Stock Recommendations for Indian Share Markets

Stock Idea - Visa Steel

2008-08-26T12:02:00.000+05:30

Recommendation: Buy

CMP = Rs 51.85 (at the time of this recommendation)

Target price = Rs 62.2

Key points:

Background: Visa Steel Ltd. (VSL) is a part of the Kolkata-based Visa Group. The company currently produces pig iron, low ash metallurgical coke, ferro chrome and to some extent chrome concentrates. VSL is currently operating a blast furnace with production capacity of 225000 TPA of pig iron and a stamp charged coke oven plant of 400000 TPA. The company is also operating a chrome ore beneficiation plant and a chrome ore grinding plant with capacity of 100000 TPA each. VSL has manufacturing facilities in Kalinganagar and Golagaon, both in Orissa. The company has also been commissioning a 300,000 tonnes sponge iron facility by FY09. VSL is an emerging integrated special and stainless steel player by Fy11. Apart from India, Visa Steel has a strong global presence in countries like China, Australia, Indonesia, Switzerland, UK and Hong Kong.
The performance of VSL has been remarkable in the past couple of quarters, mainly because of the sharply higher realisation from its coke and ferro chrome business. The company has stabilised its pig iron facility after a shutdown during the last couple of quarters. One of the two DRI kilns with a capacity of 150000 has already been commissioned. Full benefits are likely to come from Q3FY09 onwards and from Q2FY09. Good backward integration in terms of raw materials and expected firmness in coke and ferro chrome prices should help the company to do well in the near future.
Since the company is already producing the raw materials for these two plants, there will be a significant cost reduction for the new plants. Adding to this, an additional 25 MW power plant by March 2010 would further help the company to reduce its costs and even earn some revenues as well. According to the latest development, the company is likely to set up a 2.5 MTPA steel plant in Chhattisgarh within three or four years.
Shifting focus to manufacturing segment: The Q1FY09 result also indicates a significant transformation in the business of the company. Unlike previous years and quarters the revenues from the trading segment have come down sharply. Contribution of the manufacturing segment has been on the rise. Going forward the company plans to further scale down its trading business and concentrate more on its manufacturing segment. These robust numbers in Q1FY09 came despite a nil contribution from one of its major products, that is, pig iron due to a planned shutdown for a refractory lining in Q4FY08. However, the pig iron facility has been stabilised and is expected to contribute to the topline from Q2FY09.
Sales were 10205 tonnes. The sponge iron plant of 300,000 tonnes capacity, along with 50 (2 x 25) MW power plant through waste heat recovery are expected to start functioning from Q2FY09. Thus, additional revenues from pig iron and sponge iron along with expected higher sales volume in coke and ferro chrome will further boost the topline, whereas lower power cost will support the bottomline from Q2FY09 onwards. Bright prospects for coke and ferrochrome price in the near to medium-term future is likely to help the company to enjoy strong realisations.
Financials: Continuing its stellar performance since Q4FY08 Visa Steel reported an even more robust growth in earnings during the first quarter (April-June) FY2009, mainly driven by fairly higher sales volume and strong realisations from its two major segments (LAM coke and ferro chrome). Net sales soared more than 275% to Rs 255.73 crore against Rs 68.07 crore in the corresponding quarter of the previous year. Manufacturing activities, with a turnover of Rs 232.4 crore or almost 91% of the total net sales, mainly contributed to the growth in topline. Turnover from trading activities remained far lower at Rs 23.4 crore.
Valuation: The backward integration into iron ore, chrome ore, steam coal, coke and power will help the company to expand its margins significantly, going forward. In addition, commissioning of fresh capacities in Q2FY09E and late FY10E would help it to expand its topline along with improved cost structure. The planned setting up of stainless steel and bar & wire rod plant during end FY10E is also going to be one of the key triggers for the company.
I strongly recommend Buy call on this stock with price target of Rs 62.20, which is 3.12x of its FY10E EPS for an investment horizon of 3- 6 months.

Invest Wisely in dividend yielding stocks - Q3-2008

2008-08-21T09:25:00.002+05:30

The recent volatility on the stock markets is posing challenges to investors looking for safe returns. High dividend yield stocks offer a safe haven to investors where safety is priority than high returns. So even if the market remains volatile going ahead, an investor can still get a decent return on investment, thanks to good dividend yielding stocks. The dividends are paid no matter what direction stocks moves and can provide a higher yield on investment in a weak market.

Here is the list of the high-dividend-yield companies:

Company name	Expected on	Dividend	Face value (Rs)	CMP (Rs)	Dividend Yield (%)
Banco Products	Aug 21	70%	2	32.3	4.3
Wyeth	Aug 22	300%	10	479.65	6.3
Indiabulls Real	Aug 27	675%	2	312.85	4.3
Indiabulls Sec.	Aug 27	375%	2	72.05	10.4
Savita Chemicals	Aug 28	115%	10	263.95	4.4
Gillanders Arbut	Sep 4	40%	10	86.8	4.6
Andhra Sugars	Sep 12	50%	10	112.4	4.4

Source: ICICIdirect.com Research

Stock Idea - GVK Power

2008-08-20T10:51:00.001+05:30

Company background:

GVK is a diversified business entity with its primary focus on urban infrastructure projects. The company also has a significant presence in the hospitality, services and manufacturing sector. In the Indian growth story, GVK has realised the need for infrastructure development and embraced this challenge to create world class infrastructure, particularly in power, airports and roads. The company has an asset base of close to Rs 50 billion (US$1.22 billion) and an order book worth around Rs 150 billion (US$3.66 billion). GVK also has the strength of 7,000 technical professionals with the required capabilities.

GVK Power has two power plants, the 220 MW Jegurupadu-II and 464 MW Gautami plant. These are lying idle due to non availability of gas. Gas availability is expected to commence from October 2008. This should help to increase its revenues in its power division. With projects ranging from power, infrastructure, realty, coal mines and expected oil and gas blocks, GVK Power is expected to put up a good performance in the coming year and post good numbers. Also GVK Power may announce commercial production in next 6 months.

Financials:

As the company has an exposure towards airports, any unforeseen event like terrorist attacks can impact the arrival of passengers, thereby impacting revenues.
GVK also has exposure to real estate with respect to areas around the airport. A slowdown in real estate can significantly affect revenues from this segment. Slowdown in India's GDP growth can hamper infrastructure spending and, thus, have an adverse impact on the infrastructure sector.
The Q1FY09 revenues increased by 10.8% yoy, driven by a 6.2% and 14.6% yoy increase in revenues of the power and roads divisions, respectively. EBITDA grew slower than sales at 3.2% yoy, as EBIT margins of the power division dropped by 570 bps yoy due to major maintenance expenses on one turbine of the J-I power plant.
Interest cost (-54% yoy) came in lower than expected due to repayment of loans of the J-I power plant. Other income fell 18.6% yoy due to investment of cash surplus in SPVs. GVK provided tax at 9.6% in Q1FY09 as compared to 22.9% in Q1FY08 and estimates of 20%, mainly due to lower other income.
GVK's share of profits from MIAL increased by 39.1% yoy to Rs 12.3 crore, driven mainly by a 67% yoy increase in non-aero revenues at the Mumbai airport. Consequently, PAT post minorities and after adding share of income from associates, jumped 88% to Rs 40.5 crore.

Valuation:

GVK pure play on infrastructure: I believe that with the government expected to spend $494 billion on infrastructure spending during the Eleventh Five Year Plan, the company will be on a roll as it will provide ample opportunities for companies like GVK to grow substantially. GVK, with its diverse business mix including airport projects will definitely benefit the company.
With a diverse portfolio of infrastructure projects and revenue visibility on key projects over the next couple of quarters, GVK is strongly poised to benefit from the huge infrastructure rollout planned in India over the next five years.
GVK is currently trading at 34x FY10E earnings. I maintain a strong Buy call on this stock with a target price of Rs 49 over next 3-6 months.

Stock Idea - Orchid Chemicals & Pharmaceuticals

2008-08-18T11:39:00.001+05:30

Recommendation: Buy (again!!)

CMP = Rs 256 (at the time of this recommendation)

Price target: Rs 300

Key points:

Orchid Chemicals has entered into a collaborative drug discovery deal with US-based global pharmaceutical major, Merck & Co. As per the deal, Orchid would be undertaking the late-stage development and manufacture of an anti-coagulant drug candidate initially discovered and developed through Phase I clinical trials by Merck. Towards this, Orchid has acquired a majority stake in Diakron Pharmaceuticals, a US-based drug discovery and development company, which has an exclusive license agreement with Merck for the compound.
Orchid plans to further develop the drug up till Phase II (a) clinical studies and then outlicense it to a global pharmaceutical company for further development and commercialisation, sometime in FY2010. The company will conduct a 25-30-patient Phase II (a) study on the compound which is estimated to cost around $4 million.
Orchid’s consolidated profits would take a $2-3 million hit due to an increase in the R&D spend on this study. However, the deal is a significant milestone in Orchid’s R&D efforts, as it vindicates Orchid’s R&D capabilities, and could pave the way for more such collaborative drug discovery deals in the future. Orchid would also gain from Diakron's worldwide distribution rights once drug is launched commercially.
At the current market price of Rs 256, Orchid is discounting its FY2009E earnings by 15.7x and its FY2010E earnings by 11.9x.
I maintain a very positive and Buy recommendation on this stock with a price target of Rs 300.

This festival season, add Golden Shine to your portfolio

2008-08-14T10:48:00.000+05:30

In the current economic scenario where inflation is threatening to get out of control, investors need to invest in asset classes, which have a positive correlation with inflation. Gold is one such asset which has historically done well during periods of high inflation. This is because during such times investors shift their holdings toward hard assets as the purchasing power of paper money starts dwindling.

An analysis of the price of gold during the high inflationary period of 1970's in the United States shows that gold gave handsome returns during the years when inflation was on an uptrend. As average inflation shot up from 6.5% in 1977 to 13.58% in 1980, the average annual price of an ounce of gold also zoomed from USD 147 to USD 615 . Once inflation was brought under control post 1980, the price of gold also started receding.

Gold exchange trade funds (ETF) are one of the most convenient ways of investing in gold.

Gold ETFs are open-ended mutual funds that put your money in physical gold and issue units to you in demat form. Investing directly in to bullion has storage and security issues. In case of jewelry there is too much of spread between the price and the value for it to be considered as true investment. Gold ETFs can be traded easily on the stock exchange at a transparent price and in convenient denominations, making it a more 'liquid' investment as compared to gold bullion. Another advantage is that investments through ETFs do not attract wealth tax provisions.

Currently, there are five gold ETFs listed on the National Stock Exchange. ETFs have outperformed the stock market indices with an average return of 42% in the last one year. For an average investor ETFs are the best route to get more out of his gold investments. An allocation between 5% - 10% of their portfolio to gold is recommended.

Stock Idea - Mold-Tek Technologies

2008-08-12T12:12:00.001+05:30

Recommendation: Buy

CMP = Rs 72 (at the time of this recommendation)

Price target: Rs 169

Key points:

Q1FY2009 revenues of Mold-Tek grew by 23% yoy to Rs 33.9 crore. While the plastic division’s revenues grew by 24% yoy, the KPO division’s revenues grew by 18.2% yoy during the quarter. The operating profit margin improved by 312 basis points during the quarter on account of better profitability of the plastic division. The earnings before interest and tax margin of the plastic division improved by 10 basis points. Consequently, the company’s operating profit grew by 52.6% yoy to Rs 5.5 crore during the quarter.
The interest and depreciation grew by 63.2% and 20.6% respectively during the quarter. The company’s net income grew by 54.9%. yoy to Rs 4.2 crore. It also announced that the high court of Andhra Pradesh has approved the de-merger of its structural engineering KPO operations and the plastic packaging product manufacturing division.
Mold-Tek is witnessing traction in its high-rise building business. It has added 2 new & prominent clients in Canada and one in Amsterdam. To cater to these clients and the potential new clients, the company plans to expand its HRB team from 50 to 170 members. It also plans to open a new branch in Nasik and the revenues from this branch are expected to flow from Q3FY2009.
At the current market price, the stock is trading at attractive valuation of 4.9x FY2009 earnings estimate and 3.7x FY2010 earnings estimate.
I maintain Buy recommendation on the stock with price target of Rs 169 over next 6-7 months.

Stock Idea - Ratnamani Metals and Tubes

2008-08-09T09:49:00.001+05:30

Recommendation: Buy
CMP = Rs 786 (at the time of this recommendation)

Price target: Rs 1,110
Key points:

The revenues of Ratnamani Metals and Tubes Ltd (RMTL) grew by 31.4% to Rs 249.7 crore on account of a strong volume growth in both the stainless steel and carbon steel pipe segments. The operating profit of the company grew by 24.1% to Rs 56.4 crore in the quarter. The operating profit margin declined by 133 basis points to 22.6% due to an increase in the other expenses. The company's other expenses as a percentage of sales increased by 353 basis points to 11.2% in Q1FY2009.
RMTL's interest cost declined by 29.8% while its depreciation charge rose by 20.9% in Q1FY2009. During the quarter, the company made a provision to the tune of Rs 7.86 crore for a mark-to-market loss on its exposure to forex contracts. The reported net profit increased by 12.6% in the quarter.
The combined order book of the company stood at Rs 700 crore at the end Q1FY2009 as against Rs 650 crore for the same period last year. At the current market price, the stock trades at price-to-earnings of 6.2x and 5.2x its FY2009 and FY2010 estimates.
I maintain a strong Buy call on this stock with a price target of Rs 1,110.

Tips to Cut Health Insurance Premium in 2008

2008-08-06T16:19:00.001+05:30

With health insurance attracting so much attention now, it will be wrong for us not to cover this topic in our articles. Today many people still cannot afford purchasing a health insurance policy due to the skyrocketing prices. Here we've collected best tips to reduce regular payments and get an affordable health policy.

A good way to lower life insurance premium is to use med services via phone. These community services are free and operate 24/7 offering high quality medical help to everyone. You can trust experienced nurses that work there with all your problems and be sure to get professional medical advice for free.However do not practice such calls as a substitute to actual visits to the doctor. They are primarily designed to offer advice for you to take precautious measures to stop the illness at the very start. So you'll be ok soon and also reduce the number of visits to the doctor. That will positively reflect on your life insurance bills.
This tip is mostly for those who are of "healthy type" and get sick rarely. Consider purchasing a catastrophic health insurance policy. First, its premiums are considerable lower, and since you are not ill frequently, you do not need the full coverage. Second, they are really useful in case of sudden accidents or ailments.
Do not disregard generic medications. Of course, brand name drugs are well trusted and proved to be effective, but they also make your health insurance expenses grow a lot. Generic drugs may be less popular, but not less efficient. It is regulated by law for generics to contain the very same active ingredients as the brand names have. They may only differ in inactive constituents. So, consider buying generic medications, but do discuss your decision with your doctor at first.
Excessive weight causes extra payments. Since BMI (Body Mass Index) plays an important role in evaluating your health insurance premium, it is important to know, that overweight people have a higher risk factor for insurers than normal weight customers. But it doesn't mean that your premium will be reduced only if you lose 50 pounds! Just a few lost pounds will positively affect your health insurance bills and will spur you to lose more, get fit and healthy.
Smokers pay more. Health insurers speak the language of figures and statistics, and smokers are proved to run a higher risk of getting different deadly diseases than non-smokers. Consequently, cigarette-addicts will get a higher premium. Now there is another good reason to quit smoking - to lower health insurance bills. If you have not taken a cigarette for about a year, do inform your insurance agent and see your premium cut a lot.
Before purchasing health insurance it is recommended to spend time looking for online quotes. It is fast and easy - you instantly get health insurance quotes from a number of your local companies. You can choose the best suitable offer. Insurers compete for customers, and so, the more comparisons you make, the greater chance of getting a cheap health insurance policy you have.

Stock Idea - Andhra Bank

2008-08-06T10:18:00.001+05:30

Recommendation: Buy

CMP = Rs 59 (at the time of this recommendation)

Price target: Rs 90

Key points:

Andhra Bank reported a not-so-healthy PAT of Rs 77.6 crore indicating a decline of 45% yoy. The net interest income for Q1FY2009 was Rs 346.3 crore, largely flat despite a healthy growth in the advances (23% yoy), as the reported margins contracted by 71 basis points yoy. The non-interest income declined by 9.7% yoy on the back of a treasury loss of Rs 1 crore during the quarter.
The operating expenses were largely stable at Rs 259.7 crore during the quarter. The expenses were contained primarily due to a 2.9% decline in staff expenses, while other operating expenses grew by 11.9% yoy. Notably the provisions witnessed a significant (more than 10 times) jump and stood at Rs 122.7 crore.
The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing assets were 1.15%, down 37 basis points yoy, while the net non-performing assets were down by 10 basis points to 0.10%. The growth in the advances though lower as compared to the industry growth, was at healthy 23% yoy, while the deposits registered a growth of 20.6% yoy.
At the current market price, the stock trades at 5.0x 2009E earnings per share, 2.6x 2009E pre-provisioning profit and 0.8x 2009E book value.
I maintain a Buy recommendation with a price target of Rs 90.

Stock Idea - Tata Motors

2008-08-05T09:52:00.001+05:30

Recommendation: Hold

CMP = Rs 396 (at the time of this recommendation)

Price target: Rs 545

Key points:

Q1FY2009 results of Tata Motors are not satisfactory mainly because of lower-than-expected margins. However, its PAT is higher than estimated earlier, mainly on account of a higher other income and a lower tax outgo during the quarter. The net sales for the quarter grew by 14.4% to Rs 6,928.4 crore on the back of a 3.9% volume growth and a 10.1% realisation growth during the quarter.
Domestic sales of commercial vehicles increased by 16% while that of passenger vehicles declined marginally. The export sales volume declined by 34%. An increase in the overall expenses, such as raw material cost, employee cost and other expenses, resulted in decrease in the operating profit margin by 130 basis points. Hence, the operating profit dropped by 3% in this quarter.
A higher other income and a lower tax outgo helped the adjusted PAT to grow by 59.3%. After accounting for a forex loss of almost Rs 200 crore and a profit of Rs 113.7 crore on the sale of the stake in Tata Auto Components, the reported net profit declined by 30.1% to Rs 326.2 crore. Tata Motors has not reported the consolidated results for Q1FY2009 since the financial statements of Jaguar and Land Rover are under compilation and have not been finalised yet. However the performance of the new subsidiaries was also affected by the rising commodity prices and interest rates during the quarter.
At the current levels, the stock trades at 6.5x its FY2010E consolidated earnings and is available at an enterprise value/earnings before interest, depreciation, tax and amortisation of 3.1x.
I maintain a Hold recommendation on this stock with a price target of Rs 545.

