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Sharekhan Trading Call - GE Shipping

New Trading Call
Date: 18/01/2006 | Company Name: GESHIP | Call Type: Go Short
Stop Loss/ Reversal: 254.0000
Buy/Sell Price Rs.: 243.00
Current Price Rs.: 243.80
Potential P/L%: 0.3200
Target: 223-210
Remark:
Investment Argument: The stock has formed a wedge like pattern. Go short with a stop loss at Rs254 for the targets of Rs223 and Rs 210.

Sharekhan Trading Call

Date: 18/01/2006 | Company Name: IFLEX | Call Type: Go Short
Stop Loss/ Reversal: 1150.0000
Buy/Sell Price Rs.: 1120.00
Current Price Rs.: 1124.70
Potential P/L%: 0.4100
Target: 1010-950
Remark:
Investment Argument: This call is to be initiated after the stock breaks the level of Rs1,100. The stop loss would be at Rs1,150. The targets are Rs1,010 and 950.

Sharekhan Investor's Eye

Sintex Industries
Cluster: Apple Green
Recommendation: Buy
Price target: Rs192.5
Current market price: Rs162

Price target revised to Rs192.5

Result highlights

* Sintex Industries Ltd (SIL) reported a revenue growth of 14.4% year on year (yoy) in Q3FY2006 to Rs210.3 crore. The revenue growth was marginally lower than our expectation, mainly because the plastic business grew at a slower growth rate of 5.2% yoy.
* The operating profit margin (OPM) saw a phenomenal improvement of 140 basis points yoy and of 80 basis points quarter on quarter (qoq) to 18.6%. The growth in the OPM was above our expectation. Accordingly, the operating profit (OP) saw a strong growth of 31.8% yoy to Rs39.2 crore.
* The revenues of the textile division grew at a robust 28.5% yoy in Q3FY2006 to Rs72 crore on the back of a strong growth in the Canclini business. Even the profit before interest and tax (PBIT) margin saw an improvement of 460 basis points yoy to 20.3%.
* The plastic division saw a slower growth of 5.2% yoy to Rs140.4 crore, mainly on account of a 28.1% decline in the tank business. The robust growth in the businesses of pre-fabricated structures (Pre-Fab) and custom mouldings (CM) helped the PBIT margin to improve by 550 basis points yoy.
* The strong volume growth in the Pre-Fab and CM businesses coupled with a 406.4% year-on-year (y-o-y) jump in the sales to the Canclini joint venture (JV) caused the profit after tax (PAT) to grow by 31% to Rs20.3 crore in the quarter.
*The company's earnings per share (EPS) for Q3FY2006 stood at Rs2.2 per share, in line with our expectations.
*We have introduced the consolidated earnings estimates for the FY2006-08 period and arrived at EPS estimates of Rs11.1 and Rs13.7 for FY2007 and FY2008 respectively. We have rolled over our price target to FY2008E consolidated earnings and arrived at the price target of Rs192.5, valuing the company at 14x.



Jaiprakash Associates
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs458
Current market price: Rs376

Price target revised to Rs458

Result highlights

* Jaiprakash Associates Ltd's (JAL's) Q3FY2006 stand-alone net profit at Rs57 crore was below our expectations of a net profit of Rs66 crore. The primary reasons were higher interest costs and lower other income. The net sales for the quarter were up 19.7% to Rs797 crore driven by a sharp 30% growth in the company's cement revenues.
* The operating profit margin (OPM) jumped by 340 basis points to 21% due to a sharp jump in the margins of the construction business. The OPM for the cement business fell marginally by 40 basis points during the quarter due to higher fuel costs. Overall, the operating profit during the quarter jumped by 43% to Rs167 crore.
* As the company commissioned a new 1-million-tonne grinding unit at its Tanda plant and a captive power plant during the quarter, its depreciation charge jumped by19% and interest cost increased by 15.5% during the period. Overall, its net profit during the quarter jumped by 27% to Rs57 crore.
* At the current market price of Rs376, the stock is discounting its FY2007 consolidated earnings by 13.5x and its FY2007 consolidated earnings before interest, depreciation, tax and amortisation (EBIDTA) by 7.1x. We maintain our Buy recommendation on the stock with a revised price target of Rs458. Our price target is based on the sum-of-parts valuation of the company.

Pre-Market Watch

Market may remain weak

Although the market rebounded from its five straight losses in yesterday's trades, nervousness is likely to continue on concerns of FIIs turning net sellers in the last few sessions. Also the investors are waiting for a clear picture from the Reliance Industries demerger process that would commence in a short while in a special trading session arranged by the SEBI today.

The Nifty could test 2790 levels on the downside while it has a likely support at 2824 during intra-day trades. The Sensex has a likely support at 9240 and could test resistance at 9321.

After remaining closed on Monday, the US indices took a sharp beating on Tuesday as crude oil prices flared up nearly 4% on reports of further attacks on Nigeria's oil industry by the militants. As a result, the Dow Jones dropped 64 points at 10896 and the Nasdaq declined 14 points to close at 2303. The US market is likely to remain under pressure on Wednesday following a lower-than-expected quarterly numbers from IBM, Intel and Yahoo.

