Who needs Amitabh to become a crorepati?

Money doesn't grow on trees. It can only be acquired by proper investment and planning. If you want to be a crorepati through legitimate means then you have to put your money in such savings instruments that will appreciate your investments as well as provide for financial security to your near ones in case of your untimelydemise.

Compounding is the oldest trick in the investment book and the best and smartest way to increase your returns. So you should take the advantage of compounding at an early age. Here are some tips to becomea crorepati, without changing your present life style.

When you start investing, insurance is the first thing that comes to your mind. It gives you safe returns as well as protection to your family. It's not always right that only the experts can master theprinciples of investing. Anyone can manage his or her investments.

All one has to do is to be cautious and not to take undue risks. In insurance there are several options. While all other insurance investments give a blend of insurance and investments, term insuranceplan gives a pure insurance option.

According to different term insurance plans, it costs you around Rs 2,500 per annum to get an insurance cover of Rs 10 lakh. However, if you will go for any endowment or whole life plans it will cost you awhopping Rs 25,000.

One should use the insurance policies for protecting his family. If you can save the nearly Rs 23,000 premium and put it in some better savings instruments like mutual funds which can give you a return of20-25 per cent in the long term.

Another important thing is to protect yourself from the growing medical expenses.

Every human being is exposed to various health hazards. Medical emergency can strike anyone without warning. You can lose all yoursavings if you don't have a health insurance policy.

If you are spending Rs 10,000 per annum on your health, you can reduce it significantly by paying only Rs 2,000 which can give you a healthinsurance policy worth Rs 1 lakh.

What it means is that not only do you save Rs 8,000 every year but your medical expenses are taken care of by the policy. In the long run if you invest this money in some saving instrument it can give youbetter returns.

If you will add the above two figures and calculate with a compound interest of 15 per cent, then it will come to around Rs 1 crore in 20years.

If you are moderate risk taker you can also invest in mutual funds rather than investing in pure debt funds. While, the debt funds give you a return of around 4-5 per cent, any mutual fund can give a higherreturn of around 20 per cent per annum.

You can also take the systematic investment plan (SIP) route. It won't make hole in you pocket as you need to invest a small amount everymonth.

If you start putting Rs 2,000 every month at the age of 25 then you will have around Rs 1 crore at the age of 50 (assuming an averageannual return of 10 per cent).

Today Indians are living longer and they are also facing difficulty to save money.

As government jobs are shrinking, more and more people are moving towards private sector jobs where there is little job security.

Thus, it has become inevitable to plan your retirements accordingly to meet your future expenses. Also investments can grow to a very large sum if you manage them effectively.

Pension plans are attractive investment vehicles for building up retirement savings, mainly because of their automatic re-balancingfeature and tax efficiency.

Generally, they maintain a 60-40 debt-equity allocation at all times, thus, reducing your headache of constantly re-balancing your portfolio. In pension plans you also have to shell out less premiums
than life insurance plans.

Once you understand where you stand financially and a rough idea of how you will get there where you want to go, then you can startearning from your investments which is called as passive income.

Weekly Technical Analysis

Ok. Finally the Verdict is Out. Markets have really been strong and we have definitely broken the downtrend. Look for good weeks ahead.

Positives

• All indicators maintaining their uptrend.
• MACD Cross above 0.

Negatives

• None in particular. Still extremely Overbought.

Analysis

After a few weeks of "Do Not trade" and "have patience" words, we mentioned in our previous newsletter that last week(week ending 27th May) would be a decisive week. And it really was. We also clearly stated to go LONG if we broke the 6500 level. Which was decisively broken last week. Since we have left the 50 DMA way back and have never looked at it again, there is every reason to believe that we are now in a Bullish zone. The downtrend and downward waves are over and it is now time to create the upward waves.

Outlook

Ok, we are again at the most difficult question. What would happen in the coming week. Since we broke past all resistances and key levels and moving averages, we are in a good strong bullish zone. But at the same time, we are Extremely overbought. As much as we would want to go long, we are tempted to go Short too. Short, Not because the market might go down. But because a correction is long due. Again, if we look back. Indian markets have a tendency to stretch the overbought-ness to few weeks. So what do we do. Since a Correction is due, it is advised to go Long only with strict stop-losses around the strong support levels. We would strongly suggest you trade only in the second half of the week, by which time we expect some correction to have happened or to start.

The Flavour Of Oil

Valuations of oil stocks are likely to greatly improve in the long run. And then oil will truly smell sweet.

Is it the right time to invest in oil stocks? Let us examine a few facts. India, as a market, has a humungous appetite for oil. However, only 30 per cent of its requirement of nearly 110 million metric tonnes per annum is met by domestic producers. The downstream companies that refine and market crude, thus, have to import a major portion of their requirements. This is hugely expensive, as global crude prices have been ruling at $50-plus (Rs 2,200-plus) for some months now. They then process this crude and sell it at government-determined low prices. Who makes up the deficit? No one. It's a straight hit to their bottom lines. Will the government raise prices? Probably. But it is unlikely to raise them enough to make good the entire loss anytime soon.

Sounds bad? Yes. Does it still make sense to invest in these companies? Yes. Here's why: the current situation cannot go on for ever. Something has got to give. Either global prices will come down (which appears unlikely at present), or the government will have to raise prices. Once the oil companies (particularly the refining and marketing companies) are allowed to sell their products-especially kerosene and LPG-at market-determined prices (or at rates close to them), their bottom lines are likely to improve substantially. The profits of exploration and production major ONGC (Oil and Natural Gas Corporation) will shoot up too as it will not have to share a part of the implied subsidy burden with the refining and marketing companies. Then again, the stocks of most of these companies (with the possible exception of ONGC) are hugely undervalued, and any change in the scenario is likely to improve their valuations considerably. Here's a more detailed look at the oil sector from an investment perspective.

