Super Indian Stocks

Swaraj Mazda, Premier Limited; a true multibagger

2011-01-24T10:03:00.000-08:00

Swaraj Mazda has renamed its entity as SML Isuzu. This is one stock that we like because of two things - one, the parentage and the strong exposure of parentage into the areas where India definitely, need some building up. The company is doing the rounds that Actis wants to exit and Isuzu wants to buy that particular stake. This story has been doing the round right from Rs 310 when the promoters heard a rumour that Rs 400 would be offered to Actis for exiting its 5% holding.

The company’s parentage is connected with Sumitomo Corporation, which is an almost 1.5 trillion Japanese Yen company. If I look into the space where the parent is right now, India definitely requires these kinds of companies for maintaining 8-8.5% GDP growth. Apart from this, if I look into the standalone numbers for Swaraj Mazda, I see that the company would clock close to Rs 20 of EPS for this fiscal itself.

Companies from Japan normally trade in the range of 20-25 times forward. That gives me a target of Rs 500. But there is one small catch that this stock has not fallen every time the market has received a beating down. This shows that the stock has been actually accumulated by strong hands. We have a longer-term target on the stock of close to Rs 1,000.

Right now, on the financials, there is nothing to suggest that it can easily go to Rs 1,000 level but if I see the company’s potential in aerospace, railways, I think with the 5-6% exit from Actis, the company would bring in more from the parent and would like to use the expertise of the parent. That would be shaping out for the company in the years to come.

We have an estimate of close to Rs 32 EPS for next fiscal. Going by the same multiple rule which means 20-22 times forward multiple, it leaves me in a comfortable zone of Rs 650-700 from one-and-half-two year’s perspective. But on a longer-term, this stock should be accumulated everyday, 5-7% one should be adding 100 shares.

If someone wants to buy 1,000 shares for the stock because on the longer-term this is one stock which I feel would definitely hog the limelight as a delisting candidate or the stock would gives a multi bagger potential because of the strong parentage from Sumitomo Corp and is into a space which India definitely requires in the future.

On Premier

Premier Limited is one stock that has hogged the limelight yesterday itself from our report. We saw a technical bounce from its oversold position of close to Rs 90 and the stock closed close to Rs 100. If I look into the financials of the company, it has promising prospects going forward.

Premier formerly known as Premier Automobiles Limited use to be famous for its Padmini for its product but now the company has again come up with an SUV called Rio with 1.5 billion PAT with a China based company. The company has two segments - engineering and the automobile space. If I see into the engineering space itself, with its production capacity ramping up in the wind turbine space, there is a lot of potential but there is a hidden asset in the company which the company owns strategically.

In 2008, Indiabull Real Estate and other companies bid for the land that one of its holding company PAL-Peugot, at that point of time use to hold, close to Rs 1,000-1,500 crore but the deal could not work out. This company owns 200 acres of land in the same area. The company is in talks with some builders and they are ready to get rid of this extra land. I see that the company can easily generate close to Rs 550 crore within six-eight months time.

This is one tough call for any company when this kind of deal gets structured. Company’s like Hind Composite, which where in talks with a lot of players for almost two years have become a multibagger in two-and-half years.

Looking at the balance sheet, the company owns close to Rs 200 crore of debt into the books. The market cap is close to Rs 300 crore. By the sale of land itself, the company would generate close to Rs 600 crore in terms of cash flow. If the company pays out their debt into the books, the company’s EPS is going to just double in no time.

Apart from this the company expansion has been completed in Chinchwad based in Pune where it also owns 27 acres of land and factory. This is one area where the company can easily go for brownfield expansion which is very important. If I you look at their two engineering divisions - the company would clock close to Rs 8.5 EPS for this year and close to Rs 11 of EPS for next fiscal.

They just started to reflect again in their bottomline and topline. We feel there is a promising prospect for the company, both from hidden gem side and also from the prospect of the business itself.

We have a longer-term target of close to Rs 180 but yesterday the v-shape recovery that the stock took; we feel that the technical target can also be played with a target of Rs 125 in the days to come. This is one company that should be bought because there were brokerage reports suggesting the stock could be a multibagger even when the stock was hovering around Rs 170-180 mark in 2007 with just the land deal getting structured and going through.

If someone has a potential to hold the stock and trade into the stock for next two-and-half years, the stock could be a true multibagger with limited downside on the stock. We have a buy rating on the stock with a medium-term target of close to Rs180.

Simran Farms Ltd. – A Multibagger in the Making

2011-01-24T02:31:00.000-08:00

Industry – Poultry

BSE Code – 519566
Current Price – Rs. 40/-
Target Price – Rs. 91 /-
Target Price Period – Short to Medium Term

Equity Capital – 3.79 cr.
Promoter Holding – 36.22 %

Market Cap – Rs. 15.16 cr.
FY10 Sales – Rs. 136.68 cr.
FY10 Operating Profit – Rs. 5.89 cr.
FY10 Net Profit – Rs. 3.48 cr.
FY10 EPS – Rs. 9.19
Current P/E – 4.35

A Brief Overview of the Company :

Simran Farms Limited is a 21 year old company operating in poultry industry. Under the broad spectrum of poultry industry, Simran Farms is mainly engaged in Parent Poultry Breeding activities and Commercial
Broilers. The Company has most modernised parent poultry breeding farms near Indore in Madhya Pradesh and commercial broiler farms in Madhya Pradesh, Chattishgarh, Gujarat & Maharashtra.

Management & its Competitive Strength :

Simran Farms is managed by Mr. Harender Singh Bhatia who is a veteran in poultry industry with 32 years of rich experience in all the facets of poultry industry right from poultry keeping, feed management, farm
management, hatching of eggs, management of hatcheries to marketing of chicks, eggs & birds. His contribution in the development and growth of poultry industry in Madhya Pradesh is very well recognised.

Since inception, i.e., since 1989, Simran Farms has seen many ups and downs of poultry industry and it is worthwhile to note here that the management of the company has depicted its competitive strength by
sticking to the same line of business despite severe recessionary trends that poultry industry went through since last many years. The management of the company not only enabled the company to sail through
the recessionary phase but proactively built pillars for exponential growth of the company during good phase of poultry industry.

Investment Rationale :

Embeded above is the investment rationale for the company. The pain that management took of sustaining the company in recessionary phase of the industry and the proactive steps taken by the management to
ensure exponential growth of the company in good phase of poultry industry make Simran Farms an excellent pick in current scenario. Let us first understand the macro perspective then the micro perspective and then the valuation perspective for investment into Simran Farms Limited.

Macro Perspective :

Poultry Industry is currently Rs. 40,000 cr. Plus industry in India. The industry has transformed itself from a mere backyard agricultural activity to a profitable, dynamic commercial industry. One of the fastest growing segments of Indian agricultural sector, its growth is driven by an increasing urban population, a growing middle-class with increasing per capita and disposable income apart from rising foodgrain and cereal prices and stable poultry prices.

India, with a poultry population of 489 million and estimated more than 532 billion eggs production, ranks among the top three countries in egg production in the world. While the production of agricultural crops has been rising at 1.5-2 per cent a year, the broiler production is growing at the rate of nearly 8-10 per cent every year and growth in production of poultry/chicken meat increased from mere 0.12 million tonnes in 1981 to 2.2 million tonnes presently. Consumption of chicken in the country is expected to double in the next five years. The eating out phenomenon coupled with more quick service restaurant chains is changing the consumption profile of Indians. The changing eating habits, cropping fast food outlets and quick service
restaurants speak highly in favour of improvement in levels of poultry production over the next many years. Domestic poultry industry currently produces 240 crore birds commercially every year. To cope with the doubling of demand by 2014-15, the industry will need to grow at a rate of 12-15% annually.

