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Saturday, September 19, 2009

International Travel House Ltd and Timken India Ltd:Future growth outlook and prospects

1)Scripscan:International Travel House Ltd

Story:International Travel House(ITH), an ITC group company is India's premiere travel and tourism company offering full bouquet of travel solutions and services like air tickets, business travel, car rentals, conferences, exhibitions, forex, event management, inbound and outbound leisure trips. ITH commenced operations in 1981 and its expertise has been built up over 28 years and is now one of India’s largest travel management company with presence in 11 cities. ITH is one-stop-shop for tourists, whether corporate or leisure and its corporate clients include many of the largest and most discerning corporates such as Infosys, Sun micro, Citibank, Bharti Airtel, Siemens etc. apart from the ITC group.Tourist arrivals into India have grown at an average of 18.7% p.a. in the last three years. The boom times witnessed by the India travel and tourism industry in the past and the higher disposable incomes have resulted in more Indians going for holidays in Indian and abroad. To sustain growth of 18-20% p.a. in foreign and domestic tourist traffic achieved recently, an improvement in overall infrastructure facilities, specific connectivity to important tourist sites and an increase in investment in the hospitality sector are needed. All this augurs well for ITH and a window of opportunity lies for ITH, which runs a huge fleet of 650 cars, has access to the Welcomgroup of Hotels, is a authorized currency changer and provider of global scale Hotel and Airline bookings.For the year ended March 2009, ITH had posted a net profit of Rs 8.19 cr (down 22%) on net sales of Rs 79 cr(flat). On a equity of 7.99 cr (Promoters’ stake – 61.69%) the EPS is Rs 10.25 and the dividend declared is 30%.. At CMP of Rs 89 the ITH stock trades at 8.7 times FY09 earnings(TTM) and at 7.4 times FY10E earnings(Rs 12). Given its parentage, the future of ITH appears promising. Moreover the current slowdown in the travel and tourism sector offers investors an attractive opportunity to accumulate the ITH stock at current low levels and more on declines. Also, as the company is poised to launch its online portal soon to boost its retail travel market share, the stock should fetch better and higher valuations. Investors can start accumulating the ITH stock at current levels and add more on declines for good returns in the medium-long term. Accumulate on declines for decent gains of 40-45% in the next 6-8 months.

2)Scripscan:Timken India Ltd

Story:Timken India, (TIL) co-promoted by The Timken Company, US, (2008 Sales: $5.7 billion) and Tata Steel was incorporated in 1987 as Tata Timken. Timken acquired Tisco's 40% equity and consequently increased it's holding to the current 80.02%. Its name was changed to Timken India from 2 July 1999. The Timken Company is a leading global manufacturer of highly engineered bearings, alloy steels, and related components and assemblies. Globally, Timken is a leader in almost all industrial segments, and India is no exception. Timken products can be found in most challenging of application environments in industries including cement, mining, heavy engineering, construction, and oil and refineries. The wide range of applications, team of segment specialists and ability to customize solutions for optimal results set Timken apart. The unique bearing repair and maintenance services, machine health monitoring systems, related products such as induction heaters, universal joints and single-point lubricators, and maintenance products from the wide Permatex range are some of the value-additions from Timken. Timken offers friction management products and services that find application in a wide-range of sectors such as automobiles, electrical and engineering, agricultural-machinery and infrastructure equipment.Apart from the Indian unit (Timken India), the parent company's manufacturing bases in South Africa, the UK and the US make bearings for railways worldwide. Timken has been supplying to the Indian Railways for over 50 years. However, the first indigenously assembled cartridge tapered roller bearings (CTRBs) were sold as axle bearings for Indian Railways' freight wagons in 1991. Since then, the MNC associate has been intensively working to develop specific solutions for application on Indian Railways' rolling stock. As Timken India manufactures global-level quality products at much lower costs, it has tremendous outsourcing opportunity. The company is already gaining from this kind of outsourcing. The parent is focusing on Asian markets, particularly India and China, for major growth.Timken India is not over-dependent on the automotive sector. Its focus is more on the industrial sector, where mind-blowing action is slated to take place. Of all the bearing companies, Timken India will be the one to benefit the most from it. US bearings major Timken expects India to be a key contributor to its target of growing its Asian business to a billion dollar by next year. Its oldest subsidiary, TIL - with its facility in Jamshedpur manufacturing tapered bearings - achieved a sales turnover of Rs 404 cr. in 2008. The unit also played a crucial role in re-engineering a cost effective process to revive the prospects of highly specialized products, whose production line in US had to be closed due to high cost structure.For the year ended Dec'08, TIL's net sales stood at Rs 404.49(up 20%). The PAT stood at Rs 53 cr., which was 41.7% higher when compared with corresponding period last year. On a equity of 63.7 cr. the EPS stood at Rs 8.31. For the Q1 ended March 2009, TIL has posted net profit of Rs 8 cr. on net sales of Rs 85.4 cr.. With sustained growth, both on the domestic and the outsourcing fronts, expected in future and the fact that the US parent, The Timken Company, holds over 80% stake in the Indian associate make the scrip at the P/E of 10 attractive for investment. Accumulate on declines for decent gains of about 45-50% in the next 6-8 months.

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