Areva T&D plans to invest about 60 million Euro in next 3 years, to
modernize its production sites and build new plants. The company is
aiming at 25% growth annually over the next five years looking at
India`s need for electrification to sustain its economic growth. It is
also in preliminary talks with Indian firms to set up nuclear power
projects in India. The company aspires to double its growth by 2009,
at point when India is estimated to be contributing 13% to 14% of
sales of the company.

The company reported the sales of Rs 3,893.10 million in Q1FY08 with
the growth rate of 19%, in comparison with the Q1FY07 sales of Rs
3,281.30 million. The net profit for the company rose to Rs 378.50
million, with the growth rate of 53% versus net profit of Rs 247.80
million. The analysts` say that the stock at a current market price Rs
1,550 is trading at 43.41 times to its earning and 15.62 times to its
book value and is priced to yield some good returns in the medium to
long-term.