SR.Stock

Buy IDFC around Rs 161; target Rs 180: ICICIdirect.com

2013-05-16T03:43:00.000-07:00

IDFC is a good candidate for short covering. It had witnessed significant short additions in the last couple of series. Recently, when it underperformed the broader market, the short build-up increased. The stock open interest has gained more than 34 percent from the highest OI seen in the April series. However, the stock had major support at Rs 147, which it did not breach in May despite repeated jitters. We believe this set the stage for good short covering in the stock when the Nifty surpassed its major resistance of January highs

The BFSI space is finding fresh momentum. The leader of the BFSI segment, HDFC Ltd, has made its new lifetime high and continues to sustain above these levels. Hence, we expect a catch-up exercise from its peers like IDFC in the near term. In such a scenario, the stock may head towards its previous highs of Rs 180.

IDFC has surpassed its highest Call base of 160 strike. Closure of these positions should provide fresh momentum to the stock. At the same time, continuous addition at Put ATM strikes indicate prevailing support on downsides. Currently, noteworthy open interest has been accumulated at the 150 Put strike, which is expected to act as a strong support level in the near term

During the recent leg of profit booking, on downsides, it observed cash based buying support near Rs 150. Moreover, from the beginning of the May series, the stock has witnessed strong delivery based volume in the range of Rs 147-155

Fundamental Outlook:

IDFC is one of the specialised infrastructure-financing companies in India catering to private sector players. It has grown its credit book at a healthy pace of 23 percent CAGR to Rs 55737 crore over FY08-13 and continues to grow in the long term. However, with the infrastructure sector witnessing a slowdown, we are factoring in modest credit growth in the near term at 15.4 percent CAGR to Rs 74814 crore over FY13-15E. NIM has been maintained consistently at healthy levels of ~4 percent. With ALM matched very closely, spreads have remained stable at ~2.5 percent over time in spite of interest rate movements. It has a well-managed asset book with GNPA ratio of 0.15 percent and NNPA ratio of 0.05 percent. The return ratios are strong with RoA of 2.8 percent for FY13 while RoE may sustain at 14-15 percent as its leverage (low at 5.2x now) may improve over time.

Recommendation: Buy IDFC in cash in the range of Rs 157-161 for price target of Rs 180 with a stop loss of Rs 147 (Time Frame: 3 months)

Buy Coal India; target Rs 374: Nirmal Bang

2013-04-03T09:53:00.000-07:00

Nirmal Bang is bullish on Coal India (CIL) and has recommended buy rating on the stock with a target price of Rs 374, in its April 03, 2013 research report.

"Coal India, the street has given paramount importance to the government selling a part of its stake in the company, ignoring all the positives. After a stagnant performance over FY08-FY12, CIL's coal production has picked up in FY13 and is expected to accelerate over FY14-FY15. We expect coal off-take CAGR of 5.6 percent over FY12- FY15E versus 2.6 percent CAGR attained over FY09-FY12. CIL has framed its fuel supply agreements (FSAs) in such a manner that it is most unlikely to attract a penalty for short-supply of coal due to the inclusion of force majeure clauses on factors like delay in land acquisition and getting forest and environmental clearances. CIL stock trades at an attractive valuation with EV/EBITDA multiple at 5.7x/4.1x FY14E/FY15E earnings, respectively, well below the average of 10.2x.

CIL stock trades at EV/EBITDA multiples of 5.7x/4.1x FY14E/FY15E earnings, respectively, much below the past 29 months' (post listing) average of 10.2x. It trades below 2SD across parameters like P/E, EV/EBITDA and P/BV and it is at such a low multiple for the first time since its listing. Hence, we believe the CMP factors in all the negatives.

We expect CAGRs of 8 percent/12 percent/13 percent in revenue/ EBITDA/PAT, respectively, over FY12-FY15E, driven by a 5.6 percent growth in volume and a 2.5 percent rise in realisation. We believe coal price hike is imminent given the pressure on costs following the sustained rise in diesel prices and its resultant impact on overall inflation. Cash reserves of CIL are likely to go up from Rs592bn at the end of FY12 to Rs1,054bn (54 percent of current market capitalisation) at the end of FY15E.

The company needs to ramp up output to 584mt by FY17E, which implies a CAGR of 7.0 percent over FY15E-FY17E. CIL has not achieved this kind of growth in the past 10 years and hence it would be difficult for the company to achieve this output target. However, CIL has framed FSAs by including force majeure clauses on all possible causes of coal short-supply like delay on the part of the government to grant and renew mining leases including land acquisition, environmental and forest clearances, shortage of imported coal (no response to enquiries or logistics constraints) and law and order problem (largely pertaining to Maoists). As a result, there are remote chances of CIL attracting a penalty in case of short-supply of coal.

We believe the accounting treatment of OBRA under Indian Generally Accepted Accounting Principles (GAAP) is fair as it limits the scope for any negative surprises in the later part of the coal extraction phase. However, as per the International Financial Reporting Standards (IFRS), OBRA should not be taken into account. Adopting a fair policy, we have treated OBRA as an expense and accumulated OBRA provision in the balance sheet has been considered as a long-term liability (treated as debt in EV/EBITDA target calculation)

Valuation: CIL stock trades at P/E multiples of 10.4x/9.1x based on FY14E/FY15E earnings, respectively, while EV/EBITDA multiples stand at 5.7x/4.1x for the same period. The P/E and EV/EBITDA multiples are well below the past 29 months' (post listing) average of 13.6x and 10.2x, respectively. We have valued the stock at EV/EBITDA of 7.5x FY15E (in line with global peers' one-year forward EV/EBITDA multiple), which is around 25 percent discount to the average multiple. However, we believe the stock could trade at a higher multiple compared to the global average due to conservative accounting practices, mainly related to over-burden removal adjustment. Besides, conservative accounting practices, CIL's return ratios are much above those of global peers. As a conservative practice, we have treated long-term provisions, which includes long-term employee provisions like gratuity and leave encashment, OBRA and mine closure provision, as debt. Our target price of Rs 374 is 21 percent above the CMP and therefore we have assigned a buy rating to CIL," says Nirmal Bang research report.

Source

Buy Hexaware Tech; target of Rs 123: Angel Broking

2012-12-25T04:40:00.003-08:00

Angel Broking is bullish on Hexaware Technologies and has recommended buy rating on the stock with a target of Rs 123 in its December 07, 2012 research report.

“Hexaware Technologies (Hexaware) has announced downward revision of its 4QCY2012 revenue guidance to US$92mn from US$94.7-96.5mn earlier; and thereby its full year CY2012 USD revenue growth guidance is now lowered down to 18% yoy from 20% earlier. The company attributed this to a sudden change in project scope and deliverables from a large client which is amongst its top-10 clients. This decline is likely to impact 4QCY2012 operating margin by 500-700bp qoq. However, the management indicated that this is a one-off event and the rest of the business currently continues to operate as earlier.”

“Hexaware has downgraded its 4QCY2012 revenue guidance from a range of US$94.7-96.5mn (2-4% qoq growth) to US$92mn (1% qoq decline) due to changes in the scope and timeline of one specific project with one of its top-10 clients. Also, hurricane Sandy’s negative impact of US$0.45mn is built in into the guidance cut. The management also hinted that growth and margin in 1QCY2013 could also be impacted, but reiterated that the worst is behind. The management indicated that this will have a material adverse impact on the profitability margin metrics during 4QCY2012 and could impact operating margins by 500-700bp qoq. This downward revision seems to be disproportionate as the revenue cut is of US$2.5-4.5mn while EBITDA is being cut by US$6-7mn. The downward revision in guidance and margin decline has lead to our CY2013E revenue growth estimate being revised down to 13.5% from 15.0% and EBITDA margin to 19.8% from 21.1% earlier. EPS estimate of CY2012 and CY2013 is being revised down by 6% and 8.5% to Rs10.7 and Rs11.2, respectively.”

“We believe that this is a one-off event and the rest of the business currently continues to operate as earlier. This move is undoubtedly negative, but we believe the steep ~25% fall in Hexaware’s stock price over the past three months, captures most of the negatives at this juncture and the current level makes a good entry point to the stock. We maintain our Buy rating on the stock with a revised target price of Rs123, valuing it at 11x CY2013E EPS,” says Angel Broking research report.

Buy Jaiprakash Associates; Target 104

2012-08-12T05:40:00.002-07:00

Motilal Oswal is bullish on Jaiprakash Associates and has recommended buy rating on the stock with a target of Rs 104 in its August 1, 2012 reports.

“Jaiprakash Associates (JPA) reported standalone PAT of INR1.4b for 1QFY13, marginally lower than our estimate of INR1.6b. While EBITDA was in-line at INR7.7b, led by better operating performance of the Cement and EPC divisions, PAT growth was arrested by higher depreciation and dismal performance of the real estate (RE) division.”

“Cement volumes were 3.59m tonnes (ex-Gujarat/Andhra Pradesh) and realization was up INR385/tonne QoQ. Increase in cost (~INR200/tonne) restricted EBITDA improvement - up INR188/tonne to INR1,035/tonne. Higher depreciation restricted EBIT growth; EBIT for 1QFY13 was INR2.3b, lower than our estimate of INR2.4b, despite higher EBITDA. EPC division performance continued to surprise. EBIT margin was a robust 30% (fourth consecutive quarter of high margin). Revenue was in-line at INR12.2b (v/s INR12.7b in 1QFY12). RE division revenue was INR1.6b (v/s INR5.6b in 4QFY12 and INR3.5b in 1QFY12), the lowest since 4QFY10, despite pre-sales of INR70b+ as at March 2012. The management had indicated focus on delivery/execution in our interaction in the past; revenue booking should have accelerated, in our view. EBIT margin was 40% v/s 44% in 4QFY12 and 53% in 1QFY13.”

“We marginally downgrade (by ~4%) our FY13 earnings estimates to factor in higher depreciation, dismal RE performance, partly offset by Cement/EPC division performance. We expect JPA to report standalone net profit of INR8b in FY13 (down 22%) and INR10.3b in FY14 (up 29%). Maintain Buy,” says Motilal Oswal research report.

Buy Bharti Airtel Target 370: Motilal Oswal

2012-07-15T10:53:00.001-07:00

Motilal Oswal has come out with its report on telecom space. The research firm recommends buy rating on Bharti Airtel.

“In 1QFY13, we expect the average wireless traffic for the top-4 operators to grow ~4% QoQ. Wireless RPM decline is likely to continue due to relatively higher competitive activity amidst regulatory uncertainty. Operators have not been able to fully pass on the negative impact of hike in service tax and change in regulations f or tariff vouchers. We expect Idea to continue reporting the highest traffic growth at 6% QoQ, followed by Bharti (3.5% QoQ).”

