A Time Communications Publication 1 Caution: Please note that your copy/access to our website is for your exclusive use only. Any attempt to share your access to our website or forwarding your copy to a non‐subscriber will disqualify your membership and we will be compelled to stop your supply and forfeit your subscription thereafter without any refund to you. T I M E S A TIME COMMUNICATIONS PUBLICATION VOL. XXIII No. 34 Monday, 30 June – 6 July 2014 Pages 20 Rs.15 Markets struggle at higher levels By Sanjay R. Bhatia The markets continued to struggle at higher levels and displayed a range bound trend with a negative bias. The FIIs remained net buyers in the cash segment but were net sellers in the derivatives segment. Domestic institutional investors (DIIs) continued to press sales and were net sellers for the week although they did turn into net buyers on some days. The Rupee continued to trade above the 60 mark against the US Dollar. The breadth of the market remained positive although the benchmark indices fell indicating that buying was concentrated in mid‐cap and small‐cap stocks while selling was witnessed in index heavyweights. The volumes recorded during the week remained low indicating lack of interest among participants or indecisiveness due to uncertainty of trend ahead of the Union Budget. Global market cues, too, remained subdued and were range bound with no major triggers for a broad based rally. Crude prices, on the other hand, sustained at higher levels due to the continuing tensions in Iraq. On the domestic front, the Central government deferred its decision on oil and gas prices by another three months. Technically, the prevailing negative technical conditions weighed on the market sentiment leading to selling pressure. The Stochastic, MACD, RSI and KST are all placed below their respective averages on the daily charts. Further, the RSI and Stochastic are also placed below their respective averages on the weekly charts. Moreover, the RSI is still placed in the overbought zone on the weekly charts. These negative technical conditions would lead to further bouts of selling pressure. However, the prevailing positive technical conditions still hold good and would lead to buying support at lower levels. The KST and MACD are placed above their respective averages on the weekly charts. The Nifty remains placed above its 50‐day SMA, 100‐day SMA and 200‐day SMA. Further, the Nifty’s 50‐day and 100‐day SMA are placed above the Nifty’s 200‐day SMA, which is known as the ‘Golden Cross’ breakout. These positive technical conditions would lead to buying support at lower levels. The +DI line has slipped below the ADX line but is still placed above the –DI line on the weekly charts. Further, the +DI line is placed above the 38 level on the weekly charts but has come off its recent highs indicating that buyers are booking profits regularly. The markets lack clear direction ahead of the Budget and the lack of buying support
Transcript
A Time Communications Publication 1
Caution: Please note that your copy/access to our website is for your exclusive use only. Any attempt to share your access to our website or forwarding your copy to a non‐subscriber will disqualify your membership and we will be compelled to stop your supply and forfeit your subscription thereafter without any refund to you.
T I M E S A TIME COMMUNICATIONS PUBLICATION
VOL. XXIII No. 34 Monday, 30 June – 6 July 2014 Pages 20 Rs.15
Markets struggle at higher levels By Sanjay R. Bhatia The markets continued to struggle at higher levels and displayed a range bound trend with a negative bias. The FIIs remained net buyers in the cash segment but were net sellers in the derivatives segment. Domestic institutional investors (DIIs) continued to press sales and were net sellers for the week although they did turn into net buyers on some days. The Rupee continued to trade above the 60 mark against the US Dollar.
The breadth of the market remained positive although the benchmark indices fell indicating that buying was concentrated in mid‐cap and small‐cap stocks while selling was witnessed in index heavyweights. The volumes recorded during the week remained low indicating lack of interest among participants or indecisiveness due to uncertainty of trend ahead of the Union Budget. Global market cues, too, remained subdued and were range bound with no major triggers for a broad based rally. Crude prices, on the other hand, sustained at higher levels due to the continuing tensions in Iraq. On the domestic front, the Central government deferred its decision on oil and gas prices by another three months.
Technically, the prevailing negative technical conditions weighed on the market sentiment leading to selling pressure. The Stochastic, MACD, RSI and KST are all placed below their respective averages on the daily charts. Further, the RSI and Stochastic are also placed below their respective averages on the weekly charts. Moreover, the RSI is still placed in the overbought zone on the weekly charts. These negative technical conditions would lead to further bouts of selling pressure.
However, the prevailing positive technical conditions still hold good and would lead to buying support at lower levels. The KST and MACD are placed above their respective averages on the weekly charts. The Nifty remains placed above its 50‐day SMA, 100‐day SMA and 200‐day SMA. Further, the Nifty’s 50‐day and 100‐day SMA are placed above the Nifty’s 200‐day SMA, which is known as the ‘Golden Cross’ breakout. These positive technical conditions would lead to buying support at lower levels.
The +DI line has slipped below the ADX line but is still placed above the –DI line on the weekly charts. Further, the +DI line is placed above the 38 level on the weekly charts but has come off its recent highs indicating that buyers are booking profits regularly. The markets lack clear direction ahead of the Budget and the lack of buying support
A Time Communications Publication 2
at higher levels is turning the markets weak. If the Nifty slips below the 7400 level, then it is likely to fall further and could test the 7229‐7200 support levels. However, if the Nifty manages to move up and sustains above 7600 level, it could test the 8000 level and a sustainable rally could unfold. In the meanwhile, the markets would continue to take cues from the new government’s policy decisions and news flow on the forthcoming Budget session next month, the Rupee‐Dollar exchange, global markets and the crude prices.
Technically, on the upside, the BSE Sensex faces resistance at the 25420, 25700 and 26000 levels but seeks support at the, 24750, 24500, 24000, 23408 and 22323. The support levels for the Nifty are placed at 7402, 7229, 7118, 7067 and 6872 while it faces resistance at 7593, 7675, 7700, 7750 and 7800 levels.
Investors should avoid long positions till the Nifty closes above the 7600 level.
Rain, rain, please begin… By Fakhri H. Sabuwala The Modi sarkaar completes its first month in office and is satisfied with the work done by it, Prime Minister Narendra Modi acknowledges that there are areas where we need to improve. He also empathized that unlike the previous government he did not have the luxury of a ‘honeymoon period’. His every move was closely watched and commented upon.
Although he enjoyed the luxury of a weak opposition, some of his decisions lack political acumen. While the railway fare hike was the need of the hour, it overdone and hit a large portion of Mumbai’s population. The anger of the BJP’s allies at the rail fare hike indicates that it may have cost them the luxury of an easy win in the Maharashtra assembly elections. Although the rollback of second class suburban fares did save the situation, it left a scar on the image of the government, which was one preparing to take some harsh measures.
Taking a cue from the rollback of suburban train fare, the Modi cabinet possibly decided to defer the gas price rise and put on hold its decision to raise petrol, diesel and kerosene prices. For the first time, Modi's new economics (Modi‐nomics) stood diluted and politics was once again seen to score over economics. While the BJP won the election by making economics the politics of the nation but governing running is a different ball game altogether since politics is a populism and not economics! The impact of this was visible as it halted the pre‐Budget rally midway and left the market gasping for a fresh air in its first sprint session.
Inflation is giving the sleepless nights to the government in general and the PM and FM in particular. Taming inflation is becoming much more difficult with the dark grey clouds playing truant. It is the end of June and most parts of India are yet to experience a downpour. Prices of essentials are rising and there is very little that the government can do even by managing the dwindling supply side.
Low rainfall will not only hit agriculture and agro‐based industries but also affect the overall demand and growth prospects. Initially the impact is noticeable only in the agri related segments but the downturn thereafter will have a viral impact on all the other segments too. Deficit rainfall will have a direct impact on our $2 trillion economy and the companies that directly or indirectly depend on the farm sector for raw materials and for rural consumption of their products.
