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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 29 Monday, June 2 – 8 , 2008
Pages 17
Cautious & tentative
sentiment to prevail
By Sanjay R. Bhatia
The weakness on the bourses continued last week on the back of the indecisiveness on the part of the government to hike
fuel prices. The crude oil prices have also corrected after the recent rise but the US economy continued to emit mixed
signals. The advance decline ratio remained negative on the back of lower volumes. Traders and speculators were seen
booking profits at higher levels and also creating fresh short positions. Incidentally, FIIs remained net sellers in the cash
segment but were net buyers in the derivatives segment. Mutual Funds, however, were net buyers using lower levels as a
buying opportunity.
The global cues have remained more or less positive.
Crude prices have corrected from their recent historic
highs of $135 per barrel to around $126 per barrel. The
US economy continued to display mixed signals while
global markets have shown a steady uptrend. Domestic
bourses continued to display volatility due to the expiry
in the derivatives segment. The rupee continued to
depreciate against the US dollar, which is a negative for
oil marketing companies in a scenario where crude
prices are rising. Even though crude prices have
corrected by around US $10, the oil marketing
companies find it difficult on the back of increasing
under recoveries.
The government's failure to take a decision on hiking
fuel prices also affected the market sentiment. Even
though, the markets show signs of going up, lack of confidence prevails as the markets are unable to sustain at higher
levels. Now, it is important that fund flows improve and follow-up buying emerges especially at higher levels. It is also
important that government takes a decision on fuel prices soon. The markets also keenly await the arrival and progress of
the monsoon. Stock specific activity will be witnessed amidst intermediate bouts of volatility and choppiness. The market
sentiment is likely to remain cautious and tentative and every rise is likely to meet with selling pressure unless some
positive news flow is witnessed. Any negative news would trigger a sell-off.
On the upside, the Sensex faces resistance at the 16608 and 17300 levels but has support at the 16372 and 15699 levels. The
Nifty faces resistance at the 4899 and 5025 levels while 4647 and 4482 are its important support levels.
Traders and speculators can buy Ranbaxy with a stop loss of Rs.510 and a target of Rs.555.
1
Trying times ahead
By Fakhri H. Sabuwala
India may be passing through one of the most difficult times and the problem gets aggravated by not accepting the
economic realities and living in a fool's paradise. Political compulsions are fine but they, too, do not seem to support the
ruling coalition as can be seen from the election results for the Karnataka state assembly. May be government slept over in
rationalising fuel prices in tune with global rates and the crude oil price hike and thereby allowed inflation to raise its
ugly head. Now that the country's oil marketing companies are bleeding profusely and unable to survive, a crash course
is being undertaken as a rescue mission but neither will it save such corporates nor the government as the action may be
too little too late.
Envisage a situation where oil touches $150 and gallops to euphoric levels of $200 a barrel. Though hypothetical, the
outcome in such an event may be fatal for several economies. Some of the prophecies give an insight of what the day after
holds for us.
Percentile oil expenditure of Asian economics to their GDP may rise to near peak levels of 1980 and thus cut
growth by at least 1.5% to 2%.
High energy intensity economies such as Indonesia, Malaysia, Thailand and Taiwan may be affected more than
India and China as the latter is shielded by oil subsides.
Average rate of inflation could rise another by 3% to 3.5% defying the supply-driven measures of the
government.
Current account deficits may probably worsen for most Asian economies posing definite challenges to the
currencies of India, Korea, Taiwan and Thailand.
Countries raising oil prices in tune with global prices will survive the risk of fiscal deficit. But countries like India,
which subsidise the cost may find it difficult to swallow the large fiscal deficits.
Balancing growth in the face of high inflation remains a dangerous diabolic situation for Asian governments.
Tightening resources and purchasing power to moderate inflation will lead to a major slowdown in economic
momentum. The slowdown is not all that worrisome for now but it will worsen once the US economy takes a nap.
Last but not the least; the Indian situation is more precarious on the government as the eve of an election is not ready to
take bold steps fearing loss of votes. This turning a blind eye to the grim realities is not a paying proposition. Better to
educate the nation of the grave realities of global economics rather than live the subsidy regime. Sounds impossible and
difficult! But it is the only recourse.
Things to do:
Stay away from cement, banking, automobiles and infrastructure segments
Keep a close watch on the monsoon – its quantum and distribution.
Monitor the petrol-diesel price hike and its impact.
Hide in the comfort zone of FMCGs - HUL, Dabur, ITC, Marico etc.
Support corporates benefiting from the crude oil price rise - Shiv Vani Oil & Aban Offshore.
Support the defensive pharma and telecom segments.
Expect directional move
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 16468.32 attained a high at
16666.03 and fell to a low of 16196 before it closed the week
at 16415.57 and thereby showed a net fall of 249 points on a
week-to-week basis.
In the last week's update, we had indicated that the bears
have the edge. We saw a weak and struggling market that
managed to hang above the level of 16200 for 3 trading days.
In spite of the negative flows, the Sensex managed to remain
above 16200.
On the daily chart, in the event of a breakout and close
above 16667, we could find the Sensex moving higher
towards 17125 at least. But if we see a sustained fall and
close below 16185, then the slide will continues towards 15715 at least.
A long legged doji formation on weekly charts last week has put the market in an indecisive state. Either side movement
above 16667 or below 16185 will decide the movement and momentum for the week.
2
The overall bias is for a downward movement and only a breakout and close above 17736 can take the Sensex up towards
18300. A rise and close
above 17736 can also
create a false breakout.
The range of 17736-18300
is also the exhaustion
range for the Sensex.
WEEKLY UP TREND STOCKS
Whenever the Sensex
closes above 18300, the
pattern formation focus
would change from the
Zig-Zag pattern to the Flat
corrective pattern.
Weekly resistance will be
at
16666 and 17125.
Weekly support will be at
16185 and 15715.
3
Sensex Wave Analysis
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
TRANSWORLD
INFOTECH
294.00 187.9
251.6
272.8
315.2
378.9
78.0
242.6
30/05/08
STERLING
BIOTECH
215.20 169.0
197.9
209.4
226.7
255.6
77.3
203.4
30/05/08
GLENMARK PHAR 657.00 527.3
613.3
655.7
699.3
785.3
76.7
649.8
30/05/08
SESA GOA
4286.00 3693.7
4057.7
4193.3
4421.7
4785.7
73.7
4164.5
30/05/08
REI AGRO
1657.00 1273.0
1508.0
1594.0
1743.0
1978.0
73.5
1624.3
30/05/08
Wave I-2594 to 3758
WEEKLY DOWN TREND STOCKS
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
Wave B-14677 to 17735
Wave C- 17735 to 16196
(Current ongoing move)
Internal of Wave C
Wave i- 17735 to 16546
Wave ii-16546 to 17497
Wave iii- 17497 to 16196
(Current ongoing move)
Further internals of Wave
iii
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
BRAHMANAND
HIMGHAR
146.80
112.0
137.9
155.0
163.9
189.8
0.00
165.91
30/05/08
SOBHA
DEVELOPERS
498.85
432.2
478.2
503.6
524.2
570.2
24.13
541.05
09/05/08
BGR ENERGY SYT 344.60
219.7
312.7
373.9
405.7
498.7
24.45
416.42
09/05/08
MADRAS
CEMENTS
2682.00 2413.0
2605.0
2720.0
2797.0
2989.0
25.53
2848.25 02/05/08
THERMAX
426.35
366.6
411.1
440.3
455.6
500.1
27.32
454.09
07/03/08
PUNTER'S PICKS
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
ALLIED DIGITAL SERV
532875
944.50
920.00
944.50
880.00 984.4
1048.9
0.91
GODFREY PHILLIPS
500163
1431.00
1415.00 1490.00
1330.00 1588.9 1748.9
1.35
MAX INDIA
500271
177.00
169.80
179.00
165.00 187.7
201.7
0.85
VINATI ORGANICS
524200
102.25
97.00
105.75
92.20 114.1
127.7
1.20
Wave 1 from 17497 to
16196
If the Sensex does not fall
below 16196 and closes
above 16666 then we will
find Wave 2 will have an
up direction. A pull-back
of the fall from 17497 to
16196, assuming at this
point that 16196 is not
violated, is likely. The
pull-back to 16845-16998
is possible but could
ultimately surrender the
BUY LIST
Scrip
Last Close
Buy
Price
Buy
Price
Buy
Price Stop loss Target
Monthly Relative
Strength (RS)
MONNET ISPAT & ENERG
586.00
564.99
555.10
545.21
513.20 648.8
54.26
gains if not this week then in the week thereafter.
