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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 27
Monday, May 19 – 25, 2008
Pages 21
Nervous & tentative
sentiment prevails at higher levels
By Sanjay R. Bhatia
The markets displayed strength on the back of good global cues last week. Fall in crude oil prices have not only helped
global markets but also Indian market to rally. Traders and speculators were seen taking fresh positions while cutting
their existing short positions. The market breadth has remained positive amidst higher volumes. Incidentally, FIIs
remained buyers in the cash as well as the derivatives segment. Mutual Funds, on the other hand, were net sellers using
higher levels to book profits.
The global cues have remained positive. The crude prices
have softened a bit while global markets rallied on the back
of positive US economic data. On the domestic front, the
Indian basket crude continued its uptrend even as the
Finance Minister declined to hike auto fuel prices and also
did not agree to share 57% revenue loss of oil-marketing
companies. Inflation continued to remain a cause of concern
even though it shows signs of flattening out on a week-on-
week basis. But on a year-to-year (YoY) basis, it continues to
touch new historic highs due to the base effect. Now, it is
important that the markets witness follow-up buying at
higher levels especially as the benchmark indices near their
resistance levels.
Even though the markets have flared up on back of good global market cues and fall in crude prices, it has not been on
higher volumes. The market sentiment remains nervous and tentative at higher levels. Hence profit-booking and selling
pressure will be witnessed. In the meanwhile, the markets would continue to take cues from global markets and crude
prices. The rupee is likely to continue to depreciate against the dollar and in all likelihood will touch the Rs.44 level in a
few months. Stock specific activity will be witnessed amidst intermediate bouts of volatility and choppiness in the
truncated trading this week.
On the upside, the Sensex faces resistance at the 17600, 17824 and 18115 levels and has support at the 17300 and 16608
levels. On the upside, the Nifty faces resistance at the 5300 and 5463 levels and 5156 and 5025 are its important support
levels.
Traders and speculators are advised to buy Shipping Corporation of India with a stop loss of Rs.239 and a target price of
Rs.330-350.
1
Caution! Drive slow
By Fakhri H. Sabuwala
What more can you expect but to abandon the car and take public transport when crude oil touches $125 a barrel and gas
approaches $4 a gallon. This way, the Indian economy shall move out from the fast lane as fighting the oil-fed inflation
becomes the priority for governments and central banks around the world.
But given the political compulsions, the Finance Minister is in an election mode and an anti-incumbency wary
government will not mind sacrificing growth to pacify the divine electrorate. The stock market had anticipated this and
was, therefore, sulking. Little wonder, no rally forecasts come forth and talks of sideway movements or a rangebound
swings are on.
The worst possible outcome for our economy is now unfolding itself. Look at the speed with which the dollar is
appreciating or the rupee depreciates and the strong commodity prices particularly crude oil. This will invite tighter
monetary control and a downside risk to growth. How long will the past three weeks long rally of over 1000 points last?
Is it not out of tune with the stark realities?
Petrol and diesel shortages could be a real threat and play havoc. This 'oil boil' may lead to withdrawal of FII money as
the three economic angels of high interest rates, high growth and a rising currency, known as the impossible trinity, taper
off.
During the week, Karnataka completed its initial round of polling and each night the IPL 20/20 fever rose as the fours
and sixes overshadowed the dress and dances of the cheerleaders. But the rising temperature and the onset of the
monsoon may augur well for the bourses. The Sensex has remained in the vicinity of 17K and is looking for a trigger on
either side. Since politics and economics are pulling the benchmark in opposite directions. And amidst such stress, the
marketmen are angling smartly for a big catch. Typically, a year when every rupee has to be earned the hard way!
What's cooking?
* Tata Communications (formerly VSNL) has partnered with US based Sonus to build a network to offer phone calls over
the internet globally. A positive for the company.
* Jindal Stainless along with Indonesian mining major, Antam, has signed an agreement to jointly develop a nickel
smelting and stainless steel plant at an investment of about Rs.841 cr. in Indonesia. The Jindals shall have 45% stake and
Sulwasis of Indonesia shall hold 55% share and shell out US $700 million as investment.
* Bharti Airtel is featured on the front pages in its attempt to woo MTN and the record billions it is going to raise.
Whether it is a joint venture, a merger or just acquiring a stake is too early for us to know. Amidst all this, what went
unnoticed was the small yet a strategic move in the telecom market to launch the iPhone later this year. Watch out for the
long queues to get this gizmo.
* Whenever Bharti sparkles, RCom illuminates and in its slow paced moves floats a joint venture with telecom equipment
provider Alcatel-Lucent for network management services and expects a $500 million revenue in the first five years.
RCom shall hold 33% stake while the French-American major will hold the major 67%.
From the Analyst's desk
Glenmark Pharma: Surpassing its own guidance thanks to the strong growth in its base business powered by the US
market and the receipt of US $15 million of R&D income for 'Oglemilast' from Forest Labs. Consolidated revenues leap by
69% YoY to Rs.570 cr. and EBIDTA margin expands by whopping 920 bps to 39%. At the analysts meet, Glenmark
enhanced its earning guidance to 8% for FY09 and 15% for FY10.
The key triggers for FY09 are additional US $15 million milestone payment from Forest Labs, two more licensing deals,
and last but not the least the listing of Glenmark Generics with a business of US $2 billion and a consistently strong
performance of the US business.
It's a buy, buy and buy for medium-to-long-term investors.
Can Sensex sustain at higher range?
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 16641.45 and maintained its low at
16546.55. Further it recovered back to form a weekly high at 17497.36
and closed the week at 17434.94 and thereby showed a net rise of 686
points on week-to-week basis.
The Engulfing Bear candlestick pattern that was formed two weeks
back and last week's bearish pattern was countered by a bullish
candlestick pattern namely the Piercing Line. The bears who were
dominant two weeks back got an equally strong reply last week. The
support of 16500-16400 range held well by the Sensex and moved to
test the weekly resistance of 17422 by attaining a high at 17497.36.
Weekly resistance will be at 17600-17773. Weekly support will be at
2
17159-16821-16546. A fall and weekly close 16546 will once again upset the positive rhythm that was built last week.
Sensex Wave Analysis
WEEKLY UP TREND STOCKS
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
Wave B-14677 to 17735
Wave C- 17735 to 17434
(Current ongoing move)
Internal of Wave C
Wave i- 17735 to 16546
3
Wave ii-16546 to 17497
(Current ongoing move)
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
1720.00 1328.3
1578.3
1686.7
1828.3
2078.3
80.5
1611.8
28/03/08
GLENMARK PHAR
668.00 594.3
641.3
661.7
688.3
735.3
77.2
646.2
28/03/08
CAIRN INDIA
299.65 231.2
273.9
290.9
316.6
359.3
74.1
270.2
9/05/08
STERLING BIOTEC 207.65 153.1
187.1
200.6
221.1
255.1
72.9
200.5
14/03/08
NESTLE INDIA
1841.00 1679.0
1784.0
1832.0
1889.0
1994.0
71.4
1748.8
28/03/08
WEEKLY DOWN TREND STOCKS
If the high of 17735 is
crossed then the above
wave count will not be
applicable
Alternate Wave count
will be as follows:
Wave A-21206 to 14677
Wave B-14677 to 17735
Wave a-14677 to 17735
(Current ongoing move)
Internals of Wave a
Wave i-14667 to 16452
Wave ii-16452 to 15464
Wave iii-15464 to 17735
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
THERMAX
458.20
415.5
445.5
462.7
475.5
505.5
25.84
485.11
7/03/08
SOBHA DEVELOP
558.80
515.9
545.9
562.9
575.9
605.9
26.50
588.85
9/05/08
MADRAS CEMENT 2930.00 2786.7
2886.7
2943.3
2986.7
3086.7
27.40
3086.00
2/05/08
BGR ENERGY SYS 440.25
397.9
424.9
436.4
451.8
478.8
27.80
446.52
9/05/08
GRASIM INDUS
2290.00 2069.7
2213.7
2281.3
2357.7
2501.7
28.20
2412.00
2/05/08
PUNTER'S PICKS
Wave iv-17735 to 16546
Wave v-16546 to 17497
(current ongoing move)
The current Wave v can
get terminated in the
17735 to 18431 range.
Once the 5 waves are
complete it will complete
Wave a of overall Wave
B. Subsequently, a slide
down to Wave b of Wave
B will begin with a
downward direction.
Alternative Count of
Wave B
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
DEEPAK NITRITE
506401
134.10
131.65
140.00
119.00 153.0
174.0
1.25
ENT NETWORK (INDIA)
532700
430.55
411.00
438.00
395.00 464.6
507.6
0.96
GILLANDERS
ARBUTHNOT
532716
82.75
81.40
84.30
77.80
88.3
94.8
1.12
MACMILLAN INDIA
532440
176.00
172.00
184.95
161.20 199.6
223.4
1.60
BOSCH
500530 4291.00
4175.00 4298.00
4071.00 4438.3 4665.3
0.67
SAH PETROLEUM
532543
18.95
18.60
19.95
16.70
22.0
25.2
1.34
DEEPAK NITRITE
506401
134.10
131.65
140.00
119.00 153.0
174.0
1.25
Wave a-14677 to 17735
BUY LIST
Scrip
Last Close Buy Price Buy Price Buy Price Stop Loss Target 1 Target 2
Monthly
RS
CAIRN INDIA
299.65
282.70
274.95
267.20
242.10
348.4
414.1
98.33
Wave b-17735 to 16546
Wave c-16546 to 17497
(Current ongoing move)
Wave c to move higher beyond 17735
Conclusion
If the low of 16546 is not
violated in days to come,
we can look up towards
range of 17735-18431.
Strategy for the week
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
ASIAN PAINTS
1217.00
1243.55 1257.00
1270.45
1314.00 1129.6
44.65
WELSPUN-GUJARAT STAH
380.55
383.63
390.00
396.37
417.00
329.6
40.64
Overall strategy still remains to exit on a rally to 17735-18431. Traders can take benefit from trading opportunities to
trade long but ensure to exit on the rally to 17735-18431. Exit all long positions on fall and close below 16546.
* Som Distilleries counter is going strong with continuous circuit filters after its robust Q4FY08 results. With a major
expansion of Rs.55 cr. in land, the share is likely to double in the medium-term.
TOWER TALK
* Tulsyan NEC is being cornered by persons in the know as its FY08 EPS of Rs.27 went unnoticed by marketmen.
Analysts project an EPS of Rs.40 for FY09 and a share price target of Rs.175. Its book value of Rs.95 and small equity of
Rs.5 cr. makes it a bonus candidate.
