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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 23
Monday, April 21 - 27, 2008
Pages 16
Corporate results
and derivatives expiry to determine trend
By Sanjay R. Bhatia
The markets displayed a positive range bound trend amidst intermediate bouts of volatility. Sustained and broad based
buying was witnessed amidst positive breadth of the market and higher volumes in truncated trading last week. Traders
and speculators were seen building fresh positions after bellwether Infosys results. However, they were also seen booking
profits at higher levels and also building fresh short positions. FIIs
remained net sellers in the cash segment but were net buyers in the
derivatives segment, albeit they were also occasional sellers. Mutual
Funds also remained net buyers during the course of the week.
Selling pressure was evident at higher levels as the market sentiment
was still tentative. Global cues have remained mixed with crude oil
once again spiking due to less inventory data. Global markets more or
less remained positive although the US economy continued to emanate
mixed signals with fears of recession still present and inflation
numbers continue to concern India. The volumes recorded have
improved along with fund flows. Now, it is important that the
corporate results meet market expectations to improve the market
sentiment as happened with Infosys when no shocks emerged and
improved the sentiment of the severely beaten IT stocks.
In the meanwhile, the markets are likely to take cues from the global markets, crude oil prices and the inflation rate,
which declined last week. The market trend is likely to remain volatile ahead of the derivatives segment expiry on
Thursday.
On the upside, the Sensex faces resistance at the 16608 level but has support at the 16,372 and 15,699 levels. On the upside,
the Nifty faces resistance at 5025 and 5156 levels while 4899 and 4647 are its important support levels.
Traders and speculators can buy Alstom Projects with a stop loss of Rs.642 for a target price of Rs.751.
1
That's how it is…always!
By Fakhri H. Sabuwala
The series of 'How to' books is unending. Top of them all the perennial bestseller 'How to win friends and influence people'. But if
there could be any title to beat this bestseller it could be 'How to win the market and influence investors'. Regrettably, such a book is
not available and neither is it under preparation to the best of my knowledge. Hence we have to search within or look elsewhere.
What does a disciplined and dedicated investor need today? He needs some solace with some assurance that this too, like
all difficult things, shall pass. Experience has taught us that the darkest hour of the night is at dawn and from the pitch
dark is born the first golden ray of a new morning.
This is not the first time that investors are facing difficult times. It is a natural consequence of the excesses of optimism
and the euphoria seen in the last quarter of 2007. The brewing U.S. sub-prime crisis was also overlooked till the big heads
were rolling. And this is what triggered the big sell-off on 21
st
& 22
nd
January 2008. This was the beginning of the end of
the euphoria. Till this day, no bad news ever mattered and was shrugged off. And since this day no positive news makes
any difference whatsoever. That is how it is. The market reacts in extremes!
Most of us regret having missed out on selling, even partially, when the Sensex skyrocketed to 21,000. And most of us are
likely to regret not having supported select counters when they were available dirt cheap till two weeks ago. That is how
it is…always!
Now lets take a closer look at today's situation. Due to financial crisis, global expansion is losing speed. The slowdown
has been the worst in advanced economies. The U.S. is possibly facing the most difficult economic phase in recent times.
Europe, too, is decelerating. Compared to Western economies, emerging economies may experience a little slowdown but
their resilience may save them from disaster.
Both developed and developing economies are experiencing headline inflation, which is on the rise. Food and crude oil
prices are at an all-time high. In developed economies, core inflation is up despite slowing growth whereas in emerging
economies, inflation is up but so is the demand and the weight of energy and food is greater in the consumption basket.
At home, the situation also has political overtures. Ten states are going to polls and no election is easy when inflation is
rising its ugly head. The Lok Sabha polls, too, are a year away. The 'India Shining' story is also losing its glow. GDP
momentum is slowing down and politicians including the Finance Minister and the Prime Minister are preparing to tame
the inflation even at the cost of sacrificing growth! This is what the market is afraid of. Hikes in interest rates and
manouvering of CRR may add to its woes as and when they are announced.
But even in the midst of such dark clouds, the silver lining is visible in the form of the Index of industrial production,
which depicted a growth of 8.6% for February 2008 compared to 5.8% in January 2008 and 7.7% in December 2007. With it
comes the reaffirmation that India's growth story is very much on track. Capital goods growth, which was 2.1% in
January 2008 turned out at 10.4% in February 2008 and consumer durables from a negative of 3.1% in January 2008 to a
positive 3.3% in February 2008. Though interest sensitive, the demand growth for cars on the back of the Sixth Pay
Commission recommendations may get a fresh impetus.
The Trade Policy sets US $200 billion (Rs.8,00,000 cr.) export target for FY09. If achieved, it will generate one crore new
jobs. Is this then not the time to pick up growth stories that can withstand the onslaught of slowdowns and combat
inflationary pressures? That's how it is always, when it comes to making shrewd investments.
Pull-backs to be tested
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 15694.41 attained a low of
15573.03 and moved up to a high of 16570.57 before closing the
week at 16481.20 and thereby showed a net rise of 728 points on
a week-to-week basis. The Sensex tested the upper range of
16500 and closed around it. The candle movement was strong
and significant.
Expect resistance at 16683 and 16892. Weekly support will be at
16208, 15845 and 15573. If the resistance levels of 16683 and
16892 are crossed and the weekly close is above 16892, then
expect the pull back to get extended towards 17642 at least to
18426 to an outer extent. The 0.382, 0.500 and 0.618 levels of the
fall from 21206 to 14677 is placed at 16892, 17642 and 18426.
A fall and weekly close below 15573 will take the Sensex back to test 15300. If the level of 15300 is violated and the close is
also below it, then expect a sustained fall to violate 14677 and move down towards 14100 at least.
Sensex Wave Analysis
PUNTER'S PICKS
Wave I-2594 to 3758
Wave II-3758 to 2904
Wave III- Internals as
follows:
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- 8799 to 21206
Wave A-21206 to 14677
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
FACOR STEELS
532657
6.95
6.63
6.95
6.09
7.5
8.3
0.62
PANACEA BIOTEC
531349 390.60
384.00
395.00
360.00
416.6
451.6
0.85
TTK PRESTIGE
517506 136.85
131.50
138.00
124.00
146.7
160.7
0.76
UCAL FUEL SYSTEM
500464
81.45
78.00
84.45
71.00
92.8
106.2
1.08
VARDHMAN TEXTILES
502986 119.15
116.85
122.00
108.05
130.6
144.6
1.03
2
Wave B-14677 to 16570 (current ongoing move)
If the correction of the fall
from 21206 is expected to
unfold into Zig-Zag A-B-
C formation, then the
pull-back rise can go up to
16892 levels and exceed
towards
17642.
Subsequently,
the
movement
may
get
terminated in the range of
16892-17642 to surrender
the gains and move down
to 14677-14100.
WEEKLY UP TREND STOCKS
If the correction of the fall
from 21206 is expected to
unfold in a flat pattern
formation, then the pull-
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
REI AGRO
1515.00 1238.3
1413.3
1486.7
1588.3
1763.3
80.0
1496.0
28/03/08
CAIRN INDIA
257.55 227.5
246.5
254.5
265.5
284.5
73.4
241.6
11/04/08
GLENMARK PHAR
555.70 413.6
505.1
546.1
596.6
688.1
68.9
508.9
28/03/08
ITC
211.05 193.6
204.4
208.7
215.3
226.1
68.5
205.6
28/03/08
ESSAR OIL
262.55 204.2
241.6
258.0
279.0
316.4
68.3
236.4
28/03/08
back rise can go up to
17642 at least and move
up as near the peak of
21206 as much as possible
to surrender the entire
gains.