Micro Perspective :

After looking at the macro perspective, let us look at the micro perspective i.e. a perspective specific to the company Simran Farms Ltd.. For this we need to look at four aspects viz.,

(1) Management Initiatives in the past and whether such initiatives met success or not
(2) Management Goals for the future
(3) Current Industry Developments which can immensely benefit the company
(4) Possible and Most probable future scenario for the company

Now, lets explain in detail each aspect one by one:

(1) Management Initiatives in the past and whether such initiatives met success or not :

We will start with this aspect only, because, for any company which is into a transformation phase of becoming a mid-cap from a small-cap company, management initiatives and success of such initiatives in the
initial transformation-phase is extremely important. As stated before, Simran Farms’ management stuck to the same line of business i.e. confined their operations to only the industry of their expertise viz. Poultry industry despite severe recessionary and adverse pressures that poultry industry went through since last many years because of rising prices of maize and soyabean which constitute 70% of the cost for any poultry-based company, spread of diseases like bird flu, stagnant demand and prices of poultry products, etc. This fact depicts the credibility of management of the company as otherwise in these many years any uncredible management would have easily ventured out into some other line of business.
Now, the second thing which demands an investment in Simran Farms is the initiatives or pillars that the management started to build to ensure the exponential growth of the company in the good phase of
poultry industry. Such pillars came in the form of the company venturing into commercial broiler farming in FY07 apart from parent poultry breeding farms which was its main activity since last many years. Immediately after that i.e. in FY08 it ventured into contract farming for quick ramp-up of scale and based on this plan it started 80 farms in FY08. Immediately after that i.e. in FY09 company ventured into other states like Gujarat and Maharashtra apart from Indore which is its main hub. In FY09 company started its operations on 200 farms and built a vision to consolidate entire Simran group operations under one roof i.e. Simran Farms Ltd. For this, initially it started to consolidate activities of the listed company itself. In addition,
company also started in-house feed production on large scale in FY09 to improve the profitability of the company as feed cost constitute 70% of the total cost of any poultry-based company.

Now, the third thing which we can’t ignore is that whether the initiatives taken by the management of Simran Farms since FY07 met any success or not. The best answer for this is to look at the financial s
of the company for last six years which are given below :

FY05 FY06 FY07 FY08 FY09 FY10
Sales 11.99 12.33 17.14 30.78 72.30 136.68
OP 0.09 0.59 0.60 0.82 2.50 5.89
NP -0.89 -0.12 -0.17 0.25 2.90 3.48

As can be seen from the above, from FY07 onwards company’s sales more than doubled every year while on bottomline front it staged a great turnaround with FY08 seeing the company coming out of red and FY09 and
FY10 seeing the company more than doubling its profit every year. FY09 included exceptional gain of Rs. 1.50 cr. pertaining to one-time settlement with bank and so its real net profit for FY09 comes to 1.40 cr. All these numbers clearly show that the initiatives which management of Simran Farms took in the past have met with immense success.

(2) Management Goals for the future :

Management of Simran Farms Ltd is working with a vision to consolidate all the activities of Simran Group under the listed entity viz., Simran Farms Ltd. This vision was charted out in FY08 and to start with, it was planned to first consolidate each and every activity of Simran Farms to bring-in operational efficiency and then to move on to bring unlisted group firms under its belt. FY09 and FY10 saw the consolidation of activities of listed firm and from FY11 onwards we can see the group firms merging with the listed entity.

The group firms of Simran Group include :

Simran Hatcheries
Singh Hatcheries
Simfa Labs (Vetline)

With consolidation of these group firms into the listed entity, Simran Farms will be present in all segments of poultry sector including breeding, hatching, broiler farming, feed production, vet medicine(via Simfa Labs), etc. Only the segment left out will be retailing of poultry products which can fetch decent margins for the company, however, this segment can be ventured into at a later stage.

(3) Current Industry Developments which can immensely benefit the company :

There are three major developments pertaing to poultry industry which will lead to a rerating of the listed companies operating in this industry and more specifically will immensely benefit Simran Farms Ltd. Those developments are :

(a) Declining-to-Stable Input Prices
(b) Rising Output (Product) Prices
(c) Double Digit Growth a Compulsion for Poultry Industry

(a) Declining-to-Stable Input Prices :

Feed in the form of Maize (Corn) and Soyabean constitute 70% of the cost of production for any company operating in poultry industry. In last many years prices of this commodities shot up because of excessive demand and limited supply. However, now the scenario is entirely different. Stiff decline in export of soyabean because of bumper soyabean output in Brazil and USA has put pressure on soyabean prices in the domestic market. Soyabean meal prices have declined from January 2010 price of Rs. 19,000 per tonne to Rs. 15,300 per tonne as of today. Similarly bumper corn crop in Karnataka and Bihar has put extreme pressure on corn prices too wherein the prices have declined from Rs. 11,200 per tonne as of January 2010 to Rs. 8700 per tonne as of today. This reduction in prices of major input of poultry industry has enabled the average cost of live bird to come down to Rs. 45 per live bird.

Also, the prices of soyabean and corn are likely to decline or at the most remain stable in the near future too because – (i) The southwest monsoon which covered half of the country last week, has entered the
soybean belt. Good monsoon rains, which irrigate 60 percent of the country’s farms, will boost soybean output. (ii) Inspite of bumper corn crop in Karnataka and Bihar, corn export is likely to fall due to lower priced global offerings and quality issues. In early part of 2010 because of quality issues, there were rejection of large consignments of corn meant for exports. Because of this in contrast to last year wherein for the entire export year ending September 2009 India exported 2.3 mn. Tonne corn ; whereas this year ending September
2010 India is likely to end with just 0.8 mn. Tonne of corn export.

To conclude, Input prices for poultry industry are likely to remain soft in the near future too.

(b) Rising Output (Product) Prices :

This is the main factor which will lead to significant rerating of, specifically Simran Farms, and broadly all the poultry stocks. The main product in which Simran Farms deals in i.e., Broilers has seen its price shoot up in last few months. Wholesale live weight Broiler prices have shot up to Rs. 78-80 per kg. From Rs. 58-62 prevailing just few months back. This has resulted in increase in retail prices of dressed broiler to Rs. 40-150 a kg. Up from Rs. 110-120 prevailing few months back. Similarly, egg prices have also started to move up in
the last few months across the country. Wholesale egg price is currently quoting at Rs 2.58 per egg, up from Rs 2.40 per egg a month back. In the retail market, egg is currently selling at Rs. 3.50 per piece.

Normally, during summer months, poultry products’ prices, especially that of broilers, normally remain stable because of low demand in summer months due to hot conditions. However, this time, in summer months too demand has remained constant because of high prices of cereals and pulses which are otherwise a rich source of protein.
Hence, people have instead turned to broiler meat which is a very rich source of protein and other vitamins. India is fifth ranked broiler producer in the world with an estimated production of 2.3 million tonne of broiler meat per annum. However there is a huge scope for the growth of poultry industry as the country’s per- capita consumption is only 2.4 kilogram per person per annum and per capita consumption of broiler meat has grown at 10% in last 15 years.