Weak monsoon will upset plans of the new government and derail the nation's wheels of growth. Modi‐nomics, on which the market was booming, may have to retrace its forward march and adjust to the bitter realities of the day. The damage may be contained to a great extent if the Rain Gods smile in early July 2014 and retain the wet spell. But will they smile? That is a billion dollar poser.
The immediate impact of this development can be seen on restricting the upside in stocks like Jain Irrigation, Rallis, Kaveri Seeds, Mahindra & Mahindra Financials, Hindustan Unilever, Escorts, Kirloskar Brothers, Mahindra & Mahindra, RCF, Bajaj Auto, Hero Moto, Balrampur Chini, UPL, Marico, Godrej Consumer Products.
The list may be limited for now to the Agri and Consumption stocks but the downward slope may trigger a viral impact that may turn out to be the toughest test for the NDA Modi sarkaar. So, the rains alone can rescue the Modi sarkaar at this stage!
If the situation does not improve, we may have to wait for long to breach the recent top on the upside and nightmares may haunt the Dalal Street till then.
BAZAR.COM
A Time Communications Publication 3
Correction still on By Hitendra Vasudeo Last week, the BSE Sensex opened at 25108.08 attained a high at 25427.80 and fell to a low 24878.66 before it closed the week at 25099.91 and showed a net fall of 5.58 points on a week‐to‐week basis. A doji candlestick pattern was formed on the weekly chart, which indicates sideways volatility during the week ended Friday, 27 June 2014. Further rally can continue if it sustains above 25735. Till then, expect profit booking or selling pressure on the spikes on Sensex and Sensex related stocks. Specific sectors will perform in a selective market henceforth. The bull band wagon that was witnessed in the last couple of months has momentarily been halted. There is no denying that the rally would continue for a few months. Intra‐day, intra‐week or intra‐day month corrections will continue but the rally will not always be smooth for each period. Support will be at 24878 and 24644. Weekly resistance will be at 25457‐26010. Weekly support will be at 24904‐24878‐24655‐24351. On the monthly chart, if we look at the macro count then Wave 1 ended at 4643 in September 1994 and Wave 2 ended at 2904 in May 2003. Wave 3 ended in January 2008 at 21206 whereas Wave 4 ended in August 2013 at 17448. Wave 5 projection can, therefore, be as low as 28800 but can exceed to 35000. A major problem on the monthly chart can develop below 17448. Broadly, the corrections are for buying as we may surpass 28800 in due course of time. The fall on the Sensex/Nifty in 2008 was of 9‐14 months duration from the January 2008 peak. The breakout in March 2014 happened. So if we look at 9 month to 14 months, the rally can last between December 2014 and May 2015. The fall was 63.7% from the 2008 peak of 21206 to 7697. If we add the same percentage, then the upside target is 34715. BSE Mid Cap Index The range for this index is 9318‐8763. Correction will be seen below 8763 and the upside momentum will continue above 9318. BSE Small Cap Index The range for this index is 10203‐9478. Correction will be seen below 9478 and upside momentum will continue above 10203. BSE Bankex Deeper correction is below 16845. Strategy for the week
Trader’s long and holding stocks can keep the Sensex stop loss at 24000. Use the rise from the current level to 25700 to book profits on long positions. Buy if a breakout and close above 25700 is witnessed.
WEEKLY UP TREND STOCKS Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy with
whatever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value then the trend will change from
Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal of the Up Trend.
Note: Positional trade and exit at stop loss or target whichever is earlier. Not an intra-day trade. A delivery based trade for a possible time frame of 1-7 trading days. Exit at first target or above.
WEEKLY DOWN TREND STOCKS Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell with whatever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly reversal of the Down
Plastiblends India is attracting the attention of investors as the company is expected to report good growth over the next few years.
Essel Packaging stock may hit a high of Rs.175. The Banco Products stock has given a strong breakout. Good growth is expected in the company. Sutlej Cotton is an underpriced stock that may hit the Rs.450 mark in future. Marketmen expect a good turnaround in Kilburn Engineering. After a fund bought the shares of ISGEC Heavy Engineering last month, the stock is attracting attention of investors. Uflex, which posted an EPS of Rs.27 in FY14 is all set to garner an EPS of Rs.35+ in FY15. The share is expected to touch Rs.175 mark.
Superhouse is expected to post an EPS of Rs.40 in FY15 against the EPS of Rs.33.4 in FY13. The share is being cornered by HNIs. A conservative P/E multiple of 5 will take its share price to Rs.200.
Shares IFGL Refractories have been bought by HNIs and informed persons on the back of the robust demand for its products and major expansion at its overseas subsidiaries. Its FY14 EPS of Rs.18 is likely to rise to Rs.25 in FY15 and the share may touch Rs.250 mark on a P/E ratio of 10 as against the industry average of 24.
Amarjothi Spinning has not participated in the rally of textile shares. Its FY14 EPS of Rs.30 will take its share price to over Rs.120 mark.
Deepak Ferilizers is an underpriced share considering its expected EPS of Rs.35 in FY15 as against the FY14 EPS of Rs.27. The share has all the potential to touch Rs.200 mark.
Technocraft Industries is set to clock an EPS of Rs.45 in FY15. (Rs.34 in FY14). The share is poised to cross the Rs.270 mark at a P/E of only 6.
An Ahmedabad based analyst recommends Moldtek Techno as a hot buy for the week.
By Amit Gupta
DLink (India) Ltd. (Code: 533146) Last Close: Rs.55 D‐Link (India) is into marketing and distribution of networking, broadband, digital, voice and data communication products of its parent, D‐Link Corporation of Taiwan, which is globally renowned for its networking products and solutions and has presence in 67 countries. It distributes switches, routers, modems, voice over internet protocol (VOIP) products, surveillance equipment, print servers, Ethernet cards and broadband equipment. It has a strong demand for networking infrastructure in India.
Enterprise IT spending has grown from US $28.5 billion in CY10 to US $39.7 billion in CY13 at a CAGR of 12%, which will lead to a strong demand for networking products like routers, switches and access points to storage and surveillance products across all verticals.
Also, the robust growth in mobile connectivity the number of subscribers has zoomed from 26 crore in FY08 to 90 crore in FY14 at a CAGR of 23% and broadband penetration has almost quadrupled from 10 lakh in FY08 to 1.5 crore in FY14 at a CAGR of 25%, which is pushing the demand for PCs, tablets, smart phones for networking, especially in Wi‐Fi networks.
Its sales have grown at a CAGR of ~56% during FY11‐14 on the back of aggressive marketing and steps taken to enhance customer satisfaction like ensuring a presence at the lowest price point, augmenting distribution networks, etc. On a higher revenue base of FY14, we expect the robust growth to continue at a CAGR of ~24% through FY14‐17 due to the following reasons. It is a market leader in important product categories such as Switches (1st with 37% market share), Wireless (1st with 40% market share), Routers (2nd with 37% market share).
Robust growth expected in active product at a CAGR of 20% through FY14‐17 and passive product at a CAGR 40% through FY14‐17 categories.
Strong parental support by way of a pipeline of a latest and innovative products as well as working capital cycle management.
Its pan‐India distribution network with over 18 branch offices, 90 distributors at National and Regional levels across India with 500 dealers and 5000 re‐sellers allows it to reach every nook and corner of India.
TOWER TALK
BEST BET
A Time Communications Publication 6
Enterprise IT spending is expected to grow at a CAGR of 12% and reach US $50 billion by the end of CY15 from US $38 billion in CY13. With the spending on IT on the rise, networking products and services will continue to be in great demand in the foreseeable future.
The emergence of an affluent and growing middle class is triggering the demand in the mobile and internet segments and fuel the increase in 3G/4G subscribers and broadband users thereby creating greater demand for networking products by individual users.
