Sensex
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Saturday, May 03, 2008
Money Times May 5 – 11, 2008
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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 25
Monday, May 5 – 11, 2008
Pages 17
Market to remain positive
but profit–booking may emerge at higher levels
By Sanjay R. Bhatia
The markets displayed a positive trend amidst intermediate bouts of volatility and choppiness on announcement of RBI's
monetary policy and the FOMC meeting last week. Positive developments from both these events saw the markets move
higher. Sustained and broad based buying was witnessed amid neutral breadth of the market and good volumes during
the truncated trading week on account of the holiday on Thursday, 1
st
May 2008 for Maharashtra Day. Traders and
speculators were seen building fresh positions but were also
booking profits at higher levels. Incidentally, FIIs remained net
buyers in the cash as well as the derivatives segment. Mutual
funds, too, remained net buyers during the course of last week.
The global cues have more or less remained positive. Crude oil
prices continued to spike higher but are likely to come down
with the Nigerian situation improving. Global markets also
displayed a positive trend after the US Federal Reserve
announced rate cuts. It cut the Federal Fund rate by 25 bps to 2%
and discount rate by 25 bps at 2.25%. However, the outlook for
future cuts remains unclear. Even though the RBI announced a
further hike in CRR by 25 bps and maintained a status quo on
Repo Rate and Reverse Repo Rate, inflation continues to remain
a cause for concern. Now, it is important that fund flows
improve further, especially at higher levels for the markets to continue to move higher to test the Sensex 18,000-18,500
level. The result season has been on expected lines and the next trigger for the domestic markets would be the monsoon
forecast.
In the meanwhile, the markets would take cues from the global markets and crude prices. The markets are likely to
remain positive unless we have some negative news, which could trigger a short-term correction. Profit booking and
selling pressure is likely to be witnessed at higher levels. Stock specific activity will continue amid occasional bouts of
volatility and choppiness.
Technically, as we had indicated, the Nifty and BSE Sensex managed to move above their 200-day SMAs, which is a
positive sign and augurs well for the markets. On the upside, the Sensex faces resistance at the 17,824 and 18,115 levels
but has support at 17,600, 17,300 and 16,608 levels. On the upside, the Nifty faces resistance at 5300 and 5463 levels, while
5156, 5025 and 4899 are important support levels for the Nifty.
Traders and speculators can buy Colgate with a stop loss of Rs.397 and a target price of Rs.500-520.
Stay stock specific for rewards
By Fakhri H. Sabuwala
1
Gone are the days when you threw a dart and picked up whatever it hit to make money. Gone also are the days of the
benchmark moves. The indices have lost their importance and the investment game more or less revolves around growth
stories of companies and as such potency of the respective scrips.
This is what was evident over the past few weeks and more so after the announcement of Q4 and FY08 results. This trend
was becoming loud and clear on the days the market was volatile intra-day and closed lower. Certain scrips came out
with flying colours. Some such stocks which readily come to mind are Sesa Goa, Sun Pharma, Hero Honda, Glenmark
Pharma among the large ones.
Despite the tremors of a cool off in the two-wheeler segment, lower margins and negative reports from brokerages, Hero
Honda is establishing its place of pride in that segment. So is the case with Sun Pharma and Glenmark, which did not
fetch a robust response from analysts of different broking outfits. Such contra moves by scrips clearly spell out our lack of
understanding of their strengths.
This year will be one in which smart & sharp anglers are going to make tonnes of money and the rest of us will only sway
in the waves of volatility. What is the need of the hour is not a quantitative or objective analyses but a subjective analysis
and an attempt to read the scrip's story between the lines. Don't worry as intuition also plays a role for success in equity
markets. It is just not arithmetics alone, emotions too play a role. So does irrationality!
Some such thought provoking growth counters that can catch the investor fancy in coming months are enumerated
hereunder.
Bartronics: This major player and a pioneer in Automatic Identification and Data Capture and RFID (Radio
Frequency Identification) solutions has already established its place in the US and Singapore markets. It is now
aiming to enter Europe through the acquisition of an existing player with reputed clients. The takeover cost may
be in the vicinity of $100 million that will be raised partly by floating debts and partly through capital infusion.
This acquisition will give the company a larger and deeper presence in the global market and makes it a company
to watch.
KEC International: India's largest power transmission EPC (engineering, procurement and construction)
company is about to close a Rs.800 cr. order in coming weeks. This is over and above the Rs.4200 cr. order book
position it already has.
Its Managing Director & CEO, Shri Ramesh Chandak, expects the US market to open up in the next 6-8 months as
the developers there are currently undertaking 'right of way' studies for setting up transmission towers. It is
worthwhile to note that the US has not seen any major investment in power transmission and distribution (T&D)
for over a decade and is expected to start spending and creating and replacing T&D infrastructure.
KEC is into an equal partnership JV with a local US company called Power Engineers to tap the potentially $50 -
$60 billion US market. This JV is in the process of being empanelled with utilities and would bid for complete
EPC projects. KEC would continue to supply transmission towers to the contractors.
For Q4FY08, its revenue is up 60% at Rs.1031 cr. and net profit is up 103% at Rs.61 cr.
HDFC: This housing finance company partly owned by Citigroup Inc. reports a 40% rise in net profit following
the sale of its stake in its general insurance company. The Rs.202 cr. it received from this sale consolidates its
financial clout. HDFC has an advantage over banks, which need to maintain CRR. The company's net profit does
not include Rs.294 cr. profit it made in mark to market gains from derivatives.
The appointment of Dr. Bimal Jalan, former RBI governor, its board is a factor that makes a difference even
though it is subjective in nature.
Apart from them, even LIC Housing Finance Ltd., which has reported robust results and a 100% dividend is also
a scrip to watch out. All these are 'Lambi race ka Ghoda'.
Pull-back level to be tested
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex opened at 17251.56, attained a low at 16978.89
and moved up to register weekly high at 17621.24. The Sensex finally
closed the week at 17600.12 and thereby showed a net rise of 522
points on a week-to-week basis.
The Sensex is now on the verge of testing the second pull-back level
of the fall from 21206 to 14677. The 0.500 and 0.618 levels are placed
at 17942 and 18712 respectively. The high registered last week was
17621 and we are on the verge of testing the 17942 level during the
week.
Weekly resistance will be at 17821-17942. Weekly support will be at
2
17400-17178-16978.
The 200 day EMA and
SMA are placed at 16907
and 17424. The 3-point,
1.27
and
1.618
retracements levels of the
rise from 14677 to 16452,
projected up from the
higher bottom of 15321,
gives the levels of 17575
and 18193.
WEEKLY UP TREND STOCKS
Last week, the Sensex
entered the range of
17575-18193. In this range
we also have the 0.500
pull back retracement at
17942. The higher range of
17575-17821-17942-18193
is the level to be watched.
We could find the current
move getting exhausted
at either of the levels at
17821-17942-18193.
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
GLENMARK PHAR
668.00 537.0
619.0
652.0
701.0
783.0
77.3
581.8
28/03/08
REI AGRO
1615.00 1330.0
1505.0
1570.0
1680.0
1855.0
76.9
1538.8
28/03/08
BOMBAY DYEING
1038.00 647.0
887.0
976.0
1127.0
1367.0
73.7
827.4
17/04/08
SESA GOA
4332.00 3109.0
3852.0
4115.0
4595.0
5338.0
73.2
3535.8
17/04/08
LIC HSG. FINANC
364.70 282.5
334.5
356.2
386.5
438.5
68.7
319.9
04/04/08
WEEKLY DOWN TREND STOCKS
The
parallel
channel
comprises the 3 points
15532, 14677 and 18895.
The upper channel value
is around17968 and is
falling every day by 100
points. The channel value
is round the corner to
offer resistance.
If the market continues its
upward movement, then
we could find the Sensex
testing the higher range
of 17821-17942-18193 at
least and may be to 18712
to an outer extent, if it
closes above 18193.
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
GRASIM INDS
2369.00 1859.0
2238.0
2486.0
2617.0
2996.0
26.49
2534.50 02/05/08
SIEMENS
578.10
463.9
540.8
580.4
617.7
694.6
28.28
622.41
02/05/08
THERMAX
499.25
452.8
486.4
507.2
520.1
553.7
28.62
508.56
07/03/08
INDIA CEMENTS
172.50
156.3
167.1
172.5
177.9
188.7
30.31
177.51
17/04/08
MADRAS CEMENT 3176.00 2927.3
3107.3
3218.7
3287.3
3467.3
31.85
3253.50 02/05/08
PUNTER'S PICKS
Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery
based trade for a possible time frame of 1-7 trading days. Exit at first target or above.