WEEKLY DOWN TREND STOCKS
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
CONTAINER CORP 937.00 -352.0
608.0
1239.0
1568.0
2528.0
27.83
1540.00 17/04/08
SOBHA DEVELOP
588.20
556.9
578.8
591.4
600.7
622.6
30.49
596.25
07/03/08
HT MEDIA
145.65
133.1
141.1
144.6
149.1
157.1
31.29
150.74
29/02/08
EDELWEISS CAPIT 780.85
675.4
746.3
782.6
817.2
888.1
32.51
775.80
17/04/08
NAGARJUNA CON 191.95
167.2
183.7
191.8
200.1
216.6
32.93
197.95
07/03/08
Conclusion
Higher range of 16892 to
be tested or it can move
higher as
well but
sustainability at higher
range can once again be
the issue.
Strategy for the week
Exit long positions on rise
to pull back levels of
16892-17642.
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
NATIONAL ALUMINIUM C
422.90
431.98
440.00
448.02
474.00
364.0
50.33
* SAIL is seeking a breakout from the clutches of the government. The first attempt was today. This week, it may touch
Rs.197 and later Rs.226.
TOWER TALK
* Infosys and HCL Tech have proved beyond doubt that pleasant surprises are in store from quarters least expected.
* Gitanjali Gems is the scrip to watch as the gem and stone exports get a new life in the export policy document.
* Local players are treading where even FIIs feared to tread trade! Look at the volume statistics of deliveries by FIIs and
local MFs in lesser known scrips.
* TTML, Chambal Fertilisers and Ispat Industries are once again in the limelight. The old hands are working on it.
* GMR Infra has a long way to go if the rumours of the development of 38 airports is true.
* GTL is a scrip to watch going by its FY08 results.
* Micro Technologies has tied up with MTNL to offer Micro LMTS (Lost Mobile Tracking System) to secure 2 million
mobile handsets of MTNL subscribers. The scrip is being accumulated by few HNIs.
* Bihar Caustic has commissioned its 60 TPD stable bleaching powder plant. The scrip is available cheap at an
EV/EBIDTA of less than 3 times and P/E ratio of 4 despite being an Aditya Birla group company.
* Eastern Silk may surprise the market by announcing robust numbers for March 2008 quarter on 23
rd
April. Keep a close
watch on this counter.
3
* Surana Telecom and Bhagyanagar India have both announced a buy back scheme. While the share price of Surana
Telecom has shot up by over 40% Bhagyanagar is still around the same level. Exit Surana Telecom and shift to
Bhagyanagar.
* Tera Software holds surplus land worth Rs.40 cr. Thus the company's business is available at a mere Rs.20 per share. A
screaming buy.
* Stone India, engaged in meeting the spare requirements of Indian Railways, is available at attractive levels considering
its earning potential. A value buy.
* Ansal Housing & Construction is available lower than what was paid by strategic investors. The stock can appreciate
sharply considering its earnings potential.
* Orchid Chemicals has had a good run and is taking a breather. Partial profit booking is in order for those who entered
Rs.150 level.
* IT stocks like Infosys, Wipro, Satyam, I-flex are available at reasonable P/E as compared to the past and can be
considered for accumulation in small lots.
* The improved market sentiment has impacted the gray market too with the unofficial premium of Kiri Dyes shooting
up to Rs.18-22 and Aishwarya Telecom at Rs.8/9.
* MIRC Electroincs on news of dividend could go up to Rs.24 from Rs.18 now.
* Vimta Labs may touch Rs.108 on news of some developments.
4
By Saarthi
BEST BETS
SEAMEC Ltd. (Code: 526807)
Rs.150
South East Asia Marine Engineering & Construction (SEAMEC) is a 78.24% subsidiary of Coflexip Stena Offshore
Mauritius Ltd., which in turn is owned by Technip S.A of France, the largest oilfield engineering, construction and service
group in Europe. SEAMEC operates multi-purpose support vessels (MSV) for diving and provides underwater/subsea
engineering and construction, maintenance, inspection of under-water structures, rescue-operations and fire-fighting and
other support services for offshore oil/gas installations located in India and abroad. Hence it is a pure play of charter
hiring of MSVs, which are more specialized than Offshore Supply Vessels (OSV) as they are equipped with Dynamic
Positioning (DP) system and can go underwater for repair & maintenances of underwater pipelines. Notably, there are
just about 30-35 MSVs operating in the world and Technip is the undisputed leader with 17 of them. In India, SEAMEC is
a leader with 4 out of 6 vessels whereas the balance two are with ONGC.
Earlier, SEAMEC owned three vessels viz., Seamec-I with 1700 DWT, Seamec-II with 2100 DWT, Seamec-III with 2100
DWT. But it has now acquired the fourth vessel 'Seamec Princess' which has been upgraded and deployed to work from
March 2008 only. This vessel is quite huge and technically more advanced compared to the existing three vessels. Hence it
has been hired out at a charter rate of a whopping US $105,555 per day by M/s. Sime Darby Engineering, Qatar, for nine
months. After that it would be deployed with M/s. Workboat International, FZCO, Dubai, towards early December at a
charter rate of US $68,333 per day. In short, this vessel will give a strong fillip to the company's revenue as well as earning
this fiscal.
In comparison, SEAMEC-I is deployed with Dolphin offshore at charter rate of around at US $23,333 per day and
SEAMEC-III is hired by M/s. Superior Offshore at US $55,555 per day while SEAMEC-II is under statutory dry dock at
Curacao dry dock yard, Netherland Antilles since September 2007 and is expected to get ready by mid 2008. With prices
of crude oil rising higher, exploration activity
has increased manifold across the globe and it
has now become profitable to extract oil
reserves from deep undersea deposits as well.
There has also been a spurt in undersea pipe
laying to reduce transportation costs of oil &
gas. All these factors have lead to a sharp
increase in the charter rates for MSVs.
Despite being in a capital-intensive industry,
this MNC is a debt free company. To derisk its
business
model,
the
company
is
contemplating to bid for exploration and pipe
laying engineering contracts on its own going
forward. Financially, CY07 was not as good as
most of vessels were under dry dock and the
company had to bear the dry docking
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expense. But CY08 will be pretty good because it will report bumper results for the second half as all its four vessels will
be deployed by then. Accordingly, it is estimated to report total revenue of Rs.250 cr. with PAT of Rs.75 cr. for FY08
ending 31
st
December 2008. This translates into an EPS of Rs.22 on its equity of Rs.33.90 cr. That means the scrip is
currently available at a P/E ratio of merely 7. Although the company operates in a cyclical industry, still it deserves much
better valuation and is bound to get re-rated on announcement of its June 2008 quarterly results. Ironically, its share price
has crashed 50% from its recent high of Rs.305 and is available at an enterprise value of merely Rs.500 cr. Investors are
strongly recommended to buy at current levels as its share price can shoot up to Rs.350 within a year considering a
reasonable discounting by 16 times against FY08 earnings.
Elgi Equipments Ltd. (Code: 522074)
Rs.53
Established in 1960, ELGI Equipment Ltd. (EEL) is the market leader and Asia's largest manufacturer of air compressors
and automobile service station equipment. As air compressors are used in a wide range of applications, the company
caters to almost all industrial sectors ranging from mining, defence, transport, pharmaceuticals, power, oil, railways,
chemicals, textiles, printing to ship building, paper, electronics, telecommunications, medical, food & beverages and
plastics. Of late, the company has closed down its loss making diesel engine business. Presently, EEL has the following
three business divisions:
I. Compressor: This division constitutes nearly 75% of total sales and is involved with the design, development and
manufacture of exhaustive range of electric and diesel powered screw air compressor (oil free, portable, world's smallest
etc), centrifugal air compressor, air ends, reciprocating air compressors, borewell compressors, bare compressor pumps
etc. Besides it also manufactures railway compressors and a variety of equipment solutions for railway applications.
Recently, the company developed new generation compressors, which are small, light strong, portable and designed for
special, customized applications.