Exploration And Production

All over the world, increases in crude prices bring joy to oil exploration and production companies. The scenario is different in India, though. India's biggest exploration and production company, ONGC-also India's most valuable company, with a market cap of over Rs 1,25,000 crore-has not really been able to benefit from the global surge in crude prices due to domestic political compulsions. Bowing to the demands of the refining companies and unable to take the burden on itself, the Union government in 2004 decided that ONGC and GAIL (India) Ltd. would have to share the subsidy burden on LPG and kerosene with the refining and marketing companies. Today, that translates to an outgo equal to one-third of the total subsidy component on LPG and kerosene for ONGC. This is adversely affecting its bottom line. For instance, in 2004-05, ONGC had to fork out Rs 3,114 crore to IOC, HPCL and BPCL as subsidies for LPG and kerosene.

Is ONGC still a good bet? Sanjiv Prasad, analyst at Kotak Securities, reckons it is probably a better bet than the refining companies. On a turnover of Rs 35,450.75 crore (for the first nine months of 2004-05), it raked in profits of Rs 9,075.94 crore. This is after shelling out the subsidy to the refining companies. Moreover, increased investments in infrastructure, new gas discoveries, improving import facilities and continuing high prices are seen as positives for the company. Analysts expect the deregulation of the gas sector to add Rs 1,500 crore to ONGC's bottom line every year. Further, it now has permission to set up around 1,100 retail outlets (it set up its first outlet in Mangalore recently), which is likely to add to its overall growth in the near future. So, if you have stocks of ONGC, just hold on to them for dear life.

Refining And Marketing

The subsidy burden takes its highest toll on the public sector integrated downstream companies (which refine and market petroleum products) such as IOC (Indian Oil Corp.), BPCL (Bharat Petroleum Corp.) and HPCL (Hindustan Petroleum Corp.). These companies buy their crude either from ONGC (which bears one-third of the subsidy burden) or from global markets at prevailing international prices. However, they are unable to sell their products at market prices and, thus, have to bear huge losses. The total under-recoveries borne by the PSUs have gone up from Rs 9,370 crore in 2003-04 to Rs 19,900 crore in 2004-05. According to the Ministry of Petroleum, this is expected to touch Rs 37,000 crore this fiscal, while the oil companies put the figure at Rs 50,000 crore. And while they do benefit from higher refining margins of $12.15 (Rs 534.60) per barrel, they lose out because they are unable to sell their final products-kerosene, diesel and LPG-at market prices, thus, directly affecting their bottom lines.

So, what should your approach as an investor be? Should you buy, sell, or hold these stocks? Opinions differ, but analysts of all hues agree that over the long term, oil stocks are a veritable gold mine. Says Gul Tekchandani, Chief Investment Officer, Sun F&C: "Valuations are extremely attractive because going forward, there will be substantial returns for equity holders. The subsidy issue, too, should get sorted out soon." Tekchandani's logic: these stocks have hit rock-bottom prices, and you're unlikely to get them at such low values later. The outlook for the future is positive as well: India is an energy-deficient country, and demand for oil will certainly increase. Besides, all these companies have strong fundamentals.

Others are cautiously optimistic. Ramdeo Agarwal, Managing Director, Motilal Oswal Securities, says: "There is no significant upside in the short run unless the government revises oil prices," but admits in the same breath that it could well be a good time for the retail investor to get his feet wet because these stocks have already bottomed out.

So, if you don't have stocks of oil refining and marketing companies, the time to get in is now. And if you already own them, the right strategy will be to hold on to them, despite the negative sentiments currently surrounding the sector. Among the refiners, analysts are most bullish on IOC, simply because it owns and operates the country's largest crude oil and product pipeline network of nearly 80,000 km. Marketing companies using this network have to pay IOC access and transit fees, thus, giving it another revenue stream.

Then, there's Reliance. India's biggest private sector refiner, with 27 million tonnes per annum of refining capacity at Jamnagar, does not have to bear the burden of subsidies. Says Jigar Shah, Head of Research at K.R. Choksey Shares and Securities: "The infighting within the Ambani family has pushed its valuation down. This makes it even more attractive."

Whichever way you look at it, the energy sector in India looks good for the future. And if you've managed to stand your ground on slippery turf, the flavour of oil will be one to savour, and remember

Business Today

Traditional items propel export growth

The 24.13 per cent export growth in dollar terms during 2004-05 owed itself largely to the robust performance by five traditional products - agriculture and allied products, ores and minerals, gems and jewellery, chemicals and related products and engineering goods - which together constitute a preponderant 65 per cent of the aggregate exports of the country.

Latest foreign trade data collated by the Directorate General of Commercial Intelligence & Statistics and compiled by the Economic Division of the Commerce Department for the fiscal year 2004-05 show that the country's exports touched $79,247.05 million, against $63,842.97 million in 2003-04, reflecting a growth of 24.13 per cent.

Agriculture and allied exports with a weight of 7.61 per cent in total exports posted a reasonably high growth of 11.60 per cent during 2004-05 at $6,033.94 million, against $5,406.70 million in 2003-04, while ores and minerals exports (weight 5.29 per cent) logged a growth of 77.03 per cent at $4,193.44 million, against $2,368.73 million in the previous year.

