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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 37 Monday, Jul. 28 – Aug. 3, 2008
Pages 16
Market turns cautious
before new monetary policy
By Sanjay R. Bhatia
The markets rallied on the back of the UPA government winning the Vote of Confidence and the slide in crude oil prices.
Short covering was witnessed, which helped the markets move higher. Incidentally, even Nifty Future started trading at a
premium. However, this did not last for long as profit booking was witnessed at higher levels and fresh shorts were
added. Regular bouts of volatility and choppiness were witnessed. Traders and speculators were seen covering their short
positions and going long as also booking profits at regular intervals. Incidentally, FIIs remained net buyers in the cash as
well as the derivative segments. Mutual Funds, however, remained net sellers during the week.
The global cues have remained mixed. Crude prices continued
to correct and have fallen below the $125 per barrel while the
US economy continued to emit mixed signals. On the domestic
side, there were positive cues with the UPA winning the Vote
of Confidence without the Left allies. This is a positive as it
would allow the government to proceed with faster reforms.
Inflation, too, has started cooling off and was 11.89% from
11.91% recorded in the previous week. Hopefully, the falling
prices would induce the RBI Governor not to take any harsh
steps while unveiling the Monetary Policy on 29
th
July. FIIs
inflows have also improved and the quarterly results have not
given any major negative surprises.
Now it is important that the global cues remain positive,
especially the crude prices, which could fall below $120 level.
It is also important that there are no shocks for the markets
from the RBI's monetary policy. In the meanwhile, the markets would continue to take cues from the Q1 results, global
markets and crude prices and the RBI's policy. Stock specific action will be witnessed amidst bouts of volatility and
choppiness being the derivatives expiry week.
On the upside, the Sensex faces resistance at the 14677 and 15000 levels and has support at the 14141, 13989 and 13779
levels. On the upside, the Nifty faces resistance at the 4482 and 4647 levels while 4108 and 4074 are its important support
levels.
Investors can buy Engineers India with a stop loss of Rs.532 and a price target of Rs.732.
Broad outlook: Exit on rally
TRADING ON TECHNICALS
By Hitendra Vasudeo
Last week, the Sensex gave a breakout and close above 14066 on daily chart and then moved up strongly to a high of
15130 but reacted down to close lower on Friday at 14274. The Sensex last week opened at 13782.13 and fell to a low of
1
13581.19. Further, it moved up to make a weekly high at 15130.09 and closed the week at 14274.94 and thereby showed a
net rise of 630 points on week to week basis.
We had doubts about its sustainability at the higher range of around 14100. A breakout was witnessed and it scaled to a
high but closed weak from the highs. As a result of such movement, resistance will be witnessed at higher range of 15130-
15789. Weekly support will be at 13782-13527.
On the daily chart, isolated area like an island reversal has been witnessed after a gap up opening on Thursday followed
by gap down on Friday. Resistance gap will be at 14484-14608. A close above the gap can take of the high for a pull-back
rise towards 15835 at least.
On the immediate front on daily chart, we can look for
retracement of the rise from 12514 to 15130 before further
attempts are made to cross and close above 15130. The
retracement levels are placed at 14131-13823-13516. If
recovery has to come back during the week, then it has to be
from the retracement level. Subsequently, it must cross and
close above 15130. Failure to cross 15130 and a close below
13516 can take the Sensex back down to test 12514. It could
even violate it to move down towards 12344 and move
towards 11000-10500 range.
For the time being, expect the Sensex to make a higher
bottom against 12514 at either of the retracement levels
and move up to 15259-15390 and 15834.
Sensex Wave Analysis
Wave I- 2594 to 3758
Wave II- 3758 to 2828
Wave III- 2828 to 21206 (not yet complete)
Internals of Wave III
Wave 1- 2828 to 6249
Wave 2- 6249 to 4227
Wave 3-4227 to 21206
Wave 4- 21206 to 12514 (not sure about its completion)
Normal Count mentioned last week
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 W-21206 to 14677
Wave X-14677 to 17735
WEEKLY UP TREND STOCKS
Wave Y- 17735 to 12514
Wave X- 12514 to 15130
(current ongoing move)
As a result of another
Wave X means that we
are getting into Triple
Zig-Zag
formation.
Moment the Wave X gets
complete, we will fall
back below 12514 to
complete Wave Z.
Another overall Count
Structure can be as
follows:
Wave I- 2594 to 3758
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
679.00 595.3
648.3
670.7
701.3
754.3
79.6
639.5
18/07/08
STERLING BIOTEC 206.80 172.9
193.6
201.0
214.3
235.0
74.9
189.9
18/07/08
CIPLA
225.60 185.2
212.9
228.0
240.7
268.4
72.6
215.0
11/07/08
LUPIN
718.00 591.7
675.7
717.3
759.7
843.7
72.3
694.5
11/07/08
SPICE COMMUN.
73.75 61.5
68.9
71.5
76.3
83.7
72.2
73.8
04/04/08
2
Wave II- 3758 to 2828
WEEKLY DOWN TREND STOCKS
Wave III- 2828 to 21206
Internal of Wave III
Wave 1-2828 to 3416
Wave 2- 3416 to 2904
Wave 3-2904 to 6249
Wave 4- 6249 to 4228
5
th
Wave in Extension
Wave 5 from 4228 to
21206
Internals of Wave 5
Wave i- 4228 to 6954
Wave ii-6954 to 6069
Wave iii-6069 to 12671
Wave iv- 12671 to 12316
Internals of Wave iv
3
Wave a- 12671 to 8799
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
OMAXE
123.65
99.0
116.4
126.6
133.8
151.2
21.50
125.64
09/05/08
MOSER-BAER IND
95.20
75.2
88.7
95.6
102.1
115.6
23.43
104.22
30/05/08
KALPATARU POWE 740.00
635.0
710.0
755.0
785.0
860.0
24.07
743.50
09/05/08
GAMMON INDIA
213.90
175.8
203.2
220.0
230.6
258.0
24.31
218.11
13/06/08
CENTURY TEXTIL
467.00
367.8
438.3
480.2
508.8
579.3
25.41
481.49
09/05/08
Wave b-8799 to 14723
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
DHAMPUR SUGAR MILLS 500119
55.45
53.00
57.25
51.10
61.1
67.2
1.29
ICRA
532835 689.35
674.25
699.00
546.20
793.4
946.2
0.73
REPRO INDIA
532687 128.00
118.50
128.00
117.05
134.8
145.7
0.85
SHIVA CEMENT
532323
9.92
9.07
10.18
7.90
11.6
13.9
0.83
Wave c- 14723 to 12316
Wave v- 12316 to 21206
Wave IV- 21206 to 12514
(current ongoing move)
Conclusion
A weaker close from the
high last week has put it
back in an indecisive
state. Isolated trading on
Wednesday and
Thursday has created a
stiff
resistance.
Consolidation
above
13500 will be needed to
make attempts to cross 15130. But how it will sustain at higher range above 15850 will be an issue.
EXIT LIST
Scrip
Last Close Sell Price Sell Price Sell Price Stop loss Target
Monthly Relative
Strength (RS)
REI AGRO
959.00 1082.98 1139.50
1196.02
1379.00 604.0
36.14
Strategy for the week
The overall strategy remains to exit on a rally to 15850. Near term traders can look for retracement level and a subsequent
back to trade long and exit on rise. Traders who can play with stop loss should only attempt to trade long. Otherwise,
avoid trading long. Failure to sustain at the retracement level of 13500 could spell trouble.
*
Although market veterans feel that the worst is over and markets may rise, technical analysts are sure that market is
going to make new low below 12K level in coming months.
TOWER TALK
*
Zensar Tech has reported very encouraging results for the June 2008 quarter. Little wonder, the scrip shot up 30-35% in
just four trading sessions.