* Market grapevine has it that Numeric Power, which is heading to post an EPS of Rs.90 in FY08, is likely to consider a
liberal bonus. The share is poised to touch Rs.800 mark.
* Micro Technologies with an EPS of Rs.50 is going cheap. Some traders have accumulated the stock in anticipation of it
touching the Rs.500 mark in one year.
* Repro India is being accumulated by the circles close to the management in anticipation of excellent results. It is poised
to touch Rs.150 soon.
* Lloyd Electric's takeover of Luvata Czech, a Fin pack heat exchanger manufacturer in Europe, will add Rs.250 cr. to
revenue. With a likely EPS of Rs.25, persons in the know project a share price of Rs.150 in the near term.
* Celestial Labs attracts good volumes on hopes of an EPS of Rs.12 for FY09 and a share price of Rs.75.
* Godawari Power is going cheap. It has been allotted coal and iron ore mines, which would cut costs and push up
earnings. Sources expect an EPS of Rs.35 for FY08 and Rs.66 for FY09 and the share can touch Rs.350 in the medium-term.
* A Mumbai based operator specialising in micro caps is extremely bullish on Accurate Transformers. Once he acquires
his quantity, he will take the scrip to newer highs. Keep a watch.
* Phillips Carbon is setting up carbon black facility of 1,00,000 MTA and co-generation power plant of 16 MW in phases
in Vietnam as a joint venture with subsidiaries of Vietnam National Chemical Corporation. Scrip looks interesting.
* Kamanwala Housing is being aggressively accumulated by some shrewd operators. Scrip may continue its vertical rise
in coming weeks as well.
* LG Balkrishnan & Bros is demerging and transferring its forging business to LGB Forge Ltd., which will be listed
separately. Accordingly, shareholders will get 1 share of LBG Forge for every share in LG Balakrishnan. As the record
date is 28th May, the scrip may remain in action.
* Asahi Songwon a chemical manufacturer has been recommended for strong gains with a target of Rs.200 by a leading
research analyst firm. The stock closed at Rs.47, which is far below its IPO price of Rs.90.
* Sandur Manganese witnesses interested buying in view of the strong demand for its manganese and iron ore. Investors
who bought at lower levels can book partial profit even though the company management is bullish for the current year.
* Ankit Metal is being eyed by savvy investors as it has embarked on a massive expansion plan. Investors seem to be
betting on the good performance of the management in the group company Rohit Ferro.
* With 65% market share in the wine business, Champagne Indage, a leading broking house has put a target of Rs.800+.
* Amara Rajas Batteries' target of $1 billion (Rs.4200 cr.) turnover in five years makes it a scrip to power your portfolio.
* Opto Circuits may report an EPS of Rs.30 for FY10, over twice the current EPS. Analysts see the stock crossing its 52-
week high of Rs.581.
* XL Telecom plans to manufacture 3 million CDMA handsets and supply them to Tata Teleservices, MTNL and BSNL.
* The grey market premium for Gokul Refoils was quoting Rs.22-24 and Anu's Labs at Rs.21-23.
By Saarthi
BEST BETS
Patels Airtemp India Ltd. (Code: 517417)
Rs.64.90
Incorporated in 1973, Patels Airtemp (India) Ltd. (PAL) is a leading designer, manufacturer and supplier of the complete
range of heat exchangers such as shell & tube type, finned tube type and air cooled heat exchangers, pressure vessels,
columns, air-conditioning & refrigeration equipments like coils, air handling units, fan coils, fans & blowers, condensers
& chillers etc. It also makes Dow therm condensers, inter coolers and after coolers, oil coolers, air heaters, HP & LP feed
water heaters, LPG bullets etc. These industrial process plant equipments are supplied to leading industrial sectors like
power projects, refineries, fertilisers, cement plants, petrochemicals, engineering, pharmaceuticals, textiles, chemicals etc.
The company also undertakes turnkey projects in the highly specialized and related area of Humidification, Ventilation
4
and Air-Conditioning (HVAC). Its expertise in HVAC project includes industrial air conditioning, pharmaceutical plant
air conditioning, textile humidification, pressurisation and ventilation systems, evaporative cooling systems etc. Besides,
it also undertakes project work for air-conditioning multiplexes, offices, educational institutions, halls, theatres, hospitals
etc.
PAL has two manufacturing units at Mehsana and Ahmedabad in Gujarat. It has technical collaboration with M/s. Tek
Fins Inc., USA, for design and manufacture of air-cooled heat exchangers. To support its turnkey HVAC projects, the
company has backward integrated its facility to manufacture packaged air conditioners, ductable air-conditioners, split
air-conditioners, window air-conditioners etc. to cater to the domestic industrial segments. Importantly, all the products
that it manufactures in the plant are designed in-house using the most advanced software.
The company is accredited by the American Society of Mechanical Engineers (ASME) and the National Board of Boilers &
Pressure Vessels. Hence, its products have the coveted ASME `U' Stamp authorisation. It maintains quality standards to
satisfy third party inspections from leading agencies such as Lloyds, EIL, BVIS, IBR, CCOE, PDIL, LINDE, H&G,
Technimont ICB, UHDE, CHEMTAX, BAXCOUNSEL etc. For updating its heat transfer technology, it has also become a
member of HTRI (Heat Transfer Research Inc., USA). It caters to a very huge clientele including leading companies across
the industry and is an approved supplier for most of them. Although miniscule, it also exports equipments to Germany,
Italy, Indonesia, Sri Lanka, UAE, Jordan, UK, Ukraine etc.
Due to strong industrial growth and the fast growing economy, this engineering fabrication company is doing extremely
well. For the first nine months ending 31st December 2007, its sales improved by 20% to Rs.36 cr. but its net profit shot up
by 130% to Rs.3.70 cr. on the back of better operating efficiency and lower interest cost. Accordingly, it is expected to end
FY08 with a topline of Rs.50 cr. with a bottomline of around Rs.5 cr. This works out to an EPS of Rs.10 on its equity of Rs.5
cr. Considering its healthy order book position, the company can register 20-25% growth in FY09, which means an EPS of
Rs.12-13. Currently, this fast growing engineering company is trading fairly cheap at a P/E multiple of less than 6 and is
available at a market cap of merely Rs.30 cr. Investors are strongly recommended to buy this scrip at current levels with a
price target of Rs.100 within a year.
ANG Auto Ltd. (Code: 530721)
Rs.98.30
ANG Auto Ltd. (ANG) was established in
1991, as a merchant exporter named ANG
Exports to market automotive components to
some US based companies. Subsequently, it
set up a plant to manufacture brake pins &
rollers, camshafts, brake shoes and other
critical components like dummy axles, gear
sets, slack adjusters etc. Later in 2005, it
widened its product portfolio by merging two
group companies viz. ANG Auto Pvt. Ltd.
and ANG Automotive Industries Pvt. Ltd.
with itself. Today, under the leadership of
Premjit Singh, ANG is among the few
companies in the world to be completely
integrated – from manufacturing components
to sub-assemblies and assemblies and finally
to vehicles. It has a portfolio of 15 different
products with expertise in two critical auto-
component systems i.e. braking system and
transmission system for heavy commercial
vehicles, trailers and other vehicles. Notably,
with the commencement of its trailer plant in
April 2007, ANG has become the largest
trailer manufacturing company in India with
a capacity of 3600 trailers per year against a
cumulative competing capacity of 600 trailers
per year.
5
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As on today, ANG has eight world-class
manufacturing facilities with five units in
Noida, one in Nalagarh – Himachal Pradesh,
one in Faridabad - Haryana and latest trailer manufacturing unit in Sitarpur - Uttarakhand. From July 2007, the company
started producing trailer axles based on a new friction welding technology, which is the first of its kind in India. Recently,
it also launched two unique products viz. the automatic slack adjuster and the single piece dummy axle, which have
become the major growth drivers for the company. Its automatic slack adjusters offer a continuous running life of 75,000
km (before adjustment) compared to the prevailing industry standard of about 20,000 km and it has even obtained a US
patent for it. ANG is among the selected companies in the world having a patented 'auto slack' developed and engineered
by its in-house technical team. However, the biggest achievement by the company is its trailer manufacturing plant set up
by ANG Auto Tech, a 75% subsidiary in collaboration with FUWA Engineering of China. Unbelievably, the entire trailer
except for the tyre, rim and spring leaf is manufactured in-house enhancing asset utilization, cost management, quality
control and superior return on capital employed. Hence, within four months of commencement of operations, ANG
possesses the expertise to offer 18 trailer variants in multiple configurations (24 ft, 32 ft, 36 ft and 40 ft) customised around
different payloads with different structures and attachments for diverse applications. In order to become the largest
trailer manufacturer in Asia, ANG is augmenting its capacity to 6000 trailers per year at an investment of Rs.36 cr. and
expects to start operating in FY09. This product commitment resulted in Ashok Leyland selecting the company for an
alliance partnership whereby ANG would manufacture trailers and Ashok Leyland would market them as a co-branded
product. This five year contract is valued at Rs.1500-1800 cr., which is a huge breakthrough for ANG.
Currently, ANG derives 70% of its revenue from exports to the quality conscious US and European markets in addition to
Australia, Brazil and Mexico. Going ahead, the company has drawn up a blueprint to extend a step further into the
manufacture of suspension systems and is also looking at backward integration to set up a forging unit at Bhiwadi,
Rajasthan at a capex of Rs.37cr. To consolidate its operations further, the company has also decided to merge ANG Auto
Tech with itself. Incidentally, the market for trailers in India is virtually unexplored although it forms a major mode of
logistic solution in developed economies due to cost and other factors. Therefore, given the massive investment and rapid
developments in road infrastructure, the future prospects of trailers are mind-boggling. Earlier in May 2007, the company
raised around Rs.50 cr. through the FCCB route to be converted into equity shares at Rs.325 per share. However, due to
industrial slowdown and the rising input costs, it may end FY08 with sales of Rs.120 cr. and PAT of Rs.16 cr. on a
standalone basis. This translates into an EPS of Rs.13 on its current equity of Rs.11.90 cr. while the diluted EPS works to
Rs.12. Meanwhile, since ANG Autotech has started commercial production of trailers from FY08 only and the future
prospects look promising, the management has taken the approval for a buyback of equity shares up to 24.30% of the total
paid up equity capital at a maximum price of Rs.215 per share finding current the valuations very cheap. However, it is
yet to begin the actual buying and investors are recommended to buy the scrip at current levels as it can appreciate by
50% from hereon in a year's time.