Scrips
BSE
CODE
Last
Close
Buy Price
Buy On
Rise
Stop Loss Target 1 Target 2
Risk
Reward
ABC BEARINGS
505665
90.40
88.00
92.50
86.10
96.5
102.9
1.41
AUTOLINE INDUSTRIES
532797 216.05
209.00
218.00
201.55
228.2
244.6
0.84
BATLIBOI
522004
48.65
46.50
48.80
43.30
52.2
57.7
0.66
BLUE DART EXPRESS
526612 693.00
676.00
710.00
656.00
743.4
797.4
1.36
FORBES GOKAK
502865 526.40
495.00
535.00
475.20
572.0
631.8
0.89
GREAVES COTTON
501455 255.45
248.50
257.40
240.00
268.2
285.6
0.82
MOHIT INDUSTRIES
531453
19.90
18.15
20.00
16.10
22.4
26.3
0.66
RICHA KNITS
532766
74.75
71.95
75.90
69.05
80.1
87.0
0.94
SUPREME INFRASTRUC
532904 103.15
98.50
104.70
94.60
110.9
121.0
0.91
VIVIMED LABS
532660 105.80
99.00
109.40
96.20
117.6
130.8
1.22
As we head towards the
retracement
levels,
following
stop
loss
becomes very important.
If the Sensex fails to
sustain at the pull-back
retracement levels, then it
can slide down to a lower
range and back to the low
of
14677.
Therefore,
observe stop loss to avoid
getting trapped in case of
failure of any further
moves.
Sensex Wave Analysis
Wave I-2594 to 3758
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
NATIONAL ALUMINIUM C
438.40
445.31
448.50
451.69
462.00
418.3
52.69
3
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 17621 (current ongoing move)
Internals of Wave B
Wave a-14677 to 16452
Wave b-16452 to 15464 (A triangle was witnessed in Wave b)
Wave c- 15464 to 17621 (Current ongoing move)
Wave 1-15464 to 15953
Wave 2-15953 to 15573
Wave 3-15573 to 16871
Wave 4-16871 to 16698
Wave 5-16698 to 17621 (Current ongoing move)
If Wave 5 is complete in days to come, then we will complete Wave B and then Wave C will begin which will have a
downward direction. This
move can get terminated at 17821-17942-18193 or get extended to 18712. The expected range of termination of the pull-
back is 17821-17942-18193.
If the correction of the fall from 21206 is expected to unfold in a Zig-Zag A-B-C formation, then the pull-back rise can go
up to 17170 levels and exceed towards 18712 maximum. The movement may get terminated in the range of
17172-17942-18712 to surrender the gains and move down to 14677-14100.
If the correction of the fall from 21206 is expected to unfold in a flat pattern formation, then the pull-back rise can go
beyond 18712 and can retrace the entire fall from 21206 to 14677 on the Wave B leg.
Let see how the movement unfolds from hereon and how far it goes up from here.
Conclusion
Till the low of 16978 is not
violated, we will test the range of 17821-17942-18193.
Strategy for the week
Rise is being witnessed and the first pull back has been attained. Overall strategy remains to exit on rise to pull-back
levels. Traders can maintain a stop loss of 16978 on weekly closing basis for any long positions in the market.
* The Godrej Group is on a trimming spree. All its companies are being repositioned, brand logo changed, new
marketing strategies developed and above all a big splash in developing a township 'Godrejnagar' in Vikhroli.
TOWER TALK
* All shareholders who opted for the buy back of Essar Steel shares at Rs.48 will repent as the company is on a big
expansion drive all over the world. It just created a 7 MMTPA capacity by buying Esmark for $1.1 billion. The scrip
becomes more valuable after delisting!
* You are worried about global slowdown and liquidity crisis. But just look at the money raised by the 50 largest private
equity players last year….a neat $250 billion!
* Sandur Manganese & Iron Ore is touted as a SESA Goa in the making. The company is on a stupendous growth path
and the stock is available at very low valuation.
* Jindal Photo has posted excellent results and is grossly undervalued. With an EPS close to Rs.42, the stock is an
attractive proposition around Rs.185 levels.
* Aro Granite board is meeting for a bonus issue. It is a stock with a good future potential.
* Biocon has announced 1:1 bonus. It is the best stock in the biotech space and can be considered for long-term
investment.
* Tanfac Industries is available at a low P/E. It has posted an EPS of Rs.12.2 and is a value buy around Rs.63 level.
* Tata Elxsi declares 70% dividend for FY08 offering a yield of about 4% at CMP. It has corrected 50% from its high and is
available fairly cheap.
* SEAMEC has come out with disappointing March 2008 quarter and reported a huge loss due to dock charges and other
provisioning. Scrip may correct 10-15% in coming days. Buy only at declines.
* C&C Construction has a massive order of more than Rs.1500 cr. and has reported an encouraging March 2008 quarter as
well. A scrip to keep a watch on.
4
* Contrary to everyone's expectation, the market is moving up constantly at a good pace but with less conviction. Take
this opportunity to lighten your position and play safe.
* Selan Exploration has shot up dramatically from a low of Rs.109 in March 2009 to current Rs.270 levels. Book profit and
shift to SEAMEC at lower levels.
* Ennore Coke Ltd. is set to start commercial production now that its new power system is synchronised with the plant.
* Is NEPC India eyeing the aviation sector again?
* Grey market premium for Gokul Refoils & Solvent started at Rs.25-27 per share while Aishwarya Telecom was
quoting Rs.19-21 last week.
* Proxy IPO application forms for Rs.1 lakh retail application are quoting at Rs.1900/2100 for Gokul Refoils & Solvent.
5
By Saarthi
BEST BETS
Lokesh Machines Ltd. (Code: 532740)
Rs.74
Established in 1983 and promoted by Mr. Lokeshwara Rao, a first generation entrepreneur & technocrat, Lokesh
Machines Ltd. (LML) is engaged in the design, development and manufacture of custom built special purpose machines
(SPM) and general purpose CNC (computerized numerical control) machines along with their components. From a
modest beginning handling job works, today the company has emerged as an integrated machine tool manufacturer with
operations in two main business segments namely machine tools and auto parts. Over a period, LML has developed
various range of SPMs including single and multi spindle machines, shuttle type, way type, linear and rotary indexing
machines, linear transfer lines etc. Under the CNC segment, it manufactures horizontal and vertical machining centre,
turning centre, milling and boring machines etc. And in the auto component sector, it concentrates on
manufacturing/machining auto components like cylinder blocks, cylinder heads etc to original equipment manufacturers.
Hence, LML primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Presently, the
company derives 70% revenue from machining division whereas the rest 30% comes from its auto component division.
LML has all five manufacturing units located in Andhra Pradesh and in technical association with Grob Gmbh-Germany,
Fagima-Italy, SCMS-Japan, AVM Angelini-Italy, Wenig Wemas-Germany & IMT Intermato-Italy. In the domestic market,
the company supplies mainly to M&M, Ashok Leyland, Force Motors, Cummins, Tata Motors, Bajaj Auto, Bharat Forge,
Kirloskar Oil Engines, Everest Kanto Cylinders etc. LML has a capacity for machining and supply of 1,20,000 units per
annum each of cylinder blocks and cylinder heads, especially for M&M. Recently, it set up an additional facility for
machining of 40,000 units per annum each of cylinder blocks and cylinder heads, especially for Ashok Leyland. After
successful trial runs, the production at this facility has commenced from April 2007. Of late, LML has also made a foray in
overseas markets with orders from M/s. FPT Industries Spa-Italy, Honda Motorcycles-Japan and HOWA-Japan. Further,
its technical partner Wenig Wemas-Germany has also placed an initial order of 100 machines worth Rs.20 cr. Going
forward, the company looks to gradually increase its share in the international market.
In April 2006, LML came out with an IPO at Rs.140 per share and raised Rs.42 cr. These entire proceeds have been utilized
for setting up new facility for Ashok Leyland and also to meet the cost of modernisation and to upgrade the existing
facilities for the manufacture of CNC machine tools. Financially, the company is doing well as it recorded 20% growth in
sales and 30% growth in net profit to Rs.68 and Rs.8.60 cr. respectively for the first nine months. Thus for the entire FY08
it is expected to clock a turnover of Rs.105 cr. with PAT of Rs.13 cr. i.e. an EPS of Rs.11 on its equity of Rs.11.80 cr.