While exports of gems and jewellery (17.29 per cent) notched up a growth of 29.62 per cent at $13,705.44 million in 2004-05, against $10,573.38 million, exports of chemicals and related products registered a growth of 27.28 per cent at $12,677.21 million, against $9,960.12 million in 2003-04.

Engineering goods exports (18.41 per cent) acquitted themselves well by posting a growth of 38.71 per cent at $14,587.37 million, against $10,516.45 million in 2003-04. Textile exports with a dwindling share of 15.16 per cent in overall exports put up a tepid show by notching up a negative growth of 1.53 per cent at $12,017.46 million, against $12,2204.71 million in the previous year. The dip in exports assumes significance in the light of the fact that the quota regime in global trade in textiles and clothing ended in the final quarter of the last fiscal but this did not get reflected in any marked rise in export receipts.

Destination-wise, India's exports continued its growth story with Asia and Oceania as this region absorbed 47.41 per cent of its total exports and recorded a rate of growth of 27 per cent at $37,573.37 million in 2004-05, against $29,621.10 million in the previous year. Exports to West Europe (23.80 per cent) grew by 19.72 per cent at $18,859.10 million in 2004-05, against $15,752.10 million in the previous year, while exports to the Americas (20.42 per cent) logged a growth of 20.50 per cent at $16,181.76 million during 2004-05, against $13,428.35 million in 2003-04.

Though East Europe, Africa and Latin America account for a meagre share of India's exports, these regions displayed bullish trends by registering a reasonably higher export growth with India during 2004-05, reflecting the diversified nature of India's export efforts.

Among the top 15 countries for exports, Singapore recorded the highest growth of 79 per cent at $3,795.51 million during 2004-05, against $2,124,84 million in 2003-04, followed by China of 55 per cent at $4,586.28 million ($2,955.10 million) and the United Arab Emirates of 38 per cent at $7,098.14 million ($5,125.61 million).

On the import front, the 37 per cent growth in imports during 2004-05 saw the import bill touching $1,07,066.11 million, against $78,149.62 million during 2003-04. Bulk imports with a weight of 39.09 in aggregate imports grew by a hefty 43.03 per cent during 2004-05 at $41,851.00 million, against $29,259.46 million in 2003-04. Petroleum, crude and lubricants which account for 27.87 per cent of total import grew by a whopping 45.09 per cent at $29,844.10 million in 2004-05, against $20,569.60 million in the previous year, partly fuelled by a flare-up in world crude prices which cruised to a level of $50 per barrel.

Machinery imports with a weight of 10 per cent in total imports grew by a moderate 15.11 per cent at $10,709.87 million during 2004-05, against $9,303.90 million during 2003-04.

Equally with a share of 10.11 per cent in aggregate imports, import of gold and silver registered a rate of 57.87 per cent at $10,824.38 million during 2004-05, against $6,856.42 million in the previous year, marking a recrudescence of interest in bullion as a safe haven for investment by the public.

Destination-wise, India's imports from Asia and Oceania, which accounts for a share of 35.40 per cent in total imports, grew by close to 40 per cent at $37,899.26 million, against $27,151.41 million in the previous year. Import from West Europe (22.60 per cent) was up by 29.45 per cent at $24,194.92 million, against $18,690.45 million in 2003-04. Imports from the Americas (8.36 per cent) grew by a robust 29.18 per cent at $8,947.03 million, against $6,926.20 million in 2003-04.

Among the top 15 countries for imports, the highest growth last fiscal was logged by UAE of 122 per cent at $4,581.96 million ($2,059.85 million), followed by Switzerland of 76 per cent at $5,817.92 million ($3,312.75 million) and China of 66 per cent at $6,746.66 million ($4,053.23 million).

Sharekhan Stock Idea

Television Eighteen India 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs350
Current market price: Rs280

Profit has a new destination

Key points

• Television Eighteen (TV18) is India's leading business news broadcaster, running the English business news channel CNBC TV18. 
• The news advertising space is likely to grow at a compounded annual growth rate (CAGR) of 25% over the next two to three years.
• With its new Hindi business channel called Awaaz and the launch of a general English news channel in the near future, TV18 would be best placed to garner a higher share of the news advertisement market.
• New distribution agreements could bring in pay revenues at a substantial premium to that as per the existing agreement. 
• At 10.3x FY2007E earnings and 5.3x FY2007E EV/EBITDA, TV18 is the most attractive media stock both on growth basis and on valuation basis.
• We recommend a Buy with a price target of Rs350.

Weekly Analysis

Positives

• All indicators resuming their uptrend.
• Good Relative Strength.

Negatives

• None in particular, except that we must take out the emotional 6500 Mark, which has been eluding us for a while now.

Analysis

One good thing about the market is that it has broken it's downtrend a couple of weeks back. Now it is in a state of consolidation. But one must always have a very close eye on the moving averages along with support/resistance levels, because they have a major influence along with other factors. Since we are so close to 50 DMA and that we have had good rally over the past couple of weeks, we are in a sort of catch-22 situation. We want the indices to consolidate, which is good for a healthy uptrend. But at the same time, we do NOT want the indices to move back below 50 DMA. So, what do we do. Again, as we mentioned, this Coming Week would be a very crucial one. And it may decide the fate of where the market is headed in the following weeks to come.

