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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 39
Monday, August 11 - 17, 2008
Pages 16
Wait for a breakout
Markets to remain rangebound
By Sanjay R. Bhatia
A rangebound trend persisted on the bourses last week, amidst occasional bouts of volatility and choppiness. As usual,
selling pressure and profit booking was witnessed at higher levels as the markets remained tentative at higher levels.
Traders and speculators were seen booking profits at regular intervals. Incidentally, FIIs remained net buyers in the cash
as well as the derivative segments. Mutual Funds however, remained net sellers booking profits during the week.
The global cues remained mixed. Crude oil prices were
volatile and rangebound on inventory data signalling the
possibility of hurricanes disrupting oil supply. Crude was
trading at $117.80 but had touched an intra-day low of
$117.11 on 6 August 2008. The US economy continued to
display a negative picture, Sub prime woes continued to
take its toll on US markets as AIG, the world's largest
insurer, posted its third consecutive quarterly loss of more
than $5 billion as it wrote down bad mortgage-related
investments.
On the domestic side, inflation continued to move higher
touching a 13-year high of 12.01% for the week ended 26
July 2008. Inflation is likely to rise further as the rise in
sugar prices have not been factored in this inflation rate
and more monetary measures are likely in future. With no
domestic triggers, the markets would continue to take cues from global markets and crude oil prices. However, markets
continue to lack follow-up buying leading to profit booking and selling pressure at higher levels. The markets are likely to
remain range bound amidst stock specific action. Occasional bouts of volatility and choppiness will be witnessed.
On the upside, the Sensex faces resistance at the 15332 and 15699 levels but has support at the 15000, 14677 and 14141
levels. On the upside, the Nifty faces resistance at the 4647 and 4899 levels while 4482, 4108 and 4074 are its important
support levels.
Investors should wait for a breakout.
Sensex 14,500 is the key support
TRADING ON TECHNICALS
By Hitendra Vasudeo
1
Last week, the Sensex attained our projected level of 15130-15259-15422. The high registered last week was equal to our
last resistance for the week 15422. Subsequently, it cracked down to a low of 14888 but closed higher on Friday. The week
to week closing was positive. Last Monday, 4 August the Sensex opened at 14594.64, attained a low at 14503 and moved
up to form a weekly high at 15422.82. The Sensex finally closed the week at 15167 and thereby showed a net rise of 511
points on week to week basis. The market has been positive for 5 weeks now on a week-to-week basis.
If we see a further close above 15422, then we can look for the pull-back of the fall from 21206 to 12514. The 0.382, 0.500
and 0.618 levels are placed at 15838-16834-17892. Depending on the momentum and sustainability, each of these levels
will be focused on turn by turn.
If we take the retracement of the last corresponding falling leg from 17735 to 12514, then 0.500 and 0.618 levels are placed
at 15120 and 15736. Last week, the level of 15120 was respected as it made 15130 and had reacted down. But later 15120
got crossed and tested 15422 to react down once again.
If we can cross 15422, the next cluster of resistance is around 15736-15838. If that happens, then we will automatically see
a trend line breakout of the trend line taken from 21206 and 17735. A breakout and close above 15422 can lead the rise
towards 15736-15838 at least. And if the same gets crossed, then a rally towards 17687-18000 is possible.
Important support for the time being this week is last week's low of 14503. A fall and weekly close below 14503 will
puncture the pull back and a fall can begin, which can take the Sensex down to 12514 also.
Sensex Wave Analysis
Wave I- 2594 to 3758
Wave II- 3758 to 2828
Wave III- 2828 to 21206 (not yet complete)
Internals of Wave III
Wave 1- 2828 to 6249
Wave 2- 6249 to 4227
Wave 3-4227 to 21206
Wave 4- 21206 to 12514
Wave 5- 12514 to 15522 (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
Wave I-2594 to 3758
Wave II-3758 to 2904
Wave III- Internals as follows:
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- 8799 to 21206
Wave W-21206 to 14677
Wave X-14677 to 17735
Wave Y- 17735 to 12514
Wave X- 12514 to 15422 (current ongoing move)
As a result of another Wave X, we are getting into a Triple Zig-Zag formation. The moment Wave X gets complete, it can
fall back below 12514 to
complete Wave Z. Wave X
can stretch to the 0.382
retracement level of the
fall from 21206 to 12514,
which is placed at 15838.
If it exceeds 15838, then
the count will not be
valid. If that happens,
then we could be looking
at an alternate Flat pattern
Wave B that can stretch
beyond 0.618 levels of
17892.
WEEKLY UP TREND STOCKS
Another overall count
structure can be as
follows:
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
STERLING INT'L.
350.55
299.6
333.3
349.8
367.0
400.7
71.9
306.9
25/07/08
CASTROL INDIA
311.75
265.8
294.8
306.9
323.8
352.8
69.8
276.5
18/07/08
SPICE COMMUN.
74.20
72.1
73.4
73.9
74.7
76.0
67.6
74.0
08/08/08
MAX INDIA
220.75
159.5
198.5
215.3
237.5
276.5
66.9
191.7
18/07/08
CIPLA
234.55
207.4
223.8
229.4
240.2
256.6
66.5
223.9
11/07/08
2
Wave I- 2594 to 3758
WEEKLY DOWN TREND STOCKS
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
Wave i- 4228 to 6954
Wave ii-6954 to 6069
Wave iii-6069 to 12671
Wave iv- 12671 to 12316
3
Internals of Wave iv
Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell
with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to
Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal
Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly
reversal of the Down Trend.
Last
Center
Relative
Weekly Down
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Cover
Short
Cover
Short
Sell
Price
Sell
Price
Stop
Loss
OMAXE
125.05
101.7
116.1
121.6
130.5
144.9
21.22
125.25
09/05/08
MOSER/BAER IND
90.55
71.1
85.0
93.4
98.9
112.8
21.92
96.24
30/05/08
GAMMON INDIA
201.40
167.6
192.7
209.2
217.9
243.0
22.53
211.73
13/06/08
BAJAJ HOLDING
343.75
264.3
320.8
354.4
377.3
433.8
23.97
394.52
18/07/08
ABAN OFFSHORES 2511.00 2125.7
2400.7
2565.3
2675.7
2950.7
36.58
2680.00 1/8/2008
PUNTER'S PICKS
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
Wave V- 12514 to 15422
(current ongoing move)
Wave V can a rally
towards 17892-20596 is
possible provided 13727
is not violated.
Conclusion
Next round of positive
movement
and
momentum
can
be
witnessed above 15422.
Last week low of 14500 holds the key for the current pull-back uptrend.
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
D-LINK INDIA
532419
88.90
86.00
91.40
81.65
97.4
107.2
1.18
EMMSONS INTERNATION 532038 247.55
235.00
259.00
225.00
280.0
314.0
1.44
GEMINI COMMUN.
532318 170.50
166.00
176.00
161.95
184.7
198.7
1.66
IND-SWIFT LAB.
532305
51.40
48.50
51.95
47.50
54.7
59.2
0.85
MIRZA INTERNATIONAL
526642
15.75
14.80
16.80
14.66
18.1
20.3
2.18
MONSANTO INDIA
524084 1576.00
1555.00
1688.00
1487.00
1812.2 2013.2
2.65
PSL
526801 350.35
331.15
365.00
324.05
390.3
431.3
1.52
RAJ TELEVISION NETWO 532826 109.85
109.00
114.90
100.65
123.7
138.0
1.51
VESUVIUS INDIA
520113 180.15
170.50
182.50
160.00
196.4
218.9
0.81
Strategy for the week
Corrective dips during the week can be used for buying with a stop loss of 14500. Corrective dips to support of 15031-
14639 could be used for buying with a stop loss of 14500. Book profit on rise to 15800 or above.
* Austral Coke's capacity claim and IPO pricing has been punctured by Gujarat NRE Coke and a TV channel has exposed
the questionable pre-IPO placement to a fund. Marketmen wonder if this will be a repeat of the promoters' earlier issue of
Gremach Infrastructure Equipments.
TOWER TALK
* Liberty Phosphate has announced fabulous results for the June 2008 quarter together with news of preferential
allotment of 28 lakh shares at Rs.18. Scrip may continue to hit upper circuits this week as well. Catch it if you can.
