Moser Baer: Another challenging quarter

Read here

Indiainfoline - Kirloskar Oil Engines

Kirloskar Oil Engines

Download here

Indiainfoline - Control Print India

Control Print India

Download here

Motilal Oswal - Indian Card Clothing

Motilal Oswal Recommends Buy On Indian Card Clothing @ 267 Wuth Target Price 476


Download here

Sharekhan Special

Dividend Yield Stocks

Download here

Amar Remedies: Invest at cut-off

Source : Hindu Business Line

AN INVESTMENT can be considered in the initial public offer of the Mumbai-based Amar Remedies. Investors can subscribe to the offer at the cut-off price. The offer is being made through the book-building route in the Rs 24-28 price band. Given the current state of the market, we believe investors should also consider booking profits if the targeted rate of return is attained on the stock's listing.

Company background

Amar operates primarily in the Ayurvedic toothpaste segment, from which it derives 85 per cent of its revenues; toothpowder, a pain relieving ointment and a balm chip in with the rest. Amar intends to launch a set of 24 Ayurvedic products to address the health-, hair- and skin-care segments. The proceeds of the IPO is to be used to set up a facility at Surat for the to-be launched products and an R&D laboratory; a portion of the funds raised would also be used for marketing and branding-related activities for the new products, and for working capital purposes.

Amar has a product portfolio of 15 brands of toothpaste, of which 12 are exported and three sold in the domestic market. In FY-05, the company began exporting its products directly instead of through intermediaries, which was the operating mode to address the export market earlier.

Financials and prospects

Amar is a small outfit and ended FY-05 (the company follows a July-June fiscal) with revenues of Rs 106 crore and earnings of Rs 6.75 crore. Revenues have recorded a compounded growth of 55 per cent over a four-year period, earnings at 74 per cent.

The competitive nature of the business is manifest in the operating margin, which, at close to 10 per cent for FY-05, represents a more than 300-basis-point improvement compared to the prior fiscal. Direct exports, which accounted for Rs 5 crore in FY-05, appear to have played a key role in boosting margins. With Ayurvedic medicines increasingly gaining acceptance, largely due to their purported benefit of not having any side-effects, prospects for companies operating in this space appear good. Such medicines are gradually being accepted in the West too, throwing up exports opportunities.

The domestic market for herbal products (including of other disciplines such as Siddha and Unani medicine) is estimated at close to $1 billion, which represents a significant opportunity for a player such as Amar.

We also note from the offer document that though Amar requires Rs 21.7 crore, it would raise at least Rs 36 crore, assuming the offer goes through at the lower end of the price band. The excess funds at its disposal may be used to repay short-term loans of close to Rs 15 crore, which, in turn, would lead to substantial savings in interest costs (Rs 2 crore in FY-05).

Valuation and view

At the upper end of the price band of Rs 28, the stock would trade at about nine times its expected per-share earnings (on an expanded equity base) for FY-06. Our earnings growth estimates are conservative, as the effect of the capex should reflect higher depreciation, though we expect it to be offset in part by a lower interest outgo. The valuation level is competitive compared to peers such as Zandu, whose stock trades at close to 18 times the trailing four quarter earnings. Amar's return on shareholder funds for FY-05, at 27 per cent, is another positive. At Rs 28, the stock would command a market cap-to-sales multiple of 0.7, which, in our view, provides room for an upside.

What to watch for

Amar's toothpaste facility at Daman enjoys tax breaks, which will be partially withdrawn from FY-07 onwards. The higher incidence of taxation thereafter will compress earnings. The inapplicability of the product patent law for Ayurvedic products, which may spawn several me-too products, is also a key risk.

Offer details

Amar is offering 1.5-crore shares in the price band of Rs 24-28. Post-public issue, the promoter holding in the company will fall from close to 100 per cent to 43 per cent. Allianz Securities is the lead manager to the issue, which opened on August 25 and closes on August 31.

Hindu Businessline Recommendations

BUY   >>  ESAB India, Siemens, SKF India

SELL  >>  Essel Propack

HOLD >>  3i Infotech

Mid-caps: Early to rise and....

Read here

Motilal Oswal - Syndicate Bank

Syndicate Bank Recommends Buy On Syndicate Bank @ 71 With Target Price 130

Download here

Motilal Oswal - HCL Tech

Motilal Oswal Recommends Buy On HCL Tecnologies @ 436 With Target Price 452

Download here

TTK Prestige: a new RETAIL kid on the block

TTK Prestige: a new RETAIL kid on the block

BSE Code 517506   Rs 113

Equity Rs 11.3 Res 32 crs, Book Value Rs 41, Sales Rs 189 crs, EPS Rs 8.83 adjusted to write offs, PEx05 13       

BACK GROUND

TTK Prestige Ltd. a TTK Group company was incorporated in Oct 1955 and commenced the manufacture of pressure cookers in 1959 with technical support from Prestige Group, UK. It became a deemed public company in Jun.'88. Its name was changed to the present one in Jun.'94. It established facilities at Bangalore to manufacture a wide range of domestic and industrial appliances.

"Prestige" is India's leading kitchen appliances brand that symbolizes safety and reliability. The company is consolidating its existing strengths and is launching newer product categories and markets that it had not ventured into before.

With state-of-the-art facilities, the company has successfully launched its pressure cooker under the Manttra brand name in the US market, thus becoming one of the first organized Indian corporate entities to sell pressure cookers in the US under Indian-owned brand names.

The company entered into a tie-up with the world-renowned Braun , Germany, for marketing its products in India.

