Sunday, March 9, 2008
Friday, March 7, 2008
Saturday, March 1, 2008
Fundamentaly Good Stocks
Following are some of the excellent buys purely from Fundamental point of
view.
a) Canara Bank
b) Central Bank
c) Uco Bank
d) IDBI
e) Reliance Industries
f) NTPC
g) Power Grid
h) Union Bank
view.
a) Canara Bank
b) Central Bank
c) Uco Bank
d) IDBI
e) Reliance Industries
f) NTPC
g) Power Grid
h) Union Bank
Wednesday, February 27, 2008
tips for tommorrow
Best Absolute Buys: ONGC, ICICI Bank, HDFC, Sterlite, REL, GAIL, HZL, Grasim,
Maruti, PNB, HDIL, Sun TV, BEL, Punj, Union Bank
Maruti, PNB, HDIL, Sun TV, BEL, Punj, Union Bank
Tuesday, February 26, 2008
Long term buy calls for BSE & NSE 27/02/2008
Thermax tgt 950
ENIL tgt 650
Provogue tgt 1500
Grasim Ind tgt 4025
Welspun Guj tgt 600
Aventis Pharma tgt 1198
ENIL tgt 650
Provogue tgt 1500
Grasim Ind tgt 4025
Welspun Guj tgt 600
Aventis Pharma tgt 1198
Budget Railway
Railways to make steel coaches from now onwards this should benefit steel producing companies. Railways to implement IT technologies, and smart cards, online booking facilities on mobiles, etc. This should provide oppotunities to software and IT companies for providing the same facilities.
Thursday, February 21, 2008
Intra day trading stocks for 21st Feb, 2008
GMR Infrastructure, Buy around Rs 173, Target1 -Rs180, Target 2 - Rs. 185, Stop Loss- Rs 170
Gujrat NRE Coke, Buy around Rs 157, Target 1- Rs. 164, Target 2- Rs 167, Stop Loss- Rs 152
Gujrat NRE Coke, Buy around Rs 157, Target 1- Rs. 164, Target 2- Rs 167, Stop Loss- Rs 152
Wednesday, February 20, 2008
Tuesday, February 19, 2008
tip 19/2
Oil Country Tubular, CMP- Rs. 86, Target - Rs. 105, Short term
Mcdowell, CMP- Rs. 1602, Target - Rs. 2000, Short term
Mcdowell, CMP- Rs. 1602, Target - Rs. 2000, Short term
India Foils
We had initated buy call in India Foils at Rs 27 which got hammered to Rs 14 in very thin volume in last 2 weeks.
Mr Dutta CEO of ESS DEE Aluminium in an interview to a wire channel has indicated a price of Rs 150 crs for India Foil and also indicated to acquire 90% shares which mean the shares will be de listed and the current market cap of Rs 46 crs too much under priced.
At Rs 150 crs market cap basis and in view of the fact that promoters hold only 39% the first fair price of open offer could Rs 50 per share where the market cap of Rs 150 crs gets matched.
The scope of revision in the price is also not ruled out as 57% stake is held by others.
Investors may take their own call on the approximate price of open offer as our price calculations are only indicative.
We have vested interest in the stock.
Mr Dutta CEO of ESS DEE Aluminium in an interview to a wire channel has indicated a price of Rs 150 crs for India Foil and also indicated to acquire 90% shares which mean the shares will be de listed and the current market cap of Rs 46 crs too much under priced.
At Rs 150 crs market cap basis and in view of the fact that promoters hold only 39% the first fair price of open offer could Rs 50 per share where the market cap of Rs 150 crs gets matched.
The scope of revision in the price is also not ruled out as 57% stake is held by others.
Investors may take their own call on the approximate price of open offer as our price calculations are only indicative.
We have vested interest in the stock.
Monday, February 18, 2008
some accumulation for BSE
Market seems to be volatile and weak. I would like to advise investors to be cautious and keep investing in step in every fall and keep some cash available.
Some value stocks to keep watch on and accumulate -
Bharati Shipyard - CMP- Rs 580 , target - Rs. 700, Short term
Alps Industries, CMP- Rs 46.8, Target - Rs. 60 , short term
Gv films , CMP- Rs 6.83, Target Rs. 9, short term.
Nagarjuna Fertilizer, CMP- Rs. 48, Target - Rs. 60, short term
Some value stocks to keep watch on and accumulate -
Bharati Shipyard - CMP- Rs 580 , target - Rs. 700, Short term
Alps Industries, CMP- Rs 46.8, Target - Rs. 60 , short term
Gv films , CMP- Rs 6.83, Target Rs. 9, short term.
Nagarjuna Fertilizer, CMP- Rs. 48, Target - Rs. 60, short term
BSE tips for 18/02
Buy Petronet @ 77 tgt 90
Buy Bombay dyeing at 700 tgt 850
Sell R power at 430 (closing buy call)
Cuy Rpower at 400-410 if available today only
Buy Nifty 5250 March
Buy Powergrid 107 tgt 120
Buy Bombay dyeing at 700 tgt 850
Sell R power at 430 (closing buy call)
Cuy Rpower at 400-410 if available today only
Buy Nifty 5250 March
Buy Powergrid 107 tgt 120
Wednesday, February 13, 2008
Long Term Tips
Infosys buy @ cmp tgt 2000
RCom cmp tgt 800
Bharti cmp tgt 1100
Ranbaxy cmp tgt 550
R Power cmp tgt 525
Powergrid cmp tgt 136 in a month
NTPC @ cmp tgt 300
RCom cmp tgt 800
Bharti cmp tgt 1100
Ranbaxy cmp tgt 550
R Power cmp tgt 525
Powergrid cmp tgt 136 in a month
NTPC @ cmp tgt 300
Tuesday, February 12, 2008
Friday, February 8, 2008
Ahmednagar Forgings
Recommendation: Book Out
Current market price: Rs203
Book out
Result highlights
*
The Q2FY2008 results of Ahmednagar Forgings Ltd (AFL) are below our estimates.
*
The company's sales for the quarter grew by only 8.8% to Rs165.8 crore. The domestic sales remained flat at Rs111 crore and the export sales grew by 30% to Rs54 crore. The export revenues were flat on a quarter-on-quarter (q-o-q) basis.
*
The operating profit margin (OPM) has been maintained at 20.6%. As a result, the operating profit grew by 8.5% to Rs34.2 crore. Higher interest and depreciation costs led the profit after tax (PAT) to remain flat at Rs17.7 crore.
*
The ramp up in exports is not happening, as expected. There has been a delay in product approvals for exports. The domestic revenues are also not growing due to a slowdown in the domestic market.
*
AFL is making preferential allotment of 17 lakh shares and 38 lakh warrants to its promoters at a price of Rs240, thereby raising Rs132 crore. The funds will be used in buying assets such as forging lines. The preferential allotment would lead to an equity dilution of 16%. The resolution to raise money through debt of Rs2,000 crore has also been cleared.
*
Slow ramp up in exports, slow down in domestic market and 16% equity dilution would be a dampener on AFL's performance. We downgrade our earning estimates for FY2008 and FY2009 by 25% to Rs16.3 and Rs20.6 respectively. At the current market price of Rs203, the stock is trading at 9.9x its FY2009E earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.0x. We advise investors to Book out of the stock.
Current market price: Rs203
Book out
Result highlights
*
The Q2FY2008 results of Ahmednagar Forgings Ltd (AFL) are below our estimates.
*
The company's sales for the quarter grew by only 8.8% to Rs165.8 crore. The domestic sales remained flat at Rs111 crore and the export sales grew by 30% to Rs54 crore. The export revenues were flat on a quarter-on-quarter (q-o-q) basis.
*
The operating profit margin (OPM) has been maintained at 20.6%. As a result, the operating profit grew by 8.5% to Rs34.2 crore. Higher interest and depreciation costs led the profit after tax (PAT) to remain flat at Rs17.7 crore.
*
The ramp up in exports is not happening, as expected. There has been a delay in product approvals for exports. The domestic revenues are also not growing due to a slowdown in the domestic market.
*
AFL is making preferential allotment of 17 lakh shares and 38 lakh warrants to its promoters at a price of Rs240, thereby raising Rs132 crore. The funds will be used in buying assets such as forging lines. The preferential allotment would lead to an equity dilution of 16%. The resolution to raise money through debt of Rs2,000 crore has also been cleared.
*
Slow ramp up in exports, slow down in domestic market and 16% equity dilution would be a dampener on AFL's performance. We downgrade our earning estimates for FY2008 and FY2009 by 25% to Rs16.3 and Rs20.6 respectively. At the current market price of Rs203, the stock is trading at 9.9x its FY2009E earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.0x. We advise investors to Book out of the stock.
Ranbaxy Laboratories
Recommendation: Buy
Price target: Rs558
Current market price: Rs374
Generic Nexium—a potential exclusivity opportunity
Key points
*
Ranbaxy Laboratories (Ranbaxy) has received tentative approval from the US Food and Drug Administration (US FDA) for generic Esomeprazole Magnesium Delayed-Release Capsules, 20 mg (base) and 40 mg (base), the generic version of Astra Zeneca's blockbuster drug Nexium. Annual sales of Nexium is around $5.5 billion (IMS - MAT: December 2007).
*
Ranbaxy was the first to file a Para IV abbreviated new drug application (ANDA) with the US FDA, seeking approval to market Nexium in the USA. It will thus gain from being awarded a 180-day period to exclusively market the product in the USA upon final approval from the USFDA. We expect the final approval for Ranbaxy's version of generic Nexium to come by April 2008, when the 30-month stay expires, thus allowing Ranbaxy to launch the product 'at-risk' in the USA with 180-day exclusivity.
*
Based on our calculations, we believe the Nexium opportunity could yield $550 million in revenues and $220 million in profits for Ranbaxy during the 180-day exclusivity. This will translate into incremental earnings of Rs21 per share for Ranbaxy. However, we do not believe Ranbaxy would launch the product 'at-risk' in the USA before the outcome of the litigation. In such a case, Ranbaxy could attempt to enter into an out-of-court settlement with Astra Zeneca for the launch of generic Nexium.
*
Ranbaxy has already announced four exclusivity opportunities until 2010, collectively valued at Rs68 per share. Further, Ranbaxy has in its kitty, 18 more Para IV filings with potential first to file (FTF) status, representing a market size of about $27 billion. The company expects to monetise at least one FTF opportunity every year. We expect the news flow on Para IV challenges and associated exclusivity opportunities to continue.
*
We expect the announcements on de-merger of the new drug discovery research (NDDR) division, clarity on the Lipitor launch in Canada and other countries across the world and news flow on potential FTF opportunities to act as positive triggers for the stock. At the current market price of Rs374, Ranbaxy is trading at 17.5x its estimated CY2008E and 15.3x its estimated CY2009E earnings. We maintain our Buy recommendation on the stock with a sum-of-the-parts price target of Rs558 (20x CY2009E earnings of base business plus Rs68 for exclusivity opportunities).
Price target: Rs558
Current market price: Rs374
Generic Nexium—a potential exclusivity opportunity
Key points
*
Ranbaxy Laboratories (Ranbaxy) has received tentative approval from the US Food and Drug Administration (US FDA) for generic Esomeprazole Magnesium Delayed-Release Capsules, 20 mg (base) and 40 mg (base), the generic version of Astra Zeneca's blockbuster drug Nexium. Annual sales of Nexium is around $5.5 billion (IMS - MAT: December 2007).
*
Ranbaxy was the first to file a Para IV abbreviated new drug application (ANDA) with the US FDA, seeking approval to market Nexium in the USA. It will thus gain from being awarded a 180-day period to exclusively market the product in the USA upon final approval from the USFDA. We expect the final approval for Ranbaxy's version of generic Nexium to come by April 2008, when the 30-month stay expires, thus allowing Ranbaxy to launch the product 'at-risk' in the USA with 180-day exclusivity.
*
Based on our calculations, we believe the Nexium opportunity could yield $550 million in revenues and $220 million in profits for Ranbaxy during the 180-day exclusivity. This will translate into incremental earnings of Rs21 per share for Ranbaxy. However, we do not believe Ranbaxy would launch the product 'at-risk' in the USA before the outcome of the litigation. In such a case, Ranbaxy could attempt to enter into an out-of-court settlement with Astra Zeneca for the launch of generic Nexium.
*
Ranbaxy has already announced four exclusivity opportunities until 2010, collectively valued at Rs68 per share. Further, Ranbaxy has in its kitty, 18 more Para IV filings with potential first to file (FTF) status, representing a market size of about $27 billion. The company expects to monetise at least one FTF opportunity every year. We expect the news flow on Para IV challenges and associated exclusivity opportunities to continue.
*
We expect the announcements on de-merger of the new drug discovery research (NDDR) division, clarity on the Lipitor launch in Canada and other countries across the world and news flow on potential FTF opportunities to act as positive triggers for the stock. At the current market price of Rs374, Ranbaxy is trading at 17.5x its estimated CY2008E and 15.3x its estimated CY2009E earnings. We maintain our Buy recommendation on the stock with a sum-of-the-parts price target of Rs558 (20x CY2009E earnings of base business plus Rs68 for exclusivity opportunities).
Deepak Fertilisers & Petrochemicals Corporation
Recommendation: Buy
Price target: Rs169
Current market price: Rs132
JV with Yara International
Key points
*
Deepak Fertilisers & Petrochemical Corporation Ltd (DFPCL) has agreed to form a joint venture (JV) company with Yara International ASA (Yara International) to produce and market ammonium nitrate and specialty fertilisers in India.
*
DFPCL will own 51% stake in the JV, while the Norway-based Yara International will own the balance 49% stake. The current heads of agreement will be converted into final agreement after due diligence and necessary company and regulatory approvals.
*
The JV will provide DFPCL stability and flexibility in its operations in ammonium nitrate and specialty fertilisers segments through Yara International's leadership in the ammonia value chain and a large-scale ammonia/urea production base in the low-cost natural gas regions. The JV will also invest in the company's Paradip project of setting up a 300,000 million tonne per annum (MTPA) ammonium nitrate plant.
