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Monday, November 27, 2006

Asit C Mehta - Cranes Software


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FII: +Rs.995cr & MF –Rs.213cr


FII were Gross Purchaser of Rs.3560.30cr, Gross Seller of Rs.2565.80cr and Net Buyer of Rs.994.60cr.
MF were Gross Purchaser of Rs.291.82cr, Gross Seller of Rs.504.55cr and Net Seller of Rs.212.73cr.

The provisional figures were marginal at Rs.0.91cr and these are unlikely to be taken lightly by the markets. Be careful in long positions

L T Overseas Ltd.


Background:
  • LT Overseas Ltd. (LT Overseas) was incorporated as a private limited company in the year 1990. Subsequently in the year 1994, it converted to a public limited company.
  • The company is primarily into the business milling, processing and marketing of branded & non-branded basmati rice. It also into manufacturing of rice food products. The company owns 19 brands including established brand like ‘Daawat and Heritage’. These brands are registered in 40 countries.
  • Products of the company are sold both in domestic and overseas markets. In international market, the company has presence in UK, Canada, UK and other European Union. Top three foreign destinations are Saudi Arabia, USA and Spain. In domestic market the company has more than 100 distributors across the country.
  • The company has a capacity to process 30.5 tonnes per hour (TPH) of paddy. It has its own processing facility in the state of Haryana. It has 74 mandis for procurement of basmati paddy.
Object of the issue:
  • Expansion, Automation and Modernization at Sonepat, Haryana.
    1. To set up a new Parboiled rice (sella) processing and milling capacity.
    2. To set up a new milling line for producing value added rice.
    3. To add balancing equipments and Automation of existing facility.
    4. To set up Silos and Flat storage facility.
  • Generating power for captive consumption.
  • General Corporate Purposes.
  • To meet the Public Issue Expenses.
Strength:
  • Domestic sales have been in increasing trend since FY02. There is an increase in domestic sales of more than 64% in FY06 as against a total sales increase of 12.5%.
  • Market share of branded basmati rice is 35% in comparison to 22%, 3 years back. EBITDA margins for unbranded exports are around 8% vis-à-vis around 16% for branded exports. Growth in domestic market for basmati is clearly visible as it is growing at 6% CAGR with branded basmati demand growing at 15% CAGR. Demand is set to rise with increase in number of consumers as well as the quantity consumed.
  • LT Overseas is one of the top three players having a market share of 22% in domestic market. Large-scale operation of the company provides economics of scales and helps competitive pricing of its products.
Weakness:
  • LT Overseas has not able to penetrate in overseas market. Export sales has been in decreasing trend since FY04. In FY06 Export sales were Rs.1,97million where as in FY04 the same was Rs.2,62 million.
  • LT Overseas has contingent liabilities to the tune of Rs. 442.97 million. In the event of crystallization of any of the contingent liabilities, bottom line of the company will have an adverse effect.
  • Although, net profit as a percentage of sales has been in increasing trend, still the margin is around 2.75%.
Valuations:
  • RoNW has increased from 10.73% in FY05 to20.27% in FY06. Book Value per share during the same period has increased from Rs.67 to Rs.76.
  • EBIDTA for the three-month ended June 30, 2006 was Rs.87.91 million. EBIDTA as a percentage of income during this period was 8%. In FY 2006, EBIDTA increased to Rs.319 million in FY06 from Rs.268 million in FY 05, showing an increase of 19%. As a percentage to total income it has increased from 7.43% to 7.91% during the said period.
  • Post Issue EPS based on FY06 result works out to be Rs.5. At a price band of Rs.50 to Rs.56, P/E multiple is 10x to 11x. Average Industry P/E is 11.60.

Kovilpatti Lakshmi Roller Flour Mills Ltd.