Stock Idea - Corporation Bank

2008-08-04T13:31:00.001+05:30

Recommendation: Buy

CMP = Rs 253 (at the time of this recommendation)

Price target: Currently reviewing…

Key points:

Corporation Bank reported a PAT of Rs 184.3 crore, indicating a growth of 4.1% yoy. The net interest income was Rs 378.0 crore, up by 7.2% yoy despite a healthy growth in the advances (28.3% yoy). The non-interest income provided some relief with a 32.7% growth yoy.
The operating expenses were Rs 214.6 crore during the quarter. The expenses were contained primarily due to a 13.0% decline in staff expenses, while other operating expenses grew by 12.4% yoy. In line with the robust growth in the non-interest income and the contained growth in the expenses, the pre-provisioning profit registered a healthy growth of 16.5% yoy.
Notably, the provisions witnessed a huge 400% jump and stood at Rs 100.8 crore – mainly because of a significant (Rs 248 crore—net of tax) marked to market loss on the bank’s investment book. The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing assets stood at 1.46% (down 61 basis points yoy), while the net non-performing assets were down by 10 basis points to 0.36%.
The capital adequacy ratio was healthy at 12.43% as at the end of June 2008, compared with 13.3% a year ago. The growth in advances was healthy at 28% yoy, while the deposits registered a growth of almost 26% yoy. The healthy business growth implies that the bank is again focusing on building the advances book after a muted performance in Q4FY2008, when the bank was focusing on rebalancing its advances book.
At the current market price of Rs 253, this stock is trading at 4.5x EPS for 2009E earnings per share.
I am currently reviewing the stock’s valuation and would report it shortly on this portal.

Stock Idea - Bank of Baroda (BoB)

2008-08-04T10:07:00.000+05:30

Recommendation: Buy

CMP = Rs 227 (at the time of this recommendation)

Price target: Currently reviewing…

Key points:

Bank of Baroda (BoB) reported a net profit of Rs 370.9 crore for Q1FY2009, indicating a growth of 12.1% yoy. The Q1FY2009 profit after tax was above our estimates of Rs 327 crore. The net interest income for the quarter stood at Rs 1,057 crore, up 16.9% yoy because of a robust 42.1% growth in the advances and a significant improvement of 790 basis points in the credit deposit ratio to 71.8%.
The non-interest income was up by almost 21% yoy to Rs 512.6 crore as compared to that last year. Notably, this growth was achieved on the back of higher growth in the foreign exchange income (up by 50%), followed by core fee income (up by 44%) and recoveries (up by 38%). The operating expenses during the quarter were marginally up by 3.7% yoy; other operating expenses increased by 5.3% yoy, and the employee expenses increased by 2.8% yoy.
The provisions and contingencies were up by 98.2% yoy, mainly due to a significant spike in the marked to market provisions to Rs 218.6 crore during the quarter as compared to the same time period last year. The asset quality of the bank improved during the quarter at gross levels. The gross non-performing assets declined by 5.3% yoy to Rs 2,091.1 crore. However, the net non-performing assets increased by 10.8% yoy to Rs 575.5 crore. The capital adequacy ratio remains comfortable at 13.19% as compared to 14.33% last year.
The advances witnessed a robust growth of 42.1% yoy and stood at Rs 111,214 crore at the end of Q1FY2009. This growth was achieved on the back of a strong 67.8% growth in the foreign advances, a healthy 31.0% growth in the farm loan segment, a 19.5% growth in the small and medium enterprise segment and a 18.8% growth in the retail segment.
At the current market price of Rs 227, BoB trades at EPS of 5.0, 2.5x 2009E.
I am currently reviewing the stock’s valuation and would report it shortly on this portal.

Stock Idea - Ranbaxy Laboratories

2008-08-01T14:21:00.001+05:30

Recommendation: Buy

CMP = Rs 475

Price target: Rs 575

Key points:

Ranbaxy Laboratories has delivered a disappointing performance in Q2CY2008, largely due to a whopping forex loss of Rs 193.1 crore. The revenues grew by 13% in rupee terms to Rs 1,829.6 crore in Q2CY2008, which is marginally below are estimate of Rs 1,876.3 crore. The growth was primarily driven by a 12% rise in the revenues from the developed markets and a 9% jump in the revenues from the emerging markets.
While the US markets continue to do well, the performance in Europe is disappointing due the lower than anticipated sales in the UK and Germany. Romanian markets grew by 5.2% and the growth is expected to improve in the coming quarters. The operating performance was in line with our expectations. The operating profit margin expanded by 260 basis points to 12% as compared to 9.4% in Q2CY2007, led by improving gross margins. Consequently, the operating profit stood at Rs 218.7 crore, registering a growth of 43.7% yoy.
Despite a healthy operating performance, the reported PAT has witnessed a decline of 91.3% to Rs 22.9 crore due to the huge forex loss. Excluding the translation loss, the reported PAT is Rs 160.8 crore. The management has re-affirmed its guidance of an 18-19% growth in the top line in US Dollar terms and has stated that it expects to ramp up the growth in the coming quarters to achieve the said guidance.
At the current market price, it is discounting its CY2008 base earnings (excluding exclusivities) by 34.0x and its CY2009E base earnings by 20.2x.
I maintain a cautious Buy recommendation on the stock with a price target of Rs 575.

Stock Idea - Esab India

2008-07-30T11:59:00.001+05:30

Recommendation: Buy (again! J)

CMP = Rs 385 (at the time of this recommendation)

Price target: Rs 575

Key points:

The revenues of Esab India for the quarter grew by 31% to Rs 114.4 crore led by the magnificent performance of the consumable division (revenues grew by 39.8% to Rs 86.6 crore) during the quarter. The equipment division's revenues grew by 9.6% to Rs 27.8 crore in the same quarter. The operating performance of the company remained stable with the operating profit margin at 24.6% in Q2CY2008. Consequently, the operating profit of the company grew by 29.8% to Rs 28.1 crore in the same period.
The PBIT of the consumable division increased by 45.4% to Rs 25.2 crore in the quarter. This resulted in a 120-basis-point increase in the division's PBIT margin. The earnings before interest and tax margin of the equipment division, however, declined sharply by 320 basis points, leading to an 8% decline in the PBIT of the business to Rs 4.7 crore. Esab’s interest cost increased by 26.1% to Rs 0.3 crore whereas its depreciation charge rose by 21.8% to Rs 1.6 crore during the quarter. Consequently, its net profit grew by 30.9% to Rs 18.5 crore.
For H1CY2008, Esab reported growth of 27.9% and 28.4% in its revenues and profits respectively. It also declared a 130% (= Rs 13 per share) dividend for its shareholders during the second quarter of CY2008. Esab would remain one of the major beneficiaries of the continued buoyancy in its user industries, such as pipes, shipbuilding and steel. Furthermore, a greater level of component indigenisation is likely to protect its margins against any adverse impact of the rising steel prices.
At the current market price the stock discounts our CY2008 and CY2009 earnings estimates by 9.1x and 7.7x respectively.
I maintain Buy recommendation on the stock with a price target of Rs 575 over next 5-6 months.

Stock Idea - Gateway Distriparks

2008-07-30T10:22:00.001+05:30

Recommendation: Buy (again!!! J)

CMP = Rs 85 (at the time of this recommendation)

Price target: Rs 236

Key points:

On a consolidated basis, the net sales of Gateway Distriparks Ltd grew by almost 99% yoy to Rs 96.2 crore particularly due to the continued strong volumes at the Jawaharlal Neheru Port Trust (JNPT) and a ramp-up of the rail business. It’s Q1FY2009 results of are quite positive, owing to a strong top line growth and lower than anticipated losses in the rail business during the quarter.
The operating profit margin declined by 1,050 basis points yoy because of a change in the company's sales mix but improved by 230 basis points sequentially to 35.1%. The sequential improvement in the margin was achieved on the back of improved profitability of the rail and cold storage businesses. Better utilisation, increased efficiency and commencement of operations on the export-import routes improved the profitability of the rail business.
The cold storage business too broke even at the net level in Q1FY2009. Consequently, the operating profit of GDL grew by 53% to Rs 33.7 crore in Q1FY2009. Both depreciation and interest charges rose considerably due to high capital expenditure incurred by the company to expand its container and rail businesses. Consequently, the net profit grew by 12% to Rs 21 crore in Q1FY2009.
The company, in its board meeting, has also approved a proposal to buy back its shares from the open market through stock exchanges at a price not exceeding Rs 110 per share, payable in cash, for an aggregate amount not exceeding Rs 64 crore.
At the current levels, the stock is trading at 9x FY2010E earnings.
I maintain a very strong Buy recommendation on the stock with a price target of Rs 236 over next 6-7 months.

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2008-07-29T14:46:00.000+05:30

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Scour.com invite from Sagar

2008-07-28T12:25:00.001+05:30

Hey reader,

Did you hear about Scour? It is the next gen search engine with Google/Yahoo/MSN results and user comments all on one page. Best of all - we get paid for using it by earning points with every search, comment and vote. The points are redeemable for Visa gift cards! It's like earning credit card or airline points just for searching! Hit the link below to join for free and we will both get points!

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Stock Idea - 3i Infotech

2008-07-28T12:15:00.000+05:30

Recommendation: Buy (again!! J)

CMP = Rs 107 (at the time of this recommendation)

Price target: Rs 180

Key points:

3i Infotech's top line grew by 33.9% qoq to a whopping Rs 468.5 crore in Q1FY2009. While, the acquisitions contributed 19.9% to the sequential growth, the organic growth contributed 14.1% to the same. The operating profit margin declined by 299 basis points to 21.8% during the quarter on account of unfavorable sales mix (higher revenues contribution from the low-margin business). Consequently, the company's operating profit grew by 17.7% qoq to Rs 102 crore during the quarter.
The net income grew by 20.1% qoq to Rs 58.7 crore. In terms of operational highlights, the company's order book grew by 6.1% qoq to Rs 917.8 crore driven by healthy sequential growth of 9.7% in the product order book. The revenues from the top five clients and top 10 clients (excluding ICICI group) grew by 148.7% and 78.5% respectively on a sequential basis.
I have revised the FY2009 earning estimates upwards by 1.8% because of higher-than-expected contribution from the acquisitions.
At the current market price, the stock is trading at attractive valuation of 7.3x FY2009 earning estimates and 6.0x FY2010 earning estimates.
I maintain Buy recommendation with price target of Rs 180 over next 3-4 months.

Stock Idea - Allahabad Bank

2008-07-24T12:30:00.000+05:30

Recommendation: Buy

CMP = Rs 58

Price target: Rs 95

Key points:

Allahabad Bank reported PAT of Rs 93.4 crore for Q1FY2009, indicating a decline of 53.4% yoy. This decline was mainly because of a substantial increase in the provisions and contingencies which increased to Rs 202.2 crore as at the end of Q1FY2009 compared with Rs 24.5 crore during the same period last year. The sharp rise in the provisions was primarily due to higher investment depreciation to the tune of Rs 264.1 crore. The reported net interest income for the quarter stood at Rs 495.5 crore, up by 9.8% on a yoy basis, mainly driven by a around 24% increase in the advances during the quarter.
On the margin front, while the margins remained largely stable sequentially, the net interest margin declined by 22 basis points yoy to 2.75% from 2.97%. The growth in advances was slightly below the industry growth during the quarter. However, it still remains healthy at 24% yoy, due to higher demand from the oil marketing companies. Meanwhile, the deposits registered a growth of 16.5% yoy.
The non-interest income for Q1FY2009 stood at Rs 117 crore, up 23.6% yoy on the back of higher treasury gains. The core fee income increased 6% yoy to Rs 107.3 crore. The gross non-performing assets in percent terms improved by 59 basis points to 1.87%. However, the net non-performing assets in percent terms remained flat at 0.75%. The capital adequacy ratio of the bank stood at 11.68% in Q1FY2009 compared with 12.71% a year ago.
At the current market price of Rs 58, the stock trades at 3x 2009E EPS, 1.8x 2009E pre-provisioning profit/share and 0.5x 2009E book value/share.
I maintain a Buy recommendation on this stock with a price target of Rs 95 over next 4-5 months.

Stock Idea - Satyam Computer Services

2008-07-24T11:15:00.000+05:30

Recommendation: Buy (My personal favourite!)

CMP = Rs 383 (at the time of this recommendation)

Price target: Rs 521

Key points:

The consolidated revenues of Satyam Computer Services grew by 8.5% qoq and 43.2% yoy to Rs 2,620.18 crore in Q1FY2009. In dollar terms, the revenues grew by 3.9% qoq to $637 million. The revenues in dollar terms were inflated by $13.5 million due to accounting difference in the US GAAP and the Indian GAAP. Adjusting for this, the company's revenues grew 1.7% qoq to $624 million, which were below its guidance range of $631.7-634.8 million. This was primarily due to loss of the animation business in Satyam's BPO subsidiary, aggregating to $6.7 million.
The operating profit margin improved by 134 basis points qoq to 24.1%, despite the negative impact of the rise in the visa cost (80 basis points). This improvement was mainly due to the positive impact of the rupee depreciation and operational efficiency. Consequently, the company's operating profit grew 14.8% qoq to Rs 632.3 crore. The net income grew by 17.3% qoq to Rs 547.7 crore. Despite forex loss of around Rs 36 crore in Q1FY2009, the other income stood at Rs 33 crore in Q1FY2009 as compared to Rs 23 crore during same period last year.
In terms of guidance for Q2FY2009, the revenues in dollar terms are guided to grow at a muted sequential rate of 2.3% (unadjusted for accounting difference). The earnings in dollar terms for the next quarter are guided to decline by 7.9% sequentially due to the wage hike (effective July). The management is cautious on the demand environment in the retail and the banking, financial services and insurance (BFSI) verticals and maintains its stable outlook on pricing.
At the current market price, the stock is trading at attractive valuation of 11.9x FY2009 earning estimates and 10.3x FY2010 earning estimates.
I continue to maintain a strong Buy recommendation on Satyam with a price target of Rs 521.

Stock Idea - Thermax

2008-07-23T10:49:00.001+05:30

Recommendation: Buy (again!!)

CMP = Rs 375 (at the time of this recommendation)

Price target: Rs 602

Key points:

Thermax has announced its largest order win valued at Rs 820 crore (that is 31% of its current backlog) for the supply of a coal fired boiler to a captive cogeneration plant of a refinery. The boiler is expected to generate 390 megawatt of electricity. It would manufacture the coal fired boiler under the technology license with Babcock & Wilcox. The current order may be executed jointly by Thermax and Babcock in order to enable the indigenisation of the technology.
Of late, the biggest area of concern for Thermax has been the slowdown in its order inflow, as is evident from the Q4FY2008 order backlog of Rs 2,637 crore vis-à-vis the order book of Rs 3,100 crore in Q4FY2007. The latest order may provide some respite as far as the concerns over a slowdown in the order inflow are concerned. We expect a gradual pick-up in the company's order inflow in future as clients are expected to finalize the pending orders.
Though the visibility of the company's revenues has increased with the latest order win, the rising input cost continues to pose a risk to its operating profit margin and to its earnings as a result. The concerns are valid. However, Thermax carries 70-75% of its order backlog on a fixed price basis for which it ties up raw material supplies as soon as a contract is won. The stock price of Thermax has been under pressure lately because of concerns over its slowing order inflow and rising raw material cost that could adversely affect its earnings.
At the current market price, this stock is valued at 12.2x and 10x FY2009E and FY2010E earnings.
I continue to recommend a Buy call on this stock with a price target of Rs 602.

Stock Idea - Glenmark Pharmaceuticals

2008-07-21T13:35:00.000+05:30

Recommendation: Buy

CMP = Rs 599 (at the time of this recommendation)

Price target: Rs 754

Key points:

Glenmark Pharmaceuticals has proved itself as India's best play on research-led innovation. Of its pipeline of 13 molecules, five molecules are undergoing clinical trials. The company has managed to clinch four out-licensing deals for its developmental molecules collectively worth $734 million and has already received $117 million in initial milestone payments for the same. It has recently decided to restructure its business into two separate entities: GPL and GGL. GGL would be a 100% subsidiary of GPL and would be listed on the Indian bourses.
Its core business comprising generics in the USA and branded formulations in Latin America, the other semi-regulated markets and in India has seen stupendous success, due to its focus on niche specialties and brand building. I expect the core business to grow at a 34% CAGR over FY2008-10, driven by a CAGR of 40% in the generic segment and a 29% CAGR in the branded formulation business.
I expect Glenmark's consolidated revenues to grow at a 31% CAGR over FY2008-10 to Rs 3,377.7 crore, driven by a 34% CAGR in the core business and a $60-million milestone income in each of the two years. A robust growth in the top line would lead to a 26% CAGR in the consolidated profits over FY2008-10 to Rs 994.8 crore.
Assigning a PE multiple of 18x to its fully diluted core earnings of Rs 30.6 per share in FY2010E, I value Glenmark's core business at Rs 550 per share.
I recommend a Buy option on this stock with a price target of Rs 754.

Stock Idea - HDFC

2008-07-18T11:37:00.001+05:30

Recommendation: Buy (must buy!!!)

CMP = Rs 1,721

Price target: Rs 2,912

Key points:

HDFC reported a bottom line of Rs 468.1 crore in Q1FY2009, indicating a growth of 25.6% on yoy basis and a decline of 23.4% on qoq basis. The PAT was just Rs 529 crore, below earlier estimates.
The net interest income for the quarter was Rs 651.6 crore, up 36% yoy buoyed by a 27.6% growth in loan disbursals and a healthy improvement in the net interest margin. The healthy top line growth could not trickle down fully to the net total income due to the moderate growth (16.4% yoy) in the other operating income. Besides this the company did not report any capital gains during the quarter. The net total income stood at Rs750.3 crore, up 28.2% yoy.
The operating expenses were up by 26.6% yoy to Rs 86.7 crore, primarily driven by a significant increase in the other expenses (up 44.8% yoy) and the staff expenses (up 35.8% yoy).
Loan approvals during the quarter stood at Rs 9,996 crore, up 29.6% yoy in the same period last year. The disbursements during the quarter rose by almost 28% to Rs 7,204 crore from Rs 5,645 crore in the same period last year.
At the current market price of Rs 1,721, the stock trades at 19.8x FY2009E EPS and 3.6x FY2009E book value/share.
I maintain a strong Buy recommendation with a revised price target of Rs 2,912 over next 7-8 months.

