Buy Moser Baer; target of Rs 400: PINC Research

Broking House, PINC Research has maintained buy rating on Moser Baer, with a target of Rs 400.

PINC Research report on Moser Baer:

Moser Baer India Ltd. (Moser) is a leading player globally in optical media with a capacity of 3.2 bn units p.a. It is largely an OEM focused player with 85% of revenues accruing from the segment.

It has consistently increased the share of high value added media like DVDRs, DVD-RWs etc. in its sales mix and has forayed into manufacturing HD-DVDRs & Blu-Ray discs.

Leveraging its manufacturing scale, Moser is now targeting the fast growing home video market, (est size Rs 13 bilion). Despite a large part of this being dominated by the grey market, it is expected to grow at 40% CAGR to Rs 21 billion by FY10.

This growth is expected to be accentuated by the sharp improvement in print quality at an attractive price point, which Moser plans to offer.

It is also expanding its presence in the fast growing solar crystalline and amorphous silicon photovoltaic market with capacity expected to grow from 80 MW in FY08 to 440 MW by FY10. Bulk of the capacities will achieve commercialisation in FY09 and FY10. Towards this, it has received an order for USD 100 mn to be executed in next 2-3 years.

After being severely impacted by falling realisations and rising polycarbonate prices, Moser came back on track with a 19% growth in net sales to Rs 19.8 billion in FY07 and a 24x jump in net profit to Rs 1.1 billion. It continued its performance in Q1FY08 with a 50% improvement in net profits to Rs 97 mn.

With stabilisation of its optical media business and foray into the fast growing entertainment distribution and solar PV segments, Moser is set to consolidate its profitability and lower its sensitivity to the optical media business. Thus, we initiate coverage with a ‘BUY’ recommendation and 12-month price target of Rs 400.