“We expect consolidated EBITDA margin for Bharti to remain largely flat QoQ at 33.2%; margin for India and South Asia business is also likely to be stable. Idea is likely to report consolidated EBITDA margin of ~28%; flat QoQ on an adjusted basis. For RCom, we model consolidated EBITDA margin of 32% in 1QFY13. The regulatory environment continues to be uncertain. While EGoM decided to offer higher quantum of spectrum (10MHz+) in the upcoming auction mandated by the Supreme Court, the crucial decision on reserve price has been delayed. Potential industry consolidation/exit of new entrants could lead to improvement in the operating environment for the Indian wireless sector, given the discounted pricing being offered by challengers to buy market share.”

“Over FY12-14, we expect 14/25% EBITDA CAGR for Bharti/Idea, led by 10/17% traffic CAGR in the India wireless business. Reiterate Buy on Bharti (trades at an EV of 7x FY13E and 5.7x FY14E EBITDA) and Idea (trades at an EV of 6x FY13E and 4.6x FY14E EBITDA). Maintain Neutral on RCom,” says Motilal Oswal research report.

Rakesh Jhunjhunwala Quotes

2012-06-04T03:57:00.003-07:00

“If a girl is beautiful a suitor will come. If a stock is beautiful, a suitor will come. So I don’t search for suitors when I buy the stock.”

“I have learnt two things about the press and wives. When they say something – don’t react.”

“India will remain in a phase of very good economic growth for the next 30 years.”

“Markets are like women — always commanding, mysterious, unpredictable and volatile.”

“Anticipate trend and benefit from it. Traders should go against human nature.”

“ Successful investors are opportunistic and optimistic ones.”

“The mother of bull all runs is still to come.”

“I have two-three dreams in life. The first dream is that when I die and only truth of life is death, how many people come to my funeral and say, a good man has died. That is the greatest ambition in my life. Second thing is I want to earn the greatest wealth of the world in the most legitimate manner; practical legitimate manner and leave the largest part of it to charity.”

“Respect the market. Have an open mind. Know what to stake. Know when to take a loss. Be responsible.”

“Growth comes out of chaos.”

“Market is above individuals. The market is rational. An individual can never be smarter than the market.”

“Maximise profits and minimise losses.”

“Invest in a business not a company.”

“Emotional investment is a sure way to make loss in stock markets.”

“If in doubt, listen to your heart.”

“The country has rediscovered its confidence.”

“Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it.”(Goethe)
“Aspire, but never envy.”

“Be paranoid of success — never take it for granted. Realise success can be temporary and transient.”

“Build a fighting spirit — take the bad with the good.”

“When you see a horizon, it seems so distant. When you reach that horizon, you will realize how many more horizons are within reach.”

“Have some cash in hand so that you can grab the opportunity when it occurs.”

“Blindly following stock picks by big investors is not a wise thing to do.”

“Look at the sources of Profits. What are the reasons that will give rise to Profits in the medium and long-term term”.

“Look at the factors and circumstances that will create an opportunity for business in the sector”.

“If there is value in Large Cap, buy it. If there is value in Small Cap, buy it. But don’t obsess on irrelevant matters”

“Give your investments time to mature. Be Patient for the World to discover your gems”.

“Never get carried away by aberrations, recognize and respect them but do remember that the market corrects its aberration though it takes time.”

“Don’t worry about things that you neither know about nor can do anything about. It’s not important. Instead focus your energies on what you can and should know well enough – the business of the company you are investing in“.

“Never in my life have I not made an investment because the stock is not popular. In fact I like to make the investment when the stock is not popular.”

“vadhere vadhare levanu vadhare vadhare beichavanu”-Buy as the market is rising sell as the market is falling.

“Like wives markets are always right. With wives you can argue but with markets you can’t.
“If the Indian economy performs well, the money will come from Timbaktu, but it will come,”

“In trading, we make mistakes everyday. You know one author once said beautifully, that it’s not important that you are right or wrong in trading; it’s important how much you lose when you are wrong and how much you make when you are right.”

“You know, trading always keeps you on your feet, it keeps you alert. That’s one of the reasons why I like to trade.First thing I’ve learnt is that markets work. They are the best mechanism to build societies.”

“Either don’t come to markets or don’t regret what you have done.”

“Teji me sab ka bol bala, mandi me sab ka muh kala.”

“I only make mistakes, which I can afford, where I can lift to begin again.”

“You do not succeed without obsession.”

“The market is supreme.”

“With time, everything changes and passes. Find the excesses.”

“As a rule in trading never ever average.”

“Always know what to stake and when to take a loss.”

“Make the investment when the stock is not popular.”

“The prettiest part of the stock is that it has to be cheap – the entry point.”

“Do not invest in those cheap stock which will give huge returns when your children are grown up.Think about a reasonable time also.”

“Hold on to a stock only if will give returns and not become emotionally attached to it.”

“In the market you have to be like a chameleon, always changing your colours and going with the trend. You’re lost if try to go against it.”

“See the world as it is, rather than what you would like it to be.”

“When opportunities come, they can come through technology, marketing, brands, value protections, capital, etc. You need to be able to spot those.”

“Invest in the small caps, which will be the large caps. The biggest challenge of investing is that you should recognise whether organization has the ability to scale.”

“I have far less than people think, but far more than I need.”

“I initially wanted to become a broker, but I didn’t have the capital to be a broker, so I started investing.”

“Markets make excesses but those excesses come to an end.You have to judge how long will that excess last and when will it end.We will try and make money both ways.”

“Trading is against human nature.”

“You have to lose many a battle to win the war”. (Churchill)

“My decision to aggressively invest in the asset class of Indian equities at the right time was a very important determinant of my success.”

” Value investing is relevant in all circumstances. But thought processes and principles are dynamic and not static. Be open to change.”

“If you see an opportunity, grab it today!

Buy M&M; target of Rs 851: SPA Research

2012-04-12T03:07:00.002-07:00

SPA Research is bullish on Mahindra and Mahindra(M&M) and has recommended buy rating on the stock with a target of Rs 851 in its April 09, 2012 research report.

“Mahindra & Mahindra, flagship company of the Mahindra group, is the market leader in Utility Vehicles (UV's) & tractors in India, having ~56% & ~42% market share respectively. It is one of the most diversified conglomerates in the Indian automobile space with presence across segments viz. passenger vehicles, LCVs, Tractors, 3-wheelers, 2- wheelers & M&HCVs. Given the Company's thrust on new product developments, success of XUV5OO and attractive valuations, we initiate a "BUY" recommendation on the stock.”

“Post success of XUV5OO, M&M plans to further enhance its product portfolio with several launches lined up in the coming months. It plans to launch Maxximo- passenger van (for personal transport) in Q1FY13 & Compact SUV in Q3FY13. It also plans to launch variants of Reva (REVA-NXR) & Verito (sub 4m) in H2FY13. Apart from this, M&M plans to launch two models from the Ssangyong's stable viz. Korando C & Rexton (luxury SUVs) in the automotive segment over the next 15 months. We expect automotive division's volumes to register CAGR of ~13.7% over FY12E-FY14E. M&M has got strong traction in the pick-ups segment i.e. in the less than 3.5 tonnes category. It has strong presence with ~ 22% market share in the sub 2 tonnes category & ~68% market share in the 2-3.5 tonnes category. The passenger version of Maxximo has also gained market share to the tune of ~31% in the Maxi-cabs category. We expect M&M's pick-ups & MPV segment to be the future growth drivers & register volumes CAGR of ~19.0% over FY12E-FY14E.”

“M&M is expanding its tractor capacity by 100000 units at Zaheerabad to 333000 units scheduled to commence operations by July 2012, by incurring a capex of INR 3bn. Tractors being highly dependent on monsoons & rural income, its demand is very erratic in nature. With some structural hiccups viz. lower crop realization & slowing agricultural credit, we believe M&M volumes to grow by 8.0% in FY13E and bounce back to ~14.0% in FY14E, resulting in a CAGR of 14.9% in tractors revenues (~38% revenue contribution) over FY12E-FY14E.”

“M&M is the market leader in UV's & tractors in India. With the ramp up of capacity at Chakan, success of XUV5OO, several launches lined-up in the coming months, rebound in tractors sales and investments in subsidiaries viz. Reva, Defence & Ssangyong providing second leg of growth opportunities in the years to come, we expect M&M’s standalone revenues & profits to register a CAGR of 18.0% & 12.9% respectively over FY12E-FY14E. We have valued M&M using SOTP method, to arrive at a target price of INR 851 over a period of 18 months. We initiate a "BUY" recommendation on the stock,” says SPA Research report.

Buy Tata Motors target of Rs 253

2012-01-17T12:43:00.000-08:00

LKP is bullish on Tata Motors and has recommended buy rating on the stock with a target of Rs 253 in its January 10, 2012 research report.

"Tata Motors, robust performance from Jaguar as well as Land Rover in the emerging markets enabled TAMO to put up a strong performance over FY 12, as a result of which the YTD sales have reached above 2,16,000 units. This indicates that even if the company sells about 28,000-30,000 units per month hereon for the rest of the three months of FY12, JLR can easily cross 2,90,000 units, which is way above our previous conservative estimate of 2,70,000 units. The traction which is shown by JLR on increasing demand for it's recently launched Evoque, a smaller engine fitted Jaguar XF and emerging markets like China, Middle East, Russia, Brazil etc, we expect the company to offset any losses happening in the Eurozone. Margin wise, we still believe that Evoque will not be a dampener as differential pricing in various geographies will help the company prevent any margin fall. We now expect JLR to grow at 19.4%/16.3% in FY 12E/13E to reach 291k/338k respectively."

"Robust demand for LCVs insulated from the macro headwinds is helping the company to put up a solid show on the CV side of the business. LCVs used mainly by the consumption side of the industry and last mile transportation still remains buoyant. We have increased the LCV volume forecast to 353k/414k from our previous estimate of 323k/383k for FY12E/13E, translating into growth of 23%/17% respectively. The company's LCV (Tata Ace and variants) capacity expansion plan at Pantnagar and setting up new capacity at Dharwad will yield results from FY 13 onwards, due to which we have increased the FY13 numbers by 8%. On the MHCV side, the company is still showing resilience with moderate growth of close to 7%. With freight rates stable except for eastern parts of the country and expectation of interest rate cycle reversing though industrial growth is slightly slowing down, we are maintaining our MHCV estimates at 222k/239k for FY12E/13E, which implies a growth of 6%/8% respectively."