* Simplex Castings has bagged a huge order of Rs.62 cr. from SAIL in consortium with a Korean company. Accumulate at
declines.
* Stone India belonging to the Duncan Goenka has once again disappointed with a loss for the June 2008 quarter.
Management has been making rosy announcements for a long time but offers no explanation for such poor performance.
* Crew Boss is being accumulated by informed people. Keep an eye on the scrip and buy at declines for short-term gain.
* Despite posting a horrible result for the June 2008 quarter, the share price of Flat Products has shot up considerably.
Investors are once again advised to book profit and exit.
* Ansal Housing is developing 1,200 acres from its land bank of 2500 acres. With a likely EPS of Rs.30 for FY09, its shares
are being accumulated by knowledgeable persons.
* Ajanta Pharma is nearing completion of its expansion and R&D facility for about Rs.18 cr. Sources expect an EPS of
Rs.24 in FY09 and Rs.30 in FY10. The share may spurt to Rs.120 in the near term.
* A leading brokerage house strongly recommends Surya Pharma for the long-term with a target price of Rs.150. It is
likely to post an EPS of Rs.45 in FY09.
* Sathavahana Ispat has already commissioned its 30 MW co-generation power plant. With Q1EPS of Rs.5, it is likely to
post an EPS of Rs.22 for FY09. Buy with a target of Rs.75 in the medium-term.
* Hariyana Ship Breaking, which registered Q1EPS of Rs.8, is all set to register an EPS of Rs.18 for FY09. The share may
cross the Rs.60 mark.
* Kamanwala Housing is being recommended by a real estate analyst. It is all set to post an EPS of Rs.45 and the share is
available with 1:1 bonus. It may appreciate by more than 40% in the medium-term.
* Goa Carbon is bullish on its future prospects. It is expected to clock sales of Rs.500 cr. with a net profit of Rs.40 cr. and
its FY09 EPS would work out to Rs.43. The share is heading towards the Rs.175 mark.
* Insecticides India, which posted an EPS of Rs.5 in Q1FY09 is doing well. With further expansion, it is all set to post an
EPS of Rs.22 in FY09 and Rs.35 in FY10. The share is going cheap with a target of Rs.75.
*Sunil Hitech with an order book of Rs.1375 cr. is foraying into the EPC business with a pilot order for a 30 MW co-gen
power plant, 60 KLD distillery and 6000 TCD sugar plant worth Rs.330 cr.
* Vijay Shanti Builders, which allotted 45 lakh warrants to the promoters convertible at Rs.95 per share in September
2007, was recently listed on the NSE too. It has a huge order book of Rs.1370 cr.
By Saarthi
BEST BETS
Krone Communications Ltd. (Code: 523411)
Rs.113.85
Incorporated in 1988, Krone Communications Ltd. (KCL) belongs to the world renowned ADC Krone group - which has
sales, manufacturing and development offices in more than 35 countries and sells in more than 150 countries. In 2004, the
ADC group (USA) took over the Krone group (Germany) and today the ADC Krone group is one of the leading
international players in communication networks as it designs and manufactures global network infrastructure products
and services. These infrastructure solutions are the foundation of every network to enhance its speed, bandwidth and
quality of Internet/data, video and voice transmissions. Fibre and copper connectivity components designed for wireline,
wireless, broadcast, enterprise, and cable networks serve as the critical junction and connection points that tie the
networks together and link sophisticated electronics to each other. Its digital cross connect, fibre termination and outside
plant equipment, small-form-factor connectors, fibre and copper management systems, remote test and monitoring
products and structured cabling solutions enable the network technicians to organise, connect, manage and test the assets
for maximum network performance.
KCL, being part of the group, is engaged in the same business but caters 100% to Indian clients. Its manufacturing plant is
located at Peenya in Bangalore where about hundred product lines of ADC Krone's networking and telecom equipment
are manufactured. Apart from these, KCL also enjoys the privilege of marketing the parent company's various innovative
and patented products like OmniReachTM, Fibre-to-the-Premises solutions, FibreGuide
®
Raceway, Ethernet Distribution
Frames, RF Worx Signal Management Platforms, DSX1/3, PowerWorx
®
Fuse Panels etc. It also provides solutions for the
Enterprise market segment. Its new TrueNet
®
structured cabling system is an integrated portfolio of industry-leading
enterprise network solutions. This system combines proven cable connectivity and cable management solutions for fibre,
10 Gigabit Ethernet over UTP copper, and Category 6/5e from the data centre to the desktop. In addition, the company
enables wireless carriers to get more from their networks with its Digivance RF Transport solutions. Digivance allows
wireless service providers to enhance their networks by extending coverage and distributing capacity where it is needed
in a cost-effective manner. Wireline offerings include LoopStarTM line-powered Wi-Fi solutions that provide a low-cost
and easy-to-deploy approach in building a network of Wi-Fi hotspots. In addition, the new LoopStar 800 Sonet access
system for business services and the SG-1 Service Gateway enables the delivery of value-added, revenue-generating, IP-
based services, which are the latest additions to the Wireline product portfolio.
Due to the constant decline in the wireline segment, KCL has been concentrating on the wireless segment and is always
looking forward to introduce more ADC wireless products like coverage & capacity solutions and core fibre solutions for
the wireless market. Notably, KCL has a very strong clientele including biggies like Rcom, Tata Tele, Bharti Tele, Siemens,
HFCL, Lucent, TCS, Alcatel, Cognizant, Ericsson, Neyveli Lignite, Hexaware etc. On the financial front KCL has its year
ending on 30 October and for FY07 it registered 15% rise both in sales and net profit at Rs.93 cr. and Rs.8 cr. respectively
thereby posting a healthy EPS of Rs.17 on its small equity of Rs.4.60 cr. It has an impeccable record of uninterrupted
dividend payment since the last 15 years. In 2005, the ADC group came out with statutory open offer to acquire 23% stake
at Rs.92 but did not get any response from shareholders as the prevailing market price at that time was Rs.130. In the
current fiscal, for the six months ending 30 April 2008, its sales declined by 15% to Rs.37.50 cr. but PAT improved by 15%
to Rs.3 cr. despite the huge price volatility in raw materials like copper and plastic. Accordingly, it may clock a turnover
of Rs.90 cr. with net profit of Rs.8.50 cr. for FY09, which translates into an EPS of Rs.18. Thus this debt-free MNC is
trading fairly cheap at a market cap of merely Rs.50 cr. discounting its current year estimated earnings by merely 6 times.
Secondly with 62% stake, there is also a possibility that the parent company may come out with buy-back offer at a higher
4
price to delist the company. Long-term investors can buy it at the current price with a price target of around Rs.175 (i.e.
60% appreciation) in 15-18 months.
Hitachi Home & Life Solutions (India) Ltd. (Code: 523398)
Rs.120.70
Established in 1984, Hitachi Home & Life Solutions (India) Ltd. (HHLSL), a subsidiary of the Hitachi group of Japan, is
engaged in the business of manufacturing and sale of air conditioners in India. While room air conditioners and packaged
air conditioners are being manufactured in India in technical collaboration with Hitachi, Japan, the company sources the
higher end of air conditioning systems like chillers, self-contained roof top AC and set free from its affiliated companies
worldwide. Today, HHLSL is amongst the top air conditioning companies in India with strong nationwide sales,
distribution and service network comprising 14 branches, 250 sales and service dealers, more than 800 showroom dealers
and 350 service points. It also exports air conditioners to the SAARC, Middle East and other tropical countries. Since late
2005, the company has also ventured into of trading of refrigerators and washing machines to capitalise on its brand
equity and strong distribution network in India.
