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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 42
Monday, September 1 - 7, 2008
Pages 17
Wait for a clear direction to emerge
By Sanjay R. Bhatia
The markets displayed a rangebound trend with a negative bias. The global cues have remained more or less negative.
The crude has witnessed a bounce back on the back of low inventory data and fears of tropical storm Gustav damaging
U.S. oil and natural gas facilities in the Gulf of Mexico. Traders and speculators were seen selling at higher levels and
going short. Incidentally, FIIs have remained net sellers in the cash but were buyers in the derivatives segment. Moreover,
Mutual Funds remained net buyers supporting the
markets at lower levels.
1
The US has continued to emanate mixed economic cues.
However, its Q2 GDP growth has surprisingly been high.
The crude prices have cooled off a bit on reports that the
International Energy Agency has pledged to open its
emergency stockpiles if the tropical storm Gustav
damages U.S. oil and natural gas facilities in the Gulf of
Mexico. On the domestic front, inflation has surprisingly
cooled off marginally, which is a positive sign but could
be just a one-off blip and is expected to rise in the near
future.
As indicated in the previous issue, the rupee has
depreciated to around Rs.44 to the US dollar. The markets
have struggled to find a direction and the participation
continued to remain lacklustre at higher levels. The
market sentiment continues to remain tentative and confidence is yet to emerge fully. The FII inflows have remained
unenthusiastic. It is important that markets witness higher participation especially higher levels, from the FIIs. With no
immediate domestic triggers, the markets would continue to take cues from global markets, crude oil prices and of course
the domestic inflation rates. The markets are likely to remain rangebound. Stock specific action will be witnessed amidst
intermediate bouts of volatility and choppiness.
On the upside, the Sensex faces resistance at the 14677, 15000 and 15332 levels but has support at the 14141, 13791 and
13454 level. On the upside, the Nifty faces resistance at the 4482, 4647 and 4899 levels but 4189, 4108 and 4074 are its
important support levels.
Investors should wait and watch for a clear direction to emerge.
Tough August ends at last
By Fakhri H. Sabuwala
The weakness at Dalal Street may have come from January 2008 but the going was the toughest in August 2008. The
volumes were dismal, investment earnings or trading profits just not there, and breakeven at brokerages was far off.
Going through the deadly grind were the traders and even the investors. All of them were losing patience and each one
wanted to return home as soon as possible but that was farfetched with no profitable opportunity emerging in the month.
A little rise one day was followed by a big fall the next day. The exodus of FII money from the Indian scene was
demoralising. Will the FIIs return? May be yes but they might come only when the labour pangs for the delivery of a bull
market are over. It's always that way. Till then, only the patient and courageous shall last.
It's no secret that lakhs of crores have been washed off from market capitalisation. Rs.50,000 cr. worth of equity was sold
by FIIs alone over the last six months. Add to it the retail investors quitting the arena, sale by domestic institutions and
mutual funds followed HNIs switching to debt to hedge their portfolio from further erosion. Only the Life Insurance
Corporation of India, the big daddy of the capital market, comes forward to absorb all that is valuable. It is heading for a
10% mark in corporates like Tata Motors, Siemens, Grasim, Cipla, Kesoram etc. It has done most of its shopping over the
last 6 months and was replenishing its earlier sales. What does this mean? Simple, it was just selling part of its holding in
months prior to January 2008 and was now picking up quantity more than it had sold earlier. What a lesson for small
investors. Make long-term bets and don't lock-in your entire investments in any one stock and don't exit completely
unless you have lost faith in the company or its management.
Keep your investments divided in two parts – core and floating. Keep the core portfolio untouched across the ups and
downs. The churning will happen only in the floating stocks. Progressive sales can be made at every rise. By doing so,
you not only book profit but are also cash rich awaiting the doom to enter the counters at lower prices in a bigger way. It's
not that small players can't practice this. It's only a matter of a clear thinking and prudence.
A deeper analysis of Q1 results clearly indicates the resilience in large companies vis-à-vis the mid-sized and small ones.
Companies with a quarterly revenue of Rs.4000 cr. i.e. approx. $1 billion have recorded a faster topline growth compared
to the others. While the average growth of all corporates put together has been 24% the Rs.4000 cr. plus club recorded 33%
growth. It is seen that the topline growth for Q1FY09 has been robust and perhaps the best in the past 4 quarters. The
slowdown is just not visible. One wonders why the figures at the micro level put together belie the Index of Industrial
Production (IIP) slowdown.
But profits for Q1 are hit and hit badly. Raw material costs have surged 26% during Q1 and cost of finance (interest) is up
by 34% YoY basis. Even the bottomline of large companies, despite the drop in growth from 30% to 10% is still much
better than the average 6% of the aggregate companies.
High volatility is the order of the day. Yet the rollovers suggest a lack of confidence. The GDP figures though in line with
expectations gave a new lease of life to the sentiment on Friday, 29
th
August 2008 the last day of the most listless month so
far. Thank God August is over and lets play the loving tune of 'Come September'.
Wide rangebound market
TRADING ON TECHNICALS
2
By Hitendra Vasudeo
Following was the view expressed last week: "The
support range of 14153-13727 holds the key to the
overall market." Last week, the Sensex opened at
14643.37 attained a high at 14672.69 and crashed
down to a low of 14002.43 before closing the week at
14564.53 and thereby showed a net rise of 163 points
on week-to-week basis. The Sensex took support
from the important range of 14153-13727 by making
a low at 14002 and recovered to close at 14564 to
record weekly gains.
Earlier, the Sensex had shown 5 weeks of weekly
gains from 12822.75. And although the Sensex made an intra-week low of 12514 but closed positive on a week-to-week
basis. In the last 3 weeks, we had 2 weeks of negative weekly closing but last week we had a week-to-week positive gain
in the important support range. As a result of the last week's price movement, the Sensex has formed a Hammer. The
Hammer suggests an attempt to move higher could be attempted with intra-week corrections.
Resistance will be witnessed first at 2 weeks high of 14824. Initial resistance range will be at 14672-14824. In case of further
breakout and close above 14824, expect a rise towards the next resistance range of 15130-15167 first and then towards
15422-15579-15789.
Support will continue to be in the lower range of 14136-14066-13727.
Sensex Wave Analysis
Wave I- 2594 to 3758
Wave II- 3758 to 2828
Wave III- 2828 to 21206
(not yet complete)
WEEKLY UP TREND STOCKS
Internals of Wave III
Wave 1- 2828 to 6249
Wave 2- 6249 to 4227
Wave 3-4227 to 21206
Wave 4- 21206 to 12514
Wave 5- 12514 to 15579
(valid till 13727 is not
violated)
If that holds, then the
logical target can be
17964-20568, which is the
5
th
Wave failure range
targets.
Normal Count
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
CASTROL INDIA
339.95 273.1
314.0
329.0
354.9
395.8
78.1
318.0
18/07/08
CIPLA
240.20 222.2
233.7
238.6
245.1
256.6
72.3
236.4
11/07/08
NESTLE INDIA
1776.00 1689.0
1742.0
1761.0
1795.0
1848.0
71.4
1701.5
01/08/08
AIA ENGINEERING 1566.90 1473.1
1531.0
1553.0
1588.9
1646.8
70.4
1528.8
25/07/08
BOMBAY RAYON
373.15 305.9
346.8
361.4
387.7
428.6
70.1
355.9
25/07/08
Wave I-2594 to 3758
WEEKLY DOWN TREND STOCKS
Wave II-3758 to 2904
Wave III- Internals are 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
Wave Y- 17735 to 12514
Wave X- 12514 to 15579
Wave Z- 15579 to 14002
(Not yet complete)
Another overall count
structure can be as
follows:
Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell
with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to
Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal
Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly
reversal of the Down Trend.
Last
Center
Relative
Weekly Down
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Cover
Short
Cover
Short
Sell
Price
Sell
Price
Stop
Loss
BRAHMANAND HIM 17.25
14.0
16.2
17.5
18.5
20.7
8.63
18.91
29/08/08
SOBHA DEVE.