Vesuvius India Ltd.: Add on declines
ANALYSIS
By Devdas Mogili
Vesuvius India Ltd.(VIL), formerly known as Vesuvius Refractories, is a 17-year old Kolkata based company established
in 1991. The company was promoted by the Vesuvius Group of UK in association with Biswajit Gupta and its name was
changed to the present one in 1992. Saibal Kumar Gupta is the chairman while Tanmay Kumar Ganguli is the managing
director of the company.
The Vesuvius Group, which holds about 55.57% of the share capital of the company, is a world leader in the design,
engineering, manufacture and delivery of refractory products, systems and services for high-technology industrial
applications. The group is present in 30 countries on 5 continents, with 50 manufacturing units, 7 R&D centres and
numerous sales agencies.
VIL manufactures specialised ceramics required in the continuous casting process of steel making. Its products include
shrouds, monoblock stoppers, submerged nozzles and tundish nozzles. As a part of the backward integration process, the
company has installed a mixing plant and a second plant to expand the production capacity.
VIL has adopted both the organic and inorganic route for expansion. As part of its inorganic growth, the company
acquired KSR International (India) Ltd., and has also acquired the monolithic plant of Carborundum Universal at
Visakhapatnam. It has also assigned the technical know-how from Answer Technologies Inc, USA, for the manufacture of
Blast Furnace Casthouse Refractories and General Purpose Pumpables.
In 2000-01, it ventured into the non-steel industry with its monolithics business using new technology. It has acquired the
crucible manufacturing unit of Diamant Carbon & Graphite Products Ltd. at Mehsana, Gujarat in March 2003. Crucibles
are used in the non-ferrous industry and this acquisition enhances its foray into the non-steel sector. During 2004, the
company expanded the capacity of Refractories (Shaped) from 90,600 pieces to 4,19,600 pieces.
Expansion: A new manufacturing facility has been set up near its existing factory at Visakhapatnam and will be its fourth
factory. It manufactures pre-cast shapes and tap hole clay, commercial production of which commenced in December
6
2007. The total capacity of its two factories at Visakhapatnam has increased to 96,500 TPA from 39,600 TPA and will
augment the increased demand for its Linings Business.
Performance: The company reported good results for the calendar year ended 31
st
December 2007. It clocked net sales of
Rs.319 cr. with net profit of Rs.32 cr. posting an EPS of Rs.15.80.
Financial Highlights:
(Rs. in lakh)
Latest Results: Sales rose 17.02% to
Rs.81.56 cr. in Q1CY08 against
Rs.69.70 cr. in Q1CY07 whereas net
profit rose 13.28% to Rs.7.59 cr.
against Rs.6.73 cr. in Q1CY07. During
Q1CY07, it recorded a basic/diluted
EPS of Rs.3.74. Going forward, the
annualised EPS works out to Rs.14.96.
Financials: The company has an
equity base of Rs.20.30 cr. with a book
value of Rs.78.29. and is a debt-free
company. Its RoCE is 35.26% and
RoNW is 21.66%.
Particulars
QE 31/03/08
QE 31/03/07
YE 31/12/07
Net Sales/Income
8156
6970
31943
Other Income
100
84
368
Total
8256
7054
32311
Total Expenditure
a. Inc/Dec in Stock
(256)
(149)
76
b. Raw Materials
2766
2459
11636
c. Purchase of Finished Goods
1762
1362
5686
d. Employees Cost
514
450
1816
e. Depreciation
213
225
529
f. Other Expenditure
2031
1606
7054
g. Total
7030
5953
27097
Interest
14
32
191
Profit Before Tax
1212
1069
5023
Tax Expense
453
396
1815
Net Profit after Tax
759
673
3208
Share Profile: The company's shares
with a face value of Rs.10 are listed
and traded on the BSE and NSE under
the B group. Its share price touched a
52-week high of Rs.332 and a low of Rs.185. At its current market price of Rs.208.05, it has a market capitalisation of
Rs.411 cr.
Paid up Equity Share Capital
(FV: Rs.10)
2030
2030
2030
Res Exc Revaluation Reserves
-
-
13864
Basic/Diluted EPS (Rs)
3.74
3.32
15.80
Dividends: The company has a liberal distribution as can be seen from the distribution of dividends as shown below:
CY 2007: 37.50%, CY 2006: 35%, CY 2005: 35%, CY 2004: 42.5%, CY 2003: 30%, CY 2002: 27.5%.
Shareholding Pattern: The total promoter holding in the company is 55.57% while the balance of 44.43% is with the non-
corporate promoters, institutions, mutual funds and the Indian Public. Among the mutual funds, HDFC, UTI, and
Franklin India have been adding the company's shares to their various schemes from September 2007 onwards.
Prospects: Vesuvius supplies refractory products mainly to steel industry and also to sponge iron, aluminium, power and
cement manufacturers. The growth of these industries will trigger a huge demand for refractories in the forthcoming
years and for which the company is gearing up.
The Government of India projects an investment of close to Rs.2,80,000 cr. in the Indian steel sector by end of 2012 and
the National Steel Policy had envisaged a total production of 110 MMTPA by 2020, which now stands revised to 180
MMTPA . The country has emerged as the fifth largest producer of crude steel and is set to become the second largest
global steel producer by 2015-16 by when steel production is targeted to increase to 137 MMTPA from the present 51
MMTPA.
Steel consumption in India has been growing at the rate of 8-12% over the last 5 years keeping pace with the GDP growth
rate. The per capita consumption of steel in India is around 50 kg as against 280 kg in China and 500 kg in the developed
countries, which indicates the huge potential to drive steel consumption in the country.
With a sustained high GDP growth, improvement in the quality of life and increased usage of steel in construction, the
demand for steel and steel products will remain high in India. The brownfield and green-field projects of the major steel
plants would also contribute to a greater demand for refractory materials and provide huge opportunities for refractory
industry. Again, acquisitions of international steel plants by Indian steel majors have opened the doors for local sourcing
of their international needs.
Conclusion: Vesuvius India is an MNC Associate company with an excellent track record.
At its current market price of Rs.208.05, its share is discounted at a P/E multiple of less than 14 times, which is also the
industry average. However, considering its consistently good performance, decent distribution policy, excellent track
record, good pedigree and robust prospects makes it a good candidate for adding to one's portfolio. The scrip may be
added at every decline for decent appreciation in the medium-to-long-term.
Market may remain rangebound
MARKET REVIEW
By Ashok D. Singh
The BSE Sensex rose 697.87 points or 4.17% to close at 17,434.94 for the week ended Friday, 16 May 2008. The NSE Nifty
rose 175.10 points or 3.51% to end 5157.70 in the week. The key benchmark indices soared shrugging off weak industrial
7
8
production data, high inflation and rising global crude oil prices. Depreciating domestic currency against the dollar
boosted export driven IT stocks.
The BSE Mid-Cap index rose 137.04 points or 1.96% at 7,129.70 for the week. The BSE Small-Cap index rose 114.62 points
or 1.35% at close at 8,620.26.
The industrial production growth dropped sharply to 3% in March 2008 slowing from the previous month's unrevised
8.6% government data showed on Monday, 12 May 2008. It was the slowest annual growth since the 2.4% rise in February
2002.
Manufacturing production rose 2.9% in March 2008 from a year earlier compared to 8.6% growth in February 2008.
Industrial output rose 8.1% in FY08 compared to 11.6% in FY07.
The Infrastructure sector output rose 9.6% in March 2008 from a year earlier, faster than a downwardly revised 7.1%
growth in February 2008. Output had risen an annual 10.5% in March 2007. It rose 5.6% in FY08.
C. Rangarajan, chairman of Prime Minister's Economic Advisory Council, on 12 May 2008, said the annual inflation rate is
expected to moderate to 6% in the next three to four months from its 3-½ year high of 7.6% in late April 2008. Rangarajan
said the economy is expected to grow 8% to 8.5% in FY09 as high global oil prices shave off some momentum.
The wholesale price index rose 7.83% in 12 months to 3 May 2008, higher than previous week's annual rise of 7.61%,
government data released on 16 May 2008, showed. It was the highest since an annual reading of 7.93% on 6 November
2004. The annual inflation rate was 5.74% during the corresponding week of the previous year.
US light crude for June delivery surged to a record high of $126.98 on Tuesday, 13 May 2008. However, the price eased to
$123.74 on 15 May 2008 as rising US distillates stocks and Iran's reassurances that it would not cut crude exports
strengthened the US dollar.
The Indian rupee fell to the lowest level since April 2007 to Rs.42.445 per US dollar on Wednesday, 14 May 2008 on
speculation that record crude oil prices will widen the nation's trade and current-account deficits increasing the demand
for foreign currencies. The currency also weakened after overseas investors further sold local equities.
Tourist arrivals in India rose 10.7% to 3,69,677 in April 2008 over April 2007, the government data showed on Monday, 12
May 2008. Foreign exchange earnings from the sector rose 6.8% to $817 million in April 2008 over April 2007. FIIs have, so
far, sold shares worth Rs.529.10 cr. this month till 14 May 2008. They sold shares worth Rs.10,887.20 cr. in calendar year
2008 till 14 May 2008. Domestic funds sold shares worth Rs.639.80 this month till 14 May 2008.
On Monday, 12 May 2008, frenzied buying in late trade helped the market snap its five-day slide. The BSE Sensex rose
123.83 points or 0.74% to close at 16,860.90. The broader based NSE Nifty was up 30.05 points or 0.60% at 5,012.65.
On Tuesday, 13 May 2008, equities reversed early gains in choppy trade to settle lower closely mirroring European
markets which opened after the Indian market. The BSE Sensex slipped 108.04 points or 0.64% at 16,752.86. The broader
based Nifty shed 54.85 points or 1.09% at 4,957.80.
On Wednesday, 14 May 2008, relentless buying in software and metal stocks in late trade propelled market higher after a
nervous start. The BSE Sensex surged 225.49 points or 1.36% at 16,978.35. The broader based NSE Nifty gained 53.95
points or 1.09% to end at 5,011.75.
On Thursday, 15 May 2008, the market settled near the day's high helped by a late buying frenzy in index pivotals. Shares
from real estate, software and capital goods were at the forefront of the rally. The 30-share BSE Sensex surged 375.19
points or 2.21% to close at 17,353.54. The broader based NSE Nifty gained 103.50 points or 2.07% at 5,115.25.
On Friday, 16 May 2008, rally in Asian and European markets and firm US stock futures indicating higher opening of US
stocks helped the Indian market shrug off a surge in inflation to the highest level in more than three years. Shares from
the banking and metal sectors advanced on renewed buying. The Sensex rose 81.40 points or 0.47% settling at 17,434.94.
