About The Company
The company has been in limelight for quite some time. It has been fairly fancied among the investor as a portfolio stock in the capital markets.
About The Results
Prism Cement having changed its accounting year to end with March ending instead of June had posted good results for quarter as well as period ended 31st March,09. This is the first audited results of FY 09 having posted by any company, even ahead of Infosys. Due to improved performance in Q3 , the company has declared a final dividend of 5%, which along with 10% interim having already paid, make it 15% for the period or 20% annualised, against 10% having paid last year.
The company posted a total income of Rs.245 crores in Q3 against Rs.218 crores of Q2 and Rs. 167 crores of Q1 while total for the period is at Rs.630 crores. PAT for Q3 stood at Rs. 50 cr. Against Rs. 31 cr. Of Q2 and Rs. 15 cr. of Q1. A rising trend on topline and bottomline. It is also heartening to note that on an EPS of Rs. 3.23 a dividend of Re.1.50 is being paid. Thanks to debt free status of the company. This is inspite of the fact that tax liability of the company for FY 09 has been at 40% against 26% of FY 08.
About the Stock
Share ruling at 27 has fully factored in the working for FY10 and would see its full value coming in at Rs.30.
We must wait for the fair value to arrive to make any fresh positions.
Wednesday, April 15, 2009
Firstsource Solutions - Multibagger
The present market capitalization of the company is at Rs 725 crore while the enterprise value is close to Rs 2,000 crore. With the repurchase of FCCB, the company would get vastly re-rated. Share now ruling around Rs 19 is witnessing huge volume, on expectations of stake sale. If that happens, it is likely to rise to Rs 30 per share, which is expected to be atleast the stake sale price.
Firstsource Solutions (FSL)Firstsource Solutions (FSL) is a global BPO company, providing services across the banking and financial services sector, telecom, media and healthcare industries. It provides services throughout the customer lifecycle, including customer acquisition, customer care, billing and collections, transaction processing and business research and analytics.
FSL has global clients with over 20 Fortune Global 500, Fortune 500 and FTSE 100 companies and includes over 800 leading hospitals in US, 3 of top 5 global healthcare insurance companies, 2 leading Indian mobile service providers, 2 of the world’s top 10 telecom companies and one of the largest Indian bank.
FSL acquired MedAssist Inc, the largest provider of revenue cycle management services to hospitals in USA. For acquiring this, FSL issued FCCB of US$ 275 million, which are due for redemption in Dec 2012 or convert at Rs 92.29 per share. As share price is ruling at Rs 17, conversion seems unlikely.
Due to the FCCB concern, share price has taken a beating and had its 52-week high/low of Rs 51/Rs 9.50. The share is now ruling at Rs 19.10.
The company has started buying back FCCB in March 2009 and had repurchased FCCB of US$ 49.70 million till date, which is commendable, as after this, the outstanding FCCB is just at US$ 225 million.
FSL, for the year ended 31/03/08 had a total income of Rs 1,334 crore with a PBT of Rs 143 crore and PAT of Rs 132 crore.
The present equity of the company is at Rs 428 crore, with face value of Rs 10 each. Of this, ICICI Bank, being the promoters, hold 26.74% while 50.77% is held by 4 OCBs and 7.04% by FIIs and Foreign Venture Capital Investors. This is thus leaving low float of about 15% with the public.
In the past, Warburg Pincus wanted to acquire the company and even ICICI Bank is keen to divest its stake and exit from the company at a proper price.
The company does not have much debt except the FCCB. As at 31/03/08, it had a total debt of Rs 1,225 crore with FCCB being at Rs 1,103 crore. However, the company has intangible assets of Rs 1,888 crore being Goodwill on various acquisitions but no write offs will be required as there is no impairment.
The present market capitalization of the company is at Rs 725 crore while the enterprise value is close to Rs 2,000 crore. With the repurchase of FCCB, the company would get vastly re-rated.
In case ICICI Bank, opts to sell, which is most likely, open offer for 20% would be made, resulting in 100% acceptance, as 4 OCBs holding 51% may not participate. In that case, share price will rise to stake sale price.
Share now ruling around Rs 19 is witnessing huge volume, on expectations of stake sale. If that happens, it is likely to rise to Rs 30 per share, which is expected to be atleast the stake sale price.
Considering all these factors, share qualifies as a risk free bet at Rs 19.10, which is likely to give close to 50% return in next six months.
Firstsource Solutions (FSL)Firstsource Solutions (FSL) is a global BPO company, providing services across the banking and financial services sector, telecom, media and healthcare industries. It provides services throughout the customer lifecycle, including customer acquisition, customer care, billing and collections, transaction processing and business research and analytics.
FSL has global clients with over 20 Fortune Global 500, Fortune 500 and FTSE 100 companies and includes over 800 leading hospitals in US, 3 of top 5 global healthcare insurance companies, 2 leading Indian mobile service providers, 2 of the world’s top 10 telecom companies and one of the largest Indian bank.
FSL acquired MedAssist Inc, the largest provider of revenue cycle management services to hospitals in USA. For acquiring this, FSL issued FCCB of US$ 275 million, which are due for redemption in Dec 2012 or convert at Rs 92.29 per share. As share price is ruling at Rs 17, conversion seems unlikely.
Due to the FCCB concern, share price has taken a beating and had its 52-week high/low of Rs 51/Rs 9.50. The share is now ruling at Rs 19.10.
The company has started buying back FCCB in March 2009 and had repurchased FCCB of US$ 49.70 million till date, which is commendable, as after this, the outstanding FCCB is just at US$ 225 million.
FSL, for the year ended 31/03/08 had a total income of Rs 1,334 crore with a PBT of Rs 143 crore and PAT of Rs 132 crore.
The present equity of the company is at Rs 428 crore, with face value of Rs 10 each. Of this, ICICI Bank, being the promoters, hold 26.74% while 50.77% is held by 4 OCBs and 7.04% by FIIs and Foreign Venture Capital Investors. This is thus leaving low float of about 15% with the public.
In the past, Warburg Pincus wanted to acquire the company and even ICICI Bank is keen to divest its stake and exit from the company at a proper price.
The company does not have much debt except the FCCB. As at 31/03/08, it had a total debt of Rs 1,225 crore with FCCB being at Rs 1,103 crore. However, the company has intangible assets of Rs 1,888 crore being Goodwill on various acquisitions but no write offs will be required as there is no impairment.
The present market capitalization of the company is at Rs 725 crore while the enterprise value is close to Rs 2,000 crore. With the repurchase of FCCB, the company would get vastly re-rated.
In case ICICI Bank, opts to sell, which is most likely, open offer for 20% would be made, resulting in 100% acceptance, as 4 OCBs holding 51% may not participate. In that case, share price will rise to stake sale price.
Share now ruling around Rs 19 is witnessing huge volume, on expectations of stake sale. If that happens, it is likely to rise to Rs 30 per share, which is expected to be atleast the stake sale price.
Considering all these factors, share qualifies as a risk free bet at Rs 19.10, which is likely to give close to 50% return in next six months.
JVL Agro Industries - Multibagger
With a massive scale up through expansion projects & acquisitions, and growth visibility in coming years, JVL Agro with revenues of Rs.1155 crores, expected EPS of Rs.50 for FY 09 and a market cap of Rs.58 crores looks undervalued, in an industry unlikely to go out of fashion.
JVL Agro Industries Ltd.JVL Agro Industries Ltd. was incorporated in 1989 under the name of Jhunjhunwala Vanaspati Limited. The company set up its unit at Jaunpur, close to Varanasi in the year 1990 with the production capacity of 25 tpd. From a 25 tdp capacity in 1990, the company has grown substantially and now claims to be India’s largest unit for manufacture of vanaspati with a capacity of 72,000 tpa at Jaunpur. The company besides Vanaspati now produces various Refined Oils and Mustard Oil and has recently diversified its business activities into fertilizers and other agro based products.
The company has its manufacturing facilities at Jaunpur, close to Varanasi and at Alwar, Rajasthan. The company has a capacity to produce 72,000 tpa of Vanaspati, 1,14,000 tpa Refined Oils and 81,000 tpa Mustard Oil.
The company sells its products under ‘Jhoola’ brand which commands a market share of 35% of the Uttar Pradesh vanaspati market, 23% share of Bihar, 5% of Jharkhand, 9% of Maharashtra, 6% of Madhya Pradesh and 8% of Gujarat. (Source : Company’s Annual Report March 08)
Expansion and Diversification Projects:
The company has undertaken various expansion and diversification projects which will add substantially to its scale of operations leading to higher revenues and profitability.
• Greenfield Project in Bihar - The Company has acquired around 10 acres at Dahri-on-sone in Bihar to set up a 750-tpd capacity refinery/vanaspati unit. The project is in the final stages of implementation and the first phase for 500 tpd is expected to go on stream in May 2009.
• Expansion at Varanasi Plant - The company has set up a new refinery at Varanasi with a capacity of 400 tpd which has gone on stream in December 2008. This has doubled the production capacity at its Varanasi plant. (from 72,000 tpa before the expansion.)
• Greenfield Project at Haldia - The Company has acquired around 8.5 acres at Haldia to set up a 1000-tpd capacity refinery. The project is under implementation and is expected to go on stream in 2010-11.
• Expansion Project at Alwar - The Company is setting up an edible oil refinery of 100 tpd at Alwar, Rajasthan, to manufacture refined and soybean oil.
• Acquisition of Fertilizer PSU - The Company acquired the assets and properties of 318-acres factory unit of M/s Pyrites Phosphates & Chemicals Limited (a PSU in liquidation) at Amjhore, Bihar, through auction to venture into fertilizers. The unit besides land of 318 acres also has captive pyrite mines, which is the main raw material for manufacture of sulphuric acid used for manufacture of Single Super Phosphate (SSP). The unit has over 250 acres of surplus land which can be utilised for expansion of the unit in future.
• Multi Services SEZ – The group had acquired a stake in Hari Fertilizers Ltd. located in Varanasi and plans to develop a 333 Acre SEZ on the land of Hari Fertilizers Ltd., for which the company has received State and Central Government approvals.
Investment Rationale:
JVL Agro is one of the most attractive proxies of India’s cooking media sector. The company possesses a product basket extending from vanaspati to various refined oils. With a market share of 35% in Uttar Pradesh and 23% in Bihar in Vanaspati, the company commands leadership position across two of India’s most densely populated states. The company has established a strong foothold in these markets, without spending much on advertising. The company has a brand that is visible, attractive and available; has a scale that is imposing and economical and enjoys a reach that is extensive and penetrated.
The various expansion projects undertaken by the company will add substantially to the topline and bottomline of the company in the years to come. The group has plans for Real Estate development on 333 acres in Varanasi in which it proposes to develop a Multi-services SEZ for which approvals from Central and State Government has been obtained.
The market cap of the company at the current price is Rs 58 crores. The entire debt of Rs 70 crores (Term Loans of Rs 7.16 crores and the balance as Working Capital) is against Cash Credit Limit (against Rs 85 crores which the company holds as Fixed Deposits). For the first 9 months of FY 08-09, the company has reported PAT of Rs 28 crores. For full year, it is expected to be around Rs 36-38 crores, resulting in an EPS close to Rs 50. The stock thus trades at a PE of just 1.5 at its CMP. Moreover, out of the total turnover of Rs 1155 crores in FY 08, the revenue from Trading is just Rs 281 crores, majority of revenues coming from refining/ manufacturing activity.
With a few expansion projects having gone on stream and the others expected to be on stream soon, we expect a significant scale up of its operations in the coming years with significant growth in Sales and Profitability.
Consider this :-
• The company has a Book Value of Rs 105 (expected to increase to over Rs 150 in Mar 09),
• Generates healthy ROCE of 29%
• The company has a receivable cycle of just 10 days, which talks of prudent financial management & controls
• The impact of expansion projects and acquisitions on the company’s Sales and Profitability will show in the coming years.
• The revenue and profit potential of its 333 acres SEZ in Varanasi as and when the active implementation takes place,
With the roadmap of growth chalked out by the management by way of various expansion projects and acquisitions, the capacities of the company in various segments will go up significantly than the current capacities.
The stock trading at Rs 77 with a PE of 1.5 and a market cap of Rs 58 crores looks grossly undervalued. The growth in the company is clearly visible which we believe could be atleast 25-30% each year for the next few years.
The extent of undervaluation of the company becomes even more evident when compared with the peer group.
Investors can choose to accumulate the stock at the current price and on declines.
JVL Agro Industries Ltd.JVL Agro Industries Ltd. was incorporated in 1989 under the name of Jhunjhunwala Vanaspati Limited. The company set up its unit at Jaunpur, close to Varanasi in the year 1990 with the production capacity of 25 tpd. From a 25 tdp capacity in 1990, the company has grown substantially and now claims to be India’s largest unit for manufacture of vanaspati with a capacity of 72,000 tpa at Jaunpur. The company besides Vanaspati now produces various Refined Oils and Mustard Oil and has recently diversified its business activities into fertilizers and other agro based products.
The company has its manufacturing facilities at Jaunpur, close to Varanasi and at Alwar, Rajasthan. The company has a capacity to produce 72,000 tpa of Vanaspati, 1,14,000 tpa Refined Oils and 81,000 tpa Mustard Oil.
The company sells its products under ‘Jhoola’ brand which commands a market share of 35% of the Uttar Pradesh vanaspati market, 23% share of Bihar, 5% of Jharkhand, 9% of Maharashtra, 6% of Madhya Pradesh and 8% of Gujarat. (Source : Company’s Annual Report March 08)
Expansion and Diversification Projects:
The company has undertaken various expansion and diversification projects which will add substantially to its scale of operations leading to higher revenues and profitability.
• Greenfield Project in Bihar - The Company has acquired around 10 acres at Dahri-on-sone in Bihar to set up a 750-tpd capacity refinery/vanaspati unit. The project is in the final stages of implementation and the first phase for 500 tpd is expected to go on stream in May 2009.
• Expansion at Varanasi Plant - The company has set up a new refinery at Varanasi with a capacity of 400 tpd which has gone on stream in December 2008. This has doubled the production capacity at its Varanasi plant. (from 72,000 tpa before the expansion.)