"After having a dismal run in the first half of FY 12, PV sales is showing signs of improvement with Nano sales now consistently selling 6k-7k per month. With new variants of Nano coming up we expect the steady state rate of Nano to be at 10,000 per month in FY13. Also with a variant of Indica Vista launched recently the PV sales are looking upwards. With the upcoming launch of Tata Safari Storme as displayed in the Auto Expo 2012, we expect the company to show some revival in its flagging UV business. We now expect PV sales to be at 301k/347k in FY12E/ FY13E, a growth of (2%)/15% respectively."

"With robust expectations from JLR business and steady business from the domestic side, we are revising our volume estimates as well as margin estimates for the company, though we feel that in short term, margins will be affected due to currency risks. We expect consol margins to be at 11.7%/12.8% for FY 12E/13E from our earlier expectations of 11.7%/12.2%. We now value the domestic business at 8xEV/EBITDA at Rs 122 and JLR at 3x EV/EBITDA at Rs 141. We arrive at a target of Rs 253, which is an upside of 19% from current levels after subtracting Rs 28/share of net debt and adding back the subsidiary value of Rs18," says LKP research report.

Catch Them Young: ETIG's 100 Fastest Growing Companies

2011-09-24T05:34:00.000-07:00

The economy is on a recovery mode and the bulls in stock market have once again taken the centre stage. The pundits in market have started predicting Sensex to reach 20K and beyond. Is this the beginning of another bull run? In last bull run which started in 2003, many small- and midcap companies broke into the large-cap club by the time rally came into an abrupt end in early 2008. While no one can guarantee about the future performance of current companies, the past performance is an essential tool to predict the future.

ET Intelligence Group, in a bid to help its reader find out tomorrow's gems, has come out, like every year, with the list of India's fastest growing small companies. The stocks of few of these companies are definitely going to turn out to be multi-baggers of tomorrow. Even if investors can't pinpoint on such particular stocks, a portfolio approach, based on the performance analysis of individual companies, would definitely yield good returns

We had brought out a similar list last year and it generated tremendous interest amongst our readers. With the audited balance sheets of most companies are out, we thought of updating this list. Here, we present the 2009 Edition of ETIG's 100 Fastest Growing Small Companies. (Log on to www.etintelligence.com to access the complete list )

We have excluded the large sized companies from the list for the simple reason that we keep on hearing much about such companies. We have also excluded companies with total revenue of less than Rs1 crore, companies from banking sector and pure-investment companies. We feel that such companies (with less than Rs 1 crore of revenue) are at a very nascent stage. Similarly, the companies in financial services space work in a different environment and face unique set of regulations compared to the companies from other sectors and the usual comparison may not hold true for them.

The top 100 companies appearing in our list mostly belong to the old economy sectors.

Around 90% of the top 100 companies are from manufacturing sector, clearly indicating the dominance of manufacturing in small and medium enterprises. Some of the sectors to which these companies belong are capital goods, cement, pharmaceuticals and metals among others. Topping the list are capital goods and cement sector with 14 and 10 companies, respectively.

The company that topped our list is Sulzer India followed by Oil Country Tubular. Sulzer manufactures pipe and other engineering products and is subsidiary of a Swiss multinational. Similarly, Oil Country Tubular is a manufacturer of drill pipes, tubing and other such highend engineering products. The other companies that appeared in the top 10 list are Tata Sponge Iron, Zydus Wellness, Liberty Phosphate, Rain Commodities, Engineers India, India Infoline, Crisil and Praj Industries among others. Barring India Infoline and Crisil, majority of these top 10 companies belong to highend manufacturing sector.

So how did we arrive at this interesting list of 100 companies? There are nearly 5,000 companies listed on the BSE out of which around two-thirds are traded on a regular basis.

Finding 100 out of these 5,000 companies was not an easy job. We took a two-pronged approach to find out these 100 companies.

Initially, we considered a sample of close to 2,300 companies whose stocks are actively traded and historical data is readily available. We wanted to focus on mainly small- and mid-sized companies. At the same time we didn't want to consider very small companies. It is a better idea for retail investors to leave such smaller companies to venture capitalist and look at them only when they attain a minimum size.

Keeping all these factors in mind, we generated two lists, one based on revenue (annualised) and the other one based on market cap, both in descending order. All those companies which figured among the top 10% and bottom 50% of these two lists were knocked-off . This process essentially removed around 1300 companies from the sample.

The remaining 1,000 companies became our universe for further analysis based on growth in annualised revenue, operating profit and net profit in last twelve quarters. We also included other quantitative parameters like debtequity ratio, interest coverage ratio, operating cash flow and return on capital employed (ROCE) among others.

While filtering the companies based on growth parameters , we considered only those companies, which beat the average growth rates of all the 1,000 companies. Also, we eliminated those companies that have a debtequity ratio of more than 2.0 in their latest financial year and relatively lower interest coverage ratio. After this process, we were left with almost 300 companies.

At this stage, we decided to rank the companies based on the their 3-year growth rates, the ratio of operating cash flows (actual) to cash profit (reported) and 3-year average return on capital employed (RoCE). First we arrived at rankings based on individual parameters and then came out with a composite ranking (to be read as final ranking). While arriving at the composite ranking, we assigned 50% weightage to the quality parameter –cash flow ratio and RoCE– and rest to the revenue and earnings growth. Finally, we weeded out companies, which reported losses in recent quarters or whose growth was too dramatic.

Our emphasis on quality factors ensured that the companies in our final list are not only growing fast but the growth has not come at the cost of putting their financial future in peril. The cash flow from operations has kept pace with the growth in earnings and their balance sheet remains out of danger. Besides, a high RoCE ensures surplus is left over for re-investment and sharing with shareholders even after paying off the creditors and bankers. This in turn ensures the sustainability of their business model.

However, investors should not take their investment decisions solely based on these rankings. They can use this list as a stepping-stone but readers are advised to do their own research and due diligence while betting their hard earned money on any of these stocks. And always remember , past returns are no guarantee for future performance.

The forthcoming issues of Investor's Guide will have a detailed analysis of select companies from the current list.

Source : The Economic Times

'The worst seems over for now' - Shankar Sharma

2011-08-28T23:23:00.000-07:00

Shankar Sharma, chief global trading strategist, First Global, spoke to Ujjval Jauhari on the markets.

How do you see the markets panning out from here on, given the recent sell-off? What are the likely triggers for an upside / downside?

The worst seems to be over for now. We will have to see what fresh developments take place globally, but I don’t see an immediate downside from here on. The markets have corrected substantially and we can argue to a reasonable extent that the negatives are factored in at current levels.

The immediate-term triggers for an upside can be a good set of GDP numbers, the Reserve Bank of India (RBI) changing its hawkish stance and a solution to the political imbroglio.

What is your opinion on the first quarter results of India Inc?

The June 2011 quarter results were tepid; there were not many positives. The results were not good enough to propel the markets higher and I don’t see any improvement for the second quarter too. I expect earnings downgrades for the rest of the year.

How are the foreign institutional investors (FII) viewing developments across the world and especially in India?

The FIIs surely have no options but to come to emerging markets (EM), given the problems in the US, Europe and Japan.

But overall, if the global equities are in a weak spot, this factor by itself may not be enough to take the Indian markets higher. However, the FIIs have not turned negative for India post this correction. What may queer the pitch is the local political situation more than anything else.

Given the sharp correction in commodities and commodity-related stocks, do you see any value in them now?

Most industrial commodities move in tandem with the equity markets. So, if equity markets recover, one can expect an improvement in commodities. Looking at global scenario, there might be a technical rally. But on a secular basis, I don’t think this trend can be sustained.

Are there any other sectors where you see some value? Any mid-cap or small-cap picks?

Valuations of small-caps look reasonable. They have tanked 80-90 per cent from their highs. I think the next bull market will happen in small caps. One can start bottom fishing in this space. However, one has to be careful in selecting the stocks.

What is your advice for investors in the present scenario?

Fixed deposit rates are far more predictable and are a good bet. As of now, I don’t think any incremental money is going into equity markets. Medium-to-long term investors can start investing 20 per cent of their funds into equities.

source:smartinvestor.in

Buy GTL Infra; target of Rs 20: A C Choksi

2011-08-09T23:06:00.001-07:00

A C Choksi is bullish on GTL Infra and has recommended buy rating on the stock with a target of Rs 20 in its July 29, 2011 research report.

“GTL Infrastructure Limited formed in Feb.2004 belongs to the Global Group enterprise. The Global Group has 7 operating companies (two of which are listed on the stock exchanges) operating in 46 different countries. GTL Infrastructure Limited is engaged in the business of Shared Passive Telecom Infrastructure in India. The company builds, owns, operates and maintains passive network infrastructure (towers) to cater to the infrastructure needs of cellular telecom operators. GTL's towers are distributed across High Average Revenue Per User (ARPU) generating Metros and Class A Circles and high growth regions of Class B & C Circles which benefits the telecom operators to rollout 2G, 3G or BWA on a pan-India basis in a short time.”

“The company reported a net loss of Rs. 139 crore in the year ended March 2011 as against a net loss of Rs. 2.58 crores during the previous year. Sales rose 40.86% to Rs. 490.12 (standalone) crores in the year ended March 2011 as against Rs. 347.95 crores during the previous year. The company has outstanding FCCBs worth USD 228 million or Rs 1007.78 crores due in Nov.2012 which are redeemable at a premium of 40%. The company has a debt of Rs 5040 crores at an interest of 10.5% which is mostly secured, as the company has an asset cover ratio of one and half times. The stock price of the company fell by 48.5% on June 20, 2011 after its parent company GTL Ltd withdrew a $ 300 million capital raising plan for the company. Rumours about the company's promoters having pledged all their shares also added to this decline. The promoters of GTL Ltd pledged 99% of their shares on July 4, 2011 with their lenders due to the amount of outstanding debt in the company. Both GTL and GTL Infrastructure have gone for a Capital Debt Restructuring to change their capital structure in order to help them with their debt crisis. The telecom industry has also faced problems post the 2G scam as many investors refrained from investing in the sector. Higher interest rates, low average revenue per user and inflated diesel costs have affected the company's profitability significantly.”

“Higher interest rates, low ARPU and hiked diesel costs have affected the profitability of the telco's is the last year. We believe that ARPU growth with new services like the 3G and the NTP-2011 along with various other measures taken by the government will offer positives to the telecom sector in the coming future. GTL Infrastructure has a portfolio of 32,650 towers. Considering the level of operations the company will not find it difficult to redeem the outstanding FCCB's. The company's consolidated figures suggest that the company will start making decent profits in the future. We believe the CDR will prove successful and GTL Infrastructure will be able to slash the debt mountain off its balance sheet as most of the debt is secured as the company has an asset cover ratio of 1.5 times. We recommend a 'BUY' call on the stock with a target price of Rs 20,” says A C Choksi research report.