*
Indian technical ammonium nitrate (TAN) consumption is growing at about 5-6% per annum on the back of high coal demand for power generation. DFPCL is the only major domestic producer of TAN, with the balance being met through imports.
*
DFPCL has already increased its ammonia capacity to 130,000 tonne per annum (TPA) from 90,000TPA during the second quarter. This along with increased natural gas availability and additional ammonia storage tank would benefit the company in reducing the raw material cost and enhancing its nitric acid production.
*
For FY2009, we expect the company to post a revenue growth of 18.8%.
*
At the current market price of Rs132, the stock is trading at 8.5x its FY2009E earnings and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.2x. We maintain our Buy recommendation on the stock with a price target of Rs169.
Price target: Rs169
Current market price: Rs132
JV with Yara International
Key points
*
Deepak Fertilisers & Petrochemical Corporation Ltd (DFPCL) has agreed to form a joint venture (JV) company with Yara International ASA (Yara International) to produce and market ammonium nitrate and specialty fertilisers in India.
*
DFPCL will own 51% stake in the JV, while the Norway-based Yara International will own the balance 49% stake. The current heads of agreement will be converted into final agreement after due diligence and necessary company and regulatory approvals.
*
The JV will provide DFPCL stability and flexibility in its operations in ammonium nitrate and specialty fertilisers segments through Yara International's leadership in the ammonia value chain and a large-scale ammonia/urea production base in the low-cost natural gas regions. The JV will also invest in the company's Paradip project of setting up a 300,000 million tonne per annum (MTPA) ammonium nitrate plant.
*
Indian technical ammonium nitrate (TAN) consumption is growing at about 5-6% per annum on the back of high coal demand for power generation. DFPCL is the only major domestic producer of TAN, with the balance being met through imports.
*
DFPCL has already increased its ammonia capacity to 130,000 tonne per annum (TPA) from 90,000TPA during the second quarter. This along with increased natural gas availability and additional ammonia storage tank would benefit the company in reducing the raw material cost and enhancing its nitric acid production.
*
For FY2009, we expect the company to post a revenue growth of 18.8%.
*
At the current market price of Rs132, the stock is trading at 8.5x its FY2009E earnings and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.2x. We maintain our Buy recommendation on the stock with a price target of Rs169.
Bank of Baroda
Recommendation: Buy
Price target: Rs500
Current market price: Rs393
Treasury gains drive strong PAT
Result highlights
*
For Q3FY2008, Bank of Baroda (BoB) reported a profit after tax (PAT) of Rs501 crore, beating our estimate of Rs402.6 crore and the consensus estimate of Rs378.3 crore. The PAT indicates a growth of 52.3% year on year (yoy) and 53.1% quarter on quarter (qoq) primarily driven by a strong growth in the non-interest income.
*
The net interest income (NII) growth was moderate at 9.8% yoy to Rs997.5 crore. The NII growth was largely due to the continued pressure on the net interest margin (NIM) and a relatively slower credit growth of 23% compared with that of 27.1% during H1FY2008.
*
During the quarter, the deposits grew by 22% yoy to Rs136,900 crore, while the advances rose by 23% yoy to Rs 95,518 crore. With the advances growth outpacing the deposit growth, the credit-deposit (CD) ratio improved to 69.8% for the quarter from 68.7% for the previous quarter and 69.2% for the year-ago period.
*
The non-interest income spiked up 85.2% yoy to Rs618 crore on the back of strong treasury gains, thereby supporting the bottom line. The treasury gains for the quarter came in around Rs194.4 crore, about five times the gain in the year ago period.
*
The operating expenses growth was contained at 7.1% yoy to Rs683 crore, while on quarter-on-quarter (q-o-q) basis it declined by 14.4%. This was largely due to a 8.5% year-on-year (y-o-y) decline in the staff expenses, partially offset by 40% y-o-y jump in the other operating expenses.
*
The asset quality remained healthy with the gross non-performing assets (GNPA) declining by 14.6% yoy to Rs2,040.3 crore, while the net non-performing assets (NNPA) were largely flat yoy at Rs517.2 crore. However, the provisioning coverage declined to 75% for the quarter from 77% for the previous quarter and 78% for the year ago period.
*
The bank remains well capitalised with a capital adequacy ratio (CAR) of 13.5% at the end of December 2007 compared with 12.9% at the end of September 2007 and 12.2% at the end of December 2006.
*
In short term, the proposed initial public offering (IPO) of the UTI Mutual Fund should act as a trigger for BoB, as the bank holds 25% stake in the fund. Recent media reports suggest a valuation of about Rs6,500 crore for the UTI Mutual Fund compared with our valuation of Rs4,000 crore.
*
At the current market price of Rs393 the stock is quoting at 8.2x its FY2009E earnings per share (EPS), 4.3x its pre-provision profit (PPP) and 1.3x FY2009E book value (BV). We maintain our Buy recommendation on the stock with a price target of Rs500.
Price target: Rs500
Current market price: Rs393
Treasury gains drive strong PAT
Result highlights
*
For Q3FY2008, Bank of Baroda (BoB) reported a profit after tax (PAT) of Rs501 crore, beating our estimate of Rs402.6 crore and the consensus estimate of Rs378.3 crore. The PAT indicates a growth of 52.3% year on year (yoy) and 53.1% quarter on quarter (qoq) primarily driven by a strong growth in the non-interest income.
*
The net interest income (NII) growth was moderate at 9.8% yoy to Rs997.5 crore. The NII growth was largely due to the continued pressure on the net interest margin (NIM) and a relatively slower credit growth of 23% compared with that of 27.1% during H1FY2008.
*
During the quarter, the deposits grew by 22% yoy to Rs136,900 crore, while the advances rose by 23% yoy to Rs 95,518 crore. With the advances growth outpacing the deposit growth, the credit-deposit (CD) ratio improved to 69.8% for the quarter from 68.7% for the previous quarter and 69.2% for the year-ago period.
*
The non-interest income spiked up 85.2% yoy to Rs618 crore on the back of strong treasury gains, thereby supporting the bottom line. The treasury gains for the quarter came in around Rs194.4 crore, about five times the gain in the year ago period.
*
The operating expenses growth was contained at 7.1% yoy to Rs683 crore, while on quarter-on-quarter (q-o-q) basis it declined by 14.4%. This was largely due to a 8.5% year-on-year (y-o-y) decline in the staff expenses, partially offset by 40% y-o-y jump in the other operating expenses.
*
The asset quality remained healthy with the gross non-performing assets (GNPA) declining by 14.6% yoy to Rs2,040.3 crore, while the net non-performing assets (NNPA) were largely flat yoy at Rs517.2 crore. However, the provisioning coverage declined to 75% for the quarter from 77% for the previous quarter and 78% for the year ago period.
*
The bank remains well capitalised with a capital adequacy ratio (CAR) of 13.5% at the end of December 2007 compared with 12.9% at the end of September 2007 and 12.2% at the end of December 2006.
*
In short term, the proposed initial public offering (IPO) of the UTI Mutual Fund should act as a trigger for BoB, as the bank holds 25% stake in the fund. Recent media reports suggest a valuation of about Rs6,500 crore for the UTI Mutual Fund compared with our valuation of Rs4,000 crore.
*
At the current market price of Rs393 the stock is quoting at 8.2x its FY2009E earnings per share (EPS), 4.3x its pre-provision profit (PPP) and 1.3x FY2009E book value (BV). We maintain our Buy recommendation on the stock with a price target of Rs500.
Good time to buy
sensex has previously tested its 200 dma which is currently @ 16780 while
the 200 ema @ 17160.
previous chart patterns suggests whenever the fall in sensex is in excess of
10% it takes minimum 2-3 instances at 200 dma to form a bottom.
I think panic bottom has already been found @ 15400 and it would be not be
tested unless we r in extreme grim situation.
the correction which has started from 18900 is a technical correction, in
fact sensex attempted to cross 100 dma @ 18800 but failed to sustain
resulting in testing of 200 dma again @ 16800.
critical levels to look out are 17170 , 16774 on daily charts, 16777, 16220
on weekly charts on down sides.
16220 levels would be the major support level based on moving averages.
the above comments are purely based on moving average theory, which is the
most popular theory , further chart patterns from during JAN2004- JULY 2004
also suggest intermediate bottom @ 16200 below the median trend line, the
same has been posted previously & would be posted with recent developments
by monday.
--
Make a habit to book half of yours profit at 1tgt & rest in half prts. at
every consecutive tgt.
the 200 ema @ 17160.
previous chart patterns suggests whenever the fall in sensex is in excess of
10% it takes minimum 2-3 instances at 200 dma to form a bottom.
I think panic bottom has already been found @ 15400 and it would be not be
tested unless we r in extreme grim situation.
the correction which has started from 18900 is a technical correction, in
fact sensex attempted to cross 100 dma @ 18800 but failed to sustain
resulting in testing of 200 dma again @ 16800.
critical levels to look out are 17170 , 16774 on daily charts, 16777, 16220
on weekly charts on down sides.
16220 levels would be the major support level based on moving averages.
the above comments are purely based on moving average theory, which is the
most popular theory , further chart patterns from during JAN2004- JULY 2004
also suggest intermediate bottom @ 16200 below the median trend line, the
same has been posted previously & would be posted with recent developments
by monday.
--
Make a habit to book half of yours profit at 1tgt & rest in half prts. at
every consecutive tgt.
Wednesday, February 6, 2008
Godawari Power & Ispat
CMP: Rs 292.65
Target price: Rs 400
India Infoline has maintained a ‘buy’ on Godawari Power & Ispat as it feels that the company’s capacity additions will lead to robust volume growth thereby driving the bottomline in the coming years.
“Capacity additions, which were commissioned 100% in September 2007, will lead to robust volume growth for the company. GPIL’s strong volume growth coupled with higher realisations, will lead to its revenues rising by a CAGR of 50.9% over the period FY07-10E,” says the report. Operating margins are expected to remain flat at 19.8% in FY08 and 19.9% in FY09 and then expand to 22.9% in FY10, it adds.
Target price: Rs 400
India Infoline has maintained a ‘buy’ on Godawari Power & Ispat as it feels that the company’s capacity additions will lead to robust volume growth thereby driving the bottomline in the coming years.
“Capacity additions, which were commissioned 100% in September 2007, will lead to robust volume growth for the company. GPIL’s strong volume growth coupled with higher realisations, will lead to its revenues rising by a CAGR of 50.9% over the period FY07-10E,” says the report. Operating margins are expected to remain flat at 19.8% in FY08 and 19.9% in FY09 and then expand to 22.9% in FY10, it adds.
Yes Bank
CMP: Rs 257.40
Target price: Rs 300
CItigroup Global Markets has maintained its ‘buy’ rating on Yes Bank while raising the target price from Rs 230 to Rs 300 to factor in the proposed capital raising and continued strong growth of the bank.
“We rate Yes Bank with a buy/medium risk rating and an EVA-based Rs 300 target price,” says the report. The foreign brokerage feels that even though Yes Bank is relatively young, it has strong execution skills.
“It has built a focused asset portfolio, has strong treasury and advisory income businesses, and has kept risks relatively low. Moreover, we believe the bank offers aggressive growth potential,” the report adds. It further adds that the key catalysts for the stock's medium-term performance are likely to be easing domestic interest rate & liquidity environment, fresh capital raising and strong growth in investment banking fees.
Target price: Rs 300
CItigroup Global Markets has maintained its ‘buy’ rating on Yes Bank while raising the target price from Rs 230 to Rs 300 to factor in the proposed capital raising and continued strong growth of the bank.
“We rate Yes Bank with a buy/medium risk rating and an EVA-based Rs 300 target price,” says the report. The foreign brokerage feels that even though Yes Bank is relatively young, it has strong execution skills.
“It has built a focused asset portfolio, has strong treasury and advisory income businesses, and has kept risks relatively low. Moreover, we believe the bank offers aggressive growth potential,” the report adds. It further adds that the key catalysts for the stock's medium-term performance are likely to be easing domestic interest rate & liquidity environment, fresh capital raising and strong growth in investment banking fees.
JAIN iRRIGATION
CMP: Rs 636
Target price: Rs 760
Morgan Stanley has maintained ‘overweight’ on Jain Irrigation Systems as it expects the company’s margins to expand over the next three to five years with faster growth in micro irrigation systems (MIS).
“We believe that Jain Irrigation Systems is an interesting play on India agriculture with industry leadership in the fast-growing MIS business and presence in high growth potential agro processing business,” says the report.
Strong growth momentum in micro-irrigation systems and fruits & vegetables processing continues to drive strong growth, it adds. According to the brokerage, MIS and fruits & vegetables (FV) processing businesses have registered a growth of 71% and 86% year-on-year for the first nine months of the current financial year.
Target price: Rs 760
Morgan Stanley has maintained ‘overweight’ on Jain Irrigation Systems as it expects the company’s margins to expand over the next three to five years with faster growth in micro irrigation systems (MIS).
“We believe that Jain Irrigation Systems is an interesting play on India agriculture with industry leadership in the fast-growing MIS business and presence in high growth potential agro processing business,” says the report.
Strong growth momentum in micro-irrigation systems and fruits & vegetables processing continues to drive strong growth, it adds. According to the brokerage, MIS and fruits & vegetables (FV) processing businesses have registered a growth of 71% and 86% year-on-year for the first nine months of the current financial year.