Background:
  • Kovilpatti Lakshmi Roller Flour Mills Ltd. (KLRFM) was incorporated as Kovilpatti Lakshmi Roller Flour Mills Private Ltd. It became a Public Ltd company in the year 1982. Company has 1 flourmill, 2 textile units & 1 metal fabrication facility in Tamil Nadu.
  • KLRFM started its wheat flourmill operation in 1964. Its total milling capacity is 5000 tons a month. It markets its wheat products in the South and Central regions of Tamil Nadu and Kerala.
  • In 1978 company established an Engineering Division to manufacture sheet metal products. In 2001 KLRFM leased out this facility for Rs. 1,75,000/- per month. However, this agreement has expired on 30 September 2006. Now KLRFM has overtaken the operations. They are further expanding this division by acquiring Eltex Super Castings Ltd.
  • The company undertook further diversification in 1982 with entering into cotton textile spinning. It has 2 spinning mills. Unit I has a capacity of 29,520 spindles & Unit II has a capacity of 1,344 rotors. It supplies yarns primarily to clothing units in Maharashtra and Tamil Nadu and exports to East Asian countries such as Korea, Malaysia and Singapore.
  • The flour milling division milled 42,190 tons of wheat in FY06 accounting for 51.18% of the turnover. Textile division produced 48,16,383 kgs of cotton yarn valued at Rs. 43.13 crores which contributed to 48.82% of the company’s revenue.
  • The flour-milling unit has obtained ISO 9001 certification; textile unit 1 has obtained ISO 9002 certification.
  • KLRFM has nearly completed restructuring & started the operations of Eltex Super Castings Ltd., which has a production capacity of 9000 TPA. It has acquired 65.44% of the equity share capital of Eltex in August 2006. This acquisition is being funded with help of Rs.14.3 crore of FPO, Rs. 9.74 crore debt & Rs.6.56 crore of internal accruals.
  • Pre FPO promoter’s holding is at 60.39%, post issue the holding will come down to 28.99%.
Objects of Issue:
  • Investment in Eltex of Rs.1,7 crore
  • Forestablishment of 2 wind mills of 1.25 MW each for Rs.1,2.30 crore
  • To meet issue expenses for Rs.1.3 crore
Strengths:
  • KLRFM markets all its products under the brand name "Kuthuvilakku" which has garnered good acceptance from the user industries.
  • KLRFM owns 9 wind mills with a total installed capacity of 6.25 MW of power generation for captive consumption. This has resulted in lower power cost (saving of Re.1 per unit) for the company and tax benefits.
  • Company has restarted its engineering division & most of its old clients like TVS Group companies, Amalgamation Group, Elgi Group, LMW & Audco India have shown interest in procuring supplies from it.
  • The company’s OPM increased by 2.5% to 10.5% in FY06 from 8% in FY05. Its NPM increased from 1.9% in FY05 to 3.3% in FY06. Also company enjoys low debtors/ sales ratio of 8%. It has been consistent between 7%-9% since FY03.
Weakness:
  • The bulk of the issue proceeds is for investment in Eltex Super Castings Ltd. ["Eltex"], which is a Sick Industrial Unit.
  • Company has generated negative cash flow of Rs.4.5 crore in FY06.
  • Both industries in which company has been operating have grown at a CAGR of 5% and above but KLRFM sales grew by 4% CAGR for last 6 years.
  • Sales for FY06 declined by 2.6% (YoY) to Rs.92.4 crore from Rs.94.9 crore in FY05. Also, company has an inconsistent sales track record for a period of FY00 to FY06.
Valuation:
  • Company’s shares are listed on BSE stock exchange and are currently trading at Rs.69 as on 22nd November 2006.
  • KLRFM’s FY07 half yearly sales grew by 20% & PAT by 11% (YoY).
  • The company’s net worth as on 30th June 2006 is Rs.18.1 crore and book value per share at Rs.75.3 per share (pre equity issue).
  • Post issue annualized EPS based on 30th September 2006 earnings is Rs.6.85 per share. The shares are being offered in the price of Rs.55 at PEx of 8 & PBx of 1.25 (expected).