• Greenfield Project at Haldia - The Company has acquired around 8.5 acres at Haldia to set up a 1000-tpd capacity refinery. The project is under implementation and is expected to go on stream in 2010-11.
• Expansion Project at Alwar - The Company is setting up an edible oil refinery of 100 tpd at Alwar, Rajasthan, to manufacture refined and soybean oil.
• Acquisition of Fertilizer PSU - The Company acquired the assets and properties of 318-acres factory unit of M/s Pyrites Phosphates & Chemicals Limited (a PSU in liquidation) at Amjhore, Bihar, through auction to venture into fertilizers. The unit besides land of 318 acres also has captive pyrite mines, which is the main raw material for manufacture of sulphuric acid used for manufacture of Single Super Phosphate (SSP). The unit has over 250 acres of surplus land which can be utilised for expansion of the unit in future.
• Multi Services SEZ – The group had acquired a stake in Hari Fertilizers Ltd. located in Varanasi and plans to develop a 333 Acre SEZ on the land of Hari Fertilizers Ltd., for which the company has received State and Central Government approvals.
Investment Rationale:
JVL Agro is one of the most attractive proxies of India’s cooking media sector. The company possesses a product basket extending from vanaspati to various refined oils. With a market share of 35% in Uttar Pradesh and 23% in Bihar in Vanaspati, the company commands leadership position across two of India’s most densely populated states. The company has established a strong foothold in these markets, without spending much on advertising. The company has a brand that is visible, attractive and available; has a scale that is imposing and economical and enjoys a reach that is extensive and penetrated.
The various expansion projects undertaken by the company will add substantially to the topline and bottomline of the company in the years to come. The group has plans for Real Estate development on 333 acres in Varanasi in which it proposes to develop a Multi-services SEZ for which approvals from Central and State Government has been obtained.
The market cap of the company at the current price is Rs 58 crores. The entire debt of Rs 70 crores (Term Loans of Rs 7.16 crores and the balance as Working Capital) is against Cash Credit Limit (against Rs 85 crores which the company holds as Fixed Deposits). For the first 9 months of FY 08-09, the company has reported PAT of Rs 28 crores. For full year, it is expected to be around Rs 36-38 crores, resulting in an EPS close to Rs 50. The stock thus trades at a PE of just 1.5 at its CMP. Moreover, out of the total turnover of Rs 1155 crores in FY 08, the revenue from Trading is just Rs 281 crores, majority of revenues coming from refining/ manufacturing activity.
With a few expansion projects having gone on stream and the others expected to be on stream soon, we expect a significant scale up of its operations in the coming years with significant growth in Sales and Profitability.
Consider this :-
• The company has a Book Value of Rs 105 (expected to increase to over Rs 150 in Mar 09),
• Generates healthy ROCE of 29%
• The company has a receivable cycle of just 10 days, which talks of prudent financial management & controls
• The impact of expansion projects and acquisitions on the company’s Sales and Profitability will show in the coming years.
• The revenue and profit potential of its 333 acres SEZ in Varanasi as and when the active implementation takes place,
With the roadmap of growth chalked out by the management by way of various expansion projects and acquisitions, the capacities of the company in various segments will go up significantly than the current capacities.
The stock trading at Rs 77 with a PE of 1.5 and a market cap of Rs 58 crores looks grossly undervalued. The growth in the company is clearly visible which we believe could be atleast 25-30% each year for the next few years.
The extent of undervaluation of the company becomes even more evident when compared with the peer group.
Investors can choose to accumulate the stock at the current price and on declines.
Saturday, April 4, 2009
Nucleus Software Exports Ltd- Multibagger
Strong order flow inspite of slowdown, low dependence on US Markets and Strong Business Model –Nucleus Software, a debt free company having over Rs 100 crores as Cash & Bank Balance looks attractive at the current market cap of Rs 170 crores.
Nucleus Software Exports Ltd.
Nucleus Software Exports Ltd. is a Delhi based company with over 20 years experience of Software development for the Banking & Financial Services industry. The company is focused on Banking, Financial Services and Insurance sectors (BFSI). The company has a 5 acres State of the Art Development Centre in Noida and employs over 2000 people. Besides Noida, the company has development centres in Singapore, Pune and Chennai.
In the mid to late nineties and early two thousands, when most players in the software industry were focusing on low risk service model focusing mainly on the US markets, Nucleus Software chose to take the High Risk model of Product Development and focused on markets in Asia and Far East, the rewards of which have been accruing to the company over the past few years. Infact, the company’s products like FinnOne and Cash@Will command leadership positions in their respective product categories, with FinnOne becoming the world’s largest selling product in its product category.
Nucleus has offices and subsidiaries across the globe – in Japan, Australia, Singapore, Netherlands, UAE, Hong Kong, Philippines and Korea. The company has four development centres globally. The company has a client list comprising of who’s who of the Banking & Financial sector.
The company has been getting various accolades and awards from time to time, recent ones being :-
a) The company’s product FinnOne has recently been ranked as World’s No.1 Selling Lending Software product by International Banking Systems (IBS), UK for the fourth consecutive year.
b) The Annual Report and Accounts of the company for year ended March 31, 2008, have been adjudged as the BEST under the category ‘Information Technology, Communication and Entertainment enterprises’ of the ‘ICAI Awards for Excellence in Financial Reporting’, by the Institute of Chartered Accountants of India (ICAI). A Gold shield will be awarded to the Company by ICAI.
c) For the third consecutive year in 2008, the Company has been selected as one of the “Top 25 Companies Adopting Good Corporate Governance Practices”, by the Institute of Company Secretaries of India (ICSI).
d) For the second year running, the Company has been listed among “Top 15 Exciting Emerging Companies to Work For” by NASSCOM. Your Company has also been recognized under “Best Practices” for Performance Management System by NASSCOM for the year 2008.
Investment Rationale:
Strong Order Flow inspite of Economic Slowdown – Inspite of the slowdown being witnessed across the globe, order flows for the company in the recent times have been strong and the company has added new customers. Nucleus bagged 8 new product orders and acquired 6 new customers for implementing 20 product modules of the FinnOne Suite & Cash@Will in the third quarter of year 2008-09. Product orders were bagged from leading financial institutions in Middle East, South East Asia, India & US. Consolidated for nine months ending December 31, 2008, Nucleus has won 20 new customers and 25 new product orders for implementing 84 modules of FinnOne™ and Cash Management Suite. The order flow continues in the Jan-Mar 09 quarter too as is evident from various announcements made by the company to the Stock Exchanges in recent months. Despite global recession, the company has not lost any clients.
Insulated from US Markets - The company derives just about 1% of its total revenues from the US markets and is largely insulated from the happenings in the US Financial markets. The company thus may not get significantly impacted by the collapsing Banks & Financial Institutions in the US.
Cash is King – The company has Cash and Bank Balance of over Rs 100 cr. The total market cap of the company currently is about Rs 170 cr. The core business is thus going at very attractive valuations. Moreover, the company carries no secured or unsecured loans on its balance sheet and is totally debt free.
The stock of Nucleus Software has fallen from a high of Rs 600 witnessed in 2007 to a current price of around Rs 50. Even though, the slowdown in the world economy and the margin pressure being witnessed by the company may be some of the factors which have taken a toll on the stock price, we feel that the stock of Nucleus Software has been battered primarily on account of the perception factor – when you think of a software company catering to the Banking & Financial Institution sector, the first thing which comes to an investors mind is US and the crumbling Banks, Financial Institutions and Insurance companies there – a closer scrutiny of the company shows that contribution from US is just about 1% of the total revenues of the company.
Besides the pressure on margins being witnessed by the company, one of the reasons for lower profits was Forex losses of Rs 9 cr in the 9 months of the current FY, which may not be of recurring nature. The company has actively taken cost cutting measures and rationalization of resources, the impact of which we believe will show in the coming quarters.
We believe that this debt free company, having Cash and Bank Balance of over Rs 100 cr available at a market cap of Rs 170 cr is attractively valued at the CMP.
Nucleus Software Exports Ltd.
Nucleus Software Exports Ltd. is a Delhi based company with over 20 years experience of Software development for the Banking & Financial Services industry. The company is focused on Banking, Financial Services and Insurance sectors (BFSI). The company has a 5 acres State of the Art Development Centre in Noida and employs over 2000 people. Besides Noida, the company has development centres in Singapore, Pune and Chennai.
In the mid to late nineties and early two thousands, when most players in the software industry were focusing on low risk service model focusing mainly on the US markets, Nucleus Software chose to take the High Risk model of Product Development and focused on markets in Asia and Far East, the rewards of which have been accruing to the company over the past few years. Infact, the company’s products like FinnOne and Cash@Will command leadership positions in their respective product categories, with FinnOne becoming the world’s largest selling product in its product category.
Nucleus has offices and subsidiaries across the globe – in Japan, Australia, Singapore, Netherlands, UAE, Hong Kong, Philippines and Korea. The company has four development centres globally. The company has a client list comprising of who’s who of the Banking & Financial sector.
The company has been getting various accolades and awards from time to time, recent ones being :-
a) The company’s product FinnOne has recently been ranked as World’s No.1 Selling Lending Software product by International Banking Systems (IBS), UK for the fourth consecutive year.
b) The Annual Report and Accounts of the company for year ended March 31, 2008, have been adjudged as the BEST under the category ‘Information Technology, Communication and Entertainment enterprises’ of the ‘ICAI Awards for Excellence in Financial Reporting’, by the Institute of Chartered Accountants of India (ICAI). A Gold shield will be awarded to the Company by ICAI.
c) For the third consecutive year in 2008, the Company has been selected as one of the “Top 25 Companies Adopting Good Corporate Governance Practices”, by the Institute of Company Secretaries of India (ICSI).
d) For the second year running, the Company has been listed among “Top 15 Exciting Emerging Companies to Work For” by NASSCOM. Your Company has also been recognized under “Best Practices” for Performance Management System by NASSCOM for the year 2008.
Investment Rationale:
Strong Order Flow inspite of Economic Slowdown – Inspite of the slowdown being witnessed across the globe, order flows for the company in the recent times have been strong and the company has added new customers. Nucleus bagged 8 new product orders and acquired 6 new customers for implementing 20 product modules of the FinnOne Suite & Cash@Will in the third quarter of year 2008-09. Product orders were bagged from leading financial institutions in Middle East, South East Asia, India & US. Consolidated for nine months ending December 31, 2008, Nucleus has won 20 new customers and 25 new product orders for implementing 84 modules of FinnOne™ and Cash Management Suite. The order flow continues in the Jan-Mar 09 quarter too as is evident from various announcements made by the company to the Stock Exchanges in recent months. Despite global recession, the company has not lost any clients.
Insulated from US Markets - The company derives just about 1% of its total revenues from the US markets and is largely insulated from the happenings in the US Financial markets. The company thus may not get significantly impacted by the collapsing Banks & Financial Institutions in the US.
Cash is King – The company has Cash and Bank Balance of over Rs 100 cr. The total market cap of the company currently is about Rs 170 cr. The core business is thus going at very attractive valuations. Moreover, the company carries no secured or unsecured loans on its balance sheet and is totally debt free.
The stock of Nucleus Software has fallen from a high of Rs 600 witnessed in 2007 to a current price of around Rs 50. Even though, the slowdown in the world economy and the margin pressure being witnessed by the company may be some of the factors which have taken a toll on the stock price, we feel that the stock of Nucleus Software has been battered primarily on account of the perception factor – when you think of a software company catering to the Banking & Financial Institution sector, the first thing which comes to an investors mind is US and the crumbling Banks, Financial Institutions and Insurance companies there – a closer scrutiny of the company shows that contribution from US is just about 1% of the total revenues of the company.
Besides the pressure on margins being witnessed by the company, one of the reasons for lower profits was Forex losses of Rs 9 cr in the 9 months of the current FY, which may not be of recurring nature. The company has actively taken cost cutting measures and rationalization of resources, the impact of which we believe will show in the coming quarters.
We believe that this debt free company, having Cash and Bank Balance of over Rs 100 cr available at a market cap of Rs 170 cr is attractively valued at the CMP.
DLF - Stock Investments
About The company
DLF is the giant of Indian realty sector and has been the most admired promoter well known for its quality in work and the experience they hold.
About the present situation of the sector
The reality sector is the one , who is worst hit in this slowdown. The promoting company has to face many challenges , thereby losing the considerable part of the total income earned in the past rally. Either new projects are not launched , who were scheduled to be inaugurated and those who has already in process has negligible speed in the work progress due to lack of realization of installment and excess cancellation of bookings.
DLF Nightmare
Almost 300 buyers, who had backed out of DLF’s ‘Garden City’ project in Chennai, refused to leave its premises till they got a written assurance that their money would be paid back in full. The total number of exiters from the project was 580 out of its existing base of 1,800 customers and DLF was to give a letter outlining the timeline of refund. But people just continued waiting and and finally patience wore off and angry people refused to leave DLF premises until they got the refund letters.
DLF has now assured them that the formal refund letter addressed individually to the exiters would be given by April first and the process of full refund will commence from 1st April, 2009, and will be completed before 30 September, 2009. The priority of disbursement shall be based on the order of first exit letters received and will be intimated by 10th April 2009. Times are indeed bad but it seems to be the worst phase for realty developers.
DLF is the giant of Indian realty sector and has been the most admired promoter well known for its quality in work and the experience they hold.
About the present situation of the sector
The reality sector is the one , who is worst hit in this slowdown. The promoting company has to face many challenges , thereby losing the considerable part of the total income earned in the past rally. Either new projects are not launched , who were scheduled to be inaugurated and those who has already in process has negligible speed in the work progress due to lack of realization of installment and excess cancellation of bookings.
DLF Nightmare
Almost 300 buyers, who had backed out of DLF’s ‘Garden City’ project in Chennai, refused to leave its premises till they got a written assurance that their money would be paid back in full. The total number of exiters from the project was 580 out of its existing base of 1,800 customers and DLF was to give a letter outlining the timeline of refund. But people just continued waiting and and finally patience wore off and angry people refused to leave DLF premises until they got the refund letters.