Source:moneycontrol.com

Tulsian's multibaggers for today: Cummins & Ruby Mills

2011-08-03T22:59:00.000-07:00

In an exclusive interview to CNBC-TV18, SP Tulsian of sptulsian.com spills out his multibagger picks —Cummins & Ruby Mills .

He finds Cummins strong business model, health order pipeline and consistence on margins lucrative to acquire the stock with a time horizon of about six to eight months. He sees vast rerating for the Ruby Mills stock and says, he is positive on the stock from both short-term and long-term point of view.

Below is an edited transcript of SP Tulsian’s comments on CNBC-TV18. Also watch the accompanying video.

On Cummins

Cummins may fall at about 1.5% to 2% in the EBITDA margin. It is likely to get offset by the volume increase of the company. In FY12, the company posted an EPS of Rs 30 and has been a consistent performer with top line of close to about Rs 4,000 crore. In FY12, earning the EPS of Rs 30 is likely to increase to about Rs 35 to Rs 36, which is a PE multiple of 15.

The stock has been ruling into a PE multiple of close to about 25. They are into power generation, automotive business and manufacturing of diesel and gas based generators, which have robust demand into the industrial segments. They have a strong business model and a strong order pipeline. The company has always maintained its margins.

One can acquire the stock at a price of Rs 700 and within a time horizon of about six to eight months he can get a price of about Rs 750.

On Ruby Mills

Ruby Mills is an interesting play. The company owns about12,200 square meters of land at Dadar in Mumbai. They have leased the land for joint development in which the ownership, building and the land will remain with the company. The huge inflow from this property has started flowing in into the books of the company.

In FY11, they booked an income of about Rs 70 crore from this company. About four lakh square feet has been leased out and by end of 2011, and the entire property will get leased out through the lease rental or the advance premium. The company is recognising the income from this property on the cash flow basis.

The company also has their existing real estate property developed on the same plot. It has the balance FSI of close to about 5-6 lakh sq. ft that is likely to get developed in the next six months or so. The valuation of the Dadar property estimates to about Rs 2,000 crore. The company should be able to have a PAT of close to about 75-100 crore every year, on a sustainable basis, which will give them an EPS of close to about Rs 300 to Rs 350 starting from FY13.

There is going to be a vast rerating of the stock. The stock is likely to be move to about Rs 1,500 in next six to eight months time. I am quite positive on the stock from both short-term and long-term point of view.

On JSW Steel

In the near-term there is not much of an upside until there is clarity on the mining issues and production. The company recently raised their production to 10 million tonne and the interest and appreciation burden is to be booked by the company in the financials. Hence, with all this into consideration, I don’t think that one can really take comfort or safe call for at least for this quarter. One has to wait for another 10-15 days to find out how the events shape up. In the near-term, I don’t think much weakness is seen from hereon.

On Lanco

There is no general comfort on most of the infrastructure stocks — GMR , IVRCL , Lanco or GVK . One cannot say if the trend applies to Lanco or if Lanco has bottomed out at Rs 16, however, there is renewed interest with the kind of up moves seen Unitech, which has also been deceptive.

I won’t be using this as a fundamental call but for the technicals, one has to play with the trend. One has to take a day to day call but for the fundamentals one can see shares coming back to Rs 15 to Rs 16 level where he can contemplate buying.

On Power Grid

Power Grid has a strong project pipeline but they all seem to be back ended. Their project with Tata Power was expected to be complete in FY12 but not much has been flown in. The Q1 result has been a bit disappointing and Q2 is unlikely to have any positives. Therefore, taking all this into consideration, the stock has been moving in a range post its FPO holding — 95 on its bottom and 110 on its top. Hence, maybe that was a broad range and it will continue to remain within that range. One can take it as a stock likely to move in a range of Rs 100-110 in next couple of months or so.

On IVRCL

IVRCL earnings are quite bad and in fact the IVRCL Prime, where the company has majority stake has been seen as the culprit. Going by the standalone performance of IVRCL Infra, I don’t think that there are any concerns. However, on a consolidated basis, the market is going to be nervous on the stock because of the results.

On the listing of Inventure

It is unfortunate because to see de-growth in the business of the company. The client business fell by more than 50% in FY11. The company’s debt stands at 50 crore, expected market cap is Rs 250 crore, EPS was Rs 4.44 in FY12 and it translates to a PE multiple of 25 plus. I don’t see a value of more than Rs 30 but you never know what will be the speculative element. Instead of looking to the fundamental one has to watch whether the operations will go on for a week or a month or ten days and when it will subside. However, ultimately the issue has to come and settle at around Rs 30.

On Reliance Infra

The developments have been positive but I don’t know how long it will get reflected into the share price. Whenever we see the kind of these positive news flows or maybe the short coverings or some informed buying coming in and you see these stocks moving up by Rs 25 to Rs 30 in one go. Hence, probably it can take the share price to about Rs 585 to Rs 590. However, I won’t be taking a positive call on the stock. It can give a trading bump for those who want to look for the trading gains, maybe in next couple of days or so.

Source : moneycontrol.com

Suzlon Energy can move upto Rs 75: SP Tulsian

2011-07-31T22:56:00.001-07:00

SP Tulsian, sptulsian.com feels that Suzlon Energy can move upto Rs 75 in next 6 months or so.

Tulsian told CNBC-TV18, "Suzlon Energy - all the positive news and indications are coming in – Hansen stake sale, RePower getting squeezed or delisted or even the enabling resolution to raise Rs 5000 crore because in the last rights issue also we have seen the amount getting infused from the promoters or the associates because at that time the rights issue was made at much higher price than the prevailing market price, so maybe the debt of about Rs 12,000 crore, which is still remaining in the books of company may get partly liquidated by this fresh capital raising plan."

He further added, "If you see the results of Q1 all this indicates that management is now firm and taking the positive and affirmative steps which should go well for improving the valuations of the stock and I am expecting that the share can move to about Rs 75 level in the next 6 months or so."

Source:moneycontrol.com

Buy Sterlite Industries; target of Rs 205: Angel Broking

2011-07-31T22:51:00.000-07:00

Angel Broking is bullish on Sterlite Industries and has recommended buy rating on the stock with a target of Rs 205 in its July 25, 2011 research report.

“Sterlite Industries’ (Sterlite) consolidated net revenue for 1QFY2012 stood at Rs 9,824cr, slightly below our estimate of Rs 10,200cr. Net profit at Rs 1,640cr was also slightly below our estimate of Rs 1,700cr. For 1QFY2012, Sterlite’s consolidated net sales grew by 65.8% yoy to Rs 9,824cr. Top-line growth was aided by higher metal sales volume as well as metal prices. Further, merchant power sales during the quarter increased by 244.2% yoy to 1,652mn units. However, the company’s power tariff declined by 28.7% yoy to Rs 3.6/unit.”

“Strong EBITDA growth aided by rising prices: EBITDA margin expanded by 358bp yoy to 28.1% because of higher realisations across most product categories despite cost increases witnessed in a) the aluminium segment on account of higher alumina and power costs and b) the zinc segment due to higher stripping ratio and royalty costs. Consequently, EBITDA increased by 84.2% yoy to Rs 2,758cr. Net profit for the quarter increased by 62.6% yoy to Rs 1,640cr, slightly below our estimate of Rs 1,700cr.”

“Sterlite is currently trading at 7.9x and 5.3x FY2012E and FY2013E EV/EBITDA, respectively. We expect Sterlite to benefit from the expansion of zinc-lead smelting capacity during FY2012–13. Furthermore, Sterlite’s expansion in the silver-rich Sindesar Khurd mine should result in robust bottom-line growth. We maintain our Buy rating on the stock with an SOTP-based target price of Rs 205,” says Angel Broking research report

Source:moneycontrol.com

Stocks that Sharekhan says will be roaring success

2011-07-26T22:38:00.000-07:00

Sharekhan has come out with its report on various companies result update.

Allahabad Bank : Allahabad Bank’s Q1FY2011 was characterised by strong NII growth, decline in NPAs and strong fee income growth. The bank targets to grow its advances by 25% in FY2012. Currently the stock trades at 1.4 FY2012 book value. We have a positive outlook on the stock and will release a detailed note shortly.

Axis Bank : Axis Bank delivered a strong earnings growth in Q1FY2012, though the core income was slightly below estimates due to a moderation in business and dip in margins. Nevertheless, the asset quality trends seem reasonable while fee income showed a strong pickup. We continue to maintain our estimate of a 22% CAGR growth in earnings over FY2011-13 contributed by 24.5% growth in advances. We maintain our BUY rating with a target price of Rs1,637 (3x FY2012 book value).

Union Bank of India : Union Bank’s Q1FY2012 results were marred by one off provision on account of revised provisioning norms leading to lower than estimated growth in earnings. We have trimmed our loan growth estimates as the bank has lowered guidance on business growth. Going forward, the slippages could moderate as the bank has migrated to system based NPA recognition (except for agri loans). We expect the bank’s earnings to grow at a CAGR of 21% over FY2011-13. We value the bank at 1.5x FY2012 book value, resulting in a target price of Rs375. We maintain our Buy recommendation on the stock.

FAG Bearings India : FAG is a debt-free company and has cash of Rs180 per share on books. We expect the company to report earnings per share (EPS) of Rs107 in CY2011 and Rs122 in CY2012. At Rs1,344 FAG trades at 11x one year forward earnings. The valuation is in the higher band and the stock has been re-rated due to the consistently high quality of its earnings. We have a positive long term view on the company.

See which stocks Mutual Funds/UTI have bought in last quarter?

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Source : moneycontrol.com

Tulsian's multibaggers: Tulip Star, Xpro India and Nile Ltd

2011-07-20T22:44:00.001-07:00

SP Tulsian of sptulsian.com joins CNBC-TV18 to give his outlook of the market today and pick his multi-bagger ideas. He recommends Tulip Star Hotel, which recently won an arbitration at Juhu Centaur. Valuations reveal almost Rs 200 crore market cap and even when taking a very conservative view, the stock could go up to Rs 300 in about 6-12 months, Tulsian says.

His next pick is Xpro India . The company which is into commercial film packaging has shown sharp improvement in its financials, he says. Though topline remained steady, bottomline almost doubled in the previous quarter. The company barely has any debt on books and currently commands a book value of 100. Trading at earnings per share of Rs 10, it is very likely that over a 5-6 month period, the stock could breach Rs 75 level and return an EPS value of Rs 12.