Nifty moves closer to 4000 mark


The market continued its winning streak with Sensex surging to a record high. It was the index's 12th record close in 19 trading days so far this month. Steady to firm Asian markets and short covering in derivatives ahead of expiry of November 2006 derivatives contracts aided the Sensex’s surge. November derivatives contracts expire on Thursday 30 November.

Cement, banking, power generation and IT shares led today’s Sensex surge. Refinery shares edged lower though.

Sensex jumped 70.26 points or 0.5% to settle at 13,773.59, a record closing high. The S&P CNX Nifty advanced 18.05 points or 0.46% to settle at 3,968.90, a lifetime closing peak.

The market opened on a firm note and it firmed up further in early afternoon trade. Sensex rose as much as 95.69 points to a high of 13,799.02 at 12:24 IST which is a lifetime high for the barometer index.

Select side counters surged. The market breadth was positive. 1425 shares rose on BSE as compared to 1129 shares that declined. 64 shares were unchanged. Gainers outpaced losers by a ratio of 1.26:1. BSE clocked a turnover of Rs 4173 crore, much lower than Friday (24 November)’s Rs 5249 crore.

Sensex has risen 46.5% this year, making it Asia's best performing market. The near term trend on the bourses would be determined by the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts this Thursday (30 November). Derivatives positions are quite large. On 22 November, the open interest in NSE’s futures & options segment hit an all-time high of Rs 57,158 crore. The previous record high was Rs 56,991 crore of 27 April 2006. 46% of the open positions are stock futures and 22% are index-based futures.

Meanwhile, large daily FII figures indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios. On a net basis, there has been stepping up of inflow by FIIs over the past two months. Their inflow totaled Rs 8378.20 crore in November 2006 (till 23 November). The inflow was Rs 8013 crore in October 2006. The inflow was Rs 1145 crore in July, Rs 4643.10 crore in August and Rs 5425 crore in September. The cumulative inflow for calendar 2006 has totaled $8.5 billion. The inflow was a record $10.7 billion 2005.

Market men are watching also as to what extent the ruling government is able to pass some of the financial sector reforms. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill, which proposes to increase the voting rights of foreign stakeholders in private banks presently capped at 10%. However, the Left parties are opposed to the amendment fearing that it will lead to a takeover of private banks by foreign entities. The winter session has just begun, and will last till 19 December 2006.

In today’s trade, cement shares rose on firm cement prices. ACC gained 3.8% to Rs 1114, Gujarat Ambuja Cements added 3.6% to Rs 143.50, Grasim rose 0.6% to Rs 2690.30 and UltraTech Cement advanced 0.5% to Rs 886.

Tata Power rose 2.3% to Rs 590 after the company today reported 61% growth in net profit for Q2 September 2006 to Rs 202.32 crore (Rs 125.67 crore). Total revenue rose 16.5% to Rs 1279.17 crore from Rs 1097.21 crore.

NTPC rose 2.3% to Rs 153.60 on its plans to set up a power plant in Sri Lanka. But the stock pared gains, after rising as much as 5.1% to a high of Rs 157.80 at 10:52 IST. A block deal of 10.35 lakh shares was executed in the scrip on BSE at Rs 155 at 14:01 IST.

Bharti Airtel rose 2% to Rs 629.45 after group company Bharti Enterprises agreed to form a joint venture with US retailer Wal-Mart Stores to enter the Indian retail sector.

IT shares were in demand. Wipro rose 1.9% to Rs 602, HCL Tech advanced 1.7% to Rs 640.25, and TCS rose 0.8% to Rs 1157.80. Software major Infosys shed 0.3% to Rs 2226. TCS Chief Executive S. Ramadorai said on Friday (24 November) TCS was getting new contracts at 5-10 percent higher billing rates. He said the existing contracts were being negotiated for renewal at 3-5 percent higher rates.

Tata Steel lost 0.5% to Rs 480.50 in volatile trade. Corus Group PLC said on Monday it is to give Brazilian steel company Companhia Siderurgica Nacional SA (CSN) more time to weigh up a formal offer for the Anglo-Dutch steel group. CSN approached Corus on Nov 17 with an informal takeover offer of 475 pence a share topping the 455p a share bid from India's Tata Steel on Oct 20.

