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T
I
M
E
S
A TIME COMMUNICATIONS PUBLICATION
VOL. XVII No. 52
Monday, November 10 – 16, 2008
Pages 18
Markets cautiously positive
By Sanjay R. Bhatia
The markets witnessed a range bound trend during the course of last week. The earlier part of the week witnessed a relief
rally on the back of short covering and selective value buying by big domestic institutional investors. However, negative
global cues saw the markets erase all the gains to come back to square one. But short covering and selective value buying
again on Friday, 7 November 2008, saw them end the week with modest gains. Volatility was witnessed during the week.
Traders and speculators were also seen adding fresh short positions at higher levels. FIIs remained marginal buyers in the
cash segment and also in the derivatives segment. Mutual Funds, however, have remained net sellers during the week.
The global cues have remained mixed. Crude oil prices
continued the downfall on the back of recessionary fears,
which would curtail future demand. The US economy
continued to display negative signals. The central banks of
various countries continued to cut rates in a coordinated
effort. The European Central Bank (ECB) and the Bank of
England have once again reduced interest rates to improve
liquidity conditions. On the domestic front, inflation climbed
up marginally after falling for five consecutive weeks. The RBI
is likely to take further monetary steps to improve liquidity
conditions but its needs to be seen how soon they do it as the
inflation rate as risen marginally.
Thus the markets failed to sustain at higher levels and
continued to witness selling pressure due to lack of confidence
and conviction. The relief rally witnessed has mainly been on
the back of short covering. Lack of follow-up buying hindered
any sustainable relief rally. It is now important that the markets witness follow-up buying at higher levels. Otherwise,
they would continue to drift into the negative. The overall market sentiment is cautiously positive. Any global negative
news would result in a sell-off on the bourses. In the meanwhile, the markets would continue to take cues from global
markets and crude oil prices. Selling pressure is likely to continue at higher levels as fresh short positions get added,
while selective value buying would be witnessed at lower levels.
1
Technically, as forecast in the last issue, the relief rally did not last long. It is, therefore, important that the markets
witness follow-up buying at higher levels if any sustainable rally has to unfold. On the upside, the Sensex seeks support
at the 8929, 7685 and 6150 levels but faces resistance at the 10000, 12575 levels. On the upside, the Nifty faces resistance at
the 3300 and 3518 levels but 2967, 2866 and 2632 are its important support levels.
Investors should wait and watch.
Further pull-back likely
By Hitendra Vasudeo
TRADING ON TECHNICALS
In last week's issue, we had indicated that the Sensex was out of ICU! It was indeed so. We had anticipated a pull-back
level of the fall from 21206 to 7697 and the 23.6% level was placed at 10900 and 38.2% at 12888 level. On the immediate
front, we can expect 10900 at least. The level of 10900 was attained as the Sensex made a high of 10945 reacted thereafter
on Thursday, 6 November 2008.
Last week, the Sensex opened at 10209.3
attained a high at 10945.41 and fell to a low of
9631.59 to finally close the week at 9964.29 and
thereby showed a net rise of 148 points on a
week-to-week basis.
2
Sensex Wave Analysis
Normal Count
Wave I-2594 to 3758
Wave II-3758 to 2904
Wave III-2904 to 12671
Internals are as follows:
Wave 1- 2904 to 6249
Wave 2-6249 to 4227
Wave 3-4227 to 12671
Wave IV- 12671 to 8799
Wave V- 8799 to 21206
Wave W-21206 to 14677
Wave X-14677 to 17735
Wave Y- 17735 to 7697 (not yet complete)
Wave a- 17735 to 12514
Wave b-12514 to 15579
Wave c-15579 to 7697 (not yet complete)
Wave 1-15579 to 14261
Wave 2-14261 to 15107
Wave 3-15107 to 7697
Wave 4-7697 to 10945 (not yet complete)
Wav a -7697 to 10845
Wave b- 10845 to 9631 (not yet complete)
After last week's movement, we have modified
the wave count and converted into a double zig-
zag as shown in the chart. The chart illustration
would help to get an idea. The count suggests
that pull-back rally is on and could get extended
to higher range of 10945
to 11395.
Alternatively, Wave 4
from 7697 to 10945 is
complete and Wave 5 has
begun from 10945 to test
the lows or it could
terminate into a 5
th
Wave
failure to terminate Wave
c and Wave Y.
On the immediate front,
the Sensex has formed an
Engulfing
bear
candlestick pattern on
daily charts after making
a high of 10945. If the
high of 10945 is crossed
then we could get an
extended pull-back rally.
WEEKLY UP TREND STOCKS
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
TATA COMMUN.
491.35 378.2
457.8
503.9
537.5
617.1
82.4
444.9
31-10-08
JAYBHARAT TEX.
228.95 188.7
215.5
228.7
242.2
269.0
81.6
207.1
31-10-08
DIVI'S LABS
1258.00 969.3
1146.3
1211.7
1323.3
1500.3
78.0
1096.0
31-10-08
INDIAN BANK
136.20 109.7
126.3
132.9
142.9
159.5
76.9
125.5
31-10-08
GILLETE INDIA
765.00 596.7
706.7
758.3
816.7
926.7
75.3
697.5
31-10-08
598The pull-back level of the fall from 21206 to 7697 is 23.6% at 10900 and 38.2% at 12888. To an outer extent, the pull-
back could get extended towards 50% at 14435 and 61.8% at16049.
If now depends how quickly we can cross and close above 10945 on a sustained basis with a follow-up rise. If 10945 is not
crossed,
then reverse
pressure could set in.
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
AMTEK AUTO
70.20
47.1
63.1
72.1
79.1
95.1
15.74
79.10
16-05-08
JINDAL STAINLESS 38.35
27.1
34.9
39.3
42.8
50.6
16.69
46.79
14-08-08
SOBHA DEVELOP. 105.80
64.5
94.5
113.3
124.5
154.5
18.98
112.29
12-09-08
NDTV
98.10
67.2
89.1
102.1
111.0
132.9
19.17
99.75
01-08-08
BL KASHYAP & SO 299.05
182.9
269.8
327.4
356.7
443.6
19.33
339.86
14-08-08
Alternative Wave Count
for the fall from 21206
Wave 1-21206 to 14677
Wave 2- 14677 to 17735
Wave 3- 17735 to 7697
(not yet complete)
Internals of Wave 3
Wave -17735 to 12515
Wave 2- 12515 to 15579
Wave 3- 15579 to 7697
(not yet complete)
Micro Internals
Wave i- 15579 to 14002
Wave ii-14002 to 1510
Wave iii-15107 to 7697
Wave iv-7697 to 10945
(not yet complete)
PUNTER'S PICKS
3
This count suggests that
there
will be a pull-back for
Wave iv to retrace the fall
from 15107 to 7697. The
pull-back level of this fall is placed at 11395 (50%) and 12284 (61.8%).
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
MATHER & PLATT PUMPS
532469
179.35
177.00
189.00
165.00 203.8
227.8
1.71
Both the counts suggest a pull-back. The intensity of the pull-back will decide whether it will immediately retest the low
or at some later period.
Weekly resistance will be at 10209-10945. Weekly support will be at 9631-9415.
The retracement levels of the rise from 7697 to 10945 are placed at 9710-9327-8943.
The Sensex must cross 10945 and not fall below 8943. To round off, it must cross 11000 and not fall below 8900.
The Sensex at this point is placed such that we could see sideways movement in a band of 11000-8900 unless we
immediately cross 11000 and maintain a weekly close above it as well as with a positive weekly candle. If that happens
then the picture could change altogether and we could look for higher pull-back levels.
Conclusion
Volatile sideway moves could be witnessed. A breakout and close above 11000 needs to be sustained and one off day will
not help.
Strategy for the week
Traders could trade long but keep in mind to book profit. Investors with stuck-up long positions can look for
opportunities to exit wherever possible and try to generate cash at higher levels.
* Sarda Energy & Minerals shares are being cornered by a bull operator, who anticipates an EPS of Rs.65 in FY09.
TOWER TALK
* Hariyana Ship-Breakers is all set to post an EPS of Rs.25 in FY09. Investors can grab the share for decent gains.
* An analyst strongly recommends the shares of Prithvi Information Solutions, which could advance by over 50% in the
medium-term.
* A punter is cornering the shares of XL Telecom in anticipation of 50% appreciation on the black of excellent September
2008 quarterly results.
* Bharat Gears, which posed excellent results, is an excellent buy.
* The employee cost and day-to-day administrative cost of Lok Housing has disappeared along with sales. Are all
employees are paid based on sales?
* KLG Systel has bagged a huge order worth Rs.130 cr. from Punjab State Electricity Board. Yet there is no respite for the
share as it continues to tumble down. Buy below Rs.100 level.
* Most companies were hit due to higher interest cost and notional forex loss on back of sharp rupee depreciation during
the last quarter. Although the rupee has stabilized, higher interest cost will continue to dent the bottomline of companies
in coming quarters.
* The Q2FY09 results of Kolte-Patil Developers are quite encouraging with a net profit at a whopping Rs.46 cr. But this is
because of extraordinary items and not from operational activity.