Readymade kitchens have taken the world by storm. Scrupulously designed to fulfil individual needs and adapt to available space, modular kitchens that have become the common way of life. Standardized modules, pre-fabricated in a varied range of materials, colours and finishes graciously fit the bill of fare to suit the modern kitchen. With the convenience and comfort of ready modules, one can avail of modern facilities and maintain a consistency in décor that defines one's personal statement of style. This has placed the modern housewife and working woman on the threshold of hand convenience where all one needs to do is order for one and before you blink your eye the ready kitchen is fitted into your house.

The basic modules are characterized by standardized units for the floor and wall, deep units to accommodate electrical appliances and gas trolleys, and a wide choice of accessories in the form of wire baskets, carousels, adjustable shelves and pull-out units.

Materials used are just as varied. You could choose from natural or lacquered wood, combinations of wood and laminate, laminate and granite, or even aluminium and marble, or just flow freely with the tide of ingenious material at hand and explore your creative flair for a custom built one.

No matter what the size and the shape of the kitchen, the two basic preferences have always been wood and laminate for the cabinets and shutters, along with sturdy material like marbles or granite for the worktops. All other options are generally designed around these.

Advantages of a modular kitchen are

They look good.

Optimize space.

Are made of durable material.

Selection of different materials for different uses is a difficult decision to make which is easily solved by a modular kitchen.

A modular kitchen takes care of things like exhaust hoods/chimneys which otherwise is ignored.

Replacement/repairs are easy.

Kitchen work/equipment/utensils get proper definition, role and place to function.

Person gets motivated to work in such kitchens.

Almost all over the world, in most homes, both husband and wife go out to work either out of necessity or out of choice and as such time spent in the kitchen is minimal giving rise to a demand for a well designed and convenient kitchen. Modular kitchens can very well fulfill this demand. With modular kitchens gaining popularity more manufacturers will jump into the field and the increased competition will result in prices becoming more affordable.

MANAGEMENT:

 

The Board of Directors is headed by Executive Chairman Mr.TT JAGANNATHAN

 

Name	Designation
T T Jagannathan	Executive Chairman
S Ravichandran	Managing Director
T T Raghunathan	Vice Chairman
Ajay I Thakore	Director
Latha Jagannathan	Director
Vandana R Walvekar	Director
R Rajagopalachari	Director
R Srinivasan	Director
K Shankaran	Director & Company Secretary

 

FINANCIAL HIGHLIGHTS

(Rs. crores)

Particulars	200503	200403	200303
Sales	189.37	138.54	104.82
Other Income	0.25	6.35	-0.21
PBIDT	12.19	11.59	-6.11
Interest	6.36	9.21	9.54
PBDT	5.83	2.38	-15.65
Depreciation	1.87	1.83	1.77
PBT	3.96	0.55	-17.42
Tax	0.04	0.04	-
Deferred Tax	---	0.3	-5.95
PAT	3.81	0.21	-11.47
Equity Capital	11.33	11.33	11.33
Book Value Rs.	41.00	35.10	34.40
Earnings Per Share           Rs.	3.40	0.2	-----

Comments on Financial Performance:

The company has turned around from loss of Rs.11.47 crores to profits of Rs. 3.81 crores. Reduction of excise duty from 16% to 8% and pick up in the disposable income spurred the demand of the company's products and helped to turnaround in FY 05. However effective 1^st April 2005, since company has come under VAT regime the effective reduction from 16% to 4% will add both to the top line as well as bottom line.  

FY 2005 profit excludes one-time non-recurring expense of Rs.5.02 crores without which the profits would have been Rs 8.83 crores.

Investment Rationale:

The company has just turned around and returns from such stocks are generally far superior to the market returns over medium to long term. The PE multiple is required above 20 in case of growth driven secular stories. TTK is in the process of building a largest retail story in India. Pentaloon has got advantage of early mover though its valuations are not reflected in the earnings whereas  

TTK is successfully recouped its lost market share in last two years. TTK has braced aggressive plans for modular kitchens only in the current fiscal which will add to the top line substantially.               

TTK has entered into retail segment with a smart kitchen retail format.  TTK has opened 55 exclusive stores through franchise mode and the company plans to open 100 stores by March 2006. The company will be offering modular kitchens and complete kitchen solutions apart from its regular kitchen appliances like Pressure Cookers, Non-stick Cookware, Kitchen Electrical Appliances and Gas Stoves. With improved life style and disposable income, modular kitchen has become indispensable part of any modest kitchen. Even with modest investment of Rs 20 to 25 lac on the house by a middle and upper class segment the hobson's choice is now a modular kitchen. Even if one store is able to sell 5 modular kitchen a month it will add at least 60 to 70 crs to the top line which will take TTK in the fast lane of growth the real driver of the stock.  

The changing lifestyle, double income family structures, rising income levels and preference for the safe and branded products will be sales drivers for the company. Its foray into retail will also drive future growth, as there is a good recall and high regard for its "prestige" brand, which signifies quality and safety.  

TTK Prestige Ltd had launched the new range of products "Modular Kitchens" during the month of June 05 which are being sold through the Company's exclusive outlets "Prestige Smart Kitchens".  The initial response is very encouraging. TTK is ready to explore its relationship with Wallmart and K Mart for modular kitchen is 07.  

The company's US subsidiary Manttra Incorporation is growing at around 20% per annum. The "Mantrra" brand pressure cookers are sold through US major Retail chains like Wal-Mart, K-Mart, Fred Meyer, and Target etc.

