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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVI No. 43 Monday, September 10 - 16, 2007
Pages 16
Sentiment remains positive
but profit booking likely at higher levels
By Sanjay R. Bhatia
The markets continued to display a positive trend week amid intermediate bouts of high volatility and choppiness.
Occasional days of consolidation were witnessed amidst short covering and fresh buying, which helped the benchmark
indices to come within striking distance of historic highs and conquering new peaks. The advance-decline ratio remained
positive during the week supported by good volumes, which is a positive sign for the markets. Incidentally, FIIs
remained net buyers in both the cash and derivatives segment. Domestic institutional investors too, remained net buyers.
The Indian markets bounced back on the back of good cues from global
markets. Bank of England and European Central Bank maintained a
status quo on their interest rates, which was on the expected lines.
However, the US Federal Reserves meeting on September 18 is crucial
for the markets. In case, it abstains from cutting interest rates, then the
markets could react negatively even though the central banks of
developed countries continue to provide liquidity support to overcome
the US subprime crisis. Crude oil prices have remained volatile on fears
of fresh disruptions in the US due to cyclonic storms. The rupee has
more or less remained stable.
Fund flows have also improved over the last fortnight, which is a
positive sign for the markets. In the meanwhile, the markets would
continue to keep a tab on global cues, especially the US Federal Reserve meeting. The markets will continue to witness
stock specific activity amidst intermediate bouts of volatility and choppiness. It is important that fund flows remain good
for the markets to sustain the present rally. The markets would continue to witness profit booking and selling pressure at
higher levels.
Technically, the market sentiment is looking positive. On the upside, if the Sensex manages to sustain above the 15450
level, it is likely to test the 15900 level. The Sensex has support at the 15450 followed by the 14900 level. If the Nifty
manages to sustain above the 4387 level, it is likely to test the 4560 level followed by the 4620 level. The 4387 followed by
the 4187 level are its important support levels.
Traders and speculators could buy Allahabad Bank with a stop loss of Rs.90 and a target price of Rs.108-112.
1
Mera Bharat mahaan!
By Fakhri H. Sabuwala
For a moment, consider India, our nation as a stock listed at our bourses. Would you buy it? A grueling question indeed
and to answer it in a clear manner is even more perplexing. Yet, rational thinking and the points mentioned hereunder are
illustrative but certainly not exhaustive. It will, however, indicate whether we are bullish or bearish on its economy. Let's
consider the pros and cons of this hypothesis and it will help us in being a better investor and a smarter student of the
stock market.
2
Pros
* Democracy: India's six-decade old democratic credentials give it an advantage over countries like China, Russia or
Brazil. We can acquire a premium for our setup, its transparency, governance, fair judiciary, efficient executive and smart
legislation. Each citizen's electoral voice is very well recorded and it puts every government to an acid test every five
years. Any government that fails to deliver or falls short of expectation is punished. This is what allows our nation to
introspect and to grow as per aspirations.
* Huge consumer base: "Hum do, hamare do" was an active campaign over two decades back. It is India's very huge
populace that has come to her rescue and makes it resident economy. The growing middle-class and the rising youngsters
in the total population underwrites huge economic growth. Assuming that the younger lot is able to find jobs, their
income levels improve thus improving the standard of living of the overall populace. As per the official statistics
provided by the government, the household mix is positive today with 46% of the total population forming a strong
consumer base or a consuming class as compared to hardly 17% forming such a class in FY1995.
* Growing entrepreneurship: A vibrant and strong entrepreneurial culture is emerging on the horizon. The younger lot is
improving on the standards of education and exposure to international best practices, which results in the emergence of
entrepreneurship as a source of competitive advantage for the country. Seeds of entrepreneurship like lesser government
interference and downing its role as a facilitator, fewer bureaucratic hurdles and easy access to capital are being sown
already. Despite being counted among the most corrupt countries globally, the fact remains that de-regulation is
happening at every stage curtailing the gray areas that feed corruption. The setting up of independent regulators in
sectors like insurance, telecom, capital markets and improving upon regulations in infrastructure sectors like power is a
key positive. Earlier despite being entrepreneurial, constraints on these fronts resulted in a brain drain. But now a reverse
flow of brains is visible.
The fact that Indian companies are becoming multi-nationals of late and world leaders are trooping into India whether on
their own or with a local partner speaks volumes of our entrepreneurial skills and growth potential.
* Competitive advantage: Although the English language is a legacy of the British, it provides us with a long-term
competitive advantage all over the world. Alongwith it a high level of skill sets, low cost structure and the time zone
difference gives us the sharp edge to move ahead. India emerges as a country with a large talent pool. Little wonder,
sectors like IT, pharma and manufacturing serve clients worldwide. Not only has this benefited us in adopting global
corporate practices and governance but also helped to move us up the value chain. Of course, the backbone is India's
belief in a proper basic education, which can add to the talent pool and enable us to sustain the competitive advantage.
* Low penetration levels: The per capita consumption of most goods and services of India compares poorly with
developing and developed economies. For instance, India's per capita consumption of cement, steel, aluminium is much
lower than China or USA. Our per capita usage of services like travel, leisure, telephone, mobiles, internet usage, is likely
to double or even treble in a decade. This entails large capex by government and the corporates leading to large toplines
and stronger bottomlines.
* Robust financial backbone: A strong central bank, a rational economic policy together with the monetary and fiscal
measures provide a strong platform to support India's long-term objectives of growth with price stability.
Cons
* Delicate coalition: A central government with support from the Left and regional parties as coalition partners, can
jeopardize the vision of an economist prime minister and an able finance minister. Short term political compulsions,
retaining of Vote-banks and populist measures in the name of socio-economic upliftment may win votes and assure
political power but they may retard the momentum of growth and fritter resources by less than optimum utilisation.
* Bureaucratic hurdles: Not everything being in black and white develops gray clouds. This leads to fear amongst foreign
investors and opens the gates of corruption.
* Urban-rural gap: The urban-rural disparity in growth is one more reason for worry. But with improving infrastructure,
this distance shall be bridged sooner than later.
* Rich & poor divide: The rich get richer and the poor get poorer is what was happening over the last sixty years. Will
such social economic disparity create social tensions and liquidate our resources?
* Strong rupee: Otherwise considered as a sign of strength, the strong rupee may make Indian exports, both of
commodities & IT services, less remunerative and less profitable.
* Fiscal deficit: This has always remained the FM's worry. A little imprudence here could make matters worse.
Conclusion
In an attempt to draw a picture in the investors mind, a bigger picture of our country and its economic story needs to be
created, painted and worked upon to give it a fuller dimension.
What is important is to lay our hands on the growth story and the irreversibility of economic reforms despite political
imbalances and upheavals. In spite of the rally of late, the valuations look attractive and promising. Just look at India's
market capitalisation to GDP ratio compared to some developed and developing countries. This clearly shows that we are
undervalued and have a long way to go.
Mkt. Cap US $ bn.
GDP US $ bn.
Mkt. Cap as % of GDP
Global
28519
50428
56.6%
Asia
6103
16959
36%
US
11357
10626
106.9%
China
1244
6354
19.6%
Japan
3220
3518
91.5%
India
433
2890
15%
UK
2474
1606
154%
So happy investing and creating wealth on Dalal Street.
3
Top will be tested
TRADING ON TECHNICALS
By Hitendra Vasudeo
The Sensex last week witnessed a battle with the gap as forecast in the previous issue. The gap was in the range of 15568-
15654. On Wednesday, the Sensex made a high of 15580 but on Thursday it opened with a downward gap at 15383. It
faced resistance at the gap and opened lower. It recovered on Thursday to close higher at 15616. On Friday, the Sensex
opened at 15655, attained a high of 15716 to cover the gap and closed lower at 15590. A tug of war was seen at the gap
range of 15568-15654. It was a battle in a way.