Stock Idea - Marico

2008-07-17T12:14:00.001+05:30

Recommendation: Buy (again!! J)

CMP = Rs 50 (at the time of this recommendation)

Price target: Rs 77

Key points:

Marico's net sales increased by 22.5% to Rs 1,906.7 crore in FY2008 from Rs 1,556.9 crore in the same period last year. The sales growth was mainly achieved because of a strong volume growth of 13%, a price hike of 5% and an inorganic growth of 4.5% during the year.
Marico's focus portfolio delivered a strong performance in FY2008. Its flagship brand Parachute, premium edible oil brand Saffola and hair oil basket achieved a healthy volume growth of 11%, 22% and 16% respectively during the fiscal. During FY2008, despite a rise in the number of creditor days to 57.6 from 54.8 in FY2007, the working capital cycle increased from 27.5 days to 33.5 days on account of an increase in both the inventory and the loans & advances.
Marico’s ROCE increased by almost 7% in FY2007 – it was possible on account of the restructuring of the balance sheet undertaken by the company in FY2007 (including an adjustment of the intangible assets against the special reserves to the extent of Rs 309 crore). It is now aiming at rationalising its portfolio to focus on its beauty and wellness business. It divested its processed food business operated under the brand Sil to Scandic Food India Pvt Ltd, the Indian subsidiary of Good Food A/S, for a profit of Rs 10.6 crore in FY2008.
The growing urbanisation of the Indian population and the increasing acceptance of specialised products and services provide a good opportunity for Marico to strengthen its roots in the country's lowly-penetrated beauty and wellness segment. To become a major player in this segment the company is continuously looking to expand its focus portfolio in both organic and inorganic ways.
At the current market price of Rs 50, the stock trades at 16.2x and 12.7x its FY2009E and FY2010E EPS of Rs 3.1 and Rs 3.9 respectively.
I maintain Buy recommendation on Marico with a price target of Rs 77 over next 6 months.

Stock Idea - Orbit Corporation

2008-07-16T10:35:00.001+05:30

Recommendation: Buy (again!)

CMP = Rs 249 (at the time of this recommendation)

Price target: Rs 808

Key points:

The top line of Orbit Corporation grew by 28.8% yoy to Rs 81.8 crore in Q1FY2009. The bulk of the revenues (almost Rs 56 crore) were booked from Orbit WTC and around Rs 11 crore from Orbit Arya. Orbit had pre-sales revenues worth Rs 578.3 crore at the end of Q1FY2009 compared with Rs 644.8 crore at the end of Q4FY2008.
The operating profit margin of Orbit declined to 40.5% during the quarter due to an increase in both its corporate expenses and its raw material cost. Consequently, the company's operating profit grew by 18.6% yoy to Rs 33.1 crore during the quarter. The company's effective tax rate stood at 32.2% in Q1FY2009 vs 23.6% in Q1FY2008, as none of its projects qualified for tax benefits under the section 80 IB during the quarter. The company has indicated that none of its projects is going to qualify for tax benefits in the future as well. Hence, going forward, the company is likely to pay tax at full rate.
During Q1FY2009, the company's interest expenses grew at a lower rate than expected, as it capitalised the interest expenses on compulsorily convertible debentures worth Rs 200 crore raised for the Orbit Highcity project. The interest expenses on the project stood at Rs 8.27 crore during the quarter. Orbit's net income remained flat at Rs 18.2 crore during the quarter.
In Q1FY2009, the company acquired an 85% stake in Ahinsa Buildtech Pvt Ltd at a cost of Rs 130 crore. The acquisition will give Orbit the right to develop the Orkay Mills project at Andheri in Mumbai. The average cost of land for this project works out to Rs 4,725 per sq ft. The company plans to develop the saleable area of 275,000 sq ft for mixed use.
However, the capitalisation of the interest expenses for the Orbit Highcity project would also lead to a reduction in the interest expenses of Orbit because the project is not likely to start in the near term.
At the current market price, valuation of this stock stood at 4.3x FY2009 earnings estimate and 3.1x FY2010 earnings estimates.
I continue to maintain Buy recommendation on this stocj with a price target of Rs 808.

Stock Idea - Ranbaxy Laboratories

2008-07-15T11:30:00.001+05:30

Recommendation: Buy (again!!)

CMP = Rs 476 (at the time of this recommendation)

Price target: Rs 575

Key points:

The US government has levied against Ranbaxy Laboratories the allegations of violation of federal law, fraud, concealment of data and introduction of adulterated and misbranded products in the US. The US FDA has filed a motion in a US court seeking access to relevant documents to review Ranbaxy's manufacturing operations at its Paonta Sahib plant in Himachal Pradesh.
Ranbaxy has denied the charges made by the US FDA, stating that there is no evidence of using unapproved active pharmaceutical ingredient sources or fabricating data, and intends to file a response on July 14, 2008. Its US formulations accounted for 26% of its revenues and ~35% of its earnings before interest, tax, depreciation and amortisation in CY2007. The legal implications of the allegations made by the US FDA could range from recalling some of Ranbaxy's products from the US to a complete ban on the company from supplying products in the US market.
Further, legal damages in the form of penalties could follow and the management's role in the current developments could raise credibility issues. Despite the US government taking Ranbaxy to court, Japanese drug maker, Daiichi Sankyo, has decided to pursue its acquisition of Ranbaxy at the previously agreed price of Rs 737 per share.
The above development could depress sentiment and remain as a negative overhang on the stock until the issue is fully resolved. On the other hand, Daiichi Sankyo's continued interest in Ranbaxy, despite the criticality of the above issues, lends some comfort to the stock.
At the current market price of Rs 476, Ranbaxy is discounting its CY2008 base business by 34.0x and its CY2009 base business earnings by 20.2x.
I maintain a strong Buy recommendation on the stock with a price target of Rs 575.

Industry Update - Cement industry forecast for Q1FY2009

2008-07-15T09:47:00.002+05:30

Key points:

It looks that severe cost pressures will continue to impact profitability of companies in the Cement sector. Overall, select cement companies have registered a 6% growth in the volumes in Q1FY2009. Companies like Shree Cement, Madras Cements and Orient Paper and Industries have reported an impressive volume growth of around 26%, 12% and 10% respectively. This was mainly due capacity enhancements carried out by them.
In terms of realisation, India Cement is expected to show a strong growth of 16.3% in its realisation due to a change in its market mix. Apart from this, the average realisation for Orient Paper and Industries is expected to increase by 13.2%, as the average realisation in the corresponding quarter of the last year was depressed due to clinker sales.
Despite this, the cement industry as such looks quite promising. I estimate an average growth of 11.6% in the revenues and a almost 17% decline in the earnings for the select companies.

Industry Update - Pharma industry forecast for Q1FY2009

2008-07-14T14:30:00.001+05:30

Key points:

Companies which I am considering here would report almost a 30.9% increase in their revenues for Q1FY2009. Major driver for this mammoth growth would be a steady growth in the domestic market, the new product launches in the regulated markets, strong growth in the contract research and manufacturing services businesses, and the consolidation of the acquisitions made in the previous year. As exports command over 50% share of the pharma industry's revenues, the weaker rupee would also aid the top line.
The operating profit margin of companies (that are covered here) is expected to expand by 330 basis points, largely driven by exclusivity revenues (Sun Pharmaceuticals), savings arising out of the de-merger of R & D units (Piramal Healthcare) and the effect of operating leverage for companies with a strong top line growth (Lupin and Ranbaxy). On the other hand, rising input, power and fuel costs would negatively affect the margins of companies like Orchid Chemicals and Surya Pharmaceuticals. Wockhardt and Opto Circuits may reel under margin pressure on account of the consolidation of low-margin acquisitions.
Despite a strong top line growth and a robust operating performance, the reported net profit of companies would grow just by 1.6%. This would be on account of the mark-to-market losses recorded by companies like Ranbaxy Laboratories, Orchid, Wockhardt and IPCA Laboratories (because they have outstanding forex liabilities). Higher interest and depreciation costs (due to acquisitions) would also affect the reported profits in the case of Wockhardt, Cadila and Opto. On excluding the forex impact, the adjusted net profits of these companies might grow by 50.5%.
My personal top picks include Sun Pharma (which surprised positively with higher than expected exclusivity revenues), and Lupin (which is expected to deliver strong top line and bottom line growth). On the other hand, companies like Ranbaxy, Wockhardt and Orchid could surprise negatively due to higher than anticipated forex losses.
The key risk to the above estimates is companies reporting mark-to-market losses on hedging instruments or on foreign currency derivatives. I believe Ranbaxy & Wockhardt would have outstanding foreign currency hedges, on which they could incur certain losses.

Stock Idea - Cadila Healthcare

2008-07-14T13:35:00.000+05:30

Recommendation: Buy

CMP = Rs 314 (at the time of this recommendation)

Price target: Rs 372

Key points:

Cadila Healthcare (Cadila) has decided to hive-off its consumer product business and merge the same with its listed subsidiary, Carnation Nutra Analogue. In consideration, Carnation Nutra will allot to shareholders of Cadila four fully-paid-up equity shares of Rs 10 each for 15 equity shares of Rs 5 each held in Cadila. Consequently, Cadila's stake in Carnation Nutra would increase from 61.56% currently to 70.2% post the restructuring.
Cadila would also amalgamate Zydus Hospital and Medical Research Private Ltd with itself by canceling the existing nine crore shares held by Zydus Hospital in Cadila and issuing 10.08 crore fresh equity shares to Zydus Hospital. The move would result in equity dilution of 8.7% in Cadila and add no value for the minority shareholders. The restructuring is intended to consolidate the group's consumer product business under one entity and aims to unlock value in its consumer product business.
In consideration for the consumer product business, Cadila shareholders would get additional shares of Carnation Nutra (4:15 – 4 shares of Carnation Nutra for every 15 shares of Cadila). I would value Carnation Nutra stock at Rs 87 per share.
I maintain Buy call with a price target of Rs 372.

Entrecard brings you a lot of cash - literally!

2008-07-11T14:08:00.000+05:30

IT'S RAINING CASH... I am serious. Entrecard is giving out lots of prizes in cash / kind in this arguably the biggest virtual SALE!! Here is the list to soothe your eyes:

I personally want to win the Fantasy Baseball prize... because 10,000 credits is huge! I can do many things with it...

Prizes in Cash ( ≡ Entrecard credits)

Fantasy Baseball - 10,000ec — You can trade in 10,000ec!!
Q3-n - 5000ec — Q3-n is selling their 1950s dinette furniture to finance this contest.
Øblog - 4000ec — Wow! 4000ec is going for like $30 on the Entrecard market.
Evil Woobie - 3000ec…
Turnip of Power - 1001ec…
Celebrity Pictures - 1000ec — Credits were acquired through legal means.
Evil Entrecard Kid! - 1000ec — Entrecard trivia: Evil Woobie and Evil Entrecard Kid are not related. Yet.
Modern Glam - 1000ec…
Dot Com Mogul - 1000ec — With this 1000ec, you might be able to buy back Q3-n's dinette furniture.
Blabberwocky - 1000ec — It's a play on Jabberwocky.
Looking For Scoop - 1000ec…
Eyespi20.com - 1000ec — And she'll teach you how she does that weird signature thing.
Travelin' Show - 1000ec…
The Hypnotist - 1000ec — She will put you under a spell. Recognize!
Diet Pulpit - 1000ec — You can buy a lot of imaginary rice cakes with 1000ec. J
The Realtor - 500ec — You want insight. Listen to her write.
Romelo - 500ec — Romelo, Romelo, wherefore art thou 500ec?
WebATBP.com - 500ec…
Inspire Emotion - 500ec — Almost pay for your favorite 512ec ad!
Sue Doe-Nim - 500ec — She'll probably give you the credits then mock you for wanting them.
Thailand Land of Smiles - 500ec — Actually, that's 500 smiles.
FitnessLifeClub - 500ec…
Lisa Cooking - 500ec — Surprise the whole family with 500 Entrecard credits.
JunkieYard Dot Com - 500ec…
Movie Reviews - 500ec…

Prizes in kind

Aerten Art - She's donating a painting. Seriously. Go look at her site and tell me you wouldn't want a painting.
ImpNERD - 125×125 ad for a month — Let's see, ImpNERD usually sells advertising for 256ec/day. You get this for a month.
PoemsofQuotes - A cheesy poem about the winner's topic!!
Eyespi20.com - A custom made 125×125 card.
Diet Pulpit - One week ad spot right below the banner and a personal greeting from Lady Rose saying, "Congratulations!"…
JunkieYard Dot Com - Three blogroll links.
The Hypnotist - A Hypnotic Audio…

HOW to win??? It's very simple; check out Entrecard rules & guidelines to win this contest!

Stock Idea - ICICI Bank

2008-07-10T12:46:00.000+05:30

Recommendation: Buy

CMP = Rs 601 (at the time of this recommendation)

Price target: Rs 1,204

Key points:

Margins and not volumes is what ICICI Bank seems to be focusing on now. The current account and savings account growth will be the key driver for margin expansion going forward. A deceleration in the advances book growth and a near 100% growth in the incremental growth proves the point.
With seasoning of credit portfolio, the bank has seen an up tick in delinquencies. Rapid growth in unsecured lending (CAGR of 82%) as compared to total advances (CAGR of 24%) over the past three years is likely to put further strain on the asset quality. The rising interest rate scenario may further worsen things for the bank.
ICICI Bank's contingent liability increased by 105% in FY2008. 90% of this constitutes exposure in currency & interest rate swaps and other derivative instruments. In view of the Reserve Bank of India's latest provisioning guidelines related to these instruments, the bank may have to make additional provisions. Unfavorable market conditions raises concern over the bank's higher exposure to sensitive sectors like real estate and capital markets. The management, however, believes that the road ahead will be challenging considering the worsening global and domestic economic scenario. Despite this, the management is bullish on India's long-term growth prospects and foresees robust growth outlook for the Indian financial sector.
At the current market price of Rs 601, the stock trades at 13.7x 2009E earnings per share.
I maintain a strong Buy recommendation on the stock with a price target of Rs 1,204.

Stock Idea - Navneet Publications (India)

2008-07-07T10:15:00.001+05:30

Recommendation: Buy

CMP = Rs 66.5 (at the time of this recommendation)

Price target: Rs 80

Key points:

The net sales of Navneet Publications Ltd (NPL) for Q4FY08 grew by a robust 29.5% yoy to Rs 59.1 crore. The sales growth was on account of hefty growth in publication and stationery businesses. The publication business witnessed a robust growth of 28.5% yoy to Rs 21.8 crore. The stationery business achieved a healthy growth of 33.8% yoy to Rs 38.0 crore, mainly on account of good domestic demand and introduction of non-paper stationery products.
The operating profit margin declined by 102 basis points to 9.0%, mainly on account of a higher other expenditure. An additional promotional expenditure of Rs 1.5 crore towards the stationery business led to a steep hike of 47% in the other expenditure to Rs 15.9 crore. The other income for Q4FY08 stood at Rs 1.0 crore as compared to Rs 0.5 crore during Q4FY07. A higher other income coupled with a lower incidence of tax led to a 57.1% growth in the reported net profit to Rs 2.1 crore.
Going forward the publication segment, one of the major revenue contributors for NPL, will achieve a moderate growth, as in FY2009 revision of syllabus is due only for a few standards in the states of Gujarat and Maharashtra. However, the growth in near future will be driven by some of the new initiatives undertaken by the company such as introduction of non-paper stationery products, foray into Urdu publication and e-learning business.
At the current market price of Rs 66.5, the stock is trading at 8.8X its 2010 estimated EPS and at an enterprise value /earnings before interest, depreciation, tax and amortisation of 5.7X.
I maintain a strong Buy recommendation with a price target of Rs 80 over next 6 months.

Monetary squeeze & high Inflation expected to continue...

2008-07-01T17:01:00.002+05:30

The Reserve Bank of India (RBI) stepped up its efforts to tame inflation by increasing both the repo rate and the Cash Reserve Ratio (CRR) rate by 50 basis points each (100 basis points = 1 percentage point). This latest move reflects the reversal in interest rate expectations in 2008. With domestic inflation under control and a slowdown in industrial production, markets were expecting monetary easing at the start of the year. However, a sharp rise in headline inflation numbers changed the interest rate environment dramatically.

The economy had witnessed a period of sustained high growth rate for the past few years and relatively lower inflation, helped by pre-emptive actions taken by RBI. It had withstood the rise in oil and commodity prices relatively well, helped by strong growth and the absence of a full passthrough of global energy prices. However, sustained domestic demand and rising imported inflation have led to a sharp rise in headline inflation numbers since March, leading to a slew of fiscal and monetary measures. This culminated in the multiyear high inflation numbers released two weeks ago, and RBI’s 50 basis-point hike in CRR and repo rates last week. Thus yields have moved up sharply across the curve.

On the other hand, strong capital outflows and concerns about the widening trade deficit have resulted in the rupee losing ground against major currencies. Despite the US dollar weakening in 2008, the rupee has weakened against the greenback. On the fiscal front, off-balance sheet items such as oil and fertiliser subsidies, the farm loan waiver and possible wage hikes due to Sixth Pay Commission recommendations, are raising concerns. Despite recent strong trends in advance tax payments, there are worries about possible revenue pressures due to an expected economic slowdown. In recent weeks,we have seen an uptick in nonfood credit growth—26.2% as of June 6.

While India’s external position remains strong, helped by large foreign exchange reserves and a relatively low external debt-to-GDP ratio, investors are worried about the impact of the increasing value of oil imports and FII outflows on the current account deficit. The RBI has clearly indicated that aggregate demand pressures have been on the higher side, despite monetary tightening, and seems focused on alleviating inflationary pressure. It has indicated that key economic drivers—investment and consumption—are strong, contributing to increased demand. In such a scenario, global oil prices and inflationary pressures are likely to determine domestic monetary policy.

