Fw: Kotak FMP Series 59 - Invest Now !!

 



INVESTMENT OBJECTIVE     The investment objective of the Scheme is to generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk. The scheme will invest in debt and money market securities, maturing on or before maturity of the scheme. There is no assurance that the investment objective of the Scheme will be achieved.       SCHEME TYPE   Close ended debt scheme       MINIMUM INVESTMENT DURING NFO   Rs. 5,000/- and in multiples of Rs 10 for purchase and switch-ins.       OPTIONS     Growth and Dividend Payout.           LISTING     The units of the scheme will be listed on BSE on allotment and maybe on other stock exchanges also.         BENCHMARK     CRISIL Short Term Bond Index.           LIQUIDITY     Units of this scheme will be listed on Bombay Stock Exchange. Investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The units cannot be redeemed with KMMF until the maturity of the scheme.         MATURITY     160 days after the date of allotment of units.           COLLECTION CENTRE     Purchases /Switches: At KMAMC Authorized collection centers, CAMS investor service centers & CAMS transaction points as indicated on the back cover of the SID.         For any investor related queries, please call on our toll free number - 1800 222 626 / 66384400. For any distributor queries, please contact your relationship manager or write to us at advisorhelp@kotak.com.   Existing investors CLICK HERE to invest online.     Risk Factors: Kotak FMP Series 59 (A close ended debt scheme). Investment Objective: - To generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk. The scheme will invest in debt and money market securities, maturing on or before maturity of the scheme Asset Allocation: Debt and Money Market instruments and government securities – 100% Load Structure: Exit Load: Nil Liquidity: Units of this scheme will be listed on Bombay Stock Exchange. Investors may sell their units in the stock exchange(s) on which these units are listed on all the trading days of the stock exchange. The units cannot be redeemed with KMMF until the maturity of the scheme. NAV of the scheme shall be calculated daily. Scheme Specific Risk Factors: The Scheme will invest entirely in Debt/ Money Market Instruments and Government securitie s. Liquidity in these investments may be affected by trading volumes, settlement periods and transfer procedures. These factors may also affect the Scheme's ability to make intended purchases/sales, cause potential losses to the Scheme and result in the Scheme missing certain investment opportunities. BSE Disclaimer: - It is to be distinctly understood that the permission given by BSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by BSE nor does it certify the correctness or completeness of any of the contents of the Draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of Bombay Stock Exchange Limited. Risk Factors: Mutual Fund and securities investments are subject to market risks and there is no assurance or guarantee that the objective of the Scheme would be achieved. As with any securities investment, the NAV of the Units issued under the Scheme can go up and down depending on the factors and forces affecting the securities markets. Past performance of the Sponsor/AMC/Fund or that of existing schemes of the Fund does not indicate the future performance of the Scheme. Kotak FMP Series 59 is only the name of the scheme and does not in any manner indicate either the quality of the scheme, its future prospects and returns. Statutory Details: Kotak Mahindra Mutual Fund is a Trust (Indian Trust Act, 1882). Investment Manager: Kotak Mahindra Asset Management Company Ltd. Sponsor: Kotak Mahindra Bank Ltd. (liability Rs. Nil). Kotak Mahindra Bank Limited is not liable or responsible for any loss or shortfall resulting from the operations of the Scheme Trustee: Kotak Mahindra Trustee Company Ltd. Please read the Scheme Information Document (SID) and Statement of Additional Information (SAI) of the sche me carefully before investing. SID & SAI available on mutualfund.kotak.com

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Fw: Investor's Eye: Update - ITC, Grasim Industries

 

 