*
Price of calcined petroleum coke has jumped siginificantly and is expected to remain high in the near future. Keep
accumulating Rain Commodities.
*
Technically, Spanco Telesystem has bottomed out and can be bought safely at current levels. Post its Q1 numbers, the
scrip can see a smart rally in the short-term.
*
The panic selling in Lok Housing is over. The scrip has stabalised and can easily double from the current level within a
year. Long-term investors can safely buy it now.
* MacMillan India is transforming itself into an IT company. Its publishing company shares would be bought back at
Rs.69. A great opportunity for buying the IT business of Macmillan India cheap with little downward risk.
* Super Tanneries has announced Board Meeting for considering Bonus. There is some action seen on this stock.
* Bihar Tubes has been adding capacities by inorganic acquisitions. Stock looks good for patient investors.
* Country Condos traded on NSE as Neocure is looking steady at Rs.28 level. Is it a country club in the making?
* Numeric Power, which posted an EPS of Rs.85 in FY08 is doing well and is set to register 35% higher bottomline leading
to an EPS of Rs.115. With tiny equity of Rs.5 cr., marketmen expect a liberal bonus.
* Micro Technologies, which posted an EPS of Rs.50, is going cheap. Some traders have already accumulated the stock in
anticipation of it crossing Rs.400 mark in one year.
* IFB Agro, the maker of vodka, has posted an EPS of Rs.10. The share is going cheap.
* A reputed brokerage house strongly recommends Goa Carbon. Given the firm prices of calcined petroleum coke, it can
register an EPS of over Rs.28 in FY09. The share could appreciate by 50% in the near future.
* Technocraft Industries is all set to post an EPS of Rs.15 in the current year. The share is being accumulated by the
persons in the know.
* Deep Industries and IDFC are being accumulated by punters.
* Godawari Power, which posted an EPS of Rs.35, has been allotted 2 iron ore mines and 2 coal mines for captive use.
Analysts project an EPS of above Rs.55 in FY09 and Rs.70 in FY10. Investment can double in the medium-to-long-term.
* The shares of Tulsyan NEC are being cornered by punters in the know. Its EPS of Rs.27 for FY08 went unnoticed by
marketmen. Its book value of Rs.95 and small equity of Rs.5 cr. makes it a bonus candidate.
* Lloyd Electric, which took over Luvata Chez in Europe, will add Rs.250 cr. in revenue and is likely to post an EPS of
Rs.24 against Rs.19 in FY08. Persons in the know project a share price of Rs.125 in the near term.
* Ennore Coke is likely to purchase a coal mine and the promoters are likely to increase their stake to 80%.
* The takeover code in Shiva Cement may be triggered when 17.7 million warrants issued to ACC come up for
conversion in December 2008 or earlier in August on technical grounds.
By Saarthi
BEST BETS
SKF India Ltd. (Code: 500472)
Rs.211.60
Established in 1923, SKF India Ltd. (SIL) is a part of the US $6 billion global AB SKF Group and is a leading technology &
solutions provider of products, solutions and services in the area of bearings, seals, mechatronics,, services and
lubrication systems. With 90% revenue coming from bearings, SIL is India's largest bearing manufacturer commanding
more than 30% market share. Nearly 10% of its bearings revenue comes from exports. Ball bearings are used in the
rotating parts of virtually every machine or product manufactured. The automobile industry is the biggest user of
bearings followed by general engineering, heavy industries and the railways. Importantly, SIL manufactures all types of
roller bearings, ball bearings, bearing units, bearing housings, plain bearings etc. in hundreds of sizes providing an
extensive product range that literally caters to each and every conceivable application. According to specific industry
segments, SIL has created the following four profit centres or business units.
• Automotive Business Unit (30%): is responsible for sales to the car, light truck, heavy truck, bus and vehicle
component industries and the vehicle service market. The products include wheel hub bearing units, taper roller
bearings, small deep groove ball bearings, seals, special automotive products and complete repair kits for the
vehicle service market.
• The Electrical Business Unit (20%): is responsible for sales to manufacturers of electric motors, household
appliances, electrical components for the automotive industry, power tools, office machinery and two-wheelers
• The Service Business Unit (20%): offers mechanical services, predictive and preventive maintenance, condition
monitoring, decision-support systems and performance-based contracts. It also supports industrial customers with
knowledge-based service solutions to optimize plant asset efficiency.
• The Industrial business Unit (30%): is one of the fastest growing units as it has four specialized business areas
namely aerospace, railways, lubrication systems, actuation & motion control.
Besides the above, SIL manufactures precision textile machinery components for textile mills, spindle manufacturers and
drafting conversion manufacturers. It even helps the textile mills modernise their existing machinery. Currently, SIL
operates through two manufacturing plants based in Bangalore and Pune. However for future growth, it is putting up a
new plant at Haridwar, Uttarakhand, with a capacity of 48 million pieces of bearings, which will cater to the two-wheeler
market. The plant is expected to start commercial production by mid 2009. Last fiscal, it launched power transmission
products as a new product range to capture the growth in the energy sector. Recently, SIL also got engaged into
marketing, sales and distribution of large size bearings for the industrial segment being produced by another group
company. Ironically, the SKF Group has recently set up a new unit in Ahmedabad not under SIL but through SKF
Technologies India Pvt. Ltd. at an investment of Rs.270 cr. to manufacture large bearings. Besides, AB SKF in India also
manages another wholly owned subsidiary called SKF Sealing Solutions Pvt. Ltd., which offers customers complete
sealing solutions based on its leading edge technology.
With India expected to emerge as one of the world's largest economies, it is bound to witness phenomenal growth in the
industrial, infrastructure and engineering sectors including the automotive segment. Hence the future prospects of the
bearings industry, as well as SIL, are quite promising. However, the rise in steel price is a cause of worry as it is the basic
material and accounts for almost 45% of the total cost. Besides, the competition from the unorganised sector is getting
4
intense by the day. Still, SIL is expected to do well on the back of its strong goodwill and wide distribution network.
Financially also, it is on a very strong footing as it continues to be a zero debt company. For the year ending 31 December
2007, it reported 20% rise in sales to Rs.1568 cr. and 60% jump in net profit to Rs.161 cr. posting an EPS of Rs.30 on its
equity of Rs.52.70 cr. However, the H1FY08 figures are not so encouraging due to decline in OPM and single digit growth
in the topline. Accordingly for CY08, it may clock a turnover of Rs.1725 cr. with PAT of Rs.145 cr. leading to an EPS of
Rs.27. This means that the scrip is currently trading a P/E ratio of less than 8 times, which is extremely cheap for such a
professionally run, well-managed and debt-free MNC engineering company. From CY09, the company is expected to
maintain healthy double digit growth on the back of revenue generation from its new Haridwar plant. Investors are
strongly recommended to buy at current levels with a price target of Rs.325 (50% appreciation) within 12-15 months.
Aegis Logistics Ltd. (Code: 500003)
Rs.167.80
Founded in 1956, Aegis Logistics Ltd. (ALL) started operations as a specialty chemicals manufacturer and supplier to the
paints industry. In 1977, the company diversified into liquid logistics management when it set up a port terminal in
Mumbai to handle ships carrying cargo of chemicals. Later in 1994, it became India's first company to set up a private
refrigerated liquefied petroleum gas (LPG) terminal with know-how from Tractebel Gas Engineering of Germany. Today,
ALL is engaged in providing integrated supply chain management services, which includes product sourcing, shipping,
import/export, custom clearance, storing, moving and distributing petroleum products to the end user. From its
headquarters in Mumbai, the company serves clients all over India in the automobile, steel, glass, ceramic, petroleum,
chemical, vegetable oil and petrochemical sectors. The main products handled by company are LPG, naptha, diesel,
caustic soda, motor spirit, EDC etc. The company has segregated its business process into five heads namely - tank
storage and terminalling, chemical distribution, gas storage and distribution, petroleum distribution and logistics
management services. Broadly, ALL's business model can be divided into the following two segments:
5
s well.