264.70
237.5
255.5
264.2
273.5
291.5
19.67
273.06
22/08/08
PARSVNATH DEVE 115.90
103.1
111.4
115.1
119.6
127.9
24.33
118.64
14/08/08
INFRA DEV FINAN
91.75
80.8
88.2
92.1
95.6
103.0
24.81
95.64
16/05/08
OMAXE
122.15
106.6
117.1
122.6
127.6
138.1
24.96
128.39
22/08/08
PUNTER'S PICKS
Wave I- 2594 to 3758
Wave II- 3758 to 2828
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
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
BAJAJ ELECTRICALS
500031
450.05
436.10
460.00
396.00 499.6
563.6
0.92
BANNARI AMMA.SPIN.MI
532674
71.60
71.00
77.45
64.50
85.5
98.4
1.95
BRITANNIA INDUSTRIES
500825 1440.00
1425.00 1449.00
1410.00 1473.1 1512.1
1.10
CORPORATION BANK
532179
288.65
280.00
292.00
267.00 307.5
332.5
0.87
EMAMI
531162
302.50
295.05
317.70
285.00 337.9
370.6
2.02
GARWARE WALL-ROPES
509557
86.55
82.80
95.00
79.70 104.5
119.8
2.61
Wave i- 4228 to 6954
Wave ii-6954 to 6069
Wave iii-6069 to 12671
Wave iv- 12671 to 12316
Internals of Wave iv
Wave a- 12671 to 8799
Wave b-8799 to 14723
Wave c- 14723 to 12316
Wave v- 12316 to 21206
Wave IV- 21206 to 12514
3
Wave V- 12514 to 15579 (current ongoing move)
Wave V can rally towards 17892-20596 provided 13727 is not violated.
Conclusion
A sideways rangebound market is being witnessed in the wider band of 15800-13727. Since the range is wider, swings
within the range will be witnessed.
Strategy for the week
Trade long on dips during the week to 14136-14002 with a stop loss of 13727 or wait for a fall below 14136 and when it
moves above 14136 then buy with low below 14136 as the stop loss. Alternatively, trade long on rise and close above
14824 and book profit at 15130-15167, 15422-15579 and 15789 as the opportunity arises. A close below 13727, will take the
Sensex down towards 12514 at least and to an outer extent to 10700.
* Even in the poor market sentiment, the Nectar life Science stock hit new highs despite any fundamental change in its
working. Grab this opportunity to book profit and exit as the scrip may find buyers due to the recent stock split
announcement.
TOWER TALK
* Broking firms are desperately waiting for the market sentiment to turn positive as retail volumes have totally dried up
in the last couple of months.
* Keep accumulating MTNL at sharp declines as interest is bound to build up in this counter as and when BSNL comes
out with an IPO in the near future.
* The Gujarat Apollo management enjoys declaring bonus as it is the third bonus in the last three years that it has
announced for shareholders.
* MM Forgings is a good cum bonus buy in view of its strong growth. 30 September 2008 is the Record Date for issue of
Bonus Shares.
* Tera Software, a strong player in the e-governance, has announced 20% dividend, which gives a dividend yield of 5% at
CMP. A value buy at current levels.
* Nectar Life Science has announced a stock split. The company is a pharma companies fancied by investors.
* Panama Petro, which posted 79% higher net profit in Q1FY09 with quarterly EPS of Rs.14.6 is all set to garner an EPS of
Rs.50 for FY09 on a tiny equity of Rs.4.8 cr. Marketmen expect a liberal bonus in the current year and the share is likely to
touch Rs.200 at a conservative P/E of 4.
* Based on Technocraft Inds. 50% higher net profit for Q1FY09 at Rs.10.5 cr., the scrip is all set to post an EPS of Rs.18.
Considering its strong fundamentals and strong book value of Rs.116, the share is going cheap and may cross Rs.75.
* Insecticides India, which posted Q1EPS of Rs.4.9, is reportedly faring well. Its phase-I expansion is expected to be
completed and phase II by March 2009, which will take EPS to Rs.30 for FY10. Marketmen target a share price of Rs.75 in
the short-term.
* Visaka Industries, which posted Q1FY09 EPS of Rs.9, is betting big on the demand of asbestos cement sheets. With
expected higher margins, it may post an EPS of Rs.28 for FY09. This promising stock is available at a discount to its book
value of Rs.100 and can easily cross Rs.90.
* Market grapevine has it that Hyderabad Industries would declare a liberal bonus in the current year and the share is
likely to touch Rs.250.
* The shares of Supreme Infra are being cornered by punters as it is likely to post an EPS of above Rs.26 in FY09 and
Rs.35 in FY10. Sources expect the share price to touch Rs.100 in the near term.
* The shares of Nelcast are an excellent buy with a likely EPS of Rs.20 in the current year. Sources close to the
management are buying in the counter with a likely target of Rs.100.
* An analyst with the reputed brokerage house strongly recommends the shares of Numeric Power, which is all set to
post an EPS of Rs.100+. With its tiny equity of Rs.5 cr., it is an ideal bonus candidate.
* With captive iron-ore mine, mega expansion plans, foray into power, backward integration through group company
merger, coal linkages and the demand for its products, Ramsarup Inds. with a likely EPS of Rs.40 in FY09, offers a good
potential at a P/E of just 2.8.
By Saarthi
BEST BETS
J Kumar Infraprojects Ltd. (Code: 532940)
Rs.88.85
Established in 1980, J Kumar Infraprojects Ltd. (JKIL) is a civil engineering and infrastructure development company
whose primary focus is on the development of roads, flyovers, bridges, railway overbridges, irrigation projects,
commercial and residential buildings, railway buildings, sports complexes and airports. For smooth functioning, it has
broadly divided its project work into four segments namely transport engineering, civil construction, irrigation projects
and piling work. Among these segments, JKIL has developed strong expertise in transport engineering space like
4
undertaking the design & construction of roads & flyovers on a turnkey basis, widening of highways etc. It is also among
the few construction companies implementing innovative construction techniques such as RCC box jacking, volumetric &
panelised construction, insulating concrete framework (ICF), flexible concrete pavement technology etc. However, JKIL's
operations are largely confined to Maharashtra and that too in Mumbai. Notably, it is listed as a class IA contractor with
the PWD, Government of Maharashtra and has been a preferred government contractor over the past years.
Over the years, the company has earned many accolades for timely & quality execution of projects. Few of its well known
projects include Konkan Bhavan Flyover at Navi Mumbai, Ghatkopar Cheddanagar flyover, Aurangabad flyover,
Goregaon Sports Complex, Residential quarters for AAI staff, Bandra Terminus Bldg etc apart from various projects for
road widening, irrigation and piling. Interestingly, JKIL prefers to execute the whole project independently and bags the
contract directly from government agencies and developers. With substantial orders coming from government dept its
main and renowned clientele includes MSRDC, MMRDA, PWD, MCGM, Mumbai Rail Vikas Corporation, Indiabulls Real
Estate, SMC Infrastructures and Sarthak Developers. It has strategic alliances with other private contractors like Era
Construction, Indiabulls, Nagarjuna etc. with whom it has entered into project specific JVs and subcontracting
relationships for specific purposes. Importantly, to complete the project effectively and on time, the company owns a
large fleet of modern construction equipments like hydraulic piling rigs, putmiester, mobile boom placer concrete pump
and stationary concrete pumps, transit mixers, various capacity cranes, poclains, frontend loaders, JCBs and tippers. It
also has a ready-mix concrete (RMC) plant for captive use as well as to supply to third parties. Of late, the company has
been putting in more efforts to expand the lucrative business of piling and RMC.
As of now, JKIL has huge orders in hand of more than Rs.700 cr. to be executed in the coming 24 months. This is 3.5 times
its FY08 turnover and ensures strong revenue visibility for coming years. Importantly, its execution across multiple
segments has not only enabled JKIL to de-risk its business model but also provide a platform to leverage on the
opportunities emerging from these segments. With the massive investments expected in the infrastructure segment and
the government making higher budgetary allocation, the future of JKIL looks quite promising. It reported 90% jump in
revenue to Rs.214 cr. and 140% increase in PAT to Rs.19.50 cr. posting an EPS of Rs.9 for FY08. Even for Q1FY09, it
reported an encouraging performance and is expected to end FY09 with a topline of Rs.400 cr. with net profit of Rs.28 cr.
This translates into an EPS of Rs.14 on its current equity of Rs.20.70 cr. Thus at the CMP, the scrip is trading fairly cheap at
a P/E ratio of merely 6 against its FY09 earning. Secondly, the scrip is available at 20% discount to its IPO price of Rs.110.
Investors are advised to buy at sharp declines with a price target of Rs.120 within a year.
Cera Sanitaryware Ltd. (Code: 532443)
Rs.129.90
Established in 1980, Cera Sanitaryware Ltd. (CSL) is a pioneer in the sanitaryware segment and is currently the third
largest company in the organised sector
with over 20% market share in India. It
is the first company to launch
innovative designs with a versatile
colour range in the sanitaryware
segment apart from introducing the
bath suite concept. The twin flush
cistern model, which saves upto 50% of
water, was launched by CSL only. In
the last couple of years, the company
has evolved itself into a total bathroom
solutions provider, from a mere
sanitaryware manufacturer. It deals in
several products from simple ceramic
wash basins to ultra hi-tech shower
temple. Broadly, it has segmented its
product profile into five categories -
sanitaryware, bath fittings, kitchen
sinks, shower temples & whirlpool.
