SumanSpeaksPlus: A Crucible of Research Reports:

2010-08-04T12:55:00.000-07:00

PICK OF THE WEEK:

Sathavahana Ispat Ltd

BSE Code: 526093

CMP: Rs.43.70

Book Value: Rs.56.16

EPS: Rs.7.62

Dividend yield: 3.43%

Introduction: Sathavahana Ispat Ltd (SIL), promoted by Mr. A.S. Rao, a Metallurgical Engineer from IIT (worked in SAIL in senior capacities for over two decades) was set up in 1989 to manufacture pig iron. At present Sathavahana Ispat Limited (SIL) is engaged in the manufacture and sale of pig iron in core sector of the iron and steel industry. The Company is using Mini Blast Furnace Technology. SIL had replaced TATA-KORF technology with CHINASHOUGANG. It uses the Anshan technology sourced from P.R. China for metallurgical coke making. Production from the mini blast furnace is of a high quality and can be assured to contain a minimum iron content of 93.5% and 4% carbon content. With the production of metallurgical coke, SIL is integrated backward for the key input material. Metallurgical coke is the key input material for Iron making.

Pig iron is of two grades - basic grade and foundry grade. Basic grade is used in the manufacture of steel and whereas foundry grade is used to make castings. Basic grade is produced mainly by the Integrated Steel Plants (ISPs) for captive consumption in the manufacture of steel and exports. Part of the production is also diverted to the domestic market. Foundry grade is mainly used for castings and is produced by the Mini Blast Furnace units. Pig iron is also the basic raw material for most of the engineering products and construction industry. It is also a raw material for foundry and engineering industry. With the significant growth in the main user industries like automobiles, construction, foundries, etc, the demand for iron and steel has increased significantly.

Shareholding Pattern: The promoters hold 36.20% while the general public holds 63.80%. The DIIs hold 1.32%. Moreover 6.59% of the shares of the company are locked.

Financials: For Q4FY10, the company came out with very good set of numbers. The total income of the company came out to be Rs.121.05 Cr as against Rs.89.94 Cr in the same period previous year. The PBDT came out to be Rs.13.39 Cr as against a loss of Rs.39.96 Cr in the same period previous year. The net profit of the company came out to be Rs.9.50 Cr as against a loss of Rs.27.33 Cr in the same period previous year. The EPS of the company for Q4FY10 came out to be Rs.2.89 against a negative EPS of Rs.8.18 in the same period previous year. Moreover, both the operating and net profit margins improved significantly in Q4FY10 as compared to the same figures in the previous year.

Triggers:

Sathavahana Ispat Ltd’s pig iron manufacturing capacity is 2.10 lakh tpa and metallurgical coke 3 lakh tpa. It commenced operation in its 30MW co-generation of power in the Bellary district of Karnataka from July 2008. It has already signed Power Purchase Agreement (PPA) at Rs.3.25 per unit. The surplus metallurgical coke production from this facility is being sold in the nearby market. SIL is enhancing coke capacity to 4.5 lakh tpa.
Meanwhile, Sathavahana Ispat Ltd informed that the Pig Iron making plant of the Company situated at Haresamudram Village, Bommanahal Mandal, Anantapur district, Andhra Pradesh has been re-started (after it was shut down from August 17, 2009 for relining of blast furnace and for other repairs) on October 01, 2009 after completion of Blast Furnace relining..
During FY08, the SIL had issued 15.4% stake (49 lakh shares) to Stemcor Holdings, a strategic investor at a price of Rs.60 per share. Stemcor is a $6 billion leading consultancy firm, which provides marketing, finance and logistic services to steel industry. SIL also converted 6.25 lakh shares and 15.70 lakh warrants issued to promoters at Rs.60 per share. The funds raised were utilized to meet the aforesaid coke capacity expansion and 10 MW power plant.
In order to insulate itself from impact of fluctuation in international prices of metallurgical coke, it has now started manufacturing metallurgical coke, a key raw material, in house from March, 2004. Further, the SIL has now taken up expansion of the coke making facility by 1, 50, 000 tpa and augmentation of additional co-generation power of 10 MW is expected to be completed by the end of Q2FY11. It has also taken up works to de-bottleneck idle capacity in the turbine generator capacity whereby additional power of 25 MW can be generated through thermal route. This work is likely to be completed by the end of this year, CY2011.
Pig Iron is the basic raw material for most of the engineering products, foundry industry and construction industry. With the significant growth in the main user industries like automobiles, construction, foundries, the demand for iron and steel has increased significantly. The total production of pig iron in India has increased from 1.59 million tonnes in 1992 to the present level of 5.30 million tonnes in 2009.
On the domestic front, India is the fifth largest steel producer with a production of steel of 59.57 million tonnes (+4.2% YoY) in FY10. The steel consumption in FY10 rose by 7.6% YoY to 56.32 million tonnes as against 52.35 mt in the FY09. The steel production is likely to go up to 124 mt by 2012 and cross 200 mt by 2020. The proposed investments of Rs.1.5 lakh crore to create additional 22.4 mtpa of steel in the last three months would increase the demand of pig iron going forward.
The SIL enjoys prominent position in South India being the largest and quality supplier of pig iron to casting & forging industry, is expected to boom in the near future due to increased exports (China factor) and high growth in domestic automotive and engineering sectors.
Moreover, very recently the Chinese government has removed tax rebates on some steel products reflecting China's increasingly prudent attitude towards exports of resources including steel. The repeal of rebates will impact China's domestic steel products market in the short term. Many analysts are of the opinion that, the Chinese steel industry may suffer losses in the third and fourth quarters due to the government's decision to remove export rebates, putting further pressure on mills. Not to mention that those mills have already suffered from falling product prices and soaring raw material costs. The decision to remove export rebates comes amid growing export risks imposed by trade measures from the United States and the European Union. So China is already in trouble and its efforts to bully the world in term of steel industry will be further curtailed if the Yuan is made to appreciate. The Yuan appreciation is likely to have a negative impact on the Chinese steel industry in the short term despite lowering the import costs for iron ore. From an export point of view, a 3% increase in the Yuan and the removal of the 9% and 13% rebates on hot-rolled coil and cold rolled coil will reduce the competitiveness of Chinese steel products in the global market. Some industry insiders are of the opinion that the Yuan appreciation will also push the Chinese steel industry to adjust restructuring moves and focus more on improving the technical value of products. Besides this most of Chinese steel products exported overseas are low value-added products and have been successful mostly because of the price advantage. Now, with the present scenario emerging, it might be difficult for the Chinese Steel companies to pass on the additional costs to the exporting countries, making Indian exports much more competitive---THIS WOULD GIVE INDIAN STEEL EXPORTS AN ADDITIONAL EDGE AGAINST THE DRAGON...!!
With the augmentation of enhanced pig iron and coke capacity together with upcoming cogeneration of power at the Greenfield site, SIL is confident of taking fullest possible advantage of the current uptrend in the iron and steel industry. SIL is likely to post an EPS of Rs.13.5--14 in FY11.

Chart Check and Conclusion: From the charts it is seen that the scrip has made very good pattern. Moreover, from the charts it is found that a rock solid bottom around Rs.40—42, has been formed which will be difficult to break on the downside, unless there is a crash in the markets. Most of the parameters on the charts are seen in buy mode and the scrip could give a break out in the next week, if the markets remain stable.

The scrip of Sathavahana Ispat Ltd is available at an unbelievable price of Rs.43.70 with a dividend yield of 3.43%. Moreover, with expansion plans in place and expected boom in industry cycles in the coming days, we can assume that good growth rates in the company will be sustained in FY11 & FY12, making SIL, a steal in a growing industry. Buy the scrip around Rs.43—44 for a target of Rs.51—Rs.58-Rs.65, for the short and medium term perspective. In the long term the scrip could even cross Rs.100. Please keep a SL of Rs.39 for any short term play.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: The scrip was recommended to the Paid Groups on 4th July, 2010 in the Sunday Report sent to the Paid Groups.

2010-07-12T02:21:00.000-07:00

PICK OF THE WEEK:
Balaji Amines Ltd.

BSE Code: 530999
CMP: Rs.166.50
Book Value: Rs.140.57
EPS: Rs.31.86
P/E: 5.23
Industry P/E: 8.31
Dividend: 20%
Target: Rs.188-189
SL—Rs.147

Introduction: Balaji Amines Ltd, is an ISO 9001: 2008 certified company, specialized in manufacturing Methylamines, Ethylamines, Derivatives of Specialty Chemicals and Natural Products. It also has facilities for the manufacture of derivatives, which are down stream products for various Pharma /Pesticide industries apart from user specific requirements.
Balaji Amines Limited (BAL), one of the leading manufacturers of Aliphatic Amines in India was set up in the year 1988 to cater to the growing requirements of value based Specialty Chemicals. BAL commenced manufacture of Methyl Amines in the year 1989 and subsequently added facilities for manufacture of Ethyl Amines and other derivatives of Methyl Amines and Ethyl Amines.
BAL has been consistently adding capacities and fine tuning the processes to provide quality products at lowest cost to the customers. World over, Amine technology is a closely guarded process with only a few handful companies having access to such technology. BAL for the first time in India tested on an indigenously developed technology and developed it further over a period of time.
Today, BAL‘s products are accepted in international markets and have gained the distinct export quality status, which makes it one of the few companies in India having the potential to match the stringent international quality standards for which it has been awarded ISO-9001: 2000 Certification apart from other appreciations and continuous orders from global majors for its product range.
BAL`s state-of-the-art manufacturing facility is located at Tamalwadi Village, near Solapur (Maharashtra State, India). The facility is fully equipped with latest technology like digital computerized controlled systems, which facilitates the control of operations from the control room in addition, BAL possesses an excellent R&D facilities and laboratory, which helps in conducting basic research and also to fine tune the processes.

Shareholding Pattern: The promoters hold 54.64% while the 45.36% of the shares of the company. Among the non-promoters Bhagyanagar Wood Plast Ltd holds 2.17% of the shares of the company.

Financials: For FY10, the company came out with good set of numbers. The total income of the company for FY10 came out to be Rs.263.35 Cr as against Rs.254.53 Cr in the same period previous year. The net profit of the company FY10 came out to be Rs.20.65 Cr as against Rs.15.33 Cr in the same period previous year. The reserves of the company increased from Rs.65.03 Cr in FY09 to Rs.85.20 Cr in the same period previous year. The EPS of the company for FY10 came out to be Rs.31.86 as against Rs.23.65 in the same period previous year. Also both the net and operating profit margins increased marginally in FY10, in Q-o-Q basis.
For Q4FY10, the company came out with very good numbers. The total income of the company for Q4FY10 came out to be Rs.73.66 Cr as against Rs.56.89 Cr in the same period previous year. The PBDT for Q4FY10, more than doubled to Rs.9.06 Cr as against Rs.2.81 Cr in the same period previous year. The net profit of the company for Q4 FY10 came out to be Rs.3.84 Cr as against Rs.63 lakhs in the same period previous year. The EPS of the company for Q4FY10 jumped to Rs.5.93 as against Re.0.97 in the same period previous year. The interesting part is that while the OPM increased to 16.03% in Q4FY10, from 11.51% the NPM of the company increased to 5.12% from mere 1.12 % in the same period previous year.

Industry: The Indian chemical industry is an integral part of the Indian economy, contributing around 6.7% of the Indian GDP. It touches our lives in many ways, whether it is thermoplastic furniture we use or a synthetic garment we wear or drug we consume—we are inextricably linked with it. The industry is a vital part of the agricultural and industrial development in India and has key linkages with several other downsteam industries, automotive, consumer durables, engineering, food processing, etc.
With World Trade Organisation (WTO) assuming an increasing role in international economics, there is an inevitable move towards an inter-linked global economy. However, there have been cases where certain segments of the industry such as pharmaceuticals and biotechnology have performed exceedingly well even at a global level.
The chemical industry in India has the potential to grow to around USD 100 billion by 2010 according to a well known accounting firm. For the industry to achieve this size, Specialty and Knowledge chemical segments would need to grow at 16.4 per cent (current growth rate is 7.9 per cent) and 27 per cent (current growth rate is 12.3 per cent) respectively, while the Basic chemicals segment would need to sustain its current growth rate of 7.7 per cent. This would mean that the Indian industry’s composition would change to match the profile of the chemical industry in global markets.
At USD 100 billion, the industry’s contribution to India’s GDP is expected to grow from the current 6.7% to 12.1% and its share of the global industry is expected to increase from 1.9% to 3.9%, by the end of 2010.
At the Base case, if the current growth rates are maintained, the industry is expected to grow to USD 60 billion by 2010. In that case, the industry’s contribution to India’s GDP would increase to 7.1% and its share of the global industry would increase to 2.3%. The industry would need to seek new directions in order to achieve the incremental USD 40 billion over the Base case scenario. At 12.1% of India’s GDP, the USD 100 billion chemical industry in India will have a substantial impact on the national economy. Some of the areas where the impact is expected to be significant include:
■ Emergence of a new breed of entrepreneurs and leaders who will steer the industry;
■ Rise in the level of intellectual capital being generated and a consequent increase in the number of patents filed;
■ Creation/ acquisition of manufacturing assets, as well as sales networks overseas by Indian companies;
■ Increase in direct employment within the industry from the current levels of around 0.9 million to around 1.3 million by 2010, with the indirect additional employment figures expected to be a multiple of about 4-6 times this number;
■ Development of core skills in chemistry, chemical engineering and general management with an emphasis on the Specialty and Knowledge segments;
■ Increase in the demand for chemical plants and equipment, fabrication and process automation services, with most of the demand being for Specialty and Knowledge chemical plants;
■ Closure of companies/ plants as a result of consolidation as well as relocation of plants to form clusters to reap cost benefits, share knowledge and improve coordination with buyers/ suppliers;
■ Improvement in safety, health and environmental (SHE) standards;
■ Increase in the overall investment levels as India moves towards becoming a global sourcing base for Speciality and Knowledge chemicals;
■ Extensive use of information technology (IT) within the industry for business as well as technical applications;
■ Emergence of Indian aggregators or trading houses offering value to end-customers as well as manufacturers through investments in global sales and distribution facilities, relationships and access to large capacities; and
■ Conducive regulatory and legal framework with changes in legislation pertaining to Value-added Tax (VAT), intellectual property rights, etc.
The chemical industry is a key contributor to the world economy. It is a knowledge-based industry with significant investments in R&D. The industry supplies to virtually all sectors of the economy and produces more than 80,000 products.
In terms of consumption, the chemical industry is its own largest customer and accounts for approximately 33% of the consumption. In most cases, Basic chemicals undergo several processing stages to be converted into downstream chemicals. These in turn are used for industrial applications, agriculture, or directly for consumer markets. Industrial and agricultural uses of chemicals include auxiliary materials such as adhesives, unprocessed plastics, dyes and fertilizers, while uses within the consumer sector include pharmaceuticals, cosmetics, household products, paints, etc.
Growth in revenues within the chemical industry depends largely on the overall growth of the economy and industrial production, and is often measured as a multiple of GDP growth. The chemical industry is a cyclical industry and is driven largely by the business cycles of end customer segments.
The Chemical Industry can be segmented into three broad types: Basic chemicals, Specialty chemicals and Knowledge chemicals. Basic has high feedstock and other raw material costs, whereas Specialty has very high selling and product development costs. Knowledge segment, on the other hand is characterized by large spends on advertising and R&D. Basic is the most mature segment with the lowest profitability, while Knowledge chemicals have the highest profitability and growth projection. Globally, the Basic segment accounts for about 47% of the industry, Specialty 25% and Knowledge 28%.
The economic downturn has had little impact on the Knowledge chemicals industry with most products (largely pharmaceuticals) being price inelastic. However, other trends including the increasing presence of generics within the market and the need for shorter development cycles, resulted in earnings pressure on companies in this segment. Growth within the segment has also been driven by longer life expectancy, population growth; greater spends on healthcare, improved agricultural techniques, etc. Chemical companies across the world have adopted different strategies to face the present day economic realities. In addition to certain universal trends, there are differences in drivers and trends across segments.
Globalisation is a common theme across all three segments of the chemical industry. An enhanced geographical spread gives companies the ability to optimise their supply chain costs globally. As a result, companies tend to establishe their manufacturing locations close to sources of feedstock or close to alternative markets. The destination countries too favour this strategy as is evident by the incentives offered for setting up plants.
Some countries actively pursuing such opportunities are Canada, South Korea and China. Canada has distinct advantages such as cheaper energy and lower corporate taxes. China is being developed into a transportation, distribution and storage hub servicing the needs of the entire Asian chemical industry.