Headquartered in Ahmedabad, HHLSL's manufacturing facility at Kadi, Gujarat, with an installed capacity of 250,000
units is among the seven Hitachi room air conditioner facilities worldwide. It also has another manufacturing facility in
Silvassa. HHLSL has always been at the forefront of technology and boasts of being the first to introduce products like hi-
wall splits, remote controlled ACs, ACs with plus one technology etc. Last year, it launched 'ACE' split AC with auto
humidity control technology, which is able to reduce the humidity level by nearly 27%. It has also introduced 'Iota' in sub
one tonne capacity to capture the needs of the people living or working in the small apartments/cabins in the metros. It
also has Atom Square split AC, which is an unique product having two indoors with only one outdoor working on. Its
Atom & Atom XL are the smallest split ACs in size with enough cooling power to chill a grand hall or a huge conference
room. Interestingly, HHLSL even has a product called 'Spacemaker' designed specially to cater to the air conditioning
requirement of the telecom industry and enjoys above 20% market share in this segment. The company is now marketing
'Vi' series with focus on style and physical appearance along with simple functions and features.
At the same time, the company has introduced a new range of two door refrigerators and new 'Beat Wave Wash' washing
machines to increase its market share. Its commercial air conditioning division is also on rampant growth due to the retail
sector and the mall culture expanding in a big way and the trend of setting up BPOs and R&D centres in India. These and
other factors will lead to significant growth in commercial
air conditioning products like ductable ACs, self contained,
setfree (variable refrigerant volume system) and chillers
(large air-conditioning application). Preferences for the
lower running cost over the initial cost will also lead to a rise
in inverter based technologies. It is supplying R407C variant
in the chillers, which is an environment friendly refrigerant.
Recently, it also launched 'Takumi' range of ductables
ranging from 3 tonnes to 16.5 tonnes, which is doing
extremely well.
To summarize, the air conditioning market is growing at
nearly 25% and with only 2% penetration level, the demand
for ACs is expected to continue in coming years. On the back
of the strong demand for split ACs, HHLSL currently
derives 40% revenue from split ACs and 60% from window
ACs. Going forward, the ratio is expected to get skewed
towards split ACs. Financially, the company made a smart
turnaround in FY05 and since then it has been able to
maintain its growth momentum. For FY08, its sales was up
by 40% at Rs.447 cr. and net profit more than doubled to
Rs.42 cr. recording an EPS of Rs.18 on its equity of Rs.23 cr.
Considering its Q1FY09 figures, company is expected to
maintain its PAT of Rs.42 cr. on higher sales of around
Rs.525 cr. Hence, at CMP, the scrip is available at P/E ratio
of less than 7, which is reasonably cheap for an MNC with
such a strong brand value. However, rising import of cheap
Chinese products coupled with increasing input costs and
cut throat competition is a serious cause of concern for the
company. Still investors can accumulate at sharp declines
5
with a price target of Rs.180 in 12-15 months.
Alpha Geo (India) Ltd.: A good investment stock
ANALYSIS
By Devdas Mogili
Hyderabad based Alpha Geo (India) Ltd. (AIL), is a 21-year old company established in 1987 as a private limited
company that subsequently became public in 1989. The company provides seismic and related services to the upstream
oil industry. AIL entered the capital market in January 1994 to acquire equipment for conducting 3-D seismic surveys. Mr.
A. Dinesh is the managing director of the company.
The company is engaged in undertaking seismic surveys for oil exploration companies and for seismic data acquisition. It
has obtained technical know-how from Alpha Geo, USA.
AIL entered into a contract with the Oil and Natural Gas Corporation (ONGC) in February 1989 for acquisition of seismic
data in the Kashipur belt at the Himalayan foothills. The company also undertook similar contracts for Hindustan Oil
Exploration and Oil India Ltd. (OIL).
It has also commenced data processing activities, oil drilling and exploration. The first is for seismic data acquisition,
processing and interpretation for the Northeastern part of the country for a private sector oil company. The contract for
OIL was for seismic data interpretation services.
The company in strategic alliance with its US partner was awarded two contracts by OIL for undertaking 3D seismic data
acquisition and processing for blocks in Assam and Arunachal Pradesh. It was also awarded a contract by Essar Oil for
3D seismic data acquisition of 145 sq. km of 3D data in its block near Mehsana in Gujarat.
AIL was awarded a Rs.1,6.40 cr. contract by ONGC for undertaking 2D seismic data acquisition for its block in Mizoram
and is expected to complete 3D seismic data acquisition for Geopetrol International Inc. at its block in Arunachal
Pradesh in calendar year 2008.
NELP: National Exploration Licensing Policy (NELP) was formulated by the Government of India in 1997-98 to provide a
level playing field by which all parties may compete on equal terms for the award of exploration acreage. NELP VI has
concluded recently and it is estimated that the value of seismic services for NELP-V and NELP-VI onshore blocks of
around Rs.8000 cr. will be generated over the next 3 years.
Performance: AIL registered net sales income of Rs.81.57 cr. with a net profit of Rs.12.65 cr. netting an EPS of Rs.25.41 for
FY08.
Financial Highlights:
(Rs. in lakh)
Quarterly Results: The company announced fabulous
results for Q1FY09. On net sales income of Rs.45.06 cr., it
clocked a net profit of Rs.12.19 posting a basic/diluted
EPS of Rs.23.81. Going forward, its annualised EPS works
out to a massive Rs.95.24.
Financials: The company has an equity base of Rs.5.12 cr.
and with free reserves of Rs.42.39 cr. the book value of the
share works out to Rs.92.79. It has a debt:equity ratio of
1.16 with RoCE 28.78% and RoNW 30.08%.
Share Profile: AIL's share with a face value of Rs.10 is
listed and traded on the BSE and NSE under the Indonext
(S) category. Its share price touched a 52-week high/low
of Rs.1079/Rs.215. At its current market price of Rs.411.55
it has a market capitalisation of Rs.215 cr.
Dividends: The company has been paying dividends as
shown below:
FY08 - 15%, FY07 - 15%, FY06 - 10%, FY05 - 10%.
Particulars
Q1FY09
Q1FY08
FY08
Net Sales/Income
4506.25
2065.77
8157.39
Other Income
5.79
3.97
32.51
Total Income
4512.04
2069.74
8189.90
a. survey expenses
1837.56
1065.87
3551.52
b. Staff Cost
115.58
104.10
463.05
c. Other Expenditure
207.16
101.09
383.59
d. Depreciation
415.37
327.26
1385.44
Total Expenditure
2575.67
1598.32
5783.60
Int/Fin Charges
62.72
89.61
351.22
Profit before tax
1873.65
381.81
2055.08
Prov. for taxation
Current tax
726.00
173.00
909.59
Deferred tax
(72.99)
(39.62)
(129.54)
FBT
1.40
3.50
10.21
Total
654.41
136.88
790.26
Net Profit after tax
1219.24
244.93
1264.82
Paid up equity (FV: Rs.10)
511.98
494.49
511.98
Res Exc Rev Reserve
-
-
4239.21
Basic/Diluted EPS (Rs)
23.81
4.95
25.41
Shareholding Pattern: The promoter's holding in the company is 34.16% while the balance 65.94% is held by non-
corporate promoters, strategic investors, mutual funds and the Indian public. Among mutual funds Stanchart, LIC
Mutual, Sundaram Finance have been adding the company's shares for the last one year for their various schemes.
Prospects: The global oil demand is expected to rise by 3.5 million bbl/d between 2005-07, led by the growth in USA,
China and other developing Asian countries. This strong demand growth will, in turn, help keep world oil prices at
relatively high levels.
The seismic survey sector expects to report aggressive global growth in the coming years. The high profits reported
recently by oil exploration and production companies will be reinvested immediately to counter the declining oil & gas
6
reserves. The stagnating oil & gas reserves position across most countries may lead to an energy crisis in the next few
decades and calls for more prospecting, which in turn will call for more seismic data.
The reserves depletion crisis is particularly alarming. Most of the world's large oil fields are more than 50 years old and
are facing a 'serious decline'. Some producers have reported higher depletion rates than the generally assumed 3% - Saudi
Arabia 8%, Venezuela 7.8%, UK at 8.9% and Mexico more than 10%.
The combination of a growing demand in India-China and the socio-political conditions have strengthened the price of
oil making it imperative for countries to develop their own resources and strength their respective economic security.
During 2006, India and China decided to strengthen their strategic ties by inking a major pact envisaging joint
exploration, production and acquisition of oil assets in third world countries, which would substantially reduce their
energy costs. This agreement will help both India and China to acquire oil blocks around the world in partnership.