The broader based NSE Nifty advanced 42.45 points or 0.83% to close at 5157.70.
Bharti Airtel rose 1.09% to Rs.851.35. The firm is reportedly evaluating a bid for South Africa-based communication
services provider MTN Group.
Reliance Communications gained 11.65% to Rs.601.85. Reliance Infratel, a 95% telecom infrastructure subsidiary of the
company is reported to have secured the SEBI's nod for a public issue. The Anil Ambani group company may offload a
10.05% stake in Reliance Infratel to raise Rs.5,000-6,000 cr. through the IPO.
Ranbaxy Laboratories gained 8.79% to Rs.510.70. The company has signed a deal to develop new anti-infective drugs for
US-based Merck & Co Inc. As per the deal, Ranbaxy will carry out drug discovery and clinical development through
Phase II clinical trials, while Merck will be responsible for the development and commercialisation.
Reliance Industries rose 4.25% to Rs.2635.20. Recently, RIL had shut all of its 1,432 petrol pumps in the country after sales
dropped to almost nil as it could not match the subsidised price offered by public sector companies.
Depreciation of the Indian rupee against the US dollar generated interest in software counters as the Indian software
firms earn more than half of their revenues in dollar terms. India's largest software services exporter TCS surged 6.40% to
Rs.976.15, Infosys Technologies, the nation's second biggest software exporter by sales, spurted 6.89% to Rs.1871.19 and
Wipro, the third largest exporter by sales, flared up 0.99% to Rs.506.15.
India's top tractor maker Mahindra & Mahindra fell 1.52% to Rs.662. The company said on Friday, 9 May 2008, that it is
hiking vehicle prices in the range of 1.5% to 2.5% due to rise in input costs. The price hikes will come into effect from 19
May 2008.
Hindalco Industries jumped 17.37% to Rs.203.70. ICICI Bank galloped 7.68% to Rs.941.15
The Sensex rose 697.87 points to close at 17,434.94 last week. Next week is a curtailed trading week as the market remains
closed on Monday, 19 May 2008, on account of Buddha Purnima. The market is likely to be rangebound in the absence of
any major domestic trigger with Q4FY08 results nearing the end.
Inflation data will be closely watched as it remains as a major worry and hindrance for domestic growth. High inflation
may compel the government to take more fiscal measures to rein in prices in addition to a slew of measures taken
recently. The government has banned export of cement and non-basmati rice, cut import duty on some items and
imposed of export duty on some steel items to rein in rising prices.
Control Print (India) Ltd.: Good growth potential
STOCK PICK
By Suman Mukherjee
BSE Code: 522295
Book Value: Rs.47.53
EPS: Rs.9.15
P/E: 5.40
Dividend: 20%
Market Cap: Rs.37.18
Performance: Market out-performer
Target: Rs.130-160 in 18 months
Introduction: Control Print (India) Ltd. (CPL) began in 1991 with a dream of bringing Indian packaging at par with the
international benchmarks in terms of coding & marking and is the undisputed market leader in the coding and marking
machinery with a market share of around 40%. It has a product range of contact coders, superior touch coders, specialized
metal marking systems, sophisticated ink jet coders and advanced laser coders that can be used to print on any type of
surface like plastic, glass bottle, paper, wood, steel etc.
The company operates in a single segment, viz. Coding & Marking machines and consumables thereof.
The company has entered into a technical collaboration with KBA-Metronic AG, Germany for manufacture of Industrial
Ink-Jet Printers at Nalagarh, Himachal Pradesh. The company has also entered into technical collaboration for Thermal
Transfer Overprinters, Large Character Printers and ink-jet consumables.
KBA-Metronic AG, Germany, is the undisputed worldwide technology leader in Coding, Marking and Printing. The
venture will lead to Industrial Ink-jet Printers manufactured in India based on the know-how transferred from KBA-
Metronic. It is worth noting that KBA-Metronic AG is a wholly owned subsidiary of Koenig & Bauer AG (KBA), the
world's third largest printing equipment manufacturer.
The company will also be manufacturing KBA-Metronic's wide range of specialized ink formulations for various
applications. With this tie-up, the company will be the first Indian manufacturer of industrial inkjet printers. The
company has already set up a manufacturing and assembly facility for marking and coding devices at its facility in
Nalagarh, Himachal Pradesh and which has already started commercial production from FY08. It shall he expanded for
production of the Industrial Ink-jet Printers.
The company plans to export printers to other
emerging markets in conjunction with KBA-
Metronic.
The company has launched its 'Conprint'
range of consumables for ink-jet printers and
has also started marketing the full range of
products.
Shareholding Pattern: The promoters hold
38.2% while the investing public holds 57.25%
of which United India Insurance holds 4.52%,
promoters have increased their holding from
36.57% to 38.2% in FY08.
9
Financials: For Q3FY08, its total income was
flat at Rs.9.26 cr. as against Rs.10.45 cr. in
Q3FY07 while the net profit was lower at
Rs.1.04 cr. as against Rs.1.81 cr. in Q3FY07.
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This reduction in sales and profit was due to changeover of products.
Investment Rationale:
(1) Earlier, CPL made preferential allotments of 1,25,000 equity shares of Rs.10 each at a premium of Rs.53 per share i.e.
Rs.63 per share as per SEBI guidelines to the promoters.
(2) The company declared a dividend of 20% for FY07 and may reward shareholders again in FY08.
(3) CPL plans to develop its land in a prime area of Mumbai, for commercial purpose in FY09. It will first develop its
property at Chandivali, Andheri East, Mumbai. In fact, the value of its land is more than its market cap of Rs.37.18 cr. This
is an important trigger for re-rating the scrip.
(4) CPL has commenced the commercial production of Conprint Hot Ink Coders and its consumables Ink Rolls at
Nalagarh in Himachal Pradesh. The products are at par with similar imported products and it has received repeat orders
from the users.
(5) The cumulative margins of printer and consumable sales are expected to expand further in FY09 and FY10.
(6) The company's topline and bottomline is expected to see good growth from marketing of high end digital printers.
The digital printers are used to print variable information on the Aluminum foil packaging of pharmaceutical tablet strips
or on the packaging labels.
(7) One of the promoters has recently increased his holding in the company.
(8) The company's clients include Coca Cola, Pepsi, P&G, Shaw Wallace, Cipla, Dr. Reddy's Laboratories, Novartis, Rane
Brakes, Tata Steel, SAIL, Hindalco, Jindal Iron, Aksh Optifibre and the like.
(9) With organized retailing coming off age in India, packaging has assumed importance. As a result, this technology has
readymade domestic and overseas markets.
Concerns:
(1) Entry of new players could increase the already strong cut throat competition existing in the industry. With the market
set to expand rapidly, many new players can be expected.
(2) Any delay in employing the latest technology could reduce growth targets. While CPL is already in talks with many
large companies for digital printers, the low cost machine sales would depend on its ability to market the product
efficiently.
Conclusion: CPL is in a relatively new industry with mammoth growth potential. It is also the only listed company in this
segment. This makes comparing valuations difficult and complex. It is worth understanding that CPL derives majority of
its revenue from FMCG, Pharmaceutical and the Auto sectors. Since CPL is dependent on these sectors, it ought to get
valuations closer to sectors dependent on these sectors. But the fact that it derives revenue from multiple sectors reduces
its dependence on one particular sector. As a result stability in earnings is high. Profit visibility is also expected to
improve as its printer base continues to grow over the next few years resulting in high consumable sales.
Considering these factors, the CPL share may get a valuation lower than the core sectors but closer to the dependent
sectors. At a P/E of only 5.4, Book Value of Rs.47.53, Dividend of 20% and EPS of Rs.9.15, the scrip is available at an
attractive CMP of Rs.49.45 and could get re-rated soon.
The scrip is near its 52-week low of Rs.41 and thus has a minimum downside. In the short-term if the scrip is able to cross
Rs.57 with good volume then the next target could be Rs.70-75. The stock is in the oversold territory and a bounce back
could be expected very soon. Please keep a strict Stop Loss of Rs.45.5 in case it starts to slide or if the market dynamics
change suddenly. I place a target of Rs.130-160 in 18 months time frame.
10
Sensex targets 18,500
MARKET
By G. S. Roongta
The stock market having reacted from its recent high of 17735.70 on the BSE Sensex the week before completed the
reaction last week on 13
th
May 2008 when it nosedived to 16697.47 in intra-day trading before it closed in the red by only
108 points at 16752.86, which is nearly 1000 points from its recent high.
Both the rise above 17500 level and the correction thereafter had been anticipated and spelt out in this column well in time
before the events occurred. Readers who may be new to Money Times can check back on my forecasts over the past 3/4
weeks and verify it with the subsequent market movements. Last week itself, I had stated that a reaction
from 17538 level was essential considering that the market is in a consolidation phase and a 50%
correction of the latest rise will make the market more healthy for future growth.
G.S. Roongta
Thus despite several negative news such as the sharp drop in the Index of Industrial Production (IIP) to a
six year low of 3%, which prompted bears to hammer the market afresh, together with crude oil hitting a
record high and the rupee depreciating sharply, the market remained positive and closed the week with
a gain of 697.87 points at 17434.94.
But the fall of the rupee against the dollar was a major relief to exporters and IT & ITES companies,
which had been badly hit by the sharp rise of the Indian rupee against the US dollar over the past 18 months or so. Which
is why IT stocks led the recovery that was in evidence on Tuesday, 13
th
May 2008 itself when the Sensex regained half of
its lost ground by the close of the trading session. This was followed by the bounce on 14
th
& 15
th
May 2008 when the
CNX Nifty crossed the crucial level of 5050 with handsome gains.
As both the Sensex and Nifty posted a strong recovery, the bears rushed to cover their short positions, which in turn
helped the markets to close with substantial gains for the week ending Friday, 16
th
May 2008.
What is interesting to observe is that apart from negative economic factors like fall in IIP rate runaway crude prices at
$128 per barrel and the falling rupee, there was equally disturbing news about the major earthquake in China and the
bomb blast in Jaipur, which the bears would have capitalised upon in a weak market. But their attempt to do so fizzled
out in no time as they rushed to cover their short positions having realised the strong undercurrent in the market.
According to me, the market stands fully corrected at the current juncture, which has convinced the bulls that the Sensex
is in no mood to go down further below the level of 16500.
As a result of the sharp recovery, stocks from the capital goods, automobiles, IT & ITES, banking, recorded hefty gains on
15
th
May 2008 itself and the strong trend in them has continued thereafter.