Triggers:

In Nov. 09, the company commenced production of Polyvinyl Purrolidone (PVP K-30), which is a binder for granules and tablets. This product is presently made by ISP and BASF around the globe apart from China. The plant capacity for the product is 1, 200 TPA and with this, the company will be having advantage of in-house raw materials, right from GBL, 2P to PVP K-30. This is the 6th product in the company’s basket and is likely to add Rs.50 Cr to the topline of the company per annum.
The company was able to sustain the trend in its performance primarily due to the effective product mix. The long term purchase price contracts with vendors of raw materials and the stringent cost control policy measures implemented by the management have been major contributors to the performance.
In FY09, the company acquired 100% shares in its subsidiary company, Bhagyanagar Chemicals Limited making it as wholly owned subsidiary company, as against 99.95% in the previous year. It remains to be seen how this move is able to push up both its top and bottomlines.
There were reports in certain sections of the media some months back that Hyderabad-based speciality chemicals manufacturer Balaji Amines Limited (BAL) is setting up a three-star hotel at a cost of about Rs.30 crore at Solapur in Maharashtra. The company has already finalised a deal with the Sarovar group for managing the hotel being set up in an extent of 1.5 acres and has also entered into a memorandum of understanding with them. According to the management, the hotel was conceived for utilization of its vacant land and also keeping in view the future developments in and around Solapur where NTPC, Bharat Forge and Thermax among others were establishing their units.
BAL, which has two manufacturing units, one at Tamalwadi in Maharashtra and another at Bollarm, has also embarked upon a Rs.60-crore expansion project to be completed by August 2010. The expansion of the project is being funded through Rs.40 Cr term loan and Rs.20 Cr of internal accruals. The Maharashtra Industrial Development Corporation (MIDC) has allocated 40 acres of land to the company at Tamalwadi where its manufacturing unit is located. The company is expected to get good benefit of expansion from Q2FY11 when, sales are expected to grow by 30-35 % along with significant improvement in bottomlines.
It is worth mentioning here that in July 2009, BAL, which is a leading manufacturer in the field of fine chemicals, speciality chemicals, aliphatic amines and derivatives, completed a Rs.70 Cr expansion-cum-diversification project involving setting up two windmills of 1.5 Mw and 2.5 Mw each, a research and development plant and a PVPK production plant. After the second expansion project, the company's installed capacity would go up to 50,000 tonnes per annum (tpa) from the current level of around 45,000 tpa. It would also be adding another windmill of 1.5 Mw capacity being set up at Sataram in Maharashtra at a cost of about Rs.10 Cr. The company hopes to achieve a turnover of over Rs.500 Cr by 2012.
The company has made strategic investment of Rs.2.94 Cr in Balaji Greentech Products Limited which reportedly broke even in the 1st year of operation. Balaji Amines Ltd had earlier diversified into the manufacture of CFL and LED, through its new company Balaji Green Tech Products Ltd. The BAL had been able to achieve an average annual growth rate of over 20 per cent in the past five-six years.
Balaji has continued to give its full thrust to the in-house Research and Development initiatives both in Unit-I and Unit-II at Hyderabad. These R & D centres are doing remarkable work in identifying new products, conducting research for new derivatives of amines, natural products, optimizing the input parameters for achieving better value additions, increasing the capacity utilization of the plant by improving the process, fine tuning the process, etc.
India has a leading global presence in the field of pharmaceuticals and some of the largest pharmaceutical companies belong here. Balaji Amines provides the vital raw material inputs to some of these companies and given the quality consistency and the demand for the company's products is increasing, it is being increasingly recognized as a dependable supplier in the long run. In addition to the domestic market the company has developed a long term vendor relations with its overseas customers and a large amount of company's efforts are being focused on the development of overseas markets. The management is of the view that the demand for the company's products being stable to increasing in nature and thus consistent and continuing market exists for the company's products across all verticals.

Chart-Check and Conclusion: From the charts it has been found that the scrip is above its both 50-DMA and 200-DMA, which is itself a bullish indicator. The other chartical parameters are more or less in the buy mode, with clear positive indications from MACD and Bollinger Bands.
Considering the management, products, unique business model, low equity, strong brand image, sophisticated technology, export thrust, innovative products and expansion of capacity, the scrip of Balaji Amines look grossly under priced at a P.E. Ratio of 5.23. If, stock commands a modest P.E. Ratio of 10, its share price should not be less than Rs.300, in any case considering pervious earnings (in 2005, it share price had gone upto Rs.550). After the 2nd phase of expansion the company’s top and bottom lines are expected to change dramatically. Moreover, the promoters are investor friendly but low profile. Now considering the short term play, the scrip can be purchased above Rs.167.5, for a target of Rs.188-189, SL—Rs.147. However, considering good visibility of earnings, for next 2 years one can buy the scrip for a target of over Rs.300. It is really a stock to accumulate for every portfolio.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.
The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: The scrip was recommended to the Paid/Premium Group on 11th July, 2010, in the Sunday Report sent to them.

2010-07-05T19:23:00.000-07:00

PICK OF THE WEEK
Indsil Hydro Power and Manganese Ltd
BSE Code: 522165
CMP: Rs.74.75
Book Value: Rs.50.02
Market Cap: Rs.71.11 Cr
Dividend: 10%

Introduction: Incorporated in 1990, Indsil Hydro Power & Manganese Ltd is the part of Indsil group. The company is in the business of smelting of specialty alloys and power generation in India.
The company has two units named Smelter Works at Palakkad, Kerala, INDIA and Hydro electric works at Rajakkad, Idukki District, Kerala, INDIA. The Company`s products include low carbon silico manganese and high carbon silico manganese. Indsil, with business interests in specialty alloys and power generation is a fast growing GROUP with well integrated manufacturing plants and a well diversified geographical base.

Shareholding Pattern: The promoters hold 50.05% of the shares of the company while the general public holds 49.95% of the shares of the company. DIIs hold 6.67% of the shares of the company.
Financials: For Q4FY10, the company came out with good set of numbers. The total sales of the company for Q4FY10 came out to be Rs.23.08 Cr as against Rs.14.13 Cr in the same period previous year. The PBDT for Q4FY10 came out to be Rs.4.63 Cr as against Rs.1.12 Cr in the same period previous year. The net profit of the company came out to be Rs.3.74 Cr as against Rs.23 lakhs in the same period previous year. This is on a very small equity of Rs.9.51 Cr. The EPS of the company for Q4FY10 came out to be Rs.3.93 as against Re.0.25 in the same period previous year. This is on a very small equity base of Rs.9.51 Cr. Moreover, both the net and operating profit margins increased in Q4FY10 as compared to the same period previous year.
Triggers:

There are strong rumours in the markets that the company is likely to declare 2:3 Bonus issue with the declaration of the Q1FY11 results. At the current price of Rs.74.75 the stock looks attractively valued taking into considering the upcoming bonus issue (if any).
The Company has achieved a target whereby the current debt equity ratio is almost zero. The company is expected to become debt-free within the next few months.
Due to good monsoon till now, water levels for hydro power plants are better compared to last year. In the Ferro manganese business, realization likely is better compared to Fiscal. There is also pick up in export to Europe market due to a little stabilsation of the Euro Zone. The company is looking for acquisition of ore mines in Ferro & Manganese business abroad. The market cap of the company is only Rs.71.11 Cr, whereas the cost of setting up a 18 Mw power plant is around Rs.120 Cr.
Indsil Hydro Power and Manganese Ltd earlier informed BSE that the Company along with its group sister Company, Indsil Energy & Electrochemicals Ltd. have entered into an arrangement on February 17, 2010 with the Muscat Overseas Group from the Sultanate of Oman (represented by Al-Tamman Trading Establishment L.L.C) to form a 50:50 joint venture for the purpose of setting up a 75,000 tpy ferro chrome smelter in the Sultanate of Oman. The project would have access to 100% captive chrome ore which would be made available from the existing mining operations of the Muscat Overseas Group. Indsil would be providing the technology, operating and marketing expertise for the proposed smelter project. The share capital would be held equally by both parties to the joint venture. The project is expected to cost around USD 30 Million or Rs.140 Cr and is expected to operational by end of 2011. This is great news for the share holders of the company.
The Company also has 18 Mw Hydel Power plant in Kerala where rainfalls are very good. Indsil also planning to double its smelter capacity in India. It is one of the safest scrip at the CMP, according to a Mumbai based reputed analyst.

Chart-Check and Conclusion: From the charts it has been found that the stock has made a beautiful pattern and could be accumulated at any price above Rs.72.5 for a target of Rs.80 in the short term and Rs.130, in the medium to long term. The scrip can easily give 100% return in the next 18 months time frame. Please keep a SL of Rs.67.30 for any short term trade.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.
The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: This stock was recommended to the Paid Groups on 27-06-10, in the Sunday Report, sent to them, as the Pick of the Week.

2010-07-01T10:57:00.000-07:00

PICK OF THE WEEK:
Videocon Industries Ltd
BSE Code: 511389
CMP: Rs.203.85
Book Value: Rs.294.25
EPS: Rs.24.09
P/E: 8.46
Industry P/E: 14.54
Dividend: 20%
Dividend Yield: 0.98%

Introduction: Videocon Industries was incorporated in 1986. The company has two core activities, which include the manufacturing, assembly, marketing and distribution of consumer electronics and home appliances, and exploration and production of oil and gas. The company presently has seven operating business divisions, in which major divisions are consumer electronics, home appliances, components, etc. In India, Videocon Industries Ltd has eleven manufacturing facilities. The manufacturing facilities produce a complete range of consumer electronics, home appliances and critical components such as compressors, etc. It is the only listed company manufacturing glass panels in India. The facility at Bharuch is largest in the world at a single location and the third largest overall.
Videocon Industries Ltd is one of the major CRT manufacturers globally, with plants in Poland, China and Mexico. The Poland plant also produces glass shells. It assembles air conditioners in Oman and CTVs in Italy. The company has emerged as one of the largest colour picture tube (CPT) manufacturers in the world after the acquisition of Thomson's CPT business, and expects this to grow its international sales in the next couple of years. Videocon started its oil and gas division a few years ago and presently holds a 25 per cent stake in the Ravva oil field, located on the Krishna-Godavari basin. The operating cost of the Ravva oil field is supposed to be the lowest in the world. Internationally, it has interests in oil blocks, one in Oman, two in Australia and one in Timor Sea near Indonesia.
It is an ISO 14001 and OHSAS 18001 certified company and has received the CE approval for exports to the EU. It has also been certified by the VDE Testing and Certification Institute and corresponds with British standards as well.

Shareholding Pattern: The promoters hold a whopping 68.46% while the general public holds 22.97%. The FIIs hold 3.64% (3.92%), and DIIs hold 6.63% (5.27%). Thus while DIIs have increased their stake, FIIs have slightly reduced their stake in the company. Moreover, Bennett Coleman & Company Ltd holds 2,325,500 shares or 1.01% stake while Life Insurance Corporation of India holds 9,915,111 shares or 4.29% of the shares of the company.

Financials: For Q4FY10, the company came out with good set of numbers. The total income of the company for Q4FY10 came out to be Rs.2846.16 Cr as against Rs.2220.60 Cr in the same period previous year. The PBT almost doubled to Rs.209.65 in Q4FY10 as against Rs.110.48 Cr in the same period previous year. The net profit of the company more than doubled in Q4FY10 to Rs.149.65 Cr as against Rs.72.98 Cr in the same period previous year. The EPS of the company for Q4FY10, more than doubled to Rs.6.47 as against Rs.3.18 in the same period previous year.

Triggers:
• Videocon Industries Ltd informed that the Rights Issue Committee of the Board of Directors of the Company at its meeting held on April 22, 2010, has allotted 5,13,92,243 Equity Shares of Rs.10 each at a Premium of Rs.215.00 per Equity Share on Rights Basis. The amount paid on application was Rs.112.50 (Rs.5.00 towards face value and Rs.107.50 towards premium). Since the right issue price is so much high and hence we say that the stock is likely to move up further.
• The Company, through its wholly owned subsidiaries and/or joint ventures is carrying on the exploration activities in the oil and gas fields in Brazil, Mozambique, East Timor, Oman, and Australia.
• As a part of Company’s overall plans of acquiring further interests in oil and gas fields worldwide, the Company, through one of its subsidiaries, acquired a 12.5% participating interest in Production Sharing Contract, covering the area referred to as Nunukan Block, located offshore Indonesia.
• During the FY10 a pre-salt discovery was announced in the Wahoo prospect offshore Brazil block in the Campos basin wherein VB Brazil Petroleo Private Limitada, a joint venture company of the Company with Bharat Petro Resources Limited, through its wholly owned subsidiary, holds, a 25% participating interest.
• More than 480 net feet of natural gas, in high quality reservoir sands with a gross column of more than 1,200 feet was encountered in Rovuma Basin, Area 1, offshore Mozambique, wherein one of the subsidiaries of the Company holds 10% participating interest.
• The Company continues to reap dividends from its oil & gas venture in Rawa Oil & Gas Field in India. Moreover, since it is into consumer electronics space, and hence it is expected to get benefit from the Football World Cup and ensuring Common Wealth Games, in India for obvious reasons.
• Videocon Telecommuncations Limited (VTL), (formerly Datacom Solutions Limited), one of the subsidiaries of the Company, has been awarded License to provide Unified Access Services in 21 local service areas and has also been allotted spectrum in 20 of these local service areas. VTL is in process of launching the mobile services and has substantially completed creation of the basic infrastructure for the same. VTL has signed interconnect and roaming agreements with various operators and has entered into long term master service agreements with various reputed infrastructure providers for usage of their passive telecom infrastructure services. VTL plans to roll out its mobile services commercially in six circles within a short time. VTL plans to roll out the mobile services commercially in rest of the telecom service areas where spectrum has been allotted, by December 2010.
• One of the subsidiaries of the Company, Pipavav Energy Private Limited (PEPL) is implementing a Power project in Gujarat, near Pipavav port, Gujarat. This will be a thermal power plant with a capacity of 1,200 MW and the same will be completed in two phases. PEPL has signed necessary Memorandum of Understanding with the government of Gujarat whereby Gujarat government has agreed to provide all required support to the project. PEPL has obtained necessary environmental clearances from Gujarat Pollution Control Board for constructing the power plant and has also obtained CRZ clearance from State Department of Environment & Forest. Acquisition of the necessary land required for the first phase of the project has been substantially completed and PEPL has invited bids for key equipments and necessary civil work and bathymetric survey work. The Company is also considering power projects in the other parts of the country and evaluating alternate technologies for the same.
• The company has allotted 1,858,275 equity shares on preferential basis, to Infotel Telecom Infrastructure Private Limited at a price of Rs.242.16 per equity share inclusive of a premium of Rs.232.16 per equity share.
• The company introduced Integrated Digital TV (iDTV) with a built-in digital decoder having MPEG 4 DVB-S2 Digital signal; Introduced LED TV with Nano Pixels for immense picture performance and Razor slim design. It also introduced Unique SMART TV, which set a platform for Internet TV to enjoy the Live Chatting, Browsing, Video conferencing, email access, Blu Tooth connectivity etc.; and various other ranges/series of LCD TV with Full HD 1080p resolution. It introduced Star Rated Products in Consumer Electronics and Home appliances. With this technology, the customer can have benefit of saving approximately 15% of power consumption, resulting into effective utilization of power resources in the nation.
• The company introduced paint less product with a unique Hot and Cold Technology for moulding of parts. This helps to reduce pollution generated due to hazardous chemicals used in plastic paints and its process. Customer can enjoy the high glossy finish with ultimate scratch resistance. It has developed new ranges of Direct Cool as well as Frost Free refrigerators like Ecocool, Ecocool Plus, Ecofresh, Deofresh, Nutricool, Nutricool Plus, Powercool. Developed 4 & 5 Star rated refrigerators with new exterior finish i.e. PCM-Pre-coated material.
• In near future, the Company is proposing to concentrate on all the areas mentioned earlier and to focus efforts on new technologies which could offer better products in the domestic market. The Company has bagged SAP ACE Award, twice in a row, for Best Consumer Sector Implementation and Excellence in Implementation of Various SAP Modules.
• During the year under review, Videocon Indonesia Nunukan Inc., Senior Consulting Private Limited and Jumbo Techno Services Private Limited became subsidiaries of the Company.
• The company believes that its strategy of end to end supply chain integration with global scale and low cost base and with entry into the global brand space through the acquisition route will transform it into a global CE & HA powerhouse with a strong cash flow from the oil and gas business.
• Videocon Industries Ltd has informed BSE that Videocon Industries Ltd. (VIL) advises that M/s. Anadarko Petroleum Corporation (Anadarko), the Operator of block BM-C-30 offshore Brazil in the Campos Basin, has announced the results of the Wahoo-1 drillstem test in the Wahoo field, located in block BM-C-30, in the deepwater Campos Basin offshore Brazil. The Wahoo-1 well flowed at a test rate of approximately 7500 barrels per day of 31-degree API gravity crude oil and approximately 4 million cubic feet per day of associated natural gas. This is indeed music for the shareholders.

Chart-Check: Considering the points mentioned above, the scrip could be purchased above Rs.203, for a target of Rs.215—Rs.242, in the short term. Most of the parameters are more or less in buy mode, though the scrip is little in the overbought territory. Since the Crude Oil prices are moving during the last few days, it is an ideal stock for the investors to accumulate. Please keep a SL of Rs.186 for any short term play.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.
The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.
Note: The stock was recommended to the Paid Groups on 20th June, 2010. The stock already gave good return to the investors.

2010-06-25T12:00:00.000-07:00

PICK OF THE WEEK:

Samtel Colour

CMP: Rs.16.80

Book Value: Rs.30.23

Market Cap: Rs.90.03

P/E: 1.18

Introduction: Samtel Color is the flagship company of the Samtel group, and manufactures the widest range of Colour TV tubes in India and has a capacity of over 10 million picture tubes per annum. The company was incorporated in 1986 with a technical collaboration with Mitsubishi Electric, Japan to manufacture 14” and 21” Color Picture Tubes (CPTs). With a market share of over 60%, Samtel is India’s largest integrated manufacturer of a wide range of displays for television, avionics, industrial, medical and professional applications, TV glass, components for displays, machinery and engineering services. The group employs 6,000 people in nine world-class factories and has an annual turnover of Rs.1,200 crore. Its clients include leading domestic and international TV manufacturers.

Integrated backwards with its component divisions at Ghaziabad and Parwanoo, Samtel Color also manufactures electron guns and deflection yokes for colour picture tubes.

Shareholding Pattern: The promoters hold 49.61% while the general public holds 50.39% of the shares of the company. The FIIs hold 1.32% while the DIIs hold 2.35% of the shares of the company. Also Life Insurance Corporation of India, holds 2.23% of the shares of the company, which is a very good positive indicator for the shareholders of the company.

Financials: For Q4FY10, the company came out with very good numbers. The total sales of the company for Q4FY10 came out to be Rs.275.65 Cr as against Rs.251.07 Cr in the same period previous year. The PBDT of the company for Q4FY10 came out to be whooping Rs.23.27 Cr as against a loss of Rs.14.90 Cr in the same period previous year. The net profit of the company for Q4FY10 came out to be Rs.7.74 Cr as against a loss of Rs.26.92 Cr in the same period previous year.