Its excellent service quality maintained with initiatives like pick‐up and drop facility for dysfunctional products from the client’s place helps it retain existing clients and obtain repeat business as well as acquire new clients through referrals. Valuation: We recommend to ‘Buy’ D‐link for a price target of Rs.70 at a P/E multiple of 10.0x to its FY16E EPS. We expect revenue and profits to post a CAGR of 25% and 28% respectively, through FY14‐16. At the CMP, the D‐Link stock trades at 7.6x and 6.1x times its estimated earnings for FY15 and FY16 on a diluted equity base (Equity issued to fund the acquisition of TeamF1 Networks). Technical Outlook: The D‐Link stock is very strong on the daily chart as it has been making higher highs and higher lows. It is very strong in all time frames and has been trading above all important moving averages like 200‐DMA & 100‐DMA and has formed an ascending triangle pattern in the longer time frames.
Start accumulating it at the current level Rs.56 and on dips to Rs.49 for medium‐to‐long‐term investment and price target of Rs.70+ in the next 6 months.
Excel Industries: For fertile gains By Devdas Mogili Excel Industries Ltd. (EIL) is a Mumbai based company, which is part of A. C. Shroff’s Excel Group incorporated in 1960. The other group companies include Excel Crop Care. It manufactures Industrial Chemicals, Speciality Chemicals, Bio‐fertilizers and Bio‐remediation technologies. Its manufacturing facilities are at Roha, Lote Parashuram in Maharashtra and another unit at Ahmedabad in Gujarat. Mr. Ashwin Shroff is the chairman and managing director of the company.
EIL’s product portfolio includes a range of Agrochemical Intermediates, Pharmaceutical Intermediates, Polymer Input Materials, Speciality and Performance Chemicals. Its business can be broadly classified in the five divisions: Chemicals, Polymer Inputs, Veterinary, Environ‐Biotech and Pharma divisions.
It has also launched 3 new formulations under the brand name of Celcron, Hexzol and Bipex. Its Chemicals Business division has commissioned two plants to manufacture 200 TPA of mining chemicals and 200 TPA of speciality chemicals.
As a part of diversification, it has commissioned a plant to manufacture of Celrich at Ahmedabad with a treatment capacity of 500 MT of waste per day. The company’s prestigious CWM (Centralized Waste Management) plant is considered one of the best waste treatment plants in the country. The bio‐fertilizer manufactured at this plant is sold under the name of ‘Celrich’ by its group company Excel Crop Care. New Projects/Expansion: EIL has set up a new plant at its Lote Parshuram site to manufacture pharmaceutical intermediates. The company is developing the market for certain identified intermediates and has developed their manufacturing processes through its Research & Development (R&D). Certain veterinary products are also being introduced. Performance: For FY14, EIL recorded consolidated revenue of Rs.418.92 crore with net profit of Rs.17.99 crore posting an EPS of Rs.16.50. Financials:(Rs. in lakh) Standalone Consolidated Particulars Q4FY14 Q4FY13 FY14 FY13 FY14 FY13 Total Income 11226.62 9287.59 41691.93 38411.30 41891.93 38411.30 Total Expen 10301.54 9388.27 38873.16 35425.31 38893.04 35432.07 Other Incom 279.54 296.62 456.23 405.12 518.10 429.83 Finance Cos 336.59 289.71 1221.58 1220.78 1221.87 1220.99 Tax Expense 4.74 (58.06) 305.27 688.79 316.14 695.06 Net Profit 863.29 (35.91) 1748.15 1481.56 1798.98 1493.01
Key Financial Ratio: Y/E Mar Net Sales EBITDA PAT EPS 2013 353.7 19.5 12.3 3.5 2014 487.6 21.7 13.6 3.8 2015E 614.4 27.6 17.8 5.0 2016E 757.7 34.1 22.3 6.3
STOCK ANALYSIS
A Time Communications Publication 7
Equity (FV:Rs.5) 545.28 545.28 545.28 545.28 545.28 545.28 Re Ex Re Reserves - - 14119.45 12849.77 14326.88 13006.36 EPS (Rs) 7.92 (0.33) 16.03 13.59 16.50 13.69 Latest Results: It posted highly encouraging standalone results for Q4FY14 as it recorded Total Income of Rs.112.27 crore with Net Profit of Rs.8.63 crore against a Loss of Rs.35.91 crore in Q4FY13. Thus it posted an EPS of Rs.7.92 for Q4FY14 as against a negative EPS of Rs.0.33 in Q4FY13. Financials: EIL has a low equity base of Rs.5.45 crore with a share book value of Rs.136.37 and a price:book value ratio of 0.93. It has a low debt:equity ratio of 0.57 with RoCE of 16.20% and RoNW of 11.49%. Share Profile: The company’s share with a face value of Rs.5 is listed on the NSE and BSE under the B group. Its share price hit a 52‐week high/low of Rs.170/Rs.56.20. At its CMP of Rs.170.20, it has a market capitalization of just Rs.185 crore against its total revenue of Rs.419 crore indicating a very attractive market cap:sales ratio. Dividends: The company has been paying dividends as follows: FY14 ‐ 75%, FY13 ‐ 60%, FY12 ‐ 40%, FY11 ‐ 75% (incl. Special Dividend of 25%), FY10 ‐ 40%, FY09 ‐ 10%, FY08 ‐ 20%. Shareholding Pattern: The promoters hold 42.04% equity stake while the balance 57.96% is with non‐corporate promoters, institutions and the investing public. Prospects: Agrochemicals continue to be the leading business segment of the company contributing over 50% of its revenue. The demand for agri‐intermediates continues to be strong in FY15 as well. There is a steadily growing demand for the company’s mining chemicals based on the tin price ruling in the global metal market and its ability to meet the demand.
EIL has developed new customers for its speciality products and is introducing some new products whose full potential will be realized in the coming years. Its strong R&D base will enable it to develop advanced intermediates for the newly launched Herbicides and Fungicides. It has also taken steps to develop the new business of Electronic Chemicals that find application in the Solar Photovoltaic Industry and in Display devices.
The volumes of its Water treatment chemicals are likely to grow owing to its shift in the pricing strategy. The design and construction of the facility to manufacture Pharmaceutical intermediates has also been completed and trial productions are underway. The outlook for its Organic Waste Converter (OWC) business is also encouraging.
For centralized plants, its focus is to provide Waste‐To‐Energy (WTE) solutions at a centralized level to Urban Local Bodies (UBL). Their urgent need to find WTE solutions will open up a large number of projects across the country. Since the ULBs seek integrated operations like collection, transportation, treatment, recycling and final sanitary land‐fill, EIL can offer its microbial process for accelerated composting, which can be a 15‐step in the integrated process. The project in Mauritius on the process licensed by the company is running very successfully and is likely to open up further opportunities for the company both in India and overseas. If the present NDA Government’s penchant for creation of mega and smart cities in the country is anything to go by the prospects for waste disposal companies is extremely bright.
EIL is also venturing into Veterinary Medicines and trial productions have begun. With the introduction of several new business areas, EIL’s healthy growth is certain. Conclusion: Excel Industries is a pioneer in indigenous chemical technology and sustainable waste management. It is also one of the premier manufacturers of Speciality Polymer Additives and high quality Veterinary APIs in the country.
At its CMP of Rs.170, the EIL share discount less than 10.5 times its FY14 EPS of Rs.16.50 against the industry average P/E multiple of around 21. Since the stocks of Agrochemicals and Speciality Chemical companies are fancied, the EIL stock would attract attention on the bourses. Considering its exuberant performance, good earnings, low P/E multiple, high payouts, attractive price:book value, market cap:sales, professional and investor‐friendly management and bright prospects going ahead, the EIL share offers value for money. It may be picked up for fertile gains in the medium‐to‐long‐term. Moreover, the EIL share is available slightly below its book value indicating a good margin of safety for risk‐averse investors.