News
WE ARE BULLISH ON THE MARKET AS LONG AS IT STAY ABOVE 18000. THE MARKET IS FINDING ITS FEET HERE WHICH IS VERY GOOD FOR LONG TERM. I.T. AND PHARMA STOCKS LOOKS VERY ATTRACTIVE FOR LONG TERM. INFOSYS, TCS, SATYAM, CIPLA, RANBAXY CAN BE BOUGHT FOR A LONG TERM VIEW YOU WILL DEFINITELY GET GOOD RETURN. POWER STOCK CAN RALLY ON ACCOUNT OF RPOWER LISTING AHEAD, BUY NTPC TATA POWER, POWER GRID FOR SHORT TERM GAIN. HAVE AN EYE ON SAIL! THERE IS SOME NEWS IN HFCL ALSO!
recoo
2/5/2008 J P Hydro 85.00 140.00 81.00 30 days target
2/5/2008 Hindustan Oil 126.50 175.00 98.00 Average
2/4/2008 LIC Housing 301.00 375.00 290.00
2/5/2008 Hindustan Oil 126.50 175.00 98.00 Average
2/4/2008 LIC Housing 301.00 375.00 290.00
Tuesday, February 5, 2008
tips
Investors are advised to wait as the market is going to fall and then buy.
GV Films, CMP- Rs. 7.85, Target - Rs. 10, Short term
KEI Industries, CMP- Rs. 90, Target, 120, Short term
KRBL, CMP- Rs. 138.45, Target - Rs. 180, Short term
Bharati Shipyard, CMP- Rs. 630, Target - Rs. 800, short term
GV Films, CMP- Rs. 7.85, Target - Rs. 10, Short term
KEI Industries, CMP- Rs. 90, Target, 120, Short term
KRBL, CMP- Rs. 138.45, Target - Rs. 180, Short term
Bharati Shipyard, CMP- Rs. 630, Target - Rs. 800, short term
Sunday, February 3, 2008
Bartronics India
Angel Broking has recommended buy on Bartronics India with a target of Rs 364 in its report dated 30 January 2008. "Bartronics India is a company operating in the automatic identification and data capture solutions segment. BIL enjoys a pre-eminent position in the Indian AIDC segment, and is all geared up to record strong growth going ahead. It is set to leverage the strong growth expected in the Retail sector. The company is also the only smart cards manufacturer in India and this segment is expected to surge on strong demand from the Telecom, Banking and Government sectors. We expect BIL to record CAGRs of 128% and 115% in topline and bottomline respectively over FY2007-10E. At the cmp, the stock is trading at .5x FY2010E EPS on the fully diluted equity capital. We Initiate Coverage on the stock, with a Buy recommendation and 15-month Target Price of Rs364." says Angel Broking Research Report
Friday, February 1, 2008
29 calls gave fruit
Hope you got the fruit of calls made for 29 jan.. will keep posting some tips for future eeryday soon.. and also starting mcx posts also
Tuesday, January 29, 2008
Start Accumulating and buying all out
Start Buying and accumulating stocks as the downtrend is almost over.,
Great stocks in frontline
bajaj steel
dena
idbi
gmr infra
leela
ispat
minda
facor alloys
Adlabs
RIL
POwergrid
Hind Mot
Nalco
Noida Toll Bridge
L& T
JP Associates
Zee News
Great stocks in frontline
bajaj steel
dena
idbi
gmr infra
leela
ispat
minda
facor alloys
Adlabs
RIL
POwergrid
Hind Mot
Nalco
Noida Toll Bridge
L& T
JP Associates
Zee News
tips
| 1/29/2008 | Punj Lloyd | 505.00 | 750.00 | 410.00 | Average |
| 1/29/2008 | Peninsula land | 122.50 | 220.00 | 86.00 | Average |
| 1/29/2008 | BEML | 1495.00 | 2250.00 | 1300.00 | Average |
| 1/29/2008 | Arvind Mills | 66.00 | 118.00 | 44.00 | Average |
| 1/29/2008 | Bombay Dyeing | 865.00 | 1400.00 | 735.00 | Average |
Monday, January 28, 2008
Stock nearing 52 week high
Here is a list of stocks still quoting within 15 % of their 52 week highs. The Industry name is also given.Majority belongs to the Financial sector.These are the stocks Mutual Funds are mopping up.Mutual fund data given in the previous post also confirms this. Keep a close watch.
| Ticker | Year High | Close | Fall% | Industry | |
| AMARAJABAT | 234.80 | 232.65 | 0.92 | Electric Equipment | |
| SBIN | 2464.55 | 2407.40 | 2.32 | Banking | |
| KTKBANK | 268.10 | 258.50 | 3.58 | Banking | |
| KARURVYSYA | 529.70 | 499.65 | 5.67 | Banking | |
| WELGUJ | 526.75 | 496.85 | 5.68 | Steel | |
| PNB | 711.35 | 667.85 | 6.12 | Banking | |
| REIAGRO | 982.30 | 920.15 | 6.33 | Food Processing | |
| EXIDEIND | 86.50 | 80.75 | 6.65 | Auto Ancillary | |
| AKRUTI | 1291.30 | 1201.40 | 6.96 | Construction | |
| CUB | 49.36 | 44.85 | 9.15 | Banking | |
| INDIANB | 232.00 | 209.80 | 9.57 | Banking | |
| IDFC | 232.50 | 209.80 | 9.76 | Finance | |
| HEROHONDA | 767.85 | 691.20 | 9.98 | Automobiles | |
| HDFCBANK | 1788.95 | 1608.45 | 10.09 | Banking | |
| MAHABANK | 94.25 | 84.45 | 10.40 | Banking | |
| UNIONBANK | 229.15 | 203.00 | 11.41 | Banking | |
| OPTOCIRCUI | 542.60 | 479.55 | 11.62 | Electronics | |
| BANKINDIA | 448.00 | 395.85 | 11.64 | Banking | |
| ICICIBANK | 1435.00 | 1261.30 | 12.10 | Banking | |
| ASIANELEC | 560.85 | 492.90 | 12.12 | Electric Equipment | |
| YESBANK | 265.75 | 232.60 | 12.47 | Banking | |
| ERACONS | 905.15 | 787.45 | 13.00 | Construction | |
| ORIENTBANK | 314.40 | 273.25 | 13.09 | Banking | |
| AXISBANK | 1268.15 | 1097.75 | 13.44 | Banking | |
| GTL | 308.25 | 266.80 | 13.45 | Telecom Equipment | |
| LT | 4506.70 | 3892.65 | 13.63 | Engineering | |
| WOCKPHARMA | 434.65 | 375.15 | 13.69 | Pharmaceuticals | |
| ITC | 231.30 | 198.45 | 14.20 | Cigarettes | |
| SIEMENS | 2074.70 | 1777.35 | 14.33 | Electronics | |
| BANKBARODA | 492.40 | 420.30 | 14.64 | Banking | |
| HDFC | 3180.15 | 2714.25 | 14.65 | Finance Housing | |
| SINTEX | 573.45 | 488.90 | 14.74 | Diversified | |
| ALBK | 139.35 | 118.55 | 14.93 | Banking |
29 Jan Tips
Ranbaxy Laboratories, CMP - Rs. 369.25, Target- Rs. 500, Short term.
Patel Engineering, CMP- Rs. 770.10, Target- Rs. 1100, short term
Patel Engineering, CMP- Rs. 770.10, Target- Rs. 1100, short term
Todays Tips
Reliance Energy, CMP- Rs. 2550, Tgt- Rs. 3300, short term.
Minda
Buy these to cover your losses
Minda
Buy these to cover your losses
Sunday, January 27, 2008
Why Ispat Might look good
Ispat has a great future because of the follwing reasons:
1. Fundamentally solid company
2. Strong Hands (Mittal group)
3. Favorite/ Liquid stock
4. Steel is an emerging Sector
5. stake sale by the company in feb..
and the list is endless.I would say this is going to make our money doubled in Feb if bought at current price..WE WILL SEE THIS..
1. Fundamentally solid company
2. Strong Hands (Mittal group)
3. Favorite/ Liquid stock
4. Steel is an emerging Sector
5. stake sale by the company in feb..
and the list is endless.I would say this is going to make our money doubled in Feb if bought at current price..WE WILL SEE THIS..
BSE Long Term Tips
Sujana Metals Buy at 39 Target: 50 within 3 months 75 in a year
SAH Petro: CMP 18 Tgt 50
SAH Petro: CMP 18 Tgt 50
Friday, January 25, 2008
Future Stocks Multi Baggers
Karnataka Bank
SBI
Satyam
Bahrat Electronics
GTL
Shri Cements
UBI
PNB
Hero Honda
Federal Bank
SBI
Satyam
Bahrat Electronics
GTL
Shri Cements
UBI
PNB
Hero Honda
Federal Bank
Thursday, January 24, 2008
Best Buy Scrips
Hi Guys
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Best Buy Scrips
Hi Guys
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Sorry for not posting during the difficult time
This is A new phase of the Stock Market in India , and i am damn sure bout that.
The market for the year will be volatile for sure, but 25 Jan 2008 is the day, mark my words friends, this is the day when you will have the full opportunity to go out there in the market and buy any share of your liking, and we guarantee you more than 25% returns.
Some of the share we recommend are
Alok
Arvind Mills
Adlabs
RPL
RNRL
Dena Bank
IDBI
Vijaya Bank
Sasken
Infosys
ISpat
Hind Motors
RIL
Rel Infra
Brigade
Ranbaxy
SBI
Icici
Balaji Telefilms
Avon
In Foils
IFCI
Moserbear
These scrips will rock 2008
Bank of India Update
Bank of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs432
Current market price: Rs391
Q3FY2008 results: First-cut analysis
Result highlights
*
Bank of India's (BoI) profit after tax (PAT) during Q3FY2008 grew by a whooping 101% year on year (yoy) and 20.4% quarter on quarter (qoq) to Rs511.9 crore. The PAT growth was significantly above our and consensus estimates. The strong PAT growth was on the back of robust rise in the interest income, spike in the non-interest income led by treasury gains, and contained operating expenses.
*
The net interest income (NII) of Rs1,079.5 crore during the quarter indicates a robust growth of 25.7% yoy mainly due to continued strong growth in advances coupled with an improvement in the net interest margin (NIM).
*
The reported NIM of 3.14% for the quarter reflects an improvement of 10 basis points yoy from 3.04% for the year-ago period. The NIM improvement was mainly due to the improvement in yields on advances (115 basis points) and the investments (105 basis points), which outweighed the 83-basis-points year-on-year (y-o-y) increase in the cost of funds.
*
During the quarter, the advances grew by a strong 30% yoy to Rs103,657 crore indicating an uptick in the credit off take compared with H1FY2008. The growth in advances was led by a strong growth in foreign advances (up 32.7%). Meanwhile the deposits grew by 27.4% yoy to Rs135,835 crore on the back of a 36% y-o-y growth in the term deposits and a 32.5% y-o-y growth in the current account deposits. However, due to the higher growth in the term deposits, the current account and saving account (CASA) ratio declined to 37% for the quarter from 40.7% a year ago.
*
The non-interest income witnessed a whooping growth of 72% yoy to Rs554.1 crore. The growth in the non-interest income was primarily due to the surge in treasury gains, which were up 109% yoy. Meanwhile the fee income grew by a strong 39.5% yoy.
*
Notably, the operating expenses were up by only 5.5% yoy, whereas it declined by ~2% qoq to Rs 662.2 crore. The lower operating expense growth can be traced to the decline in other operating expenses (down 13% yoy), whereas the staff expenses were up 17% yoy. As a result of lower operating expenses and strong income growth, the cost-income ratio for the quarter improved significantly to 40.5% compared with 50.6% for the year-ago period.
*
Asset quality continued to improve yoy with a 10% y-o-y decline in the gross non-performing assets to Rs1,969.3 crore and a 29.5% decline in the net non-performing assets to Rs633.5 crore. Consequently, the provision coverage for the quarter improved significantly to 78% from 66% for the year-ago period.
*
Capital adequacy remains healthy with the capital adequacy ratio (CAR) at 12.5% at the end of December 2007 compared with 11.7% at the end of December 2006.
*
At the current market price of Rs391, BoI trades at 10.1x its 2009E earnings per share (EPS), 5x its 2009E pre-provisioning profit (PPP) and 2x its 2009E book value. In view of the higher-than-expected Q3FY2008 numbers, we intend to revisit our earnings model.
Cluster: Apple Green
Recommendation: Buy
Price target: Rs432
Current market price: Rs391
Q3FY2008 results: First-cut analysis
Result highlights
*
Bank of India's (BoI) profit after tax (PAT) during Q3FY2008 grew by a whooping 101% year on year (yoy) and 20.4% quarter on quarter (qoq) to Rs511.9 crore. The PAT growth was significantly above our and consensus estimates. The strong PAT growth was on the back of robust rise in the interest income, spike in the non-interest income led by treasury gains, and contained operating expenses.
*
The net interest income (NII) of Rs1,079.5 crore during the quarter indicates a robust growth of 25.7% yoy mainly due to continued strong growth in advances coupled with an improvement in the net interest margin (NIM).
*
The reported NIM of 3.14% for the quarter reflects an improvement of 10 basis points yoy from 3.04% for the year-ago period. The NIM improvement was mainly due to the improvement in yields on advances (115 basis points) and the investments (105 basis points), which outweighed the 83-basis-points year-on-year (y-o-y) increase in the cost of funds.
*
During the quarter, the advances grew by a strong 30% yoy to Rs103,657 crore indicating an uptick in the credit off take compared with H1FY2008. The growth in advances was led by a strong growth in foreign advances (up 32.7%). Meanwhile the deposits grew by 27.4% yoy to Rs135,835 crore on the back of a 36% y-o-y growth in the term deposits and a 32.5% y-o-y growth in the current account deposits. However, due to the higher growth in the term deposits, the current account and saving account (CASA) ratio declined to 37% for the quarter from 40.7% a year ago.
*
The non-interest income witnessed a whooping growth of 72% yoy to Rs554.1 crore. The growth in the non-interest income was primarily due to the surge in treasury gains, which were up 109% yoy. Meanwhile the fee income grew by a strong 39.5% yoy.