If the high of 17736 is
crossed, then the above
wave count will not be
applicable.
Conclusion
Expect directional move
after last week's indecisive move.
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
BLUE STAR
423.10
440.14
447.52
454.91
478.80 377.6
32.94
RELIANCE INDUSTRIES
2402.00 2511.71 2549.00
2586.29
2707.00 2195.7
33.81
EVEREST KANTO CYLIND
314.95
319.11
326.15
333.19
356.00 259.4
51.97
Strategy for the week
The overall strategy still remains to exit on a rally to Weekly resistance levels. Traders can benefit from trading
opportunities to trade long but ensure to exit on the rally to weekly resistance levels.
* Accurate Transformer is scouting for strategic investors to raise capital to fund its working capital. Share price may
shoot up Rs.200 in the short-term.
TOWER TALK
* Dull market offers good opportunities to accumulate Spanco Telesystem, Lokesh Machines and Asian Electronics
almost at their 52-week low levels.
* Bihar Tubes has bucked the trend and shot up considerably in the short-term. Book profit immediately and shift to
Patels Airtemp or Mazda Ltd.
* Second phase of Garuer & Weil may complete by mid-2009. Get your holding converted to Lok Housing and Ansal
Housing.
* Promoters of Micro Forging are selling aggressively in the open market. No wonder, the scrip is hitting daily new lows
and seems headed for a single digit.
* Bharat Gears has posted impressive results with an EPS of Rs.12.59. The stock is available at very low valuations around
Rs.41 and is a value buy at current levels.
* Bhuwalka Steel has projected a revenue of Rs.125 cr. with profit of Rs.12 cr. from joint venture pealty project in
Bangalore. Stock to watch for consistency in performance.
* Master Trust has been gaining investor fancy once again. The company has a good investor base in Punjab and in rural
areas.
* Futura Polyester has planned a rights issue at Rs.10 each. Stock can be accumulated on declines.
* If BPCL, HPCL and IOC were companies with majority public holding and run on commercial lines they would have
brought honours to the country.
* UTI MF, SBI MF and four other AMCs to float sharia-compliant equity schemes for foreign as well as Indian investors.
* HDFC and LIC Housing face the music in the dull housing market. They now allow EMI holidays till possession!
* Government enhances ECB limits by 5 times to help corporates raise cheaper foreign loans. Why not allow NTPC and
other PSUs even to raise ECBs?
* Bonus from L&T when the capital goods sector is in a cool off may mean some more cheerfulness from other capital
goods companies.
* Auto finance companies may face defaults as petrol and diesel prices soar. Little wonder, some in-house finance
companies of auto majors are calling it quits!
* Dabur Pharma in its new avatar is going great guns as its new products are accepted in foreign markets.
* GVK Power Infra, a Re.1 face value scrip, is under accumulation by two big investment houses and may cross Rs.80
soon.
* BHEL counter may be cooling off but its robust order book and timely execution may see the scrip crossing Rs.2600
mark by Diwali.
* The unofficial on new issues in the grey market has firmed for Anu's Labs to Rs.40-45 while Gokul Refoils was quoted
at Rs.10/12 and Niraj Cement Structurals at Rs.9-11.
By Saarthi
BEST BETS
Z F Steering Gear (India) Ltd. (Code: 505163)
Rs.170.75
Belonging to well-known Firodia Group of Kinetic fame, Z F Steering Gear (India) Ltd. (ZF) was incorporated in 1981 to
manufacture mechanical - worm & roller and power steering gears in financial and technical collaboration with M/s. Z F
Friedrichafen AG of Germany, the world's largest independent steering gears manufacturer. Today, ZF is the market
leader in both mechanical and hydraulic power steering gears especially for commercial vehicles and the tractor industry.
Its product range includes ball and nut power steering gear, rack and pinion power steering gears, worm and roller
manual steering gears, intermediate shafts, vane pumps, steering columns, bevel gear boxes, universal joints, servocom
steering gears etc. It has an enviable clientele including all auto majors like Tata Motors, Ashok Leyland, M&M, Eicher
4
5
Motors, Escorts, Bajaj Tempo, Swaraj Mazda, PunjabTractors, Volvo, L& T John Deere, New Holland etc. Of late, it has
entered the passenger car segment by supplying rack & pinion power steering gears for the 'Indica' car. In the near future,
the company hopes to develop new products such as a collapsible steering column for cars, telescopic steering column for
HCV, aluminum pump for higher HP engines, pump parts localisation etc.
ZF's state-of-the-art plant at Pune is equipped with specially designed machinery from ZF, Germany, for manufacturing
critical components and its has its own in-house heat treatment facility consisting of sealed quench furnaces, pit
carburised furnaces for case carburising, nitriding etc. To cater to the rising demand, the company has expanded its
installed capacity of power steering gears from 150,000 to 240,000 per annum and of mechanical steering gears from
100,000 to 120,000 per annum at a capital expenditure of approx. Rs.7 cr. Also, in view of the encouraging response from
the automobile manufacturers, ZF is in the midst of enhancing the production capacity to 300,000 units of power steering
gears and 150,000 units of mechanical steering gears. Secondly, it has entered into a 26:74 joint-venture with its
collaborator, ZF Lenksysteme, GmbH, to promote a new company for developing and manufacturing new products that
will be different and will not compete with its current product range.
Importantly, the sale of commercial vehicles is increasing due to improved road-infrastructure and the Supreme Court
ban on overloading of commercial vehicles. It recorded a growth of 33%, producing 520,000 vehicles in FY07 compared to
391,083 vehicles in FY06. On the other hand, tractors recorded 20% growth in sales on higher government subsidies.
Moreover, with India emerging as the hub for small-car manufacturing, many players have announced capacity
expansions and many new global players have set-up state-of-the-art production facilities in India. And since ZF's future
prospects are closely linked to the demand for commercial vehicles, multi-utility vehicles and tractors, it is expected to do
much better in coming years.
Financially, ZF is by and large a debt-free company. In fact, it has invested about Rs.37 cr. in unlisted firms which yields
handsome dividend in the form of 'other income'. The promoters currently hold about 72% in the equity, of which the
German collaborator holds 26% and Bajaj Tempo holds nearly 10% stake. The management of the company is very
professional and investor-friendly with an impeccable track record of uninterrupted dividend payment since the last two
decades. For FY08, it has again announced 80% dividend, which amounts to an yield of almost 5% at the CMP. ZF has still
not tapped the global market, which presents a huge opportunity. At the same time, it is not affected by the sharp rupee
appreciation unlike other auto ancillary companies. For FY08, it registered very marginal growth in sales as well as net
profit at Rs.223 cr. and Rs.27.85 cr. respectively. Still this works out to an EPS of Rs.31 on its equity of Rs.9.07 cr.
Considering its debt-free status with a healthy cash EPS of Rs.45, huge reserves of Rs.100 cr., strong promoter holding,
high dividend yield, the stock is available extremely cheap at Enterprise value of Rs.155 cr. i.e. at an EV/EBIDTA of
merely 3 times. However, import of cheaper power steering gears from China and the steep rise in raw material costs is a
big threat to the company. Investors are advised to buy the scrip for a price target of Rs.240 (i.e. 40% return) in 12-15
months.
Kolte-Patil Developers Ltd. (Code: 532924)
Rs.110
Founded by Mr. Milind Kolte & Mr. Rajesh Patil in 1991, Kolte-Patil Developers Ltd. (KPDL) is a well-known real estate
development company in India that develops and constructs properties mainly in Pune and Bangalore. Till now, it has
developed and constructed 25 projects (22 in Pune and 3 in Bangalore) which constitutes 16 residential complexes, 4
commercial complexes, 3 commercial cum residential use and 2 IT parks covering a total of approximately 4 million sq. ft.
of saleable area. As of today, it has presence in the entire gamut of construction ventures like residential projects,
integrated townships, IT parks, commercial complexes and hospitality sector. In fact, the company has even received the
Government of Maharashtra's First Prize for 'Best IT Infrastructure in the State of Maharashtra' for its GigaSpace IT Park
project in Viman Nagar, Pune.