MARKET REVIEW
Better than stocks! 3500 sq. ft. carpet prime space in Bandra West, Mumbai
For sale, a 29-year old investment company holding 3500 sq. ft. carpet area across two floors in superstructure with lift and terrace
available for residential or commercial use. Brand new construction. Situated off Turner Road near Linking Road & S.V. Road junction, it is 2 minutes walk from the station and 5 minutes drive from Western
Markets settle a tad lower By Devendra A. Singh The BSE Sensex (30‐share index) settled at 25,099.92 falling 5.59 points and the CNX Nifty closed at 7,508.80 edged lower 2.65 points for the week ended Friday, 27 June 2014.
On the last day of trading session, the BSE Small‐Cap index moved up 40.91 points to close at 10,022.29 while the BSE Mid‐Cap index edged up 24.33 points to close at 9,205.17. Both these indices outperformed the Sensex.
The market settled flat ending a tad weaker on global worries during the week. Key bourses fell in 3 out of the 5 trading sessions for the week.
On the inflation front, India’s headline inflation surged to 6.01% in May 2014 from 5.2% in April 2014. Food inflation soared to 9.50% in May 2014 from 8.64% in April 2014. Prices of non‐food articles were up by 4.94% in May.
Manufactured goods inflation came at 3.55% while primary articles inflation was at 8.58% in May 2014. Finance Secretary Arvind Mayaram said, “I believe our potential growth rate is 8%. And to get there, we need to
develop resources. And that which we cannot generate domestically must come from outside and if it comes from outside then we prefer it in the form of foreign direct investment (FDI) rather than foreign institutional investment (FII) if overseas resources need to be generated to spur economic expansion to its potential level.”
Foreign investment is considered crucial as India needs an estimated $1 trillion in the 5‐year period ending March 2017 to overhaul its infrastructure of ports, airports and highways to boost growth. A decline in foreign investment could affect the country’s balance of payments and the Indian currency.
Overall inflows grew 8% to $24.29 billion in FY14 from $22.42 billion in FY13. To further attract foreign inflows, the government plans to relax the FDI policy in sectors such as Defence, Railways and Construction.
An announcement made by Finance Minister (FM), Arun Jaitley, that in order to provide a fillip to the capital goods and automobile sector and given the government’s commitment to revive economic growth, it has decided to extend duty concessions by 6 months up to 31 December 2014 beyond 30 June 2014. This was done in the wake of an unprecedented negative growth in the automobile industry.
In February 2014, the central government had reduced the excuse duty on small cars, motorcycles, scooters, 3‐wheelers and commercial vehicles from 12% to 8%. On mid‐segment cars, it was reduced from 24% to 20% on large cars down from 27% to 24% and on SUVs from 30% to 24%.
Also, to stimulate growth in the capital goods and consumer durables sector excise duty was reduced from 12% to 10% on all goods falling within Chapters 84 & 85 of the Central Excise Tariff.
Meanwhile, the Confederation of Indian Industry (CII) welcomed the statement of FM Arun Jaitley to further extend the stimulus provided on 17 February 2014 by way of reduction of excise duty up to 31 December 2014 on certain goods.
CII hopes that further extension of the stimulus package will be considered by the government keeping in view the negative growth in automobiles as well as capital goods sectors during FY15.
The reserve money with Reserve Bank of India (RBI) jumped Rs 1,714.1 billion (11%) on a YoY basis as on 20 June 2014. The reserve money growth was at 5.6% in the same period last year. Total reserve money as on this date was Rs 17,226.3 billion.
The currency in circulation went up 11.5% or Rs 1,413.5 billion on a YoY basis as on 20 June 2014. Bankers deposit with RBI was also up by Rs 309.3 billion (9.8%) YoY basis. Total bankers deposit with RBI as on this
date was Rs 3,473.4 billion. Other deposits with RBI fell Rs 8.8 billion (43.1%) on a YoY basis as on 20 June 2014. Total other deposits with RBI as
on this date were Rs 11.6 billion. On the monsoon front, the monsoon has covered half the nation till mid‐June. The weather office has forecast below
average rainfall in 2014 due to fears of El Nino, a weather event marked by the warming of sea surface temperatures in the Pacific Ocean that can lead to droughts in the Asia Pacific region including India.
Key indices edged weaker on Monday, 23 June 2014, on steep rise in crude oil prices. The Sensex fell 74.19 points (‐0.30%) to close at 25,031.32. The Nifty was down 18.10 points (‐0.24%) to close at 7,493.35.
Key indices registered gains on Tuesday, 24 June 2014, on some positive scenario. The Sensex rallied 337.58 points (+1.35%) to close at 25,368.90. The Nifty was up 86.85 points (+1.16%) to close at 7,580.20.
A Time Communications Publication 9
Key indices fell on Wednesday, 25 June 2014, on global worries. The Sensex lost 55.16 points (‐0.22%) to close at 25,313.74. The Nifty was down 10.95 points (‐0.14%) to close at 7,569.25.
Key indices moved lower on Thursday, 26 June 2014 on high crude oil prices. The Sensex fell 251.07 points (‐0.99%) to close at 25,062.67. The Nifty was down 76.05 points (‐1.00%) to close at 7,493.20.
Market performance settled on a rising note on the last trading session on Friday, 27 June 2014 on buying of stocks. The Sensex edged higher 37.25 points (+0.15%) to close at 25,099.92. The Nifty was up 15.60 points (+0.21%) to close at 7,508.80.
The Sensex slipped by 5.59 points to close at 25,099.92 last week. Market participants will closely look at the Budget session of Parliament, which is likely to begin on Monday, 7 July 2014.
The Cabinet Committee on Parliamentary Affairs (CCPA) has decided that the first budget of the PM Narendra Modi will be presented on Thursday, 10 July 2014. The Rail Budget will be presented on Tuesday, 8 July 2014, while the Economic Survey will be tabled on Wednesday, 9 July 2014.
The Vote‐on‐Account approved by the previous Parliament ends on Thursday, 31 July 2014 and a new Budget has to be passed by the new Parliament before that date.
Moreover, the election of the Deputy Speaker will also take place during the Budget session. Investors will closely watch the country’s monsoon rain for July‐September 2014, which is a crucial factor and will
decide the market scenario ahead. On the global front, investors will focus on the Middle East crisis that will decide the global market movements in
future. GURU SPEAK - By G. S. Roongta Market to remain volatile till the Budget Last week was influenced by the F&O expiry on Thursday, 26 June 2014. There was a huge outstanding position to be squared up both by the Bulls & Bears. Because of this, no hectic movements were seen despite the fact that the global situation remains tense as crude oil prices flared up on account of the strife in Iraq and the weak monsoon situation in India.
The bulls were extremely excited at Narendra Modi’s positive outlook and action in reforming the economy through a liberalized policy outlook. The recent railway freight hike and the sharp hike in import duty in sugar from 15% to 40% and providing interest free loans worth Rs.14,000 crore to enable the sugar mills to clear the dues of sugarcane farmers were two important steps in that direction. Besides this, a hike in Gas price is very much on its agenda. But looking at the popular discontent on railway fare & freight hike, this move has been deferred.
On the other hand, bears were betting on higher inflation, lower factory production in May 2014 and falling Rupee with crude oil prices rising globally. Thus, higher stock prices appear unsustainable to them and led to of profit booking.
The fight between the bulls and bears was like a tug‐of‐war as both tried to pull the market to their side based on their vision, understanding and future outlook about the economy and the stock market.
The BSE Sensex which settled at 25,105.50 followed by CNX Nifty at 7511 for the week ended on Friday, 20 June 2014, has not moved significantly on either side and was extremely range bound throughout the week near to the previous week’s closing. The Sensex closed at 25099.92 very near to the previous week’s closing of 25105.50 as mentioned above while the Nifty closed at 7508.80 on the F&O expiry value to excess speculations in Nifty Futures. The Sensex fell 5.59 points while the Nifty lost 2.65 points for the week ended Friday, 27 June 2014, which can be ignored looking to the
increased volumes and overbought positions both in the Futures and Option (F&O) and cash segments of stocks as well as the index futures.
