Financial Daily from THE HINDU group of publications
Sunday, May 23, 2004
Financial Daily from THE HINDU group of publications Sunday, May 23, 2004 |
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Investment World
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Stocks Markets - Recommendation Picks for the patient investor
AFTER this week's carnage, the markets are likely to remain range-bound or move with a negative bias till policy-related uncertainties are put to rest. In this backdrop, investors may be better off staying away from sectors which are closely tied to Government policymaking. Satyam Computers and Maruti Udyog are two stocks which may be less vulnerable to downside in a volatile market. Satyam Computers: Buy
Investors with a time-horizon of a year may consider taking exposures in the Satyam Computers stock. At the current market price of Rs 303, the stock is trading at a price earnings multiple of 17 times its 2003-04 earnings. Satyam has projected per share earnings of Rs 20.3 to Rs. 20.6 for 2004-05, translating into a per share earnings growth in the 15-17 per cent range. Considering the strong growth prospects, at the stock is still trading at a sizeable discount to its frontline peers makes the stock attractive. Strong volume growth, in line with sequential growth in the past three quarters of 2003-04 along with a stable pricing environment, with new clients coming in at higher-than-average billing rates enthuses confidence in the stock. In this context, the pressure on operating margins may be dictated more by wage pressures within the company and less than by volumes and pricing in the coming year. Maruti Udyog: Buy
INVESTORS can consider taking additional exposures to the stock of Maruti Udyog (MUL) at the current price of Rs 464. The stock holds medium term upside potential. The current recommendation is based, not just on the slippage in the stock price, but also on the basis of the potential impact that the announcement of a new diesel engine plant could have on its future earnings. The proposed new Rs 350 crore, diesel engine plant to be set up in technical collaboration with Fiat of Italy and Adam Opel (part of GM) will manufacture hi-tech common rail direct injected diesel engines for use in current and future Maruti cars. MUL is currently only a fringe player in the fairly large diesel-driven passenger car market. With future demand for diesel-driven cars only increasing (the fuel price differential is set to continue), this plant, and importantly, the three-way partnership could put MUL in the reckoning for a larger share of this market, which is currently dominated by Tata Motors.
Krishnan Thiagarajan
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