The company is part of the TTK group that is a 76-year-old group. The group has build and operated some of the most trusted brands in the country like Prestige, Kiwi, Durex, Kohinoor, Brylcream, Eva etc. The promoters are holding 72.41% stake in the company that shows the confidence of the promoters in the company.

The company exports directly to UK, Europe, Middle East, Africa, Australia and SAARC countries. 86% sales are domestic while 14% is exports.

The company had been a consistent profit making and dividend paying company till FY 2003 when it had made loss for the first time in its history of 47 years. The company went into trouble due to increase in the excise duty from 8% to 16%, competition from the unorganized sector and higher staff costs, the company has restructured since then and started paying dividend from the current year.

Key Concerns:

The company is experiencing turnaround and runs a risk of not successfully completing the whole process of restructuring.

The company faces competition from the unorganized sector.

The liquidity of the stock on the markets is not very good.

The company operates in only kitchen appliances segment.

Recommendation:

The company has restructured and cleaned its balance sheet using the big bath behavior i.e providing for all the expected and some of the unexpected losses in the bad years so the future performance is better. Considering the business model of the company, we feel the earnings will increase manifold in the coming years.

 

TTK Prestige, whose main line of business is manufacturing and marketing of pressure cookers, is now entered into the modular kitchen segment. With the spurt in demand for high-end housing and interiors a significant chunk of future revenues could come from this line of business.

 

AFTER TTK Prestige's entry into the modular kitchen market last week, the latest entrant to join the fray is German major Hacker. The 196-million euro company has forged a tie-up with a local distributor and will sell its products through a newly formed company called Kanu Hacker Kitchens Pvt Ltd. And in keeping with the extreme price sensitivity of the Indian market, the company has decided to start its modular kitchen range at a lower price range, beginning with Rs 2 lakh. Mr Mukesh Kumar, Chairman and Managing Director of Kanu Hacker Kitchens, said that unlike its competitors, Hacker manufactures each and every accessory for a modular kitchen. TTK stand out with cost advantage here being an established player in the industry with 60 years's experience and brand loyalty consumers. At the same time Kanu Hacker will help this segment to expand at a much faster space. Aurora another Italian brand is roaring to enter India.

TTK has a US subsidiary Manta for its pressure cooker which has tie up with  Wal-Mart, K-Mart, Fred Meyer, and Target etc the largest retail stores in US and going forward TTK is set to explore the export possibility of modular kitchens to them being existing patronage. However, TTK has enough space in India itself due to the changing test of Indian housewife's. It is also believed that TTK may expand the fleet of stores to more than 500 to 1000 in next three years and then probably look for the export market.

Though Pentaloon Retail has succeeded in targeting the right audience in right spot at the right time, we believe it is time to switch some your gains to this upcoming retail kid. Citibank has put a sell recommendation in Pentaloon Retail whereas we would suggest switch to TTK.

Navneet Publications - Sharekhan

Navneet Publications (India) 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs405
Current market price: Rs284

Publishing powerhouse

Key points

• Navneet Publications (India) (Navneet) is the leader in supplementary and reference book markets in Gujarat and Maharashtra with a share of 60% in each market. 
• Navneet is all set to reap the benefits of the change in the syllabus in Gujarat (currently underway) and the same to begin in Maharashtra from FY2007, where it is overdue for two years. 
• As a result of the changes in the syllabus the revenue from the company's publication business will grow at a compounded annual growth rate (CAGR) of 24% over the next three years from Rs167.52 crore in FY2005 to Rs315.25 crore in FY2008. 
• In June 2005 Navneet—through its wholly-owned subsidiary in Spain—acquired the publishing business and brand of Grafalco, a Spain-based children's book company, for 459,000 euros. 
• Navneet Edutainment, a wholly-owned subsidiary in the business of educational CD ROMs, would be merged with Navneet. Navneet would continue with the existing product portfolio of the edutainment business. 
• The company's top line will improve at a CAGR of 17% from Rs274.54 crore in FY2005 to Rs434.28 crore in FY2005 and its bottom line will grow at a CAGR of 24% from Rs30.92 crore in FY2005 to Rs59.00 crore in FY2008.
• At the current market price of Rs284 Navneet's stock trades at a price/earnings ratio (PER) of 11x FY2007 (9x FY2008) and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 7.12x FY2007 (6.05x FY2008). We recommend a Buy on Navneet with a price target of Rs405

FCS Software Solutions: Avoid

Source : Hindu Business Line

INVESTORS can avoid the initial public offering being made by FCS Software Solutions at Rs 50 per share. Since the overall software services business is booming, FCS Software's focus on application maintenance, e-learning and product engineering services will continue to offer opportunities for revenue growth. However, being a small player in a sector where even the medium sized players are finding thegoing tough, represents a significant risk.

In the absence of niche focus and committed revenue streams, vendor consolidation, scale-up difficultiesand pricing pressure at the lowerend of the software value chain will be the key challenges.

FCS Software is makingthis IPO to finance the creation of IT infrastructure to house 300 new developers and meet working capital requirements. Of the project cost of Rs 19.9 crore, Rs 17.5 crore is to be met through this offer. Of the total revenues of Rs 85 crore for 2004-05, IT consulting has been the key contributor with 55 per cent, and e-learning and product engineering, the other two segments,
chipping in with 25 per cent and 20 per cent respectively.