The F&O position is fully settled, squared up and rolled over wherever feasible by both the bulls & bears in Nifty futures and individual stocks. The rollover is reported to be nearly 71% in Nifty Futures and between 65% and 70% in index stocks.
Going forward, the Union Budget will be big trigger for the market. Anything may happen on this most important event from the stock market point of view.
Expectations built on the first budget of Prime Minister Narendra Modi after winning the election with an absolute majority was a sure sign of an euphoric market. Captains of trade & industry are all hoping for some or the other sops by
G. S. Roongta
A Time Communications Publication 10
way of relief in duty or reduction etc. But how long and how far it would be possible to satisfy all of them needs to be seen? It is indeed a herculean task and what would be the impact of the Budget is a matter of speculation rather than an academic or intellectual exercise.
However, it is crystal clear that Mr. Narendra Modi’s Budget will be as vibrant as he speaks, growth oriented and will attempt to remove the bottlenecks wherever possible to set the sectors free from bureaucratic controls. The Budget is also expected to be reform oriented. Thus, it will be a landmark budget. But the problem is that the market is already up by 5000 points and is also overbought. In view of this situation, who will come forward to pull up or list the market any further fearing a trap on account of the excess speculative position built.
Under such circumstances, instead of taking a big position in anticipation of a good budget, it would be better to watch the situation closely and act only when you are sure of a good budget or wait for it to shed some of the accumulated budgetary fat.
Blind betting is not advisable on the Nifty or Sensex stocks since mid cap and small cap stocks have ample opportunities to ride the market if the Budget proposals are industry friendly.
As I have been emphasizing, there is ample scope in mid cap and small cap stocks as many of them are traded below book value and available at extremely low P/E ratios compared to other stocks due to lack of awareness among investors. They can rise by 100% to 200%. Their list is long but a few of them could be counted on one’s finger tips in the limited space available.
1.) Idea Cellular: This Aditya Birla group company is a subsidiary of Aditya Birla Nuvo.
It is the 3rd largest telecommunications company after Bharti Airtel and Reliance Communications. It has recently raised funds
Roongta’s Panchratna
Launched on 1st April 2014, check out the mind-blowing performance of ‘Panchratna’
‘Panchratna’ is a quarterly investment newsletter by our esteemed fundamental
analyst, Mr. G. S. Roongta.
The lacklustre five years between 2008 and 2013 have created a great opportunity to invest in Penny stocks, Dark Horses and Turnaround stocks in 2014-15 and reap profits higher than what expensive blue chips or Index based stocks can
offer.
Mr. G. S. Roongta, who has acquired a name in identifying such winners early in Money Times, will pick five such stocks below Rs.50 each for an investment
horizon of 1-2 years.
Priced at Rs.2500 per quarter, Rs.4000 half-yearly & Rs.7000 annually, the next issue will be released on 1st July 2014.
Book your copy now! To subscribe, you can deposit cheque/cash or transfer the amount via RTGS/NEFT to the company bank account:
(1) Time Communications (India) Ltd C/A 10043795661 at State Bank of India, Fort Market Branch, Fort, Mumbai 400 001 (IFSC: SBIN0005347) or
(2) Time Communications India Limited C/A 623505381145 at ICICI Bank Ltd., Fort Branch, Fort, Mumbai – 400 001 (IFSC: ICIC0006235) Note: For cash deposit, kindly add Rs.25 extra for SBI or Rs.100 extra for ICICI Bank as cash counting charges levied by the bank.
After transfer, please advise us by e-mail mentioning the bank & branch, electronic transfer number and date of payment with your subscriber name and the product selected to enable us to begin your supply immediately.
through equity dilution worth Rs.3000 crore through a QIP. The Idea Cellular share made a 52‐week high of Rs.188 about four to six months back. Many Midcap shares have doubled or trebled thereafter but Idea Cellular lost Rs.52 instead!
Thus, there is great value in it. But since it is an Aditya Birla group stock brokerages prefer to beat it down first to grab it in large quantities at lower levels. This is the group’s history because it cares little about its stock values or share prices after mopping up the promoters’ stake to a satisfactory level. 2.) Sangam (India): This is a good small cap stocks with good fundamentals. This Textile stock is expected to fare extremely well FY15 onwards as the Budget may provide some sops to the Textile industry ailing since the last 3‐4 years.
Its current share price is Rs.50 while the 52‐week high was Rs.60 and the stock may double in the next 6‐9 months.
It is a divided paying company and reporting profits for the last several years. It is available below book value and a throwaway P/E ratio. Its financial profile is enumerated below: A) FY14 turnover: Rs.1450 crore. B) Operating Profit: Rs.195 crore, C) Less Depreciation (Rs.74 crore) + Interest of Rs.66 crore = Rs.140 crore D) Profit before tax: Rs.55 crore E) Other Income: Rs.6 crore F) Tax: Rs.21 crore G) Net Profit: Rs.40 crore H) Paid‐up Equity: Rs.39 crore.
The EPS is Rs.10.27 giving price:earning ratio of just 5. The company has declared a dividend of 15%. Its book value (BV) is Rs.100 but the share traded below 50% of BV or available 200% lower on an active market basis.
3.) Another good stock is OCL Iron & Steel a company demerged from OCL Industries Ltd. and an emerging cement company in Odisha.
Readers are well‐aware that any stock identified by this column has great potential as it is backed by good fundamentals. Six months back, the stocks recommended at a nascent stage of their potential were many but RCF, SCI, DCW Ltd and Elecon Engineering recommended here have risen by over 200% in just six months or so.
The super bull run has already started, as I reported earlier. The Indian stock market was tuned and habituated to follow Asian and global markets trends before opening. Now I am of the opinion that the time has come that global markets and Asian markets will follow the trend of the Indian stock markets.
The Sensex has corrected by 500‐700 points on week‐to‐week basis but has rebound speedily to cover the lost ground in a day or two as seen last week on Tuesday, 24 June 2014 by rising over 300 points.
Thus, the long‐term trend of the market is extremely bullish but jerks & jolts will of course be there always like on journey during landing and takeoff in an aeroplane when it flies at dizzy heights.
The F&O expiry for June 2014 settled at a healthy level. But the new month of July 2014 will see a new game impacted by Budget expectation and reality.
The market has yet to hit a new high but any event based correction should be taken as a consolidation phase, which is a must in a rising market to make it more healthy and sound.
The second edition of ‘Panchratna’ featuring five low priced stocks will be out on Tuesday, 1 July 2014. We have selected stocks keeping in mind the Budget impacted stocks so that subscribers stand to gain the maximum.
By Vinod Harlalka Given below are the TOP 10 Gainers & Losers in the Futures segment in the June 2014 expiry.
TOP 10 GAINERS No. Scrip May Exp. June 2014 Expiry Dif
FUTURES WATCH
A Time Communications Publication 12
Closing Open High Low Close % 29-05-14 30-05-14 26-06-14
REC Ltd. (Code: 532955) (CMP: Rs.354) (TGT: Rs.380+) Rural Electrification Corporation Ltd. (REC) is a public sector financial institution that provides interest bearing loans to state electricity boards (SEBs), state power utilities and state power departments or the private sector for developing all segments of rural power infrastructure. It has diversified into other related areas and activities such as financing of decentralized power generation projects, use of new and renewable energy sources, consultancy services, transmission, sub‐transmission distribution systems, renovation, modernization and maintenance. Its subsidiaries include REC Transmission Projects Company Ltd; REC Power Distribution Company Ltd; Vemagiri Transmission System Ltd and Vizag Transmission Ltd.