Triggers:

The market for color picture tubes (CPT) continued to grow in India although it is declining globally. The domestic CPT market is expected to show growth of around 5-10% over the next two years as the benefit of GDP growth percolate in the Indian economy. Imports which had surged has now started declining after imposition of Anti-dumping duties, by the GOI.
The company has submitted a further debts restructuring proposal to ease the liquidity constraints which has been approved by the Lenders under the CDR mechanism. The Scheme, envisages inter-alia restructuring of principal, conversion of debts into fresh equity shares of the Company, infusion of funds by promoters etc. This is expected to further work wonders for the company.
The committee of the Board of Directors of the Company in its meeting held on January 25, 2008 had allotted 23,25,581 warrants having optional right of conversion into against each Equity share of face value of Rs10.00 each at a premium of Rs.11.50 per share to M/s. CEA Consultants Pvt. Ltd. (promoter Company). The Company has informed that, the committee of the Board of Directors of the Company in its meeting held on July 24, 2009 considered and approved the conversion of Warrants into equity shares and allotted 23,25,581 equity shares of face value of Rs.10.00 each at a premium of Rs.11.50 per share to M/s. CEA Consultants Pvt. Ltd, (the promoter Company)" in pursuant to the preferential issues under SEBI (DIP) guidelines, 2000 as amended from time to time (conversion of warrants within 18 months from the date of allotment of warrants).
It has a series of 1sts (firsts) to its credit: (a) 1st to introduce Digital Color Monitor in India (b) 1st to launch 12", 14" and 17" B&W picture tubes in India (c) 1st to launch 14" and 21" FST tubes in India (d) 1st to launch Mono Display Tubes in India (e) 1st to assemble and seal glass shells in India (f) 1st to offer the largest range of 14", 21" FST and 21" F&FST color picture tubes in India (g) 1st to establish itself as the largest regular exporter of tubes (h) 1st to manufacture specialty tubes for industrial, military and medical applications, from the private sector (i) 1st public-private partnership in the area of defense avionics.
The TV brands on shop shelves have changed over the years–in the eighties, it was Weston, Crown, Texla and Uptron; in the nineties, BPL, Videocon and Onida; and today, it’s LG, Samsung and Sony. The TVs too have changed–B&W made way for colour, the 14-inch and 20-inch screens gave way to the 21-inches, now we have superflat screen TVs, tomorrow perhaps 34-inches and then plasma TVs. Despite all this churning, one company that has survived and grown is Samtel Color. Samtel is today India’s largest colour picture tube (CPT) manufacturer. Its competitors– Hotline, JCT Electronics and BPL in the domestic picture tubes market are fighting financial constraints just to survive in this volume-driven market where the agility and ability to manage and make the most of a fast-changing market are critical.
Prices of TVs, and thus picture tubes, drop sharply (4-5 per cent a year) as volumes scale up; the key to profitability is improved productivity and cost-control as well as the ability to move on to new growing segments where net realisations are higher. Samtel is doing just that. In March 2002, the company set up a third line for 21-inch superflat picture tubes (SFTs) for colour TVs and colour display tubes (CDTs) for PC monitors; two more lines have come up at the same site. Work on the fourth line (for 29-inch tubes) is also completed. So, volumes and net realizations are set to look up in the next few years as the company expands capacity to more than 9 million–more than the total industry size today. Its CDR package is expected to bring new lease of life for the company.
The Indian avionics leader, Samtel Display Systems (SDS), was awarded the Frost & Sullivan ‘Hot Investment Opportunity Award 2009′ in the Indian Aviation Suppliers Market. This award recognizes the Company’s outstanding business model based on unique and differentiated products, continuous upgrades of systems, long-term client contracts and industry certifications such as SAE/AS 9100 Rev-B. This is the first time that Business Financial Services (BFS) at Frost & Sullivan has awarded an Indian participant in Aerospace Sector. It is worth mentioning here that, Samtel Display Systems is the only privately owned company manufacturing high-end avionics products in the country. Moreover, the deal between Samtel and HAL for Sukhoi runs for the entire lifetime.
Samtel Display Systems (SDS) is a key Indian player in high-technology products for avionics and military applications in both domestic and international markets. SDS straddles the entire value chain from design, development, manufacture, testing, qualification, repair & maintenance and obsolescence management of avionics products and equipment for military as well as commercial aircraft. Its products include Color Avionic Tubes (CAT), Multi Function Displays (MFD), Head Up Displays (HUD), Helmet Mounted Displays (HMD), Automated Test Equipments (ATE) and IADS, as well as Control Displays for Armored Military Vehicles. SDS is a part of the Samtel Group, India’s largest integrated manufacturer of a wide range of displays for television, avionics, industrial, medical and professional applications, TV glass, components for displays, machinery and engineering services.
Earlier in 2010, Samtel Display Systems (SDS), one of India’s leading private sector aerospace companies, has inked a memorandum of understanding (MoU) with Swedish major Saab to jointly develop, manufacture and market a new generation head-up display (HUD) for helicopters. RIGS is a new-generation advanced lightweight HUD designed by Saab to provide helicopters with a cost-effective display solution. RIGS gives all-weather capability, ideal for flying and landing helicopters in challenging conditions, by presenting landing information and images from enhanced vision sensors, enabling pilots to see through darkness, smog, smoke and various levels of snow, rain and fog. SDS is already in advanced stages of developing HUDs for fighter aircraft. Subsequent to this MoU, SDS will now also be involved in the development of RIGS HUD together with Saab. SDS and Saab will jointly market RIGS in India to potential Indian customers for the Indian commercial and military airborne market. SDS will be involved in the development of RIGS electronics and software and will also develop and manufacture parts of the RIGS HUD. Initially, the parts manufactured by SDS will be for the Indian market, with the potential of serving international market in the long run. SDS may also, at a later stage, leverage its relationship with HAL (Hindustan Aeronautics Limited) for the joint marketing activities of RIGS. The company hopes that this collaboration will extend to other international markets as well over the next few years. This is the second MoU to be signed between Saab and SDS. This collaboration marks its next step towards consolidating its position in the Indian aerospace and defense market. Samtel Display Systems (SDS), earlier announced the opening of its office in San Jose, California, as part of its international expansion programme. This development marks a significant foray of SDS into the international market, thus facilitating close liaison with existing and potential customers, while helping SDS pursue business development activities in this geography. Since the creation of SDS, the company has received overwhelming response from the US market. The new venture is expected to minimize constraints due to long distances and time differences and enable it to reach out to wider-set of clients. SDS is a frontrunner in India’s private sector defence industry, having joint ventures and memorandums of understanding with Thales, Airbus, Honeywell, Lockheed Martin and Boeing, as well as Indian government defense organizations, the Defence Research and Development Organisation (DRDO) and Hindustan Aerospace Limited (HAL). It aims to grow from an expected turnover of Rs.100 Cr in 2010-11 to Rs.600 Cr in 2014-15 through expansion into the head-up displays, helmet mounted displays, automated testing equipment and OLED (organic LED) technologies. The only Indian company to manufacture cockpit displays for the Airbus family, it is also the chosen supplier of cathode ray tubes for Honeywell’s EFIS40 electronic flight instrument system. This segment was previously monopolised by Sony.

Chart Check and Conclusion: In a major turnaround, Samtel Color, the flagship company of electronics giant Samtel group, posted a net profit of Rs.76 Cr ($17.11 million) for fiscal 2009-10 (FY10) against a loss of Rs.75 Cr for the nine month period ended March 31, 2009. For the fiscal ended March 31, the company has declared a consolidated revenue of Rs.1, 114 Cr as compared to Rs.717 Cr during the nine-month-period ended March 31, 2009.

The consolidated revenue for the quarter ending March 31 increased by 10 percent to Rs.269 Cr in comparison to Rs.245 Cr for the corresponding quarter of the previous year. The company’s net profit after tax increased by 129 percent to Rs.8 crore in comparison to a loss of Rs.27 Cr for the corresponding quarter in the previous year, “thus showing a complete turnaround of the result”.

Samtel Color’s EBIDTA has shown an increase of 1,336 percent during the quarter by rising to Rs.31 crore in comparison to a loss of Rs.2 Cr in the previous year. Samtel Color manufactures the widest range of colour TV tubes in India from 14-inch to 29-inch and has a capacity of over 10 million picture tubes per annum.

From the charts it has been found that most of the parameters are in buy mode. One can accumulate the scrip at the CMP of Rs.16.80, for a target of Rs.21-25 in the short term. Please keep a SL of Rs.12-13 for any short term play.

Note: The stock recommended on 13th June, 2010, to the Paid Group members in the Sunday Report.

2010-06-15T16:31:00.000-07:00

PICK OF THE WEEK:
ANG Auto Ltd
BSE Code: 530721
CMP: Rs.49 and Rs.53.50
Book Value: Rs.72.84
EPS: Rs.5.78
P/E: 9.26
Industry P/E: 16.46
Market Cap: 67.09 Cr
52-Week High/Low: Rs.62.95/Rs.35.30

Introduction: When it comes to providing complete undercarriage solutions for trucks and trailers, ANG Auto Industries Ltd (Formerly ANG Auto Ltd) is the preferred name world over for its quality products such as heavy vehicle spare parts and automotive trailer parts. It is a Tier I and Tier II approved original equipment (OE) supplier to some of the leaders of HCV segment in US, Europe and Latin America. The company deals in heavy vehicle spare parts like automatic slack adjuster, manual slack adjuster, fully dressed dummy axle, automotive trailer parts and air brakes.
It has succeeded in reaching a broader international market in these years. It is one of the largest manufacturers in India of the components used in manufacture of trailer axles, transmission and airbrake systems. More than 55 % of its revenue is derived from exports to quality conscious US and European markets in addition to Australia, Brazil and Mexico, among others. Its brand-enhancing customers comprise Tier-I and Tier-II companies across the world like Arvin Meritor (USA), Alliance Corporation (USA), Zenus Starker–BMW (USA) and Bosch Rexroth (UK), among others. Its manufacturing presence across five facilities covers nearly 250,000 sq. ft. across NOIDA and Faridabad, Sitarganj and Uttranchal (both adjacent to New Delhi, India’s capital). Its shares are listed on the Bombay Stock Exchange, Delhi Stock Exchange, National Stock Exchange and Ahmedabad Stock Exchange.

Shareholding Pattern: The promoters hold 48.38% while the general public holds 51.62%.

Financials: On a consolidated basis, For Q4FY10, the total sales of the company came out to be Rs.124.45 Cr as against Rs.117.2 Cr in the same period previous year. Profit from Operations for Q4FY10, before other income, interest and exceptional items came out to be Rs.14.12 Cr as against Rs.15.24 Cr in the same period previous year. The net profit of the company for Q4FY10 is a whooping, Rs.5.05 Cr as against Rs.81.91 lakhs in the same period previous year. This is on a very small equity of Rs.12.54 Cr. The consolidated EPS of the company for Q4FY10 came out to be Rs.4.03 against Re.0.65 in the same period previous year. Thus there is a significant improvement in the financials of the company in FY10 as compared to FY09.

Triggers:

The company last year entered into a joint venture to produce and market mobile towers solutions in India. ANG Auto Ltd and TowerWorx, US, have 50:50 stake in the new company known as TowerWorx India (P) Ltd. It is important to note that TowerWorx, US, is the largest mobile tower producer in the US having a large customer base across the globe like AT&T, TMobile and Verizon, among others. The joint venture is expected to reap in good revenues from the telecom companies, in the near future.
Last month the company received a huge order of Rs.33.37 Cr from L & T MHI - Boilers Pvt. Ltd. for manufacture and supply of boiler support structure for Jai Prakash Power Venture Ltd. for their upcoming power plant at Nigrie, Dist. Singrauli, Madhya Pradesh. The company hopes to garner more such orders in the near future.
The company attained the ISO and TS-16949 certifications, and is moving to implement the TPM and the TQM standards across all its plants over the coming days.
It is one of the few companies in the auto-ancillary space in the world to be completely integrated - from the manufacture of components to sub-assemblies and assemblies and finally to vehicles. What makes ANG Auto unique in India among the select few in the world is the convergence of integration and scale revolving around a priority to commission capacities among the top three in the country.
It has enhanced its value at every intermediate point in the following ways: (i) Through economies of scale, growing volumes to match global standards, (ii) Through the innovation of products enhancing the competitiveness of its users, (iii) Through the manufacture of quality products, leveraging its rich international experience of processes and practices. As a result, ANG Auto quantities, taking the business of its customers ahead. Industries Ltd of today provides international-quality products at Indian cost in growing
It is important to note that domestic trailer use is still at a nascent stage in India. The government’s thrust on improving road infrastructure and proper implementation of overload restriction for the commercial vehicles is expected to drive the demand for trailers. The container movement volumes have now begun to show some positive momentum.
India is now a global auto component hub and a significant player in the global automobiles supply chain. It is now a supplier of a range of high-value and critical automobile components to global automobile giants. Moreover, the good point is that the automobile industry is showing signs of revival as CV sales rebounded in FY10 as compared to FY09. Moreover, an investment of around US$15 billion, slated for the auto components sector over the next few years, is expected to drive sectoral growth. The prospects of the domestic auto industry appear optimistic as an increasing number of global automobile OEMs are establishing bases in India. Toyota Motors earmarked Rs.3, 200 Cr investment over 2008-11 for the second plant at Bangalore. Nissan intends to move its small car unit from the UK to India. It is expected that the country will be able to offset China and other Southeast Asian countries' traditional manufacturing advantage in the coming years; taking the industry a step closer to its targeted revenue of US$40 billion by 2014.
Auto companies have passed on the 2 per cent rise in excise duties duty to the customers and hence they are not affected. Now increase in disposable income of consumers with significant relief on personal taxation in the Union Budget of 2010-11 is expected to drum up the sales of auto majors in the near future—already some signs are being seen in the market. A significant relief on personal taxation front in the Union Budged 2010 could possibly outweigh negative factors. In addition, the excise duty rollback is only one third of the total cut (6 per cent) doled out through the stimulus package. There were no further negative surprises for the Auto Sector in the budget, 2010. It would be important to touch upon other significant budget proposals relevant for auto sector. While corporate income tax rates remained unchanged, reduction of surcharge on domestic companies from 10 to 7.5 per cent would lessen the tax burden. However, Minimum Alternate Tax (MAT) increases from 15 to 18 per cent, will to some extent offset the for eligible companies having an approved in-house R&D unit from 150 to 200 per cent of the expenditure incurred. This would stimulate additional investment in R&D activity paving way for innovation. With the growing trend towards providing advanced driver assistance features, safety and comfort features in vehicles, continuous innovation and adoption of new systems will be vital to retain competitiveness in the automotive industry. Certain companies were required to call back large number of vehicles in recent past due to technology issues. This tax measure could possibly work as a fillip to increase focus on R&D in long term resulting in better technology products. Thus the sector outlook remains strong for the ANG Auto Industries Ltd. benefit due to reduction in surcharge. One of the budget proposals enhances weighted deduction
To reduce dependence on the auto sector, ANG has ventured into the manufacture of boiler structure for thermal power plants. The Government of India has envisaged capacity addition to the tune of 78,700 MW during the Eleventh Five Year Plan, of which 75.85% is expected to be thermal power capacities. This provides significant optimism to the Company’s business outlook. The Company enjoys a favourable debt-equity-ratio, enabling it to raise further debt in any case of any need.
The Company enjoyed 46:54 revenue split between domestic and export markets. Off late the company has shifted its focus from the European market to Latin American, the US and other smaller markets and hence it would not affected too much by the European Financial Crisis.
Constant efforts are being made by the Company to reduce energy consumption, upgrade technology as well as equipment and derive optimum benefits from the present sources. The Company is continuously identifying the scope for improving end use efficiency by evaluating the generation of power increased. In-house training is imparted regularly to plant personnel for adopting technology advancements and cost containment. Further, the Company follows better product improvement, cost reduction, better quality and stability of products. techno-economic viability of various energy conservation measures. The Company’s captive engineering practices, which include reverse engineering processes for enhancing productivity,
The company has invested Rs 24.98 Cr in a steel fabrication unit for the manufacture of boiler structures for thermal power plants. The trial run has already begun in the company’s unit and soon the commercial production will start. It has also bought back 7,50,000 equity shares at Rs.53.52 per share and 7 mn bonds at a 50% discount on face value.

Chart Check and Conclusion: From the charts it has been found that the stock is just near the 50 and 200 day moving averages which is positive sign for the shareholders and investors in general. From the charts it is further found that MACD, RSI and Candle Stick Patterns are in buy mode. One can buy the scrip above Rs.51.5 for a target of Rs.80 in the medium to long term. In the short term the scrip may move towards Rs.62, where some profit booking is advised.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report. The calls made herein are for informational purposes and are not recommendations to any person to buy or sell any securities. The information is derived from sources that are deemed to be reliable but its accuracy and completeness are not guaranteed. The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family members may or may not have positions in the Scrips mentioned in this column. Investors should take their own decisions while buying and selling the shares/securities.

Note: The stock was recommended on 06-06-10, to the Paid Groups in the Sunday Report sent to them.

2010-05-11T13:25:00.001-07:00

PICK OF THE WEEK

Info Drive Software Ltd

BSE Code: 530703

CMP: Rs.27.10

EPS: Rs.1.63

Introduction: Info-Drive Software Limited [BSE: INFDS, 530703], is a multi-dimensional Technology and Business Services Company offering:

* Specialized expertise in Applications Deployment and Banking Solutions

* Remote Infrastructure Management

* Biometric Solutions at enterprise level and

*Back-office transaction processing in Healthcare and Benefit Administration domains.

The company serves the high-growth banking in the Middle East and Far East markets segment by providing turnkey systems integration solutions entailing custom software implementation, hardware optimization and data center maintenance. Through a unique synthesis of organic and inorganic growth model on top of highly specialized offerings in the IT, Infrastructure and BPO verticals, it has established a well-balanced portfolio of services catering to the mainstream, uncontested, and emerging markets globally.

With headquarters in Chennai (India), Info-Drive has service delivery centers across India, Kuala Lumpur (Malaysia) and Dubai (UAE) supporting the business development centers in the USA (Sunnyvale and New York), and Singapore. These also support the multiple systems integration centers pan-India.