The overall weekly movement was as follows: The Sensex opened the week at 15401.99, attained a low at 15323.05 and
moved up to a high of 15716.06. Finally, it closed the week at 15590.42 and thereby showed a net gain of 267 points on a
week-to-week basis. Good to see week-to-week gains over 900 points gain in its previous week. As a result of the weekly
closing, the Sensex has
given the highest weekly
closing till now. It is some
kind of a weekly closing
breakout on the weekly
closing line graph but
further bullish moves will
be confirmed only on
further rise and weekly
close above the of 15868.
WEEKLY UP TREND STOCKS
The weekly trend is up
after the weekly closing
on 31/08/07 of 15318. The
weekly trend can turn
down on fall below 14581
or if the Friday weekly
close is below 14868.
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
Last
Center
Relative
Weekly
Up
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Stop
Loss
Buy
Price
Buy
Price
Book
Profit
Book
Profit
BLUE STAR
322.10 298.4
314.4
322.7
330.4
346.4
69.4
316.2
22/06/07
PUNJ LLOYD
305.05 258.0
286.8
297.3
315.6
344.4
69.4
273.3
31/08/07
INDIA CEMENTS
267.20 218.7
249.8
263.4
280.9
312.0
69.0
239.3
10/08/07
HCL INFOSYSTEMS 229.30 172.9
206.9
218.4
240.9
274.9
68.4
195.7
31/08/07
MADRAS CEMENTS 3818.00 3418.7 3663.7
3754.3
3908.7
4153.7
68.0
3533.8
24/08/07
The
most
important
question is: Will the top
get crossed? After looking
at the last two week
movements, it looks like
the top will be tested. But
a weekly close above the
top is required in order to
witness a further follow
up of the rise.
WEEKLY DOWN TREND STOCKS
In case of a further
breakout and close above
15868, expect the Sensex
to move towards 17957-
19248-21337 in times to
come. In terms of time, on
breakout and close above
Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell
with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to
Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal
Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly
reversal of the Down Trend.
Last
Center
Relative
Weekly
Down
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Cover
Short
Cover
Short
Sell
Price
Sell
Price
Stop
Loss
SOBHA
DEVELOPERS
757.80
690.6
739.4
769.7
788.1
836.9
27.61
757.35
20/07/07
AVENTIS PHARMA 1222.00 1074.3
1168.3
1208.7
1262.3
1356.3
31.64
1235.25 13/07/07
BPCL
303.95
284.6
298.4
306.6
312.2
326.0
32.86
305.78
27/06/07
P&G HYG.
750.00
728.3
743.3
751.7
758.3
773.3
34.28
762.00
03/08/07
STERLING
BIOTECH
157.00
151.2
155.4
157.9
159.5
163.7
37.67
158.47
27/07/07
15868, we can expect 17957 at least by 24
th
Sept.-18
th
Oct.'07. But for such a confirmation, we need a breakout and a
weekly close above 15868.
Weekly support will be at 15543-15370-15318. Weekly resistance will be at 15683-15763-15868.
Review of the Elliot Wave Count to get the broad market picture:
Preferred First Count:
Wave 1 – 2594 to 3758;
Wave 2 – 3758 to 2828;
Wave 3 – 2828 to 12671;
Internals of Wave 3
Wave i – 2904 to 3416
Wave ii – 3416 to 2904
Wave iii – 2904 to 6249
Wave iv – 6249 to 4227
Wave v – 4227 to 12671
Wave 4
Wave a – 12671 to 8799
Wave b – 8799 to 14723
Wave c – 14723 to 12316
Wave 5 – 12316 to 15868
Internals of Wave 5
Wave 1 – 12316 to 13386
Wave 2 – 13386 to 12425
Wave 3 – 12425 to 14384
PUNTER'S PICKS
Wave 4
Wave a – 14384 to 13554
Wave b – 13554 to 14683
Wave c – 14683 to 13946
Wave 5 – 13946 to 15868
Internal
structures
would change if the
Sensex crosses the top.
It looks like at this point
we have developed a
Flat
pattern. In a
corrective Flat pattern,
we can test the top or
even cross it
later to surrender the
entire fall as well.
Corrective
Wave
Structure- A-B-C
Corrective
patterns
within Wave A – WXY
Wave A – 15868 to
13779
Wave W – 15868 to
14705
Wave X – 14705 to
15542
Wave Y – Developed
into a minor triangle to complete the leg at 14128 and not at 13779
Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery based
trade for a possible time frame of 1-7 trading days. Exit at first target or above.
Scrips
BSE
CODE
Last
Close
Buy Price
Buy On
Rise
Stop Loss Target 1 Target 2
Risk
Reward
AUTOMOTIVE
505010 499.85
492.50
505.00
474.50
523.9
554.4
0.95
AXON INFO.
505506 718.00
675.00
740.00
626.00
810.5
924.5
1.00
BHORUKA
506027
36.40
34.40
36.60
32.75
39.0
42.8
0.71
COCHIN MINE.
513353
38.20
35.55
41.90
34.05
46.8
54.6
2.06
COMPUTECH
531224
7.71
7.36
8.40
6.90
9.3
10.8
2.00
DATAMATICS
532528
47.55
46.55
49.60
42.40
54.1
61.3
1.26
GODFREY PHILLIPS
500163 1416.00
1322.00
1435.00
1295.00
1521.5
1661.5
0.87
KILPEST (INDIA)
532067
79.15
78.45
80.00
71.85
85.0
93.2
0.81
KULKARNI PO.
505299 135.85
133.10
140.40
128.05
148.0
160.4
1.56
MASTER TRUS.
511768
57.80
55.85
59.65
52.60
64.0
71.1
1.19
RUBY MILLS
503169 1027.00
1001.00
1087.00
951.00
1171.1
1307.1
1.90
SALORA INTE.
500370 157.80
155.10
162.35
149.50
170.3
183.1
1.50
SARDA PLYWOOD
516003
37.35
35.00
41.15
33.00
46.2
54.3
2.03
SIMPLEX CASTINGS
513472
77.10
74.75
77.35
72.05
80.6
85.9
0.70
SOUTH BIOTE.
532669
23.20
22.75
23.25
21.10
24.6
26.7
0.66
SUKHJIT STAR.
524542 151.80
146.60
153.60
142.00
160.8
172.4
0.92
TTK PRESTIG.
517506 149.25
147.05
155.00
140.00
164.3
179.3
1.62
YUKEN INDIA
522108 219.80
208.00
225.00
205.00
237.4
257.4
1.19
Wave Y – 14705 to 14128
Wave B- 14128 to 15716 (current ongoing move)
If the Sensex crosses the top, then we could get into an irregular flat situation. A fall and close below 15300 will end Wave
B of the pull back rally and Wave C will begin down.
4
If the Flat pattern gets into an Irregular Flat pattern, then the rise can get extended to 125% of the fall from 15868 to 14128.
If that is going to be the case, then the Sensex must first cross the gap and then the top. The price implication of Wave B of
an irregular flat can take the Sensex towards 16303 at least.
When the Sensex crosses the old top, we need to see and check the count again whether we are unfolding into any
impulsive move.
Alternate Count
The alternate count still keeps hopes alive as in this case then correction can be short and not a very long one as witnessed
in the first count.
Alternate Count
Wave 1 – 2594 to 3758;
Wave 2 – 3758 to 2828;
Wave 3 – 2828 to 15868;
Internals of Wave 3
Wave 1 – 2904 to 3416
Wave 2 – 3416 to 2904
Wave 3 – 2904 to 6249
Wave 4 – 6249 to 4227
Wave 5- 4227 to 15868
Internals of Wave 5 into a terminal pattern
Wave A – 4227 to 12671
Wave B – 12671 to 8799
Wave C – 8799 to 14724
Wave D – 14724 to 12316
Wave E – 12316 to 15868
Wave 4
Wave a – 15868 to 13779
Wave b – 13779 to 15716 (Current ongoing move)
On both counts, a pull-
back rise is in progress
with sustainability at
higher levels as a
question mark.