Investor's Eye [September 23, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE ITC      Cluster: Apple Green Recommendation: Buy Price target: Rs227 Current market price: Rs192 Price hike in cigarettes Key points WNC prices increased by 10%: ITC has increased the prices of the Wills Navy Cut (WNC) brand of cigarettes by 10%. The price of a pack of ten cigarettes has been increased to Rs44 from Rs40 earlier. WNC contributes around 5% of ITC's total cigarettes sales volumes. This is the second price hike the company has effected in its cigarette portfolio after the announcement of the Union Budget for FY2012. ITC recently hiked the prices of the Classic brand (5% of cigarette sales volume) of cigarettes by 10% to Rs110 for a pack of 20 cigarettes. Year-to-date price increase in the cigarette portfolio currently stands at 5.1%.  Price hikes to lessen the impact of VAT increase in key states: The recent price hikes in the cigarette portfolio have been undertaken largely to mitigate the impact of the recent hike in the value-added tax (VAT) in the key states of Tamil Nadu, West Bengal and Andhra Pradesh (which together contribute close to 32% to the cigarette revenues).  Outlook and valuations: Since our last update (dated on September 02, 2011) the stock has corrected by ~5%. This provides an opportunity for the investors to invest in the stock with the expectation of a decent upside of 19% from the current levels. Hence, in view of the decent upside and the better earnings visibility over the next two years, we maintain our Buy recommendation on the stock with the price target of Rs227. At the current market price the stock trades at 24.5x its FY2012E earnings per share (EPS) of Rs7.8 and 20.5x its FY2013E EPS of Rs9.4.    Grasim Industries      Cluster: Apple Green Recommendation: Buy Price target: Rs2,630 Current market price: Rs2,350 Annual report review Key points FY2011 performance marred by cement division: The VSF & chemical division propelled FY2011's revenue growth. However on account of a muted cement volume and a drop in the average cement realisation, the overall revenue growth of the company was limited to 6.7%. A higher cost inflation led to margin contraction by over 700 basis points (bps), eroding the net profit by 21.6% year on year (YoY) to Rs2,163.9 crore. Segmental performance: The cement division is the major contributor to Grasim's revenues. It formed 75% of the total revenues in FY2011 whereas the VSF and chemical divisions contributed 23% and 3% respectively. As demand revived for VSF and prices surged for competing fibers like cotton, the revenue from the VSF division grew by 22.6%. The chemical division also posted a double digit revenue growth. However, the performance of the cement division was affected due to a decline in the average cement realisation. Hence the consolidated revenue could grow by just 3.2%. In terms of profitability, the VSF division has maintained its healthy margin (profit before interest, depreciation and tax [PBIDT]%) at 33.7%. However, the profit before interest and tax [PBIT]% of the cement as well as the chemical division contracted due to cost inflation and pressure on cement realisation during FY2011.  Key developments during the year: The demerger of the company's cement business into a separate subsidiary, Samruddhi Cement Ltd (SCL), and the subsequent merger of SCL with UltraTech Cement (UltraTech) were completed during the year. UltraTech completed the acquisition of ETA Star Cement Company with its assets comprising of 2.3 million TPA clinker facility and grinding units spread across UAE, Bahrain and Bangladesh. Consequent to this acquisition, the cement capacity stands augmented at 52MTPA. Further, on the VSF front, the company has acquired a 33% stake in Aditya Holding AB, Sweden, which acquired Domsjo Fabriker AB (Domsjo), Sweden, at an enterprise value of approximately Rs1,570 crore. Domsjo is a pulp mill company and hence Grasim has secured its captive pulp requirement for VSF production.  Maintain Buy with a target price of Rs2,630: We continue to prefer Grasim as our top pick among the other large players due to its strong balance sheet, comfortable debt - equity ratio (0.4x FY2011), attractive valuation and diversified business. We estimate the consolidated earnings of the company to grow at a compounded annual growth rate (CAGR) of over 17% during FY2011-2013. We use the sum of the parts (SOTP) valuation methodology to arrive at a target price to Rs2,630 for the stock. At the current market price the stock discounts its FY2013 estimated earning per share (EPS) by 7.3x. We maintain our Buy recommendation on the stock. Outlook and valuation: We continue to prefer Grasim as our top pick among the large players due to its strong balance sheet, comfortable debt-equity ratio (0.4x FY2011), attractive valuation and diversified business of the company. We estimate consolidated earnings of the company to grow at a CAGR of over 17% during FY2011-2013. We arrive at a target price to Rs2,630 using the SOTP valuation methodology. At the current market price the stock discounts FY2013 estimated EPS by 7.3x. We maintain our Buy recommendation on the stock. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Investor's Eye: Update - Maruti Suzuki, Fertilisers

 

 