*
Notably, the operating expenses were up by only 5.5% yoy, whereas it declined by ~2% qoq to Rs 662.2 crore. The lower operating expense growth can be traced to the decline in other operating expenses (down 13% yoy), whereas the staff expenses were up 17% yoy. As a result of lower operating expenses and strong income growth, the cost-income ratio for the quarter improved significantly to 40.5% compared with 50.6% for the year-ago period.
*
Asset quality continued to improve yoy with a 10% y-o-y decline in the gross non-performing assets to Rs1,969.3 crore and a 29.5% decline in the net non-performing assets to Rs633.5 crore. Consequently, the provision coverage for the quarter improved significantly to 78% from 66% for the year-ago period.
*
Capital adequacy remains healthy with the capital adequacy ratio (CAR) at 12.5% at the end of December 2007 compared with 11.7% at the end of December 2006.
*
At the current market price of Rs391, BoI trades at 10.1x its 2009E earnings per share (EPS), 5x its 2009E pre-provisioning profit (PPP) and 2x its 2009E book value. In view of the higher-than-expected Q3FY2008 numbers, we intend to revisit our earnings model.
Canara Bank Update
Canara Bank
Recommendation: Buy
Price target: Rs315
Current market price: Rs274
Q3FY2008 results: First-cut analysis
Result highlights
*
Canara Bank during Q3FY2008 reported a profit after tax (PAT) of Rs458.8 crore beating our estimate of Rs410.4 crore. The Q3FY2008 PAT indicates a growth of 26.4% year on year (yoy) and 14.2% quarter on quarter (qoq), primarily driven by a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) for the quarter stood at Rs934.4, down 1.3% yoy from the NII of Rs961.9 crore (adjusted for tax refund and amortisation) for the year-ago period. Excluding the adjustments, the NII would have declined by 10% yoy.
*
Meanwhile, the operating expenses grew by 13.5% yoy to Rs723 crore, mainly driven by a higher other operating expenses. Moreover, the other expenses are likely to remain high in the next quarter as well, owing to the re-branding exercise launched by the bank recently.
*
The provisions at end of the quarter stood at Rs199 crore, down 24.3% yoy while up 11.3% qoq. The lower provisions yoy helped support a higher PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.6% year-on-year decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were largely flat at Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13.7% at the end of December 2007 compared with 12.7% at the end of December 2006 and 13.9% as at the end of September 2007.
*
At the current market price of Rs274, the stock is quoting at 6.6x FY2009E earnings per share (EPS), 3.4x its 2009E pre-provisioning profit (PPP) and 0.9x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Recommendation: Buy
Price target: Rs315
Current market price: Rs274
Q3FY2008 results: First-cut analysis
Result highlights
*
Canara Bank during Q3FY2008 reported a profit after tax (PAT) of Rs458.8 crore beating our estimate of Rs410.4 crore. The Q3FY2008 PAT indicates a growth of 26.4% year on year (yoy) and 14.2% quarter on quarter (qoq), primarily driven by a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) for the quarter stood at Rs934.4, down 1.3% yoy from the NII of Rs961.9 crore (adjusted for tax refund and amortisation) for the year-ago period. Excluding the adjustments, the NII would have declined by 10% yoy.
*
Meanwhile, the operating expenses grew by 13.5% yoy to Rs723 crore, mainly driven by a higher other operating expenses. Moreover, the other expenses are likely to remain high in the next quarter as well, owing to the re-branding exercise launched by the bank recently.
*
The provisions at end of the quarter stood at Rs199 crore, down 24.3% yoy while up 11.3% qoq. The lower provisions yoy helped support a higher PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.6% year-on-year decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were largely flat at Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13.7% at the end of December 2007 compared with 12.7% at the end of December 2006 and 13.9% as at the end of September 2007.
*
At the current market price of Rs274, the stock is quoting at 6.6x FY2009E earnings per share (EPS), 3.4x its 2009E pre-provisioning profit (PPP) and 0.9x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Union Bank of India Update
Union Bank of India
Recommendation: Buy
Price target: Rs230
Current market price: Rs200
Q3FY2008 results: First-cut analysis
Result highlights
*
For Q3FY2008 Union Bank of India reported a profit after tax (PAT) of Rs365 crore, beating our estimate of Rs298.8 crore. The Q3FY2008 PAT indicates a growth of 42.7% year on year (yoy), driven by a healthy growth in interest income and a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) stood at Rs788 crore, reflecting a growth of 14.9% yoy and 17.1% qoq. Meanwhile, the non-interest income witnessed a whooping growth of 69.3% yoy to Rs347.5 crore.
*
During Q3FY2008, the operating expenses jumped by 29.5% yoy to Rs499.7 crore. The growth can be traced to a 55.1% year-on-year (y-o-y) increase in the other operating expenses while, the staff expenses grew by 14.5% yoy. Despite the significant increase in the operating expenses, the cost-income ratio was marginally up by 1% to 44%.
*
Notably, the provisions during the quarter declined by 22.2% yoy on reported basis, which pushed the PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.1% y-o-y decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were down significantly by 60% to Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13% at the end of December 2007 compared with 13.2% at the end of December 2006 and 11.6% at the end of September 2007.
*
At the current market price of Rs200, the stock is quoting at 7.8x FY2009E earnings per share (EPS), 4x its 2009E pre-provisioning profit (PPP) and 1.5x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Recommendation: Buy
Price target: Rs230
Current market price: Rs200
Q3FY2008 results: First-cut analysis
Result highlights
*
For Q3FY2008 Union Bank of India reported a profit after tax (PAT) of Rs365 crore, beating our estimate of Rs298.8 crore. The Q3FY2008 PAT indicates a growth of 42.7% year on year (yoy), driven by a healthy growth in interest income and a jump in non-interest income coupled with lower provisions.
*
The reported net interest income (NII) stood at Rs788 crore, reflecting a growth of 14.9% yoy and 17.1% qoq. Meanwhile, the non-interest income witnessed a whooping growth of 69.3% yoy to Rs347.5 crore.
*
During Q3FY2008, the operating expenses jumped by 29.5% yoy to Rs499.7 crore. The growth can be traced to a 55.1% year-on-year (y-o-y) increase in the other operating expenses while, the staff expenses grew by 14.5% yoy. Despite the significant increase in the operating expenses, the cost-income ratio was marginally up by 1% to 44%.
*
Notably, the provisions during the quarter declined by 22.2% yoy on reported basis, which pushed the PAT growth.
*
Asset quality remained robust during the quarter with gross non-performing assets (GNPA) witnessing a 18.1% y-o-y decline to Rs1,524.8 crore. Meanwhile, the net non-performing assets were down significantly by 60% to Rs873.2 crore.
*
Capital adequacy ratio (CAR) remained healthy at 13% at the end of December 2007 compared with 13.2% at the end of December 2006 and 11.6% at the end of September 2007.
*
At the current market price of Rs200, the stock is quoting at 7.8x FY2009E earnings per share (EPS), 4x its 2009E pre-provisioning profit (PPP) and 1.5x FY2009E book value. We are revisiting our earnings model following the higher-than-expected numbers released by the bank.
Balaji Telefilms
Balaji Telefilms
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs262
Raring to go
Result highlights
*
Balaji Telefilms Ltd's (BTL) operating performance for Q3FY2008 was below our expectations. The programming hours in the commissioned category increased to 233.5 hours during the quarter from 190.5 hours in Q2 with the launch of three new shows during the quarter. However, much lower realisations on these shows led to a more-than-expected decline in the blended realisations in the commissioned category to 31.7 lakh per hour.
*
The revenues for the quarter increased by 2.6% quarter on quarter (qoq) to Rs80 crore. The operating profit margin (OPM) declined to 33.2% in Q3FY2008 against a hefty 42.4% in Q2FY2008 due to lower blended realistions during the quarter. However, we believe this is a normal feature of the television content business wherein realisations pick up as the show stabilises over a period of time. The net profit for the quarter thereby declined by 28.4% qoq and 13.6% year on year (yoy) to Rs18.8 crore.
*
BTL has pounced on the opportunity provided by the increasing content demand in the Hindi general entertainment channel (GEC) space due to new channel launches. It has launched three new shows during the quarter—Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tarah on Sony. In the coming quarters, the company is looking at diversifying into reality shows. The management has hinted at launching two more shows (one of which will be on NDTV Imagine), a reality show and a soap in the coming quarter.
*
The launch of its Tamil and Telugu channels through its joint venture (JV) with Star has been delayed due to procedural issues, and we expect these channels to be launched only by Q1FY2009 end. We believe that the JV presents immense potential for value creation for BTL and consequently for its shareholders.
*
We remain positive on the television content and film businesses of BTL and its foray into regional entertainment that would enable it to grow from a TV content provider to a broadcaster. We maintain our sum-of-the-parts (S-O-T-P) price target at Rs427.
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs262
Raring to go
Result highlights
*
Balaji Telefilms Ltd's (BTL) operating performance for Q3FY2008 was below our expectations. The programming hours in the commissioned category increased to 233.5 hours during the quarter from 190.5 hours in Q2 with the launch of three new shows during the quarter. However, much lower realisations on these shows led to a more-than-expected decline in the blended realisations in the commissioned category to 31.7 lakh per hour.
*
The revenues for the quarter increased by 2.6% quarter on quarter (qoq) to Rs80 crore. The operating profit margin (OPM) declined to 33.2% in Q3FY2008 against a hefty 42.4% in Q2FY2008 due to lower blended realistions during the quarter. However, we believe this is a normal feature of the television content business wherein realisations pick up as the show stabilises over a period of time. The net profit for the quarter thereby declined by 28.4% qoq and 13.6% year on year (yoy) to Rs18.8 crore.
*
BTL has pounced on the opportunity provided by the increasing content demand in the Hindi general entertainment channel (GEC) space due to new channel launches. It has launched three new shows during the quarter—Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tarah on Sony. In the coming quarters, the company is looking at diversifying into reality shows. The management has hinted at launching two more shows (one of which will be on NDTV Imagine), a reality show and a soap in the coming quarter.
*
The launch of its Tamil and Telugu channels through its joint venture (JV) with Star has been delayed due to procedural issues, and we expect these channels to be launched only by Q1FY2009 end. We believe that the JV presents immense potential for value creation for BTL and consequently for its shareholders.
*
We remain positive on the television content and film businesses of BTL and its foray into regional entertainment that would enable it to grow from a TV content provider to a broadcaster. We maintain our sum-of-the-parts (S-O-T-P) price target at Rs427.
Genus Power Infr Update
Genus Power Infrastructures
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs803
Current market price: Rs680
Price target revised to Rs803
Result highlights
*
For Q3FY2008, the net sales of Genus Power Infrastructures Ltd (GPIL) grew by 25.2% year on year (yoy) to Rs105.3 crore, which was marginally below our estimates.
*
The operating profit for the quarter grew by 30.8% to Rs16.5 crore. The operating profit margin (OPM) expanded by 70 basis points yoy to 15.7%, which was in line with our expectation. The OPM improved on account of operating leverage.
*
The interest cost increased by 10.7% yoy to Rs4.7 crore while, the depreciation charge declined by 14.7% yoy to Rs1.2 crore.
*
A larger contribution from the Haridwar plant (which falls in the tax-free zone) resulted in the lower tax rate of 10.9% for the quarter as compared with 14.7% in the same quarter last year. Consequently, the net profit grew by 59.2% yoy to Rs9.97 crore as against our estimates of Rs10.8 crore.
*
The current order book of the company stands at Rs400 crore, which is 1.1x its FY2007 sales. The company is also the lowest bidder for orders close to Rs800 crore.
*
For the nine months of FY2008, GPIL reported a spectacular revenue growth of 35.9% yoy to Rs289.6 crore, whereas the profits grew by 67.5% yoy to Rs26.1 crore.
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs803
Current market price: Rs680
Price target revised to Rs803
Result highlights
*
For Q3FY2008, the net sales of Genus Power Infrastructures Ltd (GPIL) grew by 25.2% year on year (yoy) to Rs105.3 crore, which was marginally below our estimates.
*
The operating profit for the quarter grew by 30.8% to Rs16.5 crore. The operating profit margin (OPM) expanded by 70 basis points yoy to 15.7%, which was in line with our expectation. The OPM improved on account of operating leverage.
*
The interest cost increased by 10.7% yoy to Rs4.7 crore while, the depreciation charge declined by 14.7% yoy to Rs1.2 crore.
*
A larger contribution from the Haridwar plant (which falls in the tax-free zone) resulted in the lower tax rate of 10.9% for the quarter as compared with 14.7% in the same quarter last year. Consequently, the net profit grew by 59.2% yoy to Rs9.97 crore as against our estimates of Rs10.8 crore.
*
The current order book of the company stands at Rs400 crore, which is 1.1x its FY2007 sales. The company is also the lowest bidder for orders close to Rs800 crore.
*
For the nine months of FY2008, GPIL reported a spectacular revenue growth of 35.9% yoy to Rs289.6 crore, whereas the profits grew by 67.5% yoy to Rs26.1 crore.
Ranbaxy Update
Ranbaxy Laboratories
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs350
Price target revised to Rs558
Result highlights
*
Ranbaxy Laboratories (Ranbaxy)'s performance in Q4CY2007 and CY2007 has been above expectations. Its consolidated revenues grew by 5.1% in rupee terms to Rs1,784.50 crore in Q4CY2007 and by 9.5% to Rs6,017.0 crore in CY2007. The growth in dollar terms was more robust: 19% in Q4CY2007 and 20% in CY2007.
*
The growth was driven by a 24% growth in the sales to the emerging markets and a steady growth of 14% in the sales to the developed markets. The US business declined by 3.7% (on a high base of Q4CY2006 when the company had recorded substantial revenues from exclusivity opportunities) to $104 million during the quarter. However, the base business in the USA (excluding the impact of exclusivity revenues) grew by 8%.