Presently, it boasts of manufacturing
large range of WCs, squatting pans,
plastic cisterns, seat covers, bidets,
wash basins, urinals, kitchen sinks,
taps, whirlpools, bath tubs etc. In line
with today's high technology, CSL also
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5
provides automatic electronic flushing system, automatic water flow sensor tap, automatic hand dryers/soap dispensers
and perfume sprayers. Especially for the premium class, it has sophisticated and elegant shower temples with Jacuzzi
features, shower cubicles & shower panels. It also has a strategic tie-up with Sanitec group, an Italian designer
sanitaryware for importing premium sanitaryware and marketing it in India under their brand name - Pozzi Ginori. In
short, it has a mix of products that cater to all types of consumer from the lower middle class to the elite class. Currently,
CSL derives 40% of its revenue from institutional sales and the balance 60% comes from retail sales.
CSL's manufacturing unit in Kadi, Gujarat, uses technology from Germany, Italy, UK and Australia, to produce products
that suit Indian conditions. Incidentally, this is the first plant that uses natural gas as feedstock thereby reducing the cost
of production considerably. It has a direct connection with GAIL apart from obtaining natural gas at a very cheap rate
directly from the ONGC oilfields while others are getting imported LNG, which is three times costlier. Its plant is
equipped with captive power plants and wind turbines. To meet the rising demand, CSL expanded its capacity from
16,500 MTPA (1.3 million pieces) to 24,000 MTPA (2 million pieces) in October 2007 only. It distribution network
comprises 400 dealers, 4000 retailers, 9 depots and 14 zonal offices across the country. To boost retail sales, the company
came up with novel idea of setting up live CERA bath studios where consumers, architectures, interior designers etc can
actually see how the premium products will look, feel and function in their homes. With eight such studios across India,
the company is now putting up Cera Bath Galleries with its retail partners. In coming years, both such formats will be
replicated in several other cities and towns. To maintain its growth momentum, CSL is planning a major foray into taps as
there is only one strong Indian brand, followed by mediocre brands. The company is also contemplating to enter the
premium tile segment through outsourcing.
With the increased production capacity, CSL is also looking at the export market more seriously and intends to increase
its share from 5% currently. In the future, it plans to further increase the capacity to 3 million pieces i.e. approx 35,000
MTPA at an investment of Rs.30 cr. by 2010. Apart from the ongoing boom in housing, hospitality & the retail segment,
which is expected to sustain for a few more years, CSL will also benefit from the replacement and up-gradation market.
With a strong foothold in western and northern India, the company is taking initiatives to increase its presence in central
and southern India. Having created such a strong brand and goodwill, it will not be difficult for CSL to have a pan India
presence. Financially, CSL has been faring satisfactorily as it registered 20% growth in sales to Rs.128 cr. and 10% growth
in net profit at Rs.10 cr. for FY08. It posted decent results for the Q1FY09 as well. Accordingly, it can clock a turnover of
Rs.160 cr. with PAT of Rs.11 cr. i.e. an EPS of Rs.18 on its tiny equity of Rs.3.10 cr. with face value of Rs.5 per share.
Investors can accumulate at declines for a price target of Rs.180 in 12-15 months.
Jai Balaji Industries Ltd.: Aggressive growth plans
ANALYSIS
By Devdas Mogili
Jai Balaji Industries Ltd. (JBIL), formerly known as Jai Balaji Sponge Pvt. Ltd., is a 9-year old Kolkata based company
belonging to the Jai Balaji Group established in 1999.
The Jai Balaji Group is a well-known steel manufacturing group in the secondary sector in eastern India. The group has a
chain of value added products, which include Sponge Iron, Pig Iron, Reinforcement Steel TMT Bars, Alloy and Mild Steel
Ingots, Wire Rods and Carbon Alloy and Mild Steel Heavy Rounds. Mr. Aditya Jajodia is the chairman and managing
director of the company.
JBIL entered the capital market with a maiden public issue of Rs.10 cr. in October 2003. The company has an installed
capacity of 1,05,000 MTA at its sponge-iron facility at Raniganj and installed capacity of 85,000 MTA of MS Ingots at
Durgapur both in West Bengal. Its plant is coal-based and enjoys locational advantage due to its proximity to its basic raw
materials viz. coal and iron ore.
JBIL has entered into an agreement with HEG Ltd. for purchasing its steel unit consisting of steel billets plant of 1,00,000
MTA, sponge iron plant of 1,20,000 MTA and 12.8 MW captive power plant situated in Durg district in Chhattisgarh,
In July 2007, the company entered into a Memorandum of Understanding (MoU) for purchase of 100% shareholding of
Nilachal Iron and Power Ltd. (NIPL). NIPL has a 1,05,000 MTA sponge iron plant and in Saraikela Kharsawan district in
Jharkhand.
JBIL has also entered into a MoU with the Government of West Bengal for setting up a 5 million MTA steel plant, 3
million MTA cement plant and 1215 MW captive power plant within 10 years at an investment of Rs.16,000 cr. in district
Purulia, West Bengal. The company will also be setting up a Steel Plant in SEZ in the state of West Bengal.
It has also signed a MoU with the Government of Chhattisgarh on 8 August 2008 for setting up an integrated steel plant in
the State.
Performance: During FY08, the company notched up net sales of Rs.1290.76 cr. with net profit of Rs.118.87 cr. recording a
basic EPS of Rs.25.23 and a diluted EPS of Rs.24.37.
6
Financial Highlights:
(Rs. in lakh)
Latest Results: The company posted
impressive results for Q1FY09. It
registered net income of Rs.464.13 cr.
with a net profit of Rs.46.30 cr. netting a
basic EPS of Rs.9.82 and a diluted EPS
of Rs.7.92. The annualised basic EPS
works to 39.28 and diluted EPS of
Rs.31.68.
Financials: JBIL has an equity base of
Rs.47.11 cr. with supporting reserves
excluding revaluation reserves of
Rs.305.41 cr. and the book value of its
share works out to Rs.74.83. It has a
debt:equity ratio of 2.54 while RoNW is
at 42.97% and RoCE at 23.89%.
Share Profile: JBIL's 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.668/153. At its current market price
of Rs.220.15, it has a market capitalization of Rs.1198 cr. The share has a beta value of 0.8.
Particulars
Q1FY09
Q1FY08
FY08
Net Sales/Income from operations
46413.45
24588.09
129075.84
Other Income
660.99
691.22
5652.04
Total Income
47074.44
25279.31
134727.88
Expenditure
a. Inc/Dec in Stock
(383.76)
(3286.44)
(5574.88)
b. Raw Materials consumed
29865.76
11828.83
65912.18
c. Purchase of traded goods
-
5590.85
25644.79
d. Employee Cost
618.43
225.74
1776.08
e. Depreciation/Amortization
1424.40
966.07
4335.17
f. Other Expenditure
6376.20
4324.79
17998.39
Total
37901.03
19649.84
110091.73
Profit Before Interest and Tax
9173.41
5629.47
24636.15
Interest & Finance Charges
3117.94
2050.86
11016.81
Profit Before Tax
6055.47
3578.61
13619.34
Tax Expense
Current Tax including FBT
1867.67
400.59
2008.01
MAT Credit Entitlement
-
-
(1073.32)
Deferred Tax
(441.91)
818.64
797.35
Total
1425.76
1219.23
1732.04
Net Profit
4629.71
2359.38
11887.30
Paid up equity share capital
4711.47
4711.19
4711.47
Reserves Exc Rev Reserves
-
-
30541.13
Basic EPS (Rs)
9.82
5.01
25.23
Diluted EPS (Rs)
7.92
5.01
24.37
Dividends: The company has been paying dividends as shown:
March 2007 - 8.5%, March 2008 - 10%.
The company hiked the dividend by 1.5% to 10% for FY08.
Shareholding Pattern: The promoters hold 63.93% stake while the balance 36.07% is held by non-corporate promoters
and the investing public. Reliance Mutual Fund has added JBIL's share to the Reliance Diversified Power Sector scheme
during October and December 2007.
Prospects: The Indian steel sector is on a roll and the Indian Iron & Steel Industry has come to occupy a dominant
position in the socio-economic development of the country. The buoyancy in the sector continues because of a strong
demand in various user industries such as automobiles, infrastructure, capital goods etc. These sectors are doing well
and would need additional steel in coming years.