In the near term, monetary policy is expected to retain a tightening bias. Any pause or change of direction will depend on inflation. We expect liquidity to remain tight, and, despite advance tax flows, the CRR hike, along with RBI intervention in forex markets, should remove excess liquidity from the system. The increased differential between repo/reverse repo rate is in line with the central bank’s stated policy of maintaining a wider band in uncertain times. Any unexpected increase in government’s borrowing programme leading to higher bond issuances will impact the demand-supply scenario. The average duration of our portfolios continues to be on the lower side, and we are focusing on accrual products. Investors should look to focus on funds such as shortterm floating rate funds, fixed maturity plans, and ultra short bond funds.

Courtesy: Franklin Templeton

Stock Idea - International Combustion (India)

2008-07-01T10:58:00.001+05:30

Recommendation: Buy

CMP = Rs 378

Price target: Rs 519

Key point:

In Q4FY2008, the revenues of International Combustion Ltd (ICL) grew by 20.3% to Rs 29 crore. On a segmental basis, the revenues of the material handling equipment division grew by 9.1% to Rs 20.1 crore whereas that of the geared motor and gear box division increased by a strong 53.6% to Rs 9.1 crore, however, the division’s margin fell sharply by 350 basis points to 11.2%.
The operating profit of ICL grew by 21% to Rs 5.9 crore during the quarter. The operating profit margin was flat at 20.4% (up ten basis points). The company’s interest cost declined by 25% to Rs 0.1 crore and its depreciation charge rose by 11.4% during the quarter.
Consequently, the net profit grew by 40.2% to Rs 3.5 crore, which was ahead of our expectations mainly due to a higher than expected revenue growth during the period. The current order book of the company stands at Rs 56 crore of which Rs 49 crore worth of orders are for the material handling division and the balance Rs 7 crore are for geared motor division.
At the current market price the stock trades at 6.3x FY2009E earnings and enterprise value /earnings before interest, depreciation, tax and amortisation of 2.9x on FY2009E.
I recommend a Buy option on this stock with a price target of Rs 519 over next 6-7 months.

Stock Idea - Bharat Bijlee

2008-06-30T12:42:00.001+05:30

Recommendation: Hold

CMP = Rs 2,080

Key points:

Bharat Bijlee Ltd. (BBL) revenues grew at a CAGR of 36.7% and net profit increased at a CAGR of 45.8% over FY2006-08. The transformer division of the company has reported first full year of operations for its enhanced capacity of 8,000MVA. The company is further increasing its transformer capacity to 11,000MVA. The new capacity is expected to be operational by July-September 2008.
The motor business' revenue grew by 24.5% in FY2007. The outlook for the current year also looks promising. However, the demand from certain sectors, particularly sugar and textile machineries, is slackening. During FY2008 the company obtained orders worth Rs 629 crore compared with Rs 579 crore in the previous year. In the first two months of FY2009, the company received orders worth Rs 97 crore (vs Rs 67 crore in the same period of FY2008), taking the total outstanding orders to Rs 362 crore.
The management has indicated that the revenue growth may decline in Q1FY2009 mainly due to the disruption of production at the current plant on account of the ongoing work at the site to develop a new capacity. The new capacity is likely to be commissioned by August 2008. Consequently, the Q1FY2009 results would remain subdued and might decline in the top line and profits. The management seems confident of covering some lost sales in the subsequent quarters.
The commissioning of the new capacity and the subsequent expansion in the capacity would remain the key to growth of BBL for the next couple of years. In our view, the near-term performance of the company would remain subdued which would be a drag on the stock.
At the current market price the stock is trading at 8.7x its FY2009E earnings and enterprise value/earnings before interest, depreciation, tax and amortisation of 3.3x.
I would recommend a HOLD call on BBL for next at least 6 months.

Stock Idea - ICI India

2008-06-27T11:32:00.001+05:30

Recommendation: Buy
CMP = Rs 534 (at the time of this recommendation)
Price target: Rs 622
Key points:

ICI India's FY2008 results are not comparable with FY2007 results, as the company sold off its Advanced 2K refinished paint business in March 2007. The net sales stood at Rs 992.6 crore during FY2008, as against Rs 1,015.2 crore in FY2007. On a comparable basis, the net sales increased by 13.7% to Rs 951.2 crore on the back of a strong performance by the chemical business.
The return on equity (RoE) and the return on capital employed (RoCE) stood at 8.8% and 13.2% respectively in FY2008, which are lower compared to the RoE of 12.4% and the RoCE of 15.6% in FY2007. The decline in the return ratios was primarily due to a lower other income, as there were lower returns on the average investments.
ICI India's cash from operating activities stood at Rs 82.90 crore in FY2008 on account of a better working management. In terms of outlook, the management is positive. However, it cites that its paint business would be impacted by a clear slowdown in the user industries like auto and real estate.
The margins are likely to be under pressure due to the surging crude oil prices coupled with the hike in the key input prices. However, the company has a huge pile of cash of Rs 700 crore, which it can use to generate organic or inorganic growth going forward.
At the current market price, the stock is trading at 18.1x (net of cash on books) its FY2010E core earnings per share of Rs 17.4.
I maintain a strong Buy recommendation with a price target of Rs 622.

Stock Idea - Ranbaxy Laboratories

2008-06-24T10:12:00.000+05:30

Recommendation: Buy

CMP = Rs 543 (at the time of this recommendation)

Price target: Rs 575

Key points:

There have been a lot of activities happening in Ranbaxy Laboratories (Ranbaxy) – for example, the proposed equity dilution and the cash infusion from the Daiichi Sankyo deal, the reset of the foreign currency convertible bonds at a lower price, the revalued fair value of first to file (FTF) opportunities after the Pfizer settlement and the revised exchange rate assumptions. Consequently, I have downgraded the earning estimates of the base business in CY2008 by 20.5% (largely to factor in the research expenses as new drug discovery research {NDDR de-merger} is called off now).
On the other hand, I have upgraded base business earnings by 16.7% for CY2009. On a fully diluted equity base of 48.6 crore shares, new revised estimates would yield earnings of Rs 14 per share in CY2008 and Rs 23.5 per share in CY2009 for the base business (excluding FTFs).
Ranbaxy's FTF opportunities are revalued to account for the recent out-of-court settlement with Pfizer on Lipitor and Caduet. I expect Ranbaxy to earn revenues and profits of $4.3 billion and $1.7 billion respectively from all the FTF opportunities and the out-of-court settlements announced so far. Using a discount rate of ~9%, these settlements and FTF opportunities yield an NPV of ~Rs 106 per share.
I continue to maintain Buy recommendation on the stock despite the fact that the stock price is nearing our fair value price target, with a price target of Rs 575 over next 4-5 months.

Stock Idea - Tourism Finance Corporation of India

2008-06-20T09:45:00.000+05:30

Recommendation: Buy

CMP = Rs 19.5 (at the time of this recommendation)

Price target: Rs 30

Key points:

The net interest income of Tourism Finance Corporation of India (TFCI) declined by 27.0% yoy to Rs 11.2 crore in Q4FY2008, mainly due to a 15.6% drop in the interest income and an 11.0% increase in the interest expenses.
Notably, the operating expenses of TFCI declined sharply by 30.3% yoy during the quarter, primarily due to a higher base in the year-ago quarter on account of an extraordinary payment of Rs 1.0 crore made towards the arrears of employee expenses.
In addition, there was a write-back of provisions (for bad and doubtful debt) of Rs 10.0 crore, as the same was no longer required. The significant write-back was the primary reason why the bottom line improved. Hence, the net profit for Q4FY2008 also increased by a strong 60.2% to Rs 15.3 crore.
At the end of the fiscal, the sanctions made by the company stood at Rs 333.8 crore, up 36.0%. The disbursals also registered an increase of 50.0% to Rs 180.36 crore. However, the high growth in the disbursals could not translate into growth of the loan book due to higher repayment of loans.
The loans increased by 6.0% to Rs 372.7 crore, breaking the previous five years' trend of declining growth. The gross NPA’s stood at Rs 61.0 crore on an asset base of over Rs 500 crore.
During the quarter, TFCI raised Rs 63.8 crore through the preferential allotment of 1.32 crore equity shares of Rs 10 each for cash at a price of Rs 48 per share. The capital raising was aimed at enabling the company to finance its future growth.
At the current market price of Rs 19.5, the stock trades at 8.2x its FY2009E adjusted EPS of Rs 2.4 and 0.6x its FY2009E book value of Rs 34.9.
I maintain a Buy call on this stock with a price target of Rs 30.

Stock Idea - Orchid Chemicals & Pharmaceuticals

2008-06-19T09:57:00.000+05:30

Recommendation: Buy

CMP = Rs 251 (at the time of this recommendation)

Price target: Rs 300

Key points:

Orchid Chemicals' (Orchid) Q4FY2008 and FY2008 results are a mixed bag: Strong margin pressure along with higher than anticipated interest burden and forex translation losses dragged down the profitability of the company during Q4FY2008.
The US generic market continued to power Orchid's growth, with revenues growing by 55.9% to Rs 379.2 crore in Q4FY2008 and by 35.7% to Rs 1,238.9 crore in FY2008. The growth was driven by the consolidation of the market share in niche product opportunities like Cefepime injections, Cefdinir tablets, and Cefoxitin and Cefazolin injections.
Orchid's operating profit margin (OPM) shrank by 730 basis points to 20.3% in Q4FY2008 and by 290 basis points to 27.8% in FY2008. The declining margin restricted the operating profit growth to 14.6% at Rs 77.1 crore in Q4FY2008 and to 23.2% at Rs 344.8 crore in FY2008.
Orchid's debt level remains high at $220 million (excluding the foreign currency convertible bonds as reflected in the increase in the interest cost in Q4FY2008. Further, the capex cycle does not seem to be over yet, with the company planning capex of ~Rs 150 crore in FY2009 and of Rs 150-175 crore in FY2010.
The management has stated its intention of reducing its debt level further in the coming years. Despite the strong growth drivers and a robust business model, I believe the above-mentioned concerns will remain as an overhang on the stock, until the company's financials clearly reflect the management's intentions.
In view of these concerns, I maintain a cautious Buy recommendation on the stock with a price target of Rs 300.

Stock Idea - Television Eighteen (TV18) India

2008-06-18T12:10:00.001+05:30

Recommendation: Buy

CMP = Rs 261 (at the time of this recommendation)

Price target: Rs 486

Key points:

TV18 stock has witnessed a slide in the past month and I believe it has got to do more with market sentiment rather than any weakening of the company's fundamentals, though macro risks of an overall slowdown in business activity cannot be negated. I believe the following factors have led to a correction in the price of the stock:
An overall correction in the stock market due to the dependence of CNBC and Awaaz for their advertising revenues on the financial services business a significant portion of which comes from market participants.
A substantial portion of Web18's revenues comes from subscription-based portals such as moneycontrol.com, poweryourtrade.com and commoditiescontrol.com. A slowdown in stock market activity is perceived to directly affect the growth of these businesses.
The growth of the relatively new business of Newswire18 depends to a large extent on the mood of stock market participants.
The postponement of Web18's listing and the consequent unlocking of value for TV18's shareholders, which was perceived to be a trigger.
However I am quite buoyant about TV18 and believe that it will shoot up like a phoenix. I would recommend a Buy call on this scrip with price target of Rs 486 over next 7-8 months.

Stock Idea - Marico

2008-06-16T17:42:00.000+05:30

Recommendation: Buy

CMP = Rs 65 (at the time of this recommendation)

Price target: Rs 77

Key points:

Consumer spending patterns in India are gradually changing due to factors like rising aspiration levels, increasing income levels, growing brand consciousness and easy availability of credit. Not only that, an average urban household is also becoming increasingly conscious of beauty and health, and aware of the benefits of personal care.
Despite this, according to a survey carried out by AC Nielsen, 30% of Indians are willing to spend more on beauty products and treatments to enhance their appearances. To tap this enormous opportunity several retail and FMCG companies have entered or are planning to enter the Rs 25,000-crore health & beauty retail segment in India. The operating profit margin (OPM) in this segment lies in the 20-25% range.
Marico is leveraging its strength in the beauty and wellness segment through Kaya, which is recognised as a pioneer in skin care and beauty services. Kaya, which currently has 56 skincare clinics in India and nine such clinics in the Middle-East, contributed around Rs 98.5 crore to Marico's total revenues during FY2008.
The growing urbanisation of Indian cities and acceptance of specialised products and services provides a good opportunity for Marico to strengthen its roots in the low penetrated health and beauty segment in India. We believe that going forward Kaya would be one of the growth drivers for the company. However, the profitability of the company as a whole would be under pressure in the near term on account of a steep increase in the prices of its key raw materials.
At the current market price of Rs 64.6, the stock trades at 20.9x and 16.7x its FY2009E and FY2010E EPS of Rs 3.1 and Rs 3.9 respectively.
I maintain Buy recommendation on the stock with a price target of Rs 77.

Stock Idea - Axis Bank

2008-06-15T11:12:00.001+05:30

Recommendation: Buy

CMP = Rs 716 (at the time of recommendation)

Price target: Rs 1,150

Key points:

The financial year 2008 was a roller-coaster year for the banking industry, with the outlook very positive at the beginning of the fiscal but clouded by multiple macro-concerns in the second half of the fiscal. Amidst all this, Axis Bank churned out an impressive earnings growth on the back of an aggressive business growth and capital infusion.
The retail banking operations of Axis Bank contribute about 20% to the bank's total income and only 8% to its bottom line, making it the least profitable segment. Wholesale banking is most lucrative business for the bank owing to its strong position in the loan syndication business. However, significant focus on strengthening the current account and savings account (CASA) should drive Axis Bank's profitability going forward.
The restructuring of the corporate banking business has helped the segment achieve a strong growth (a 68.3% growth in corporate advances). A leadership position in the loan syndication business provides further impetus to the corporate banking business.
The concentration of the bank's exposure to certain industries is a cause for concern with gems and jewelry forming 39.5% of the non-fund exposure, and non-banking finance companies & trading companies forming 13.6% of the fund based exposure. Also, a higher off-balance sheet exposure may require increased provisioning considering the Reserve Bank of India's tough stance and revised guidelines on the subject.
The bank's management believes that the operating environment for banks would get tougher owing to further possible monetary tightening, marginal deterioration in credit quality and valuation losses due to the widening of spreads.
At the current market price of Rs 716, the stock trades at 18.1x 2009E earnings per share, 8.6x 2009E pre-provisioning profit per share and 2.7x 2009E adjusted book value per share.
I maintain a very strong Buy recommendation on the stock with a price target of Rs 1,150 over next 6-8 month time frame.

Stock Idea - Grasim Industries

2008-06-12T11:22:00.001+05:30

Recommendation: Buy

CMP = Rs 2,192 (at the time of recommendation)

Price target: Rs 3,002

Key points:

Grasim Industries (Grasim) has struck a deal with Welspun Power and Steel (Welspun) to sell its sponge iron business (Vikram Ispat) for a consideration of Rs 1,030 crore by way of a slump sale. The proceeds from the sale will be invested in the core businesses of cement and viscose staple fibre.
The sponge iron division will be sold at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.4x FY2008 EBIDTA. Considering the poor performance of the sponge iron division in the past (low capacity utilisation and EBIDTA margin), we believe the sale would be value accretive for the shareholders of Grasim.
At the current market price of Rs 2,192, the stock is trading at 8.8x its estimated FY2009E earnings per share (EPS).
I maintain Buy recommendation on the stock with a price target of Rs 3,002 over next 6 months.

Stock Idea - Punj Lloyd

2008-06-05T12:54:00.001+05:30

Recommendation: Buy

CMP = Rs 287 (at the time of recommendation)

Price target: Rs 532

Key points:

Punj Lloyd Ltd's (PLL) headline numbers were broadly in line with our expectations. The revenues grew by 37.8% to Rs 2,346.7 crore. The process plant contributed 36.3% to the top line. Led by strong performance in the standalone entity, the consolidated operating profit margin (OPM) increased by 60 basis points to 10.6%. The operating profit grew from 45.7 crore to Rs 248.6 crore. The net profit grew by 32.4% to Rs 117.7 crore.
The auditors have made qualification on a project being executed by the subsidiary Simon Carves, which may incur a potential loss of Rs 305.3 crore due to change in the scope of the work. However, the management has now highlighted that the company has already reached an agreement on the recovery of £15 million (~Rs 125 crore). The management has further maintained that it would be able to reach the breakeven in the project and is negotiating with the client for the same. The company plans to spend Rs 350-400 crore as capital expenditure over FY2009.
The company continued to focus on its strategy of increasing its order ticket size. The current order of Rs 19,595.6 crore has an average execution period of 26 months. The company has a robust order backlog and provides high visibility to the future earnings of the company. Rs 709 crore worth of orders are legacy orders.
At the current market price, the stock trades at 16.5x and 12.4x FY2009E.
I maintain a strong Buy call on this stock with a price target of Rs 532 over next 607 months.

Stock Idea - Punjab National Bank

2008-06-04T14:09:00.001+05:30

Recommendation: Buy

CMP = Rs 480 (at the time of this recommendation)

Price target: Rs 632

Key points:

Punjab National Bank (PNB) reported an impressive growth of 128.8% yoy in its bottom line during Q4FY2008. The profit after tax (PAT) of Rs 543.8 crore was well above our expectation. The net interest income (NII) for the quarter stood at Rs 1,517.3 crore, up 12.7% yoy. After adjusting the year-ago NII for one-time gain (Cash Reserve Ratio income of Rs 56 crore), the NII growth comes at 17.6% yoy.
The non-interest income registered a 9.8% decline yoy and reached Rs 537.2 crore. Notably, the operating expenses were down 21.8% yoy to Rs 827.7 that helped boost the bottom line. The decline in the operating expenses stemmed from a 33.3% decline in the staff expenses. The provisions and contingencies were down significantly by 72.6% yoy to Rs 167.7 crore. The decline was primarily due to improving asset quality.
The advances registered a healthy growth of 23.7% yoy to Rs 1,19,502 crore, while the deposits were up 19% yoy to Rs 1,66,457 crore. The current account and saving account ratio stood at an impressive 43%. The asset quality improved further during the quarter on both absolute and relative basis. The gross non-performing asset (GNPA) in percent terms stood at 2.74%, significantly down from 3.45% a year ago, while the net non-performing asset in percent terms declined to 0.64% from 0.76% a year ago. The significant improvement in the asset quality has allayed concerns to a great extent.
Capital adequacy ratio (CAR) as at the end of Q4FY2008 stood at a comfortable 12.96% based on Basel requirements, while based on Basel II the CAR was 13.46%.
At the current market price of Rs 480, The stock trades at 6.4x 2009E earnings per share (EPS), 3.3x 2009E pre-provisioning profit per share and 1.2x 2009E book value per share.
I maintain Buy recommendation on the stock with revised price target of Rs 632 over next 6 months.