In my article last week, I had stated that if the Sensex crosses 17600, its next target can be fairly assumed around 18700.
Since the Sensex has already touched 17435, there is every likelihood that it may attempt a new high between 18500 to
18700 before it reacts again. This systematic rise and fall (correction) thereafter will finally decide the fate of its long-term
journey beyond 21200 together with interim corrections in between based on its fundamental strength. This process will
make the market healthy and sound even if it lacks the crazy momentum play witnessed in 2007.
Readers may have observed that the metal stocks recommended last week have performed well. Hindalco, Hindustan
Zinc, Nalco and Sterlite Industries hit a new high and remained positive throughout the week.
Similarly, Tea stocks performed well and market leader, Tata Tea flared up handsomely to hit a new recent high.
I had also made a special mention of Textile stocks getting re-rated given the depreciating rupee against the US dollar and
Indian textiles and garments getting an edge over China in developed countries like USA, UK and many others. The same
observation was echoed by a leading pink paper five days later as the Textile & Garment sector started attracting fresh
orders. This leading business newspaper reinforces my outlook of the sector and expects textile stocks to flare up to dizzy
heights.
Graphite India recommended in this column has posted wonderful results with its net profit jumping 37% at Rs.133.66 cr.
in FY08 whereas the profit for Q4FY08 was up by 42%. The company's Board has recommended a dividend of Rs.3 on its
Rs.2 paid-up share i.e. 150%. The company is expanding capacity by 10,500 tonnes at a cost of Rs.187.5 cr., which will be
ready by next year. Given the buoyancy in the demand for steel the world over, the future of Graphite India is quite
robust as the Steel sector is destined to post double digit growth. Hence Graphite India at the current market price of
Rs.61 is an attractive pick given its working fundamentals.
Similarly, JK Lakshmi Cement came out with flying colours with 26% rise in net profit at Rs.224 cr. while sales jumped by
32% to Rs.1286 cr. The company's Board has recommended a final dividend of 15%, which together with an interim of
10%, amounts to 25% for FY08. This means that the company's growth is sound and given its expansion plan to raise
capacity to 5 MMTA from the current 3.6 MMTA, it will climb the hierarchy of cement stocks. The company is also setting
up a greenfield cement plant of 2.7 MMTA at a capex of Rs.1100 cr. with simultaneous expansion in its power generation
capacity to become self-sufficient. Given this level of expansion and growth, this scrip is grossly underpriced at Rs.110 at
a P/E ratio of just 3 and provides ample opportunity of growth.
I would also like to draw readers' attention to my recommendation on Maruti Suzuki two weeks back as it shot up by
Rs.100 to Rs.840 before it closed the week at Rs.819.
Those who track the market strictly by Sensex stocks and overlook fundamentally strong shares are unlikely to record
good gains as Sensex stocks move both ways unlike fundamentally strong shares, which tend to flare up. Since the
inherent strength of the market in intact and the bullish trend is alive despite the sharp reaction since 20
th
January 2008,
investors should make the most of opportunities and pick up fundamentally strong scrips that are recommended in this
column.
What is most encouraging is that despite FIIs'
net selling of Rs.800 cr. this month till 12
th
May 2008 aggregating to Rs.12500 cr. in 2008,
they are losing the leadership of the market as
they alone cannot decide its fate. The Indian
stock market is now quite broadbased and
punters or any individual entity cannot force
the direction of the market based on sheer
money power. The natural strength of the
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11
market is far more powerful and will always assert itself like water finding its own level.
The market is awaiting the monsoon, which is expected to be normal and in time and will be the next trigger for the stock
markets. Investors are likely to return to the market to enjoy a good harvest hereon and encash every reaction as an
opportunity to buy into fundamentally strong stocks.
Elecon Engineering, Graphite India, Tube Investments, NTPC and IDBI Bank look good and one can safely take a position
in them. Biocon, which has come out with 1:1 bonus also looks attractive and Tata Motors at current rate is most
attractive.
Scheme Analysis
MUTUAL FUNDS
NFO Analysis
Sahara Power & Natural Resources Fund
By Devangi Bhuta
Objective
The investment objective of this open ended scheme is to generate long term capital appreciation through investment in
equities and equity related securities of companies engaged in the business of generation, transmission, distribution of
Power or in companies directly or indirectly engaged in the power sector or in companies principally engaged in
discovery, development, production, processing or distribution of natural resources including Base Metals, Minerals and
Commodities, Oil & Gas, Coal , Renewable Energy Resources, Water, Agricultural Produce etc.
Asset Allocation
Investments (Min 65%/Max 100%) in equity and equity related instruments of companies engaged in Power generation,
transmission & distribution and companies engaged in discovery, development, processing or distribution of natural
resources. Not more than 35% investment in debt and money market instruments.
Analysis
Past performance snapshot of existing equity schemes of Sahara Mutual Fund.
Name
NAV
Structure
Sahara Infrastructure Fund - Variable
Pricing - Growth
3.82
-10.68
-18.74
29.29
NA
14.8
Open Ended
Sahara Infrastructure Fund - Fixed
Pricing - Growth
3.76
-10.8
-18.99
28.41
NA
14.59
Open Ended
Sahara Growth Fund - Growth
4.01
-5.89
-11.21
26.53
37.46
64.63
Open Ended
Sahara Taxgain - Growth
5.38
-7.24
-10.86
26.52
33.09
26.15
Open Ended
Sahara Midcap Fund - Growth
7.34
-7.83
-5.73
26.48
29.77
23.41
Open Ended
Sahara Wealth Plus Fund - FP - Growth
3.31
-7.52
-12.63
16.64
NA
16.94
Open Ended
Sahara R.E.A.L Fund - Growth
NA
-14.11
NA
NA
NA
8.36
Close Ended
Average performance of similar category
funds
4.6
-9.15
-13.03
25.65
33.44
24.12
-
BSE Sensex
5.99
-4.17
-11.48
21.38
37.16
-
-
Analysis: The power sector which is one of the focus areas of this scheme remains fairly potent. It does have some
interesting picks especially the Power Transmission and Distributions space, power ancillaries and power financing
segments. Power generation companies, however, will remain market performers provided regulatory hurdles do not
dampen their execution.
As for natural resources, the markets offer a wide array of stock picks but the valuations and the sector diversifications
within these segments remains to be seen. While Water, Agriculture and Renewable Energy appear to be the most
interesting bets in the long-term while Oil & Gas space and commodities would be more of a demand & supply play.
Regulatory issues in many of these segments are high and the stock selection and the strategy of the fund manager will
play a crucial role.
Caveat Emptor: The past performance of the equity schemes of Sahara Mutual Fund is fairly average and does not inspire
much confidence. Investors may, therefore, give this one a miss considering that there are other schemes with a similar
investment objective by proven fund managers.
By Saarthi
STOCK WATCH
12
HBL Power Systems Ltd. (Code: 517271) (Rs.318) is the leader in design, development and manufacture of industrial &
specialised batteries, allied electronic products and DC systems in India. In fact, it is the market leader in VRLA (valve
regulated lead acid) and NCPP (nickel cadium pocket plate) batteries and enjoys 50% market share of the domestic
telecom market. Moreover, it is among the few companies in the world making ultra high specialty batteries for military
use like thermal, reserve and torpedo batteries. Notably, it stands 3
rd
globally for Nicad Passenger aircraft batteries and
2
nd
for industrial alkaline batteries. Apart from supplying various batteries for train lighting, air conditioned coaches etc.,
the company has, of late, designed and developed a wide range of microprocessor based signaling products and power
systems to cater to the needs of the Indian Railways. Recently, the company set up two new factories at Vizianagaram and
SEZ Vizag in Visakhapatnam at a capex of Rs.150 cr. For FY08, it is expected to clock a turnover of Rs.1000 cr. with net
profit of Rs.72 cr. leading to an EPS of Rs.30 on its equity of Rs.24.30 cr. A solid bet.
******
For Q4FY08, JK Laksmi Cement Ltd. (Code: 500380) (Rs.111.05) reported 10% growth in sales as well as profit to Rs.291
cr. and Rs.68 cr. respectively. Accordingly for entire FY08, its sales were up 30% to Rs.1107 cr. and PAT increased by 25%
to Rs.224 cr. This leads to an EPS of Rs.37 on its equity of Rs.61 cr. On this, it declared a total dividend of 25% for the year.
To maintain its momentum, the company is expanding its cement capacity to 5 MMTPA from 3.6 MMTPA by the end of
FY09. On the other hand, it is betting high on its lucrative ready-mix concrete (RMC) business and intends to add 5 more
RMC plants in FY09 taking the total number of RMC units to 14. Besides, it has replaced its high cost debts by cheaper
funds and has considerably reduced its interest cost. By 2011, the company plans to complete the setting up of its 2.70
MMTPA greenfield cement plant at Chhattisgarh at a capex of Rs.1100 cr. and has already obtained the limestone mining
lease approval. Despite the government's interference to control cement prices, this company is expected to grow at a
healthy pace in coming years.
******
Simplex Casting Ltd. (Code: 513472) (Rs.73.80) manufactures heavy engineering castings in various grades for industries
like steel, rail, mining, cement, power and other engineering sectors. To de-risk its business model, the company is
moving up the value chain and is venturing into machined castings. This will improve margins going forward and will
also lead to the addition of new clients who seek machined components. For Q4FY08, although its sales improved by 10%
to Rs.44 cr., PAT declined marginally to Rs.2 cr. However, for full FY08, it recorded 10% growth in sales of Rs.150 cr. and
30% growth in net profit Rs.7.40 cr. Hence it posted an EPS of more than Rs.12 on its equity of Rs.6 cr. Couple of months
back; it bagged a prestigious order worth Rs.14 cr. from Indian railways for the supply of coco bogies and expects to get
more such orders in future. Currently, it has a very healthy order book position of Rs.120 cr., which includes export
orders worth Rs.30 cr. Interestingly, it has plans to venture into project execution and turnkey business of steel plants and
also intends to forward integrate into valve manufacturing, which is a very high margin business. Although rising input
costs is a cause of concern, still it's a decent buy at the current level.
******
In the last few months, the price of newsprint has shot up nearly 40% and is being sold at more than Rs.35,000 per tonne.