*
Despite the sharp appreciation in the rupee and the high base of Q4CY2006 (when the company had recorded high-margin Simvastatin revenues under exclusivity), the company's operating profit margin (OPM) expanded by 100 basis points year on year (yoy) to 16.7%. Consequently, the operating profit of the company rose by 11.7% to Rs297.7 crore in Q4CY2007.
*
Despite a 55.5% rise in the interest expense and a 76.6% decline in the foreign exchange (forex) gains recorded by the company in Q4CY2007, the net profit rose by 1.1% to Rs187.9 crore. This was above our estimate of Rs164.7 crore.
*
For CY2007, Ranbaxy's consolidated revenues grew by 20% to $1,607 million. However, due to the impact of the appreciating rupee, the growth in rupee terms was more moderate at 9.5% to Rs6,590.4 crore. The sales reported by the company were ahead of our estimates. The net profit for CY2007 stood at Rs790.1 crore, up by 53.3% yoy. Excluding the impact of forex gains, the net profit stood at Rs606.9 crore, a growth of 15% yoy.
*
Ranbaxy has decided to demerge its new drug discovery research (NDDR) operations into a separate entity effective from January 1, 2008 and list it subsequently. While the specific framework and other details of the de-merger are currently under finalisation and will be announced by February 2008, the management has indicated that the company will save about $20-25 million of expenses incurred on NDDR projects annually from CY2008 onwards. The announcement of the details of the demerger scheme will act as a near-term catalyst for the stock.
*
The management has guided towards an 18-20% top line growth in dollar terms in CY2008. That's an expansion of the OPM from 15.1% in CY2007 to 17.5-18% in CY2008, resulting in a net profit growth of 20-25% in CY2008. This guidance is excluding any revenues and profits from the exclusivity opportunities in the USA.
*
We have upgraded our estimates to reflect the guidance provided by the management. Based on our new estimates, we expect Ranbaxy's recurring revenues (excluding the exclusivity opportunities) to grow by 18.2% in CY2008 to $1,900 million and by 16.0% in CY2009 to $2,202.0 million. However, the growth in rupee terms will be lower (as per our assumption of continued rupee appreciation) at 12.5% to Rs7,412 crore in CY2008 and at 12.9% to Rs8,369 crore in CY2009. This will result in a recurring net profit growth (excluding the extraordinary items) of 8% to Rs852.2 crore in CY2008 and of 15% to Rs980.3 crore in CY2009. This will, in turn, translate into fully diluted earnings of Rs21.3 and Rs24.5 in CY2008 and CY2009 respectively.
*
Ranbaxy believes that it has first-to-file (FTF) status on approximately 18 Para IV abbreviated new drug application (ANDA) filings, representing a market size of about USD27 billion. It expects to monetise at least one FTF opportunity every year for the next few years and has already announced the opportunities until CY2010 (generic Imitrex in CY2008, generic Valtrex in CY2009 and generic Lipitor and Flomax in CY2010). Based on our discount-cash-flow (DCF) calculations, we believe that the FTFs announced so far are collectively valued at Rs2,716 crore, translating into a per share value of Rs68.
*
Using the sum-of-the-parts valuation method, we arrive at a fair value of Rs558 per share for Ranbaxy (after assigning a 20x multiple to CY2009E base earnings per share of Rs24.5 plus the Rs68 per share value of the FTFs). At the current market price of Rs350, Ranbaxy is trading at 16.4x its estimated CY2008 and 14.3x its estimated CY2009 earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs558, an upside of 52% from the current levels.
Cluster: Apple Green
Recommendation: Buy
Price target: Rs558
Current market price: Rs350
Price target revised to Rs558
Result highlights
*
Ranbaxy Laboratories (Ranbaxy)'s performance in Q4CY2007 and CY2007 has been above expectations. Its consolidated revenues grew by 5.1% in rupee terms to Rs1,784.50 crore in Q4CY2007 and by 9.5% to Rs6,017.0 crore in CY2007. The growth in dollar terms was more robust: 19% in Q4CY2007 and 20% in CY2007.
*
The growth was driven by a 24% growth in the sales to the emerging markets and a steady growth of 14% in the sales to the developed markets. The US business declined by 3.7% (on a high base of Q4CY2006 when the company had recorded substantial revenues from exclusivity opportunities) to $104 million during the quarter. However, the base business in the USA (excluding the impact of exclusivity revenues) grew by 8%.
*
Despite the sharp appreciation in the rupee and the high base of Q4CY2006 (when the company had recorded high-margin Simvastatin revenues under exclusivity), the company's operating profit margin (OPM) expanded by 100 basis points year on year (yoy) to 16.7%. Consequently, the operating profit of the company rose by 11.7% to Rs297.7 crore in Q4CY2007.
*
Despite a 55.5% rise in the interest expense and a 76.6% decline in the foreign exchange (forex) gains recorded by the company in Q4CY2007, the net profit rose by 1.1% to Rs187.9 crore. This was above our estimate of Rs164.7 crore.
*
For CY2007, Ranbaxy's consolidated revenues grew by 20% to $1,607 million. However, due to the impact of the appreciating rupee, the growth in rupee terms was more moderate at 9.5% to Rs6,590.4 crore. The sales reported by the company were ahead of our estimates. The net profit for CY2007 stood at Rs790.1 crore, up by 53.3% yoy. Excluding the impact of forex gains, the net profit stood at Rs606.9 crore, a growth of 15% yoy.
*
Ranbaxy has decided to demerge its new drug discovery research (NDDR) operations into a separate entity effective from January 1, 2008 and list it subsequently. While the specific framework and other details of the de-merger are currently under finalisation and will be announced by February 2008, the management has indicated that the company will save about $20-25 million of expenses incurred on NDDR projects annually from CY2008 onwards. The announcement of the details of the demerger scheme will act as a near-term catalyst for the stock.
*
The management has guided towards an 18-20% top line growth in dollar terms in CY2008. That's an expansion of the OPM from 15.1% in CY2007 to 17.5-18% in CY2008, resulting in a net profit growth of 20-25% in CY2008. This guidance is excluding any revenues and profits from the exclusivity opportunities in the USA.
*
We have upgraded our estimates to reflect the guidance provided by the management. Based on our new estimates, we expect Ranbaxy's recurring revenues (excluding the exclusivity opportunities) to grow by 18.2% in CY2008 to $1,900 million and by 16.0% in CY2009 to $2,202.0 million. However, the growth in rupee terms will be lower (as per our assumption of continued rupee appreciation) at 12.5% to Rs7,412 crore in CY2008 and at 12.9% to Rs8,369 crore in CY2009. This will result in a recurring net profit growth (excluding the extraordinary items) of 8% to Rs852.2 crore in CY2008 and of 15% to Rs980.3 crore in CY2009. This will, in turn, translate into fully diluted earnings of Rs21.3 and Rs24.5 in CY2008 and CY2009 respectively.
*
Ranbaxy believes that it has first-to-file (FTF) status on approximately 18 Para IV abbreviated new drug application (ANDA) filings, representing a market size of about USD27 billion. It expects to monetise at least one FTF opportunity every year for the next few years and has already announced the opportunities until CY2010 (generic Imitrex in CY2008, generic Valtrex in CY2009 and generic Lipitor and Flomax in CY2010). Based on our discount-cash-flow (DCF) calculations, we believe that the FTFs announced so far are collectively valued at Rs2,716 crore, translating into a per share value of Rs68.
*
Using the sum-of-the-parts valuation method, we arrive at a fair value of Rs558 per share for Ranbaxy (after assigning a 20x multiple to CY2009E base earnings per share of Rs24.5 plus the Rs68 per share value of the FTFs). At the current market price of Rs350, Ranbaxy is trading at 16.4x its estimated CY2008 and 14.3x its estimated CY2009 earnings. We maintain our Buy recommendation on the stock with a revised price target of Rs558, an upside of 52% from the current levels.
Monday, January 21, 2008
Best Time to buy
While the correction has been deep and painful, there is still room to make money in select stocks, reports CNBC-TV18. It has been a sharp knock for all the midcap or smallcap stocks. But there are still some very interesting stocks to pick up.
Radico Khaitan is one of them, with a current market price around Rs 130. The stock has corrected nearly 45%, from its all-time highs or 52-week high, of around Rs 220. Reliance Capital has bought nearly 37.67 lakh shares, which is around 4% stake, at a value of around Rs 150. So, one is getting around 15% discount to the level, which Reliance Mutual has bought into.
Alok Industries is another stock, where the stock has corrected nearly 25%, from its 52-week high of around Rs 110. The most interesting thing is that the company has issued warrants to the promoters at Rs 102 per share, which is again a 15% discount to the prevailing market price.
JP Associates is another stock, where the current market price is hovering around Rs 400. The stock has corrected nearly 21%, from its 52-week high, of around Rs 510. There has been a bullish brokerage report on the stock. Merrill Lynch’s target is at Rs 530 per share. Merrill Lynch reiterated buy on value creation via subsidiary JP Infratech & Power.
Inox is another stock, which has seen correction. The stock has corrected 30%, from a 52-week high, of around Rs 242. Again, Reliance Capital has bought nearly 43 lakh shares or nearly 5% stake at Rs 143 per share on an average.
Noida Toll Bridge, where the stock had seen exceptional run up, has corrected 28% from its 52-week of around Rs 85. India Infoline’s price target is at Rs 107.
Saregama is another very interesting stock, which it has corrected nearly 34%, from its 52-week high of around Rs 388. It is now trading at around Rs 250. Reliance MF had bought nearly 7% stake at Rs 250 per share in September 2007.
Aban Offshore has corrected nearly 25%, from its 52-week high, of around Rs 5,416. Goldman Sachs has reiterated buy with target of Rs 5,400.
Indian Stock Market collapse heavily
Sensex fell over 1300 points in a single biggest fall of the Indian Sensex Market. Most of the shares were in the negatives and were 10-30% down. Nifty closed at about 5250
NSE Futures Tips for 21 Jan 2008
REcommend Buy
Ranbaxy at cmp for intra day
IFCI intraday
Nifty FEb Futures for 15 days will toucj 6300 in 15 days
Ranbaxy at cmp for intra day
IFCI intraday
Nifty FEb Futures for 15 days will toucj 6300 in 15 days
BSE TIp for 21 Jan 08
Reccomend buy in Kohinoor Broadcasting at cmp around 16
Will touch 40 by Feb 5 that is within 15 days...
Will touch 40 by Feb 5 that is within 15 days...
Sunday, January 20, 2008
20 Stocks to buy in 2008 for BSE - Yatish
Adlabs Films
With a strong presence across the entertainment industry value chain of content production, distribution, and exhibition, Adlabs becomes the choicest pick.
Domestic consumption and leisure spends will remain buoyant as disposable incomes rise across the country fuelling growth at Adlabs.
Adlabs produces and distributes films, and is a dominant player in the multiplex segment. It has also acquired 51 per cent stake in television content producer Synergy Communications, the maker of Jhalak Dikhhla Jaa and Kaun Banega Crorepati.
In the FM radio business, its subsidiary, which runs Big FM has 44 FM licenses across India. This could also become a value unlocking opportunity going forward.
Over the past three years, Adlabs has impeccably delivered a top line growth of over 100 per cent y-o-y, along with high profitability. In the September 2007 quarter, it raked in a whopping 69 per cent operating profit margin.
But going by the past numbers, operating margins have remained in excess of 50 per cent consistently, with net profit margins at over 22 per cent. The stock has appreciated three-fold since January 2007 and should do well.
Bank of Baroda
Bank of Baroda has a strong presence in western India -- a key zone for retail and industrial growth-- with equally good rural network.
Further, the bank is one of the few banks having a substantial international presence, which contributes 18-20 per cent to total business and 30 per cent to profits. This business is expected to rise further with the bank growing its global presence.
The bank has improved its fundamentals over the past several years on key parameters such as net interest margins (NIMs) and asset quality despite growing at a robust pace (asset growth CAGR of 19 per cent in FY04-07). Going ahead, the bank's focus on NIMs backed by moderate growth augurs well.
Besides, its initiatives such as online trading services, and joint ventures in insurance and asset management, will help it create value for its shareholders.
Additional triggers could be in the form of consolidation within the public sector bank space. All this put together makes this stock, which is reasonably valued at 1.4 times its FY09 estimated book value, an attractive investment opportunity.
Bharat Bijlee
Though Bharat Bijlee has risen by a whopping 228.5 per cent in the last one year, even at current levels, it is inexpensive.
Consider this: The company has investment in various companies including Siemens, HDFC and ICICI Bank.
At current rates, their combined value works out to Rs 317 crore (Rs 3.17 billion), or about Rs 560 per share.
Excluding this, the core business is valued at attractive valuations of 20 times FY08 earnings and 15 times FY09 estimated earnings.
The company is capitalising on the emerging opportunities in the power transformer sector, which accounts for 65 per cent of its total revenues with the balance from motors.
In the Eleventh Five Year Plan, a total power generation capacity of 78,000 mw is planned. This augurs well for transformer manufacturers such as Bharat Bijlee.
The company on its part has recently expanded its transformer capacity to 11,000 MVA from 8,000 MVA. The motors business is also witnessing 25 per cent growth and Bharat Bijlee has forayed into higher frame motors of up to 400 kw. All this put together make Bharat Bijlee a good pick.
Bharati Shipyard
Stocks of shipbuilding companies have been re-rated on the back of rising order book-to-sales to over seven times. The stock price of ABG Shipyard has gone up 267 per cent, while Bharati Shipyard is up 107 per cent over the last one year.
The gain has been higher in the case of ABG Shipyard, thus stretching its valuation at 33 times its FY08 estimated earnings. Bharati Shipyard is still trading at a comfortable 18 times estimated FY08 EPS and 13 times FY09 EPS.
Also, its current order book of about Rs 4,639 crore (Rs 46.39 billion) (11 times its FY07 revenue) is strong enough for maintaining 50 per cent growth for the next three years.
Bharati is building a greenfield shipyard which will enable it to build six vessels up to 60,000 dwt (dead weight tonne) against 15,000 dwt currently by December 2008. This will enable Bharati to improve its execution speed and bid for more projects.
