>ICSA (FAIRWEALTH)

Investment Period: 3-6 Months.
We initiate a Buy call on ICSA (India) Ltd with a 58% upside potential on the stock from the current levels. Investment advice is based on strong growth in top line, diversified businesses and strong outlook for the power sector over next 10 years. We expect top line to grow by 30-35% over next two years and our conservative projections suggest that bottom line will grow at compounded annual rate of 15%. Stock is currently trading at 4.6 x its FY09 Earnings and 4.6x and 3.7x its FY10E and FY11E earnings.

Investment arguments:

■ Strong order Book Position: The order book at the end of the quarter stood at Rs 1915 crore executable over 12-18 months. Embedded Technology segment has order book of Rs 650 crore executable over next 6-9 months and balance is for Infrastructure EPC segment. The order pipeline is about Rs 700 crore.

■ Allocation Of funds by govt: The RAPDRP(Restructured Accelerated Power Development and Reforms Programme) is the restructured version of APDRP, which has a budget of Rs 50000 crore to be spent over 3 years of which Rs 10000 crore is towards Technology acquisition (the segment which the Company caters to).

■ Increased allocation of Government projects under Rajiv Gandhi Grameen Viduytikaran Yojana (RGGVY) to 7000 crores up by 27% will have see significant orders coming in for ICSA.

■ Inorganic Growth: As a part of its inorganic growth, last year ICSA acquired the energy Meter plant of ECE industries in Hyderabad, thereby enabling itself to manufacture energy meters on its own capacity. Moreover in order to enhance the revenue and enjoy the tax benefit, it has diversified into non conventional energy and is setting up a 20 MW capacity wind power project in Andhra Pradesh out of which nearly 10MW has already being commissioned.

■ Discounted Valuations: Share is trading at 72% discount to its adjusted all time closing high of 587. India power and Infra sector have strong growth ahead, and ICSA will continue to be a part of it.

To see full report: ICSA