Hence, prices of poultry products, especially broilers, is likely to remain rising-to-stable in the near future.

As discussed before in the section ‘Macro Perspective’, consumption of chicken in the country is expected to double in the next five years. The eating out phenomenon coupled with more quick service restaurant
chains is changing the consumption profile of Indians. The changing eating habits, cropping fast food outlets and quick service restaurants speak highly in favour of improvement in levels of poultry production over the next many years. Domestic poultry industry currently produces 240 crore birds commercially every year. To cope with the doubling of demand by 2014-15, the industry will need to grow at a rate of 12-15% annually. Thus, double digit growth is more of a compulsion than a luxury for poultry industry.

(4) Possible and Most probable future scenario for the company :

In the next few years Simran Farms Limited is likely to emerge as a strong player to contend with in the poultry industry. Already in the current year i.e., in FY10 it has surpassed Srinivasa Hatcheries on the Sales front. The pace at which Simran Farms is growing and the aggresive management style that the current management of the company is adopting, will surely make Simran Farms a completely integrated end-
to-end player in the poultry industry with a presence in all segments of the curve. The consolidation of the company as well as group firms and the initiatives like in-house feed-production, contract farming, etc. will dramatically improve profitability of the company in the coming years. Coupled with these micro factors, macro factors like fall in input prices, rising demand of end products, spike in end- product prices is likely to add to the growth momentum of the company and will lead to dramatic improvement in top-line and bottom-line of the company in the coming years.

Valuation Perspective :

This is the third and most important perspective to be looked into deeply for investment into any company. Here again we need to look at four aspects, viz.,

(a) Current Financials
(b) Future Financials
(c) Current Valuation
(d) Peer Group Valuation

(a) Current Financials :

Before looking at current financials aspect, let us first look at past 5 years financials of the company to check the quality of current financials. Financials for last five years is given below :
FY05 FY06 FY07 FY08 FY09 FY10
Sales 11.99 12.33 17.14 30.78 72.30 136.68
OP 0.09 0.59 0.60 0.82 2.50 5.89
NP -0.89 -0.12 -0.17 0.25 2.90 3.48

As can be seen from the above, Simran Farms has maintained its topline even in recessionary period of poultry industry. On the contrary, in FY07 and FY08 there was widespread birdflu scare prevalent which
forced many small-scale firms as well as farmers operating in poultry industry to go bankrupt and shutdown their operations. In such times Simran Farms actually reported healthy topline growth because of aggresive strategy adopted by the management to expand in bad times.
This strategy paid of and so when the bad phase of poultry industry ended Simran Farms started reporting extremely healthy topline growth. Bottomline growth was muted in FY08 and FY09 because of investment in
expanding the operations [FY09 bottomline number includes Rs. 1.50 cr. Gain from one-time settlement with bank]. However, the business model adopted of first achiving the scale and then improving the bottomline
proved to be shrewd one as in the first six months of good phase of poultry industry, Simran Farms went ahead of Srinivasa Hatcheries, its immediate listed competitor, in scale and also managed a dramatic
improvement in bottomline. Yes ! the fortunes of poultry industry turned corner only in October-November 2009 and so FY10 only saw six months of good phase of poultry industry. The main benefit of fall in input prices and spike in product prices is likely to be felt from FY11 onwards which will coincide with operational efficiences which the company is likely to achieve because of consolidation of activities of the company as well as group. An indication of such operational efficiences is already seen in FY10 numbers wherein company has achieved record operating profits of Rs. 5.62 cr.

(b) Future Financials

As explained above, the main benefit of fall in input prices and spike in product prices is likely to be felt from FY11 onwards which will coincide with operational efficiences which the company is likely to achieve because of consolidation of activities of the company as well as group. Simran Farms is likely to end current FY11 with a topline of Rs. 182 cr. And a bottomline of Rs. 6.30 cr. In FY12 the topline is likely to be around Rs. 210 cr. While the bottomline is likely to shoot up to Rs. 11.55 cr. In FY12 the real effect of consolidation of
activities of the company, merger of group firms, geographic expansion as well as full utilization of in-house feed production is likely to be seen which will result in dramatic improvement in bottomline. Current FY11 will see a spike in topline while bottomline is likely to follow the trend of FY10 only wherein OPM & NPM were below industry average. This is because FY11 will again see expansion of operations as well as group firms’ amalgamation issues. All these expenses are likely to keep the margins of FY11 under pressure.

As discussed in above two sections, Simran Farms reported an EPS of Rs. 9.19 for FY10 and is likely to post an EPS of Rs. 16.62 for FY11 and Rs. 23.10 for FY12 (In FY12 we have factored in an equity expansion for likely capex which might even happen in FY11; if in FY11 this equity expansion happens then EPS for FY11 is likely to be Rs. 12.60).

Hence, at the current market price of Rs. 40, Simran Farms is available at a PE of 4.35 based on FY10 earnings, 2.41 based on FY11 earnings and 1.73 based on FY12 earnings. Also, on market-cap-to-sales
bases it is available at just 0.11 sales based on FY10 numbers, 0.08 sales based on FY11 numbers and a meagre 0.07 sales based on likely FY12 numbers.

(d) Peer Group Valuation :

Simran Farms has only four listed competitors viz.,

Venky’s India Ltd.
Srinivasa Hatcheries
SKM EGG Products
Hind Industries

Out of above, Venky’s is more of an expanded player with a presence in other areas too which Simran Farms is not present in or is not planning to be present in ; SKM Egg primarily deals in egg and egg products while Hind Industries deals in selling of meat and meat products. Only Srinivasa Hatcheries can be strictly called peer as far as Simran Farms is concerned as it is this company which is present in most of the areas where Simran Farms is present in or is planning to be present in. Still, we will look at each company’s current valuation on the bourses to judge the under-, over- or reasonable- valuation of Simran Farms on the bourses.

Venky’s is currently quoting at a PE of 8.5 and 0.67 sales based on reported FY10 numbers. Srinivasa Hatcheries is quoting at a PE of 6.5 and 0.65 sales based on reported FY10 numbers, SKM egg is quoting at a
PE of 57.5 and 0.30 sales based on reported FY10 numbers and Hind Industries is quoting at a PE of 8.4 and 0.19 sales based on reported FY10 numbers.

Based on above valuations it is apparent that Simran Farms with a PE of 4.35 and market cap to sales of 0.11 is the cheapest and most promising company available in the poultry sector.

Conclusion :

To conclude the report as well as investment argument in favour of Simran Farms Limited, a company :
(1) which is transforming itself into a mid-cap from a small-cap player
(2) operating in an industry which has just started its boom cycle (normally boom cycle in poultry industry lasts for four years)
(3) having negligible debt on its books
(4) likely to achieve operational efficiencies because of scale, falling input prices, rising output prices, backward integration initiatives,
(5) available at a PE of just 4.5 and a market-cap-to-sales of 0.11 based on FY10 and a PE of just 2.41 and a market-cap-to-sales of 0.08 based on FY11 numbers
(6) having peer group – lowest of which is quoting at a PE of 6.5 and a market-cap-to-sales of 0.19 even when all the players except Venky’s are smaller in scale than Simran Farms is the safest bet in current market with a little downside risk and significant upside potential. This company warrants a significant
rerating sooner rather than later and so a price target of Rs. 91 which entails to a PE of just 5.4 and a market-cap-to-sales of just 0.19 based on expected FY11 numbers is put on the stock.