• Liquid logistics (20%): The company owns and operates one of India's largest private sector liquid terminal on a 20-
acre plot at Trombay having storage capacity of 165,000 KL with 26 tanks of sizes ranging from 1,100 KL to 10,000 KL.
During 2007, the company acquired 75% stake in Adani group's Sealord Containers Ltd. located at Trombay with a
storage capacity of 75,000 KL. Immediately, it also acquired 100% stake in Konkan Storage Pvt. Ltd. at Kochi having a
storage capacity of 51,000 KL and boasts of a total capacity of around 290,000 KL. Notably, ALL specialises in
handling hazardous chemicals and dangerous goods classified under the Petroleum Act as Class A, B and C for IOC,
BPCL, HPCL, Reliance, Supreme Petrochemicals, HLL, Jubilant Organsys among its main customers. Its high profit
margin, almost half of the profit, came from this segment in FY08 although it contributed only 20% to the topline.
Considering the robust future outlook, ALL is setting up a third terminal in Trombay with a capacity of nearly 55,000
KL by FY10. ALL intends to emerge
as a national player and has
accordingly acquired land in
Haldia and Mangalore port. For
future, it's looking to have set-up in
Kandla and Chennai port a
• Gas Storage & distribution (80%):
ALL
imports,
markets
and
distributes
bulk
propane,
propylene and LPG to a variety of
industrial customers in the western
region and is one of the largest
private sector supplier in India. It
operates a 20,000 MT fully
refrigerated LPG terminal, which is
connected to the Pir Pau Jetty in
Mumbai by 12" low temperature
steel pipelines. It also offers gas
storage and handling to various
LPG bulk suppliers on an open
user terminal basis. Of late, ALL
has ventured into the lucrative
business of marketing and retailing
of LPG through autogas dispensing
stations under the brandname
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6
he company substantially.
'AEGIS Autogas'. This business is presently at the take-off stage with vehicles increasingly converting into gas-based
vehicles due to the unprecedented rise in crude oil price. Initially, the company is targeting only Tier 2 cities and has
already opened 38 retail outlets across five states. It intends to open 100-150 such stations over the next few years and
achieve sales volume of nearly 100,000 MT of LPG through retail sales. Importantly, it plans to set up around 90% of
the stations under the dealer owned dealer operated (DODO) model, with only 10% under the company owned
dealer operated (CODO) model. To conclude, the retailing business alone is estimated to contribute sales of around
Rs.250-300 cr. by FY10, which will boost the profit margin of t
Recently, ALL took over its 70% joint venture undertaking namely Hindustan Aegis LPG, which actually owned the
refrigerated LPG terminal. Effective 01/04/2007, ALL has become the owner of that terminal. Hence it does not have to
pay the tankage charges, which it used to pay for the use of the terminal facility. Against this acquisition, the company
has allotted 36 lakh equity shares to the other 30% shareholders of Hindustan Aegis and also absorbed approx Rs.30 cr. of
debt. Fundamentally, ALL has been faring well and ended FY08 on a buoyant note with 55% rise in sales to Rs.374 cr. and
65% jump in PAT to Rs.39 cr. This translates into an EPS of Rs.20 on its expanded equity of Rs.19.90 cr. Accordingly, for
FY09, it is expected to clock a turnover of Rs.450 cr. with net profit of Rs.45 cr. i.e. an EPS of Rs.23 on its current equity.
Considering its aggressive expansion plans for LPG retailing and pan India distribution in liquid logistic, the ALL scrip is
trading extremely cheap at the current market cap of less than Rs.350 cr. Investors are strongly recommended to buy it at
current levels and add on every declines for a price target of Rs.275 (i.e. 60% appreciation) within a year.
Oil Country Tubular: Robust prospects
ANALYSIS
By Devdas Mogili
Oil Country Tubular Ltd. (OCTL) is a 23-year old Hyderabad based company established in 1985. OCTL's wide product
range covers Drill Pipes, Heavy Weight Drill Pipes, Drill Collars, Production Tubings, Casings, Tool Joints, Couplings,
Pup Joints, Subs and Cross Overs. The company's plant is located at Narketpally in Nalgonda District of Andhra Pradesh.
Dr. T. S. Sethuraman is the chairman while K. Suryanarayana is the Managing Director.
OCTL manufactures the complete range of drill pipes, production tubings and casing pipes with a capacity of 50,000 TPA.
It has a tie-up with Baker Hughes Tubular Services of USA. The company is concentrating on Drill Pipes and has planned
to double its installed capacity of Drill Pipes from 10,000 to 20,000 MTA through internal accruals.
Clientele: Since, OCTL's business is linked with the oil exploration industry; its main clients are ONGC and OIL.
Exports: OCTL successfully executed its first export order for drill pipes worth $774,000 in January 1995 to a UK company
but the Russian market is one of the largest customers of OCTL goods. The company has entered into a long-term
arrangement with Grant Prideco of Switzerland for services and purchase of tubular goods manufactured by it. It also
exports to Syria and Iran.
Order Book: The company's order book position as on 31 March 2008 was Rs.154 cr. for execution in FY09 includes export
orders worth Rs.122 cr.
New Products: OCTL has developed new products and is in the process of developing further products viz. Heavy
Weight Drill Pipes, Drill Collars, Subs and other down-hole equipments.
Performance: For FY08, it posted a turnover of Rs.339.53 cr., which includes export turnover of Rs.254.14 cr. registering a
growth of 28.92% as against Rs.264.76 cr. in FY07. Its profitability has zoomed from Rs.11.44 cr. in FY07 to Rs.28.91 cr. in
FY08, a growth of over 153% recording an EPS of Rs.6.53.
Financial Highlights:
(Rs. in lakh)
Latest Results: Sales declined 20.50% to Rs.61.96 cr. in
Q1FY09 as against Rs.77.94 cr. during Q1FY08. However,
net profit rose 11.78% to Rs.10.91 cr. in Q1FY09 from
Rs.9.76 cr. in Q1FY08. It registered a basic/diluted EPS of
Rs.2.46 for the quarter. Going forward, the annualised
EPS works out to Rs.9.84.
Particulars
Q1 FY09
Q1 FY08
FY08
Net Sales/Income
6195.73
7793.59
33953.44
Other Income
29.74
41.31
179.87
Total Income
6225.47
7834.90
34133.31
Total Expenditure
4645.69
6523.90
25911.02
Interest
27.30
302.90
3755.25
Profit Before Tax
1552.48
1008.10
4467.04
Tax Expenses
461.31
32.00
1575.78
Net Profit
Financials: The company has an equity base of Rs.44.29
cr. and recorded a RoCE of 104.50% and RoNW of
48.22%. It has a low debt:equity ratio of 0.59.
Share Profile: The company' shares with a face value of
Rs.10 are listed and traded on the BSE under the B group.
Its share price touched a 52-week high/low of Rs.123/Rs.50. Currently; the share is trading around Rs.59.65 with a market
capitalisation of Rs.252 cr. It has a beta value of 0.7.
Dividends: With a view to conserve resources, to reduce debt and to meet the capital expenditure for
additional/upgradation of equipments, the company has not paid any dividends.
1091.17
976.10
2891.28
Paid up equity share cap.
FV: Rs.10 per share
4428.95
4428.95
4428.95
Res Exc Rev Reserves
-
-
0.65
Basic/Diluted EPS (Rs)
2.46
2.20
6.53
Shareholding Pattern: The promoter holding in OCTL is of 33.10% while the balance 66.90% is held by non-corporate
promoters and the Indian public.
Prospects: The demand for OCTL's products has increased multifold due to substantial increase in oil exploration
activities since crude oil prices are on the rise. Its products are well accepted in the international market on account of its
quality and FY08 timely delivery.
