Buy Stone India; target of Rs 87: Sushil Finance

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Buy Stone India; target of Rs 87: Sushil Finance

Sushil Finance is bullish on Stone India (SIL) and has recommended buy rating on the stock with a target of Rs 87 in its December 8, 2010 research report.

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Sushil Finance is bullish on Stone India (SIL) and has recommended buy rating on the stock with a target of Rs 87 in its December 8, 2010 research report.

"Stone India Ltd (SIL) is part of the Duncan Goenka Group engaged in the business of rail products. SIL's business segments include Carriage Business group, Locomotive Business group and Train Power Business group supplying to the Indian Railways. SIL has posted decent performance during the quarter ended 30th September 2010. The topline was marginally below our expectations however margins were above estimates due to sharp decline in Cost of goods sold as percentage of Sales. We continue to be positive on the future prospects of the company and expect future growth to be driven by introduction of newer products and tieup with RailRunner,U.S.A. At the current market price of Rs 62, SIL is available at valuation of 4.6x its FY12E EPS of Rs 13.4. We initiated coverage with a BUY at levels of Rs 66 for initial target price of Rs 87. We conducted a concall with the Management of Stone India Ltd. Key highlights of the results and Concall discussions are summarized below."

"Stone India Ltd has posted its Q2 FY11 numbers broadly in line with our estimates. Its revenues were marginally below expectation however margins beat expectations due to significant reduction in cost of goods sold as percentage of sales. We expect Consolidated topline of Rs 1255 million & Rs 1487.4 million for FY11 & FY12, respectively. We believe introduction of newer products, contribution from RailRunner projects and growth in its existing business will drive its future growth. We initiated coverage with a BUY at levels of Rs 66 for initial target price of Rs 87. We maintain our BUY rating with a target price of Rs 87 (i.e. 6.5x FY12E EPS of Rs 13.4)," says Sushil Finance research report.

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