Fw: Investor's Eye: Update - Telecommunications (End of 3G roaming pact among the players- Raises question on 3G revenue model); Viewpoint - Gujarat State Fertiliser Corp (In expansion mode); MF - Sharekhan's top equity mutual fund picks

 

 

Investor's Eye [December 22, 2011]  Sharekhan www.sharekhan.com

Summary of Contents SECTOR UPDATE Telecommunications     End of 3G roaming pact among the players- Raises question on 3G revenue model  The Department of Telecom (DoT) has asked the telecom operators to terminate the 3G intra circle roaming arrangements entered amongst them, with immediate effect. The show cause notices in this respect would be issued to the players today or latest by Friday morning.  We believe that if the 3G roaming pact/ arrangements are not permissible, as stated by the government, then it would be sentimentally negative and would also have a potential revenue impact. Further the entire 3G model would come under question with players having to work their business economics again in the light of changed policy environment. VIEWPOINT Gujarat State Fertiliser Corp        In expansion mode Extensive expansion plans: Gujarat State Fertiliser Corporation (GSFC) has plans to expand its product portfolio across segments especially the chemical segment with a total investment of about Rs1,400 crore. The projects that shall contribute significantly to the total revenue include a methanol plant (at a cost of about Rs350 crore), a TIFERT unit (at a cost of about Rs1,200 crore) and a nylon 6 plant (at a cost of about Rs275 crore). These three proposed plants will contribute nearly Rs1,825 crore at full capacity utilisation. The methanol plant will be operational by Q4FY2012 whereas the TIFERT unit would start production by Q1FY2013 and the nylon-6 project will commence production in Q3FY2013.  Cash rich with almost no debts on books: The planned capital expenditure of about Rs1,400 crore for the debottlenecking and brownfield projects will be fully funded through internal accruals. This will help the company to remain debt-free and utilise the huge cash at its disposal for growing in future through investing in projects related to its core competence. The company's management has clarified that it will invest only in projects related to the company's product portfolio and will not diversify in non-core areas. At the end of the Q3FY2012 GSFC has cash balance of Rs850 crore, which is enough to fund its future projects. Outlook and stock view: Though we believe the company should be able to report a 9.0-9.5% compounded annual growth rate (CAGR) in its revenues over FY2011-13, its earnings could at best remain flat, if not decline, due to the margin pressure in both the fertiliser and the chemical business. On the positive side, its valuations are supportive and the company has a strong balance sheet with a huge cash of Rs850 crore (30% of its market capitalisation) at the end of Q3FY2012. Its return on equity was healthy at over 25% in FY2011. At the current market price the stock is trading 3.5x and 4.0x its FY2012E and FY2013E earnings respectively and has a dividend yield of 2%. We do not have a rating on the stock. . MUTUAL GAINS Sharekhan's top equity mutual fund picks Large-cap funds Mid-cap funds Multi-cap funds ICICI Prudential Focused Bluechip Equity Fund - Ret SBI Magnum Sector Funds Umbrella - Emerg Buss Fund ICICI Prudential Discovery Fund Principal Large Cap Fund IDFC Premier Equity Fund - Plan A Reliance Equity Opportunities Fund Franklin India Bluechip Religare Mid Cap Fund - Growth Mirae Asset India Opportunities Fund - Reg Birla Sun Life Frontline Equity Fund - Plan A HDFC Mid-Cap Opportunities Fund Tata Dividend Yield Fund Tata Pure Equity Fund Sundaram Select Small Cap Fund UTI Opportunities Fund Indices Indices Indices BSE Sensex BSE MID CAP BSE 500 Tax saving funds Thematic funds Balanced funds ICICI Prudential Taxplan UTI India Lifestyle Fund HDFC Prudence Fund HDFC Taxsaver Birla Sun Life India GenNext Fund HDFC Balanced Fund Religare Tax Plan Fidelity India Special Situations Fund Birla Sun Life 95 Fidelity Tax Advantage Fund Canara Robeco Infrastructure Fund Canara Robeco Balance Franklin India Taxshield DSP BlackRock Natural Resources & New Energy Fund - Ret ICICI Prudential Balanced Indices Indices Indices CNX500 S&P Nifty Crisil Balanced Fund Index Fund focus SBI Magnum Sector Funds Umbrella - Emerging Bussiness Fund   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.   Click here to read report: Investor's Eye

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