The Indian steel industry ranked seventh in the world crude steel production with an annual production of about 45
million tonnes in FY07. The Indian economy witnessed robust growth with the GDP growing by around 8%. The main
drivers of this growth were the manufacturing and services sector.
The growth in domestic steel demand, a vigorous growth in domestic steel production led by the secondary steel
making sector, availability of mineral resources, abundant labour as well as professional and technical expertise, all
operating in the backdrop of a free market economy have boosted the growth of the steel industry. The growth in steel
consumption is characterised by substantial investments in the sector, both towards enhancement of existing capacities as
well as setting-up of greenfield projects. Domestic consumption of non-alloy steel, at 44 million tonnes, was 12% higher
compared to last year. The current growth of the Indian economy is likely to sustain the surge witnessed in domestic
consumption of steel during the year.
Conclusion: JBIL is an existing, profit-making company with an established presence in West Bengal. The company has
adopted both organic and inorganic routes for its expansion programmes the benefits of which will accrue in the days to
come.
At its current market price of Rs.220, the share is discounted less than 10 times its FY08 earnings against the industry
average P/E multiple of over 18. Going forward, the company is expected to clock an EPS of around Rs.40. Considering
its aggressive growth plans, excellent performance and bright prospects, the share of JBIL may be considered with a
medium-to-long-term investment horizon.
The trend is likely to remain sideways
MARKET REVIEW
By Ashok D. Singh
The Sensex gained 163.04 points or 1.13% to 14,564.53 for the week ended Friday, 29 August 2008. The NSE Nifty gained
32.55 points or 0.75% at 4,360 for the week. The market started the week with marginal gains on falling crude oil prices
and reports of a near-normal monsoon. The market slumped later on expectations of higher weekly inflation figures.
7
However, it ended the week on a buoyant note as inflation fell for the first time in 28 weeks. The Sensex gained in three
out of five trading sessions.
The BSE 30-share Sensex has lost 5,722.46 points or 28.2% in calendar year 2008 so far from its close of 20,286.99 on 31
December 2007. It is 6,642.24 points or 31.32% away from its all-time high of 21,206.77 struck on 10 January 2008.
The BSE Mid-Cap index rose 15.44 points or 0.27% to 5,742.29 in the week. The BSE Small-Cap index slipped 34.21points
or 0.49% to 6,891.64 in the week.
The GDP grew 7.9% in the June 2008 quarter from a year earlier, easing from the previous quarter's 8.8% rise as industrial
activity slowed due to monetary tightening. The GDP growth in Q1FY09 was lower than market expectations of a rise of a
little above 8%. The government released the GDP data during trading hours on Friday, 29 August 2008.
Inflation based on the wholesale price index rose 12.40% in 12 months to 16 August 2008, which was below the previous
week's annual rise of 12.63% due to lower prices of some minerals and fuels, government data released on, 28 August
2008, showed.
The annual monsoon rains between 1 June 2008 to 24 August 2008 were just below the long-term average, the government
said on Tuesday, 26 August 2008. Up to late August 2008, the rains were 1% below the average, it said.
Ratings firm Standard & Poor's launched the S&P India Select Index aimed at providing foreign funds tradable exposure
to Indian equity markets. Stocks that have reached the maximum investment limit for foreign institutional investors (FIIs)
have been excluded from the index due to lack of access to such scrips for these investors, S&P said.
The market regulator, Securities and Exchange Board of India (SEBI) altered the Disclosure and Investor Protection
guidelines to hasten the process of right issues on Thursday, 28 August 2008. In another move, SEBI has disallowed FII
sub-accounts falling in categories of 'foreign corporate' and 'foreign individual' in the definition of qualified institutional
buyers (QIBs). These sub-accounts will not be allowed to invest in the primary market through FIIs.
On 29 August 2008, the NSE kickstarted trading in the exchange-traded rupee futures for the first time in India. Good
volumes were reported on day one with the front-month contracts witnessing brisk activity. The contract size is $1,000
each.
FIIs sold shares worth Rs.1,211.70 cr. in August 2008 (till 28 August 2008). FIIs old shares worth Rs.28,513.60 cr. in the
calendar year 2008. Mutual funds sold shares worth Rs.700.40 cr. in August 2008 (till 27 August 2008).
BSE Bankex (up 5.32% to 7,009.69), BSE Realty index (up 1.02% to 4,995.25), BSE Metal index (down 0.13% to 12,348.2),
BSE Power index (up 0.24% to 2,604.11), BSE Capital Goods (down 0.32% to 11,886.62), BSE IT index (up 3.38% to
3,966.75), BSE Auto index (up 4.21% to 4,001.23) edged higher from the sectoral indices on BSE.
The Sensex rose 48.86 points or 0.34% at 14,672.69 on Monday, 25 August 2008. Key benchmark indices ended with
marginal gains despite a strong start. The market retreated from the day's high struck in early afternoon trade as index
heavyweight Reliance Industries along with banking shares eased. A sharp slump in the price of oil and notable gains in
US stocks on Friday, 22 August 2008, had triggered the firm opening.
The Sensex rose 31.87 points or 0.22% to 14,482.22 on Tuesday, 26 August 2008. Stocks ended choppy trading sessions
slightly higher boosted by the fall in crude oil prices and reports of a near normal monsoon. IT and banking stocks played
a lead role in the recovery. The market had opened weak on negative global cues.
The Sensex lost 185.43 points or 1.28% at 14296.79 on Wednesday, 27 August 2008. The market was rangebound
throughout the day but cracked in late trade on fears of a further monetary tightening by the Reserve Bank of India to rein
in inflation which is at a multi-year high. Index heavyweight Reliance Industries and bank stocks led the decline in key
benchmark indices.
The Sensex lost 248.45 points or 1.74% at 14,048.34 on Thursday, 28 August 2008. Intense selling in index heavyweight
Reliance Industries and bank stocks
triggered a sell-off in late trade. Concerns of
high inflation and steady rise in crude oil
prices for three consecutive sessions
weighed on the sentiments. Volatility was
high in the second half of the trading
session ahead of the expiry of August 2008
derivatives contracts. The market breadth
was weak.
8
The Sensex rose 516.19 points or 3.67% at
14,564.53 on Friday, 29 August 2008. Data
showing a slower-than-expected GDP
growth in Q1FY09 and softening of inflation
raised hopes for a pause in monetary
tightening by the central bank, triggering a
solid rally on the bourses.
Tata Steel rose 0.99% to Rs.600.35. The company posted 60.43% rise in consolidated net profit to Rs.3900.90 cr. on 39.18%
increase in total income to Rs.43560.96 cr. in Q1FY09 over Q1FY08. The company announced the results after trading
hours on Thursday, 28 August 2008.
DLF rose 1.93% to Rs.493.30 in the week. As per the recent reports on 27 August 2008 the firm has sought shareholders
approval to raise up to Rs.10000 cr. by selling shares to institutional investors.
ICICI Bank jumped 4.19% to Rs.671.50. As per the reports on 25 August 2008, the company plans to shift its call centre
operations from Mumbai, Chennai and Bangalore centres to Hyderabad to save cost and eliminate inefficiencies.
Satyam Computer Services (up 8.66% to Rs.419.85), State Bank of India (up 4.26% to Rs.1,403.60), HDFC Bank (up 6.91%
to Rs.1,277.25), Ambuja Cements (up 0.25% to Rs.80.20) edged higher.
The Sensex added 163.04 points to close at 14,564.53 last week. The market seems to be recovering a bit from the weaker
sentiment it witnessed over the last few weeks but the trend is likely to remain side ways with no major gains in near
future.
9
Positive trend emerges
MARKET
Hindalco stock underperforms
By G. S. Roongta
Although my forecast of 'Market to improve' has come true by the closing of the week on Friday, 29 August 2008, it gave
several anxious moments in between as technical analysts forecast a downfall on the ground that the support levels had
been broken.
The week started on Monday, 25 August 2008, with movements in a narrow range and trading was
confined to a few pivotal stocks. But the BSE Sensex closed with a gain of 48.65 points at 14450.35. The
fluctuation on the Sensex was on the higher side of about 250 points from its low of 14416.20 for the day.
Next day, Tuesday, 26 August 2008, exhibited the same pattern closing with a small gain of 31.87 points
to close at 14482.82 with a spread of over 200 points from the low of the day.
However, the bears were in action on Wednesday & Thursday, 27 & 28 August 2008, with a loss of 185.43
points and 248.45 points respectively. But those who were watching the markets closely must have
observed that the bear action was initiated just one hour before closing time on both days. This action clearly betrays their
lack of confidence and whether they will succeed if nothing negative emerges on the inflation front or in the movement of
crude oil prices, which had gathered some strength on the back of low US inventories. But this loss of 434 points over two
consecutive days did impart nervousness in the markets.