Conclusion: AIL enjoys a reputation for quality data acquisition, analysis and interpretation and its ability to capture
every seismic industry upturn through its presence across 2D and 3D seismic services.
Nearly 44% of India's terrain is unexplored or under-explored for oil reserves. AIL is India's only seismic company in the
private sector engaged in 3D and 2D seismic. The company is, therefore, on solid grounds.
Going ahead, at its current market price of Rs.411, the AIL share price is discounted less than 5 times against the industry
average P/E of over 12 times. With oil prices expected to remain firm, the prospects for oil exploration and seismic survey
companies are bright. The AIL share may be considered as a good portfolio choice with a medium-to-long-term
perspective.
Sensex closes above 15,000
MARKET REVIEW
By Ashok D. Singh
The Sensex gained 511.13 points or 3.49% to close at 15,167.82 for the week ended 8 August 2008. The NSE Nifty added
115.95 points or 2.62% to close at 4,529.50 for the week. Fall in crude oil prices to a 3-month low, recovery in rainfall and
buying by foreign institutional investors helped the Sensex close above the crucial 15,000 mark. The Sensex rose in four of
the five trading sessions in the week ended Friday, 8 August 2008.
The BSE Mid-Cap index rose 244.23 points or 4.33% to 5,886.97 and the BSE Small-Cap index rose 201.64 points or 2.89%
to 7,181.74.
BSE Bankex (up 9.9% to 7,395.03), BSE Auto index (up 8.58% to 3,970.20), BSE Realty index (up 5.96% to 5,508.88), BSE
Capital Goods index (up 3.58% to 12,565.88), BSE Power index (up 1.48% to 2,701.10), BSE IT index (up 2.26% to 3,885.86)
edged higher in the week.
Inflation based on the wholesale price index rose 12.01% in 12 months to 26 July 2008, marginally above the previous
week's annual rise of 11.98%. Inflation for the week ended 31 May 2008 was revised upwards to 9.32% from 8.75%.
The monsoon was above average for the first week in August 2008, helping ease a dry spell that had threatened to delay
sowing of crops including rice and cotton. Showers in July 2008, the wettest month in the June-September season, were
18% below average, undermining prospects for record grain output critical to lowering food inflation.
Government's direct tax collections rose an annual 46.9% to Rs.71648 cr. in April-July 2008.
Crude oil prices declined sharply from a record high $147.27 a barrel hit on 11 July 2008. Oil held near $118 a barrel on
Friday 8 August 2008.
FIIs bought shares worth Rs.1527.90 cr. in the first few days of August 2008 (till 7 August 2008). FIIs sold shares worth
Rs.25774.20 cr. in the calendar year 2008, till 7 August 2008. Mutual funds sold shares worth Rs.286.10 cr. in the month of
August 2008 (till 7 August 2008).
The key benchmark indices settled lower on Monday, 4 August 2008, after swinging wildly throughout the day. Global
cues were mixed with negative bias. However buying momentum in small-cap and mid-cap stocks kept the market
breadth strong. Selling pressure was seen in capital goods, banking and power stocks.
The Sensex advanced 383.20 points or 2.63% to 14,961.07 on Tuesday, 5 August 2008. A fall in US crude oil prices to 3-
month low and firm European markets triggered a solid rally on the bourses.
Stocks ended a volatile session slightly higher on Wednesday, 6 August 2008, extending gains for the second straight day.
Strong global cues triggered a solid rally in first half of the day's trading session. However, profit booking at higher levels
in second half capped gains. Sensex rose 112.47 points or 0.75% to 15,073.54. The US Federal Reserve at a meeting held
after Indian market hours on 5 August 2008 left key interest rate unchanged at 2%.
The Sensex rose 43.71 points or 0.29% at 15,117.25 on Thursday, 7 August 2008. The key benchmark indices ended with
marginal gains ahead of the inflation data.
Key benchmark indices staged a strong intra-day rebound on late Friday, 8 August 2008, boosted by fall in crude oil
prices and higher US stock futures. Banking and auto shares recovered sharply from early lows. Volatility was high
throughout the day. The Sensex rose 50.57 points or 0.33% to 15,167.82.
7
Sensex rose 511.13 points to close at 15,167.82 last week. The market will take cues from June 2008 industrial production
figures, which the government will release on Tuesday, 12 August 2008. Falling crude oil prices and improvement in
south west monsoon will provide some relief to investors. Rising inflation remains a major worry for the markets in the
medium-term.
8
e true:
rther.
Bulls take charge
MARKET
Buy Graphite India Ltd.
By G. S. Roongta
The week ended Friday, 8 August 2008 again proved to be quite favourable as it closed in the positive with a gain of
511.13 points on the BSE Sensex closing at 15167.82 while the CNX Nifty gained 115.95 points on a week-to-week basis
closing at 4529.50. The markets have closed in the positive for 5 weeks in a row, which signifies that the bulls are back.
Last week, crude oil prices came down sharply to US $118 per barrel from its high of US $148 in mid-July 2008. I had
repeatedly observed in this column over the last 2/3 weeks that there is rampant speculation in crude oil futures and
stock futures, which are closely inter-related and the game is going to burst out very soon. The burst in crude oil
speculation and the CNX Nifty Futures exposed simultaneously, will pave the way for a rally.
Accordingly, the CNX Nifty zoomed from a low of 3790.2 on 16 July 2008 to an intra-day high of 4615.9 on Tuesday, 5
August 2008 recording a handsome gain of 825.7 points in just 14 trading sessions. Correspondingly, the BSE Sensex rose
from a low of 12514.02 to 15422.82 gaining 2908.8 points.
Readers of Money Times will recall that I have clearly stated that the market will bounce back sharply once it gets a
positive cue or a favourable trigger since all the earlier negatives had been discounted. But the bear operators continued
to suppress the market whenever possible but had to surrender when it refused to go down any further beyond the
Sensex 13000 or the Nifty 4000 levels. Their repeated efforts to break these levels proved futile as the market bounced
back every time. This clearly indicated that a sharp and powerful rally was bound to follow whereas bear operators were
dismissing such bounce backs as mere pull-backs of short coverings.
The pink papers, which appeared convinced of a deep bear phase all this while, have suddenly changed colour within a
week as evident by a leading business daily declaring 'Crude oil slides to $118, Sensex rises 383 in late surge' in bold
headlines on the front page on Wednesday, 6 August 2008. It further added 'For the last few sessions, the Indian markets
have been moving away from the global trend and progressing on internal strengths'.
From where has this internal strength emerged all of a sudden when they were all very bearish till a week before? Had
they lost sight of the strengths of the Indian economy or the workings of the corporate sector all this while?
As against this, this column remained
firm in its outlook despite the two
benchmark indices breaching their
sensitive levels several times. This
columnist, however, disregarded all
rumours aimed at pulling down the
market and was firm on what the
future holds since the past had already
taken its toll. Thus my observation in
the past 4/5 weeks, as summarized
below, turned out to b
(1) Rampant speculation in Nifty
Futures to burst out soon.
(2) Oil speculation interlinked
with global stock markets to be
exposed soon.
(3) Gold price will lose its glitter.
(4) Indian stocks refuse to go
down any fu
(5) Bottom-fishing is the only
remedy to make profit.
Readers may observe that in the deep
crisis and panic conditions prevailing in
the stock market for the past several
months, Money Times continued to
For F&O Traders
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NEW
provide moral support to readers advising them not to panic and invest selectively in fundamentally strong shares
available at throwaway prices. And now that the markets are reviving, I have the satisfaction of realising that I have done
my duty sincerely without fear or favour and will continue to do so.
From the last issue I have resumed stock recommendations and had recommended JK Lakshmi Cement whose share price
has moved up from Rs.77 to Rs.85 on Thursday, 7 August 2008 and closed the week at Rs.83.55, thus gaining nearly 12%
within a week. All other cement stocks such as ACC, Grasim, UltraTech, JK Cement, India Cement etc., too, have
witnessed a sharp upward move.
The future of the cement industry looks quite encouraging despite the periodic interference by the government in trying
to curb cement prices rather than letting it being determined by the forces of demand and supply. The demand is quite
robust despite capacity addition of 30 million tonnes while other capacities are in the pipeline and may get operational by
end FY09.
