Mold-Tek Technologies
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs215
Current market price: Rs155
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs215
Current market price: Rs155
Unlocking value
Key points
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KPO business growing exponentially: Mold-Tek Technologies (MTT) has gained the critical size and required expertise in the niche area of structural engineering KPO services. The size of the opportunity in this space is huge and the company has taken inorganic initiatives to move up the value chain and establish presence in the key overseas markets. Consequently, we expect its KPO business to grow at a CAGR of around 160% over the next three years.
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Expanding the plastic packaging service business: In the recent past, the company invested in modernisation and expansion of its manufacturing units in the plastic packaging business. It also bagged orders from large and reputed clients in the oil & lubricant business, further consolidating its leadership position in the segment. The plastic packaging business is likely to grow at a CAGR of over 20% in the three-year period FY2007-10.
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Unlocking value in KPO business: The company has filed an application for the de-merger of its two businesses into separate entities. We believe this would result in the re-rating of the KPO business that is not only growing at an exponential rate but also enjoys much higher margins. We value the KPO business alone at Rs189 per share.
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Attractive valuations: With its revenues and earnings expected to grow at CAGR of 31% and 66% respectively over FY2007-10, MTT is attractively valued at 7.6x FY2009 and 5.3x FY2010 estimated earnings (as the existing combined entity). Taking into account the de-merger ratio also (holders of 100 existing shares to get 72 shares of the plastic company and 28 shares of the KPO company), the KPO business alone is valued at Rs189 per share. We recommend a Buy call on MTT with a price target of Rs215.
KPO business growing exponentially: Mold-Tek Technologies (MTT) has gained the critical size and required expertise in the niche area of structural engineering KPO services. The size of the opportunity in this space is huge and the company has taken inorganic initiatives to move up the value chain and establish presence in the key overseas markets. Consequently, we expect its KPO business to grow at a CAGR of around 160% over the next three years.
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Expanding the plastic packaging service business: In the recent past, the company invested in modernisation and expansion of its manufacturing units in the plastic packaging business. It also bagged orders from large and reputed clients in the oil & lubricant business, further consolidating its leadership position in the segment. The plastic packaging business is likely to grow at a CAGR of over 20% in the three-year period FY2007-10.
*
Unlocking value in KPO business: The company has filed an application for the de-merger of its two businesses into separate entities. We believe this would result in the re-rating of the KPO business that is not only growing at an exponential rate but also enjoys much higher margins. We value the KPO business alone at Rs189 per share.
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Attractive valuations: With its revenues and earnings expected to grow at CAGR of 31% and 66% respectively over FY2007-10, MTT is attractively valued at 7.6x FY2009 and 5.3x FY2010 estimated earnings (as the existing combined entity). Taking into account the de-merger ratio also (holders of 100 existing shares to get 72 shares of the plastic company and 28 shares of the KPO company), the KPO business alone is valued at Rs189 per share. We recommend a Buy call on MTT with a price target of Rs215.
STOCK UPDATE
Aurobindo Pharma
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs527
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs914
Current market price: Rs527
Aurobindo enters Omnicef market
Aurobindo Pharma (Aurobindo) has received approval from the US Food and Drug Administration to manufacture and market the oral suspension form of Cefdinir 125mg/ml and 250mg/ml in the USA. Cefdinir is the generic version of Abbott Laboratories' (Abbot) blockbuster product Omnicef in the USA, having a market size in excess of $850 million. Approximately $533 million of this comes from the suspension form of the product, which is used to treat a variety of ear, sinus, nose, throat and skin infections.
Aurobindo Pharma (Aurobindo) has received approval from the US Food and Drug Administration to manufacture and market the oral suspension form of Cefdinir 125mg/ml and 250mg/ml in the USA. Cefdinir is the generic version of Abbott Laboratories' (Abbot) blockbuster product Omnicef in the USA, having a market size in excess of $850 million. Approximately $533 million of this comes from the suspension form of the product, which is used to treat a variety of ear, sinus, nose, throat and skin infections.
Television Eighteen India
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs571
Current market price: Rs469
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs571
Current market price: Rs469
TV18 to launch a business daily
Mirroring our expectations, TV18 has announced entering the business daily space. The company has entered into a 50:50 joint venture with Jagran Prakashan for launching a Hindi business newspaper. The duo would also launch business dailies in other Indian languages. TV18 has aggressively entered print media by acquiring Infomedia India, which provided it a platform for entry and expansion in the print space. TV18 recently announced acquisition of Infomedia India a leading publisher of special interest magazines and Yellow Pages (for details refer our update "TV18 acquires Infomedia" dated December 12, 2007). The company further forged a partnership with Forbes Media, a leading global business publisher to launch a business magazine in January 2008 (refer our update "TV18 partners Forbes").
Mirroring our expectations, TV18 has announced entering the business daily space. The company has entered into a 50:50 joint venture with Jagran Prakashan for launching a Hindi business newspaper. The duo would also launch business dailies in other Indian languages. TV18 has aggressively entered print media by acquiring Infomedia India, which provided it a platform for entry and expansion in the print space. TV18 recently announced acquisition of Infomedia India a leading publisher of special interest magazines and Yellow Pages (for details refer our update "TV18 acquires Infomedia" dated December 12, 2007). The company further forged a partnership with Forbes Media, a leading global business publisher to launch a business magazine in January 2008 (refer our update "TV18 partners Forbes").
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