Spice Mobiles – a compelling BUY
Near Term Target Rs 40/-
Contributed by Parelkar in http://www.moneycontrol.com

Spice Mobile phones made its entry two years ago in the Indian market targeting the entry-level handset segment. Debuting with handsets targeted at the entry-level segment, today, the brand is growing rapidly and has a bouquet of offerings targeting entry, mid & premium segments. Spice Mobiles Ltd has heralded a new chapter in the history of Indian mobile telephony by launching the first ever DUAL MODE PHONES this year.

The erstwhile name of the company is Modi Olivetti, and the company was originally into computer hardware business. In mid 2007, the name of the company has been changed to Spice Mobile in order to reflect the new found thrust which is business of mobiles.

With rapid consumerism sweeping the country, India has emerged as the second largest mobile handset market, poised for explosive growth. In a report by Gartner, India has been hailed as the next big mobile handset market by 2009. It is forecasted that China and India alone would account for nearly 60% of the global demand, with the Indian market surpassing China in 2009.

If one takes balance sheets of Spice Telecom and Spice Mobiles and reads between the lines, Spice Telecom definitely looks very attractive. Spice Communication is in the green because of one time sale of Tower business. However, the deal with Idea has put the stock price on fire.

The top line and bottom line of Spice Telecom has been growing at a handsome rate. The company has been regularly paying dividends. The company is eyeing Rs 1000 crore sales for the current fiscal (against Current Rs 400 crores), which it is well poised to achieve with a slew of initiatives and launches. The management of the company is very dynamic and capable of achieving the target.

What makes the Spice Telecom more interesting and definitely very attractive is the three year agreement which B K Modi is going to sign with Idea/ Telekom Malaysia for sales of its mobiles. The agreement, if concluded, will help Spice Mobiles to extend their reach not only in India but also in other markets where Telekom Malaysia has a presence. It is expected these products will be sold as hot cakes in the price sensitive markets where Telkom Malaysia is present. In most of these circles or locations, the Spice Mobiles will be packaged along with the services being offered by these two telcom majors.

The EPS of the stock is Rs 2.52/- The P/E at a market price of Rs 19.50 is 7.67. One should remember that the face value of the stock is Rs 3.00/- The stock is traded in both BSE and NSE. The 52 week low and high is NSE has been Rs 18 and Rs 37 respectively.

The downside risk of the stock price is very less. We recommend a BUY with a near term target of RS 40/- It definitely makes sense for any kind of investor to take exposure to the stock of Spice Telecom.

But if the rumors of the talks with Japanese major are true, then the price may higher levels.

We wish you all Happy and Risk free investing!

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