This augurs well for Rama Paper Mills Ltd. (Code: 500357) (Rs.22.95) as it derives nearly 60% of its revenue from the
newsprint segment. Its 6 MW co-generation captive power plant is fully operational now. Further, the company has
undertaken an expansion project of putting MG Machine to manufacture Tissue/Poster Paper at a capex of Rs.24 cr. In the
last two years, the promoters have infused more than Rs.15 cr. by making preferential allotment of 45 lakh equity shares
at Rs.35 per share. However, despite the 500 bps improvement in the operating margin, the company reported flat
numbers for FY08 due to substantial increase in interest & depreciation costs. Its sales and PBT remained flat at Rs.84.50
cr. and Rs.8 cr. respectively. But on the back of lower tax provisioning, its PAT was up 90% to Rs.7 cr. recording an EPS of
Rs.7 for FY08. It is expected to declare 10% dividend, which means a good yield at CMP. Buy at sharp declines.
By Kukku
FIFTY FIFTY
Investment Calls
* Kamat Hotels (India) Ltd. (KHIL) (Rs.171.90), promoted by the Mumbai based Kamat Group in 1986, operates a 245
room five star hotel 'The Orchid' near the Mumbai domestic airport. The company also manages two hotels - Kamats
Khandla Hotel and The Kamats Plaza.
KHIL came out with an IPO in October 1994 at a premium of Rs.50 per share of Rs.10 aggregating Rs.30.60 cr. and 5.5 lakh
14% NCDs of Rs.100 aggregating Rs.5.5 cr. to expand and modernise its hotel business.
Tourist arrivals, hotel occupancies and room rates have touched an all time high. With the success of 'Incredible India'
campaign, introduction of low cost airline services, growing thrust on development of infrastructure and India's
emergence as a dominant outsourcing hub have led to a remarkable increase in foreign tourists arrivals boosting the
prospects of the hospitality sector.
13
KHIL achieved an aggregate turnover of Rs.112.83 cr. in FY07 against Rs.82.34 cr. in FY06. PAT was Rs.20.58 cr. in FY07
against Rs.15.58 cr. in FY06.
For the first nine months of FY08, it posted sales of Rs.105 cr. against Rs.76.5 cr. in the previous corresponding period. Net
profit shot up more than 100% to Rs.22.15 cr. from Rs.11.04 cr. on its equity of Rs.13.79 cr. as the gross profit margin
improved from 34.45% to 37.56%. KHIL may post an EPS of around Rs.25 for FY08. Thus stock is available at P/E ratio of
less than 7.
Morgan Stanley Mauritius Company holds around 4.76% in KHIL.
The weakening of the rupee will also help the hotel industry to improve profit margins.
The KHIL stock has a 52-week high of Rs.315 and is facing resistance around Rs.180 level. Sustained closing above Rs.180
can give a good upside breakout. At current valuations, its market cap is just Rs.220 cr.
KHIL is one of the cheapest stocks in the hotel sector, which investors can add with a long-term view.
* Kalpana Industries Ltd. (KIL) (Rs.112.50) is one of the leading downstream processors of polymer compounds
providing the basic raw materials to the power cables industry.
Net profit of KIL rose 100% to Rs.6.52 cr. in Q4FY08 as against Rs.3.26 cr. in Q4FY07. Sales rose 21.72% to Rs.135.39 cr. in
Q4FY08 against Rs.111.23 cr. during Q4FY07. For the full year, net profit rose 121.12% to Rs21.67 cr. in FY08 as against
Rs.9.80 cr. during FY07. Sales rose 46.70% to Rs.448.27 cr. in FY08 as against Rs.305.57 cr. during FY07. Full year EPS is
around Rs.19, which is in line with our projections made a few months back.
For FY09, it is expected to achieve sales of Rs.630 cr. with net profit of around Rs.37 cr. posting an attractive EPS of
around Rs.32.
The promoters hold 74.3% stake while JM Financial Mutual Fund holds 1,30,004 shares as on 30th April 2008.
The stock has reacted from a high of Rs.205 to the current level where the downside risk is minimal.
At CMP, the stock trades at a P/E multiple of about 6 on FY08 earnings and around 3.5 times its estimated FY09 earnings.
Investors can accumulate this stock for a price target of Rs.225 over the next one year. The stock faces resistance at Rs.122
level. Sustained closing above this level may give a good breakout for the upside.
Market Guidance
* Arrow Webtex (Rs.57.55) manufactures narrow woven fabrics, woven labels, printed labels and printed elastic tapes.
The company also operates in the real estate development and consultancy space and leases out properties acquired.
A subsidiary of Arrow Webtex has acquired Victor Hotels & Motels, which proposes to set up an offshore gaming
business High Sea Cruises and Entertainment.
The stock was recommended earlier and is being accumulated by smart investors in expectation of new developments.
Investors are advised to stay invested for target price of Rs.100 over the next one year.
* IFCI (Rs.62.75) stock is firm. It seems to be in the grip of strong investors and may seek higher levels.
* A V Cottex (Rs.27.60) - New developments are said to be taking place. Stay invested or add in small quantity around
Rs.22/24 levels.
* Champagne Vineyard (Rs.60.70) was recommended about six months back at Rs.65 from where it flared up to above
Rs.100. Investors should hold on as positive developments are said to be taking place.
* ECE Industries' (Rs.382.50) Q3FY08 quarter results were not encouraging and FY08 results, too, may not be
encouraging.
* Mysore
Paper Mills (Rs.10)
was
recommended earlier in this column. Long-
term investors can continue to hold. Sale has
declined by 10.11% to Rs.103.87 cr. in Q4FY08
but it posted a net profit of Rs.0.31 cr. as
against net loss of Rs.6.40 cr. in Q4FY07. Stay
invested. Besides paper, the company is also
into sugar manufacturing. It may turn around
on its restructuring story and firm paper
prices.
FOR WEEKLY GAINS
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* Western India Shipyard (Rs.20.20), which
was re-listed after restructuring at Rs.21 level is
likely to report a good turnaround over the
next few quarters under the management of
ABG Shipyard. Investors can accumulate this
stock on reaction around Rs.17/18. Earlier,
profit booking was advised in this stock at
Rs.45+ level.
14
* IL&FS Investment Managers (Rs.297.35) was also recommended earlier around Rs.170 level, long-term investors can
continue to hold or even add on reaction for good long-term growth. The company has very strong presence in private
equity investment. Its net profit rose 62.04% to Rs.28.04 cr. in FY08 over FY07 on 64.04% growth in total income of
Rs.82.55 cr.
On 1st April 2008, the company's board recommended issue of 1:2 bonus issue. The stock is cum bonus now and is a good
portfolio investment for long-term investors.
* Revathi Equipments (Rs.1100) - There was an error in our report last week. The company has taken 70% equity stake in
SEMAC International, which is said to have order position of above Rs.100 cr. (not sale of above 100 cr. as wrongly
mentioned). As per informed sources sales are around Rs.32/35 cr. with PAT margin of around 20%. After Munak
Catalysts and Potential Services, this is the third highly profitable acquisitions Revathi has made in last two years. The
stock is likely to cross its previous high in the next 6 months.
* Walchandnagar Industries (Rs.414.85) - There is said to be good accumulation by smart investors between Rs.400-465
levels in the last few weeks. Decisive closing above Rs.475 level may give a good upward breakout. Profit-booking was
advised at Rs.12000 level before split & bonus as the risk factor is the sharp rise in steel/casting & forging prices, which
are the main raw materials of the company. Those who booked profit can think of re-entering the stock.
* Ion Exchange (Rs.215), which was recommended from time to time, is said to have attracted the attention of some big
investors and the stock has given good upmove in last week. Knowledgeable smart investors are talking of big target in
this stock. ICICI Prudential holds around 4.31% while Rakesh Jhunjhunwala holds around 3.95% in the company. Stay
invested or add on reaction around Rs.190/195 levels.
* Net profit of Nelco (Rs.104.15) rose 116.59% to Rs.9.27 cr. in Q4FY08 as against Rs.4.28 cr. during Q4FY07. Investors are
advised to stay invested or add on dips as long-term story is intact.
* Among our recommended stocks Rohit Ferro Tech (Rs.146.50), Cairn India (Rs.299.65), Tribhuvan Housing (Rs.73.55)
closed at all time highs. Book part profits in these stocks.
Rise in input cost - There is a sharp rise input costs mainly in steel over the last 5 months. But compared to other
countries where steel prices are still higher, India is still better placed. Moreover it must be appreciated that the
government persuaded steel manufacturers to reduce the costs and absorb part of the increase in input costs.
Note: Investors need to be cautious at higher levels. Stay invested with good stocks. Nifty may go up well beyond 5250 on
short covering and if there is good follow up by FIIs.
By V. H. Dave
EXPERT EYE
The shares of Goa Carbon Ltd. (GCL) (Code: 509567) (Rs.92.80) are being accumulated by HNIs, operators and investors
in the wake of its excellent FY08 results. The buzz is that this calcined coke major is expected to perform even better in the
current year in view of the robust demand for its products as the user industries are in expansion mode.
GCL, was promoted by the Dempo Group, is into iron ore mining & exports, manufacturing pig iron, barge building, ship
repairs & civil construction besides manufacture & marketing of paints and varnishes, extruded foods and breakfast
cereals, publication of newspapers and marketing of reputed brands of consumer durables and commercial vehicles.
GCL's calcination plant of 75,000 TPA capacity was set up with technical assistance from Great Lakes Carbon Corporation
(USA) and is located in South Goa, 40 kms away from the Mormugao port. It has a well-equipped laboratory and quality
control systems and procedures. The plant is ISO 9001:2000 certified by Bureau Veritas and is also 14001:2004 certified.
GCL also has two other plants at Bilaspur in Chattisgarh (40,000 TPA) and at Paradeep in Orissa, (1,25,000 TPA), which
were acquired in 1999 and 2001 respectively. Thus the total Calcined Petroleum Coke (CPC) manufacturing capacity of
GCL is 2,40,000 TPA. CPC is used in aluminium smelters to process alumina.
GCL has integrated all its acquisitions by merger of both its erstwhile subsidiaries to realize maximum operational
efficiency and to meet buyers' requirement of CPC on all India basis. It exports CPC to Australia, Russia, Iran, Saudi
Arabia, Indonesia and the UAE and is continuously exploring new export opportunities.
Exports constitute almost 30% of its sales. Its state-of-the-art manufacturing facilities provide ample opportunities for
leading global aluminium smelters to outsource their requirements from GCL.
GCL has achieved all round improvement in working on account of cost effectiveness, operational efficiency, increase in
market share and optimum utilization of production capacity.
It turned around during Q4FY08 and posted excellent results beating street expectations. For this quarter, it posted a net
profit of Rs.13 cr. on sales of Rs.68 cr. as against a net loss of Rs.9 lakh on sales of Rs.72 cr. in Q4FY07.