G.S. Roongta
However, the marginal fall in inflation figures belied the hopes of bears and the upsurge in global markets on the back of
the growth in US GDP numbers after a long time changed the sentiment on Friday, 29 August 2008. The Sensex gained
516.19 points to close at 14564.53 and the CNX Nifty gained 146 points to close at 4360 wiping out the losses of the
previous two days and creating new hopes for a better market ahead.
Whatever may be the outcome of the tussle between the bulls and bears, one thing is crystal clear that follow-up action by
retail investors is certainly missing on both sides of the market. At the current juncture, retail investors are in no mood to
buy a stock or sell it at throwaway prices. They prefer to stay away for the time being till a clear trend emerges.
Technical experts, however, are not sure about the direction of the market as they are stuck between the major support
and resistance levels of the current trend line with Nifty 3820 at the lower end and 4580 at the upper end. Let us see how
the market responds to the action of the bulls and bears and prove either one of them wrong.
But the fact is that marketmen have begun to wonder if there is any worthwhile interest in the near term as a major
market rally may be unlikely before Diwali. But if global triggers remain positive, the market will move out from its
narrow range of operations in August 2008 and we may witness a larger range of 1000 – 1500 points on the BSE Sensex on
a weekly basis.
In such an ill-liquid market, which is starved of fresh funds or rotational funds through buying and selling of stocks, it is
not prudent to make any stock recommendations. Even the Rs.20,000 - 30,000 cr. payout by way of corporate dividends
has not found its way back to the market as it ought to given the throwaway prices of several fundamentally strong
stocks.
FIIs, too, remain net sellers at higher levels and their net sales in calendar 2008 upto 28 August 2008 has surpassed
Rs.28,000 cr., which is the highest ever since they started investing in India in 1991. However, it is very likely that FIIs
may start returning now that the US dollar has appreciated by nearly 12% against the Indian rupee and they can buy
more equities for every dollar invested.
Another demeaning factor is the increasing mobilisation of funds by corporates through IPOs, rights issues, debentures,
private placements or other permissible modes especially as most IPOs are quoting at hefty discounts of upto 70% from
the offer price. Hardly any IPO can justify its pricing and some rights issues are now reported to have been cancelled in
view of the current market sentiment.
The fact of the matter is that some industrial groups have acquired global dimensions and their continuous thirst to grow
has led them to milk investors again and again without caring to reward shareholders for their unflinching support.
Reliance, Tatas, Birlas who were considered investor friendly houses now appear less investor friendly in their ever
increasing hunger for growth and racing ahead with acquisitions or diversifications.
The two Reliance Groups are no longer as investor friendly after the IPOs of Reliance Petroleum and particularly Reliance
Power.
The Tatas with two large big sized companies – Tata Steel and Tata Motors, are into huge borrowings despite the shares
of both companies having tumbled by 40-60% from their peaks.
The Aditya Birla Group, too, has disappointed investors as it has always sought fresh shareholder funds for the last 15
years without ever caring to bother about returns to shareholders like bonus or liberal dividend payouts.
Hindalco, which came out with a rights issue 2 years ago at its lifetime high price of Rs.95 for Re.1 paid-up (or Rs.950 for
Rs.10 paid-up 3 years before) is again asking shareholders to subscribe to its rights issue at Rs.96 in the ratio of 3:7.
The Hindalco stock turned ex-rights (XR) at Rs.124 on 28 August 2008 and fell to Rs.120. It is interesting to note that the
Hindalco stock, which had hit Rs.250 two years ago after the Rs.10 paid-up share was split into 10 shares of Re.1 paid-up,
it has never seen that price again over the last two years despite the huge big bull run!
This share may again fall to Rs.100-110 once it turns ex-dividend (XD) next week or so. It may fall further as the time of
subscription draws near as existing shareholders may sell their holding and apply for the rights if the difference between
the two is 15-20% without caring that the stock was quoting Rs.200 even after the market crashed in January 2008.
Without considering the plight of its shareholders, the Hindalco management, which ironically speaks loudly about
enhancing shareholder value for the last 5 years, is actually lowering shareholders' wealth. But the poor shareholders
have no choice either to stay long or get away under such forced circumstances. This is how these big industrial houses
drive away their long-term shareholders by putting them in such critical circumstances.
The payout from Hindalco is also very low compared to its earnings. Just look at its financial strength and earnings,
which is indeed robust. Had the management been generous, investors would have made some handsome money even in
a short duration. But those shareholders who are with the company since 5-10 years have hardly benefited. Even those
since inception have just earned an average yield not more than 18% p.a. taking together the rights and bonus. This is
hardly attractive compared to the yields of several MNCs or other Indian stocks known for their generous payouts.
Hindalco's net profit in FY08 is lower despite higher
income and lower depreciation because of tax
adjustment of Rs.541 cr. in earlier years as per the
notes given. It is astonishing that the profit is lower
despite the peak prices of aluminium. Its EPS, too, is
lower at Rs.18.92 as against Rs.24.59 in FY07.
Equity: Hindalco's equity capital despite the
increase by rights issue is still very low at Rs.122.65
cr.
Hindalco Industries Ltd.
(Rs. in cr.)
Particulars
2006-07
2007-08
Total income including others
18683
19694
Gross Profit before Int. & Dep.
4385
3894
Interest
242
281
Depreciation
638
588
Profit Before Tax
3505
3026
Taxation
940
705
Net Profit
2564
2320
Reserves & Surplus: The reserves have built up over the years to Rs.17174 cr. i.e. nearly 140 times its equity. But the
management has never though of issuing bonus shares to please the shareholders since 12 years when the last bonus was
issued.
Dividend: The management had reduced the dividend distribution in 2006-07 as against 2005-06, which has inched up
slightly after the shareholders protested about the management's policy at the last AGM.
Size: Although the company has grown into a giant at the cost of shareholders, the management is very stingy in
rewarding them and is, therefore, considered investor unfriendly.
Investments: Its investment in shares & securities including its own sister companies have increased at a galloping speed
to reach as high as Rs.14108 cr. in 2007-08 as against Rs.8675 cr. in 2006-07. Its appreciation in quoted investments alone is
more than 5 times apart from the appreciation in unquoted investments. Although this is several times more than the
invested funds yet the management does not care to pass on some of these gains to the shareholders by way of better
payouts.
Conclusion: These are the reasons that investors are abandoning the market slowly but steadily ad their percentage is
reducing year after year.
On Friday, 29 August 2008, when the Sensex gained over 516 points and 1010 stocks advanced, Hindalco or Grasim barely
inched up. This clearly indicates that the Aditya Birla Group is losing its capital market image.
By Saarthi
STOCK WATCH
10
Vivimed Labs Ltd. (Code: 532660) (Rs.73.10) is a speciality chemical manufacturer catering to segments like oral care, sun
care, skin care, hair care, natural extracts, preservatives, anti microbial, anti oxidants, anti-aging molecule etc. In fact, it is
the world's second largest manufacturer of Triclosan - an antibacterial used for oral care, and one of the top three
companies for Avis – a chemical that improves the ultra-violet (UV) absorbing ability of Sunscreen. Couple of months
back, it acquired 100% stake in M/s. James Robinson, UK, which is a global manufacturer and supplier of speciality
chemicals used in hair dyes, pharmaceuticals and photographic films/prints to ophthalmic sunglasses. Organically, too,
the company has been expanding capacity and has chalked out greenfield expansion plans in Uttarakhand and
Hyderabad. Considering its Q1FY09 results and the acquisition of the UK company, Vivimed is estimated to post
consolidated sales of more than Rs.225 cr. with net profit of Rs.17 cr. This will lead to an EPS of Rs.18 on its current equity
of Rs.9.40 cr. whereas its diluted EPS works out to Rs.13 on its diluted equity of Rs.12.65 cr. Accumulate at declines.
******
Hitachi Home & Life Solutions (I) Ltd. (Code: 523398) (Rs.111.70), a 68% subsidiary of Hitachi, Japan, is among the top
air-conditioning companies in India with an installed capacity of 250,000 units per year. It manufactures high
technological home and commercial air conditioners like window AC, split AC, concealed splits, ductables, chillers and
specific telecom cooling solutions. To capitalise its brand equity and strong distribution network in India, the company
has also ventured in the business of trading in refrigerators and washing machines. Its plant at Kadi, Gujarat, is among
the seven Hitachi room air conditioner facilities worldwide. Being a technology driven company, it has introduced several
innovative products such as ACE, IOTA, ATOM Square, Takumi etc., which are doing well in the market. Its refrigerator
and washing machines sales are also picking up. On the other hand, its commercial air conditioning division is also on
rampant growth mainly due to the retail sector and mall culture expanding in a big way. The trend of BPOs and R&D
centres also augurs well for the company. Although its June 2008 quarter results were not that encouraging, still it is
expected to end FY09 with sales of Rs.525 cr. With PAT of Rs.42 cr. i.e. an EPS of Rs.18 on its equity of Rs.23 cr. At current
levels, this share is trading reasonably cheap and can be bought for a target of Rs.180 in the medium-term.