Its corporate culture is driven by:

* A strong sense of client-centricity

* Empowered decision-making with high accountability

* Sustained investment in domain expertise for continual differentiation in offerings and

* A constant focus on identifying green field opportunities for steady value creation for the company.

These attributes have fuelled Info-Drive’s rapid growth in the chosen markets, helping it become a truly ‘niche’ provider of both scale and specialized services. Partnering on an integrated or discrete engagement model, we are able to unlock measurable savings for clients globally.

Its portfolio of services entails:

* Business Process Outsourcing services

o Healthcare (Data Capture, coding and billing)

o Benefit Administration services (Life cycle of Qualified Pension Plans and IRS filing)

* IT Services

o Lifecycle Development Services

o Product Support and Customization Services

o Platform Porting Services

o Product Migration Services

* IT Infrastructure Management Services

o Remote Infrastructure Management

o Data Center Management

* Biometrics

o Avant Guard-Auto

o Avant Guard-IT

o Avant Guard-Access Control

o Avant Guard- 32 Bit E-Kit

Shareholding Pattern: The promoters hold 18.50% while private corporate bodies hold 16.51%. The non-promoter holding is 81.50%.

Share Holding Pattern as on :	31/03/2010		31/12/2009		30/09/2009
Face Value	10.00		10.00		10.00
	No. Of Shares	% Holding	No. Of Shares	% Holding	No. Of Shares	% Holding
PROMOTER'S HOLDING
Indian Promoters	5408456	18.50	5407956	18.50	5372208	18.37
Sub Total	5408456	18.50	5407956	18.50	5372208	18.37

NON PROMOTER'S HOLDING
Institutional Investors
Mutual Funds and UTI	800	0.00	800	0.00	800	0.00
Banks Fin. Inst. and Insurance	7600	0.03	8000	0.03	8000	0.03
FII's	91689	0.31	91689	0.31	91689	0.31
Sub Total	100089	0.34	100489	0.34	100489	0.34
Other Investors
Private Corporate Bodies	4827674	16.51	4836407	16.54	4859177	16.62
NRI's/OCB's/Foreign Others	4015445	13.73	2989783	10.23	3920618	13.41
Others	1026589	3.51	1001917	3.43	1002828	3.43
Sub Total	9869708	33.76	8828107	30.19	9782623	33.46
General Public	13860637	47.40	14902338	50.97	13983570	47.83
GRAND TOTAL	29238890	100.00	29238890	100.00	29238890	100.00

Financials: For FY09, the net sales of the company came out to be Rs.13.65 Cr as against Rs.4.25 Cr in the same period previous year. The other income of the company came out to be Rs.97 lakhs as against Rs.49 lakhs in the same period previous year. The operating profit of the company for FY09 came out to be Rs.4.77 Cr as against Rs.2.64 Cr in the same period previous year. The Gross profit of the company for FY09 came out to be Rs.5.55 Cr as against Rs.2.95 Cr in the same period previous year. The net profit if the company for FY09, came out to be Rs.5.22 Cr as against Rs.2.28 Cr in the same period previous year.

The EPS of the company for FY09 came out to be Rs.1.79 as against Rs.0.78. The net profit in FY09 would have been much higher if the employee expenditure and other expenses have not shot up by so much. The employee expenditure increased to Rs.1.64 Cr in FY09, as against Rs.72 lakhs in the same period previous year. The other expenditure shot up to Rs.7.24 Cr as against Rs.90 lakhs in the same period previous year. The depreciation has also increased significantly during FY09, as against FY08.

For Q3FY10, the total sales of the company came out to be Rs.5.19 Cr as against Rs.6.46 Cr in the same period previous year. The operating profit of the company nearly doubled to Rs.1.84 Cr in Q3FY10 as against Rs.1.03 Cr in the same period previous year. The net profit of the company for Q3FY10 came out to be Rs.1.62 Cr as against Rs.1.01 Cr in the same period previous year. The operating profit margin of the company increased to 35.51% in Q3FY10 as against 15.85 % in the same period previous year. The GPM of the company increased to 32.7% as against 17.57% in the same period previous year. The NPM of the company increased to 30.95% (almost double) in Q3FY10, as against 15.19% in the same period previous year. The EPS of the company for Q3FY10 came out to be Rs.0.55 as against Rs.0.34 in the same period previous year.

For the nine months ending December, 2009, the total sales of the company came out to be Rs.10.69 Cr as against Rs.119.4 Cr in the same period previous year. The net profit of the company during the period came out to be Rs.4.20 Cr as against Rs.3.98 Cr in the same period previous year. The operating profit margin of the company also increased to 43.96% as against 34.77% in the same period previous year. The NPM of the company during the period came out to be 38.81% as against 31.74% in the same period previous year. The EPS of the company for the nine months ending December, 2009, came out to be Rs.1.44 as against Rs.1.36 in the same period previous year.

However, a little concern is given by the fact that during the nine months ending December, 2009, the employee expenditure almost doubled to Rs.2.64 Cr as against Rs.1.19 Cr in the same period previous year. But this is offset by the significant decrease in the other expenses to Rs.3.35 Cr as against Rs.6.6 Cr during the nine months ending December, 2009.

Triggers:

There is a big change in the global economy and the Company has been able to adapt well and march along with overall improved performance. Keeping in mind the Company’s future outlook and the avowed objective to reward the Shareholders, the Board shall maintain its policy of returning a portion of its free cash flow to its shareholders at a level it considers prudent in light of the current economic and financial environment. The Board recommended a Dividend of 5% (Rs.0.50 paise) per share for FY 08-09. The Board is confident of ensuring sustainable returns to the Shareholders for now and many years to come.
The Company continued to win new engagements and grow existing relationships in the traditional area of Hardware Sales & Maintenance, Systems Integration and has strengthened its presence in areas such as IT Consulting and IT Infrastructure Management services. The broad range of services enables the Company to provide end-to-end solutions to its clients - combined with its geographical spread provided comprehensive and high value added services to its clientele.
The Company in FY 08-09 has chalked out a new strategy and has realigned its operating structure and enhanced technology offering. The revised organizational operating structure paves the way for more accountability & performance by casting a P&L responsibility on Heads of Operations. The Company today is much more focused and is executing at a higher efficiency than a year ago.
The synergies between the subsidiaries which have been acquired in the past are yielding results in making InfoDrive as a group, provider of end-to-end comprehensive solutions.
The Company’s Income from operations in FY09 grew by 221% to Rs.13.65 Cr from Rs.4.25 Cr in 2008, thus making further growth in 2009. The corresponding Total expenditure including depreciation is Rs.9.28 Cr in 2009 from Rs.1.87 Cr in 2008. Correspondingly the Profit after Tax increased by 129% to Rs.5.22 Cr in 2009 as compared to a profit of Rs.2.28 Cr in 2008.. The Company’s Stand alone operations have shown substantial growth. The company seeks long term engagements with clients while addressing their Outsourcing requirements. Its customer centric approach has resulted in high level of client satisfaction. The demand for the Company’s services continues to look robust, and the relentless focus on niche areas within Business Process Outsourcing (BPO) and Information and Communication Technology (ICT) services continues to resonate with target customers.
The Company’s chosen target segment in BPO space does not have any exposure to the recession in USA and has not seen any slowdown in demand from its US clients. USA continued to be the largest market for its BPO operations and hence any improvement in the fundamentals of the US is positive for the company. The company derived 75 percent of its BPO revenues from repeat business. The Company continues to believe that, for the nature of services it provides, growth is predicated on superior service delivery execution, ongoing value enhancing workflow and domain competency rather than on vagaries of macroeconomic market forces.
The Company’s investments in uncontested market opportunities and innovation have enabled it to conceptualize and undertake a large, end-to-end critical project in Digi-Life segment. As part of this practice initiative, the Company has won several high-value contracts in Information and Communication Technology (ICT). It has rapidly established itself as industry leader in creating a truly unique e-Living Practice that provides automation, digital life-style, and community networking & unified integration of media, telecom and internet for homes and community.
The quality of revenue and the annuity nature of its client contracts make its growth plans highly predictable and sustainable over a longer time horizon, relative to its sector peers. The global economic events and the resultant slow- down has created enormous headwind to the growth of services industry in general and offshore outsourcing industry in particular. The Company’s investments in new growth engines like e-living, specialized service offerings in BPO like Benefits Administration Services and value centricity in the large Systems Integration projects have helped convert today’s challenging market environment into opportunities for growth.
Even in this difficult environment, the Company continues to make substantial investments in developing its domain expertise and strengthening its technology competencies. The Company is focused on Intellectual Property (IP) led growth strategy in some of the chosen service offerings and as a testimony have built several tools like InsTIL, CampIT, industry pioneering Biometrics solutions and are actively offering these to several blue-chip clients, as an integral part of its service offerings. As a result of these initiatives, the Company is well equipped to benefit when the global economy, especially the US, is revving.
Though the current external macroeconomic conditions continue to be uncertain, however it is widely believed that the company’s performance bulwarked by a professional management team will continue to surpass the expectations, as witnessed over the last few years.

· Info-Drive Software Limited (Singapore Branch) was incorporated in November 2007, to expand its business in Hardware Sales & support services business in Singapore. The Company in FY09 has signed a reseller agreement with Hewlett Packard Singapore (Sales) Pte Ltd (HP) for selling the entire line of HPs Products in India.

Subsidiaries: The Company today is a global corporation having presence in 5 countries :

           Subsidiary                                                                         Country of Incorporation

       Info-Drive Software Inc                                                         United States of America

       Info-Drive Systems Sdn Bhd                                                   Malaysia

       Info-Drive Software LLC                                                         United Arab Emirates

       Precision Infomatic (Madras) Pvt Ltd                                       India

       Info-Drive Software Pte Limited                                             Singapore

       Info-Drive Software Limited                                                   Canada

       Precision Techserve Private Limited                                        India

       Precision Galaxy Private Limited                                              India

       Precision Techconet Private Limited                                        India

       Legend Systems Private Limited                                              India

       Technoprism Inc                                                                      United States of America

       Technoprism LLC                                                                     United States of America

During FY09, InfoDrive Dubai has made good progress on its strategy to target multi-year deals with end to end ownership of customer systems and processes. This initiative has helped the Company further its objective of long term partnership with the customers. Within few months of launch of Digi-life practice, InfoDrive Dubai secured its first multiyear million dollar order in ICT space for InfoDrive, India. The scope of work includes providing community datacenter, call-center & e-Living experience. Hardware Platform, Software Drivers & Applications are developed in conjunction with several OEM & technology giants including Microsoft and Cisco. The phase one of the project which includes e-Living thrill ideation, e-Living commerce blueprints, infotainment solution architecture has been successfully delivered in FY09.

Info-Drive Software Ltd has informed last month that it is entering into the S A S, and Risk Management Practices. These Practices are advanced and analytical practices in the areas of operational risks, anti -money laundering, fraud analytics, and customized fraud solutions. The company hopes to derive significant revenues from it.
Last year, Info-Drive Software LLC, an IT services provider and a subsidiary of Chennai-based Info-Drive Software and Xerox had formed a "go to market" strategic partnership for offering to the customers paperless office products and total document solutions of Xerox in the UAE. In a statement, Info-Drive said the tie up will help medium and large enterprises to conserve cash by eliminating wastes and business-non value -adds at department and organization level while retaining core business value adds. It is one of the few who has become a member of the business partner program of Xerox Solutions & products in the UAE.

Conclusion: Considering the points mentioned above the scrip could be purchased at the CMP of Rs.27.10 for a target of Rs.31-31.5 in the very short term. MACD, Bollinger Bands, Stochastics, etc are in buy mode and cross over could take the scrip upto Rs.35 in the short to medium term, unless the world markets further crashes. The candle stick chart pattern is indicating good upward movements in the days to come. Moreover, volume built-up was seen in the counter in the last trading session. But on the negative side the scrip is still below its 50 and 200 DMA. In case of any market crash please put a Stop Loss at Rs.24.5.

Note: The stock was recommended to the Paid Groups on this Sunday (9th May, 2010) in the Sunday Report.

Not

2010-05-09T13:52:00.000-07:00

Pick of the week:

MANJUSHREE TECHNOPACK

BSE Code: 532950

CMP: Rs.42.85

Introduction: Manjushree Technopack Limited is an integrated packaging solution provider, delivering its customers with innovative cutting edge plastic packaging solutions.

Founded in 1997 by Vimal Kedia, Manjushree started as a small umbrella manufacturing unit in Guwahati, Assam and thereafter in 1984 forayed into manufacturing of Plastic Flexible packaging. Manjushree come up with its first IPO in 1995 to diversify into the PET bottles manufacturing unit in Bangalore. Today, Manjushree is the largest converter of PET and Preforms in India with an installed capacity of 30,000 MTPA and caters to the packaging needs of the FMCG fraternity. Besides PET, Manjushree also manufacturers oxygen barrier Retortable Multi layer and Stretch Blow Moulded bottles - both of these were brought into India for the first time by Manjushree.

Manjushree’s sales network consists of 6 marketing offices in all the major metros in India with two manufacturing facilities in Bangalore, with over 30,000 sq. meters of built up area, employing over 500 people and using the best of Japanese and American Technologies. Company produces over 120 million containers per annum, for 5ml-15litre capacities in over 240 designs, shapes and sizes.

Company’s clientele includes multinationals from a wide variety of industry segments: UNI-LEVER GROUP, NESTLE, HEINZ, PEPSICO, GLAXOSMITHKLINE, LOTTE, P&G, COCA-COLA, CADBURYS, RECKITT BENCKISER, WRIGLEYS, PERFETTI VAN MELLE AND ARYA VAIDYASALA to name just a few.

Shareholding Pattern: The promoters hold 57.15% while the general public holds 42.85%. The promoters have been steadily increasing their stake since the last few quarters.

Triggers:

Overall installed capacity of plant has gone upto 21,740 MTPA in view of expansion cum diversification project completed during the year, as compared to 9120 MTPA as at previous year end. The major capacity additions have been for the manufacture of PET Preforms to the tune of 11100 MTPA and the balance capacities have been added for the containers. The actual production of containers and performs during the FY09 amounted to 6722 MT (2008 - 4410 MT) excluding conversion jobs of 1757 MT (2008 - Nil) resulting in a capacity utilization of 39% of year-end installed capacity on absolute basis, which is due to the fact that the major capacity additions have been made only towards the fag end of the year. The turnover of manufactured items was 6657 MT (2008 - 4200 MT).
The company has now embarked upon further expansion of PET / Monolayer containers / Preforms manufacturing capacity during current and next year at an estimated capital outlay of Rs.30 Cr to be fully financed out of internal accruals--as a result of which the overall plant capacity is likely to increase by 7000 MTPA by the end of FY 2011.
The Company continues to have a strong focus on innovation, research and development for sustained growth while enjoying a preferred supplier status with most of its MNC clientele in FMCG, Parma and allied sectors. It has a dedicated team of technically qualified / trained personnel and professionals manning different operational segments in a decentralized environment.
The company is completely focused on its niche of rigid plastic packaging where the growth opportunities are tremendous. It is confident of seeing a 30% CAGR in its business, for the next 5 years. What is important to note is that capital Expenditure has been doubling every year from last 3 years--from Rs.8 Cr to Rs.16 Cr, to Rs.32 Cr in FY09. The company has announced a Rs.64 Cr Term Loan for acquisitions of fixed assets in the current year.
Manjushree has an equity base of just Rs.13.55 Cr that is supported by huge reserves of around Rs.45.91 Cr leading to a share book value of Rs.43.9. The promoters hold 57.15%, non-promoter corporate bodies hold 16.41% while the investing public holds 25.45% stake in the company. For Q3FY10, it recorded net sales of Rs.39.35 Cr with net profit of Rs.2.63 Cr against net sales of Rs.27.48 Cr with net profit of Rs.1.98 Cr in Q3FY09. For the first 9 months of FY10, it recorded net sales of Rs.108.64 Cr with net profit skyrocketing 42% to Rs.7.60 Cr against net sales of Rs.82.59 Cr with net profit of just Rs.5.50 Cr in the corresponding period previous year. The quarterly EPS was Rs.1.94 while the 9 monthly EPS was Rs.5.61. At the current level, the stock is available at a forward P/E multiple of just 6. MTL paid 10% dividend for FY09.

Conclusion: The stock has been trading between Rs.42-47 for quite sometime, taking Rs.42 as the support. It is unlikely that this support zone would be broken unless there is a crash in the markets. Investors can buy this stock with a stop loss of Rs.42. On the upper side, the stock can zoom up to Rs.55-56 levels in the short-term and Rs.67-69 level in the medium-term.

2010-04-01T04:28:00.000-07:00

Illegal madrassas: A breeding ground of terror
Vicky Nanjappa

Intelligence agencies are worried about nearly 9,000 illegal madrassas which have mushroomed across India without requisite approval by the authorities.
India has over 21,000 registered madrassas approved by the respective state governments and the Wakf Board.
IB sources say efforts are on to shut down illegal madrassas and the state authorities have been warned about their operations. Intelligence officials suspect Pakistan-based outfits may be using these illegal madrassas to carry out their operations in India, after the crackdown on terror modules and sleeper cells.
IB officials say nearly 3,000 illegal madrassas have been set up in the last year, with Maharashtra [ Images ] and Kerala [ Images ] having the maximum concentration. They claim that Pakistan's Inter Services Intelligence has managed to pump in nearly Rs 20 crore to fund these illegal institutions.
These institutions do not report to the Wakf Board and their syllabus is the same as the one followed in madrassas in Pakistan, say IB sources. The syllabus is based on the Anwar al-Awlaki school of thought, which has been adopted by Lashkar-e-Tayiba's [ Images ] front organisation Jamat-ud-Dawa, and speaks of 44 different ways to perform jihad
At class V level in these madrassas, students are taught that Hindus helped the British set up their empire in India. In class 6 and class 7, the students are clearly told that there is no way in which they should reconcile with India, since the only way to attain total freedom is by fighting and becoming martyrs.
Earlier, the various terror outfits concentrated on recruiting people for sleeper cells and modules, but soon realised that the concept of jihad needed to be introduced at an younger age to encourage fundamentalism. The illegal madrasas want to ensure that the students learn to internalise the jihadi school of thought.
Tracking such madrassas poses a problem for intelligence agencies, as they keep shifting base, and the fact that most of their students are children invariably shields them from any kind of suspicion.