* Both Numeric Power and HBL Power have reported disappointing results for the September 2008 quarter. Wait for
December 2008 quarterly results before averaging or building new positions.
* Ashok Leyland is resorting to a 3-day week. A definite sign of recession and credit squeeze in the heavy automobiles
sector.
* Best stocks are those whose book value is more than the current market price, have a consistent dividend record and
offer a dividend yield of over 10% says an analyst. Many small caps meet this criterion.
* Stocks of profit making IT companies with single digit P/E are a good hedge in the falling market because they are
subjected to greater corporate governance practices.
* Research analysts are feeling the heat of the downtrend. Many brokerages have advised analysts to cut their salaries or
look for new job elsewhere. The number of research reports, which were churned out in great numbers, has also come
down.
* Morgan Stanley mutual fund units which are traded in stock market can be considered for investment in small
quantities.
By Saarthi
BEST BETS
Voltamp Transformers Ltd. (Code: 532757)
Rs.367.65
Established in 1963, Voltamp Transformers Ltd. (VTL) is a leading manufacturer of customized transformers for
industrial, building and power applications. It has special expertise in production of dry type vacuum resin impregnated
(upto 3 MVA/11 kV class) and cast resin transformers (upto 7.5 MVA/33 kV class) apart from manufacturing regular oil
filled power & distribution transformers, induction furnace transformers and unitised substations. In fact, it is the market
leader in dry type transformers with around 40% market share. Unlike other transformer manufacturers, VTL's focus is
on the non-state electricity board (SEB) industrial and engineering segments, which has enabled it to maintain
profitability on a consistent basis. It caters to a wide spectrum of transformer users in various industries like
petrochemicals, oil refining, cement, paper & pulp, pharmaceuticals, automobiles, steel, power plants, buildings, metro
rail applications, mining and many others. Its client base includes leading business houses, well-known PSUs and large
corporates such as Reliance Industries, Jindal Steel, Bharat Forge, Hindalco, Guj Alkalies, Kirsloskar Group, JK Cement,
Siemens, ABB, L&T, Torrent Power, Suzlon etc. to name a few. The company derives nearly 40% of its total revenue from
sale of distribution of transformers, 35% from power transformers and the balance 25% from dry type transformers.
VTL has three manufacturing units, one each for power, distribution and dry type transformers at Makarpura, Vadodara,
with a combined production capacity of 9000 MVA per annum on a three shift basis. Surprisingly, VTL has consciously
taken low exposure to SEB, which constitutes about 5% of its total sales. As per the management, SEB market for
transformers is large but is characterized by stiff price competition and long credit periods, which results in a huge
receivables position thus bloating is working capital. However, in case of a downturn, VTL always has the option to
increase supplies to SEB. But currently with nominal revenue contribution from the SEBs, VTL's exposure to receivable
risk due to the poor health of SEBs is low. On the other hand, it is focused on dry type transformers as it is highly
lucrative with better margins and is less competitive as the technology is not easily available. Accordingly, VTL has
licence agreements with two German companies for the manufacture of vacuum resin impregnated dry type transformers
and cast resin dry type transformers.
To meet the rising demand for transformers, VTL is in the midst of a greenfield expansion and is setting up a
manufacturing facility at Vadadla, Vadodara, at an investment of about Rs.35 cr. The plant, expected to go operational by
April 2009 and will enhance its capacity by more than 50% taking the total transformer manufacturing capacity to 13000
MVA from 9000 MVA. Post expansion, the capacity across business segments will stand as distribution transformers –
5000 MVA, power transformers – 6000 MVA and dry type transformers – 2000 MVA. With the government aggressively
pressing for accelerated development of power generation, transmission and distribution capacities, the transformer
industry is expected to continue at a CAGR of above 15%, for the next five years. VTL being one of the oldest and
established players in the transformer sector is sure to benefit. Secondly, with the increasing demand for dry type
transformers, their contribution to overall sales is bound to increase, which in turn will give a boost to its operating
margins. Thirdly, the recent fall in copper prices will also positively impact its bottomline going forward. Meanwhile,
VTL's has a satisfactory order book position of around Rs.400 cr.
4
Recently, VTL came out with encouraging Q2FY09 results. While Sales grew by 15% to Rs.170 cr., but PAT jumped by
50% to Rs.27 cr. on the back of better operating margins, which stood at 22% against 19% last year. Accordingly for
H1FY09, it recorded 25% & 40% growth in sales and net profit to Rs.340 cr. and Rs.50.50 cr. respectively. Thus, it has
already posted an EPS of Rs.50 for H1FY09 and for entire FY09, it may clock a turnover of Rs.650 cr. with net profit of
Rs.85 cr. i.e. an EPS of Rs.84 on its equity of Rs.10.10 cr. It may even declare a dividend of Rs.15 for FY09, which gives a
yield of more than 4% at the CMP. Fundamentally, the company is quite strong being debt-free and with huge reserves of
more than Rs.150 cr., liquid cash worth Rs.60 cr., ROCE of 95% and ROE of 60%. Considering its 52-week high of Rs.1940,
the scrip has been battered down mercilessly to 20%, thereby providing them excellent opportunity for long-term
investors to accumulate for a price target of Rs.675 in 12-15 months.
Ratnamani Metals & Tubes Ltd. (Code: 520111)
Rs.72.45
Established in 1983, Ratnamani Metals & Tubes Ltd. (RMTL) has emerged as a multi-product, multi-location company
providing total piping solutions to a diverse range of industries. Its business can be categorized mainly into two segments
— stainless steel tubes & pipes and carbon steel pipes. Its Carbon Steel Division, makes high frequency welded (HFW) &
electric resistance welded (ERW) pipes apart from manufacturing longitudinal submerged arc welded (L-SAW) pipes &
helical submerged arc welded (H-SAW) pipes of large diameter. These pipes are primarily used for continuous
transportation of large quantities of oil, natural gas and water over long distances. On the other hand, its Stainless Steel
Division produces seamless and welded tubes and pipes of various grades conforming to different ASTM and DIN
standards. It also manufactures large diameter electric fusion welded (EFW) stainless steel pipes in a single long seam
upto a length of 12 metres. Stainless steel tubes and pipes are typically used in heat exchangers, boilers, condensers,
refrigeration, instrumentation, hydraulics, fuel injection, exhaust systems for automobiles apart from being used as
general piping for power plants, space application and special piping for nuclear applications. Thus, RMTL caters to the
niche markets of emerging sectors like oil & gas, petrochemicals, fertilizers, water distribution, refineries, chemicals,
power plants, sugar, automobile, food and dairy, paper, pharmaceutical, nuclear, aeronautics, space research centres,
atomic energy, ship building, railway coaches etc. About 50% of its turnover comes from oil, gas, petrochemicals industry
followed by 20% from power and the balance 30% from the others. It has a large domestic customer base like BHEL, L&T,
Reliance Industries, IOCL, HPCL, BPCL, GAIL, Alfa Laval, Alstom Power, NTPC etc. At the same time, exports account
for 45% of its revenue as RMTL is an approved vendor of hydrocarbon majors like Shell, Total, Chevron, Exxon Mobil,
Agip KCO, Bechtel, TOYO Engg, Aker Kvaerner, Linde, BASF, Chiyoda, Dow Chemicals, BTT France etc.
RMTL has two state-of-the-art manufacturing plants at Chhatral and Kutch in Gujarat with a total installed capacity of
19,000 MTPA for stainless steel and 300,000 MTPA for carbon steel. In FY08, however, the capacity utilisation in the
stainless steel segment was 70% and in the carbon steel segment it stood at 30%. RTML meets 100% of its power
requirement from its 24 windmills generating 20.54 MW of green power. It has also got itself partly backward integrated
by establishing a hot extrusion line, which has reduced its dependence on imported materials to some extent. Apart from
these units, the company operates two mobile plants for making large diameter SAW pipes at the customer's site. These
plants can be dismantled and re-erected within a short span of time and can produce pipes with diameter from 36" NB
upto 135" NB in various thicknesses depending upon the project requirements. As a part of its forward integration, RTML
has recently set up a 3 layer polyethylene and epoxy coating line with capacity of 2.7 million sq. mtrs. To maintain its
growth momentum, it has also expanded its SS welded tube capacity by 3000 MTPA and is in the process of doubling its
H-SAW pipe capacity by 100,000 MTPA through brownfield expansion in two phases. Post expansion, its production
capacity for stainless steel will stand increased to 22000 MTPA and that of carbon steel to 400,000 MTPA. The company
has also developed titanium tubes for application
in the power industry, which will later be
extended to cover aerospace, defence, water
desalination, etc. Further, the company has
outlined a capex of Rs.90 cr. in FY10, which
includes setting up large diameter and higher
thickness stainless steel welded pipe plant with
capacity of 1500 MTPA and re-organisation of the
existing plant at Chhatral.
5
As of now, RTML has a decent order book of over
Rs.500 cr. to be executed over the next 6-9 months.
Of this, 50% order is for the Carbon Steel Division
and 50% for its Stainless Steel Division. Besides,
only 20% is export order with the rest 80% to be
supplied locally. Incidentally, the demand for
Profitrak/Investrak product meets
Our Technical Products Awareness Programme is back for
traders & investors.
