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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 40 Monday, August 18 - 24, 2008
Pages 17
Markets rangebound negatively
unless some positive cues emerge
By Sanjay R. Bhatia
The markets displayed a rangebound trend with a negative bias during the last truncated trading week. Occasional bouts
of volatility and choppiness were witnessed as the markets witnessed profit booking and selling pressure at higher levels.
Traders and speculators were seen booking profits at regular levels and also going short. Incidentally, FIIs remained net
sellers in the cash as well as derivative segments. Mutual Funds, however, remained net buyers supporting the markets at
lower levels.
The global cues have remained negative. Crude oil prices
once again flared up on the back of low US inventory data
and the strengthening of the US dollar. The US markets
remained weak on renewed credit concerns and the weak
consumer confidence due to inflationary pressures. SEBI at
its meeting announced a few changes like reducing the
timeline for rights issue from 109 days to approx. 43 days
and the pricing of QIP to be made on the basis of the average
price of two weeks. But it remained undecided on the P
Notes issue, which was against market expectations. The
Prime Minister's Economic Advisory Council's estimates
that the economy would grow by 7.7% during the current
fiscal lower than the recent RBI forecast of 8% on back of the
high interest rates triggered by the rise in crude prices,
commodity prices and the global market turmoil.
1
With no domestic triggers, the markets have been languishing in a trading range. Now, it is important that participation
improves. The markets continue to remain tentative at higher levels due to lack of confidence and follow-up buying at
higher levels. In the meanwhile the markets would continue to take cues from the global markets, crude prices and of
course the domestic inflation rates. The markets are likely to remain rangebound with a negative bias unless some
positive cues emerge. Stock specific action will be witnessed amidst intermediate bouts of volatility and choppiness
On the upside, the Sensex faces resistance at the 15000, 15332 and 15699 levels but has support at the 14677 and 14141
levels. On the upside, the Nifty faces resistance at the 4482, 4647 and 4899 levels while 4108 and 4074 are its important
support levels.
Investors should abstain from taking long positions.
Market in lighter vein!
By Fakhri H Sabuwala
Have you heard of Laughter Therapy propagated by the Laughter Club? Have you experienced it? If not, visit a garden or
a park early morning and you will see, hear and feel the hearty laughter of a group encircled. Young and old laugh away
to glory destressing themselves to relax.
This is also the scene in the dealing rooms at brokerages. Traders and brokers are finding a false sense of solace in such
laughter therapy as they shrug off the bear hug. They share their feelings and agony through the latest market lexicon on
SMS. No need to remind you of the Raj Kapoor film 'Mera Naam Joker', which underscopes the facts that it is the clown
who has the heaviest heart. Little wonder, only such persons can wear a smile on their face and tickle your ribs knowing
fully well that real life is far from being funny.
'God never fails' reads a board at the entrance to a church. A smart investor added 'Ask him to try trading in Nifty
Futures!'. This is no cruel joke but the stark truth. Would you believe a smart speculator suggesting the inclusion of the
Sensex and Nifty in the Wholesale Price Index (WPI), which is a measure of inflation? At least their addition will cool the
flames of inflation!
Reduced workload in the dealing rooms gives way to an idle mind as cuts in jobs and salaries shows up. With trading
volumes at one-fourth of the good old days breaking even on a daily basis is a distant possibility. Even the ideas of
investment are changing. HNIs are not in a mood to churn their holdings. Possibly, they are sitting on a huge chunk of
worthless paper and are strapped for cash. The small fries are into intra-day trading and losing patience holding on to
their stocks. The trigger of stop losses is drying up their meagre resources.
Who is listening to the sound advice emitting from the research reports? Each one of us is focused on protecting our
capital rather than chase outsized returns. Will any prudent investor listen to the age-old advice in a bear market? Where
is the money? Even if you have it, where is the trust and confidence? Most of us know that many of the stocks that we
own are unlikely to participate in the next round of the bull run. And who shall roll the dice? The time is not to add to
your agony but learn and capture valuable insights circulating in the market. Take it with a pinch of salt, for the author is
compiling a key to abbreviations at Dalal Street. Here are few of them for you to ponder:
P/E: Plunge Endless
EBIDTA: Exit before it tumbles down
QIB: Quixotic Indian blunder
HNI: Has no idea
FII: Furious Impoverished Investors
PMS: Pre Meditated Schemes
SIP: Suicide by investing patiently
Investor: Someone who is broke
Broker: Worse than an investor
Correction: Something that begins on your buying a scrip
Fund Manager: Last year's ace stock picker, now locked up in an asylum
Momentum buying: Fine art of buying high and selling low
Value buying: Art of buying low and selling even lower.
Uptrend in question
By Hitendra Vasudeo
The key support mentioned in the last issue was almost
tested last week. The low registered last week was 14686.
Last week, the Sensex opened at 15430.31, attained a high
at 15579.78 and fell to a low of 14686.66 before it finally
closed the week at 14734.29 and thereby showed a net fall
of 433 points on a week-to-week basis.
As a result of last week's movements, the Sensex has
formed a Dark Cloud Cover candlestick pattern on the
weekly charts. On the daily chart on 12 August 2008, the
Sensex formed an Engulfing Bear candlestick pattern. Both
these patterns have bearish implication. After such
pattern formations, the preceding rise has come to a halt
and only on a breakout and close above the peak of these patterns can an upward trend resume. Expect a correction of the
last corresponding rise or a fall down to test back the lows. The high of both the Engulfing Bear on daily chart and Dark
Cloud Cover on the weekly chart is 15579. This means that a rise and close above 15580 is needed to resume the uptrend.
A fall and close below 14500 on weekly charts can take the Sensex back down to 12514.
TRADING ON TECHNICALS
2
After a bearish candlestick pattern on weekly charts, sometimes we get a pull-back and we could even get a Piercing Line
pattern, which has a bullish implication. But if the high is not crossed and the close is below it, then it might not serve the
purpose of the bulls. In that case, it will be a pull-back rise to the last immediate fall. In our case, it is from 15579. Pull-
back to 15167-15579 can be used to exit long positions and to sell. A breakout and close above 15580 is the first minimum
requirement, next requirement will be a close above 15789 and 15838.
If we see a further close above 15422, then we can look for a 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.
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 15579 (valid till 13727 is not violated)
If that holds, then the logical target can be 17964-20568, which is the 5
th
Wave failure range targets.
Normal Count
Wave I-2594 to 3758
Wave II-3758 to 2904
Wave III- Internals as
follows:
WEEKLY UP TREND STOCKS
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- 8799 to 21206
Wave W-21206 to 14677
Wave X-14677 to 17735
Wave Y- 17735 to 12514
Wave X- 12514 to 15579
(current ongoing move -
will seek confirmation of
the intermediate top this
week)
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 level
of 17892.
Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy
with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to
Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value
then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal
of the up Trend.
Last
Center
Relative
Weekly
Up
Close
Point
Strength Reversal Trend
Scrips
Level 1 Level 2
Level 3 Level 4
Value
Date
Stop
Loss
Buy
Price
Buy
Price
Book
Profit
Book
Profit
CASTROL INDIA
314.15 278.2
301.6
312.5
325.0
348.4
72.0
293.4
18/07/08
SPICE COMMUN
74.50 72.0
73.7
74.5
75.3
77.0
68.9
74.1
08/08/08
LUPIN
742.00 682.7
724.7
749.3
766.7
808.7
68.7
732.5
11/07/08
STERLING INT'L.
330.85 291.2
319.2
335.6
347.2
375.2
68.6
325.0
25/07/08
CIPLA
233.45 208.2
224.6
232.2
241.0
257.4
68.2
228.4
11/07/08
WEEKLY DOWN TREND STOCKS
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
PARSVNATH DEVE 117.40
95.0
111.5
122.2
128.0
144.5
23.83
119.85
14/08/08
INFRA DEV FINAN
96.20
76.0
91.0
100.9
106.1
121.1
26.04
98.19
16/05/08
AMTEK AUTO
189.55
161.4
180.1
189.4
198.9
217.6
29.10
196.50
16/05/08
HCL INFOSYSTEM 118.90
102.8
114.7
122.3
126.6
138.5
29.76
123.80
01/08/08
UNITED BREW.