2010-03-16T04:54:00.000-07:00

Pick of the Week:
Rane Brake Linings
BSE Code: 532987
CMP: Rs.110.80
EPS; Rs.14.14
P/E: 7.84
Industry P/E: 23.63
Dividend: 20%
Market Cap: Rs.87.7

Introduction: Rane Brake lining, established in the year 1964, is a part of the Rane Group which is one of the leading Auto Component Groups in the country. Rane Group has eight group companies and has access to best technologies.

Rane Brake Linings Ltd has technical and financial collaboration with Nisshinbo Industries, Japan for manufacturing Asbestos Free Brake Linings, Disc Pads and Clutch Facings. It had won the Deming Application Prize in 2003. The complete spectrum of products from Rane Brake Lining is manufactured in 3 plants located at Chennai, Hyderabad and Pondicherry. The plant at Pondicherry is an exclusive Asbestos Free Facility.

It has a wide range of products and is a preferred supplier to major OEMs in India and abroad. It also exports to 20 countries and has access to best technologies. It serves a variety of industry segments: : Passenger Cars, Multi Utility Vehicles, Light Commercial Vehicles, Medium & Heavy Commercial Vehicles, Farm Tractors, Three-wheelers, Two-wheelers and Stationary Engines.

It hopes to remain a market leader in India and a global player in friction material composites through environment friendly technology & people competence.

Shareholding Pattern: The promoters hold 62.01 % while the general public holds 37.99%. Among the general public DIIs hold 9.76% of the shares of the company.

Financials: For Q3FY10, the company came out with very good numbers. The total income of the company came out to be Rs.60.04 Cr as against Rs.42.84 Cr in the same period previous year. The net profit of the company came out to be Rs.3.11 Cr as against a loss of Rs.1.82 Cr in the same period previous year. The EPS of the company for Q3FY10 came out to be Rs.3.93 as against (-) Rs.2.52 in the same period previous year.

Triggers:

In Q3FY10, the company achieved a significant growth of 102% in the domestic OE market and 28% growth in domestic replacement market. Few new OE business acquisitions and introduction of few low cost models in the domestic Replacement market was also done in Q3FY10.
In future the company hopes to get good growth in sales. It will continue with its focus on Cost Management initiatives (like lean factory management and TPM) and efficient working capital management. The low interest rate environment is already working wonders for the company.
Last year (Q1FY10) the new state of the art plant at Trichy, Tamil Nadu commenced production and is now working at 90% of its phase I capacity. The state of the art plant is expected to play a significant role in the coming years in improving the sales revenue and profitability of your Company.
The company last year started to supply brake linings to Mahindra Navistar, GM Tavera and MSIL Ritz. Supplies of asbestos free brake linings to Tata Motors for their commercial vehicle segments are likely to grow in future. The company is presently implementing some export orders for Egypt.
Nisshibo Brake Inc (NISB) who has been the technology partners of the company since 1996 have increased their shareholding to 20%. This will help the company in further advancement of research and development to meet the new technology requirements of the future. Indian automotive industry is dominated by Japanese and Korean auto manufacturers. The increased co-operation with Nissihinbo Group will not only serve the Japanese and Korean manufacturers but also other European and domestic car companies in India. The technical inputs and greater co-operation from Nissinbo Group would thus be beneficial to the Company in terms of business potential and customer relationship.
The continuance of global majors in USA and Europe showing keen interest in sourcing auto components from India based on cost and quality, presents an opportunity for the company to grow its exports market further.
The company hopes to ride on the recovery in the domestic market while consolidating its operations. It has already taken a couple of initiatives to sharpen its cost competitiveness. The company hopes to do better in the following quarters due to expected less volatility in the commodity prices.
The company could review its plans for setting up an assembly, finishing and delivery facility at Sanand, Gujarat for supplying components for Tata Motor’s “Nano”.
It has Green Material Policy to ensure products meet stringent eco norms. Its design centre has Computer Aided Design (CAD) and sophisticated test equipment like full-scale inertia dynamometer, thermo gravimetric analyzer, pyrolysis gas chromatograph, etc.
The company is already supplying friction material brakes to armoured vehicles and tanks. The company is exploring synergistic opportunities in Railways, aerospace, power, etc.
Rane Brake Linings Ltd (RBL) and its shareholders will stand benefitted by RBL becoming a subsidiary of Rane Holdings Ltd. (RHL). RBL as a subsidiary is having closer association and greater backing of RHL.

Caution:

Further slow down in the domestic economy.
Slow recovery of Commercial Vehicles segment in India.
Worsening of global recession especially in US and Europe adversely affecting export market.
Competition from the MNCs who are setting up production facilities in India.
Volatility in Commodities and Foreign exchange rates.

Conclusion: The Rane Group will now manufacture in-house those components that were earlier being imported from Japan. This is indeed an encouraging development. Moreover the continuance of the low interest regime is also positive for the company.

From the charts it has been found that most of the parameters are in buy mode. The stock could be purchased above Rs.106, for an immediate target of Rs.115—125. In the long term the stock could reach Rs.170—200.

Note: The stock was recommended to the Paid Groups on 14-03-2010, as Pick of the Week.

2010-03-09T00:29:00.000-08:00

Pick of the Week:
Raj Television Network Ltd: Long term Gold:
BSE Code: 532826
CMP: Rs.54.30
Book Value: Rs.86.75
Market Cap: Rs.70.47 Cr

Introduction: Raj Television Network Limited is one of the largest Tamil television and broadcasting company in southern region. The company incorporated in 1994, broadcasts five channels presently in various southern languages. Raj TV, its flagship television channel launched in 1994 was the first general entertainment channel of the company. Besides Raj TV, the Company promotes Raj digital plus, an exclusive movie channel, two Raj Musix, 24X7 Music Channels, one in Tamil and other in Kannada and one 24X7 News Channel. Raj TV and Raj digital plus are free to air in Chennai and pay channels outside Chennai.
Other Channels are free channels. The company gets its revenue primarily form advertisement and subscription of channels. The Company has also rolled into movie production and distribution business.
Shareholding Pattern: The promoters hold 72.48% while the general public holds 27.52%. In the general category, FIIs hold 4.07%.
Triggers:

As a part of potential external growth strategy, Raj Television Network Ltd has ventured into movie distribution platform for distributing theatrical rights of movies from time to time. The company has acquired distribution rights of upcoming Tamil movie, “Kutty” for some specified areas in Tamil Nadu, Starring one of the top line Tamil Star Dhanus. The movie is expected to be released all across shortly. The company is hopeful of getting better revenue from such distribution.
The company has entered into the business of movie production and produced few movies from time to time. Some of is upcoming movies are almost in the post production stage and awaiting for release.
Since the Indian movie sector have started recovering from the market slowdown and more and more movies are being produced and released in India , within a very short span of time, the Company feels that it can manage to recover it’s investment in few weeks of release of the movies and also there is substantial scope to grow further as Tamil movie market is expanding both geographically and economically across the world.
The subscription revenue of the company are expected to grow because of availability of various distribution platforms like cable, CAS, DTH, IPTV, VOD etc. Further, the increasing spends on advertisement by the industry houses will boost the further growth. It is to be noted that the Company's channels are now available in DTH, IPTV and other digital platforms besides cable distribution.
The Company is continuously making efforts to entertain the viewers with good programs and quality contents. The company always experiments on the viewer’s demand and choice and designs its contents and programs in the viewer’s prospective. The Company shall look forward to give better and quality entertainment to strengthen its brand and popularity in future.
As part of future projection and strategy, the company is spreading its subscription base by way of launching new channels. During fiscal 2008-09 the Company aunched one 24X 7 music channel in Kannada and has pipelined few more new channels in various languages. This will add substantially to revenue base of the company. The Company has already got the approval for one overseas channel RAJTV-ASIA from Ministry of Information and Broadcasting (MIB) and working on for airing of the same in overseas market. In order to compensate against the sluggish market, the Company is innovating few low budget programs to have cost effective benefit.
Against the total projected utilization of Rs.52.81 Crores from the IPO funds, an amount of Rs.38.67 Crores has been utilized towards Acquisition of contents, strengthening facilities, purchase of new equipment, up gradation of existing equipment, production of Movies, Construction of Studio and general corporate purpose. This is expected to generate good revenues in the next few quarters.

Conclusion: Considering the above mentioned condition, the stock of Raj Television Network Ltd can be purchased for the medium to long term for a target of Rs.90. In the short term, the stock could drift towards, Rs.57—60 mark. However, the scrip should be purchased with a long term play in mind. The company has huge potential and considering this the scirp looks undervalued at this point of time.
Note: The stock was recommended to the Paid Groups (and this report sent to them) on this Sunday (7th March, 2010). The stock has already hit its target.

2010-03-04T01:58:00.000-08:00

PICK OF THE WEEK:
Moser Baer Ltd
BSE Code: 517140

CMP: Rs.77
Book Value: Rs.100.02
Market Cap: Rs.1276.60 Cr
Dividend: 6%

Introduction: Moser Baer, is one of India's leading technology companies. Established in 1983, Moser Baer successfully developed cutting edge technologies to become the world's second largest manufacturer of Optical Storage media like CDs and DVDs. The company also emerged as the first to market the next-generation of storage formats like Blu-ray Discs and HD DVD.
Recently, the company has transformed itself from a single business into a multi-technology organisation, diversifying into exciting areas of Solar Energy, Home Entertainment and IT Peripherals & Consumer Electronics. Moser Baer has a presence in over 82 countries, serviced through six marketing offices in India, the US, Europe and Japan, and has strong tie-ups with all major global technology players. Moser Baer has the distinction of being preferred supplier to all top global OEM brands.

The company manufactures the entire spectrum of optical storage media products including Recordable Compact Discs (CD-R), Rewritable Compact Discs (CD-RW), Recordable Digital Versatile Discs (DVD-R), Rewritable Digital Versatile Discs (DVD-RW) and blue laser discs (Blu-Ray).
Shareholing Pattern: The promoters hold 16.17%, while the public holding is 83.71%.
Financials: Revenue for FY09 stood at Rs.23, 924.4 million, profit before depreciation, interest, exceptional items and tax stood at Rs.4, 530.3 million and losses after tax was Rs.1, 508.7 million. Turnover was impacted during the year by the difficult economic environment, partially offset by weakening of Rupee. The Company was able to hold its operating margin through production efficiencies and control on working capital. The Company continues to generate gross cash flow and the same was Rs.3, 462.8 million in FY09.

For Q3FY10, the total sales of the company came out to be Rs.59.2 Cr as against Rs.65.52 Cr in the same period previous year. The net profit of the company for Q3FY10 came out to be Rs.3.23 Cr against a net loss of Rs.25.6 Cr in the same period previous year. Also both the net and operating profit margins improved considerably.
Triggers:

Moser Baer launched a digital video processing and authoring facility in Chennai. Moser Baer announced successful trials of first Gen 8.5 Thin Film plant.
The company will set up one of India's largest rooftop solar PV Installations in Surat.
The Company continues to focus on both extension of geographic reach in emerging growth markets as well as on development & growth of new customer accounts across major product lines globally to cement its leading position on storage media. These efforts will renew focus following the recent royalty settlement and resultant increased levels of Business certainty.
Moser Baer signed exclusive home video licensing deal with UTV Motion Pictures. The company concluded a strategic tie-up with LDK Solar.
Moser Baer's thin film solar modules are now IEC (International Electrotechnical Commission) certified. It also launched 600VA UPS with improved features for better performance, MP3 players, TFT Monitors, LCD TV, etc.
With the significant reduction in input costs, and relatively stable pricing, the optical media business is a strong cash generator for the group.
Moser Baer’s range of products makes it one of the world’s largest manufacturers and technology innovators in the optical media space. Its products are sold in 82 countries and it has six marketing offices in India, the US, Europe and Japan. In the Indian market, Moser Baer made its foray into the domestic optical storage market with the launch of the Moser Baer label in 2003. The company has blazed a new trail by introducing technologically innovative and truly world-class products in the Indian market.
A notable development in 2008 was the emergence of Blu-Ray as the future high definition format, with Toshiba announcing the discontinuation of HD DVD investments. Blu-Ray offers a considerable increase in storage capacity with its 25 to 50 GB data capacity. Moser Baer, the first non-Japanese company to have developed its own technology for manufacturing Blu-Ray, stands to benefit from the exponential growth that will inevitably come in sales of advanced formats in the coming months. The company is set to leverage its R&D strengths to establish leadership position in terms of supply of Blu-Ray media for global consumption.
The Company last year settled its long drawn licensing and patent dispute with Phillips. The amicable settlement has paved the way for Moser Baer to maintain and strengthen its market leadership position as the worlds leading manufacturer of optical storage media products.
Moser Baer is also investing in nano technologies, which are in the R&D phase. This is a futuristic technology and because it will use very little material, it has the potential to bring down the cost of electricity generation considerably.
The solar energy sector is increasingly realising its potential as a cost-effective alternative source of power. In the last fiscal, Moser Baer Photovoltaic Limited has consolidated its production facilities by installing 80 MW Module line and 80 MW Cell line manufacturing capacity. The cumulative efforts have resulted in it achieving a growth of more than 100% over FY08. Despite an increasingly difficult environment for Solar especially in 3rd & 4th quarter of the year, as the credit market froze, it continued to execute its strategy to make the Company, a global provider of high quality solar solutions. While the solar industry has grown astonishingly over last decade, however, it is still in a nascent stage of growth. Market structures differ between countries primarily on account of subsidies in place, ownership of installation, nature of customer and variability of grid connection. In FY09, Germany & Spain continued to dominate in Solar market and governments across the world have increasingly announced subsidies to promote renewable energy industry in general and solar, in particular.
While the financial crisis has created a challenging environment in short term for the Industry, the fall in prices of Silicon and solar modules has helped the industry to accelerate towards grid parity and therefore, create greater opportunities for the company.
The company would benefit from the following provision in the recent Budget:
(a) In FY11, the renewable energy plan outlay up by 61% at Rs.10 billion.
(b) To set up National Clean Energy Fund. Rs.5 billion has been set aside for the setting up solar and small hydro units.
(c) To set up 20, 000 MW of Solar Power by 2022.
(d) To waive excise duty on photovoltaic cells and solar panels.

Conclusion: Considering all the facts mentioned above it has been found that the scrip is highly undervalued and should move up in the days to come. Medium and long term investors can buy the scrip at any price above Rs.70 for a short term target of Rs.92. In the long term the scrip could make new highs and could cross Rs.200 in the days to come.
From the charts it has been that most of the parameters are in buy mode. Besides this the stock is in the highly oversold territory and a bounce is expected very soon.

Note: The stock (This report was also sent to them) was recommended to the Paid Groups in this Sunday (28th February, 2010) .

2010-02-18T05:30:00.000-08:00

Refex Refrigerants: Updates:

Refex Refrigerants Ltd came out with better than expected results for the Q3FY10, though the net sales dipped a bit. The total sales of the company the Q3FY10 came out to be Rs.6.92 Cr as against Rs.10.16 cr in the same period previous year. But what is amazing to note is that Profits from ordinary activities before tax is Rs.20.23 lakhs against a net loss of Rs.7.83 Cr in the same period previous year.

Also the net profit for the Q3FY10 came out to be Rs.12.16 lakhs against a net LOSS of Rs.4.57 Cr in the same period previous years.The company's wind farm project is going on smoothly and hopefully the company hopesa to complete the project within the next 6 months time frame. The company is also expected to free its pledged shares within a very short time. According to the sources close to me, it could get freezed in the next 3 months time frame.

The company's season has started and hopefully from the Q1FY11, Refex Refrigerants would start to show better performance.......

It is presently not using its full capacity due to economic downturn, which affected both its top and bottomlines. However, it is hoping to show better performance in the days to come, as the economy gathers steam. Its products are envionment friendly and hence it has a long way to go in the days to come. HOPING IT SHOW THE 2007--2008 PERFORMANCE GOING FORWARD. Meanwhile they have updated their web-site and you can go through the same in your free time.