Besides, it is planning to invest Rs 2,000 crore (Rs 20 billion) along with Apeejay Shipping to set up a shipbuilding yard on the eastern coast, which will be commissioned in FY 2011. A relatively lower valuation and strong earnings visibility makes this stock an attractive investment.
Bhel
Today, the biggest constraint in the power sector is the supply of equipment, especially the critical power equipment required for the larger projects.
But, for Bhel, which commands about 65 per cent market share in the domestic power equipment industry, this provides long-term earnings visibility.
While competition is rising with new players like L&T and Chinese companies vying for a share, Bhel's order book of Rs 62,400 crore (Rs 624 billion), almost 3.6 times its FY07 revenues, instils confidence. The successful acquisition of orders for super critical boilers and high technology gas turbines required for the bigger projects would only improve its order book further.
Considering the huge order backlog and the orders in pipeline, Bhel is expanding its capacities by 67 per cent to 10,000 mw by January 2008, which will further increase to 15,000 mw by December 2009.
Bhel is also expanding its forging and casting capacities and a new fabrication plant to help reduce its dependence on imports. These should also help lower costs in the years to come. Overall, a better industry outlook, strong order book and expansion of existing capacities will drive the stock from the current levels.
Bharti Airtel
With a mobile subscriber base of 51 million, Bharti Airtel is India's largest mobile service provider. While it has added an average of 2 million subscribers a month in Q2, it is expected to crack the 100 million subscriber mark by FY10.
While the company has experienced good growth, its ARPU has fallen by 10 per cent over the last three quarters, much ahead of the 4 per cent decline experienced by Reliance Communications Even then, operating margins have improved, on the back of higher margin in broadband business and cost reduction.
Going forward, increase in scale of operations will keep costs in check. Capital and operating expenditure is also likely to come down after the formation of Indus, a tower infrastructure company, which will manage the tower infrastructure of Bharti, Vodafone and Idea.
A trigger for the stock could be the listing of Bharti Infratel, the tower division and which holds 42 per cent in Indus. Bharti Infratel already has 20,000 towers and plans to set up more.
RCOM will be the biggest threat for the company if it manages to soon roll out its GSM services across 15 circles. Additionally, any unfavourable outcome over the spectrum issue will have its impact; it could lead to increased investments in upgradation of existing equipment.
To conclude, Bharti's revenues should grow by 35 per cent in the next two years on the back of subscriber expansion, start of Sri Lankan operations by March 2008, and launch of IPTV and DTH. A sum-of-parts valuation puts the per share value of Bharti at Rs 1,200, a 27 per cent upside from the current levels.
Blue Star
The central air conditioning major, Blue Star, is a key beneficiary of the economic boom in the country across sectors like IT/ITES, retail and telecom.
This is reflected in the strong CAGR of 32 per cent and 40 per cent in sales and operating profit respectively in the past three years.
Notably, such strong growth traction is expected to continue as the company is sitting on a strong order book position, which is at Rs 1,030 crore (Rs 10.30 billion) as on September 2007. It is likely to get repeat orders from its existing customers as they expand operations.
It is expanding its capacities by investing about Rs 60-70 crore (Rs 60-700 million), which will lead to economies of scale and rationalisation of costs leading to margin expansion. Its return on equity and return on capital employed, which were at 34 per cent and 26 per cent, respectively, in FY07, will only improve.
However, the full benefits will be reflected only from the next financial year. The macro factors too continue to be robust, with huge investments planned in all the above mentioned sectors.
Dishman Pharmaceuticals
Dishman, a pharma outsourcing player, is moving up the value chain from being a commoditised chemicals supplier to a research partner for innovator companies.
Its acquisition of Swiss-based Carbogen-Amcis (CA), which offers drug development and commercialisation services, has helped it tap into the client base of CA that includes seven of the top ten US drug companies.
With three projects in phase-III development, and likely to hit commercial production in two years, CA's revenues are expected to grow 15 per cent annually to Rs 400 crore (Rs 4 billion) by December 2008.
Dishman caters to 50 per cent of Dutch pharma major Solvay Pharma's requirement of eposartan mesylate, an anti-hypertension medication. Its acquisition of Solvay's Vitamin-D business will boost revenues. Its foray into China to manufacture Quats, a catalyst, is also seen positively.
All these should help reduce Solvay's share of 25 per cent in Dishman's revenues going forward. With earnings expected to grow between 25-30 per cent in the next two years (Rs 12 in FY08, Rs 15 in FY09 and Rs 20 in FY10), the stock can deliver 28-30 per cent returns in one year.
Educomp Solutions
Educomp, the market leader in Kindergarten-12 education products, is a successful niche player. It has made some smart acquisitions, entered new areas. and garnered a client base of almost 6,000 schools across India besides, a small presence in Singapore and the US. Its first mover advantage makes it difficult for competition to catch up anytime soon.
Besides, the company has so far acquired and built the abilities to design and create content for schools, learning and school infrastructure management solutions, online teaching solutions, community building solutions and more recently into setting up its own schools.
Financially, Educomp's top line has almost doubled every year and operating margins have been maintained above 50 per cent.
Considering the growth potential in the Indian education industry, Educomp is likely to keep its juggernaut rolling for the coming few years. In FY09, Educomp will double its top line again and grow its earnings by 75 per cent. Although there has been a concern over valuations, the consistent earnings growth justify the same.
HDFC
HDFC is an ideal play on the gamut of financial services. Besides market dominance in housing finance, it provides huge potential for value unlocking from its investment in banking, insurance and mutual fund subsidiaries.
The proposed UTI Mutual Fund IPO, stake sale by Reliance Capital in its mutual fund entity and the probability of listing of insurance companies though in the long term, should provide triggers. Moreover, there is a possibility of a merger with HDFC Bank.
Its core business--housing finance will continue to do well. Its loan book is expected to witness a CAGR of 25 per cent over the next two years. Its net interest margins are expected to remain stable at around 3 per cent.
And, HDFC is known for its asset quality. HDFC's stock trades at about 5 times FY09 estimated book value (adjusted for the value of its subsidiaries, which is about 30 per cent of HDFC's market capitalisation), and is a worthy pick.
India Infoline
India Infoline is another company representing financial services, except the lending business.
Its stock price has grown more than fourfold in the last one year amid many positive triggers like capital raising for expansions, tie-up with strategic investors for investments in subsidiaries and restructuring of its various businesses.
Besides equity broking, it has expanded its product basket to include institutional equities broking, commodities broking, margin finance, investment banking and, distribution of life insurance, mutual fund and loans products.
It is investing towards building a strong distribution network (596 branches in 345 cities) and customer base (5 lakh clients) for its various services. Accordingly, the share of its traditional broking business of about 56 per cent in FY07 revenues is expected to come down over the years.
The stock trades at 51 times and 44 times estimated earnings for FY08 and FY09, respectively. While it looks cheaper than Edelweiss, in terms of market capitalisation to revenues, it trades at a higher P/E than Indiabulls.However, it has the most de-risked business model compared to other players. Given India Infoline's aggressive growth strategy, the stock is ideal for long term investors.
Jain Irrigation
Jain Irrigation, which is in the businesses of micro irrigation systems, food processing and plastic pipes and sheets, is a direct play on the growing emphasis on agriculture. Irrigation systems account for 30 per cent of its revenue. It's revenues from micro irrigation have grown at 70 per cent annually.
Growth will be maintained on the back of its plans to launch new irrigation systems, higher replacement demand, focus on geographical diversification.
Jain's five overseas acquisitions, including a 50 per cent stake in NaanDan of Israel, the world's fifth largest micro-irrigation company, will help in terms of access to technology and access to large markets such as South Africa, US, and Europe.
In food processing, which accounts for 14 per cent of total income and grew by 74 per cent in FY07, Jain produces juices and dehydrated vegetables for companies like Coco Cola, Nestle , etc. This business to grow at healthy from hereon.
In plastic pipes and sheets, its products find application in agriculture (30 per cent market share) and telecom (70% share) among others and, should continue to grow at a healthy pace.
To sum up, Jain is operating in high growth areas, while exports too are expected to grow rapidly, which makes it a good investment case.
Jindal Saw
Jindal Saw, the most diversified Indian pipe manufacturer, makes submerged arc welded (Saw), seamless and ductile iron spun pipes, which are used in diverse applications like oil & gas and water-based infrastructure.
The company is expanding its capacities in phases which will bring economies of scale-- longitudinal Saw pipes (by 25 per cent), helical Saw pipes (233 per cent) and seamless pipes (150 per cent) -- by FY09. These expansions are well-timed due to strong demand for pipes on account of surging demand for oil and gas globally.
Over the next three-four years, global demand (including India), for Saw pipes is estimated at 200,000 km involving an investment of $60 billion.
Jindal Saw is likely to gain due to restructuring of the investment holdings in Jindal Group companies, wherein it has substantial investments in Nalwa Sons, Jindal Stainless, JSW Steel and Jindal Steel & Power, are worth about Rs 2,200 crore (Rs 22 billion). Excluding the value of investments, the stock trades at 9 times its FY09 estimated earnings, which is attractive as compared with 17 times for Welspun Gujarat.
Larsen & Toubro
Reinventing itself and successfully developing new businesses are among L&T's key strengths. That, along with the domestic infrastructure and global hydrocarbon investments, is responsible for the rising revenues and order book. It is now targeting a turnover of Rs 30,000 crore (Rs 300 billion) by FY10 as compared with Rs 18,363 crore (Rs 183.63 billion) in FY07.
Going forward, there is more business to come, as the government has estimated an infrastructure investment of $500 billion during the Eleventh Five Year Plan. Besides, a lot of money will also be spent by domestic players in the metal, oil and gas, power and other industries.
Little wonder, L&T's order book has been rising. As of September 2007, the engineering and construction division had an order book of Rs 42,000 crore (Rs 420 billion).
Going forward, L&T is also focusing on the overseas markets and has targeted exports to increase to 25 per cent of 2010 sales. It is entering shipbuilding, railway locomotives, power generation and power equipment as well.
While all these investments in different businesses will help sustain future growth, the medium term continues to be robust. Some of it is already rubbing off positively on the share price. Although the stock seems richly valued, it can fetch good returns.
Maruti Suzuki
On the back of a sound foundation of existing products (13 models priced between Rs 2 lakh and Rs 15 lakh), strong distribution, efficient service network and new product launches, Maruti Suzuki will maintain its dominant position.
The company has 52 per cent market share by volume of the Indian car market and 62.5 per cent of the small car segment, which is commendable given the stiff competition from global majors.
Maruti grew at a scorching 18 per cent, compared with the 13 per cent recorded by passenger car market in H1 FY08. For eight months ended November 2007, sales volume was up 19.7 per cent to 500,108 vehicles led by 49 per cent growth in exports. Notably, exports are expected to grow 40 per cent annually for the next two years; its share in total sales is likely to move up to 12 per cent in 2010 from 7 per cent in FY07.
Maruti is already augmenting capacities by 3 lakh in a phased manner by FY10 to a million units. Besides, it has lined up Splash (A2 segment) and the concept car A-Star (A1 segment), while a Swift sedan is on the cards. These will help earnings grow by 20 per cent annually in the next two years. Aggressive pricing, enhanced margins on the back of improved product mix, indigenisation and scale benefits, will help Maruti do well.
ONGC
Oil exploration companies are set to benefit from the current high oil prices and firm outlook. India's largest oil exploration company, ONGC is the best bet in this space. ONGC with interest in 85 domestic blocks including 52 offshore fields, has made 28 discoveries in the past two years, of which, 14 were made in FY08 itself.
Further, its 100 per cent subsidiary, ONGC Videsh has stakes in 26 blocks across 15 countries and is expected to be the key growth driver with its share in ONGC's consolidated revenues and profits expected to rise to 20 per cent (14 per cent now) and 14 per cent (9 per cent now), respectively.
ONGC's substantial interests in MRPL, Petronet LNG
GAIL and Indian Oil Corporation are the topping. Moreover, the IPO of Oil India in the next few months could provide further triggers.
What also makes ONGC attractive is that it is the cheapest among its Asian peers trading at 10.1 times estimated FY09 earnings and enterprise value per barrel oil equivalent of about 7.5 times for FY09.
Going ahead, exploration successes especially in the KG basin and favourable announcement on various issues like sharing of subsidy burden, cess and deregulation in gas prices will be big positives.
Patel Engineering
Patel Engineering, which is having an order book of Rs 5,400 crore (Rs 54 billion) almost 4.8 times its FY07 revenues, would be the key beneficiary of the boom in the construction, power and real estate sectors.
Within power sector, the 11th Five Year Plan has an outlay of Rs 70,000 crore (Rs 700 billion), adding another 18,000 mw in hydropower generation. Patel Engineering has 22 per cent market share in the domestic hydropower construction, which accounts for 60 per cent of its current order book.
Also, the company has pre-qualified for new projects worth over Rs 6,000 crore (Rs 60 billion) as on September 30, 2007.
Besides, its entry into own power generation setting up of 1,200 mw thermal power plant at an investment of Rs 5,000 crore (Rs 50 billion) are positive triggers. Meanwhile, its core businesses including construction of dams, transportation and micro-tunneling are growing at a faster pace thus providing sustainable earnings growth.
The immediate trigger would come from its real estate business. Patel Engineering has transferred a land bank of about 1,000 acres spread across Bangalore, Chennai, Hyderabad and Mumbai to Patel Realty India, a 100 per cent subsidiary.
According to estimates, the real estate business is valued between Rs 500-520 per share. All of these make Patel Engineering an attractive investment.
Reliance Communications
Reliance Communications (RCOM) has a mobile telephony market share of 18 per cent and subscriber base of 38 million, which is rising by a million every month. And this should continue to rise as RCOM penetrates into smaller towns.