The operating margin at 13.5 per cent appears to be in line with that clocked by other small-sized companies. But sustaining and enhancing these margins in the face of stiff competition, pricing pressures in the application maintenance business and vendor consolidation, especially among the Fortune 500 companies, will be a key challenge. If one adds the yearly wage hikes ranging from 13-15 per cent and
industry-wide attrition, the risks associated with being a small player are quite high.

To top it all, the lower end of the application management business, accounting for over 50 per cent of the company's revenues, is getting commoditised. Since the frontline software companies are focussed on achieving significant productivity improvements in application maintenance work through automation and offshoring, smaller firms will remain exposed to the risk of getting marginalised in the medium term.

Though e-learning and product engineering will be relatively high growth areas in the coming years, intense competition from large and medium-sized companies and the lack of long-term contracts can resultin margin pressures in the near term.

In this backdrop, though the price-earnings multiple works out to 7.5 times its 2004-05 per share earnings on an expanded equity base, the risks outweigh the scope for attractive returns in the medium term.

Investors can give this offer a go by.

The minimum lot for application is 100 equity shares. The offer price of Rs 50 is payable in two instalments, of Rs 25 each on application and allotment. The issue opens on August 22 and closes on 26. The leadmanager is Allianz Securities.

Motilal Oswal - IDFC

Motilal Oswal recommends Buy On IDFC @ 65 With Target Price 78

Download here

Sharekhan - Kirloskar Brothers

Kirloskar Brothers  
Cluster: Apple Green
Recommendation: Buy
Price target: Rs600
Current market price: Rs517

Revising price target

Taking into consideration the increased visibility of the company's earnings, its strong order inflow and the overall positive outlook for its business, we have revised our price target to Rs600 per share post split.

Stockmarkets: Count of death? - Equitymaster

1, 2, 3, 4.....13, 14, and 15! No, these are not the number of scams unearthed in Indian politics in the past eight months (there might be many more!). Instead, these are the number of weeks in the recent past when the Indian equity markets have risen incessantly. In terms of months, while the gains have not been consistent since he markets went on a northbound trajectory since the mid of 2003, the tone has been overly bullish. And the movement has been rather fast.

While many factors seem to have changed in the field of equity investing over the years, two factors that remain the same, and would continue to cling to sentiment on the stock markets are greed and fear. These factors have played crook on investments made by small investors in the past and, we fear, the way Indian markets are moving up, greed and fear may cause heartbreaks once more.

Wait! We are not here to spoil the party (or the hangover!) that is making rounds in the Indian equity markets, we are only reiterating our cautious stance. We completely concur with the long-term growth story of the Indian economy and on the fact the India has finally 'appeared' on the global scale. However, our concern relates to the fact that we (in the equity markets) seem to be moving rather too fast. And thus, the chances to trip are high.

Consider the facts, apart from the companies that have a long-history of being listed on the bourses, even those that are just appearing on the public scene and about whose fundamentals investors have no (or less) clues, are gaining substantially in this period of intense optimism. While some call it the 'IPO boom' and some call it 'the emergence of a new India Inc.,' we would like to caution investors from investing in these new kids on the block without having ideas about their performances in the past. To take a leaf from Benjamin Graham's thoughts, the abbreviation 'IPO' does not only stand for 'initial public offering.' More properly, and especially at these times, this might mean either of the following:

• It's Probably Overpriced
  
  

• Imaginary Profits Only
  
  

• Insiders' Private Opportunity, or
  
  

• Idiotic, Preposterous, and Outrageous

Finally, while the greed factor is much responsible for this merry-making on the bourses, even a small hint of fear taking over can end up in a contagion, hurting the sentiment of those for who believe that there is no stopping markets from going up, and up, and higher up! And that would be unfortunate for small investors who would have invested their hard-earned money as guided by the 'ever-optimist' forecasts.

Hindu Businessline Recommendations

BUY >> GHCL, Orient Abrasives, Bajaj Auto
HOLD >>
Hindustan Construction, National Aluminium, Rajasthan Spinning

Sharekhan Special - Logon to Logistics

Log on to logistics

We believe companies like Container Corporation of India, Gateway Distriparks and Balmer Lawrie, three dominant players in the CFS and ICD business, are potential beneficiaries of the growth in the containerised cargo business. We are initiating coverage on all three companies and their respective earnings and valuation details are given in the following exhibit.


STOCK IDEA

Balmer Lawrie & Company
Cluster: Cannonball
Recommendation: Buy
Price target: Rs481
Current market price: Rs400

Taking long strides
Balmer Lawrie is a public sector undertaking (PSU) with a history spanning over 75 years. It has a diverse business portfolio, which spans both manufacturing and service businesses. But it is the company's service business that accounts for the dominant share (of 62.0%) of its revenue. Improved financial health and the robust performance of the logistic SBU are the key triggers for the re-rating of the stock. Balmer Lawrie's consolidated earnings will grow at a strong CAGR of 36.2% between FY2005 and FY2007, with consolidated earnings per share (EPS) of Rs47.3 in FY2007E. Considering the company's improving return ratios and strong earnings growth prospects, the stock is trading cheap at a price/earnings ratio (PER) of 8.5x FY2007E.


Container Corporation of India
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,450
Current market price: Rs1,100

On fast track
Container Corporation of India (Concor) moves international containerised cargo from ports to its inland container terminals (ICDs) throughout India in wagons, which are transported via the rail network owned by the Indian Railways (IR). In the light of Concor's sustainable business model coupled with stable earnings growth and high earnings visibility, we believe the valuations are fairly attractive and provide decent upside from current levels.