For FY08, it earned 4430% higher net profit of Rs.15.5 cr. (Rs.28.5 lakh) on sales of Rs.208 cr. (Rs.185 cr.). The EPS was
Rs.16.9 and a dividend of 30% was declared.
GCL's equity capital is Rs.9.2 cr. and with reserves of Rs.51.4 cr., the book value of the share works out to Rs.66. The
promoters hold 56.4% in the equity capital, PCB's hold is 6.3% leaving 37.3% with the investing public.
15
GCL is now firmly established as a leading Indian petcoke calciner. It is a regular supplier to aluminium smelters,
graphite electrode and titanium dioxide manufacturers as well as other users in the metallurgical and chemical industries.
But close to 70% of the CPC demand comes from the aluminium sector. Due to the rising demand, CPC prices have been
firming up.
The growth of the petroleum coke business is linked with the growth of basic aluminium metal production, steel industry
and manufacture of titaniumdioxide. The growth of aluminium metal production is expected to be in the range of 6% to
9%. The steel industry, globally, is looking up for a growth, which is expected to be positive. There are a number of
brownfield expansions happening and some of them are at the completion stage. Considering all these factors, the GCL
management is of the firm view that the petroleum coke business is promising in the long-term.
GCL is likely to register sales of Rs.250 cr. in FY09 with net profit of Rs.22 cr. This would result in an EPS of Rs.24. The
GCL share, currently available at Rs.92, discounts its current EPS of Rs.16.9 by just 5.6 times and FY09 projected EPS of
Rs.24 by only 3.9 times. A reasonable P/E of even 8 will take its share price to Rs.135 in its medium-term and to Rs.192 in
the long-term. The 52-week high/low of the GCL share has been Rs.123/38.
******
The shares of Chowgule Steamships Ltd. (CSL) (Code: 501833) (Rs.61.20) are being accumulated by interested parties in
view of its robust FY08 results, wherein it has posted an EPS of Rs.22. The market grapevine has it that a leading business
group has shown interest in the company.
CSL was incorporated in April 1963 with the objective of meeting the transportation needs of iron ore exports of
Chowgule & Company, the parent company of the Group. Initially, CSL started its operations with three liberty type
ships that were later replaced by modern bulk carriers in response to the emerging market needs.
CSL's main business is chartering vessels
and providing shipping services such as
manning ships, fixing vessels, taking ships
on bareboat charter and other activities
connected with shipping.
16
It's overseas fleet tonnage totals 2,97,677
DWT consisting of four Panamax vessels
with an average age of 7 years as against
the world average age of over 15 years.
These vessels are engaged in voyage and
time charters with reputed international
charterers, moving bulk cargoes like iron
ore, grain, coal, fertilizers etc.
CSL's coastal fleet consists of four mini-bulk
carriers totalling 10,603 DWT. The average
age of these vessels is less than 6.5 years
and they are primarily servicing a contract
for ocean - transportation of one million
tonnes of cement clinkers on the West Coast
of India i.e. Jafrabad to Magdalla and
Ratnagiri.
CSL has also acquired a 1995 built
handymax vessel of 47,574 DWT an
d recently sold its Panamax vessel 'Maratha
Explorer' on 29
th
January, 2008 through its
wholly-owned
subsidiary,
Chowgule
Steamships Overseas Ltd (CSOL). Its profit
on sale of ships during FY08 stood at Rs.76
cr. CSOL has placed a new order for
building a 37,000 MT DWT super box
bulker with a Saiki Heavy Industries Co.,
Japan, and supplied by Onomichi Dockyard
Co, Japan and has signed a Letter of Intent
(LoI) and has also paid an advance of 10%. The vessel will be delivered in March 2011. CSOL has an option to place an
order for 3 more such vessels in the same series, details of which will be negotiated with the shipyard.
July – September 2007
EBG Quarterly Performance:
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.
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
17
As per the consolidated result, CSL has achieved 91% increased income of Rs.192 cr. and earned 400% higher net profit of
Rs.80 cr. excluding the Rs.76 cr. pertaining to the profit on sale of ships and Rs.9 cr. for other exceptional items. Its EPS
excluding these items works out to Rs.22.
Its equity capital is Rs.36.3 cr. and with reserves of Rs.256 cr., the book value of its share works out to Rs.81. The
promoters hold 67% in its equity capital, PCB's hold 5% leaving 28% with the investing public.
Chowgule Ports & Infrastructure Pvt. Ltd. (CPIPL), co-promoted by CSL has a concession agreement with Maharashtra
Maritime Board (MMB) interalia for the development of a minor port at Jaigath. CPIPL is a Special Purpose Vehicle (SPV)
floated to undertake port infrastructure development and ship repair projects at Jaigath. The port development projects
would be undertaken under BOOT basis. In terms of the concession agreement, MMB also has an option to contribute up
to 11% in the eventual capital of CPIPL.
CSL can take advantage of the increased freight rates in the dry bulk market and improve the earnings of its international
fleet. Its strategy of employing ships in the spot market has paid good dividends. On the coastal front, it has decided to
upgrade the condition of its ships.
Various reports and surveys indicate that the international freight market will continue to be strong. Freight rates were
driven by increased volumes of Chinese imports of iron ore and coal and by increased volume of imports of coal by
Indian industries and the power sector.
The Planning Commission has given priority for development of major and non-major ports with private participation.
The government has allocated substantial funds for port connectivity, port development and building of infrastructural
facilities for water transport under the National Maritime Development Programme.
In view of the above, the prospects for the shipping industry are highly promising for the medium-term. Moreover, if
market talk is to be believed, a leading Indian business group has shown interest in CSL for its various business plans. It
may even take a sizeable stake in the company.
The share of CSL is traded at Rs.61 discounting its EPS of Rs.22 for FY08 by 2.8 times against the industry average P/E of
10. This leaves good scope for the scrip to rise in line with the improving results. Investment in this share has the potential
to appreciate by over 35% in 3-6 months. The 52-week high /low of the share has been Rs.105/24.
******
Hariyana Ship-breakers Ltd. (HSBL) (Code: 526931) (Rs.42.85) has announced highly encouraging Q4FY08 results,
which has gone unnoticed by market circles. The counter is now witnessing silent buying by the circles close to the
management.
HSBL, incorporated in 1981, was promoted by Shanti Sarup Agarwal, Rajeev Agarwal and associates. The promoters also
have interests in group companies like Inducto Steels, Inducto Ispat Alloys, Hariyana International, Hariyana Ship
Demolition, Hybrid Properties, Bapa Real Estates, Hariyana Machinery and Hariyana Fashion. The company had tapped
the capital market with an IPO in 1995.
HSBL is in the business of ship-breaking at the world famous Alang Ship-breaking Yard, where it has a plot. The ships are
purchased from foreign as well as Indian companies. Apart from ship-breaking and the manufacture of sponge iron, the
company also trades in iron & steel products by importing them. As part of its diversification plans, HSBL has set up a
sponge iron plant at Hassan, Karnataka in 2004 with an installed capacity of 1 lakh TPA.
During Q4FY08, its net profit shot up to Rs.6.1 cr. against Rs.0.4 cr. in Q4FY07 and the EPS works out to Rs.9.8. For FY08,
HSBL posted 173% higher net profit of Rs.6.3 cr. on 26% increased sales of Rs.143 cr. while the EPS stood at Rs.10.2. The
results are not strictly comparable with the previous quarter/year as, its group companies Hariyana Fashions Pvt. Ltd.
and Hariyana Machinery Export Pvt. Ltd. were merged with it in FY08.
HSBL continues to make investments in plant & machinery block to improve its sales & profitability. During FY06 and
FY07, it had added plant & machinery worth Rs.13 cr. for expanding its activities. The value of its gross block as on
31/03/2007 was Rs.36 cr. HSBL is yet to release its annual report for FY08.
Its equity has gone up to Rs.6.2 cr. from Rs.5 cr. due to the merger. With reserves of Rs.26 cr., in FY08, the book value of
the share works out to Rs.52. The promoters hold 73% in the equity capital, corporates hold 8.6% leaving 18.4% with the
investing public.
Ships made of steel are a rich source for ferrous scrap at the end of their active life and are an alternative to the non-
renewable resource of iron ore and suited for the production of simple steel products. Obsolete vessels are also a source
for second hand equipments and components.
Ship-breaking is an important activity along the west coast of India, especially in Gujarat, the state with the longest
coastline. Alang, a small coastal town in Gujarat, houses the world's largest ship-breaking yard. Thousands of workers
break down a number of ships in this yard producing around 1.5 million tonnes of scrap steel every year. Scrap recovered
from ships is used as re-rollable scrap and melting scrap in Asian countries where scrap-based re-rolling mills are
operative. The prospects of the ship-breaking industry thus appear bright given the demand for ferrous products.
As for the steel sector and sponge iron industry, the long-term prospects are bullish. Going forward, it is expected that
steel prices will inch up from current levels on the back of healthy demand. The increased thrust on infrastructure
development and rural construction coupled with the steady performance of user industries like automobiles, consumer
durables, construction, infrastructure etc. augurs well for this industry.
With the merger of Hariyana Fashions Pvt. Ltd. and Hariyana Machinery Exports Pvt. Ltd. with itself, HSBL is into
diverse fields like leather fashions, textile and machinery exports whose prospects appear bright.
HSBL has also entered property development. For this, it is partnering Swastik Developers at Goa since January 2008.
Based on the above, HSBL is likely to achieve sales of Rs.180 cr. in FY09 with net profit of Rs.11 cr. resulting in an EPS of
Rs.18. The HSBL share is currently traded at Rs.42.85 at a P/E multiple of 4 on its FY08 EPS of Rs.10.2 and 3 times its
projected EPS of Rs.18 for FY09. The share is strongly recommended with a price target of Rs.75 in the medium-to-long-
term. The 52-week high/low of the share has been Rs.65/25.
18
By Nayan Patel
TECHNO FUNDA
Jay Ushin Ltd.
BSE Code: 513252
Last close: 83.30
This company has an equity of just Rs.3.87 cr., Indian
promoter holds 43.60%, foreign promoter, Ushin Ltd.,
holds 25%, corporate bodies hold 17.06% while the
Indian public holds only 12.85% in the company.
The company has posted good financial numbers for the
March 2008 quarter. While net sales shot up 32.40% to
Rs.62.93 cr. from Rs.47.53 cr., net profit zoomed 184% to Rs.1.42 cr. from Rs.50 lakh.