Outlook

This should be the last week of patience. We believe the coming week would give us a clearer picture of what is in store ahead. Since the market could go either way, it is strictly advised to stay away from trading. Keep a close eye on two levels. 50 DMA and 6500 levels. If we break 50 DMA and move down, short immediately for a short-term gain. If we move above 6500 and stay there, then go long.

Source : DLNgroup

Hindu Businessline Recommendations

Buy  >> Tata Tea
Sell  >> Raymond, Goodyear India, Zee Telefilms
Hold >> Tata Motors

Research Summary - Motilal Oswal

Motilal Oswal - Download the research summary - Research Summary

Motilal Oswal - Eveready Industries

Motilal Oswal recommends a BUY on Eveready Industries. Download here

Kotakstreet - Siemens - Stock India

Kotak recommends a BUY on Siemes with a target of Rs. 2632. Download the report here

Watch for the following stocks

Scrips  with Targets

Kaveri Telecom   >>     200
TCFC                  >>     50
Sterling Resort    >>     75
Thirumalai           >>     250
Fairfield Atlas      >>     150
Patel Engg           >>     400

Hindu Businessline Recommendations

Buy >> Maruti Udyog, Container Corporation,
>> TISCO, Sun Pharma, Harrisons Malayalam

Hold >> I-Flex Solutions, P&G

Indian investors follow 'beacon'

Read here

Exhibiting strength

The Nifty has moved above the 1973 resistance level and closed on a strong note. After posting a double bottom at 1900, the index moved above the peak of 1973 and in the short-term is likely to exhibit momentum. On the upside the Nifty is likely to target 2012 and 2020.
The 20-DMA at 1958 and the 10-DMA at 1940 are support levels. Any intra-day decline should see the Nifty find support around 1958 and 1940.

Dena Bank has a support at Rs 28.50 and on the upside the stock could test Rs 33. Canara Bank has a support around the rising gap at Rs177-178 and any intra-day decline should see the stock find support around this level. On the upside the stock could move to Rs 197.

Reliance Industries is likely to exhibit intra-day strength above Rs552. SBI could test Rs 635 and the stock has a support at Rs 606.

Stock Ideas Report Card

Aban Loyd Chiles Offshore
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs2,330
Current market price: Rs1,948

Well on growth track

Result highlights

• Aban Loyd Chiles Offshore's revenues from operations for Q4FY2005 were up by 52.6% year on year (yoy) and by 79.1% quarter on quarter (qoq) to Rs102.7 crore. For the full year the growth was 6% yoy in line with our expectations.
• The operating profit for Q4FY2005 was up by 103.5% yoy (226.6% qoq) to Rs60.8 crore. For FY2005 the performance was much ahead of our expectations with a growth of 14.6% yoy.
• The net profit for Q4FY2005 was up by 100.3% yoy (96.3% qoq) at Rs19.9 crore.
• However the net profit for FY2005 at Rs50.1 crore was below our expectation due to higher both depreciation and interest cost.

 

Alok Industries 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs120
Current market price: Rs63

Well woven

Alok Industries reported a 64% rise in the net profit for Q4FY2005, ahead of our expectations. A large part of the outperformance was on account of the additional export incentives given under the "Target Plus" policy announced in the last export-import policy. An impressive performance with regard to the exports of bed linen and a 100-basis-point expansion in the operating margin, primarily reflecting a change in the product mix, were the key highlights of the results. However the earnings per share have been short of our estimate as the majority of the dilution on account of the foreign currency convertible bonds and optionally fully convertible debentures issued to the Life Insurance Corporation was completed in FY2005. Additional capacities in bed linen and apparel wear are going on stream in the middle of FY2006 which should drive the earnings growth. We are marginally upgrading our FY2006 EPS estimates by 5.7%. The stock currently trades at 6.8x FY2006E earnings.

Bharat Bijlee 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs4,550
Current market price: Rs4,000

Power-packed future 

While initiating coverage on Bharat Bijle in our report dated November 29, 2004 we had mentioned the following investment arguments:

• Reforms in the power sector to be the driver of Bharat Bijlee's transformer business;
• A high level of industrial activity to drive volumes of its electric motor business;
• The transfer of its lift division to improve its profitability and return ratios; and
• Cash and cash equivalent in its kitty shall provide safety.

All of these investment arguments are gradually materialising, thereby improving the business prospect and earnings outlook for Bharat Bijlee.

 

Cipla 
Cluser: Cannonball
Recommendation: Buy
Price target: Rs310
Current market price: Rs254

VAT blues
With the export strategy in place through tie-ups with companies based in the USA and the UK (as an outsourcing hub), the revenue streams for the company have now become stable. The company has also commissioned a new manufacturing unit in Baddi, Himachal Pradesh. The margins over the last few quarters have also shown an improvement. We maintain our buy on the stock with a price target of Rs310.

Corporation Bank 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs370
Current market price: Rs346

Strong operating growth

Corporation Bank has reported a strong growth of 16.6% year on year (yoy) and of 3.9% quarter on quarter (qoq) in its net interest income (NII) for Q4FY2005. The growth in the NII rebounded after a meagre 3.3% growth posted by bank in Q3FY2005. However the net profit declined by 9.9% as the bank made a higher provision for bad loans against a write-back of Rs19 crore in Q4FY2004. The fee income also showed an impressive growth of 24% yoy and of 42.9% qoq for Q4FY20005. However the profit for the full year at Rs402.2 crore was lower than our estimates of Rs640 crore as during Q2FY2005 the bank transferred Rs4,930 crore of government securities from the Available for sale (AFS) category to the Held till maturity (HTM) category, providing an accounting loss of Rs205  crore. Adjusting for this one-time losses the net profit of the bank would have been Rs607 crore compared to our estimate of Rs640 crore. At the current market price of Rs346.5, the stock is quoting at 8x its FY2006E earnings and 1.4x its FY2006E book value. We maintain a Buy on the stock.