Gateway Distriparks
Cluster: Cannonball
Recommendation: Buy
Price target: Rs240
Current market price: Rs190

Gateway to growth
Gateway Distriparks Ltd (GDL) is the largest private sector player in the business of port related logistic support and services. GDL's new facility (covering 50 acre of land) will commence operations in Q3FY2007 and will be fully operational in FY2008 (when JNPT is likely to commence its fourth terminal). The new facility could handle around 240,000TEUs per annum which will take GDL's TEU handling capacity to 560,000TEUs, ie 1.75x its FY2007 capacity. Hence with this kind of capacity in place GDL's growth trajectory is likely to maintain its upward momentum. We believe the stock's valuations are attractive and recommend a Buy on GDL with a price target of Rs240.

Sharekhan - Tata Tea

Tata Tea
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,040
Current market price: Rs789

Nicely brewed

• Tata Tea Ltd (TTL) is transforming itself from just a bulk tea player to a branded/packaged tea player.
• With various TTL brands acquiring strong recognition and respectable market share, we believe that the transformation strategy adopted by TTL is well on track.
• TTL is further derisking its business model by exiting/restructuring its bulk tea manufacturing portfolio.
• Though the transformation strategy is not reflected in the company's profit numbers, the company's profitability in the future will be driven by the better revenue mix, cost cutting and lower interest burden.
• The derisked business model makes us believe that the stock's current valuation is cheap compared to that of its peers in the branded fast moving consumer goods (FMCG) business.
• At the current market price of Rs789 the stock is trading at 13.2x its FY2007E earnings per share (EPS) and at 8.0x its FY2007E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We recommend a Buy on the stock with a price target of Rs1,040

Indiainfoline - Capital Hotels & Developers

IndiaInfoline recommends BUY on Capital Hotels & Developers

Download here

Sharekhan - Ultratech

UltraTech Cement
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs490
Current market price: Rs384

Ultra-profitable

Key points

• Cement prices in the country have risen in the past one year and are expected to remain buoyant owing to a rising demand, depleting surplus supply and slow-down in capacity addition.
• We expect UltraTech Cement Ltd (UCL), which has the highest leverage to cement prices, to benefit the most from the continued uptrend in cement prices.
• UCL's freight costs are high mainly due to the long lead distance for its cement markets. We believe that the synergies with Grasim would help it in reducing its freight costs and in improving its margins.
• UCL has lined up a capital expenditure (capex) plan of Rs1,003 crore over the next two years; this includes a Rs540-crore, 92-megawatt (MW) thermal power plant for captive use. This shall reduce its dependence on grid power and lower its power cost.
• The construction boom in the Middle-East has increased the export prices of cement and clinker by 59% year on year to US$43 FOB and US$35 FOB respectively. Since around one-third of UCL's capacity is located near the Gujarat port we expect the company to be the prime beneficiary of the buoyancy in the export market.
• Driven by the firm cement prices, increased utilisation levels and the company's transformation into an efficient cement producer UCL's net profit is expected to grow at a healthy compounded annual growth rate (CAGR) of 76% over FY2005-07.

Motilal Oswal - I&PCL

Motilal Oswal recommends Buy On Investment And Precision Casting @ 610 With Target Price 792

Download here

Motilal Oswal - Reliance Industries - BUY

Motilal Oswal Recommends Buy On Reliance Industries @ 707 With Target  Price 791

Download here

Sasken IPO Analysis

Way2Wealth  Analysis

Download here

Update on IOC Cheating Case

I received a mail from one of the IOC Personnel asking for my Phone Number and Address which I have given. Let us see what comes out ofit.

Motilal Oswal - Value Investing - August

Download here

Motilal Oswal - SBI

Motilal Oswal recommends BUY on SBI

Target >> 900

Download here

Cheating at IOC Outlet

This happened today - Aug 7th 2005. I wanted to fill some petrol and had gone to the IOC Outlet at Airport Road - Bangalore. I asked to fill up for 200 rupees.

When I was paying money to the other person there, I just turned away for a moment. Meanwhile, the guy who fills up the petrol - says - he filled up for 50 rupees - the LCD showing 50 rupees. I clearly saw that he hadn't filled up - he just says - he heard for 50 rupees and says - he will fill for 150 rupees. I told him I saw that no petrol was put in. He sheepishly didn't even argue and filled up for 200 rupees.

Actually, the same thing happened the last time I went to fill up the petrol at the same outlet - the exact same thing happened except that I did not notice whether he had filled up petrol for 50 rupees.

I posted a complaint at the IOC website. Keep a watch when you get your fuel filled next time.

IPOs in Pipeline

Download Prime Database here

Sharekhan Valueline

Download here

HT Media - AVOID - Way2Wealth

Way2Wealth recommends AVOID on HT Media

Download here

Hindustan Times - (Unknown Analysis)

IPO & Size

HTM, one of India's leading print media company, is making public offer of 76,91,000 equity shares (FV Rs.10), comprising Fresh Issue of 46,40,000 equity shares, offer for sale of 23,55,000 shares by HPC, Mauritius and 6,96,000 shares by Hindustan Times by way of Green Shoe option. At Price Band of Rs.445-Rs.530, HTM is garnering Rs.206.48 crore–Rs.245.92 crore. Post Issue equity will rise to Rs.47.09 crore fully diluted and promoters' holding will come down to 68.37% (77.11%). Proceeds of issue will be deployed for expansion of printing operations at Noida and Mumbai, augmenting of sales and marketing especially for establishing brand in Mumbai and entering into providing FM radio services subject to regulatory approvals.