Independent Research Report – Savera Industries Limited

2010-11-21T06:18:00.000-08:00

Chennai-based Savera Industries Ltd (Savera) is a hospitality player incorporated in 1968. It owns and operates a 230-room four-star deluxe hotel in Chennai. Preferring to concentrate all business energy on this one property, it does not have any major expansion plans. We assign Savera a fundamental grade of ‘2/5’, indicating that its fundamentals are ‘moderate’ relative to other listed securities in India.

Hotel in the heart of Chennai provides a steady stream of cash flows

Savera Hotel is located in Mylapore, in the heart of Chennai, in close proximity to the airport, railway station and tourist spots. With the aim of attracting business travelers, it offers all modern amenities such as conference room, board room, banquet hall and Wi-Fi connectivity. The hotel has had a good influx of business travelers over a period of four decades as reflected by its occupancy rates (OR) and average room revenue (ARR) resulting in steady stream of cash flows. Although the ORs were low in FY09 and FY10 (47%), the economic revival has pushed it back to higher levels. Savera reported an OR of 68% in the first half of FY11. We expect a similar rate for the full year.

Improving industry outlook a positive

With an improvement in the domestic economy, the hotel industry is back on track with a sharp rise in room demand. Industry sources expect room demand to grow by 13-15% over FY10-12. Moreover, even though there are supply concerns in the premium hotel segment there is not much supply coming in the mid-market business segment where Savera is positioned.

No immediate expansion plan

Apart from the plan to acquire a 30-room budget hotel at an estimated cost of Rs 60 mn (Rs 2 mn per room) in Bengaluru, Savera has no major expansion plans. It is focused on profitably running the Chennai hotel. While this would result in steady cash flows, we believe it would not result in any substantial value creation for shareholders in the long term.

PAT to grow at a two-year CAGR of ~50%; EPS to more than double

We expect Savera to post a PAT CAGR of 50% from Rs 25 mn in FY10 to Rs 57 mn in FY12 driven by revenue growth and margin expansion. Revenues are expected to increase at a two-year CAGR of 12% to Rs 442 mn in FY12 while net margins are expected to improve from 7.2% in FY10 to 11.3% in FY11 and to 12.9% in FY12. We expect EPS to increase from Rs 2.1 in FY10 to Rs 4.8 in FY12.

Valuation - the current market price has strong upside

We have valued Savera on an EV/adjusted room basis. We have given a multiple of Rs 4.5 mn on EV/adj.room which translates into a fair value of Rs 73 per share. We initiate coverage on Savera with a valuation grade of ‘5/5’, indicating that the market price has ‘strong upside’ from the current levels.

RPP Infra Projects IPO : Analysis

2010-11-21T03:10:00.001-08:00

RPP Infra Projects Limited is entering into primary market with an Initial Public Offer (IPO) of 6,500,000 Equity Shares of Rs 10 each. The IPO is opening on 18th Nov 2010 and the shares will be available for subscription up to 22nd Nov 2010. The price band for the issue has been fixed at Rs. 68 – Rs. 75 Per Equity Share. RPP Infra Projects Limited is in thebusiness of infrastructure development such as Highways, Roads and Bridges. Company is also involve in civil work like SEZ Development, Water Management projects, Irrigation and Power Projects.

The objects of the issue are to fund the capital expenditure, provide for working capital margins, to fund an SPV for proposed BOT projects and for general corporate purposes.

Company Financials:-
(Rs in Crores)

	For the year ended 31-Mar-10	For the year ended 31-Mar-09	For the year ended 31-Mar-08	For the year ended 31-Mar-07
Total Income	146.88	101.22	72.13	44.67
Profit After Tax (PAT)	8.26	4.12	2.05	1.86

Risk Factors:-
1. Rating agency FITCH has given IPO grade 2 which shows a Below Average Fundamentals.
2. The company plans to enter into BOT/BOOT segment. This segment is highly competitive and as company has no past experience of executing BOT projects, it would be very difficult to get in.
3. In the past, the directors of the company have attracted disqualification under Sec 274 (1) of the Companies Act.
4.The objects for which the funds are intended to be raised have not been appraised by any bank or financial institution.

Valuation and Recommendation :-
At the price band of Rs 68-75, the company is demanding a valuation of 18x on its FY11 earnings, on the post issue expanded capital of Rs 22.60 crores, which is expensive, for a mid sized company. Several other companies like J Kumar Infraprojects Ltd. with market cap. of Rs 652.05 crores and Pratibha Industries Ltd. with market cap. of Rs 706.96 crores are available at much cheaper valuation in the same segment. BOT segment is highly competitive and for a new entrant it will take a long time to stablish itself. So if you are looking listing gain then AVOID subscription.

FD? or FMP?

2010-11-21T02:46:00.001-08:00

Dear Investor,

Most of us park our money in fixed deposits unaware that tax on interest earned can be as high as 33.99%! That’s why Fidelity’s Fixed Maturity Plan makes sense. The fund will aim to provide reasonable returns at minimal risk by investing in a quality portfolio of fixed income securities with maturity periods that are mostly in line with its own. And, you pay as little as 22.66% tax with indexation or 11.33% without it! Check out the table below.

FD? or FMP?

* Pre-tax yield (illustrative) based on returns from securities rated P1+ /AAA / its equivalent (net of expenses) Illustrative inflation assumed based on RBI objective of 7% inflation by Q4 FY09 *Investors have the option of paying a flat 10% tax on their gains if they choose not to take indexation advantage All rates and returns provided are for Illustrative purposes only
	Fixed Deposit	FMP Growth Option for Retail Plan (with indexation)
Net pre-tax yield (illustrative)	10.00%	10.50%*
Amount invested	100000	100000
Tenure	370 Days	370 Days
Indexed value - FY09 (at 7% assumed inflation)**	NA	107000
Taxable Income/Capital Gains	10137	3644
Income Tax/Capital Gains Tax(%)*	33.99%	22.66%
Income Tax/Capital Gains Tax (Rs.)	3446	826
Post Tax Maturity Value	106691	109818
Post Tax Yield	6.69%	9.82%

your investment of Rs.18100 would now have gone to, hold your breath, Rs.3,26,888!!!!!

2010-11-21T01:42:00.000-08:00

Dear sir,

I am in awe of your writings and would appreciate if you can guide a poor man like me. My earnings don’t leave with enough savings. Still, with great sacrifice on my part, I can invest 700rs per month. Is this too little? Should I consider investing in safe options like Bank FD; insurance, etc…Guide me to have some decent lump sum in around 20-25 years time. Please.

Thanks,

Nisarg

Dear Nisarg,

First of all, I appreciate your effort to save the money as "Money Saved is Money Earned"

Saving is nothing but “spending less than earned income”.

Rs.700 is not a small amount at all. Better late than never, better small than no investment at all.

Do you know that if you had invested just Rs.100 in Reliance Growth Fund for the last 181 months, your investment of Rs.18100 would now have gone to, hold your breath, Rs.3,26,888!!!!!

Yes, you read it right…your investment of a paltry of Rs.100 would have grown to more than 3 Lakhs of rupees….!!!!!!

So, if Rs.100 can achieve this much, your Rs.700 too could earn a lot and can easily make you a Crorepati..

Ignore people who tell you to invest in Recurring deposits or buy Gold or even consider Insurance.