Below is the verbatim transcript. Also watch the accompanying video

Q: You have picked Tulip Star today?
A: If you see the arbitration award which has come in, I would call it in favour of the company and against Siddhivinayak Realties. In fact, Siddhivinayak Realties is a joint venture between Oberoi Realty and the promoters of DB, and they have lost the case against the Tulip Star. The six acre property, that’s Juhu Centaur Hotel, is owned by V Hotels Private Limited. Tulip Star holds 50% stake in V Hotels, which means, effectively, they are having 50% ownership of the Juhu Centaur Hotel. After this arbitration award, they have to refund Rs 73 crore back to the promoters of Siddhivinayak Realties, and now, they will be able to sell this property on fresh terms. If you take the developable area of anywhere between 14-15 lakh square feet and if you go by the valuations of the hotel properties, it should be able to fetch them a good Rs 3000 crore. Now, as per the shareholding pattern, the promoters hold close to about 57% stake in Tulip Star, which 30.4% stake is held by Cox & Kings . 33% belongs to very close associates of the promoters, and so, virtually there is floating stock of a bare 10%. The present marketcap of this company is just Rs 70 crore and if I take a valuation call of about Rs 3,000 crore for the whole hotel, it translates to Rs 1,500 crore being the share of this company. Again, there is only the Rs 21 crore debt, which has come from the associates, friends and corporates, of which, 37 crore has been lent to V Hotels.

So, with the debt-free company which has Rs 70 crore market capitalization, even if I apply the same criteria of 15-20% of the net present value which should effectively translates into the valuation of this company, logically this company should get a marketcap of anywhere at least between Rs 200-220 crore. The share has a potential to move to Rs 300 plus, in fact, it works out to about Rs 400 plus, but I am taking a conservative call that it should move to Rs 300. One has to, however, keep a view of 6-12 months on this stock. There is no financial performance, there are no clarity about the ownership. So if you are convinced with this kind of structure and these kind valuations, then one can expect a price of Rs 300 in next 6-12 months time.

Q: Take us through why you are bullish on Xpro India ?

A: I am bullish on the packaging film segment on the whole, whether you talk of Jindal Poly , Polyplex Corporation …

Xpro India is a SK Birla Group company and they are engaged in co-excluded Biaxially-Oriented Polypropylene (BOPP) films, co-excluded cast-film and they also make thermoformed refrigerator liners, which are industrial products used in refrigeration etc. The financial performance of this company reveals there has been sharp improvement in for FY11. Topline grew a bare 10-15%, but the bottomline almost doubled. That is largely on the lines of the financial performance having posted by all the packaging companies. Topline was Rs 300 crore plus, the equity of the company is close to about 11 crore, the present book value is Rs 100 and the company posted an EPS of about Rs 10. In fact, for the past couple of months, we have been seeing that prices of all these packaging films have stabilized, and since this company is more into the commercial products, they have a better profit margin apart from the fact that they have six plant operational, largely in the eastern part.

So if you go by all these financial estimates and marketcap of just Rs 60 crore, there is not much debt in the books of the company, maybe Rs 80-90 crore, of which Rs 40 crore has been availed for working capital. The entire enterprise value of the company works out to close to Rs 100 crore, share is available at a PE multiple of 5 times, price to book is 0.5. I am expecting that maybe in the current year, the company should be able to post an EPS of 12. Taking all this into consideration, there is very limited downside and if someone can keep a view of 6 months, they can expect a price of Rs 75 for the share.

Q: The other midcap you have picked for us is Nile Limited . What attracts you to that name?

A: This is an interesting story. The company is into making lead and lead alloys from waste lead acid batteries and they also make glass lined vessels and pressure vessels. This company, for the last four years, has been at rift with GMM Pfaudler who has a larger presence in glass lined vessels and pressure vessels. They were holding close to about 17% stake along with one associate, and Nile Limited was not transferring those stakes in the name of GMM Pfaudler. Nile has now resolved to this division for about Rs 58 crore. The shareholder consent has already been sorted, the resolution for that has already been moved, the postal ballot and everything. So I am expecting that they will be mobilise about Rs 58 crore, that will help the company to become debt free.

If you see their present operations, they have two plant; one in Hyderabad with capacity of 12,000 tonne per annum, second at Tirupati with 20,000 tonne per annum. The Tirupati plant is catering largely to Amara Raja Batteries because they also have a plant there. Also, Exide result of Q1 has disappointed more due to raw material cost because for any battery maker, 70% of the raw material cost constitutes of the lead.

Going ahead, the margins of the company is going to improve. For FY11, the company posted an EPS of 24, but strangely, EPS of 28 has been posted by the company in Q4 alone. This is because, it was said that probably, they are keeping their results suppressed to fight the stake acquisitions of GMM Pfaudler.

Now, the company’s focus will purely be on lead and lead alloys business which has tremendous potential. I am expecting an EPS of 30 plus. I won’t be surprised to see EPS even moving to 40 for FY12, but one has to keep the conservative estimates at about 30 plus, topline of Rs 300 crore plus. Marketcap of the company is now at Rs 70 crore with promoter equity reasonable at 50%. Taking this into consideration, share though has risen in last couple of days, still has potential to move to about Rs 300 in the next six months. It’s going to be a very consistent performer in the portfolio on a longer scale too, but I am taking a call of Rs 300 in the next six months.

Source:moneycontrol.com

Multibagger in 5 years? Buy HDIL says PN Vijay

2011-07-12T22:44:00.000-07:00

HDIL could be a multibagger with five year point of view, says PN Vijay, Portfolio Manager.

Vijay told CNBC-TV18, "There could be a bottom somewhere in the real estate sector in India because the correction here has been very severe and many other good companies at least have taken some very strong measures to cut the debt and improve the occupancy if you will like to call that. That is an amount of flats and offices sold as compared to the new."

He further added, "If you look at some other statistics coming out, the new additions are becoming very slow. Unfortunately, in India we don’t track the new housing stats and employment the way we track inflation. If we track these two, we will get to know how fast the slowdown in the economy has been. They are very startling indeed. So the new housing stats has come down to zero I feel because of all this supply-demand imbalance is getting corrected and those companies, which are able to reduce their debt successfully would come out as probably multibagger over next five years."

"HDIL could be a multibagger if you take a five year point of view,DLF could also do extremely well once they have applied the scissor relentlessly and cut off all their non-productive assets. So we have some real scope for bottom fishing there but nothing less than three years."

source :moneycontrol.com

Buy Fortis Healthcare; target of Rs 173: IIFL

2011-07-12T22:43:00.000-07:00

IIFL is bullish on Fortis Healthcare and has recommended buy rating on the stock with a target of Rs 173 in its July 13, 2011 research report.

“Fortis Healthcare (on the daily chart) has given an upside breakout, considered to be an important bullish signal. The stock is poised for further gains in the next few trading sessions. The undertone is reasonably strong and is likely to push price higher. After consolidating in the range of Rs 160-165 for last five trading sessions, the stock closed above the peak of its trading range of Rs 640 last week. The upside breakout is well accompanied with decent volumes. Based on above mentioned technical evidences, we recommend traders to buy the stock above Rs 167 with stop loss of Rs 164 for target of Rs 173,” says IIFL research report

Source:moneycontrol.com

Aashish Tater cherry-picks Premier and Wabco-TVS

2011-07-12T22:40:00.001-07:00

Aashish Tater joins CNBC-TV18 to cherry pick his favorite stocks for the day which he says are multi-bagger ideas.

He recommends Premier Ltd with a target price of Rs 180. The current price is around Rs 90. Trading at Rs 6-7 earnings per share, there is a good possibility of the stock rising up by 18% from current year EPS, he says. “There is limited downside to Premier.”

His second pick is Wabco-TVS . This stock has got tremendous potential going forward, Tater says. The stock is going to give a CAGR return of close to 20-25% year-on-year for next 3 years, at least in terms of visibility of topline and bottomline, he says. Wabco-TVS is the pioneer in air-brake manufacturing and most of the top players in the auto industry are Wabco’s clients. So, the fundamentals of the business are strong. As for the stock, it currently trades at a price-to-earnings multiple of less than 14 times. Tater recommends buying Wabco-TVS with a price target of Rs 1400. “That is easily achievable for the stock; I would advice buying at every dip in a 2-3year horizon,” Tater says.

Below is the verbatim transcript. Also watch the accompanying video

Q: The first one you have picked is Premier.

A: Premier Limited is one stock where I feel there is a limited downside. The company recently announced that they are willing to exit or jointly develop their free-hold land in Dombivali area which can give them approximately Rs 650-700 crore of free cash flow. This is much higher than their current market cap and debt in the book, that is, their enterprise value. Once the cash comes into the balance sheet, the company will be able to retire its debt which will give them an Earnings Per Share (EPS) of close to Rs 7-8. Currently, the company does Rs 6-7 of EPS and we expect another 18% rise in the current year EPS. So, from 2 years perspective, once the deal actually materializes, the company will be able to do close to Rs 15-16 odd in terms of EPS. Assign a PE multiple of Rs 12 for this particular stock, it gives you a target of Rs 180 odd. The stock currently is available at close Rs 90. A 100% jump can be expected over the next 12-18 months perspective. The company is paying a consistent dividend and I think this is a one stock which should be bought from a longer-term perspective though in small quantities.

Q: You also like Wabco-TVS, take us through why you like that story?

A: Wabco-TVS is another stock that we feel has got tremendous potential, going forward. A stock that is going to give you a CAGR return of close to 20-25% year-on-year for next 3 years, at least in terms of visibility of topline and bottomline. Now, they are the pioneer in this space of assistant air-brakes. Looking into the profile in terms of customers, all the top automobile companies, they are the main suppliers. Almost 85% of the market share is captured by them in the original equipment manufacture segment, and in the replacement industry, they have a market share of close to 70%. Such a market leader is available at a PE multiple of less than 14 times. It is definitely a buy on every dip for this stock and we have a medium-term target of close to Rs 1400 odd mark. I would still suggest that one should keep a very longer-term view. Thus, this is one portfolio bet which should be added on every correction whenever there is an anti-point for the stock for the next 2-3 years.

Source:moneycontrol.com

Sharekhan handpicks 15 stocks for investment

2011-07-10T22:41:00.001-07:00

Sharekhan has come out with its report on Stock Ideas.

ADITYA BIRLA NUVO : the company is best valued using the sum-of-the-parts (SOTP) method. In the wake of the better than expected margin and efficiency of the insurance business, we have raised our new business achieved premium (NBAP) margin multiple for the insurance segment from erstwhile 16% to 18% for FY2012 with an assumption of a 15% growth in the new business premium (on the back of a 29% decline reported by the company in FY2011). Further, with the company for the first time reporting net worth for the consumer finance business, we incorporate the same at 1x its book value. Thus, the revised SOTP-based price target works out to Rs960 and we continue with our Hold recommendation on the stock.

