Fw: Investor's Eye: Viewpoint - Liberty Phosphate; Update - Transmission and distribution

 

 

Investor's Eye [September 07, 2011]  Sharekhan www.sharekhan.com

Summary of Content VIEWPOINT Liberty Phosphate    Key beneficiary of NBS scheme Key points Leading producers of SSP: Liberty Phosphate was incorporated in 1976 to produce essential nutrients like sulphur for crops. It has around 18% share of the domestic SSP market. In India the total consumption of SSP has grown at a compounded annual growth rate (CAGR) of 8% over FY2008-11. Being the industry leader Liberty Phosphate has better capacity utilisation as compared to some of its peers. It has grown its revenues at a strong CAGR of 56% over FY2008-11. This along with a significant improvement in its operating profit margin (OPM) helped its bottom to grow at a CAGR of 179% over the same period NBS scheme a complete game changer for SSP: The SSP industry was almost dead due to the unfair policy adopted by the Government of India of subsidising SSP and favouring the manufacturers of DAP and complex fertilisers. But the introduction of the nutrient-based subsidy (NBS) scheme and the declaration of sulphur as an important crop nutrient, in line with nitrogen, phosphorus and potassium (NPK), revived the SSP industry. The Government of India included sulphur in the NBS policy from April 1, 2010. thereby providing a level playing field to the manufacturers of SSP with regard to the DAP and complex fertiliser makers. According to the NBS policy, the subsidy for all major nutrient, NPKS, are fixed by the government while the maximum retail price (MRP) of a product is flexible and is fixed by companies according to the cost of production in order to maintain the margin. Organic and inorganic growth initiatives to drive growth: Liberty Phosphate is planning to increase its capacity through de-bottlenecking at different plant locations. It has increased its capacity by 99,000 tonne through de-bottlenecking which has increased its installed capacity to 5.62 lakh tonne. The company is further planning to set up a plant at Dahej to produce 1 lakh tonne of triple super phosphate and 1 lakh tonne of complex fertiliser. There are substantial inorganic growth opportunities as many of the SSP units have closed and are available for sale. A cash balance of around Rs20 crore on books and a favourable debt-equity ratio will help the company cash in on these opportunities in the coming years. Liberty Phosphate can grow inorganically capitalising on its brand and marketing network. Easy accessibility to raw materials: One of the key advantages enjoyed by Liberty Phosphate is the easy availability of raw materials from local suppliers, eg rock phosphate from Rajasthan Mines and sulphuric acid from Hindustan Zinc. Rock phosphate and sulphuric acid are the basic raw materials required for the production of SSP. Liberty Phosphate is having a long-term contract with the local suppliers of these raw materials.  Outlook and valuation: Liberty Phosphate is one of the largest manufacturers of SSP and can grow by capitalising on its brand name and distribution network. Given the aggressive expansion of its manufacturing capacities Liberty Phosphate can potentially grow at a CAGR of around 22% over the next two years. In terms of valuations, the stock trades at around 1.6 x FY2013 rough estimate; this makes it one of the cheapest stocks in the complex fertiliser space. However, in view of the stock's extremely low both market cap and volumes at the counter, we do not have it under our active coverage.  SECTOR UPDATE Transmission and distribution  Power Grid's low order awarding activity disappoints  Key points Power Grid Corporation of India Ltd (PGCIL)'s order awarding activity has been very poor so far in FY2012 and signals a muted order inflow scenario for the transmission and distribution (T&D) companies in H1FY2012, unless the order inflow picks up in September of 2011. In July this year, no orders were awarded as per the company's website. Most of the T&D players draw a sizeable chunk of their orders (ranging from 5% to 50% of their order book) from PGCIL and have been experiencing a dry order inflow spell since March 2011. Though traditionally the first half of a financial year is sluggish compared to the second half, when the order awarding activity picks up, but we can see a substantial fall on a yearly basis too.  In one of our earlier reports on the sector (dated March 30, 2011) we had said that the order inflow would gain momentum moving forward as PGCIL was expected to invest about Rs17,700 crore during FY2012, the last year of the 11th Five-Year Plan. PGCIL is also expected to double its investment to Rs120,000 crore in the 12th Five-Year Plan from Rs55,000 crore in the 11th Five-Year Plan. However, prima facie it appears that so far this has remained only an opportunity and not taken any concrete shape. This also means that while the order inflow for most companies would remain sedate in at least the first half, more companies would be chasing fewer orders. This would further pressurize the margins, which are already reeling under the pressure of higher input cost and interest rates.  Hence, we remain cautious on the T&D sector where the order inflow has become very critical for achieving earnings growth in the coming quarters. Companies most affected by this slowing momentum of order inflow are Crompton Greaves, ABB, Siemens and Areva T&D. Bharat Heavy Electricals Ltd (BHEL), which has recently forayed into the T&D space by winning the largest T&D order in India, would also be affected to some extent. However, most of these companies are already trading at (or below) five-year average multiple and could see a rally once the order inflow activity and industry capital expenditure cycle pick up.   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: Maha Life Gold

 

IEP INSURANCE BROKING SERVICES PVT. LTD.

4F, 4th Floor, Kences Towers, Ramakrishna Street, North Usman Road, T.Nagar, Chennai 600017.

 

Dear Investor,
Greetings from IEP Insurance.

We have great pleasure in introducing  " Maha Life Gold " from Tata AIG Life Insurance – a whole life insurance plan, which is an Ideal Gift to your beloved child.

Benefits :

• Child Life will be covered up to the age of 100, by paying premium for 15 years only.
• Guaranteed Annual Cash Payout @ 5% p.a from 10^th year onwards till 100^th Birthday.
• Non Guaranteed Annual Cash Dividend from 6^th year onwards till 100^th birthday. ( Payout Declared for FY 2010-11 is 2.62%)
• In the event of unfortunate death of the parent during the premium payment term, all the future premium will be waived and the child will receive the Annual Payout every year up to his/her 100^th birth day.
• Tax Benefit U/S 80c & 10(10D) of IT Act 1964.

Individuals aged between 30 days to 60 years can join this plan.

Illustration :

Parent aged 40 takes the policy for his 5 year old child with a Life cover of Rs.10 Lac. The Annual Premium payable is Rs.92,695/- & the Child Life will be covered up to his / her 100^th birth day for Rs.10 Lac.

• From 6^th year onwards the child will start receiving the Non Guaranteed Annual Cash Dividend approximately Rs.40,000/-* 
• From 10^th year onwards the child will start receiving approximately Rs.90,000 ( Guaranteed Rs.50,000 + Non Guaranteed Rs.40,000*)
• The child will receive both the payouts till his/her 100^th birthday (which is totally a Tax Free Income)

In the unfortunate event of parent's death, say after paying premium for five years, all the future premiums  ( 10 X 92,695 = 9,26,950 ) will be waived off & the child will continue to get approximately  Rs.90,000 as Annual Cash Payout till his/her 100^th Birth Day.

*  Annual Cash Dividend is Non Guaranteed & for illustration purposes assumed the same @ 4% p.a.

For more details please contact us. 

    

Regards,

IEP Insurance Broking Services Pvt Ltd.,