277.30
240.7
267.2
283.6
293.7
320.2
30.73
289.27
14/08/08
3
Another overall count
structure can be as
follows:
PUNTER'S PICKS
Wave I- 2594 to 3758
Wave II- 3758 to 2828
Wave III- 2828 to 21206
Internal of Wave III
Wave 1-2828 to 3416
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
KALE CONSULTANTS
532268
44.25
42.50
47.00
41.75
50.2
55.5
2.40
MARICO
531642
62.70
59.10
62.95
57.50
66.3
71.8
0.70
Wave 2- 3416 to 2904
Wave 3-2904 to 6249
Wave 4- 6249 to 4228
5
th
Wave in Extension
Wave 5 from 4228 to 21206
Internals of Wave 5
Wave i- 4228 to 6954
Wave ii-6954 to 6069
Wave iii-6069 to 12671
Wave iv- 12671 to 12316
Internals of Wave iv
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 15579 (current ongoing move)
Wave V can rally towards 17892-20596 provided 13727 is not violated.
Conclusion
A weak candle last week puts a question mark for a further uptrend.
Strategy for the week
Exit long positions at 15167-15579 as the opportunity arises.
* India Glycols' profit for q1FY09 was affected due to the planned shut down for 21 days for debottlenecking and change
of catalyst. Accumulate at sharp declines.
TOWER TALK
* Selan Exploration has been granted the long awaited mining lease for the Ognaj oilfield. But don't rush to buy. Buy
during correction.
* Core Projects' scrip has shot up on news that it will soon be included in the F&O list. Exit now and buy later.
* SAAG RR has bagged a huge order from ONGC for the second time and is looking to raise capital through preferential
allotment. Catch it, if you can.
* It appears that Panama Petro and Balaji Amines have been able to pass on the rise in input costs as both have reported
fantastic results for the June 2008 quarter. Worth a punt at current levels.
* Hyderabad Industries posted an EPS of Rs.22.7 for Q1FY09. With further expansion to be completed in Q3FY09, it is all
set to post an EPS of Rs.35 for FY09. Marketmen expect the share price to cross Rs.300.
* Visaka Industries has posted Q1FY09 EPS of Rs.9. Going by the trend; an EPS of Rs.28 can be expected. The share is
poised to touch Rs.100.
* Supreme Infrastructure is doing well with Q1FY09 EPS of Rs.7 and company circles expect an EPS of Rs.30 for FY09.
The share can easily touch Rs.100.
* With 7% equity stake by Patel Engineering, KNR Constructions is all set to garner an EPS of Rs.18 in FY09 and Rs.26 in
FY10. Some analysts recommend share with a target price of Rs.120 in the long term.
* Mazda Industries is likely to post an EPS of Rs.22 on its small equity of Rs.4.3 cr. The share is heading towards the 3-
digit mark.
* Ador Fontech is expected to clock am EPS of Rs.35 in FY09. The share can appreciate by at least 40%.
* Circles close to the management of Sudarshan Chemicals expect a liberal bonus and an EPS of Rs.22.
* Inside sources say that Micro Technologies is doing well with its undergoing expansion. EPS of Rs.75 is expected. The
share is good for long-term and can fetch 100% return.
* Kamanwala Housing is a good buy as it is cum bonus 1:1 and is available at low P/E.
4
* MSP Steel's expansion plans include steel, thermal power and cement plants in MP and Chattisgarh. Stock looks
attractive at current levels from a medium-term perspective.
* VST Tillers prospects look bullish with a good monsoon in the South and government thrust on agri business. It is a
debt-free company and is a good small cap play with limited downward risks.
* China has cut down on chemical production in view of the Olympic Games. Indian chemical companies are reportedly
receiving large orders that will continue till end of the year.
5
By Saarthi
BEST BETS
Vivimed Labs Ltd. (Code: 532660)
Rs.75
Incorporated in 1989, Vivimed Labs Ltd. (VLL) is a speciality chemical manufacturer focused on the Home and Personal
Care (H&PC) segment. Its extensive range of speciality chemicals cater to segments like oral care, sun care, skin care, hair
care, natural extracts, preservatives, anti-microbials, anti-oxidants, anti-aging molecule etc. In short, the company's
primary strength is in synthetic organic chemistry. Also, VLL is the worlds 2
nd
largest manufacturer of Triclosan - an
antibacterial used for oral care and one of the top three companies for Avis – a chemical, which improves UV absorbing
ability of Sunscreen. Of late through acquisition of Creative Health Care and merger of associate company, VVS
Pharmaceuticals Pvt. Ltd., VLL has entered into the speciality pharma business as well. Today, VLL is an active player in
CRAM (Contract Research and manufacturing) segment providing vendor partnerships ranging from molecular research
to collaborative manufacturing. It holds a unique position in the international H&PC industry with supply-chain
relationships with global leaders including - Unilever, L'Oreal, Procter & Gamble, Johnson & Johnson etc. Having
exclusive tie-ups with global logistics companies, VLL offers shipment, warehousing, redistribution and door delivery
services to large global majors. It has a global network of offices, representatives and distributors across America, Europe,
Far East and the Asia Pacific region.
VLL has two speciality chemicals plants – one in Bidar (Karnataka) and the second in Hyderabad (AP). Apart from these,
it has three other pharmaceutical finished dose plants one each at Hyderabad (AP), Kashipur (Uttaranchal) and Haridwar
(Uttaranchal) where it manufactures all types of solid oral, liquid orals, tropical applications, small volume parenterals,
cytotoxic etc. As the demand for end products in H&PC industry (like skin care, hair care, oral care products) is growing
substantially, VLL is witnessing robust demand for its chemicals. It has been constantly expanding its capacity and has
chalked out a capex plan for coming years as well. It has already bought land in Uttranchal for a greenfield expansion and
another 23 acres in Hyderabad to set up state-of-the-art R&D centre and a pilot plant. Meanwhile, its CRAM division is
focusing on exploring joint ventures/strategic alliances with manufacturers and IP companies in the speciality chemicals
sector to partner in areas ranging from
custom synthesis to commercial
production.
It
offers
contract
manufacturing services from less than 1
metric tonne to more than 100 metric
tonnes. On the other hand, its R&D
section is busy in researching and
collaborating for creating new drug
delivery systems with special thrust on
anti-obesity dieting products, anti-
arthritic drug, anti-wrinkler, anti-
oxidant, anti-cancer drug and anti-acne
products. Notably, it has undertaken
new formulations in urinary disorder
and psoriasis treatment and the results
are very encouraging.
VLL is also growing inorganically and
has recently acquired 100% stake in
M/s. James Robinson, UK, which is an
international
manufacturer
and
supplier of speciality chemicals used in
hair dyes, pharmaceuticals and
photographic
films/prints
to
ophthalmic
sunglasses.
With
manufacturing plants in UK, Germany
For F&O Traders
Profitrak Daily Fresh Futures
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How a 'Buy' is decided?
'Fresh Buy' as per our trading signal. But the trading signal must be
supported by increase in open interest and volumes and the candle
movement (Close>Open) is positive. The stock with the highest relative
strength will be selected as the daily fresh buy from the F&O segment.
2) Follow up on an earlier Uptrend or 'Buy'. These stock futures remain
in an uptrend till the prices are above the Daily Reversal Value.
3) Exit Long position indication
4) One Sell Per Day (if available as per our 'Sell' criteria)
5) Follow Up of earlier Downtrend or 'Sell'
6) Exit Short indication
Subscription: Rs.4000 per month.
Visit www.moneytimes.in for sample copy.
For further details contact us on 022-22654805 or email us at
NEW
and India, James Robinson (now a 100% subsidiary of VLL) offers a novel range of photochromic dyes for a wide variety
of applications including ophthalmics, plastics, coatings and inks, and fluorescent dyes for both textile and non-textile
applications. To fund the acquisition and expansion plan, VLL has raised roughly Rs.60 cr. through FCCB of US $15
million in June 2007 to be converted at Rs.185 per equity share. Not a single FCCB have been converted as on date and
even after lowering the conversion price chances of conversion are less. For FY08, on a consolidated basis, VLL reported a
turnover of Rs.181 cr. with PAT of Rs.16 cr. i.e. an EPS of Rs.17. Considering its Q1FY09 results and acquisition of the UK
company, VLL is expected to post consolidated sales of more than Rs.225 cr. with net profit of Rs.17 cr. This will lead to
an EPS of Rs.18 on its current equity of Rs.9.40 cr. whereas its diluted EPS works out to Rs.13 on its diluted equity of
Rs.12.65 cr. Investors are strongly recommended to buy at current levels with a price target of Rs.110 within 12 months.