BAJAJ FINSERV : The company’s profit was lower in FY2011 due to the sharp increase in the motor pool losses. The company is among the top performers in the general insurance space with a combined ratio of about 98% excluding motor pool and has shown profits despite an adverse environment. In a steady state the company expects to generate return on equity (RoE) of 15% from the general insurance business. Of late Bajaj Finance Ltd (BFL), the financing subsidiary of Bajaj FinServ, has started focusing on infrastructure lending and construction equipment lending. The company is looking for deals worth Rs50-100 crore in power, port and road projects. It plans to build a book of around Rs3,000-4,000 crore in three to four years. We maintain our Buy recommendation on the stock with a price target of Rs634.

BAJAJ HOLDINGS & INVESTMENT : For Q4FY2011, Bajaj Auto and Bajaj FinServ reported a strong performance. However, for Bajaj Auto we have reduced our price target due to the macro headwinds likely to hit going forward. We value BHIL based on our price target for Bajaj Auto and on the base case scenario for Bajaj FinServ and the other group companies on cost; we give a holding company discount of 50% for the same. Furthermore, the company has cash and liquid investments worth Rs5,442 crore on its balance sheet. However, we value these investments giving it a 40% discount on account of its volatile nature. Consequently, we arrive at a fair value of Rs1,009 for the stock (based on the company’s fully diluted equity), which is significantly above its current market price of Rs764. Moreover, the company has given a healthy dividend of Rs35 per share which translates into a dividend yield of 4.6%, making the stock attractive at this price. We, therefore, maintain our Buy recommendation on the stock with a revised price target of Rs1,009.

BHARAT HEAVY ELECTRICALS : We are also cutting down BHEL’s target multiple to 10% premium to Crompton Greaves target (16x) multiple from earlier 20% premium in view of hangover of likely FPO, margin pressure and slowdown in its growth momentum. Accordingly, our revised fair value works out to Rs2,596 (17.6x FY2013E earnings). At the current market price, the stock trades at 13.1x FY2012E earnings, which is quite attractive and at a significant discount to its average historic multiple of 20-21x. Hence, we maintain our Buy recommendation on the stock.

CADILA HEALTHCARE : Cadila through its US subsidiary has entered into a material definitive agreement to acquire the assets and the product pipeline of US based Nesher Pharma, a subsidiary of KV Pharma. Cadila will pay $60mn in cash for the divested assets, however the timeline for product launches is yet unknown. The transaction At the CMP of Rs904, Cadila is trading at 21.1x its FY2012E and 17.3x its FY2013E earnings. We maintain Buy with a price target of Rs1045.

GAYATRI PROJECTS : Currently, the stock is trading at 6.5x and 4.4x its FY2012E and FY2013E diluted earnings respectively, making the valuations attractive. Hence we maintain our Buy recommendation with a price target of Rs405.

GENUS POWER INFRASTRUCTURES : At the current market price, the valuation remains attractive at 3.4x FY2013E earning per share (EPS) while it discounts its FY2011 book value by 0.6x. Hence we maintain our Buy recommendation on the stock with a revised price target of Rs23 (5.5x FY2013E EPS).

GRASIM INDUSTRIES : On the valuation front, we continue to value the stock using the SOTP valuation methodology and maintain our price target of Rs2,750 with the Buy recommendation. At the CMP the stock trades at a PE of 7.8x discounting its FY2013 estimated EPS.

INFOSYS TECHNOLOGIES : The recent organisational restructuring and management realignment at Infosys is likely to get reflected in the weak Q1FY2012 financial performance. Nevertheless, we believe the 13% correction in the stock price since the company’s Q4FY2011 results announcement and the current discount of 10.4% to TCS large factor in the near-term headwinds. At the current market price of Rs2,861, the stock trades at 20.3x and 16.7x FY2012E and FY2013E earnings respectively. We remain structurally positive on Infosys’ long-term sustainable and robust business model and recommend investors to Buy the stock with a 12- month price target of Rs3,485.

ITC : We have incorporated the balance sheet numbers for FY2011 and there are no major changes in our earnings estimates for FY2012 and FY2013. At the current market price the stock trades at 24.4x its FY2012E EPS of Rs7.9 and 20.6x its FY2013E EPS of Rs9.3. We maintain our Buy recommendation on the stock with a price target of Rs223.

LARSEN & TOUBRO : The current valuation at 17.4x FY2013 estimate largely factors in all the concerns as the same is still much lower than its five-years average one-year forward multiple of 23x. Hence, we maintain our Buy rating on the stock with a price target of Rs2,011.

MARUTI SUZUKI INDIA : We have downgraded our earning per share (EPS) estimates for Maruti for FY2012 and FY2013 on account of lower than expected volume growth. Our volume growth assumption now stands at 8% and 13% for FY2012 and FY2013. Consequently our EPS for FY2012 and FY2013 has been revised downwards to Rs85 and Rs98.3 respectively. We maintain our Hold recommendation with a revised target price of Rs1,277.

MAX INDIA : The company expects a flattish growth in its life insurance business in FY2012 despite a sluggish growth in the insurance premiums. During FY2011, its life insurance business registered a growth of 9% year on year (YoY) against a 20% year-on-year (Y-o-Y) decline for the other private players. The expense ratio for the life insurance business dropped to 34% in FY2011 (29% in Q4FY2011) from 40% in FY2010 due to increased distribution through the bankassurance mode and rationalisation of branches and agency force. We maintain our Buy recommendation on the stock with our SOTP-based price target of Rs234.

PATELS AIRTEMP INDIA : In line with the revised estimates, we have revised our price target for the company to Rs103 (5x FY2013 earnings per share [EPS]). At the current market price the stock is available at 4x FY2012E earnings. Given its healthy dividend yield of 2.7% and robust return on net worth of 23.7% (for FY2011), the stock’s valuations appear to be quite attractive. We maintain our Buy recommendation on the stock.

SELAN EXPLORATION TECHNOLOGY : We have cut FY2012 estimates marginally to account for the lower than expected production volumes in Q4FY2011. However, with aggressive drilling programme, we expect Selan’s net revenues and earnings to grow at CAGR of 40% and 42% respectively over FY2011-13, largely driven by volume growth. Currently, the stock is available at 14.4x FY2012 and 8.7x FY2013 earnings estimates. We maintain our Buy rating and price target of Rs500.

TATA CONSULTANCY SERVICES : We remain positive on TCS on a longer-term perspective. However, in the medium term, looking at the uncertainties in the key geographical regions and the increasing probability of further negative news flow, we maintain our Hold recommendation on the stock with a 12-month price target of Rs1,315. At current market price of Rs1070, the stock trades at 20.4x and 17.1x its FY2012E and FY2013E earnings respectively.

TORRENT PHARMACEUTICALS : At the CMP of Rs609, Torrent is trading at 16.4x its FY2012E earnings and 13.7x its FY2013E earnings. We roll over our multiple to FY2013 and value the company at 14x PE. This gives us a price target of Rs640, an upside of 5%. Citing the limited upside from the current levels, we downgrade our rating to Hold.

UNITY INFRAPROJECTS : We expect the earnings to grow conservatively at a CAGR of 18% over the next two years, which is much lower than the management’s guidance. Currently the stock trades at a P/E of 4.9x FY2012e earnings, which is very attractive. Hence, we maintain our Buy recommendation with a price target of Rs112.

Source : moneycontrol.com

Upbeat on telecom, buy Bharti Airtel, Idea: Motilal Oswal

2011-07-08T04:56:00.001-07:00

Motilal Oswal has come out with its report on telecom space. The research firm remains positive on the telecom sector.

Business momentum strong; 3G spectrum amortization and interest costs to impact earnings: We expect revenue momentum to remain strong, driven by continued growth in aggregate minutes of usage, relatively stable tariff environment and increased data usage. Amortization and interest costs related to 3G license fee paid last year would hit the P&L of companies from 1QFY12, depressing headline earnings.

Usage growth robust; slight pressure on tariffs: We expect RPM decline of 0.5/ 1.7% QoQ for BHARTI/IDEA in 1QFY12 v/s 1-3% decline for GSM incumbents in the last three quarters and an average decline of 7-8% QoQ in the preceding three quarters. We expect BHARTI to report revenue growth of ~3% QoQ, driven by ~4% mobile traffic growth. We expect QoQ revenue growth of ~3% for RCOM and ~5% for IDEA.

Expect slight margin expansion for BHARTI, RCOM; moderation for IDEA: We expect EBITDA margin to increase ~40bp QoQ for BHARTI (ex-Africa) and 70bp QoQ (consolidated), driven by operating leverage in domestic as well as Africa business. However, for IDEA, we expect adjusted EBITDA margin to decline ~50bp QoQ primarily due to 3G launch expenses off-set partially by operating leverage. For RCOM, we expect ~90bp QoQ EBITDA margin expansion, driven by higher margin in broadband and 'others' segments.

QoQ PAT trends to remain divergent: We expect BHARTI's PAT to remain flat QoQ, despite increased finance cost and amortization expenses for 3G license fee, driven by 5% QoQ EBITDA growth. IDEA's PAT is likely to decline QoQ, due to (1) one-off revenue accretion and cost reversals in 4QFY11, and (2) impact of 3G license fee-related costs below EBITDA. For RCOM, proforma PAT should grow ~23% QoQ primarily driven by ~6% QoQ EBITDA growth. We have not modeled capitalization of 3G spectrum fee for RCOM.

Industry subscriber additions decline significantly: Industry subscriber net adds have declined meaningfully in 1QFY12 to 13m-15m per month v/s 19m-20m in preceding quarters. We model an average net adds run-rate of 14m/month for FY12 and 10m/month for FY13. We are not surprised by declining trend in net adds and believe this is driven by (1) market saturation, especially in urban markets (real penetration is now >50% on pan- India basis), and (2) lower aggression and high churn rate for challengers, which implies a better competitive environment for incumbents. We believe traffic growth and data revenue contribution would be key revenue drivers rather than subscriber net adds, going forward.

MNP update: Recent TRAI data on MNP (launched 20 January 2011) suggests an increase in porting requests to 8.5m (1% of subscriber base) as of 30 April v/s 3.8m (0.5% of subscriber base) as of 28 February. Initial trends imply that MNP related subscriber churn remains insignificant; our industry interactions suggest that even 'revenue' churn is insignificant. However, full impact of potential renegotiations in enterprise tariffs is likely to be completely visible only by 2QFY12. We continue to believe that MNP is unlikely to be a game changer, given the largely pre-paid nature of the Indian market (>96% of subscriber base) and high churn levels (50-120% per year).