On yearly basis, the company's net sales zoomed by 57.43% to Rs.237.85 cr. from 151.08 cr., while net profit skyrocketed
529.85% to Rs.4.22 cr. from Rs.67 lakh.
The company posted an annual EPS of Rs.10.92. At the current level, the stock is available at a P/E ratio of just 7.6. Last
year, it paid 10% dividend but may declare a huge dividend for FY08 after the marvellous numbers. At the current level,
the stock is available dirt cheap. Short-to-long-term investors can buy with a stop loss of Rs.74. On the upper side, the
share can go up to Rs.96 cross over will take it to Rs.110 in coming days.
Kewal Kiran Clothing declares 40% dividend for FY08
MONEY FOLIO
Review
- Jayshree Chemicals recommended last week at Rs.27.20,
touched Rs.32.05 level.
- R System recommended one month back in Issue No.22 dated
14/04/2008 at Rs.88, touched Rs.120 last week.
- Lloyd Electric recommended in Issue No.24 dated 28/04/08 at
Rs.109.65, touched Rs.131 level.
- Prime Property recommended in same issue at Rs.85.50,
touched Rs.96 last week.
Kewal Kiran Clothing Ltd. (KKCL), owners of popular apparel brands 'Killer', 'Integriti', 'Lawman Pg 3' and 'Easies' and
its exclusive retail outlets by the name of 'K-Lounge' has decalred a final dividend of 20%. Together with the interim
dividend of 20%, the total dividend payout stands at 40% for FY08.
KKCL recorded 19.4% higher revenue at Rs.159.6 cr. in FY08 against Rs.133.64 cr. in FY07 and its PAT was 13.1% higher at
Rs.21.10 cr. as against Rs.18.65 cr. in FY07.
RCF registers record turnover
Rashtriya Chemicals and Fertilizers Ltd. (RCF), has achieved a record turnover of Rs.5236.36 cr. for FY08, which is about
47% higher over FY07 and posted a net profit of Rs.158.15 cr. The sale of fertilizers touched a new high of over 40 lakh MT
in FY08.
RCF is an ISO 14001, OHSAS 18001 & ISO 9001 certified Public Sector Company and a leading manufacture of Urea,
Complex Fertilisers and wide range of Industrial Chemicals with an excellent marketing network.
RCF achieved this performance in spite of various limitations like inadequate supply of natural gas, skyrocketing input
prices, unavailability of raw material and severe competition in the market place. This was possible due to optimum
utilisation of available resources, maximization of efficiencies in energy and raw material consumption, effective
deployment of manpower, adoption of state-of–the–art technologies and enduring team sprit.
Sadhrta and Enjo to launch hitech cleaners
Sadhrta Retail Pvt. Ltd has announced its joint venture with Enjo Produktionsges.m.b.H. to bring its 'Clean the world'
message to India. Enjo products aim at protecting the environment and creation of a better lifestyle. Enjo was founded in
1990 in Austria and it has a global presence in 26 countries worldwide.
These chemical-free products can be used in hospitality sectors such as Hotels, Restaurants & Bars, Spas, Housekeeping
management companies, Hospitals, branded showrooms of cars, garments, gems etc. Enjo fibre products last for many
19
years on average 5 to 7 years and replaces litres of chemical cleaners saving money over their lifespan. The company has
decided on direct selling and retail outlets as the marketing strategy, as no other method of selling can offer better service
to the customer.
Arvind Mills' new identity
The Arvind Mills Ltd., the flagship company of the Lalbhai Group and India's largest integrated textile manufacturer and
leading branded apparel and retailer with consolidated revenues of Rs.2655 cr. in FY08, plans to transform itself from a
pure fabric & apparel company to a strong diversified business group with focus on branded apparel and apparel retail
has been renamed Arving Ltd. and adopted a new logo.
On the drawing board are strategies to de-leverage the balance sheet. The company will focus on enhancing its own brand
as well as growing the global brands through partnerships and increasing its presence across customer segments and
categories.
Arvind's apparel retail business will focus on two segments to bridge to luxury and value retail. In the fabric business, the
company will evolve a direct fabric retailing initiative to target premium customers in the country while the garment
business will continue to add value to the textile business.
To reduce the impact of high level borrowings on its profitability, Arvind is focusing on debt reduction using cash flows
of the fabric business and unlocking value of non-strategic assets together with capital infusion from promoters plans to
raise about Rs.700 cr. over 3 years towards debt repayment.
Varun Shipping's ups FY08 dividend to 50%
Varun Shipping's net profit for FY08 shot up by 59.73% to Rs.225.8 cr. compared to Rs.141.4 cr. in FY07 and the company
has recommended a final dividend of 20%, which together with two interim dividends of 15% each works out to 50%
compared to 45% in FY07. The EPS was Rs.15.19 compared to Rs.11.26 in FY07.
The company's freight and charter hire income increased by 26.49% to Rs.850.8 cr. in FY08 compared to Rs.672.6 cr. in
FY07. Improvement in freight and charter hire income was mainly due to the acquisition of additional vessels,
particularly in the offshore sector.
In FY08, the company acquired India's first very large gas carrier (VLGC), Maharshi Bhardwaj and two large modern
Anchor Handling Towing and Supply (AHTS) vessels, MV Sudaksha and MV Suvarna. These acquisitions have enabled
the company to establish leadership position in the large AHTS sector in the Asian region. Varun Shipping is also the first
Indian company to operate large AHTS in the North Sea.
Star Panel Boards to invest Rs.900 cr.
Star Panel Boards Ltd., a joint venture between the Associate Group and Kings Wood, is setting up three manufacturing
units at an investment of Rs.900 cr. to manufacture Medium Density Fibre (MDF) and Particle Boards. On production, the
company will be the largest manufacturer of MDF and Particle Boards in India, the Middle East and the SAARC region.
The company plans to have a manufacturing capacity of one million cubic metres per annum of Panel Products by 2014.
The company has obtained the mandatory clearances from the Supreme Court for the states of Karnataka, Andhra
Pradesh and Gujarat and the necessary project clearances from the respective states and has acquired the industrial lands.
The Associate Group is the amalgam of two professional business houses – M/s. Farouk Sodagar Darvesh & Company
and M/s. Jawahar Saw Mills, spanning almost a century in the timber business through three generations. On the other
hand, Kings Wood are the largest suppliers of pulpwood in the country with nearly 28 wood crop collection depots.
Cerebra turns around
Cerebra Integrated Technologies Ltd., which is now renamed as Cerebra Ltd., has turned around after financial
restructuring involving one-time settlement (OTS) with its bankers. Today, the company is debt-free and has a positive
book value having wiped out pas losses.
The company has now embarked on a 150-seater medical transcription centre for its UK clients and will soon launch its
Legal Process Outsourcing (LPO) venture followed by an Architectural Outsourcing unit. Cerebra, therefore, plans to
entrench itself in the KPO business.
It has tied up with Red Sun Consulting India to provide SAP training to corporate customers and plans a few acquisitions
overseas apart from strengthening its Electronic Manufacturing Services and regain its foothold in the hardware business.
Neha International consolidates Ethiopian operations
Neha International Limited (NIL), a leading floriculture company has received the permission of Foreign Investment
Promotion Board (FIPB) to acquire Globeagro Holdings, Mauritius, which became its 100% subsidiary from 8th February
2008 and has significant holding in 3 Ethiopian floriculture companies. NIL has, therefore, consolidated the financials of
Globeagro from 8th February 2008.
For the year ended 31/03/2008 (nine month period), NIL has declared a standalone revenue of Rs.14.32 cr. with a PAT of
Rs.1.15 cr. and consolidated revenue of Rs.21.66 cr. with a PAT of Rs.4.53 cr.. Its EPS for the period is Rs.3.29.
To part finance its expansion plans, the company proposes to raise up to US $25 million through issue of
FCCBs/ADRs/GDRs. The necessary mandate has been taken from the shareholders.
Soma Textiles plans speciality finishes on fabrics
Soma Textiles and Industries Limited, engaged in the manufacture of textile products, cotton yarn, high-value shirting
fabrics, bottom wear fabrics, and denim fabrics is planning to install a polymerizer for developing specialty finishes on
fabrics. It will focus on continuous length dyeing of shirting and bottom weight fabrics. The company plans on major
expansion whereby it will introduce soft and flat finishing range for denim fabrics keeping in mind future market
requirements.
The company's product range includes cotton-combed yarns, polyester-cotton and polyester-viscose yarns, shirting and
bottom-wear categories in 100% cotton, polyester cotton blends and polycottons, silky denims, slub and streaky denims,
polydenim, stretch denim, exotic denims, etc. The company has an installed capacity of 55,440 ring spindles, 552 rotors
and 476 looms.
The company has recently allotted 1,850,000 GDRs worth $17.2975 million representing 18,500,000 underlying equity
shares of Rs.10 each to the Depository Deutsche Bank Trust Company Americas.
K Sera Sera launches new film
K Sera Sera Productions Ltd. has commenced production of a new movie titled 'Tara Sitara' and has sorted out the
problems with director, Ram Gopal Varma, pertaining to the movie titled 'Sarkar Raj', which is scheduled to be released
on 6
th
June 2008.
Recently, the company announced that it will jointly produce six films with Sahara Motion Pictures, which is valued at
Rs.100 cr. This is the first time two corporate entities are joining hands to co-produce Hindi movies.
Maars Soft to foray into media & entertainment
Maars Software International Ltd. is setting up a subsidiary by the name 'Maars International Pvt. Ltd.' to foray into
media, entertainment and film distribution business with total project outlay of about Rs.100 cr. and form joint ventures
for infrastructure development across India for developing residential and commercial complexes estimated project cost
of the same is about Rs.2000 cr.
The Board has decided to apply in principal approval with applicable stock exchanges for issue of GDR to an extent of
approx. $18 million.
Birla Sun Life Insurance regains momentum
Birla Sun Life Insurance Company Ltd. (BSLI), the pioneer of Unit Linked Life Insurance plans amongst the private life
insurers, has registered an increase in market share to 6.6% amongst private life insurance players in India as on March
2008.
This increase in market share is reflected in both its individual life insurance and group insurance businesses. The
individual life business has a market share of 6.6 % amongst private players, while the group business has a market share
of 7.8% amongst private players
For FY08, it achieved APE (Annualized Premium Equivalent) of Rs.2204 cr., recording a growth rate of 131% resulting in
the company emerging among the fastest growing life insurance companies in India.
This increase in market share & growth rate during fiscal 2008 has been realized on the back of an aggressive distribution
expansion strategy & introduction of a range of innovative new plans & funds, which have provided the company unique
opportunities to tap new market segments.
.
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.
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