******
Graphite India Ltd. (Code: 509488) (Rs.58.95) is one of the few global players manufacturing graphite electrodes as it is a
closely guarded technology. With the present installed capacity of 78,000 tonnes, the company boasts of producing nearly
8% of the total global graphite output. To cater to the rising demand, it is implementing a capex at its Durgapur plant to
enhance its graphite electrodes capacity by 10,500 tonnes to be operational by end FY09. Being backward integrated, it has
the facility to produce 30,000 MTPA of calcined petroleum coke (CPC) apart from generating 33 MW of power through
Hydel and Multi-fuel routes. Further, it is contemplating to enhance its captive power generation by 100 MW in the next
two years. Earlier in October 2005, the company raised nearly Rs.175 cr. through the FCCB route, which is yet to be fully
converted at Rs.55. Despite being hit by forex losses it posted decent results for Q1FY09 and is estimated to end FY09 with
consolidated sales of Rs.1500 cr. with net profit of Rs.155 cr., which works out to an EPS of Rs.9 on its fully diluted equity
of Rs.36 cr. with a face value of Rs.2 per share. With a dividend yield of nearly 5%, this is one of the safe picks with a
minimal downward risk.
******
SKF India Ltd. (Code: 500472) (Rs.233.85) is India's largest bearings manufacturer commanding more than 30% market
share across the country. It manufactures all types of roller bearings, ball bearings, bearing units, bearing housing, plain
bearings etc. in hundreds of sizes and thus has an extensive product range literally providing solution to any and every
conceivable bearing application. Last fiscal, it launched power transmission products as a new product range to capture
the growth in the energy sector. Of late, SIL is
also engaged in marketing, sales and
distribution of large sized bearings for the
industrial segment being produced by
another group company. For future growth,
the company is putting up a new plant in
Haridwar, Uttarakhand, with a capacity of 48
million pieces of bearings, which will cater to
the two-wheeler segment. The plant is
expected to start commercial production by
mid-2009. Due to rise in input costs and stiff
competition coupled with pressure from
customers, the company may not be able to
maintain its CY07 EPS of Rs.30 and may end
CY08 with sales of Rs.1725 cr. with profit of
Rs.145 cr. i.e. an EPS of Rs.27. Despite taking
Daily Fresh Buy
(for the busy investor)
PROFITRAK is pleased to announce the launch of 'Daily Fresh Buy' for
investors/ traders who are keen to focus and gain from a single stock every
trading day.
With just one daily recommendation selected from stocks in an uptrend,
you can now book profit the same day or carry over the trade if the target
is not met.
Our review over the next four days will provide new exit levels while the
stock is still in an uptrend.
This low risk, high return product for the busy investor is available for
subscription at Rs.2000 per month. For details contact
moneytimes@vsnl.com or phone on 022-22616970/ 22654805.
11
the de-growth into consideration, this debt free MNC is available fairly cheap. Buy at declines.
12
By Kukku
FIFTY FIFTY
* Amrutanajan Health Care (Rs.318.50) has a market cap of just Rs.100 cr. The company has sold land and buildings
situated at Egattur, Chengleput Taluk, Kancheepuram District, Tamil Nadu, to LIC for Rs.110 cr. and is sitting on cash of
Rs.100 cr. from sale of land & building paid 400% special dividend. The company is looking for acquisitions. Moreover, it
is restructuring its existing business and investments in its subsidiaries. The company still has good surplus real estate at
prime locations, which can fetch good money.
The company is liberal in dividend distribution as it paid dividend of 60% for FY07 and 70% for FY08. Its record of bonus
shares is encouraging as given below:
Long-term investors can add this stock on dips.
Bonus
* Investors can keep watch on Sicagen India (Rs.12.95), which is a result of a
de-merger as its book value is around Rs.89. It is into trading and service
undertakings and coffee plantations. The trading companies consist of
building materials and Vehicle sales while the services undertakings consist of
travel related services, ship building and repairs, governor servicing and
windmill power generation. The company plans to introduce large retail
formats with a comprehensive range of building material products since the retail market for construction materials holds
great potential.
Year
Ratio
Book Value
(Rs.)
EPS
(Rs.)
2001
1:1
154.63
37.63
1992
1:3
21.00
3.58
1988
1:1
29.54
6.70
1986
2:3
38.23
12.22
1983
1:2
34.45
8.57
1980
1:3
37.00
4.56
* For Q4 ended 30 June 2008, the loss of Oudh Sugar Mills' (Rs.56.45) reduced from Rs.28 cr. to Rs.2.99 cr. The capacity
enhancement of its Hargaon Distillery at Hargaon (U.P.) has been completed successfully and the construction of its
greenfield integrated sugar project of 7000 TCD along with a sugar refinery and co-generation plant at Dhadha Bujurg
(Hata), Kushinagar (U.P.) is progressing and will be commissioned during season 2008-09.
The company will get the full benefit of capacity in FY09 as also the benefit of firm prices will be reflected in FY09 results
only. When sugar prices were firm in FY06, the company paid a dividend of 45% on an EPS of Rs.24. Seeing the current
trend of sugar prices; the company is very likely to report net profit of around Rs.36-40 cr. on a conservative basis leading
to an attractive EPS of Rs.16-18 level. Hence it is assumed that the divided for FY09 can be around 30%. Thus stock has a
limited downside from the current level as recent the rights issue is also around Rs.60 level. Investors can accumulate this
stock on dips.
Risk factors: (1) Higher debts, (2) It is a commodity stock and (3) Performance will be subject to firm sugar prices.
* There is improvement in the working of STG Technology (Rs.18.05) in the last few quarters. Investors can keep a watch
on this stock having a book value of Rs.19 and 52-week high/low of Rs.44/14. Thus the downside is limited.
* Sakthi Sugar (Rs.108.15) - There will be an acquisition by one of its subsidiaries. Stay invested in this stock or add
around Rs.95/96 levels on dips.
* SKF India (Rs.233.85) is a zero debt company as there are no long-term borrowings. Short-term borrowings are
restricted to need based working capital requirements. It is a good portfolio choice for long-term investors. The stock has
a book value of Rs.103 and its 52-week high/low is Rs.490/202. Last dividend was 60% while current year expected EPS
may be Rs.30/32.
* Gujarat Apollo Industries (Rs.181.45) has come out with its third bonus issue in the last 3 years. In 2005, ratio was 1:1.
In 2007, ratio was 1:2 and the same in 2008. It's a good stock to stay invested in or to add on dips around Rs.160 level.
* Mazda Ltd.'s (Rs.65.05) expected EPS is around Rs.17/18 for FY09. Book value is around Rs.61 and 52-week high/low is
Rs.120/42. Good stock to hold in the portfolio. Sustained closing above Rs.66 level can give a good breakout.
* Pratibha Industries (Rs.244.85) - The water segment plays an important and crucial role in the performance of the
company and contributes 60-70% towards its turnover and profitability. The order book also consists of substantial
projects from the water segment. During FY08, it successfully commissioned the crucial and sizeable first phase of the
New Mumbai Municipal Corporation (NMMC) water pipeline project.
The company will be among the first to have world class pipe manufacturing and coating facility to fully meet the piping
needs of its operations in water and hydrocarbon segments. It caters to an ever increasing market, which is currently
witnessing serious demand-supply mismatch.
Its order position stood at Rs.2050 cr. as on 31 March 2008. The execution period of these orders ranges from 1-4 years.
The company is very confident and bullish on getting more big sized orders that will have substantial positive impact on
its working, profitability and standing in the industry.
It reported net profit of Rs.34 cr. for FY08, which is expected to go up to Rs.50/55 cr. in FY09 resulting in an attractive EPS
of around Rs.28-32. The 52-week high of the stock is Rs.470 while the current price is Rs.225 where it looks attractive for
investment with a long-term view.
* Traders can keep watch on stock like Core Projects & Technologies (Rs.299.80), Shree Astvinayak Cine Vision (Rs.543)
and Refex Refrigerants (Rs.303.35).