Stock Idea - Mahindra & Mahindra

2008-05-30T09:35:00.001+05:30

Recommendation: Buy

CMP = Rs 641 (at the time of recommendation)

Price target: Rs 900

Key points:

The Q4FY2008 results of Mahindra & Mahindra are a little lower than expectations due to higher than anticipated tax expenses. The net sales grew by 14.6% to Rs 3,148.2 crore, higher than expected growth mainly due to a stronger performance of both the business divisions, automotive and farm equipment.
The operating profit margin declined by 50 basis points yoy and by 40 basis points sequentially to 10.9%, as the operating profit grew by 9.2% to Rs 342.4 crore.
Looking at the segmentals, the automotive revenues grew by 16% to Rs 2,077.9 crore while the profit before interest and tax (PBIT) margin of this division remained almost flat yoy at 10%. The revenues of the farm equipment division grew by 9% while its margin improved by 270 basis points yoy and by 70 basis points sequentially to 14.5%.
I remain bullish on M&M and recommend Buy option on this stock with a price target of Rs 641.

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2008-05-30T08:43:00.000+05:30

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Stock Idea - ITC

2008-05-28T11:47:00.002+05:30

Recommendation: Buy

CMP = Rs 206 (at the time of recommendation)

Price target: Rs 247

Key points:

ITC registered a growth of 16.7% year on year (yoy) in its net sales to Rs 3,934.4 crore during Q4FY2008. The sales growth was led by strong growth in non-cigarette FMCG and agri-business revenues and was slightly higher than our expectation of Rs 3,865 crore.
The operating profit margin (OPM) for the quarter declined by 104 basis points to 26.6% as against 27.6% in the corresponding quarter of the previous year. This was mainly because of the rise in the raw material cost, as the raw material cost as percentage of sales increased by 274 basis points to 46.9% as compared to 44.1% in the same quarter last year. Thus, the operating profit increased by 12.3% yoy to Rs 1,044.7 crore during the quarter.
A jump of 60.0% in other income to Rs 163.7 crore (higher than our expectation), helped the net profit to grow by 13.1% to Rs 735.6 crore during Q4FY2008. Despite a 6% increase in excise duty and imposition of a 12.5% VAT, cigarette volumes declined only by 1% as against our expectation of 2.5% for FY2008.
The non-cigarette FMCG business continued its remarkable progress with a 48.1% revenue growth. The segment loss increased to Rs 117.9 crore on account of the increase in the brand building activities on new product launches in the personal care category. Increase in commodity prices such as wheat, vegetable oil, maize and skimmed milk powder are imposing pressure on the margins of branded packaged food business.
Agri business regained its growth momentum in the second half of FY2008. Consequently, agri-business revenues increased by 16.1% to Rs 1,078.1 crore and the PBIT margin improved to 3.4% for Q4FY2008.
At the current market price of Rs 205.7 the stock trades at 17.9x its FY2010E EPS of Rs 11.5.
I continue to maintain a strong bullish stance on the stock and a recommend Buy call on ITC with a price target of Rs 247 over next 3-6 months.

Stock Idea - Balaji Telefilms

2008-05-27T10:43:00.003+05:30

Recommendation: Buy

CMP = Rs 181 (at the time of recommendation)

Price target: Rs 299

Key points:

Balaji Telefilms Ltd (BTL) operating performance for Q4FY2008 was above our expectation. Programming hours in the commissioned category increased to 289.5 hours from 201 hours in Q4FY2007 with the launch of four new shows in the last two quarters. Much lower realisation on these shows combined with discontinuance of one of the more popular and high-revenue yielding shows Kasauti Zindagi Kay led to an anticipated drop in the blended realisation in the commissioned category to Rs 29.7 lakh per hour.
Overall revenues for the quarter increased by 24.7% yoy to Rs 96.5 crore. The operating profit margin (OPM) for the quarter stood at 36% against 39.3% in Q4FY2007. Thus the adjusted net profit for the quarter increased by 14.7% yoy to Rs 24.4 crore.
BTL has pounced on the opportunity provided by the increasing demand for content in Hindi general entertainment channel (GEC) space with the launch of new channels and shows. It has launched four new shows during the last two quarters — Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tara on Sony and Kis Des Mein Hain Mera Dil on Star Plus. In the coming quarters, the company is looking to diversify its business by launching reality shows such as Kaun Jeetega Bollywood Ka Ticket on 9x, Gharwali Baharwali on Sony and a mythological show of Mahabharat. These new launches will ensure growth in the television content business going forward.
In the film segment, Balaji Motion Pictures is distributing Ram Gopal Verma's Sarkar Raj and will also release its co-production Woodstock Villa. Thus BTL has ventured film production and distribution in a big way and targets releasing seven to eight movies a year.
I am quite positive on the television content and film businesses of BTL. At the current market price of Rs 181.3, the stock trades at 9x its FY10E earnings per share (EPS) of Rs 20.2.
I maintain a strong Buy recommendation on BTL with a price target of Rs 299 over next 6 months.

Stock Idea - Crompton Greaves

2008-05-26T13:13:00.000+05:30

Recommendation: Buy
CMP = Rs 232 (at the time of recommendation)
Price target: Rs 367

Key points:

Crompton Greaves Ltd (CGL) has reported a 17.1% growth in its stand-alone revenues to Rs 1,159.5 crore for Q4FY2008. The revenues of the power system business grew by 8.3% to Rs 606.4 crore during the quarter. The revenues of the consumer products division increased by a strong 27.3% to Rs 352.2 crore. The profit before interest and tax (PBIT) margin improved across businesses save the consumer products business whose margin declined by 90 basis points to 10.5%.
The operating profit of the company as a whole grew by 36.9% to Rs 156.6 crore. The sharp increase in the operating profit margin (OPM; up 200 basis points) came in as a positive surprise. The OPM improved mainly on account of a reduction in the raw material cost as a percentage of sales which declined by 230 basis points to 69.1%.
The interest charge declined by 26.5% to Rs 7.4 crore and the depreciation charge dropped by 34.7% to Rs 7.4 crore. Consequently, the net profit grew by 47.4% to Rs 103.1 crore. On a consolidated basis, the group's turnover was Rs 2,020.7 crore during the quarter. The OPM stood at 13.6% whereas the net profit was at Rs 145.9 crore.
In my view, CGL is well poised to benefit from the investment in the power transmission and distribution (T&D) space. Its international subsidiaries provide it access to international markets and also help it emerge as an integrated supplier for the products and services in the T&D space.
I am maintaining a strong positive view on the company with a Buy recommendation and price target of Rs 367 over next 6 months.

Stock Idea - Bajaj Holdings & Investment

2008-05-26T09:09:00.003+05:30

Recommendation: Buy
CMP = Rs 674 (at the time of recommendation)
Price target: Rs 941

Key points:

Bajaj Holdings & Investment Ltd (BHIL) holds a 30% stake each in the new Bajaj Auto and Bajaj Finserve. BHIL also holds cash and investments held by the erstwhile Bajaj Auto. Since the company was formed after the de-merger of the erstwhile Bajaj Auto, the previous comparable figures are not available.
BHIL has reported a consolidated top line of Rs 62.6 crore for Q4FY2008 and that of Rs 3.63 crore for FY2008. The PAT stands at Rs 79.3 crore for Q4FY2008 and at Rs 525.7 crore for FY2008.
BHIL holds cash and investments in various companies, such as ICICI Bank, Bajaj Auto Finance and Maharashtra Scooters. It will continue to hold the cash and investments in liquid form for the next two years to be able to lend to the newly formed Bajaj Auto and Bajaj Fin Serv if and when the need arises. Only when these two companies begin to generate sufficient cash flows on their own to fund their businesses will BHIL invest the cash and investments for the long term. For instance, BHIL also has a 260-acre special economic zone in Aurangabad and part of the cash could be used to expand this business in future.
I have valued the stakes of Bajaj Auto and Bajaj Finserve in BHIL at a 50% holding company discount and it works out to Rs 234 per share. Further, as on date the value of BHIL's investment portfolio is Rs 692 per share.
I recommend a Buy option on the stock with a price target of Rs 941.

Stock Idea - Ceat

2008-05-22T12:52:00.000+05:30

Recommendation: Buy

CMP = Rs 119 (at the time of recommendation)

Price target: Rs 196

Key points:

The net sales of Ceat grew by 14.8% to Rs 646.2 crore in the quarter. The original equipment sales continued to decline whereas the replacement sales grew strongly by 28.2% in Q4FY2008. The operating profit margin (OPM) declined by 180 basis points to 6.0% as a result of a higher raw material cost. Consequently, the operating profit declined by 12.3% to Rs 38.5 crore.
For FY2008, the sales grew by 9.2% to Rs 2,329 crore and the adjusted PAT increased by 80.7% to Rs 67.7 crore. Ceat sold a small part of its Bhandup plant and realised a value of Rs 130 crore during the year. So, the reported PAT grew by 294% to Rs 147.6 crore.
The company increased prices of tyres by 5% in April 2008 due to the rising raw material prices. It has also announced a capex of Rs 1,000 crore for setting up a radial plant and relocating the Bhandup plant. Further details of this capex including the time period and the funding pattern are yet to be finalised.
I maintain positive view on Ceat, as the stock is trading at very cheap valuations. At the current market price of Rs 119 the stock is trading at 5.2x its FY2010 earnings of Rs 24.5 and enterprise value (EV/earnings before interest, tax, depreciation and amortisation (EBITDA) of 2.8x.
I maintain a strong Buy recommendation on Ceat with a revised price target of Rs 196.

Stock Idea - Canara Bank

2008-05-19T10:04:00.001+05:30

Recommendation: Buy

CMP = Rs 237

Price target: Rs 315

Key points:

Canara Bank has reported a profit after tax (PAT) of Rs 464.1 crore for Q4FY2008, reflecting a decline of 8.1% yoy. The reported PAT is marginally above our expectation of Rs 451.1 crore. The top line performance is disappointing with the net interest income (NII) declining by 12.9% yoy to Rs 922.5 crore owing to pressure on the margins and a muted advances growth.
The non-interest income provided some relief with a 14.1% growth yoy. The operating expenses grew by 10.1% to Rs 697.6 crore during the quarter. The growth in the operating expenses can be traced to a 30.9% jump in the other operating expenses. Meanwhile, the staff expenses declined by 4.3% yoy. Despite the other income growth coupled with lower operating expenses, the pre-provisioning profit was down 10.7% yoy.
Notably, the provisions continued their declining trend. The provisions and contingencies stood at Rs 375.1 crore, down 24.5% yoy. The lower provisions coupled with a positive growth in the non-interest income helped the bank check the decline in the profitability.
The asset quality of the bank remained healthy with an improvement on absolute and relative basis. The gross non-performing asset (GNPA) percentage came in at 1.31%, down 20 basis points yoy, while the net non-performing asset (NNPA) percentage was down 10 basis points to 0.84%.
The capital adequacy ratio was healthy at 13.25% as at end of March 2008, largely in line with the year-ago level of 13.50%. Growth in advances was muted at 8.9% as the bank focused on rebalancing its advances book. In line, the deposit growth was muted at 8.2% yoy.
At the current market price of Rs 237, Canara Bank trades at 5.4x 2009E earnings per share, 2.9x 2009E pre-provisioning profit and 1.0x 2009E book value.
I maintain Buy recommendation and price target of Rs 315 on the stock.

Stock Idea - Opto Circuits India

2008-05-15T15:17:00.000+05:30

Recommendation: Buy

CMP = Rs 338

Price target: Rs 460

Key points:

Opto Circuits India’s (Opto) non-invasive business is expected to grow at a compounded annual growth rate (CAGR) of 39.5% over FY2007-10E to Rs 550.7 crore on the back of rising demand for its sensors and patient monitoring systems, coupled with an increasing market penetration and innovative new launches.
The invasive business would be driven by the increasing acceptance of the company's stents due to superior technology and better pricing. Further, the growing revenues from DIOR in Europe and the semi-regulated markets due to limited competition would also fuel the growth of the invasive segment. We expect the invasive segment (EuroCor) to contribute ~43% to the company's total revenues by 2010.
Opto has recently completed its $70 million acquisition of Criticre Systems (Criticare), a US-based publicly listed company specialising in vital signs and gas monitoring instruments. We estimate the Criticare acquisition to generate incremental earnings of Rs 0.60 per share in FY2009E and Rs1.80 per share in FY2010E. We will incorporate the impact of the acquisition after the announcement of Opto's FY2008 results.
Opto's fully diluted earnings (without Critcare) would grow at a CAGR of 35% over FY2007-10E on the back of a 57% CAGR in revenues. Opto is trading at attractive valuations of 16.9x FY2009E fully diluted earnings and 11.3x FY2010E fully diluted earnings.
I maintain Buy recommendation on Opto with a price target of Rs 460 over next 6-7 months.

Stock Idea - Surya Pharmaceuticals

2008-05-13T17:57:00.001+05:30

Recommendation: Buy

CMP = Rs 107

Price target: Rs 205

Key points:

Surya Pharmaceuticals (Surya) reported an impressive 89.5% increase in revenues to Rs 156.5 crore in Q4FY2008. The revenue growth in FY2008 was equally robust with a jump of 63.2% to Rs 496.7 crore. An escalation in the raw material cost caused Surya's operating profit margin (OPM) to shrink by 420 basis points to 14.8% during Q4FY2008 and by 40 basis points to 17.0% in FY2008. Consequently, the operating profit grew by 46.8% to Rs23.1 crore in Q4FY2008 and by 59.0% to Rs 84.4 crore in FY2008.
Despite higher interest and depreciation charges, Surya's net profit grew by an impressive 56.6% to Rs 12.8 crore in Q4FY2008 and by 95.4% to Rs 46.7 crore in FY2008. In addition to its investment in the sterile facility in Jammu, Surya has announced a capex of Rs 100 crore for further de-bottlenecking of the existing capacities and expansion of menthol capacities. This would lead to a substantial jump in the company's interest and depreciation costs in FY2009, thereby straining its profitability.
At the current market price of Rs 107, Surya is trading at 3.6x its FY2009E diluted earnings of Rs 29.7 and 2.7x its FY2010E diluted earnings of Rs 39.9. At the current prices, Surya offers a remarkable combination of strong growth at cheap valuations.
I maintain strong Buy call on this stock with a price target of Rs 205 over next 6 months.

Stock Idea - Aditya Birla Nuvo

2008-05-07T16:24:00.001+05:30

Recommendation: Buy

CMP = Rs 1,507

Price target: Rs 2,035

Key points:

„ The consolidated revenues of Aditya Birla Nuvo (ABN) grew by 43.4% yoy to Rs 3,804.4 crore in Q4FY2008. The growth was driven by the solid performance of the insurance business, which grew by 78.3% yoy to Rs 1,477 crore, contributing 39% to the overall revenues. The garment, insulator, financial service, carbon black and telecom businesses also contributed well to the overall growth. The share of the high-growth businesses (garments, life insurance, BPO, software and telecom) in the total sales in Q4FY2008 improved to 76% as compared with 73% in the same period last year.

„ However, the operating profit margin (OPM) declined by 560 basis points to 5.2% on account of margin pressure in the key business segments and increased contribution of the insurance division. Consequently, the operating profit declined by 31% to Rs 197 crore. The telecom, insulator, rayon, textile and financial service businesses witnessed improvement in the profit before interest and tax (PBIT) margin while the margin declined sharply in the garment, carbon black, BPO, fertiliser and life insurance businesses, thereby reducing the overall margin by 430 basis points to 2.1%.

„ The company registered a net loss of Rs 21.8 crore as against a net profit of Rs 82.8 crore during the corresponding quarter last year due to higher depreciation and interest costs. The company continued to invest the cash generated from the value businesses into the growth businesses like life insurance and telecom. The company is also planning for aggressive retail expansion and joint venture for value-added fabrics.

„ At the current market price, the stock trades at a price/earnings ratio of 40.2x FY2009E consolidated earnings and enterprise value (EV) / earnings before interest, depreciation, tax and amortisation (EBIDTA) of 13.0x FY2009E.

„ I maintain a Buy recommendation on ABN with a price target of Rs 2,035 over next 8-10 months.

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Create your Future with Best of the Breed Online Casinos

2008-05-06T15:49:00.000+05:30

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Stock Idea - Bank of India

2008-05-05T09:37:00.002+05:30

Recommendation: Buy

CMP = Rs 361

Price target: Rs 458

Key points:

Q4FY2008 results of Bank of India were above our expectations. The profit after tax (PAT) was Rs 757 crore, indicating an impressive growth of 69.2% yoy. The net interest income for the quarter came in at Rs 1,216.8 crore, up 25.7% yoy on the back of continued robust growth in advances and expansion in net interest margin (NIM).
The reported NIM for the quarter stood at 3.24%, indicating an expansion of 10 basis points yoy. The improvement in NIM was largely driven by margin expansion in international business, while the margin for the domestic business was flat at 3.71%. The non-interest income was up 13.3% yoy to Rs 653.3 crore. Importantly, the year-ago non-interest income included a one-time gain of Rs 52 crore from Nigerian oil bonds and a Rs 14 crore gain from sale of fixed assets.
The operating expenses during the quarter were up marginally by 1.3% yoy to Rs 657.9 crore. The operating expenses growth was contained due to a 7.6% y-o-y decline in staff expenses, which helped to partly offset the 20.9% y-o-y increase in the other operating expenses. Consequently, the cost-income ratio improved significantly to 41.7% from 52.1% a year ago. Provisions and contingencies were down by 6.5% yoy, which in turn boosted the bottom line.
The asset quality of the bank improved during the quarter as evidenced by a 8.1% yoy decline in the gross non-performing assets and a 27.1% yoy drop in the net non-performing assets. In line, the provisioning coverage ratio improved to 69.3% from 61.3% a year ago. The capital adequacy ratio (CAR) moved up to 12.95% from 11.58% a year ago, helped by qualified institutional placements (QIPs).
At the current market price of Rs 360.7, Bank of India trades at 7.4x 2009E earnings per share (EPS), 4.1x 2009E pre-provisioning profit (PPP) per share and 1.8x 2009E book value (BV) per share.
I maintain Buy recommendation on the stock with price target of Rs 458.

Getting a cash advance has never been easier...