A personal talk and meeting with Hitendra Vasudeo between 3
p.m. to 6 p.m. on the 2nd & 4th Saturday of every month at
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pipes is expected to remain strong over the next 3-5 years due to committed investments in power and in oil & gas
exploration & production (E&P) sectors. Moreover, a sizeble demand is also expected from replacement of old pipes. In
September 2007, to fund its expansion plan the company made a preferential allotment of 4.50 lakh warrants to be
convertible at Rs.950 (FV Rs.10) per share. But looking at the CMP, this conversion may not materialize; place hence no
equity dilution is expected in the near future. For FY08, it recorded 50% growth in sales to Rs.845 cr. and 40% increase in
PAT to Rs.90 cr. despite taking a hit of Rs.27.50 cr. due to M2M losses on derivative instruments. For H1FY09, its sales
improved by 25% to Rs.498 cr. but net profit was flat at Rs.49 cr. Since, the company did not make provisions for notional
forex loss; its net profit would have been lower by approx Rs.10 cr. But the recent fall in the steel and other commodity
prices will relieve some pressure on its operating margin having a positive impact on its bottomline.
So taking everything into consideration, RTML is estimated to end FY09 with sales of Rs.1000 cr. and PAT of Rs.80 cr.
leading to an EPS of Rs.18 on its equity of Rs.9 cr. having FV as Rs.2 per share. Although the company recently split its
stock it has huge reserves of over Rs.200 cr. on such a small equity. Also it being the 25
th
year of its operation, it may
declare a liberal bonus to cheer shareholders. Hence investors are strongly recommended to accumulate this scrip at
declines for a price target of Rs.110 in 15 months.
Indraprastha Gas: Recession-proof prospects
ANALYSIS
By Devdas Mogili
Indraprastha Gas Ltd. (IGL) is a 10-year old New Delhi based company established in 1998. It is a joint venture between
GAIL (India) Ltd., Bharat Petroleum Corporation Ltd. and the Government of the National Capital Territory of Delhi. IGL
was promoted to implement the Compressed Natural Gas (CNG) expansion programme and the Piped Natural Gas
(PNG) project for varied applications in the domestic and commercial sectors. Mr. U. D. Choubey is the chairman while
Mr. the Rajesh Vedvyas is the managing director of the company.
IGL commenced its operations in February 1999 by taking over and executing the Delhi City Gas Distribution Project in
Delhi from GAIL (India) Ltd.
In December 2004, the company commissioned two CNG facilities in Noida and also embarked upon expansion of its gas
distribution network within the National Capital Region (NCR).
CNG Business: In FY08, IGL has further augmented its CNG distribution infrastructure as the number of CNG stations
increased from 153 in March 2007 to 163 in March 2008, which include 69 mother stations, 46 online stations, 46 daughter
booster stations and 2 daughter stations. The installed compression capacity went up from 20.18 lakh kg/day in March
2007 to 20.18 lakh kg/day in March 2008.
The estimated number of vehicles running on CNG in Delhi as on 31st March 2008 was over 2,25,000 including 12,000
buses and 123,000 private vehicles.
PNG Business: IGL has extended its PNG distribution infrastructure to the new areas in Delhi. During FY09, it plans to
extend its PNG distribution network to more areas besides providing connections to new customers in the existing
network. As on 31 March 2008, it has provided PNG connections to over 122,000 domestic and 300 commercial customers.
R-LNG Business: IGL has been supplying Re-gassified Liquid Natural Gas (R-LNG) to 16 industrial consumers and is
exploring new gas supply sources for meeting the demand of this segment.
Expansion: IGL has planned capital investment of Rs.78 cr. for its expansion projects in the NCR towns of Noida, Greater
Noida and Ghaziabad.
The company started the project execution activities in Noida in October 2007, after getting a NOC from the UP
Government. A steel pipeline of 12 kms has already been laid down and 2 CNG stations are expected to be operational
soon.
It has also laid 22 kms of steel pipeline in Greater Noida and 2 CNG stations are expected to be operational by December
2008. Besides providing CNG, the company has also made plans to start supply of PNG to households in Noida and
Greater Noida.
In Ghaziabad, it has been allotted 2 sites for CNG stations for which project execution activities shall commence after
necessary regulatory approvals. IGL also has plans to supply CNG through retail outlets of Oil Marketing Companies
(OMCs) in 2008-09.
In Haryana, IGL has decided to go ahead with a JV model for setting up City Gas Distribution Projects in Sonepat and
Panipat. M/s. Siti Energy Ltd. has been identified as a JV partner for these towns and work will start after obtaining
necessary regulatory approvals.
Performance: IGL reported impressive results for FY08. It registered net sales income of Rs.705.98 cr. with net profit of
Rs.174.46 cr. recording an EPS of Rs.12.46.
6
Financial Highlights:
(Rs. in lakh)
Particulars
Q2FY09
Q2FY08
H1FY09
H1FY08
FY08
Gross Sales/Income from operations
24,309.92
20,003.90
45,861.11
38,594.01
80,979.80
Less: Excise Duty
2,791.29
2,594.28
5,269.02
5,009.14
10,381.97
Net sales/Income from operations
21,518.63
17,409.62
40,592.09
33,584.87
70,597.83
Other operating income
148.65
65.34
237.72
128.30
695.66
Total Income
21,667.28
17,474.96
40,829.81
33,713.17
71,293.49
Expenditure
(Increase)/Decrease in stock in trade
(0.04)
-
(1.78)
(0.58)
(0.70)
Raw materials
9,590.73
7,456.01
18,033.17
14,387.49
30,294.42
Employee cost
537.32
347.42
1,073.36
704.72
1,525.60
Depreciation
1,685.61
1,582.33
3,320.70
3,138.70
6,257.67
Other expenditure
2,881.52
2,105.34
5,425.67
4,122.05
8,775.10
Total Expenditure
14,695.14
11,491.10
27,851.12
22,352.38
46,852.09
Other income
538.82
409.43
1,075.50
746.28
1,648.15
Profit before tax
7,510.96
6,393.29
14,054.19
12,107.07
26,089.55
Tax expense
2,493.37
2,108.37
4,668.41
3,980.10
8,643.99
Net profit after tax
5,017.59
4,284.92
9,385.78
8,126.97
17,445.56
Paid-up equity share capital (FV: Rs.10 each)
14,000.02
14,000.02
14,000.02
14,000.02
14,000.02
Reserves excluding revaluation reserves
-
-
-
-
43,645.97
Basic and diluted EPS (not annualised)
3.58
3.06
6.70
5.80
12.46
Latest Results: In Q2FY09, sales increased by 23.99% to Rs.215.19 cr. as against Rs.174.10 cr. in Q2FY08. Net profit rose
17.11% to Rs.50.18 cr. in Q2FY09 from Rs.42.85 cr. in Q2FY08. IGL clocked a basic and diluted EPS of Rs.3.58 against
Rs.3.08 in Q2FY08. The annualised EPS works out to Rs.14.32.
Financials: IGL has an equity base of Rs.140 cr. of shares of Rs.10 each with a book value of Rs.41.18. Its RoCE is 49.59%
and RoNW is 33.42%.
Share Profile: The company's shares with a face value of Rs.10 are listed and traded on the BSE and NSE under the B
group. Its share price touched a 52-week high/low of Rs.182.50/92.10. At its current market price of Rs.105, it has a
market capitalisation of Rs.1476 cr. The IGL share has a beta value of 0.6, which indicates that the stock is less volatile.
Shareholding Pattern: As on 31 September 2008, the promoters' holding in the company was 45%, government holding
was 5% and the balance 50% is held by non-corporate promoters, mutual funds and the Indian public. The shares of IPG
are quite popular with mutual funds like Sundaram, HDFC, UTI, Birla, LICMF, ING Vysya, Taurus, Chola, and India
Excel (offshore) Fund have added the company's shares to their various schemes.
Dividends: The company has been paying dividends as shown below:
FY08 - 40%, FY07 - 30%, FY06 - 25%, FY05 - 20%, FY04 - 15%
It can be seen that the company has been stepping up dividends over the last five years. It has hiked the dividend from
30% to 40% for FY08.
Prospects: CNG is an eco-friendly and economical due to which a large number of private car manufacturers are
introducing their CNG variants. There is also a large-scale conversion of private cars into CNG mode. The recent increase
in prices of petrol and diesel will further boost the CNG business.
In view of the forthcoming Commonwealth Games in 2010, a large number of high capacity buses and Radio Taxis
running on CNG are expected to be added to the public transport fleet in Delhi for the convenience of visitors.
IGL has planned large-scale expansion in the PNG segment for which a capital expenditure of Rs.63.3 cr. has been
earmarked for Delhi in FY09 to provide additional PNG connections to over 50,000 domestic households.
Conclusion: IGL is a niche player with virtually no competition to boot. Moreover with fears of recession looming large
the world over, the company is operating in a sector that is recession proof. Besides, the forthcoming Commonwealth
Games will boost the demand for CNG.
At its current market price of Rs.105, the IGL share price is discounted less than 9 times its FY08 earnings against the
industry average P/E multiple of 13 times. Going forward, IGL is expected to post an EPS of over Rs.14. Considering its
encouraging performance and bright prospects, the IGL share may be added to one's portfolio for significant gains in the
medium-to-long-term.
