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Saturday, September 12, 2009

Sterlite Technologies Ltd and IDBI Bank Ltd:Future growth outlook and prospects

1)Scripscan:Sterlite Technologies Ltd

Story:Sterlite technologies has best operating profit margin when compared against peers. The stock at present is due for re-rating as the demand for Optic Fiber and Optic Fiber Cable is coming out of hibernation and SOTL with its cost leadership as well as capacity expansion drive is in better position to take full advantage of the situation.Besides growth potential in the core business, the company has de-risked its business model by acquiring power conductor business which is on upswing due to robust sectoral outlook. This has made a strong case for SOTL to be valued richly in comparison with its peers.The acquisition though appearing non-core to SOTCL telecom business, the synergies are present in the form of running the business. The customer profile is similar for both the business involving government companies and also provides locational advantages in terms of operational synergies. This makes the entry of the company in the fast growing power sector which is witnessing robust investments in generation, transmission and distribution. Thus the company is about to witness remarkable change in the quality of earnings on back of sustainable growth in the telecom and power sector.Though valuations are expensive at the moment buy as we all knows quality never comes at a cheap rate.A great long term buy at dips.

2)Scripscan:IDBI Bank Ltd

Story:In July 1995, the Bank made its first public issue of equity shares of Rs 10 each at a premium of Rs 120 per share. But it has been a long term disappointment and did not perform well. The stock had run up to Rs 119, but now has come down to Rs 104 levels.The company has a market cap of around Rs 7500 crores.With huge cash and a high book value under its belt.The current market price of the company does not capture its holdings in many companies like NSE, CDSL, NSDL etc. The merger with IDBI Bank has been done smoothly and the company is now on road to becoming a universal banker like ICICI. It has a good retail portfolio.It also holds good amount of properties.The company has consiolidated long on the bourses and may just give an upswing in the coming days.I expect the stock to perform very well going ahead and investors can buy the stock with a year-end target of Rs 125.

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