The scrip is currently trading at a P/E ratio of
merely 8 times, which is extremely cheap for
such a fast growing engineering company.
Moreover, the continuous growth in the
domestic demand for machine tools, both in
the capital goods and auto component sectors
provides an opportunity for further progress.
For FY09, it has the potential to post an EPS of
Rs.14-15. Interestingly, the scrip made a 52-
week high of Rs.166 on 7
th
January 2008 and a
low of Rs.51 on 24
th
March 2008. Considering
its IPO price of Rs.140 and the current market
sentiment, it is a safe bet and can give
handsome returns in the medium-to-long-
term. Investors are strongly recommended to
buy at current levels as the scrip can easily
appreciate 50% within 9-12 months.
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Pioneer Distilleries Ltd. (Code: 531879)
Rs.76.60
Incorporated in 1992, Pioneer Distilleries Ltd. (PDL) is engaged primarily in the manufacture of extra neutral alcohol
(ENA), rectified spirit (RS), denatured spirit (DS), and absolute alcohol (Ethanol). Its fine grade of ENA is mostly used as
a raw material for several brands of renowned liquor. On the other hand, Ethanol is also supplied to pharmaceutical
companies and petroleum companies. This apart, PDL also processes the carbon-dioxide (CO
2
) generated in the
fermentation process to manufacture commercial grade CO
2
and has appointed SKVM agencies as its sole selling
agent. Although the company uses molasses as raw material, it has also obtained licence for the manufacture of grain
based alcohol. Hence in case the price of molasses shoots up or there is a shortage, PDL can use various grains like jowar,
bajra, rice etc. as alternative raw materials for the manufacture of alcohol.
PDL's plant at Nanded in Maharashtra is located near many sugar factories, which ensures regular and cheap supply of
its raw material i.e. molasses. During FY07, the company doubled its production capacity from 50 KLPD (kilo litres per
day) to 100 KLPD and is currently running at 100% capacity utilisation. It is further planning to double the installed
capacity to 200 KLPD for which statutory permission from the excise department has been received. On the back of
increased demand for ethanol products by petroleum companies, PDL is also contemplating to increase the capacity of its
ethanol plant from 30,000 to 130,000 litres per day. In addition, it is also looking to set up an Acetic Acid plant of 30 MT
per day and Ethyl Acetate of 20 MT per day capacity. Apart from all these, the company is setting up a 5 MW biogas
based power generation project and additional effluent treatment plant to emerge as a zero distance company in future.
Both these plants are expected to commence operations by August 2008 through a capex of Rs.40 cr. Notably, PDL is
entitled to get carbon credits for its biogas power project and is in the process of tying up with a reputed UK organisation
for getting registered with UNFCCC. The power thus generated will be sold to the Maharashtra power grid and will be
an extra source of income for the company.
After making a remarkable turnaround financially in FY07, PDL continued to report an encouraging performance for
FY08. Due to better operating efficiency and fall in raw material costs, the company was able improve its operating
margin from 14% to 24% in FY07. Based on the first three quarter results, it is likely to improve its OPM to 28-30% for
FY08. In order to fund its expansion, it made an preferential allotment of 11.45 lakh warrants at Rs.21 and recently allotted
another 7 lakh warrants at Rs.53. For FY08, it may clock a turnover of Rs.75 cr. with net profit of Rs.12 cr., which works
out to an EPS of Rs.11 on its current equity of Rs.11.20 cr. interestingly; PDL also owns around 300 acres of land, which is
being used for agricultural purpose where treated effluent is used for cultivation. Considering the company's expansion
plans and other factors, it can post an EPS of Rs.14 for FY09. Hence at a fair discounting by 8 times against FY09 earnings,
the scrip can move up to Rs.110-120 (i.e. 50% return) within a year.
Pondy Oxides & Chemicals Ltd.: A safe investment
ANALYSIS
By Devdas Mogili
Pondy Oxides & Chemicals Ltd. (POCL) is a 13-year old Chennai based company established in 1995. It started as a
partnership firm trading in zinc and lead oxides and subsequently forayed into the manufacture of zinc oxide by setting
up a manufacturing unit in Pondicherry.
The company is mainly engaged in manufacturing metallic oxides and plastic additives. POCL's business consists of three
principal segments viz. Metals and Oxides, Plastic Additives and Batteries. Its Metallic Oxides Division is located at
Mettupalayam, Pondicherry. The PVC Stabilisers Division is at Sembiapalayam, Pondicherry, the Smelter Division is at
Kanchipuram, Tamil Nadu and the Zinc Division at Thiruvallur Taluq, Tamil Nadu. Padam Chandra Bansal is the
chairman while Anil Kumar Bansal is the managing director of the company.
POCL entered the capital market in January 1996 to expand its capacity of zinc and lead oxides. The project also included
setting up a red lead and zinc production plant as a joint venture with Malaysian based M/s. Katril Oxides (M) Sdn Bhd.
The company's subsidiary, M/s. Baschem Pharma Ltd., started a new unit in Maraimalai Nagar for manufacturing Liquid
Stabilisers, Epoxy Oil and Metallic Octates and started commercial production in January 1999.
Expansion: During 2006, the company tapped the capital market with a rights issue, the proceeds of which have been
utilised for the project located at Sipcot Industrial Park, Sriperumbedur; for manufacturing lead metals and compounds
to a significant extent.
The company's expansion programme for the manufacture of lead metal and its compounds at Sipcot Industrial Park,
Sriperumbedur in Tamil Nadu has been completed and the project for manufacturing refined zinc is in process.
R&D: POCL has a well-equipped central R&D laboratory where research is an ongoing process.
Performance: During FY08, sales rose to Rs.194.25 cr. against Rs.120.78 cr. in FY07. Net profit improved to Rs.4.50 cr.
against Rs.2.90 cr. in FY07 and registered an EPS of Rs.4.46 against Rs.2.87 in FY07.
6
Financial Highlights:
(Rs. in lakh)
Latest Results: Net sales rose to Rs.46.62 cr. in
Q4FY08 against Rs.37.71 cr. during Q4FY07. Net
profit shot up to Rs.1.29 cr. in Q4FY08 as against
Rs.0.82 cr. during Q4FY07. The company
recorded a basic/diluted EPS of Rs.1.28. The
annualised EPS works out to Rs.4.46 as against
Rs.2.87 for FY07.
Financials: During August 2006, the company
raised Rs.7.35 cr. through a rights issue in the
ratio of 2:3. The company's current equity is
Rs.10.11 cr. with a book value of Rs.18.90. It has
a debt:equity ratio of 1.07, RoCE of 21% and
RoNW of 19.68%.
Share Profile: The company's shares with a face
value of Rs.10 are listed and traded on the BSE
under the B2 group. Its share price touched a 52-week high of Rs.38.40 and a low of Rs.17. At its current market price of
Rs.23, it has a market capitalization of Rs.24.16 cr. The share has a beta value of 0.6, which indicates low volatility.
Particulars
Q4FY08
Q4FY07
FY08
FY07
Net Sales/Income
4662.31
3770.96
19425.42
12077.56
Other Income
26.80
9.79
124.29
25.26
Total Expenditure
a. Inc/Dec in Stock
254.55
186.95
-136.76
118.25
b. Raw Materials
3321.64
2444.44
14734.91
8415.57
c. Staff Cost
40.37
49.09
249.89
177.77
d. Other Expenditure
Excise Duty
534.94
520.97
2403.15
1635.64
Others
201.41
298.84
1113.75
1025.46
Interest
74.71
84.54
341.03
199.14
Depreciation
37.58
34.90
166.28
89.68
Profit Before Tax
223.91
161.02
677.46
441.31
Prov. for taxation
94.95
78.56
227.00
151.37
Net Profit
128.96
82.46
450.46
289.94
Paid up equity
1010.71
1010.71
1010.71
1010.71
Res Exc Rev Reserves
900.41
Basic/Diluted EPS (Rs)
1.28
0.82
4.46
2.87
Dividends: The company has been paying dividends as shown: FY07 - 12%, FY06 - 15%, FY05 - 16%.
The company paid a dividend of 12% for FY07 on its expanded equity following its rights issue.
Shareholding Pattern: As on 31
st
March 2008, the promoter holding in the company was 31.72% while the balance 68.28%
was held by non-corporate promoters and the Indian public.
