Fw: Sector Report: Gold Loans - 'Lending with comfort'

 

Gold Loans: 'Lending with comfort'

 

 

India - a huge gold loan market

India is one of the largest markets for gold accounting for ~10% (18,000-20,000 tons) of the global gold stock. Rural India is estimated to hold around 65% of this. Shaped by sentimental and structural factors, country's demand for gold has been buoyant defying the phenomenal rally in price. It is estimated that ~10% of country's gold stock has been pledged, of which, ~75% is in the unorganized market (money lenders, pawn brokers, etc) and balance ~25% in organized market (specialized NBFCs, other NBFCs, commercial/cooperative banks, etc). 

 

Organized market growing at robust pace

As per IMaCS Industry Report (2010 update), the organized gold loan market in India stood at Rs350-400bn at end-FY10 having witnessed a robust 40% CAGR over FY02-10.  We estimate the market to have crossed Rs550bn by end-FY11 as specialized NBFCs Muthoot Finance and Manappuram combine have grown their book by Rs130bn+ during the year. Share of the organized pie has been increasing rapidly due to significantly lower rate of interest charged, higher LTV offered and perceived safety of the ornaments. With penetration still negligible at 1-1.5%, the organized market would continue to witness strong growth.    

 

Specialized NBFCs better placed than banks

Amongst organized players, specialized gold loan NBFCs have witnessed exceptional growth driven by management aggression/strength, robust branch expansion, belligerent marketing spend and ability to raise capital timely. Given the customers preference for them over banks due to critical factors like low levels of documentation, quick disbursal of loans, higher LTV offered, flexibility in loan terms, etc, specialized NBFCs command premium yields and enjoy superior profitability. Therefore, they represent a much better medium to ride the gold loan growth story.

 

Initiate coverage on Muthoot and Manappuram with BUY rating

We initiate coverage on Muthoot Finance and Manappuram with a BUY rating. Both the companies have witnessed 100%+ CAGR in their gross gold loan book over FY09-11. Notwithstanding the substantial business investments made, they have improved their profitability profile. Their dream run is expected to normalize though on account of higher base, intensifying competition in the key Southern region, recent adverse regulation with respect to assignments and steep increase in funding cost. Nevertheless, their earnings CAGR is estimated to be strong in the range of 35-50% thereby making current valuations (1.6-1.7x FY13 P/BV) attractive. Key risk factors would be unfavorable regulatory changes and material correction in gold prices.

 

Muthoot Finance – BUY

CMP Rs154, Target Rs202, Upside 31%

 

±  Largest gold financing company in the country with 20%+ market share

±  AUM growth to moderate but remain strong on higher base

±  NIM to decline on steep increase in funding cost; yield to be relatively resilient

±  Earnings CAGR to remain brisk at 39% over FY11-13E

±  RoA to marginally come-off; RoE to normalize

 

Manappuram Finance & Leasing – BUY

CMP Rs57, Target Rs73, Upside 28%

 

±  Fastest growing gold loan company; 8x AUM growth over FY09-11

±  New branches to drive 45% AUM CAGR over FY11-13E

±  NIM to contract sharply due to decline in yield and increase in funding cost

±  Earnings CAGR to remain robust at 47% over FY11-13E

±  RoA to trend down while RoE to improve

 

 

 

Please click on the link to view the attachment.

 

 

 

Warm Regards,

 

Amar Ambani

 

  

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Fw: Investor's Eye: Update - Zydus Wellness, Automobiles; Special - Q1FY12 IT earnings preview

 