Insurance is NOT AN INVESTMENT.

People do not advise you about Mutual Funds because they get ZERO Commission on Mutual Funds where as in Insurance they get about 40% (the recent IRDA has brought this down to about 10%, but still quite a deal) and in Post Office and other investment avenues, they get at the least 2%.

Gold at best gives a return on par with Inflation (even though the last few years have been an exception). With Recurring Deposit, you actually 'LOSE' your Capital when you consider Inflation and Taxes.

The Best option is 'MUTUAL FUNDS".

Reliance, SBI and Sundaram Mutual Funds have SIP for as low as Rs.100.

Sip investments allow you to start small and accumulate huge.

If possible, add another Rs.50 to your savings.

My advise for you is to split this Rs.700 into say about 4-5 Schemes and invest as advised below every month.

My preferred Funds would be

1.Reliance Growth Fund – Rs.100

2.Reliance Regular Savings Fund- Equity – Rs.100

3.SBI Magnum Contra Fund – Rs.100

4. Sundaram Mid Cap Fund – Rs.250

5. SBI Magnum Balanced Fund – Rs.100

6. Reliance Equity Opportunities Fund – Rs.100

These Funds are a Good mixture of Large Cap, Diversified and Balanced Funds with a bias towards Conservative investment.

Nifty Forms Bullish Hammer Candelstick Formation

2010-11-19T22:31:00.000-08:00

Nifty Forms Bullish Hammer Candelstick Formation

Bullish Hammer

• Direction: Bullish
• Type: Reversal
• Reliability: Moderate

After an established downtrend
• Hammer candles have a small real body that forms at the upper end of the days trading range
• The candle can be either blue or red, analyst usually do not differentiate.
• Lower wick at least twice as long as the real body
• No (or almost no) upper wick

After a bearish sell-off a significant rally brings price back up creating a long bottom wick. By day end buyers are able to push prices back to the upper range creating a short body.

The Hammer pattern signifies a weakening in bearish sentiment. The long lower wick signifies an initial continuation of the downtrend. However, renewed buying sentiment acts as support and drives the price higher to close near its opening price.

• Strength and Confirmation

The strength of a Hammer formation depends on where it appears. If a hammer forms near support levels, then the likelihood of a strong bullish reversal is high. However, if the hammer forms in the middle of a trading range it tends to have little significance. In ideal conditions traders want the wick length to be several times longer than the body of the candle. The longer the candle, the more buyers were able to drive price back up and the stronger the bullish signal this candle provides.

Although traders will usually wait for confirmation the next day, look for buying opportunities to come.

Nifty has shown all the possibility of reversal formation form a low of 5009 which was formed today in panic in morning selling of Telecom Stocks.

I have given a description of Hammer Formation and possiblity of trade on Bullish side.

Now 5 EMA @6075 is the main hurdle for trend to turn to bullish side.RSI is shoing positivr divergence and STOCH is in oversold zone.Recipe for a bullish chart all we need to price to move up 6075 and sustain and close above it

Above 6075 Tgt 6106 and 6179

RELIANCE SMALL CAP FUND - SIP WOULD DO WONDERS

2010-11-17T22:39:00.001-08:00

AGGRESSIVE FUND FOR HIGH RISK HIGH RETURN INVESTOR

Reliance Mutual Fund have launched an aggressive fund focussing purely on Small Caps aptly named "Reliance Small Cap Fund".

The Fund will be managed by Mr.Sunil Singhania who has had a great success with Reliance Growth Fund.

Small Caps are largely under-researched and the key is to identify companies which can become Large Caps.

Reliance Small Cap Fund will be investing in companies which have a market cap between Rs.170cr to Rs.2200cr.

The Fund will aim to invest in Entry Level Companies which however have a good quality Business Model and has the ability to scale up itself to become Large Cap.

The notable thing is that unlike with their NFOs, this time Reliance have had a low key exposure of this Reliance Small Cap Fund in terms of ads, hoardings. Mr.Shailesh Raj Bhan, Fund Manager of Reliance equity Opportunities Fund said, the low profile was intentional and they were looking at a size of around 500 crore for this fund.

Mr.Shailesh Raj Bhan also indicated they would be looking at a portfolio of around 50-60 companies.

INVESTMENT APPROACH :

The Fund would be doing following up a purely "Bottom Up" Approach and would be less likely to look at Macro View foccussing more on micro view.

COMMENTS & RECOMMENDATION :

Small Caps are very volatile., they tend to rise more than the rest of market in a bull market and likewise fall steeper than the rest in the Bear Market.

Timing your entry and exit from these small caps is imperative and essential to make maximum profit.

DSPBR Micro Cap Fund has done exceedingly well but most probably its close ended nature helped the fund hide the fact of the volatility it had to face.

Sister Reliance Regular Savings Fund-Equity has about 18% exposure to Small Caps and has done exceedingly well even in Bear Market of 2008.

The most notable thing about Small Caps is this, The BSE Small Cap fund has outperformed the Sensex and BSE Mid Cap by a wide margin of more than a huge huge 20% over a 6 year period. That sums up the issue. Yes, Small caps are volatile but they have the potential to become the next multi-baggers if you spot the right one. Who better than the Reliance Star Fund Manager, Mr.Sunil Singhania to do this for you??

Although, Small Caps tend to be very volatile, they can give your portfolio a much needed 'alpha' adding to the overall returns. The volatility associated with small caps tend to get evened out over a period of time. SIP Investment would be the BEST method to maximize your returns from this Fund.

DEFINITELY RECOMMENDED FOR THOSE WHO CAN DIGEST HIGH VOLATILITY.

RECOMMEND INVESTMENT THROUGH SIPS AND/OR INVESTING A SMALL SUM AT REGULAR INTERVALS.

Caveat : Have a minimum of 3 years time frame and Do not have more than 10% exposure to this Fund, even if you are an Aggressive Investor.

Note: Exit load is quite at 2% for redemption before one year., which however, is actually, is beneficial and motivates to stay invested for longer period.

Sensex likely to hit 23,500 by end-2011: Prudential Financing

2010-11-16T03:18:00.001-08:00

Riding on the solid GDP growth and strong global liquidity flows into the country, the Bombay Stock Exchange's benchmark Sensex is likely to hit the psychological level of 23,500 by end-next year, an international financial sector expert said today.

"We are looking at good gains from the Indian equity market. The Indian equity market is poised for a tremendous growth. Looking forward, I will say the Sensex is likely to reach 23,500 level by December 2011," US-based Prudential Financial Managing Director John Praveen told reporters here.

There will be a strong uptrend in FII inflows as India's economic growth story is very strong, he said.

As per Sebi data, overseas fund houses were net buyers of Indian equities worth $6.42 billion during October, the highest amount pumped in by FIIs in any single month. The total net investment by FIIs now stands at $ 24.79 billion, the highest in a single year.

The developed nations are not growing to their full potential and hence, every one wants to capture the growth story of emerging markets, including India, which is driven by strong domestic demand and solid exports, the expert said.

Sectors such as infrastructure and industry are likely to fare well on the equity markets, he said.

During the first quarter of 2010-11, the Indian economy witnessed a healthy 8.8 per cent growth. The 30-share Sensex today settled at 20,589, down 286.62 points over its last close following mixed corporate results.