To capitalise the ongoing boom in the real estate sector, KPDL has very aggressive plans of investing nearly Rs.3650 cr. in
coming 5-6 years. Currently it's in the midst of developing 28 projects (24 in Pune and 4 in Bangalore) with a total saleable
area of around 18 million sq. ft. (on 22 million sq. ft. of land area) consisting of 10 residential complexes, 11 commercial
development, 5 IT parks, 1 integrated township and 1 service apartment. Out of these 18 million sq. ft., township accounts
for 42%, residential projects contributes 35%, commercial space adds upto 11%, IT parks to 10% and the rest forms the
service apartments. For funding these projects, KPDL has entered into a joint venture agreement with ICICI Venture
Funds for development of three of its larger project namely - 400-acre Township at Hinjewadi, Pune, 1.1 million sq. ft. IT
Park at Kharadi, Pune and Bungalows scheme in 80 acres area at Wagholi, Pune. Besides, it has formed a joint venture
with UK based Real Estate Fund - K2 Property Ltd. (subsidiary of Yatra Capital) for development of residential properties
in Pune. Additionally, it has signed a term sheet with Arora Holdings of UK for setting up of two hotels - one in Pune and
other in Bangalore at a total investment of Rs.600 cr. Apart from the above 28 projects (18 million sq. ft.), KDPL has also
entered into MOU or has acquired development rights for an additional 22 million sq. ft. of saleable area on 33 million sq.
ft. of land in and around Pune and Bangalore. Although the actual land bank owned by the company is less than 15 acres
but the development right is equivalent to a whopping 755 acres of land. With this, the company has a total developable
space of almost 40 million sq. ft (18 million + 22 million). These reserves will provide the company a secured development
pipeline over the next 5-6 years ensuring it profitability going forward.
For acquisition of development rights and to fund its ongoing project, KDPL raised Rs.275 cr. in November 2007 via IPO
route at Rs.145 per share. Financially, the company is doing extremely well and has ended FY08 on a buoyant note.
Revenue jumped by 60% to Rs.369 cr. and net profit shot up 55% to Rs.129 cr. This translates into EPS of Rs.17 on its
equity of Rs.75.30 cr. Importantly, the company is at an inflexion point and can register phenomenal growth in coming
years. For FY09, it may clock a turnover of Rs.650 cr. with net profit of Rs.160 cr., which works out to an EPS of Rs.21 its
on current equity. Because of the apprehension about sustainability of high real estate prices, most housing construction
scrips are poorly discounted on the bourses. But at a modest discounting by 8 times against FY09 earnings, the KPDL
scrip has the potential to touch Rs.175 within a year. Investors are recommended to buy at the current level and add on
sharp declines.
Mold-Tek Technologies Ltd.: A portfolio pick
ANALYSIS
By Devdas Mogili
Mold-Tek Technologies Ltd. (MTL), formerly known as Mold-Tek Plastics, is a 22-year Hyderabad based company
incorporated in 1986. It manufactures injections and blow moulded plastic items and specialises in both standard and
made-to-order packaging solutions for leading brands of paints, lubricants, pharmaceuticals, cosmetics and FMCGs.
Recently, the company diversified into Information Technology related services.
MTL's plastic containers are used for packing paints, lubricants, chemicals, Vicks inhalers, Vicks Vaporub containers,
plastic containers for fan and toy manufacturers and also its own products. The company has two divisions: Plastics and
IT (KPO). Plastics can further be segmented into the tube & oils, paints, consumer products, PET containers etc.
MTL's manufacturing faculties are located at Annaram in Andhra Pradesh and Daman. J. Lakshmana Rao is the chairman
and managing director of the company.
Expansion: The company expanded its plastic moulding capacity and the PET containers manufacturing facility. It also
acquired Strongpet Polymers Pvt. Ltd., an existing PET bottle manufacturer; and merged it with itself in November 1995.
With this acquisition, it forayed into the PET packaging business. Recently, it also acquired Teck-men Tools Pvt. Ltd.
MTL developed pails for chemicals, inks & pharmaceutical products and received trial orders followed by regular orders.
New Forays: During 1999-2000, MTL diversified into the Information Technology business. In FY07, its IT (KPO) Division
commenced engineering services for high-rise buildings for its clients in USA & Canada and visualises excellent growth
prospects.
In April 2007, it also acquired Cross Road Detailing Inc., an engineering services KPO, located in Indiana, USA, with a
view to enhance its IT (KPO) division's footprint in developed markets.
This division recorded over 204% growth in 2006-07 to register a turnover of Rs.11.40 cr. Based on confirmed agreements
on hand; it is expected to grow by 2 to 2.5 times over the previous year. Having established its credentials in structural
engineering services to US clients, it is poised for rapid growth.
Clientele: The company's clientele includes companies like Procter & Gamble, ITC, Asian Paints, Ponds (India), Goodlass
Nerolac, Balmer & Lawrie and Leo Toys. Its liquid packaging container has been well received by all the leading lube
manufacturers like Indian Oil, Veedol, HPCL, etc. Its plastic packaging containers are exported to UAE and Singapore.
Performance: For FY08, net sales rose 16.66% to Rs.102.80 cr. as against Rs.88.12 cr. during FY07. Net profit, however, shot
up by 57.88% to Rs.13.12 cr. in FY08 as against Rs.8.31 cr. in FY07 and it reported an EPS Rs.11.98 for FY08.
Financial Highlights:
(Rs. in lakh)
Latest Results: Net sales in Q4FY08 increased
10.71% to Rs.26.04 cr. as against Rs.22.59 cr.
during Q4FY08. Net profit shot up 29.78% to
Rs.2.31 cr. in Q4FY08 as against Rs.1.78 cr.
during Q4FY07 leading to a basic/diluted EPS
of Rs.8.44 on an annualized basis on its
marginally higher increased equity.
Particulars
Q4FY08
Q4FY07
FY08
FY07
6
Financials: The company has an equity base
of Rs.10.96 cr. with a book value of Rs.38.75, It
has a debt equity ratio of 1.29. It has a RoCE of
22.34% and RoNW of 37.16%.
Share Profile: The share of MTL with a face
value of Rs.10 is listed and traded on the BSE
Gross Sales/Income
2748.5
2351.64
11122.83
9580.09
Less: Excise Duty
144.31
92.31
842.21
768.21
Net Sales/Income
2604.19
2259.33
10280.42
8811.88
Other Income
30.57
2.71
100.88
4.41
Total Income
2634.78
2262.04
10381.3
8816.29
Total Expenditure
2313.75
2005.96
8845.28
7764.80
Int & Fin charges
62.80
45.58
196.86
188.51
Exceptional item
27.10
0.01
27.1
0.01
Profit Before Tax
231.11
210.49
1312.06
862.97
Prov for tax inc FBT
0
32.27
0
32.27
Net Profit after tax
231.11
178.22
1312.06
830.70
Paid up equity (FV: Rs.10)
1095.50
1045.50
1095.50
1045.50
Res Exc Rev Rese
3149.24
1647.18
3149.24
1647.18
EPS (Rs) annualized
8.44
6.80
11.98
7.95
under the B group. Its share price touched a 52-week high/low of Rs.195/Rs.64. At its current market price (CMP) of
Rs.70, it has a market capitalisation of Rs.75 cr. The share has a beta value of 1.1.
Shareholding Pattern: The promoter holding in the company is 44.80% while the balance 55.20% is held by non-corporate
bodies, institutions, mutual funds and the Indian public. Among mutual funds, Cholamandalam Opportunities Fund has
acquired the company's shares in October 2007 for two of its schemes.
Dividends: The company has been paying dividends from 2005-06 onwards as shown below:
FY07 - 20%; FY06 - 10%.
Prospects: The continuous and steady growth of the Indian economy will positively impact the plastics packaging
industry as a whole. The expansion of the economy in general augurs well for cosmetics & pharmaceuticals. Emergence of
new players and expansion by established industry heavyweights in each segment will create greater growth
opportunities for MTL.
With the introduction of a new product range at its new facility at Daman. MTL's outlook is very positive. Its quality
assurance system at Daman has enhanced its competitiveness and will boost the profitability of the company
significantly.
Conclusion: MTL is a profit-making, dividend paying company with a leadership status in engineering and packaging
and is the only listed company active in Structural Engineering KPO Services in India.
Its share at the CMP of Rs.70 discounts less than 7 times its FY08 earnings against the industry average P/E multiple of
about 23 times. In view of its consistently good performance, organic & inorganic expansion and the positive outlook for
the industry, makes the MTL scrip a good portfolio choice for investors with a medium-to-long-term perspective.