About HTM

HTM is India's second largest print media company in terms of circulation of daily newspapers. It publishes two daily newspapers – Hindustan Times in English and Hindustan in Hindi, apart from a couple of magazines. As part of its strategy to grow the newspaper' national presence, company has launched Hindustan Times in Mumbai.

Investment Positives

Ø "Hindustan Times" has the largest circulation among English dailies in Delhi (25% lead over its nearest competitor) and neighbouring areas of Chandigarh, Ludhiana etc. Being one of the leading media brands in India, "Hindustan Times" attracts higher ad-spend, better rates and more attractive business arrangements than many of its competitors. On the other hand, HTM's Hindi publishing is also going to be one of the growth drivers as company's earlier investments in high growth markets in Hindi belt will now add to sales and profitability as these markets have turned around.

Ø HMT's foray into Mumbai market, which has the largest share of print media advertising expenditure in India, is a key step to grow company's national footprint and exploit the most lucrative advertising market in India. Entry of "Hindustan Times" in Mumbai (which is currently dominated only by a single newspaper) will provide advertisers and readers with greater visibility and a compelling alternative. Moreover, attractive subscription offers from the new entrant may bring it a significant number of readers leading to expansion of Mumbai market. Company is investing a substantial amount for launching and sustained visibility of its brand in Mumbai. Thus, by combining its leading presence in Delhi and other key markets with its Mumbai edition, HTM has an opportunity to capture a greater share of national ad-spend.

Ø The Indian economic scenario presents promising growth opportunity for the industry. Out of advertising pie of Rs.11,800 crore (In 2004), Print media contributed 46% of ad spend, while TV media contributed 41%. With increase in GDP, literacy, purchasing power and ad-spend., advertisement pie continues to experience double digit growth. While print segment is growing at 15%, TV segment is growing at 13%. Readership of print media is growing at 18% in Hindi and 14% in English.

Ø HTM is improving its operating efficiency through enhancement of revenue generation efficiency, streamlining its manpower over past two years, and reducing newsprint cost (constitutes 50% revenue) through better sourcing and lowering of waste. Moreover, for better asset utilization, company will be undertaking third party printing jobs from Q3 FY06.


Ø Company is selectively considering entering into complementary newspaper and print media businesses, where it can either leverage its brands, its existing advertising customer base or both. It is also considering launching business/financial newspaper and other English editions in key high-growth markets in southern India. In addition, to further its goal to develop into a leading media business, HTM is exploring other opportunities in Indian media sector, such as FM radio, internet etc.

Ø In Q1 FY2006, company has reported total revenue of Rs.181.77 crore. There has been improvement in advertisement revenue to Rs.147.38 crore due to increase in advertisement rates in May 2005. Reduction in competitive pressure in Delhi market has enabled HTM to reduce its sales and marketing expenditure. Operating margins stand at 21.4%. Company's PAT for the quarter stood at Rs.9.8 crore.


Investment Negatives

Ø Mumbai venture will have a negative impact for at least next two years and till then it could act as a drag on HT Media's earnings. Market scenario in Mumbai remains challenging owing to aggressive competition.

Ø Business is heavily dependant on advertising revenue and a downturn in the economy may adversely affect company's revenues.

Ø A spurt in newsprint cost in near term is another cause of concern.

Valuation

At IPO band of Rs 445-530 per share, stock is offered at 61-73 times its FY 2005 fully diluted adjusted earnings of Rs.7.25 and at 51-61 times FY 2006 expected fully diluted earnings of Rs.8.7. Not withstanding positives, though there may be moderate listing gains, we recommend "AVOIDING" the issue, in view of very steep pricing.

Motilal Oswal - PNB

Motilal Oswal recommends Buy On Punjab National Bank @ 435 With Target Price 530

Download here

Motilal Oswal - M&M

Motilal Oswal Recommends Buy On Mahindra & Mahindra @ 678 With Target Price 748

Download here

Motilal Oswal - TISCO

Motilal Oswal recommends Buy On TISCO @ 373 With Target Price 502

Download here

Sharekhan Stock Update

Grasim Industries 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,430
Current market price: Rs1,178 

Subdued performance

Result highlights

• Grasim Industries' net sales (stand-alone) for Q1FY2006 stood at Rs1,553 crore, registering a 2.4% growth on a year-on-year (y-o-y) basis. 
• The operating profit margin (OPM) at 24.1% declined by 430 basis points primarily on account of lower margins in the viscose staple fibre (VSF) and sponge iron businesses. 
• The operating profit stood at Rs374.4 crore, registering a decline of 13% yoy. 
• The interest expenses fell by 19% yoy to Rs26.5 crore primarily due to the restructuring of debt and higher cash on books, while the other income grew by 24% yoy to Rs20.1 crore.
• The pre-exceptional net profit stood at Rs205.6 crore, down 6.2% yoy. The net profit after the exceptional items stood at Rs251 crore, recording a growth of 14.5% yoy. 
• On a consolidated basis the company's net sales for the quarter grew by 8.4% to Rs2,495 crore primarily driven by the improved performance of UltraTech Cement Company and its subsidiaries. 
• Pre-exceptional consolidated net profit grew 20% to Rs251 crores.

