M&M and ABG Shipyard can buy for medium to long term basis

MAHINDRA & MAHINDRA

Expecting a number of positive triggers for M&M in the year ahead. The management continues to unlock value in its various subsidiaries and group companies. The public issue of MHRIL is around the corner and the same is expected to be listed in 2008. The company is slated to launch its new ultilty vehicle Ingenio in August 2008, while a new sports utility vehicle is also planned. The JV with International Truck for manufacturing medium and heavy commercial vehicles is expected to start by CY2009. At the current market price of Rs 830, the stock quotes at 11.9x its FY2009E consolidated earnings. On the basis of above news target expecting Rs.900-Rs.950 in medium term.

ABG Shipyard

ABG Shipyard the company’s topline grew by 68% Y-o-Y to Rs 2,584 million (Rs 258.4 crore), accompanied by strong operating margin of 25%. Expecting FY09 turnover estimate upwards by 20% to Rs 18.9 billion (Rs 189 crore) on account of the expansion at Surat,”. The company has announced Rs 4 billion (Rs 400 crore) expansion of its Surat facility, which will increase its fabrication capacity by four times, that in order to fund expansion, the company has issued four million warrants to its promoter at a price of Rs 796. Further, the company plans to raise Rs 8 billion (Rs 800 crore) through a QIB issue and the estimated equity dilution, post-issue, is likely to be 22%. This states company is promisive in medium term to long term.