DLF has now assured them that the formal refund letter addressed individually to the exiters would be given by April first and the process of full refund will commence from 1st April, 2009, and will be completed before 30 September, 2009. The priority of disbursement shall be based on the order of first exit letters received and will be intimated by 10th April 2009. Times are indeed bad but it seems to be the worst phase for realty developers.
Assam Company - Short Term Investments
About The Company
Assam Company is in the business of cultivation, manufacture and sale of tea. It is also engaged in the business of oil and gas exploration.
The stock has been in lime light during the boom period in the capital market and was most fancied stock among the traders.
About The Results
The company has posted results for the year ended 31st Dec 2008, the limited review shows exactly why the stock market had valued this stock in the “speculative” category. Understating its depreciation and employee costs, while overstating its segmental profits by plantation and oil and gas sectors, the company has only got deeper into the red. Its MTM forex loss for the year stood at Rs.45.33 crore, arising on account of outstanding FCCB Loan of US$ 44.70 million.
The seasonal cycle indicates that the fourth quarter is usually its best but this time, it posted a net loss during the fourth quarter. A purely “penny” trading stock and that too in the range of Rs.3-5.
About the Stock
The stock, on the bourses is considered mainly as a low priced speculative stock, allowing the investors to trade in a stock which is quoted even below its face value of Rs.10 per share. Currently quoted at levels of Rs.6, it is unbelievable that during the boom time, it had managed to touch a new high at Rs.40. Either today the 52-week highs have no relevance or today we are seeing a more realistic valuation of the stock
Assam Company is in the business of cultivation, manufacture and sale of tea. It is also engaged in the business of oil and gas exploration.
The stock has been in lime light during the boom period in the capital market and was most fancied stock among the traders.
About The Results
The company has posted results for the year ended 31st Dec 2008, the limited review shows exactly why the stock market had valued this stock in the “speculative” category. Understating its depreciation and employee costs, while overstating its segmental profits by plantation and oil and gas sectors, the company has only got deeper into the red. Its MTM forex loss for the year stood at Rs.45.33 crore, arising on account of outstanding FCCB Loan of US$ 44.70 million.
The seasonal cycle indicates that the fourth quarter is usually its best but this time, it posted a net loss during the fourth quarter. A purely “penny” trading stock and that too in the range of Rs.3-5.
About the Stock
The stock, on the bourses is considered mainly as a low priced speculative stock, allowing the investors to trade in a stock which is quoted even below its face value of Rs.10 per share. Currently quoted at levels of Rs.6, it is unbelievable that during the boom time, it had managed to touch a new high at Rs.40. Either today the 52-week highs have no relevance or today we are seeing a more realistic valuation of the stock
Gontermann Peipers India Ltd - Multiabber Info
About The Company
Gontermann Peipers India Ltd (GIP) was promoted in technical and financial collaboration with Gontermann-Peipers GmbH, Germany, a front-ranker in the manufacture of Rolls – casting and forging rolls. In 1981 the company was taken over by the Ispat Group. The promoters and their various companies hold 55.13% of the equity.
About The Results
The financial performance of the company had not been too encouraging for the second quarter and as predicted, it got only worse for the third quarter ended 31st Dec 2008. YoY, sales dipped 27%. When the beginning was bad, the ending had to suffer. It ended the quarter with a net loss of Rs.1.08 crore. OPM more than halved from 23% in Q3FY08 to around 7% in Q3FY09.
Apart from the slowdown, what really made matters worse was the minor fire that occurred in the Melting & Foundry Division of the factory on November 28, 2008 and it reopened on 1st Dec 2008. Operations were partially affected and though the company has adequate insurance cover, the loss on account of production was higher.
Source: http://www.sharetradingtips.in/
Gontermann Peipers India Ltd (GIP) was promoted in technical and financial collaboration with Gontermann-Peipers GmbH, Germany, a front-ranker in the manufacture of Rolls – casting and forging rolls. In 1981 the company was taken over by the Ispat Group. The promoters and their various companies hold 55.13% of the equity.
About The Results
The financial performance of the company had not been too encouraging for the second quarter and as predicted, it got only worse for the third quarter ended 31st Dec 2008. YoY, sales dipped 27%. When the beginning was bad, the ending had to suffer. It ended the quarter with a net loss of Rs.1.08 crore. OPM more than halved from 23% in Q3FY08 to around 7% in Q3FY09.
Apart from the slowdown, what really made matters worse was the minor fire that occurred in the Melting & Foundry Division of the factory on November 28, 2008 and it reopened on 1st Dec 2008. Operations were partially affected and though the company has adequate insurance cover, the loss on account of production was higher.
Source: http://www.sharetradingtips.in/
Wednesday, April 1, 2009
Nucleus Software Exports Ltd- Multibagger
Strong order flow inspite of slowdown, low dependence on US Markets and Strong Business Model –Nucleus Software, a debt free company having over Rs 100 crores as Cash & Bank Balance looks attractive at the current market cap of Rs 170 crores.
Nucleus Software Exports Ltd.
Nucleus Software Exports Ltd. is a Delhi based company with over 20 years experience of Software development for the Banking & Financial Services industry. The company is focused( Read the rest of this entry)
Nucleus Software Exports Ltd.
Nucleus Software Exports Ltd. is a Delhi based company with over 20 years experience of Software development for the Banking & Financial Services industry. The company is focused( Read the rest of this entry)
Monday, March 30, 2009
Unity Infraprojects - Multibaggers Info
Unity Infraprojects share at Rs 73.85 qualifies a risk free and safe buy for those who have a 6 months view, in which share has potential to touch three digit mark with virtually no downside risk.
Unity Infraprojects
Unity Infraprojects is a Mumbai based engineering and construction company providing integrated engineering and construction services on a turnkey basis including electrical, fire prevention and control, plumbing and air conditioning which is resulting in a higher margin.The company has been undertaking projects across the country for road projects, PWD. Municipal Corporations, State Govt and local authorities and have orders in hand of close to Rs 2,000 crores which would get completed in next two years.
To execute the projects in time and to maintain its smooth implementation with better margins the contracts are taken of safe and remunerative projects only by the company.( Read the rest of this entry)
Unity Infraprojects
Unity Infraprojects is a Mumbai based engineering and construction company providing integrated engineering and construction services on a turnkey basis including electrical, fire prevention and control, plumbing and air conditioning which is resulting in a higher margin.The company has been undertaking projects across the country for road projects, PWD. Municipal Corporations, State Govt and local authorities and have orders in hand of close to Rs 2,000 crores which would get completed in next two years.
To execute the projects in time and to maintain its smooth implementation with better margins the contracts are taken of safe and remunerative projects only by the company.( Read the rest of this entry)
Wednesday, March 25, 2009
Multibagger - Greaves Cotton
Recent downturn in the stock market has brought down prices of some counters lower than their intrinsic worth. And the time seems to be right for the investors to go on for shopping for companies which are available at prices investors could never think of. Now based on the similar line, our low price scrip for this fortnight is Greaves Cotton (GCL) which is trading at its book value. It is said that in uncertain markets dividends act as a soothing factor. Hence along with consistent dividend payment history and dividend yield of more than 7 per cent GCL seems to be comfortably placed.
The scrip also seems to be placed better on the valuation front where the CMP
72 discounts its trailing 12 months earning by just 3.50x. In addition, market-cap to sales ratio of just 0.28x and EVIEBITDA of l.75x makes the scrip further more lucrative. What adds to the confidence is low debt? equity ratio of just 0.1 3x. We also feel that the expected reduction in the diesel prices, infrastructure stimulus packages announced by government, declining financing cost and reduction in rawmaterial prices make GCI. a good buy at current levels. GCL manufactures diesel engines for the three-wheeler segment (51 per cent of the revenues), Infrastructure equipments (25 per cent), agricultural equipments (11 per cent) and industrial diesel engines for power generation (12 per cent).
There are several reasons why we are recommending GCL. But here one should note that GCL is mostly dependent on the automobile sector where no immediate recovery is expected. Hence the reasons we are providing are of longer term nature and the impact can not be seen in the short term. First is, GCL is mainly into diesel engines and government’s move to cut the diesel prices is expected to be a positive one. In addition company’s dependency on the three- wheeler segment earlier an issue. But now GCL has de-risked itself by entering intothe four- wheeler (Sub One Tonne) segment. We feel it is expected to mitigate some of the negative growth witnessed in the three- wheeler segment. Even the launch of twin cylinder diesel engine plant and Gil series of diesel engines is expected to help the company show better volumes. Company is also expected to be benefited on account of lowering financing cost.
Now, the important factor is that along with increased volumes margins growth is also expected in both the segments as key raw material prices (Ferrous metals) have declined considerably. Another important factor is due to lean fixed cost structure even a modest rise in volumes is expected to help in improvement of margins.
On the financial front, after posting a flat topline growth and decline in bottomline for FY08 (June ending), Q1FYO9 (September 2008) results have not been encouraging. Now, as stated earlier, the impact of all above factors will come in long term and hence the December quarter results may not be encouraging. But one should not judge the company by the performance of just one quarter. GCL has got all the ingredients to perform in long term and hence we recommend the investors to buy the scrip at current levels with a target price of Rs 98 in next one year.
The scrip also seems to be placed better on the valuation front where the CMP
72 discounts its trailing 12 months earning by just 3.50x. In addition, market-cap to sales ratio of just 0.28x and EVIEBITDA of l.75x makes the scrip further more lucrative. What adds to the confidence is low debt? equity ratio of just 0.1 3x. We also feel that the expected reduction in the diesel prices, infrastructure stimulus packages announced by government, declining financing cost and reduction in rawmaterial prices make GCI. a good buy at current levels. GCL manufactures diesel engines for the three-wheeler segment (51 per cent of the revenues), Infrastructure equipments (25 per cent), agricultural equipments (11 per cent) and industrial diesel engines for power generation (12 per cent).
There are several reasons why we are recommending GCL. But here one should note that GCL is mostly dependent on the automobile sector where no immediate recovery is expected. Hence the reasons we are providing are of longer term nature and the impact can not be seen in the short term. First is, GCL is mainly into diesel engines and government’s move to cut the diesel prices is expected to be a positive one. In addition company’s dependency on the three- wheeler segment earlier an issue. But now GCL has de-risked itself by entering intothe four- wheeler (Sub One Tonne) segment. We feel it is expected to mitigate some of the negative growth witnessed in the three- wheeler segment. Even the launch of twin cylinder diesel engine plant and Gil series of diesel engines is expected to help the company show better volumes. Company is also expected to be benefited on account of lowering financing cost.
Now, the important factor is that along with increased volumes margins growth is also expected in both the segments as key raw material prices (Ferrous metals) have declined considerably. Another important factor is due to lean fixed cost structure even a modest rise in volumes is expected to help in improvement of margins.
On the financial front, after posting a flat topline growth and decline in bottomline for FY08 (June ending), Q1FYO9 (September 2008) results have not been encouraging. Now, as stated earlier, the impact of all above factors will come in long term and hence the December quarter results may not be encouraging. But one should not judge the company by the performance of just one quarter. GCL has got all the ingredients to perform in long term and hence we recommend the investors to buy the scrip at current levels with a target price of Rs 98 in next one year.
Multibaggers - Kamanwala Housing Construction Ltd (KHCL)
Kamanwala Housing Construction Ltd (KHCL) was originally incorporated in 1984 as Kamanwala Housing Development Finance Company mainly to cater middle class buyers by constructing low cost housing and financing it at nominal rates.
Kamanwala Housing Construction (KHCL) is a reputed small sized player in the housing construction segment. KHCL has a slew of projects lined up which would enable it to register aggressive growth in its revenues and earnings over the next two-three years.
KHCL has several projects lined up in prime localities of Mumbai due for completion in the next two years. KHCL’s revenue and earnings will see strong growth trajectory due to the execution of these projects and also enable the company to enhance its image in segment and get into contracts of higher value going ahead.
Derisking business by expanding to new geographies
To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings.
Diversification into commercial space
KHCL has entered into commercial segment as well and has drawn up ambitious expansion plan on a much larger scale. In the last couple of years, it has acquired good land bank in Mumbai for future projects.
Good track record
Having a track record of more than two decades, KHCL has completed the execution of 18 projects in Mumbai, with saleable area totaling more than one million square feet.
Recent developments
To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a 33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both residential and commercial units. Meanwhile it is negotiating for few projects at 4 bunglow, Andheri Kurla Road.
Amalgamation of Doongursee Diamond Tools
During Q4Fy08 the company has amalgamated its subsidiary called M/s. Doongursee Diamond Tools Ltd with itself. Notably, this subsidiary is holding one lakh FSI for the Malad project.
Bonus Issue
During Q1FY09, KHCL issued bonus shares in the proportion of one equity share of Rs 10 each for every existing equity share held. The company has also recommended a dividend of 25% for FY08.
Valuation
KHCL is expected to register robust growth in revenues and earnings going forward. It is currently quoting at compelling valuations of 0.8x and 0.7x FY10E and FY11E earnings. The stock has succumbed to the market turmoil and its price has declined significantly in the last 3 months. With a strong project pipeline to drive revenue and earnings growth, the stock has potential to deliver handsome returns to the investors over a period of next one year. Investors can enter into the stock at current level , which is very attractive and should enable investors to earn a healthy return on their investment.
Kamanwala Housing Construction (KHCL) is a reputed small sized player in the housing construction segment. KHCL has a slew of projects lined up which would enable it to register aggressive growth in its revenues and earnings over the next two-three years.
KHCL has several projects lined up in prime localities of Mumbai due for completion in the next two years. KHCL’s revenue and earnings will see strong growth trajectory due to the execution of these projects and also enable the company to enhance its image in segment and get into contracts of higher value going ahead.
Derisking business by expanding to new geographies
To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings.
Diversification into commercial space
KHCL has entered into commercial segment as well and has drawn up ambitious expansion plan on a much larger scale. In the last couple of years, it has acquired good land bank in Mumbai for future projects.
Good track record
Having a track record of more than two decades, KHCL has completed the execution of 18 projects in Mumbai, with saleable area totaling more than one million square feet.
Recent developments
To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a 33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both residential and commercial units. Meanwhile it is negotiating for few projects at 4 bunglow, Andheri Kurla Road.