II. Automotive Equipment: With around 20% contribution to sales, this segment provides total service station solutions
through the supply of a range of equipment and tools for two, three & four wheelers. The broad categories of equipments
include engine/gas analyzer, head light aligner, AC system service, wheel balancer/aligner, hydraulic lift, collision repair
system, painting/denting equipment, auto car washer system, pneumatic tools, lubricating pumps and various other
diagnostic equipments. Due to its product quality and commitment, EEL has been approved as a 100% supplier to Toyota
and Honda car dealerships in India. A full-fledged garage has nearly 128 equipments, and EEL either deals with most of
them or manufacturers all of them. Incredibly, EEL is also India's pioneer and leading manufacturer of mobile service
units which are specially designed and equipped with all facilities for repair/lube, arranged on the platform of a vehicle
for easy operation. Mobile workshops are a vital ancillary for repairing and lubricating immovable machineries at
construction and mining sites, desert regions and other far-flung work places.
III. Manufacturing and Engineering Solutions: This is a new business segment started by the company recently but
contributes hardly 5% of the total revenue as of now. Because of the rich experience of four decades and state-of-the-art
infrastructure, EEL has the advantage of offering end to end mechanical engineering solutions and contract
manufacturing services of precision engineered parts to clients who are looking for cost-effective, subcontracting solution.
The division's core strength lies in managing long term contracts with large original equipment (OE) clients. It also offers
total air solutions for clean and dry air such as moisture separator, refrigerated air dryer, air receiver, airmate drains,
demand side controller etc.
Presently, EEL has two production facilities in Coimbatore which can manufacture all types of compressors covering a
range from 0.75HP to 1500HP for volumes from 1.8 cfm (cubic feet per minute) to 80000 cfm. Apart from India, the
company has presence in more than 50 countries across the world covering Europe, North America, Latin America,
Africa, Australia, Middle East, South East Asia, West Asia and the Far East. Interestingly, it is setting up a manufacturing
facility in China, which is expected to commence production in 2008. It is also forming a subsidiary in Sharjah and Brazil
for trading and warehousing. To concentrate on each business segment, the company is hiving off its automotive
equipment business into a separate wholly-owned subsidiary called ATS-Elgi Ltd.
Fundamentally, the company has recorded very encouraging performance for the nine months ending 31
st
December
2007. Sales grew by 20% to Rs.325 cr. but net profit shot up 70% to Rs.29 cr. due to higher efficiency. Accordingly, it is
expected to clock a turnover of Rs.450 cr. with PAT of Rs.35 cr. for FY08. This works out to an EPS of more than Rs.5.50 on
its equity of Rs.6.30 cr. with a face value of Rs.1 per share. Notably, due to strong economic and industrial growth, EEL is
expected to grow at a CAGR of 20-25% over the coming three years. Hence it can report an EPS of Rs.7 for FY09, which
means the scrip is currently discounted by a mere 7 times against its FY09 earnings. Apart from being a debt-free
company, EEL has been consistently paying dividend for over decades. Considering all these factors, investors are
recommended to buy it at current levels with a price target of Rs.80 in 9-12 months.
ANALYSIS
5
Prism Cement Ltd.: On the fast growth track
By Devdas Mogili
Prism Cement Ltd. (PCL) is a 16-year old Hyderabad-based company originally incorporated as Karan Cement and
promoted by B.V. Raju in 1992. Subsequently, it was acquired by the Rajan Raheja Group and associates and its name was
changed to the present one in 1994. Presently, it has diverse interests. Other group companies include Exide Industries,
Hathway, Globus, JW Marriot in Mumbai etc.
A joint venture agreement was executed between Rajan B. Raheja, F. L. Smidth & Company, Denmark, and the
Industrialization Fund of Developing Countries, Denmark, for setting up of a cement plant with the latest technology. The
company's plant is located at Satna, Madhya Pradesh. Rajan B Raheja is the chairman while Manoj Chhabra is the
managing director of the company.
The company has set up a 2.51 MMTPA ultra-modern cement plant, which is one of the most advanced cement in the
world. The plant has been set up with the latest technology equipped with state-of-the-art machinery and technical
support from F.L Smidth & Co. A.S Denmark, a global leader in cement technology. PCL has successfully created a niche
for itself in the Indian cement industry and has also set up a packing unit at Allahabad to cater to the requirement of
customers in Eastern/Central Uttar Pradesh.
PCL manufactures and markets Portland Pozzollana Cement (PPC) under the brand name 'Champion' and the full range
of Ordinary Portland Cement (OPC) of 33, 43 and 53 Grades.
'Champion', PCL's largest selling product and is a general-purpose cement popular for all applications during house
construction. PCL's OPC is in demand for specialised cement concrete applications like high-rise buildings, bridges,
manufacturing AC sheets, pipes, poles etc. The company increased its share of PPC production from 72% during 2005-06
to 87% during 2006-07.
Expansion: The company has embarked upon expansion of capacity through a brownfield expansion of 2 MMTPA of
clinker at Satna, Madhya Pradesh, and thereafter setting up of a greenfield project of 2 to 3 MMTPA of clinker at
Kurnool, Andhra Pradesh. After these expansions, the total cement capacity of the company would increase to around 10
MMTPA by 2011-12.
Performance: The company produced 21.69 lakh tonnes of clinker and 22.39 lakh tonnes of cement during the year ended
30
th
June 2007 as against 22.02 lakh tonnes of clinker and 21.60 lakh tonnes of cement during the previous year.
For 2006-07, net sales increased to Rs.766.80 cr. compared to Rs.571.74 cr. in the previous year registering a growth of 34%
and reported a net profit of Rs.192.77 cr. registering an EPS of Rs.6.46.
Financial Highlights:
(Rs. in cr.)
Latest Results: The company has
come out with good results for the
quarter ended 31
st
March 2008. It
clocked net sales turnover of
Rs.228.66 cr. with net profit of
Rs.64.36 cr. netting an EPS of
Rs.2.16.
Going
forward,
the
annualized EPS works out to
Rs.8.64.
Dividends: The company paid a
maiden dividend of 10% for 2006-
07. It has also declared and paid an
interim dividend of 10% for 2007-
08.
Financials: The company has an
equity base of Rs.298.25 cr. with a
book value of Rs.13.79. It is almost
debt-free with a low debt : equity
ratio of 0.16. It has an ROCE of
73.53% and RONW of 54.34%.
Particulars
QE 31/03/08
QE 31/03/07
YE 30/06/07
Sales
266.64
234.11
883.48
Less: Excise Duty
37.98
32.19
116.68
Net Sales
228.66
201.92
766.80
Other Income
5.05
1.44
4.42
Expenditure
Raw Materials
16.56
13.80
48.62
Stores & Spares
7.51
7.30
29.32
Power & Fuel
58.85
43.48
187.22
Employees Cost
7.75
6.47
23.88
Freight Outward
20.24
15.58
62.29
Inc/Dec in Stock
2.23
1.31
(5.57)
Depreciation & Amortisation
7.72
8.29
34.00
Other Expenditure
27.18
22.85
90.79
Total Expenditure
148.04
119.08
470.55
Finance Charges
0.90
0.46
6.61
Profit Before Tax
84.77
83.82
294.06
Prov for current tax
(19.20)
(9.43)
(34.13)
Prov for FBT
(0.10)
(0.10)
(0.29)
Deferred Tax
(1.11)
(18.81)
(66.87)
Net Profit
64.36
55.48
192.77
Paid up equity (Rs.10 per share)
298.25
298.25
298.25
Reserves Ex Rev Reserves
-
-
112.97
EPS (Rs)
2.16
1.86
6.46
Share Profile: The company's share with a face value of Rs.10 is listed and traded both on the BSE and NSE under the B
group. Its share price touched a 52-week high of Rs.79.50 and a low of Rs.31.30. At its current market price of Rs.42, it has
a market capitalization of Rs.1262 cr. and a beta value of 0.9.
Shareholding Pattern: As on 31
st
March 2008, the promoter holding in the company was 61.74% while the balance of
38.26% is held by non-corporate promoters, institutions, mutual funds and the Indian public. Among mutual funds,
6
Magnum, Sundaram, Reliance, Franklin India, Chola and Birla Mutual Fund have added the company's shares to their
various schemes.
Prospects: The country's GDP is projected to continue to grow at around 8% in 2007-08. Infrastructure and housing is on
the top of the agenda and spending on improvement of existing and construction of new roads, bridges and airports will
be a priority for the Central Government.