After our observation, Grasim and ACC, the two largest cement manufacturers, have reported better offtake in the
monsoon ridden month of July, which was higher than their production. On this news release, the pink papers turned
positive and declared: 'Sentiments turn positive for cement stocks and investors resort to value buying'.
I still maintain that JK Lakshmi Cement is a good buy even at Rs.87/88 and the cheapest among all cement stocks based
on its emerging capacity additions and fundamental strength. Those who have missed to buy this stock in the overall
weak market sentiment can do so now and take a small position to reap a good harvest in the long-term.
This week I have identified yet another fundamentally strong share, which looks to be underpriced based on its emerging
good future.
Graphite India Ltd.
BSE Code: 509488
NSE Code: GRAPHITE
Plants: Graphite India Ltd. (GIL) has varied business interests such as electrodes, graphite equipment, glass reinforced
plastic (GRP) pipes & tanks and power. Graphite electrodes comprise more than 70% of its total business. Its plant is
situated at Sagarbhanga in Burdwan District of Durgapur and another plant at Satpur in Nashik.
The production of graphite electrodes has gone up in FY08 to 74,414 MT as against 67,576 MT in FY07. The future of the
company's electrodes is related to steel production, which is projected to remain high by an average growth of 8% in
2008-09.
Financial Highlights:
(Rs. in cr.)
From the above highlights, it will be observed that
the company's earning through its various business
activities is quite superb, which is likely to
continue in the current year too as the demand for
its products are quite robust as its future is linked
with the steel industry.
Similarly, the demand for GRP pipes and tanks is
also very commendable with the entry of private
sectors in the retailing of petroleum products,
which has greatly enhanced the use and
opportunities of GRP tanks.
Since power is the major input in the
manufacturing of graphite electrodes, as a part of
cost reduction initiative besides adequate and
timely supply of power, the company has made in-
house arrangement to meet any eventuality.
Particulars
2007-08
2006-07
Equity Capital
30.22
29.38
Reserves & Surplus
667.69
564.81
Loan Funds
473.05
581.80
Performance Review
Revenue
1065
827
Operating Profit
240
165
Other Income
36
38
Expenditure
Gross Profit after Interest
241
172
Depreciation
33
30
Provision for Taxation
73
44
Profit After Tax
134
98
Non-recurring Items
-
96
Profit after Non-recurring Items
134
194
Equity Dividend on Rs.2 paid-up share (Rs.)
3
3
Dividend %
150
150
Basic EPS
9
7
Debt:Equity
0.34:1
0.52:1
Presently, the company has 33 MW power generation through hydel and multi-fuel routes. Thus the future outlook of the
company is bright.
Reserves & Surplus: the company has built large reserves over the years, which is over 20 times its issued capital and
thus provides a golden opportunity for bonus shares.
Dividend: The company has been raising its dividend distribution year after year based on its profitability. The dividend
paid in 2004-05 was Rs.15.07 cr. in 2005-06 it was up at Rs.20.10 cr., which was further raised to Rs.50.70 cr. and again to
Rs.53.03 cr. in the year under review. The 150% dividend is at par to best dividend paying companies like Ashok Leyland,
Tata Motors, Maruti, Hindalco and several others.
EPS: The company's EPS, too, has been rising from Rs.3.27 in 2004-05 to as high as Rs.9.03 in 2007-08, which is 200%
higher within 3 years.
9
Market Price: GIL's Rs.2 paid-up share is traded between Rs.50-60 since the last 6 months and might flare up anytime as
it looks quite underpriced looking to its earning, future prospects and distribution.
Outlook: GIL's outlook is quite bright looking at its sound financial strength as its turnover has doubled since 2004-05
while profitability has trebled. In view of this, the share looks to be quite good and provides excellent opportunity to buy
and add to your portfolio.
By Saarthi
STOCK WATCH
For Q1FY09, Jupiter Bioscience Ltd. (Code: 524826) (Rs.119.35) reported 20% growth in sales to Rs.29 cr. and 10% rise in
net profit to Rs.7 cr. Notably, it registered an operating margin of 53% for the quarter. The company operates in a very
niche segment and is among the few companies in the world with competency in the synthesis of peptides. It is poised to
become a global peptide solutions group having a broad canvas of peptide chemistry products, peptide reagents,
coupling reagents, protective agents and suppliers of key ingredients used in peptide based pharmaceuticals. Earlier, the
company entered into a 10-year product purchase agreement with Ranbaxy on peptide pharmaceuticals for the global
market and as per contract allotted 31.77 lakh warrants at Rs.147. It has also finalised to acquire a manufacturing facility
of Merck Life Sciences, Switzerland, and has even signed a long-term business contract with them. Recently, it has entered
into licensing agreement with California based GI Logics Inc. for development/sales for the use of Diamox for diagnostic
& eradication of H. pylori bacterium. Last fiscal, it raised Rs.100 cr. through the QIP route at Rs.153 per share. Further, it
cancelled the 27.50 lakh equity shares allotted to the promoters and instead issued 40 lakh warrants at Rs.182 to strategic
investors. For FY09 on a standalone basis, it is estimated to clock a turnover of Rs.175 cr. with PAT of Rs.40 cr., which will
work out to an EPS of Rs.18 on its fully diluted equity of Rs.22.50 cr. One of the safest bets in the current market
sentiment.
******
After the amalgamation of Rain Calcining with itself, Rain Commodities Ltd. (Code: 500339) (Rs.222.50) has been posting
encouraging results on a consolidated basis. Currently, it is one of the largest producers of Calcined petroleum coke
(CPC) with 7 plants in USA and one plant in India and has a total installed capacity of 2.40 million tonnes of CPC.
Besides, it also produces cement at its 1.60 million tonnes cement plant in South India and sells it under the 'Priya' brand.
For the Q2 ending 30 June 2008, it posted a net profit of Rs.94 cr. on net sales of Rs.1081 cr. This is despite the fact that it
provided Rs.42 cr. on restatement of foreign currency loan as per the June 2008 exchange rate. Remarkably, its OPM was
more than 25% and with CPC trading above US $350 per tonne, its margin are expected to increase in H2FY08. In order to
maintain its growth momentum and cash in on the robust demand for CPC, the company is setting up two additional
facilities for another 0.6 million tonnes of calcined coke, which will be operational by 2010. Meanwhile, for CYFY08, it
may report consolidated sales of Rs.4250 cr. with net profit of Rs.350 cr. i.e. an EPS of Rs.46 on its fully diluted equity of
approx. Rs.76 cr. Keep accumulating at sharp declines.
******
Belonging to the FAG group of Germany, FAG Bearings India Ltd. (Code: 505790) (Rs.390) is among the largest player in
the Indian Bearings industry commanding nearly 13% market share. It is a leading OEM supplier to the automotive,
mechanical and electrical engineering industries besides the Railways. Notably, the company is the market leader in the
spherical roller bearing segment with a 60% market share. Despite the rising input cost and the slowdown in the auto
industry, its sales improved by 15% to Rs.179 cr. and PAT grew by 10% to Rs.23 cr. for the June 2008 quarter. To maintain
its market share, the company is contemplating a Rs.350 cr. expansion plan for needle bearings in the near future.
Although no spectacular growth is expected in coming years, this debt-free MNC is available at a cheap valuation
compared to its fundamentals. For CY08, it is estimated to report a topline of Rs.700 cr. with a bottomline and Rs.85 cr.,
which will lead to an EPS of Rs.51 on its equity of Rs.16.60 cr. Hence at its current market cap of Rs.650 cr., the scrip is
discounted by less than 8 times although historically it hasn't traded much below 14 times. Thus, it seems that all the
negatives have been factored in the CMP and its share price is poised to move upwards only as and when the general
sentiment improves. Secondly, the company has free reserves of more than Rs.300 cr. on such a low equity, which makes
it a bonus candidate as well.