Soaring crude oil prices depresses the market
MARKET REVIEW
By Ashok D. Singh
The market succumbed to selling pressure on weak global equities and soaring crude oil prices. A possible hike in
domestic fuel prices weighed heavily on the market last week. The Sensex declined 234.07 points or 1.41% to close at
16,415.57 for the week ended Friday, 30 May 2008. the NSE Nifty lost 76.45 points or 1.54% to end at 4,870.10 for the week.
The BSE Mid-Cap index declined 176.57 points or 2.55% to 6,760.54. The BSE Small-Cap index slumped 384.39 points or
4.51% to 8,133.04.
While the government dithered on hiking the price of petrol & diesel, it eased the ban on cement exports from the ports in
Gujarat, which accounts for almost 90% of India's cement exports. Earlier, on 11 April 2008, the government had banned
cement export in its bid to rein in rising inflation.
On Thursday, 29 May 2009, SEBI allowed sovereign wealth funds, university funds, endowments and charitable trusts to
register as FIIs.
The GDP grew 8.8% in Q4FY08 from a year earlier led by strong expansion in the services sector. The annual growth
matched an upwardly revised 8.8% growth in Q3FY08. The GDP was 9% in FY08. The government had earlier estimated
annual growth of 8.7% in FY08.
Inflation based on the wholesale price index rose 8.1% in 12 months to 17 May 2008, above the previous week's annual
rise of 7.82%, government data released on 30 May 2008 afternoon showed. Inflation for the week ended 22 March 2008
was revised upwards to 7.85% from 7%.
FIIs sold shares worth Rs.3,927.60 cr. so far in May 2008. They sold shares worth Rs.14,285.70 cr. in calendar year 2008 till
28 May 2008. Domestic funds sold shares worth Rs.567 cr. in May 2008, till 28 May 2008.
The BSE Sensex plunged 301.14 points or 1.81% at 16,348.50 on Monday, 26 May 2008, extending previous week's steep
losses on weak cues from Asian markets. Banking and capital goods stocks suffered the most in the slide. Information
technology stocks were the star performers.
The Sensex fell 72.91 points or 0.45% at 16,275.59 on Tuesday, 27 May 2008. Weakness in the second half of the trading
session dragged the markets lower on reports of a likely oil cess or surcharge on income tax and corporate tax.
The Sensex rose 249.78 points or 1.53% at 16,525.37 on Wednesday, 28 May 2008. The market, which moved between
positive and negative zones in early trade, surged in the second half led by a rally in IT and cement stocks. A sharp fall in
crude oil prices and firm European markets also aided the positive sentiment as did the FM's denial to introduce new tax
proposals to help ease the mounting losses of state oil firms due to soaring crude oil prices.
The Sensex lost 209.11 points or 1.27% to 16,316.26 on Thursday, 29 May 2008. The market, which swayed between
positive and negative territory earlier in the day, slumped in the last hour of trade. Major selling pressure was seen in
auto and banking shares. Tata Motors plunged even as Larsen & Toubro bucked the weak market trend.
The Sensex rose 99.31 points or 0.61% to 16,415.57 on Friday, 30 May 2008. Falling global crude oil prices and strong Q4
GDP growth data kept market up throughout the day. Power and oil & gas stocks tumbled. Capital goods and
information technology stocks were in demand.
7
The Sensex lost 234.07 points to close at 16,415.57 last week. The market is slated to track global equities in the absence of
major domestic trigger. However better than expected Q4 gross domestic product figures unveiled by the government on
Friday, 30 May 2008, would provide some succour to the market. Earnings downgrade amid rising input and interest
costs, high inflation, rising crude oil prices and drying up of global liquidity due to credit crisis remain a major concern
for the Indian stock market. The Q4 corporate results were more or less in line with market expectations.
8
Continue bottom-fishing
MARKET
By G. S. Roongta
Last week, the stock market continued to drift lower on account of the forthcoming F&O settlement on Thursday, 29
th
May 2008 for the rollovers to the June 2008 contracts.
With a weekly fall of 686 points on the Sensex for the week ended Friday, 16
th
May 2008 and a fall of 801 points over the
next week ending Friday, 24
th
May 2008 and finally a loss of 234.07 points during last week ended on Friday, 30
th
May
2008, the BSE Sensex has plunged by over 1700 points in lacklustre trading over the past three weeks. The sentiment has
been wrecked by two major issues viz. the rising price of crude oil and the runaway inflation. Both of them are interlinked
and both hit a new high not only in India but also across the globe.
As a result, FIIs have turned net sellers over the past ten days right since 21
st
May 2008. Upto Tuesday,
27
th
May 2008, FIIs have divested to the tune of Rs.3131.90 cr., which is really very high when considered
on a week-to-week basis. The total sale in May uptil 27
th
was Rs.3110 cr. on a net basis and a cumulative
Rs.15100 cr. in calendar 2008 till now, which is the highest ever since FIIs started investing in India.
Such large scale, non-stop divestment by FIIs right from January 2008, is, therefore, a cause for major
concern. The question that arises is: Who will absorb such large scale divestment week after week and
month after month? Moreover, the bear operators are ganging up to push sales as they have the
command of the market since 21
st
January 2008.
G.S. Roongta
Thus despite good corporate numbers for FY08, the market sentiment stands disturbed on account of the FIIs whose
perception of a bull market stands changed after the sub-prime crisis that surfaced in USA and continues to affect the US
economy till date.
How long this situation will continue is difficult to say precisely because the global economy has started impacting our
economy, which is quite evident with the rise in inflation and deterioration of our currency vis-Ã -vis the US dollar and
other Asian currencies.
But is it not strange that just a few months back, when the Indian rupee has appreciated sharply against the US dollar,
economists and marketmen express their shock and worry as the rupee had appreciated from Rs.43 to Rs.39 per US dollar.
And now the same economists and marketmen are concerned about the sharp fall by almost 10% in the Indian rupee,
which has made imports, especially of crude oil costlier. But the recent depreciation has improved the fortunes of the IT
and ITES industry as also textiles and garments after their exports had been blunted by the rising rupee earlier.
The technology sector is the greatest beneficiary of this slide in currency equation followed by fabric and garment
exporters. Does this mean that one should not just look at the rise and fall of popular indices but look at the markets in a
broader perspective and figure out the fast paced changes that are occurring? Until two months back, there was no
interest in technology, textile or other export oriented stocks. But now stocks from these sectors are consistently rising
even in a weak market. Infosys, Satyam have already risen by 20 - 25%!
The market thus displays a confusing mode moving directionless as the bulls and bears fight it out and pull it in their
favour. Any trigger at the support or resistance levels will make or mar the market by a rally or correction of 1500 - 2000
points on the Sensex. Because of this the broad market sentiment will remain stressed till the Sensex breaches the 14000
level or gather strength to pierce the 18000 level. Otherwise, we must assume that the market is passing through a deep
and large consolidation phase and investors should either indulge in bottom-fishing when it goes down within this range
or book profits at higher levels.
Else, they should accumulate only promising stocks because no one is now concerned with fundamentals nor enamoured
with growth of future prospects. This is quite evident from the attitude of the market towards some stocks whose
fundamentals remain strong and the future even more promising.
For example, capital goods stocks have been beaten down badly. But if we look at the Q4 results of L&T, we are left
wondering as to why the stock ha been beaten from the high of Rs.4670 to Rs.2250 i.e. over 50% erosion in its value
despite the excellent performance put in by the company and the generous reward of 1:2 within two years and a record
dividend of Rs.17 per share.
Similar was the case with Hindalco and Grasim about which I had written earlier.
In the stock market there is no logic or rationality to justify the rise or fall in specific stocks or the market in general as a
lot of hidden forces are at work and their roll is never known in advance but emerges only in a post mortem or in an
investigation/enquiry. Can anybody explain why L&T rose upto Rs.4670 and what was the basis for the strong bull
sentiment in this stock? What fundamentals have weakened or the future outlook of the company stands disturbed that
justify the fall in price by 50%? Either the L&T bulls of yester months were foolish to take the stock price as high as
Rs.4670 or the present bear operators are foolish who are selling it below Rs.2500 i.e. below half its peak price when the
company displays strong fundamentals and has a very bright future ahead.