The Indian cement industry has registered a production growth of about 9-10% for the last three consecutive years.
However, the per capita consumption of around 125 kgs compares poorly with the world average of over 260 kgs. This
emphasises the tremendous scope for growth in the Indian cement industry in the long-term.
Conclusion: PCL, after the initial hiccups and teething problems, has finally turned the corner and is now on the fast
growth track. Further, after the successful completion of its greenfield and brownfield expansions, its profitability is
expected to shoot up significantly.
The company's share at the current market price of Rs.42 discounts the EPS less than 6 times against the industry average
P/E multiple of 11. The current share price has not fully factored in the future growth and earnings. The dividend yield
works out to 2.38%. The share may be added to one's portfolio on declines with a long-term perspective.
Positive Q4 results help the market close higher
MARKET
By Ashok D. Singh
The BSE Sensex added 673.56 points or 4.26% to 16,481.20 for the week ended Thursday 17 April 2008. The NSE Nifty rose
180.6 points or 3.77% to 4,958.40.
The quarterly results season started with Infosys announcing it's Q4 results on 15 April 2008. IT socks were in the
limelight after Infosys' decent guidance for FY09. The Sensex gained in all the three trading sessions in the week. It was a
truncated trading week having been closed on Monday, 14 April 2008 on account of Ambedkar Jayanti and on Friday,18
April 2008 on account of Mahavir Jayanti.
The BSE Mid-Cap index rose 313.17 points or 4.8% to 6,836.39 in the week. The BSE Small-Cap index gained 449.93 points
or 5.56% to 8,531.36.
FIIs' outflow in April 2008 totalled Rs.288.10 cr. (till 15 April 2008) and 2008 totalled Rs.11,720.90 cr. till 15 April 2008.
Mutual Funds were net buyers of shares worth Rs.5 cr. this month till 16 April 2008.
The BSE Sensex rose 346.02 points or 2.19% at 16,153.66 on Tuesday 15 April 2008. The battered stock market found a
solace in IT bellwether Infosys Technologies' good future outlook, which triggered a broad-based rally in IT stocks.
Healthcare and oil & gas stocks marched ahead as well. Ranbaxy Laboratories was the top gainer from the Sensex pack.
The BSE Sensex rose 90.53 points or 0.56% at 16,244.19 on Wednesday, 16 April 2008. After trading in a narrow range
through the day, the market eased from early highs yet ended with a decent gain. It was a rewarding session for IT stocks
for the second consecutive day. Small and mid-cap stocks extended gains from the previous session. Positive cues from
the global markets boosted domestic bourses.
The BSE Sensex rose 237.01 points or 1.46% at 16,481.20 on Thursday, 17 April 2008. Good buying interest helped market
end on a strong note. IT and banking stocks were in demand throughout the trading session. Initial forecast of a near-
normal monsoon this year by the Indian Meteorological Department boosted the market sentiment besides positive global
cues.
The wholesale price index rose 7.14% in the 12 months to 5 April 2008. This was slower than the previous week's annual
rise of 7.41%.
The annual monsoon is likely to be near normal at 96%-104% of the long-term average in 2008, Science Minister, Kapil
Sibal said on Wednesday, 16 April 2008. According to a recent forecast by Columbia University's International Research
Institute for Climate & Society, rains will be good in the first half of the four-month monsoon season in India. The
monsoon rains usually fall from June to September.
SEBI had said short selling and securities lending and borrowing will be operationalised from 21 April 2008.
IT stocks galloped. India's second largest IT exporter by sales Infosys gained 17.15% to Rs.1666.45 in the week. The
company reported 1.46% rise in net profit to Rs.1249 cr. on a 6.34% growth in revenue to Rs.4542 cr. in Q4FY08 over
Q3FY08 on 15 April 2008.
Infosys' operating profit rose 6.17% to Rs.1478 cr. in Q4FY08 over Q3FY08. The core operating profit margin was 32.54%,
slightly lower than 32.59% in Q3FY08.
Infosys has given guidance of a between 16.3% to 18.3% growth in earnings per share to between Rs.92.32 to Rs.93.92 for
FY09 over FY08. It has given guidance of a between 19.2% to 21.1% growth in revenue to between Rs.19894 cr. to Rs.20214
cr. for FY09 over FY08.
7
As per US GAAP, Infosys has given guidance of a 16.7% to 18.7% growth in earnings per American Depository Shares at
between $2.31 to $2.35 for FY09 over FY08. It has given guidance of a between 19% to 21% growth in revenue as per US
GAAP to between $4.97 billion to $5.05 billion for FY09 over FY08.
Tata Consultancy Services (up 10.21% to Rs.1000.90), Satyam Computer Services (up 8.25% to Rs.468.95) and Wipro (up
13.01% to Rs.459.20) edged higher in the week.
Ranbaxy Laboratories jumped 8.17% to Rs.479.80. On 15 April 2008, UK's second largest drugmaker, AstraZeneca Plc
signed a settlement agreement in its Nexium patent infringement litigation against Ranbaxy. AstraZeneca said that under
the deal Ranbaxy would be allowed to start selling a cheap, copycat version of Nexium on 27 May, 2014.
Grasim Industries gained 1.48% to Rs.2568.60. The company said on 15 April 2008 it has increased its stake from 25% to
45% in AV Cell Inc, a joint venture company in Canada for a total consideration of around Canadian dollar 6 million.
ICICI Bank (up 5.92% to Rs.835.20), State Bank of India (up 0.89% to Rs.1682.85), Reliance Industries (up 3.4% to
Rs.2636.95) edged higher in the week.
The Sensex gained 673.56 points to close at 16,481.20. The earnings season has started on a positive note. Although the
market surged last week after Infosys gave a decent guidance for FY09 on 15 April 2008. However, high inflation and
rising crude oil is a cause for concern for the market in the near term. On the global front, good results/guidance from
Intel Corp, JPMorgan Chase & Co and other blue chips eased worries that weak US economy would sap corporate profits.
Q4FY08 results of India Inc. will dictate the near term trend on the bourses. The market will be closely watching what the
company managements have to say about the outlook for FY09. Analysts will also scrutinize disclosures that companies
may make regarding foreign exchange derivatives products that they have bought on the advice of their bankers. A steep
decline in the value of the US dollar against the Japanese Yen and the Swiss Franc hit Indian corporates, which have used
these two currencies (Yen and Franc) extensively to swap their rupee denominated debt.
Morgan Stanley expects 23% growth in net earnings of 104 out of 108 firms in its Indian coverage universe in Q4FY08 over
Q4FY07.
Breakout may take Sensex to 17500 level
MARKET
By G. S. Roongta
With two short trading days last week, the stock market performed well as a whole and quite in line with my
observations over the last 2/3 weeks.
Monday, 14
th
April 2008, was a holiday for the Indian bourses on account of Ram Navmi - the birthday of God Rama.
Whether Lord Rama saved the market from disaster is an open question as global markets were weak with the Dow Jones
having shed 250 points and the Hang Seng down by 650 points at one time during the day. Had our
markets been open that day, we may have also faced an onslaught of selling spree in keeping with global
markets. But thanks to Lord Rama, we were spared this ignominy on account of the holiday.
G.S. Roongta
In the backdrop of weak global markets, our markets also opened on a weak note with the Sensex lower
by 200 points on Tuesday, 15
th
April 2008. While trading in a zig-zag manner for about an hour, the
market started gaining strength ignoring the weakness in global markets to score an intra-day gain of
676.43 points as the BSE Sensex touched a low of 15,573.03 and a high of 16,249 while closing nearer the
top at 16,153.66 with a gain of 346 points.
