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Morgan Stanley hikes Himachal earnings estimates

NetScribes/Salil Panchal

Morgan Stanley Dean Witter (MSDW) has re-rated the Himachal Futuristic stock as an outperformer, setting a target price of Rs 2,000 over the next one year. The US-based brokerage has also also revised upwards its earnings forecast for the company.

MSDW's latest report on Himachal says that orders from the cellular and broadband business have boosted the company's order book by over 50 per cent from September 2000 levels to Rs 24.3 billion.

The report also sees Himachal gaining substantially from a recent deal with Cisco Systems, whereby it will outsource the latter's data products and network equipment, and operate as a systems integrator for India.

"On the strength of the order book and tie-ups with global telecom equipment majors, we are raising our EPS estimates for Himachal for FY2001 by 10.6 per cent and for FY2002 by 4.2 per cent,'' the report says.

On Tuesday, the Himachal scrip closed at Rs 1,093.05 on the Bombay Stock Exchange against a previous close of Rs 1091.95. The counter witnessed trading in 9.74 million shares.

Himachal is among the most volatile scrips in the Indian markets. In recent weeks, the stock has been at the receiving end with funds like Birla Mutual, Alliance, SBI Mutual and Prudential ICICI selling heavily after a leading local operator exited from the counter. Over the past two weeks, the US-based Janus, a leading FII, has also been selling the stock. FIIs hold just under 23 per cent in the HFCL stock, say marketmen.

Most of the leading mutual funds had entered the Himachal counter at the Rs 550-700 levels. Thus, even at current valuations, they would stand to gain substantially. But the stock has been falling steadily and brokerages and funds have used every high to exit from the stock.

MSDW's optimism is based on the view that in the coming months, Himachal will gain from a proper order mix distributed across cellular, broadband and fixed-line consumers as against its past focus on only fixed-line players. It has, therefore, raised its revenue estimates for the next two years by 1.6 per cent and 0.7 per cent, respectively.

Operating profit margin estimates for Himachal have been revised to 26 per cent (FY2001) and 25 per cent (FY2002), considering that the company has reduced its dependence on other manufacturers and increased manufacturing capacities.

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