REC’s loan growth continues to decelerate with 17% v/s 24%+ in the previous three years. T&D (Transmission and Distribution) segment (Rs.82,100 crore; 55% of loans) grew at 25% YoY while the generation segment grew ~18% YoY to Rs.65,400 crore (44% of loans).
Private sector loans grew 28% YoY to Rs.21,100 crore (14% of loans). We expect 15% loan CAGR in FY14‐16E. Loans worth Rs.31,100 crore with current yield of 12.6% to be re‐priced in FY15.
Borrowings stood at Rs.1,30,000 crore (17% YoY) with ~foreign borrowings at ~14%. Borrowings of Rs.13,000 crore would be re‐priced in FY15E. Foreign borrowings to the tune ~32% remain unhedged. Unamortized foreign currency loss stands at Rs.530 crore.
Margins were marginally lower at 4.9% QoQ with pressure on yields at 12.1% by 244 bps QoQ. However, cost of funds (CoF), too, declined by 20 bps QoQ at 8.4%. We have factored net interest margins (NIMs) of 4.8% over FY15‐16E.
Asset quality remained stable as it reported flat gross non‐performing assets (GNPAs) of Rs.490 crore QoQ (0.3% of advances). However, with increased Provisional Coverage Ratio (PCR), net non‐performing assets (NNPAs) declined 12% YoY at Rs.350 crore. REC’s rescheduled assets 22.2% of loans stand at Rs.33, 000 crore. We expect GNPA at 0.8%/1.3% and factor higher loan loss provisioning (LLP) by 25 bps in FY15‐16E. Valuation: The REC stock has seen a sharp run‐up recently on hopes of reforms in the power sector. If the reforms do play out, they will improve business visibility, help keep net interest margins (NIMs) high and assure higher return ratios. REC enjoys regulatory arbitrage since it is not required to provide for rescheduled loans. This is the key risk to
STOCK WATCH
A Time Communications Publication 13
reported earnings. However, in the interim, asset quality would be a key factor. We advise a ‘Buy’ on this stock with a price target of Rs.385. Technical Outlook: The REC stock is very strong on the daily chart as it has been making higher highs and higher lows. It is very strong in all time frames and has been trading above all important moving averages like 200‐DMA & 100‐DMA.
It has formed an ascending triangle pattern in the longer time frames. Start accumulating at CMP and on dips to Rs.325 for medium‐to‐long‐term investment and price target of Rs.380+ in the next 6 months.
*******
Suprajit Engineering (Code: 532509) (CMP: Rs.105) (TGT: Rs.125+) Suprajit Engineering Ltd. (SEL) manufactures a range of control cables and instruments. It is a manufacturer of automotive cables with plants strategically located in the South, West and North India to serve automobile manufacturers throughout the country and is an exporter of non‐automotive control cables and push‐pull cables to some of the world's manufacturers. Its products are classified as auto‐components and it operates in the primary segment of auto‐components market. It produces an exhaustive range of mechanical control cables for motorcycles, cars, commercial vehicles and various non‐automotive cables with a capacity of over 150 million cables. It also specializes in the production of instruments, speedometers and many other parts. In December 2012, SEL implemented a new automotive cable manufacturing plant at Bengaluru. Q4FY14 highlights: SEL reported Q4FY14 consolidated adjusted PAT at Rs.13.2 crore (+13.1% YoY) in line with estimates. Revenues grew 15.3% YoY to Rs.130 crore while EBITDA grew 27.9% YoY with margins at 18.1% that expanded 177 bps YoY led by better gross margins (+176 bps) and lower other expenses of ‐116 bps. Employee costs went up by 114 bps YoY in Q4FY14.
The business share of Hero Motorcycle and Scooter India Pvt Ltd (HMSI) improved 20‐25% in FY14 from ~10% earlier and the management expects it to reach ~50% over the next 1‐2 years.
The management has announced Capex plans of Rs.60 crore over FY15‐16E across: (1) new cable plants at Narsapura Industrial area in Karnataka and Vallam‐Vadagal in Chennai; (2) capacity expansion at the existing Pathredi plant in Rajasthan; (3) additional equipments for Suprajit Automotive its 100% subsidiary; (4) renovation of the Bommasandra in Bengaluru plant, which it can manage through internal accruals.
We expect SEL to register 28% CAGR in earnings over FY14‐16E with margins maintained at ~17%. SEL is a high quality auto‐ancillary company with healthy return ratio at ~30% and a strong balance sheet and
ambitious capacity expansion plans. At the CMP, SEL trades at 17/13x FY15/16E EPS. We maintain a ‘Buy’ on the stock with a revised price target of Rs.125. Technical Outlook: The Suprajit Engineering stock is very strong on the daily chart and has been making higher highs and higher lows. It is very strong in all time frames and has been trading above all important moving averages like 200‐DMA & 100‐DMA and has formed an ascending triangle pattern in the longer time frames.
Start accumulating at CMP and on dips to Rs.90 for medium‐to‐long‐term investment and price target of Rs.125+ in the next 6 months.
By Vihari
Ushdev International: For solid appreciation The share of Ushdev International Ltd. (UIL) (Code: 511736) (Rs.304) can be bought for a killing as it is available at a mouthwatering P/E multiple of just 5.1 on FY14 EPS and 4.5 times the estimated FY15E EPS of Rs.70.
Incorporated in 1994, UIL is one of the largest companies in Metal trading with interests in power generation too. It came out with an IPO of 17.5 lakh equity shares aggregating Rs.1.75 crore in December 1994. It was incorporated and led by the late Mr. Vijay Gupta and is presently being led by the third generation promoter, Mr. Prateek Gupta who is the Vice Chairman.
UIL diversified into Wind Power Generation in 1997 and has an installed capacity of 28.3 MW in five States of Tamil Nadu, Maharashtra, Gujarat, Rajasthan and Karnataka.
It commenced operations with trading in steel & steel products. Constantly expanding its product portfolio, UIL raced ahead of its competitors and has emerged as a giant in the metal trading business and trades in ferrous and non–ferrous metals. It is among the top 50 metal trading companies in the world in terms of annual sales and the 3rd largest private
EXPERT EYE
A Time Communications Publication 14
sector metal trading company in India. For steel mills, it not only supplies raw materials but also purchases the finished goods from them.
On 2 September 2009, it inaugurated its first wholly‐owned subsidiary UIL (Singapore) Pte. Ltd in Singapore which commenced operations by trading with countries like Philippines, Malaysia, India, Indonesia and Australia. It has facilitated expansion of the overall business operations of the Ushdev group outside India exponentially. Strategically placed at a geographical advantage, it also helps to be closer to the suppliers and customers and is accessible to newer markets. UIL Singapore achieved sales of Rs.2940 crore for FY14. Subsequently, the stake of UIL has been diluted to 43.17% in March 2014.
UIL Hong Kong Ltd. was inaugurated in Hong Kong by UIL on 12 November 2009. This wholly‐owned subsidiary was set up to cater to the markets like Vietnam, Thailand, China, Canada, USA, UAE, India etc. UIL HK has achieved sales of Rs.3784 crore in FY14. Subsequently, the balance stake of UIL has been diluted to 43.21% in March 2014.
Although UIL commenced operations by trading in steel & steel products, it now trades in each and every product related to steel manufacture: Raw Materials: Metallurgical Coal/Coke, Sponge Iron, Iron Ore‐Lumps, Fines, Pellets, Pig Iron, Steel Scrap and Liquid Metal; Flat Products: H. R. Coils/Steel/Plates, H. R. Pickeled Coils, C. R. Coils/Sheets, Galvanised products, Annealed products, Pickeled Products, Colour Coated Sheets, Corrugated Sheets, MS Sheet/Coils/Plates and Tin; Long Products: Angles, Beams, Channels, Billets, Ingots, Pipes, Rods, Wires, Carbon & Stainless Steel Bars/Rods/Structures and Wires.