This sharp rise can be attributed to the Q4 results of Infosys together with the results for FY08, which was declared on
Tuesday, 15
th
April 2008 and telecast live on the business channels. Despite the pressure in earning ratios both at the gross
and net levels, analysts, as I had said in my last article, viewed its performance as satisfactory despite the exchange loss
that it suffered on account of the appreciation of the Indian Rupee against the US Dollar and the slowdown in USA that
affected its growth. Infosys reported a net profit of Rs.1249 cr. for Q4FY08 against Rs.1144 cr. in Q4FY07 recording a single
digit growth of 9.2% after a few years. The declaration of final dividend of Rs.7.25 per share with a special dividend of
Rs.20 per share for FY08 amounted to a generous distribution of over 30% of its retained earnings, which saved the
market from collapsing.
I had very specifically mentioned in my article last week that if corporate performance is not up to the mark, it might be
viewed as satisfactorily and the market may bounce since it had already washed away the valuation by 35-40% in
anticipation of weak earnings growth. The Infosys results has proved my point if we compare its Q3FY08 results, which
was good but considered below expectations due to the good market sentiment that prevailed early January 2008. And for
this reason the Infosys stock started tumbling thereafter. This time, however, it was just the opposite as I had visualized in
last week's column and its performance and generous payout has helped change the sentiment of the market.
The market sentiment continued to be good on Wednesday, 16
th
April 2008, as the Sensex gained 90.53 points to close at
16,244.19 after making an intra-day high of 16,413.8 and the CNX Nifty at 4940, which neared their breakout levels. But
the market turned volatile at these breakout levels on both the indices displaying two-way volatility till closing.
8
The trading on Thursday, 17
th
April 2008, the last trading of the week, was even more encouraging as the Sensex gained
237 points to close at 16,481.20 and the Nifty at 4958.40, which clearly rules out any dreadful levels of 10,000 or below,
which was forecast by a prominent Indian bear operator, Shankar Sharma and an international investment guru, Marc
Faber. If they really wish for the market to fall below 10,000 level they will have to reincarnate themselves as 'Ravan' - the
demon king and 'Kansa' - the evil king who was decimated by his nephew, Lord Krishna.
Money Times readers my recall my strong conviction in the last two articles when I stated that even if the bears tried to
push the market down further, they will find it very difficult to do so. As I stated last week, the gimmicks of bear
operators to hammer down Sensex stocks to create a panic will not work any further as the market had crashed beyond
limits. Despite several analysts giving two-way opinions about the future of the market, I prefer to voice my strong
conviction about the revival in market sentiment over the past two weeks.
As I stated last week, both the Sensex and the Nifty were near the 25
th
January 2008 low levels whereafter we witnessed a
10-week long bear phase. The market refused to touch the four digit levels (as forecast by Mr. Shankar Sharma), which
had played with the investors' psyche and frightened most investors in mid cap and small cap stocks. Many of them
deserted the market after his interview on CNBC, whereas the same gentleman had gone on record on the same channel
and forecast a Sensex figure of 25,000 after admitting that he had changed his opinion based on both economic and
corporate fundamentals. But within 8-10 weeks, this gentleman turned 180 degrees back to his well-known bearish
outlook! Those who sold their stocks at throwaway prices listening to such opinions on the channels may regret their
hasty action.
But if we look at the rise, we observe that the market is moving at a snail's pace compared to the past because investors
are afraid of profit booking at higher level, which may follow by fresh bear hammering. Till such time as clear indications
of a bull market are not available, profit booking at higher levels will be the order of the day in pull-back rallies. This is
because many investors have already suffered and many are sitting on fences to liquidate their holdings in the current
rally. Under these circumstances, the market may take some more time to consolidate at each rise of 500–700 points.
The Sensex has thus recovered the 1031 points that it had lost in the previous week and any rise beyond the breakout
levels will start attracting investors. As I said on several occasions earlier, the long-term bull run is still alive and that the
recent correction despite its severity is just a part of that market. The future story will unfold once the Sensex crosses
19,000 level and determined the destiny of the market. Mid cap and small cap stocks have started gaining grounds and
hundreds of them have appreciated by 20-30% from their recent lows.
'A' group shares like Grasim, Hindalco, Tata Tea, IDBI, NTPC, Tata Steel appear ready to spurt once the corporate results
are announced.
Idea Cellular, Power Grid Corporation, Elecon Engineering, Hotel Leela, Zuari Agro, Graphite India, Tube Investments
etc., which lost much grounds are good stocks for that will gain 15-20% on immediate revival.
Garden Silk, Modern Steels, Sarda Energy, Sarda Plywood, Pearl Polymer are among the few fundamentally strong shares
that can be expected to move up as the rally marches ahead this week onwards.
The month of April 2008 as a whole will be quite interesting, if no negative news impact the markets any further.
Inflation, which remains the greatest worry, may ease on account of the several steps initiated by the government. But 29
th
April 2008, will prove to be the watershed when the Reserve Bank announces its new policy.
What does the Result Season hold for MFs?
MUTUAL FUNDS
By Devangi Bhuta
With Infosys declaring results as expected, the markets appear to have cheered up a bit. But unpleasant surprises cannot
be ruled out with the new ICAI norms in respect to accounting of derivatives, which require corporates to disclose and
provide for derivatives losses with immediate effect. Further, a slowdown in the monthly macro economic parameters
may be a drag for sometime. So what does it hold for the Mutual Fund Industry?
As we move further into the result season, Reliance Industries result would be an important milestone. Further, Indian
markets appear to have corrected sharply compared to global markets and the markets could see some upside and
staggered purchases into bluechip, infrastructure, natural resources and agriculture related equity schemes in the near
term.
Some of the interesting schemes which appear to hold good potential include Reliance Natural Resources Fund,
Templeton India Growth Fund, Franklin Bluechip Fund etc.
It must be reiterated that investors must understand the risk appetite and that the key triggers for equity markets is the
monsoon and the political scenario over the long term.
The NEW UTI Logistics and Transportation Fund
9
UTI Auto Sector Fund has been an underperformer in line with the overall performance of this segment. Launched in
2004, the scheme was skewed towards mid and small cap companies and has gradually shifted to large cap players,
which constitute the majority comprising stocks like Tata Motors, Mahindra & Mahindra, Maruti Suzuki India, etc.
The fund has amended its scope of investments. Earlier, it invested in auto and auto ancillary sectors. Now it also targets
firms providing logistic and transportation services and those engaged in design, manufacturing, distribution or sale of
transportation equipment, which fairly broadens the scope of investments for the fund.
Logistics sector appears to be extremely potent in a growing economy and is expected to attract huge investments. Its
potential is highlighted by the fact that logistics industry is expected to touch US $125 billion in 2010 from US $90 billion
in 2007 according to a white paper by Orkash Services, a consultancy firm.
This extended mandate certainly improves the prospects of this scheme. But investors maybe better off waiting to see the
stock picks and the sector allocation before considering a fresh exposure.
The risk factor remains on the higher side as compared to a well-diversified scheme, which at present appears to be a
better bet than sector specific schemes.
10
By Saarthi
STOCK WATCH
C&C Constructions Ltd. (Code: 532813) (Rs.203) is primarily engaged in the construction of airfield pavements-rigid and
flexible, state and national highways, city and rural roads, bridges and culverts and other infrastructure projects in India
& Afghanistan. It also specialises in laying optic fibre cables, maintenance of telecom networks, electrical transmission
networks, microwave towers, manufacturing & erection of telecom antennas. Presently, C&C boasts of an order book of
more than Rs.1000 cr. made up entirely of road projects that have to be fully executed by June 2009. A couple of weeks
ago, it bagged an addional massive EPC order of Rs.574 cr. from Jaypee Associates for the construction and development
of a four lane road from Zirakpur to Parwanoo, passing through the states of Himachal Pradesh, Haryana and Punjab. For
FY08 ending 30
th
June 2008, C&C is expected to clock a turnover of Rs.425 cr. with profit of Rs.35 cr. i.e. an EPS of Rs.19 on
its equity of Rs.18.30 cr. For FY09, it can
earn a profit of Rs.40 cr. on a topline of
Rs.1000 cr., which works out to an EPS of
Rs.22 on its current equity. Buy at sharp
declines only.
