Bullish on McNally Bharat, TRF, & Himadri Chem: Emkay Share

Currently, the stock is trading at a little less than 20 times FY09. The stock has been on fire lately because investors have started looking at the company's strong order book and earning skills. We expect the great period for McNally to continue. Our earlier target was about Rs 250 based on FY09 earnings. This should roll on to FY10 earnings and one will see a greater upside from here onwards.

Q: What about TRF? Why do you like that counter? They have an acquisition to boot recently. What sort of appreciation are you looking at for this particular stock?

A: TRF is another strong player in the material handling space. One should not forget the Tata pedigree which is attached with TRF. Apart from being strong in the core area of material handling, they have done an acquisition in a diversified area which is not related to the core business. Yet, the acquisition is good. They have acquired York Equipment in Singapore, which is a trailer axle company.

For CY06, the company posted about Rs 160-200 crore in topline. If one considers a Rs 200 crore topline for TRF coming from York, with a 50% stake at about Rs 100 crore, that is a clear addition of about 20% to its numbers straight away. TRF is among the best in the material handling equipment space considering the operational parameters and the way business is done using a smaller capital employment. Even the company's return ratios are strong, traction is great, and they are present in all segments of material handling.

TRF should do about Rs 95 in earnings for CY09. We have not yet considered the York Equipment figure. Considering those figures, earnings will be on a higher side as compared to our estimates of Rs 95. Our earlier price target was about Rs 1,500. That would surely revise after considering York numbers.

TRF has also bided for a 4,000-mw ultra mega power project. From this, they are expecting a huge Rs 1,000-1,200 crore order, which would flow in a small way.

Considering these two surprises, which are not factored into earnings, TRF looks a great bet from hereon. Once we factor the numbers, there is still a huge upside left in TRF.

Q: Your price target on Himadri Chemicals?

A: The target will be upwards of about Rs 750. For FY09, it is expected to do Rs 42 in earnings. The stock is trading close to 15-17 times. If one would see global players like Cooper, they are already trading at 20 times. So, there is clear-cut upside in Himadri Chemicals.

Disclosure:

I don't hold any of these shares.