Valuation and view: Ongoing policy revamp (regulatory reforms) could drive consolidation, which is a positive for GSM incumbents. We believe that market mechanism could lead to price discovery of 2G spectrum lower than 3G/TRAI valuations, as potential 2G spectrum supply has increased. Revenue and EBITDA growth is likely to rebound in FY12, driven by robust traffic growth, lower RPM decline and launch of 3G services. Reiterate Buy on BHARTI and IDEA.

Tata DOCOMO tariff hike an incremental positive; RPM outlook unchanged near-term: Tata DOCOMO, the GSM brand of Tata Teleservices issued a notice that new subscribers joining the network from June 16th 2011 will have to pay higher rates for STD calls after one year of activation and also increased SMS tariffs. Tata Teleservices has a ~9% revenue market share on a pan-India basis (including CDMA) and has >5% market share in most circles. While this development reinforces our view that tariff environment is improving and indicates more rational pricing from Tata DOCOMO going forward, we highlight that: (1) There would be no impact on tariffs in the near-term; (2) The tariffs for existing subscribers remain unchanged (Tata DOCOMO had offered 1p/s tariff for life); and (3) Churn rate in the industry remains high at 8-10% per month implying that an average subscriber actually leaves the network within the first year. During 1HFY12 we continue to expect moderate declines in RPM due to (1) full impact of decline suffered in 4QFY11 (2.5-3% for GSM incumbents), and (2) seasonal weakness in 2Q. Structurally, efforts by price leader like Tata DOCOMO to rebalance RPM indicates improved competitive environment. Every 1% change in RPM impacts EBITDA for Bharti/ Idea/RCom by 1.3-3.2%. We maintain Buy on Bharti Airtel and Idea Cellular .

Source : moneycontrol.com

Tater's multibagger picks: Esab India, Phoenix Mills

2011-07-06T23:14:00.000-07:00

Aashish Tater, Head of Research, Fort Share Broking has pickedEsab India and Phoenix Mills as his multibagger stock ideas for the day.

"Melrose came out with a open offer with 780 pence for the parent Charter Plc which is a holding company for Esab Holding Pvt Ltd which is a parent for Esab India. We have a target of Rs 1,000 if there is an open offer from Melrose. We will definitely ask our investors not to tender into the stocks because roughly we feel that open offer can come somewhere around Rs 550 to 600 depending upon the conditions. But on longer term this stock is a portfolio bet from our side."

"Last time talking about realty we had a long call on Parsvnath and a short call on Unitech and we covered our shorts on Unitech . Now we want to diversify our part of our portfolio into another safe bet which is Phoenix Mills . Every time there is a market correction one should be entering this stock at around at Rs 180-185 and should be looking to exit around Rs 230 and that too only of 50% of what you hold."

Also Read: A couple of policy rate hikes still possible: HDFC

Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.

On Esab India:

Esab India is a story which we broke out for Elantas Beck where the parent itself is a de-listing candidate. We will not see robust returns like what we saw in Elantas Beck because the free float is available right now is close to 45%.

Recently, Melrose came out with a open offer with 780 pence for the parent Charter Plc which is a holding company for Esab Holding Pvt Ltd which is a parent for this particular company, Esab India. There will be a revised offer from Melrose some where around 930 to 940 pence which is substantially 20-25% premium to their last bid.

It makes a lot of sense for Melrose to acquire this particular asset that Charter owns and they have got potential that will give them higher return on assets. If I look at the annualized equivalent value if at 930 they would be paying close to 7.5-8%. On the other hand ESab India is available at 14.65% in terms of EV. Annualised value if I try to take an arbitrage it takes around 11.5-12% that gives a target of Rs 640.

In terms of fundamentals, even if there is no offer for Charter Plc by Melrose in terms of revision, they would still do an EPS close to Rs 44-45. A company which is going to pay Rs 20 of dividend a parent like Charter which even has got a potential to go to a better parent Melrose I think this stock is a portfolio bet.

At current levels if there is an 20% open offer that means the float from the market would be squeeze totally because the remaining float will be in a very strong hands. Then the story will begin because there will be hardly any float left.

We have a target of Rs 1,000 if there is an open offer from Melrose. We will definitely ask our investors not to tender into the stocks because roughly we feel that open offer can come somewhere around Rs 550 to 600 depending upon the conditions. But on longer term this stock is a portfolio bet from our side.

On Phoenix Mills

Last time talking about realty we had a long call on Parsvnath and a short call on Unitech and we covered our shorts on Unitech. Now we want to diversify our part of our portfolio into another safe bet which is Phoenix Mills.

Looking at this particular patterns in terms of chart the stock has been range bound even in difficult times and finding support at Rs 180 mark and is finding resistance on Rs 230. When I took a call in terms of valuation at Rs 180-185, that is the recommended level to enter into this particular stock.

We felt that its assets actually gives a lot of support for the stock at those levels because it will be available at 0.6-0.7 times to its high street Phoenix. If I take a call for 2012 for Phoenix Mills there will be a lot of re-rentals in terms of free cash flows that will be generated by the company. We would be taking a quarter on quarter call for the stock.

If I take a call I would suggest that every time there is a market correction one should be entering this stock at around at Rs 180-185 and should be looking to exit around Rs 230 and that too only of 50% of what you hold. Why this particular thing would come up because we would like to see how the rentals are shaping up. Analyst who are tracking this there are speculations of 140 lease rentals on conservative side to 190 on the higher side.

They also own the Pune mall where the rental is expected close to Rs 60 per sq feet. Almost 2.5 million sq feet is under development which is expected to commence of only 1.5 will be executable in terms of leasing the rest is salable and car parking area.

The company also owns a hotel which will be operational in the name of Shangri-La, which will be operational sometime in third quarter if not second quarter of 2012 itself. We feel there are lot of assets that the company owns and given the company’s almost debt free it hardly pays an interest of Rs 4-5 crore for the full year. We feel this years free cash flow they would be sitting on zero debt cash. If someone wants to take a contrarian bet into this sector they can also look into Phoenix Mills.

Source : moneycontrol.com

Bajaj Auto, M&M, Maruti Suzuki top picks: PINC Research

2011-07-04T22:36:00.001-07:00

PINC Research has come out with its report on auto sector. The research firm has maintained neutral rating on the sector.

Finance, Fuel cost, Strike.... Indian automotive industry continues to witness soft demand emanating from high fuel cost and increase in interest rates. The passenger car industry has been the worst impacted by this and reported their worst performance over the last 30 months. Beside the slow demand, the industry was also besieged by employee strike at Maruti Suzuki’s Manesar plant. In this gloom, 2-wheeler segment maintained their outperformance with strong double digit growth. The prime factors behind strong performance of 2-wheeler segment is their low dependence on financing and lower operational cost. The surprise during the month was growth in medium and heavy commercial vehicle (MHCV) segment despite their high dependence on financing and weak freight market owing to monsoon.”

“We expect MHCV segment sales to see a decline over next 3 months due to increase in diesel price announced in June 2011. Moreover, last year the segment was doing very well due to recovery in the economy and impending emission norm changes.”

Two-wheelers: Industry dispatches grew by 16% to 1.24mn units. Market leader, Hero Honda, maintained its over 0.5mn units run rate. Bajaj Auto dispatches were higher by 14% to 323k units.

Passenger Vehicles: Passenger vehicles dispatches had a low single digit growth with adverse impact due to strike at Manesar plant of Maruti Suzuki. Toyota became the latest entrant in the compact car segment with launch of ‘Etios Liva’. Next few months are expected to be busy for the industry with several launches scheduled. M&M was one of the outperformer in the segment with its array of diesel powered utility vehicles.

Commercial Vehicles: MHCVs volumes contrary to our expectation witnessed a growth. LCV segment continues to see strong demand.

Our Viewpoint: We expect automobile demand to remain soft till the month of August. Demand revival is expected to happen with the onset of the festive season in the month of September’11. We estimate 15% growth in 2-wheelers and passenger vehicles demand during FY12. However for passenger car segment, demand is expected to remain weak during H1FY12. Our top picks in the sector are Bajaj Auto, Mahindra & Mahindra and Maruti Suzuki.

Hero Honda Motors (HH):
Hero Honda (HH) maintained a monthly runrate of over 0.5mn units for the fourth consecutive month. Dispatches during June’11 grew 20.1% to 512k units and were inline with estimates. The company has reported record 1.53mn dispatches in Q1FY12. The company is expected to finalise the location for its fourth plant shortly. Gujarat and Karnataka are expected to be on the top of the list for possible location. HH is expected to invest Rs8bn on the new facility with a capacity of 1mn units per year. We maintain a ‘HOLD’ rating on the stock with a target price of Rs1,806 discounting FY13E earnings 14x.

Bajaj Auto (BJAUT):
Bajaj Auto (BJAUT) dispatches for the month of June’11 were ahead of our estimates with an overall growth of 16.2% YoY to 367k units. While three wheelers dispatches were inline with estimates, the motorcycle segment exports were ahead of estimates. Overall motorcycle dispatches grew 14.2% YoY to 323k units. The company had launched the Discover 125cc in April’11 and is expected to launch the new 150cc Boxer in the near future. Three wheeler dispatches were up 34.4% YoY and were inline with estimates. Exports jumped 24.6% YoY and 12.1% MoM to 142k units. Overall dispatches for Q1FY11 crossed the 1mn unit mark to 1.1mn units, the highest ever for the company. We maintain a ‘BUY’ recommendation on the stock with a target price of Rs1,665 discounting FY13E earnings 13.5x.

TVS Motor (TVSL):
TVS Motor (TVSL) monthly dispatches for Jun’11 were inline with estimates albeit with a poorer mix. Lower single digit growth in the motorcycle segment was compensated by the 20% plus growth in the scooter segment. Overall dispatches grew 14.3% YoY to 182k units. Motorcycle sales reported a moderate single digit growth of 5% to 70k units. We estimate that domestic motorcycle dispatches have declined during the month and reflects further marginalisation of TVSL in domestic market. Scooter segment continued to outperform with a growth of 21% to 44k units.

However, given the capacity expansion by market leader HMSI, we see threat to scooter segment of TVSL. Low margin-high volume Moped segment maintained its steady growth of 21% to 64k units. Three wheeler dispatches for the month are at 3.8k units. Overall domestic dispatches grew by 10% to 155k units while the exports reported a growth of 48% to 23k units. We expect TVSL to clock volumes of 2.28mn units in FY12. We maintain a ‘HOLD’ rating on the stock with a target price of Rs64 discounting FY13E earnings 12x.