For Q4FY14, its net profit soared 78% to Rs.102.6 crore on 74% higher revenue of Rs.5236 crore and quarterly consolidated EPS stood at Rs.30.3. For FY14, net profit climbed 68% to Rs.208 crore on 46% higher revenue of Rs.12962 crore. The EPS stood at Rs.61.5 and a dividend of 21% has been proposed. UIL’s equity capital is Rs.33.8 crore and with reserves of Rs.733.5 crore, the share book value works out to Rs.227.
In FY13, it forayed into non‐ferrous metals comprising Aluminium, Copper, Zinc, Lead, Nickel and Tin in a big way. The demand for non‐ferrous metals comes from sectors such as Agriculture, Automobiles, Railways, Telecommunications, Construction and Chemicals. It also trades in LME registered Copper Cathodes, Non‐LME registered Copper Cathodes, Copper scrap, Copper Rods and Copper concentrates in the copper category and Nickel wires, Nickel Cathodes and Nickel Briquettes in the Nickel category.
It currently imports different forms of metals from 26 countries and also exports different forms of metals to 28 countries worldwide.
According to the Planning Commission, India's steel production is expected to grow by around 60 MMTPA during the 12th Five Year Plan 2012‐17 and the domestic steel consumption will continue to grow steadily for several years driven by increasing urbanization, favorable demography, GDP growth, refocus on industrialization and stepped up investments in infrastructure.
Renewable energy accounts for approximately 12% of the total 200 GW of power generation capacity installed in India. The Indian wind energy sector has an installed capacity of 21, 136 MW as on 31 March 2014. In terms of wind power, India ranks 5th in the world. The prospects for wind energy in India are bright.
In March 2014, it diluted its holdings in subsidiary companies worth Rs.148.4 crore to a group company UD Trading Group Holding. Further, these subsidiaries have also issued fresh shares to the said UD Trading Group Holding for a total value of Rs.102 crore. The fund raised is being utilized for expansion purposes.
The grading factors in the company's market position of being one of the largest players in the domestic metals trading business with exposure in steel finished products, raw materials and non‐ferrous metals. It follows an aggregator business model for its ferrous metals trading business wherein the company has a policy of placing an order with a supplier only after receiving an order from a customer, which mitigates the risk of price fluctuation in the underlying metal.
In the non‐ferrous trading business while UIL does hold inventory, it largely insulates itself from price risk in the underlying metal. The grade also factors in company's high exposure to non‐ferrous
Fresh One Buy – Daily Fresh One Buy – Daily is for investors/traders who are keen to focus and gain
from a single stock every trading day. With just one daily recommendation selected from stocks in an uptrend, you can now book profit the same day or carry over the trade if the target is not met. Our review over the next 4 days will provide new exit levels while the
stock is still in an uptrend. This low risk, high return product is available for online subscription at
Rs.2500 per month. Contact us on 022-22616970 or [email protected] for a free trial
A Time Communications Publication 15
metals trading business going forward, which has higher PAT margin compared to trading in ferrous metals with higher exposure to overseas markets through rising exports and higher share of revenue from subsidiaries.
It is ranked amongst Asia’s top 200 Most Promising Brand in 2012‐13 by the World Consulting & Research Corporation (WCRC). It has been ranked no.4 among the 30 fastest growing companies in India by ‘Outlook Business’ magazine.
Today, it is a well‐known name in the Wind Power Industry. Its results reflect the sound execution of its business plans centered on expansion and disciplined cost. Even in a fragile global economy, it remains well‐positioned to earn solid profits and growth.
Based on the current going, UIL is expected to notch an EPS of Rs.70 in FY15. At the CMP of Rs.311, the share trades at a P/E multiple of just 4.9 on FY14 EPS of Rs.61.5 and 4.3 times the FY15 estimated EPS of Rs.70. A conservative P/E of just 6.5 will take the share price to Rs.455 in the medium‐term and offer a cool gain of about 45%. The 52‐week high/low of the share has been Rs.388/200.
*******
DCM Shriram Industries: Great potential Sugar stocks are in the limelight after media reports suggested that in a move to bail out the ailing sugar industry, Food Minister, Mr. Ram Vilas Paswan has agreed to raise import duty from 15% to 40%. With major turnaround ahead of the government’s initiatives, DCM Shriram Industries (DCMSIL) (Code: 523369) (Rs.118) has produced excellent Q4FY14 results and declared a handsome dividend of 35%. The share is worth buying for decent appreciation of over 40% in the medium‐term.
DCMSIL is a part of the diversified DCM Shriram group and was established in 1990 following the 3‐way split of DCM Ltd. It has operations in Sugar, Alcohol, Organic and Inorganic Chemicals, Drug Intermediates, Rayon Tyrecord, Shipping Containers and Processed Cotton Yarn. It has manufacturing facilities located at Daurala in UP and Kota in Rajasthan. Half of its turnover comes from sugar. It has 12 MW co‐generation power plants.
Its Daurala Sugar Complex comprises a 12000 TCD sugar plant, a distillery and an aromatic chemicals unit. Shriram Rayons, situated at Kota, comprises rayon tyrecord/yarn/fabric and nylon chafer/fabric plants with capacity of 16,200 TPA. Daurala Organics, its chemical division, manufactures new generation of drug intermediates. Its capacity of Organic/Fine Chemicals is 13,874 TPA while that of alcohol is at 45,000 kilo litre p.a.
The sugar division of the company was established in 1932 in the name of ‘Daurala Sugar Works’. Since then, the company has diversified into a spectrum of related activities, which include manufacturing pharmaceutical grade sugar, sugarcane research farm, setting of distillery, manufacture of Indian made Foreign Liquour (IMFL), Bio‐Methanation, manufacture of aromatic chemicals, co‐generation of power etc.
Its indigenously designed distillery is rated among the largest in terms of capacity producing rectified spirit, extra neutral alcohol (ENA), denatured spirit and potable alcohol. Its 9000 KL Anhydrous Alcohol plant that produces ethanol for mixing with petrol has the latest state‐of‐the‐art Membrane Technology and is the first plant of its kind in India established by a Japanese MNC.
The Shriram Rayons division was set up in 1965 to produce rayon tyrecord and the engineering and design for the plant was provided by Chemtex of USA. It is a major manufacturer of high‐grade rayon tyre cord with nylon and rayon conversion facilities catering to both the domestic and overseas markets.
It also has a complex for the manufacture of inorganic chemicals. The company receives technical assistance from two foreign companies, Beunit Fibres Inc of USA and Chemtex Inc of USA.
As per segment analysis, sugar constitutes 49% of the total turnover, fibre constitutes 27% and industrial chemicals 24%. Both Sugar and Fibre contributed 41% each to the overall operating profit while industrial chemicals contributed 18% to the operating profit.
For Q4FY14, net profit zoomed to Rs.15.8 crore from a loss of Rs.13 lakh in Q4FY13 on 17% higher sales of Rs.318 crore. For FY14, consolidated net profit zoomed 441% to Rs.31.9 crore on 19% higher sales of Rs.1284 crore. The FY14 EPS stood at Rs.18.3 and a dividend of 35% has been proposed.
DCMSIL equity capital is Rs.17.4 crore and with reserves of Rs.202 crore, the share book value works out to Rs.126. The promoters hold 43.8% in the equity capital, foreign holding is 0.4% and institutions hold 7.7% with PCBs holding 32% leaves 16.1% with the investing public.
India’s sugar output is likely to decline 5.33% this October 2014 to September 2015 sugar season as unfavourable climatic conditions will lead to lower yields in the major growing areas. The government’s decision to give subsidy on
A Time Communications Publication 16
exports of raw sugar will lead to higher exports and reduce the excess sugar stocks in India. Aided by lower output in India, ex‐mill sugar prices are expected to increase gradually.