If the Sensex crosses the
top of 15868, then we could get into a situation that Wave 4 was complete at 13779 and the current rise from 13779 was a
part of the Wave 5. We will wait for a week before jumping on to a conclusion on this count.
BUY LIST
Scrip
Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2 Monthly RS
IDFC
134.00
132.01
130.77
129.54
125.55 142.50 152.9
73.38
UCO BANK
35.55
34.71
34.20
33.69
32.05
39.00
43.3
72.42
MADRAS CEMENT
3818.00 3751.41 3722.50
3693.59
3600.00 3996.40 4241.4
54.15
Strategy for the week
Corrective dips to 15543-15370-15318 can be used for buying with a stop loss of 15300. Book profit at 15683-15763-15868
and re-enter long on breakout and close above 15868. Subsequently, keep a stop loss of low of the week or 15300
whichever is lower at the time of breakout.
* Lanco Int'l, El Forge, First Leasing, Whirlpool, Exide are experiencing a turnaround and are small and beautiful scrips
for your portfolio.
TOWER TALK
* Small operators are picking up Shreyans Inds. and Galada Power & Telecom.
* Market gurus refer to IDBI as a mini UTI Bank (now Axis Bank) and BOI a mini SBI. Just read the hidden message in
this premise.
* BHEL, PVR, Ballarpur (BILT), 3M India and Adlabs are scrips which can add glitter to your portfolio even from their
current prices.
* Indian Hotels, First Source Ltd. and Gateway Distriparks are three scrips, which can turn multi-baggers from hereon.
* United Credit, a Kolkata based finance and nanotech company is reported to have taken stake in CSE according to an
analyst.
* Bodal Chemicals is being accumulated on expectations of scorching growth.
* Karuturi Networks has been the darling of institutions and received a favourable response for funds for acquisition of a
Dutch company.
* Grauer and Weil is a value buy as it is a good story in chemicals and prime real estate.
5
* Investors will do better in the short-term if they switch from Indotech Transformers and shift to Accurate Transformers
says a fundamental analyst.
* As per market grapevine, Valecha Engineering is tipped to see a sharp rally in coming days. Lot of action is building up
in this counter. Keep a watch on volumes.
* Hazoor Multiprojects has hived off its media business and made preferential allotment of 85 lakh warrants to
promoters and others to be converted into equity shares at Rs.16 per share. Scrip is in action and may hit a new high soon.
* LT Overseas is venturing into bio diesel business and has signed a MOU for 50,000 hectare with MP government for
jatropha cultivation. A risk-free buy at current levels
* Some serious buying is taking place in Rohit Ferro & Anjani Portland. Technically, both are looking very strong and
may move up further in the short-term.
* Pondy Oxides & Chemicals, which has yet to split into Rs.2 face value share, has set up a new Zinc refining division
which will start commercial production this month and is booked for the whole year.
* Rumours are rife that a political heavy weight associated with Raj TV Ltd., is expected to pull the scrip above Rs.300
levels. The stock has also come out of the T group and has hit non-stop circuits for the last few days.
Kamanwala Housing Construction Ltd. (Code: 511131)
Rs.123.20
BEST BETS
Kamanwala Housing Construction Ltd. (KHCL) was originally incorporated in 1984 as Kamanwala Housing
Development Finance Company mainly catering to middle class buyers by constructing low cost houses and financing it
at nominal rates. Attar Apartments and Kamanwala Nagar at Virar were built under this programme. Subsequently, it
also ventured into acquiring few old buildings and tenements and then transferred the ownership to tenants at reasonable
rates after carrying out repairs and renovation. Later in 1995, it diversified into manufacturing of steel ingots for its own
construction requirement and was renamed as Kamanwala Industries Limited. However, it does not undertake this
activity any longer and hence it changed its name to KHCL in 2006, to reflect the focus on its core activity i.e. construction.
Today, from the low cost housing projects it started out with, the company has transitioned itself to executing prestigious
projects of high quality in prime locations.
With a track record of more than two decades, KHCL has completed 18 projects in Mumbai with a total saleable area of
more than one million square feet. Few of its well-known constructions are Manavsthal-Andheri, Krishna Kunj-Goregaon,
Mukta Apartment-Khar, Manavsthal I & II-Goregaon, Vaibhav Apartment-Bandra, Maker Kundan Garden-Anderi etc.
However till now company was only into residential segment and that too on a small scale. But on the back of real estate
boom, it has entered into commercial segment as well and has drawn up ambitious expansion plans on a much larger
scale. In the last couple of years, it has acquired a good land bank in Mumbai for future projects. Its ongoing and future
projects are:
Manavsthal - Saki Naka, Andheri (E): Consisting of 240 flats. Phases I and II have already been completed and sold off.
Phase III is now on a completion stage with 70% area sold off.
Pinnacle Corporate Park, Bandra Kurla Complex is a commercial project comprising of 75,000 sq. ft. out of which 43,000
sq. ft. area has already been sold. It is expected to be completed by 2008 and will enhance the image of the company in the
construction Industry.
Residential Project - Malad (W) is being taken up on Marve Road under the Slum Rehabilitation Authority (SRA)
scheme. Architectural plans for this Rs.33 cr.
project have already been approved, and
financing obtained. Implementation is in full
swing, and the project of 2,03,000 sq ft is
slated for completion in September 2009.
Vallabh Terrace - Opera House is an existing
building at Opera House admeasuring about
15,000 sq. ft. area which KHCL has purchased
for
redevelopment/upliftment
and
subsequent conversion of tenancy rights into
ownership rights and will be completed
during the current year.
Commercial cum Residential Projects,
Versova for a total cost of Rs.40.50 cr. for
developing 1.00,000 sq. ft. area. As soon as the
architectural plans are approved by the
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concerned authorities the construction work will commence.
Rishi Tagore - Santacruz (W) being in a prime location, company is planning to develop this into a luxurious 60,000 sq. ft.
residential complex for which the land cost alone is Rs.35 cr.
To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint
venture agreement having 20% share with M/s. Prajay Engineers and others for the development of a land admeasuring
35 acres at Patancheru, Hyderabad. It has also purchased an additional 2-acre land in Hyderabad for Rs.1.60 cr. to
construct commercial/residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a
33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising
both residential and commercial units. Meanwhile, it is negotiating for few projects at Four bungalows, Andheri-Kurla
Road, Mulund, & BKC phase-II.
To conclude, KHCL has entered into an exponential growth trajectory and the market is bound to re-rate this company
sooner than later. For FY07, it made a strong turnaround for FY07 with sales of Rs.83 cr. (against Rs.11 cr.) and net profit
of Rs.13 cr. (against Rs.0.50 cr.) posting an EPS of Rs.26 on equity of Rs.5 cr. To fund its working capital requirement,
KHCL made preferential allotment of 15.84 lakh equity shares and 19.95 lakh warrants at Rs.98 per share in Dec 2006. In
the near future, the company is planning to amalgamate its subsidiary called M/s. Doongursee Diamond Tools Ltd. with
itself. Meanwhile, for the June'07 quarter, it recorded revenue and net profit of Rs.17 cr. and Rs.3 cr. respectively. Hence
for entire FY08, it is estimated to report total revenue of Rs.125 cr. and PAT of Rs.16 cr. This works out to an EPS of Rs.25
on its fully diluted equity of Rs.6.50 cr. Although its profit margin seems too high and the company has a debt of more
than Rs.50 cr., it still has the potential to give handsome return over a period of time. Investors are recommended to buy
at declines only.