Prospects: POCL is a major player in Metallic Oxides industry and is maintaining its number one position with a market
share of about 30% in the Plastic Additives segment. Further, following its backward integration by setting up a
manufacturing unit for a lead smelter, its cost of input is expected to reduce significantly.
In addition, the company undertakes various measures like improvement in productivity, cost reduction exercise,
reduction of defectives, intensifying sales promotion activities and improving sales through better distribution network.
Conclusion: POCL is one of the major players in the metallic oxides and plastic additives. Further, its strategic backward
integration efforts will result in a significant improvement in topline and bottomline in the future.
At its current market price of Rs.23, the POCL share is discounted less than 5 times its latest earnings against the industry
average P/E multiple of 19 for the chemical industry. Moreover, the share is available slightly above its book value, which
indicates sufficient margin of safety for investors. This small cap stock can be considered for investment with a medium-
to-long-term perspective. The chances of appreciation are quite high while likelihood of declines is less.
Market clocks gains for the fourth straight week
MARKET REVIEW
By Ashok D. Singh
The BSE Sensex gained 474.14 points or 2.76% to 17,600.12 for the week ended Friday, 2 May 2008. The NSE Nifty rose
116.50 points or 2.27% to 5228.20, for the week. The market clocked gains for the fourth straight week tracking firm global
markets and on the back of good Q4FY08 results. Both the benchmark indices - BSE Sensex and NSE Nifty settled above
key levels of 17,600 and 5,200. Asian stocks edged higher on speculation that the global credit-market turmoil will ease.
The BSE Mid-Cap index rose 181.26 points or 2.56% to 7,237.47 for the week, outperforming the Sensex. The BSE Small-
Cap index rose 93.99 points or 1.07% to 8,821.71 for the week, underperforming the Sensex. FIIs were net sellers of shares
to the tune of Rs.10,358 cr. till 29 April in CY08.
Trading for the week started on a weak note as investors turned cautious ahead of RBI's monetary policy meet on
Tuesday, 29 April 2008. The 30-share BSE Sensex lost 110.02 points or 0.64% to 17,015.96 and the broader based S&P CNX
Nifty was down 22.05 points or 0.43% at 5,089.65, on Monday, 28 April 2008.
The market advanced on 29 April 2008 after RBI kept interest rates unchanged. The Sensex jumped 362.50 points or 2.13%
at 17,378.46 while the broader based S&P CNX Nifty was up 105.85 points or 2.08% at 5,195.50 on that day.
The BSE Sensex shed 91.15 points or 0.52% at 17,287.31 and the broader based S&P CNX Nifty lost 29.6 points or 0.57% at
5,165.90 on Wednesday, 30 April 2008 as traders booked profit ahead of the outcome of the US Federal Reserve's policy
meeting later in the day. Markets were shut on Thursday, 1 May 2008 on account of Maharashtra Day.
On Friday, 2 May 2008, the market posted gains despite the latest data showing a rise in inflation to highest level in more
than three years. Firm global markets supported domestic bourses with the Sensex scaling 2-month high. The Sensex
advanced 312.81 points or 1.81% at 17,600.12 and the broader based S&P CNX Nifty rose 62.30 points or 1.21% at 5,228.20
on that day.
7
The US Federal Reserve on Wednesday, 30 April 2008, cut Fed Funds rate by 25 basis points to 2% and hinted at a pause
in its recent campaign to lower borrowing costs.
India's wholesale price index rose 7.57% in 12 months to 19 April 2008, accelerating from the previous week's annual rise
of 7.33%, government data released on 2 May 2008 showed. The rate was the highest since a reading of 7.68% on 13
November 2004.
The BSE Sensex gained 474.14 points to close at 17,600.12 last week. Local market are expected to take cue from the global
markets in the near term as earnings season has almost come to an end with majority of frontline companies having
already declared their results. i-flex Solutions, Century Textiles, JSW Steel, Union Bank of India and Ashok Leyland
among others are the key results to watched out for during the forthcoming week
Markets across the globe have managed to stage a sharp pull-back from their lows hit in mid-January 2008 on hopes that
the global credit-market turmoil will ease. The benchmark index BSE Sensex has risen 2,790.63 points or 18.84% from its
low of 14,809.49 touched on 17 March 2008. However, it is still 3,606.65 points or 17% away from its all time high of
21,206.77 hit on 10 January 2008.
Inflation remains the biggest concern for the Indian stock market. The measures taken by the Union government to
control inflation have also added to uncertainty on corporate profits. Given that parliamentary elections are scheduled
next year, the government may leave no stone unturned in its attempt to rein in inflation.
8
Market mood improves
MARKET
but analysts disappoint
By G. S. Roongta
Amid fears about the RBI adopting hard measures to control inflation, which is at its highest over the past three years, the
stock market remained rather cool and calm instead of reacting sharply as it used to earlier.
Further, with the government taking steps to bring down the prices of essential commodities like food and vegetable oils,
which affect the common man directly and cement and steel by tweaking duty structures and prevailing on
manufacturers to hold the price line and desist from hiking prices and thereby absorb the rise of input
costs themselves.
G.S. Roongta
But cement and steel manufacturers are finding it hard to abide by the government fiat or to go against it.
Under the circumstances, such manufacturers have turned cautious and chose to declare lacklustre
results to give the impression that their margins are under pressure on account of rising input costs and
their inability to pass on the same to their customers in the present scenario. In reality, both cement and
steel are enjoying boom times but manufacturers feel that they would hurt their own interest by
declaring fancy results at this juncture given the mood of the government.
The results declared by Grasim Industries and several other companies recently is a living example of this strategy
adopted by cement and steel manufacturers to remain on the right side of the government and thereby forego the
declaration of bumper profits. I say this because Grasim has come out with flying colours declaring the highest ever profit
in its history. But it has fallen short of the expectations of analysts resulting in a loss of 250 points from its peak on 28
th
April 2008, the day its Q4 results were announced. Next day, the stock fell from a high of Rs.2735 to Rs.2485 on a single
day!
This fall in its share price was despite the fact that the Grasim scrip had ruled as high as Rs.4600 during 2007-08 and has
thus lost Rs.2000 in a matter of a few months. Is it not an irony that a stock can react to such an extent that its price melts
down by nearly 50% in just 3-4 months when the company has done exceedingly well QoQ basis and put out exceptional
numbers for FY08?
Let us ponder on this a little and consider the following:
(1) Grasim's consolidated turnover for FY08 has smartly shot up to Rs.17,436 cr. from Rs.14,387 cr. in FY07 – a rise of
over 20% by Rs.3049 cr.
(2) Profit before exception items but before interest and depreciation has spurted by over Rs.1080 cr. at Rs.4530 cr.
from Rs.3451 cr. in FY07. It has achieved this volume of business on its small equity of Rs.91.69 cr. only.
(3) PAT is also higher by Rs.987 cr. at Rs.3346 cr. against Rs.2359 cr. in FY07.
(4) Diluted and Basic EPS is extraordinarily high at Rs.315.35.
(5) The company has raised dividend distribution to Rs.30 per share or 300% i.e. thrice the value of its paid-up
equity, which will cost the company Rs.3166.44 cr.
(6) The company is a leader in its product categories such as staple fibre, cement and sponge iron.
Grasim's EPS and dividend distribution is incomparable and even superior to other highflier companies. Yet the analysts,
who were boasting about Grasim's performance just few months back when it was quoting around Rs.4600, have
suddenly changed track and issued a sell recommendation asking investors to lose money at this low rate. What kind of
recommendation is this? Should they not advise investors to accumulate at this price?
Should analysts not be held accountable for issuing the wrong recommendation at these two different price levels? Why
did they not caution investors or issue a fresh downward rating well in time? Why should investors believe their ratings
and forecasts when it proves so wrong or so untimely? Are these analysts reports motivated considering that the stocks is
quoting at a P/E multiple of less than 10 and is yet recommended for sale?
As against the recommendation of such analysts, I hereby recommend that the Grasim stock at the current price is highly
attractive and instead of selling it, investors must buy it now at Rs.2368 and on further declines. It has great potential with
great growth prospects as it will invest Rs.3000 cr. in FY09 to expand the manufacturing capacities of its various products.
Grasim is the leader in staple fibre not only in India but globally and its stock will regain the lost ground sooner than
later.
Grasim is also a bonus candidate as its equity of Rs.91 cr. is very low compared to its size and volume of business, which
may cross Rs.20,000 cr. in FY09. Its turnover : equity ratio is the highest and the company has built up extra ordinary
reserves of Rs.9013 cr. i.e. almost 100 times its paid-up equity. It is, therefore, an ideal bonus candidate having declared
3:4 bonus 20 years back in 1988.