2008-05-04T20:56:00.000+05:30

Do you desperately need hard cash, immediately? What do you need the most in this situation is - CASH! There are many ways to obtain cash, like using credit cards, loans, or by puring earning more money. There is one more way: Cash Advances... These are the fastest way to obtain secure, online cash advance and payday loans. And when it comes to Cash Advance, perfectcashadvance is the undoubted and most preferred provider. With perfectcashadvance, applying and qualifying for payday loans is quick and easy, and there are no documents to fax at all! You can avail your own fast cash loan in 3 simple steps:

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Stock Idea - Genus Power Infrastructure

2008-05-04T16:16:00.002+05:30

Recommendation: Buy
CMP = Rs 563
Price target: Rs 673

Key points:

Genus Power Infrastructures Ltd (GPIL) reported a 27.4% growth in the revenues. The meters sales continue to be robust, however the project sales were deferred due to rising input costs.
The operating profit grew by 75.9% yoy to Rs 35.1 crore. The operating profit margin (OPM) reported a sharp 500-basis-point improvement to 18.1% on the back of a steep decline in the other expenses. The other expenses as percentage of sales decreased to 2.5% from 11.7% in Q4FY2007.
The interest cost was up 12.4% to Rs 4.4 crore, while the depreciation charge rose by 107.5% to Rs 1.4 crore. Aided by better-than-expected operating performance the net profit of the company reported a growth of 102.1% to Rs 25.5 crore.
The current order book of the company stood at Rs 417 crore with close to 60% coming from the meters business. The company was also the lowest bidder for orders worth Rs 450 crore. GPIL is a leading manufacturer of electronic energy meters. The company is well poised to benefit from the government's plan to spend on the country's power transmission and distribution sector.
At the current market price, the stock trades at 11.6x its FY2009E and 8.9x its FY2010E earnings.
I recommend buy call on this stock with price target of Rs 673.

Insurance - The Need Of Time. Are you In?

2008-05-03T13:55:00.002+05:30

It is said that a human being is a social animal. Normal humans would like to be surrounded by like-minded people, their beloved ones, and friends. As we socialize, we increase our material belongings and losing any of our precious possessions would hurt us. To ensure that we do not lose much due to loss of our prized possessions, we generally tend to opt in for Insurance. If you are looking for quality quotes on Insurance, approach EZ Insurance Portal - the one stop shop for all your Insurance needs - be it life or non-life.

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One Stop Shop for Mortgage Loans

2008-05-02T19:27:00.001+05:30

We talked a lot about mortgages for individuals, personal mortgages, etc. However, there are a few individuals who are not so familiar with mortgages and hence require assistance & guidance in selecting a great deal suitable to them. And that's precisely where mortgagefindernetwork fits in - it simply takes the hassle out of selecting best mortgage loans. They have a dedicated team of specialist advisors who guide the customer throughout and help them find the best possible deal. They strive to take the customer away from the grind of securing a mortgage loan (note that it can sometimes become a nightmare) through their vast network of lenders to secure the funds required by the customer with far less paper work and a lot more speed!

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Stock Idea - Hindustan Unilever

2008-05-02T09:39:00.001+05:30

Recommendation: Buy

CMP = Rs 251

Price target: Rs 280

Key points:

Net sales of Hindustan Unilever Ltd's (HUL) grew by 19.1% yoy to Rs 3,793.9 crore. The sales growth was driven by a stupendous performance of the home and personal care (HPC) segment, which grew by 21.2% yoy. The foods segment that contributed 16.1% to the revenues grew by 15.6% yoy, pulling down the overall sales growth.
The soaps and detergent business put up a strong show with sales growth of 19.9% yoy to Rs 1,738.2 crore and the profit before interest and tax (PBIT) margin of 13.4% (up by 144 basis points yoy). Personal care product business outperformed our expectations with a handsome growth of 23.5% yoy. I believe extended winter, contribution from new launches under the brands Dove and Ponds, and price hikes contributed to the strong growth in the revenues of the segment. The PBIT margin for the segment stood at 24.7% (up by 25 basis points yoy).
The operating profit margin (OPM) as a whole declined by 70 basis points to 10.75% yoy, mainly due to the increase in the other expenses by 28.3% yoy to Rs 663.5 crore. The raw material cost as a percentage to sales showed a decline of 78 basis points to 54.7%. Hence the operating profit increased by 11.9% yoy to Rs 407.8 crore.
The other income increased by 126.2% yoy to Rs 77.3 crore leading the earnings before interest, depreciation, tax and amortisation (EBIDTA) to increase by 21.7% to Rs 485.1 crore. As the interest income (net of interest expenses) was lower by 44.1% at Rs 20.1 crore, the increase in adjusted net profit was lesser and stood at 16.7% to Rs 378.4 crore.
I am optimistic about the performance of HUL's HPC business and pleased by the fact that the company is exploring ways to maintain the growth in the segment by expanding its presence in premium personal care products. At the current market price of Rs 251 the stock trades at 26.8x and 22.9x its CY2008E and CY2009E earnings per share (EPS) of Rs 9.4 and Rs 10.9 respectively.
I maintain Buy recommendation on the stock with target price of Rs 280.

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True Power of Credit Cards Unleashed by IVI

2008-04-30T21:21:00.002+05:30

According to a study of spending habits of people across the developed countries, it is estimated that an average person owns atleast 2 credit cards. Especially in the developed countries like the US and the UK, people carry less of cash and more of credit cards, and the developing countries are fast catching up! More choices confuse people and that's precisely where many people fail to choose the correct card that suits their lifestyle and spending habits. And that's precisely where IVI Credit comes into picture with its awesome service of providing best offers on credit cards and providing useful insights, all under one roof.

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Stock Idea - Nicholas Piramal India

2008-04-29T11:53:00.001+05:30

Recommendation: Buy

CMP = Rs 354

Price target: Rs 434

Key points:

The Q4FY2008 and FY2008 results of Nicholas Piramal India Ltd (NPIL) are ahead of our expectations. The company's top line grew by 19.0% yoy to Rs 767.9 crore in Q4FY2008 and by 16.2% to Rs 2,872.8 crore in FY2008. The growth was driven by an impressive performance in the branded formulation business (up by 17.8% in FY2008, despite the temporary setback received in Q1FY2008 on account of lower phensydyl sales), strong traction in the Indian custom manufacturing (CMG) operations (up by 18.9% in FY2008) and the pathology laboratory (path lab) business (up by 71.8% in FY2008).
The reported operating profit margin (OPM) expanded by 1,330 basis points to 26.5% in Q4FY2008 and by 340 basis points to 18.9% in FY2008. The margin improved on the back of rising operating leverage and savings arising out of the demerger of the new chemical entity (NCE) R&D unit into an independent company. Even on a like-to-like basis (without considering the impact of the savings from the NCE R&D demerger), the margin expanded by a robust 310 basis points in Q4FY2008 and by 100 basis points in FY2008.
The company incurred a one-time restructuring charge in its international operations, on account of which the reported net profit (after extraordinary items) grew by 141.7% to Rs 132.8 crore in Q4FY2008 and by 53.1% to Rs 218.1 crore in FY2008. In FY2008 the company delivered earnings of Rs 17.5 per share, which were in line with its guidance and ahead of our estimate of Rs 17.2 per share.
The management has guided towards a 16% like-to-like growth, with continued improvement in the OPM to 20.5%, resulting in earnings of Rs 21 per share in FY2009. Given the strong margin expansion, we believe that the earnings guidance provided by the management is conservative. The profits are expected to grow by 20.4% to Rs 533.3 crore, resulting in earnings of Rs 25.5 per share in FY2010E.
At the current market price of Rs 354, NPIL is discounting its FY2009E earnings by 16.7x and its FY2009E earnings by 13.9x.
I maintain Buy recommendation on the stock with a price target of Rs 434.

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Uplift Your Lifestyle with Online Coupons...

2008-04-28T15:24:00.004+05:30

Until a few years before, when we wanted to buy our favourite stuff, we personally visited a shop to try out (and eventually purchase it). We also had very limited information about latest products in the market and also about competition! This led us to always worry whether we got the best deal, and whether being duped for our hard-earned money! This is all passe noe. Here comes a revolutionary concept in online shopping - Shop with Coupons. And no one other than 1-coupons is the pioneer in it.

1-coupons guarantees that you will not get any fake products - only genuines on offer here. You buy the best-selling coupons from this site and use them in the stores of that company just like you use your PIN number at an ATM machine (or a cash-in-the-hole machine). Isn't it simple!! There are many great offers and discounts available of most of the coupons. My favourite coupons are the Sony Style, Dell, and Apple Store coupons. You know, I am (born) crazy about these high-tech gadgets, and I always believed these companies are THE pioneer in technology! There are some exciting offers like:

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Stock Idea - Andhra Bank

2008-04-28T14:50:00.000+05:30

Recommendation: Buy
CMP = Rs 81
Price target: Under review
Key points:

Andhra Bank reported a disappointing set of numbers for Q4FY2008. The profit after tax (PAT) declined by 10.5% yoy to Rs 124.3 crore. The net interest income (NII) was down 11.6% yoy to Rs 342.9 crore. The interest expenses growth of 42% yoy outpaced the 20.5% growth in the interest income, pointing towards pressure on the net interest margin.
The non-interest income continued to be a major contributor to the bottom line with a 32.5% growth at Rs 183.3 crore. The operating expenses were down 7.6% yoy to Rs 213.1 crore, primarily driven by a substantially lower staff expenses (down 21.1% yoy).
Meanwhile, the other operating expenses were up 8.1% yoy. Strong non-interest income coupled with a decline in the operating expenses helped the bank post a positive albeit a muted growth of 5.9% in the operating profit.
The asset quality of the bank improved further as reflected by a 34 basis points y-o-y decline in % gross non-performing assets (GNPA) to 1.07%. On absolute terms as well, the GNPA declined by 6.2%. Meanwhile, the % net non-performing assets (NNPA) came in at 0.15%, down 2 basis points yoy.
The capital adequacy ratio at end of the quarter stood at a comfortable 11.61%, largely in line with the year ago level of 11.33%. Advances registered a growth of 22.4% yoy to Rs 34,556 crore. Of the total advances, retail advances growth stood at 19.5% yoy, while small and medium enterprise advances were up by 22.7% yoy. The FY2008 PAT reached at Rs 575.6 crore indicating a growth of 7% yoy.
At the current market price of Rs 80.6, is is trading at 5.5x FY2009E earnings per share, 2.9x FY2009E pre-provisioning profit and 1x FY2009E book value.
I am currently reviewing the valuation of this stock and would shortly report my findings. Till then, I would advise my readers to include this stock in their portfolio.

Make your life easy with handy tips on best credit cards

2008-04-28T14:36:00.004+05:30

It is estimated, according to a recent study, that an average American owns 3 credit cards. Especially in the developed economy like America, people carry less of cash and more of credit cards. Naturally there are not only interesting offers available on credit cards, but also huge non payments and frauds. If you are looking for a reliable and trustworthy card, who would you approach? Had there been a service that compares all credit cards available in the market, it would prove tremendously useful to general customers! And that's precisely where SmartCreditChoices score over others.

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Stock Idea - Bharti Airtel

2008-04-27T21:54:00.000+05:30

Recommendation: Buy

CMP = Rs 915

Price target: Rs 1,100

Key points:

The net revenues of Bharti Airtel grew by 12.3% qoq and by 45% yoy to Rs 7,819.1 crore during Q4FY2008. The revenue growth was much ahead of the consensus estimate and driven by robust sequential growth of 14.4% and 9.3% in the mobile service business and the non-mobile service business respectively.
The operating profit margin (OPM) declined by 100 basis points qoq to 41.6% during the quarter, largely due to an increase in the operating expenses resulting from the transfer of passive infrastructure (network towers) to its subsidiary, Bharti Infratel. Moreover, the downward revision in the tariffs to Rs1 a minute for all pre-paid schemes in January and higher sales & marketing expenses also dented the overall profitability. The operating profit grew by 9.7% qoq and by 45.1% yoy to Rs 3,251.8 crore.
The interest expenses (net of interest income) jumped sharply to Rs 215.7 crore (up from Rs 81 crore in Q3) largely due to Rs 147.2 crore of losses related to forex fluctuations and mark-to-market losses on the company's derivative exposure. On the other hand, the depreciation charge declined by 6.5% qoq to Rs 970.2 crore (again due to the transfer of passive infrastructure to Bharti Infratel). Consequently, the earnings jumped by 7.6% qoq and by 36.9% yoy to Rs 1,852.9 crore.
In terms of new developments, the company inducted $1.35 billion from private equity investors in Bharti Infratel, valuing the subsidiary at $10-12.5 billion. It has received additional spectrum in seven circles and is eligible in six more circles as per the new norms. In terms of regulations, the Telecommunication Regulatory Authority of India (TRAI) announced the phasing out of access deficit charges and introduced guidelines for sharing of active network infrastructure during the quarter.
At the current market price the stock trades at 20.3x FY2009 and 16.7x FY2010 estimated earnings.
I maintain Buy call on the stock with a price target of Rs 1,100.

Contracts For Difference (CFD) Unleashed...

2008-04-25T15:35:00.002+05:30

CFD for beginners:
Any “wise” investor who speculates on the stock market (in any country) would consider borrowing little bit of money in order to buy shares that she feels would surely go up. She might get a (expensive?) loan from her bank and then buy her favourite shares, in the hope of making a healthy profit that will more than cover the cost of servicing the loan. Another way of achieving a similar goal is to buy a contract for difference (CFD).

What is CFD and how does it work?
A CFD is an agreement between two parties to exchange, at the close of the contract, the difference between the opening price and the closing price, multiplied by the number of shares specified within the contract.

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Stock Idea - Reliance Industries

2008-04-25T11:18:00.001+05:30

Recommendation: Buy

CMP = Rs 2,577

Price target: Rs 3,025

Key points:

Reliance Industries Ltd (RIL) has reported a growth of 35.8% yoy in its stand-alone revenues to Rs 37,286 crore for Q4FY2008 which is on the higher side of market expectations. In terms of segments:

The refining division grew by 36.4% yoy to Rs 28,686 crore.
The petrochemical division grew by 12.3% yoy to Rs 14,119 crore, driven largely by the growth in volumes.
The exploration and production (E&P) division grew by 51.1% to Rs 828 crore.

The operating profit margin (OPM) during the quarter declined by 270 basis points yoy and by 80 basis points qoq to 16.1% in Q4FY2008. In terms of segments:

The margin for the petrochemical division declined by 60 basis points to 10.4% due to higher crude oil prices.
The gross refining margin (GRM) for the company increased marginally on a sequential basis from US$15.4 per barrel to US$15.5 per barrel in the quarter ended March 2008. The GRM was higher on account of sustained structural tightness in the global distillate market and sustained light-heavy differential.
The margin for the E&P division declined by 110 basis points to 54%.

The company's net profit increased by 24% yoy to Rs 3,912 crore during Q4FY2008 over the same quarter last year. Its interest expenses were lower during the quarter due to the rupee's appreciation vis-à-vis the US Dollar whereas the depreciation charge was marginally higher. For FY2008, the consolidated net sales grew by 19.5% to Rs 137,147 crore. The consolidated net profit (after excluding exceptional items) grew by 26.9% to Rs 15,326 crore. The exceptional item of Rs 4,733 crore represents gains primarily arising out of transactions concerning Reliance Petroleum Ltd (RPL) shares.
During the year, RIL made nine new discoveries in its offshore E&P blocks. It also achieved 90% overall progress in the implementation of RPL's complex refinery. Reliance Retail today operates over 590 stores in 57 cities, spanning over 3.5 million square feet of trading space across 13 states.
With nine oil and gas discoveries during the year and a portfolio of exploration blocks, the company holds a great promise in the exploration business. The refinery business would exhibit good performance on the back of superior margins and volume growth in future as RPL's new refinery becomes operational during FY2009. This along with the growing contribution from the retail business provides a well diversified growth opportunity.
Currently the stock is trading at 14.5x FY2010E consolidated earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 11.1x.
I maintain strong Buy recommendation on the stock with a price target of Rs 3,025.

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Stock Idea - UltraTech Cement

2008-04-24T12:19:00.000+05:30

Recommendation: Buy (again!!)

CMP = Rs 824

Price target: Rs 1,100

Key points:

UltraTech Cement (UltraTech) in their Q4FY2008 results reported a top line growth of 9.3% yoy at Rs 1,601.6 crore. Volumes for the quarter stood at 4.88 million metric tonne (MMT) against 4.81 MMT a year ago, implying an increase of 1.5% yoy.
The operating profit margin (OPM) for the quarter improved by 260 basis points yoy to 30.5%. The OPM improved mainly on account of higher cement prices. The earnings before interest, depreciation, tax, and amortisation (EBIDTA) per tonne for the quarter stood at Rs 1,001, higher by 17.8% yoy. However, on a sequential basis EBIDTA per tonne was down 7.9%, as the increase in the cost of manufacturing cement was higher compared to the rise in the cement prices. For the quarter ended, the company reported a profit after tax (PAT) of Rs 282.8 crore, up 22.2% yoy.
The cost of raw material per tonne of cement during the quarter ended shot up by 38.4% yoy to Rs 326. The cost of power and fuel per tonne of cement also was higher by 15.5% yoy to Rs 756.5. This was mainly on account of higher domestic and imported coal prices. Imported coal prices were up almost 100% yoy.
For the quarter ended, the freight and handling expense per tonne of cement was lower by 10.6% yoy at Rs 578.7. However it was marginally up on a sequential basis. The increase in freight and handling cost sequentially can be attributed to the diesel price hike in February 2008.
For the year ended FY2008, on a standalone basis the net sales stood at Rs 5,509.22 crore, up 12.2% yoy. The operating profit stood at Rs 1,720.06 crore, up 21.3% yoy and the PAT stood at Rs 1,007.61 crore, up 28.8% yoy. For the year ended FY2008, on a consolidated basis the net sales stood at Rs 5,623.82 crore, up 13.2% yoy and the PAT was reported at Rs 1,010.05 crore, up 28.7% yoy.
The company has recently announced a dividend of Rs 5 per share. At the current market price of Rs 825, UltraTech is trading at 10.6x its FY2009E earnings per share (EPS) and at an enterprise value/tonne of $137.
I maintain a Buy recommendation on the stock with a price target of Rs 1,100 over next 6 months.

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Stock Idea - Tata Consultancy Services (TCS)

2008-04-23T10:02:00.001+05:30

Recommendation: Buy (very strong!!!)