Hyderabad Industries 
Cluster: Apple Green
Recommendation: Buy
Price target: Rs500
Current market price: Rs419

Another spectacular quarter

Result highlights

• Hyderabad Industries Ltd's (HIL) net sales in Q1FY2006 went up by 11.4% to Rs131.8 crore. While the building product business contributed Rs121.5 crore, the heavy engineering division (HED) contributed Rs5.48 crore to the company's top line. 
• The operating profit growth of 90.7% to Rs28.35 crore was primarily driven by strong asbestos prices and lower losses in the HED. 
• The interest cost came down by 52% to Rs1.42 crore as strong cash flows led to loan repayments. We expect the interest cost to further come down in the coming quarters.
• The reported net profit (after the write-off of the expenses on account of a voluntary retirement scheme or VRS) increased by 129.7% to Rs15.07 crore in Q1FY2006. However the net profit before extraordinary items increased by 169.5% to Rs17.68 crore in Q1FY2006. 
• The HED was transferred to Titagarh Wagons Limited on July 8, 2005. The HED registered losses to the tune of Rs3.77 crore in Q1FY2006 the negative impact of which will not be felt in the future.

Reliance Industries

Cluster: Evergreen
Recommendation: Buy
Price target: Rs800
Current market price: Rs741

Results above expectation

Result highlights

• Reliance Industries Ltd's (RIL) revenue for Q1FY2006 grew by 24.5% year on year (yoy) to Rs17,784 crore on the back of the buoyancy in its refining business.
• The refining margins remained robust during the quarter and continued to command a premium over the regional margins in Asia because of a superior crude mix. However the petrochemical business faced pressure in terms of pricing as well as volumes.
• The operating profit was up by 27.1% yoy to Rs3,546 crore owing to a strong expansion in the company's refining margins.
• The net profit was up by 60.8% to Rs2,310 crore due to operational efficiencies, lower interest outgo and lower depreciation.

Television Eighteen India

Cluster: Emerging Star
Recommendation: Buy
Price target: Rs350
Current market price: Rs343

Results in line with expectations

Result highlights

• Television Eighteen India's (TV18) overall results for Q1FY2006 are in line with our expectations.
• Its top line grew by a good 57% during the quarter led by the advertisement revenue, which grew by 58% in Q1FY2006.
• With the operating costs remaining under check the operating profit margin (OPM) improved by 40 basis points.
• The net profit improved by 28.5% to Rs8.0 crore during the quarter.
• At the current market price of Rs343 the stock is quoting at 12.1x FY2007E earnings and 6.5x its EV/EBITDA.
• We maintain our Buy call on the stock.

ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs650
Current market price: Rs520

Earnings momentum sustained

Result highlights

• ICICI Bank reported a strong 35% year-on-year (y-o-y) and 7.7% quarter-on-quarter (q-o-q) growth in its net interest income (NII) on the back of a strong growth in its advances.
• The strong growth momentum in the bank's fee income continued-during the quarter the fee income grew by a strong 57.4% year on year (yoy).
• The operating profit for Q1FY2006 grew by 74.7% yoy to Rs970.8 crore. Notably the core operating profit grew by even a stronger 100.5% yoy.
• However the net profit growth was restricted to 23% yoy as the company used the strong operating performance to make higher provisions for the amortisation of the premium on its "held till maturity" (HTM) investment portfolio.
• We maintain our Buy recommendation on the stock with a revised price target of Rs650.

Thermax 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs780
Current market price: Rs655

Robust growth in revenue

Result highlights

• Thermax' revenue saw a robust year-on-year (y-o-y) growth of 79.7% to Rs226.5 crore in the quarter. The growth came on the back of a strong volume growth in its key business segments: energy and environment.
• The energy segment grew by 87.6% to Rs 152.5 crore and the environment segment grew by 68.5% to Rs83.9 crore in the quarter.
• The company's operating profit margin (OPM) increased by 330 basis points to 8.8% in the quarter, reflecting the gains arising on account of economies of scale and falling input prices as a percentage of revenues.
• The net profit reported a y-o-y growth of 137.1% to Rs13.3 crore in the quarter, mainly driven by a strong revenue growth resulting from a robust order book.
• The stand-alone order backlog stood at Rs810 crore in Q1FY2006 as against Rs770.0 crore in Q4FY2005. The consolidated order backlog stood at Rs1,150 crore at Q1FY2006 as against Rs1,130 crore in Q4FY2005. 
• The earnings in the quarter stood at Rs5.6 per share on a stand-alone basis and at Rs3.2 per share on a consolidated basis.
• Considering that the company's strong order book shall impart visibility to its earnings and that the outlook for the company's key business segments is robust, we believe that the stock is trading at attractive valuations of price/earnings ratio (PER) of 12.4x FY2007 and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.5x FY2007E. We maintain our Buy call on Thermax with a price target of Rs780.

Omax Auto

Cluster: Apple Green
Recommendation: Buy
Price target: Rs178
Current market price: Rs138

Reiterate a Buy 

Result highlights

• The net sales of Omax Auto Ltd (OAL) grew by an impressive 25.0% year on year (yoy) to Rs144 crore in Q1FY2006.
• The operating profit margin declined by 60 basis points yoy to 10.2% leading to a 17.4% yoy growth in the operating profit.
• The net profit growth was muted and was up 1.9% yoy due to higher interest and depreciation charges.