The Sensex ends its 6-week losing streak
MARKET REVIEW
By Ashok D. Singh
The market closed higher last week, ending its 6-week losing streak on the back of global central banks taking measures
to tackle the turmoil in the financial markets. The BSE Sensex closed higher in three out of the five trading sessions. The
Sensex rose 176.23 points or 1.80% to close at 9,964.29 for the week ended Friday, 7 November 2008. The NSE Nifty gained
87.30 points or 3.02% to 2,973 for the week. The BSE Sensex is down to almost half, nearly10,000 points in the calendar
7
year 2008 so far from its close of 20,286.99 on 31 December 2007. It is 11242.48 points or 53.01% below its all-time high of
21,206.77 struck on 10 January 2008.
The BSE Mid-Cap rose 155.35 points or 4.85% to 3,355.38 and the BSE Small-Cap index advanced 134.99 points or 3.58% to
3,900.10. Both the indices outperformed the Sensex.
Central banks across the globe were seen rushing to cut interest rates during the week to shore up the world economy to
calm the panic financial markets. The European Central Bank cut its key rate by 0.50% to 3.25% on 6 November 2008. The
Bank of England slashed its benchmark interest rate by 1.5% points on 6 November 2008 to 3%. Meanwhile, central banks
in Switzerland, South Korea, Denmark, and Czech Republic also announced rate cuts during the week. In late October
2008, the US Federal Reserve slashed its key-lending rate by a half point to match a historic low of 1%.
The International Monetary Fund (IMF), in its World Outlook Report released on 6 November 2008 cut its 2008 global
growth forecast to 3.7% and 2009 global growth forecast to 2.2% from its October 2008 estimate of 3.9% and 3%,
respectively. The IMF also cut its 2008 India growth forecast to 7.8% and 2009 India growth forecast to 6.3% from its
October 2008 estimate of 7.9% and 6.9%, respectively.
Prime Minister (PM), Dr. Manmohan Singh, told top business leaders on Monday, 3 November 2008, that the government
will take all necessary monetary and fiscal policy measures to protect growth. The PM also said that the government was
working closely with other countries to ensure coordinated policy action for the containment of the global financial crisis.
FIIs have been pulling out their investments from India and other emerging markets to shore up resources to beat the
global liquidity crunch. In India, FIIs were net sellers of Rs.49,947.60 cr. in calendar 2008 till 5 November 2008.
Trading for the week started on an upbeat note following a surprise rate cut by the Reserve Bank of India (RBI) over the
weekend. The stock market regulator's decision to increase the tenure for lending and borrowing of stocks and firm Asian
equities also supported the bourses. The Sensex jumped 549.62 points or 5.62% to 10,337.68 and the Nifty surged 158.25
points or 5.48% to 3,043.85, on Monday, 3 November 2008.
Bank stocks led the rally in a choppy session on Tuesday, 4 November 2008 with gains in key overseas equity markets
supporting the upmove. The Sensex rose 293.44 points or 2.84% to 10,631.12 and the Nifty was up 98.25 points or 3.23% to
3,142.10.
Weakness in European stocks and lower US index futures pulled the market sharply lower on Wednesday, 5 November
2008. The Sensex plunged 511.11 points or 4.81% to 10,120.01 and the Nifty was down 147.15 points or 4.68% to 2,994.95.
The Sensex fell 385.79 points or 3.81% to 9,734.22 and the Nifty was down 102.30 points or 3.42% to 2892.65 on Thursday,
6 November 2008, as an unexpected increase in inflation rate shattered hopes of further interest rate cuts by the RBI.
Data showing rise in infrastructure sector output and positive global cues boosted the domestic bourses on Friday, 7
November 2008. The Sensex gained 230.07 points or 2.36% to 9,964.29 and the Nifty rose 80.35 points or 2.78% to 2973.
Infrastructure stocks were the star performers in the week. Reliance Infrastructure was up by 22.80% at Rs.560.90, GVK
Power & Infrastructure was up 65.36%
at Rs.18.19, IVRCL Infrastructure was
up by 64.17% at Rs.139.05, GMR
Infrastructure was up by 33.93% at
Rs.67.50, and Lanco Infrastructure was
up by 48.48% at Rs.168.95. India's
infrastructure sector output grew 5.1%
in September 2008 from a year earlier,
well above 2.3% annual growth in
August 2008, government data released
on Friday, 7 November 2008 showed.
8
DLF surged 27.54% to Rs.280.90 even as
Morgan Stanley cut price estimate on
the stock by 82% to Rs.256.
Banking stocks were boosted by the
RBI's initiative to prop up liquidity in
the financial system and on hopes
lower rates will boost lending. ICICI
Bank rose 7.99% to Rs.431.25. State
Bank of India rose 12.60% to Rs.1249.25.
HDFC Bank gained 6.34% to Rs.1088.55
Most state-run banks cut their prime
lending rates during the week. Bank of
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Baroda, Allahabad Bank, Central Bank of India, Oriental Bank of Commerce and Corporation Bank reduced lending rates
by 75 bps to 13.25% with effect from 10 November 2008.
The RBI, on Saturday, 1 November 2008, unexpectedly cut its main short-term lending rate viz. the repo rate for the
second time in as many weeks to ease a growing cash squeeze, spur faltering economic growth and fend off damage from
the global financial crisis. Besides a cut in the repo rate, the central bank took other liquidity boosting measures, including
a cut banks' cash reserve ratio (CRR) by 100 basis points (bps) to 5.5%.
The RBI also cut banks' statutory liquidity ratio (SLR) by 100 bps to 24% of their deposits w.e.f. 8 November 2008. The
CRR is the percentage of deposits, which the banks must keep with the central bank. The CRR cut is expected to release
Rs.40000 cr. into the system. The SLR is the ratio of government bonds and other approved securities that banks have to
hold as a percentage of their total deposits.
Telecom stocks rose on reports government will allocate spectrum for next generation wireless networks to successful
bidders by the end of January 2009 after holding an auction as planned earlier in the month. Reliance Communications,
the country's second largest telecom services provider by sales rose 3.38% to Rs.228.15 whereas India's largest telecom
services provider by market share Bharti Airtel was up 0.15% to Rs.650.
Metal stocks declined after recent sharp fall in metal prices on global recession worries. Sterlite Industries (down 12.77%
to Rs.246.15), Tata Steel (down 9.52% to Rs.190.10), edged lower.
Hindalco Industries rose 0.42% to Rs.60.45 on reports the company has cleared the bridge loan taken to acquire Canada's
Novelis.
IT pivotals slipped on worries the US outsourcing business will be curtailed and the direct impact will be on IT sector
after Barack Obama won the US presidential election. Satyam Computer Services lost 8.87% to Rs.277.75. Infosys fell
8.62% to Rs.1262.50. Wipro slipped 4.30% to Rs.260.45. Tata Consultancy Services declined 2.40% to Rs.524.55.
Indian IT pivotals derive a major share of revenues from exports to the US. Obama has strong reservations on outsourcing
from the US. He had made many statements during his election speeches that he would discourage outsourcing from the
US when he comes into power.
The Sensex gained 176.23 points to close at 9,964.29 last week. Key benchmark indices may continue to be guided by
overseas cues as sentiments remain fragile on worries of widespread global recession. Back home, the index of industrial
production data will be watched keenly. The index of industrial production data for September 2008 will be released on
12 November 2008. Growth in core industries dipped in August 2008 tracking the overall decline in index of industrial
production to 1.3%. On the flip side, the sustained fall in crude oil prices from a record high of $147.27 a barrel struck on
11 July 2008 augurs well for the global economy. New York's main contract, light sweet crude for December 2008 delivery
was hovering near $60 in Asian trades on fears of slowdown in the global economy.
Market gains confidence
MARKET
By G. S. Roongta
After the stupendous pull-back since the Diwali Muhurat trading session on Tuesday, 28 October 2008, the market
continued its upward trend in the early part of last week giving the impression that confidence had returned on the
bourses. This was, however, short-lived as they were once again adrift amid losses in keeping with global markets.
The pull-back from the token trading on Muhurat day till Tuesday, 4 November 2008, and the opening
on Wednesday, 5 November 2008, was a rise of 2933.73 points on the Sensex at 10631.12 from its recent
low of 7697.39 made on the eve of Diwali on Monday, 27 October 2008. This rise is indeed remarkable
considering that it was a 3-day trading week given the two holidays on account of Diwali and Bhaubeej
in the week before last and in sharp contrast to the Black Diwali Eve.
As I had stated last week, the rise of 500 points at the token Muhurat trading session was an auspicious
sign to bring in Samvat 2065, which will prove to be a fabulous year for those who enter the market
afresh at the current throwaway prices. Several stocks have gained 50-70% from their low levels in just a
matter of 7/8 trading sessions. For example, Tata Steel, which had fallen below Rs.150 in the week before last touched
Rs.245 on Tuesday, 4 November 2008. Is it not history that the stock gained nearly 100 points to mark a rise of 70% in just
4 trading sessions? Similarly, Hindalco, which had touched a low of Rs.38 a week ago gained 70% to hit a high of Rs.65.60.