ESAB India  
Cluster: Vulture's Pick
Recommendation: Buy
Price target: Rs215
Current market price: Rs205

Earnings surge

• Esab's net sales for Q1CY2005 grew by 24% year on year (yoy) and stood at Rs54.1 crore.
• The operating profit margin (OPM) improved by 760 basis points yoy and by 140 basis points quarter on quarter on account of a drop in the consumption of raw material. The raw material cost as a percentage of sales fell from 50.1% to 46.9% yoy and dropped by 120 basis points sequentially.
• The improvement in the margins was primarily driven by a huge improvement in the margins of the Equipment division, which saw a rise of a whopping 1,280 basis points to 18.4%.
• During the quarter the operating profit zoomed by 89% to Rs12 crore as against Rs6.34 crore for the corresponding period last year.
• The net profit for the quarter registered a staggering growth of 155% and stood at Rs7.5 crore.

Geometric Software Solutions 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs550
CMP: Rs485.00

Growing in double-digits 

Result highlights

• Geometric Software Solutions' overall results are in line with our expectations.
• The top line is up by 14.7% in rupee terms quarter on quarter (qoq). In dollar terms the same is up by 17.2%.
• The operating profit margin fell during the quarter but if we ignore the one-time expenses incurred during the period the same is largely in line with expectations.
• The company has given a robust growth guidance for FY2006: a growth of 45-50% in the top line in US Dollar terms and a similar growth at the net profit level.
• At the current market price the stock is quoting at 12.3x FY2006E earnings.
• We maintain our Buy call on the stock.
  
  

Gujarat Ambuja Cement 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs424.00

Reading between the lines 

Results highlights

• Gujarat Ambuja Cement's net sales registered a growth of 19.4% year on year on the back of a 15% growth in cement sales and a 4% growth in cement realisation.
• The operating profit margin (OPM) is down 280 basis points primarily because of a huge 26% rise in power and fuel costs, and a 19% increase in staff cost.
• The operating profit grew by 9.1% and stood at Rs199 crore as against Rs182.3 crore last year.
• A 19.6% increase in the depreciation charge resulted in a negative bottom line growth of -1.5%.
• Adjusted for an extraordinary foreign exchange loss, the stand-alone net profit is higher by 24% at Rs146.7 crore. The consolidated net profit registered a growth of 22.6% to Rs161.7 crore.
• The company has announced a dividend of 60% (Rs6 per share), a 1:2 bonus issue and a 1:5 stock split (face value to be split from Rs10 to Rs2).

HCL Technologies 
Cluser: Ugly Duckling
Recommendation: Buy
Price target: Rs400
Current market price: Rs347

BPO business drives growth 

Result highlights

• HCL Technologies' revenues grew by 7.1% quarter on quarter (qoq) in Q3FY2005.
• Its software services business grew at a disappointing 3.3% qoq in rupee terms.
• The business process outsourcing (BPO) business continues to record a strong growth and grew by 17.9% qoq.
• The infrastructure management business grew by 24% sequentially.
• The overall EBITDA margins were maintained again.
• The stock trades at 14.0x FY2006E and at 4.6% dividend yield. We maintain our Buy call.

HDFC Bank 
Cluster: Evergreen
Recommendation: Buy
Price target: Rs600
CMP: Rs558.55

A "30%" machine

Result highlights

• HDFC Bank's net interest income (NII) grew by 42.4% year on year (yoy) for Q4FY2005 and by 33.2% yoy for the full year ended March 31, 2005.
• During FY2005 the net advances grew by 44.1% to Rs25,566 crore driven by a 47.5% growth in the retail advances.
• The bank's deposits grew by 19.6% yoy during FY2005 on the back of a 46.3% growth in the saving account deposits.
• The capital adequacy ratio (CAR) improved from 9.7% in Q3FY2005 to 12.2% in Q4FY2005 on account of an American depository share (ADS) issue of $293.4 million.
• The bank has declared a dividend of Rs4.50 per share for FY2005.

 

Hyderabad Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs300
Current market price: Rs210

A clean(-up) exercise

Result highlights

• Net sales of Hyderabad Industries Ltd (HIL) in Q4FY2005 rose 30.5% to Rs114.7 crore, driven by a 28% increase in the sales from the Asbestos division.
• The operating profit stood at Rs13.97 crore in Q4FY2005 as compared to Rs7.09 crore in Q4FY2004.
• HIL reported a net loss of Rs5.73 crore in Q4FY2005. However the net profit before extraordinary items stood at Rs4.9 crore, registering an increase of 129%
• The net sales increased by 25.8% to Rs407 crore in FY2005.
• The operating profit in FY2005 rose by 332% to Rs49.34 crore.
• The net profit before extraordinary items stood at Rs20.4 crore as compared to a loss of Rs4.2 crore in FY2004.