Sun Pharmaceutical Industries

Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs650
Current market price: Rs615

Formulation sales rise

Result highlights

• Sun Pharmaceuticals' net revenue was Rs385.9 crore during Q1FY2006 as compared to Rs278.9 crore in Q1FY2005 (an increase of 38.3%) primarily because of an increase in its formulation sales.
• The operating profit grew by 33.1% over Q1FY2005, at a mildly lower pace compared to the growth in the net revenue, and stood at Rs135.2 crore, as the company faced pricing pressure in USA and other foreign markets. 
• The profit before tax (PBT) rose by 48.3% year on year (yoy). This was due to an increase in the interest income (Rs16.2 crore for Q1FY2006) from the return on excess funds obtained from the issue of foreign currency convertible bonds (FCCBs). 
• The profit after tax (PAT) increased by 54.2% over Q1FY2006 to Rs136.3 crore helped by a 13% reduction in the total tax over Q1FY2005.
• At the current market price of Rs615 the stock is trading at 22x FY2006E earnings.

Gujarat Ambuja Cement

Cluster: Apple Green
Recommendation: Book Profit
Current market price: Rs67.4

Book profit

Result highlights

• The net sales of Gujarat Ambuja Cement (GACL) for Q4FY2005 stood at Rs720.5 crore, registering an impressive 21% year-on-year (y-o-y) growth, driven by a 16% volume growth and a 4.4% growth in realisations.
• The volume growth was mainly driven by the commissioning of the new 1-million-tonne capacity grinding unit at Ropar, Punjab and the merger with Ambuja Cement Rajasthan Ltd.
• The operating profit margin (OPM) for the quarter declined by 80 basis points primarily because of a 19% increase in the power & fuel cost. However for FY2005 the OPM improved by 160 basis points.
• The operating profit for the quarter grew by 18% to Rs227.1 crore year on year (yoy). For FY2005 the operating profit registered a growth of 40%.
• The pre-exceptional net profit for the quarter grew 1% to Rs145.2 crore yoy. However the post-exceptional net profit jumped by 24% to Rs145.2 crore yoy.

Bajaj Electricals 

Cluster: Ugly Duckling
Recommendation: Book Profit
Current market price: Rs354

Book your profits

Result highlights

• Bajaj Electricals Ltd's (BEL) revenue grew by 26.3% in Q1FY2006 to Rs137.4 crore on the back of the strong performance of the company's lighting and consumer durable businesses. 
• The lighting business continued its growth momentum in the quarter, registering a year-on-year (y-o-y) growth of 31.1% with revenue of Rs56.3 crore. Even the consumer durable business clocked a y-o-y growth of 30.4% with revenue of Rs65.9 crore in the quarter. 
• The operating profit margin (OPM) improved by 390 basis points in the quarter to 7.4% as compared to 3.5% in the same period last year, driven mainly by lower raw material costs as a percentage of its revenue.
• The company's key business segments registered a sharp improvement in the profit before interest and tax (PBIT) margins. The lighting segment's PBIT margin improved from 5.3% in Q1FY2005 to 8.9% in Q1FY2006 while that of the consumer durable segment improved from 1.4% in Q1FY2005 to 3.9% in Q1FY2006.
• The company reported a profit after tax (PAT) of Rs1.6 crore in the quarter against a loss of Rs2.0 crore in the same period last year, in line with estimates. 
• The extraordinary income in the quarter stood at Rs3.5 crore (on account of discontinued operations) while the PAT (after extraordinary expenses) stood at Rs5.1 crore in the quarter against Rs0.7 crore in the same period last year. 
• We believe that at the current levels BEL's valuation factors in all possible positives. Thus in the absence of any fresh triggers and considering the rich valuations of the stock currently-price/earnings ratio (PER) of 11.6x FY2007E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 6.1x FY2007E—we advise booking profits.

Punjab National Bank  

Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs500
Current market price: Rs435

Results in line with expectation

Result highlights

• Punjab National Bank (PNB) reported a strong growth of 14.1% in its core operating profit for Q1FY2006 on a year-on-year (y-o-y) basis. However the bank's overall operating profit declined by 8.6% year on year (yoy) as the treasury income was much lower this quarter.
• The growth came on the back of a 16.3% y-o-y growth in the net interest income (NII) and a 19.2% growth in the fee income.
• The net profit grew by 11.0% yoy as the bank wrote back Rs36.2 crore of its non-performing asset (NPA) provisions.
• The capital adequacy ratio (CAR) at the end of the quarter was at 15.5%, higher than Q1FY2005's 12.7% due to the public offering (PO) done in Q4FY2005.
• At the current market price of Rs435 the stock is quoting at 1.4x its FY2006E expected book value. We maintain our Buy recommendation on the stock with a price target of Rs500.

Marico Industries 

Cluster: Apple Green
Recommendation: Buy
Price target: Rs300
Current market price: Rs291

Growth momentum sustained

Result highlights

• Marico Industries reported an 11.8% growth in its revenue and a 33.9% rise in its operating profit in Q1FY2006, thus maintaining the growth momentum of the past quarters. 
• The growth was powered by a volume growth of 6.0% in the consumer product business whose key brands showed a robust volume growth.
• The high-margin consumer product portfolio saw a healthy volume growth of 9.0% in the quarter, contributing 71.0% of the consumer product revenue.
• The operating profit margin (OPM) improved by 178 basis points in the quarter to 10.8%, primarily because there was no revision in Parachute prices despite the fall in the company's raw material costs.
• Powered by the improvement in the margins the earnings growth was robust at 27.8% to Rs3.7 per share in the quarter.
• The company announced an interim dividend of Rs1.2 per share in Q1FY2006. 
• The stock trades at a price/earnings ratio (PER) of 15.7x FY2007E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 11.1x FY2007E. Looking at the healthy growth prospects for the company we maintain our Buy call on the stock with a price target of Rs300.