I really wonder how this Aditya Birla group company is so complacent to allow the market to washout its market
capitalization in this fashion when its performance outranks any Indian company or an MNC. Its management should
have announced a buyback much earlier as the company is sitting on huge idle funds. This would have also helped the
promoters raise their stake in the company to reduce the risk of any future takeover threat at such a low stock price. But
since the management is a silent witness to the beating down of its stock value, the less said about its market perception
the better. Investors, however, should not get carried away by the game of vested interests and lose out on a good stock at
a throwaway price. In fact, investors should buy Grasim and hold on for better returns.
In the past also these analysts had given sell recommendations on stocks like Tata Tea, Maruti Suzuki, Tata Steel, Hero
Honda and Hindalco. But within the next 4 to 6 months all these stocks were re-rated no sooner market operators had
cornered bulk quantities of these stocks at low levels and which are now quoting at their highest levels since. The same is
likely to happen in Grasim as innocent investors may get fooled by analysts' ratings and lose out on future handsome
profits or incur huge losses if they had bought it around Rs.4500 again on analysts' recommendations.
What is so special about these stocks when
other stocks from the same sector are still
reeling low such as SAIL and JSW Steel from
the steel sector and struggling near their recent
bottoms? Similarly, Tata Motors, Maruti Suzuki
and M&M are also struggling at their recent
lows in the automobile sector. Tata Tea, too, is also no exception.
Company
CMP as on
30/04/08
52-week
High
52-week
Low
Appreciation
from its low
Hero Honda
850
865
561
289 points
Tata Tea
915
1015
586
329 points
Tata Steel
818
970
471
347 points
Hindalco
202
223
135
67 points
Stocks that have been downgraded by analysts are ACC, Gujarat Ambuja Cement, Grasim, L&T, M&M, Maruti Sizuki
and Tata Motors. Investors should not be surprised to find on fine morning that all these stocks have been re-rated on
some pretext or the other.
Operators play with all the tools at their disposal, which include the public relations and press conference specialists, the
print media, TV channels, analysts and rumour mongers to drive a stock up or down to suit their convenience and large
profit motives. This is how they kill the golden goose time and again when common investors wake up to realize how
they were fooled and desert the market. But greed brings them back to the market and the game of manipulation
continues.
According to me, Grasim, Hindalco, Tata Steel, Tata Tea, Maruti Suzuki, Tata Motors and ACC will prove to be winners
of 2008 despite the pessimistic outlook of analysts solely based on the government initiative to curb cement and steel
prices. Demand and supply are the prime movers of the market economy and no amount of government interference can
affect their working so long as the demand is robust.
Two weeks back, when there was gloom all around, there was no one to forecast in clear cut language in which direction
the market was headed. I did dare to break the silence and had forecast that the Sensex would hit 17,500 when nobody
was prepared to speak of a 500 point rally at that juncture. Readers will be happy to note that the Sensex has met my
forecast last week and may realise its value in the backdrop of the confusion created by the pink media and the TV
channels, which repeatedly gave prominence to bear market operators.
Investors should, therefore, exercise care and not get carried away by the media or analysts as they may be working in
tandem with market operators to promote their interests rather than the interest of common investors. Understand the
broad economic parameters and company fundamentals before buying or selling a stock.
MUTUAL FUNDS
9
Infra Funds: Attractive for the long-term
By Devangi Bhuta
Earlier, there was uncertainty over the Credit policy but after the reassurance on that front and the US Federal rate cut on
the overnight lending and discount rate the markets continued their volatile trend through.
Mutual Fund NAVs did take a hit although some schemes have now become attractive again considering the strong
prospects of the sector. The infrastructure pack is one of them.
India's GDP has grown from US $400 billion a decade ago to nearly US $1 trillion. This has increased the pressure on the
country's power, transport and urban infrastructure in the backdrop of increased commercial activities, proliferation of
new urban habitats and rising disposable incomes. But India's infrastructure spending accounts for just 4% of GDP, which
is abysmally low compared to China's 9%.
According to a consultation paper circulated by the Planning Commission, the investment required in infrastructure in
India is US $494 billion during the Eleventh Plan period (2007-12). This would increase the share of infrastructure
investment to 9% of GDP from 5% in 2006-07 and translates into an annual incremental investment of US $40 billion.
This clearly highlights the potential in this space and Mutual Funds schemes dedicated to this space appear to be an
attractive investment avenue. Some of these schemes do focus on other sectors also to an extent. But by and large, they are
invested into various segments of the infrastructure space.
DSPML India Tiger Fund is has the
highest weightage on Capital Good Space
followed by Construction. It has a fair
balance of large and mid cap stocks,
which have good fundamentals and has a
moderate churn ratio, which augurs well
for the company. Tata Infrastructure Fund
has also been a good performer and
appears to be a good bet.
This thematic fund, which revolves
around the India Growth story, now
awaits the rains and a good monsoon
would reiterate the strength of the Indian economy. If so, buying into these funds in a staggered manner may yield good
returns over a longer time horizon.
Scheme
NAVs as on 30/04/08
ICICI Prudential Infrastructure Fund
29
Canara Robeco Infrastructure Fund
21
Tata Infrastructure Fund
34
Sahara Infrastructure Fund - Fixed Pricing
15
UTI Infrastructure Fund
37
Birla Infrastructure Fund
15
PRINCIPAL Infrastructure & Services Industries Fund
14
DSPML India Tiger Fund
45
Sundaram BNP Paribas CAPEX Opportunities Fund
24
By Saarthi
STOCK WATCH
Belonging to the BC Jindal group, Jindal Poly Films Ltd. (Code: 500227) (Rs.234.80) makes polyester films (BOPET),
polypropylene films (BOPP), metallised films and coated films with in-house capability to produce polyester chips for
captive consumption. It is one of the largest manufacturer of flexible packaging films with an installed capacity of BOPET
(111000 TPA), BOPP (90000 TPA), metallised film (40000 TPA), coating (18000 TPA) and polyester chips (70000 TPA). It
has announced decent results for Q4FY08 and ended FY08 with sales of Rs.1258 cr. with PAT of Rs.134 cr. This translates
into an EPS of Rs.48 on its equity of just Rs.28.10 cr. With cash EPS of more than Rs.75 and book value of a whopping
Rs.280, the scrip is trading fairly cheap at a P/E multiple of less than 5 times. The company is incurring a huge capex
under which it will expand its capacity by 90,000 TPA for BOPP, 50,000 TPA for BOPET, 14,000 TPA for metallised films
and 4500 TPA for Coating. Although rising crude oil price is still a cause of concern, investors can accumulate the share at
sharp declines.
******
Belonging to the high profile RPG group, Phillips Carbon Black Ltd. (Code: 506590) (Rs.196.50) is the pioneer and the
largest manufacturer of carbon black in the country. In fact, it is the undisputed leader with a capacity of 270,000 MTPA,
which is almost 47% of the total installed capacity of carbon black in India. Recently, it reported satisfactory results for
Q4FY08 as sales improved by 8% to Rs.274 cr. but net profit jumped by 40% to Rs.19 cr. on better operating efficiency and
lower tax provisioning. For entire FY08, although sales remained flat at Rs.1033 cr., its PAT shot up 280% to Rs.89 cr.,
which works out to an EPS of Rs.35 on its equity of Rs.25.25 cr. Importantly, to protect its profit margin the company has
re-negotiated the pricing formula with its customers with a built-in escalation clause. To maintain its growth momentum,
its has chalked out a massive Rs.350 cr. expansion plan to be completed by December 2008 whereafter it will have carbon
black capacity of 395,000 MTPA. Meanwhile, its 30 MW power generation plant from waste gas in Durgapur is expected
to be commissioned within a couple of months. To sum up, the company is estimated to post an EPS of Rs.38-40 for FY09
on its fully diluted equity of Rs.28.25 cr.
