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Wednesday, September 27, 2006
Sharekhan Investor's Eye - Sept 27
Orient Paper and Industries
Cluster: Vulture's Pick
Recommendation: Buy
Price target: Rs800
Current market price: Rs579
Capex plan on track
After an exceptional first quarter performance, Orient Paper and Industries is all set to cash in on the booming cement cycle. It has lined up a capital expenditure (capex) plan of Rs205 crore for the next two years. As part of the capex plan, it is augmenting its cement capacity to 3 million tonne and paper capacity to 30,000 tonne per annum. Further, to rationalise its fuel cost the company is also setting up a 30-megawatt captive power plant.
VIEWPOINT
Zenith Infotech
Stock value at its zenith
Zenith Infotech's revenues are expected to grow at a robust compounded annual growth rate of 60% over the two-year period FY2006-08. However, the stock appears to be fully priced after considering the huge (possible) equity dilution planned to raise resources. At the current market price the stock trades at 25.2x FY2007 and 14.7x FY2008 estimated earnings (on a diluted equity base).
Movers & Shakers
- Rajesh Exports advanced on announcing the launch of Laabh Jewellers.
- United Phosphorus rose on signing a deal to buy Dupont's Bensulfuron-methyl business.
- Sical Logistics hit the upper limit of 5% on the likely acquisition of Bergen Offshore Logistics.
- Ranbaxy inched up on announcing the launch of Storvas in Malaysia.
- Sonata Software was locked at the upper limit of 5% on signing an agreement to buy a 50.1% stake in TUI Infotec.
- Escorts notched up gains on receiving Rs114 crore from its stake sale in Carraro to its joint venture partner, Carraro Italy.
- McNally Bharat Engineering jumped on bagging an order from France-based Solios Carbone.
- Dr Reddy�s Laboratories was marginally up on reports that the company has signed a deal with ClinTec International to jointly develop an anti-cancer compound, DRF 1042.
- Monnet Ispat slipped despite announcing plans to set up a Rs4,200 crore power plant in Orissa.
The Lost World - Jay Dubhashi
We Indians have a love-hate relationship with foreign companies, usually known as multinationals. We know that in this globalised world, we simply cannot avoid them and at the same time, we are not entirely happy about their presence in our midst.
So, from time to time, we crack the whip and ask them to behave. But they know they are here to stay and take it all in their stride. Fifteen years ago or so, before the economy was thrown open, things were different. Indian companies, whether in soft drinks or automobiles, were sitting pretty. They had a nice monopoly business going and since they never had to compete with foreign companies, they were clueless about their impact.
Ramesh Chauhan of Parle, who had built a profitable soft drink business from scratch, was initially rattled when news came that Coca-Cola had received a license to operate in India. Since I was all for Swadeshi, he believed that I might be of some use. So he came to see me.
I asked him if he knew Coca-Cola people. No, he said, he didn't. I told him that I knew some of them and had visited their offices in Atlanta. I told him that Coca-Cola's entry would be followed by Pepsi's-- or was it the other way round-- and Parle would have to take on two giant multinationals in a small market. Did he have the capacity to do that? A few weeks later, I heard that Parle had sold out to Coca-Cola for a hundred crore, which was a great deal of money then. That was the end of the nascent soft drink industry in India for it is either Coke or Pepsi now and there is no other choice for the consumer.
Things were a little different with the auto industry, but not all that different. When Maruti was taken over by Suzuki, I wrote in my column that companies like Premier Automobiles would soon be on their way out, just as Coke had replaced Parle. For Suzuki would be followed by other foreign auto companies and they would sweep the market.
Not so, wrote Vinod Doshi, who ran Premier Automobiles at the time. He actually took the first plane to Delhi from Bombay and came to see me. I have now forgotten what arguments he put forward, but within months he had signed up with Fiat of Itlay and had, in effect, sold out to them and virtually closed down his business, just as I had predicted.
I have not met Doshi for a long time, but, as far as I know, his Premier plant is no more. One more Indian business has fallen prey to yet another multinational.
It must be said both the soft drink business and the automobile businesses are flourishing. I am told that we are now producing or selling a million cars a year, about ten times more than what we did before liberalisation. The same must be the case with soft drinks.
I used to drive a Premier, now I drive a Maruti. But I neither drink Coke nor Pepsi because they don't suit me. Incidentally, I have never seen the inside of a McDonald's, either here or in the US, for reasons that have nothing to do with the fact that Mc Donald's is a foreign business. I just don't like hamburgers and I am allergic to French Fries.
DCB - IPO
DCB is a new private sector bank, which has embarked on revitalization plans. As part of revitalization plan, the bank has in
place a new management team & the board of directors committed to improving bank’s operational performance & overall business.
DCB’s business is concentrated in certain regional centers, primarily Maharashtra, AP and Gujarat. The Bank has 106 interconnected branches including 5 extension counters & 34 Satellite offices, spread over 26 cities in the country. It also has an ATM network of 58 interconnected onsite and 43 interconnected offsite ATMs.
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Citigroup - Nagarjuna Construction
Entering the big league — We initiate coverage on Nagarjuna with a Buy/Medium Risk (1M) rating and target price of Rs191. Among the fastest-growing construction companies in India, Nagarjuna has diversified skill sets and an improving business mix to exploit the growth opportunity in the construction sector. We expect Nagarjuna to provide 27% upside and rate its peers HCC and Gammon as Sell.
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Movers & Shakers
- Sterling Biotech attracted unabated buying on reports that the company will acquire China Gelatin in an all-cash deal.
- NIIT rallied sharply on launching IFBI in a tie-up with ICICI Bank.
- Asian Tea & Exports hit the upper circuit breaker of 5% after the company reported that it would take on lease a tea production facility and increase the capacity to produce 2 million kilogram of black tea per annum.
- Radha Madhav Corporation was frozen at the upper limit of 5% on receiving a packaging order worth Rs3.25 lakh from Reliance Retail.
- Alok Industries inched lower despite reporting that it will acquire a 60% stake in the Czech Republic-based Mileta International.
- Northgate Technologies fell sharply despite announcing the company's proposal to raise $35 million.
- Sujana Universal eased even as the company proposed to raise $15 million by selling equity shares through the GDR route.
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