Numeric Power System Ltd. (Code: 532051)
Rs.438.95
Incorporated in 1995, Numeric Power System Ltd. (NPSL) is a leading manufacturer of uninterrupted power supply
(UPS) systems, stabilizers and power conditioners in India. It has been the undisputed leader for online, offline/
interactive UPS in India for more than a decade. Ranging from 0.5 KVA to 4800 KVA, company offers the total range of 1
Phase and 3 Phase UPS systems that are built with advanced technology and state-of-the-art features suitable for unitary
and parallel redundant configurations addressing a wider band of the industry from PCs, servers, banks, data centers,
healthcare and large IT network protection. Apart from products, it also undertakes turnkey projects and offers end-to-
end solution for SCADA/EMS package, large network of industrial process, power transmission, support systems and
distribution management. It also provides services such as annual maintenance contract (AMC) of UPS and power
conditioners of not only its own brand but also for other brands. NPSL regularly exports its products to Canada, UK,
China, South America, Singapore, Vietnam, Mauritius, Dubai, South Africa, Nigeria, Kenya, Ethiopia, Uganda etc.
Incidentally, NPSL is also a national distributor for a range of 'Panasonic' brand of sealed lead acid batteries.
It has eight worldclass manufacturing facilities spread across Pondichery, Chennai, Parwanoo in HP and Colombo-
Srilanka and is the biggest integrated manufacture of UPS in India. The company's fully owned subsidiary in Sri Lanka,
Singapore, Mauritius and an export-processing unit in Chennai cater to the overseas markets. In India, it has a strong
distribution network through 1800 channel partners spread across 400 towns. This is backed by 201 sales and service
location apart from 27 specialized test and repair centres along with an exclusive helpdesk, which works 24x7. It has an
enviable and high profile clientele including Infosys, Siemens, Intel, Philips, Microsoft, Veritas, HDFC, Citibank, ICICI,
RBI, NIC, Reliance, ABB, BMW, NCR, Nokia, major stock exchanges etc. Interestingly, around 75% of the ATMs in the
country are fitted with UPS supplied by NPSL. Last year, the company implemented an auxiliary power systems project
for Power Grid Corporation in the entire northeastern States in a turnkey effort involving design, supply and installation
of total power conditioning systems.
For future growth, NPSL has adapted the latest power conversion techniques combined with advanced digital controls in
the newly designed 'Numeric Digital HPX' series in addition to the HP and HPE models that are already deployed in the
market under power ratings from 2 to 60 KVA. This new version HPX series is designed to primarily address IT and
Industrial requirements including intelligent monitoring using the Internet. After terminating its 10-year tie-up with Meril
Gerin Asia in 1996, the company entered into a joint venture with the French UPS major SOCOMEC SA to distribute,
market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. To
consolidate its operations, NPSL has recently demerged the UPS manufacturing business of Numeric Electronics Pvt. Ltd.
(NEPL) and merged it with itself against allotment of 52,920 equity shares to NEPL.
With more and more businesses running on technology solutions, the need for power protection systems for reliability
and quality has become vital. Given India's significant power deficits and the ubiquitous outages and voltage
fluctuations, NPSL products have significant market potential in the country. For FY07, it recorded 20% growth in sales to
Rs.272 cr. whereas net profit increased by 10% to Rs.18.80 cr. posting an EPS of Rs.38 on its small equity of Rs.5 cr. For the
first quarter, sales jumped up 30% to Rs.76 cr. but net profit zoomed up 75% to Rs.8.9 cr. against Rs.5.10 cr. last year.
Accordingly for full year FY08, it may report sales of Rs.325 cr. and profit of Rs.24 cr. This works out to an EPS of Rs.48 on
its equity capital of Rs.5.05 cr. At the current market cap of Rs.220 cr., the company is available reasonably cheap and
deserves better valuation being in a high growth sector. Hence investors are recommended to accumulate at declines with
a price target of Rs.575 (i.e. 30% appreciation) in 9-12 months.
Modern Dairies Ltd.: On the comeback trail
ANALYSIS
By Devdas Mogili
Modern Dairies Ltd. (MDL) is a 15 year old Karnal (Haryana) based company incorporated in 1992. It is engaged in the
production of dairy products like packed liquid milk, skimmed milk powder, whole milk powder, instant milk food, pure
ghee and butter.
MDL is a part of the Modern Business Group, with headquarters in Chandigarh and is strategically located at the centre
of milk rich belt in Karnal on the National Highway No.1, just 136 Kms. from North Delhi.
The company has a fully integrated, state-of-the-art plant with ultra modern machinery spread over a built-up area
exceeding 2,00,000 sq. ft. It has invested in the most modern dairy machinery and has incorporated the latest technologies
to give its customers the very best in India and abroad. All the processing parameters are standardised to ensure the
highest quality. The equipments are supplied by renowned multinationals like Westfalia-Germany, Bar Rosin-U.K., APV-
Denmark, GEA Processing India Ltd. and Alfa Laval.
MDL follows stringent hygiene, sanitation norms to meet the physical, chemical and microbiological standards to ensure
total quality. Its 3-tier stages of pre-process, in-process and post-process controls are implemented to achieve a zero defect
in the products.
The company has taken a major step forward to set up a project for value added products at an estimated project of Rs.91
cr. which has since been revised to Rs.155 cr. The plant is planned to produce casein, whey protein concentrates,
lactose, demineralised whey powder and pure ghee, which has been substantially completed. The commercial
production of the 1
st
line started from February 2007. The production of the 2
nd
line was to be commissioned by August
2007. Further, the project has been enhanced for the production of pharmaceutical grade lactose, co-generation of power
and investment in milk procurement infrastructure etc.
Clientele: The company has a list of reputed clientele like Glaxo Smith Kline Consumer Healthcare, Nestle India, Mother
Dairies, Domino's Pizza, Pizza Hut, Britannia - New Zealand Milk, Britannia Industries, Coca Cola – India, Cadbury's,
Raptakos Brett and Hindustan Unilever Ltd. etc.
The company has signed a commercial agreement with Britannia Industries for supply of pasteurised milk in consumer
packs, in addition to table butter and pure ghee, which the company is supplying for quite some time. This year, MDL has
also undertaken to add additional facilities for pasteurised poly pack milk, cheese making etc.
Exports: The company successfully exports acid casein, whey protein concentrates, edible lactose, skimmed milk powder,
full cream milk powder and cheese worldwide, mainly to countries like USA, France, Germany, Italy, Poland, Ivory
Coast, Madagascar, UAE, Kuwait, Oman, China, Philippines and South Korea
Performance: MDL's past performance is nothing much to write home about. It came out of the purview of the BIFR
during 1998-99 and started consolidating its position following a rehabilitation package worked out by the BIFR.
For FY07, the company clocked sales of Rs.171.80 cr. with a net profit of Rs.2.84 cr. netting an EPS of Rs.3.25.
Financial Highlights: (Rs. in lakh)
Q1 Results: Net Sales rose 243.88% to
Rs.74.69 cr. in Q1FY08 as against Rs.21.72 cr.
during Q1FY07. Net profit rose 11150.00% to
Rs.2.25 cr. in Q1FY08 as against Rs.0.02 cr.
during Q1FY07 and recorded a basic/diluted
EPS of Rs.2.57. Going forward, the
annualized EPS works out to Rs.10.28.
Financials: Its equity capital is Rs.8.75 cr.
and with reserves excluding revaluation
reserves of Rs.13.40 cr., the book value of the
share works out to Rs.25.31.
Bonus: Recently, the board of MDL has
recommended a 1:1 bonus.