******
10
Micro Technologies (I) Ltd. (Code: 532494) (Rs.317.80) is a global provider of security, safety and life-support solutions
with its very unique, hi-tech, first of its kind and innovative products like Home Security Micro HSS, Vehicle Security
Micro VBB, Lost Mobile Tracking System, Secure-Bank Black Box, Disaster Management System, Access Control Solution
etc which have a huge demand worldwide. It also boasts of introducing dynamic products like Office Black Box, Shop
Security System & Electric Black Box. Once again, the company has reported excellent results for Q4FY08 as its topline as
well as bottomline increased by 70% to Rs.51 cr. and Rs.16 cr. respectively. For full year FY08, it earned a net profit of
Rs.53 cr. on total revenue of Rs.171 cr. This leads to an EPS of Rs.48 on its current equity of Rs.10.95 cr. Recently, it
launched the Lost Notebook Tracking System, Micro Video Door Phone and Micro Intelligent Surveillance System. It was
also tied-up with MTNL under which it will offer Micro LMTS to secure the mobile handsets of 2 million MTNL
subscribers. Although constant equity dilution restricts the upside of the scrip, investors can still accumulate at sharp
declines.
******
Jupiter Biosciences Ltd. (Code: 524826) (Rs.163.90) has declared satisfactory results for Q4FY08. While it recorded 25%
growth in sales to Rs.130 cr., net profit zoomed by 65% to Rs.30.70 cr. for entire FY08. Of late, it has cancelled the 27.50
lakh equity shares allotted to promoters and instead issued 40 lakh warrants at Rs.182 to strategic investors. Hence its
current equity stands at Rs.15.40 cr. and not Rs.18.13 cr. and, therefore, for FY08 it registered an EPS of Rs.20. Importantly,
the company has entered into a 10-year product purchase agreement with Ranbaxy on peptide pharmaceutical for the
global market and as per contract allotted 31.77 lakh warrants at Rs.147. It is also setting up a 5500 sq. ft. manufacturing
facility in Maryland, USA to cater the US, Canadian and European markets. Couple of weeks back, it finalised its takeover
of a manufacturing facility of Merck Life Sciences in Switzerland and the acquisition formalities are under process. At a
reasonable discounting by 12 times, the scrip can shoot up to Rs.240 within a year. Keep accumulating at declines.
11
By Kukku
FIFTY FIFTY
Investment Call
* Cords Cable (Rs.124) was incorporated on 21
st
October 1991 as Cords Cable Industries Pvt. Ltd. by a group of three
professionals, Naveen Sawhney, D.K. Prashar and Rakesh Malhotra to cater to the growing requirement for high quality
customised cables. One of the objectives was to acquire and takeover as a going concern the partnership business carried
on under the name and style of Cords Cable Industries Ltd. (CCIL).
The company manufactures cables up to 1.1 KV for various applications including industrial, utility and buildings. Its
clients include BHEL, NTPC, Hindalco, ACC, HPCL, GAIL, Tata Steel, Siemens, Honeywell, L&T, MRPL etc.
CCIL had come out with an IPO of 30.85 lakh shares in the price band of Rs.125-135 per share and the issue was
subscribed 4.99 times.
Commercial production of its LT cable expansion commenced as per schedule in Q4FY08. But the full impact would be
felt in FY09 as it provides a massive push to sales. CCIL's current order book is Rs.102 cr., which is well-diversified
among varied sectors.
For Q4FY08, the company won approvals from Alstom, Areva T&D, Siemens and Technip for their global operations in
addition to existing approvals from within India. It reported a net profit of Rs.4.79 cr. in Q4FY08 on sales of Rs.52.08 cr.
For FY08, its net profit rose 96.01% to Rs.13.74 cr. against Rs.7.01 cr. in FY07. Sales rose 86.57% to Rs.170.88 cr. against
Rs.91.59 cr. in FY07. Its equity capital is Rs.11.43 cr. giving an attractive annualised EPS of around Rs.12.
For FY09, sales are projected at around Rs.275 cr. with net profit of Rs.23 cr. yielding an attractive EPS of around Rs.20. At
present, the company has a strong book value of Rs.72. The stock looks attractive to buy on dips. Last week, this stock was
recommended for buying around Rs.96 level.
Market Guidance
* Gujarat Apollo Inds. (Rs.259) has reported encouraging FY08 results reporting full year EPS of around Rs.35 against
Rs.18 in FY07. OPM improved from 22.33% to 24.25%. Keep a watch to add this stock on reaction around Rs.220/230
levels for good long-term growth.
* Net profit of Tata Metaliks (Rs.168) rose
66.02% to Rs.25.55 cr. in Q4FY08 against
Rs.15.39 cr. in Q4FY07 whereas sales rose
49.63% to Rs.311.73 cr. against Rs.208.34 cr. in
Q4FY07.
For FY08, its net profit rose 135.92% to
Rs.69.62 cr. against Rs.29.51 cr. in FY07
whereas sales rose 51.71% to Rs.1033.38 cr.
against Rs.681.15 cr. in FY07. Full year EPS is
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around Rs.27.5 against Rs.11.67 in FY07. The stock is cum dividend of 70%. Since prices of pig iron are very firm, we may
see an encouraging trend in the current year too. A good stock to add on dips.
* DIC India's (Rs.165) net profit rose 46.31% to Rs.2.97 cr. in Q4FY08 against Rs.2.03 cr. in Q4FY07. Sales rose 15.05% to
Rs.103.67 cr. in Q4FY08 against Rs.90.11 cr. in Q4FY07. We may witness encouraging performance in future too. Stay
invested.
* Atlas Copco's (Rs.1174) Q1CY08 results are encouraging. Net profit rose 38.77% to Rs.24.95 cr. against Rs.17.98 cr. in
Q1CY07. Contrary to market expectations, operating/gross/PAT margins improved in spite of higher provisions for
depreciation. Strong growth is expected in future also. Stay invested.
* Supreme Industries (Rs.240) - There are indications of some teething problems with new capacities, which affected the
margins for its March 2008 quarter. There will be more stability in output from increased capacity expected from Q4
onwards. Long-term outlook is encouraging. At the current level of Rs.225, dividend yield too is good. It is a safe
investment bet.
* PG Foils (Rs.80) has reported net profit of around Rs.8 cr. after provisions of Rs.4 cr. towards key man insurance policy.
Results are encouraging in line with expectations. The stock is under accumulation by a leading broking firm for
knowledgeable investors.
* Kesar Enterprises (Rs.72) has reported encouraging results as its March 2008 quarter profit flared sharply to Rs.8.46 cr.
against just Rs.28 lakh during same period of last year.
A subsidiary company was formed on 21
st
January 2008 by the name of Kesar Terminals & Infrastructure Ltd. but
commercial operations are yet to commence.
Restructuring is said to be on and the company has the benefit of a low capital base of Rs.6.79 cr. It has a diversified
product base with good income from its storage division and the full benefit of expansion will come in FY09. The liquor
industry is also growing rapidly over the past decade and expected to do very well in coming years.
Expected surge in sugar prices will benefit Kesar Enterprises. It also has good real estate, which will benefit long-term
investors. Buy on reaction around Rs.65 level.
* Mather & Platt Pumps (Rs.123) results were below expectations. Current quarter results, too, may not be encouraging.
* Disa India's (Rs.1606) March 2008 quarter results are below expectations in view of the economic slowdown and the fall
in margins of foundries. Investors can partly switch to Atlas Copco for better growth.
* Ferro Alloys Corpn.'s (Rs.30) results are encouraging. Hold on to the stock.
* Mumbai real estate prices are still firm and many builders have increased rates recently. Last week, we recommended
HDIL at Rs.720. It has shot up to Rs.845. Hold on to it.
* Orchid Chemicals (Rs.255) and Reliance Petro (Rs.203) are likely to remain in action. Hold on to them.
* Saregama India (Rs.130) is another good stock available at an attractive valuation of Rs.130.
* Sugar prices are likely to remain high. Stay invested in sugar stocks.
Note: Market has moved up in line to our expectation as discussed in the last few issues. Sustained closing above Nifty
5300 shall give a decisive upward breakout. Investors are advised not increase buying commitment at higher levels.
Since leverages positions are very low, downside in the market is not much. Stay invested in strong growth oriented
stocks.
Investors should avoid buying the above discussed stocks at higher levels if they move up sharply.
By V. H. Dave
EXPERT EYE
Advanced Micronic Devices Ltd. (AMDL) (Code: 517552) (Rs.63.45), a subsidiary of Opto Circuits (India) Ltd. (OCIL), is
engaged in two specialised activities viz. cardiovascular instrumentation and computer networking systems and has
emerged as a lead player in the Healthcare sector with focus on products related to cardiac care/intensive care. It claims
to have the largest installed base in cardiac exercise stress test systems and foetal monitoring systems in cardiac
instrumentation and to have installed the largest number of networking installations. During November 2001, the
company became a subsidiary of OCIL, consequent to its acquisition of 59.70% equity shares in AMDL.