Indian Petrochemicals Corporation 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs230
Current market price: Rs170

Another quarter of growth

Result highlights

• Indian Petrochemicals Corporation Ltd's (IPCL) net sales for Q4FY2005 are higher by 1% compared to that in the corresponding quarter of last year because of a drop in the revenue from the chemical trading business.
• However the operating profit for the quarter grew by 71.5% as the operating profit margin (OPM) expanded by 826 basis points
• The interest cost was lower by 42% year on year (yoy).
• The net profit adjusted for extraordinary items is up by 239.4% yoy.

Infosys Technologies 
Cluster: Evergreen
Recommondation: Buy
Price target: Rs2,500
CMP: Rs1,957.00

Top line grows by 6% 

Result highlights

• Infosys Technologies' top line grew by 6.0% on a sequential basis, at a rate lower than our expectations but higher than the company's guidance.
• The operating profit grew by 7.9% on a sequential basis. 
• The operating profit margin (OPM) improved for the second consecutive quarter.
• The provision for post-sales customer support, the higher depreciation cost and the lower other income affected the bottom line, which grew at just 3.2% sequentially.
• Although there will be apprehensions with regard to the company's performance in the short term (considering the muted first quarter guidance given by the company), yet the long-term outlook for the information technology giant remains positive.
• At the current market price the stock is quoting at 21.2x FY2006E earnings.
• We maintain our Buy call on the stock with a 12-month price target of Rs2,500.

Jaiprakash Associates 
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs240
Current market price: Rs186

Raising the target
At current levels the stock is discounting its FY2006 consolidated estimated EPS of Rs21.5 by 8.7x. We believe that the stock's valuations are attractive, considering the robust order book of the construction business and firm cement prices across the company's key markets. We reiterate our Buy recommendation on the stock with a revised price target of Rs240.

 

Mahanagar Telephone Nigam 
Cluser: Vulture's Pick
Recommendation: Buy
Price target: Rs170

Current market price: Rs121

Numbers ahead of expectations 

Result highlights

• The top line is up 4.5% quarter on quarter (qoq) ahead of expectations.
• EBITDA margins declined, but are not comparable qoq.  
• Valuations are attractive at a dividend yield of 4.1-4.5%.
• We maintain our buy with a reduced price target of Rs170.

NDTV 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs245
Current market price: Rs175

Encouraging numbers 

Result highlights

• NDTV's overall numbers are ahead of expectations.
• The company's top line for Q4FY2005 was up 76% year on year (yoy)--5.5% higher than our expectations.
• The operating profit for Q4FY2005 is 28.8% higher than our expectations.
• NDTV's future looks more promising following the announcement of the results.
• We maintain our Buy call.

 

Reliance Industries  
Cluster: Evergreen
Recommendation: Buy
Price target: Rs660
Current market price: Rs539

Results above expectations

Result highlights

• Reliance Industries' revenues for Q4FY2005 are up by 29.6% year on year (yoy) (by 0.6% quarter on quarter or qoq) to Rs19,840 crore on the back of buoyant refining margins and a surge in the petrochemicals cycle.
• The operating profit is up by 34% yoy (7.8% qoq) to Rs3,546 crore.
• The net profit has risen by 61.5% due to a one-time adjustment of Rs300 crore in the deferred tax liability.
• Reliance Infocomm broke even at the net profit level during the quarter.
  
  

Satyam Computer Services 
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs450
Current market price: Rs405

Results meet expectations 

Result highlights

• Among the Indian information technology (IT) companies that have declared their Q4FY2005 results so far Satyam Computer Services has reported the highest volume growth of 8.7%.
• During the quarter the company's top line grew by a good 8.8% in US Dollar terms and by 7.0% in Indian Rupee terms, both on a sequential basis.
• The operating margins improved by 10 basis points (despite a 1.8% appreciation in the rupee against the dollar) due to a higher growth in the offshore business.
• The net profit grew at 22% on a sequential basis due to a higher other income and lower taxation.
• The company has acquired Citisoft, a UK based company.
• At the current market price the stock is quoting at 13.6x FY2006E earnings.
• We maintain our Buy call on the stock.

Tata Metaliks

Cluster: Emerging star
Recommendation: Book Profit
Current market price: Rs161

Disappointing results

Result highlights

• Tata Metaliks Ltd's (TML) revenues grew by 101.7% to Rs71.5 crore year on year (yoy); the revenues however declined by 3.7% sequentially due to lower realisations.
• The margins came under pressure with the operating profit margin (OPM) down from 41.5% in M9FY2005 to 21.6% in Q4FY2005.
• The cost of its raw materials rose in Q4FY2005, with the cost as a percentage of sales rising from 47.9% in M9FY2005 to 60.5% in Q4FY2005.
• The profit after tax (PAT) growth was lower at 30.2% to Rs8.8 crore and failed to meet our implied Q4FY2005 estimates of Rs14.3 crore.
• The earnings for FY2005 at Rs25.3 per share were also lower than our estimates of Rs27.6 per share by Rs2.3 per share.
• In view of the pressure on the company's margins, we revise our FY2006 estimates downwards by 14.6%. We recommend investors book profit at the current market price. (The stock is up 284% from our recommended price of Rs41.9).

Upper Ganges Sugar Industries
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs300
Current market price: Rs210

Against all odds

Result highlights

• Upper Ganges Sugar Industries Ltd's (UGSIL) revenues for Q3FY2005 grew by 28.7% year on year (yoy) and by 44.4% quarter on quarter (qoq) to Rs104.9 crore.
• The operating profit grew by a strong 34.8% yoy (by 76.9% qoq) to Rs36.7 crore.
• The pre-exceptional profit was up by 144.8% yoy; however exceptional items marred the show. Post-exceptional items the profit was down by 22.2% yoy.
• About 1,325,000 quintal of sugar stock was carried forward to the last quarter of the year with unrealised gains of Rs43 crore.