Prospects: The dairy industry in India is
growing at a rapid pace. Presently, India
maintains the status as the largest producer
Particulars
QE 30/06/07
QE 30/06/06
YE 31/03/07
Sales / Income
7488
2172
17180
Less: Excise Duty
19
-
42
Net Sales Income
7469
2172
17138
Other Income
191
55
227
Total Expenditure
Operating Profit
711
61
794
Interest
250
22
188
Cash Profit
461
39
606
Depreciation
122
32
190
Profit before tax
339
7
416
Provision for taxation
Current incl FBT
35
2
49
Deferred tax
112
3
120
Less: MAT Tax asset
(33)
-
(36)
Net Profit
225
2
284
Paid up equity
875
875
875
Res ex Rev reserves
-
-
1340
Basic/Diluted EPS (Rs)
2.57
0.02
3.25
8
of milk in the world with an annual growth rate of about 4% and the dairy industry in India is in for a major
development.
As per estimates, only 15% of the total milk produced in the country is processed by the organized sector. Since milk
production is getting more and more commercialized, this percentage is likely to grow at a very fast rate in coming
years.
Realizing the potential in the dairy sector, MDL has also decided to invest in a big way and plans to manufacture a wide
range of value added products, which are to be exported and sold to big corporates in the country.
Conclusion: MDL after facing initial hiccups, has decisively turned around. The latest buzz doing the rounds is that the
Mukesh Ambani's Reliance group may take a stake in the company for regular supply of milk based products for the
Reliance Retail outlets. The share price of MDL zoomed to high levels on this news. However, currently, it has settled at
around Rs.90.
At its current market price of Rs.90, the share price is discounted less than 10 times its estimated earnings. Heritage
Foods, which is in the similar business, is enjoying a very high discounting. Assuming a reasonable P/E multiple of even
15, the share could race towards the Rs.150 mark. If the RIL connection comes through, its share price will zoom to high
levels in days to come.
Sensex closes higher third week in a row
MARKET REVIEW
By Ashok D. Singh
The Sensex rose 271.82 points or 1.77% to 15,590.42 for the week ended 7 September 2007. The BSE Sensex gained on 3 out
of the 5 trading sessions last week. The NSE Nifty rose 45.5 points or 1.01% to 4518.60 for the week along with all the
sectoral indices.
The week started on a firm note after the US Federal Reserve chairman, Ben Bernanke, and US president George Bush
assured that they would not let the economy collapse. It extended gains later. TCS, Reliance Energy, Ranbaxy Labs,
Infosys, HDFC Bank, HDFC and ICICI Bank were the major gainers among the Sensex constituents. The Sensex rose
103.45 points or 0.68% at 15,422.05 on Monday, 3 September 2007. European and Asian markers were mixed on that day.
The Sensex rose 43.35 points or 0.28% at 15,465.40 on Tuesday, 4 September 2007 as the market settled with small gains,
amid mixed trend in index pivotals. European and Asian markets were subdued.
The Sensex declined 19.25 points or 0.12% at 15,446.15 on Wednesday, 5 September 2007. Domestic stock markets
snapped their eight-day winning streak, as profit booking emerged at higher levels in late trades in sync with Asian and
European markets, which also swung in and out of positive zone. Buying was seen in software, sugar and realty stocks.
Selling was witnessed in capital goods and oil & gas stocks.
The Sensex gained 170.16 points to 15,616.31 on Thursday, 6 September 2007. The market scaled higher as buying
continued throughout the day, except for the odd blip in early trade. Asian markets also rebounded from initial
sluggishness while European stocks were trading mixed.
The Sensex lost 25.89 points or 0.17% to 15,590.42 on Friday, 7 September 2007. The market pared early gains as fresh
selling emerged in the later half of the day when European markets drifted lower.
FIIs bought shares worth a net Rs.2191.60 cr. in four trading sessions from 3 September 2007 to 6 September 2007. Mutual
funds bought shares worth a net Rs.353.80 cr. in four trading sessions from 3 September 2007 to 6 September 2007.
BSE, on Monday, 3 September 2007, decided to add 13 stocks to trade-to-trade segment, to be effective from Friday, 7
September 2007. The stocks being transferred to trade-to-trade segment include Acrow (India), Indokem, Rasoi, Yashraj
Securities, Lakshmi Mills Company and Transchem, among others. BSE has revised daily circuit filter for a number of
stocks effective, 7 September 2007. Following the revision, a total of 376 stocks will attract 10% circuit filter, 346 shares will
attract 5% circuit filter and 30 stocks will attract 2% circuit filter.
NSE has decided to extend trading timing by 45 minutes from 25 September 2007 to 9 October 2007 due to loss of satellite
connectivity during this period. Trading will close at 11:25 IST and re-open at 12:10 IST. The final closing will be at 16:15
IST, instead of 15:30 IST.
The market posted its third straight gain for the week and Sensex rose 271.82 points to close at 15,590.42 last week. FIIs
have been on a buying drive recently. A lot will also depend on how global markets pan out. Of late, local markets have
been closely tracking movements in global markets. Also caution will prevail in the global markets ahead of the US
Federal Reserve meeting scheduled to be held on 18 September 2007.
Market to stay bullish
MARKET
By G. S. Roongta
9
The week long winning streak witnessed week before last continued early last week and was perhaps the lengthiest after
May 2006. So when it broke on Wednesday, 5
th
September 2007, it rang alarm bells amongst analysts. Although the
damage was an insignificant 19 points on the BSE Sensex after a rise on 7 consecutive trading sessions, the pink media
and TV channel analysts developed cold feet and started issuing warnings of caution and advised
investors to book profit.
G.S. Roongta
It was very interesting to watch the popular business channels when the Sensex and the Nifty slipped
into the red after staying in the positive territory throughout the trading session on Wednesday, 5
th
September 2007. But the last minute profit booking took its toll wiping out all the gains of the day and
ushering the indices into the negative zone at the close of the session. That's when most analysts
developed cold feet and began singing a new tune.
The business papers warned off a further correction before the indices hit a new high taking a cue from
the US and other global markets.
Actually, the recent correction of over 2000 points on the Sensex was more than enough. According to me, this correction
had scattered away all clouds of uncertainty whether it was on the domestic front on account of the political fall out
between the UPA government and its Left supporters or because of the US subprime issue. The risk from both these had
been factored in the liquidation of the heavy over bought position that had been built up by the bulls operators earlier. It
was this liquidation that knocked off 2000 points from the peak level of the Sensex just two weeks back. With this, as
stated earlier, the market had turned healthy and strong negating any further risk.
In view of this heavy correction, not only is the Sensex likely to hit its all time high of 15,868.85 and the CNX Nifty to
achieve its peak of 4,647.95 that they had achieved on 24
th
July 2007 but also achieved higher tops beyond Sensex 16,000
and the Nifty at the 4,800 mark. There are valid reasons for my forecast narrated below.
The monsoon season, which causes the economy to slow down due to disturbance in transportation of goods, slack
attendance in offices, break downs on the work front and minimum working hours is now set to get over in the next few
weeks. Thus the overall productivity will improve in the third quarter.
Secondly, the robust corporate performance visible all along will now get accelerated after the expiry of the slack second
quarter coinciding with the monsoon.
Third, the rain this year was above average and certainly better than last year. This will help achieve higher agricultural
production. This along with higher industrial production will help push the GDP growth to 10% in FY07-08.
If this forecast of mine turns true, the ongoing bull market will continue on strong economic fundamentals.
With higher agricultural and industrial production, inflation will remain under control with enough supply of goods and
services. And when the inflation is low, the liquidity with the banks will be sufficient which may lead to softening of
interest rates. In fact, interest rates may come down instead of going up as being feared by some economists.
According to me, the US Federal will further reduce interest rate, which alone will have a salutary effect on the US and
other global economies. If it happens, the global economy which is disturbed by the slackening demand in automobiles
and home loans, will breathe a sigh of relief.
The Automobile sector in India will bounce back on good kharif production thanks to the widespread rains. The rural
prosperity will result in offtake of consumer durables and automobiles. No sooner the metreology department confirms
the monsoon bounty, the stock markets will turn bullish again. Till then, we may witness choppy and volatile moves or
sideways market with narrow movements.