Amalgamation of Doongursee Diamond Tools
During Q4Fy08 the company has amalgamated its subsidiary called M/s. Doongursee Diamond Tools Ltd with itself. Notably, this subsidiary is holding one lakh FSI for the Malad project.
Bonus Issue
During Q1FY09, KHCL issued bonus shares in the proportion of one equity share of Rs 10 each for every existing equity share held. The company has also recommended a dividend of 25% for FY08.
Valuation
KHCL is expected to register robust growth in revenues and earnings going forward. It is currently quoting at compelling valuations of 0.8x and 0.7x FY10E and FY11E earnings. The stock has succumbed to the market turmoil and its price has declined significantly in the last 3 months. With a strong project pipeline to drive revenue and earnings growth, the stock has potential to deliver handsome returns to the investors over a period of next one year. Investors can enter into the stock at current level , which is very attractive and should enable investors to earn a healthy return on their investment.
Sunday, March 15, 2009
South Indian Bank - Multibagger
South Indian Bank has its presence in 23 states with 500 branches and 26 extension counters and 225 ATM Networks. The bank, during FY 08 had opened 25 new branches, upgraded 8-extension counter, and opened 50 ATMs. The bank holds licence to open 15 new branches and plans to open 30 branches in the year FY 09.
The bank, as at 31-03-08, had total deposits of Rs 15,156 crores while advances were at Rs 10,754 crores with total business of the bank being placed at Rs 25,910 crores. Capital Adequacy ratio of the bank as at 31-03-08 was at 13.80% while net NPAs were at 0.33%. Gross NPAs of the bank, as at 31-03-08 were at Rs 188.48 crores against Rs 321.21 crores as at 31-03-7. During FY 08, the bank had recovered NPAs of Rs 172.31 crores against the target of Rs 130 crores.
During FY 08, the total income of the bank was placed at Rs 1,434 crores with profit after tax of Rs 151.62 crores, resulting in an EPS of Rs 18.77 while book-value per share as at 31-03-08 was placed at Rs 128.43.
During FY 08, the bank had issued 2 crores equity shares at Rs 163 per share (premium of Rs 153 per share) to Qualified Institutional Investors. Due to this issue, paid-up equity of the bank increased to Rs 90.41 crores while net worth improved of Rs 1,161 crores.
For quarter ending June 08, the bank had a total income of Rs 406 crores with profit after tax of Rs 38.62 crores, resulting in an EPS of Rs 4.27 for the quarter. FY09 is likely to have an income in excess of Rs 1,800 crore with estimated PAT of Rs 175 crores, which should translate into an EPS of Rs 19.50. Expected book-value on 31-03-09 of the bank would be over Rs 140.
The bank had proposed to issue bonus in the ratio of 1 share for every 4 shares held and the record date for the same has been fixed at 17-10-08 and share would go ex-bonus from 16-10-08. The present market price of the stock at Rs 106 is cum-bonus.
The bank has total investments of Rs 4,572 crores as at 31-03-08, of which government securities are of Rs 3,590 crores while Rs 982 crores are in Debentures, shares and other investments.
The bank has strong presence in NRIs and as 31-03-08, the bank had total NRI Deposit of Rs 3,085 crores being 20.35% of the total deposit of the bank.
Even Bank is holding 4.99% stake of Dhanlakshmi Bank, which implies an intention to acquire the bank, if feasible, at an appropriate time.
Share now ruling at Rs 98.60, had its 52 week high low of Rs 285 and Rs 87 and is now ruling at a PE of less than 6 on historic and expected earnings. Even it is available at cum-bonus and price to book-value of 0.80 : 1. All this shows great scope of appreciation in the investments in the time to come. The present market capitalization of the bank is close to Rs 950 crores, translating per branch valuation of less than Rs 2 crores.
The share qualifies a good buy at Rs 45.00, which has potential to rise to Rs 140 in the next 12 months with minimum downside.
The bank, as at 31-03-08, had total deposits of Rs 15,156 crores while advances were at Rs 10,754 crores with total business of the bank being placed at Rs 25,910 crores. Capital Adequacy ratio of the bank as at 31-03-08 was at 13.80% while net NPAs were at 0.33%. Gross NPAs of the bank, as at 31-03-08 were at Rs 188.48 crores against Rs 321.21 crores as at 31-03-7. During FY 08, the bank had recovered NPAs of Rs 172.31 crores against the target of Rs 130 crores.
Kirloskar Electric Company - Multibagger
During FY 08, the total income of the bank was placed at Rs 1,434 crores with profit after tax of Rs 151.62 crores, resulting in an EPS of Rs 18.77 while book-value per share as at 31-03-08 was placed at Rs 128.43.
During FY 08, the bank had issued 2 crores equity shares at Rs 163 per share (premium of Rs 153 per share) to Qualified Institutional Investors. Due to this issue, paid-up equity of the bank increased to Rs 90.41 crores while net worth improved of Rs 1,161 crores.
For quarter ending June 08, the bank had a total income of Rs 406 crores with profit after tax of Rs 38.62 crores, resulting in an EPS of Rs 4.27 for the quarter. FY09 is likely to have an income in excess of Rs 1,800 crore with estimated PAT of Rs 175 crores, which should translate into an EPS of Rs 19.50. Expected book-value on 31-03-09 of the bank would be over Rs 140.
KSB Pumps- Multibagger
The bank had proposed to issue bonus in the ratio of 1 share for every 4 shares held and the record date for the same has been fixed at 17-10-08 and share would go ex-bonus from 16-10-08. The present market price of the stock at Rs 106 is cum-bonus.
The bank has total investments of Rs 4,572 crores as at 31-03-08, of which government securities are of Rs 3,590 crores while Rs 982 crores are in Debentures, shares and other investments.
The bank has strong presence in NRIs and as 31-03-08, the bank had total NRI Deposit of Rs 3,085 crores being 20.35% of the total deposit of the bank.
Buy McNally Bharat Engineering Company
The present equity of the bank is at Rs 90.41 crores with face-value of Rs 10 each. FIIs are holding 43% while 12% are held by banks, insurance companies, FIs, and MFS and 45% is held by the general public. Prominent shareholders of the bank are Federal Bank (4.94%) IFC, Washington (4.80%) Goldman Sachs (3.93%) LIC (1.77%) Union Bank (1.06%) and SBI 1.02%.Even Bank is holding 4.99% stake of Dhanlakshmi Bank, which implies an intention to acquire the bank, if feasible, at an appropriate time.
Share now ruling at Rs 98.60, had its 52 week high low of Rs 285 and Rs 87 and is now ruling at a PE of less than 6 on historic and expected earnings. Even it is available at cum-bonus and price to book-value of 0.80 : 1. All this shows great scope of appreciation in the investments in the time to come. The present market capitalization of the bank is close to Rs 950 crores, translating per branch valuation of less than Rs 2 crores.
The share qualifies a good buy at Rs 45.00, which has potential to rise to Rs 140 in the next 12 months with minimum downside.
Stocks To Watch of The Week - 16 March 09
Mahindra and Mahindra- Short Term Investments
M&M derives about 65 per cent of its automotive revenues from utility vehicles (UVs), where it has steadily improved market share from 45 per cent in 2004 to 53 per cent now. Interest from institutional buyers such as small and medium businesses and cab operators has helped the company manage the slowdown better than most other vehicle-makers. Backed by sales of Scorpio and Bolero, M&M’s UV sales volumes were flat in 2008, after averaging a 14 per cent growth in the preceding three years.
Though the segment did witness deceleration in the December quarter, growth has picked up to 20 per cent in the first two months of 2009, driven by launches. LCVs and three-wheelers constitute 20 per cent of M&M’s automotive revenues (though it is not a prominent player in this segment) and this segment relies largely on rural demand.
Introduced in January 2009, Xylo, targeted at retail buyers, infused the much-needed buoyancy to M&M’s sales (4,000 units sold until February). Since it is strategically priced below other sedans and MUVs such as Toyota Innova and Chevrolet Tavera, Xylo appears well-positioned against competition.
Apart from this, the company launched an upgraded model of Scorpio this month. M&M has recently passed on to consumers the excise duty cuts, which , may be visible from the next quarter. The demand for SUVs usually accelerates ahead of elections and that may deliver a short-term boost to sales as well.
Farm equipment
M&M holds 40 per cent market share in the farm equipment segment. After sustaining growth in the first half of this fiscal, the segment witnessed a 7 per cent decline in volumes during October-December 2008. Going by favourable factors such as adequate monsoon and increased credit availability in the hands of farmers, the segment appears well-placed to sustain sales growth this year. Punjab Tractor’s amalgamation with M&M, which is to take effect from this quarter, may add market share and strengthen M&M’s presence in the Northern market, though it is unlikely to have a material near term impact on the per share earnings.
Financial Aspects
After a sustained net profit growth of 25-30 per cent (excluding exceptional gains) in the five years to 2006-07, M&M saw a sharp deterioration in the profit picture in the first nine months of 2008-09, concentrated mainly in the December quarter. While revenues on a consolidated basis grew 13.2 per cent to Rs 21,652 crore, net profit after minority interest declined by 26 per cent to Rs 809.5 crore from Rs.1095 crore.
On a standalone basis, the December quarter saw the company report a loss of Rs 26 crore (before other income, interest and exceptional items), compared to a profit of Rs 280 crore in the same period last year. However, profits were depressed to a significant extent by forex losses of Rs 182 crore (gain of Rs 13.9 crore last year) taken this quarter. This pertains to cancellation of forward contracts and revaluation of foreign currency borrowings. Of this, Rs 136 crore may be of a one-time nature and is unlikely to impact profitability in the coming quarters.
While forex losses did play a role in depressing the profit picture, lower production and revenues — the company sold mainly from inventories — higher raw material costs and possible inventory losses on excise duty cuts also contributed to the decline in profit margins. However, with the company substantially drawing down its inventories in the December quarter and raw material costs (steel, aluminium and paint) easing significantly, profit margins may stage a sharp improvement, from here on. A recovery in sales volumes and the recent excise duty cut will also help improve revenues, helping better recovery of fixed costs. Going forward, though forex losses on existing loans (due from 2011) will remain a drag, lower interest rates on working-capital borrowings may help lower financing costs.
Expansion plans
Fairly ambitious capex plans have also weighed on the M&M stock’s valuations. The company had previously lined up a capex of around Rs 7,500 crore. Due to the overall slowdown in the sector, the company has revised its plans downward to Rs 5,000 crore, phased out over the three years to 2012.
M&M appears to have funded the major portion of this by means of FCCBs and ECBs and is setting up a new UV plant in Chakan with a capacity of 3,50,000 vehicles. This plant would be operational from FY 2010. Debt-equity ratio, which stood at 0.6 at end-March 2008, continues to be at the same level.- HBL
Though the segment did witness deceleration in the December quarter, growth has picked up to 20 per cent in the first two months of 2009, driven by launches. LCVs and three-wheelers constitute 20 per cent of M&M’s automotive revenues (though it is not a prominent player in this segment) and this segment relies largely on rural demand.
Buy McNally Bharat Engineering Company
Introduced in January 2009, Xylo, targeted at retail buyers, infused the much-needed buoyancy to M&M’s sales (4,000 units sold until February). Since it is strategically priced below other sedans and MUVs such as Toyota Innova and Chevrolet Tavera, Xylo appears well-positioned against competition.
Apart from this, the company launched an upgraded model of Scorpio this month. M&M has recently passed on to consumers the excise duty cuts, which , may be visible from the next quarter. The demand for SUVs usually accelerates ahead of elections and that may deliver a short-term boost to sales as well.
Farm equipment
Buy Jaiprakash Associates Ltd - Short Term
M&M holds 40 per cent market share in the farm equipment segment. After sustaining growth in the first half of this fiscal, the segment witnessed a 7 per cent decline in volumes during October-December 2008. Going by favourable factors such as adequate monsoon and increased credit availability in the hands of farmers, the segment appears well-placed to sustain sales growth this year. Punjab Tractor’s amalgamation with M&M, which is to take effect from this quarter, may add market share and strengthen M&M’s presence in the Northern market, though it is unlikely to have a material near term impact on the per share earnings.
Financial Aspects
After a sustained net profit growth of 25-30 per cent (excluding exceptional gains) in the five years to 2006-07, M&M saw a sharp deterioration in the profit picture in the first nine months of 2008-09, concentrated mainly in the December quarter. While revenues on a consolidated basis grew 13.2 per cent to Rs 21,652 crore, net profit after minority interest declined by 26 per cent to Rs 809.5 crore from Rs.1095 crore.
Buy GVK Power & Infrastructure Ltd - Short Term
On a standalone basis, the December quarter saw the company report a loss of Rs 26 crore (before other income, interest and exceptional items), compared to a profit of Rs 280 crore in the same period last year. However, profits were depressed to a significant extent by forex losses of Rs 182 crore (gain of Rs 13.9 crore last year) taken this quarter. This pertains to cancellation of forward contracts and revaluation of foreign currency borrowings. Of this, Rs 136 crore may be of a one-time nature and is unlikely to impact profitability in the coming quarters.
While forex losses did play a role in depressing the profit picture, lower production and revenues — the company sold mainly from inventories — higher raw material costs and possible inventory losses on excise duty cuts also contributed to the decline in profit margins. However, with the company substantially drawing down its inventories in the December quarter and raw material costs (steel, aluminium and paint) easing significantly, profit margins may stage a sharp improvement, from here on. A recovery in sales volumes and the recent excise duty cut will also help improve revenues, helping better recovery of fixed costs. Going forward, though forex losses on existing loans (due from 2011) will remain a drag, lower interest rates on working-capital borrowings may help lower financing costs.
Expansion plans
What is GDP ?
Fairly ambitious capex plans have also weighed on the M&M stock’s valuations. The company had previously lined up a capex of around Rs 7,500 crore. Due to the overall slowdown in the sector, the company has revised its plans downward to Rs 5,000 crore, phased out over the three years to 2012.
