Indian Stock Market

TTL's business model is extremely scalable on account of the high growth potential of its

target markets. Also, efficient management of its working capital cycle, coupled with a stable

debt scenario and adequate capex have the potential to generate operating leverage and

improve asset turnover ratio. Lastly, its superior technology platform and proven track record

serve as effective entry barriers, thereby insulating it from competition.

We estimate TTL's net sales (consolidated) to clock a CAGR of 47% (FY07-FY10) to ~Rs13bn

in FY10. Improving capacity utilisation and the resultant economies of scale coupled with

profitable operations of its various subsidiaries should enable the company to sustain an

OPM of ~21% from FY08-10. We expect it to notch up profits of Rs870mn in FY08, Rs1.3bn in

FY09 & Rs1.7bn in FY10 resp.

At the CMP of Rs745, it trades at a P/E and EV/EBITDA of 9.2x & 5.8x resp of its FY10E

earnings. We initiate coverage on the company with a 'BUY' recommendation and a price

target of Rs1,215 with an investment perspective of 18 months.