Frontline bank shares were in demand after bond price hit 7-month high. State Bank of India gained 2% to Rs 1282. ICICI Bank was 0.8% to Rs 882. A block deal of 17.6 lakh shares was executed in the FII segment in the scrip on BSE at Rs 885.

Oil exploration major ONGC added 1.7% to Rs 871.90 on market expectations of new gas finds.

Reliance Industries (RIL) lost 0.8% to Rs 1251. Reliance Industries is finding more and more gas in the Krishna Godavari basin off southern India, Chairman Mukesh Ambani said on Monday. Reliance made one of the world's largest gas finds at the KG basin in 2002.

Hindustan Zinc jumped 5.6% to Rs 970.65 after the top zinc producer raised zinc prices by 3.5 percent to Rs 2,28,800 a tonne. The firm simultaneously cut lead prices by 3.04 percent to Rs 82,800 a tonne.

GE Shipping was trading at Rs 221.30 compared to the last trading price of Rs 336.70 of 7 November 2006. The scrip was relisted today giving effect to a restructuring scheme whereby its offshore services division has been demered into a separate company which would be listed separately. 37.2 lakh shares changed hands in the counter on BSE.

Lanco Infratech closed at Rs 241.40 on BSE compared to IPO price of Rs 240. The scrip reached a low of Rs 239.55 and a high of Rs 275. 1.02 crore shares changed hands in the counter on BSE.

Rise in crude price weighed on refinery shares. Indian Oil Corporation lost 3% to Rs 488.05, HPCL shed 1.8% to Rs 310.50 and BPCL shed 1.1% to Rs 371. Nymex crude was up 56 cents at $59.80. It had hit a high of above $60 in intra-day trade today.

Bhel lost 1.1% to Rs 2500. The company said on Monday it had won a Rs 129 crore order from Hindustan Zinc to build a power plant in Rajasthan.

UTI Bank lost 0.3% to Rs 495. Three block deals of 23.11 lakh shares each were executed in the UTI Bank scrip on BSE at average price of about Rs 501.30.

Construction firm Unity Infraprojects rose 3% to Rs 539 after a consortium headed by it secured a contract worth Rs 65.58 crore to expand the Amritsar airport building. It would partner with Pratibha Industries in this project. Pratibha Industries dropped 3% to Rs 230.30.

Essar Oil rose 2% to Rs 52.70 after the firm said late on Friday it had started operations at its $2.4 billion refinery at Vadinar in western India.

Lok Housing and Constructions rose 4% to Rs 337.05 after the firm said its board approved raising up to $200 million in the overseas market through convertible bonds or depositary receipts.

Tyre shares edged higher on the back of falling natural rubber prices. JK Industries jumped 10% to Rs 136.90, MRF rose 5% to Rs 4995, Falcon Tyres rsoe 2.5% to Rs 113, Apollo Tyres gained 2.2% to Rs 346 and CEAT rose 1% to Rs 121.15. Natural rubber is a key raw material in the manufacture of tyres.

Punj Lloyd jumped nearly 9% to Rs 1044 on reports it has evinced interest in setting up a refinery in Russia. It has also evinced interest in setting up a construction equipment manufacturing unit and an agriculture project in that country.

Sun TV ended flat at Rs 1515. The company said on Monday its board has approved the merger of satellite television company, Gemini TV with itself. The board also approved merging Udaya TV excluding the FM (frequency modulation) radio division, with itself.

Plantation firm McLeod Russel India rose 2.4% to Rs 108 after the company said on Monday its board would meet on Dec. 1 to consider merging its subsidiary, Doom Dooma Tea Co. Ltd., with itself.

UTV Software lost 2.4% to Rs 259.50. UTV Software said on Monday it plans a television joint venture with a unit of Malaysia's Astro All Asia Networks Plc., marking its return to television broadcasting.

Hindustan Construction (HCC) lost 2.4% to Rs 150. As per reports, Hindustan Construction (HCC) is planning an initial public offering of its real estate unit HCC Real Estate. It is currently 100% owned by HCC.