CMP = Rs 887

Price target: Rs 1,079

Key points:

Tata Consultancy Services (TCS) has reported a growth of 2.9% qoq and of 18.4% yoy in its consolidated revenues to Rs 6,094.7 crore for Q4FY2008. The sequential revenue growth was contributed by a volume growth of 4.8% and rupee depreciation of 1.1%. However, the revenues during the quarter were adversely affected by a 1.6% decline in the blended realisation and a 1.4% decline due to a change in the revenue mix (following a higher offshore proportion).
The operating profit margin (OPM) declined by 118 basis points to 25.5% sequentially. The OPM was dented by lower blended realisation (a 1.6% sequential decline) and an increase in the overhead cost as a percentage of sales (up 70 basis points to 21.1% of the sales). On the other hand, a favourable offshore-onsite mix and a 320-basis-point improvement in the utilisation rate (including trainees) to 75.8% partially cushioned the pressure on the OPM. Consequently, the operating profit declined by 1.7% qoq to Rs 1,552.4 crore.
The other income declined sharply by 25.4% qoq to Rs 78.1 crore. Moreover, the company's effective tax rate increased to 13.5% in Q4FY2008 from 12.7% in Q3FY2008. Consequently, the net income fell by 5.6% qoq to Rs 1,255.9 crore, which was below our expectation of Rs 1,377.7 crore.
The performance was largely dented by a slowdown in the business from two of its top clients (from the banking and financial services domain) and project delays in the other verticals in the last quarter. As a result, a 4.8% sequential volume growth didn't completely translate into higher revenues and improved margins. The stock is expected to under-perform in the near term.
Given the sluggish demand in the BFSI vertical, the management is cautiously optimistic on the demand environment. The scenario is expected to improve, moving ahead.
The company closed six large deals during the quarter. The deal pipeline is also healthy (25 deals with the run rate of over US$50 million) and the management expects the growth to improve in the coming quarters. TCS has set a target of 30,000-35,000 gross employee additions in FY2009.
At the current market price, the stock is trading at 14.9x FY2009 earnings estimate and 14.0x FY2010 earnings estimate.
I maintain very strong Buy recommendation on the stock with a price target of Rs 1,079 over next 6 months.

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2008-04-23T10:00:00.003+05:30

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Stock Idea - Esab India

2008-04-23T09:58:00.001+05:30

Recommendation: Buy (again!!! J)

CMP = Rs 432

Price target: Rs 575

Key points:

For CY2007 ESAB India has reported a healthy 19.4% growth in its sales and a 25.2% rise in its profits. The company continues to grow at a robust rate owing to the government's thrust on infrastructure development. ESAB India remains a leader in the welding products industry.
The consumables business recorded a growth of 16.7% for the full year on account of a good volume growth with marginally better realisations except for the wire segment where price continues to be under pressure. The equipment business reported an increase of 26.8% in revenues while its earnings before interest and tax (EBIT) margin reported a healthy increase of 360 basis points on account of operating leverage.
Overall, the company improved its operating profit margin by 70 basis points to 23.3%.
During the year, Charter Plc, its parent company, increased its stake in ESAB India by acquiring shares from the open market at a price of Rs 505 per share, taking the total holding to 55.56% from 37.31% earlier.
The outlook on ESAB India remains positive. The hectic activity in India's core infrastructure sectors, like roads, ports, airports and construction, and the other industrial sectors are expected to drive the volumes for the welding industry.
Being the market leader ESAB India is expected to make the most of this boom. I maintain strong Buy recommendation on the stock with a price target of Rs 575.

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Stock Idea - BASF India

2008-04-22T12:18:00.002+05:30

Recommendation: Buy
CMP = Rs 210
Price target: Rs 330
Key points:

The stand-alone Q4FY2008 results of BASF India (BASF) are in line with the expectations. The net sales of the company grew by 20.3% yoy to Rs 193.4 crore, mainly driven by a strong 29.6% growth in the sales of agricultural products and a 20.2% growth in the sales of performance products. The plastic division’s sales also grew by a healthy 18.1%.
The operating profit margin (OPM) during the quarter remained flat at 5.1% yoy. The margin for the performance product and chemical divisions improved while the same for the agricultural product and nutrition division, and the plastic division declined during the quarter. Consequently, the operating profit grew by 18.5% to Rs9.8 crore in Q4FY2008.
Despite increased interest and depreciation charges, the company’s net profit increased by 20.2% to Rs4.4 crore during the quarter. For FY2008, the consolidated net sales grew by 24.5% to Rs 1,053.6 crore and the PAT grew by 14.8% to Rs 57.5 crore on the back of the solid performance by the agricultural product and nutrition division during the year.
The consumption boom in the company’s user industries (white goods, home furnishings, paper, construction and automobiles) is expected to continue and hence we should remain optimistic about the company’s growth prospects.
In my opinion, the stock is trading at attractive valuations of 6.9x FY2009E consolidated earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.9x.
Hence I maintain Buy recommendation on the stock with a price target of Rs 330 over next 6 months.

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2008-04-20T11:45:00.002+05:30

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Stock Idea - HCL Technologies

2008-04-17T12:24:00.001+05:30

Recommendation: Buy

CMP = Rs 261

Price target: Rs 318

Key points:

HCL Technologies (HCL) has reported a revenue growth of 7.1% qoq and 23.3% yoy to Rs 1,944.8 crore for the third quarter ended March 2008. In dollar terms, it has reported a sequential growth of 5.2% in its consolidated revenues to US$484.9 million. The sequential growth in the revenues was driven by a volume growth of 6.6% (a 5.3% growth in software service business, an 8.5% growth in Infrastructure Management Services [IMS] and a 4.5% growth in the BPO business).
The operating profit margin (OPM) improved by 88 basis points to 22.3% on a sequential basis. The margin improvement was aided by higher realisations (7 basis points), hedging gains (22 basis points), improved revenue mix (26 basis points) and efficiency gains (48 basis points). This positive affect was however partially offset by higher infrastructure expenses of around ten basis points.
In terms of segments, the EBITDA margin of all the three business lines improved on a sequential basis. The IMS and software service businesses reported a sequential margin improvement of 113 basis points and 93 basis points respectively. The BPO service business reported a 16 basis-point sequential improvement in its margin. However, the forex loss of Rs 27.1 crore as compared with a forex gain of Rs 5.8 crore in Q2FY2008 resulted in a relatively lower earnings growth of 2.9% qoq to Rs 342.5 crore.
In terms of operational highlights, the company signed deals worth $500 million during the quarter. However, it has maintained its full year revenue growth guidance of around 35%, implying a relatively muted sequential growth in Q4FY2008. This is largely due to a slowdown in the business from two of its top ten clients as a fallout of the scenario in the USA. Moreover, the company added just 1,848 employees in Q3FY2008 and has scaled down the recruitment target to 9,000 employees in FY2008 from 12,000 employees targeted earlier.
At the current market price, the stock is trading at 12.2x FY2009 earnings estimate and 10.9x FY2010 earnings estimate.
I maintain Buy recommendation on the stock with revised price target of Rs 318 over next 3 months.

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Stock Idea - Ranbaxy Laboratories

2008-04-16T15:15:00.001+05:30

Recommendation: Buy

CMP = Rs 482

Price target: Rs 625

Key points:

Ranbaxy Laboratories (Ranbaxy) has entered into an out-of-court settlement relating to the launch of generic Nexium, Astra Zeneca's blockbuster drug for gastroesophageal reflux disease. Under the terms of the settlement, Ranbaxy can launch generic Nexium in the USA on May 27, 2014 with 180-days exclusivity. This is ahead of the drug's patent expiry in 2018. Further, Ranbaxy will also supply a significant portion of Astra Zeneca's requirement for Nexium in the USA from May 2010 onwards and supply esomeprazole magnesium (the active pharmaceutical ingredient for Nexium) from May 2009 onwards.
In a separate agreement, Ranbaxy has also been designated as the authorised generic player for two older Astra Zeneca products the heart drug Plendil, or felodipine, and the 40mg version of ulcer pill Prilosec, or omeprazole. Ranbaxy will be compensated for its distribution services on standard commercial terms.
Nexium clocked revenues of $5.2 billion in 2007 and is Astra Zeneca's biggest product. Using the discounted cash flow (DCF) approach, valuation of Ranbaxy's Nexium deal with Astra Zeneca comes to Rs 70 per share.
Clarity on the launch of generic Lipitor both in the USA as well as in the other world markets, along with news flow on further Para IV first-to-file (FTF) opportunities, would act as trigger for the stock. At the current market price of Rs 482, Ranbaxy is trading at 22.5x its base CY2008E and 19.7x its base CY2009E earnings (excluding exclusivity opportunities).
I maintain Buy recommendation on the stock with a revised price target of Rs 625.

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Q4FY2008 earnings preview - Special Report

2008-04-14T09:49:00.003+05:30

Key points:

The earnings of the Sensex companies are likely to grow by 22.2% year on year (yoy) and 2.4% quarter on quarter (qoq) in Q4FY2008.
Excluding ONGC and DLF, the earnings are expected to grow by 16.2% yoy and 3.6% qoq. The estimated earnings growth is expected to be relatively much slower than the growth witnessed in the previous few quarters and indicates moderation in the overall growth momentum.
The report card of banking and capital goods companies will undergo extensive scrutiny following the series of negative developments recently.
The expected 22.2% yoy growth would mainly be achieved on the back of the high growth in the oil & gas sector (76.2% yoy) and the telecom sector (34.9% yoy) while the automobile sector is expected to act as a drag on the Sensex' earnings.
The Q4FY2008 performance gains all the more important against the backdrop of a deterioration in the macro environment, ie soaring headline inflation, a dip in the industrial production during January 2008, lower automobile sales and losses from foreign exchange (forex) derivatives.
Some of the sectors have been facing tough challenges: Cement (high fuel cost), fast moving consumer goods (FMCG; higher raw material cost) and capital goods (capacity constraints).
The Reserve Bank of India (RBI) and the finance minister have taken cognisance of the fears of a slowdown. However, the macro situation does not offer easy solution for stimulating growth because inflation (7.4% as on March 29th) is already well above the RBI's target rate of 5%.
On the positive side, the Union Budget has spelled out multiple measures to stimulate consumption and investments. For instance, the loan waiver scheme and tax slab restructuring are likely to give a major boost to consumption, though in the medium to longer term.
Overall, the scenario looks healthy, though I anticipate further moderation in earnings growth. I would suggest my readers to stay invested.

Stock Idea - Unity Infraprojects

2008-04-10T13:17:00.002+05:30

Recommendation: Buy

CMP = Rs 581

Price target: Rs 970

Key points:

Unity Infraprojects (Unity) has bagged two new orders worth Rs 222 crore. The first order totaling Rs 133.6 crore is for the construction of a mall and a hotel, whereas the second order worth Rs 88.3 crore is for the construction of five towers with basement and a podium.
With these two orders, the company has bagged orders worth around Rs 450 crore in Q4FY2008. This implies its current order book stands at Rs 2,425 crore at the end of March 2008, which is a growth of 21.4% year on year (yoy).
The prospects for Unity are very bright and I recommend Buy call on this scrip with a price target of Rs 970 over next 6 months.

Stock Idea - Madras Cements

2008-04-09T14:12:00.003+05:30

Recommendation: Buy

CMP = Rs 3,202

Price target: Rs 4,800

Key points:

Madras Cements has completed the process of buy back. As a result of the buy back the earnings per share (EPS) of the company will increase by 1.5%. Firm cement prices in south India will be the key driver for the company's earnings in Q4FY2008.
The company had a capacity of 6 million tonne at the end of FY2007, which increased to 7 million tonne at the end of FY2008 and is expected to further increase to 10 million tonne by the end of FY2009. Capacity additions will drive the volumes growth of the company.
At the current market price of Rs 3,202, the share trades at 8.7X and 6.7X its FY2008 and FY2009 earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisaion (EBIDTA) of 5.5X and 5X for FY2008 and FY2009 respectively.
I maintain a strong Buy recommendation on the stock with a price target of Rs 4,800.

Stock Idea - Ashok Leyland

2008-04-08T11:05:00.001+05:30

Recommendation: Hold

CMP = Rs 35

Price target: Rs 43

Key points:

Ashok Leyland's total vehicle sales during March 2008 grew by 26.7% to 10,698 units from 8,444 units in the same month a year ago. The sales in the domestic market grew by 20%, whereas exports were up by 128% for the month. The surge in sales can be attributed to the year-end push in domestic sales and pending export orders. For FY2008 sales are at 83,309 vehicles, in line with our estimate of 83,200 units. For the same period, export sales have grown by 21% to 7,286 units whereas the domestic sales have declined by only 1.3% to 76,045 units leading to gain in the market share.
Ashok Leyland had announced a price hike of 2.5% in end February 2008 to offset the input price increase. Also, the management decided to pass on the benefit of a reduction in the excise duty on buses from 16% to 12% and of the cut in the cenvat on trucks from 16% to 14%. So, the effective price increase has been only to the extent of 1%.
Ashok Leyland has recently concluded an external commercial borrowing program of US$200 million. This is the largest ever loan taken by the company in a single transaction till date. The loan will partly fund the requirements of the company to meet its expansion plans and overseas investments.
Ashok Leyland has a huge capital expenditure (capex) plan of ~Rs 2,000 crore for the next two to three years. It has planned capex to expand its existing capacity and to set up a new manufacturing facility at Uttarkhand. Further additional investment will be required for its light commercial vehicle joint venture with Nissan.
The stock price has corrected substantially, thereby providing decent upside to earlier price estimates of Rs 43. However, it would be reviewed again after the announcement of Q4FY2008 results, clarity on the investment in the joint venture with Nissan and impact of the higher raw material prices.
Currently I recommend Hold call on this stock.

Stock Idea - Orchid Chemicals & Pharmaceuticals

2008-04-07T08:50:00.000+05:30

Recommendation: Buy
CMP = Rs 207
Price target: Rs 375
Key points:

According to a few media reports, Solrex Pharmaceuticals has acquired an 8.06% stake in Orchid Chemicals (Orchid) from the open market. The stake has been acquired at an average price of Rs 165-170 per share. As per media speculation, Solrex Pharmaceuticals belongs to the Ranbaxy group. If the media speculation is to be believed and the Ranbaxy group manages to take over Orchid at a cheap price of Rs 165-170 per share, it would come as a huge benefit for the group. The company will gain from acquiring a fundamentally strong business with a complementary product portfolio and that too at extremely cheap valuations.
Pursuant to the ~40% plunge in the share price of Orchid on March 17, 2008 due to relentless selling by the troubled Bear Stearns and the subsequent margin call trigger for the promoters, the promoter holding in Orchid had reduced from 24% to 17%. The low promoter holding coupled with the sharp fall in the share price made Orchid an attractive takeover target.
Tfair value of Orchid works out to Rs 375 per share, which means that the Ranbaxy group's purchase price would work out to a 120% discount to the fair value of the company and a 93% discount to the 52-week high price of Rs 328. In fact, the acquisition price would be at par with Orchid's estimated FY2008 book value of Rs 167.6 per share.
Orchid's business model is fundamentally strong with a strong presence in the USA and expansion plans underway in Europe. However, the stock has been plagued by several concerns including a relatively low promoter holding and an over-leveraged balance sheet. I feel that the potential takeover of Orchid by the Ranbaxy group or even the holding of a minority stake by the Ranbaxy group in Orchid will ensure long-term growth for Orchid, as the latter would be in stronger and more credible hands.
At the current market price of Rs 207, Orchid is discounting its FY2008E earnings by 11.9x and its FY2009E earnings by 8.8x. The valuations at these levels seem absolutely compelling when viewed in context of the strong growth potential that awaits the company.
I retain strong positive stance on the stock and maintain Buy recommendation with a price target of Rs 375.

Stock Idea - ICI India

2008-04-01T17:36:00.001+05:30

Recommendation: Hold

CMP = Rs 643

Price target: Rs 622

Key points:

The board of directors of ICI India has approved divestment of its adhesives business for a total consideration of Rs 260 crore to an Indian affiliate of Henkel group, subject to adjustments for actual working capital and cash balances. This is in line with AKZO Nobel's (which has acquired 100% stake in ICI Plc, the parent company of ICI India) decision to divest ICI's global adhesives and electronic materials business to Henkel AG.
While ICI's global business is transferred to Henkel AG at a valuation of 2.1X its sales, the Indian adhesive business has fetched 2.3X its expected sales for FY2008. The deal will include transfer of portion of Thane manufacturing facility and about 120 employees currently working with the business and the company's shareholding in its subsidiary Polyinks to Henkel.
I remain positive on ICI India primarily on account of good prospects for paint industry going forward, synergies that would arise on concerted efforts of Akzo Nobel in growing ICI India's business and a huge pile of cash that opens up opportunities for organic and inorganic growth.
Valuing the core business at 20X FY2009E EPS of Rs 17.8 (excluding other income) and adding the cash per share of Rs 266, I arrive at a fair value of Rs 622 for the stock.
At the current market price of Rs 643, the stock trades at 21X its FY2009E EPS of Rs 30.9. I recommend a Hold call on this stock.

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2008-03-26T21:17:00.003+05:30

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Stock Idea - Hindustan Unilever

2008-03-19T12:07:00.000+05:30

Recommendation: Buy

CMP = Rs 231

Price target: Rs 280

Key points:

The revenue of Hindustan Unilever Ltd (HUL) grew by 13.3% yoy to Rs 13,717.8 crore in CY2007 contributed by an increase in its volumes, a better product mix and price hikes effected during the year. Active cost-cutting measures across segments and prudent price hikes led to a 130-basis-point improvement in the company's OPM to 13.7%. The net profit of the company increased by 14.9% to Rs 1,769.1 crore.
The home and personal care business comprising soap & detergent and personal care products (contributing around 73% to the total revenue) continued to show a double-digit growth of 12.2% yoy to Rs 10,046.4 crore. The food business posted a strong growth of 20.4% yoy to Rs 2,231.1 crore. The company's innovative and strong brand building capabilities have resulted in strong growth of 15.2%, 39.8% and 17.2% in its beverages, processed foods and ice cream sales respectively.
Exports were affected by the appreciation of the rupee and grew by 5% in rupee terms as against a growth in excess of 15% in dollar terms. The company is rationalising its product portfolio by exiting from low-value businesses to improve the performance of the export business going forward.
HUL completed the buy-back of 3.02 crore shares from the open market at an average price of Rs 207.13 per share, leading to an outflow of Rs 626.27 crore in CY2007. The equity capital reduced by 1.37% to Rs 217.7 crore. Total reserves declined from Rs 2,502.81 crore to Rs 1,221.49 crore in CY2007. This has led to a hefty improvement in the return ratios. While the return on capital employed improved from 72.6% to 102.2%, the return on net worth improved from 61.2% to 85.0% in CY2007.
Better business performance, efficiencies through cost savings across segments and an efficient collection system resulted in strong operating cash flows of Rs 1,710.5 crore. Nitin Paranjpe (ex-executive director of the HPC segment) has been appointed as the managing director and chief executive officer (CEO) of the company.
At the current market price of Rs 231, the stock trades at 24.8x its CY2008E earnings per share (EPS) of Rs 9.3.
I maintain Buy recommendation on HUL with a price target of Rs 280.