******
Sujana Towers Ltd. (Code: 532887)
(Rs.110) is engaged in manufacturing
galvanized steel towers used in power
transmission and as telecom towers. It also
provides various services including
engineering
consultancy,
turnkey
installations, inspection & maintenance of
towers etc. It has set up two large scale
units at Hyderabad to emerge as India's
largest
galvanized
steel
tower
manufacturing company and has expanded
its tower capacity from 28,125 TPA to
1,28,125 TPA. In view of the fast growing
demand for transmission towers and
telecom towers and associated services
within India and the neighbouring
countries, it is in the midst of setting up
another 1,00,000
TPA manufacturing
facility at Chennai in order to cater to the
domestic and export markets. It also
intends to set up/acquire subsidiaries in
the Middle East and South East Asia for
developing power transmission and
telecom infrastructure services. To fund its
growth plans, the company made
preferential allotment of 80 lakh warrants
at Rs.140 and plans to raise nearly Rs.300 cr.
April – June 2007
EBG Quarterly Performance:
100% once again
During April – June 2007, which is the third quarter of the fourth year of
'Early Bird Gains' (EBG) – the investment newsletter that spots multi-
baggers, it has scored 100% success with all 15 recommendations
recording an appreciation.
EBG has, therefore, consistently, maintained quality while the bonus
issues in excess of 30% highlight the confidence of its recommendations.
Issue
Dated
Scrip
Buy
Price
Highest
price since
recom.
Growth
%
04/04/07
Panama Petrochem
129.00
270
109
11/04/07
Rolta India
335.90
780
132
18/04/07
Metalman Industries
18.19
47
158
25/04/07
Indag Rubber
31.00
113
264
02/05/07
Paradyne Infotech
116.45
440
279
09/05/07
Pochiraju Inds. Ltd.
22.60
64
183
16/05/07
Asian Oilfield Services
73.95
446
503
23/05/07
Hanung Toys & Textiles
165.50
300
81
23/05/07
XL Telecom & Energy
119.30
595
400
30/05/07
Bharat Gears
73.00
89
22
06/06/07
Kanpur Plastipack
22.75
34
49
13/06/07
Deepak Fertilisers
89.30
178
99
13/06/07
MSP Steel & Power Ltd.
19.15
89
365
20/06/07
Bihar Tubes Ltd.
103.65
222
114
27/06/07
Astral Poly Technik Ltd.
105.00
235
123
EBG for sure profits
through the FCCB/GDR route. It is expected to report total revenue of Rs.600 cr. with profit of Rs.50 cr. for FY08. This
leads to an EPS of Rs.13 on its current equity of Rs.19.50 cr. and Rs.11 on its diluted equity of Rs.23.50 cr. A solid bet.
******
Indo Asian Fusegear Ltd. (Code: 532658) (Rs.108) manufactures a wide range of electrical circuit
protection equipment including distribution boards, switch boards, switch panels, fuse switches, MCCBs, HRC Fuses,
MCBs, RCDs, etc. Besides, it's one of the largest manufacturer of CFLs and MCB's in India. To capitalize the ongoing
boom, it is diversifying into the power sector business and will undertake distribution projects on behalf of state
electricity boards, corporations and utilities on a franchise basis. Meanwhile, it has forayed into cables & wires
manufacturing business with a planned investment of Rs.100 cr. in phases. For the higher end segment, the company is
setting up a plant in Haridwar under a joint venture with Simon Holding (Spain) for manufacturing home and building
automation products for the first time in India. At the same time, it is putting up a facility in Saudi Arabia through a tie-
up with Saudi National Glass for production of Compact Fluorescent Lamps (CFLs) and High Intensity Discharge Lamps
(HID Lamps). For FY08, it is expected to clock a turnover of Rs.280 cr. with PAT of Rs.16 cr. on a conservative basis, which
works out to an EPS of Rs.10.50 on its equity of Rs.15.30 cr. However, the company has the potential to post an EPS of
around Rs.15-16 for FY09. Few weeks back, the company finalized an issue of 19 lakh warrants to promoters and others.
At a reasonable discounting by 12 times against its FY09 EPS, its share price can move upto Rs.180 in the medium-term.
******
Royal Orchid Hotels Ltd. (Code: 532699) (Rs.103) operates in the hospitality sector with major presence in Bangalore.
Currently, it manages eight properties including five star hotels, budget, resort, serviced apartments etc with a total room
strength of around 655 rooms. Interestingly, the company follows a unique 'Asset light' business model of taking
properties on lease or entering into a contract for managing & operating the existing hotel instead of owning them
outright. This has helped the company manage its funds efficiently, have lower payback period on its projects and earn
attractive operating margins. In the next few months, it is planning to open 'Royal Orchid Central' – four star category
hotels at Pune (120 rooms) and Hyderabad (65 rooms) to cater to the business class. Subsequently, it plans to open five
star hotels in Mumbai, Bangalore and Delhi. But for real growth, the company wants to target the lower end of the
hospitality pyramid and plans to set up a chain of 50 budget hotels across India under the brand 'Pepper Mint' in the next
3 to 5 years. Recently, it bought a 30 acre property in Tanzania and also formed a joint venture with Parsvanath to
develop 10 hotels at an investment of Rs.500 cr. Couple of days back, the company also acquired 50% stake in Galaxy
Beach Resort (65 rooms) in Goa. For FY08, it may report total revenue of Rs.140-150 cr. with net profit of Rs.35 cr. on a
consolidated basis i.e. an EPS of Rs.13 on its equity of Rs.27.25 cr. A decent bet in the hospitality sector.
By Kukku
FIFTY FIFTY
Investment Call
* Jindal Saw Ltd. (Rs.612) follows a multi-product approach to pipes - offering a full product portfolio of LSAW
(longitudinal submerged arc welded), HSAW (helical submerged arc welded), seamless, DI pipes, anti-corrosion
coatings, connector casings and Hot reduction Bends. Its product portfolio allows it to comfortably straddle between
value-driven products (DI and seamless pipes, which are high-margin segments) and volume-driven ones (SAW pipe
business).
Besides LSAW and HSAW, it is increasing its focus on the water infrastructure sector in India. The company is
currently one of the very few pipe manufacturers capable of offering a complete pipes solution to the water sector (i.e.
spiral pipes, ductile pipes and accessories). The DI pipe business gives the company an opportunity to take advantage of
the strong domestic capital expenditure cycle seen in the water transportation segment in India. A combination of
increasing government focus to build water infrastructure and the rising support from multilateral agencies (such as the
World Bank and the Asian Development Bank) is likely to result in a strong demand for DI pipes. The company is
implementing capacity expansion in all three key segments on expectation of overall margin expansion.
The company has firmly established itself as a credible supplier in the global market. This is reflected in the large and
reputable client accreditations that the company has been able to garner in the past few years. Its current order book
exceeds US $1 billion (Rs.4000 cr.) with export orders of more than 65%.
In the domestic market, the company has bagged the prestigious and unique project from Cairn Energy India Pvt. Ltd.
(Cairn) involving supply of LSAW line pipes for the world's longest underground pre-insulated heat traced pipeline.
The order value exceeding US $200 million (Rs.800 cr.) is for supply of line pipes, Tracer Tube, Insulation and Bends for
Barmer Salaya Pipe Line (BSPL) project of Cairn.
The company divested its interest in its US subsidiary in the financial year ended 31
st
December 2007. The consideration
allows the company to pursue its expansion and debottlenecking plans and make other investments for better
margins/returns in USA.
11
It has investments of Rs.17 cr. while their market value is around Rs.235 cr. The fundamentals of the company are very
encouraging as it has strong book value of Rs.371, EPS of Rs.63, trading at P/E ratio of just below 10 against its yearly
high of Rs.1225; the stock is available at around Rs.620 level. Investors can add this stock on every dips for good long-
term growth.
Market Guidance
* MTNL (Rs.105) has received a total refund of Rs.2860 cr. in the last ten months, which works out to Rs.45 a share. It is
claiming full benefits under Sec 80IA as against the partial benefit granted to it. Grant of the full benefit would be a key
positive trigger for the stock.