Similarly, Elecon Engineering, another stock from the capital good sector, has been beaten down from its ex-bonus high
price of Rs.343 to Rs.125 despite the company having issued 2:1 bonus and maintain the dividend on its enlarged capital
and has also posted excellent results.
There are hundreds of such stocks whose topline and bottomline have recorded a growth of 25 – 40% at the minimum and
some of them have grown by 50 – 100%. Yet the stock market has discounted these stocks and beaten them heavily. Those
who watched Mr. A. M. Naik, Chairman and CEO of L&T, address the press conference on Thursday, 29
th
May 2008 will
have observed that he repeatedly emphasized that L&T will continue to grow by 30 – 40% per annum till 2010. I wonder
what more could be expected from the CEO of a company, which is known for its reliability and investor-friendly outlook
for decades. The company is professionally run and places great importance on investor relations. But nobody has any
answer why this bluechip rose or fell so sharply except to blame it on the market trend. Is this not a clear display of the
entry and exit of big players in a stock that they felt they could ride their fortune?
Again, if we look at realty stocks, the situation is even more alarming. Stock prices have suffered between 50 – 70%
liquidation. Even market leaders like Unitech, DLF, Sobha Developers and Omaxe suffered 50 – 65% like second and
third-rate stocks like Ansal Housing, Ansal Properties, Lok Housing, Amara Raja Realty etc. DLF fell to Rs.603 from
Rs.1225; Unitech fell to Rs.247 from Rs.546 whereas Ansal Housing crashed from Rs.469 to Rs.140.
What does this price fall reflect? Does it denote any sensibility in realty stocks or any basis for their rise or fall? The same
is the case with cement stocks and now automobile and banking stocks as they have been beaten down badly. Because of
this I sincerely request investors in general
and Money Times' readers in particular that
they should not fall blindly for the gimmicks
and tricks of manipulators. They should keep
their eyes open at all times, apply their mind
and evaluate what is good or bad for them
and whether the ruling stock prices are
justified at any point of time. A cool mind and
an in-depth analysis will reveal the
underlying truth.
Just as Tata Steel was beaten down to nearly
half at Rs.480 when it bought over Navelli but
is now the star performer in the current bad
market so also will strong performers like
L&T, Hindalco and Grasim revive with a
vengeance after the game of the bear
operators gets over. On Thursday, 29
th
May 2008, the Tata Motors stock was similarly beaten down heavily on the
grounds of a takeover abroad. Thus there is no dearth of reasons, whether related or unrelated, to justify the rise or fall in
stock prices. But if investors throwaway their precious stocks in such weak markets and play into the hands of bear
operators, they will be the bigger losers as they will never be able to get back the stock once it gathers fancy again.
The stock market may bounce back anytime as it is resisting hard from being pulled down. If the bears fail to bring down
the Sensex to the 14000 level, then the bulls will emerge and push it above between 17000 – 18000. Investors must,
therefore, either stay away from the market or accumulate good stocks at the bottom. This is the only remedy in the
current market situation.
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th
January 2008)
Templeton Equity Portfolio Managers adopt a long term disciplined approach to investing and use the widely known
philosophy of 'value investing' and seek to generate long-term capital returns.
9
10
Asset Allocation (%)
Period
Returns (%)
Equity
97.6
1 mth
-0.5
Debt
0
3 mths
4
Mutual Funds
N.A
6 mths
-5.6
Money Market
0
1 year
25.5
2 year
63.4
Cash / Call
2.4
3 year
The scheme has been one of the most consistent performers and continues to hold over 10% of its portfolio in Tata
Investment Corporation (TIC), which comprises 15% of the total corpus. Promoted by Tata Sons, it was setup to assist in
the promotion of new companies and projects and partly to act as an investment company. The portfolio churn does not
appear to be very high and it is well-diversified between various sectors. The strategy is to buy and hold, which augurs
well for the investor. Even though the fund appears to be investing in stocks for the short-term, they too are
fundamentally good picks.
149.4
5 year
534
Patient investors looking for stable long-term returns may consider it for investment at declines keeping in mind its cash
market exposure to stocks and sectors.
Standard Chartered Premier Equity Fund
(Recommended in Issue No. 11 dated 28
th
January 2008)
Asset Allocation (%)
Equity
79.42
Period
Returns (%)
Debt
7.73
1 mth
-3.5
Mutual Funds
N.A
3 mths
-7.3
6 mths
-11.3
Money Market
1.87
1 year
35
2 year
76.9
Cash / Call
10.99
The scheme has been a consistent performer in the diversified category. Educomp Solutions represents 5% of this fund
followed by Axis Bank, Kaveri Seeds and Shree Renuka Sugars.
The scheme has recently exited Zee Entertainment and Asahi India Safety Glass and is not a large cap oriented scheme.
Further, it is heavyweight on the Financial Services Segment followed by the Technology Space. Although the scheme has
a good track record, it may appear to lack direction in keeping with the directionless market as most of its stocks from the
mid cap segment have turned risky.
Investors may adopt a wait and watch approach given the volatile market scenario.
- Devangi Bhuta
By Saarthi
STOCK WATCH
Shree Ganesh Forgings Ltd. (Code: 532643) (Rs.39.10) specialises in manufacturing the complete line of stainless steel,
carbon steel and alloy steel forgings for various industries including automotive. In fact, it makes over 2500 specialised
items on piecemeal production and manufactures different varieties of flanges and fittings weighing from 0.5 kg to 1000
kg. Last year, the company had acquired 100% stake in Hertecant N V Belgium and ELFE France from Outo Kumpu,
Sweden and which are reportedly doing well. Importantly, its project to double capacity from 11,000 tonnes to 22,800
tonnes is almost completed. Two press machines with 2500 tonnes and 4000 tonnes capacity and 48 computer numerically
controlled (CNC) robotic machining lines have already been installed. For FY08, the company is estimated to clock a
turnover of Rs.225 cr. with PAT of Rs.17 cr. on a consolidated basis, thereby posting an EPS of Rs.14 on its current equity
of Rs.12.50 cr. The scrip has corrected sharply from its high of Rs.135 and can easily appreciate 50% from current levels.
Despite being a commodity scrip, buy and hold it patiently.
******
Last week, Tamil Nadu Newsprint & Papers Ltd. (TNPL) (Code: 531426) (Rs.100.10) came out with decent Q4FY08
results. Sales improved by 10% to Rs.250 cr. and PAT increased by 25% to Rs.27.40 cr. For FY08 also, it registered 10%
growth in turnover at Rs.939 cr. and 30% rise in net profit at Rs.113 cr. posting an EPS of Rs.16 on its equity of Rs.69.20.
Despite significant debt on its books, the company has good dividend payout ratio and declared 45% dividend (incl.
interim) for FY08 offering it a yield of 4.5% on its CMP. Notably, the company has completed phase-I of its mill
development plan and its current production capacity stands at 260,000 TPA for pulp and 245,000 TPA for paper. By
putting up a turbo generator of 20 MW and taking its total power generation capacity to 86 MW, the company is now self-
reliant for its entire power needs including additional power requirements for anticipated growth over the next few years.
Further to de-risk its exposure to volatile wood pulp prices, the company is estimated to have raised its pulpwood
plantation by another 12,000 acres taking the total to around 31,000 acres. Moreover, it is setting up a mini-cement plant of
400 TPD for producing high grade cement using the lime sludge and fly ash generated in the process of manufacturing
paper. It is also contemplating to construct an IT Park measuring an office area of 4 lakh sq. ft. on its surplus land in a
suburb of Chennai. A good bet in the paper sector.
******
SEAMEC Ltd. (Code: 526807) (Rs.151) is expected to register good growth in revenue for FY08 ending 31
st
December 2008
as there will be minimal dry dock charges and all vessels will be operational. Its first vessel is deployed with Dolphin
Offshore for two years at US $23,333 per day; third vessel is hired by M/s. Superior Offshore at US $55,555 per day
whereas fourth vessel has been let out at US $105,555 per day to M/s. Sime Darby Engineering, Qatar. However, its
second vessel is under dry dock due to explosion/fire and is expected to be ready shortly. Meanwhile, the company has
reported poor performance for the first quarter ending 31
st
March 2008 as it posted a loss of Rs.17 cr. with a decline in
revenue by 40% at Rs.35 cr. Still, it may to register total revenue of Rs.250 cr. with PAT of Rs.55 cr. on a conservative basis
for CY08. On the back of a robust outlook, the company is planning the acquisition of one more vessel by the end of
calendar 2008. Due to strong cash flows and its debt-free status funding the acquisition is not an issue for the company.