13
By V. H. Dave
EXPERT EYE
The share of Su-Raj Diamonds & Jewellery Ltd. (SDJL) (Code: 507892) (Rs.61.50) is recommended for steady
appreciation in the long-term. Dealers say there is selective interest in the counter on grounds that the company would
record good growth in the next few quarters due to the positive outlook of the industry.
SDJL was founded in the sixties by Mr. Rajnikant Mehta and Mr. Suresh Mehta as a partnership firm, which was later
converted into a private limited company and limited company by the present chairman and managing director, Mr. Jatin
Mehta, under whose stewardship SDJL went public in 1986. After expansion in 2001, the company emerged stronger in all
aspects pertaining to jewellery manufacturing and sales.
SDJL's extensive offering of jewellery is designed keeping in mind the rich cultural heritage of India and the trend setting
international styles. Its state-of-the-art facility creates jewellery made from hand picked diamonds and gemstones that are
studded in exquisite plain gold, giving it an immaculate finish of international quality.
During FY08, the company recorded 36% higher sales of Rs.2140 cr. with 31% increased net profit of Rs.62.6 cr. resulting
an EPS of Rs.14.3 and paid a dividend of 20%. During Q1FY09, sales went up by 46% to Rs.574 cr. and net profit by 28% to
Rs.15 cr. over Q1FY08.
SDJL's equity capital has gone up to Rs.43.8 cr. consequent to the issue of 36.20 lakh shares to the promoters at a price of
Rs.85 per share. With reserves of Rs.602 cr., the book value of the share works out to Rs.147.5. The promoters hold 54.4%
in the equity, non-corporate promoters hold 7.8%, institutions/mutual funds hold 9.6%, foreign holding is 16.8% leaving
11.5% with the investing public.
The Gem & Jewellery industry is ranked as one of the fastest growing sectors and is a leading foreign exchange earner
recording a net increase of 9% in exports at Rs.84058 cr. in 2007-08 against Rs.77102 cr. in 2006-07.
While USA accounts for 30% of the industry's exports, other markets like Japan, CIS nations and African countries are
being explored by the industry. There is a huge demand for Indian traditional jewellery as well as contemporary designs.
The growth in industry is lead by jewellery, especially from SEZ/EPZ.
Coming to future prospects, SDJL is one of India's largest diamond manufacturers and exporters and is also a lead player
in the international fine gold jewellery market. With unique designs, exceptional craftsmanship and a host of other
capabilities, SDJL is a one stop shop for all kinds of jewellery.
It is likely to register sales of Rs.2700 cr. with net profit of Rs.80 cr. in FY09, which would give an EPS of Rs.18.3. At the
CMP of Rs.62, the share is trading at a P/E of just 3.4 against the industry average P/E of 10.5. Considering the bright
prospects of the Gem & Jewellery industry and improved performance of the company, the SDJL share offers potential for
further appreciation in the medium-to-long-term. The share is likely to appreciate by more than 30% in the next 6-9
months. The 52-week high/low of the share has been Rs.115/50.
******
The excellent Q1FY09 results produced by Surya Pharmaceuticals Ltd. (SPL) (Code: 532516) (Rs.97.70) went unnoticed
by the marketmen. Based on the quarterly results, SPL could post an EPS of Rs.40 in FY09. The share is going cheap at a
P/E multiple of just 2.5 against industry average P/E of 24.
SPL is a Chandigarh-based pharmaceutical company with four manufacturing facilities spread across Himachal Pradesh,
Haryana and Punjab. It was incorporated in 1992 to manufacture bulk drugs and intermediaries. In 2001 it ventured into
manufacturing of active pharmaceutical ingredients (APIs) and formulations. During December 2003, SPL came out with
a public issue of shares at a premium of Rs.35 each aggregating Rs.13.5 cr. During FY07, it increased its equity to Rs.14.5
cr. on account of conversion of warrants.
SPL carries its manufacturing through four state-of-the-art manufacturing units, three for APIs and one for formulations,
with specialisation in Betalactums, Cephalosporins and non-sedative Anti-histamines.
SPL is among the top 5 producers in these segments and among the top 50 pharmaceutical companies of India. Its 500+
overseas customers are spread out in over 70
countries contributing to annual exports of
almost US $75 million, which constitute 34%
of sales.
Currently, SPL is implementing its 5
th
new plant at
Jammu in Himachal Pradesh and has spent Rs.57
cr. towards gross block including debottlenecking
and modernisation of the existing plants. The
Jammu project is poised to be a USFDA facility
targeting to manufacture APIs and Steriles.
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During FY08, sales advanced by 72% to Rs.487 cr. and net profit by 76% to Rs.41.7 cr. yielding an EPS of Rs.28.8. During Q1FY09,
sales have further gone up by 53% to Rs.153 cr. and net profit by 40% to Rs.14.2 cr. while the quarterly EPS was Rs.9.8.
Its equity capital is Rs.14.5 cr. and with reserves of Rs.165 cr., the book value of the share works out to Rs.124.5. The
promoters hold 35% in its equity capital, foreign holding is 2.6%, PCBs hold 38% leaving 24.4% with the investing public.
SPL has recently entered the business of manufacturing menthol and its derivatives. Menthol is a synthetic product with a
wide array of applications in the pharmaceutical industry and the FMCG industry. In the pharmaceutical space, menthol
is primarily used for its cooling property in a variety of products to relieve skin irritation, sore throat and nasal
congestion. It is also used to treat sunburn, fever and muscle aches as well.
The market for Cephalosporins in USA & European Union (EU) is estimated at around US $6 billion and many leading
products in Cephalosporins are off-patent now in USA & EU. North America is the largest and fast growing
pharmaceutical market in the world with a retail sale of US $265.7 billion (44%). EU accounts for US $169.5 billion (28%)
while Japan accounts for US $60.3 billion (10%).
The premier regulated markets of the world i.e. US, EU and Japan together account for US $495.5 billion sales constituting
82% of the global retail sale. The share of the Indian pharmaceutical industry in the global market is expected to be over
US $15.2 billion by 2010. SPL has major market opportunities in the chosen product segments.
SPL is all set to achieve sales of Rs.725 cr. and a net profit of Rs.60 cr. in FY09 and the EPS would work out to Rs.40. At the
CMP of Rs.98, the share is trading at a P/E of 2.5 against an industry average of 24. Investment in this share is likely to
fetch a decent appreciation of over 50% in 6-9 months. The 52-week high/low of the share has been Rs.151/69.
******
Som Distilleries & Breweries Ltd. (SDBL) (Code: 507514) (Rs.21.95) has posted highly encouraging results for Q1FY09
with high profit against a loss in Q1FY08.
Incorporated as a public limited company in March 1993, SDBL had set up a project to manufacture beer with an installed
capacity of 1,00,000 hltr. (hector litre) p.a. and bottle Indian made foreign liquor (IMFL) with an installed capacity of
54,000 hltr p.a. The company's distilleries
are located at Rojra Chak in Raisen,
Madhya Pradesh (M.P.). Commercial
production commenced in January 1995.
October – December 2007
EBG Quarterly Performance:
100% once again
During October – December 2007, which is the first quarter of the fifth
year of 'Early Bird Gains' (EBG) – the investment newsletter that spots
multi-baggers, it has scored 100% success with all 15 recommendations
recording an appreciation.
EBG has, therefore, consistently, maintained quality while the bonus
issues in excess of 30% highlight the confidence of its recommendations.
SDBL has installed a canning line for
packing beer in cans, which is capable of
filling 15,000 bottles per hour of 650 ML or
filling 30,000 cans per hour of 330 MML or
18,000 cans per hour of 500 ML. During
2001-02, the installed capacity of beer was
increased to 23,800 KL. Technological
know-how is obtained from Skoda of
Czechoslovakia.
14
SDBL was the first to introduce the concept
of strong beer in India with the launch of its
flagship brand 'Hunter'. Legend, Genius,
Sunny, Rocky, Black Fort, Grapine and
Awara are the other brands in the group's
brand portfolio. It laid special emphasis on
building brand equity on its Hunter Extra
Strong Premium Beer, Legend Premium
Beer and Legend Premium Lager Beer.
Issue
Dated
Scrip
Buy
Price
Highest
price since
recom.
Growth
%
Tyche Peripherals Sys.
64.15
116.4
03/10/07
81
10/10/07
Hilton Metal Forging Ltd.
35.00
72.5
107
17/10/07
Hind Aluminium Inds.
SDBL's 2.7 MW biogas based captive power
project is the first power plant in India to
generate electricity from potable alcohol
distillery waste. SDBL has a vibrant
presence in 13 states of India through a
strong distribution network.
