Buy Indo Asian with one-year price target of Rs 240

Indo Asian Fusegear still looks attractive compared to its peers. But considering it's a smaller player and still not the leader it is still a good pick at current levels, says Kapil Bagaria of Sushil Finance.

At current market price of Rs 137.60 (on July 12) it is trading close to 8.75 times its FY07 earnings and six times its FY08 earnings. The company is estimated to report earnings of Rs 16.2 per share for this financial year and Rs 24 apiece for the financial year 2008.

The electrification drive and the construction boom offer two major opportunities for Indo Asian Fusegear to establish and consolidate its market position. They are focused on these two segments especially with their lighting equipment and switchgear products since these are more domestic or household-centric.

Increasing raw material prices of metals like copper and brass and any slowdown in the construction, infrastructure and economic activity in India can have an adverse impact on Indo Asian Fusegear's business in India. In FY07, price increase in its basic inputs can impact the company's operating margins by at least 100 basis points.