Although the company operates in a cyclical industry, it still deserves better valuation and is bound to get re-rated on
announcement of its June 2008 quarter results. Keep accumulating at sharp declines
******
Pondy Oxides Ltd. (Code: 532626) (Rs.22.75) is one of the leading producers of metallic oxides and plastic additives. It
manufactures Zinc Oxide, Lead Sub-Oxide, Litharge Red lead and solid and liquid stabilizers of PVC. In fact, it boasts of
the number one position in the industry with a market share of about 30% in its Plastic Additives Division. Recently, it
declared robust results for Q4FY08. Sales jumped by 30% to Rs.41 cr. whereas net profit shot up by 60% to Rs.1.30 cr.
Accordingly, it ended FY08 with sales of Rs.170 cr. and PAT of Rs.4.50 cr. registering an EPS of Rs.4.50 on its equity of
Rs.10 cr. To concentrate on its core business, the company has decided to dispose off its battery unit in Tamil Nadu. Last
year, the company went in for backward integration by setting up manufacturing unit for Lead smelter thereby
minimizing the cost of inputs to optimum levels. For FY09, it may clock a turnover of Rs.200 cr. with profit of Rs.6 cr. i.e.
EPS of Rs.6 on its current equity. It's trading fairly cheap at an EV of around Rs.40 cr.
By Kukku
FIFTY FIFTY
Investment Calls
* Oriental Hotels' (Rs.277.50) net profit rose 14.69% to Rs.43.49 cr. for FY08 as against Rs.37.92 cr. in FY07. Sales rose
12.66% to Rs.215.90 cr. in FY08 as against Rs.191.64 cr. in FY07.
These results were achieved despite the major renovation programme under execution in Taj Coromandel in which 68
rooms (previous year 66 rooms) were not in operation during the year. Further, the Patio Restaurant was under
renovation, which has since reopened as 'Prego'.
Provision for retirement benefits of Rs.3.49 cr. (previous year Rs.83 lakh) in accordance with Accounting Standard 15 on
'Employee Benefits' issued by The Institute of Chartered Accounts of India.
Consolidated sales are Rs.245 cr. and net profit is Rs.53.13 cr. yielding an attractive EPS of Rs.29.75. The company
declared a dividend of 105%, which is 50% of the total profits.
With strong book value of Rs.145, its market cap is just Rs.500 cr. Long-term investors can accumulate this stock for good
long-term growth.
* Net profit of JMC Projects India (Rs.241.45) shot up by 63.59% to Rs.9.57 cr. in Q4FY08 as against Rs.5.85 cr. during
Q4FY07. Sales rose 90.32% to Rs.309.83 cr. in Q4FY08 as against Rs.162.79 cr. during Q4FY07.
For FY08, net profit rose 92.96% to Rs.30.68 cr. as against Rs.15.90 cr. during FY07. Sales rose 82.92% to Rs.914.98 cr. in
FY08 as against Rs.500.21 cr. during FY07. Full year EPS is around Rs.17 while the book value of the share is around Rs.84.
The company has a strong order book position of Rs.2500 cr., which will enable it to achieve healthy growth in terms of
turnover and profitability. Sharp rise in sales by about 40% and profits by 50/60% is likely over the next two or three
years. The stock looks very attractive around Rs.235 level.
Market Guidance
* Jaihind Projects (Rs.121.70) in consortium has been awarded order of Rs.206.53 cr. from Gujarat State Petroleum Ltd.
for installation and construction services, goods supply within India and mandatory spares supply for the Morbi Mundra
Pipeline Project. There are indications that more such orders are underway over the next few months. Stays invested or
add around Rs.110/115 levels.
11
* Nile Ltd. (Rs.129) has fallen sharply after poor Q4FY08 result, which was due to a sharp fall in lead prices as the
company held some stocks of the same. Moreover, in glass lined equipments division some of the ready equipments
could not dispatched in the last quarter.
From 1
st
April 2008, the company has availed the benefit of expanded capacity in its Lead Division. It is understood that
the company is able to pass on the increase in the input costs in glass lined equipment division to the customers. We may
see improvement in the current quarter onwards. As per informed sources, the outlook of the company is encouraging.
Stay invested.
* As mentioned in the last issue, the results of ECE Industries (Rs.374.95) are not encouraging. But stay invested as long-
term outlook is encouraging.
* Smart investors are accumulating Ranbaxy (Rs.528.65). Stay invested.
* Karnataka Bank (Rs.202.15) is good level for investors to add the scrip to their portfolios.
* The quality of crude extracted from the Amguri blocks enables Assam Company (Rs.31.50) to quote a premium price
due to its lower sulphur content and boost its revenue growth. One broksing firm projects sales of Rs.425 cr. for FY09 with
net profit of Rs.19 cr. yielding an attractive EPS of Rs.5. Good stock to add on reactions around Rs.32 level.
* Partial profit booking was advised in Ruby Mills (Rs.1043) at higher levels. Those who booked profit can switch partly
to Ashiana Housing around Rs.71. Its valuations are attractive as its market cap is just Rs.140 cr.
* Indian Hume Pipes (Rs.702.10) has reported full year EPS of around Rs.31.7 and declared a dividend of 70%. It has
strong order position of Rs.1139 cr. while FY08 sales were Rs.385 cr. It is also entering in to real estate development work.
If the stock reacts to Rs.650 level, investors can add the stock.
* For FY08, net profit of Hindustan Dorr-Oliver (Rs.113.90) rose 47.33% to Rs.22.63 cr. as against Rs.15.36 cr. in FY07.
Sales rose 46.31% to Rs.305.07 cr. in FY08 as against Rs.208.51 cr. in FY07. The company has a strong order book position
and is likely to post similar growth is sales & profits over the next few years. It is good stock for investment at the current
level.
* Tata Motors's (Rs.576.90) results are flat as hinted a few months back in view of rising input costs. Even the current
quarter results may not be encouraging for the auto sector. Investors can exit in case there is a sharp pull-back.
* Valuation of Ashiana Housing (Rs.69.90) is very attractive as its market cap is a mere Rs.135 cr. considering the large
projects it has in hand. The market worth of the company is much above Rs.450 cr. Long-term investors can accumulate
this stock slowly on dips.
* Tips Industries' (Rs.55.05) full year EPS is likely to be around Rs.10. Its outlook, too, is good. Stay invested or add on
dips.
* Sharyans Resources (Rs.182.90) - There shall be good value unlocking of investments. Hold on to the same.
* Jayaswal Neco (Rs.10.20) is being accumulated by knowledgeable investors.
Note: The present fearful conditions are aggravated by the short positions in view of the bearish sentiment created by the
rising crude oil and other raw material prices.
The market is likely to move in line with the
movement of crude oil. If it drops back to US
$110/115 level, the Sensex is very likely to
bounce back to 18000 level and may even cross
it.
It is better to pick fundamentally strong stocks
with good dividend yield in such uncertain
conditions at every fall. Investors can add First
Leasing around Rs.40, Sirpur Paper around
Rs.75, Andhra Sugar around Rs.90 levels.
Investors need to be cautious and should stick
to fundamentally strong companies with
proven track record with good manufacturing
base with good brand values.
Review: Even in such uncertain sentiment
stocks like Rohit Ferro Tech touched new high
of Rs.195, A V Cottax Rs.42, Tribhuvan Hsg.
Rs.83, Cairns touched Rs.343. Investors can
book partial profits in these stocks and lock part of the same in the above stocks.
12
By V. H. Dave
EXPERT EYE
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Vimal Oil & Foods Ltd. (VOFL) (Code: 519373) (Rs.46) has recently announced impressive FY08 results, which went
unnoticed by marketmen.
13
Indian dishes, whether cooked or processed, need edible oil to make them tastier and also to provide longer shelf life. But
with the rise in the price of edible oils, prices of most food articles have also shot up. India is the second largest consumer
of vegetable oils in the world and the fourth largest vegetable oil economy after USA, China and Brazil. But due to
inadequate domestic production of edible seeds, we have to import more than 40% of our requirements.
VOFL, the flagship company of the Rs.1000 cr. Vimal Group of Ahmedabad, was incorporated in 1993 in Mehsana, North
Gujarat. While it is still headquartered at Mehsana, the company has set up offices at Delhi, Mumbai and Ahmedabad.