Investor's Eye [September 20, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Maruti Suzuki India     Cluster: Apple Green Recommendation: Buy Price target: Rs1,316 Current market price: Rs1,155 Annual report review Key points Indian passenger car market on a non-linear structural uptrend: During FY2011, the Indian passenger car industry surprised with a 29% growth against an expectation of a growth of 10-12% initially. Maruti Suzuki (Maruti)'s chairman highlighted that the demand for cars is expected to double in the next five years as the real cost of buying a car has declined considerably. However the year-on-year (Y-o-Y) growth will be non-linear due to different cycles of economic environment.  The pace of FY2011 growth surprised; however future outlook cautious: The confluence of negative macro cycles such as interest rates, fuel prices and inflationary pressures is expected to hurt passenger car demand in FY2012. The earlier growth expectation of 10-15% has been downgraded to single digit growth. Unlike as in FY2011 which had an element of a positive surprise, the future is laden with uncertainties. Almost entire growth to be driven by non-petrol cars: A significant stress is being witnessed in the petrol segment due to a dramatic shift in demand for alternative fuels. Also, heightened competitive activity has resulted in aggressive discounts on several petrol models around the year. The company indicated that discount levels would be higher going forward as compared to FY2011.  Asset heavy strategy to add beta to earnings: The company has expanded its gross block at a compounded annual growth rate (CAGR) of 19% in the last five years. The Manesar II line will be commissioned from September 2011 at a cost of Rs1,800 crore while the Manesar III line is expected to be commissioned from September 2013 at a similar cost.  Unofficial figures are pegging the new greenfield plant at a cost of Rs6,000 crore. Investments of this magnitude would absorb the next two years' annual cash flows. Even as the company has approximately Rs7,400 crore of cash in its books as on FY2011, the future balance sheet would look asset heavy. This would add significant beta to the profit and loss account based on capacity utilisation and margins. Hence, volumes and margins would become key influencers for the company's stock price performance. A sharp correction in the company's stock price has priced in the negatives partially. We see a dramatic improvement in realisation and contribution margins from Q4FY2012 onwards as the full effect of the Manesar II line would be felt by then. Q4FY2012 may also see a revival in growth as the interest rates peak and inflationary pressures stabilise. Our estimates for FY2012 and FY2013 remain unchanged at Rs93.5 and Rs109.7 respectively. We are valuing the company at Rs1,316, discounting FY2013E earnings by 12x. We retain our Buy rating on the stock. However a key risk remains the tiff with the workers at Manesar which has now aggravated and is taking longer to be resolved. SECTOR UPDATE Fertilisers     Urea makers have the advantage  The volume sales data of the leading 13 fertiliser companies in India shows a decline in the offtake of the complex (non-urea) fertiliser products due to a considerable increase in the average selling price of non-urea fertiliser under the Nutrient-Based Subsidy (NBS) regime. Among the non-urea fertilisers there is a growing preference for complex fertilisers with low nutrient content as compared to DAP/MOP that has high single nutrient content. Higher prices of non-urea fertilisers are resulting in a shift towards higher usage of urea especially by marginal farmers who show an extremely price sensitive behaviour. Thus, the volume growth for urea manufacturers like Chambal Fertilisers and Chemicals (Chambal), Zuari Industries (Zuari) and Nagarjuna Fertilisers and Chemicals (Nagarjuna) is likely to remain healthy at least till the new urea policy becomes effective. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Investor's Eye: Update - BHEL, HUL

 