2010-01-25T08:34:00.000-08:00

Pick of the Week:
Alok Industries Ltd

BSE Code: 521070

CMP: Rs.24.6

Book Value: Rs.35.47

EPS: Rs.3.41

Market Cap: Rs.1490 Cr

Introduction: Alok Industries Ltd is a fully integrated textile company and is amongst India’s largest textile manufacturers. It was established in 1986 as a private limited company, with its first polyester texturing plant being set up in 1989. It became a public limited company in 1993. Over the years, it has expanded into weaving, knitting, processing, home textiles and garments. And to ensure quality and cost efficiencies it has integrated backward into cotton spinning and manufacturing partially oriented yarn through the continuous polymerization route. It also provides embroidered products through Grabal Alok Impex Ltd., its associate company.
Alok Industries Ltd, has recently entered the domestic retail segment through a wholly owned subsidiary, Alok Retail India Limited, with a chain of stores named ‘H&A’ that offer garments and home textiles at attractive price points. It has also ventured into the realty space through wholly owned subsidiaries with investments in some prestigious projects in Mumbai. The company has focused on world class infrastructure, best-in-class technology, uncompromising quality standards and dynamic product innovation. Added to these has been its constant desire to surpass customer expectations. Today, Alok Industries Ltd represents the future of India’s textile industry.
Shareholding Pattern: The promoters hold 36.69%% while the general public holds 63.20% of the shares of the company. The FIIs hold 20.92%, while the DIIs hold 12.59% of the shares of the company.
Financials: For Q2FY10, the company came out with good set of numbers. The total sales of the company for Q2FY10 came out to be Rs.975.5 Cr as against Rs.698.14 Cr in the same period previous year. The net profit of the company for Q2FY10 came out to be Rs.57 Cr as against Rs.42.15 Cr in the same period previous year; however, this on an expanded equity capital of Rs.605.08 Cr as against Rs.196.97 Cr in the same period previous year.
Triggers:
• The company charting out strategies under which it would open stores in Malls after analyzing the cost effects.
• The company has a blue chip international customer base comprising of world renowned retailers, importers and brands. With commencement of spinning of cotton yarn, the company has achieved complete integration.
• The Terry Towel project, which was part of Phase I & II, was commissioned in FY09. The Company has also successfully commissioned Continuous Polymerisation (CP) Plant at Saily (Silvassa). Phase III and Phase IV of the expansion of the Company's capacities, aggregating to Rs.1, 100 Cr and Rs.1, 180 Cr stands largely completed; the balance portion is progressing well and is expected to be completed very soon.
• The Company's textiles operations have shown encouraging growth trends, both in the domestic and in the exports markets. The capacity expansions which the Company had been putting in place for the past few years are nearing completion and the volume increases are starting to be reflected in operations and sales.
• Marketing initiatives across the world have both de-risked Alok Industries Ltd as well as contributed to a healthy order book. The Company believes that its scale of operations and integration across the textile chain will, in future, offer significant advantages in both cost and revenue.
• Given the increasing spending capacity of the middle-class consumer segment in India, retail remains an exciting prospect over the medium term. The Company's retail initiative is operated through its wholly owned subsidiary Alok Retail India Ltd., which has opened ninety 'H&A' stores across India. The Company wishes to expand the 'H&A' footprint to over 300 stores during the current financial year.
• The Company's investment in Grabal Alok (UK) Ltd, as part of the Group's overseas retail foray is now starting to show improved results. The stores, which are spread across the UK and offer quality apparel and fashion products at affordable prices, are also in the process of being rebranded from “qs’ to “Store Twenty One”. The second half of FY 2008-09 has reflected improved topline--thanks to cost rationalization and efficiency maximization measures, the 'middle line' has also shown improvement. This encouraging trend has been carried on during the first quarter of the current financial year as well.
Conclusion: From the charts it has been found that the stock is trading above it 50 and 200 days moving averages, which is encouraging. Considering the other chartical parameters it can be concluded that the stock can be purchased at any price above Rs.24 for a target of Rs.31—32 in the next 30 days time frame.

Note: The stock was recommended to the Paid Groups on 19th January, 2010, in the Sunday Report.

2010-01-14T12:00:00.000-08:00

Pick of the week:
Gwalior Chemical Industries (GCIL):
BSE Code: 532764
Book Value: Rs.80.33
EPS: Rs.38.69
P/E: 2.3
Market Cap: Rs.219.62
Accumulate: To be bought around the strong support of Rs.86
Target: Rs.105—Rs.115
Time: 6months

Introduction: Gwalior Chemical Industries (GCIL) is a producer of specialty chemical products at its two chemical facilities located at Nagda (Madhya Pradesh) and Ankleshwar (Gujarat). It has built a formidable presence in the specialty chemical industry and extensively catered to the needs of customers covering the agrochemicals, pharmaceuticals, dyes and flavours and fragrance industries. It also manufactures and sells special Viscose Dye Pigments catering to the textile sector. It caters to various industries like agrochemicals, pharmaceuticals, and dyes industries. It also produces Chlorotoluene range of products like benzyl chloride, benzaldeyhde, benzotrichloride, benzyl alcohol and its other derivatives. It also produces sulphur chloride range of products.
Shareholding Pattern: The promoters hold 59.98% while the general public holds 40.02%. The FIIs hold 2.90% while the Mutual Funds hold 8.37% of the shares of the company.
Triggers:
• The first and the foremost reason for recommending the scrip is the growth in the agrochemical segment where the growth in the agricultural sector is expected to drive the growth. With government expected to go for another round of green revolution the demand for the same is expected to increase.
• The Company has decided a buyback of shares of the Company. In the first phase, the Company proposes to buy back 40, 50,000 shares at Rs.120 per share through a tender offer route in this financial year.

• The Company has completed the transfer of its chemical business at Nagda, Madhya Pradesh and wind mill businesses at Madhya Pradesh and Maharashtra to Lanxess India Pvt. Ltd. on September 01, 2009. The Company will invest the sale proceeds in power generation business and manufacturing of high value specialty chemicals at Ankleshwar. The cash derived from sale,
after initial distribution to Shareholders, when put to use in power generation and in building the Ankleshwar facility into specialty chemical hub will yield superior return to the Shareholders. This sale shall enable the Company to distribute some cash back to the Shareholders as well as invest in the growth of the businesses.

• The company gave a dividend of 12 % (Rs.1.20 per share) for the financial year ended 31st March 2009 same as in the FY08, inspite of the challenging market conditions. The total amount of dividend for the year ended 31st March, 2009 is Rs.296.12 Lacs.

• Expansion Plans and the year under review: In the year under review (FY10) the Company has earmarked upon expansion of capacities and infrastructure facilities thereof outlined herewith along with the expected dates of completion. Sr. Name of product Existing Expected Completion
No. Capacity Capacity
1. Chlorotoluene & its Derivatives: from 84100 TPA to 137000 TPA completion on September, 2009
2. Sulphur Oxy Chloride & its Derivatives: from 41000 TPA to 41000 TPA--> Completed
3. Pigments; from 2400 TPA to 3000 TPA--> Completed
4. Others: From 115700 TPA to 170400 TPA--->Completed
5. Co-generation power plant - NIL 4 MW Power & 45 TPH Steam Jan, 2010
• The Company has achieved an international award instituted by Indian Merchant Chamber,
Mumbai. The award is given to the company in manufacturing category for adopting world class
practices in quality management systems and for creating excellence in business performance and supply chain.

• The Company has also incorporated a wholly owned foreign Subsidiary Company in the name of Gwalior Chemicals LLC in May, 2008 under the law of the United State of America, with the
objective of carrying on business of selling products manufactured by it in the American Markets.

• The Company has also incorporated a wholly owned Indian NBFC Subsidiary in the name of GCIL Finance Limited with the initial paid up capital of 250 lacs.

• The company has adopted TPM (Total Productive Maintenance), designed by JIPM (Japan
Institute of Plant Maintenance), to improve the efficiency and performance of the plants by
eliminating Break down Losses and Defects.

• The Company has handled adverse effects of largest recession of century quite well. Its well
designed product basket with recognized quality coupled with strong domestic industrial base has enabled it to deal situation squarely. The products of the Company are focused primarily on the agrochemicals, pharmaceuticals, dyes and flavors & fragrance industry and as a result, its
operations are significantly influenced by the trends of the aforesaid industries. The Company
sees a robust growth in the industries in supplies too. On the other hand availability, cost and
quality of inputs like chlorine, steam and electricity have a significant impact on the working of
the Company.

• As regards the financial performance, the company posted good results for FY08 and FY09 as a whole. On a standalone basis, the total sales of the company for FY09, came out to be Rs.381.4 Cr as against Rs.295.7 Cr in the same period previous year. The net profit of the company for FY09, came out to be Rs.27.7 Cr as against Rs.24.32 Cr in the same period previous year. This gave an EPS of Rs.11.23 in FY09, as against Rs.9.85 in the same period previous year. For Q2FY10, the total sales of the company came out to be Rs.57.53 Cr as against Rs.74.77 Cr in the same period previous year. The net profit of the company for Q2FY10, came out to be Rs.76.5 Cr as against Rs.7.03 Cr in the same period previous year. The EPS of the company for Q2FY10, came out to be Rs.30.99 as against Rs.2.85 in the same period previous year.
Conclusion and Chart Check: Though the operating profit margins are in pressure but the Company is expected to maintain its margins in future as it will be able to pass on the cost to the clients. With good amount of rise in demand and increased capacity the valuations are expected to improve and hence, the investors can slowly accumulate the scrip near the support of Rs.86, for a target of Rs.105 115, in the next 6 months time frame. The stock may not rise immediately though Bollinger bands, MACD and Stochastic are more or less in the buy mode. It is not a momentum counter and hence its rise will be slow but steady. The stock is best suited for highly volatile markets.

Note: The stock was recommended to the Paid Groups on 20-12-09 in the Sunday Report.

2010-01-14T10:53:00.000-08:00

AMBALAL SARABHAI ENTERPRISES LTD.

BSE Code: 500009,

Face Value: Rs.10

CMP: Rs.14.05

EPS: Rs.7.55

Target: Rs.22--25

Time Frame: 3 months time frame.

The company's principal activity is the manufacture and marketing of pharmaceutical products and bulk drugs. Its products are injectables, liquid, ointments, powders, tablets and capsules, vaccine and serum of penicillin, tetracycline or derivatives and Vitamin C and it derivatives. It operates in two segments: Pharmaceuticals and Electronics. The plants are located at Vadodara and Ahmedabad.

The promoter holding has increased from 26.12% in September, 2008 to 30.43% in September, 2009 quarter. Or on a Y-o-Y basis the promoters' holding has increased, which is a good sign. Now if you see, its peer group, then we would get surprised to find the names Cipla Ltd and Sun Pharma Ltd.

Some of the triggers are mentioned below:
* The Bulk Drugs plant of Synbiotics Limited, a wholly owned subsidiary of the company at Luna has already commenced production activities.
* The Company has acquired manufacturing and marketing Company i.e. Suvik Hitek Pvt. Ltd. The Ethical Division has re-launched the products of Suvik and Sarabhai Chemicals in market as planned with new team of field force who has promoted products to the selected doctors in India.

* The Oncology Division is also strengthened by adding new products and team of field force. During the year under review, Oncology Division has launched two new products viz. Fludagem & Xtinib.

* For the year 2009-10, Electronics Division of the Company has lined up high end products for marketing from reputed manufacturers and has also owned new products like Turbidity meter, Hb meter, Vis- Doublebeam Spectra, etc.

* Telerad Division would try to get the maximum possible orders for Spares/other Peripherals keeping Dollar business and system sales improving.

* During FY09, the Company has promoted a Company viz. Vovantis Laboratories Pvt. Ltd., a pharmaceutical specialists with a vision to establish a state of the art manufacturing facility specializing in Novel Effervescent drug delivery system. In a short span of time, this company is having presence in the US, Europe and Asian markets with its own offices in the respective places.

* Asence Inc., a wholly-owned subsidiary of the Company, incorporated in the US specializes in the supply of quality pharmaceutical preparations (Finished Dosage Forms and Active Pharmaceutical Ingredients) to international markets. Asence Inc., through the company, pursues a multi-layered growth strategy combining internal product development, strategic alliances and collaboration with cGMP manufacturing partners, acquisitions of products and leverage of infrastructure in India and the US.

* The Company is under massive restructuring process of its business to strengthen and improve its over all financial condition. In order to reduce cost, the Company has announced VRS Scheme and many employees have opted for the said Scheme including accounts officials and staffs.

Now if you go through the June, 2009 quarter results we will find that they were good as to compared to the same quarter previous year.

I remember a couple of years back, the stock raced from Rs.12 to around 32--33 hitting continuous upper circuits....this could be repeated this time also.

The stock has consolidated in a range for a long time before starting to move up.....Hence it should be prudent to accumulate the scrip around the CMP of Rs.14.05. The stock yesterday moved up with good volumes.

2009-12-18T13:51:00.000-08:00

Pick of the Week
Tulsyan NEC Ltd:
BSE Code: 513629
CMP: Rs.56.35
Book Value: Rs.109.97
Dividend Yield: 3.55%
Market Cap: Rs.28.18 Cr

Introduction: Incorporated in 1974 as National Engineering Cmopany, Tulsyan NEC Ltd (TNEC) manufactures rolled steel products. It tapped the capital market in 1994 for implementing a modernization-cum-expansion project. Its steel products include finished steel (84,000 TPA), MS Ingots (36,000 TPA) and MS billets (72,000 TPA). The company later on diversified into manufacturing packaging products such as HDPE/PP woven sacks & flexible intermediate bulk containers, the capacity of which at present stands enhanced to 28,000 TPA.
The company’s steel and TMT bars find application in housing & construction, power, Defense & Railways. Its bulk containers are used for packing cement, sugar, chemicals & fertilizers etc.

It is the Largest Multi-Location Steel Manufactures in South India, for TMT Steel Rebars. It has a wide spread manufacturing capacity, with the latest state-of-the-art technology. It has manufacturing facilities at Gumdipundi & Ambattur in Chennai, Bangalore, Coimbatore and Goa. It uses quality Billets which is manufactured in-house, conforming to IS: 2830/1992.

Its area of service covers the four Southern States including South Maharastra and Union Territories of Goa and Pondicherry. It supplies, in sections 8-40 mm dia & in grades of Fe-415, Fe-500, Fe-500 CRS (Corrosion Resistant Steel), all conforming to BIS Standards.

Shareholding Pattern: The promoters hold 65.59% while the general public holds 34.41%. The promoters have slightly increased their stake in Q2FY10, speaking Q-o-Q figures.

Financials: On a standalone basis, the total income of the company for Q2FY10 came out to be Rs.152.3 Cr as against Rs.217.7 Cr in the same period previous year. The net profit of the company for Q2FY10 came out to be Rs.1.5 Cr as against Rs.3.2 Cr in the same period previous year.

On a consolidated basis, the total income of the company for Q2FY10 came out to be Rs.153.77 Cr as against Rs.220.89 Cr in the same period previous year. The Net Profit after Mino Inter & Share of P & L came out to be Rs.1.77 Cr as against Rs.4.43 Cr in the same period previous year. However, the EPS of the company in Q2FY10, is alone on consolidated basis is Rs.3.54, which is good. The company is expected to clock an EPS of Rs.10—11 on FY10 on consolidated basis. For FY09, the consolidated EPS of the company was a whooping Rs.23.17.
Triggers:
(i) The Company's products are TMT Bars, Billets and Ingots in the steel division and in synthetic division it is PP Woven Sacks, FIBC and Woven Fabric. During FY09 with the completion of the enhanced capacity, the company has commenced the manufacture of ground cover and ventilated fabric. TMT Bars are used in the Construction Sector and the plastic products cater to the packaging needs of various industries such as Cement, Fertilizers, Food grains, Sugar, etc.

(ii) Tulsyan NEC Ltd has signed a Memorandum of Understanding for purchasing 100% shares of M/s. Chitrakoot Steel & Power P Ltd, Gummidipoondi, Tamil Nadu, a Sponge Iron manufacturing plant having capacity of 30,000 M.T per annum. The Company will be enhancing the Sponge Iron capacity and adding waste heat recovery Power Plant.

(iii) With the government stepping up expenditure on development of infrastructure like roads, ports, power, etc, the demand for steel is bound to increase. In anticipation of this demand increase, the company: (a) will have in place additional rolling capacity of 15 0000 mt/pa, during the current year, (b) Increase dealership network to over 200 dealers with more focus on rural sector, (c) Install a power plant of 35 MW at Gummudipondi for captive consumption, (d) Carry out backward integration by taking over the sponge unit in Gummudipondi. These expansions will not only make the company as the largest producer of TMT bars in South India among Secondary Producers but will also give it a competitive edge, by facilitating reduction of power and raw material costs.

(iv) The Cost of Steel Scrap and power are major costs incurred for producing Steel Rods. Volatility in the price of scrap affects the company's margin. To tide over the power requirement the company would be installing a 35 MW power plant at Gummudipoondi, as mentioned earlier.
(v) With globalization and liberalization the demand gap is ever increasing. With almost 3 decades of presence in the industry the company has earned a good name for its commitment to quality and timely supply. With the enhancement in production capacities the company is well poised to cater to a bigger market.
(vi) The raw materials for Steel Making are M.S. scrap, Sponge and for TMT Bars is Billets. PP granules are used for manufacture of plastic packaging products. This raw material is available in abundance within the country and can also be freely imported. Being in the commodity market the company continuously makes efforts for reducing the cost of production to sustain its margins.
(vii) The year 2008-09 witnessed an unprecedented economic crisis world over resulting in slowdown in almost all the sectors. While India hasn't witnessed the kind of major turmoil witnessed in some advanced economies it has certainly been impacted adversely. In the back drop of this crisis the working of this company has also been affected to some extent. FY09 saw shortage of power in Tamil Nadu and this affected the working of the Company. In the current year the power cut has been relaxed from 40% to 20% and it is expected to be relaxed further.
(viii) During Q2FY10, Wind farms of the Company have generated 1453368 units of Electricity and also the capacity of the Rolling Divisions at Gummudipoondi, in Tamil Nadu, has been increased by 150000 MT of TMT Bars and commercial production has also been started same period. The full benefit of this effect will however arise in the financial year 2010-11.
(ix)It has also signed a MoU with Suhayl Abdul Mohsin AL-Shoaibi & Sons Holding Company, Saudi Arabia for a proposed steel plant of 5,00,000 TPA in Saudi Arabia.
(x) In the plastics division, TNEC plans to install new capacity of about 2,000 TPA in its new facility at Kurnool (AP), which is expected to go on stream very soon.

Conclusion and Chart Check: Considering all the points mentioned above it have been found that the stock is a very good buy (on dips) for the medium to long term perspective. This essentially means that scrip would generate good returns for the shareholders over a period of 9 to 12 months time frame. Even at the current market price of Rs.56.35, the dividend yield of 3.55% is quite attractive. From the charts it has been found that some of the parameters are in buy mode. However, the stock has made a very strong bottom around Rs.51.5 which will be difficult to break on the downside and hence a little safe bet. The stock should be accumulated on all dips for the short term (3 months) target of Rs.XX (This portion is only for the Paid Groups). However, in the medium to long term the targets could be as high as Rs.XX (This portion is only for the Paid Groups).

Note: The Stock was recommended to the Paid Groups in the last week's Sunday Report.

2009-12-18T13:19:00.000-08:00

Scrips which needs to be accumulatd at the Current Market Prices:

Government's recent move related to broadcast of Satellite Television Signals could be positive for Kohinoor Broadcasting Corporation Ltd and Sanguine Media Services Ltd.