Tantia Constructions Ltd. (Code: 532738)
Rs.70
Established in 1964 in Kolkata, Tantia Construction Ltd. (TCL) has gradually evolved over the years from a railway
construction company to a full-fledged infrastructure company executing diversified projects. Today, it has presence in
roads and highways, railways, tunnels, bridges & flyovers, urban infrastructure, sewage & drainage, civil & housing
construction etc. Lately, the company has also ventured into the lucrative marine infrastructure space, power
transmission & distribution and aviation infrastructure. It is among the few companies that has very strong domain
expertise in servicing the Indian Railways – earthwork, ballast, rail-track linking and welding, bridges, tunnels,
electrification and signalling. In fact, TCL is among the five Indian companies capable of providing 'foundation-to-finish'
for mega railway bridges spanning 2 km or more. Importantly, TCL has very strong presence in the eastern and north-
eastern region, which gives it an edge as very few players are interested in bidding for these regions due to the difficult
terrain. The company's expertise can be evaluated by the fact that it has constructed over 250 km of roads in the hilly
areas of Mizoram, coastal areas of Kerala, plains of Punjab/Haryana and the plateaus of Karnataka. On the power project
front, the company has garnered the capability of in-house manufacturing and erection of transmission towers within a
very short time. Incidentally, the company has an impeccable track record of completing every single assignment since
inception.
In recent years, TCL has executed various prestigious and large scale projects in West Bengal, Assam, Bihar, Uttar
Pradesh, Tamil Nadu, Kerala, Mizoram and in neighboring countries like Bangladesh, Nepal and Bhutan. As more than
90% of its revenue comes from government projects, it caters to several government bodies including Indian Railways,
Kolkata Metro Railway, NHAI, State PWD, Central PWD, State Electricity Boards, HIDCO, KMC, Airport Authority of
India apart from NTPC, Ircon Int'l., SAIL, RITES, IOC etc. It enjoys excellent business relations and contacts with the
central and state governments leading to repeat orders, extension of projects of a higher value and a listing as a preferred
partner. Presently, TCL has a diversified and an order in hand position of more than Rs.1000 cr. to be executed in the next
24 months. Of these, road projects account for 45%, Railways: 20%, urban infrastructure: 25% and others: 10%. Thus, the
company has strong revenue visibility in coming years.
Going forward, TCL plans to bid for bigger projects in the power transmission segment as it has executed several power
projects and is qualified to bid for the same. Shortly, the company intends to foray into BOT & BOOT projects to boost its
margins. It also intends to bid for airport projects in non-metro cities. To cash in on the boom in civil construction, it is
also contemplating to foray into real estate development. As a long-term strategy, TCL intends to enter the logistics sector
by constructing and owning warehouses at strategic locations across India. Water treatment, solid waste management and
sewage treatment are also being considered to widen its work profile.
In March 2006, TCL came out with an IPO of 1.125 cr. of equity shares at Rs.50 per share with net public offer of 42.50 lakh
shares. The issue was oversubscribed by a whopping 83 times. Ironically, against its high of Rs.310 in 2006, the scrip
hardly finds any buyers now at Rs.70. In fact, it hit an all time low of Rs.56 in July 2008 although its fundamentals have
improved considerably in the last couple of years. For FY08, its revenue jumped up 50% to Rs.362 cr. and PBT increased
by 30% to Rs.20 cr. However, due to higher tax provisioning, it's PAT improved by only 15% to Rs.15.40 cr. recording an
EPS of Rs.10 on its equity of Rs.15.60 cr. It declared a lower dividend of 15% against 20% in FY07. For Q1FY09, it recorded
40% rise in the topline as well as bottomline at Rs.99 cr. and Rs.5 cr. respectively. Hence for full FY09, it may clock a
turnover of more than Rs.450 cr. with profit of Rs.20 cr. i.e. an EPS of Rs.12 on its diluted equity of Rs.16.30 cr. Recently,
the company raised around Rs.30 cr. through the FCCB route to be converted into equity at Rs.140 per share. But
considering the CMP, the possibility of conversion in this fiscal seems bleak, hence its diluted equity is not being
considered. Discounted at less than 6 times its FY09E EPS the scrip is available fairly cheap. Investors are, therefore,
recommended to buy it at current levels as its share price can double in 12-15 months.
ICSA (India) Ltd.: A good medium-term pick
ANALYSIS
By Devdas Mogili
6
ICSA (India) Ltd. is a 14-year old Hyderabad-based company established in 1994. It provides software development
services and technology solutions to the Power, Telecommunications and other sectors. Mr. G. Bala Reddy is the chairman
and managing director of the company.
The company's products include Distribution Transformer Monitoring Systems (DTMS), Theft Detection Device (TDD),
Intelligent Automatic Metre Reading (IAMR), General Automatic Metre Reading (GAMR), Computerised Online Data
Logging System (CODLS), Energy Audit Services, Pole Top RTU, Micro Remote Terminal Unit (MICRO RTU),
Multiplexer Unit (MUX unit) and Intelligent Automatic Water Reading (IAWR): Its latest offerings include Remote Street
Light Control System (RSLCS) and Agricultural Load Management System (ALMS).
The company has also forayed into metering solutions to Oil & Gas companies, which supply oil & gas through pipelines.
The products include Intelligent Cathodic Protection System (ICAP), Intelligent Telemetric Unit and Off PSP Logger
ICSA has developed innovative products for power utilities in energy management, energy audit and control applications
and provides a versatile data acquisition system using several communication media like GSM, CDMA, Satellite, Optical
fibre and RF.
However, the company's focus area has been technology solutions for the Power sector to identify Transmission &
Distribution (T&D) losses and monitor power consumption using the GSM network. The company has also introduced
the remote switching facility in keeping with the Power sector reforms. Its primary goal is to identify distribution losses,
which has been a major area of concern for power utilities. ICSA helps power utilities reduce their costs and streamline
their operations. Its remote sensing applications can transfer data from power points to the control room through
telephone lines and wireless including the GSM technology.
The company has adopted the latest embedded technology segment of the power sector. Power sector products like
Substation Controllers, Distribution Transformer Controllers, Automatic Metre Reading Systems etc. are successfully
deployed. Its remote monitoring application has numerous applications in a number of other sectors like Oil & Gas,
Mining, Irrigation, Transport and Water utilities etc.
The company has joint ventures with Oil India Ltd., in Guwahati, Assam, and Global Digital SDN, BDG, Malaysia. It has
technical association with the Indian Institute of Information Technology (IIIT) and has a subsidiary, ICSA International
PTE Ltd. in Singapore.
ICSA has entered into MoA with ECE Industries, New Delhi, to purchase all machinery and equipment along with
available drawings, designs and data of the energy metre plant of ECE Industries situated in Hyderabad. This transaction
would enable ICSA to manufacture the energy metres on its own capacity. This MoA also permits ICSA to use the brand
name of 'ECE' for a period of 6 months from the date of MOA. Thereafter, these energy metres shall be marketed under
the brand name of 'ICSA'.
Clientele: The company's clientele includes U.P. Rajkiya Nirman Nigam Ltd. (UPRNNL), Eastern Power Distribution
Company of Andhra Pradesh Ltd. (APEPDCL), APSPDCL, Kerala State Electricity Board (KSEB), CESCO, Madhya
Pradesh Paschim Kshetra Vidyut Vitran Company Ltd., Maharashstra State Electricity Distribution Company Ltd.
(MSEDCL), Nile Energy Engineering Projects (P) Ltd (NEEL), Transmission Corporation of Andhra Pradesh Ltd.
(TCAPL), Reliance Energy Ltd, Southco, Oil India Ltd., Ajmer Vidyut Vitran Nigam Ltd (AVVNL) and Elmarc Ltd.
Performance: For FY08, the company posted sales income of Rs.669.78 cr. with net profit of Rs.126.51 cr. netting a basic
EPS of Rs.32.01 (FV: Rs.10) and diluted EPS of Rs.26.69 (FV: Rs.10).
Financial Highlights:
(Rs. in lakh)
Latest Quarter: The company has come out with
very impressive results for Q1FY09. It recorded a
sales income of Rs.241.50 with net profit of
Rs.40.97 cr. registering a basic EPS of Rs.9.31 (FV:
Re.2) and diluted EPS of Rs.8.02 (FV: Re.2). Going
forward, the annualised basic EPS works out to
37.24 (FV: Re.2) and diluted EPS of Rs.32.08 (FV:
Re.2).
7
Financials: The company has an equity base of
Rs.8.80 cr. It has a debt equity ratio of 1.08 and
RoNW of 83.98% and RoCE of 60.75%.
Share Profile: ICSA has sub-divided the face
value of one equity share of Rs.10 each into five
equity shares of Rs.2 each w.e.f. 31/10/2007.
