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)
Monday, March 30, 2009
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.
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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.
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