The company recorded over 145% growth in exports at Rs.254.14 cr. during FY08 as against Rs.103.90 cr. during FY07.
Profitability is also set to improve by increased sales of Drill Pipes both in the domestic and international markets and its
foray into in the Middle East, Far East and Europe.
Conclusion: OCTL is one of the leading companies manufacturing a range of Oil Country Tubular Goods required by the
Oil Drilling and Exploration industry.
At its current market price of Rs.59.65, the share price is discounts its FY08 earnings less than 9 times against the industry
average P/E multiple of around 13. With crude oil prices shooting up, there will be more exploration activities, which will
benefit the companies like OCTL. Considering its robust prospects, increased profitability margins and a reasonable P/E
ratio, the share may be added to one's portfolio on dips for decent appreciation in the medium-to-long-term.
The market may stabilise at current levels
MARKET REVIEW
By Ashok D. Singh
Buoyed by the UPA government winning the confidence vote in parliament, the sharp correction in crude oil prices and
the short covering of derivatives positions, the benchmark indices extended gains for the third straight week for the week
ended Friday, 25 July 2008. The BSE Sensex gained 639.54 points or 4.69% to 14,274.94 while the NSE Nifty edged up
219.60 points or 5.36% to 4,311.85 for the week.
The BSE Mid-Cap index rose 333.20 points or 6.35% to 5,572.59. The BSE Small-Cap index advanced 322.89 points or
5.01% to 6778.78.
Inflation based on the wholesale price index rose 11.89% in 12 months to 12 July 2008, below the previous week's annual
rise of 11.91%. Inflation for the week ended 17 May 2008 was revised upwards to 8.66% from 8.10%.
Monsoon rains were 33% below average in the third week of July 2008 and the cumulative rainfall after the onset of the
South West Monsoon has been 2% lower than its long period average. Rains in July account for a third of the 4-month
monsoon season from June to September and are crucial for sowing crops. Scanty rainfall is bad news for the government,
which is battling runaway inflation that had surged to a 13-year high, largely due to a sharp rise in commodity prices.
FIIs were net buyers to the tune of Rs.43 cr. this month till 24 July 2008 and had sold shares worth Rs.25,422.30 cr. in the
calendar year 2008 till that day. Mutual funds bought shares worth Rs.882.20 cr. in this month till 23 July 2008.
Trading for the week started on an upbeat note. The 30-share BSE Sensex gained 214.64 points or 1.57% at 13,850.04 and
the broader based S&P CNX Nifty advanced 67.25 points or 1.64% at 4159.50 on Monday, 21 July 2008. Index pivotals
were in demand on strong rally in Asian stocks.
Market extended gains on Tuesday, 22 July 2008 ahead of the government's trust vote in parliament. The 30-share BSE
Sensex advanced 254.16 points or 1.84% at 14,104.20 and the broader based S&P CNX Nifty advanced 80.6 points or 1.94%
at 4240.10, on that day.
Markets galloped on Wednesday, 23 July 2008 after the Congress-led coalition government won a confidence vote in
parliament late on Tuesday, 22 July 2008, raising hopes for economic reforms. The 30-share BSE Sensex surged 838.08
points or 5.94% at 14,942.28 and the broader based S&P CNX Nifty advanced 236.70 points or 5.58% at 4476.80, on that
day.
The market snapped its five-day rally on Thursday, 24 July 2008 as investors booked profits at higher level. The 30-share
BSE Sensex lost 165.27 points or 1.11% at 14,777.01 and the broader based S&P CNX Nifty fell 43.25 points or 0.97% at
4433.55, on that day.
The market extended losses on Friday, 25 July 2008 following overnight sharp setback in US stocks. The sentiment was
also hit by seven blasts that took place in Bangalore. The 30-share BSE Sensex lost 502.07 points or 3.40% at 14,274. 94 and
the broader based S&P CNX Nifty fell 121.70 points or 2.74% at 4311.85, on that day.
Shares of firms which are potential beneficiaries of the Indo-US nuclear deal surged after the Indian government won
parliamentary vote of confidence clearing the way for the landmark civilian nuclear deal with the US. Reliance
Infrastructure (up 15.08% to Rs.984.65), Alstom Projects India (up 6.60% to Rs.428.70), Rolta India (up 5.41% to Rs.288.60),
Walchandnagar Industries (up 4% to Rs.267.70), Areva T&D India (up 12.56% to Rs.1655.25), Larsen & Toubro (up 3.16%
to Rs.2625.60), National Thermal Power Corporation (up 8.19% to Rs.187.50), surged.
Among mid-cap stocks, McDowell Holding (up 48.73% to Rs.141), Phoenix Mills (up 45.29% to Rs.165.85), ITI (up 44.42%
to Rs.38.20), Reliance Natural Resources (up 38.11% to Rs.95.50), Adlabs Films (up 26.83% to Rs.528.05), HMT (up 41.82%
to Rs.75.45), and Strides Arcolabs (up 38.56% to Rs.190.45), surged.
7
The Sensex gained 639.54 points to close at 14,274.94 last week. There are expectations that the government may now
push forward some economic reforms which had been stalled over the past four years due to opposition from the Left
parties. They include privatisation of state-run firms, pension reforms, higher foreign limits in insurance and more liberal
norms for foreign bank.
Some analysts, however, feel that a major big-bang push to reforms is unlikely as the government will focus primarily on
bringing down inflation ahead of key state polls and parliamentary elections which are due in May 2009.
8
Stay invested
MARKET
even as market remains volatile
By G. S. Roongta
Readers of Money Times must have witnessed that once again our solo stand about the market having no room to fall
further has been vindicated as most stocks had started resisting the bear hammering. This column had categorically stated
on more than three occasions that the market is likely to bounce back.
While many of you may be fed up with my repeated assertions whenever the bears tried to hammer the Sensex below
13,000 or the Nifty below the 4000 mark, you must appreciate this becomes inevitable when investors are misled by the
TV channels or the pink papers at such crucial junctures. Given their daily and hourly frequencies, it is
very easy for investors to be carried away by stock analysts and market experts who dole out new levels
on either side without specifying what is likely to happen first. This two-way forecast is meaningless as
investors are confused while the analysts play safe as one or the other turns true.
Such forecasts, mostly based on technical analysis, are more confusing than enlightening. What an
average investor wants to know is the direction of the market and a forthcoming change if any. Markets
are bound to go up and down depending on the prevailing fundamentals but also change course after
certain levels are attained on either side.
G.S. Roongta
For the week ended 18 July 2008, the bears had tried to slaughter the market and were hell bent to pull the Sensex below
12,000 when it recorded a loss of 654 points and the Nifty at 3650 on 15 July 2008. In such a bearish market, I must have
appeared foolish to advocate bottom-fishing for long-term investment and may have sounded off key to most of you. But
those of you who have been following me in Money Opportunities and later in Money Times since 1986 will know that I
write with a lot of thought and conviction, which more often than not has proved to be right.
My last article was an open challenge to the analysts, experts and market observers who were propagating a fall in the
Sensex below 12,000 and the Nifty below 3650. Everyone has seen what happened last week as the markets took a u-turn
after the fall in crude prices and the Vote of Confidence won by the UPA government. I had no extra or exclusive
information to stand out alone and take a contrarian view when the whole world seemed to have turned bearish. It was
my realistic assessment and experience that led me to believe that we had reached bounce back levels. Readers are also
aware that I do not speak the double language of technical analysts and forecast the market, which thanks to Goddess
Saraswati has proved to be right most often.
Let me reproduce my strongly worded conviction of last week under the heading 'A week full of surprises': "My dear
readers, how many times would you like to be misled and repeatedly hear the same song over and over again without digesting what I
have been saying for the past few weeks viz. that
the market is refusing to go below these levels and
if someone tries to push it down, it always bounces
back. The bear lobby is averse to call it a 'bounce
back' and instead asked its supporters to refer to it
as a pull-back or a short covering." Was there any
double meaning in this statement?