Accordingly, the basic and diluted EPS for
Q1FY09 has been considered on Rs.2 face value
and Rs.10 face value for the corresponding Q1FY08. The company's shares are listed and traded on the BSE under the
Particulars
Q1FY09
Q1FY08
FY08
Sales/Income from operations
24149.79
12263.44
66978.12
Other Income
50.77
34.52
727.87
Total Revenue
24200.56
12297.96
67705.99
Total Expenditure
17906.37
9023.33
46696.59
Inc/Dec in Stock
(1283.45)
(885.08)
(16.05)
Material Cost/Direct Exp
17392.49
9275.12
44932.82
Personnel Expenses
404.85
214.79
1064.62
Admn & Other Expenses
1392.48
418.50
3715.20
PBIDT
6294.19
3274.63
18009.40
Int & Bank Charges
584.91
219.87
1584.52
Depreciation
198.23
45.39
351.57
Profit Before Tax
5511.05
3009.37
16073.31
Provision for taxation
1414.14
616.92
3422.58
Profit after Tax
4096.91
2392.45
12650.73
Paid-up Equity share capital
880.17
682.07
880.17
Basic EPS (Rs)
9.31*
35.08**
32.01**
Diluted EPS (Rs)
8.02*
27.91**
26.69**
(* Face Value Rs.2, ** Face Value Rs.10)
Indonext (S) segment. Its share price touched a 52-week high/low of Rs.649/254. Currently, the share trades around
Rs.375 with a market capitalisation of Rs.1655 cr. It has a beta value of 0.9.
Dividends: The company has been paying dividends as shown below:
FY07 - 50%, FY06 - 30%, FY05 - 15%.
Shareholding Pattern: The company's promoters hold 18.47% while the balance 81.53% is held by non-corporate
promoters, financial institutions, mutual funds and the Indian public. Among mutual funds, Escorts Opportunities Fund
has added the share to its various schemes.
Prospects: The company has been aggressively concentrating on the Power sector by developing IAMR, DTMS, Sub-
station Controllers, TDD, Energy Audit Service, Software Development and Infrastructure for Power etc., which are
covered in the energy audit programme to control T&D losses.
ICSA is also developing innovative products like iCAP solutions for corrosion monitoring and control of storage tanks,
underground vessels, pontoons and foundation rebars for the Oil & Gas sector. It has also started concentrating on other
segments like the Water sector.
The company is also working on new areas like down-hole corrosion, drilling automation, oil wells automation and
exploration in the Oil & Gas sector. Furthermore, it is trying to enter into new sectors like mining automation, which is a
very big business.
Conclusion: ICSA is a the leading Indian company offering turnkey services for electrical infrastructure projects in power
generation, T&D sector, besides industrial electrification projects. The company is executing transmission projects both in
India and abroad on EPC basis and HVDS, Rural electrification and Industrial electrification in all parts of India. In a
short span, ICSA has gained recognition from all corners by its strong project execution performance.
At its current market price of Rs.375, its EPS is discounted around 11 times, which is also the industry average P/E ratio.
Considering its sparkling performance and robust prospects, the share may be considered for investment on any
weakness with a medium-to-long-term perspective.
Sentiment likely to remain edgy
MARKET REVIEW
By Ashok D. Singh
The BSE Sensex declined 443.64 points or 2.92% to 14,724.18 for the week ended Thursday, 14 August 2008. The NSE Nifty
lost 98.80 points or 2.18% at 4,430.70 for the week.
Indices ran out of steam after the 5–week rally to edge lower in truncated week ended Thursday, 14 August 2008. Poor
industrial growth, fall in car sales after 33-months and rebound in crude oil prices from a 3-month low, led the fall. The
Sensex and the NSE Nifty settled below their psychologically important levels of 15,000 and 4,500 respectively. Market
remained closed on Friday, 15 August 2008 on account of Independence Day.
The Sensex is down 5562.81 points or 27.42% in calendar year 2008 so far from its close of 20,286.99 on 31 December 2007.
It is 6482.59 points or 30.56% away from its all-time high of 21,206.77 struck on 10 January 2008.
The BSE Mid-Cap index fell 63.55 points or 1.07% to 5,823.42 in the week ended Thursday, 14 August 2008. The BSE
Small-Cap index slipped 71.30 points or 0.99% to 7,110.44 in the week.
FIIs bought shares worth Rs.986.10 cr. in August 2008 till 13 August 2008 and sold shares worth Rs.26,315.90 in the
calendar year 2008 till now. Mutual funds sold shares worth Rs.228.60 cr. in August 2008 till 12 August 2008.
Releasing the Economic Outlook for 2008-09, the Prime Minister's Economic Advisory Council (EAC) on Wednesday, 13
August 2008, projected a lower GDP growth rate of 7.7% during 2008-09 mainly on account of lower agriculture and
industrial growth and adverse fallout of global developments. Earlier in January 2008, it had projected a growth rate 8.5%
for 2008-09.
Relentless monetary tightening by the RBI has finally caught up with industrial growth. A slowdown in the
manufacturing sector pulled down India's industrial growth in June 2008 to 5.4% from 8.9% a year ago. This is however
higher than 4.1% growth as per revised figures in May 2008. The index of industrial production (IIP) went up 5.2% in
Q1FY09 compared to 10.3% in Q1FY08.
On Wednesday, 13 August 2008, the BSE revised the list of group 'A' companies, which will come in effect from 25
August 2008. BSE has decided to promote 23 scrips from group B to group A. These include Bajaj Auto, Bajaj Finserv,
Balrampur Chini, BGR Energy, Blue Star, Future Capital Holdings, Indiabulls Securities, Jubilant Organosys, KSK Energy,
IRB Infrastructure, Jain Irrigation, Marico, Mphasis, Mundra Port, NDTV, NMDC, Onmobile Global, Opto Circuits, Patni
Computer, Rural Electrification, REI Agro, Shree Renuka Sugars and Sterling Biotech.
Simultaneously, it shifted 22 scrips from group A to group B. These include ABG Shipyard, Central Bank, Andhra Bank,
Ansal Properties, Brigade Enterprises, Deccan Aviation, Dish TV, Engineers India, Great Offshore, HMT, IndusInd Bank,
Jindal Saw, LMW, Maytas Infra, Nagarjuna Fertilisers, Rajesh Exports, Reliance Industrial Infrastructure, Shree Precoated
Steels, Sobha Developers, TV 18 India, Vijaya Bank and Moser Baer (India).
8
NSE will add 39 stocks to its F&O segment from 21 August 2008. They are ABG Shipyard, Akruti City, Asian Paints, Balaji
Telefilms, Concor, Core Projects, Deccan Chronicle, Dish TV, Everonn, Firstsource, GSPL, GTL Infrastructures, HCL
Infosystems, Indiabulls Real Estate, ICSA, KLG Systel, KS Oils, MIC Electronics, Mindtree Consulting, Mercator Lines,
Monnet Ispat, MRF, Nava Bharat Venturs, Noida Toll, Opto, Orbit Corp, Prism Cem, PTC, Reliance Ind Infra, Sintex,
SREI, Thermax, Torrent Power, TV18, UCO Bank, UTV, Voltamp, Walchandnagar.
On Wednesday, 13 August 2008, SEBI's chairman, C. B. Bhave said a review of participatory notes (PNs) was made but no
decision was taken by the board. Marketmen were expecting SEBI to relax restrictions on PNs.
SEBI has slashed the timeline of rights issues to 43 days from the current 109 days and changed the pricing rules for issue
of shares qualified institutional buyers (QIB). It will now be based on the average price of the previous 2 weeks.
Trading for the week began on an upbeat note with the market logging gains on Monday, 11 August 2008, on positive
global cues and slide in crude oil prices. The BSE 30-share Sensex rose 336.10 points or 2.22% to 15,503.92 and the S&P
CNX Nifty rose 90.90 points or 2.01% to 4620.40, on that day.
Key benchmark indices ended sharply lower on Tuesday, 12 August 2008, led by heavy selling in metal, banking and IT
shares, on poor industrial output data. The Sensex fell 291.79 points or 1.88% to 15,212.13 and the Nifty fell 68.15 points or
1.47% to 4552.25, on that day.
Weak global markets played the spoilsport on Wednesday, 13 August 2008. The Sensex fell 119.01 points or 0.78% to
15,093.12 and the Nifty slipped 23.2 points or 0.51% at 4529.05, on that day.
Market extended losses for the third straight day on Thursday, 14 August 2008 after a rebound in crude oil prices
rekindled fears of inflationary pressure. Sensex declined 368.94 points or 2.44% to 14,724.18 and the Nifty lost 98.35 points
or 2.17% at 4,430.70 on that day.
The Sensex declined 443.64 points to close at 14,724.18 last week .With no key events scheduled in the forthcoming week,
the Indian stock market will closely watch global stock markets for direction. Also the inflation data in the year through 2
August 2008 released was at a new high of 12.44%. The sentiment is likely to remain edgy in the near term dampened by a
series of negative news.
