Surya Roshni (CMP: `.115/ TP: `.143/ Upside: 24%): Angel Broking Top Pick

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Surya Roshni (CMP: `.115/ TP: `.143/ Upside: 24%)
􀂄 Surya Roshni has completed a large capacity expansion program across all
products in the lighting and steel division. The new capacities are expected to
contribute to strong top-line growth of 23.8% CAGR over FY2010-12E.


􀂄 The contribution of the high-margin lighting division to sales is expected to
increase from 29.5% to 33.6% over FY2010-12E. This asset-light nature of the
expanded capacity would improve the RoCE of the company from 12.2% to 15.0%
over FY2010-12E.

􀂄 The promoters have subscribed to three rounds of warrants, two of which have
already been partially converted. We expect the outstanding warrants also to be
converted into equity, thereby increasing the promoters’ stake to 60.0% by
FY2012E from 29.1% at the end of FY2010. The promoters would infuse `193cr
into the company through these warrant conversions.

􀂄 We believe attractive valuations of 5.8x FY2012E EPS provides a good entry point
for investors. We have valued the stock at 6.6x FY2012E EPS which result into
target price of `143.