I had clearly stated that there was rampant
speculation in Nifty Futures and this game
will soon burst and help revive the market. I
had based this observation on the fact that
those who had taken a bullish position in
crude oil were bearish on equity markets and
they were likely to deploy the profits from
crude speculation to equity markets now that
they had touched such attractive buying
levels. I had the same view about gold losing
its shine and this is exactly what happened
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last week.
I cannot help but observe the statement of Mr. Shankar Sharma, a well known bear operator, on CNBC on Wednesday, 23
July 2008 after the Trust Vote, when he stated that there is scope for the Sensex to touch 15,000 or 15,500 at most in the
present circumstances. But did he forecast this last week? All along, for the past six months he has been maintaining that
the Sensex could fall below 10,000 and quote in 4 figures! The same gentleman had on the same channel stated that the
Sensex could touch 25,000 in 2008 – which was his revised opinion and he admitted it as much as earlier he had always
issued bearish forecasts. He has now again reverted to his old bearish outlook and does not rule out a Sensex below
10,000 level even though the market had touched 50% higher than this level last week!
Is it not right that a market expert should forecast what is likely to happen next? Who will compensate the thousands of
traders who may have taken a bearish position based on his earlier forecasts about the Sensex hitting below 10,000?
Further, in reply to a pointed question by the channel if the market had bottomed out and the direction it was to take, he
sounded uncertain.
In sharp contrast, I have repeatedly held that a fall below Sensex 10,000 was very unlikely. This is because the market has
been hovering mid-way between 13,000 to 18,000 levels despite several negative global cues and domestic disturbances
that have surfaced since January 2008. Now that the Trust Vote hurdle is over and crude oil prices have started receding,
inflation has stabilised and corporate results, as a whole have been encouraging, there should be a revival in equity
markets based on these fundamentals. The monsoon may be deficient in 5 or 6 states but there is still hope for revival.
Thus I rule out any pessimistic outlook below Sensex 10,000 in the given circumstances.
Under the circumstances, I expect the market to be re-rated because it has not risen 2000 points by fluke but based on the
improved fundamentals. Let the so called experts call it an extension of a pull-back rally or short-covering, the fact
remains that the F&O trading volume shot up over Rs.80,000 cr. for the first time in recent weeks and the ratio of
gainers:losers was 10:1. The cash market volumes also hit a new high on Wednesday, 23 July 2008. What does this
indicate?
Your editor, who was understandably nervous at my contrarian stand for weeks together when all other experts and
media were speaking the bearish language, has repeatedly enquired whether I would like to change my view. But I
refused point blank as I submitted my views on Thursday, 17July 2008. What happened thereafter is known to all of us.
He has also conveyed a query from readers as to why I had stopped giving stock recommendations for the past few
weeks. To this, my reply is that it is more important for me to boost the morale of investors and safeguard their interest
rather than getting them stuck with fresh commitments in an uncertain market. When there is a fire around, what is more
important is to get the water to douse the fire. Similarly, I felt that investors should be told in no uncertain terms that a
Sensex fall below 12,000 or Nifty 4000 were unlikely and any attempts to break these levels would lead to a bounce back.
This is exactly what happened and you are at liberty to name any economist, analyst, market expert or guru who has
dared to console investors in such burning circumstances that the bear phase is about to end. It is because of this I have
been advocating bottom-fishing. And now that the time is ripe, I shall revert to recommending stocks once the Sensex
settles around 15,000 level.
By Saarthi
STOCK WATCH
Although J Kumar Infraprojects Ltd. (Code: 532940) (Rs.96.35) reported a lower topline and bottomline for Q1FY09
compared to the preceding Q4FY08, still it is a good bet to buy at declines. For Q1FY09, its revenue and net profit stood at
Rs.89 cr. and Rs.7.60 cr. respectively. It is a Mumbai based small EPC company with its primary focus on construction of
roads, flyovers, bridges, railway overbridges, subways, irrigation projects, commercial and residential buildings, railway
buildings and piling works. It also has a ready-mix concrete (RMC) plant for captive use. Its operations are confined to
Maharashtra and mostly in Mumbai itself. It is registered as a class I A contractor with PWD, Government of
Maharashtra. Importantly, the company owns a large fleet of modern construction equipments like Hydraulic piling rigs,
Putmiester Mobile boom placer concrete pump and stationary concrete pumps, RMC plants, transit mixers, cranes of
various capacities, poclains, front end loaders, JCBs and tippers. Given the aggressive spending on infrastructure, the
company is witnessing the best of its times and has an all time high order book position of Rs.700 cr. executable over the
next two years. Accordingly for FY09, it is estimated to report a total revenue of Rs.400 cr. with PAT of Rs.28 cr., which
will lead to an EPS of Rs.14 on its current equity of Rs.20.70 cr. In January 2008, it raised over Rs.70 cr. through an IPO at
Rs.110 per share. Investors can safely accumulate this scrip between Rs.75-80.
******
Being a 55% subsidiary of Charter Plc, Esab India Ltd. (Code: 500133) (Rs.384) is the leader of Indian welding & cutting
industry with a market share of 20% in the industry and 40% of the organised market. It is the only major international
brand with a manufacturing, selling and distribution network across a broad range of welding products in the Indian
market. It has a wide and comprehensive range, which includes welding consumables, reclamation consumables, arc
equipments, industrial gas equipments, cutting machines and working environment products. For June 2008 quarter, it
9
reported 30% increase in sales as well as profit to Rs.114 cr. and Rs.18.50 cr. respectively and has recently set up a new
facility for the manufacture of flux cored wires and stick electrodes at its site in Irungattukottai. It is also expanding the
capacity of its Nagpur and Khardah plants for Wires and Electrodes. Last fiscal, it made Esab Welding and Cutting
Systems Ltd. its wholly-owned subsidiary and is now contemplating to merge it with itself. For the year ended 31
December 2008, this MNC is expected to clock a turnover of Rs.425 cr. with profit of Rs.65, which translates into an EPS of
Rs.42 on its equity of Rs.15.40 cr. Thus at a reasonable discounting of 12 times, the scrip can move up to Rs.500 in 12-15
months.
******
Ratnamani Metals & Tubes Ltd. (Code: 520111) (Rs.783.15) is a Tier 1 project pipe player and draws demand from large
scale industrial investment in sectors like oil & gas, petrochemicals, power, fertilizers, pharmaceuticals, sugar, etc. where
pipes are used in high temperature and a highly corrosive environment. About 50% of its turnover comes from oil & gas
and petrochemicals industry followed by 20% from power and the balance from the others. It is basically engaged in
manufacturing welded and seamless stainless steel (SS) pipes & tubes, carbon steel (CS) LSAW, HSAW and ERW pipes.
To cater to the rising demand, it is adding 3,000 TPA in stainless steel tubes and pipes capacity, which will be operational
shortly and thereby take the total stainless steel capacity to 21,900 tonnes. In the carbon steel segment, it is adding 100,000
tonnes of HSAW capacity through brownfield expansion in the current fiscal, which will double its HSAW capacity of
200,000 TPA and take the total carbon steel capacity to 400,000 TPA. For Q1FY09, its sales grew by 30% to Rs.250 cr. while
net profit increased by 15% to Rs.25 cr. posting an EPS of Rs.28. Considering its orders in hand worth Rs.650 cr., it may
clock a turnover of Rs.1100 cr. with net profit of Rs.100 for FY09. This works out to an EPS of Rs.106 on its diluted equity
of Rs.9.45 cr. However in the last fiscal, the company provided whopping Rs.27.50 cr. as mark to market loss on derivative
instruments. Secondly, the rising steel price may affect its profit margin to some extent. Hence investors are advised to
accumulate only at sharp declines.