MUNDRA PORT,RANBAXY LABS,TATA MOTORS technical charts

2010-11-15T20:02:00.000-08:00

MUNDRA PORT,RANBAXY LABS,TATA MOTORS technical charts

MUNDRA PORT

Mundra Port is forming double bottom formation which if held can see a good upmove till its 50 SMA@160 levels and if it fails to get support at 150 levels can slide till 143 levels on downside.

As technical Indocators are in oversold zone bias is towards upside

Buy above 151 Tgt 153 155 and 156

Sell Below 149 Tgt 148 and 146

RANBAXY LABS

Ranbaxy Labs has broken its solid support of 50 SMA@571 on a low volumes .Well breach on 50 SMA on upside only made the bull run from 460 levels to 610 levels.

If Ranbaxy is able to move above 471 by tommrow on closing basis we can consider today as whipsaw and initiate long positions in the counter.RSI AND STOC are in oversold region

Buy above 571 Tgt 577,588 and 597

Sell below 556 Tgt 547 and 535

TATA MOTORS

Tata Motors trading can be done based of 5 EMA(High,Low,Close) Strategy.

Tata Motors take support around 5 EMA Low @1241.6 and now faces resistance around 5EMA @1265 and after that 5 EMA High @ 1306 levels.

Long should be initiated around 1265 levels for a tgt of 1278 and 1299 and 1306 Sl 1237

REALTY sector-Break-down

2010-11-13T10:55:00.000-08:00

REALTY sector-CAUTION

BSEREALTY & CNXREALTY both index has Gapped-down and few stock in the index and stocks like UNITECH & DLF has also Gapped-down. While SOBHA, HDIL, IBREASLT were retails interest is very high also looks weak.

UNITECH

Cmp Rs.81 – Stock has Gapped-down ( Rs.86.1-85.95) and it has broken down from a rising trend & Bearish Head & shoulder. Telecom Scam will that impact UNITECH has to be watched.

DLF

Cmp Rs.327 Stock has gapped-down (Rs.345-341) this can be considered Break-away Gap which can have bearish implication.

Regards,

Super Indian Stocks

Short Term Investment Pick:NGL Fine-Chem Ltd

2010-11-13T09:22:00.000-08:00

Fundamental Perpective

NGL Fine-chem Ltd is a manufacturer of pharmaceuticals and intermediates for usage in veterinary and human health. Company caters to various global companies to custom manufacture high quality pharmaceuticals with reliability and flexibility.
Utilizing its expertise in complex multi-stage organic synthesis, company continues to expand their product portfolio with new products. Company has established a strong presence in global pharmaceutical companies with its commitment to
competitive prices, delivery schedules, international quality standards and constant technological upgradation. The Company was incorporated on December 18, 2981 as a Private Limited Company in the State of Maharashtra. The Company became a
Deemed Limited Company by virtue of Section 43A of the Companies Act, 1956 on 29.12.1993 and the necessary alternation to the Certificate of Incorporation was duly obtained from the Registrar of Companies, Maharashtra. The Company has deleted
the restrictive clauses in the articles of association by passing a special resolution on May 20,1994 and has become a Public Limited Company. The Company has got its registered office and factory at New Bombay. The Company was promoted by Mr.
A.G.Lawande, Mr.R. J. Nachane joined Mr.A.G.Lawande for actively participating in the management of the company in 1989.

Quarterly results
Jun ‘ 10 Mar ‘ 10 Dec ‘ 09 Sep ‘ 09 Jun ‘ 09
Sales 7.64 6.83 6.90 7.20 7.03
Operating profit 1.39 0.58 1.17 1.47 1.94
Interest 0.09 0.10 0.08 0.04 0.07
Gross profit 1.31 0.53 1.14 1.51 1.89
EPS (Rs) 1.18 0.52 0.98 1.36 1.38

It has an equity base of Rs.3.09crore that is supported by reserve of around Rs.8crore leading to a book share value around Rs.22.10. The promoters hold 66.68%, non promoter corporate bodies hold 11.85% while the investing public
holds 21.46% stake in the company.

For FY10, it recorded net sales of Rs.28.02crore with net profit of Rs.2.71crore against net sales of Rs.24.63crore with net profit of Rs.1.68crore in FY09. (Net profit zoomed 61% on yearly basis). The FY10 EPS was Rs.4.36. At current level,
the stock is available at a forward P/E multiple of just 5.55.

Complied from a Report Fundamental Analysis

Daily Chart of NGL

Looking at Daily Chart Resistance comes around Rs 26 and support at 50 DMA at Rs 23.

Stock is having Golden Cross Formation as 5EMA>50 SMA >100 SMA>200 SMA.

Its a kind of BUllish set up and can lead the Stock to higher levels if golden formation persists.

STOCH is forming higher low formation as indicated in charts and RSI is also on support trendline.

Weekly Chart

Looking at Weekly chart Support is seen at 50 SMA @23 and resistance at rs 26-28 range.

For higher tgts Resistance of Rs 26-28 should be cleared with volumes.

Regards,

Super Indian Stocks

Low Risk stock picks

2010-11-13T09:07:00.000-08:00

Here are some stocks which are @ support and above 200 MA. Can be low risk entry for long side. Keep tracking !!!!!!!!

COLGATE PALMOLIVE

EICHER MOTORS

SOBHA DEVELOPERS

HCL TECH

Regards
Super Indian Stocks

Ramsarup industries ltd – A value pick?

2010-11-13T05:33:00.000-08:00

Ramsarup industries ltd – A value pick?

Lets check Ramsarup Industries. Is it a value pick here? lets analyze.

Technically Ramsarup Is highly oversold on weekly charts and daily charts. Its around support zone in weekly charts. Stochastic getting flatten which is a good sign of short term reversal. Volumes totally dried during phase of fall. So all over technically its a good buy until 26 with weekly supp @ 17.

Now lets come to fundamental analysis part. Stock has a P/E ratio of 3.17 with market cap of 139 cr. It has a great book value with 163/shr where currently stock is under-priced. EPS at 12.56 looks good .Share holding pattern is less from FII’s . so all over its a great Fundamental pick too.

Around 40 Rs its a good value pick both technically as well as fundamentally. So Investors can add this stock in your portfolio.

Regards

Super Indian Stocks

STATEBANK-Looks weak

2010-11-12T21:12:00.000-08:00

STATEBANK looks weak after Gap-Down after results were announced, and this Break away gap has a downside target of Rs.2809 in my view. Banking as a sector has been outperforming the market; and giving a negative view is very difficult as banking stock have defied all logic, charts and fundamentals.

SBIN being a largest PSUBANK will the right issue be the trigger?http://in.reuters.com/article/idINIndia-52832220101111 State Bank of India Chairman O.P. Bhatt on Thursday said the government is likely to decide on the bank's rights issue this month. Bhatt, speaking at a banking seminar, said the bank intends to raise 200 billion rupees ($4.5 billion) via the rights issue.