Energy Development Ltd/NEPC India Ltd/Indowind Energy Ltd, will get positively affected because the government will give 50 paise as incentive for a unit of electricity generated by Wind Power Producers for 4-10 years.

Kohinoor Broadcasting Corporation Ltd (Book Value: Rs.11.78, EPS: Rs.1.39, P/E: 3.97 against industry P/E of 33.32, Market Cap: Rs.60.83 Cr only, while the value of Tagore Theatres alone is around Rs.100 Cr. So the business of the company and other assets are free for the shareholders at this price) should be accumulated at the CMP of Rs.5.52 for good appreciation in the next few months. The company could launch the channels in the next 3 to 4 months time frame, according to the sources close to me. It is also planning to show its channels in US and UK, which is a great news for the shareholders.

Now, if we go through its shareholding pattern we would see some very important developments: The Foreign Institutional Investors (FIIs) hold 17.95% stake in the company, while the corporate bodies hold 14.25% of the shares of the company as of 30th September, 2009. This shareholding figure of FIIs have been constant considering Y-o-Y figures. What I mean to say is that even after such massive unwindings of FIIs from many counters, their holding in Kohinoor Broadcasting Corporation Ltd, has remained constant in the last one year, which is very encouraging developments for the shareholders.

Moreover, the holdings of the corporate bodies has increaesd from 13.24% to 14.25%, considering Y-o-Y figures--this is also another positive development of the company.

Let us take a look who are holding shares of Kohinoor Broadcasting Corporation Ltd:Sophia Growth (9.34%), Shriram Credit Company Ltd(4.74%), Religare Securities Ltd (1.30%), Mavi Investments (3.39%), etc.

Besides this, according to charts, the stock is in the highly oversold territories and a normal bounce is expected, which is confirmed by Bollinger bands and daily RSI. Any cross-over could take the scrip to around Rs.XXX (for Paid Groups) ranges, by the 1st week of January, 2010. A must buy at the CMP of Rs.5.52.

Accumulate Enery Developments Company Ltd (BSE Code: 532219) at the CMP of Rs.57.5, as the company is doing excellently well. Energy Development Company Limited (EDCL) was incorporated in the year 1995 to participate in the country's renewable energy development program for sustainable sevelopment.

The Company simultaneously generates clean, green electricity from water and wind in its own power plants as well as develops energy and infrastructure projects for other developers. The Company has targets to develop and own around 500 MW of new Hydro Electric Power Projects at an approximate capital outlay of Rs.7000-8000 crores in the next 5-7 years.
The company has successfully deployed its expertise and technology to develop energy and infrastructure projects for other developers. It has created a niche for itself in providing total hydropower solutions for small hydro as well as large hydropower plants. Its services include feasibility studies, project management services, engineering, procurement and construction services and turnkey delivery.

It also provides services related to third party operation and maintenance of hydropower plants and rehabilitation, renovation, modernisation and uprating of older plants. The company is forward-looking and technology-driven with rich experience and expertise across all disciplines of power engineering, consulting, management and operational services.
The company is doing the following:

Harangi Project
Ullunkal HEP
Harangi Stage- II HEP
Karikkayam HEP
Arunachal Projects
Hassan Wind Project
Chitradurga Wind Project
Engineering, Consultancy & Project Management
EPC Contracts
O & M Services
Rehabilitation & RM & U
Bagasse Cogeneration (Eligible for Carbon Credits)

The Company demonstrated modest growth in overall business in FY09. It has commissioned new projects and acquired subsidiaries. The total turnover for the year is Rs. 117.2 Crores (Previous Yr. – Rs.65.7 Crores) The Company has two segments, namely Generation Division and Contract Division.
Generation Division:

Until FY08, the Company had only one 9 MW Harangi Hydro Electric Project in the State of Karnataka and a Wind Mill having a capacity of 1.5 MW at Hassan District. During the year, your company has successfully commissioned 7MW, Ullankal Hydro Electric Project, in the State of Kerala and also a 1.5 MW Wind Mill at Chitradurga in the state of Karnataka.

Saleable electricity generated from –(a) Hydel Power Plants were 28.036 million units (Previous Yr. – 29.03 million units) (b) Wind Mills were 4.393 million units (Previous Yr. – 1.18 million units).

Contract Division: In view of the huge spending in infrastructure in the country, your Company is targeting the growth, by participating in the infrastructure related projects such as roads, power plants, buildings etc by using the capabilities developed in house, over the years. Hence, the Contract Division was launched, which is steadily growing. This division has earned revenue of Rs. 106.23 crores (Previous Year Rs. 54.74 crores).

This scrip is a must buy especially in view of the improving fundamentals, considering the recent sequential quarterly numbers. The Q3FY10, numbers are also expected to be good, besides this lot of inter-company mergers would add more teeth to the fundamentals of the company. A must buy at the CMP of Rs.57.5 for some superb targets. From the absurd current market price of Rs.57.5, this is to give very good returns to the shareholders, believe me.

2009-11-23T13:05:00.000-08:00

PICK OF THE WEEK:

Alchemist Realty Ltd

BSE Code: 532114

Face Value: Rs.2

CMP: Rs.14.54

Market Cap: Rs.107.74 Cr

EPS: Re.0.11

Introduction: Formerly known as Pan Packaging Industries Ltd, the Company’s principal activity at present is to develop real estate property. Pan Packaging Industries Private Ltd. was originally incorporated as Private Limited company on 03 March 1983 to manufacture and supply Corrugated Boxes. The name and style of the company was changed as Pan Packaging Industries Limited on 25th April 1995. The company started its commercial production in 13-03-1984 which was its first phase of operations with an installed capacity of 900 TPA. Alchemist Realty is now widely recognized as one of the growing innovative real estate companies in India.

The Company now engages in the acquisition and development of real estate and infrastructure facilities in India. It real estate development projects include housing projects, cottages, recreation clubs, and other infrastructure projects. The company which was formerly known as Pan Packaging Industries Limited changed its name to Alchemist Realty Limited in 2006. Alchemist Realty Limited is based in Mumbai, India.

Shareholding Pattern: The promoters hold 42.3 % while the general public holds 57.70% according to the latest data available.

Shareholding belonging to the category "Public" and holding more than 1% of the Total No. of Shares

Sl. No.	Name of the Shareholder	No. of Shares	Shares as % of Total No. of Shares
1	Endogram Leasing & Trading C	8,605,580	11.61
2	Basic Soft Solutions Pvt Ltd	4,878,500	6.58
3	Manbhavan Buildwell Pvt	2,442,285	3.30
4	Basics Soft Solutions Pvt Ltd	1,917,750	2.59
5	Amandeep	2,635,200	3.56
6	Archna Singh	1,560,000	2.11
7	Sunil Talwar	1,052,695	1.42
8	Varinder Pal Singh	912,730	1.23
9	HS FII Investments Ltd	7,115,000	9.60
10	CLSA Mauritius Ltd	7,112,000	9.60
11	Somerset Emerging Opport	1,143,944	1.54
	Total	39,375,684	53.14

Financials: In FY09, though the net sales of the company increased but the net profit declined due to higher investments in Land Plots & Constructed Properties. The net income of the company for FY09 came out to be Rs.101.55 Cr as against Rs.82.87 Cr in the same period previous year. The net profit of the company came out to be Rs.1.03 Cr in FY09 as against Rs.4.54 Cr in the same period previous year. In Q2FY10, the total income of the company came out to be Rs.28.071 Cr as against Rs.5.7 Cr in the same period previous year. The net profit of the company for Q2FY10 came out to be Rs.24.62 lakhs as against Rs.12.43 lakhs in the same period previous year. During the quarter ended September, 2009, the company declared a divided of 5%, i.e.Re.0.10 per equity share of Rs.2 each for the year FY09.

Triggers:

During the year, the Company acquired lands at various locations all over the country and is in the process of launching many projects in Real Estate Development which includes housing projects, cottages, recreation clubs and other infrastructure projects. The Company has also finalized Joint Venture agreements with various Companies for launch of prestigious projects.
In the last fiscal the Company issued 7040100 equity shares of the face value of Rs.10 each as bonus shares to the shareholders in the ratio of 1:1 i.e. One bonus share for every one scare held by the shareholders as on record date i.e. 7th February, 2008. This somewhat proves that it is in investor friendly.
Alchemist Realty Limited is a real estate company, for which land is a key asset. The Company believes in acquiring lower cost land in suburban area and transforming them into modem and utilizes land. With this philosophy intact, the Company has continued to develop its land bank. This is quite evident in FY09 results, when the company invested more in assets as compared to the same value in previous year. Needless to say in FY08 and FY09, the Company acquired newer land parcels in various parts of North India.
Alchemist Realty Limited is focused on developing itself as a premium brand that enjoys a strong sense of trust amongst its stakeholders. There has been a constant endeavor to focus on creating a brand that embodies all the Company’s strategic goals and corporate values. In the real estate space, the Alchemist Realty Limited stands for: (a) Ability to identify and procure land in strategic locations, (b) Experience in executing large projects, c) Superior design, construction and development.
The company is exploring various opportunities in the real estate business and has also finalized Joint Venture agreements with various other players in the Real Estate for launch of prestigious projects. With the continuous trend of shifting population from rural areas to urban areas, increase in the size of population, the demand of both residential and commercial properties is showing an upward trend. Moreover, it is now widely believed that the US Fed will happily risk inflation in order to avoid deflation, Because the US Fed is far more worried about the possibility of deflation (systematically falling prices) caused by a double-dip recession. Japan in the 1990s suffered economic stagnation for a decade because of deflation, and the US is determined to avoid that path. So, it will keep interest rates at virtually zero for the foreseeable future. So this is expected to increases money supply by over a trillion dollars in the world and that too at virtually zero interest. The dollar is an international currency whose impact is felt across the world. Investors and speculators everywhere know that growth prospects are much better in emerging markets than in the West. So they are borrowing hundreds of billions of dollars at dirt-cheap rates to buy stocks, real estate and commodities in emerging markets. Hence, asset values are getting inflated not just in India but in all emerging markets. This is expected to push the investors to real estate stocks and pure real estates in future. The company stands to gain from this move as it has a sizable land bank.
The last year there was news in a section of the media that Alchemist Realty Ltd will invest over Rs.5, 000 Cr in the next 7-10 years for developing a land bank of 10,600 acres. The company’s land bank in CY08, stood at 10,600 acres across the country, mainly in the northern states.
Alchemist Realty proposes to open a chain of specialty restaurants in northern India under ‘Red Cap’ brand. At first, the company would open only 20 (twenty) restaurants by the end of FY11 in northern states. The size of the outlets would vary from 3,200 sq ft to 6,500 sq ft. The company would also develop over 1,000 high-end housing units by 2011. The company would construct luxury villas on nine acres of land in Shimla and an IT park at Chandigarh.

Conclusion: Considering all the factors mentioned above it will be prudent to invest in the shares of Alchemist Realty Ltd for medium to long term perspective, though some short term gains till Rs.21 cannot be ruled out.

From the weekly charts it is found that the stock has a strong support at Rs.13.5; the higher bottom being made at Rs.14.20. The fast Stochastic and Bollinger bands are in buy mode. One can buy the scrip at the CMP of Rs.14.54 for a target of Rs.21 in the short term. In the medium to long term, the scrip can rise to Rs.55-Rs.60. Hence buy this scrip in all declines.

Disclaimer: Though due care has been taken while preparing this report but no responsibility will be assumed by the author for the consequences what so ever, resulting out of acting on these recommendations or after reading the report.

The author does not accept any liability for the use of this column for buying and selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his acquaintances, his company or his family

members may or may not have positions in the Scrips mentioned in this column or may be buying or selling the above mentioned scrips during the preparation of this report or may be actively trading (buying and selling) in the scrips during the preparation of this report. I expressly disclaim any and all liabilities that may arise from information, errors or omissions in this connection. This document is not to be considered as an offer to sell or a solicitation to buy any securities. Investors should take their own decisions while buying and selling the shares/securities. This document is for private circulation and cannot be printed or published in any form, without the written permission of the author.

2009-11-19T11:22:00.000-08:00

US Markets and its economic-dilemma:

Wall Street today watched a blood bath in action, as stronger dollar, weak economic data spooked the investors (in New York Stock Exchange/ Nasdaq).
A strong dollar makes U.S. goods and services more expensive, and theoretically harder to sell, overseas. And U.S. companies that do business abroad make less money when their earnings are translated from other countries' currencies into dollars.

Moreover, a strong dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them. However a strong dollar could see a rally in the Indian Technology counters tomorrow. It could also fuel a rally in the OMCs (Oil marketing companies), Infrastructure/Real estate and pure Petrochem Companies.

Now the US consumers need to be greedier or go in for more consumerism, helping their economy and the stock markets world-wide. Or else "Obama-nomics" based on some obscure socialistic concepts, will lead us to doom and gloom. Once, Mignon McLaughlin said, "Be glad that you're greedy; the national economy would collapse if you weren't."
However, what the US Treasury Secretary Timothy Geithner said during a trip to Beijing this spring was equally shocking “Purchases of U.S. consumers cannot be as dominant a driver of growth as they have been in the past.” These are some of the ills of much debated "Obamanomics."

On the other hand, there’s a growing group of market professionals who see that the much-advertised Chinese economic miracle is nothing but a “Paper Dragon”. In fact, they argue that the Chinese have precariously overheated their economy, building malls, luxury stores and infrastructure for which there is almost NO demand, and that the entire system is approaching toward a total collapse. A Chinese collapse, of course, would have profound effects on the United States, limiting China’s ability to buy U.S. debt and provoking unknown political changes inside the Chinese regime.

The billionaire hedge fund investor Jim Chanos, the founder of the investment firm Kynikos Associates also holds this view. He is known as a famous short seller — an investor who scrutinizes companies looking for hidden flaws and then bets against those firms in the market. His most famous call came in 2001, when he was the one of the first person, to figure out that the accounting numbers presented in the pubic domain by Enron were pure fiction. The rest is history as the mighty Enron Ltd was blown to pieces within some months.
Here it is to be noted that Chinese economy like the Indian economy is under performing in-spite of mighty stimulus packages amounting to more than $900 billion to boost its $4.3 trillion economy. Another point which is tormenting the Chinese economy post Olympics is the dreaded word, overcapacity. For example the spare capacity in the cement sector according to a recent estimate is 340 million tonnes, which according to a research house is more than the combined consumption in India, US and Japan.

Hereto, the US has been driving the Chinese economy as China is still one of the major supplier of goods to the US. Inspite of ban in some of Chinese products, the China continues to be, US's biggest trade partners.
So, the Chinese factories ran on the US blood as this new found “Chinese-Socialism" devoured the US consumers.

The Chinese on the other hand, with their unbridled capitalistic expansion propelled by a system they still refer to as “socialism with Chinese characteristics or Chinese-Socialism,” are still thriving, though, with annual gross domestic product growth of 8.9 percent in the third quarter and a domestic consumer market just starting to flex its enormous muscles; while the US is still limping back to normalcy.

But it seems there is an oasis in the midst of desert: "The $787 billion stimulus is meeting its goal of creating jobs, even if problems with reporting prevent the government from knowing exactly how well it’s working", government watchdogs said today. In the US about $173 billion of the $787 billion package was spent as of September, 30, with $47 billion subject to the job-reporting requirements.

The rest of the money went for tax cuts and benefits such as unemployment insurance payments. “There are some signs that jobs are finally being created, both as a direct and indirect result of Recovery Act spending,” said the committee chairman, Democratic New York Representative Edolphus Towns.
Now if "OBAMANOMICS" works then the biggest beneficiary would be the US government as it is the “big-daddy” who digested the toxic assets of US’s misadventure with its economy.

It remains to be seen if the US can rise like a Phoenix from the debris of economic downturn. Also, it is felt that the US-China honeymoon will bring in goodies for the world economy inspite of all those occasional mud-throwing.

Someone said, "We had gay burglars the other night. They broke in but rearranged the furniture…..."

Thanks for reading my long article/column......

2009-11-10T12:26:00.000-08:00

Pick of the Week

Geodesic Ltd

BSE Code: 503699

CMP: Rs.99.55

Face Value: Rs.2

52-Week High/Low: Rs.158.65/ Rs.38.50

Price/Book: 1.50

P/E: 4.99

EPS: Rs.19.94

Dividend Yield: 1.61%

Introduction: Geodesic Ltd established inthe year 1999, operates in a niche area of developing various innovative products in the information, communication and entertainment space. Geodesic's product t-list is versatile and all-encompassing when it comes to offering choice of communication and collaboration solutions to its users, whether it is the inherently simple hand-held Simputer to web-based mobile & wireless applications to the intricately complex Spyder applications.

Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year. Focusing its inventive capabilities across all aspects of communication and collaboration the company is widely recognized for its pioneering universal instant messaging system.

Geodesic is all set to contribute significantly to the wave of Convergence by launching innovative world class products such as the Geodesic IP phone that operates across different platforms of landlines, mobile phones & desktops/laptops that will work on all prevailing internet connections and will help users save 75-80 % on long distance calls.

Geodesic's talented staff of more than 400 employees ensures innovation, utility and ease of use. The combination of a highly competent team and state-of-the-art tools enhance the development of future-proof, useful business solutions.

Geodesic has offices in UK, Sweden, Mauritius, Germany and Hong Kong. It provides solutions and services to the following segments:

Enterprise---SMB, BFSI, Large Business, System Integrators, Govt. etc.
Portals and Publishers
Handset manufacturers and Telecom Operators
Retail Business.

Its products include a communication stack (Email/IM/ VOIP/ SMS), Customer Alignment and Relationship management and the entertainment stack including Internet Radio. Geodesic Ltd also builds E-governance solutions based on its GeoAmida (Geodesic’s Hand held Computer).

Shareholding Pattern: The promoters hold 22.74 % while the general public holds 77.26% of the shares of the company.