Indian ADRs, too, were hammered on the US bourses. Leading the slump Rediff tanked 10.51%, while VSNL, MTNL, ICICI Bank and Tata Motors dropped 3-4% each. Among other laggards HDFC Bank, Dr Reddy's, Infosys, Satyam, Wipro and Patni Computers were down 1-2% each.

Crude oil prices rose sharply, with the Nymex light crude oil for February delivery soaring by $2.39 to settle at $66.31 a barrel. The London Brent crude was down 43 cents at $65.33 per barrel. In the commodity segment, the Comex gold dropped $2.70 to close at $554.30 an ounce.

Stocks to watch
Bajaj Auto to buyout 27% stake in Maharashtra Scooters for Rs151.63 crore.

Tata Consultancy Services to invest Rs6.3 crore in a joint venture partnership with the Madhya Pradesh State Electronic Development Corporation.

Praj Industries is eyeing business in developed markets like the European Union and the US.

Andhra Bank - FPO

Better than the peers

Stands out on quality of assets, productivity and profitability

Andhra Bank (ANDB), established in 1923, was nationalised in April 1980. The bank made its maiden public issue of 15 crore equity shares of Rs 10 each for cash at par, aggregating Rs 150 crore, in March 2001. The government of India (GoI) currently holds 62.5% of the pre-issue paid-up equity share capital (Rs 400 crore), which will come down to 51.5% after the issue.

On September 2005, ANDB had 1,177 branches in India, serving 1.39 crore customers. However, 854 of its branches (72.5%) are in Andhra Pradesh (AP). Sixty-three per cent of the bank’s outstanding domestic loans are to corporate & commercial businesses (includes small and medium enterprises comprising 12%). The share of the housing & retail sector constitutes 19%, and agriculture the remaining 18%.

The main objectives of the second IPO include augmenting the capital base to meet the future capital requirements arising from the implementation of the Basel II standards. Funds are also required to sustain the growth in credit in tune with the expansion of the Indian economy. On September 2005, ANDB’s capital adequacy ratio (CAR) stood at 11.95% compared to the Reserve Bank of India (RBI)-stipulated 9%. The bank intends to grow by expanding geographically in India and internationally, by increasing its volume of retail business and cross-selling various fee-based financial products and services to its customers.

Strengths

*ANDB’s asset quality is the best in its peer group, with net NPA ratio at 0.26% and gross NPA ratio at 2.27% on September 05. The bank also has a well-diversified portfolio with maximum funded exposure to the power sector (20%), followed by the textile sector (9%).

*All branches are computerised, with 88% of the business on the core banking solution platform, which will help the bank to reduce its operating expenses in the long run and confront stiff competition from private banks.

*ANDB is fully prepared to meet the Basel II requirement.

* The credit growth is a healthy at above 30%, with incremental credit deposit ratio above 100% for FY 2005. In H1FY 2006, it was 80%. With the busy season ahead, numbers could be better than last year.

*The net interest margin (NIM) had improved from 3.79% in FY 2004 to 3.95% in FY 2005. However, with a fall in yield on earning assets, NIM end September 2005 stood at 3.62%, considered quite healthy in the banking sector.

Weaknesses

*Treasury contributed above 40% of the total revenue like most other PSU banks. In a rising interest rate scenario, banks have reduced the duration of their portfolio to minimise interest-rate risks by selling high yield, long-term securities, hitting the yield on investment and restricting the net interest-income growth. However, credit growth remains buoyant and the fall in yields will be made up after a time lag.

*Operating expenses, as a percentage of net total income (OE/NTI), end September 2005 was 51%, which is comparatively higher than its peer group. The OE/NTI ratio is expected to remain at the higher end with expansion plans on the horizon.

* 72.5% of ANDB’s branches in AP generated around 58% of the advances end September 2005. The bank needs to have a larger share of business in other parts of the country to maintain the growth momentum.

Valuation

In the first half ended September 2005, ANDB’s net interest income witnessed a growth of only 4% to Rs 563 crore due to a more than 10% fall to Rs 378 crore in its interest on investments. `Other income’ fell 57% to Rs 195 crore mainly due to a 90% fall in the treasury income to Rs 33 crore end September 2005, from Rs 300 crore a year ago. However, commission income showed a promising growth of 31% to Rs 80 crore, from Rs 61 crore. The 57% fall in `other income’ weighed heavily on the net profit, which registered a fall of 29% to Rs 203 crore.

The last one-year and six-month average price of the scrip is Rs 97, whereas for the last three months, it is Rs 94.

ANDB’s annualized EPS for H1FY06 on post-IPO equity works out to Rs 8.4/ Considering the higher price band, post-IPO book value (BV) is Rs 58 and adjusted book value (ABV) is Rs 57. At the price band of Rs 82 to Rs 90, P/E is 9.8 to 10.7, which is a bit higher compared to most of its peers. P/BV and P/ABV are both around 1.6, which is in line with its peers.

Besides quality of assets, ANDB scores higher on certain other grounds compared to its peers Allahabad Bank, Corporation Bank, Indian Overseas Bank, Syndicate Bank and Vijaya Bank. Its productivity and profitability are comparatively higher than most of to its peer group members, barring Corporation Bank.