Is this not historical and do you think you will be able to witness such stock movements in future?
G.S. Roongta
These are just two examples of two blue-chip stocks whereas there are hundreds of such stocks if one cares to compile the
long list of gainers. Besides, there are hundreds of other good liquid stocks that gained equally sharp like JSW Steel from
Rs.188 to Rs.310 - a rise of 64%, JP Associates by 65% from Rs.47 to Rs.80, Elecon Engineering by 39% from Rs.36 to Rs.50,
L&T by 37% from Rs.680 to Rs.930, etc. These figures are as of Tuesday, 4 November 2008, whereas the market had
opened still higher by over 310 points on Wednesday, 5 November 2008 and would, therefore, make the rise in their stock
prices even more impressive.
9
From the trading point of view, however, one cannot arrive at a firm opinion as the market swung by over 821 points as it
closed lower by 511 points despite the strong gap up opening by 310 points on the back of strong US and Asian markets.
Hence those who track global markets were caught in a trap, which again created a panic in the market.
The sharp rise by 230 points on the Sensex to close the week at 9964.29 and 80 points on the Nifty at 2973 on Friday, 7
November 2008, lifted the gloom and ushered in a ray of hope on reports that retails investors were active having bought
stocks worth over Rs.4000 cr. between 1 September to 23 October 2008. This gives me hope that investors have regained
confidence in their abilities and will not sway or succumb to the extremities in the market that are brought about by the
market operators from time to time.
Last week, I had identified 12 good stocks that had lost value between 80-98% from their peak levels and stated that what
is left in their stock quotations is nothing short of scrap value. Hence if the FIIs were keen to realize scrap value by their
aggressive selling then retail investors should seize this God sent opportunity to acquire blue-chip stocks at throwaway
prices.
Many of you must have received messages on your mobile around Diwali about availability of blue-chips at the cost of a
burger or a soft drink or a chocolate. Who could have imagined that stock valuations could fall to such ridiculous levels.
Imagine the difference in valuations when the good days return! Yet hardly anyone dares to think and act positively
when there is blood on the streets whereas shrewd investors wait for such opportunities and jump into the fray to pick up
good stocks in the panic that prevails. This courageous and contrarian approach is what assures them of huge profits in
the long run.
Even though investors were baffled by the sharp swing of the indices closing lower by 511 points at 10120 on the Sensex
despite its 310 gap up opening and lower by 4.7% or 147.15 points at 2994.95 on the Nifty against its intra-day high of
3240.44, bookies were busy forecasting a Sensex of 12500 and a Nifty of 3450 in the near term but that a correction of 3000
points was a must and should not be a cause of disappointment. We should not forget that the market needs time for
consolidation and it would be foolish to expect the market to go up sharply one way without corresponding corrections.
For a firm trend to develop, we must first get out from the panic situation created and allow stock prices to settle down at
reasonable levels after several such breaks or pull-back rallies. This is in spite the gloom/doom scenario spread by the TV
channels or pink papers as they focus on news about the impending recession that is likely to overtake the economy given
the slowdown in demand, cut in production and going slow on expansion plans.
But let us also look at the other side of the coin as input costs have fallen sharply given the meltdown in metals and
commodities including fuel costs as crude oil has fallen from a record high of US $147 to US $67 per barrel. Similarly, coal
price has fallen from US $180 to US $100 per metric tonne. Shipping freight, too, has fallen to just 30% from the peak rate.
Since raw materials, energy and transportation costs constitute nearly 70% of manufacturing costs, why should one get
perturbed if steel prices are down by Rs.4000/6000 from their peak levels? Thus the margins will be only marginally
affected in a scenario of falling product prices on the back of falling raw material, energy and transportation costs.
Secondly, the government has suddenly become industry friendly providing all sorts of sops like liberal finance, lower
interest rates, reduction in import/export duties wherever feasible. Earlier, the government was tightening the screws on
industry on the pricing front. No doubt, the demand and supply gap has narrowed on account of the recent financial
crisis, the worst of which is hopefully over and reflected in the current stock market prices. The recovery process will start
as an outcome of production cuts, lower capacity utilization, abandoned expansions that will ultimately create a shortage
of products for real consumption. How long can the real needs be deferred? While cosmetics, entertainment, pleasures
and fanciful items can be sacrificed, real needs related to food, shelter, clothing, transportation and communication cannot
be suppressed for long. Hence the
recessionary fears will be short-lived.
10
Coming back to stock prices, when you find
that they are quoting at a 3-5 years low
despite enjoying the pink of health for almost
4/5 years and you witness forced liquidation
then you can either choose to remain in a
fool's paradise or act smart and pick up the
goodies that may never be available at such
low prices hereafter. You must thank the
financial mess triggered by the sub-prime
crisis in USA that has created this rare
opportunity for investors.
According to me, we are already near to the
bottom and there is very little scope of any
further sharp fall in stock prices of specific
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stocks. Hence those who buy now will be in a commanding position with very little to lose but plenty to gain. Just as the
Sensex fell slowly & steadily from 21,200 in just 8 months, likewise it will start consolidating first and pick up quickly
thereafter. There is, therefore, a strong case to undertake a rigorous exercise to select good stocks of your choice as all
sectors have fallen with greater speed than the speed at which they were heading upwards.
One must, therefore, have the courage of confidence and proceed to rebuild his/her portfolio and enjoy a long ride in the
growth of its valuations. There is no room for pessimism and one should be optimistic about the outcome.
By Saarthi
STOCK WATCH
At a time when most auto ancillary stocks are reeling under pressure, Hi Tech Gears Ltd. (Code: 522073) (Rs.47) is
constantly churning out an encouraging performance quarter after quarter. For Q2FY09, it registered 40% rise in sales to
Rs.92 cr. whereas net profit jumped by 65% to Rs.4 cr. posting an EPS of more than Rs.4 for the single quarter. For
H1FY09, the topline improved by 25% to Rs.173 cr. and bottomline by 35% to Rs.7 cr. With its world class manufacturing
facilities at Bhiwadi and Manesar, the company is a leading manufacturer and exporter of gears and engine/transmission
components. In FY08, the company revalued one of its lands situated in Gurgaon, Haryana, from its cost price of around
Rs.1 cr. to nearly Rs.33 cr. thereby crediting approx. Rs.32 cr. to revaluation reserve. For future growth, the company
plans to increase exports substantially and may report a total revenue of Rs.325 cr. with a profit of Rs.8.50 cr. on a
conservative basis for FY09. This translates into an EPS of Rs.9 on its equity of Rs.9.40 cr. It may again declare 30%
dividend for FY09, which gives a yield of a whopping 7% at the CMP. With its 52-week high at Rs.180, the scrip has
corrected substantially and can easily appreciate 30-50% in a year.
******
For Q2FY09, the sales of Ind-Swift Laboratories Ltd. (Code: 532305) (Rs.28.50) increased by 35% to Rs.146 cr. and PAT
improved by 45% to Rs.10.50 cr. Hence it has already posted a net profit of Rs.20.50 cr. for H1FY09 against a PAT of Rs.31
cr. for the entire FY08. Notably, the company has started exporting to USA in a big way after obtaining the USFDA
approval for Clarithromycin for its API manufacturing facility at Derabassi, Punjab, in September 2007. It is now
expecting the second USFDA approval in 2009, which will further boost its export revenue. Presently, exports to 45-50
countries constitute around 40% of sales. For future growth, the company has a robust product pipeline of 25 products,
which include few blockbuster drugs as well. It has successfully filed over 72 DMFs with the US, Canadian, UK and
European Drug Authorities. The company has been aggressively expanding its capacities and has enhanced its gross
block by almost 5 times to Rs.470 cr. from Rs.100 cr. in 2005. For FY09, it may report sales of Rs.550 cr. with net profit of
Rs.30 cr. i.e. an EPS of Rs.11 on its diluted equity of Rs.27.50 cr. To fund its growth plan, the company made a preferential
allotment of 28 lakh warrants at Rs.70 in March 2007 and recently allotted another 25 lakh warrants at Rs.70 to the
promoter group. With a book value of a whopping Rs.97 and expected CEPS of Rs.18-20, the scrip is trading relatively
cheap at a P/E ratio of less than 2-3 times. Although the company has a high debt on its books, it still is a good bet at
current levels.
******
Diamond Power infrastructure Ltd. (Code: 522163) (Rs.117.65) is a leading manufacturer of transmission & distribution
conductors, power & control cables and speciality cables. After the acquisition of Western Transformers in March 2007
and Apex Electricals in July 2007, the company has also ventured into transformer production with an installed capacity
of 7500 MVA for power transformers and 5000 MVA for distribution transformers. Recently, the company announced
fantastic results for Q2FY09 as it doubled its topline as well as bottomline to Rs.175 cr. and Rs.20.80 cr. respectively. Even
for H1FY09, it recorded over 100% growth in sales to Rs.353 cr. and profit to Rs.40 cr. To cater to the rising demand and
increase it export revenue, the company is setting up a power equipment park spread across 110 acres in Vadodara,
which would have manufacturing facilities for 50,500 MTA of conductors, 48,000 MTA of transmission towers, 25,000 kms
of LT cables, 3200 kms of HT cables and 3000 kms cables of EHV cables. The park is expected to go on stream by
December 2009 and will also have space for setting up 50 ancillary units for power equipment manufacturers. The
company has already achieved the financial closure for its Rs.260 cr. capex plan for the park. Meanwhile for FY09, it may
clock a turnover of Rs.650 cr. with PAT of Rs.55 cr. i.e. an EPS of Rs.31 on its current equity of Rs.17.60 cr.