Incorporated in 1974 as Micronic Devices, the visionary technocrats behind this venture were among the best in
promoting Implantable Pacemakers, Portable Defibrillators, Intra Aortic Balloon Pumps, ECG machines, Stress Test
Systems, Holter Systems, Foetal Monitors and Multi-parameters monitors representing renowned companies from across
the globe.
The company provides innovative and creative solutions for its clientele with leading and emerging technologies in both
IT and Healthcare. Headquartered in Bangalore, AMDL has offices in many major cities of India.
Its Strategic Electronic Division (SED) focuses on two technology areas: Global Positioning System (GPS) and Electronic
Design Automation (EDA). In keeping with the corporate philosophy of AMDL, SED offers leading edge technology
products and solutions in these two areas.
12
AMDL markets and supports high-end software tools for a start-to-finish EDA environment with tools like ORCAD
Capture, Pspice, Layout, Allegro, NC VHDL, NC Verilog, etc. These tools cover the entire design environment, right from
Electronic Circuit Design, Analog & Mixed Signal Simulation, PCB Design with Signal Integrity, VDHL/Verilog
Simulation, FPGA Design and Electromagnetic Design & Analysis.
AMDL's commitment to technology and support has been its strength and the reason for its customers to select AMDL as
a vendor of choice. Its customer base includes major corporates, Defence establishments, Software Technology Parks,
MNCs, Super-Speciality Hospitals, State & Central Government hospitals, research institutes, private & public sector
hospitals, nursing homes, polyclinics and individual doctors.
During FY07, AMDL posted 96% increased net profit of Rs.2 cr. on 6% lower sales of Rs.50 cr. while its EPS was Rs.3.3.
During Q3FY08, it earned over 1000% net profit of Rs.0.5 cr. on 15% higher sales of Rs.12 cr. For the first nine months of
FY08, sales went up by 10% to Rs.35.2 cr. and it posted 865% higher net profit of Rs.1.6 cr.
Its tiny equity of Rs.5.3 cr. is supported by reserves of Rs.13 cr., which gives the share a book value of Rs.34. Its promoter,
Opto Circuits, holds 59.7% in its equity capital, foreign holding is 1.9%, PCBs hold of 2.6% leaving 35.8% with the
investment public.
The company has direct presence in major cities like New Delhi, Mumbai, Chennai, Bangalore, Hyderabad, Trivandrum
and Calcutta. Through its offices and channel partners, AMDL has reached all super specialty centres and prominent
healthcare institutions to cater to the requirements of Physicians, Cardiologists, Cardio Vascular Surgeons, Perfusionists,
Anesthetists, Neo-natalogists, Gynecologists and Audiologists.
The Healthcare sector in India has been growing at a frenetic pace. India is becoming known as the global destination for
a large number of healthcare requirements. In fact, the growth of healthcare continues to be driven by increased longevity
of population, strong economies and innovative new products.
Large domestic markets complemented by the inflow of medical tourists provide AMDL a huge market potential and it
continues to receive good support from its parent OCIL.
Based on the current going, AMDL is likely to achieve sales of Rs.50 cr. in FY08 and register a net profit of Rs.2.5 cr.,
which would result in an EPS of Rs.4.7. Going forward, its EPS is likely to advance to Rs.8 in FY09 and Rs.10 in FY10.
The AMDL share trading at a P/E of 8.4 on FY09 estimated EPS of Rs.8 and P/E of 6.7 on FY10E is strongly
recommended for decent gains in the long-term. Investment in this share is likely to fetch an appreciation of over 50% in
the medium-to-long-term. The 52-week high/low of the share has been Rs.122/28.
******
An analyst with a reputed brokerage house strongly recommends the share of Repro India Ltd. (RIL) (Code: 532687)
(Rs.108.15) for long-term appreciation with a target price of Rs.200.
RIL originally began as a partnership firm by the name 'Repro' and was converted to Repro India Pvt. Ltd. in 1995 and
later into a public limited company with its present name. It tapped the capital market in with an issue of 26.20 lakh
shares at a price of Rs.165 per share aggregating Rs.43.2 cr. in December 2005 to part finance the enhancement of its
existing printing facility (Rs.18.4 cr.), setting up a new print facility in the Special Economic Zone (SEZ) in Navi Mumbai
(Rs.14.5 cr.), setting up infrastructure for content process outsourcing (Rs.3.5 cr.) and meeting additional working capital
requirement (Rs.10 cr.).
The company provides value-added printing
and print related solutions to major
publishing houses, corporates and software
companies
(packaging and
developing
manuals). Exports constitute 45% of sales of
the company.
Its products range includes scholastic books,
children's colouring & activity books,
scientific, technical and medical books,
trade books, digital printing books, content
services and fulfillment. Its services range
from content creating and designing, sourcing
and procurement, printing and production,
editing illustrations, colouring and imaging,
creating templates, product standardisation
and
innovation
desktop
publishing
typesetting, warehousing, assembly and
dispatches.
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RIL's main clients include publishing houses
13
such as Alligator Books, Heinneman Educational Books (Nigeria) PLC., Modern Publishing Inc, Orient Longman, Oxford
University Press. Software companies like Microsoft Inc, Lenovo India and Indian corporates include Tata Steel, Nokia
India, NIIT, Wipro and Satyam Computer Services.
Since RIL is on a Digital/PDF workflow, it has the capability to replicate products across multiple media such as print,
CD, web, archiving/cataloguing, etc.
RIL has leveraged its expertise in digital printing and content creation business in order to capitalise on the growing
opportunities both from the domestic and global markets. It is well-poised to benefit from the growing international
trend of outsourcing print and related services from countries like India.
During FY07, RIL posted sales of Rs.131 cr. and earned a net profit of Rs.9.5 cr. yielding an EPS of Rs.9. During Q3FY08,
its sales moved up by 29% to Rs.59 cr. and net profit by 72% to Rs.4.1 cr. over Q3FY07. For the first 9 months of FY08, it
reported 64% higher net profit of Rs.11 cr. on 25% increased sales of Rs.119 cr. over the previous corresponding period.
Its equity capital is Rs.10.5 cr. and with reserves of Rs.73.2 cr., the book value of its share works out to Rs.80. The
promoters hold 73% in the equity capital, institutions/mutual funds hold 7%, corporates hold 5% leaving 15% with the
investing public.
Globally, USA and UK are its very large markets. There are huge World Bank funded education projects in Africa
offering big opportunities to quality Indian printers.
The Indian printing industry estimated at US $12 billion (Rs.47, 500 cr.) has grown at 14% CAGR over last 26 years. It is
highly fragmented with low entry barriers at the lower end but there is a big opportunity for large integrated domestic
printers.
The global market for the printing industry will witness good growth with large market opportunities in USA, Europe,
and Asia. According to a study, the global print market is forecast to grow by 18% to US $721 billion by 2011 with the
fastest growth in developing/emerging countries. Digital printing processes, both electro photographic and inkjet, will
continue to grow ahead of all other sectors.
Publication printing comprises 42.9% share of the overall market for printing products and has historically been the
driver of growth in consumption of printing products. By 2011, the combined share of the market held by digital printing
processes is estimated at 21%.
Global publishing houses outsource printing requirements to lower cost destinations with technology permitting
offshoring. The US offsite printing, which is growing at 15% CAGR would grow to $25 billion (Rs.1,00,000 cr.) by 2009. EU
offsite printing currently at €15 billion (Rs.86,700 cr.) is expected to grow faster than US.
RIL's initiatives, like offering digital workflow and comparable technology, adding new clients in India and abroad,
increasing its geographical spread, enhancing products and services vertically to existing clients and/or offering value
added services, providing content services globally coupled with the global focus on education, the sustained growth in
consumption of printing products, strong outsourcing trend and the advantages of global sourcing etc. give strong
visibility to revenues & profitability in coming years.
During FY08, RIL is likely to register a net profit of Rs.16.7 cr. on sales of Rs.180 cr. and the EPS would work out to Rs.16.
During FY09, sales are expected to move up to Rs.245 cr. with net profit increasing to Rs.26 cr. while EPS would go up to
Rs.24.8.
At CMP of Rs.108, the share is trading at a P/E of 6.2 on FY08 estimated EPS of Rs.16 and 4 on FY09 projected EPS of
Rs.24.8. The share is recommended with a price target of Rs.200 in the medium-to-long term. The 52-week high/low of
the share has been Rs.184/75.
14
By Nayan Patel
TECHNO FUNDA
Gandhi Special Tubes Ltd.