Market undergoes profit-booking
MARKET
By G. S. Roongta
After a good start to the week on Monday, 11 August 2008 with a gain of 336.10 points on the Sensex, the market
witnessed profit-booking over the next 3 days before closing for the week on Thursday, 14 August 2008 as Friday, 15
August 2008 was a market holiday on account of Independence Day.
The profit-booking was in order to consolidate the recent gains of 3245 points that the Sensex had registered till 11 August
2008 at 15503.92 and the CNX Nifty, which too had registered a handsome gain of 915 points at 4620.
Although crude oil price fell to US $112 per barrel during the week before rebounding on Friday, the Index of Industrial
Production (IIP) published on Tuesday, 12 August 2008 was far from encouraging. The IIP grew at 5.4%
in June 2008 well below 8.9% in June 2007 but higher than the revised figure of 4.1% for the month of
May 2008. Since it fell below market expectation, it was felt that corporate margins are under pressure
and it will be tough for them to maintain a high growth rate in the current inflationary situation.
9
But according to me, this is a temporary phenomenon as the situation is bound to improve sooner than
later. This is because of the fall in the prices of crude oil, gold and commodities such as coal, copper, zinc,
steel, alloys and aluminium, which will have a salutary effect in days to come.
Coal prices have fallen drastically and are reported to be at a 9-week low of US $156 per tonne from the
peak of US $200 per tonne in July 2008. It may fall further as the disruption at the main coal port in Vietnam may be
resolved shortly. This port handles most of Vietnam's coal export to China and Japan and its loading capacity fell short by
30% as its loaders had collapsed in a recent storm.
G.S. Roongta
With the fall in coal prices, the cement, steel, aluminium, copper and chemical industries will stand to benefit as they are
high fuel (coal) intensive industries.
Meanwhile the prices of copper have fallen from a high of US $8950 to US $7330 per tonne on the London Metal Exchange
(LME), which is the lowest since February 2008 and represents a fall of about 18%.
Thus the fall in the price of fuel and base metals will boost industrial profitability. The inflation rate, which had shot up
from 7% to 12% till last week may start retreating once the effect of the reduced coal prices and commodities is felt by
corporates and passed down the line to the consumers.
Since the high crude prices and inflation rates had taken a toll of the stock markets in June/July 2008 to hit new lows and
created a great deal of anxiety and panic among long-term investors and short-term traders, it should logically impart
confidence now and lead to renewed buying.
Last week, Graphite India was recommended in this column but the stock could not attract the investment as it was
traded very thinly between Rs.60 to Rs.62.50 and surrendered the gains by the end of the week. This means that investors
are still not enthusiastic enough to make fresh investments on fears that the current rally may not be able to hold.
Although equity investment carries the highest risk compared to any other form of investment, it also provides the
highest rate of return when the stock selection and the timing of entry and exit is right.
Some of the other stocks recommended earlier have done well over the past 2-3 weeks with some of them gaining over
50%. I will refer to just 2 or 3 such stocks:
(1) Andhra Sugar hit a high of Rs.120 from its recent low of Rs.73.
(2) Zuari Agro hit a high of Rs.330 from its recent low of Rs.184.
(3) Elecon Engineering hit a high of Rs.127 from its recent low of Rs.80.
Likewise, there are hundreds of other stocks, which had gained by over 40% in the past 3 weeks alone. Thus while the
stock market is risky, it also provides returns several folds higher as evident from the above examples.
Continuing the spirit of recommendation, I prefer to choose Elecon Engineering this week despite it having risen by 50%.
But do not forget that the stock has fallen from its high of Rs.343 to only Rs.80 in the panic.
Before I recommend I would like to draw your attention to an investor query featured in The Hindu Business Line on 10
August 2008 on page 8 and the reply of its technical analyst.
Query: I bought Elecon Engineering at Rs.320. What is your view, should I buy more at the current price?
Reply: Elecon Engineering (Rs.118 week before last). The stock has moved below the key long-term support at Rs.130 in
June to record a 52-week low at Rs.80 but it is currently attempting to reverse from the next support band between Rs.80
and Rs.100.
The sharp spike last week accompanied by large volumes implies that the stock could have formed a significant trough at
Rs.80. Investors may hold the stock with a stop loss at Rs.78 as subsequent targets are Rs.67 and Rs.48.
The question arises as to why one should hold the stock when its next target according to the above expert is Rs.67 and
Rs.48. Why does he not say directly to sell now and buy back at its next target of Rs.48 so that investors can benefit? The
analyst will take credit if the stock shoots up but for which he wants to remain silent by not advising a sell. How the
person who made the query act should is solely his decision. What is the sense of making a query and seeking advice?
Elecon Engineering Company Ltd.
Elecon Engineering is one of the fastest growing capital goods companies. It has grown very fast over the last 3 years and
has built a highly strong base from the long foundation laid 40 years ago.
The company has two main divisions viz. Material Handling Equipment and Gear Division.
(1) Material handling equipment: This division of the company is spread over 1,17,000 sq. mtrs. It has the
technology and experience to design and build robust and reliable handling solutions for diverse industrial
segments comprising steel, cement, power and windmills. Power sector constitutes 50% share followed by
cement at 21% and steel at 15%. The division has robust order booking exceeding Rs.1200 cr. beyond the
company's full year's sales revenue.
(2) Gear Division: Elecon Engineering is Asia's largest manufacturer of industrial gears and the first Indian
company to introduce modular design concept, case hardened and ground gear technology.
Elecon is the choice of core sectors like sugar, cement, steel and fertilizers. The manufacturing base of this division is
spread over 1,73,098 sq. mtrs.
Financial Highlights:
(Rs. in cr.)
Dividend: It may be noted that the dividend of 75% is on
its enhanced equity capital of Rs.18.57 cr., which is 300%
higher compared to last year.
Bonus: The company issued a highly commendable 2:1
bonus issue last year on 11 October 2007, which is higher
than even the most fancied companies like Grasim,
Hindalco, Tata Steel, Tata Motors and alike whose ratio
has never surpassed 1:1 in recent history.
It is really amazing that the company's reserves have shot
up further even after capitalising 2:1 bonus from Rs.181.72
cr. in FY07 to Rs.218.15 cr. in FY08.
Particulars
31/03/2008
31/03/2007
Share Capital
18.57
6.18
Reserves & Surplus
218.15
181.72
Loans
409.26
283.66
Revenue
Sales including other income
836.22
728.88
Operating Profit
140.30
118.28
Interest
27.42
19.36
Depreciation
14.20
12.22
Profit Before Tax
98.68
86.70
Profit After Tax
67.20
54.90
EPS (FV: Rs.2)
7.24
6.36
Proposed Dividend
75%
75%
Growth: The company is growing at 40-50% p.a. since the last 3 years and the management is confident of maintaining it
in the current year too.
Its turnover is likely to cross Rs.1050 cr. this year while the margin will keep rising despite the inflationary impact.
10
Market Price: The company's share price ex-bonus had touched a high of Rs.340 and made a bottom of Rs.80 and now
quotes at Rs.113. It is unlikely to hit the lower levels projected by the Business Line analyst given the present state of its
robust growth prospects.
Conclusion: The Elecon Engineering share is worth accumulating in the panic as it provides excellent gain both though
dividend and capital appreciation. Elecon Engineering is another BHEL and L&T in the making in terms of capital
appreciation. Its market price had hit over Rs.3000 for Rs.10 paid-up and over Rs.630 for Rs.2 paid-up before the bonus
issue.
By Saarthi
STOCK WATCH
International Combustion (India) Ltd. (Code: 505737) (Rs.335) is among the few engineering companies that has
recorded consistent and healthy growth over the last 5 years but its scrip still remains poorly discounted on the bourses.
For FY08, it registered 20% and 40% growth in sales and net profit respectively recording an EPS of Rs.49. Currently, the
stock is available at EV/EBIDTA of hardly 4 times, which is grossly cheap by any standard for this debt-free, dividend
paying engineering company. It is engaged in manufacturing heavy engineering equipments, geared motors and gear
boxes, vibrating screens and feeders, bulk material handling equipments, rubber/polyurethane screen decks and liners,
Raymond grinding mills, air classifiers and flash drying systems etc. It makes sophisticated plant and machinery for core
sector industries such as mining, steel, cement, petrochemicals, construction, sugar, power, textiles, paper, rubber,
pharma, chemicals etc. It posted satisfactory results for Q1FY09 and is poised to end FY09 with sales of Rs.110 cr. with net
profit of Rs.13 cr. i.e. an EPS of Rs.54 on its tiny equity of Rs.2.40 cr. Due to the small equity, it also has an impressive
ROCE of 40% and ROE of 25%. Importantly, it has huge reserves of nearly Rs.45 cr., which leads to a book value of Rs.192
making it a likely bonus candidate. It's a risk-free bet which can give handsome returns in the long run.