M&M appears to have funded the major portion of this by means of FCCBs and ECBs and is setting up a new UV plant in Chakan with a capacity of 3,50,000 vehicles. This plant would be operational from FY 2010. Debt-equity ratio, which stood at 0.6 at end-March 2008, continues to be at the same level.- HBL
Buy SAIL : Stock Investments
Investors can consider buying the Steel Authority of India (SAIL) stock (Rs 82), given its low valuation. The stock trades at a price-to-earnings multiple of 4.5 times the trailing 12 month earnings. Though the jury is still out on whether the recovery in steel demand seen so far in 2009 is sustainable, SAIL remains one of the better-placed companies in the steel sector to weather the challenging times. A sharp drop in contract prices for coking coal and iron ore, expected to be negotiated for the coming year, suggests scope for margin expansion, even if steel prices continue to soften.
Read Also : Buy McNally Bharat Engineering Company
Low dependence on international orders, a focus on orders from government agencies which may benefit from higher public spending and low leverage and strong cash flows, make the company a preferred exposure in the steel sector. Investors in the stock, however, should be prepared for high volatility, as the stock’s performance may continue to carry strong linkages to global commodity price trends.
Domestic focus helps
The prospect of slowing and even recessionary trends in much of the developed world has weakened the demand for steel from user industries such as forgings, castings, automotive and construction. Both the US and Europe have seen a decline in construction and industrial activity in the last two quarters of 2008. Falling demand prompted production and price cuts by the global steel majors, with players such as Corus, Tokyo Steel and many others cutting back output by up to 30 per cent in October-November ’08.
In India, however, demand has held up better than in the other regions, with the industry’s production still up by about a per cent in the April-December 2008 period. Higher infrastructure spending by the government as a part of its two stimulus packages and a pick up in construction activities following low interest rates could help stimulate growth.
CMIE expects domestic steel production to grow by 1.5 per cent in 2008-09 and achieve a growth of 6.5 per cent in 2009-10. Responding to softening demand, steel prices have been under pressure since last year; hot-rolled coil prices fell 20 per cent from a high of Rs 48,500 per tonne in June 2008 to Rs 39,200 in December 2008.
SAIL’s sales fell in the quarter ended December 31, 2008, given a 11 per cent cut in HRC prices in November. While the effect of price cuts may continue to show up on revenues, a revival in steel volumes (up 9 per cent y-o-y in February ’09), driven by automobile and construction demand, offers some hope. On the cost front, iron ore contracts for the coming year are expected to see a price correction of 30 per cent-plus and coking coal prices are also expected to be 40 per cent lower for the year. Lower input costs would bring substantial margin relief for SAIL, given its high reliance on imported coking coal.
In the December quarter of 2008, SAIL’s profits took a hard blow (down 56 per cent) following a substantial increase in raw material costs as international coking coal prices shot up from $98 per tonne in 2007 to $300 per tonne in 2008.
Resilient to current slowdown
SAIL also looks better placed than its peers to tackle an uncertain global demand environment. SAIL derives just 3 per cent of its revenues from overseas, even as peers such as Tata Steel and JSW Steel have a much larger global exposure.
Within the domestic market too, 40 per cent of the orders are from the government agencies. With the stimulus packages promising higher infrastructure spending by the government, the company may sustain healthy order inflows in the coming quarters.
A diversified customer base is also an advantage, with the company serving a wide range of industries from construction, engineering, power, railway, to automotive and defence. The company has also been realigning its product mix, with value-added products now accounting for 40 per cent of production.
Even as other steel companies are shelving their capex plans, SAIL appears well-placed to bankroll its own expansion. The company had Rs 13,760 crore in cash balances by end-FY08, following strong operating cash flows of over Rs 8,300 crore during the year.
The company’s debt-to-equity ratio of 0.18:1 (in FY08) is low, allowing room to increase borrowings for the planned capex. SAIL has outlined a capex of Rs 53,000 crore for expanding its capacity from 14 million tonnes to 26 million tonnes by 2010-11. Of this, the company has already spent Rs 3,230 crore and has placed orders for equipment worth Rs 36,000 crore. As there are certain equipment sourcing-related delays, the projected additions to capacity may be delayed.
Given its relatively strong balance-sheet, we expect SAIL to reap benefits from recent interest rate cuts, though it may still contract higher borrowings for capex. - HBL
Read Also : Buy McNally Bharat Engineering Company
Low dependence on international orders, a focus on orders from government agencies which may benefit from higher public spending and low leverage and strong cash flows, make the company a preferred exposure in the steel sector. Investors in the stock, however, should be prepared for high volatility, as the stock’s performance may continue to carry strong linkages to global commodity price trends.
Domestic focus helps
The prospect of slowing and even recessionary trends in much of the developed world has weakened the demand for steel from user industries such as forgings, castings, automotive and construction. Both the US and Europe have seen a decline in construction and industrial activity in the last two quarters of 2008. Falling demand prompted production and price cuts by the global steel majors, with players such as Corus, Tokyo Steel and many others cutting back output by up to 30 per cent in October-November ’08.
Buy Jaiprakash Associates Ltd - Short Term
In India, however, demand has held up better than in the other regions, with the industry’s production still up by about a per cent in the April-December 2008 period. Higher infrastructure spending by the government as a part of its two stimulus packages and a pick up in construction activities following low interest rates could help stimulate growth.
CMIE expects domestic steel production to grow by 1.5 per cent in 2008-09 and achieve a growth of 6.5 per cent in 2009-10. Responding to softening demand, steel prices have been under pressure since last year; hot-rolled coil prices fell 20 per cent from a high of Rs 48,500 per tonne in June 2008 to Rs 39,200 in December 2008.
SAIL’s sales fell in the quarter ended December 31, 2008, given a 11 per cent cut in HRC prices in November. While the effect of price cuts may continue to show up on revenues, a revival in steel volumes (up 9 per cent y-o-y in February ’09), driven by automobile and construction demand, offers some hope. On the cost front, iron ore contracts for the coming year are expected to see a price correction of 30 per cent-plus and coking coal prices are also expected to be 40 per cent lower for the year. Lower input costs would bring substantial margin relief for SAIL, given its high reliance on imported coking coal.
Buy GVK Power & Infrastructure Ltd - Short Term
In the December quarter of 2008, SAIL’s profits took a hard blow (down 56 per cent) following a substantial increase in raw material costs as international coking coal prices shot up from $98 per tonne in 2007 to $300 per tonne in 2008.
Resilient to current slowdown
SAIL also looks better placed than its peers to tackle an uncertain global demand environment. SAIL derives just 3 per cent of its revenues from overseas, even as peers such as Tata Steel and JSW Steel have a much larger global exposure.
Within the domestic market too, 40 per cent of the orders are from the government agencies. With the stimulus packages promising higher infrastructure spending by the government, the company may sustain healthy order inflows in the coming quarters.
A diversified customer base is also an advantage, with the company serving a wide range of industries from construction, engineering, power, railway, to automotive and defence. The company has also been realigning its product mix, with value-added products now accounting for 40 per cent of production.
Even as other steel companies are shelving their capex plans, SAIL appears well-placed to bankroll its own expansion. The company had Rs 13,760 crore in cash balances by end-FY08, following strong operating cash flows of over Rs 8,300 crore during the year.
The company’s debt-to-equity ratio of 0.18:1 (in FY08) is low, allowing room to increase borrowings for the planned capex. SAIL has outlined a capex of Rs 53,000 crore for expanding its capacity from 14 million tonnes to 26 million tonnes by 2010-11. Of this, the company has already spent Rs 3,230 crore and has placed orders for equipment worth Rs 36,000 crore. As there are certain equipment sourcing-related delays, the projected additions to capacity may be delayed.
Given its relatively strong balance-sheet, we expect SAIL to reap benefits from recent interest rate cuts, though it may still contract higher borrowings for capex. - HBL
Friday, March 13, 2009
Sejal Architectural Glass Ltd (BUY) - Multibagger
Sejal Architectural Glass Ltd (BUY)
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
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SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
ALSO READ : HBL Power Systems - Multibagger
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
ALSO READ : Patels Airtemp - Multibagger
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
ALSO READ : Using common sense to invest for the long term
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
ALSO READ : Major Investment Mistakes made by Warren Buffet
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
ALSO READ : HBL Power Systems - Multibagger
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
ALSO READ : Patels Airtemp - Multibagger
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
ALSO READ : Using common sense to invest for the long term
Buy Stocks For Long Term Investing : Investors Guide
Buying stocks has been a nightmare for many investors in the last one year. The world stock markets crashed and came down to almost one-third of the January 2008 levels. Almost every investor's equity portfolio went negative during the last one year.
The philosophy of equity investments is the valuation of stocks depends on the expected profitability of companies and risk levels. This expectation is a factor of investor sentiments and confidence, and that is why there have been huge swings in sentiments and expectations historically.
ALSO READ : Major Investment Mistakes made by Warren Buffet
Analysts believe you should invest in stocks
with a long-term horizon (at least 2-3 years). In the recent past, stocks crashed largely due to poor sentiments and then picked up after the crashes. For example, take the case of the slowdown in 2001 or crash seen in May 2004. Investors who held on to their positions or invested in stocks during these times have earned good returns in the markets.
Some tips for investors to identify
Understand risk profile
First of all, it is important to understand your risk profile . The risk profile of an investor depends on his age, disposable income, dependent members, other investments or assets, earning security and visibility.
ALSO READ : HBL Power Systems - Multibagger
Identify stocks
The next step is to identify stocks that have fundamental value at current prices. Investing in a stock at the right price differentiates between a bad investment, good investment and a great investment. Investors should invest with a long-term outlook in fundamentally-good stocks.
Patience is the key in volatile market conditions. It is possible that the scrip you buy may further fall but you should not panic. Currently, the markets are going through a bearish phase. Investors should be even more careful while investing in a bearish phase. It is advisable to accumulate stocks by investing in small lots. In bearish market phase, even fundamentallygood stocks correct heavily at times. Therefore, it is very important to have patience and not panic.
ALSO READ : Patels Airtemp - Multibagger
Invest risk capital only
Ideally, investors should invest their own risk money in the stock markets. It is not advisable to invest all your savings in the stock markets. Diversify into other investment instruments as well.
Maintain liquidity
Investors should have enough liquidity in hand after investing in the stock markets. A cash position is the key to success in a bearish market phase. Investors should never take a loan to invest in the stock markets.
Go for blue-chip companies
Investors with a low risk appetite should invest in blue chip (front runner) companies only. Investors with a high risk appetite should invest in large-cap as well as quality mid-cap companies with a good trading volume. Never invest in penny stocks with no fundamentals.
Research
The stock market requires constant study and research. Finding good stocks at the right prices is not a one-time exercise. Active investors in the stock markets should always monitor their stocks and other stocks with potential too.
ALSO READ : Using common sense to invest for the long term
Source: Economictimes
The philosophy of equity investments is the valuation of stocks depends on the expected profitability of companies and risk levels. This expectation is a factor of investor sentiments and confidence, and that is why there have been huge swings in sentiments and expectations historically.
ALSO READ : Major Investment Mistakes made by Warren Buffet
Analysts believe you should invest in stocks
with a long-term horizon (at least 2-3 years). In the recent past, stocks crashed largely due to poor sentiments and then picked up after the crashes. For example, take the case of the slowdown in 2001 or crash seen in May 2004. Investors who held on to their positions or invested in stocks during these times have earned good returns in the markets.
Some tips for investors to identify
Understand risk profile
First of all, it is important to understand your risk profile . The risk profile of an investor depends on his age, disposable income, dependent members, other investments or assets, earning security and visibility.
ALSO READ : HBL Power Systems - Multibagger
Identify stocks
The next step is to identify stocks that have fundamental value at current prices. Investing in a stock at the right price differentiates between a bad investment, good investment and a great investment. Investors should invest with a long-term outlook in fundamentally-good stocks.
Patience is the key in volatile market conditions. It is possible that the scrip you buy may further fall but you should not panic. Currently, the markets are going through a bearish phase. Investors should be even more careful while investing in a bearish phase. It is advisable to accumulate stocks by investing in small lots. In bearish market phase, even fundamentallygood stocks correct heavily at times. Therefore, it is very important to have patience and not panic.
ALSO READ : Patels Airtemp - Multibagger
Invest risk capital only
Ideally, investors should invest their own risk money in the stock markets. It is not advisable to invest all your savings in the stock markets. Diversify into other investment instruments as well.
Maintain liquidity
Investors should have enough liquidity in hand after investing in the stock markets. A cash position is the key to success in a bearish market phase. Investors should never take a loan to invest in the stock markets.
Go for blue-chip companies
Investors with a low risk appetite should invest in blue chip (front runner) companies only. Investors with a high risk appetite should invest in large-cap as well as quality mid-cap companies with a good trading volume. Never invest in penny stocks with no fundamentals.
Research
The stock market requires constant study and research. Finding good stocks at the right prices is not a one-time exercise. Active investors in the stock markets should always monitor their stocks and other stocks with potential too.
ALSO READ : Using common sense to invest for the long term
Source: Economictimes
Bharti Airtel - Buy Stocks Research Report
Latest (March 2009) buy stocks research report on Bharti Airtel with target price. Buying stocks of Airtel in current stock market scenario would be one of the best investments to make in year 2009.Sharekhan has maintained its buy rating on Bharti Airtel with a price target of Rs 789 in its March 09, 2009 research report.
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"The amended IUC regulations (effective 1 April 2009) will come as a relief for Bharti, despite a MTC (mobile termination charge) cut from Rs 0.3 to Rs 0.2 (in line with our expectations). It could have been worse: the rival lobby had been pushing for an MTC cut to zero, which would have significantly dented Bharti Airtel’s earnings. Besides, a cut to zero would have enabled Reliance Communications, RCOM and other start-up networks to price outgoing cross-network plans far more effectively, and possibly resulted in a congestion in Bharti’s network. On the other hand, the cut does represent a setback to Bharti’s rural expansion economics."
ALSO READ : Kavveri Telecom Products - Multibagger
IIFL has upgraded its rating on Bharti Airtel to buy with a target price of Rs 710 in its March 12, 2009 research report.