What started off as a small 50-tonnes refinery has today evolved into a fully integrated, oil-processing complex that is into
seed crushing (200 TPD), solvent extraction (200 TPD) and oil refining (300 TPD). VOFL has an ISO 9001: 2000
certification.
VOFL's earlier concentration on its home state of Gujarat has now expanded to the North and Northeast covering 21
States and has contributed to its growth significantly. The success in new markets is a result of its policy to ensure that
supplies adhere to contractual specifications and satisfy the customer in terms of consistent quality and timely delivery.
This was quite easily achieved by an effective distribution network comprising 26 depots, 950 distributors and over 6 lakh
retail outlets.
During Q4FY08, while sales surged by 51% to Rs.213 cr. and net profit shot up by 154% to Rs.3.2 cr.
For FY08, as sales increased by 30% to Rs.635 cr., net profit jumped by 74% to Rs.7.3 cr. resulting in an EPS of Rs.16.
VOFL has a consistent record of declaring decent dividends. It has continuously paid dividend ranging from 10-20% over
the last five years and paid 12.5% for FY07.
VOFL has a small equity capital of Rs.4.6 cr. and with reserves of Rs.17.7 cr., the book value of its share works out to
Rs.48.90. The promoters and associates hold 33% in its equity capital leaving 67% with the investing public.
Having established a sound infrastructure, coupled with a widespread distribution network, VOFL is entering into high-
growth, ready-to-eat foods segment of the Rs.1,40,000 cr. Indian food industry. The focus of VOFL in forthcoming years
would be on improving yields, getting better quality oilseeds at competitive price and ensuring regular supplies.
India accounts for 7% of the global oilseeds & oil meal production and 10% of the world's consumption of edible oil.
Today, the organised edible oil business constitutes just 15% of the total edible oil market India. A great opportunity thus
lies for branded players as the local availability of oilseeds and oil in Gujarat has improved owing to good rains over the
last couple of years and the same is expected this year as well.
Within the edible oil industry, there is paradigm shift. It is getting more organized as the players are getting fewer but
bigger with larger refining capacities with health-conscious consumers willing to pay more for quality products.
Over the years, the Vimal Group has not only expanded its business through integration and market penetration but has
also diversified into new areas. From edible oil and de-oiled cakes, it has diversified into milk and milk products,
electrical, submersible pumps, paints & varnish, wall tiles & micro minerals.
The consumption of edible oil has been increasing at 8% every year and is around 12 million tonnes a year of which 5
million tonnes is by way of imports. The demand for edible oil is projected to reach 15 million tonnes by 2010 and 21
million tonnes by 2015.
Domestic edible oil prices are expected to move in tandem with international prices with India's increasing dependence
on imported oils, which now accounts for almost 40% of the total consumption.
The per capita consumption of edible oil in India is 12.7 kg whereas the average per capita consumption in other countries
is 20 kg. Thus, there is a huge scope for rise in the consumption of edible oil in India especially with the rise in disposable
income and rising population level.
Going by the extremely bright prospects of the industry, VOFL is likely to achieve sales of Rs.850 cr. with a net profit of
Rs.12 cr. in FY09, which would result in an EPS of Rs.26.
The share of VOFL is currently traded at Rs.46 discounting the estimated FY09 EPS of Rs.26 by only 1.9 times against the
industry average P/E of 14. Investment in this share is likely to double in 6-9 months. The 52-week high/ low of the share
has been Rs.73/25.
******
If the market grapevine is to be believed, a group is active in mopping up the shares of KIC Metaliks Ltd. (KIC) (Code:
513693) (Rs.38.10) in anticipation of excellent FY08 results.
KIC, formerly known as Kajaria Iron & Steel, manufactures pig iron and CI casting at its plant at Durgapur, West Bengal.
It had come out with an IPO in October 1994 at a premium of Rs.30. The capacity of its pig iron is 1,10,000 TPA and that of
the CI casting unit is 18,000 TPA. The technology is from Korf, Brazil. R K Kajaria heads the company.
KIC converts major part of its pig iron into castings and exports to countries in West Europe, USA, UK and West Asia. Its
major casting products are cast iron, manhole covers and cast iron gully gratings and covers.
Coming to its future prospects, pig iron is the basic raw material for most engineering products in the construction and
capital goods industry. It is also used as raw material in the foundry and engineering industry. With significant growth
in user industries like automobiles, construction and foundries, the demand for iron & steel has increased significantly.
During FY07, the plant produced 99,680 tonnes of hot metal against 72,969 MT in FY06. The production of CI castings was
7,945 tonnes compared to 7,982 MT in FY06.
During FY07, KIC sold 89,954 tonnes of pig iron compared to 62, 984 tonnes in FY06. The export of CI castings was 8,383
tonnes compared to 7,454 tonnes in FY06. It also sold 7,952 tonnes of cement compared to 6,033 tonnes in FY06.
It commissioned its hot blast stove in January 2007, which has resulted in fuel efficiency and higher productivity.
KIC's equity capital has gone up to Rs.5.15 cr. from Rs.4.69 cr. due to allotment of shares to promoters at Rs.55 per share.
With reserves of Rs.38.4 cr., the book value of the share works out to Rs.78.6. During FY07, KIC invested Rs.15 cr. taking
its gross block to Rs.79 cr.
The promoters hold 43% in its equity capital, Punjab National Bank holds 3.4%, PCBs hold 20.6% leaving 33% with the
investing public.
KIC is now an iron making unit producing pig iron, a major part of which is used in the foundry and the balance sold in
the market. It is moving forward to reach its ultimate goal of not only a steel making unit but also making its steel
making capacity at a level comparable to large integrated mini steel plants.
The total production of pig iron in India has increased from 1.59 million tonnes in 1991-92 to a peak level of 5.22 million
tonnes in 2003-04 but dropped to 4.96 million tonnes in 2006-07.
The production of pig iron as per statistics (provisional) released by the Joint Plant Committee (JPC) attached to the
Ministry of Steel for FY07 is at 4.96 million tonnes as against 4.69 million tonnes in FY06.
On the domestic front, India is the fifth largest steel producer with 49.39 million tonnes of steel. The apparent steel
consumption also grew from 39.19 million tonnes in FY06 to 43.74 million tonnes in FY07 recording an impressive growth
of 11.6%. This augurs well for the prospects of pig iron manufacturers.
There was robust growth in the global demand for iron & steel driven mainly by the increasing Chinese appetite for steel
followed by USA and the European Union by virtue of the resurgence in their economies. India is expected to become the
second largest steel producer after China by
2015-16.
July – September 2007
EBG Quarterly Performance:
The demand for steel will be much higher
due to industrial growth, infrastructure
development and the large house-building
activity in the country. The per capita
consumption of steel in India will,
therefore, go up.
100% once again
During July – September 2007, which is the fourth 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.
KIC envisages further cost reduction by
putting up a sinter plant using low-priced
iron ore fines, putting up a power plant
using the blast furnace gas, which is
currently lost in the atmosphere. The major
thrust of KIC is to enhance the productivity
of its blast furnace to the maximum
possible.
14
With expansion in various areas as outlined
above, KIC would emerge as a mini-
integrated steel plant of sizeable capacity
and produce steel at cheapest cost. It is
likely to install an electric steel making
facility to produce steel billets initially and
subsequently put up a rolling mill and
garner maximum contribution from the
available facilities.
For FY08, KIC is expected to post sales of
Rs.215 cr. and earn a net profit of Rs.8.5 cr.,
which would give it an EPS of Rs.15. The
book value of the share would rise to Rs.93.
At the CMP of Rs.38, the share is trading at
a P/E multiple of 2.9 against the industry
average P/E ratio of 16 for the casting
industry. Investment in this share has the
potential to appreciate by more than 50% in the medium-term. The 52-week high/low of the share has been Rs.94/30.
Issue
Dated
Scrip
Buy
Price
Highest
price since
recom.
Growth
%
04/07/07
Gujarat Ambuja Exports
31.85
105
230
11/07/07
Superhouse Ltd.
51.00
57
12
18/07/07
Uniflex Cables Ltd.
37.60
70
86
25/07/07
Innocorp Ltd.
35.55
70
97
01/08/07
Lokesh Machines Ltd.
111.35
166
50
08/08/07
Vinati Organics Limited
78.00
183
134
15/08/07
Jindal Photo Ltd.