******
In line with its earlier performance, Godawari Power & Ispat Ltd. (Code: 532734) (Rs.214) has once again announced
excellent results for Q1FY09. Sales increased by 90% to Rs.320 cr. and PAT jumped up 80% to Rs.38 cr. posting an EPS of
Rs.13.50 for the quarter. Currently, the company is the fourth largest manufacturer of coal based sponge iron and also one
of the leading manufacturers of mild steel in India. It completed its Phase-II expansion in September 2007 and boasts of
having an installed capacity of 495,000 TPA of sponge iron, 400,000 TPA of steel billets, 120,000 TPA of HB wire rod along
with 53 MW of captive power plant. Importantly, the company has acquired a mining license for iron ore and coal in
Chhattisgarh. It has also made investments in two JV companies - Chhattisgarh Captive Coal Mining Ltd. and Raipur
Infrastructure Company Ltd. for development of coal mines and setting up a railway siding for captive use. Recently, the
company has decided to venture into cement production along with a backward integration plan, which includes setting
up of 0.6 MTPA iron ore Pelletization plant, 0.1 MTPA iron ore Beneficiation plant, 1.2 MTPA iron ore Crushing plant etc.
Considering its robust Q1FY09 performance, it may clock a turnover of Rs.1350 cr. with PAT of Rs.150 cr. i.e. an EPS of
Rs.54 on its current equity. Worth accumulating on declines.
******
For the June 2008 quarter, Manugraph India Ltd. (Code: 505324) (Rs.95) has reported 40% growth in sales at Rs.135 cr.
and 30% increase in PAT at Rs.16.70 cr. on a standalone basis. Last fiscal, it worked at almost 100% capacity utilisation on
the back of robust demand from the domestic and export markets. The company is implementing a capex plan to enhance
its installed capacity from 830 print units to 960 print units. Recently, it participated in DRUPA 2008 exhibition in
Germany, where it fetched a tremendous response. However, the company will not be able to turn around its US
subsidiary Manugraph DGM in this fiscal as well due to the slowdown in USA. The effect of synergies may materialise in
the next fiscal. Meanwhile, the company's agreement of business co-operation for marketing with MAN of Germany
ended mutually in July 2008. But its selling agreement with MAN Ferrostaal continues. Considering its good order book
position, the company may clock a turnover of Rs.475 cr. with net profit of Rs.55 cr. i.e. an EPS of Rs.18 on its equity of
Rs.6 cr. having face value of Rs.2 per share. The scrip has been consolidating at this level for quite some time now. Being
India's largest manufacturer of web offset and sheet fed offset presses this company deserves much better valuation.
******
Pioneer Distilleries Ltd. (Code: 531879) (Rs.48) is a company engaged in the manufacture of extra natural alcohol (ENA),
rectified spirit (RS), denatured spirit (DS), and absolute alcohol (Ethanol). The fine grade of ENA manufactured by it is
used as the raw material for many brands of renowned liquor manufacturing companies. Due to buoyant economic
conditions, the company is planning to double the installed capacity to 200 KLPD for which statutory permission from the
excise has been received. It is also contemplating to increase the capacity of its ethanol plant from 30,000 to 130,000 litres
per day. Besides, its 5 MW bio-gas based power project is expected to begin commercial production from October 2008,
which will also fetch it carbon credits. Notably, Tata Power has signed a 10-year purchase agreement to purchase the
entire power generated from this unit. Incidentally, the company also owns around 300 acres of land, which is used for
agriculture and where treated effluent is used for cultivation. The company announced satisfactory results for Q1FY09
11
and may clock a revenue of Rs.75 cr. with PAT of Rs.12 cr. for FY09 i.e. an EPS of Rs.10 on its diluted equity of Rs.12.50 cr.
Moreover, at the CMP the dividend yield works to more than 4%. A good bet in the current sentiment.
12
By Kukku
FIFTY FIFTY
Investment Call
* Excel Industries (Rs.63), incorporated in 1960 is a part of A. C. Shroff's Excel Group, manufactures industrial chemicals,
speciality chemicals, bio-fertilisers and bio-remediation technologies. As part of its restructuring plan, the company has
divested its Agri business (Pesticides) to Excel Crop Care Ltd, a group company w.e.f 1 April 2002. Global pesticide
major, Nufam of Australia, is expected to pick up a sizeable stake in the Excel Crop Care Ltd.
Net profit of the company went up by 93.28% to Rs.4.60 cr. in FY08 against Rs.2.38 cr. in FY07. Sales rose 13.66% to
Rs.226.85 cr. in FY08 from Rs.199.58 cr. in FY07. Its equity is around Rs.5.45 cr. yielding an attractive EPS of Rs.4.22 on
Rs.5 paid-up stock.
Net profit shot up further to Rs.5.33 cr. in Q1FY09 against Rs.0.94 cr. in Q1FY08. Sales rose 35% to Rs.70.41 cr. in Q1FY09
against Rs.52.33 cr. in Q1FY08. Thus it has earned profits in Q1, which is more than last full year's profits. Q1 EPS works
out to around Rs.4.88.
Besides installing coal fired boilers at both Lote and Roha units, the company has installed some balancing equipments to
meet the increased demand for its products, which is reflected in the improved working of Q1FY09.
The company has also completed the expansion of its effluent treatment plant and its focus is to maintain its leadership in
manufacturing economies and environmental considerations.
Besides doing well, the company's investments worth Rs.3.27 cr. have a market value of more than Rs.20 cr., which was
around Rs.11.88 cr. on 31 March 2008.
It is interesting to note that the promoter holding has gone up by 2.3% in the last quarter.
The company also has good real estate, which gives regular annual lease rental of around Rs.1.12 cr. This income is likely
to go up sharply as more such areas are likely to be leased out from current year onwards.
If Q1FY09 results are any indication, the company is likely to report full year profits of around Rs.16 cr. posting an
attractive EPS of around Rs.15.
Investors can keep a watch on this stock to accumulate on reactions for long-term target of Rs.100.
* Kesar Enterprises (Rs.74) has the following two divisions:
Sugar & Spirits: Its sugar factory was set up in 1933 at Baheri in Bareilly district of Uttar Pradesh, which is the largest
producer of sugarcane in the country. It started with an initial crushing capacity of 1,200 tonnes of cane per day (TCD),
which has increased to 6,500 TCD over the years. It has one of the most modern and efficient sugar factories in the
country. Through constant investment in Cane Research & Development, the company has successfully developed high
yielding and early maturing varieties of sugarcane.
In 1949, it set up a Distillation Plant in order to effectively harness molasses, a by-product generated at its sugar
factory. Its initial capacity of 11,000 litres per day (LPD), increased to 45,000 LPD over a period of time. It has modern and
sophisticated processes of continuous fermentation of molasses, which gives higher yields and produces the finest quality
of spirit. The company manufactures Rectified Spirit, Extra Neutral Alcohol, Country Liquor, IMFL like whisky, rum, gin,
vodka etc.
The company has an Effluent Treatment Plant to treat the distillery waste water, which is based on the state-of-the-art
technology developed by Bacardi Corporation, USA. In the process, it generates methane rich gas (Bio-gas), which is
burnt in boilers generating power steam with secondary and tertiary drying of wash and new Reverse Osmosis.
For FY08, the sugar unit contributed sales of Rs.163 cr. while the Spirits Division contributed Rs.122 cr.
Storage: The company has 2 bulk Liquid Chemical Terminals with a combined capacity 127,000 KL at Kandla, Gujarat,
which includes specialised tanks such as stainless steel tanks and tanks equipped with heating and insulation facilities.
The tanks at Kandla are situated right in front of the jetties ensuring a quick and smooth loading and off-loading of bulk
liquids at a high pumping rate. Multiple Jetty Lines permit simultaneous discharge of cargo from more than one vessel at
any time. The possibilities for expansion at
Kandla are great and KEL looks forward to an
exciting fast paced development of this
business in coming years.
For FY08 (June ending), this division earned
revenue of Rs.12.41 cr. with profit of Rs.7.34
cr.
The company reported net profit of Rs.7.03 cr.
in Q4FY08 against a net loss of Rs.12.93 cr. in
Q4FY07. Sales rose 35.74% to Rs.63.35 cr. in
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Q4FY08 against Rs.46.67 cr. in Q4FY07 attractive EPS of Rs.10.35 for Q4 on its equity of Rs.6.79 cr.
The book value of its share is around Rs.48 while its market cap is just Rs.49 cr.