Investor's Eye [July 01, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Zydus Wellness   Cluster: Emerging Star Recommendation: Hold Price target: Rs669 Current market price: Rs642 Price target revised to Rs669 Key points FY2011-strong operational performance: It was yet another year of a strong performance by Zydus Wellness Ltd (ZWL) with the revenue growing by 26% year on year (YoY) and the profit after tax (PAT) rising by 27% YoY in FY2011. The growth was achieved on back of a strong performance by all its brands, which maintained their strong position in their respective niche categories in the domestic market. The operating profit margin (OPM) was maintained at 25% during the year.  Negative working capital: Leveraging the strength of its brands and its relationship with its channel partners through the group's pharmaceutical business, ZWL runs its business on advance collection terms from distributors and customers. The cash conversion cycle stood at negative 44 days in FY2011 (reduced from negative 80 days in FY11). This implies minimal working capital blockage and zero bad debt risk. No debt on books: The company has excellent cash generation ability and has a cash pile of around Rs87 crore, which is around 47% of its balance sheet size. Given the strong cash pile, the company will not need to raise any funds as debt or equity for its organic growth. Also, it provides an opportunity to the company to go for inorganic expansion in the domestic market (an acquisition of a brand in a niche category). Return ratios remain strong: The company's return ratios though declined from the levels of FY2010 but the same remained strong in FY2011. The return on equity (RoE) stood at 49.0% while the return on capital employed (RoCE) stood at 74% during the year. Improvement in dividend pay-out: The dividend pay-out ratio of the company improved from 27% in FY2009 to 31% in FY2011. The strong generation ability firms up our view that the company has the potential to pay a hefty dividend on a recurring basis. Focus on new launches: The company has maintained its thrust to enhance the product portfolio by developing new products in niche categories/new variants under the existing brands to maintain the strong growth momentum. The company has new products in the pipeline, which will be launched in the coming quarters. The new launches will be supported by brand building and promotional activities. Hence, we expect advertisement spend of the company to increase in the next two years.  Revision in estimates: With vegetable oil likely to show a downtrend (in line with the other edible oils) in the coming quarters, we expect the pressure on the company's gross margin to ease out in FY2013. Hence we have upgraded our earnings estimates for FY2013 by 4%. Outlook and valuation: With a portfolio of strong brands and thrust on enhancing the product portfolio, we expect the company to achieve the turnover of Rs500 crore well in advance of its target of FY2014. However, we expect the OPM to slide a bit due to a higher raw material cost and an increase in advertisement spend towards the new launches. The tax benefit from new facility in Sikkim would aid in strong bottom line compounded annual growth rate (CAGR) growth of 32% over FY2011-12 (strong compared to that of the other fast moving consumer goods [FMCG] companies). Hence, we have upgraded our price target to Rs669 (based on 25x its FY2013E earnings per share [EPS] of Rs26.7). However, with a limited upside of around 5% from the current level, we maintain our Hold recommendation on the stock. At the current market price the stock trades at 32.8x its FY2012E EPS of Rs19.6 and 24.0x its FY2013E EPS of Rs26.7. SECTOR UPDATE  Automobiles June'11 volumes: Industry resilient even as macro headwinds whirlwind  The commercial vehicle segment has thrown the biggest surprise in June 2011. The medium - heavy commercial vehicles (MHCVs) segment in particular dealt with quite a few irritants such as rate hikes, fuel price increase, driver shortage and Reserve Bank of India (RBI)'s restriction on lending to non banking financial company (NBFC)s for further priority sector lending at concessional rates. Tata Motors' MHCV segment grew by 6.2% year on year (YoY) and 3.2% month on month (MoM) in June 2011. The light commercial vehicles (LCVs) segment reported a strong growth as freight requirement for last mile connectivity remained robust. Mahindra & Mahindra (M&M) was the star gainer as their pick-ups raced at full speed. The rural centric demand theme also remained strong and surprised positively. M&M grew its tractor volumes by 37% YoY and 20% MoM. Similarly TVS Motors grew its rural centric moped by 20% YoY in June 2011. Hero Honda yet again crossed the 5 lakh units mark in the month (June 2011) and reported a 20% volume growth due to its strong rural focus.  The growth slowdown remained more selective. Maruti Suzuki (Maruti) saw a deep adverse impact due to a strike at its Manesar plant and bi-annual maintenance shutdown. Similarly Tata Motors saw its ageing product portfolio struggling to revive. It reported sluggish sales of the Nano, Indigo and utility vehicles (UVs) although there was some respite for Indica which might have benefited due to the Maruti strike. SHAREKHAN SPECIAL  Q1FY2012 IT earnings preview Key points Top line numbers likely to remain strong: We expect average sequential revenue growth of the top four information technology (IT) companies to be around 5.2% for the June quarter as against 3.9% in Q4FY2011, with an average volume growth of around 4.1% and cross currency tailwinds of 85 basis points. For the June quarter, Tata Consultancy Services (TCS) is expected to lead the pack with a 7% sequential revenue growth followed by HCL Technologies with a 5.8% quarter on quarter (QoQ) growth. Whereas, on account of organizational restructuring Infosys and Wipro are likely to report a relatively soft set of numbers. Infosys is expected to grow by 4.4% in topline while Wipro's IT services is likely to post a 3.4% QoQ growth. Under our mid-cap coverage, Polaris Software Lab (Polaris) and NIIT Technologies (NIIT Tech) are likely to report an around 5% sequential revenue growth in dollar terms for the June ending quarter.  Margins to weaken tracking wage hikes: The earnings before interest, tax, depreciation and amortisation (EBITDA) margins for the June quarter are likely to remain weak primarily on account of the wage hike cycle effective during the quarter for majority of the companies except HCL Technologies and Wipro (wage cycle is June 2011). Infosys and TCS are likely to post a more than 200 basis points sequential fall in their EBITDA margins whereas among the mid-caps NIIT Tech's margins are likely to decline by around 270 basis points QoQ and Polaris' margins could likely decline by 90 basis points QoQ. Wipro's IT services margins are likely to fall by 80 basis points QoQ while HCL Technologies' margins are likely to improve by 70 basis points QoQ.  Management commentary on sustainability of demand and visa issue: Weak datapoints emerging from US and Euro-zone coupled with looming debt crisis in the US have sparked renewed debate and apprehension on the sustainability of demand for the IT sector beyond CY2011. Further, issues pertaining to visas and potential aggravation of protectionist policy in the US have raised an alarm for an outsourcing backlash in the coming years. Although most of the companies' managements have indicated at a strong demand undercurrent for FY2012, they and industry bodies have also voiced concerns on the visa issue. Given the backdrop, we believe that in the upcoming earnings season there will be larger focus on specific management commentary on these issues, which will provide clarity and roadmap for the future.  Valuation: The recent quarterly performance of Accenture and Oracle suggest strong demand momentum and uptick in discretionary spending. Coupled with it the recent upward revision of worldwide IT spending to 7.1% by Gartner from 5.6% earlier has provided further support to the demand thesis. We continue to remain positive on the Indian IT sector for the next 12 months; however, in the short term negative newsflows and quarterly performance disappointments would impact stock performances. On an absolute risk reward ratio our top IT picks remain HCL Technologies and Polaris.   Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Investor's Eye: Idea - CESC; Sector - Insurance, Retail

 

Investor's Eye [June 29, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK IDEA CESC   Cluster: Ugly Duckling Recommendation: Buy Price target: Rs413 Current market price: Rs282 Integrated business at a discount Key points Integrated business model with strong cash generation from distribution business: CESC's presence in both generation and distribution business is an advantage given the emergence of erratic purchase of power by the state electricity boards (SEBs) due to their deteriorating financial health. The power distribution business in Kolkata is growing at a healthy rate and generates substantial free cash to fund CESC's expansion plans. CESC is doubling its generation capacity by FY2015 through addition of 600MW in Chandrapur and 600MW in Haldia. Further, 1,920MW of capacities are at an early development stage. Moreover, led by the deteriorating financials of the SEBs, the potential privatisation of the distribution business could open up opportunity for CESC.  Secured fuel supplies an added advantage: Besides coal linkage from Coal India, CESC has a secured supply of coal from two coal assets held by the promoters through ICML. Around 50% of the coal would be sourced from these mines and 30-40% of the requirement would come from the Coal India linkage; the balance 10% would be imported. CESC has a higher level of fuel security compared to most of its domestic peers which is a strong positive.  Retail turns profitable at store level; current price ignores the turnaround possibility: The retail business of CESC is currently burning significant cash at the operation level; however, we believe it is close to the end of the tunnel. The silver lining is that there are initial indications of a recovery as the business reported profits at the store level in all four quarters of FY2011. Further, backed by the current strategy of the management, we believe it could break even at the corporate level in the next three years against the management's ambitious time line of five to six quarters. Moreover, the cash generation from the monetisation of its spare land through the development of a 400,000-square-feet shopping mall in a prime area of Kolkata would partially negate the losses in the retail business.  Significant discount to peers, Buy: CESC is one of the cheapest utility stocks available in the Indian market. It trades at a discount to its book value and at a 60-70% discount to the average multiple of the comparable companies. One of the key reasons for the discounted valuations is the concerns related to the losses in the retail business that depress the return ratios at the consolidated level. However, we believe that the improving financial health of the retail business and the growing scale of the power generation and distribution business would positively affect the return ratios in future. We value per share of CESC at Rs536 (Kolkata utility business at Rs472 + the upcoming power generation assets at Rs48 + the property at Rs17 share). Further, we deduct Rs123 per share for the retail business to account for the latter's accumulated losses of Rs1,231 crore (over FY2008-11) and the estimated cumulative losses of around Rs316 crore to be incurred during FY2012-14 (before it turns profitable in FY2015) to arrive at a fair value of Rs413 for CESC. Hence, we recommend a Buy on CESC with a price target of Rs413. SECTOR UPDATE  Insurance   Hit by revised rules, product launch delays The annual premium equivalent (APE) for the life insurance industry declined in May 2011 by 15.6% year on year (YoY) but increased by 32.5% month on month (MoM) due to increased premium collection mainly in the single premium segment.   Retail Retail channel check exercise reveals volume downtrend In line with our expectation, all the retailers we spoke to confirmed on the fact that volume slowdown in the apparel category was evident in Q1FY2012. We believe that the abrupt price increase of 15-18% across all apparel brands coupled with inflation pressure restricted demand. We continue to be of the opinion that just within a couple of months, the consumer psyche would adjust towards the higher price points, resulting in a rebound in volume offtake. Looking at the mid- to long-term trend, optimism and increasing aspiration levels across consumption categories, we believe that all consumption plays are at an inflexion point, with the long term demand drivers intact. Thus, we maintain our long term bullish stance on the sector. From the point of view of large-cap stocks and in terms of valuations, we like Pantaloon. However, in the mid-cap retail space we continue to have a Buy rating on Provogue (a proxy to the retail real estate play) and KKCL (a player with a scalable business model and management) with a pedigree and a robust balance sheet. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

Fw: Merge the pay-in /pay-out date

 

Dear Customer, The Exchange has decided to merge the pay-in /pay-out date for settlement numbers 2011124 & 2011125 [NSE] and 1112064 & 1112065 [BSE] as there would be no pay-in/ pay-out activities on July 01, 2011 on account of Annual Closing of RBI. Settlement No. From To Pay In Sale against Receivables Availability 2011123 29-Jun-2011 29-Jun-2011 04-July-2011 Yes 2011124 30-Jun-2011 30-Jun-2011 05-July-2011 No 2011125 01-Jul-2011 01-Jul-2011 05-July-2011 Yes Deliveries taken in settlement number 2011124, will not be available for selling in settlement number 2011125 as the Pay-in for both the settlements are on Jul 05, 2011. Settlement No. From To Pay In Sale against Receivables Availability 1112063 29-Jun-2011 29-Jun-2011 04-July-2011 Yes 1112064 30-Jun-2011 30-Jun-2011 05-July-2011 No 1112065 01-Jul-2011 01-Jul-2011 05-July-2011 Yes Deliveries taken in settlement number 1112064, will not be available for selling in settlement number 1112065 as the Pay-in for both the settlements are on Jul 05, 2011. Kindly feel free to call us on 1800 22 7500/ 022 - 6115 1111 / (Local STD Code) 3970 7500 in case of clarifications. Warm Regards Team Sharekhan

Registered Office: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400 042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos. BSE Cash-INB011073351; F&O-INF011073351; NSE - INB/INF231073330; CD - INE231073330; MCX Stock Exchange: CD - INE261073330; United Stock Exchange: CD - INE271073350; DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP000000662; Mutual Fund: ARN 20669. Commodity trading through Sharekhan Commodities Pvt. Ltd.: MCX-10080; (MCX/TCM/CORP/0425); NCDEX -00132; (NCDEX/TCM/CORP/0142); for any complaints email at igc@sharekhan.com ; Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and Do's & Don'ts by NCDEX, and the T & C on www.sharekhan.com before investing.

Fw: Investor's Eye: Update - Max India, Telecom; MF - Sharekhan's top SIP fund picks

 

Investor's Eye [June 21, 2011]  Sharekhan www.sharekhan.com

Summary of Content STOCK UPDATE Max India  Cluster: Emerging Star Recommendation: Buy Price target: Rs234 Current market price: Rs173 Stake buy-out supports our valuation for Max Healthcare  Max India has decided to buy out 16.37% stake in its subsidiary, Max Healthcare, for Rs140 crore (at Rs29.4 per share). After the stake purchase Max India's stake in Max Healthcare will increase to around 91.84% while the remaining stake will be held by International Finance Corporation (3.1%) and overseas corporate bodies. Based on the proposed deal, the valuation of the Max Healthcare would be around Rs855 crore, which is slightly higher than our estimated value of Rs780 crore for the company.  Further, according to media reports Max India is planning to rope in a strategic partner to pick up a significant minority stake in the healthcare arm at a considerable premium. Even after considering some premium for the strategic stake we believe the proposed deal could result in further upside to our assigned valuation for Max India's healthcare business. We maintain our Buy rating on the stock with a sum-of-the-parts (SOTP) based price target of Rs234. SECTOR UPDATE Telecommunications  May net additions down 14.2% MoM, Idea reports steepest fall In May 2011 the all-India GSM operators (excluding Reliance Communications [Rel Com] and Tata Teleservices [Tata Tele]) added 9.53 million SIM cards, taking the overall base to approximately 590 million from 581 million in April this year. That is approximately a 1.6% increase over the April number. We believe that the overall weakness in the April net additions to a certain extent speaks of the moderating trend in the subscriber addition with the mobile penetration level remaining high (the all-India wireless penetration as on April stood at 69.2%, as per the TRAI). MUTUAL GAINS Sharekhan's top SIP fund picks We have identified the best equity scheme for SIP investment based on three parameters: Minimum corpus as indicated by at least 10% of the average category-corpus, the past performance as indicated by one, three and five year returns and risk returns ratios namely Sharpe, Information and Sortino.  Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.  Information ratio is one of the most important tools in active fund management. It is the ratio of active return (the return over the index return) to active risk annualised. A higher Information ratio indicates better fund manger.  Sortino ratio is similar to Sharpe ratio, except it uses downside deviation. The upward volatility as measured by Sharpe ratio does not lead to losses. It is the downward volatility that leads to losses; hence the use of which doesn't discriminate between up and down volatility. So, higher the Sortino ratio, higher would be the effective return over a period of time. Click here to read report: Investor's Eye

Regards, The Sharekhan Research Team myaccount@sharekhan.com   www.sharekhan.com to manage your newsletter subscriptions

 

**[investwise]** CRISIL Equity Research releases Quarterly update [1 Attachment]

 

[Attachment(s) from arun varghese included below]

 

Attached please find the quarterly update released by CRISIL Equity Research.

 

MSP Steel and Power Ltd - Quarterly update Q4FY11

Fundamental Grade     : 2/5

Valuation Grade          : 5/5

Fair Value                    : Rs 75

CMP                            : Rs 45

For detailed downloads of CRISIL's Independence Equity Research (IER) reports (Initiation + Quarterly), visit www.ier.co.in

CRISIL Fundamental Grade	Assessment
5/5	Excellent fundamentals
4/5	Superior fundamentals
3/5	Good fundamentals
2/5	Moderate fundamentals
1/5	Poor fundamentals

 

CRISIL Valuation Grade	Assessment
5/5	Strong upside (>25% from CMP)
4/5	Upside ( 10-25% from CMP
3/5	Align ( +-10% from CMP
2/5	Downside (negative 10-25% from CMP)
1/5	Strong downside (<-25%from CMP)

 

CRISIL IER reports provide a Fundamental Grading and a Valuation Grading of a company, presented in the form of a proprietary CRISIL Fundamental and Valuation (CFV) matrix. The Fundamental Grading is based on an analysis of the business and industry prospects, financial performance and outlook, management quality and corporate governance of a company vis-à-vis other listed companies in India. The Valuation Grading provides current assessment of the fair value of the company's stock.

 

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Fw: Sharekhan's top SIP fund picks

 

 

Mutual Gains [June 21, 2011]  Sharekhan www.sharekhan.com

Summary of Contents MUTUAL GAINS Sharekhan's top SIP fund picks We have identified the best equity scheme for SIP investment based on three parameters: Minimum corpus as indicated by at least 10% of the average category-corpus, the past performance as indicated by one, three and five year returns and risk returns ratios namely Sharpe, Information and Sortino.  Sharpe indicates risk-adjusted returns, giving the returns earned in excess of the risk-free rate for each unit of the risk taken. The Sharpe ratio is also indicative of the consistency of the returns as it takes into account the volatility in the returns as measured by the standard deviation.  Information ratio is one of the most important tools in active fund management. It is the ratio of active return (the return over the index return) to active risk annualised. A higher Information ratio indicates better fund manger.  Sortino ratio is similar to Sharpe ratio, except it uses downside deviation. The upward volatility as measured by Sharpe ratio does not lead to losses. It is the downward volatility that leads to losses; hence the use of which doesn't discriminate between up and down volatility. So, higher the Sortino ratio, higher would be the effective return over a period of time. Click here to read report: Mutual Gains   Regards, The Sharekhan Research Team myaccount@sharekhan.com

Fw: Discontinuation of Futures and Options Contracts in the security TV18

 

Discontinuation of Futures and Options Contracts in the security TV-18 - June 20, 2011 Dear Customer Kindly note that Television Eighteen India Limited has informed the Exchange that the 'Record Date - June 22, 2011' for the purpose of determining the entitlement of the equity shareholders of Television Eighteen India Limited (Discontinued Company) to receive, pursuant to the scheme in the below manner. Seventeen Fully Paid Equity Share in ibn18 (Resulting company) of the face value Rs. 2/- each for every Twenty Five Equity Share of Television Eighteen India Limited of Rs. 5/- each. Thirteen Fully Paid Equity Share in Network18 (Resulting company) of the face value of Rs.5/- each for every Hundred Equity Share of Rs. 5/- each held by the shareholders in TV18. Taking the same into consideration there would be the following adjustments carried out in the Futures and Options contracts in the security. All existing contracts of TV18 i.e. contracts with expiry dates June 30, 2011, July 28, 2011 and August 25, 2011 will expire on June 20, 2011 and shall be finally settled at the relevant settlement price. The settlement price to be reckoned for the purpose of final settlement of existing contracts shall be the closing price of TV-18 in the Capital Market segment of NSE, on June 20, 2011. No futures and options contracts will be available in the underlying TV-18 for trading from June 21, 2011 onwards. This is pursuant to NSE Circular No. 059/2011 dated June 15, 2011. Please click here to view the detailed circular. Regards Team Sharekhan

Registered Office: Sharekhan Limited, 10th Floor, Beta Building, Lodha iThink Techno Campus, Off. JVLR, Opp. Kanjurmarg Railway Station, Kanjurmarg (East), Mumbai - 400 042, Maharashtra. Tel: 022 - 61150000. Sharekhan Ltd.: SEBI Regn. Nos. BSE Cash-INB011073351; F&O-INF011073351; NSE - INB/INF231073330; CD - INE231073330; MCX Stock Exchange: CD - INE261073330; United Stock Exchange: CD - INE271073350; DP: NSDL-IN-DP-NSDL-233-2003; CDSL-IN-DP-CDSL-271-2004; PMS INP000000662; Mutual Fund: ARN 20669. Commodity trading through Sharekhan Commodities Pvt. Ltd.: MCX-10080; (MCX/TCM/CORP/0425); NCDEX -00132; (NCDEX/TCM/CORP/0142); for any complaints email at igc@sharekhan.com ; Disclaimer: Client should read the Risk Disclosure Document issued by SEBI & relevant exchanges and Do's & Don'ts by NCDEX, and the T & C on www.sharekhan.com before investing.

Fw: (Erratum) Investor's Eye: Pulse - Monetary policy review; Update - Raymond; MF - Top equity mutual fund picks

 

 

Investor's Eye [June 16, 2011] Please see the attachment for details Sharekhan www.sharekhan.com

In the Viewpoint report on Raymond on the page 4 of the Investor's Eye dated June 16, 2011, the chart titled "Branded vs Un-branded" erroneously shows the contribution of branded sales as 32% and that of unbranded sales as 68% in the company's revenue mix. The correct revenue mix is as follows: branded sales 68% and unbranded sales 32%. The error is regretted and has been rectified. Summary of Content PULSE TRACK Monetary policy review: RBI maintains hawkish stance, raises policy rates by 25 basis points VIEWPOINT Raymond Well placed to capitalise on domestic consumption play Strong brand, with dominant market share: Raymond is the oldest textile brand in India with a history spanning more than 85 years. Over the years through its quality focus approach and unique brand building initiatives (it has spent over Rs900 crore over the last ten years FY2002-11 over advertising the brand) the brand 'Raymond' has gained a unique mind share and brand recall amongst consumers. The testimony to the same is its market leadership status in the worsted fabric segment. Apart from the fabric segment, the brand Raymond also has its presence in the ready-to-wear (the apparel) segment. Besides the Raymond brand, the company possesses a bouquet of apparel brands (viz Park Avenue, Parx and ColorPlus) to name a few) that enjoy a leadership status in their respective categories. Robust distribution network, gaining strength day by day: Strong distribution is a key prerequisite for any consumer-led model and Raymond has created strong entry barriers for competitors in this regard. It has an enviable distribution set-up that is a blend of wholesalers, distributors, MBO touch points, exclusive brand outlets (EBO) and its own famous store brand, The Raymond Shop (TRS). The brand is present in more than 400 towns including class 1 to class 5 towns and cities, is retailed through an array of 1,600 MBOs and is present at over 18,000 touch points including the exclusive Raymond brands available in 739 own retail (590 TRS) stores and 149 exclusive brand stores. Since Raymond enjoys strong brand equity and recall, it has franchisees operating even out of tier-3, tier-4 and tier-5 cities.  Valuation and outlook: In FY2011, Raymond saw tremendous improvement in its financials with a strong top line growth of 22.3%. Further a strong turnaround in the business would lead to almost a three-fold increase in its profitability too. A branded play with a strong distribution franchisee, enhanced focus and operational earnings visibility, Raymond is trading at 10.4x our rough FY2013E earnings per share (EPS) of Rs37.1. This is attractive compared with the valuation of the other branded retail plays. Further, any development with regard to the Thane land (company possesses ~120 acres of land at the heart of Thane at Pokhran Road) in the form of either a joint development or a disposal would lead to value unlocking and provide significant cash to the company. On the wake of Raymond's penetration lead consumption play coupled with its strong brand equity and enchanced focus we are positive on the company. However, we do not have active rating and coverage 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 IDFC Small & Midcap Equity ICICI Prudential Discovery Franklin India Bluechip HDFC Mid-Cap Opportunities Birla Sun Life Dividend Yield Plus Birla Sun Life Frontline Equity - Plan A DSP BlackRock Small and Midcap HDFC Equity Principal Large Cap IDFC Premier Equity Fund - Plan A Reliance Equity Opportunities Reliance Quant Plus Sundaram Select Midcap Mirae Asset India Opportunities Tax saving funds Thematic funds Balanced funds HDFC Taxsaver DSP BlackRock Natural Resources & New Energy HDFC Prudence Religare Tax Plan Birla Sun Life India GenNext HDFC Balanced Fidelity Tax Advantage UTI India Lifestyle Reliance RSF - Balanced ICICI Prudential Taxplan Fidelity India Special Situations Birla Sun Life 95 HDFC Long Term  Advantage HDFC Infrastructure Tata Balanced Fund Fund focus Principal Large Cap Fund IDFC Premier Equity Fund - Plan A Click here to read report: Investor's Eye

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