What's more interesting is that despite concerns over declining, operating margins have improved to 42.2 per cent in Q2 FY08, thanks to the benefits of larger scale.
This is expected to improve further if RCOM gets the go-ahead to operate an additional 15 GSM circles as 65 per cent of passive infrastructure such as telecom towers, is common to both GSM and CDMA technologies and the investments in its existing networks will be incremental.
Additionally, it is the value unlocking in its subsidiaries that are likely to provide further triggers.
In 2008, RCOM is likely to announce a stake sale and subsequently list its tower subsidiary, Reliance Telecom Infrastructure, list its submarine cable subsidiary, FLAG Telecom, hive off of its SEZ and BPO businesses and the launch IPTV and DTH services by the first quarter of 2008.
Analysts estimate that a conservative sum-of-parts valuation based on FY09 numbers for RCOM comes to Rs 850-Rs 900 per share, which indicates an appreciation of 17-24 per cent from current levels.
Reliance Industries
In 2008, Reliance Industries' (RIL) exploration and production (E&P) division, which accounts for 50 per cent of its sum-of-parts valuation, will start selling gas from the KG Basin. The only ambiguous aspect here seems to be the pricing of gas and settlement with the ADA group and
NTPC.
Within a few months, Reliance Petroleum will also start operations, all of which should lead to a jump in RIL's profits.
Also, the bids for NELP VII will be awarded by July 2008. While further wins will add to reserves, new discoveries at existing reserves should further add to valuations and the possible de-merger of RIL's E&P division would unlock value.
While the company is yet to prove its mettle in its retail and SEZ initiatives, given its track record managing mammoth projects, one can hope to see positive results here as well.
Notably, analysts maintain their bullish outlook on the core businesses. Refining margins for RIL, already the best among global players, should remain firm until FY11, while petrochemical margins are expected to be stable with good growth in volumes. At a P/E of under 12 times FY09 estimated core earnings, RIL is a worthy investment.
State Bank of India
SBI's move to merge State Bank of Saurashtra with itself has the potential to trigger the re-rating of public sector banking stocks by pushing the much needed consolidation process.
To further expedite consolidation, the boards of SBI and its other six associate banks are meeting in January to consider merger. Should that happen, SBI's standalone balance sheet size will grow 1.5 times to Rs 8.20 lakh crore (Rs 8.20 trillion), almost double the size of ICICI Bank's.
Also, its branch network will jump 50 per cent to 14,400 branches. But, the improvement in valuations (re-rating) should get a boost when the merged entity is able to rationalise costs and extract benefits from the merger.
SBI will raise Rs 17,000 crore (Rs 170 billion) through a rights issue that should provide fuel for future growth. In a competitive Indian banking business, it is important for banks to achieve size and scale to be globally competitive.
And for investors, it is more important to find such banks at reasonable valuations. SBI meets both these criteria. SBI's stock trades at 2.2 times and 2 times its estimated consolidated book value for FY08 and FY09, respectively.
Further, SBI has investments in mutual fund and life insurance subsidiaries, which make valuations more compelling.
With a strong presence across the entertainment industry value chain of content production, distribution, and exhibition, Adlabs becomes the choicest pick.
Domestic consumption and leisure spends will remain buoyant as disposable incomes rise across the country fuelling growth at Adlabs.
Adlabs produces and distributes films, and is a dominant player in the multiplex segment. It has also acquired 51 per cent stake in television content producer Synergy Communications, the maker of Jhalak Dikhhla Jaa and Kaun Banega Crorepati.
In the FM radio business, its subsidiary, which runs Big FM has 44 FM licenses across India. This could also become a value unlocking opportunity going forward.
Over the past three years, Adlabs has impeccably delivered a top line growth of over 100 per cent y-o-y, along with high profitability. In the September 2007 quarter, it raked in a whopping 69 per cent operating profit margin.
But going by the past numbers, operating margins have remained in excess of 50 per cent consistently, with net profit margins at over 22 per cent. The stock has appreciated three-fold since January 2007 and should do well.
Bank of Baroda
Bank of Baroda has a strong presence in western India -- a key zone for retail and industrial growth-- with equally good rural network.
Further, the bank is one of the few banks having a substantial international presence, which contributes 18-20 per cent to total business and 30 per cent to profits. This business is expected to rise further with the bank growing its global presence.
The bank has improved its fundamentals over the past several years on key parameters such as net interest margins (NIMs) and asset quality despite growing at a robust pace (asset growth CAGR of 19 per cent in FY04-07). Going ahead, the bank's focus on NIMs backed by moderate growth augurs well.
Besides, its initiatives such as online trading services, and joint ventures in insurance and asset management, will help it create value for its shareholders.
Additional triggers could be in the form of consolidation within the public sector bank space. All this put together makes this stock, which is reasonably valued at 1.4 times its FY09 estimated book value, an attractive investment opportunity.
Bharat Bijlee
Though Bharat Bijlee has risen by a whopping 228.5 per cent in the last one year, even at current levels, it is inexpensive.
Consider this: The company has investment in various companies including Siemens, HDFC and ICICI Bank.
At current rates, their combined value works out to Rs 317 crore (Rs 3.17 billion), or about Rs 560 per share.
Excluding this, the core business is valued at attractive valuations of 20 times FY08 earnings and 15 times FY09 estimated earnings.
The company is capitalising on the emerging opportunities in the power transformer sector, which accounts for 65 per cent of its total revenues with the balance from motors.
In the Eleventh Five Year Plan, a total power generation capacity of 78,000 mw is planned. This augurs well for transformer manufacturers such as Bharat Bijlee.
The company on its part has recently expanded its transformer capacity to 11,000 MVA from 8,000 MVA. The motors business is also witnessing 25 per cent growth and Bharat Bijlee has forayed into higher frame motors of up to 400 kw. All this put together make Bharat Bijlee a good pick.
Bharati Shipyard
Stocks of shipbuilding companies have been re-rated on the back of rising order book-to-sales to over seven times. The stock price of ABG Shipyard has gone up 267 per cent, while Bharati Shipyard is up 107 per cent over the last one year.
The gain has been higher in the case of ABG Shipyard, thus stretching its valuation at 33 times its FY08 estimated earnings. Bharati Shipyard is still trading at a comfortable 18 times estimated FY08 EPS and 13 times FY09 EPS.
Also, its current order book of about Rs 4,639 crore (Rs 46.39 billion) (11 times its FY07 revenue) is strong enough for maintaining 50 per cent growth for the next three years.
Bharati is building a greenfield shipyard which will enable it to build six vessels up to 60,000 dwt (dead weight tonne) against 15,000 dwt currently by December 2008. This will enable Bharati to improve its execution speed and bid for more projects.
Besides, it is planning to invest Rs 2,000 crore (Rs 20 billion) along with Apeejay Shipping to set up a shipbuilding yard on the eastern coast, which will be commissioned in FY 2011. A relatively lower valuation and strong earnings visibility makes this stock an attractive investment.
Bhel
Today, the biggest constraint in the power sector is the supply of equipment, especially the critical power equipment required for the larger projects.
But, for Bhel, which commands about 65 per cent market share in the domestic power equipment industry, this provides long-term earnings visibility.
While competition is rising with new players like L&T and Chinese companies vying for a share, Bhel's order book of Rs 62,400 crore (Rs 624 billion), almost 3.6 times its FY07 revenues, instils confidence. The successful acquisition of orders for super critical boilers and high technology gas turbines required for the bigger projects would only improve its order book further.
Considering the huge order backlog and the orders in pipeline, Bhel is expanding its capacities by 67 per cent to 10,000 mw by January 2008, which will further increase to 15,000 mw by December 2009.
Bhel is also expanding its forging and casting capacities and a new fabrication plant to help reduce its dependence on imports. These should also help lower costs in the years to come. Overall, a better industry outlook, strong order book and expansion of existing capacities will drive the stock from the current levels.
Bharti Airtel
With a mobile subscriber base of 51 million, Bharti Airtel is India's largest mobile service provider. While it has added an average of 2 million subscribers a month in Q2, it is expected to crack the 100 million subscriber mark by FY10.
While the company has experienced good growth, its ARPU has fallen by 10 per cent over the last three quarters, much ahead of the 4 per cent decline experienced by Reliance Communications Even then, operating margins have improved, on the back of higher margin in broadband business and cost reduction.
Going forward, increase in scale of operations will keep costs in check. Capital and operating expenditure is also likely to come down after the formation of Indus, a tower infrastructure company, which will manage the tower infrastructure of Bharti, Vodafone and Idea.
A trigger for the stock could be the listing of Bharti Infratel, the tower division and which holds 42 per cent in Indus. Bharti Infratel already has 20,000 towers and plans to set up more.
RCOM will be the biggest threat for the company if it manages to soon roll out its GSM services across 15 circles. Additionally, any unfavourable outcome over the spectrum issue will have its impact; it could lead to increased investments in upgradation of existing equipment.
To conclude, Bharti's revenues should grow by 35 per cent in the next two years on the back of subscriber expansion, start of Sri Lankan operations by March 2008, and launch of IPTV and DTH. A sum-of-parts valuation puts the per share value of Bharti at Rs 1,200, a 27 per cent upside from the current levels.
Blue Star
The central air conditioning major, Blue Star, is a key beneficiary of the economic boom in the country across sectors like IT/ITES, retail and telecom.
This is reflected in the strong CAGR of 32 per cent and 40 per cent in sales and operating profit respectively in the past three years.
Notably, such strong growth traction is expected to continue as the company is sitting on a strong order book position, which is at Rs 1,030 crore (Rs 10.30 billion) as on September 2007. It is likely to get repeat orders from its existing customers as they expand operations.
It is expanding its capacities by investing about Rs 60-70 crore (Rs 60-700 million), which will lead to economies of scale and rationalisation of costs leading to margin expansion. Its return on equity and return on capital employed, which were at 34 per cent and 26 per cent, respectively, in FY07, will only improve.
However, the full benefits will be reflected only from the next financial year. The macro factors too continue to be robust, with huge investments planned in all the above mentioned sectors.
Dishman Pharmaceuticals
Dishman, a pharma outsourcing player, is moving up the value chain from being a commoditised chemicals supplier to a research partner for innovator companies.
Its acquisition of Swiss-based Carbogen-Amcis (CA), which offers drug development and commercialisation services, has helped it tap into the client base of CA that includes seven of the top ten US drug companies.
With three projects in phase-III development, and likely to hit commercial production in two years, CA's revenues are expected to grow 15 per cent annually to Rs 400 crore (Rs 4 billion) by December 2008.
Dishman caters to 50 per cent of Dutch pharma major Solvay Pharma's requirement of eposartan mesylate, an anti-hypertension medication. Its acquisition of Solvay's Vitamin-D business will boost revenues. Its foray into China to manufacture Quats, a catalyst, is also seen positively.
All these should help reduce Solvay's share of 25 per cent in Dishman's revenues going forward. With earnings expected to grow between 25-30 per cent in the next two years (Rs 12 in FY08, Rs 15 in FY09 and Rs 20 in FY10), the stock can deliver 28-30 per cent returns in one year.
Educomp Solutions
Educomp, the market leader in Kindergarten-12 education products, is a successful niche player. It has made some smart acquisitions, entered new areas. and garnered a client base of almost 6,000 schools across India besides, a small presence in Singapore and the US. Its first mover advantage makes it difficult for competition to catch up anytime soon.
Besides, the company has so far acquired and built the abilities to design and create content for schools, learning and school infrastructure management solutions, online teaching solutions, community building solutions and more recently into setting up its own schools.
Financially, Educomp's top line has almost doubled every year and operating margins have been maintained above 50 per cent.
Considering the growth potential in the Indian education industry, Educomp is likely to keep its juggernaut rolling for the coming few years. In FY09, Educomp will double its top line again and grow its earnings by 75 per cent. Although there has been a concern over valuations, the consistent earnings growth justify the same.
HDFC
HDFC is an ideal play on the gamut of financial services. Besides market dominance in housing finance, it provides huge potential for value unlocking from its investment in banking, insurance and mutual fund subsidiaries.
The proposed UTI Mutual Fund IPO, stake sale by Reliance Capital in its mutual fund entity and the probability of listing of insurance companies though in the long term, should provide triggers. Moreover, there is a possibility of a merger with HDFC Bank.
Its core business--housing finance will continue to do well. Its loan book is expected to witness a CAGR of 25 per cent over the next two years. Its net interest margins are expected to remain stable at around 3 per cent.
And, HDFC is known for its asset quality. HDFC's stock trades at about 5 times FY09 estimated book value (adjusted for the value of its subsidiaries, which is about 30 per cent of HDFC's market capitalisation), and is a worthy pick.
India Infoline
India Infoline is another company representing financial services, except the lending business.
Its stock price has grown more than fourfold in the last one year amid many positive triggers like capital raising for expansions, tie-up with strategic investors for investments in subsidiaries and restructuring of its various businesses.
Besides equity broking, it has expanded its product basket to include institutional equities broking, commodities broking, margin finance, investment banking and, distribution of life insurance, mutual fund and loans products.
It is investing towards building a strong distribution network (596 branches in 345 cities) and customer base (5 lakh clients) for its various services. Accordingly, the share of its traditional broking business of about 56 per cent in FY07 revenues is expected to come down over the years.
The stock trades at 51 times and 44 times estimated earnings for FY08 and FY09, respectively. While it looks cheaper than Edelweiss, in terms of market capitalisation to revenues, it trades at a higher P/E than Indiabulls.However, it has the most de-risked business model compared to other players. Given India Infoline's aggressive growth strategy, the stock is ideal for long term investors.
Jain Irrigation
Jain Irrigation, which is in the businesses of micro irrigation systems, food processing and plastic pipes and sheets, is a direct play on the growing emphasis on agriculture. Irrigation systems account for 30 per cent of its revenue. It's revenues from micro irrigation have grown at 70 per cent annually.
Growth will be maintained on the back of its plans to launch new irrigation systems, higher replacement demand, focus on geographical diversification.