Shareholding belonging to the category "Public" and holding more than 1% of the Total No.of Shares

Sl. No.	Name of the Shareholder	No. of Shares	Shares as % of Total No. of Shares
1	Sloane Robinson Llp A/C Sr Global (Mauritius Class C -International)	6,941,726	7.53
2	Genesis Indian Investment Company Ltd General Sub Fund	5,636,742	6.11
3	Tree Line Asia Master Fund (Singapore) Pte Ltd	5,576,957	6.05
4	Deutsche Secuririies Mauritius Ltd	3,838,171	4.16
5	Morgan Stanley Investment Management Inc A/C Morgan Stanley India Investment Fund Inc	955,459	1.04
6	Indea Capital PTE Ltd A/C Indea Absolute Return Fund	1,000,000	1.08
7	Carlson Fund Equity - Asian Small Cap	3,050,000	3.31
8	Genesis Asset Managers Llp A/C Smaller Companies Portfolio Of The Genesis Emerging Markets Opportunities Fund Ltd.	2,431,603	2.64
9	Sloane Robinson Llp A/C Sr Global (Mauritius) Ltd (Class B Asia)	2,493,168	2.70
10	College Retirement Equities Fund - Global Equity Account	1,971,502	2.14
11	Banque Degroof Laxembourg Sa A/C Asia Pacific Performance Sicav	1,436,595	1.56
12	Shinsei Uti India Fund (Mauritius) Ltd	1,746,892	1.89
13	Ward Ferry Management Limited A/C Wf Asian Smaller Companies Fund Ltd.	2,457,000	2.66
14	College Retirement Equities Fund - Stock Account	1,312,500	1.42
15	Ward Ferry Management Limited A/C Wf India Reconnaissance Fund Ltd	1,183,000	1.28
16	Fidelity Funds - Pacific Fund	924,441	1.00
17	Payash Securities Pvt Ltd	1,194,727	1.30
	Total	44,150,483	47.88

Financials: Geodesic Ltd reported revenue of Rs.154.4 Cr in Q2FY10, which is flat as compared to the same quarter previous year. It has managed to report a marginal rise in revenues despite revising its licensing prices downwards for the enterprise segment. Geodesic issued fewer licenses of Mundu IM and Radio to the OEM/ODM segment owing to the drop in smart phone shipments.

Its net profit for the 2^nd quarter, FY10 declined by 24% at Rs.57.03 Cr as compared to the quarter ended Sept 30, 2008. The EPS for Q2FY10 came out to be Rs.6.18 as against Rs.8.12 in the same period previous year. Dividend at 40% (Re.0.80 per share) on the face value of equity share is declared by the shareholders in the AGM held on 29-09-09 and paid on 20-10-09.

Triggers:

Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year. Company was awarded the Inaugural Red Herring Small Cap 100 award and is one of the only Indian companies to be included in the Red Herring Small Cap 100 list. Geodesic is a traded on India's major Stock Exchanges, the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
The Company is focusing its inventive capabilities across all aspects of communication and collaboration. Their areas of specialty include RDBMS, networking applications, web technologies (including interface designing and Interactivity) and security protocols. Company is widely recognized for its pioneering universal instant messaging system (www.mundu.com). The Mundu products successfully combine AIM, Google Talk, ICQ, MSN, Mundu and Yahoo with deep content collaboration across the Internet, wireless devices and platforms.
All Geodesic products are complimentary to each other. Each product can be used independently but also seamlessly integrates with all other products. Geodesic customers can begin with a single product that fulfills their requirements and as their requirements change or increase; additional products from the Geodesic suite can easily be incorporated. Geodesic was the first in the world to introduce an 'Information Slider' that changed the way people shared and collaborated information.
The Mundu SMS launched its International SMS Service in India, Australia, Singapore, Philippines, South Africa, UAE, and UK. Mundu SMS will reach out to more than 100 countries during the financial year.
It announced plans to launch Filmorbit—a portal dedicated to the India Entertainment and Media industry in India. The portal would use Mundu Entertainment stake as a means to deliver deep interlinked content. Moreover, Mundu Radio has been rated as one of the top 10 popular applications on the Nokia OVI store.
Forbes Magazine listed Geodesic in the top 200 under a billion companies. The company signed a deal with Entel PCS, Chile’s largest mobile operator to provide windows live instant messaging service to its mobile subscribers.
A UK based Financial Service Company acting as an exchange for C2C, C2B and B2B multi-currency transaction signed a trial order for the company’s GeoAmida hand held device.
The company signed deals with Orissa Capital Bank B S C, Bahrain, Business India Group and a major Korean Investment Bank to provide financial service solutions including CRM and integrated communications over web.
During the last quarter the Chandamama launched interactive children friendly portals in Kannada, Marathi, Telegu, Tamil and Hindi, with a host of features, making browsing exciting and enjoyable for readers.

Valuation and Chart Check:

The Geodesic Ltd’s business model is based on a recurring revenue stream. The nature of the products and the business promotes returning customers and all Geodesic products are created with this model in mind.

The charts however are not giving an immediate buy signal, but the same cannot be denied in the middle of the week. Both the slow and fast oscillators are highly oversold and a bounce can be expected at any time. A bounce from the temporary bottom formed should be used to accumulate. A short term target of Rs.XXXX, cannot be ruled out in the next 3 to 4 months time frame. The medium to long term investors should buy the scrip with a SL of Rs.XX.

Note: The stock was recommended to the Paid Groups (Premium and Quickie) on the last Sunday (8th November, 2009).

2009-11-04T08:28:00.000-08:00

PICK OF THE WEEK

ITL Industries Ltd

BSE Code: 522183

CMP: Rs.29.25

Market Cap: Rs.9.64 Cr

EPS: Rs.4.69

P/E: 6.24

Industry P/E: 17

Dividend yield: 3.42%

Introduction: ITL Industries Ltd. was established in 1986, as a commercial Tool Room to cater to the needs of local industries. Engineering industry in India then, was still in nascent stage and demand for Metal Sawing Machines was growing rapidly. ITL emerged as the sole manufacturer of India's first cent percent indigenously designed and developed High Speed Double Column Band Saw Machine to meet the growing demand.

Today ITL offers 60 different models of Bandsaw machine ranging from 100 mm to 1500 mm cutting capacity with manual, semi automatic, automatic and fourth generation CNC machine. In 1996, ITL joined hands with KASTO Maschinenfabrik GmbH Germany to manufacture state-of-the-art High Speed Power Hacksawing Machines in India, with a buy back arrangement. Today ITL manufacture's three models of Kasto Sawing Machines with cutting capacities 250 mm, 280 mm. and 400 mm. dia. in India as per Kasto Technology.

ITL has been the pioneer in introducing India’s first double column type metal cutting machine in the year 1990 and since then, ITL has supplied more than 2000 machines across the country and global markets.

Products:

Manufacturers, Traders & Exporters of Metal High Speed Sawing Machine. - High Speed Double Column Band Saw Machine - Blades - Bandsaw - Circular Sawing Machine - Tube/Pipe Manufacturing Machine -Power Hacksaw Machines - Special Purpose Machines - Generator Stator Bar Press - Power Packs -Micromist

Shareholding Pattern: The promoters hold 45.15%, while the general public holds 54.87% of the shares of the company.

Financials: For Q2FY10, the total income of the company came out to be Rs.14.35 Cr as against Rs.5.99 Cr in the same period previous year. Even after higher Depreciation, Interest & Finance charges and Provisions for taxation, the net profit of the company for Q2FY10, came out to be Rs.8.76 Cr as against

Rs.4.2 Cr in the same period previous year on a very small equity capital of Rs.3.25 Cr.

The EPS of the company for Q2FY10 came out to be Rs.2.69 as against Rs.1.29 in the same period previous year.

Triggers:

• The engineering industry in India is on an upswing on the back of huge demand from the construction, infrastructure and capital goods sector. This has resulted in an increase in the demand for metal cutting machines.

• ITL Industries Ltd (ITL) is well placed to take advantage of this opportunity as it is a leader in high speed sawing technology and is in the process of establishing itself in the domestic and global markets as an innovative and reliable "Cutting solution provider

• ITL has a wide product range in metal cutting solutions. The company offers 60 different models of brand saw machines ranging from 100 MM TO 1,500 MM cutting capacity with Manual, Semi Automatic, Automatic and fourth generation CNC machines. On the back of its technical tie up with a German company, ITL manufactures 3 models of Kato Sawing machines with cutting capacities of 250 MM and 400 MM diameter in India as per KLasto technology.

• The domestic demand as compared to the last year has improved in the current year. The present level of Turnover & Orders for Machine Manufacturing Division & Hydraulics Division has surpassed last year’s total turnover. The company has a good order book position.

• In some new products for Tube & Pipe Manufacturing Company, High Speed Circular Sawing Machines, ITL has captured a reasonable market size. More and more technological advancement and up-gradation of latest technology will create an opportunity to penetrate into new products liner global market in near future.

• In current year the Company is confident of growing much faster in comparison to economy capital goods industry. Looking to the present level of Orders and Enquires for Manufacturing Division i.e. Bandsaw and Tube & Pipe Manufacturing equipment it is seen that they are showing good signs of recovery. ITL's outlook on over-seas markets and domestic market are positive

on account of its strength o n cutting edge technology, cost and effective after sales services.

• The Company is falling under the capital goods industry, the growth of which is determined by overall growth of the Industry. An overall concern is pertaining to the pressure on the profitability. However, ITL has taken all measures to reduce the Direct and Indirect cost.

During the current year, the Tube and Pipe Manufacturing Division is showing excellent growth in orders and inquiry due the overall growth of Industry. The advancement of technology and strategic positioning of products is expected to give better results in the days to come.

Conclusion: According to the charts, the stock should only be bought above Rs.31, in any upmove. The short term target for the scrip could be Rs.XX.

However, in the medium to long term, the stock could give at least XX% appreciation from the current price.

Note: The stock was recommended to the Paid Groups on this Sunday (1st October, 2009).

2009-10-15T23:54:00.000-07:00

Cords Cable Industries Ltd

BSE Code: 532941

CMP: Rs.45.35

Book Value: Rs.73.26

EPS: Rs.4.7

Dividend Yield: 2.21%

Price/Book: 0.89

Market Cap: Rs.54.57

P/E:10.16

Industry P/E: 11.78

Sector: Power Cable

Introduction: Cords Cable Industries Ltd (CCIL) was established in 1987 by a group of industry professionals with an objective of catering to a growing requirement for high quality customized cables.

With it’s headquarter in New Delhi, it manufactures Instrumentation cables, Control cables, Power cables besides special cables for electrical connectivity requirements, mainly for Industry. The Company manufactures cables up to 1.1 kilovolt for applications including industrial, utility and buildings. It caters to industries such as power, steel, cement, fertilizers and chemicals, and refinery/petroleum. The Company’s products include low-tension control cables (up to 1.1 kilovolt), low-tension power cables (up to 1.1 kilovolt), instrumentation cables, signal and data cables, thermocouple extension/compensating cables, panel wires/house hold wires/flexible cables, and specialty cables.

In January 2008, the Company came out with an IPO and on 13th February 2008 got listed on Bombay Stock Exchange and National Stock Exchange of India.

In a significant development in 2008, Cords Cable Industries Limited became the only Cable manufacturer in the Asia-Pacific region to be listed by Forbes Magazine in its “Asia's 200 Best Companies under a Billion List.” It is now the biggest instrumentation cable maker in India.

Shareholding Pattern: According to the latest shareholding pattern, the promoters hold a controlling stake of 58.48% while the general public holds 41.52% of the shares of the company.

Financials: For FY09, the total sales of the company increased to Rs.222.8 Cr as against Rs.170.85 Cr in the same period previous year. However due to higher expenditure, interest and depreciation, the net profit of the company suffered. For FY09, the net profit of the company dipped to Rs.7.13 Cr as against Rs.13.8 Cr in the same period previous year, on a small equity base of Rs.11.43 Cr. The EPS of the company for FY09 dipped to Rs.6.24 as against Rs.16.81 in the same period previous year. The net and operating profit margin of the company also dipped considerably on Y-o-Y basis, due to slowing down of the world economy. The poor FY09 results considering Y-o-Y basis is mainly due to Q4FY09 results, which were abysmal and were much below expectations.

For Q1FY10, the total sales of the company though remained flat on Y-o-Y basis but the net profit dipped Y-o-Y basis. However the net profit of the company for Q1FY10, sequentially speaking was superb, which is an indication of improvement of business environment in the coming days. For FY10, the total sales of the company came out to be Rs.359.74 Cr as against Rs.360.40 Cr in Q1FY09. The net profit of the company for Q1FY10 suffered due to higher interest and depreciation. The net profit of the company for Q1FY10 came out to be Rs.67.7 lakhs as against Rs.2.44 Cr in the same period previous

year. But the though the net and operating profit margins of the company dipped considerably on Y-o-Y basis but the good point is that they improved substantially speaking sequentially; which tells us indirectly that going forward the company would do well. This is primarily the fundamental basis of recommending this hidden gem in the Power Cable Sector.

Industry Outlook: At global level, India's growth story is so far impressive with GDP expected to grow at the rate of 6-6.5% in FY10. Infrastructure needs to grow at a similar level for sustaining this GDP growth. This infrastructure is undoubtedly dependent upon the manufacturers of cables in the Indian cables industry. This augurs well for the suppliers of power cables, instrumentation and other cables.

The key to sustaining India's growth rate during a global meltdown lies in developing India's infrastructure sector as mentioned earlier. Keeping this in mind, the government is targeting an investment of US$ 20.38 billion over the next two years in the infrastructure sector. The scheme proposed by government cannot be achieved without participation of Private sector. The government has asked the Infrastructure Investment Finance Company Ltd (IIFCL) to put together a corpus of over US$ 8.15 billion for this purpose. This is in addition to the US$ 320 billion that the government plans to invest for the up-gradation of ports, railroads, highways and airports over the next 15 years. Further, the core sector growth is back on track. The index for six core industries crude oil, petroleum refinery products, coal, electricity, cement and finished carbon steel has turned in a growth of 2.9 per cent in March 2009 over March last year.

Apart from the power cables, Indian cable manufacturers are producing technologically advanced specialty cables including instrumentation cables, process control cables, low voltage electrical power cables, rubber cables, control cables, etc. which are used by the space, oil, gas, petrochemicals, fertilizers, cement, steel, railways, medical, automotive, electronics and many other core sectors of the Indian economy. Hence any positive development in the economy is directly proportional to the company’s fundamentals, which is expected to improve substantially going forward.

Triggers:

• The decline in margins in FY09 and Q1FY10 was mainly due to the increased cost of raw material which happened on account of sharp fluctuation in price of commodities like Copper & Steel which constitute almost 80% of the raw materials for cables. Moreover, global recessionary trend has adversely affected the profits of the Company by comparatively increasing the cost of inputs and slowing the product demand in the market. CCIL booked the material against order at higher price but had to offer lower price to customer when prices declined.

This has resulted into higher raw material cost for CCIL. However with improved business environment for the company in the coming days, this is expected to ease out considerably.

• Company even in the tiring business environment maintained its dividend payout in FY09 at the rate of Re.1 per share which is same as in FY08.

• The year 2008-09 proved to be a very challenging year for Indian Industry. During the year the GDP of the country fell down to 6.7% compared to 8.5% in FY’08. Cable Industry was no exception to this domestic and global meltdown. Despite all the global and domestic challenges and sharp fluctuation in commodities like Copper & Steel which constitute almost 80% of the raw materials for Cables, Cords Cable Industries Ltd (CCIL) achieved a growth of 30% in sales over FY08. To face all these challenges CCIL further diversified its business model and has added 33 new clients to its existing client base, has started exporting its product to many new countries and has added 3 new business sectors.

• In an effort to make its business model more sustainable CCIL focused aggressively on export markets and as a result the company increased the share of exports to 16.1% as against 7% in FY'08. With rupee depreciation, the company is expected to get good impetus on its export revenues. CCIL is well poised for future growth with a well developed strategy in place and is on course for achieving its target to increase the share of its export sales to 25% in FY10.

• The cable industry in the past 16 months has undergone a massive slowdown both in domestic and global markets. However the turnaround has already taken place and there is a great potential for the cable industry not only for 100% capacity utilization but also to capture more market by expansion drive. Looking at the aforesaid scenario and great potential, the company is poised for expansion. The effective steps for expansion had already been taken by the company last year but due to overall slowdown in the economy, the expansion drive was put on hold. However, now in view of the improvement in the overall situation, the project is expected to be commissioned expeditiously and is likely to commence production by April 2010. Also, RIICO allotted an alternative piece of land for the project due to certain issues with the proper procurement of the previous piece of land. The new land is better located and more suitable for the project.

The cost over run as such is proposed to be met from internal accruals & borrowings. The company had already received machinery which CCIL installed in the existing facility and has already started producing.

• As of 31st Mar 2009 CCIL had an order book of Rs.103 Crs. The company is not facing any problem in order booking. The order booking is same quantity wise but the value of the order book is low due to the declining prices of the raw materials. The order book is expected to cross Rs.150 Cr by Q4FY10.

Chart Check and Conclusion: Going forward, with increased manufacturing capacity, focus on exports and addition of new products, CCIL is poised to wire a new growth story in the cable sector.

We can expect CCIL to report Net Revenue of Rs.265 Cr, EBIDTA of Rs.29.6 Cr, EBIDTA Margin of 11.2%, PAT of Rs.11.1 Cr and EPS of Rs.9.7-Rs.10, in FY10. At the estimated EPS of Rs.9.7—Rs.10 for FY 10 the stock could trade at Rs.110-120, in the next 9-12 months time frame. Moreover, considering CCIL’s reasonable order book position, focus on exports, pick up in demand and stable commodity prices we can safely assume that CCIL’s margin is likely to improve in the coming quarters.

The stock has a solid bottom in place at XXXX (Only for the Paid Groups), where maximum accumulation should be done in any dip in the market. However, if the scrip manages to stay above XXXX (Only to the Paid Groups), then the next logical target should be XXXX (Only to the Paid Groups).

This scrip is suitable for investors who do not want to take too much risk but want a healthy return after a couple of years.

Note: The stock was recommended to the Paid Group last week in the Sunday Report. The above are the excerpts from the original report sent to the Paid Groups.