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Tuesday, January 5, 2010

Shanthi Gears Ltd:Buy/sell/hold,growth prospects and recomendation,news and results,target price and analysis,views and outlook

Scripscan:Shanthi Gears Ltd

Story:Shanthi Gears is having a challenging FY10 as there is a dip in the top-line revenues. Despite this challenge, Shanthi Gears has been able to post a EPS of 1.12 Rs for the first six months.We expect H2 for Shanthi Gears to be relatively better which will help add another 1.2 Rs to its EPS.Even after this sharp top line correction at 2.3 Rs EPS, which is conservative in our view, Shanthi Gears will trade only at 19 X PE FY10 multiple and 9 X PE Multiple for FY11.Our 12 month price target for Shanthi Gears is Rs 100 which will rise sharply as soon as its top line improves.Order book is to the tune of 900-1100 Mn or about 6 month of forward sales.ROCE (at PAT level) in the past has been solid at 15%, while even in the tough times it is expected to be above 6-7%.Balance sheet of Shanthi Gears is very healthy with good amount of cash balance and very little debt sitting on the balance sheet.Finally management has reduced the employee count and the payroll costs have gone down in FY10.we expect Shanthi Gears to give a positive surprise in the coming few months and we expect a sharp rise in its share price as soon as demandvisibility improves.


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