Most sugar mills encountered problems of cash flow in view of the losses incurred. This coupled with the delay in disbursement of interest sub‐vention loans due to high leverage of sugar companies resulted in relatively lower payment to farmers in the first half of Sugar Season (SS) 2013‐14. With the increase in arrears, farmers are likely to shift to alternate crops, resulting in lower acreage under sugarcane cultivation, resulting in a decline in sugar production and inventory levels even in the SS 2014‐15. Consequently, sugar prices are expected to continue to move higher. However, the government has announced a loan package of Rs.14,000 crore to enable sugar mills to clear these arrears. Also Ethanol blending with petrol, too, has been raised to 10% from 5%, while import duty has been raised from 15% to 40% all of which angurs well the sugar industry.
Its capability in the industrial fibre and products division has helped the unit to post a solid performance. With sustained improvement in the product quality, DCMSIL is a preferred supplier to international tyre manufacturers such as Goodyear, Bridgestone, Pirelli, Michelin and Dunlop.
Demand for DCMSIL’s chemical products continues to remain stable and it was able to raise prices as well. Its focus is on value‐added products such as extra neutral alcohol and anhydrous alcohol as well as on exports. A plant to manufacture a high‐value commissioned.
Based on the current going, DCMSIL is expected to post an EPS of Rs.30 in FY15. In view of its diversified business model, increased sugar consumption and improving future prospects for its fibre and industrial chemicals coupled with improved results.
The share Rs.118 trades at a forward P/E of less than 4 on FY15 expected EPS of Rs.30. The share is recommended for medium‐term gain with price target of Rs.150 at which the share will trade at a forward P/E multiple of 5. The 52‐week high/low of the share has been Rs.118/28.
TECHNO FUNDA
By Nayan Patel
Shri Dinesh Mills Ltd. BSE Code: 503804 Last Close: Rs.125.80
Shri Dinesh Mills Ltd. (SDML) is a Textile company that manufactures and markets woollen/worsted suitings and machine clothing (felt) products under the ‘Dinesh’ brand name in India and abroad. It also manufactures and markets empty hard gelatin capsules for the pharmaceutical and dietary supplement markets. The company was incorporated in 1935 and is based in Vadodara, Gujarat.
It has an equity base of just Rs.5.08 crore that is supported by reserves of around Rs.93.63 crore, which is 18.43 times its equity. It has a share book value of Rs.188.42 and price:book value ratio of just 0.60, which is highly attractive. The promoters hold 45.01% while the investing public holds the balance 54.92%. The promoters held 43.36% stake till March 2013 but have increased to 45.01% in one year, which indicates their confidence in the future of the company.
For FY14, net profit climbed 25.19% to Rs.4.87 crore from Rs.3.89 crore in FY13. Although FY14 total turnover was nearly flat at Rs.107.55 crore as against Rs.106.26 crore in FY13. It thus reported an EPS of Rs.9.47 for FY14.
The company has paid regular dividends. It paid 18% for FY13 and has declared 18% for FY14. The company may declare a turnover of Rs.125 crore with net profit of Rs.7.26 crore in FY15 and Rs.147 crore
turnover with Rs.9.1 crore profit in FY16. At its current market price, the share price discounts less than 8 times its FY15 (E) EPS of Rs.14.29 and less than 6.5 times its FY16 (E) EPS of Rs.17.91, which is much cheaper than its peers. The stock appears undervalued and is likely to attract value buying at this level.
Investors can buy this stock with a stop loss of Rs.100 on a closing basis. On the upper side, it will zoom to Rs.140 level in medium‐term and Rs.175+ in the next 9‐12 months. Its all‐times high price is Rs.325.
Last 5 years performance: (Rs. in crore) Year Net Sales Net Profit EPS (Rs.) 2009‐10 90.85 5.89 12.48 2010‐11 95.95 8.24 15.64 2011‐12 100.88 6.26 11.89 2012‐13 106.26 3.89 7.37 2013‐14 107.55 4.87 9.47 2014‐15 (E) 125 7.26 14.29 2015‐16 (E) 147 9.1 17.91
Review Last week, we recommended Freshtrop Fruit at Rs.31. In a negative market, it zoomed to Rs.35.90 recording ~15.81% appreciation in just one week. Hope you enjoyed the fruits.
A Time Communications Publication 17
Editorial & Business Office: Goa Mansion (Gr. Floor), 58 Dr. S.B. Path (Goa St.), Near GPO, Fort, Mumbai – 400 001. Phone: 022-2265 4805, Telefax: 022-2261 6970. Editor & Publisher: R.N. GUPTA CHENNAI: T.A.S. Venkatasubba Rao (Phone: 044-24917241, Mobile: 9444024664) JAIPUR: Satram Das (Phone: 0141-2636341) BANGALORE: V. Raghurama Reddy (Mobile: 9591763126 / 9379559166) DELHI: P. K. Vasudevan (Mobile: 9810513247) All rights reserved. No portion of this publication may be copied or reproduced without the written permission of the publisher. Any infringement of this condition will be liable to prosecution. Printed & Published by R.N. Gupta for the proprietors Time Communications (India) Ltd. and printed by him at The Urdu Press 79-A, Jairaj Bhai Lane, Mumbai – 400 008. Registration No.: 63312/91, REGD. NO. MH/MR/South - 72/ 2006-08
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.
A Time Communications Publication 18
Subscription Form
Please fill in the subscription coupon in CAPITAL LETTERS only and send it to:
The Subscription Manager Time Communications (India) Ltd. Goa Mansion (Gr. Flr.), 58, Dr. S.B. Path (Goa St.), Near G.P.O., Fort, Mumbai – 400 001. Tel. Nos.: 022‐22654805, 22616970, Email: [email protected], Website: www.moneytimes.in
I wish to subscribe to:
MEDIUM‐TO‐LONG‐TERM: DAILY TRADING:Money Times (Post/Courier/Online) Nifty (Pre‐market) (Online)
1 yr = Rs.750, 2 yrs = Rs.1400, 3 yrs = Rs.2100 1 mnth = Rs.2000, 1 yr = Rs.18000 Early Bird Gains (Courier/Online) Nifty Options (Pre‐market) (Online)
6 mnths = 4000, 1 yr = Rs.7000, 1 mnth = Rs.1500, 1 yr = Rs.12000
6 mnths = Rs.11000, 1 yr = Rs.18000 Portfolio Advisory Service (One‐to‐One/Email)
Investment Advisory Service (Phone/Email) Upto 15 stocks = Rs.1500
One time service = Rs.1000 (for 5 stocks) (Above 15 stocks, Rs.100 per additional stock)
(For courier delivery, add Rs.30 per issue or Rs.1500 p.a. to the subscription amount as courier charges)
a) I am enclosing Demand Draft/Cheque No. ________________ payable at par in Mumbai favouring
‘Time Communications (India) Ltd.’ dated _____________ on _____________________________ at Branch
______________________________________ for Rs. _____________.
b) I have deposited Cash or electronically transferred Rs._____________ via RTGS/NEFT to:
Time Communications (India) Ltd. State Bank of India C/A 10043795661, Fort Market Branch, Fort, Mumbai ‐ 400 001 (IFSC: SBIN0005347) or
Time Communications India Limited ICICI Bank C/A 623505381145, Fort Branch, Mumbai ‐ 400 001 (IFSC: ICIC0006235) and have advised you about Transfer No. _______________________ by e‐mail / phone.
c) I am aware that investment in equities is risky and stock performance is unpredictable and can result in losses in spite of all analysis and projections.
Name:
Address:
City: Pin:
Tel No Mob
Email:
Are you a Investor, Trader, Broker/Sub‐Broker, Investment Advisor, Banker Date & Place: ___________________________________ Signature: ______________________