Tata Steel Limited

2010-11-12T10:05:00.000-08:00

Tata Steel Limited
Hold (Target Price: Rs.811)

Market Data

Price on reco. date (Rs)	630 (BSE)

CMP - BSE / NSE (Rs)	630 / 630

Change since reco.	-0.1%

52-week High/Low (Rs)	737 / 434

NSE Symbol	TATASTEEL

BSE Code	500470

No. of shares	887.2 m

Free float	68.7%

Market cap (Rs m)	558,936

Rs 100 invested is now worth

Stock price performance

	Tata Steel	Index*

1-Yr	18.2%	18.4%

3-Yrs	-2.4%	5.5%

5-Yrs	11.5%	19.2%

Returns over 1 year are compounded annual averages * BSE Sensex

Shareholding (Jun-2010)

Category	(%)

Promoters	31.3

Banks & mutual funds	26.5

FIIs	15.5

Public	26.3

Other	0.4

Total	100.0

Investment Rationale

Domestic steel demand to remain robust: Amongst all the metals, steel arguably has the highest co-relation with a country's GDP growth. Thus, if we expect India's GDP to grow in the region of 7%-8% in the foreseeable future, then the consumption of steel has to increase at a proportionate rate. As per industry reports, between 2003 and 2015, the demand for steel is expected to triple, translating into a healthy CAGR in the region of 10%. One more argument that can be put in favour of robust growth in steel demand is the per capita consumption levels in the country. Per capita steel consumption in India is way behind other developed nations. Even China has per capita levels, which are almost 7 times India's. Thus, it should come as no surprise that steel demand in India will continue to head northwards for quite some time to come and Tata Steel, by way of being one of India's leading manufacturers would continue to benefit from the same.

Tata Steel Europe to provide downstream technology and synergy: In what was the biggest deal by any Indian corporate, Tata Steel in FY07 acquired 100% of the shares of Corus Group Plc, a 21 m tonne capacity steel producer with plants in UK and Netherlands. The move, in one fell swoop, pushed the company into the global league of steel producers, making it the world's sixth largest integrated steel producer with a capacity of about 31 m tonnes. The synergies that will be derived from Tata Steel and Corus (now Tata Steel Europe) coming together will be of tremendous strategic value to both organisations. The leveraging of low cost intermediate products from India with further processing at Europe to produce high-end finished products, along with several operation-related initiatives will improve the competitiveness of Tata Steel Europe in the European markets, while India will benefit from high-value, sophisticated finished products developed in R&D facilities in Europe.

Meaty plans for the future: Not one to rest on its laurels, the company has realized the need to grow in size and regional diversity to match its global peers. This was also made necessary by the impending entry of several global players in the domestic market and increased consolidation in the industry. Thus, expansion plans and that too gargantuan, could no longer be deferred. Realizing these imperatives, in 2005, the company made long-term plans of becoming a 50 m tonne steel producer by 2015 having multi-locational manufacturing facilities with strong regional presence focusing mainly on auto, packaging and construction sectors across the global markets.

The company plans to achieve these objectives through various strategic initiatives such as retaining its pre-eminent position in Indian markets by significantly expanding capacities through both brownfield as well as greenfield expansion routes, linking low cost steel production facilities with the most favorable steel consuming markets and having a balance between the growing markets of the developing countries and the mature markets with high end products and technology. Considering the company's previous track record, it would not be out of place to think that the company would be able to meet most of these objectives, thus significantly enhancing shareholder value in the process.

Fundamental picks recommended

2010-11-04T09:02:00.000-07:00

Following are the two fundamental picks recommended by the brokerage house SMC Global with a time horizon of 1 year with investment rationale:

Welspun India

Investment Rationale

Welspun has strategically located manufacturing facilities in Anjar and Vapi in Gujarat one of the major cotton-producing states. This helps the company to establish synergies between raw material sourcing and its manufacturing facilities allowing it to achieve superior cost control and improved margins. Further the company has unit in Ciudad de Juarez, Mexico, geographically close to the US market. This benefits the company in terms of cheaper transport costs and faster delivery times to its end consumers in the US.

Welspun has integrated manufacturing facilities which allows it to undertake all the production processes (Spinning, weaving, processing, cut and sew packing and logistics) involved in the manufacture of its products. This helps to exercise control over and make profit from major part of the value chain, starting from the procurement of cotton to the distribution of the company`s products.

WIL plans to spend Rs 3 billion in FY11 mainly to enhance capacity in towels, bed linen and bath rugs. It also plans to debottleneck of existing equipments to enhance productivity. By the end of current fiscal annual towel capacity is expected to increase to 46,000 tons from 41,500 now along with increasing bed linen production to 52.5million metres from 45 million metres and bath rug capacity by 2 million units to 10 million.

At present company sells its products in 32 countries with considerable presence in Europe and U.S. It now plans to tap new markets in Japan, Singapore and the Middle East in the next two years to strengthen its foothold in the Asian continent which offer phenomenal growth opportunities by tying up with local agencies.

Nahar Industrial Enterprises

Investment Rationale

The increased in domestic demand and better export holds out optimism for Indian textile industry. It is expected that this trend will continue to sustain in the coming months.

NIEL`s strategic objective is to capitalize on the growth opportunities that it believes are available in the domestic and global textile industry. At the same time the company recognizes the competitive nature of the industry, especially with established pressure from Asia, company is working on improving the production process to reduce costs.

NIEL`s client base is extremely diverse with no one customer accounting for more than 5% of total revenues. The company`s clients for processed fabric in the domestic markets include Allen Solly, Louis Philippe, Provogue, Pantaloon, etc in domestic market. In the export market, NIEL`s clientele includes names like GAP , Oshkosh, Ann Taylor , M & S, Liz Claiborne, Timberland, Aigle, and Tommy Hilfiger . Some part of the processed fabric is for self-consumption to produce readymade garments - shirts, trousers, jackets etc. It sells its cotton garments under `Cotton County` and `Monte Carlo` brands.

The company has a firm faith in the bright future of textile industry in India. It has planned expansions in spinning and weaving capacities. Net profit of the company rose 2.76 times to Rs 189.3 million in the quarter ended September 2010 as against Rs 68.6 million during the previous quarter ended September 2009. Sales rose 13.08% to Rs 2.79 billion in the quarter ended September 2010 as against Rs 2.47 billion during the previous quarter ended September 2009.

good returns in 2010

2010-11-01T22:40:00.000-07:00

I feel that the following 13 shares will give good returns in 2010 -

TODAY'S WRITING
NOIDA TOLL
ALOK INDUSTRIES
BHAGAWATI GASES
GEOGIT BNP
GEMINI CIMMUNICATIONS
HMT
ITI
WIRE & WIRELESS
TAINWALA CHEMICALS
ASSAM CO
AFTEK LTD

Indoco Remedies: All segments deliver

2010-10-31T11:59:00.001-07:00

Results Analysis from Equitymaster on 29-Oct-2010:

Indoco Remedies: All segments deliver

Indoco Remedies Limited has announced its 2QFY11 results. The company has reported 41% YoY and 65% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary

Revenues grow by a robust 41% YoY during 2QFY11 owing to strong growth in sales from both the domestic and the exports formulations businesses.

Operating margins improved by 1.8% due to lower staff costs and other expenditure (as percentage of sales).

Led by the strong growth in sales and net profits, bottomline grows by 65% YoY.

Consolidated snapshot

(Rs m)	2QFY10	2QFY11	Change	1HFY10	1HFY11	Change
Net sales	961	1,354	41.0%	1,967	2,483	26.2%
Expenditure	830	1,146	38.1%	1,627	2,084	28.1%
Operating profit (EBIDTA)	131	208	59.3%	340	399	17.4%
Operating profit margin (%)	13.6%	15.4%		17.3%	16.1%
Other income	1	0		1	0	-92.9%
Depreciation	29	34	15.9%	57	66	15.5%
Interest	7	5	-19.7%	16	12	-25.8%
Profit before tax	96	170	76.9%	269	322	19.7%
Tax	3	17	400.0%	7	21	182.4%
Profit after tax/ (loss)	93	153	65.0%	261	301	15.1%
Net profit margin (%)	9.6%	11.3%		13.3%	12.1%
No. of shares (m)				12.3	12.3
Diluted earnings per share (Rs)*					37.5
P/E ratio (x)					12.7

* based on trailing 12 months earnings

What has driven performance in 2QFY11?

