Investor's Eye: Update - IRB Infrastructure Developers; Viewpoint - CCL Products

Investor's Eye [December 15, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE     IRB Infrastructure Developers Recommendation: Buy Price target: Rs320 Current market price: Rs246   Pick-up in project awards is a near-term trigger    Key points  IRB Infrastructure Developers (IRB Infrastructure) has been the biggest beneficiary of the pick-up in awards activities in the road sector and has bagged three out of the four BOT projects awarded recently; thereby bagging orders having an aggregate value of Rs4,241 crore (cornering 30% of the total project awards). Consequently, IRB Infrastructure has swelled its order book to Rs11,587 crore (Rs7,030 crore during Q2FY2014). The outlook for project awards in Q4FY2015 is extremely positive. The National Highway Authority of India (NHAI) would have to significantly increase the awards activities to meet its own target of 5,500km in FY2015 (as against only 1,566km till October). With considerable increase in order awards activities and stressed balance sheet of many construction companies, the competitive intensity would remain benign and should help stronger players like IRB Infrastructure and Ashoka Buildcon.  Given the improving business environment and robust order awards activities, we believe that the recent weakness in the IRB Infrastructure is in line with the overall correction in the equity markets, while offering an attractive entry point for the investors. We retain our Buy rating with a price target of Rs320.   VIEWPOINT       CCL Products   Current market price: Rs160     Positives priced in; Book profits with 30% gains in seven weeks   Key points Post our report dated October 28, 2014, CCL Products' stock price has appreciated by almost 30% and stood at about Rs162. Our key investment arguments for CCL Products were; (1) largest instant coffee player with an enhanced base in Vietnam (second largest instant coffee producer in the world), and (2) commodity player with a strong balance sheet and healthy return ratio.  The company aims at enhancing its production by above 25% and exploit the opportunities in newer markets such as the USA and Africa in the near term. The newly operational Vietnam facility would help the company to post improved operating margins going ahead.  Though the business fundamentals of the company are intact, the valuations of the stock has gone up to 16x FY2016E earnings in the recent run-up, which we believe has largely priced in the near-term positives and narrowed the valuation gap as compared to its peers. Hence, we advise our investors to Book profits with about 30% gains in short time and wait for a better entry point.   Click here to read report: Investor's Eye          Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team