******
Supreme Infrastructure Ltd.'s (Code: 532904) (Rs.44.80) core competence lies in construction/widening of roads &
highways but it also undertakes other infrastructure projects like integrated nallah development, drainage work, laying of
railway tracks, construction of minor bridges, development of IT Parks, residential towers, RCC buildings, strengthening
of sea wall and laying of tetra pods etc. Its area of operation is mainly concentrated in the Mumbai region and few parts of
Maharashtra & Bangalore with major clients like NHAI, MCGM, MMRDA, MSRDC, MUTP, PWD, BMC, AAI, BPT, TMC
and also private agencies like Hiranandani, K. Raheja, Pratibha Industries, BARC, Sadbhav Engg, Mundra Port etc.
Importantly, the company has its own captive ready-mix concrete (RMC) plants, asphalt mix plants, quarrying and
crushing units, and a paver block manufacturing unit. For Q2FY09, it posted revenue of Rs.66 cr. with profit of Rs.6 cr. as
11
against Rs.18.50 cr. and Rs.1.50 cr. respectively in Q2FY08. It has already clocked an EPS of Rs.11 for H1FY09. To cater to
the increasing demand for RMC, it is planning to almost double its RMC capacity to 300 cum. per hour by adding two
new RMC plants in Mumbai and another city. With a massive order in hand of over Rs.500 cr., it may register a topline of
Rs.250 cr. with net profit of Rs.18 cr. This will translate into an EPS of Rs.13 on its equity of Rs.13.90 cr. At a reasonable
P/E multiple of 5 times, the scrip can appreciate 50% in a year's time.
12
By Kukku
FIFTY FIFTY
Investment Call
* Indraprastha Medical Corporation Ltd. (IMCL) (Rs.21.30) was incorporated as a public limited company on 16 March
1988. It came out with an IPO in 1997 with 2,29,18,300 equity shares of Rs.10 each for cash at par aggregating
Rs.22,91,83,000 to set up a multi-disciplinary super speciality tertiary care referral hospital at New Delhi, which it runs in
collaboration with the Apollo Hospitals Group and is known as Indraprastha Apollo Hospitals (IAH). It has emerged as
one of the most valuable healthcare institutions in India riding on four assets - technological, infrastructural, human and
intellectual.
During the year gone by, the hospital registered significant growth in average bed occupancy and surgical volumes. The
total income of the company stood at Rs.342.27 cr. registering an impressive growth of over 36% from the previous year's
figure of Rs.253.75 cr.
For FY08, PBT stood at Rs.25.82 cr. registering 12% growth over Rs.22.97 cr. in FY07. PAT was Rs.16.15 cr. as compared to
Rs.14.72 cr. in FY07 registering a growth of 10%. This Noida hospital, which is in its second year of operation registered
good growth in volumes but incurred a loss of Rs.2.02 cr. due to higher interest cost & depreciation. For H1FY09, its profit
was Rs.10.93 cr. higher by 26% while sales went up by 22% to Rs.189 cr.
There is tremendous demand for healthcare services in India both from domestic as well as international segments. This is
reflected in the bed occupancy figures at IAH, which touched an average of 466 for 2007-08. On several days, peak
occupancy of 524 out of 529 was achieved during FY08.
IAH is uniquely placed to take advantage of the opportunity arising from the surging demand. The company has already
submitted building plans to the Municipal Corporation of Delhi (MCD) for approval to add 200 additional beds in the
hospital complex.
A lot of upgradation and renovation was undertaken in the OPD to bring in efficiencies and meet the competition from
other new hospitals. Such infrastructural improvements are expected to bring in better realizations per patient.
IAH, Delhi, was the first hospital in India to win an international quality accreditation certificate, when it was accredited
by the Joint Commission International (JCI), USA. India's independent credit rating agency CRISIL has also assigned a
Grade 'A' rating to Apollo. IAH will also be taking more initiatives to meet the stringent quality norms that it has set for
itself.
There has been a huge surge in air ambulance
services. According to estimates, around 365
airliftings worth several lakhs of rupees
happen in Delhi every year, of which IAH
alone did nearly 90 in 2007-08.
The volume of its international patients went
up significantly in FY08 with 3239 foreign
patients admitted as against 1949 patients in
FY07. Last year, the company earned foreign
exchange of Rs.30 cr. The Iraqi Health Ministry has signed an agreement with the hospital for treating high end tertiary
care patients and for training their doctors. Strong marketing thrust in this area is expected to result in more countries
participating in such programmes.
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International Patients: According to CRIS-INFAC Hospitals Review 2007, an estimated 2 lakh international patients
visited India in 2006, up from 10,000 in 2000. The medical tourism market is estimated at Rs.1,300 cr. in 2008 and is
expected to grow to Rs.7,800 cr. by 2012, a Compounded Annual Growth Rate (CAGR) of 55%.
The outlook for the company certainly appears bright since IAH enjoys great brand equity and has a reputation of being
a preferred healthcare delivery service provider for the increasingly discerning domestic healthcare consumers as
well as the global quality conscious patients.
The company has been paying regular dividend for the past 8 years. Last dividend was 14% and its stock's 52-week
high/low is Rs.61/18. Around Rs.21, the stock looks attractive for investment as the downside is limited. Investors can
accumulate this stock for good long-term growth.
Market Guidance
* Jetking (Rs.154) has reported encouraging H1FY09 results as sales shot up by 44% to Rs.25 cr. while net profit was up
by 59% to Rs.8.07 cr. Last year, the company gave a dividend of 160% on old capital. The stock is good portfolio choice.
Add on dips.
* Yuken India's (Rs.87.50) net profit is down by 54% for Q2FY09. Exit was advised in this column few months back in
view of a slowdown in the industry.
* Fortis Healthcare (Rs.66) has reported consolidated net profit of Rs.10 cr. against loss of Rs.15 cr. during same period of
last year. Investors can keep a watch on this stock for investment on dips around Rs.55 level for good long-term growth.
* Indian Hume Pipes (Rs.285) - There is huge potential for water supply, sewage disposal, head works, treatment plants
etc. For H1FY09, the company has already performed very well with sales moving up by 75% to Rs.301 cr. while
bottomline flared up 139% to Rs.8.23 cr. There are indications that the company may get some good orders in the near
future. The company has the benefit of a low equity base of Rs.4.84 cr. If H1FY09 results are any indication, full year EPS
is likely to be around Rs.45-50. Investors can accumulate this stock on dips around Rs.250 level for target price of Rs.450 in
the next 12-18 months.
* Pratibha Industries (Rs.83.05) Q2FY09 profit shot up by 57% to Rs.10.60 cr. Stay invested or add on dips.
* Finolex Cables (Rs.23.95) is another good stock that investors can accumulate in this correction. Book value of the stock
is around Rs.42 while last year's dividend was 75%. The company should do well over the long run. Moreover, it has
good built-in values like investment in drip irrigation business under the name Plastro Plasson Inds. (PPI), in which it
holds around 10% equity, and around 30% in Finolex Industries, which also holds around 20% in PPI. Any unlocking of
values when the PPI share gets listed may give good valuation to Finolex Cables over long run.
Risk Factors: (1) There may be more of forex & derivative losses, and (2) There may be inventory losses due to sharp fall
in raw material prices.
* Ion Exchange (Rs.80.40) results are not good even for Q2FY09. Investors can think of switching to Hindustan Dorr-
Oliver or Pratibha Industries or Indian Hume Pipes.
* Favourable developments may be expected in Fem Care Pharma (Rs.534.95).
Note: Although the market has bounced back from lower levels, investors still need to remain cautious. Those invested at
lower levels can book part of profits as the market goes up.
There is a sharp fall in almost all commodity prices because of which large or retail consumers are holding back their
purchases on expectation of a further fall in finished good prices which they intend to purchase. There is a slowdown in
almost every sector and we may see further fall in margins in the current quarter due to losses on inventory or sharp &
sudden fall in prices. Most buyers or consumers are seeking discounts while most manufacturers are holding inventory
valued at much higher prices. We may see improvement in most of companies from the next quarter.
It is possible that the market may take strong support around Sensex 8900 to 9000 level on the downside and it may go up
to 12000 level on investment buying and short coverings. Investors should book part profits on such an upmove.
Avoid auto sector, shipping sector, metal & steel stocks.
Buying should be done slowly in all defensive stocks.
Last year, this column had advised locking partial profits in FMP units from time to time. Investors having invested in
FMP units should check their portfolio whether they have higher exposure in real estate or other companies where credit
rating is not good. In such a case, it is better to redeem the same and invest them in good income debt funds.