******
For the last three quarters, HBL Power Systems Ltd. (Code: 517271) (Rs.281.40) has been posting excellent results. For the
latest Q1FY09, sales shot up 130% to Rs.316 cr. whereas net profit zoomed up by 450% to Rs.33 cr. registering a whopping
EPS of Rs.14 for the quarter. Importantly, it reported a very healthy OPM of more than 20%. The company is the engaged
in design, development and manufacture of industrial & specialised batteries, allied electronic products and DC systems
in India. In fact, it is the market leader in VRLA (valve regulated lead acid) and NCPP (nickel cadium pocket plate)
batteries and enjoys 50% market share of the domestic telecom market. Moreover, it is among the very few companies in
the world making ultra high speciality batteries for military uses like thermal, reserve and torpedo batteries. It ranks 3
rd
globally for Nicad passenger aircraft batteries and 2
nd
for industrial alkaline batteries. Apart from supplying various
10
batteries for train lighting, air-conditioned coaches etc. The company has of late designed and developed a wide range of
microprocessor based signalling products and power systems to cater to the needs of the Indian Railways. Recently, the
company has put up two new factories at Vizianagaram and SEZ Vizag in Visakhapatnam under a capex of Rs.150 cr.
After posting an EPS of Rs.28 for FY08, the company is set to clock an EPS of Rs.45 for FY09 on sales of around Rs.1250 cr.
and PAT of Rs.110 cr. It is a screaming buy at current levels.
11
By Kukku
FIFTY FIFTY
Investment Call
* Mazda Ltd. (Rs.62.90) is an engineering company manufacturing process control equipments, steam jet ejectors,
condensers, turbine bypass valves and systems, evaporators and pollution control equipment.
The company is in no way connected to the late Harshad Mehta controlled Mazda Leasing Ltd. and US-based Croll-
Reynolds holds a 12% equity stake in the company.
Its products are used by a wide variety of industries such as refineries, power plants, fertilizer plants, edible oil extraction
plants, nuclear power plants and pharmaceutical manufactures. Due to major capacity expansion plans in most user
industries, the company fetches good repeat orders.
Mazda's clientele include RIL, United Phosphorus, Torrent Bio-Chem, BHEL, Cadila Pharmaceuticals, Grasim Industries,
GSFC, HPCL, IOC, IPCL, Alfa Laval (India), Alstom Power India, L&T, BPCL, IOC and Hindustan Unilever. It has
confirmed orders in hand of around Rs.50 cr.
It is understood that the company is able to pass on the price increase in the input cost to customer and the execution
period of an order is around 2-4 months.
For FY08, its net profit rose 43% to Rs.6.66 cr. as against Rs.4.66 cr. in FY07. Sales rose 14.68% to Rs.60.22 cr. in FY08 as
against Rs.52.51 cr. in FY07.
The company is doing well in exports too but due to increased domestic demand it is focusing more on domestic sales.
Based on FY08 sales of around Rs.10.5 cr., current year sales are likely to record 30% growth.
For Q1FY09, the company has reported sharp improvement is in sales & profits. Sales shot up by 70% to Rs.17.4 cr. while
net profit flared up by 160% to Rs.2.05 cr. yielding an attractive quarterly EPS of Rs.4.8 on its equity base of Rs.4.26 cr.
There are indications that Mazda shall be able to maintain margins in the future also. FY09 sales are likely to be around
Rs.75 cr. with net profits of around Rs.8 cr. resulting in an attractive EPS of around Rs.19.
Debts of the company are low as interest outgo for FY08 was just Rs.29 lakh against Rs.47 lakh in FY07.
The company is a strong and established player in its product line and has competitive advantage to leverage the
opportunities available in the engineering industry. It has
significant presence in power generation sector and will
continue to witness the growth in this segment of the
business.
Investors can accumulate this stock as its market cap is
just Rs.26 cr. and the stock can touch Rs.120 over the next
one year and is currently available at the Sensex valuation
of 6200.
* Kirloskar Brothers Ltd. (KBL) (Rs.167.55) hold 95.95%
stake in The Kolhapur Steel Ltd. (TKSL), which has
become a subsidiary company of KBL w.e.f. 2 August
2008. The company has revised the prices of its products
and is taking steps to increase prices and include the price
increase clause in future orders. Its order position is very
strong. The company also has investments worth of Rs.53
cr. whose market value is around Rs.860 cr.
It is seeking price hike from all existing customers. The
Fixed Rate Project Contracts (current fixed rate orders) in
hand is around 40%. It is focusing on faster execution of
projects to avoid adverse impact of commodity inflation,
especially in Fixed Rate Contracts and avoid liquidated
damages.
Its 52-week high is Rs.538. At the current price of Rs.170,
its downside is very little, investors can add on dips.
Market Guidance
* Indian Hume Pipes (Rs.594.35) has orders in hand worth of Rs.1258 cr. of which 83% orders are with a price increase
clause, which will ensure profit margins in future. There are indications that the company is likely to show compounded
growth of 40% per annum in the topline. PAT margins are likely to remain around 4%. Investors can accumulate this
stock on dips for good long-term growth.
* Kirloskar Pneumatic (Rs.4.40) - Successful in-house development of 1 MW Wind Mill Gear Box will create a business
opportunity of over Rs.1500 cr. during 2009-13 in the domestic and global markets. Propulsion Systems for Naval
application will generate business opportunity of over Rs.500 cr. During 2010-13, Process Gas, Marine Refrigeration,
Transmissions, Rotary Compressor & Road Railer will be the growth drivers for the future. Investors are advised to keep
a watch on this stock for investment on dips for good long-term growth.
* Kalpana Industries' (Rs.122.85) sales shot up to Rs.153 cr. from Rs.103 cr. for June 2008 quarter while net profit shot up
from Rs.3.97 cr. to Rs.7.75 cr. Full year EPS is likely to be around Rs.35. Accumulate this stock below Rs.120 level for good
long-term growth.
* Amrutanjan Health's (Rs.318.45) market cap is just Rs.102 cr. The company is sitting on cash after selling land. Long-
term investors can accumulate this stock on dips. Recently, the company declared 400% special dividend as company sold
part of its real estate. Stock is ex-special dividend now.
* Garware Wall Ropes (Rs.83.45) looks attractive for investment at current valuations. It has reacted from a high of
Rs.258.
* Net profit of JMC Projects (Rs.205.55) has gone up by 49% to Rs.7.92 cr. in Q1FY09 as against Rs.5.31 cr. in Q1FY08.
Sales rose 73.40% to Rs.312.83 cr. in Q1FY09 as against Rs.180.41 cr. in Q1FY08. The company has orders worth over
Rs.2000 cr. Its strong order book position will enable the company to achieve healthy growth in terms of turnover and
profitability in coming years.
FY09 estimated EPS is likely to be around Rs.30. The stock has reacted from its high of Rs.600 and looks attractive at
Rs.210 level.
* Core Projects (Rs.218.60) is attracting informed buying by strong investors. Stay invested.
* Knowledgeable investors are accumulating the shares of Arrow Webtex (Rs.42.10).
* Jetking (Rs.331) has reported encouraging results for June 2008 quarter. Sales are up from Rs.7.39 cr. to Rs.11.25 cr. PBT
shot up from Rs.2.9 cr. to Rs.5.37 cr. and net profit shot up from Rs.2.36 cr. to Rs.3.51 cr. It declared interim dividend of
50% on increased capital, which works out to 100% on the old capital.
Investors can continue to hold this stock. It has outperformed the market in the last 8 months. There is indication of good
times ahead.
* There is unconfirmed news that ECE industries (Rs.279.40) may enter into power projects. Stay invested.
* Results of Revathi Equipments (Rs.870) are below expectations. If stock reacts to Rs.800 level, it is good for
accumulation as long-term outlook is encouraging. There are indications of new developments in the company.
* Hindustan Dorr-Oliver's (Rs.102) net profit for Q1FY09 increased by 74% to Rs.6.1 cr. from Rs.3.5 cr. in Q1FY08 while
sales were higher by 55% at Rs.84 cr. Long-term outlook is very encouraging. The stock is a strong choice for every
portfolio for good long-term growth.
* Grauer Weil (Rs.94.85) has bounced back from its recent low to the current level of Rs.94. Stay invested. There are talks
of a merger with Bombay Paints as per informed sources.
* Rishi Laser (Rs.67.70) is under accumulation by smart investors. The company has incurred good capital expenditure
over the last few years and has developed a strong manufacturing base at various locations, the benefit of which will
come over the next few years.