Hero Honda, which sold more scooters in August 2007 with Tata Motors and M&M, too, registering slight growth in the
rainy season is an indication to conclude that the Auto industry is set to achieve higher growth targets in coming months.
The Minister of Industries, Mr. Santosh Mohan Dev, has also urged the Finance Minister (FM) to reduce excise duty on
passenger cars and heavy trucks in order to sustain the growth. Passenger cars of 1200 CC of petrol and 1500 CC of diesel
currently attract 24%excise duty. If this was to be brought down to 16%, the demand for cars will shoot up enormously
and the signs of which have already started emerging. Because of this, auto stocks have already started showing signs of
recovery. Bajaj Auto, Hero Honda, M&M, Tata Motors and Escorts recovered by 5%-7% last week compared to the earlier
week.
Reverting back to reader A. B. Upadhyaya's remarks that those who follow my recommendations are likely to miss the
bull market, I would now like to confine my recommendations to industry sectors rather than be stock specific in keeping
with the trend among fund managers and analysts who do not venture forth on specific stocks and confine themselves to
a limited review and recommendation and thereby play safe. Till now, I made efforts to identify some undervalued stocks
in the hope that Money Times readers will make large amounts of money as and when these sleeping giants awaken or
the stock gathers market fancy. But if readers feel that my recommendations miss the mark, then why should I crane my
neck?
10
My last recommendation on Modern Steels at Rs.75 was a hit as the stock was in the upper circuit lock throughout last
week while its market price shot up to Rs.121.50 before closing at Rs.110.90 in just 2 weeks. May I ask the reader, who
remarked that I should not shout that it was my
recommendation, then who's recommendation
should it be called?
I would also like o remind readers about cement
stocks which had nosedived in February/March
this year when not a single analyst came forward
in their defence at that time. ACC had nosedived
to Rs.680, Grasim below Rs.2000 while India
Cement and Shree Cement had also gone to the
dogs. If I had the guts to recommend them against
popular market perception and justified my
recommendations, who should be awarded the
credit now that these stocks have risen by 50%-
70% in just 5 months.
Chowgule Steamships has just doubled in 2
months. Should I not feel proud about my
recommendation?
The stocks referred by Mr. Upadhyaya are also up
at least by 100% from the original recommended
price. But other readers like him are unsatisfied
then it is better to be sectors specific rather than
stock specific because the Shipping industry as a
whole has registered good growth while Essar
Shipping may be an exception. So also, the Steel
industry has registered good growth but Essar
Steel and National Steel might be exceptions. Let
the readers, hereafter, choose for themselves the
stock from a particular sector unless readers at
large prefer me to remain stock specific.
11
By Saarthi
STOCK WATCH
A Rejoinder !
Dear Editor,
With reference to the previous Money Times edition, some reader
(A. B. Upadhyaya) was trying to tarnish Mr. Roongta's
reputation by sending an email, which does not have any basis.
He was trying to refer to 3 or 4 examples, which did not work
that well. But if you look at other recommendations provided by
him they have been real multi-baggers and real wealth creators.
I have invested in Elecon Engg. and Chowgule Steamship, just to
give an example. In Chowgule, I have doubled my money in just
3 months or so. I have not seen even fund managers/analysts
could come up with such recommendations.
Many times when analysts on TV have been throwing bearish
outlook, Mr. Roongta has come up with a studied call by saying
that it was an opportunity to buy in panic and not to sell away.
I really feel it's a disgrace to do mud slinging on someone who
has created wealth by giving very good recommendations. In
fact, I am an avid follower of his column and that's one of the
reasons I have subscribed to Money Times.
Again, thanks to Money Times research team and in particular to
Mr. Roongta for helping investors by giving studied calls and
creating wealth for all of us.
Regards,
Murali (By email)
Gujarat Apollo Industries Ltd. (Code: 522217) (Rs.183.95) is India's No.1 manufacturer of asphalt based road
construction & maintenance equipment like asphalt plants, soil stabilization plants, indirect heating equipment, paver
finisher, bitumen sprayer, rollers, kerb paver etc. For the June 2007 quarter, it reported satisfactory numbers as sales grew
marginally by 7% to Rs.36 cr. but net profit increased by 25% to Rs.4 cr. on the back of a higher 'other income' component.
Importantly, the company has recently concluded an exclusive technical know-how agreement with a German company
for design and manufacture of crushers and aggregate producing equipment. This will expand and complements its
current product line and will also enable it to address the mining and re-cycling industry in coming years. To cater to the
increased demand, the company is implementing a brownfield expansion plan for which it has made preferential
allotment of 5,50,000 warrants at Rs.180 to the promoter group. For FY08, it may report a topline of Rs.175 cr. and profit of
Rs.20 cr. which translates into EPS of Rs.18 on its diluted equity of Rs.11.05 cr. Hence it's one of cheapest scrips compared
to its peer group and has the potential to cross Rs.250 in the short-to-medium-term. The scrip has recently been listed on
the NSE also.
*****
Belonging to the reputed Hero group, Shivam Autotech Ltd. (Code: 532776) (Rs.99.25) was formed on the demerger of
Munjal Auto Industries. The company manufactures forgings and machining components for two-wheelers of Hero
Honda at its plant at Binola near Gurgaon. Presently, its product range consists of precision auto components including
gear blanks, transmission gears, transmission shafts, warm forged ratchets etc. For FY07, its sales and net profit stood at
Rs.130 cr. and Rs.16 cr. respectively resulting in an EPS of Rs.16 on its equity of Rs.10 cr. However, for the June 2007
quarter, sales were flat at Rs.31.50 cr. but PAT dropped sharply by 40% to Rs.2.60 cr. due to slightly lower margin coupled
with higher interest/depreciation charge. Although its business depends on Hero Honda, it can still register a topline of
Rs.140 cr. with net profit of Rs.16 cr. i.e. an EPS of Rs.16 on its current equity. Buy only at declines.
*****
Bilpower Ltd. (Code: 531590) (Rs.189.45) a leading player in manufacturing transformers electrical laminations,
stampings and cores. Besides, it's a leading trader of CRGO & CRNGO and produces the largest range of transformer
cores in India. For the June 2007 quarter, its sales grew by 35% to Rs.60 cr. but PBT jumped by 50% to Rs.6.50 cr. However
at the net level, it recorded 15% rise in PAT to
Rs.5 cr. To encash the ongoing power sector
boom, the company has chalked out very
agressive plans to grow organically as well as
inorganically. As a step towards forward
integration, it has acquired Tarapur Tranformers
and is now planning to merge SunTranstamp, a
power ancillary equipment company with itself.
It is interested in further acquisitions and is in
talks with different companies, for which it may
raise capital through FCCB/GDR route. For
FY08, it may clock a turnover of Rs.300 cr. with
PAT of Rs.21 cr., which will lead to an EPS of
Rs.23 on its current equity of Rs.9 cr. At a fair
discounting by 12 times, the scrip can cross the
Rs.275 mark in the medium-term. Buy on
declines.
*****
Cement sector is back in action in anticipation of
a price hike in coming days and JK Lakshmi Cement Ltd. (Code: 500380) (Rs.156) can witness a smart rally. The company
has started work on projects for further expanding its capacity from the existing 3.4 to 5 MMTPA and is planning to
complete it by October 2008. Importantly, it has fully commissioned both its captive thermal power plants of 18 MW
ensuring huge savings in power costs, which will boost its bottomline. Moreover, it is operating 5 RMC (ready-mix
concrete) plants and hopes to add at least 5/6 more plants during the current year. For the June 2007 quarter, it reported
40% growth in sales at Rs.266 cr. whereas it's net profit zoomed by 75% to Rs.68.50 cr. posting an EPS of a whopping Rs.12
for the said quarter. On a conservative basis, it can end FY08 with sales of Rs.1000 cr. and profit of Rs.185 cr. i.e. EPS of
Rs.30 on its fully diluted equity of around Rs.61.20 cr. Despite its high debt, the scrip has the potential to cross Rs.200
mark in the medium-term.