Its valuation is attractive with a book value of about Rs.190 and dividend of 40% over the last few years. The stock has
reacted from high of Rs.219.
* Indbank Merchant Banking Services (Rs.27) has declared dividend of 15%. The stock was recommended last week at
Rs.24. Book partial profit at above Rs.32 level.
* PNB Gilts (Rs.29) is considering dividend at its board meeting on 21
st
April. Stay invested. If dividend is around 18%,
the stock may go up to Rs.35/40 level. The stock has already given 45-50% return from lower levels.
* New developments in Khoday India (Rs.141) are said to be favourable. Those who bought it at higher levels average
out by buying at current levels. Q3FY08 results were very encouraging and Q4FY08 results are also expected to be on the
same lines. Seeing to its high of Rs.425, current valuations are very attractive.
* HOV Services (Rs.97) is a leading BPO provider servicing the finance and accounting sector. The company entered the
capital market in September 2006, offering 40,50,000 equity shares of Rs.10 each to the public at Rs.200 per equity share.
The stock is under accumulation by knowledgeable investors. Book value is Rs.64, yearly high Rs.248.
* PG Foils' (Rs.64) FY08 profit is likely to be around Rs.8 cr. posting an attractive EPS of around Rs.10. The book value of
the share is around Rs.75 while the current year outlook is very encouraging. The company's product range is similar to
that of Ess Dee Aluminum but it is an older player in this industry. While Ess Dee Aluminum is trading at a P/E ratio of
26, PG Foils is trading at a P/E of just 8. The stock reacted from its high of Rs.127 to CMP of Rs.26 where it looks
attractive.
* Religare Enterprises (Rs.376) is for momentum players or traders as it may see a good upside.
* Sharyans Resources (Rs.198) is a good long-term wealth creation story. There will be good unlocking of values over the
next two years together with more acquisitions.
* Rohit Ferro-Tech (Rs.87) is likely to remain in the bull grip as the company is said to be faring exceeding well and is
likely to acquire chrome ore mines. Full FY08 EPS likely to be around Rs.20. Current valuation is very attractive at Rs.86
level since its trading at a P/E of less than 5.
* EIH Ltd. (Rs.146) has good built in values. Its food catering business caters to international airlines worth about Rs.90 cr.
EBITDA in 2007. With 50% EBITDA margin, very high ROE growing at 25%, this business can account for 30-40% of its
market cap if demerged. In addition, EIH has a large property bank of about 15% of market cap. Investments in
international hotels is 10-15% of market cap. Bandra Kurla land could be worth 25-35% of market cap. The publishing &
printing business worth Rs.35 cr. revenue should grow substantially this year with Rs.100 cr. capex. The car rental
business clocked Rs.58 cr. in revenues. In addition, its investment in the preferential shares of EIH Associates and equity
stake in EIH Associates makes the hotel business is almost free. Long-term investors can take a small exposure in this
stock on every dip.
* Assam Company (Rs.26) among the oldest tea companies is faring well. With its other business of oil & gas exploration,
the company is expected to give good returns over the long run. Having reacted from a high of Rs.57, the stock looks
attractive around Rs.25 level for good long-term investment.
* Industrial gear boxes manufacturers have increased prices by around 20-25% to pass on the increase in input costs like
steel, castings, forgings etc. Some of these manufacturers are Elecon Engg. (Rs.173), Shanthi Gears (Rs.59), International
Combsution (Rs.384).
* Similarly, motor manufacturers have increased rates by 5-10% recently. Some of the manufacturers are Crompton
Greaves
(Rs.358),
Siemens
(Rs.647),
Kirlosker Eletric (Rs.195) etc.
* Kalpana Industries (Rs.119), Nelco (Rs.93),
RPG Cables (Rs.36), Torrent Cables (Rs.230)
are under accumulation by informed smart
investors.
Note: Bulls are likely to take grip of the
market as FY08 results seem to have been
discounted at current valuations and FII
selling seems to be over. We may now see
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positive inflows from FIIs. Nifty is very likely to touch 5100/5200 level by next week on short covering supported by
strong investment buying.
Stability at current levels will attract good inflow of funds in mutual funds. The real estate market may also stabilise in
the near future.
Stability in market will also help industry raise required funds for ongoing projects, which will help in reviving some of
the sectors, which witnessed a slowdown.
By V. H. Dave
EXPERT EYE
Roto Pumps Ltd. (RPL) (Code: 517500) (Rs.61) is recommended for steady appreciation in the long-term. The prospects of
RPL mainly depend on the prospects of the agricultural industry, which holds good promise in the long-term.
Founded in 1968 by R. R. Gupta as a partnership firm, RPL was incorporated as Roto Pumps & Hydraulics Pvt. Ltd. in
July 1975. In July 1981, Roto Pumps Pvt. Ltd., a group company, was amalgamated with it and the name changed to RPL.
It went public in 1993. Gopi Krishna Arora is the chairman whereas Harish Chandra Arora is the managing director.
The company initially manufactured and marketed helical motor pumps to the coal mining sector and then gradually
increased its base in other industrial segments. RPL has adopted technology from Kosaka Labs (part of Mitsubishi, Japan)
for triple-screw pumps while for twin screw pumps; it had a technology tie-up with Stothert & Pitt of UK.
Its integrated manufacturing plant is in Noida and its plant in NSEZ is spread over 20,000 sq. mt. The plants have
sophisticated machine tools and testing facilities that ensure consistent world-class quality matching customer
expectations. All critical components are manufactured in-house to ensure 100% quality standards. RPL manufactures
progressive cavity pumps, twin screw pumps and centrifugal pumps.
Around 35% of its sales constitute exports. The manufacturing units conform to ISO 9001 quality surveillance system from
Underwriters Lab, USA.
RPL's pumps are designed to handle a wide variety of fluids ranging from water like fluids to highly viscous, abrasive,
corrosive media with high solid and gas content. The company has an extensive experience of handling over 1100 types of
fluids. The company plans to carry out market development activities in other major markets like USA and China in
addition to other identified markets in the Middle East/Gulf and Africa.
Some of the application areas include Agriculture & Irrigation – includes surface water and underground water; Chemical
& Process Industry – includes general chemicals, paints, adhesives, varnish, inks, paper, pulp, cellulose, vegetable oils,
soaps & detergents, starch and glucose, sugar industry; Oil & Petrochemical Industry; Food, Beverages and Pharma
Industry – includes fruit & vegetable processing, dairy & milk processing, confectionary & bakery, cosmetics & pharma,
breweries, wineries and distilleries; Effluent & Sewage Treatment Plants, Mining & Construction and Ship building
industry.
During FY07, RPL posted 40% increased sales of Rs.34 cr. and earned 124% higher net profit of Rs.2 cr. while its EPS was
Rs.6.3 and it paid a dividend of 15%. During Q3FY08, although sales went up by 17% to Rs.10.4 cr., net profit shot up by
39% to Rs.82 lakh. During the first nine months of FY08, sales advanced by 21% to Rs.28.4 cr. and net profit by 38% to Rs.2
cr.
RPL has a small equity of just Rs.3.1 cr. and with reserves of Rs.8.7 cr., the book value of the share works out to Rs.38. The
value of its gross block is Rs.14.5 cr. whereas its debt : equity ratio is just 0.5:1. The promoters hold 69.9% in the equity
capital, NRIs hold 2.6%, PCBs hold 2.4% leaving 24.9% with the investing public.
The world pump market has been projected at US $36 billion (Rs.1,44,000 cr.) by 2010 and power and water sectors would
continue to remain the biggest drivers of the pump industry globally. Due to rapid urbanization, the requirement for
supply of drinking water and treatment and disposal of wastewater in developing Asian countries has increased
considerably.
The need for irrigation facilities to enhance agricultural production in developing countries has fuelled the growth of the
pump industry. Further, the overall growth in user industries such as petro-chemicals, pharmaceuticals and food-
processing will boost growth opportunities for industrial pumps.