Note: Many stocks, which were recommended in this column have flared up over the last few days. Andhra Sugar rose
from Rs.75 to Rs.115, Kesar Enterprises from Rs.55 to Rs.88, Sakthi Sugar from Rs.65 to Rs.112, Hind Dorr-Oliver from
Rs.75 to Rs.106, TRF from Rs.580 to Rs.800, Elecon Engg. from Rs.80 to Rs.128 and Jetking from Rs.270 to Rs.370.
Investors are advised to stay invested in good sugar stocks for further gains.
Nifty has closed above 4500 for the last five days and the upmove is broad based. Future moves will depend on crude
prices. If crude remains stable around $110/120 level, we may see a further upmove.
By V. H. Dave
EXPERT EYE
Panama Petrochem Ltd. (PPL) (Code: 524820) (Rs.139) is a leader in the speciality oil industry, which is expected to grow
along with the economy. The rising demand from user industries like mining, telecom, power, textiles, pharmaceuticals
and cosmetics is likely to drive the demand for PPL's products in the long-term. It has produced excellent results in
Q1FY09 by notching an EPS of Rs.14.8 in Q1 alone.
PPL supplies its products to a wide range of industries including pharmaceuticals, inks, cosmetics, textiles, power and
will very soon foray into telecom and mining, which are high growth industries.
12
PPL currently manufactures ink & rubber oil, coning oil, lubricating oil, petroleum jelly, paraffin wax and transformer oil.
Currently, the ink and rubber oil segment contributes 48% of total revenue whereas transformer oil contributes 2% of the
total revenue.
It is already supplying its products to leading global players like Micro Inks (global leader in inks), Sakata Inks, Bayer
Cropscience, E Merck etc. and has proved its products capabilities.
PPL's product portfolio is also supported by strong R&D back-up. It is now foraying into high growth and high margin
products like mining oil, transformer oil and cable jelly oil, which is likely to drive its topline and bottomline growth for
FY09-11. These high growth products because most of these products would be import substitutes or
monopoly/oligopolistic products.
During FY08, PPL's sales advanced by 20% to Rs.234 cr. and net profit by 41% to Rs.14.8 cr. and its EPS stood at Rs.34. A
dividend of 40% was paid. During Q1FY09, sales grew by 98% to Rs.98 cr. and net profit by 84% to Rs.7 cr. while the
quarterly EPS stands at a whopping Rs.14.8.
PPL's equity capital is Rs.4.8 cr. and reserves of Rs.45.9 cr. give the share a book value of Rs.106. The promoters hold 39%
in its equity, NRI holding is 3.5%, PCBs hold 17.3% leaving 40.2% with the investing public.
PPL plans to set up a new facility at Uttarakhand with an installed capacity of 90,000 MT by March 2009 taking the total
installed capacity up by 178% to 159,000 MTPA from 57,000 MTPA in FY07. Currently, PPL is operating at 80-85%
capacity and plans to manufacture the new products once the new capacity is in place.
The Indian economy is growing at 8-9% p.a. and is likely to continue growing at this rate for the next 3-5 years. With
heavy investments in industries like mining, power and telecom industries PPL would be indirect beneficiary of these
investments.
PPL's traditional products like ink oil and coning oil can grow at a CAGR of 25% and 60% respectively over a period of
FY09-11 and its new products like mining oil, transformer oil and cable jelly oil would contribute approximately 8-12%
each to its FY11 net revenue.
During FY09, its sales are expected to touch Rs.350 cr. with a net profit touching Rs.25 cr., which would give an EPS of
Rs.52. The PPL share is currently traded at Rs.139 at a P/E of 2.7 on its FY09E EPS of RS.52. The share is recommended for
medium-to-long-term with a target price of Rs.225, which would give over 60% returns. The 52-week high/low of the
share has been Rs.270/98.
******
The shares of Tulsyan NEC Ltd. (TNEC) (Code: 531629) (Rs.119) are being accumulated by shrewd investors in fairly
large quantities. The grapevine has it that TNEC is faring exceedingly well and may post a scorching EPS of Rs.75 in FY09
going by the Q1 earnings. Its expansion has now started yielding results.
Incorporated in 1974 as National Engineering Company, TNEC manufactures rolled steel products and tapped the capital
market in 1994 for implementing a modernisation-cum-expansion project. Its steel products include finished steel (84,000
TPA), MS Ingots (36,000 TPA) and MS billets (72,000 TPA). The company later diversified into the manufacture of
packaging products such as HDPE/PP woven sacks and flexible intermediate bulk containers (17,500 TPA).
TNEC created additional capacities both in steel and plastics. A rolling mill with a production capacity of 1,50,000 MTPA
was installed at Gummundipoondi, Tamil Nadu and commercial production commenced from July 2007. Its steel
products are used in the construction sector and the full effect of this expansion will be realised from this fiscal onwards.
The company's products, steel and TMT bars find application in Housing & Construction, Power, Defence & Railways. Its
packaging products find application in the Cement, Sugar, Foodgrains, Chemicals & Fertilisers and other bulk packaging
requirements.
The capacity expansion of 10,500 MTA in the Plastics Division comprising FIBC, PP Bags and Fabrics in Bangalore,
Karnataka, is in progress was completed and commercial production started in September 2007. TNEC has spent Rs.21 cr.
on these expansions.
During Q1FY09, TNEC's net profit jumped by a whopping 267% to Rs.9.9 cr. on 118% increased sales of Rs.211 cr. while
the EPS was Rs.20. During FY08, sales moved up by 24% to Rs.534 cr. and net profit by 118% to Rs.13.34 cr.
TNEC has a small equity of Rs.5 cr. and with
reserves of Rs.41.3 cr., the book value of its
share works out to Rs.93 making it a bonus
candidate. The promoters hold 64.8% in its
equity capital, foreign holding is 1.8%,
Institutions/mutual funds hold 1%, PCBs
hold 4% leaving 28.4% with the investing
public.
During FY08, TNEC's exports were around
Rs.55 cr., which was 10% of net sales. The
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company is making every effort to increase exports to 15% of sales.
Its subsidiary, Tulsyan Power has entered into a MoU with Power Trading Corporation for developing a 125 MW power
plant in Tamil Nadu. Recently, it signed a MoU with Suhayl Abdul Mohsin AL-Shoaibi & Sons Holding Company, Saudi
Arabia, for proposed steel plant of 5,00,000 TPA in Saudi Arabia.
The booming economy leading to massive investments in roads, ports, airports, railways, power and housing & retail
construction give increased visibility to TNEC's revenue and profitability. With almost 3 decades in the industry, it has
earned a good name for itself and with the enhancement in its production capacities, it is well-poised to cater to a bigger
market.
Going forward, steel prices are expected to remain firm on the back of a healthy demand scenario while the consolidation
process is expected to gain further momentum.
During FY09, TNEC's sales are expected advance by 50% to Rs.800 cr. and net profit by 100% to Rs.37.5 cr. This would
give an EPS of Rs.75. At the CMP of Rs.119, the share is trading at a P/E of 1.7 on its FY09 estimated EPS of Rs.75. A
conservative P/E of even 3 would take its share price to Rs.225, which would fetch an appreciation of over 80% in the
medium term. The 52-week high/low of the share has been Rs.143/58.
******
Vardhman Industries Ltd. (VIL) (Code: 513534) (Rs.31.85) has posted excellent Q1FY09 numbers, which went unnoticed
by the market. It has posted a net profit of Rs.4.3 cr. leading to Q1EPS of Rs.5.4 and could post an EPS of Rs.15 for FY09.
Dealers say, the shares are attractively priced and can be brought as VIL's major expansion & diversification was
successfully completed last year.
VIL, formerly Vardhman Steel, is engaged in the manufacture of steel ingots, GP/GC Coils/Sheets and Oxygen Gas. It is
also into galvanisation of ERW Pipes. Mr. Kapil Jain heads the company.