******
Gandhi Special Tubes Ltd. (GSTL) (Code: 513108) (Rs.82.50) manufactures small diameter welded and seamless tubes,
which act as an import substitute. In the seamless tube segment, GSTL faces virtually no competition as the technology
required to produce this is highly specialised. The welded tubes primarily find application in the Refrigerators,
Automobile and the general engineering industry whereas the seamless tubes are used in diesel based automobiles and
Hydraulic equipment. Importantly, the company derives more than 65% revenue from seamless tubes, which have higher
profit margin. GSTL also manufactures tubular components like condensers, compressor parts, fuel injection tube
assemblies, hydraulic tubes etc. In November 2007, it completed its Rs.35 cr. expansion plan of enhancing capacity by
2400 tonnes. Interestingly, for its power requirement, the company has put up 5 wind mills generating 5.35 MW of power.
Despite the rise in raw material prices, the company posted excellent Q1FY09 results as sales grew by 30% to Rs.23 cr.
while net profit shot up 60% to Rs.6.80 cr. registering an EPS of Rs.5 for the single quarter. On a conservative basis, it is
expected to end FY09 with sales of Rs.100 cr. and PAT of Rs.21 cr. i.e. EPS of Rs.14. The scrip can easily appreciate 50% in
a year.
By Kukku
FIFTY FIFTY
* Net profit of Kirloskar Pneumatic (Rs.400) rose by five times to Rs.6.20 cr. in Q1FY09 as against Rs.1.01 cr. during
Q1FY08. Sales rose 73.07% to Rs.107.96 cr. in Q1FY09 from Rs.62.38 cr. in Q1FY08. The results are very encouraging and
the stock has already given good upmove in the last few days. Investors are advised to stay invested or even accumulate
this stock below Rs.400 level for good long-term growth. Outlook for its gas compressors & transmission division is
encouraging. The company is likely to hold analysts meet in the first week of August 2008.
* TRF Ltd. (Rs.668), a Tata enterprise, has registered a consolidated profit of Rs.7.73 cr. for Q1FY09 on consolidated net
sales/income of Rs.124.72 cr. and the consolidated EPS stood at Rs.11.35.
The company plans to expand York Transport Equipment (Asia) Pte. Ltd. business by starting manufacture of axles in
India. Recently, it won the largest-ever order worth Rs.413.85 cr. from Damodar Valley Corporation. Good long-term
prospects.
* Sterling Tools' (Rs.68) June 2008 quarter results are encouraging. Investors can continue to hold the same.
* Sharyans Resources (Rs.157) is a debt-free company with good investment in associate and subsidiary companies. It has
significant presence in businesses like equity, debt, forex, commodity broking as well as distribution of financial products.
Sharyans is a well-diversified financial services company.
In the real estate space, Sharyans has partnered various developers/retailers and taken varying stakes in projects being
developed across India.
Good value unlocking is expected in the current year from its investments. For March 2008, it reported EPS of around
Rs.23 while book value of the share is around Rs.105. The promoters along with some investors took preferential shares
last year at Rs.230. Long-term investors can accumulate this stock on dips for good long-term growth.
10
* Patel Integrated Logistics (Rs.42) is a single stop Logistics Services Provider, offering complete logistics solutions
through its extensive infrastructure of nearly 350 offices and over 2000 delivery destinations.
The company also renders Money Transfer Services as a sub-agent of Wall Street Finance Ltd.
The company is able to pass on the increase in fuel cost, so we may see better margins from Q2FY09.
It allotted 18,00,000 equity shares of Rs.10 each at a premium of Rs.64 per equity share aggregating to Rs.13,32,00,000 in
February 2008 to some strategic investors.
The stock reacted from high of Rs.131 to the current level of Rs.42 while last three years low is around Rs.36. Book value
of the share is Rs.53. Investors can accumulate this stock on dips for good long-term growth.
* Net profit of Mysore Paper Mills (Rs.8.44) jumped to Rs.12.20 cr. in Q1FY09 as against Rs.0.13 cr. during Q1FY08. Sales
rose 34.08% to Rs.109.77 cr. from Rs.81.87 cr. in Q1FY08. Besides paper, the company also has a sugar plant.
* Yash Papers (Rs.7.50) - There is gradual improvement in the production & quality of its paper. This fiscal, we may see
improvement in production every quarter as initial teething problems in commissioning of expanded capacities are
getting over and higher level production will stabilise. Stay invested or accumulate.
Risk factor: There is increase in the input costs like caustic soda and other raw materials.
* As discussed, results of Yuken India (Rs.135) for June 2008 quarter is not good due to rise in input costs like steel,
higher interest rates and weakening rupee against the US dollar as some raw materials and items are imported. There are
clear indications of a slowdown in the machine tool industry, which is one of the user industries for its products.
* There is sharp increase in the input cost like prices of aluminium, pvc/xlpe compounds, copper & steel, which may
affect the margins of cable companies.
* DIC India (Rs.139) is a good contra pick at Rs.140/130 level because it is likely to benefit from expansion as demand is
said to be good. It is one of the most efficiently managed companies. It is a 71% MNC company. Thus there is possibility
of a delisting offer in the long run. It is good contra pick; in case crude reacts to below $100, there can be good jump in
margins. Downside is less because the company issued right issue at Rs.225, which was subscribed by foreign promoters
as most Indian shareholders did not subscribe since the prevailing price then was around Rs.210/215. Full year
consolidated EPS is likely to be around Rs.20/22 level on increased capital.
* Pratibha Industries' (Rs.212) Q1FY09 results are encouraging with net profit jumping up by 91%. Full year profits is
likely to be above Rs.50 cr. Accumulate on dips.
* P G Foils (Rs.61) - Promoter holding has gone up from 41.24% as on March 2008 to 43.34% as on June 2008.
* Nickle prices are around two years low. Companies to benefit are Mukand Ltd., Uni Abex and other stainless steel
manufacturer like Jindal Stainless Steel.
* Caustic soda prices are going strong. Stay invested in stocks like Gujarat Alkali, Andhra Sugar, Tata Chemicals etc.
View on the market: There are signs of better times ahead. We have seen crude reacting, inflation peaking out, UPA
government winning Vote of Confidence and positive in flows from FIIs.
Investors should slow down in profit booking if bought at lower levels as the market may not fall below Sensex 12500
level.
There are good buying opportunities in the
market but investors need to be very selective
and should focus on less number of stocks
where their level of comfort is high.
Real estate stocks have overreacted and there
is real value in many good real estate stocks.
It is possible that the crude oil bulls may shift
to equity markets and lock the profits earned
in crude trading as valuations are attractive.
It is possible that the same old game of tempting bears to go short and trap them to cover at higher levels may again start
thus pushing up the index to higher levels.
Sugar stocks have started attracting attention. Investors can take exposure in Sakthi Sugar, Kesar Enterprise and Andhra
Sugar.
If crude oil falls back to $100 level supported by revival of the monsoon, we may see the inflation rate going below 9%
and the market may bounce back to good levels.
As per market feedback, most fund managers and big investors have remained in cash and could not accumulate stocks at
lower levels and many of these stocks are 25/30% higher from lower levels.
Invest cautiously by keeping eye on crude price movements.
11
By V. H. Dave
EXPERT EYE
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12
The shares of Pioneer Distilleries Ltd. (PDL) (Code: 531879) (Rs.45.80) are recommended for long-term gains as it has
chalked out a major expansion, which would boost its earnings in coming years.
PDL was originally incorporated as Ganga Orgchem Ltd. in November 1992 and is based in Hyderabad. Subsequently, its
name was changed to the present one and has its Registered Office in Nanded District of Maharashtra. In 1994, PDL
embarked upon setting up a standalone distillery to manufacture Extra Neutral Alcohol (ENA), Rectified Spirit (RS) and
Special Denatured Spirit (SDS) and is a major supplier to liquor companies. It has doubled its distillery capacity to
1,00,000 litres per day from 50,000 litres per day in FY07. The good sugarcane crop will ensure adequate supply of
molasses at steady prices and benefit distillers considerably in improving margins.