The Investment Triggers are (1) Low equity; (2) Strong assets base; (3) Good built-in values; (4) Its storage division is
doing well for the last many years, which gives stability to the company. If the company demerges its Storage Division,
there can be good value unlocking; (5) With firm sugar prices, profit is likely to jump in coming quarters, which can give a
very attractive EPS on its low equity base (6) The company also has good real estate at Bareilly in UP; (7) Seeing to the
upturn cycle and Q4 EPS of Rs.10, the company can report an EPS of above Rs.40 in FY09 as current sugar prices will
yield still better margins.
Risk Factor: The company has high debts, based on high sugar cane prices. Thus any fall in sugar prices will have and
adverse effect on the company.
Market Guidance
* Sakthi Sugar (Rs.107) reported net profit of Rs.22.5 cr. against Rs.4.90 cr. during the same period of last year for the June
quarter. Keeping in mind the upturn in the sugar cycle, the stock looks attractive for investments on dips. There are
indications that its subsidiary, Sakthi Auto is likely to contribute good profits. Stock price can touch Rs.175 mark over the
next one year.
* Patels Airtemp (Rs.61) manufactures a wide range of engineering equipments such as heat exchangers, pressure vessels,
industrial fans and blowers as well as air-conditioning and refrigeration equipments. Its products are used extensively as
capital equipment by fertilisers, petrochemicals, cement, agro-chemicals, chemicals, pharmaceuticals, power industries.
With its third unit on stream, it manufactures special pressure vessels like horten spheres, LPG bullets and storage vessels
for hazardous chemicals.
It has posted encouraging results over the last few years. For FY08, it reported net profit of Rs.5.21 cr. on sales of Rs.62 cr.
recording an EPS of Rs.10.30 on its equity base of Rs.5.07 cr. For Q1FY09, its net profit shot up by 105% to Rs.1.33 cr. from
Rs.0.65 cr. in Q1FY08. Seeing to its growth rate, its FY09 EPS is likely to be around Rs.16. Stock looks attractive around
Rs.62/63 levels for a target price of Rs.90/100 over the next one year.
* Voltas' (Rs.132) June 2008 quarterly results are encouraging as net profit shot up by 63% to Rs.85 cr. Long-term
investors should continue to hold this stock or even add on dips for a target price of Rs.180 over the next 18 months.
* Nocil (Rs.28) - In view of the sharp upmove in rubber chemical prices in the last few weeks, the company should do
well. Stay invested or add on dips.
* Genus Power Infra (Rs.307) stock reacted from high of over Rs.1000 to current levels where the downside is limited.
Investors can keep a watch and take small exposure in this stock on dips around Rs.280 level. Current year projected EPS
is likely to be between Rs.35/40 level. Stay invested if holding.
* Asahi India Glass (Rs.57) has reported a loss of Rs.40 cr. for the June 2008 quarter. There is a sharp increase in fuel
costs, which is likely to exert pressure on margins. The stock is Re.1 paid-up. Investors can think of switching to Indian
Hume Pipes (Rs.595) at Rs.590, which is a Rs.10 paid-up stock and is expected to report 40% compounded growth in the
topline over the next few years together with good profits.
By V. H. Dave
EXPERT EYE
Asian Granito India Ltd. (AGIL) (Code: 532888) (Rs.52) is faring well on the back of the boom in construction and
housing activities. Its recent results, however, went unnoticed by marketmen as its share trades at a forward P/E of just
2.5 on its estimated consolidated EPS of Rs.21 for FY09.
AGIL was incorporated on 8 August 1995 as Karnavati Fincap Pvt. Ltd., for carrying on the business of non-banking
finance. Subsequently, the company was converted into a public limited company on 29 August 1995 and the name was
changed as Karnavati Fincap Ltd. AGIL was promoted by Kamlesh, Mukesh and Vinod Patel.
AGIL's plant is located in the Ceramic Zone, Dalpur, Sabarkantha District, Gujarat and it has an extensive network of
business associates comprising 250 distributors with over than 3500 retail counters and 19 depots all over India.
AGIL tapped the capital market in July 2007 with 70 lakh shares priced at Rs.97 each aggregating Rs.63 cr. for
modernisation and expansion of its vitrified plant. While close to Rs.48 cr. was earmarked for the new wall tiles unit,
around Rs.15 cr. was to be used to expand the capacity of its vitrified tiles unit.
Its sophisticated manufacturing facility utilises highly advanced technology and experienced workforce. It has India's
longest roller kiln India's first horizontal dryer from SACMI and the biggest press from the world leader SACMI, Italy.
Its 2,000 sq. mtrs. per day of vitrified-tile capacity has gone on stream from November 2007 taking the total capacity to
16,000 sq. mtrs. per day. The wall-tile unit has gone on stream in January 2008. AGIL is simultaneously implementing the
modernisation of its existing facilities.
Its subsidiary, Asian Tiles, manufactures ceramic floor tiles with a total capacity of 9,000 sq. mtrs. per day (post
expansion) and is being merged with AGIL.
13
It has chalked out further expansion of about Rs.205 cr. over the next 3 years in wall tiles, marble and DF (double
feeder)/MC tiles. This would be financed out of debts and no equity dilution will take place. AGIL would commission its
new marble facility in Q3FY09.
During FY08, AGIL earned consolidated net profit of Rs.29.6 cr. on sales of Rs.242 cr. recording an EPS of Rs.14. During
Q1FY09, its consolidated net profit advanced by 49% to Rs.10.1 cr. on 69% higher sales of Rs.84 cr. and the quarterly EPS
works out to 4.8.
Its equity capital is Rs.21.1 cr. and with reserves of Rs.146 cr., the book value of its share works out to Rs.79. The
promoters & associates hold 56% in the equity capital. Mutual funds & institutions hold 3% leaving 41% with the
investing public.
Today, vitrified tiles are replacing natural products like marbles, granites, kota stones etc. as they have better visual
appeal with polished finish, which lasts longer. Also unlike marble, which turns yellowish with the passage of time,
vitrified tiles exhibit no discolouration.
The Indian Ceramic Industry is growing by leaps and bounds with 12% growth in general and 30% growth in the vitrified
tiles segment over the last 3 years. Today, it has grown to 270 million sq. mtrs. including 40 million sq. mtrs. of vitrified
tiles at a valuation of Rs.5,500 cr.
The company enjoys a pan-India presence as it has a well-diversified geographical distribution of revenues. From the cost
angle, the company's facility is close to raw materials and it has switched to LNG from LPG over the past one year
thereby reducing its power and fuel costs. This cost efficiency would lead to increased margins.
AGIL has been focusing on the vitrified tiles segment over the past 3 years and generates the major part of its revenue
from the domestic market. It also has presence in glazed tiles and a few other variants. It competes with the unorganised
sector and the marble segment for its vitrified tiles.
Sales in FY09 are expected to touch Rs.350 cr. with net profit increasing to Rs.45 cr. with an EPS of Rs.21.3 on account of
its expansion and contribution of sanitary ware & wall tiles coming into play.
At the current market price of Rs.52, the share is traded at a P/E of 2.5 on FY09 estimated EPS of Rs.21 and is
recommended with a target price of Rs.75 in the medium-term. The 52-week high/low of the share has been Rs.135/37.
******
The shares of Banco Products (India) Ltd. (BPIL) (Code: 500039) (Rs.34) are being recommended for decent appreciation
in the medium-to-long-term as the company is faring exceedingly well and is all set to garner an EPS of Rs.8 in FY09. With
the automobile industry on an expansion spree and the global auto majors outsourcing auto parts from India, the auto
components industry has a bright future. Incorporated in March 1961 as Gaskets and Oilseals, with manufacturing
facilities at Ankhi and Bhaili in Gujarat, BPIL is one of the major players in the gasket and radiator segments. Its products
find wide applications in automobiles, oil engines, compressors, locomotives, machinery, etc. BPIL was promoted by Mr.
V. K. Patel, who has over 40 years experience in the auto components industry.
The company has four modern manufacturing plants based at Baroda (Vadodara), approximately 400 km north of
Mumbai with state-of-the-art facilities for production, design & development and quality assurance. Its new plant was
recently commissioned at Jamshedpur to cater to the needs of customers in the eastern region.
BPIL's annual installed capacity is 3,75,000 and 8,00,000 units of radiators and gaskets respectively. Its capacity of
compressed jointing sheets is 4,000 TPA and
its quality systems are certified to ISO/TS
16949:2002.
14
BPIL's products find application in passenger
cars, jeeps, tractors, trucks, buses, LCVs,
gensets,
aftercoolers,
locomotives,
earthmoving equipments, battle tanks, marine
and cabin heating.
Its OEM customers include Tata Motors, TVS
Suzuki, Ashok Leyland, Mahindra &
Mahindra, Hindustan Motors, BEML, Volvo,
Toyota, Tafe, Caterpillar, Maruti Udyog and
the Indian Railways. The company also enjoys
a presence in the replacement market. With
three major clients - Mahindra & Mahindra,
Ashok Leyland and Tata Motors, the company
holds 20% market share in the automobile
industry for its copper/brass radiators.