Stock Idea - Genus Power Infrastructures & ICICI Bank

2008-03-18T14:45:00.001+05:30

Genus Power Infrastructures

Recommendation: Buy

Price target: Rs 643

Genus Power Infrastructure Ltd (GPIL) has bought a 6 mega watt (MW) power generation plant from Genus Power Products Ltd (GPPL).
Subsequently, the shareholders of GPPL would receive one fully paid-up share of GPIL for every 60 fully paid-up shares of GPPL currently held by them.

ICICI Bank

Recommendation: Buy

Price target: Rs 1,528

With a view to allay concerns over the difference in margins reported by ICICI Bank, India and the Prudential group UK, ICICI Bank had arranged a conference call to provide clarification.

Beware of nutritional supplements - Issued in public interest

2008-03-15T10:04:00.001+05:30

As you are reading this site, you must be one of the investors - investing in stocks to make big bucks. Each one of you want to make it big - financially. We sometimes also invest in our health, go to gym and take nutrient suppliments and in effect hurt ourselves. Yes, you read it right - Dr. Shaprio has found that the nutrient supplements (consumed during weight loss / body building exercises) cause hair loss! Dr. Shapiro was the first to do a "strip incision" and the first doctor in the Southern U.S. to specialize in "micro-mini grafts." He developed this treatment to a state of the art procedure while others were and still are using plugs and other outdated methods.

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Stock Idea - Bajaj Auto

2008-03-14T10:32:00.001+05:30

Recommendation: Hold

CMP = Rs 2,080

Price target: Rs 2,635

Key points:

The courts have approved Bajaj Auto Ltd (BAL)'s demerger. March 14, 2008 is the ex-date for the price adjustment and March 25, 2008 is the record date for finalisation of the list of shareholders to be allotted shares in the two other companies. From March 14 BAL would trade on the price attributed to Bajaj Holdings & Investments Ltd (BHIL; also the new name for BAL).
For every one share held in the existing BHIL, the shareholders would get one share of the new BAL of Rs 10 each and one share of Bajaj Finserv Ltd (BFSL) of Rs 5 each. The new BHIL will hold 30% stake in both the new BAL and BFSL, which are expected to get listed by May 2008.
From 14 March 2008 the price of the existing BAL will get adjusted to that of the existing BHIL. Sum-of-the-parts (SOTP) calculation attributes a value of Rs 1,044 per share to the existing BHIL.
I have fine-tuned estimates for FY2008 and FY2009 on account of a change in the company's product mix, its higher other income and lower tax rate. The stock is currently trading at 16.6x its FY2009E earnings and 11.6x its EV / EBITDA.
I continue to value the stock using the SOTP valuation method and maintain Hold recommendation with a price target of Rs 2,635.

Best in class casino reviews for future online billionaires

2008-03-13T12:08:00.000+05:30

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Market Highlights & Stock Idea - Punj Lloyd

2008-03-13T10:13:00.000+05:30

Punj Lloyd

Recommendation: Buy

CMP = Rs 319

Price target: Rs 620

Key points:

A Punj Lloyd Ltd (PLL) led consortium with Malaysia's Dialog E & C Sdn Bhd and Petrosab Logistik Sdn Bhd has been awarded an order involving the engineering, procurement and construction (EPC) as well as commissioning of a 512-kilometre, 36-inch diameter onshore natural gas pipeline.
The project is expected to commence immediately and be completed over the next 36 months. The order is valued at USD500 million.
Though the exact quantum of work for PLL has not been disclosed, PLL is expected to carry out the EPC work of the complete contract.
This would definitely help address the concerns of a slowdown in the order inflow for PLL. I am quite optimistic about future prospects of PLL and recommend Buy call with a price target of Rs 620 over next 6 months.

Market Highlights – Profit taking trims Sensex gains

The Sensex came off its early highs on selective profit taking and ended with marginal gains at 16,128. Even as major Asian indices like Nikkei, Hang Seng, Straits Times and Kospi managed to clock 1-2% gains, the Sensex failed to hold on to its early rally and closed way off its highs amid profit taking towards the closing hours.
Riding on the back of yesterday's buoyant close and optimism in several international markets, the Sensex resumed 414 points higher at 16,541 and advanced sharply on sustained buying support to scale above 16,600 and touch an intra-day high of 16,683.
After remaining above 16,500 for the entire first half, the Sensex came under the grip of profit taking and slipped below 16,100 to touch the day's low of 16,064, 59 points down. The Sensex finally ended the session with marginal gains of 5 points at 16,128, while the Nifty gained 6 points to close at 4,872.
Among the frontliners, Cipla soared 4.26% at Rs 204, Grasim Industries rose 3.69% at Rs 2,892, Reliance Energy added 3.19% at Rs 1,328, ICICI Bank jumped 3.19% at Rs 2.98, Bharti Airtel advanced 2.73% at Rs 810.65, HDFC Bank gained 2.69% at Rs 1,367.80, Ranbaxy moved up 2.44% at Rs 464.35 and ONGC soared 2.02% at Rs 1,014.
However, Tisco dropped 6.42% at Rs 766.45 while Hindalco declined 5.47% at Rs 191.80 and DLF, SBI, Satyam Computers, Infosys, Tata Motors and Reliance Communications lost 3-4%.

Stock Idea - Esab India

2008-03-11T11:07:00.000+05:30

Recommendation: Buy

Price target: Rs 575

Result highlights:

For Q4CY2007, ESAB India reported a growth of 11.5% in the net sales to Rs 87.7 crore, which was below our expectation. The consumables division reported a growth of 14.3% yoy to Rs 62.6 crore. The PBIT for the division grew by 37.8% to Rs 16.5 crore. The equipment division reported a dismal performance with revenues growing by only 5.2% to Rs 25.1 crore, while the PBIT for the division grew by 13.2% to Rs 4.7 crore.
The operating profit for the company grew by 33.2% to Rs 19.2 crore. The operating performance of the company continues to be healthy and the margin reported an improvement of 350 basis points yoy to 21.9%. The other income grew by 8.1% to Rs 2.5 crore.
The interest cost declined by 22.2% to Rs 20 lakhs, while the depreciation charge rose by 13% to Rs 1.6 crore. Consequently, the net profit grew by 31.4% to Rs 13.3 crore. For the full year, ESAB India reported a growth of 19.4% to Rs 342.9 crore in the revenues. The operating profit grew by 23% to Rs 80 crore resulting in an improvement of 70 basis points in the operating profit margin (OPM) to 23.3%. however, the net profit for the year grew by 25.1% to Rs 53.4 crore against our full year estimates of Rs 57.4 crore.
The demand for welding products would continue to be buoyant due to the planned investments in core infrastructure sectors like roads, ports, airports, construction and the other industrial sectors in India. ESAB India, the market leader in welding products, is all set to tap this opportunity.
At the current market price, the stock trades at 10.3x its CY2008 EPS and 5.2x EV/EBIDTA. I Buy recommendation with a price target of Rs 575 over next 3 months.

Stock Idea - Maruti Suzuki India

2008-03-07T10:25:00.001+05:30

Recommendation: Buy

CMP = Rs 940

Price target: Rs 1,230

Key points:

Maruti Suzuki Ltd (Maruti) is expected to be the biggest beneficiary of the Union Budget FY2009, which has given a fillip to the automobile sector by cutting the excise duty on small cars from 16% to 12%. The benefit of this reduction in the excise duty has already been passed on to the consumers by Maruti. The company has reduced the price of six models that qualify for the lower excise duty by 3.5% each. The positive impact of this reduction should result in a higher demand and become visible in a couple of months, i.e. from April or May onwards.
The focus on increasing the disposable income in the hands of the consumer by rationalising the personal tax slabs and the recommendations of the Sixth Pay Commission scheduled for April 2008 are expected to spur spending on consumer goods and automobiles.
The sedan version of Swift is slated for launch in the last week of March 2008. The "A star" compact car is planned to be launched in October 2008, simultaneously in the export and the domestic market. The success of these products could further fuel the volume growth for Maruti.
Going forward, we believe the passenger car segment will report a better volume growth compared with commercial vehicles and two-wheelers on the back of an increase in the disposable incomes and changing demographics. Maruti would report a volume growth of 12.7% for FY2009.
At the current market price of Rs 940, the stock trades at 12.2x its FY2009E earnings and 7.8x EV / EBITDA.
I maintain Buy rating on the stock and retain Maruti Suzuki as my top pick in the automobile space with a price target of Rs 1,230 over next 6 months.

World beyond expectations with freebies...

2008-03-06T11:39:00.000+05:30

I am sure there is hardly anyone who don't like free stuff. You would definitely love to receive free shares / bonus stocks from a company, free insurance, or any other freebies! Some companies offer freebies as a part of their promotion campaign, contest (again to promote) or just as public service. But would you not like to receive all the news about who is offering what? Wouldn't it be nice if there is a single resource that tells you all this, at no cost? If you love to receive this, then join me to MySavings.com - a unique site that connects consumers to these offers by publicizing the best promotions of free products, software and services being offered on the internet for the mutual benefit of the consumer and sponsor.

It offers not only free samples and Free Stuff, but also various printable coupons, coupon codes, deals and savings - refreshed daily! There are offers in various categories like mobiles, graphics, health, home, food, personal care, and much more. My favourite is "webmasters" category where there are numerous freebies on website development, like site gadgets, free link exchange, free forum software, among others. Other equally interesting category is "user favourites." It lists some of the most-preferred & high rated offers, which I love the most.

Stock Idea - Aditya Birla Nuvo

2008-03-06T08:37:00.002+05:30

Recommendation: Buy
CMP = Rs 1,602
Price target: Rs 2,035

Result highlights:

The consolidated revenues of Aditya Birla Nuvo (ABN) in Q3FY2008 grew by 60% yoy to Rs 3,661.6 crore. The growth was driven by the solid performance of insurance business, which grew by whopping 185% yoy to Rs 1,485 crore contributing 41% to the overall revenues. Garments, insulators, financial services, carbon black and telecom businesses also contributed well to the overall growth.
The share of high-growth businesses (garments, life insurance, BPO, software and telecom) to the total sales improved to 76% in Q3FY2008 as compared with 68% in the same period last year.
However, the operating profit margin (OPM) declined by 630 basis points to 6.8% on account of margin pressure in the key business segments and increased contribution of insurance division (which is still at its nascent stage). Consequently, the operating profit declined by 17.1% to Rs248 crore.
The segmental performance showed margin decline in all the businesses except telecom, insulators and software. Profit before interest and tax (PBIT) margin declined sharply in garments, rayon, BPO, fertilisers and life insurance businesses reducing the overall margins by 440 basis points to 3.3%.
The net profit after minority interest declined by 46.4% yoy to Rs 30.2 crore due to higher depreciation costs and taxes as tax benefit from loss in insurance business is not fully reflected in the consolidated numbers.
The company continued to invest the cash generated from the value businesses into the growth businesses like life insurance and telecom. The company is also planning for aggressive retail expansion and joint venture for value added fabrics. Recently, the promoters have increased their stake by issuing warrants worth over Rs 4,100 crore to themselves.
At the current market price, the stock trades at a price/earnings ratio of 45.8x FY2009E consolidated earnings and EV/EBIDTA of 14.6x FY2009E.
I maintain a Buy recommendation on ABN with a 12-month revised price target of Rs 2,035.

Insurance - The Need of Time...

2008-03-05T21:26:00.003+05:30

Insurance is THE need of time today. Everyone today needs an insurance - be it life insurance, non-life, general, or whatever. It is the necessity today. You never know what will happen to your possessed / beloved collection (like life of yourself or beloved, your vehicle, etc.). So it is extremely important that you cover the risk of "losing" that particular asset! So isn't it wise to insure the entity of your liking? When it comes to insurance, you should choose only the best. So is Autonetinsurance as far as automobile insurance is concerned.

Autonetinsurance has introduced a new concept - Courier Insurance. It is specifically designed for those types of vehicles which provide a courier service who will do multi-drops in their courier van on a daily basis. It is in fact very important to have the correct insurance that couriers require... Failure to have the correct policy, or not to have a correct policy will lead you to lose your claims on the insurance policy. It offers its users extremely competitive, unbeatable quotes at exceptionally good quality. One can also opt in for personal or business / commercial van insurance. Why Autonetinsurance? Well, it is one of the reputed insurance group which provides affordable, high quality van insurance in the UK. Theiir resources, networking & excellent client relationships that add genuine value for their customers. I would highly recommend Autonetinsurance to everyone who is looking for van insurance... This is an advertisement.

Stock Idea - International Combustion (India)

2008-03-05T10:00:00.000+05:30

Recommendation: Buy

CMP = Rs 423

Price target: Rs 519

Key points:

After the dismal performance in the second quarter, the Q3FY2008 results of International Combustion India Ltd (ICIL) were inline with our expectation with the revenues reporting a growth of 18.4% to Rs 23.1 crore.
The material handling equipment (MHE) division reported a growth of 7.6% year on year (yoy) to Rs 17.3 crore, while on a lower base the geared motor & geared box division (GMGBD) reported a growth of 61.5% to Rs 5.9 crore. GMGBD revenues are expected to pick up from FY2009.
The operating profit grew by 35.4% to Rs 5.2 crore. The operating profit margin (OPM) improved by 280 basis points yoy to 22.3% on account of operating leverage. The net profit was up 59.8% yoy to Rs 3.1 crore, inline with our expectation.
The current order book of the company stands at Rs 51 crore. Rs41 crore worth of orders are for the MHE division, while the balance Rs 10 crore of orders are for the GMGBD. We expect the order inflow to pick up from FY2009 particularly in the GMGBD given the opportunity from the B-2000 series geared motors and geared boxes.
At the current market price, the stock trades at 9x FY2008E and 7.3x FY2009E. In terms of enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) the stock is quoting at 4.9x and 3.9x FY2008 and FY2009 estimates respectively.
I maintain Buy recommendation on this scrip with a price target of Rs 519.

Stock Idea - ITC

2008-03-04T13:59:00.001+05:30

Recommendation: Buy

CMP = Rs 193

Price target: Rs 247

Key points:

In the 2008-09 budget, excise duty rates on non-filter cigarettes have been raised to bring them at par with the duty on the filter cigarettes of corresponding length. For the non-filter plain category (>60mm <70mm), the excise duty has been increased from Rs546/1,000 to Rs 1,323 / 1,000 whereas that for the micro category (<60mm) has been increased from Rs 168 / 1,000 to Rs 819/ 1,000.
The excise duty on filter cigarettes remains unchanged. At present, cigarettes attract duty at varying rates depending upon their length and whether they are filter or non-filter. The steep hike in the excise duty on non-filter cigarettes will have a negative impact on non-filter cigarette volumes of the cigarette industry.
The impact of the excise duty hike will be marginal on ITC, as only 20% of the overall cigarette volume of the company is generated from non-filter cigarettes. The proposed increased in the excise duty (up 142% for non-filter Plains and higher by 388% for non-filter Micros) will see large volume losses for bidis and non-filter cigarettes. ITC has brands such as Scissors, Bristol and Capstan in the non-filter segment. I expect ITC's non-filter cigarette volume to decline by around 2.5% in FY2009.
With about an 80% market share in the filter cigarette segment and new launches under the regular category of filter segment (filer cigarette - <70mm, which contributes around 65% of ITC's cigarette sales), ITC would capture a large population that would be shifting from non-filter to filter cigarettes. Due to the large volume shift, filter cigarette volume may grow by 4.1% in FY2009. Consequently, the overall volume growth estimate for FY2009 is down to 2.8% from 5% earlier. And the FY2009 EPS estimate is down by 0.9% to Rs 9.80.
Effective price hikes across filter cigarette segment and strong performance by the other businesses will lead to a 17.7% growth in the net profit of ITC to Rs 3,689.2 crore in FY2009. That would be 1% less than our earlier estimate of Rs 3,725.2 crore. The company's multiple revenue drivers will help it post a strong growth going forward. At the current market price of Rs 193, ITC trades at 19.7x its FY2009E EPS of Rs 9.80.
I maintain Buy call on the stock with a price target of Rs 247 over next 3 months.

Small Cap Stock Investing for Beginners

2008-03-03T17:48:00.000+05:30

Most stock investors trade in the small cap stock market with the same chance, but only few of them make really good money in penny stocks. Many of these people, who don't make enough profit don’t possess a high level of small cap market understanding. Before your first steps in micro cap investment, it's vital to understand the great advantage and risk of trading stock of companies with a market capitalization of between $200 million and $2 billion. The main advantage of small caps trading, is the opportunity to outperform institutional investors. Because mutual funds have restrictions that limit them from buying large portions of any one issuer's outstanding shares, some mutual funds would not be able to give the penny stock a meaningful position in the fund. To overcome these limitations, the fund would usually have to file with the SEC, which means tipping its hand and inflating the previously attractive price. So now it's the time to shed some light onto these terms.

The term "microcap stock" applies to companies with low or, so called, "micro" capitalizations, meaning the total value of the company's stock. Typically, penny stock companies have limited assets. They tend to be low priced and trade in quite low volumes. When we are talking about the penny stocks, we can define them as stocks that have very low value, highly speculative stocks, unlisted on the stock exchange, and with small market capitalization. If a stock has any of these it can be called penny stock. Although penny stocks do have a very low value, it is very difficult to say how low the value should be for some stock in order to be described directly as penny stock. There are a lot of opinions about the price of the stocks. They're not listed on the stock exchanges, they have a low market cap and, as it was said before, are highly speculative. Having the info is being armed. Information means success not only in business. And for the successful start, being armed with current terms and conditions means being ready for the successful finish.