Investor's Eye [September 19, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Bharat Heavy Electricals     Cluster: Apple Green Recommendation: Buy Price target: Rs2,077 Current market price: Rs1,657 Competition pressure intensifies, PT revised to Rs2,077 Korean power equipment supplier Doosan and BGR Energy Systems (BGR) have emerged as the lowest bidder (L1) for the supply of supercritical boilers and turbine-generators (TG) respectively for the 7,200MW (9x 800MW) National Thermal Power Corporation (NTPC) power projects. Both the companies are likely to get five units of order in the respective categories. Here, Bharat Heavy Electricals Ltd (BHEL) is likely to get Rs6,520 crore worth of orders due to favourable NTPC tendering specifications, provided it matches the L1 quotations.  Larsen and Toubro (L&T), which emerged as the second lowest bidder (L2) in the TG bid is likely to get two units of order. However, there was unconfirmed news today that L&T has again been disqualified due to non-fulfillment of technical qualifications. This could be positive for BHEL as it might bag these orders. Though the competition in the supercritical power equipment space is likely to intensify with more players entering the sector, but BHEL's robust order book (3.6x in Q1FY2012) minimises the need for any aggressive bidding. We also remain positive about its recent initiatives like the ones in the power transmission & distribution sector and the overseas power equipment market, which would help the company in diversifying its business profile and geographies. Nonetheless, the concerns over the competition and the slow industrial capital expenditure cycle along with the hangover of the follow-on public offer have deepened over the last few months. These concerns are reflected in the stock's underperformance with respect to the broad market indices. BHEL'S one-year forward price/earnings (P/E) multiple has fallen from over 20x (enjoyed till FY2010) to 11.2x now. We are revising our target multiple to 14x on FY2013 earnings estimate. Hence, our revised price target stands at Rs2,077. In view of the 25% upside potential, we maintain our Buy call on the stock.   Hindustan Unilever     Cluster: Apple Green Recommendation: Hold Price target: Under review Current market price: Rs338 Annual report review Key points FY2011 profitability affected by higher raw material cost: During FY2011 Hindustan Unilever Ltd (HUL)'s adjusted (consolidated) bottom line remained almost flat at Rs2,134.4 crore despite a double-digit top line growth of about 11% year on year (YoY) during the year. The bottom line was flat mainly on account of a 243-basis-point year-on-year (Y-o-Y) decline in the operating profit margin (OPM) on account of higher raw material prices. However, the highlight of the fiscal was a 13% sales volume growth in the domestic consumer business achieved on the back of a strong volume growth in the detergent and personal care products segments, which grew by about 20% YoY and 15% YoY respectively during the year. The soap segment's volume grew by 8.5% YoY as against a volume decline of 2.0% YoY seen in FY2010. Operating cash flows declined YoY: The net cash generated from the operating activities stood at Rs1,910.2 crore in FY2011 as against Rs3,479.6 crore in FY2010. The decline in the cash generated from operations can largely be attributed to the increase in the commodity prices during the year. Hence, the free cash flows reduced to Rs1,795.8 crore in FY2011 from Rs3,077.6 crore in FY2010. With the expected reduction in the prices of the raw materials and better working capital management, we expect the free cash flows of the company to improve in the coming years.  Return ratios remained strong: The return ratios remained strong with the return on equity (RoE) and return on capital employed (RoCE) standing at 79.4% and 101.1% respectively in FY2011 as against 87.7% and 103.5% respectively in FY2010.  Dividend pay-out maintained above 75%: Despite a flat growth in the adjusted profit after tax (PAT) and a single-digit growth in the reported PAT, the company maintained the strong dividend pay-out. Its dividend pay-out ratio stood at 76.9% in FY2011 as against 78.7% in FY2010. Outlook and valuation: We expect the volume growth in the personal care business to sustain in high single digits, driven largely by a strong growth in the personal care segment in the coming quarters. Though the gross profit margin is expected to remain under pressure in Q2FY2012, the declining trend of the prices of the key inputs (such as palm oil and other crude derivatives) would help in releasing the pressure on the margins. Thus, we might see a better profitability picture in the second half of FY2012. Overall, we expect the company's net sales and adjusted PAT to grow by 12.5% and 14.5% YoY respectively in FY2012. We shall review our estimates for HUL after the declaration of its Q2FY2012 results. We maintain our Hold recommendation on the stock but due to the stock's rich valuations we keep our price target under review. At the current market price the stock trades at 29.9x its FY2012E earnings per share (EPS) of Rs11.3 and 26.0x its FY2013E EPS of Rs13.0.    Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

**[investwise]** Why Economic Growth Is Not A Sure Thing (110918)

 

What if everything you thought you knew about investing wasn't so? Or, to put it another way…what if everything you learned about investing was learned in an unusual period in investment history? A period that won't be repeated in our lifetimes?...

http://www.stock-investing-software.com/commentary/articles.html?next=17142

Ian

This week's "Tools of the Trade": http://snipr.com/tools-of-the-trade

Explicit NON-commercial advisory: Spot-on, advantageous, no-cost information, products and/or services presented weekly.
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This week's "Tools" topic: Recent ETF results from "The Reseach Lab"! Pretty cool market-open, grid-loaded listing. Just click the "Tools" link!