12
By Kukku
FIFTY FIFTY
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Investment Call
* Yuken India (Rs.220) - More update on our investment call two weeks back:
The foundry division capacity is now doubled to 200 tonnes per month and it is planning to increase it further to 500
tonnes per month gradually over the next 18 months. Funds for the same shall be raised through borrowings.
In the last 31 years Yuken has achieved the fastest growth rate in the Oil Hydraulics Industry in the country in spite of
being the last entrant. Today, most manufacturers of Original Equipment Manufacturers (OEMs) have accepted Yuken as
their preferred partners for hydraulics.
Yuken focuses on process improvements to enable it to penetrate the export market.
Its strong focus on employee involvement will eliminate waste in operations through focused initiatives. The company is
also planning to enter into USA and expects good orders over the long run. It has already developed some products for
USA market.
Yuekn is a high precision product company and is using its subsidiary as an outsourcing and supportive unit. It has four
such subsidiaries but one of them faces teething problems, which are being sorted out.
Its standalone sales may be around Rs.110 cr. in FY08 and Rs.150 cr. in FY09 while consolidated sales will be higher by
approx 25%.
There is indication of better margins in coming years and also consistent performance.
The company is importer of certain raw materials in dollar so it will benefit from the firm rupee.
The company has reported some good developments over last few years, the effect of which shall get reflected over the
next few years. Besides faring well in domestic market, it is going to become good global outsourcing too over the next
year.
The capital of the company is just Rs.3 cr. If the last few quarters are any indication, it is expected to report an EPS of
around Rs.24/28 level for FY08, which may even go up to Rs.40 for FY09.
13
Thus a precision engineering, high tech MNC company with a strong brand and four subsidiaries is available at a P/E
ratio of less than 8 against projected earning of FY08. Its market cap is just Rs.63 cr. at the current price of Rs.210.
* Kirloskar Electric Co. (Rs.240.75) has four manufacturing plants; the first unit at Bangalore produces higher range AC
machines, Transformers, and Control Equipments; the second unit at Hubli turns out small and medium range AC
Machines, the third unit at Peenya, Bangalore, produces DC Machines and the fourth unit at Mysore specializes in
Electronic products.
The company manufactures and deals in major products of Electrical Industry and has a very good brand image. It has a
large and established network of dealers and has taken various steps to improve its operational efficiency to be more
competitive.
Performance:
Transformers - Sales of Rs.1031.4 million in FY07 registering an increase of over 85% as against Rs.558 million in FY06.
Electronics and Switchgear – For FY07, sales of Rs.531.7 million registering an increase of over 34% over Rs.396.3 million
in FY06.
Projects & Systems - During the year under review, sales amounted to Rs.138 million as against Rs.68.51 million,
registering an increase of over 101%.
The company has already reported very encouraging Q1 results. Sales were up from Rs.116 cr. to Rs.141 cr. while net
profit shot up from Rs.3.12 cr. to Rs.5.31 cr. The company is expected to fare very well in the coming full year in view of
encouraging outlook for the sector.
There is indication that its subsidiary likely to be merged with the company.
Investors with long-term view can keep watch to add this stock on dips. Few weeks back, we recommended this stock at
Rs.84 level. The stock can go up to Rs.600 level over the next two years time.
Market Guidance
* PG Foils (Rs.51.25) products consist of aluminum foils, foil laminates and flexible packaging materials that find various
uses in the packaging industry. It is in same line like Ess Dee Alumimium and the stock is now catching the attention of
investors and may be heading for a good upmove. Investors holding it from lower levels since long will see better
valuations in the long run on new developments like capital expansion etc.
* Radha Madhav (Rs.71) is likely to report sales of around Rs.230 cr. in FY008 with net profit of around Rs.31 cr. giving an
EPS of around Rs.15. Sales are expected to touch Rs.400/425 cr. with an EPS of around Rs.27 in FY09. Investors can take
small exposure to this stock for long-term target of around Rs.125 to Rs.150 over the next one year. Research analysts of a
few broking firms are showing keen interest in the stock.
* Borosil Glass (Rs.535) has given superb returns from the levels of Rs.90/95 when it was recommended for investment.
Investors might have booked partial profit at every rise but are advised to remain invested in remaining quantity for still
better targets on real estate values.
* Raymond (Rs.270), Finolex Cables (Rs.75) and Shanthi Gears (Rs.77) are being accumulated by smart HNI investors.
* Voltas (Rs.149) is attracting good investment buying and may see a target of Rs.200 level. Stay invested.
* Glory Polyester (Rs.65) - Investors are firming their grip in this counter. Stay invested.
* Khoday India (Rs.300) – Good developments are on that will have a favourable on stock price. The company also has a
huge land bank with high valuations in Bangalore. Knowledgeable circles expect very high target price and the stock is
likely to remain in the news. Stay invested.
* TIL (Rs.320.20) - Sanghvi Movers is currently tipped for an upmove over the long run. Investors should however note of
it that TIL had also entered the same business and has the advantage of manufacturing all types of lifting cranes with a
strong brand name. Government norms are strict about the use of old lifting cranes, which require certificate of approval
from the authorities. Since TIL will be using all new cranes, it will have an upper hand in getting the business. TIL has
already attracted the attention of investors and investors can look for good time ahead.
* Saregama (Rs.328.70) - Sonata Investment (Anil Ambani Group) has taken position in the stock. Investors can look for
better targets ahead.
* Bag Films (Rs.56.20), Patni Computer (Rs.462.95), Nectar Life Sciences (Rs.254.45) and Tips Inds. (Rs.64.45) are also
strongly tipped in the market for investments.
* Punters are active in Karuturi Networks (Rs.229), KS Oil (Rs.73.20) per market reports and these stocks may see higher
levels.
* JK Agri (Rs.390), Golstone Teleservices (Rs.40), Gallant Metals (Rs.15.51), GTL (Rs.242) are also attracting informed
buying.
* Stelco (Rs.43) is said to be doing well and is likely to report sharp growth in its topline by about 40%. Bottomline likely
to be around Rs.160-170 lakh for Q2. Investors are advised to stay invested.
* Vijaya Shanthi Builders (Rs.190) recommended recently around Rs.110. It has given very good return in the last three
months. Investors can book part profits and think of switching to Yuken India or Supreme Industries.
* Supreme Petro (Rs.27.65), First Leasing (Rs.53) and Mangalam Timber (Rs.24.40) are the stocks, which investors can
continue to hold for better targets. Buying should be done only on reactions.
14
By V.H. Dave
EXPERT EYE
The highly encouraging Q1FY08 results of Hariyana Ship Breakers Ltd. (HSBL) (Code: 526931) (Rs.38.35) have gone
unnoticed by marketmen but is witnessing silent buying by circles close to the management.
Incorporated in 1981, HSBL was promoted by Shanti Sarup Agarwal, Rajeev Agarwal and associates. The promoters also
have interests in group companies like Inducto Steels, Inducto Ispat Alloys, Haryana International, Hariyana Ship
Demolition, Hybrid Properties, Bapa Real Estates, Hariyana Machinery and Hariyana Fashion. The company had tapped
the capital market with an issue of shares in 1995.
HSBL is in the business of ship breaking at the world famous Alang Ship Breaking Yard, where it has a plot. The ships are
purchased from foreign as well as Indian companies.
Apart from ship breaking and the manufacture of sponge iron, the company also commenced trading in iron & steel
products by importing the products and selling them in the local market. As part of its diversification plans, HSBL set up
a sponge iron plant at Hassan in Karnataka with an installed capacity of 1,00,000 TPA.