By V. H. Dave
EXPERT EYE
This share was recommended at Rs.52 on 8 November 2006 under Early Bird Gains (EBG), our investment newsletter
specializing in multi-baggers, with a price target of Rs.80 or 50% gain in the long-term. Since then it has touched a high
of Rs.113.30 on 13 December 2007 fetching a decent gain of over 100%. It is again recommended at the current throwaway
price.
The share of Simplex Castings Ltd. (SCL) (Code: 513472) (Rs.32) has come off its high of Rs.113 and provides a good
investment opportunity to discerning investors. The share is available at a P/E of just 2.2 on FY09 EPS of Rs.13.
Registered as a partnership firm in 1971, SCL was incorporated in 1980 and went public in 1993. It was promoted by the
Simplex Group, a leading manufacturer of a wide range of engineering products, castings and equipments for the core
industrial sectors. SCL manufactures heavy castings in grey cast iron and alloy cast iron.
SCL has two major units – one heavy grey iron unit and the other is a heavy steel-casting foundry. The total capacity of
SCL's Bhilai and Raipur units in Madhya Pradesh is around 30,000 tonnes. It has adopted the latest technology in view of
its earlier technical tie-up with a number of companies for its products. Some of the firms, which provide technology are
Nippon Steel Corporation, Japan; Ikio Iron Works, Japan; Dango & Dienenthal, Germany; China Metallurgical, China and
Schalker, Germany.
Its products are mainly used in steel plants, railroad equipment, wind mills, mining, power plants, cement plants, sugar
plants, pumps & valves, material handling, Defence and the Railways.
13
All major steel companies including Tata Steel, the Jindal group, SAIL, Essar and Bhushan Steel are its clients. Its overseas
clients are Indu steel - France, Arcellor - Spain, Ingersoll Rand - Italy, Sandvik AB - Sweden, Al - Nasar Company for coke
& chemicals - Egypt, Hyundai and Posco – Korea. Exports constitute around 12% of its sales.
During FY08, while sales moved up by 7% to Rs.150 cr., net profit shot up 33% to Rs.7.4 cr. and the EPS was Rs.12.2. A
dividend of 15% was paid.
During Q2FY09, sales advanced 21% to Rs.46 cr. and net profit surged by 25% to Rs.2.8 cr. For H1FY09, sales were up by
13% to Rs.79 cr. and net profit by 20% to Rs.4.2 cr. over H1FY08.
SCL's equity capital is Rs.6 cr. and with reserves of Rs.27.8 cr., the book value of the share works out to Rs.56.
The promoters hold 56.4% in its equity capital, foreign holding is 2.7%, PCB holding is 10% leaving 30.9% with the
investing public.
The company has chalked out expansion & diversification plans. It has incurred capex of Rs.13 cr. for modernisation and
machining to improve the product mix and shore up its margins. It wants to enter new areas like hydro and gas turbine
castings, fabrication and equipment building and turnkey projects for various steel plants and automobile manufacturers.
The company is planning to get into the manufacture of valves where in the margins are high.
SCL recently got a prestigious order worth Rs.14 cr. from the Ministry of railways for supply of coco bogies (chassis for
electrical locomotives) and has export orders worth Rs.30 cr.
It has also bagged an order for Torpedo Ladle Car and its facilities from SAIL's Rourkela steel plant worth Rs.62.5 cr.
India is the fifth largest producer of total casting production in the world, after US, China, Russia, and Germany. Of the
5000 units in production, over 250 units directly export castings to USA, Canada, Australia, Japan, Russia, Germany, U.K.,
France, Italy and other Asian and African countries.
The global production of ferrous and non-ferrous castings is estimated at 80 million tonnes exceeding US $ 100 billion in
value terms. The global trade in metal castings is estimated at US $ 10 billion and is expected to multiply in coming years.
Advanced countries are facing a marked change in the business climate and a rise in production costs. As a result, they
opt for large scale outsourcing to countries such as India and China.
SCL's modernisation, its improving
product mix, repeat orders from the
Indian Railways, large orders on hand,
increasing exports and improving
margins give good visibility to its
revenue & profits in the future.
14
During FY09, sales are expected to
advance by 20% to Rs.180 cr. and net
profit by 18% to Rs.8.5 cr. This would
result in an EPS of Rs.14.
At the CMP of Rs.32, the share is
trading at a P/E of 2.2 on its FY09
estimated EPS of Rs.13. The share is
recommended with a target price of
Rs.40 in the medium-term. This would
fetch a gain of 38%. The 52-week
high/low of the share has been
Rs.113/25.
******
This share was recommended at Rs.119
on 23 May 2007 under Early Bird Gains
(EBG), our investment newsletter
specializing in multi-baggers, with a
price target of Rs.160 or 30% gain in the
medium-term. Since then it has touched
a high of Rs.595 on 31 December 2008
fetching a decent gain of 400%. It is
again recommended at the current
throwaway price.
XL Telecom & Energy Ltd. (XLTEL)
(Code: 532788) (Rs.68.90) has produced
excellent Q1FY09 (June – September
2008) results posting 150% higher net
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15
profit of Rs.15 cr.
Incorporated in 1985, XLTEL, formerly XL Telecom, is a Hyderabad based company that operates through two divisions:
Telecom and Energy. In December 2006, it came out with an IPO of 39,50,000 shares of Rs.10 each at Rs150 per share
aggregating Rs.59 cr. for expansion.
Its manufacturing facilities at Hyderabad in Andhra Pradesh and Nanded in Maharashtra have annual installed capacities
of 500,000 units of cable jointing kits, 2,880 of SMPS plants, 65 MW solar modules, 3 million CDMA phones, and 150,000
litres of ethanol per day.
XLTEL used to derive almost 80% sales from Telecom products and the balance 20% from its Energy Division, which
comprises two segments – Ethanol and Solar Photovoltaic Systems (SPV). This has drastically come down to just 1.5%
from 44% in FY08 (June-end) due to high margin concentration in the energy business.
XLTEL has set up a 120 MW solar photovoltaic cell manufacturing plant in the Rajiv Gandhi Nano Technology Park SEZ
at a cost of Rs.360 cr., which is scheduled to commence its operations soon.
It recently raised $40 million (Rs.160 cr.) through a FCCB issue to part fund the above project. The FCCBs are convertible
after one year but before 5 years post issue. The balance funding of Rs.200 cr. is being financed by a Term Loan from IDBI
at 11% p.a.
It has a 3-year exclusive distribution agreement with Forta Im Ex SL, Italy to deliver a minimum of 3 MW solar modules
per annum to Europe and collaborations with Alfa Laval, Axesstel, Corning and Kyocera Wireless.
During FY08 (June end), XLTEL posted 24% higher sales of Rs.650 cr. and earned 99% higher net profit of Rs.40 cr.
yielding an EPS of Rs.21.4.
During Q1FY09, sales have further gone up by 70% to Rs.257 cr. and net profit up by 150% to Rs.15 cr. This net profit of
Rs.15 cr. is arrived at after the notional provision of Rs.5.5 cr. towards foreign exchange fluctuation.
The company's equity capital is Rs.18.8 cr. and with reserves of Rs.269 cr., the book value of its share works out to Rs.154.
The promoters hold 61% in the equity capital, foreign holding is 29.4%, institutions hold 4.4%, PCBs hold 1.5% leaving
3.7% with the investing public.
XLTEL is looking at establishing series of Solar Farms in Italy, southern France and other European countries generating
about 300 MW over 3 years.
The first of its solar farm has been established in Majorca, Spain, with an installed capacity of 1.6 MW at a capital outlay
of Euro 9.5 millions (Rs.62.7 cr.). The company has submitted bids for three tenders to supply solar energy equipment
worth Rs.640 cr. in Europe.
XLTEL has received TUV Certification for quality assurance from Germany that will act as a major catalyst for exports to
Europe.
The company has signed a Power Purchase Agreement (PPA) for 25 years with a Spanish utility company. The project is
expected to generate about Euro 19 million in revenues over its initial life with almost negligible maintenance costs.
It has signed a 5-year contract with LDK under which, LDK Solar will deliver approximately 300 MW of multi-crystalline
silicon solar wafers to XLTEL over a 5-year period, commencing in Q1FY09 and extending through 2013.
Looking at the growing global demand for Non-Conventional Energy Power Generation in the global market place,
XLTEL, as a part of its strategy to be a serious player, has decided to embark on forward integration in the solar value
chain by entering the EPC segment of solar farm establishment and into power generation using Solar Technologies.
Globally, the solar photovoltaic market is estimated at $16 billion and is expected to touch $65 billion by 2012, which
provides ample opportunity for the growth of XLTEL.
XLTEL is likely to achieve sales of Rs.1000 cr. for FY09 June year end. Net profit is likely to go up by 50% to Rs.60 cr.,
which would give an EPS of Rs.32.
At the CMP of Rs.68.90, the share is trading at a P/E of just 2.1 on its estimated EPS of Rs.32 for FY09 and offers potential
for further gain of about 40% in the medium-term. The 52-week high/ low of the share has been Rs.595/58.