Jain's five overseas acquisitions, including a 50 per cent stake in NaanDan of Israel, the world's fifth largest micro-irrigation company, will help in terms of access to technology and access to large markets such as South Africa, US, and Europe.
In food processing, which accounts for 14 per cent of total income and grew by 74 per cent in FY07, Jain produces juices and dehydrated vegetables for companies like Coco Cola, Nestle , etc. This business to grow at healthy from hereon.
In plastic pipes and sheets, its products find application in agriculture (30 per cent market share) and telecom (70% share) among others and, should continue to grow at a healthy pace.
To sum up, Jain is operating in high growth areas, while exports too are expected to grow rapidly, which makes it a good investment case.
Jindal Saw
Jindal Saw, the most diversified Indian pipe manufacturer, makes submerged arc welded (Saw), seamless and ductile iron spun pipes, which are used in diverse applications like oil & gas and water-based infrastructure.
The company is expanding its capacities in phases which will bring economies of scale-- longitudinal Saw pipes (by 25 per cent), helical Saw pipes (233 per cent) and seamless pipes (150 per cent) -- by FY09. These expansions are well-timed due to strong demand for pipes on account of surging demand for oil and gas globally.
Over the next three-four years, global demand (including India), for Saw pipes is estimated at 200,000 km involving an investment of $60 billion.
Jindal Saw is likely to gain due to restructuring of the investment holdings in Jindal Group companies, wherein it has substantial investments in Nalwa Sons, Jindal Stainless, JSW Steel and Jindal Steel & Power, are worth about Rs 2,200 crore (Rs 22 billion). Excluding the value of investments, the stock trades at 9 times its FY09 estimated earnings, which is attractive as compared with 17 times for Welspun Gujarat.
Larsen & Toubro
Reinventing itself and successfully developing new businesses are among L&T's key strengths. That, along with the domestic infrastructure and global hydrocarbon investments, is responsible for the rising revenues and order book. It is now targeting a turnover of Rs 30,000 crore (Rs 300 billion) by FY10 as compared with Rs 18,363 crore (Rs 183.63 billion) in FY07.
Going forward, there is more business to come, as the government has estimated an infrastructure investment of $500 billion during the Eleventh Five Year Plan. Besides, a lot of money will also be spent by domestic players in the metal, oil and gas, power and other industries.
Little wonder, L&T's order book has been rising. As of September 2007, the engineering and construction division had an order book of Rs 42,000 crore (Rs 420 billion).
Going forward, L&T is also focusing on the overseas markets and has targeted exports to increase to 25 per cent of 2010 sales. It is entering shipbuilding, railway locomotives, power generation and power equipment as well.
While all these investments in different businesses will help sustain future growth, the medium term continues to be robust. Some of it is already rubbing off positively on the share price. Although the stock seems richly valued, it can fetch good returns.
Maruti Suzuki
On the back of a sound foundation of existing products (13 models priced between Rs 2 lakh and Rs 15 lakh), strong distribution, efficient service network and new product launches, Maruti Suzuki will maintain its dominant position.
The company has 52 per cent market share by volume of the Indian car market and 62.5 per cent of the small car segment, which is commendable given the stiff competition from global majors.
Maruti grew at a scorching 18 per cent, compared with the 13 per cent recorded by passenger car market in H1 FY08. For eight months ended November 2007, sales volume was up 19.7 per cent to 500,108 vehicles led by 49 per cent growth in exports. Notably, exports are expected to grow 40 per cent annually for the next two years; its share in total sales is likely to move up to 12 per cent in 2010 from 7 per cent in FY07.
Maruti is already augmenting capacities by 3 lakh in a phased manner by FY10 to a million units. Besides, it has lined up Splash (A2 segment) and the concept car A-Star (A1 segment), while a Swift sedan is on the cards. These will help earnings grow by 20 per cent annually in the next two years. Aggressive pricing, enhanced margins on the back of improved product mix, indigenisation and scale benefits, will help Maruti do well.
ONGC
Oil exploration companies are set to benefit from the current high oil prices and firm outlook. India's largest oil exploration company, ONGC is the best bet in this space. ONGC with interest in 85 domestic blocks including 52 offshore fields, has made 28 discoveries in the past two years, of which, 14 were made in FY08 itself.
Further, its 100 per cent subsidiary, ONGC Videsh has stakes in 26 blocks across 15 countries and is expected to be the key growth driver with its share in ONGC's consolidated revenues and profits expected to rise to 20 per cent (14 per cent now) and 14 per cent (9 per cent now), respectively.
ONGC's substantial interests in MRPL, Petronet LNG
GAIL and Indian Oil Corporation are the topping. Moreover, the IPO of Oil India in the next few months could provide further triggers.
What also makes ONGC attractive is that it is the cheapest among its Asian peers trading at 10.1 times estimated FY09 earnings and enterprise value per barrel oil equivalent of about 7.5 times for FY09.
Going ahead, exploration successes especially in the KG basin and favourable announcement on various issues like sharing of subsidy burden, cess and deregulation in gas prices will be big positives.
Patel Engineering
Patel Engineering, which is having an order book of Rs 5,400 crore (Rs 54 billion) almost 4.8 times its FY07 revenues, would be the key beneficiary of the boom in the construction, power and real estate sectors.
Within power sector, the 11th Five Year Plan has an outlay of Rs 70,000 crore (Rs 700 billion), adding another 18,000 mw in hydropower generation. Patel Engineering has 22 per cent market share in the domestic hydropower construction, which accounts for 60 per cent of its current order book.
Also, the company has pre-qualified for new projects worth over Rs 6,000 crore (Rs 60 billion) as on September 30, 2007.
Besides, its entry into own power generation setting up of 1,200 mw thermal power plant at an investment of Rs 5,000 crore (Rs 50 billion) are positive triggers. Meanwhile, its core businesses including construction of dams, transportation and micro-tunneling are growing at a faster pace thus providing sustainable earnings growth.
The immediate trigger would come from its real estate business. Patel Engineering has transferred a land bank of about 1,000 acres spread across Bangalore, Chennai, Hyderabad and Mumbai to Patel Realty India, a 100 per cent subsidiary.
According to estimates, the real estate business is valued between Rs 500-520 per share. All of these make Patel Engineering an attractive investment.
Reliance Communications
Reliance Communications (RCOM) has a mobile telephony market share of 18 per cent and subscriber base of 38 million, which is rising by a million every month. And this should continue to rise as RCOM penetrates into smaller towns.
What's more interesting is that despite concerns over declining, operating margins have improved to 42.2 per cent in Q2 FY08, thanks to the benefits of larger scale.
This is expected to improve further if RCOM gets the go-ahead to operate an additional 15 GSM circles as 65 per cent of passive infrastructure such as telecom towers, is common to both GSM and CDMA technologies and the investments in its existing networks will be incremental.
Additionally, it is the value unlocking in its subsidiaries that are likely to provide further triggers.
In 2008, RCOM is likely to announce a stake sale and subsequently list its tower subsidiary, Reliance Telecom Infrastructure, list its submarine cable subsidiary, FLAG Telecom, hive off of its SEZ and BPO businesses and the launch IPTV and DTH services by the first quarter of 2008.
Analysts estimate that a conservative sum-of-parts valuation based on FY09 numbers for RCOM comes to Rs 850-Rs 900 per share, which indicates an appreciation of 17-24 per cent from current levels.
Reliance Industries
In 2008, Reliance Industries' (RIL) exploration and production (E&P) division, which accounts for 50 per cent of its sum-of-parts valuation, will start selling gas from the KG Basin. The only ambiguous aspect here seems to be the pricing of gas and settlement with the ADA group and
NTPC.
Within a few months, Reliance Petroleum will also start operations, all of which should lead to a jump in RIL's profits.
Also, the bids for NELP VII will be awarded by July 2008. While further wins will add to reserves, new discoveries at existing reserves should further add to valuations and the possible de-merger of RIL's E&P division would unlock value.
While the company is yet to prove its mettle in its retail and SEZ initiatives, given its track record managing mammoth projects, one can hope to see positive results here as well.
Notably, analysts maintain their bullish outlook on the core businesses. Refining margins for RIL, already the best among global players, should remain firm until FY11, while petrochemical margins are expected to be stable with good growth in volumes. At a P/E of under 12 times FY09 estimated core earnings, RIL is a worthy investment.
State Bank of India
SBI's move to merge State Bank of Saurashtra with itself has the potential to trigger the re-rating of public sector banking stocks by pushing the much needed consolidation process.
To further expedite consolidation, the boards of SBI and its other six associate banks are meeting in January to consider merger. Should that happen, SBI's standalone balance sheet size will grow 1.5 times to Rs 8.20 lakh crore (Rs 8.20 trillion), almost double the size of ICICI Bank's.
Also, its branch network will jump 50 per cent to 14,400 branches. But, the improvement in valuations (re-rating) should get a boost when the merged entity is able to rationalise costs and extract benefits from the merger.
SBI will raise Rs 17,000 crore (Rs 170 billion) through a rights issue that should provide fuel for future growth. In a competitive Indian banking business, it is important for banks to achieve size and scale to be globally competitive.
And for investors, it is more important to find such banks at reasonable valuations. SBI meets both these criteria. SBI's stock trades at 2.2 times and 2 times its estimated consolidated book value for FY08 and FY09, respectively.
Further, SBI has investments in mutual fund and life insurance subsidiaries, which make valuations more compelling.
tips
*Dear Investor* > > *Buy ADSL @ CMP its target is Double in Short term * > ** > *Buy PAN India @ CMP its Target is 15 in SHort Term * > ** > *Buy Faccor Alloys @ CMP its Target is 150 in Medium Term ( 6-8 month )* > * * > > > >
Market to coorect a little more
Market may start swinging from the next week onwards after correcting further for a few hundred points.
Reccomend buy at coorections for 12 months the following
Moserbear
Infosys
Wipro
SBi
Reccomend buy at coorections for 12 months the following
Moserbear
Infosys
Wipro
SBi
Friday, January 18, 2008
Thursday, January 17, 2008
Re rating trigger in RIL....
Reliance Industries Ltd reported net profit of Rs 8079 crs on equity of Rs 1454 crs post IPCL merger. This includes Rs 4733 crs extra ordinary income. Yet the nos are better than expected. However, the catch of RIL is not in nos (it is always underperformed stocks in comparison with global peers) ; the catch is in its value unlocking.
Reliance also announced that “Reliance Digital Retail Ltd, Reliance Brands Pvt Ltd, Reliance Wellness Ltd, Reliance Footprint Ltd, Reliance Integrated Agri Solutions Pvt Ltd, Reliance Trends Ltd, Reliance Lifestyle Holdings Pvt Ltd, Reliance Universal Ventures Pvt Ltd, Reliance Autozone Pvt Ltd, Strategic Manpower Solutions Pvt Ltd, Reliance Gems and Jewels Ltd, Delight Proteins Pvt Ltd, Reliance F&B Services Pvt Ltd, Reliance Agri Products Distribution Pvt Ltd, Reliance Leisures Pvt Ltd, Reliance Retail Securities and Broking Company Pvt Ltd, Reliance Home Store Pvt Ltd, Reliance Trade Services Centre Pvt Ltd, Reliance Food Processing Solutions Pvt Ltd, Reliance Supply Chain Solutions Pvt Ltd, Reliance Digital Media Pvt Ltd, Reliance Loyalty & Analytics Pvt Ltd” ie 22 companies have become subsidiaries of the Company.
This has potential value unlocking entities of RIL gr of companies. If RIL gr decides to unlock value in any of these entities which is basically part of retail chain then RIL gr’s market cap may rise substantially again. This is a pointer to the fact the some value unlocking may happen in coming months.
We suggest investors to remain invested in RIL stock and our target of 3350 in intact. The correction in the stock was the immediate reaction of winding up of long positions traders had taken on various buy calls in last 2 weeks. Not only our target is intact but also the story is intact and those who wish to increase commitments may take call on RIL again with the target of 3350.
Multi Baggers
| ScripCode | Scrip | Type | Equity Price | Approx Holding Period | Target Price (in Rs.) | Remarks | ||||
|---|---|---|---|---|---|---|---|---|---|---|
| BEML | R | 1700.00 | 12 Month | 7100.00 | | |||||
| 500186 | Hindustan Oil | R | 150.00 | 12 Month | 456.00 | | ||||
| 500191 | HMT | R | 132.00 | 12 Month | 500.00 | | ||||
| Bombay Dyeing | R | 900.00 | 12 Month | 2700.00 | | |||||
| 522285 | Jeyswal Neco | R | 66.00 | 12 Month | 467.00 | | ||||
| 500305 | Ispat Ind | V P | 69.00 | 1 Month | 100.00 | | ||||
| 509684 | India Foils | R | 27.00 | 12 Month | 150.00 | | ||||
| 523586 | Indian Toners | H R H R | 39.00 | 12 Month | 145.00 | | ||||
| 532275 | Landmarc Leisure | R | 6.19 | 12 Month | 40.00 | | ||||
| 530461 | Saboo Sodium | H R H R | 39.00 | 12 Month | 150.00 | | ||||
| 507944 | Bajaj Steel | V P | 244.00 | 12 Month | 700.00 | | ||||
| 523523 | Rainbow Paper | R | 143.00 | 12 Month | 450.00 | | ||||
| 502455 | Sirpur Paper | R | 130.00 | 12 Month | 750.00 | | ||||
| 501295 | IITL | V P | 134.00 | 12 Month | 550.00 | | ||||
| 531541 | Avon Organics | V P | 52.00 | 12 Month | 250.00 | | ||||
| 523610 | ITI | V P | 74.00 | 1 Month | 200.00 | | ||||
| 519560 | Neha International | V P | 66.00 | 1 Month | 175.00 | | ||||
| 532818 | EVINIX | S F | 218.00 | 12 Month | 750.00 | | ||||
| ||||||||||
Subscribe to:
Posts (Atom)