VIL performed remarkably well in FY08 in line with the encouraging trend in the steel industry. It posted 17% higher
sales at Rs.330 cr. and recorded 653% higher net profit of Rs.9 cr. over FY07 leading to an EPS of Rs.11.3. During Q1FY09,
it achieved 65% higher net profit of Rs.4.3 cr. on 15% increased sales of Rs.86 cr. as compared to Q1FY08.
Earlier, VIL's 10 MW power co-generation plant was also commissioned successfully at Jamshedpur in Jharkhand and
production has started. It has also successfully commissioned a colour coating plant at Rajpura (Punjab) with a capacity to
manufacture 41,250 MTPA coloured coated steel/aluminium sheets.
VIL's steel melting shop (SMS) with a capacity to manufacture 68,000 MTPA of billets at Jamshedpur will also contribute
to sales now.
VIL's equity capital is Rs.8 cr. and with reserves of Rs.42 cr., the book value of its share works out to Rs.62.5. The
promoters hold 60% stake in its equity capital leaving 40% with the investing public.
Coming to future prospects, the iron & steel industry, as a whole, has staged a major turnaround on the back of improved
demand from the user sector and firming up of product prices. The steel industry, as a whole, continues to witness
buoyant trends. The overall increase in its production capacity, its diversified product mix and expected economies of
scale on the back of highly responsive market conditions give visibility to VIL's encouraging outlook and substantial
growth in operating performance.
After its expansion and launch of new products, VIL's sales are moving up steadily and the co-generation power plant
takes care of its power requirement and also results in substantial reduction in its power costs. This, in turn, will push up
its profits sharply.
Based on the current going and the future prospects of the steel industry, VIL is likely to register an EPS of Rs.15/16 for
FY09, which can move up to Rs.20 in FY10 thus, the VIL share is available at a forward P/E of just 2. Investment in this
share may yield an appreciation of more than 50% in 6 months and 100% in the medium-to-long-term. The 52-week
high/low of the share has been Rs.54/18.
14
By Nayan Patel
TECHNO FUNDA
Kulkarni Power Ltd.
BSE Code: 505299
Last Close: Rs.72
Kulkarni Power Ltd. (KPL) is a 31-year old Kolhapur based
company. Its equity is just Rs.1.70 cr. while reserves are Rs.12 cr.
Promoters hold 44.25% stake in the company, corporate bodies hold
11.83% and the Indian public holds 43.91%.
KPL's long client list includes Reliance Industries, Larsen & Toubro,
Crompton Greaves, Siemens, BHEL, Bieco Lawrie and many more.
Review
- A week ago we recommended Bihar Caustic cum
15% dividend at Rs.66.95. Thereafter, the stock
kissed Rs.76.95 ex-dividend.
- Last week we recommended Panama Petrochem
at Rs.127. During the week, the stock zoomed up
to Rs.146.
In June 2008 quarter, the company declared marvellous results. Its net profit jumped Rs.1.86 cr. against Rs.36 lakh up by
417% on a quarter to quarter basis. KPL has recorded an EPS of Rs.5.47 in Q1FY09. Full year FY09 EPS may be Rs.20-22.
Against this yearly estimated EPS, the stock is available at P/E ratio of just 3.2.
This is an investor friendly company. Every year, the company reported excellent growth in sales and profit and
increased the dividend year by year. Last year, the company paid 30% dividend.
Buy with a stop loss of Rs.65. On the upper side, the stock will go up to Rs.86 level in the short-term and will cross Rs.100
mark in the medium-term. If we apply a P/E ratio of 7, then its share price can double from the current level. It is the best
stock for investors.
Resurgere Mines & Minerals IPO opens on 11
th
August
MONEY FOLIO
Resurgere Mines & Minerals India Ltd., an ISO 9001:2000 and ISO 14001:2004 company, engaged in the business of
extracting, processing and sale of mineral products and exploration and development of mining assets, proposes to enter
the capital markets with a public issue of 4,450,000 equity shares of Rs.10 each through 100% book building process in the
price band of Rs.263 to Rs.272 per equity share. The issue opens on Monday, 11 August and closes on Wednesday, 13
August 2008. The IPO has been graded 1/5 by Crisil signifying poor fundamentals in relation to listed companies and will
be listed on the BSE and NSE.
Presently, the company's extraction and processing activities for its product range, which includes various forms of iron
ore such as lump ore, Size ore, Calibrated Lump ore (CLO) and iron ore fine etc. and bauxite at its existing mining
locations in Orissa are outsourced to various service providers. In order to reduce its operational costs and to increase its
volumes, the company intends to deploy its own machinery, labour and other material resources at the existing mining
location as well as at newer mining location that it purports to undertake. To facilitate easy movement of its products, it
also proposes to acquire six railway rakes for providing them to the railways under the Wagon Investment Scheme.
The company proposes to utilise the net proceeds of the issue to part finance its plan for purchases of Plant & Machinery
valued at Rs.128.6 cr. for setting up of its own extraction and crushing facilities at the mines and purchase of six railway
rakes worth Rs.116.4 cr. to set up own logistics infrastructure facilities, besides meeting margin money requirement for
working capital. It proposes to part finance the cost through term loans of Rs.86 cr. to be raised from banks, Rs.43 cr.
through Private Equity funding from Merrill Lynch International and Rs.13.73 cr. through pre-IPO allotment. Merrill
Lynch International holds 3,000,000 equity shares, India Business Excellence Fund-I holds 910,000 equity shares, IL&FS
Trust Co. Ltd. (Trustees of Business Excellence Trust-India Business Excellence Fund) hold 402,500 equity shares, Mr.
Motilal Oswal hold 250,000 equity shares and Mr. Raamdeo Agarwal holds 200,000 equity shares in the company.
Its Operational Income grew by 145% from to Rs.403 cr. in FY08 from Rs.164.2 cr. in FY07. The net profit rose by 19% to
Rs.66.56 cr. from Rs.30.36 cr. in FY07.
Khadim India Ltd. plans IPO
Kolkata based Khadim India Ltd., the 3
rd
largest footwear retailer with 290 retail outlets and turnover of Rs.198.5 cr., plans
to enter the capital market with 55 lakh shares of Rs.10 each through the book-building route at a price band to be
determined later.
The issue is being made to fund the companies new footwear stores, large format lifestyle stores, setting up a Central
Distribution Centre in Kolkata, upgrade its IT infrastructure and general corporate purpose.
The IPO has been graded 'IPO grade 2' and will be listed on the BSE and NSE.
Obopay & Grameen Solutions partner to bank a billion
Obopay Inc., the pioneer service provider for payments via mobile phones, and Grameen Solutions, the company globally
recognised for promoting economic and social development through information and communications technology have
forged an unique alliance to use mobile technology to deliver banking services to a billion of the world's poorest people
by 2018.
The 'Grameen-Obopay Bank A Billion' initiative will provide access to affordable financial services, including cross-
border remittances, money transfer, payments, savings and credit accounts. By empowering life and work endeavors with
mobile technology that is ubiquitous even in the most impoverished and remote corners of the world, Grameen-Obopay
are bringing the full power of banking to those who need it most.
Satra Properties Q1FY09 net up by 56%
Satra Properties (India) Ltd., a company into real estate & mall development has presented encouraging results for
Q1FY09. Its standalone income has gone up by 264% to Rs.100.08 cr. from Rs.27.53 cr. in Q1FY08 and net profit has shot
up by 56% to Rs.7.66 cr. from to Rs.4.92 cr. in Q1FY08.
The company has acquired around 15 acres of prime property in Bhopal through a special purpose vehicle (SPV) in which
Gammon India Ltd. has 51% stake and Satra Property Developers Pvt. Ltd., its wholly-owned subsidiary, has 26% stake,
15
for developing shopping malls, street shops, commercial offices, food courts, five star restaurants, amusement parks, a
snow park with modern & high end amenities.
Speciality Papers' total income up by 128%
Speciality Papers Ltd. has reported 128% higher income for Q1FY09 at Rs.28.54 cr., compared to Rs.12.50 cr. in Q1FY08
and net profit at Rs.42.90 lakh from Rs.41.24 lakh in Q1FY08.
The reserves of the company rose to Rs.1148.37 lakh against the paid up equity share capital of Rs.384.08 lakh. During the
quarter, the company has allotted bonus shares in the ratio 1:1.
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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