The company has doubled its bottling and
brewing capacity from the existing 3.6
million cases p.a. Further greenfield
expansion costing Rs.29 cr. at Hyderabad in
Andhra Pradesh will take its capacity to 7.2
60.10
102
70
24/10/07
62.25
114
Kamdhenu Ispat Ltd.
29.00
18.30
37.4
104
31/10/07
CHD Developers Ltd.
31/10/07
G M Breweries Ltd.
99.00
160
62
07/11/07
Asian Granito India Ltd.
94.00
135
44
14/11/07
Mudra Lifestyle Ltd.
78.85
114.9
45
21/11/07
Lumax Auto Technologies
80.75
115.65
43
36.95
73.9
100
28/11/07
Vybra Automet Ltd.
Avantel Softech Ltd.
96.85
138.5
05/12/07
43
12/12/07
Micro Forge (India) Ltd.
26.65
36.9
38
19/12/07
Mayur Uniquoters Ltd.
57.45
74
30
26/12/07
Arvind Remedies Ltd.
4.35
6.68
54
26/12/07
Relaxo Footwear Ltd.
68.75
88.65
29
EBG for sure profits
million cases p.a. by 2009. Machinery for the expansion has been purchased from world renowned suppliers like Krones
& KHS from Germany
SDBL will invest another Rs.25 cr. in taking over a unit in Maharashtra. In addition to this, the unit will also manufacture
grain alcohol and varieties of IMFL with a capacity of 1,00,000 litres per day.
SDBL is increasing its share in the beer market. Due to its taste and strength the Hunter brand has grown 63% in the Delhi
market as against the average 5-7% industry growth. The company has also recorded 40% increase in draught beer sales
in M.P., led by the Hunter brand. SDBL was the first company to launch its draught beer in M.P. 2005. Hunter Extra
Strong Premium Beer comes in two variants - Bottle (650 ml & 325 ml) and Cans (500 ml & 325 ml).
It has introduced canned beer in Haryana, Chandigarh, Chhattisgarh and West Bengal. There are only a few markets like
Jharkhand and Orissa where the can is being introduced for the first time in beer history. The company is fetching
unprecedented acceptance for its Hunter brand beer in bottles as well as cans in the new markets.
SDBL is poised to become the third-largest brewer in four years from now after the UB Group and Shaw Wallace.
The Rs.4000 cr. beer industry continues to be driven by strong sales. International beer majors have keenly watched the
130 million cases p.a. Indian beer business. Beer is a popular beverage all over the world and contains alcohol ranging
from 8 to 9%. It is found effective in improving the appetite and is considered good for health.
While the per capita consumption of beer is less than 0.7 litre, it signifies a growth opportunity in a country with a
population in excess of 1 billion people. With almost 55% of the population in the 21-59 year age group, the potential for
growth in beer consumption is high. Coupled with the deregulation that is gaining momentum across Indian states as
well as the growing young and affluent middle class, the outlook of the Indian beer market bodes well for long-term
growth.
Indian breweries and distilleries are witnessing accelerated consolidation with major foreign players picking up stake in
the domestic majors. Recently, the takeover of Shaw Wallace's liquor business by United Breweries (UB) has opened a
new chapter of consolidation among breweries.
SABMiller and Scottish & New Castle have already set up shops in India. SABMiller, producer of Castle Lager Beer, has
effected many acquisitions in India including the beer business of Shaw Wallace and paid a premium of Rs.300 cr. for a
50% stake. Meanwhile, S&N has already entered into a joint venture with UB, manufacturer of Kingfisher Beer.
Considering the bright prospects of the beer industry, the consolidation in the liquor industry and improving results of
SDBL, the shares of the company can be purchased for decent gains in the medium-to-long-term.
During FY09, SDBL is likely to register sales of Rs.125 cr. with net profit of Rs.14.5 cr., which would give an EPS of Rs.8.
At the CMP of Rs.22, the share is trading at a P/E multiple of 2.6 on FY09 earnings against the industry average P/E of 35.
The share is, therefore, recommended with a target price of Rs.30 in the medium-term, which would give an appreciation
of over 40%. The 52-week high/low of the share has been Rs.36/13.
15
By Nayan Patel
TECHNO FUNDA
Real Strips Ltd.
BSE Code: 513558
Last Close: Rs.82.85
Real Strips Ltd. (RSL) is a leading manufacturer and exporter of
stainless steel strips, stainless steel coils and cold rolled coils. It is an
ISO 9001:2000 accredited company. RSL came in to existence in 1994 to cater to the demand for cold rolled flat products of
stainless steel, for quality conscious manufacturer. It has a very modern plant near Ahmedabad, Gujarat.
The company has an equity of just Rs.3.78 cr. backed with reserves of around Rs.15.90 cr. The promoters hold 51.04%
stake, corporate bodies hold 6.24% and the investing public holds 41.42%. RSL has posted turnaround results for the June
2008 quarter with net profit of Rs.73 lakh against a loss of Rs.47.40 lakh in June 2007 quarter. Its EPS was Rs.1.92 for the
June 2008 quarter and marketmen expect an EPS of around Rs.10-12 for FY09. RSL is a dividend paying company and the
stock is available around a forward P/E ratio of just 7.
Investors can buy this stock with a stop loss of Rs.68 as the stock can go up to Rs.105 in the short-term and cross Rs.135
level in 6-8 months.
Best investment stock for short-to-medium-term for investors.
20 Microns plans IPO
20 Microns Ltd., a pioneer and leader in micronised minerals and trendsetter in the usage of ultrafine minerals for the
Paints & Plastic industries has planned and IPO of 43,50,632 equity shares of Rs.10 each to be decided through a 100%
book-building process in the price band of Rs.50 to Rs.55 per share.
MONEY FOLIO
Review
Last week, we recommended Linc Pen & Plastics
at Rs.35. During the week, it zoomed to Rs.38.75
level. We are still bullish on this stock as this
company's future looks very bright.
The company intends to utilize the proceeds of the fresh issue in the IPO towards the current ongoing expansion plans of
the manufacturing capacities at various locations, invest in the sub-micron particle sizes required by end-market and
general corporate purposes.
NSDL launches Central Recordkeeping Agency
NSDL, the securities depository holding over 80% of the dematerialised securities in India, has established a Central
Recordkeeping Agency (CRA) for the New Pension System (NPS) on behalf of the Pension Fund Regulatory and
Development Authority (PFRDA). NPS was introduced by Government of India for its new employees (except the Armed
Forces) w.e.f. January 1, 2004. The CRA is a first of its kind of venture in India and is critical to the successful
operationalisation of the NPS.
Under the NPS, each new government employee will open an account with CRA which will be identified through unique
Permanent Retirement Account Number (PRAN). In this system, deductions will be made from employee's salary on a
monthly basis and equal amount of contribution will be made by the Government. The amount will get invested through
PFRDA appointed Pension Fund Managers (PFMs).
GS Auto Int'l. to raise funds for expansion
GS Auto International Ltd, an ISO 9002 certified company engaged in the manufacture of automotive components with
in-house facilities for design, consider raising Rs.50 cr. for its expansion plans.
It plans to enhance the present product portfolio and establish a new manufacturing unit by the issue of securities
through Foreign Currency Convertible Bonds (FCCBs)/ADRs/GDRs and or other convertible securities or through QIPs.
Gremach Infrastructure gets SEZ formal approval
Gremach Infrastructure Equipment & Projects Ltd. has received formal approval from Govt. of India, Ministry of
Commerce & Industry, for setting up a Specific Economic Zone (SEZ) for Metal at Gadhinglaz Distt. Kolhapur
(Maharashtra), which is located between Belgam and Kolhapur. Gremach has taken over full possession of land and
intends to set up a SEZ for metal industries.
A lot of foundries are located nearby. Looking to the hassle free opportunities of SEZ, they are willing to set up their units
at SEZ as Export Oriented Units. Proximity to SEZ from the iron ore belt of Goa, Sindhdurg and Bellary is an added
advantage. It is also nearest to the seaport.
25 Mumbai organisations prepare city redevelopment charter
Twenty five Mumbai-based organisation have joined hands to present their charter of amendments to the Development
Control Rules 33 (9) to the Government of Maharashtra.
The getting together of various stakeholders was prompted by the sixth collapse of an old building in Bhendi Bazaar this
monsoon, killing 25 people in South Mumbai. As a permanent solution of redevelopment of old and dilapidated
buildings, the State Government has modified Development Control Rules 33 (9) for suggestions ad objections.
The organizations representing a range of stakeholders including builders, Indian Merchants Chamber, Old Building
Landlords Welfare Association, Flat Owners' Association among many others have come together to ask the State
Government to redefine cluster development and allow the pragmatic execution of the redevelopment programme under
an Urban Renewal Scheme.
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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