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Fw: Introduction of Transaction charges in Currency Derivative Segment

 

Dear Customer, This is with reference to circulars issued by NSE: NSE/F&A/18608 and MCX-SX: MCX-SX/F&A/625/2011 respectively on transaction charges to be levied on transactions executed in Currency Segment (both Futures and Options). Copy of the circular enclosed. Transaction charges in Currency Segment would be levied on transactions executed from August 22, 2011 as per the charge structure given below:

NSE Currency Segment NSE Currency Segment Future Contracts (in %) Option Contracts (in %) Transaction Charge 0.00115 0.04000 NSE Investor Protection Fund 0.00005 0.00200 SEBI Turnover Fee (Already applicable) 0.00010 0.00010 Total Transaction Charges 0.00130 0.04210 Total Transaction Charges per Lac Rs.1.30 Rs.42.10

MCX-SX Currency Segment NSE Currency Segment Future Contracts (in %) Option Contracts (in %) Transaction Charge 0.00110 0.04000 MCX-SX Investor Protection Fund 0.00005 0.00200 SEBI Turnover Fee (Already applicable) 0.00010 0.00010 Total Transaction Charges 0.00125 0.04210 Total Transaction Charges per Lac Rs.1.25 Rs.42.10

In case of Future contracts the calculation is based on the total traded value of the contract and for Option contracts the calculation is on the total premium value. Regadrs Team Sharekhan

Registered Office: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400 042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos. BSE Cash-INB011073351; F&O-INF011073351; NSE - INB/INF231073330; CD - INE231073330; MCX Stock Exchange: CD - INE261073330; United Stock Exchange: CD - INE271073350; DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP000000662; Mutual Fund: ARN 20669. Commodity trading through Sharekhan Commodities Pvt. Ltd.: MCX-10080; (MCX/TCM/CORP/0425); NCDEX -00132; (NCDEX/TCM/CORP/0142); for any complaints email at igc@sharekhan.com ;Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and Do's & Don'ts by NCDEX, and the T & C on www.sharekhan.com before investing.

Fw: Investor's Eye: Update - Marico, Orient Paper and Industries

 

 