UTI Bank 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs300
Current market price: Rs238

Bank on it

Result highlights

• UTI Bank's advances have grown strongly by 67% year on year (yoy) in Q4FY2005; deposits too have grown by 52% yoy though at the expense of net interest margins (NIM).
• The net interest income (NII) has grown a tad slower at 19.6% yoy during Q4FY2005.
• The other income has however grown by 62.4% yoy on the back of a strong growth in the fee income and treasury profits.
• The bank's net non-performing assets (NPAs) as a percentage of its net advances was stable yoy—it improved by 27 basis points quarter on quarter (qoq).
• A global depository receipt (GDR) issue of $239 million improves the bank's Tier-I capital adequacy ratio (CAR) to 8.87%; its overall CAR was at 12.66%.

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SECTOR UPDATE

Cement 

The road ahead... 

The cement industry on a whole had a fairly decent run in FY2005, when it witnessed a rather rare phenomenon of a growth in excess of 6% in both volumes and cement prices. However FY2006 and FY2007 will be very crucial for the industry, as we believe the industry is on the verge of a demand-supply equilibrium and any significant amount of greenfield capacity addition could disrupt the parity and adversely affect cement prices which in turn could affect the profitability of the cement manufacturers.

Sugar

Pick your sweets

Exit Oudh Sugar, buy KCP Sugar and Upper Ganges
Oudh Sugar Mills, which is based in Uttar Pradesh, too faces the risk of being made to pay the huge arrears for the 2002-03 season. Looking at this risk and the declining probability of another hike in the price of sugar we recommend investors exit the company.

On the other hand a higher carried forward stock (at a cost of Rs13-14) should work as a near-term trigger for Upper Ganges Sugar. The incremental earnings per share from the carried forward stock would be even higher due to the lower equity base of the company.

KCP Sugar and Industries has the advantage of being located in the coastal Andhra Pradesh belt and the risk of SAP doesn't affect the company except for presenting a meagre liability of Rs2 crore for the 2002-03 season. A 6-megawatt power plant that is expected to be commissioned in September 2005 would also augment the company's revenues.

We maintain our Buy call on Upper Ganges and KCP Sugar Industries.

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SHAREKHAN SPECIAL

Consumer power

Is the FMCG sector coming out of hibernation? Yes, if the sector trends are to be believed:

• A handsome growth in volumes across segments in the fourth quarter of the calendar year 2004.
• The capital expenditure cycle is turning upwards after a long time--companies are heading north to take advantage of tax breaks.
• A good south-west monsoon to be crucial for the sector.
  

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VIEWPOINT

Ador Welding
Current market price: Rs121.80

Impressive results
Based on Ador's results, ESAB India is likely to post equally impressive numbers.

Result highlights

• During Q4FY2005, the net sales of Ador Welding have registered a smart growth of 43% to Rs66.65 crore. The net sales have maintained the momentum even on a sequential basis registering a growth of 43%.
• The operating profit margin (OPM) has registered an increase of 510 basis points sequentially and stood at 19.5%, primarily because of a sharp drop of 420 basis points in the raw materials/sales ratio (on a sequential basis)  from 51.6% to 47.4%.
• This combined with a 43% rise in the sales has pushed up the operating profit by a whopping 112% on a sequential basis.
• The net profit for the quarter (adjusted for extraordinary items) has registered a huge growth of 229% sequentially and a 64% growth year on year to Rs11.28 crore.
  

Bharti Tele-Ventures

Current market price: Rs207

Ringing in good numbers

Result highlights

• Bharti Tele-Ventures' Q4FY2005 results-a growth of 16.0% in the earnings before interest, tax, depreciation and amortisation (EBITDA) quarter on quarter (qoq) and a growth of 17.2% in the net profit qoq—were ahead of estimates.
• The operating leverage effect in the mobile business and the margin gains in the long distance business from the cut in the access deficit charge (ADC) and bad debt write-backs led to the positive surprise.
• The revenue per minute of mobile business declined from Rs1.5 to Rs1.4 on a quarter-on-quarter (q-o-q) basis on account of the ADC cut and higher pre-paid mix but the EBITDA per minute remained stable at Rs0.47/minute.

 

Sona Koyo Steering Systems
Current market price: Rs60

On growth path

Sona Koyo Steering Systems (Sona Koyo) has reported strong Q4FY2005 results with a profit after tax (PAT) of Rs6.2 crore, exceeding our estimates mainly due to a higher other income. The PAT grew by a record 73.7% year on year (yoy) despite higher interest and depreciation charges, boosted mainly by the other income of Rs2 crore. Despite a steep increase in its input costs, the company managed to improve its earnings before interest, depreciation, tax and amortisation (EBIDTA) margin by ten basis points to 11.8%, driven by higher economies of scale. Its net sales increased by 30.6% yoy and by 12.7% quarter on quarter (qoq) to Rs87.4 crore (as against the industry average of 18% yoy) owing to higher export sales of Rs11.1 crore.

 

Tata Consultancy Services           

Current market price: Rs 1,115

TCS belies expectations

Q4FY2005 result highlight

• The overall results of Tata Consultancy Services (TCS) are significantly below market expectations.
• The company's top line grew by just 0.2% quarter on quarter (QoQ); even in US Dollar terms the growth was low at 2.3%.
• The operating profit margin declined by 250 basis points while the operating profit declined by 8.6% QoQ.
• At the current market price the stock is quoting at 22.8x FY2005 earnings; the earnings exclude the Rs102 crore provided towards economic value added linked variable compensation and a one-time expense of Rs204 crore.