Indian pump manufacturers are on a sustained growth path backed by a strong upswing in fluid handling industries,
irrigation and urban infrastructure projects. With industry and infrastructure sustaining the uptrend, the organised
industry players continue to witness revenue growth with strong order inflow. Fluid handling industries such as
petrochemicals, chemicals, fertilizers, brewery, dairy, oil-refining etc. display accelerated growth thus paving the way for
increased demand for industrial pumps.
The booming service sector that spiral the demand for construction of office spaces, malls, entertainment amenities are
likely to trigger demand for power efficient pumps resulting in boosting the demand along with the industrial sector. The
large international pump market provides great opportunity to further increase exports to countries hither to untapped.
13
RPL is further strengthening its supply chain system and has increased stock levels at warehouse-cum-marketing
offices in Australia and UK to enable it to service these markets more effectively and also penetrate other existing
markets.
Based on the first three quarters, the company is expected to post a net profit of Rs.3 cr., which would give an EPS of
Rs.9.7. Riding high on the back of the industry boom, EPS could go above Rs.12 in FY09.
The share of RPL is traded at Rs.61 discounting its immediate estimated EPS of 9.7 by 6 times and FY09 estimated EPS of
Rs.12 by 4.8 times. The industry average P/E currently hovers at 20, which leaves good scope for this scrip of RPL to rise
further. The share has the potential to cross the Rs.80 mark in the medium-to-long-term. The 52 week high/low of the
share has been Rs.99/49.
14
By Nayan Patel
TECHNO FUNDA
Uni Abex Alloy Products Ltd.
BSE Code: 504605
Last Close: Rs.102
Uni Abex Alloy Products Ltd. is a Neterwala group company, a
pioneer and leading manufacturer of centrifugal and static casting in
heat, wear and corrosion resistant alloys. Located at Thane, near
Mumbai, the company was incorporated in 1972 and has an
excellent track record of supplying critical components to a wide range of industries. It is equipped with modern
manufacturing & testing facilities and is a premier source for high nickel and chromium alloys conforming to global
standards.
It has a tiny equity of just Rs.1.98 cr. in which promoters hold 63.33% stake. Since last three years it has posted excellent
numbers.
For December 2007 quarter, its net profit jumped 1225% to Rs.1.06 cr. while for the first nine months of FY08. Net sales
rose by 21.18% but net profit jumped 55.03% to Rs.2.31 cr. It may end FY08 with net profit of around Rs.4 cr. and post an
EPS of Rs.20. This 12.5% dividend paying stock is available at P/E ratio of just 5.
Uni Abex has executed an agreement for a joint venture with Manoir Industries of France the manufacture and marketing
of reformer tubes.
Buy with stop loss of Rs.95. On the upper side above Rs.110, it can go up to Rs.120, Rs.139 levels in the medium-term. Its
52-week high is Rs.144.
Super Tannery Ltd.
BSE Code: 523842
Last Close: Rs.10.84
Super Tannery Ltd. is a Kanpur based leather products producer with over Rs.200 cr. turnover. The company has an
equity of just Rs.3.58 cr. and the promoters hold 56.75% stake in the company. It also has overseas offices in UK and UAE.
First nine months of FY08, its net sales touched Rs.167.73 cr. with net profit of Rs.2.15 cr. For FY08, net sales Rs.220-230 cr.
with net profit of Rs.2.95 to Rs.3.05 cr. is likely. The stock is available at P/E ratio of just 6 against its FY08 EPS, which is
the cheapest in the leather industry.
Investors can buy this Rs.2 paid-up share with a stop loss of Rs.9.50. On the upper side above Rs.12, it will go up to
Rs.14.50 in coming days and is the best stock for medium-term investors. Its 52-week high is Rs.16.58.
Rolta's Q3FY08 net up by 44.3% YoY
MONEY FOLIO
Review
- Last week we recommended R System at Rs.88.
During the week, the stock zoomed to Rs.99.85
level.
- ABC Bearing was recommended at Rs.88 and it
zoomed to Rs.95.95 level during the week.
Rolta India Ltd., a leading IT company, specialising in GeoSpatial Information Systems (GIS), Engineering Design
Automation (EDA) and Enterprise Information and Communication Technology (EICT) has recorded a year-on-year
(YoY) growth of 55.4% and quarter-on-quarter (QoQ) growth of 19.3% for Q3 ended 31
st
March 2008 with Consolidated
Revenue of Rs.288.37 cr. (US $72.2 million) as against Rs.185.59 cr. (US $42.7 million) in the corresponding quarter of the
previous year.
PAT grew by 44.3% to Rs.65.72 cr. (US $16.5 million) YoY as against Rs.45.54 cr. (US $10.5 million) in the corresponding
quarter of the previous year, and QoQ growth of 9.1%.
The consolidated EPS adjusted for the issue of bonus shares at 1:1 in January 2008, was Rs.4.1 (US $0.10) for the quarter
ended 31
st
March 2008 as against Rs.2.8 (US $0.07) in the corresponding quarter last year.
Power Finance's FY08 net up by 23%
Consistent with its higher volume of operations, Power Finance Corporation's (PFC) net profit rose by an impressive 23%
to touch Rs.1209 cr. in FY08 against Rs.986 cr. in FY07. The loan sanctions of the corporation touched an all-time high of
Rs.69,498 cr. representing an increase of over 123% while disbursements recorded a rise of 15% at Rs.16,211 cr. over FY07.
Total Income of the corporation rose by 28% to Rs.5040 cr. against Rs.3928 cr. in FY07.
PFC's cumulative sanctions and disbursements reached a figure of over Rs.1,86,418 cr. and over Rs.92,065 cr., respectively.
PFC has so far financially supported projects of over 70,000 MW and about 33,000 MW have been commissioned
accounting for about 23% of country's installed capacity.
Nakoda Textile's Q1CY08 net up by 63%
Nakoda Textile Industries Ltd. (NTIL) posted a robust 61% growth in topline in Q1CY08 to touch Rs.109.74 cr. Net profit
margin grew 63% over Q1CY07 to Rs.3.32 cr.
NTIL, a major player in the fully drawn yarn segment, plans to invest Rs.325 cr. for enhancing its capacity in the coming
year. A continuous polymerization plant of 1,00,000 MTPA would be operational by mid-2009 and facilitate its complete
backward integration. Also envisaged is the addition of POY spinning capacity of 70,000 MTPA.
Toshiba launches innovative products
Toshiba India Pvt. Ltd., the 100% subsidiary of Japan's Toshiba Corporation, a world leader in high technology and
innovation, today announced the launch of a new range of products spanning key product lines, including Notebook PCs,
LCD TVs, Refrigerators and Washing Machines. The new products deliver new levels of value to Indian consumers, will
further strengthen Toshiba's presence in the Indian market.
Kotak Mahindra Bank launches credit cards
Kotak Mahindra Bank has launched its suite of credit cards, which is the newest addition to the wide array of financial
services offerings of the Kotak Group. The card range includes 2 Visa Gold Cards, a Visa Platinum Card and a Visa
Signature Card and has introduced India's 1
st
vertical card. With the launch of its credit cards, the Kotak Group now
offers a complete range of financial services.
Kotak credit cards have been built on 3 core tenets - Relevant benefits that reflect what customers do most, simplified
credit that is easy to use and transparent communication of charges. The credit cards will be available in 4 variants to
cater to the specific needs of distinct customer segments.
CEAT adopts new logo and sets up two manufacturing facilities
CEAT Ltd., in the midst of its Golden Jubilee celebrations, has unveiled a new logo symbolising the transformation
sweeping across the company. This is the first ever such change in the company's history.
CEAT shared its vision strategy that will follow the launch of the new logo. After recording the highest sales and exports
in the last fiscal the company is all set to accelerate its growth with commissioning of two new plants, increase in
production, technology tie-up for innovative and world-class products and fresh investments to the tune of Rs.1000 cr.
Investments will focus on R&D, market expansion and improving customer interface.
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources
that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does
not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell
securities based on the information in this column are solely responsible for their actions. The author, his company or his
acquaintances may/may not have positions in the above mentioned scrip.
15
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