PDL supplies ENA to the UB Group, Shaw Wallace, Radico Khaitan etc. while Ethanol is supplied to oil companies like
HPCL, BPCL and IOCL.
Although sales declined 14% during Q4FY08, net profit shot up 32% to Rs.3.2 cr. For FY08, while sales advanced by 31%
to Rs.63 cr., net profit zoomed by 144% to Rs.12.9 cr. and the EPS recorded was Rs.11.5 and a dividend of 20% was paid.
PDL's equity capital is Rs.11.2 cr. and with reserves of Rs.15.1 cr., the book value of the share works out to Rs.23.5. NRIs
hold 22.8%, institutions hold 3.8%, promoters hold 49.1%, corporates hold 1.8% and the public holds 22.5% in the equity
capital.
The work on its 5-MW biogas-based power project is expected to be completed by September 2008 and start commercial
production from October 2008. The company has entered a power purchase agreement (PPA) with Tata Power Trading
Company Ltd., Mumbai, for the entire power generated by the plant. The PPA is valid for 10 years from the commercial
operation date and the applicable annual average base rate for power purchase shall be Rs.4 per kWh for the first year.
The company will be entitled to carbon credits against this power plant, which will significantly add to its bottomline.
It owns around 300 acres of land, which is used for agriculture where treated effluent is used for cultivation. PDL is
setting up an additional effluent facility treatment plant that is an evaporator to become a zero discharge of effluent in the
future. The value of the land is about Rs.125 cr.
The company's ethanol plant operational since January 2007 and ethanol is being supplied to pharmaceutical and
petroleum companies. Keeping in view the demand for ethanol products by petroleum companies, the company has
decided to increase its capacity from the existing 30,000 litres per day to 1,30,000 litres per day.
PDL is embarking on further expansion by increasing its existing alcohol capacity from 1,00,000 litres per day to 2,00,000
litres per day.
The low per capita consumption of liquor in the country is likely to take the consumption level to new highs in coming
years. With players expanding capacities through greenfield and brownfield projects, the liquor market will be able to
meet the growing demand in the country. Also, the changing demography and social trends coupled with rising
disposable income is expected to boost the industry's prospects.
Going forward with more focused operations, a dedicated plant with increased capacity and more proactive customer
support would increase PDL's revenue & profitability.
Its captive power plant, which is expected to be operational this year, will save substantial power cost, which would
improve its results in FY09. Sales could rise to Rs.120 cr. with net profit to Rs.16 cr. and the EPS can be Rs.14.3 in FY09.
With the bright prospects of the distillery sector and its land bank of 400 acres PDL is expected to be of great interest to
liquor majors vying for backward integration. A takeover by a liquor major cannot be ruled out. If this happens, the share
price of PDL may attain dizzy heights.
The shares of PDL are traded at Rs.45.80 at a P/E of 3.1 on FY09 estimated EPS of Rs.14.3 and are recommended with a
price target of Rs.70 in the medium-term.
******
The share of Lok Housing & Construction Ltd. (LHCL) (Code: 500256) (Rs.55.50) is recommended for decent
appreciation in the long-term. The merger of Lok Shelter, LGNC (Lok Global & National Construction) and Lok Holdings
with itself certainly increases its valuation. It is also bidding to redevelop Mumbai properties in prime areas worth
Rs.20,000 cr. The share is currently available at a steep discount of 87% to its 52-week high of Rs.391 and is a good long-
term investment.
Incorporated in 1986, LHCL is the flagship company of the Lok Group and was among the first few realty companies to
be corporatised in 1987. Promoted by Lalit Gandhi, the group has built several housing complexes in the suburbs of
Mumbai like Khar, Andheri, Vikhroli and Mulund and outside Mumbai at Thane, Kalyan and Ambernath.
Till date, the Lok Group has executed and developed over 31 projects, of which 9 are currently under development;
comprising 17,000 units spread over 8.93 million sq. ft. of townships, educational institutes, health centres and
commercial units.
During Q4FY08, its net profit declined by 28% to Rs.13.1 cr. on 60% lower revenue of Rs.20 cr. The revenue was lower as
the major portion of projects was under construction. During FY08, although income declined by 18% to Rs.223 cr., net
profit jumped by 23% to Rs.112.9 cr. Its EPS stood at Rs.26.3.
LHCL's equity capital has gone up to Rs.42.9 cr. on account of issue of preferential shares to the promoters and other
investors at a premium of Rs.187. The book value of the share is Rs.46. The promoters hold 51% in the equity capital,
foreign holding is 3%, non-corporate promoters hold 31% leaving 15% with the investing public.
To build a stronger brand image synonymous with its size, scale of operations and quality housing, LHCL is in the
process of merging 3 of its group companies – Lok Shelter, LGNC and Lok Holdings with itself. Lok Shelter is involved in
urban rehabilitation and reconstruction projects. LHCL is the vehicle to acquire land while LGNC handles the diverse
infrastructure projects.
The merger will help address infrastructure projects, which is a new opportunity at a time when economic policies are
directed at modern infrastructural development. It will enhance its land bank by 356 acres by bringing together lands
acquired under different companies for further development and will expedite rehabilitation projects – another huge
opportunity through Lok Shelter. The merged LHCL can take on more mega, ultra premium and landmark projects.
LHCL alone has a robust land bank of approximately 866 acres with development potential of 49 million sq. ft. (including
properties where MOUs have been signed) at the most sought after realty destinations such as Mumbai, Pune and
Bangalore. Post merger, the company, will have a land bank of 1222 acres across the country with development potential
of 62.5 million sq. ft. and it has instituted six sigma quality systems for operational excellence, timely delivery and
seamless execution of large scale projects.
Having established its presence in Mumbai and procured land in Pune & Bangalore, LHCL is looking to establish a strong
pan India presence by foraying into other metro cities and then into Tier II & Tier III cities. It would participate in
National Urban Renewal Projects comprising slum eradication projects, demolition and reconstruction of old and
dilapidated buildings.
LHCL is currently executing a Slum Eradication Project in Khar, Mumbai, where through its group company, Lok Shelter,
it has already completed construction of four buildings. This initiative has resulted in the sanction of an FSI of 4 acres in
the most premium location in Mumbai on which the company is developing ultra premium residential houses (on 50% of
the land) and plans to construct commercial units in the balance space.
The Maharashtra Government has renewed its thrust to transform Mumbai into a world-class city. It is mammoth
challenge that requires rebuilding over 23,000 buildings (including 17,000 cessed buildings, mostly in South Mumbai) and
5,000 municipal tenanted properties, which are over 60 years old and in a dilapidated state especially after the 26 July
2005 rain. Huge funds with an estimated investment pegged at over Rs.2,20,000 cr. is required over the next 10 years for
this transformation. Further, the Maharashtra Government's move to repeal the Urban Land Ceiling and Regulation Act
(ULCRA) is expected to free close to 15,000 acres in Mumbai for development.
In May 2008, LHCL approved the issue of 3.5 million convertible warrants to promoters on a preferential basis at a price
of Rs.354 each for an aggregate amount of Rs.123.9 cr. The convertible warrant of Rs.10 face value and will be converted
into 1 share within a period of 18 months.
Considering LHCL's expertise in mass housing and ultra premium projects, its efforts to enhance its land bank, its ability
to complete projects on time, its geographic diversification and strategic investment in sites with international grade
properties give strong visibility to its profitability in coming years.
Based on the ongoing projects, LHCL is expected to generate a revenue of Rs.265 cr. with a net profit of Rs.125 cr. and the
EPS would work out to Rs.29 for FY09.