 

Wipro
Current market price: Rs648

Report card reads good

Result highlights

• Wipro's overall numbers are in line with street expectations.
• The top line of the Global IT Services business grew by 6.3% (in $ terms) sequentially led by a good volume growth of 8.5%.
• The operating margins in the Global IT Services business were stable.
• Another quarter of muted performance by Spectramind.
• The management's guidance for Global IT Services business implies a growth of 5.3% in the next quarter.
• The stock trades at 21.6x FY2006E earnings.

Moving towards 1973

The Nifty surpassed its 10-DMA at 1940 and ended the trading session on a strong note. On the upside the index is likely to target its recent high of 1973. On the downside 1920 is a crucial support level. Any intra-day decline should see the Nifty find support around 1920. In the short-term the index has formed a double bottom around 1900 (1902 and 1895), which should now provide strong support and the Nifty is likely to move up to 1973.

Oriental Bank of Commerce could test Rs300 on the upside. Any intra-day decline should see the stock find support around Rs282. Maruti is likely to exhibit intra-day strength above Rs415. Reliance Industries could test the Rs550-554 range and on the downside the stock has a support at Rs533. Tisco will exhibit intra-day strength above Rs355.75.

Shree Cement

Shree Cement
Cluster: Emerging Star
Recommendation: Book profit
Current market price: Rs367

 

Book your gains

 

We had recommended a Buy on Shree at Rs267 with a price target of Rs353 on January 5, 2005. Subsequently we revised our price target to Rs400.The stock has appreciated by 39%  since we recommended a Buy on it. However we believe the rising fuel cost will affect the earnings of all cement players and consequently have an impact on their valuations.

At the current market price of Rs367 Shree is quoting at US$98 per tonne of cement (on expanded FY2006 capacity of 3.8 million tonne) and at 6.5x FY2006 E earnings before interest, depreciation, tax and amortisation. We believe the stock's valuations are justified and advise investors to book profits at these levels.

Source : Sharekhan

Motilal Oswal Reports

Access Motilal Oswal Reports Here

Cyber Media (India): Avoid

Retail investors may avoid the initial public offering of Cyber Media (India) as the risks involved in the projects in the pipeline planned are fairly high. Given Cyber Media's long presence in niche media publications segment, it plans to scale-up its presence in content BPO (business process outsourcing) using its existing customer relationships, especially in the European market. This project is to be launched by May 2006.

While the initial flow of projects for content BPO may not be an issue, managing the challenges of scale-up, process efficiencies, attrition and competition will be fairly stiff. As the company claims that content BPO will be its main thrust area in the coming years, investors will have to assess its track record in content creation and delivery and the right tie-ups with agents in Europe over a longer time frame before taking an exposure in the stock.

Besides this Cyber Media is also launching three media publications that are to be financed through this IPO. As Singapore is slowly emerging as Asia's global hub for biomedical sciences, the company is launching BioSpectrum Singapore, a magazine focused on the nascent field of biomedical sciences. Second, to focus on the growing field of BPO, it is planning a magazine, Global Outsourcing that will focus on the readership in the Indian and American markets. Both the magazines are likely to be launched between May and July 2006. Finally, McGraw Hill, the publishers of BusinessWeek, has licensed Cyber Media to publish BusinessWeek India, subject to permission from the Ministry of Information and Broadcasting.

A chunk of the revenues for these two publications - BioSpectrum Singapore and Global Outsourcing - will be derived from advertising. As these two publications will be aimed at a global audience, the competitive intensity for advertising revenues will be quite high. Unlike information technology, where Cyber Media has operated over five publications in India for long, its exposure to the field of biotechnology and bioinformatics has been of more recent vintage (2002). Though it has run this magazine in the domestic market for over two years now and estimates a readership of 40,000, replicating this experience for a global audience remains untested.

As the quality of content will drive advertising revenues to start with, margins on this magazine will be fairly low for at least a year or two.

Relatively, its BPO publication may be placed on a better footing as it has an established presence in the Indian market.

Given these uncertain variables, the offer price of Rs 60 per share, which works out to a price-earnings multiple of 10 times the annualised per-share earnings for 2004-05, appears to be on the high side.

Cyber Media's integrated model in the publishing businessis a positive. For the nine months ended December 31, 2004, Cyber Media clocked consolidated revenues of Rs 50.4 crore and post-tax earnings of Rs 3.25 crore. The operating profit margin stands at 13.5 per cent, steadily moving up in the last couple of years.

Last year was the best for the print media across an entire business cycle, with advertising revenues driving overall growth for the general and special media.

The real test will be in sustaining this growth over the coming years. Given its long presence in this sector across publications that cover IT, telecom and consumer electronics, Cyber Media will be in a position to maintain its growth momentum.

Moreover, its integrated model has confined its dependence on advertising revenues to about 50 per cent of its consolidated revenues, with the rest coming from multimedia, online, event management and research sources. While this is encouraging, the new projects planned by Cyber Media present a new set of challenges and risks that may impact the group's overall performance.

Facts: Cyber Media is offering 28.2 lakh shares to raise Rs 16.9 crore . The offer opens on May 4 and closes on May 9. The lead manager is Khandwala Securities.

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