Maruti Suzuki India (MSIL):
Maruti Suzuki (MSIL) dispatches for the month of Jun’11 at 80k units were 6.7% below our estimates. The company reported an 8.8% decline in dispatches to 80k units. The company reported a decline in monthly numbers after a gap of 30 months as monthly dispatches fell to the lowest level since July’09. Operations during the month were severely impacted due to the worker strike at the Manesar facility. Additionally, the company took a planned annual maintenance shutdown at the Gurgaon facility for 6 days and Manesar facility for 4 days. The Manesar facility was expected to do into a maintenance shutdown in July. The company had undertaken a similar maintenance shutdown in June last year.

The A3 segment (Sx4 and Dzire) was severely impacted as dispatches slumped 60% YoY (76% MoM) to 3k units. Both Sx4 and Dzire are exclusively manufactured at Manesar and hence were impacted the most due to strike. The A2 segment (Alto, WagonR, Swift, Ritz) dispatches were marginally higher by 2.3% to 53k units. This segment was also adversely impacted as Swift and A-Star are manufactured at Manesar facility. MPV segment (Omni, Eeco) grew 22.9% YoY to 12k units. Overall domestic dispatches were down 3.8% to 70k units. Exports slumped 32.7% YoY to 10k units. We have a ‘BUY’ recommendation on the stock with a target price of Rs1,658 discounting FY13E earnings 15x.

Mahindra & Mahindra (M&M):
Mahindra & Mahindra (M&M) Jun’11 dispatches exceeded our estimates with an impressive growth in the tractor segment. Auto division dispatches too were 4% higher than estimates, growing 29% YoY to 35.6k units. Passenger UVs, wherein M&M is the market leader, grew 14.1% to 14.5k units. The pickup & SCV segment was propped up by incremental volumes from the Maxximmo and grew 64.9% to 11.6k units. Verito (earlier Logan) dispatches at 1,510 units were at a 30 month high.

Commercial vehicle dispatches were marginally down 9% to 1,010 units. Auto exports were up 37.4% to 1,812 units. The growth in the farm equipment (FES) division was surprising. Domestic tractor sales surged 39.8% YoY to 21.5k units. This is the second highest monthly dispatch for the company. Tractor exports were flat at 1,178 units. We maintain a ‘BUY’ recommendation on the stock with a SOTP based target price of Rs836.

Tata Motors (TTMT):
Tata Motors’ (TTMT) dispatches at 66k for the month of Jun’11 were 7% ahead of our estimate of 62k units. The product mix too was better than expected with commercial vehicle segment outperforming our estimates. Domestic MHCV dispatches grew by 6.2% YoY to 16k units as against our expectation of a marginal decline. LCVs continued their impressive performance, growing 18% YoY to 23k units. The passenger car segment, which has been suffering from the pangs of competition, witnessed a 20.9% decline to 18.5k units. Nano dispatches were at 5.5k units (down 29%) while Indica dispatches were at 8k units (down 9%). Indigo dispatches were down 35% YoY for the second consecutive month to 4.9k units. Utility vehicle dispatches were down 3.6% to 3.5k units. As a result of the weak passenger vehicle segment, total domestic dispatches were down 2.1% YoY to 61k units. Exports were flat at 5k units. We do not have a rating on the stock.

Source:moneycontrol.com

Brokerages bullish on Reliance Infra and Lupin

2011-07-03T22:44:00.000-07:00

Merrill Lynch recommends buying Reliance Infra with a target of Rs 1,081, the stock is currently trading at Rs 540. They see positives from the bottoming of Mumbai license area profits, a pick-up in execution and growth across the power, roads and metro rail domains.

Credit Suisse has an outperform stance with a target of Rs 480 onLupin . The company is working on eight products and is planning to launch its first biosimilar in India in FY12. The two most advanced products are about to commence clinical trials.

Know Your Investment: Answers to all your stock queries

Merrill Lynch maintains a neutral stance on Coal India with a target of Rs 400. Post strong volume growth in April, the company's production and off take growth has slowed over the last two months partly led by heavy rains. ML expects a deceleration in volumes.

Morgan Stanley maintains an equal-weight on Shriram Transport Finance with a target of Rs 820. The RBI has released a master circular on bank lending to micro, small and medium enterprises and Morgan Stanley believes that given the nature of the recommendations, the outlook on further regulatory changes remains uncertain.

Source : moneycontrol.com

Tulsian's top picks: Polyplex, Sterlite Technologies

2011-07-03T22:41:00.000-07:00

SP Tulsian of sptulsian.com in an interview with CNBC-TV18 said that he sees Polyplex and Sterlite Technologies fetching good returns ahead.

He said, "Polypex is the fourth largest thin polyester filmmaker in the world and they have their manufacturing presence in India, Thailand and Turkey. The company posted robust financial performance in FY11 on the back of which they issued 1:1 bonus. This company is sitting on huge cash and looks good when considered from the current levels. The company is expected to post a topline of about Rs 2,500 crore plus in FY12."

"Sterlite Technologies is the third largest power conductor maker in the world. The problem with this company was that in Q3 and Q4 of FY11 of the power transmission division did not perform well; partly because of the non-release of order and partly because of the shrinkage in the margin. It is expected to post a jump of 50% in its bottomline ahead."

Also Read: 10 stocks that could save your portfolio

Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying videos.

On Polypex Corp

A: Polypex is the fourth largest thin polyester filmmaker in the world and they have their manufacturing presence in India, Thailand and Turkey. In December 2010 because of the robust performance of FY11 company has issued one to one bonus which led to equity increase to about 32.60 crore. In FY11, they have been selling their stake in their Thailand unit and bought their stake down to 51% to remain the majority partner.

In my view they have taken the advantage of the robust business cycle prevailing at that point of time. They have realized quite a good amount of money from stake stale which they have bought it down to 51%. Because of that we have seen an exceptional gain of about Rs 638 crore in the financials of FY11. That Rs 638 crore does not accrue entirely to the company because of the minority interest held by the other partners as well.

Taking all this into consideration, the company posted and EPS of close to about Rs 330 on a face value of 10 for FY11 that was largely because of this exceptional gain of the stake sale.

In the last couple of quarters there has been lot of volatility in the packaging film products in India as well as abroad also. In the last one month or so when talking to the industry guys they say that prices have now settled whatever profitability we are going to see for June quarter can easily get extrapolated for entire FY12.

So, all the packaging film makers are supposed to be doing quite well from here on with not much volatility. Taking that into consideration, the company should be able to post a topline of close to Rs 2,500 crore plus with EPS of at least about Rs 100 on Rs 10 share. On conservative note, some slippage of uncertainty in the remaining three quarters EPS is not likely to fall below Rs 80. Right now the share is ruling sub Rs 200 that translates into a PE multiple of 2-2.5.

The company is sitting on a huge cash because of the stake sale they have. The consolidated cash balance in the books of company is close to about Rs 800-850 crore. So taking all these into consideration, the kind of revival in the interest of the midcap segments, the share looks quite good at these levels which can rise to maybe Rs 275-300 in the next six- eight months time.

On Sterlite Technologies

A: They are third largest power conductor makers in the world and fifth largest in optical fibre cable. The company has been providing transmission solutions to power and telecom sector. The problem with this company was that in Q3 and Q4 of FY11 of the power transmission division did not perform well; partly because of the non-release of order and partly because of the shrinkage in the margin.

In spite of that the company has been able to post an EPS of close to about Rs 4 for FY11. Normalcy is returning back again. The Q1 results which will be out in next one month, will be an indication but still I am expecting a jump of at least 50% in the bottomline of the company. They should be able to post an EPS of Rs 6 in FY12.

But if the indications which we will be getting from Q1 results, maybe the EPS can move to Rs 6.50- Rs 7. Because of this bad performance of Q3 and Q4, if we see the share has been continuously correcting, it had a high of Rs 110-115 and now it’s ruling at close to Rs 55.

I don’t think with market cap of Rs 1,900 crore, with the kind of business model with the kind of assets the company has been holding with the status of third largest and fifth largest in power conductor and optic fibre.

Taking all this into consideration it remains a stock from a long-term point of view. If one can keep a view of maybe about one year, I am expecting the price to move to about Rs 90-100 but maybe in three- four months time also share has the potential to move close to be about Rs 75.

Q; How would you look at the upstream oil companies because despite the renegotiation of the deal and the way it turned out was up 3-4% on Friday and ONGC was up as well, so how would you approach these two names?

A: Coming on ONGC, I won’t be holding my positive view in spite of getting a big relief from the royalty as cost recoverable in the Cairn matter because of the coming FPO, which is due by end of this month or even if it gets postponed it is likely to come in the next couple of months. Because there has been clarity now in respect of ONGC the under recovery, subsidy sharing and this Cairn matter.

Going forward for Cairn I am very optimistic because now there has been contradictory opinions that the share may not move up. But, I see this as a big positive mainly for the reason that Cairn was not allowed to ramp up their production because of this royalty and cess issue.

Since that has got settled and in spite of having this burden because they have been paying cess under protest so there was no concern on that account, just a matter of dispute having referred to the arbitration.

But in respect to the royalty, that can get set off against the increased production. If you really see their Q3- Q4 performance of FY11 both 6 months have posted an EPS of close to Rs 25. So even if one takes that kind of call going forward and apply PE multiple of 9-10 or even single digit, the share holds the potential.

It can move to Rs 350-360 in the near-term. But, ultimately over a period of time maybe taking a view of 12 months or so, one needs to look into the crude price behaviour and the increased production to be made by the company. So, clearance of the deal of Cairn-Vedanta is seen to be a big trigger and big positive for Cairn India.

Q: What about Reliance Industries ?

A: In Reliance there are lot of concerns now because of these new developments having taken place on Friday. I don’t think because there was some respite from delivery based selling by the institutional investors because the trading interest and some short covering happened which led the shares move back after having touched the low of Rs 813 in the month of June again moved back to Rs 940 or 930.

But I don’t think on a fundamental basis, unless and until we are going to see the Q1 results of the company, one can take a call. Because the advanced tax figures are quite deceptive.

One should not get lured by Rs 900 crore because that includes the gain to be made by the company on the BP stake sale also because some of them have been saying that 35% increase in Q1, advance tax payment can make the company to post better Q1 numbers. At least I will be waiting for the next couple of weeks or maximum next three weeks when the Q1 results will be out.

Till then I don’t think that share has any fundamental value or the reason to go beyond Rs 900, so maybe it could hover in a range, because it has been shifting its bottom. Earlier it used to be at Rs 860-870 which has now shifted back lower to about Rs 830-850. So a range of Rs 840-900 can be seen for the whole month of July.

Source : moneycontrol.com