The share is traded at Rs.55.50 at a P/E of 1.8 on FY09 estimated EPS of Rs.29. Investment in this share has all the
potential to appreciate by over 50% in the medium-to-long-term. The 52-week high/low of the share has been Rs.391/41.
13
By Nayan Patel
TECHNO FUNDA
Bihar Caustic & Chemicals Ltd.
BSE Code: 500057
NSE Code: BCCL
Last Close: Rs.66.95
Bihar Caustic & Chemicals Ltd. (BCCL) is a unit of the
Aditya Birla Group and is one of the leading Chlor Alkali
companies in India. The plant was commissioned in 1984
and is located at Garhwa Road, District Palamau in
Jharkhand. The company's product range and installed
capacities are as under:
Review
- Last week, we recommended Shyam Star Gems at Rs.174.
During the week, it zoomed to Rs.187.40. The company has
recorded 88% jump in net profit in the June 2008 quarter as
per our expectation. Investors can stay invested as the stock
will achieve our upper target in coming days.
- Two weeks ago, in the issue dated 14 July 2008, we had
recommended Visaka Industries at Rs.54.85. In just a short
time, it has zoomed to Rs.72 level and can touch Rs.85 in
coming days.
Caustic Soda lye - 92,750 TPA
Liquid Chlorine - 56,000 TPA
Hydrochloric Acid - 43,750 TPA
Sodium Hypo Chlorite - 1,800 TPA
Compressed Hydrogen Gas - 17,42,400 NM3/A
Aluminum Chloride - 12,000 TPA
Stable Bleaching Powder - 17,500 TPA
The company also owns a 30 MW captive power plant. It has equity of just Rs.23.39 cr. with reserves of Rs.194.74 cr. The
promoters hold 56.31% stake in the company, Bihar State Industrial Development Corporation holds 8.67% while the
public holds 30.18%.
The company has put in a marvellous performance since the last 2 years. For the June 2008 quarter, net sales jumped
55.88% to Rs.52.78 cr. while net profit jumped 101.82% to Rs.13.28 cr. and it recorded an EPS of Rs.5.68 compared to
Rs.2.81 in June 2007 quarter. The company has declared 15% dividend for last year and book closure for dividend is from
11 August 2008. The stock is available P/E ratio of just 3.
Buy with stop loss of Rs.60. On upper side, the stock will go up to Rs.77 level in a short span of time and to Rs.95 level in
the medium-term. Best stock from Aditya Birla Group with low P/E for short to medium-term investors.
Nu Tek India IPO opens on 29
th
July
MARKET FOLIO
Nu Tek India Ltd., a Category 1 Telecom Infrastructure Services Provider offering infrastructure rollout solutions to both
wireless and wire line telecommunication networks, will enter the capital market with an IPO of 4,500,000 equity shares
of Rs.10 each through the 100% book building process in the price band of Rs.170 and Rs.192 per equity share. The issue
will open on Monday, 29 July and close on Friday, 1 August 2008. The issue has been assigned an IPO grade 3 by CRISIL
Ltd. signifying average fundamentals and will be listed on the BSE and NSE.
The company intends to utilise the proceeds from the issue to meet the cost of capital expenditure, overseas acquisitions
and augmenting the long-term working capital requirements. To accelerate growth, it is exploring overseas markets and
has set up a subsidiary in Turkey. They have a contract with Ericssion AB, Dubai to provide services to their operations in
Middle East. Further, they are in the process of acquiring such companies/entities which are complimentary to their
requirements. The company plans to raise funds through an IPO for both its organic and inorganic growth.
Over the last 15 years, it has been serving almost all Telecom Operators, OEM Vendors and Third Party Infrastructure
Leasing Companies. The Telecom Equipment Manufacturers includes Nokia Siemens Networks Pvt. Ltd., Ericsson India
Pvt. Ltd., Motorola India Pvt. Ltd., Nortel Networks India Pvt. Ltd., Huawei Telecommunications (India) Co. Pvt. Ltd.
and ZTE Telecom India Pvt. Ltd. Among Telecom Operators, for whom it has implemented/working on various projects
for Tata Teleservices Ltd., Reliance Communications Ltd., Bharti Airtel Ltd., Idea Cellular Ltd., Vodafone Essar South
Ltd., Videsh Sanchar Nigam Ltd., Aircel Wireless Ltd. and Shyam Telelink Ltd. Amongst the Third Party Infrastructure
Leasing Companies, its major clients are Quipo Telecom Infrastructure Ltd., Xcel Telecom Ltd. ATC Tower Company of
India Pvt. Ltd. and IMI Ltd.
It has grown at a 3 year CAGR of over 45% in its income from operations to achieve Rs.95.2 cr. with gross margins of 34%
and PAT of Rs.21.2 cr. i.e. net margins of 22% for FY08. As on 15 June 2008, the company has an order book of Rs.175 cr.
comprising of work orders and letter of intents to be executed in FY09.
Rolta in S&P 2008 Global Challengers List
Rolta India Ltd. has been included in the S&P Global Challengers List by Standard & Poor's (S&P). The S&P Global
Challengers List identifies 300 mid-size companies worldwide that have a total market capitalization between US $1 to 5
billion and have shown the highest growth characteristics along dimensions encompassing intrinsic and extrinsic growth.
These companies are expected to emerge as challengers to the world's leading companies. Rolta is one of the two
companies from India that have made it to this list.
ASUS launches first Netbook
ASUS in association with Intel and Microsoft has the launched of India's first netbook - Eee PC 1000H powered by Intel(R)
Atom processor. This innovative offering will change the way computing is perceived by housewives, senior citizens,
travellers, social networking enthusiasts, teenagers and for those who want an extra PC for basic computing applications,
listening to music, e-mailing and surfing the Internet.
This ultra portable computing device features large 10" display, longer battery lifespan of upto five hours, Dolby Sound
Room, built-in Bluetooth and a keyboard that's 95% size of generic notebooks facilitating easier typing and relaxed usage.
Further, it has a 1.3M Pixel webcam with its wireless internet connection capability for web conferences anywhere,
anytime.
Dr. Batra's Health Clinic ventures into telemedicine
Dr. Batra's positive Health Clinic, India's leading homeopathic health corporate, has become the World's First Tele-
Homeopathic Clinic connecting 55 clinics spread over 17 cities in India.
14
Tele-Homeopathy involves providing medical consultation and data through an easily accessible telecommunication
network (verbal and visual communication). It enables connectivity between the patient, consulting doctor and specialist
through interactive video conferencing with critical information/reports of the patient being available online.
K Sera Sera FY08 net rises
K Sera Sera Productions Ltd. has reported a higher consolidated net profit at Rs.39.91 cr. for FY08 compared to Rs.23.92 cr.
in FY07. Total income zoomed to Rs.175.43 cr. in FY08 from Rs.45.43 cr. in FY07. The EPS has almost doubled at Rs.10.12
in FY08 from Rs.5.18 in FY07.
For Q4FY08, its standalone net profit rose to Rs.19.85 cr. compared to Rs.13.60 cr. in Q4FY08.
Epic acquires Sathian Sun Power Systems
Epic Energy Ltd. has acquired Sathian Sun Power Systems, a Tamil Nadu based Solar Energy Products company at
Salem, which presently operates in 15 collectorates.
Sathian has installed Solar Street Lights, Solar Studs & Solar Hoarding Lights for various Government bodies in Tamil
Nadu and has been in the business for the last five years with a turnover of Rs.3 cr. Its manufacturing unit has been
approved by the Tamil Nadu Energy Development Authority (TEDA) and all its products are MNRE compliant.
Epic has also acquired the business of M. M. Associates (MMA), a 24 year old leading electrical designing and contracting
firm in Kozhikode, Kerala with a turnover of Rs.5 cr. MMA has successfully executed a number of electrical projects in
Kerala for steel plants, flour mills, hospitals & multistoried commercial and domestic complexes.
15
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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