"Mobile-to-fixed termination charge has also been cut from Rs 0.3 to Rs 0.2, and this is favourable to wireless operators. Incoming TC on ILD has been raised only to Rs 0.4 from Rs 0.3, well below our expectation. We estimate that all these TC cuts -after factoring in licence fees, spectrum charges and service tax-will take 3.2% off Bharti’s EPS in FY10ii and FY11ii. We see the termination amendments as the termination of a lengthy period of uncertainty for Bharti. For the present, we see no significant regulatory threats, despite imminent change at the helm in TRAI. RCOM’s gains from this mild move will be limited, whereas Idea Cellular should be relatively unaffected. We upgrade Bharti to BUY with a target price of Rs 710," says IIFL's research report.
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"Given its large subscriber base, Bharti Airtel Ltd (BAL) receives a higher number of incoming calls from the networks of the other operators. Consequently, the reduction in TC for the domestic calls will have a negative impact of around 6.1% on BAL’s estimated earnings for FY2010. However, the negative impact would be partially mitigated by the positive impact of 1.6% on account of the increase of 10 paisa in TC for the ILD calls. Thus, the net impact of the changes in IUC regulation would be limited to 4.5% on BAL’s earnings for FY2010. We maintain our Buy recommendation on the stock with a revised price target of Rs 789," says Sharekhan's research report.
ALSO READ : Rolta India Ltd. - Multibagger
"The amended IUC regulations (effective 1 April 2009) will come as a relief for Bharti, despite a MTC (mobile termination charge) cut from Rs 0.3 to Rs 0.2 (in line with our expectations). It could have been worse: the rival lobby had been pushing for an MTC cut to zero, which would have significantly dented Bharti Airtel’s earnings. Besides, a cut to zero would have enabled Reliance Communications, RCOM and other start-up networks to price outgoing cross-network plans far more effectively, and possibly resulted in a congestion in Bharti’s network. On the other hand, the cut does represent a setback to Bharti’s rural expansion economics."
ALSO READ : Kavveri Telecom Products - Multibagger
IIFL has upgraded its rating on Bharti Airtel to buy with a target price of Rs 710 in its March 12, 2009 research report.
"Mobile-to-fixed termination charge has also been cut from Rs 0.3 to Rs 0.2, and this is favourable to wireless operators. Incoming TC on ILD has been raised only to Rs 0.4 from Rs 0.3, well below our expectation. We estimate that all these TC cuts -after factoring in licence fees, spectrum charges and service tax-will take 3.2% off Bharti’s EPS in FY10ii and FY11ii. We see the termination amendments as the termination of a lengthy period of uncertainty for Bharti. For the present, we see no significant regulatory threats, despite imminent change at the helm in TRAI. RCOM’s gains from this mild move will be limited, whereas Idea Cellular should be relatively unaffected. We upgrade Bharti to BUY with a target price of Rs 710," says IIFL's research report.
ALSO READ : Orbit Corporation - Multibagger
"Given its large subscriber base, Bharti Airtel Ltd (BAL) receives a higher number of incoming calls from the networks of the other operators. Consequently, the reduction in TC for the domestic calls will have a negative impact of around 6.1% on BAL’s estimated earnings for FY2010. However, the negative impact would be partially mitigated by the positive impact of 1.6% on account of the increase of 10 paisa in TC for the ILD calls. Thus, the net impact of the changes in IUC regulation would be limited to 4.5% on BAL’s earnings for FY2010. We maintain our Buy recommendation on the stock with a revised price target of Rs 789," says Sharekhan's research report.
Saturday, February 28, 2009
Welspun Gujarat Stahl Rohren Ltd - Multibagger
Welspun Gujarat Stahl Rohren is a part of high growth sector. The oil and energy sector is becoming very big in India and India is emerging as the pipe manufacturing hub due to its lower cost of production. Welspun is the largest player in this segment.
Welspun Gujarat Stahl Rohren Ltd
Welspun is a leading player in Steel Pipe and Tube manufacturing sector. It caters to the growing oil and energy industry, both domestically and overseas. It has shown spectacular growth and has also expanded and integrated its production capacities fast.
Financial Highlights:
For the first quarter of FY-2007-08 the company put up an impressive performance. While the revenues grew 50.5% to Rs 806.7 crores, the Net profit grew in a very robust fashion up 164% to Rs 69.3 crores. The operating margin went up a whopping 3.7% to 16.6% mainly due to the profitable global orders from Exxon Mobil and Kinder Morgan.
Reasons to buy:
- Part of high growth sector. The oil and energy sector is becoming very big in India and India is emerging as the pipe manufacturing hub due to its lower cost of production. Welspun is the largest player in this segment.
- Welspun can boast of an impressive client list which includes many overseas giants, apart from Indian majors.
- The company is completing a backward integration project with an installation of a plate mill. This will expand the margins and boost the bottom line for 2007-08.
- The company has commissioned a plant in the US to service that profitable market.
- The profit growth has not been fully discounted in the valuation on a forward PE basis. The company is attractively priced 16 times its 2007-08 earnings. This compares favourably with a profit growth of more than 100% which Welspun is witnessing.
Welspun Gujarat Stahl Rohren Ltd
Welspun is a leading player in Steel Pipe and Tube manufacturing sector. It caters to the growing oil and energy industry, both domestically and overseas. It has shown spectacular growth and has also expanded and integrated its production capacities fast.
Financial Highlights:
For the first quarter of FY-2007-08 the company put up an impressive performance. While the revenues grew 50.5% to Rs 806.7 crores, the Net profit grew in a very robust fashion up 164% to Rs 69.3 crores. The operating margin went up a whopping 3.7% to 16.6% mainly due to the profitable global orders from Exxon Mobil and Kinder Morgan.
Reasons to buy:
- Part of high growth sector. The oil and energy sector is becoming very big in India and India is emerging as the pipe manufacturing hub due to its lower cost of production. Welspun is the largest player in this segment.
- Welspun can boast of an impressive client list which includes many overseas giants, apart from Indian majors.
- The company is completing a backward integration project with an installation of a plate mill. This will expand the margins and boost the bottom line for 2007-08.
- The company has commissioned a plant in the US to service that profitable market.
- The profit growth has not been fully discounted in the valuation on a forward PE basis. The company is attractively priced 16 times its 2007-08 earnings. This compares favourably with a profit growth of more than 100% which Welspun is witnessing.
Sejal Architechtural Glass Ltd - Multibagger
Sejal Architechtural Glass Ltd (Rs 24 Buy)
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor (art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
Investment Rationale
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs 4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor (art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
Investment Rationale
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs 4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
VBC Ferro Alloys Ltd - Multibagger
VBC has invested Rs 135 crores for 30% stake in Konaseema Gas Power project which has put up a 445 MW Natural Gas based power project at a total investment of over Rs 1400 crores. Start of commercial production of Konaseema project will lead to substantial benefits to the shareholders of VBC Ferro given its small Equity Capital of Rs 4.2 crores & may lead to an upward rerating of VBC Ferro stock.
VBC Ferro Alloys Ltd.
VBC has invested Rs 135 crores for 30% stake in Konaseema Gas Power project which has put up a 445 MW Natural Gas based power project at a total investment of over Rs 1400 crores. Start of commercial production of Konaseema project will lead to substantial benefits to the shareholders of VBC Ferro given its small Equity Capital of Rs 4.2 crores & may lead to an upward rerating of VBC Ferro stock.
VBC Ferro Alloys Ltd. (VBCFAL) was incorporated in 1981 and set up a plant for production of 10,000 TPA of Ferro Silicon at Rudraram Village, Medak District, Andhra Pradesh in the year 1984. The plant went into commercial production in April 1985. VBCFAL is currently operating a Ferro Alloy Plant comprising of 2 nos. sub-merged arc furnaces of 16.5 MVA capacities each having a installed capacity to produce 10,000 MTPA of Ferro Silicon, 31,500 MTPA of Ferro Chrome and 27,000 MTPA of Silicon Manganese /Ferro Manganese.
The factory premise is situated on land measuring 80 acres (approx.) at Rudraram. The factory premises has all the facilities like raw material handling system, pollution control system, Pump House, Laboratories, fully automated control system for furnaces & weighing-batching, EOT Cranes, and In-house Power Sub-station with 25 MVA Power Transformer etc. It is situated close to 132 KVA power line of AP Transco; the raw materials required are available within radius of 200/250 KM.
The Company is currently selling its products directly through its own sales depot located at Kolkata, New Delhi and Chennai and through its agents. The Company sells its products through direct tendering process where it has been enlisted as registered vendors. The Company is presently exporting to countries like China, Japan, Korea, Singapore, Canada, Itly, Taiwan, Turkey, Abu Dhabi, Germany, Mexico, Greece etc.
Some of the major Indian clients of VBCFAL include Panchamahal Steel Limited, Baroda, Sunflag Iron & Steel Limited, Nagpur, Mahindra & Mahindra Limited, Mumbai, Shah Alloys Limited, Ahmedabad, Jindal Steel & Power Limited, Raigarh, Jayaswals Nico Limited, Nagpur, Bharat Heavy Electrical Ltd., Hyderabad, Mishra Dhatu Nigam Ltd., Hyderabad, Visakhapatnam Steel Plant, Visakhapatnam, Indo German International Pvt. Ltd., New Delhi and Nilion Exports Limited, Mumbai.
INVESTMENT IN POWER PROJECTS
VBC Ferro has invested substantial amounts in Power Projects of the group.
Konaseema Gas Power Ltd. – VBC Ferro has invested Rs 135 crores towards Equity Capital of Konaseema Gas Power Ltd. and holds approximately 30% of the Equity of Konaseema. Konaseema has set up a 445 MW Gas Based power project. The total project cost of around Rs.1400 crores has been funded through Equity of Rs 440 crores and the balance as debt. The project has been commissioned, however it is not operational due to non availability of Natural Gas. The plant is expected to be operational by Mar 2009 with new gas availability from ONGC & Reliance.
Orissa Power Consortium Ltd. – The company has invested Rs 6.17 crores towards Equity of Orissa Power Consortium Ltd., which is setting up a 20MW Dam based Hydro Power project in Orissa.
CONCLUSION
Investment in the shares of VBC Ferro is recommended for investors with High Risk appetite in view of various risks and uncertainties attached, however the stock holds potential for high returns.
First the Risks
The fortunes of company’s core business of Ferro Alloys is dependent to a great extent on global prices of raw material and finished products and in the event of any adverse movement in the price of either, the financials of the company may get affected.
The company has made substantial investments in Konaseema Gas Power Ltd.. The power project which has not been operational till date due to non availability of Natural Gas is expected to be operational by March 2009 with new gas availability from ONGC and Reliance in the KG Basin. However in the event of delays in availability of Natural Gas, the financials of Konaseema may be adversely impacted which will impact valuations of VBC Ferro.
The other major risk is the contingent liabilities in the form of various corporate guarantees given by VBC Ferro Alloys for various group companies.
Coming to the positive side
VBC Ferro Alloys is involved in the manufacture of Ferro Alloys. The company has its plant located at Medak Distt. Of Andhra Pradesh on land area of around 80 acres.
The company has made investments of Rs 135 crores in the Equity Capital of Konaseema Gas Power Ltd. and holds approximately 30% of the Equity of Konaseema. Konaseema has set up a 445 MW Gas Based power project. The total project cost of around Rs 1400 crores has been funded through Equity of Rs 440 crores and the balance as debt.
The power project which has not been operational till date to non availability of Natural Gas is expected to be operational by March 2009 with new gas availability from ONGC and Reliance in the KG Basin. The start of commercial operations of Konaseema Gas Power project would be a big positive for shareholders of VBC Ferro since further value unlocking can happen when Konaseema goes public or inducts a financial investor.
The management’s optimism is evident from the fact that Konaseema has embarked upon further expansion of its capacity to 1265 MW by setting up additional capacity of 820 MW in Stage-II. The financial closure of Stage-II is at an advanced stage.
VBC Ferro has a small Equity of Rs 4.20 crores and high Book Value of Rs 322. The company has a market cap of around Rs 97 crores and Unsecured loans of Rs 27 crores, the enterprise value of the company is less than the investments of Rs 144 crores that it has made in Associate companies namely Konaseema (Rs 135 crores) and Orissa Power Consortium Ltd. (Rs 6.17 crores).
The benefits to the shareholders of VBC Ferro will be immense after the operation of Konaseema plant given a very small Equity Capital of Rs 4.20 crores.
VBC Ferro Alloys Ltd.
VBC has invested Rs 135 crores for 30% stake in Konaseema Gas Power project which has put up a 445 MW Natural Gas based power project at a total investment of over Rs 1400 crores. Start of commercial production of Konaseema project will lead to substantial benefits to the shareholders of VBC Ferro given its small Equity Capital of Rs 4.2 crores & may lead to an upward rerating of VBC Ferro stock.
VBC Ferro Alloys Ltd. (VBCFAL) was incorporated in 1981 and set up a plant for production of 10,000 TPA of Ferro Silicon at Rudraram Village, Medak District, Andhra Pradesh in the year 1984. The plant went into commercial production in April 1985. VBCFAL is currently operating a Ferro Alloy Plant comprising of 2 nos. sub-merged arc furnaces of 16.5 MVA capacities each having a installed capacity to produce 10,000 MTPA of Ferro Silicon, 31,500 MTPA of Ferro Chrome and 27,000 MTPA of Silicon Manganese /Ferro Manganese.
The factory premise is situated on land measuring 80 acres (approx.) at Rudraram. The factory premises has all the facilities like raw material handling system, pollution control system, Pump House, Laboratories, fully automated control system for furnaces & weighing-batching, EOT Cranes, and In-house Power Sub-station with 25 MVA Power Transformer etc. It is situated close to 132 KVA power line of AP Transco; the raw materials required are available within radius of 200/250 KM.
The Company is currently selling its products directly through its own sales depot located at Kolkata, New Delhi and Chennai and through its agents. The Company sells its products through direct tendering process where it has been enlisted as registered vendors. The Company is presently exporting to countries like China, Japan, Korea, Singapore, Canada, Itly, Taiwan, Turkey, Abu Dhabi, Germany, Mexico, Greece etc.