124.95
429
243
15/08/07
Elegant Marbles & Grani
48.15
92
92
22/08/07
Pioneer Distilleries
51.70
139
169
29/08/07
Mahalaxmi Seamless Ltd
43.90
71
62
29/08/07
Idea Cellular Ltd.
116.75
161
38
05/09/07
Hindustan Tin Works Ltd
43.90
65
48
12/09/07
APW President Systems
140.40
217
55
19/09/07
Control Print (I) Ltd.
75.00
112
49
26/09/07
Spanco Telesystems
217.00
273
25
EBG for sure profits
******
Kamanwala Housing Construction Ltd. (KHCL) (Code: 511131) (Rs.135.10) is engaged in the real estate business since
1984 and has completed many prestigious residential and commercial complexes. Apart from the construction business,
the company has a mini steel plant at Nashik, Maharashtra with a capacity of 60,000 TPA. The company is diversifying
into the diamond manufacturing and trading business, in which it foresees good prospects. It has already approved the
amalgamation of Doongursee Diamond Tools with itself.
Construction work is on in full swing at its commercial project in the Bandra-Kurla complex in Mumbai having a land
cost of Rs.57 cr. for 75,000 sq. ft. areas.
KHCL also has a residential project under progress at Malad (West), Mumbai, having land cost of Rs.33.3 cr. for 2,03,000
sq. ft. area along with another residential project at Santacruz (West), Mumbai having land cost of Rs.35 cr. for 60,000 sq.
ft. area.
The redevelopment/upliftment work has commenced at its property at Opera House, Mumbai, known as 'Vallabh
Terrace' for 15,000 sq. ft. area worth Rs.76 cr. for subsequent conversion of tenancy rights into ownership rights.
Construction is also expected to commence on a plot of land admeasuring 10,010 sq. mt. at Turbhe, Navi Mumbai, worth
Rs.15.25 cr. KHCL has also acquired development rights of a commercial/residential property at Andheri, Mumbai,
having a total value of Rs.40.5 cr. for 1,00,000 sq. ft. area for which legal formalities are under progress.
During Q4FY08, its net profit jumped by 84% to Rs.9.4 cr. on 119% higher income of Rs.28.5 cr. During FY08, its net profit
shot up by 88% to Rs.24.4 cr. on 16% increased revenue of Rs.96 cr.
KHCL's equity capital is Rs.5.7 cr. and with free reserves of Rs.61.6 cr. it share has a book value of Rs.119. The promoters
hold 45% in its equity capital, PCBs hold 20%, foreign holding is 2% leaving 33% with the investing public.
KHCL has entered into joint venture (JV) agreement having 20% share with Prajay Engineers Syndicate and others for the
development of a land admeasuring 35 acres at Hyderabad for which it has contributed Rs.6.5 cr. The necessary
formalities for the project will be initiated in due course of time.
Construction on the company's plot in
Hyderabad admeasuring 2 acres worth Rs.1.6
cr. will commence soon. KHCL has also
negotiated a JV residential project at Mahim
(West), Mumbai, worth Rs.15 cr. for 40,000 sq.
ft. in which it has 50% share.
15
KHCL is in the process of undertaking a
series of new projects to shore up its presence
in new locations. It has started to develop the
slum rehabilitation projects for the middle
income group. Mumbai has more than 60% area under control of Slum Development Authority.
The important feature of the slum areas for development is that they are located in the heart of the city and marketing
them is not a problem. Once KHCL undertakes such projects, it will have an attractive business in Mumbai for another 25
years.
The commercial & residential projects in the BKC (Bandra-Kurla Complex) and other lucrative areas in Mumbai will
surely help improve the cash inflows and strengthen its financial position. These projects will enhance the image of KHCL
in the construction industry. Mumbai, being the Financial Capital of India, the BKC area is considered as the most
prestigious business centre of India.
KHCL has embarked on locational diversification through new projects at Hyderabad, a city witnessing explosive
growth. Its projects are distinguished by the high quality of construction and attention to detail. Moreover, they are all
located in prime areas.
The outlook for the company appears extremely bright. Seeing the good potential in the future, KHCL has proposed a
liberal 1:1 bonus ratio and declared 25% dividend.
During FY09, its revenue is likely to move up by 60% to Rs.150 cr. and net profit up by 50% to Rs.38 cr. This would result
in an EPS of Rs.65 (Rs.32.5 on post-bonus equity).
At the CMP of Rs.135, the KHCL share is trading cheap at a P/E of just 3.4 its FY08 EPS of Rs.43 and 2.3 times its
projected EPS of Rs.65 for FY09. Investment in this share is likely to appreciate by more than 50% in the medium-term.
The 52-week high /low of the share is Rs.229/68.
By Nayan Patel
Bharat Gears Ltd.
BSE Code: 505688
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NSE Code: BHARATGEAR
Last Close: Rs.41.50
Bharat Gears Ltd. (BGL) is a global player in gear technology and India's largest gear manufacturer. It is a global supplier
of automotive gears and heat treatment furnaces. The company manufactures a wide range of Ring Gears and Pinions,
Transmission Gears and Shafts, Differential Gears, Gear Boxes
mostly for the automotive industry. The company has a long client
list in India as well as abroad.
BGL has an equity of just Rs.7.82 cr. wherein the promoters hold
52.49%, Reliance Capital holds 6,87,295 shares (8.79%) and LIC holds
2,60,069 shares (3.33%).
The company has posted marvellous numbers for the March 2008
quarter. Net profit jumped to Rs.5.34 cr. from Rs.2.21 cr. on quarterly
basis and net profit jumped 14.68% to Rs.10.08 cr. on yearly basis.
The company posted an EPS of Rs.12.59 on a yearly basis and has
declared 10% dividend. But the stock trades at a P/E ratio of just 3.5.
Buy with stop loss of Rs.38. On the upper side, the stock will go up to Rs.46. Cross over will take it to Rs.50.
The company's 52-week high/low is Rs.89/35. The stock is now available around its bottom level. At the current level, it
is a risk-free investment.
16
Magma launches Personal Loan
MONEY FOLIO
Magma Shrachi Finance Ltd. (MSFL), among the fastest growing financial services companies, has entered the business of
providing personal loans. The company plans to evolve as a sizeable player in the personal loan market and has launched
this business from 54 locations across India and has set up a team to manage the business. Launching efforts have been
completed in the North and South and by end June it will roll out the product in all locations. The company targets a
business of Rs.30 cr. a month.
MFSL will offer the product to salaried, self-employed professionals and self-employed non-professional and will go for
direct sourcing with own sales, credit and collections people.
Kohinoor Broadcasting Q4 net up at Rs.8.14 cr.
Kohinoor Broadcasting Corporation Ltd has reported a net profit of Rs.8.14 cr. for Q4FY08 over Rs.48.71 lakh in Q4FY07.
Sales rose to Rs.62.59 cr. in Q4FY08 from Rs.6.06 cr. in Q4FY07 while EPS stood at Rs.3.82 in Q4FY08 compared to Rs.3.24
in Q4FY07.
For FY08, its net profit increased to Rs.18.73.04 cr. compared to Rs.1.33 cr. in FY07 while sales zoomed to Rs.162.40 cr.
during FY08 from Rs.22.63 cr. in FY07 and the EPS rose to Rs.3.58 from Rs.2.22 in FY07.
Sujana Metal Products acquires three steel units
Sujana Metal Products Ltd. (SMPL), part of the well-diversified Rs.3000 cr. Sujana Group has announced the acquisition
of Saritha Steels in Visakhapatnam, Glade Steels in Hyderabad and Sree Ganga Steels in Chennai.
SMPL has pumped in Rs.180 cr. for these acquisitions, modernisation and expansion of their capacities. The rapid
expansion plan undertaken by SMPL has positioned it as the company with the widest range of long steel products in the
country and will help it to cater to the fastest growing realty and infrastructure markets in South India.
SMPL has targeted 1 million tones capacity and touch sales of Rs.3100 cr. by 2010.
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.
Review
Last week, we recommended KNR Construction
and Phoenix Lamps. But due to very bad
sentiment in cash stocks, KNR Construction is going
down while Phoenix Lamp closed Rs.5 up against
the last closing. We, however, maintain that the
fundamentals of both these stocks are very good
and investors can average at lower levels and stay
invested for 4-6 months as we expect very good
returns from both these stocks.
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