Indoco’s 41% YoY growth in sales during the second quarter was driven by both the domestic and the exports formulations businesses. Sales from the domestic formulations business grew by a robust 37% YoY. The therapeutic areas which contributed to the growth of this business were ophthalmology, vitamins & minerals, respiratory and pain management.

Performance on the exports formulations front was also healthy with sales growing by a robust 39% YoY during the quarter. While exports to the regulated markets grew by 20% YoY, those to the semi regulated markets registered a robust 140% YoY growth. Growth in the latter was mainly led by Africa, Asia and Latin America. Indoco, meanwhile, strengthened its relationship with US based Watson by expanding its product development and supply pipeline by four more products. The current market size of these four products has been pegged at US$ 765 m. The partnership with Watson now covers a total of 10 products and will be the key growth driver as far as the US is concerned.

Indoco had also signed a contract with South Africa’s largest pharma company called Aspen Pharmacare in FY10. This deal encompasses 7 ophthalmic products covering 30 emerging markets. Indoco will offer these products for registration and supply the same from their US FDA approved plants. Aspen will market and distribute these products on receiving approval. This deal is expected to give a major boost to Indoco’s contract manufacturing business.

As far as the emerging markets are concerned, Indoco registered 11 products across various markets during the quarter. These products are expected to be commercialized in the third quarter of this fiscal thereby giving a further boost to revenues from the emerging markets.

Consolidated snapshot

(Rs m)	2QFY10	2QFY11	Change	1HFY10	1HFY11	Change
Domestic
Formulations	645	884	37.2%	1,323	1,610	21.7%
APIs	19	36	85.4%	43	65	51.6%
Total domestic (i)	664	920	38.6%	1,366	1,675	22.7%
Exports
Formulations	260	353	35.4%	530	681	28.5%
- Regulated	227	271	19.7%	451	522	15.6%
- Semi-Regulated	34	82	140.4%	79	160	102.4%
APIs	30	51	69.6%	42	81	93.1%
Total exports (ii)	290	403	39.0%	572	762	33.2%
Grand Total (i+ii)	954	1,323	38.7%	1,938	2,437	25.8%

What to expect?

At the current price of Rs 474 the stock is trading at a price to earnings multiple of 7.7 times our estimated FY12 earnings. Going forward, we expect Indoco’s revenues to be driven by its exports business. The US generics market will be the key catalyst in spurring growth and its focus on ophthalmology will augur well for the company since it is a niche area having relatively lesser competition as opposed to plain vanilla generics. The company is also making forays into the emerging markets through partnerships.

However, cut throat competition in the domestic market, pricing pressure in the global generics market, sharp fluctuations in currency movement and regulatory changes both in the domestic and international markets could dampen Indoco’s performance. Overall, we maintain our positive view on the stock from a long term perspective.

7 Mahurat picks from ICICI Securities

2010-10-30T08:58:00.001-07:00

With equity indices already flirting with life-time highs, our equity strategy will be to buy on any declines in the markets as we are cautiously optimistic as the velocity of markets is surely surprising and one which is fuelled by liquidity, mainly in terms of FII inflows.

At 20000+ index levels, the broader markets are trading at 18.7x and 16.2x their FY11E and FY12E earnings, respectively. Though the valuations on a FY11E basis have breached the rich valuation zone, our sense is that market expectations have rolled over the valuations on FY12E earnings. As we are writing this, we are in the midst of the Q2FY11 earnings season. Till now, Corporate India has met the expectations of the markets.

Following are 7 Mahurat picks from ICICI Securities:

1) Dish TV (Target Price: 70)

2) IDBI Bank (Target Price: 206)

3) IDFC (Target Price: 240)

4) Glenmark Pharma (Target Price: 413)

5) Maruti Suzuki (Target Price: 1,783)

6) Reliance Industries (RIL) (Target Price: 1,260)

7) Tata Consultancy Services (TCS) (Target Price: 1,210)

Accumulate Marico

2010-10-28T04:13:00.000-07:00

Strongly recommended to accumulate Marico Ltd.
at current levels with a medium-term target of 188.00
with a stoploss below 124.00.
Actually, the stock has good fundamentals, so SL is not really
needed. It should be collected as a SIS Stock.

Currently trading at 142 levels

Gold Weekly Technical Outlook

2010-10-24T00:55:00.001-07:00

Gold Weekly Technical Outlook

Gold's correction from 1388.1 extended further last week and the break of 1325.6 support confirmed that a short term top is at least formed. Initial bias will remain on the downside this week and further fall should be seen to 38.2% retracement of 1155.6 to 1388.1 at 1299.3 and below. On the upside, above 1349.6 minor resistance will flip bias back to the upside for a test on 1388.1 first.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). While a short term top is in place at 1388.1, there is no confirmation of reversal yet. Recent up trend could still extend further to 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before completion. Though, we're aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and we'd anticipate strong resistance from there to bring medium term correction finally. On the downside, however, break of 1266.5 resistance turned support will be an early alert of medium term reversal and will turn focus back to 1155.6 support for confirmation.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253. The anticipated correction didn't happen and gold will now likely climb further to 100% projection of 253 to 1033.9 from 681 at 1462 before making a top.

BHARTI SHIP near major breakout

2010-10-24T00:19:00.000-07:00

BHARTI SHIP

Rs 247 is showing sustained downtrend in weekly graph but now trend is changing as breakout nears. Stock trades above 13 and 26 Week Moving Averages and once Rs 255 is crossed on sustained basis next target can be Rs 290-300 also.

SKSMICROFINANCE-Avoid let the dust settle

2010-10-16T09:54:00.000-07:00

Avoid –SKSMICROFIN Cmp Rs.1135

This newly listed stock which has traded just 44trading days has been in news in last few weeks for all negative reason. Many investor and traders have brought into the stock as George Soros Quantum (M) fund, invested about Rs 26 crore to pick up a small stake. But some time brilliant investor too can make mistake and my personnel experience says collecting money from borrowers is never easy and now with many state government imposing strict laws on collection and with legal process in India being weak. Small or Micro financing can be a big failure so I would advised caution in this stock as this is the first company to list so. Investor can wait for few more quarters to know how the company can perform before investing their hard earned money.

Nifty EOD 15 Oct 2010 Technial Analysis( Bullish On Monday)

2010-10-16T09:41:00.000-07:00

Nifty-Spot ended at 6062.55 with a huge decline of -1.90% after hitting Days’ High on Opening at 6200.60.It has formed a Long Black Candle on Daily Price Chart pattern. The Up Trend which started on 01/09/2010 is broken today, as per Our Nifty Next Trend Finder .Now Long Positions awaited can wait for Few more days to enter in Trades with around 5900/6000 levels. Our NNI-Nifty Next Indicators which gains by +60.0% , it is now trading at +13.60% along with Increase in Open-Interest and Decline in Volume, suggest a Bullish Trading session on Monday(18Oct2010) or a no-sell-off or Flat to Positive Trading Session.