BSE Code: 513108
Traded on NSE as GANDHITUBE
Last Close: Rs.100
This week's special is Gandhi Special Tubes. This project is set up
by the Gandhi group in technical collaboration with Benteler of
Germany, which is a leading enterprise in manufacturing steel. Its
plant in Gujarat started production in April 1988. The company
also has four wind mills and the fifth wind mill has commenced
from 10
th
January 2008 at Kutch in Gujarat.
Gandhi Special Tubes has also started producing tubular
components like condenser coils & wires and has recently set up a unit in Pune. It manufactures cold formed tube nuts for
fuel injection tube assemblies. The company's quality system has been certified as per ISO\TS 16949: 2002 by M\s. TUV.
Review
- Last week, Lloyd Electric was recommended at
Rs.109.65. During the week, it touched Rs.118.
- Cosmo Films recommended at Rs.107.40, touched
Rs.115.
- Prime Property recommended at Rs.85.85 touched
Rs.93.75.
- Facor Alloys recommended at Rs.13.73 touched
Rs.15.88
- Few weeks ago, we recommended Anuh Pharma at
Rs.208.45. Last week it kissed Rs.270.
Its small diameter welded steel nuts and cold drawn seamless steel tubes attracts customers like Godrej, Voltas,
Electrolux, Carrier, Telco, Ashok Leyland, M&M, Tisco, HMT, L&T, Wipro, SAIL, BEML, BHEL, Bajaj Auto, Maruti etc.
It has a small equity of just Rs.7.35 cr. wherein the promoters' holding is 72%. The company announced mind blowing
results in March 2008 quarter as net profit jumped 44% to Rs.4.82 cr. For FY08, while net sales spurted 26.61% to Rs.77.75
cr., net profit jumped 46.39% to Rs.18.84 cr. The company paid 50% interim dividend for FY08.
Buy for short to long-term investment with a stop loss of Rs.92. On the upper side, it will zoom to Rs.125, Rs.133 in the
short-term and can go up to Rs.175+ level in the next 15 months. It is the best investment stock at current levels.
Novopan Industries Ltd.
BSE Code: 500310
Traded on NSE as NOVOPANIND
Last Close: 51.40
This Hyderabad based company is part of the well-known GVK Power Infra group company. It is a pioneer in wood
based industries. It began by bringing in the best technology from Fahrni Institute of Switzerland and has three
manufacturing units. It has an equity of just Rs.11.91 cr., wherein the promoters hold almost 75% stake while the investing
public holds 16.69%. Last year, it declared 22% dividend and has declared excellent results for the March 2008 quarter as
net sales jumped 80.71% to Rs.3.56 cr. Last year, the company upgraded its Patancheru plant with modern technology,
which will impact the company's profit from the June 2008 quarterly results.
This scrip is available dirt cheap at a P/E ratio of just 10.
Technically, also it looks very good. Buy with a stop loss of Rs.45.50. On the upper side, above Rs.55, the stock will go up
to Rs.63, Rs.71 levels in coming days. In the medium-term, the stock may cross its recent high of Rs.85.
Lanco Global Systems Ltd.
BSE Code: 532368
Last Close: 95.50
This is Lanco Infrastructure group's IT service provider company. The company has an equity of Rs.25.45 cr. Promoters
hold 67.03%, foreign investors hold 15.45% and the investing public holds only 10.04% stake in the company. Company
has posted excellent results for Q4FY08. Net sales jumped 205.51% to Rs.48.75 cr., net profit jumped 391.07% to Rs.11 cr.
For FY08, its net sales jumped 183.96% to Rs.128.89 cr. whereas net profit jumped 352.78% to Rs.25.22 cr. Yearly EPS was
Rs.9.92. The company is planning to raise Rs.160 cr. via FCCB issue.
At CMP, the stock is available at P/E ratio of just 9.6. Buy this Lanco group stock with stop loss of Rs.86. On daily charts,
the stock completes the V formation, which indicates a long-term rally. On the upper side, the stock will go up to Rs.105.
Cross over will take it to Rs.120-136.50 level in the coming 4 to 6 months. Best stock for investors.
Gokul Refoils & Solvent IPO opens on 8
th
May
MONEY FOLIO
Gujarat based Gokul Refoils & Solvent Ltd. (GRSL), engaged in the business of solvent extraction, refining of edible oils
and vanaspati manufacturing, will open its IPO of 71,58,392 equity shares of Rs.10 each for cash in the price band of
Rs.175 to Rs.195 to raise Rs.139.59 cr. at the cap price of the price band. The 100% book build issue opens on Thursday, 8
th
May and closes on Tuesday, 13
th
May 2008.
ICRA has assigned an ICRA IPO Grade 3/5 to this IPO signifying average fundamentals and it will be listed on the BSE
and NSE.
The capital raised from the issue will be deployed:
•
To set up a new 1500 TPD Soyabean processing plant near Gandhidham,
•
Expansion of its existing edible oil refinery at Surat from 100 TPD to 400 TPD,
•
Investment in its wholly owned Singapore subsidiary,
•
Funding part of its long term working capital,
•
Investment in increasing warehousing capacities and continuous Capex for existing units
GRSL's consolidated total income for FY07 was Rs.1599.86 cr. and Rs.1347.82 cr. for the period ended 30
th
November 2007.
PAT for FY07 was Rs.25.73 cr. and Rs.41.83 cr. for the period ended 30
th
November 2007. Its standalone sales has grown at
a CAGR of 39.30% over the last 5 financial years and its standalone PAT has increased at a CAGR of 41.16% over the last 5
financial years and while the EPS reported a growth of 24% in the last 3 years.
Bank of Maharashtra's FY08 net rises by 20.80%
Bank of Maharashtra has achieved an all round growth in business with a big leap in technology upgradation and
expansion of customer base in FY08. Net profit for FY08 increased by 20.80% to Rs.328.39 cr. from Rs.271.84 cr. in FY07.
15
Operating profit increased by 9.69% to Rs.672.63 cr. against Rs.613.20 cr. in FY07 in spite of higher pressure on net
interest margin and the need for additional provisioning towards employee benefits and outgo on IT expenditure.
Total income for FY08 increased 27.91% to Rs.3,820.76 cr. from Rs.2,987.08 cr. in FY07. Although the interest spread
increased 12.30% to Rs.1,228.79 cr. from Rs.1,094.19 cr. in FY07. Net interest margin during the year was 2.81% as against
3.07% during the previous year. Non-interest income rose to Rs.280.18 cr. against Rs.265.05 cr. in FY07.
Dena Bank Q4 net at Rs.110.99 cr.
Dena Bank clocked a net profit of Rs.110.99 cr. in Q4FY08 due to a rise in 'Other Income' on sale of property. Writing back
tax gains, there was no outgo from its bottomline leading to a net profit growth of 153.40% at Rs.43.80 cr.
For FY08, the bank posted a net profit of Rs.359.79 cr., up by 78.5%. NPA of the bank came down to Rs.572.60 cr. from
Rs.744.48 cr. while net NPAs declined to Rs.215.43 cr. compared to Rs.364.80 cr.
The bank expects to raise around Rs.500 cr. this year through debt to be Basel II compliant and business expansion and
looks at an overall business growth of 23-24% in FY09.
Bank of India announces Q4 & FY08 results
Bank of India (BoI) has posted a net profit of Rs.757 cr. for Q4FY08 as compared to Rs.447.44 cr. for Q4FY07. Its Total
Income increased from Rs.3128.99 cr. in Q4FY07 to Rs.4154.86 cr. in Q4FY08.
For FY08, the bank posted a net profit of Rs.2009.4 cr. as compared to Rs.1123.17 cr. in FY07. Total Income increased from
Rs.10499.24 cr. in FY07 to Rs.14472.15 cr. in FY08.
The Board of Directors of BoI at its meeting held on 30
th
April 2008, interalia, has proposed a final dividend at 40%.
Satra Properties' net up by 512%
Satra Properties (India) Ltd., a real estate & mall development company has posted 193% higher income at Rs.194.23 in
FY08 compared to Rs.66.19 cr. in FY07. PBT has risen by 471% to Rs.55.90 cr. compared to Rs.9.79 cr. in FY07. PAT shot up
by 512% to Rs.38.05 cr. compared to Rs.6.22 cr. in FY07. The EPS was up at Rs.2.45 on its equity share of Rs.2 each.
Its consolidated income for FY08 was Rs.233.06 cr. while it reported PBT of Rs.42.62 cr.
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.
16
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