The gains in LCVs and utility vehicles, however, are still at a two-year low, which is not a very encouraging development. Automobile analysts say that despite the gain in heavy vehicles, nothing much should be read into these sales figures and it cannot really be a significant indicator to a revival of the company's fortunes.

In fact, auto analysts such as Supratim Basu of ASK Raymond James, comment that the fact that Telco trades at a shade below Rs 200 has a hint of an overvaluation. Analysts feel that only a sustained performance in all product segements during the year could justify a higher value for the stock. Basu estimates that considering higher fixed costs on account of the passenger car project, the company could still report a loss between Rs 25-50 crorefor the first quarter of the current year.

In fact, the general opinion is that the company will not be in a position to benefit from any turn in the economy as much as Ashok Leyland will benefit. There are a couple of reasons for this, say analysts. One, Ashok Leyland has undertaken cost-cutting measures which have been very effective, and second, ALL does not have a passenger car business to weigh it down. ALL has increased its market share in the heavy vehicles segement by 5 per cent to 29.5 per cent. Overall, that company's market share has increased to 33 per cent in 1998-99, an increase by 3 per cent. Ashok Leyland announces its annual results on Saturday, May 22.

Analysts feel that in the short run, a lot will depend on Telco's ability to meet its production schedule for the Indica. So far, it has fallen behind schedule, though the expectation is that the company will be able to reach a target of 5,000 units a month from the current month onwards. To a large extent, the re-rating of Telco (and alsoAshok Leyland) is a direct result of a lot of money flowing in pivotals, and is not entirely company- specific. The Telco stock has increased by 50 per cent in the last few weeks, while Ashok Leyland has increased by a higher amount of 79 per cent over the same time frame.

ICI India

Next on the list of stocks to be re-rated is ICI India. ICI India, the Rs 850-crore paints-to-pharmaceuticals conglomerate, definitely deserves a second look. The stock is currently changing hands at Rs 212, discounting the expected earnings of fiscal 1999 by mere 18.4 times. The valuations are compelling, considering its current 14 per cent market share in the paints industry and ICI Plc, UK's 51 per cent stake in the company which gives it an MNC status.

The company plans to be market leader in paints industry by 2005. ICI India is looking at potential acquisitions in the industry to grow its business and meet long-term targets. Additionally, it is building distribution strengths (targeting semi-urban markets)and extending product line in the faster growing intermediate and economy segments of the market.

In a positive development, Ensign Bickford (a US-based company) plans to use its joint venture company with ICI India, namely Initiating Explosives Systems India Ltd (IESL), as a manufacturing and sourcing base for non-electric detonators. ICI holds 70 per cent stake in IESL and would indirectly benefit from this development.

ICI top management is planning to sell excess land at Gomia (in Bihar), one of ICI's explosives manufacturing sites. ICI has 2,000 acres of land (including plant and housing estate) and some portion of this is targeted for sale. This is in addition to properties in Rishra and Calcutta, which have already been earmarked for sale.

The stock has a potential of giving 30-40 per cent return to investors on year-on-year basis.

-- Sunita Nagpal