Some of the major Indian clients of VBCFAL include Panchamahal Steel Limited, Baroda, Sunflag Iron & Steel Limited, Nagpur, Mahindra & Mahindra Limited, Mumbai, Shah Alloys Limited, Ahmedabad, Jindal Steel & Power Limited, Raigarh, Jayaswals Nico Limited, Nagpur, Bharat Heavy Electrical Ltd., Hyderabad, Mishra Dhatu Nigam Ltd., Hyderabad, Visakhapatnam Steel Plant, Visakhapatnam, Indo German International Pvt. Ltd., New Delhi and Nilion Exports Limited, Mumbai.
INVESTMENT IN POWER PROJECTS
VBC Ferro has invested substantial amounts in Power Projects of the group.
Konaseema Gas Power Ltd. – VBC Ferro has invested Rs 135 crores towards Equity Capital of Konaseema Gas Power Ltd. and holds approximately 30% of the Equity of Konaseema. Konaseema has set up a 445 MW Gas Based power project. The total project cost of around Rs.1400 crores has been funded through Equity of Rs 440 crores and the balance as debt. The project has been commissioned, however it is not operational due to non availability of Natural Gas. The plant is expected to be operational by Mar 2009 with new gas availability from ONGC & Reliance.
Orissa Power Consortium Ltd. – The company has invested Rs 6.17 crores towards Equity of Orissa Power Consortium Ltd., which is setting up a 20MW Dam based Hydro Power project in Orissa.
CONCLUSION
Investment in the shares of VBC Ferro is recommended for investors with High Risk appetite in view of various risks and uncertainties attached, however the stock holds potential for high returns.
First the Risks
The fortunes of company’s core business of Ferro Alloys is dependent to a great extent on global prices of raw material and finished products and in the event of any adverse movement in the price of either, the financials of the company may get affected.
The company has made substantial investments in Konaseema Gas Power Ltd.. The power project which has not been operational till date due to non availability of Natural Gas is expected to be operational by March 2009 with new gas availability from ONGC and Reliance in the KG Basin. However in the event of delays in availability of Natural Gas, the financials of Konaseema may be adversely impacted which will impact valuations of VBC Ferro.
The other major risk is the contingent liabilities in the form of various corporate guarantees given by VBC Ferro Alloys for various group companies.
Coming to the positive side
VBC Ferro Alloys is involved in the manufacture of Ferro Alloys. The company has its plant located at Medak Distt. Of Andhra Pradesh on land area of around 80 acres.
The company has made investments of Rs 135 crores in the Equity Capital of Konaseema Gas Power Ltd. and holds approximately 30% of the Equity of Konaseema. Konaseema has set up a 445 MW Gas Based power project. The total project cost of around Rs 1400 crores has been funded through Equity of Rs 440 crores and the balance as debt.
The power project which has not been operational till date to non availability of Natural Gas is expected to be operational by March 2009 with new gas availability from ONGC and Reliance in the KG Basin. The start of commercial operations of Konaseema Gas Power project would be a big positive for shareholders of VBC Ferro since further value unlocking can happen when Konaseema goes public or inducts a financial investor.
The management’s optimism is evident from the fact that Konaseema has embarked upon further expansion of its capacity to 1265 MW by setting up additional capacity of 820 MW in Stage-II. The financial closure of Stage-II is at an advanced stage.
VBC Ferro has a small Equity of Rs 4.20 crores and high Book Value of Rs 322. The company has a market cap of around Rs 97 crores and Unsecured loans of Rs 27 crores, the enterprise value of the company is less than the investments of Rs 144 crores that it has made in Associate companies namely Konaseema (Rs 135 crores) and Orissa Power Consortium Ltd. (Rs 6.17 crores).
The benefits to the shareholders of VBC Ferro will be immense after the operation of Konaseema plant given a very small Equity Capital of Rs 4.20 crores.
Mahindra Lifespace Developers - Multibagger
Mahindra Lifespace Developers CMP : 94.80
Q1FY09 Results – Key highlights:
Subdued Quarterly Performance:
The top-line for the quarter grew by 38.4% y-o-y to Rs. 48.21 crore. The EBITDA margins were down by 130 bps y-o-y and 2,140 bps q-o-q, due to high construction cost and revenue booking from low margin properties. Net profit was Rs 9.75 crore, 20.1% lower y-o-y but when adjusted for one time gain of 4.87 crore (sale of investment) in Q1FY08 it is up 33.0% y-o-y.
SEZ Update:
1) Chennai SEZ, 20 companies have become operational as of Q1FY09 and current employee base is 8,870. MLL is likely to unlock value from its Chennai SEZ project through development and sales of premium residential and commercial properties. The project has reached an advanced stage of development with the projected employee base expected to be 44,550 in 2010 and this would provide a captive demand for its residential and commercial projects. MLL through its 51:49 JV with Arch capital would start development of ~750 homes over 55 acres in Q3FY09.
2) Jaipur SEZ The Jaipur SEZ is also undergoing rapid development with ~2,600 acre of total 3,000 acre already acquired. The company has received notification for its IT SEZ and operations would commence in Q2FY09. Jaipur SEZ land has been acquired at very attractive price and we believe the project would start contributing significantly to revenues in the next 1-2 years.
3) During 1QFY09, the company received notification for its 52-acre Biotech SEZ in Thane.
Residential Segment Going Strong- MLL launched residential projects in Mumbai and Faridabad in the quarter. MLL led consortium also won a bid to develop 1.6 msf of residential space at Mihan SEZ Nagpur for Rs 330 psf
Valuations:
At the CMP of Rs 467.80, Mahindra Lifespaces is trading at around 17.3x FY09E EPS. MLL had a subdued quarter with lower sales and margins. MLL has a debt of only Rs 285.5 crore in its consolidated books with Rs 246.6 crore being in Jaipur SEZ. It has a D/E ratio of only 0.3x which is a big positive especially in current high interest rate environment.
Looking at the strong growth prospects of all its verticals, we recommend a BUY with a target price of Rs 594. At the target price the stock would be valued at 21.8 x FY09E EPS of Rs 27.29, implying an upside potential of 26.2%.
Q1FY09 Results – Key highlights:
Subdued Quarterly Performance:
The top-line for the quarter grew by 38.4% y-o-y to Rs. 48.21 crore. The EBITDA margins were down by 130 bps y-o-y and 2,140 bps q-o-q, due to high construction cost and revenue booking from low margin properties. Net profit was Rs 9.75 crore, 20.1% lower y-o-y but when adjusted for one time gain of 4.87 crore (sale of investment) in Q1FY08 it is up 33.0% y-o-y.
SEZ Update:
1) Chennai SEZ, 20 companies have become operational as of Q1FY09 and current employee base is 8,870. MLL is likely to unlock value from its Chennai SEZ project through development and sales of premium residential and commercial properties. The project has reached an advanced stage of development with the projected employee base expected to be 44,550 in 2010 and this would provide a captive demand for its residential and commercial projects. MLL through its 51:49 JV with Arch capital would start development of ~750 homes over 55 acres in Q3FY09.
2) Jaipur SEZ The Jaipur SEZ is also undergoing rapid development with ~2,600 acre of total 3,000 acre already acquired. The company has received notification for its IT SEZ and operations would commence in Q2FY09. Jaipur SEZ land has been acquired at very attractive price and we believe the project would start contributing significantly to revenues in the next 1-2 years.
3) During 1QFY09, the company received notification for its 52-acre Biotech SEZ in Thane.
Residential Segment Going Strong- MLL launched residential projects in Mumbai and Faridabad in the quarter. MLL led consortium also won a bid to develop 1.6 msf of residential space at Mihan SEZ Nagpur for Rs 330 psf
Valuations:
At the CMP of Rs 467.80, Mahindra Lifespaces is trading at around 17.3x FY09E EPS. MLL had a subdued quarter with lower sales and margins. MLL has a debt of only Rs 285.5 crore in its consolidated books with Rs 246.6 crore being in Jaipur SEZ. It has a D/E ratio of only 0.3x which is a big positive especially in current high interest rate environment.
Looking at the strong growth prospects of all its verticals, we recommend a BUY with a target price of Rs 594. At the target price the stock would be valued at 21.8 x FY09E EPS of Rs 27.29, implying an upside potential of 26.2%.
Friday, January 30, 2009
IVRCL Infra : Multibagger Stocks
IVRCL Infra : BSE ID : 530773 NSE ID : IVRCLINFRA Reco Price Rs. 112.05 CMP: Rs.109.60 (Loss 2.19%)
IVRCL has shown a good financial performance for the FY’08 and for the second quarter FY’09. The company has a strong order book and currently it is undervalued, making the stock a good investment.
IVRCL Infrastructure and Projects
Company Profile:
IVRCL operates in infrastructure sectors namely Water & Environment, Transportation, Buildings and Power. It has a large client base, which includes public sector clients (ONGC, BHEL, IOC etc), private sector clients (Birla Institute of Technology, Tata projects, Jindal Steel & Power) and Central and State Govt. clients (Airport Authority, Indian Railways, Ministry of Defence etc). Its operations cut across geographical frontiers of the sub-continent, with headquarters in Hyderabad and administrative offices in Chennai, Cochin, Bangalore, Pune, Kolkata, Jodhpur, Chattisgarh, Ahmedabad and Goa.
Construction Sector:
Construction is the second largest economic activity after agriculture in India. Construction sector can be classified into three segments: -
1. Real Estate: The sector has suffered a meltdown in 2008 due to high interest rates and demand destruction. However we believe it will improve in the coming months due to the decrease in property prices, falling interest rates on home loans and favorable tax treatment.
2. Infrastructure: This constitutes roads, water, ports, airports, freight corridor, power, etc. Investment in the infrastructure is robust and is at the center of the various stimuli that the Government is offering.
3. Industrial Construction: This constitutes sectors like steel, textiles, fertilizers, and oil and gas refineries. This is where the maximum fall in demand is taking place and worries remain.
Construction sector uses raw materials like steel, cement apart from using large working capital. The stock prices of leading companies dropped by an average 84% for the 6-months to early September 2008 due to the credit crises, slump in the housing market, increase in the prices of construction material, increase in rate of interest and increase in the prices of oil. But due to the decrease in interest rate, inflation and cut in the prices of steel, the sector is beginning to gain strength and deserves an upgrade.
Financial Position:
For the FY’08 the Net sales increased by 54% to Rs 3867 crore from Rs 2506 crore. The company derived Rs 3693 crore of its revenues from Engineering and Construction and about Rs 259 crore from Real Estate in the FY’08. The EBITDA also showed an improvement by 91.5% to Rs 572 crore. The Net profit registered a growth of 74% to Rs 283.4 crore from Rs 163 crore.
For the second quarter of FY’09 the net revenue increased by an impressive 65% to Rs 1137 crore, due to faster execution of projects. The EBITDA grew by 69% to Rs 91.28 crore. The net profit showed an excellent improvement by 90% to Rs 67 crore from Rs 35.25 crore. This was due to high revenues and lower tax rate. Interest cost however more than doubled during the quarter due to high borrowings. The order booked during the second quarter FY’09 was worth Rs 2586.6 crore and backlog of orders during the same period was worth Rs 13,800 crore.
The total net worth in FY’08 increased to Rs 2480 crore. The company also has stock options worth Rs 1 crore. The secured and unsecured loans, which the company has, were worth Rs 1725 crore. On the asset side a major portion consisted of current assets. The Debt/Equity ratio as on 31st Mar 08 stood at 0.66.
During the year, some of the Foreign Currency Convertible Bond (FCCB) holders have exercised their option of converting their bonds into equity shares. Till the date of the Balance Sheet, amounts aggregating to US $ 18.10 million worth of bonds were converted into 3,545,284 equity shares of the face value of Rs.2 each. Rs 7.1 crore has been debited to the Profit and Loss account during the year towards foreign exchange translation difference on Foreign Currency Convertible Bonds and deposits in foreign currency.
Subsidiaries:
IVRCL’s major subsidiaries are:-
IVR prime Urban Developers Ltd: IVR Prime is dedicated to creating luxury-intensive urban infrastructure. Its net profit for the FY’08 increased by a spectacular 750% to Rs 176 crore from Rs 20.6 crore in FY’07.
Hindustan Dorr-Oliver Ltd (HDO): Hindustan Dorr Oliver Limited (HDO) is an Indian EPC company having its core business activities in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications. The company’s core business focus is on Water Management. Its net profit for the FY’08 increased by 47% to Rs 22.64 crs. Sector wise order booked in FY 2007-08 accounts for 54% in environment, 27% in minerals, 14% in fertilizers and 5% in pulp and paper. IVR Prime and HDO are listed subsidiaries on NSE.
Chennai Water Desalination Ltd: Executing the most prestigious contract of Chennai Sea Water Desalination Plant Project at Minjure, Chennai.
Alkor Petroo Ltd: is a Hyderabad based subsidiary of IVRCL engaged in Oil & Gas Exploration & Production. It has an association with Gujarat State Petroleum Corporation Ltd (GSPCL).
Investment Positives:
IVRCL has a very strong order book, making it an attractive investment. The order book remains extremely healthy at Rs 15500 crore. Recently the company bagged a few more orders, latest being from Bangalore Metro Rail Corp, IOC and Karnataka Water Supply Board in the first week of Jan 09. This will inflate the order book to a massive Rs 16000 crore approx. It has the best Order book to Turnover ratio in the industry. Also, NHAI has been going slow on orders in the last two years and it is expected to complete orders for more than 6000 kms in the one or two months- thrice the orders placed in 2007-08. IVRCL is expected to be one of the biggest beneficiaries of this.
Steel companies announced a price cut during Sep 2008, which will help reduce the cost of material for construction companies. The price of the cement is also expected to ease in the future. This will shore up margins considerably.
Decreasing rates of interest and easing inflation is bound to create a positive impact on the construction companies. With the decrease in rate of interest the cost of borrowing has reduced to a great extent, making the condition favorable for taking more debt to finance the projects.
Mid cap stocks such as IVRCL are exposed to infrastructure segment, which is expected to grow in the coming future. India, which is Asia’s 3rd largest economy, is in need of greater infrastructure spending for the next 10 years for economic expansion. India has allocated huge expenditure for the building of airports, highways and for the Commonwealth Games in 2010.
Concerns:
Any delays in implementation of the projects undertaken by the company may affect its profitability.
For more funding requirement the company has to depend on leverage, which will cause increase in the rate of interest to be paid on debt. Increasing interest costs may have a dampening affect on the profits.