During FY07, HSBL posted 15% higher net profit of Rs.2.7 cr. on 40% increased sales of Rs.158 cr. compared to FY06.
During Q1FY08, sales advanced by 259% to Rs.63.6 cr. and net profit shot up by 89% to Rs.1.7 cr. against Q1FY07.
HSBL continues invest in plant & machinery to improve its sales & profitability. During FY06, it added plant & machinery
worth Rs.11 cr. for expanding its activities. The value of its gross block as on 31
st
March 2006 was Rs.34 cr. Since its annual
report for FY07 has yet to be received.
HSBL has a tiny equity of Rs.5 cr. and with reserves of Rs.10 cr., the book value of the share works out to Rs.30. The
promoters hold 69% in the equity capital, the corporate holding is close to 10% leaving 21% with the investing public.
With a view to enhance shareholders' value, HSBL has decided to merge Hariyana Fashions Pvt. Ltd. and Hariyana
Machinery Export Pvt. Ltd. with the company. HSBL is busy finalizing the modalities in this regard.
Ships are mobile structures of comprehensive size and consist mostly of steel. At the end of their active life, they become a
sought-after source of ferrous scrap. This acts as an alternative to the non-renewable resource of ore and is particularly
suited for the production of simple steel products. Obsolete vessels available for scrapping also represent a useful source
of supply of second hand equipment and components and income for ship breaker.
Since the long-term prospects are bullish for the steel sector and sponge iron industry, HSBL has good future prospects.
Based on the above, HSBL is likely to achieve sales of Rs.240 cr. in FY08 with a net profit of Rs.6 cr. posting an EPS of
Rs.12. The shares of HSBL are currently traded at Rs.38 at a P/E multiple of 3.2 and are strongly recommended for
investment with a price target of Rs.65 at a conservative P/E multiple of little above 5 in the medium-to-long-term. The
52-week high/low of the share has been Rs.40/21.
By Nayan Patel
TECHNO FUNDA
Pioneer Distilleries (BSE Code: 531879)
This Hyderabad based Distillery supplies its products to McDowell, Shaw Wallace & Radico Khaitan. It has doubled its
capacity and has decided to set up a 5MW biogas based power plant. It also produces ethanol and already commenced
supplies to IOC, HPCL & BPCL. Net profit jumped more than 195.89% in the June'07 quarter.
Buy for short-term keeping stop loss of Rs.42 for an upper target of Rs.57. Cross over will take it to Rs.70 level in coming
days. Stock will cross Rs.100+ level in next 6-8 months. Good stock for short-term investment. Please note that book
closure for maiden dividend is 14
th
September.
Roto Pumps (BSE Code: 517500)
Best stock for short-term investment. The company has an equity of just Rs.3.09 cr., Net sales in June'07 quarter jumped
34%, profit was up by 69.23% and it declared 15% dividend vs. 12%. Looks strong on the charts also. Buy for short-term
keeping stop loss of Rs.68 for an upper target of Rs.87, 95 in coming days. Please note book closure for dividend is 21
st
September.
India International Jewellery Show 2007
MONEY FOLIO
The Gem & Jewellery Export Promotion Council's (GJEPC's) 24
th
India was inaugurated on Thursday, 30
th
August 2007.
IIJS is Asia's second largest and most popular show and has attracts 25,000 visitors worldwide. This year there is
participation by 720 domestic companies and 118 international participants, in 1566 stalls spread over 50,000 sq. mt.
conveniently segregated by product categories. Many of the international participants are housed in their country
15
pavilions organized by the Antwerp World Diamond Centre, The Italian Trade Commission, The Thai Gems & Jewellery
Traders Association and the Dubai Gold & Jewellery Group. The members of the GJEPC would be meeting the delegates
from various participation countries like China, Thailand and Russia.
Dhanus Technologies IPO opens on 10
th
Sept.
Dhanus Tehnologies Ltd., a rapidly growing communication services company, proposes to enter the capital market with
a public issue of 38,35,000 equity shares of Rs.10 each through 100% book building process in the price band of Rs.280 to
Rs.295 per equity share of Rs.10 each. The issue opens on Monday, 10
th
September and closes on Wednesday, 12
th
September and will be listed on the BSE and NSE.
Dhanus Technologies Limited, headquartered in Chennai, offers Telecommunication Services and Unified Messaging and
Enhanced Logistics services. The company has a BPO operation of telemarketing services to the US, UK and Australia
markets. The existing business segments in which the Company operates include: Telecards (V-Tel
TM
Global Calling
Cards), Teleservices/ITeS/BPO and Software Services (BPO services & Software services and development) and
Telematics (FleeTrac
TM
Vehicle Tracting Services).
The company proposes to utilize the net proceeds of the issue for financing its business plans and to achieve the benefits
of listing. It intends to expand its infrastructural facilities and equipment base and would be constructing its new
corporate office and Network Operating Centre and equipments for its ITES and FleeTrac businesses.
For the year ended 30
th
June 2007, the company's total income was Rs.90.46 cr. and net profit at Rs.24.59 cr. as against total
income of Rs.35.93 cr. and net profit of Rs.13.09 cr. for the year ended 30
th
June 2006.
Koutons Retail IPO opens on 18
th
Sept.
Koutons Retail India Ltd., an integrated apparel manufacturer and retailer proposes to enter the capital markets with a
public issue of 3,524,439 equity shares of Rs.10 each through 100% book building process in the price band of Rs.370 to
Rs.415 per equity share of Rs.10 each. The issue will open on Tuesday, 18
th
September and close on Friday, 21
st
September
and will be listed on BSE and NSE.
Koutons Retail proposes to utilize the net proceeds of the issue to fund its plans of settings up of the exclusive brand
outlets of the company, establish a new integrated manufacturing facility, purchase plant and machinery to increase the
finishing and manufacturing capacity and improvement of its information and technology network.
Koutons Retail is in the business of designing, manufacturing and retailing apparel under the "Koutons" and "Charlie
Outlaw" brands through a network of 999 exclusive brand outlets across India. It started business with the formation of a
partnership firm M/s. Charlie Creations and established a manufacturing unit with a capacity to manufacture 20,000
pieces of apparel per annum in Delhi in 1993.
Today, Koutons has 18 in-house manufacturing/finishing units and 14 warehouses in and around Gurgaon, Haryana. It
has enhanced its annual finishing and manufacturing capacity multifold and has also entered into fabricating agreements
with various manufacturing units to which it outsources stitching of certain apparels.
For FY07, Koutons Retail's restated total income was Rs.403.6 cr. and restated profit after taxes was Rs.34.5 cr. as against
Rs.1584 cr. and Rs.13.2 cr. respectively for FY06.
Mukand's new JV to make stainless steel wire
Mukand Ltd., India's leading speciality steel producer and NV Bekaert SA, Belgium the world's largest steel wire
manufacturer have signed an agreement for the formation of a Rs.100 cr. joint venture company to produce 12,000 TPA
stainless steel wires to feed markets across the world. The 50:50 joint venture will be set up in Lonand, district Satara,
Maharashtra.
Stainless steel wires are used for applications such as welding, weaving, etc. and for the manufacture of springs.
Varun Industries plans IPO
Varun Industries Ltd., the largest exporter of stainless steel kitchenware & houseware and other general merchandise
items plans an IPO. In the very first year of its operation 1996-97 it received Export Excellence Award and has been
receiving one award or another every year. It was also awarded ISO 9001:2000 in the year 2003. It exports these products
mainly to American countries, European Union, Far East and Australia, African countries and Middle East.
Varun Industries is a government recognized Star Trading House (earlier known as Four Star Export House). Its total
income has gone up from Rs.144 cr. in FY03 to Rs.761 cr. in FY07, a five fold increase registering a CAGR of more than
57% and the net profits during the same period has gone up from Rs.6.02 cr. to Rs.19.52.
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