******
An analyst strongly recommends investment in the shares of Polyplex Corporation Ltd. (PCL) (Code: 524051) (Rs.121.50)
with a target price of Rs.165 in the medium-term. The company has announced highly encouraging Q2FY09 results. PCL
is setting up a polyester film line at its existing site in Turkey at a cost of Rs.200 cr. and has other expansion plans in its
Indian facilities, which could push up its EPS to Rs.85 in FY10 on its small equity of Rs.16 cr.
PCL is the world's 5
th
largest producer of thin polyester film. With manufacturing facilities in India, Thailand and Turkey,
it meets the polyethylene terephthalate (PET) film needs of its global customers. It is one of India's leading manufacturers
and exporters of Biaxially Oriented Polyester (BOPET) Film for packaging, electrical and other industrial applications.
With its headquarters in Noida, New Delhi, the company has three PET film manufacturing facilities – one located in
Khatima, Uttaranchal; another in the Rayong province in Thailand, which is owned and operated by its subsidiary,
Polyplex (Thailand) Public Co. Ltd. (PTL); and the latest facility at Çorlu, Tekirdag in Turkey, which is owned and
operated by a wholly-owned subsidiary of PTL, Polyplex Europa Polyester Film San. ve Tic. A.S. (PE).
The total capacity of its PET chips is 1,18,000 TPA, metalliser 26,200 TPA and silicon coating facility 10 700 TPA. PET film
is a high performance film made from PET resin, generally known as Polyester Chips, which in turn is produced from
Dimethyl Terephthalate (DMT)/Purified Terephthalic Acid (PTA) and Mono-Ethylene Glycol (MEG).
During FY08, PCL registered 31% higher consolidated sales at Rs.1001 cr. and recorded 32% bloated net profit of Rs.82.4
cr. recording an EPS of Rs.54. During Q2FY09, it posted 28% higher sales of Rs.328 cr. and earned 59% increased net profit
of Rs.35 cr. During H1FY09, sales advanced 20% to Rs.585 cr. and net profit by 29% to Rs.56 cr.
The company allotted 13.50 lakh shares at Rs.152 per share and 16.50 lakh warrants with an option to apply for equal
number of shares at a price of Rs.152 per share within 18 months to the promoter group companies. Consequent to this, its
equity capital stands enhanced to Rs.16 cr. and will further increase to Rs.17.7 cr. by FY09. With reserves of Rs.454 cr., the
book value of the share works out to Rs.293.
The promoters hold 47% in its equity capital, foreign holding is 11%, institutions/mutual funds hold 7%, PCBs hold 13%
leaving 22% with the investing public.
Polyplex Europa has completed US $50 million expansion in Turkey. The metalliser plant of 5,700 TPA (No. 5) and 24,000
TPA PET film plant (Line 6) both in Turkey and the 5,700 TPA metalliser plant (No. 4) in Thailand were commissioned in
May 2008. It has already commissioned a 150 million sq. mt. extrusion coating plant in Thailand in April 2008.
Satisfactory progress is being made for its CPP (cast polypropylene) film plant of 10,000 TPA and a metalliser plant of
4,000 TPA (No. 8) in Thailand. In India, the company is also implementing a 31,000 TPA PET film (Line 7); a chip plant of
57,600 TPA, two metalliser plants of 7,000 TPA (No. 6) and 4,500 TPA (No. 7) and BOPP film of 35,000 TPA (Line 8).
PCL has established itself as one of the most profitable producers of PET film by way of cost-efficient operations resulting
from high productivity and low overheads. Its products have gained wide acceptance in USA, Europe, South-East Asia
and Australia, where it has been consistently exporting about 75% of its production.
The global packaging industry is estimated at around US $424 billion and is estimated to grow by about 3.5% p.a. over the
next decade and increase to US $600 billion by 2014.
The world's converted flexible packaging market is around 12% of the global packaging market and is close to US $50
billion (14 million MT). The global capacity of BOPP was 4.4 million MTA in 2006 and is expected to increase to 6 million
MTA by 2011.
The total market size of the Indian packaging industry is about $6 billion of which flexible packaging commands 22% or
$1.32 billion (Rs.5,500 cr.) and is expected to grow at 20% p.a. due to the increased demand for thin films.
The company's geographically diversified manufacturing locations, enhanced servicing capabilities, benefiting from the
regional trading blocs, the strong global and domestic demand, high operating rates, low overheads, strong customer
relationships, focus on high growth segments and further expansion give clear visibility to PCL's revenue & profitability
in the coming year.
During FY09, its sales are expected to go up to Rs.1260 cr. with net profit increasing to Rs.105 cr. when the EPS would
work out to Rs.59 on its enhanced equity of Rs.17.7 cr. The EPS would further go up to Rs.85 in FY10 on the back of
expansion.
At the CMP of Rs.121.50, the PCL share is trading at a P/E of 2.1 on FY09 estimated EPS of Rs.59. The share is
recommended with a target price of Rs.165 in the medium-term. The 52-week high/low of the share has been Rs.302/98.
By Nayan Patel
TECHNO FUNDA
Logix Microsystems Ltd.
BSE Code: 532341
NSE Code: LOGIXMICRO
Last Close: Rs.48.65
Logix Microsystems Ltd. (LML) is a Bangalore based company and has a long client list like GE, ABB, HP, Philips, LG
Polymers, Hoechst, ABN AMRO, etc.
The company's equity capital is just Rs.12.25 cr. while it has huge reserves of over Rs.165 cr. i.e. 13.4 times its equity
capital. Foreign holding in this company is around 48.12% while the promoters hold 22.60%, corporate bodies hold
11.37% and the Indian public holds only 15.94%.
LML has posted marvellous Q2FY09 results. Net sales zoomed by 50.38% while net profit zoomed 123.81% to Rs.4.23 cr.
In H1FY09, its sales zoomed by 55.60% while net profit zoomed 177.84% to Rs.9.53 cr. Its EPS was Rs.7.77.
Its 52-week high/low is Rs.393/48, which means that the stock is available at a very low price. The company paid 40%
dividend (Rs.4 per share) to shareholders FY08. At the current level, the stock yields 8.33% tax-free dividend. The stock is
traded at a P/E ratio of just 4.
At the current level, the LML stock looks attractive for short-to-long-term investment. Buy at every lower level with a stop
loss of Rs.38. On the upper side, the stock will go up to Rs.63 level. Crossover can take the stock to Rs.81 level in less than
6 months and it can touch Rs.110 level in less than 15 months.
16
17
PNB's Q2FY09 net up 31% YoY
MONEY FOLIO
Punjab National Bank (PNB) has put in a robust performance for Q2FY09 with 60% higher operating profit due to
improved business performance, containing operating expenses growth & reduction of Gross NPAs.
PBT for Q2FY09 at Rs.1,050 cr. has increased by 35.1%.
Its Q2FY09 net profit improved by 31.31% at Rs.707.09 cr. YoY while the HIFY09 profit registered a YoY increase of 26.56
at Rs.1,219.5 cr.
PNB's cost to income ratio has improved to 42.41% in Q2FY09 from 51.40% in Q2FY08.
The RoNW has improved to 24.98% in Q2FY09 from 20.13% in Q2FY08 whereas the Net Interest Income has increased by
32.58% to Rs.1712 cr. for the latest quarter as the Net Interest Margin has improved to 3.78% as against 3.48% Q2FY08.
It's Return on Assets improved to 1.33% for Q2FY09 from 1.23% in Q2FY08 while Net NPA Ratio has declined to 0.42%
from 1.86% on a YoY basis.
Union Bank to set up MF
Union Bank of India, a leading nationalised bank and KBC Asset Management, the globally active asset manager of the
Belgian KBC group, have formally signed the shareholders agreement to set up a joint venture asset management
company, in which they will take a stake of 51% and 49%, respectively.
Simbhaoli Sugars starts new ENA/Ethanol plant
Simbhaoli Sugars Ltd. has announced completion of its new extra neutral alcohol (ENA) and fuel ethanol plant at
Brijnathpur in District Ghaziabad of Uttar Pradesh. The molasses based ethanol manufacturing plant with an installed
capacity of 60 kilo litres per day (KLD) has been set up adjacent to SSL's Brijnathpur sugar plant.
With the start of this distillery, SSL's total ethanol/alcohol production capacity is now 210 KL/D. The project is
completed at a cost of over Rs.40 cr.
Era Infra Q2FY09 net up by 44.30%
Era Infra Engineering Ltd., an integrated infrastructure development company with a pan India presence has recorded
63.38% higher revenue at Rs.418.96 cr. in Q2FY09 from Rs.256.43 cr. in Q2FY08. EBIDTA stood at Rs.96.70 cr., an increase
of 67.88% compared to Rs.57.60 cr. in Q2FY08. Net profit was Rs.35.67 cr. up by 44.29% from Rs.24.72 cr. The operating
margins increased to 23.08% in Q2FY09 from 22.46% in Q2FY08.
For H1FY09, its revenue was at Rs.809.89 cr. up 60.59% from Rs.504.30 cr. in H1FY08. The EBIDTA for H1FY09 was
Rs.186.09 cr., an increase of 47.45% from Rs126.21 cr. in H1FY08 with net profit of Rs.64.06 cr. in H1FY09, up 12.46% as
against Rs.56.96 cr. in H1FY08.
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