There is a risk that the government could change certain regulations for the construction sector. The biggest threat relates to availability of 80IA benefit to construction companies. IVRCL has got an award from IYAT in this regard. We believe the government is not likely to enact unfavorable regulations for the sector given the present environment.
The table clearly places IVRCL as one of the most attractive bets in the Construction space. The company is growing at a phenomenal pace (change in Net profit of 74%) vis-à-vis its competitors and boasts of some fantastic orders in its kitty.
Valuation:
IVRCL has shown a good financial performance for the FY’08 and for the second quarter FY’09. The company has a strong order book and currently it is undervalued, making the stock a good investment. In our view it is one of the best plays in the Indian infrastructure. We recommend the stock as with a target price of Rs 250.
IVRCL has shown a good financial performance for the FY’08 and for the second quarter FY’09. The company has a strong order book and currently it is undervalued, making the stock a good investment.
IVRCL Infrastructure and Projects
Company Profile:
IVRCL operates in infrastructure sectors namely Water & Environment, Transportation, Buildings and Power. It has a large client base, which includes public sector clients (ONGC, BHEL, IOC etc), private sector clients (Birla Institute of Technology, Tata projects, Jindal Steel & Power) and Central and State Govt. clients (Airport Authority, Indian Railways, Ministry of Defence etc). Its operations cut across geographical frontiers of the sub-continent, with headquarters in Hyderabad and administrative offices in Chennai, Cochin, Bangalore, Pune, Kolkata, Jodhpur, Chattisgarh, Ahmedabad and Goa.
Construction Sector:
Construction is the second largest economic activity after agriculture in India. Construction sector can be classified into three segments: -
1. Real Estate: The sector has suffered a meltdown in 2008 due to high interest rates and demand destruction. However we believe it will improve in the coming months due to the decrease in property prices, falling interest rates on home loans and favorable tax treatment.
2. Infrastructure: This constitutes roads, water, ports, airports, freight corridor, power, etc. Investment in the infrastructure is robust and is at the center of the various stimuli that the Government is offering.
3. Industrial Construction: This constitutes sectors like steel, textiles, fertilizers, and oil and gas refineries. This is where the maximum fall in demand is taking place and worries remain.
Construction sector uses raw materials like steel, cement apart from using large working capital. The stock prices of leading companies dropped by an average 84% for the 6-months to early September 2008 due to the credit crises, slump in the housing market, increase in the prices of construction material, increase in rate of interest and increase in the prices of oil. But due to the decrease in interest rate, inflation and cut in the prices of steel, the sector is beginning to gain strength and deserves an upgrade.
Financial Position:
For the FY’08 the Net sales increased by 54% to Rs 3867 crore from Rs 2506 crore. The company derived Rs 3693 crore of its revenues from Engineering and Construction and about Rs 259 crore from Real Estate in the FY’08. The EBITDA also showed an improvement by 91.5% to Rs 572 crore. The Net profit registered a growth of 74% to Rs 283.4 crore from Rs 163 crore.
For the second quarter of FY’09 the net revenue increased by an impressive 65% to Rs 1137 crore, due to faster execution of projects. The EBITDA grew by 69% to Rs 91.28 crore. The net profit showed an excellent improvement by 90% to Rs 67 crore from Rs 35.25 crore. This was due to high revenues and lower tax rate. Interest cost however more than doubled during the quarter due to high borrowings. The order booked during the second quarter FY’09 was worth Rs 2586.6 crore and backlog of orders during the same period was worth Rs 13,800 crore.
The total net worth in FY’08 increased to Rs 2480 crore. The company also has stock options worth Rs 1 crore. The secured and unsecured loans, which the company has, were worth Rs 1725 crore. On the asset side a major portion consisted of current assets. The Debt/Equity ratio as on 31st Mar 08 stood at 0.66.
During the year, some of the Foreign Currency Convertible Bond (FCCB) holders have exercised their option of converting their bonds into equity shares. Till the date of the Balance Sheet, amounts aggregating to US $ 18.10 million worth of bonds were converted into 3,545,284 equity shares of the face value of Rs.2 each. Rs 7.1 crore has been debited to the Profit and Loss account during the year towards foreign exchange translation difference on Foreign Currency Convertible Bonds and deposits in foreign currency.
Subsidiaries:
IVRCL’s major subsidiaries are:-
IVR prime Urban Developers Ltd: IVR Prime is dedicated to creating luxury-intensive urban infrastructure. Its net profit for the FY’08 increased by a spectacular 750% to Rs 176 crore from Rs 20.6 crore in FY’07.
Hindustan Dorr-Oliver Ltd (HDO): Hindustan Dorr Oliver Limited (HDO) is an Indian EPC company having its core business activities in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications. The company’s core business focus is on Water Management. Its net profit for the FY’08 increased by 47% to Rs 22.64 crs. Sector wise order booked in FY 2007-08 accounts for 54% in environment, 27% in minerals, 14% in fertilizers and 5% in pulp and paper. IVR Prime and HDO are listed subsidiaries on NSE.
Chennai Water Desalination Ltd: Executing the most prestigious contract of Chennai Sea Water Desalination Plant Project at Minjure, Chennai.
Alkor Petroo Ltd: is a Hyderabad based subsidiary of IVRCL engaged in Oil & Gas Exploration & Production. It has an association with Gujarat State Petroleum Corporation Ltd (GSPCL).
Investment Positives:
IVRCL has a very strong order book, making it an attractive investment. The order book remains extremely healthy at Rs 15500 crore. Recently the company bagged a few more orders, latest being from Bangalore Metro Rail Corp, IOC and Karnataka Water Supply Board in the first week of Jan 09. This will inflate the order book to a massive Rs 16000 crore approx. It has the best Order book to Turnover ratio in the industry. Also, NHAI has been going slow on orders in the last two years and it is expected to complete orders for more than 6000 kms in the one or two months- thrice the orders placed in 2007-08. IVRCL is expected to be one of the biggest beneficiaries of this.
Steel companies announced a price cut during Sep 2008, which will help reduce the cost of material for construction companies. The price of the cement is also expected to ease in the future. This will shore up margins considerably.
Decreasing rates of interest and easing inflation is bound to create a positive impact on the construction companies. With the decrease in rate of interest the cost of borrowing has reduced to a great extent, making the condition favorable for taking more debt to finance the projects.
Mid cap stocks such as IVRCL are exposed to infrastructure segment, which is expected to grow in the coming future. India, which is Asia’s 3rd largest economy, is in need of greater infrastructure spending for the next 10 years for economic expansion. India has allocated huge expenditure for the building of airports, highways and for the Commonwealth Games in 2010.
Concerns:
Any delays in implementation of the projects undertaken by the company may affect its profitability.
For more funding requirement the company has to depend on leverage, which will cause increase in the rate of interest to be paid on debt. Increasing interest costs may have a dampening affect on the profits.
There is a risk that the government could change certain regulations for the construction sector. The biggest threat relates to availability of 80IA benefit to construction companies. IVRCL has got an award from IYAT in this regard. We believe the government is not likely to enact unfavorable regulations for the sector given the present environment.
The table clearly places IVRCL as one of the most attractive bets in the Construction space. The company is growing at a phenomenal pace (change in Net profit of 74%) vis-à-vis its competitors and boasts of some fantastic orders in its kitty.
Valuation:
IVRCL has shown a good financial performance for the FY’08 and for the second quarter FY’09. The company has a strong order book and currently it is undervalued, making the stock a good investment. In our view it is one of the best plays in the Indian infrastructure. We recommend the stock as with a target price of Rs 250.
Marico : Multibagger Stocks
Marico : BSE ID : 531642 NSE ID : MARICO Reco Price Rs. 59.80 CMP: Rs.58.05 (Loss 2.93%)
Marico is expected to witness 20% CAGR in net profit over FY0811E. Operating margin is likely to remain under pressure due to firm raw material prices (copra, sunflower). However, it will mitigate input cost impact by implementing material price hikes across products.
Marico
Transformation into a complete FMCG player:
Marico dominates the Rs 13 billion branded coconut oil market with flagship brand Parachute (48% market share) and enjoys No.2 position in the edible oils market with brands Saffola and Sweekar. Over the years, Marico has made constant efforts for diversifying its revenue base into other categories like hair care (Parachute Therapie), skin care (Kaya & Sundari), soaps (Parachute Jasmine, Manjal, Camelia & Aromatic) and functional foods (Saffola Atta, Saffola Diabetes Atta Mix). As a result, its heavy dependence on the Parachute brand has reduced sharply (from 75% of revenues in 1990's to 40% in Q2 FY09). We believe this re-positioning will strengthen the company's brand equity and help transform itself into a complete FMCG player.
variants), Edible
oil (Saffola,
Sweekar), Others
(Manjal, Revive,
Medikar)
Kaya Skin Clinics - a highly scalable model:
Kaya Skin Clinics has made a name for itself in the advanced skin care segment. With 77 clinics (67 in India and 10 in the Middle East), the Kaya business has broken even at the operating level with operating profit of Rs 50 milion (revenues Rs 1 billion in FY08, Rs 760 million in H1 FY09). Apart from skin care solutions, Marico also markets cosmetic dermatological skin care products and offerings under the Kaya brand. The product sales now comprise 12% of Kaya's revenues. The venture is a highly scalable one and represents an avenue of steady revenue stream. In an attempt to tap the fast-expanding organised weight-loss market, Marico has launched 'holistic weight loss' centers under the Kaya Life brand in FY08. Currently, there are three centers in Mumbai under this venture. This venture offers weight loss solutions that are customized to individuals and is expected to start contributing to net earnings from FY10.
Rising share of international business to drive growth:
Marico's strategy of expanding into related international markets with significant potential demand for its existing products such as Bangladesh and Middle East has paid off handsomely. The international business (main areas of operations in Bangladesh, MENA and South Africa) currently contributes 16% (Rs 3 billion) to the total turnover. It has successfully launched various product variants by capitalizing on mother brand 'Parachute' and is gradually increasing its presence in the overseas markets. (Parachute coconut oil has achieved a leadership position in Bangladesh with 70% market share while, in the Middle East market, Parachute cream has achieved 29% and 15% market share in the UAE and KSA respectively.) Marico's product variants have started gaining strong volume market share across the globe.We believe the rising contribution from international business and potential acquisitions will help Marico in maintaining consistent growth.
Valuation and recommendation:
With 25% of the company's turnover coming from the rural market, a sizeable portion of Marico's revenues are likely to be resilient in the current uncertain environment. This is because rural India has benefited from years of good monsoon, farm loan waiver and incomes have been rising at a faster pace than urban India.
We expect Marico to witness 20% CAGR in net profit over FY0811E. Operating margin is likely to remain under pressure due to firm raw material prices (copra, sunflower). However, we believe it will mitigate input cost impact by implementing material price hikes across products. The stock is trading at around 12.9x FY11E EPS of Rs 4.4. We recommend BUY with a price target of Rs 69, an upside of 22.1%.
Marico is expected to witness 20% CAGR in net profit over FY0811E. Operating margin is likely to remain under pressure due to firm raw material prices (copra, sunflower). However, it will mitigate input cost impact by implementing material price hikes across products.
Marico
Transformation into a complete FMCG player:
Marico dominates the Rs 13 billion branded coconut oil market with flagship brand Parachute (48% market share) and enjoys No.2 position in the edible oils market with brands Saffola and Sweekar. Over the years, Marico has made constant efforts for diversifying its revenue base into other categories like hair care (Parachute Therapie), skin care (Kaya & Sundari), soaps (Parachute Jasmine, Manjal, Camelia & Aromatic) and functional foods (Saffola Atta, Saffola Diabetes Atta Mix). As a result, its heavy dependence on the Parachute brand has reduced sharply (from 75% of revenues in 1990's to 40% in Q2 FY09). We believe this re-positioning will strengthen the company's brand equity and help transform itself into a complete FMCG player.
variants), Edible
oil (Saffola,
Sweekar), Others
(Manjal, Revive,
Medikar)
Kaya Skin Clinics - a highly scalable model:
Kaya Skin Clinics has made a name for itself in the advanced skin care segment. With 77 clinics (67 in India and 10 in the Middle East), the Kaya business has broken even at the operating level with operating profit of Rs 50 milion (revenues Rs 1 billion in FY08, Rs 760 million in H1 FY09). Apart from skin care solutions, Marico also markets cosmetic dermatological skin care products and offerings under the Kaya brand. The product sales now comprise 12% of Kaya's revenues. The venture is a highly scalable one and represents an avenue of steady revenue stream. In an attempt to tap the fast-expanding organised weight-loss market, Marico has launched 'holistic weight loss' centers under the Kaya Life brand in FY08. Currently, there are three centers in Mumbai under this venture. This venture offers weight loss solutions that are customized to individuals and is expected to start contributing to net earnings from FY10.
Rising share of international business to drive growth:
Marico's strategy of expanding into related international markets with significant potential demand for its existing products such as Bangladesh and Middle East has paid off handsomely. The international business (main areas of operations in Bangladesh, MENA and South Africa) currently contributes 16% (Rs 3 billion) to the total turnover. It has successfully launched various product variants by capitalizing on mother brand 'Parachute' and is gradually increasing its presence in the overseas markets. (Parachute coconut oil has achieved a leadership position in Bangladesh with 70% market share while, in the Middle East market, Parachute cream has achieved 29% and 15% market share in the UAE and KSA respectively.) Marico's product variants have started gaining strong volume market share across the globe.We believe the rising contribution from international business and potential acquisitions will help Marico in maintaining consistent growth.
Valuation and recommendation:
With 25% of the company's turnover coming from the rural market, a sizeable portion of Marico's revenues are likely to be resilient in the current uncertain environment. This is because rural India has benefited from years of good monsoon, farm loan waiver and incomes have been rising at a faster pace than urban India.
We expect Marico to witness 20% CAGR in net profit over FY0811E. Operating margin is likely to remain under pressure due to firm raw material prices (copra, sunflower). However, we believe it will mitigate input cost impact by implementing material price hikes across products. The stock is trading at around 12.9x FY11E EPS of Rs 4.4. We recommend BUY with a price target of Rs 69, an upside of 22.1%.
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