Investor's Eye [September 15, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Marico    Cluster: Apple Green Recommendation: Hold Price target: Rs153 Current market price: Rs143 Price target revised to Rs153 Key points Volume growth momentum: Marico registered a strong volume growth of 21% year on year (YoY; organic volume growth of 14% YoY) in Q1FY2012. This was despite a significant price increase in some of its key brands. However, going ahead the company expects factors like the slowdown in the global economy and the high food inflation and rising interest rates in the domestic economy to have some impact on consumer sentiments which, in turn, is likely to affect the demand for the company's products (especially the discretionary items in its portfolio).  Situation in international market: The business environment in the Middle East and North Africa region (which contributes 5% to the company's total turnover) remains bleak due to continued political uncertainty in most of the constituent countries (including Libya, Syria and Yemen). Inflation is another key factor which is hurting consumer sentiment in most of the countries in which Marico operates. Outlook on copra prices: The copra prices are still higher by 60% on a year-on-year (Y-o-Y) basis. The copra prices have seen a sharp increase on account of two main factors: (1) the link between vegetable oil and crude oil, as the usage of vegetable oils as a non-conventional source of energy increased during a spike in crude oil prices; and (2) an increase in the funds flowing into commodities. Hence, it has become difficult for companies like Marico to revive their strategies. Though the price increases effected in the past in the Parachute franchisee were accepted in the market but the company is reluctant to increase the prices further as doing so might have an adverse impact on the sales volume of Parachute in the current inflationary scenario. Gross margins to remain under pressure in the coming quarters: Though the company has taken price increases in its portfolio but the gap persists between the increase in the raw material prices and the price hikes implemented by the company. Hence the gross profit margin would remain under pressure in Q2FY2012 as well. We expect the gross profit margin to be lower by over 500 basis points on a Y-o-Y basis in Q2FY2012.  Ad spends would vary on a sequential basis: The company has indicated that it will support its focus product portfolio and new launches with adequate advertisement spends and promotional activities. Hence the advertisement spends as a percentage of its sales would vary on a quarter-on-quarter basis. Outlook and valuation: The higher raw material cost would continue to put pressure on the margin for the next one to two quarters. However, considering the product portfolio of strong brands and the company's ability to launch innovative products in domestic as well as international markets, we believe the long-term growth story of Marico is intact. Hence, we maintain our Hold recommendation on the stock with a revised price target of Rs153 (based on 23x its FY2013 earnings per share [EPS] of Rs6.7).  We maintain our earnings estimates for FY2012 and FY2013 and shall review them after the announcement of its Q2FY2012 results. At the current market price the stock trades at 28.3x its FY2012E EPS of Rs5.0 and 21.5x its FY2013E EPS of Rs6.7.    Orient Paper and Industries    Cluster: Vulture's Pick Recommendation: Buy Price target: Rs70 Current market price: Rs62 Annual report review Key points Cost inflation offset the revenue growth during FY2011: Inspite of a slowdown in cement (company's core business) consumption during FY2011, Orient Paper & Industries (OPIL) posted an impressive 20.9% revenue growth. This was on account of stabilisation of its new cement capacity, expansion of its market mix and an impressive performance by its electrical division. However, on account of continued losses in its paper division coupled with margin contraction in the cement as well as the electrical division, the company's net profit declined by 10.2% to Rs143.1 crore.  Segmental performance: The cement division was the major contributor to OPIL's revenues, making for 53% of the total revenues in FY2011 whereas the electrical division and the paper division contributed 33% and 14% respectively. All the three business divisions have reported a double digit revenue growth. However the growth in the paper division (15.9%) was largely on account of the low base effect. The cement revenue grew by 15.5% whereas the revenue from the electrical division grew by 33.6%. In terms of profitability, the paper division continued to post a loss at the profit before interest and tax (PBIT) level (Rs33.3 crore) on account of plant shut down due to water shortage. In addition the PBIT% of the cement as well as the electrical division has contracted due to cost inflation during FY2011. Going ahead, in FY2012 we expect the company to post an expansion in its operating profit margin (OPM) due to surge in cement realisations.  Key developments during the year: During the year OPIL has finalised an expansion of the cement capacity by 3 million-tonne-per-annum (mtpa) at Gulburga, Karnataka, with an investment of approximately Rs1,700 crore. The funding will be done through a mix of internal accruals and debt. To ensure a regular supply of power, the company is also setting up a 50MW power plant. The plant is expected to commence production after FY2014 and the overall cement capacity will enhance to 8mtpa. In the electrical division the company has planned to add household appliances such as mixers, geysers, coolers, room heaters etc to its products portfolio. In the paper division, to overcome the water shortage issue, the company has set up two water reservoirs to overcome water scarcity.  Cement business to de-merge, leading to value unlocking for shareholders: In order to unlock value for the shareholders and provide better focus to each of the businesses, the management has recently announced to carry out a de-merger of its cement business. The same will be transferred to a newly formed entity which would be named Orient Cement Ltd (OCL; which will get listed). The paper and the electrical businesses will continue to remain in OPIL. The shareholders of OPIL will get one share in OCL for each share held in OPIL. The appointed date for the said de-merger is April 2012. We believe the development could be value unlocking for the shareholders.  Debt and cash level: During the year the company borrowed Rs30 crore and the total outstanding debt stood at Rs544 crore. The present debt equity ratio of the company stands at 0.6x which will ensure comfortable debt raising to part fund the Karnataka plant. On the other hand the cash level increased by Rs12 crore and stood at Rs59 crore. Further the company has made an additional investment of Rs19 crore (in a liquid mutual fund scheme) and the total investment made stood at Rs66 crore.  Increase in working capital cycle affects operating cash flow: The debtor days increased to 45 in FY2011 as compared to 42 in FY2010 while the inventory days decreased to 31 for the year as against 34 in the previous fiscal. The creditor days decreased to 62 as compared to 65. Hence with the increase in the working capital cycle and contraction in the profitability, the net cash flow from operating activities declined to Rs234.4 crore in FY2011 as compared to Rs261.9 crore in FY2010. Return ratios are comfortable: Due to an increase in capital employed, the return ratio was adversely impacted during the fiscal. The return on capital employed (RoCE) declined to 18.4% in FY2011 (as against 22.3% in FY2010) and the return on net worth (RoNW) decreased to 16% in FY2011 (as against 20.8% in FY2010). Maintain Buy with target price of Rs70: Due to the supply discipline mechanism followed by the manufacturers in the southern region, the company is being benefited in terms of strong growth in realisations. But going ahead we expect the cement price to come under pressure with a likely increase in supply. However, the company's efficient cost structure gives it an advantage over other players. Further the company is in the process to introduce a range of new products in the electrical division which could lead to strong revenue growth in the electrical division. Further, in addition to a strong balance sheet and attractive valuation, the demerger of the cement division will act as a re-rating factor for the stock. Hence we maintain our Buy recommendation on the stock with a price target of Rs70. At the current market price, the stock trades at a price earning (PE) multiple of 5.6x and enterprise value (EV)/ EBIDTA of 3.6x, discounting its FY2013 estimated earnings.     Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions