Fw: Sharekhan's top SIP fund picks

 

 

Mutual Gains [For March 28, 2012]  Sharekhan www.sharekhan.com

Summary of Contents MUTUAL GAINS Sharekhan's top SIP fund picks Large-cap funds Multi-cap funds Principal Large Cap Fund ICICI Prudential Discovery Fund - IP Birla Sun Life Frontline Equity Fund - Plan A Birla Sun Life Dividend Yield Plus Tata Pure Equity Fund Tata Dividend Yield Fund Birla Sun Life Top 100 Fund UTI Opportunities Fund Reliance Top 200 Fund - Retail Quantum Long-Term Equity Fund BSE Sensex BSE 500 Mid-cap funds Tax saving funds SBI Magnum Sector Funds Umbrella - Emerg Buss Fund HDFC Taxsaver DSP BlackRock Small and Midcap Fund Fidelity Tax Advantage Fund Sundaram Select Midcap Franklin India Taxshield IDFC Premier Equity Fund - Plan A Religare Tax Plan Sundaram SMILE Fund ICICI Prudential Taxplan BSE Midcap S&P Nifty Fund focus Principal Large Cap Fund Click here to read report: SIP fund picks   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

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Investor's Eye: Update - Jaiprakash Associates; Special - Monthly economy review; MF - Sharekhan's top equity mutual fund picks, Sharekhan's top SIP fund picks

 

 

Investor's Eye [March 28, 2012] Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Jaiprakash Associates Cluster: Ugly Duckling Recommendation: Buy Price target: Rs105 Current market price: Rs77 New orders in bag, execution a key challenge The company has bagged orders worth Rs913 crore in Bhutan for construction of 720MW hydroelectric projects. The expected margin in the newly awarded projects is around 20-21%, which we believe is positive for the engineering, procurement and construction (EPC) division of the company. Further, the company has successfully completed two mega projects, namely the Karcham Wangtoo project and the Yamuna Expressway project, and will start generating revenue in the near term. Further, the cement division has posted a robust 40% volume growth for February 2012 due to an improvement in the cement demand and capacity addition. With the increase in the price of cement in the past couple of months, the realisation and EBITDA per tonne of cement in Q4FY2012 are expected to improve on a sequential basis.  Valuation: We continue to like JAL due to its diversified business model and aggressive expansion plan. However, the cost pressure in the cement division and the fluctuating profitability in the construction division will be the key risks. In terms of valuation, we continue to value the stock using the sum-of-the parts (SOTP) valuation method and arrive at a value of Rs105 per share. We maintain our Buy recommendation on the stock with a price target of Rs105. At the current market price, the stock is trading at PE of 25.1x FY2012 and 18.5x FY2013 earnings estimates. SHAREKHAN SPECIAL Monthly economy review   Economy: Industrial growth remains subdued; inflation increases In January 2012, the Index of Industrial Production (IIP) grew by 6.8%, which was significantly higher than the market's expectations. The higher than expected performance was led by a strong growth in the manufacturing sector (up 8.5% year on year [YoY]) and a sharp jump in the non-durable consumer goods sector.  The Wholesale Price Index (WPI)-based inflation for February 2012 came in at 6.95%, higher than the Street's expectations. The inflation rate for December 2011 too has been revised upwards to 7.74% from the provisional figure of 7.47%. The growth in exports remained weak showing an increase of 10.1% YoY (up 6.7% in December 2011). Imports grew by 20.3% YoY (up 19.8% in December 2011). The trade deficit for January 2012 came in at $14.7 billion, higher than the trade deficit level recorded in December 2011. The trade deficit increased by 117.9% YoY.  Banking: CRR cut by 75 basis points; interest rates likely to decline in Q1FY2013 In its last policy meeting, the Reserve Bank of India (RBI) had maintained the status quo on the interest rates. However, prior to the monetary policy the RBI had reduced the cash reserve ratio (CRR) by 75 basis points (125 basis points since January 25, 2012). However, at the March 15th mid quarter policy review the RBI kept the rates unchanged. Going ahead, if inflation moderates or the government initiates steps for fiscal consolidation the RBI may reduce the repo rates in the April 17th policy review meeting. The credit offtake registered a growth of 16.4% YoY (as on March 9, 2012), which was higher than the growth of 15.8% recorded in the previous month (as on February 10, 2012). The credit growth is in line with the RBI's guidance of 16%. The deposits registered a growth of 13.9% YoY (as on March 9, 2012), which was lower than the 15% year-on-year (Y-o-Y) growth seen during the previous month (on February 10, 2011). The growth in the deposits has fallen due to the higher yields offered by the other debt instruments. The credit-deposit (CD) ratio was at 76.7% (as on March 9, 2012), higher compared with the 75.6% CD ratio as on February 10, 2012. Meanwhile, the incremental CD ratio increased to 109% for the period, which was higher than the ratio seen during the previous month, reflecting a slower deposit growth and tighter liquidity in the market.  The yields on the government securities (G-Secs; of ten-year maturity) stood at 8.6% as on March 28, 2012, in line with the previous month's levels. The G-Sec yields across the long-term maturities have increased on a month-on-month (M-o-M) basis. Equity market: FIIs remain buyers  During the MTD period in March 2012 (March 1-26), the FIIs were net buyers of equities and the domestic mutual funds were net sellers of domestic equities. For the MTD period in March 2012 (March 1-26), the FIIs bought equities worth Rs8,702 crore while the mutual funds sold equities worth Rs1,081 crore. 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 Franklin India Bluechip HDFC Mid-Cap Opportunities Fund SBI Magnum Global Fund 94 Principal Large Cap Fund DSP BlackRock Small and Midcap Fund Reliance Equity Opportunities Fund DSP BlackRock Top 100 Equity Fund - IP Religare Mid Cap Fund Mirae Asset India Opportunities Fund - Reg UTI Wealth Builder Fund - Series II IDFC Sterling Equity Fund  Reliance NRI Equity Fund Indices Indices Indices BSE Sensex BSE MID CAP BSE 500 Tax saving funds Thematic funds Balanced funds ICICI Prudential Taxplan Fidelity India Special Situations Fund HDFC Prudence Fund Canara Robeco Equity Taxsaver Canara Robeco Infrastructure Fund HDFC Balanced Fund Reliance Tax Saver (ELSS) Fund UTI India Lifestyle Fund Reliance RSF - Balanced Tata Tax Advantage Fund - 1 Birla Sun Life India GenNext Fund Canara Robeco Balance Taurus Taxshield DSP BlackRock Natural Resources & New Energy Fund-Ret Tata Balanced Fund Indices Indices Indices CNX500 S&P Nifty Crisil Balanced Fund Index   Fund focus UTI India Lifestyle Fund Sharekhan's top SIP fund picks Large-cap funds Multi-cap funds Principal Large Cap Fund ICICI Prudential Discovery Fund - IP Birla Sun Life Frontline Equity Fund - Plan A Birla Sun Life Dividend Yield Plus Tata Pure Equity Fund Tata Dividend Yield Fund Birla Sun Life Top 100 Fund UTI Opportunities Fund Reliance Top 200 Fund - Retail Quantum Long-Term Equity Fund BSE Sensex BSE 500 Mid-cap funds Tax saving funds SBI Magnum Sector Funds Umbrella - Emerg Buss Fund HDFC Taxsaver DSP BlackRock Small and Midcap Fund Fidelity Tax Advantage Fund Sundaram Select Midcap Franklin India Taxshield IDFC Premier Equity Fund - Plan A Religare Tax Plan Sundaram SMILE Fund ICICI Prudential Taxplan BSE Midcap S&P Nifty   Fund focus Principal Large Cap Fund   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - GlaxoSmithKline Consumer Healthcare (Annual report review); Viewpoint - Anil (Well placed to cash in on the potential opportunity)

 

 

Investor's Eye [March 27, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE GlaxoSmithKline Consumer Healthcare Cluster: Evergreen Recommendation: Buy Price target: Rs3,000 Current market price: Rs2,670 Annual report review Key points CY2011 performance - high teens growth: Glaxosmithkline Consumer Healthcare Ltd (GSK) posted a high-teen growth in its top line and bottom line during the year. The top line growth of 16.5% year on year (YoY) was driven by a mix of volume and value. The malted food drinks (MFD) segment (94% of total revenues) grew by 16.3% YoY, driven by an around 9% YoY volume growth. Horlicks, which is the company's flagship brand, grew by around 18% during the year. The biscuits portfolio had done exceptionally well with a growth of 30% in CY2011. Though the operating profit margin (OPM) declined by 51bps YoY (to 15.8%), the strong growth in the business' auxiliary income and interest income resulted in an 18.5% YoY growth in the bottom line. Cash conversion cycle improved further: The company's cash conversion cycle improved from negative 89 days in CY2010 to negative 100 days in CY2011, indicating an improvement in working capital management. The creditor days have increased from around 139 days in CY2010 to 154 days in CY2011. Hence despite an above 40% growth in loans and advances in the last couple of years, the company's ability to generate cash from operating activities has remained strong. We expect the cash conversion cycle to further improve in the coming years. Return ratios remain strong: The return ratios continued to improve with the return on net worth (RoNW) and return on capital employed (RoCE) up from 32.2% and 48.7% respectively in CY2010 to 33.8% and 51.7% in CY2011. Cheery dividend player: The company is known to be a cheery dividend payer in the fast moving consumer goods (FMCG) space. As anticipated the company has paid a dividend of Rs35 per share in CY2011 (350% of face value). The dividend payout ratio stood at 41% in CY2011, which has improved in comparison to its average dividend payout ratio of around 33%. With the profit after tax (PAT) growth likely to sustain at close to 20%, we expect the dividend pay out ratio to sustain at around 40% in the coming years. Maintain positive bias on stock: We have incorporated the CY2011 balance sheet numbers in our estimates and the same has not led to any major change in our earnings estimates. Considering the low penetration of the MFD category and GSK's strong presence in it, we believe the company is well poised to achieve a top line and bottom line growth of close to 20% each over CY2011-13. At the current market price the stock trades at 26.2x its CY2012E earnings per share (EPS) of Rs101.8 and 22.1x its CY2013E EPS of Rs121.1. We maintain our Buy recommendation on the stock with a price target of Rs3,000. VIEWPOINT Anil        Well placed to cash in on the potential opportunity Key points High growth potential for Indian starch industry compared to global average: The starch industry in India is at a nascent stage with the per capita consumption of starch in the country being the lowest at 1.3kg compared with 64.5kg in the USA and over 10kg in many comparable Asian countries. However, the same is likely to improve in the coming years, as starch finds diverse applications in the food and beverage, paper, pharmaceutical, textile and animal feed industries. Thus, with the rising demand for starch products from various industries, the Indian starch industry is expected to grow by around 15% per annum in the coming years.  Anil, largest player with wide product portfolio: Anil is one of the top three players in the domestic starch industry with an organised market share of close to 20%. However, in the high-margin value-added starch products it has a market share of 40-50%. Research and development (R&D) has played pivotal role in Anil's success, helping the company to gradually shift from a commodity product business to a business of value-added products. The company has reputed clients including players like ITC, Nestle India, Amway, Dabur, Heinze, Lupin, Arvind Mills and Raymond.  Robust track record with aggressive expansion plans: Anil has grown its revenues at a robust 31% compounded annual growth rate (CAGR) in the tough period of FY2008-11. The improving revenue mix in favour of value-added products has enabled it to double its operating profit margin (OPM) to 17.2% from less than 10% earlier, resulting in an exponential growth at 76.7% CAGR in its earnings during the three-year period. Going ahead, we expect Anil's revenues to grow at a CAGR of 25% over FY2011-14 and the increasing proportion of the value-added products would further boost the margins to around 19% in the next two years. To achieve the same, the company is expanding its manufacturing capacities to 1,000 tonne per day (tpd) in a phased manner, aims to launch new products and enhance its geographical reach to newer overseas markets.  Additional triggers-food processing park and land bank: The Anil group of companies received the approval from the ministry of food processing industries of India to set up a Mega Food Park project in Gujarat. The group will form a special purpose vehicle (SPV; a consortium of companies from the food processing, logistic and infrastructure businesses) in which Anil will have a majority stake of 40%. The group will bring in land of 87 acres (valued at around Rs25 crore) for its 40% stake in the SPV. Once the project is completed it will add tremendous value to the stock of Anil. The company's manufacturing facility is located at Bapunagar, Ahmedabad in an area covering 1.5 lakh square metre. In future the company could shift its manufacturing facility to a special economic zone / tax benefit zone, thereby unlocking value in terms of land bank (the Bapunagar land area is currently valued at Rs800-900 crore). Outlook and valuation: With the enhancing capacity, Anil is well poised to cash in on the opportunity created by the increasing demand for starch in the domestic market. With most of the starch consuming industries growing at a healthy rate we expect Anil's top line to grow at a CAGR of 25% over FY2011-14. Further, with an expected improvement in the OPM, the bottom line is expected to grow at a CAGR of 37.0% over FY2011-14. At the current market price the stock trades at 3.5x its FY2013E earnings per share (EPS) of Rs70.4 and 2.3x its FY2014E EPS of Rs106.1 (rough estimates). We see potential for a substantial upside in the stock over the next 12-24 months. Historically, the stock has traded at price/earnings (PE) multiple of 4-5x its one-year forward earnings. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Fw: Investor's Eye: Update - Aditya Birla Nuvo (Bullishness continues), Provogue India (Price target revised to Rs35)

 

 

Investor's Eye [March 26, 2012]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE Aditya Birla Nuvo Cluster: Apple Green Recommendation: Buy Price target: Rs1,050 Current market price: Rs951 Bullishness continues We continue to like the strong positioning that Aditya Birla Nuvo's businesses enjoy in their respective fields. The company is amongst the top five players in the insurance, asset management, telecommunications (telecom; Idea Cellular-the fastest growing telecom company; the third in ranking) and apparels (Madura Garments with its marquee brands, consistent and resilient growth, and profitable set-up) businesses. Given its presence in diverse businesses, we value Aditya Birla Nuvo on an SOTP basis, assigning a piecemeal value to each of its businesses and then adjusting the same with the company's consolidated debt to arrive at a price target. Thus, our price target for the stock is Rs1,050 and we maintain our Buy rating on the stock. Provogue India Cluster: Ugly Duckling Recommendation: Buy Price target: Rs35 Current market price: Rs16 Price target revised to Rs35 The event - Provogue India shares get re-listed on the exchanges with demerged status Provogue India (Provogue)'s shares that had got temporarily suspended from trading for the demerger process got listed today on the bourses at Rs17 per share.  As per the scheme of demerger every shareholder holding 1 share of Provogue has received 1 share of Prozone Capital Shopping Centers Ltd (PCSCL; face value Rs2). The face value of Provogue shares has got reduced from Rs2 to Rs1. The capital structure for both, Provogue (the demerged entity that got listed today which now only holds the core retail business) and PCSCL (which will hold all the real estate business and assets) has been illustrated below in a table. Shares of PCSCL will get relisted after it files for the same, which may take one to three months. Our fair value for Prozone works out to Rs27 per share. Based on the auditor's statement, Rs207 crore of the net book value of approximately Rs714 crore has been transferred into the demerged entity (PCSCL). Thus the pre acquisition based on this statement works out in a ratio of 29% (207/714) for PCSCL and 71% for Provogue. Post restructuring, our revised target price for Provogue is Rs35; Maintain Buy: Post restructuring Provogue now holds only the core retail assets that include brand sales- Provogue along with export sales, ie those which were part of standalone financials. Thus our standalone financials and estimates for Provogue remain intact. We expect a decline in FY2012 profits while we expect FY2013 to witness strong recovery with a 26% growth in earnings. Valuing branded business and the export business of Provogue with a blended price earning ratio (PER) at 10x FY2013, we arrive at a target price of Rs35 for Provogue. Thus our revised target price for Provogue now stands at Rs35 and we maintain our Buy rating. Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a postition in the companies mentioned in the article.

Regards, The Sharekhan Research Team myaccount@sharekhan.com Manage your newsletter subscriptions