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During FY08, BPIL's sales advanced by 15% to
Rs.299 cr. while net profit shot up by 43% to Rs.18.5 cr. recording an EPS of Rs.6.1. and it paid a decent dividend of 70%.
During Q1FY09, sales have advanced by 24% to Rs.84 cr. with net profit of Rs.13.8 cr., which is a substantial rise of 133%.
The quarterly EPS stands at Rs.1.9.
BPIL exports its products to Africa, Middle East, Europe, South East Asia, Australia, Germany and Singapore. It continues
to focus on exports, which comprise around 25-28% of its sales.
During FY07-08, it issued bonus shares in 1:1 ratio and also allotted 4.5% stake to Japan Metal Gasket for around Rs.10 cr.
raising its equity to Rs.14.2 cr. With reserves of Rs.88 cr., the book value of the share works out to Rs.14.4.
The promoters hold 66% in the equity capital, foreign holding is 12%, PCBs hold 2% leaving 20% with the investing
public.
In January 2006 its 100% EOU to manufactures aluminum radiators became operative. The EOU plant has added 4,80,000
units a year and competes with the low-priced Chinese and Korean aluminum radiators. The company exports 1,80,000
radiators p.a. to Europe and plans to double exports by next year and has plans of cost reduction.
The industry estimates a demand of around 20 million radiators in the European market and 30 million for original
equipment spare (OES) radiators p.a. BPIL has secured substantial OEM orders and other contribution would be visible in
the coming year.
With the domestic automobile industry growing at about 8% p.a. and outsourcing of components on a high, the Indian
auto components industry has cruised along at top speed. According to estimates by the Automotive Component
Manufacturers Association (ACMA), domestic production increased to $10 billion (approximately Rs.43,000 cr.), while
exports jumped by 30% to $1.8 billion (approximately Rs.7,700 cr.). The auto components industry has grown from $2.4
billion in 1997 to over $9 billion in 2007-08.
Major expansions in the automobile industry will certainly help BPIL increase its offerings to clients such as General
Motors, Ford Motors, which are setting up greenfield plants in India. Maruti Udyog has lined up an Rs.9,000 cr. and Tata
Motors together with Fiat is investing Rs.12,000 cr. for car production. Ashok Leyland, a major customer of BPIL is
spending Rs.1,000 cr. for ramping up its capacity. Further, Volkswagen, Honda Siel and Hyundai are collectively
investing Rs.5400 cr. for ramping up capacities.
During FY09, BPIL is all set to garner sales of Rs.350 cr. with a net profit of Rs.57 cr. This would give an EPS of Rs.8.
The shares of BPIL are currently traded at Rs.34, discounting its estimated FY09 EPS of Rs.8 only 4.2 times. The industry
average P/E for the auto components industry currently rules firm at 12.7, which leaves scope for the BPIL scrip to rise
further.
Applying a conservative P/E multiple of 6, its share price has the potential to cross the Rs.48 mark, which would fetch a
decent appreciation of over 40% in the medium-to-long-term. The 52-week high/low of the share has been Rs.52/25.
15
By Nayan Patel
TECHNO FUNDA
L G Balakrishnan & Bros
BSE Code: 500250
NSE Code: LGBROS
Last Close: Rs.14.65
L G Balakrishnan & Bros (LGB), a leading industrial group in South
India, was established way back in 1937. Starting with a fleet of 250
buses, LGB grew into India's leading Roller chain manufacturer. Today, LGB stands proud as the premier manufacturer
of both automotive and industrial chains under the popular brand name 'ROLON'.
The company has five chain manufacturing plants, all ISO 9001 certified by Underwriters Laboratories Inc., USA. Three of
the manufacturing facilities along with the central functions have been registered to ISO/TS 16949 by UL, USA. About
15% of LGB's products are being exported to USA, European countries, Australia, New Zealand, South Africa, Japan, Far
East & Middle East countries.
It has an equity of just Rs.7.85 cr. with huge reserves of around Rs.138 cr. (17.57 times its equity). Promoters hold 43.97%
stake in the company, foreign investors hold 11.35%, corporate bodies hold 3.45% and the Indian public holds 40.94%.
For the June 2008 quarter, LGB has posted very good results. It has posted net sales of Rs.132.85 cr. while net profit
zoomed 84.35% to Rs.6.36 cr. and recorded a quarterly EPS of Rs.0.81 on its Re.1 paid-up equity share. Last year, it paid
35% dividend to shareholders. At the current level, the stock is trading at P/E ratio of just 6. Its 52-week high/low is
Rs.45.40/Rs.12.45. This means a fundamentally good stock is available at the bottom price. Buy with a stop loss of
Rs.12.45. On the upper side, the share price will go up to Rs.22 in the medium-term. Stock can go up to Rs.30 level in 6-8
months.
Sylvan Silvassa to develop tourism
MONEY FOLIO
Review
- Last week, we recommended Kulkarni Power
at Rs.72.35. Last week, while the market slid
more then 2%, Kulkarni Power zoomed up to
Rs.81 level.
The Union Territory (U.T.) of Dadra and Nagar Haveli with its scenic locales, lush green forests, unpolluted environment
and unique tribal art & culture has emerged as a popular tourist destination. Formation of a large reservoir at Dudhani on
commissioning of the Madhuban Dam has transformed the locale and opened new vistas of tourism development. The
Tourism Department has already promoted its capital Silvassa as 'Sylvan silvassa'.
There are several starred and unstarred category hotels & resorts offering a wide range of accommodation to choose from.
The present bed capacity has crossed 3000 beds and several other projects are in the pipeline.
During the last two decades efforts have been made to develop tourist centres in the form of garden, tourist complexes,
health resort, water sports, deer park, wildlife sanctuary all in harmony with nature. The implementation of various
development schemes in the earlier plan periods has laid a strong foundation of infrastructure to support future growth
of tourism.
Important future proposals through Public Private Partnership (PPP) will include Golf Course, Convention Centre,
Institute of Hotel Management, River Front development and construction of a barrage, Madhuban Garden and an Air
Strip. The projects proposed will alter the face of tourism in the U.T. and will help to move towards high end tourism.
Puravankara subsidiary into affordable housing
Puravankara Projects Ltd. has launched a 100% subsidiary, Provident Housing and Infrastructure Ltd. to provide
affordable premium housing for the middle-class on the outskirts of the metros.
Phase-I of the project will cover Bangalore, Chennai, Hyderabad, Coimbatore and Mysore where 64,500 homes with a
total built up area of 59.80 million sq.ft. will be constructed over the next five years at accost of about Rs.8,000 cr. In
Phase-II, its footprint will also cover cities like Delhi, Kolkata ,Kochi,Jaipur,Pune and Nagpur.
The prices of Provident homes which are to be developed in a phased manner are presently priced at Rs.10 lakh, Rs.15
lakh and Rs.20 lakh and comprise of one, two and three bedroom homes.
TeamLease launches Job hotline in 11 languages
TeamLease, India's largest staffing company has launched a national hotline to tackle the matching problem of connecting
talent supply with jobs as also address the mismatch problem by training unemployable talent for jobs.
Launched on 15 August 2008, India's Job Hotline 60012345 will be accessible in 11 languages. Any candidate can call this
number for registration and for an upto 8 minute preliminary assessment, 8 am to 8 pm, 7 days a week.
Union Bank launches online funds transfer & QCC
Union Bank of India is leveraging technology to enhance customer convenience and has launched two more tech products
viz. Online Neft and Quick Collection of Cheques (QCC). The Online NEFT service helps customers transfer funds to
other bank branches through their Internet Banking facility.
Union Bank has already launched Online RTGS facility for instant transfer of funds of over Rs.1 lakh to other banks free
of cost.
QCC enables customers to get credit within 6 days of depositing the cheque, which is made possible by the Core Banking
Solution (CBS).
25
th
Gem & Jewellery show is bigger & better
The 5-day 25
th
India International Jewellery Show (IIJS) 2008, organised by the Gems & Jewellery Export Promotion
Council (GJEPC), has scaled to be bigger than ever before. This year the IIJS has 18000 registered visitors, 800 exhibitors
and 1600 booths with over 250 international booths, over 2000 international visitors and seven international country
pavilions representing Italy, Belgium, Thailand, Japan, Dubai, Turkey and Israel making it truly a global show.
Delegations from Hungary, Uzbekistan, Pakistan, Bangladesh, Myanmar, Thailand, Israel and Iran will be discussing the
road ahead for the Indian Gems & Jewellery sector and their respective countries.
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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