City Union Bank jumped 14% to Rs 150.50 after the bank said on Friday its board will meet on 30 November 2006 to consider further issue of equity shares by way of preferential allotment.

Bank of Rajasthan was flat at Rs 38.10. As per reports, the private sector bank plans to get into life and general insurance businesses, after shoring up its net worth to Rs 1000 crore in 18 months.

IDBI ended flat at Rs 77.75. It plans to raise Rs 350 crore through bonds this week.

Adani Enterprises ended flat at Rs 202. The export firm said its board would meet on Dec. 2 to consider issue of foreign currency convertible bonds or other securities or debt.

Provogue India rose 2.2% to Rs 448. The company’s board meets on December 1 to consider expansion plans.

Alembic Glass lost 1.7% to Rs 2775. As per reports, it has come out of purview of BIFR as its net worth has become positive on amalgamation of Shreno with itself.

Emkay - Sterlite Industries


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Sharekhan Eagle Eye (equities) & Derivatives Info Kit for November 28, 2006


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Sharekhan Investor's Eye dated November 27, 2006


Mahindra & Mahindra
Cluster: Apple Green
Recommendation: Buy
Price target: Rs870
Current market price: Rs835

Buy-out urges unsated

Key points

  • Mahindra & Mahindra (M&M) has been in the thick of action lately, announcing two acquisitions and planning to enter the US markets. The company appears to be well on its way to target sales of $1 billion for the Mahindra Systems and Technology group by 2010.
  • M&M has acquired DGP Hinoday by buying out its existing shareholders—the DG Piramal group and India Private Equity Fund, Mauritius. The residual stake of 34% would continue to be with Hitachi Metals. DGP Hinoday is a market leader in castings and ferrites with sales of Rs243 crore.
  • Though the price at which these acquisitions have been made have not been announced, we are impressed by the overall strategy of the group and maintain our positive stance on the stock.
  • M&M expects to maintain the strong volume growth momentum in the automotive sector in H2 at roughly the same pace as in the first half of the fiscal, ie around 14-15%.
  • Using the sum-of-parts model, we have valued M&M's core business at Rs607 (14x FY2008E earnings) and its subsidiaries at Rs263. We maintain our Buy recommendation on the stock with a price target of Rs870.
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Sensex gains, but closes off its intra-day high


After witnessing range-bound moves through the day, the market settled in positive territory. The Sensex, which touched an intra-day high of 13799, finally ended the trading session with gains of 70 points at 13774. The Nifty gained 18 points to close at 3969. The breadth of the market was positive. Of the 2,632 stocks traded on the BSE, 1,446 stocks advanced, 1,115 stocks declined and 71 stocks ended unchanged.

Among the 11 sectoral indices, the BSE CD index rose 2% at 3371 and the BSE Bankex added 0.83% at 7209. However, the BSE FMCG index, the BSE HC index and the BSE Oil & Gas index were down 0.20% each.

Among the front-line stocks Gujarat Ambuja led the upmove and soared 3.43% at Rs143. ACC rose 3.39% at Rs1,109, NTPC jumped 2.56% at Rs154 and Bharti Airtel advanced 2.25% at Rs630. However, Dr Reddy's dropped 2.33% at Rs737, HLL fell 1.46% at Rs240, Cipla declined 1.15% at Rs261 and BHEL was down 1.01% at Rs2,503.

Rajesh Exports vaulted 9.90% at Rs252, Gitanjali Gems surged 8.31% at Rs222, Su-raj Diamond soared 7.56% at Rs52 and Suashis Diamond advanced 7.29% at Rs143. Goldiam International, Blue Star, VIP Industries and Blow Plast gained 1-4% each.

Among the major gainers Pidilite Industries surged 19.43% at Rs139, Punj Lloyd soared 9.04% at Rs1,047 and Crompton Greaves advanced 6.45% at Rs275.

Over 103.14 lakh Lanco Infrastructure shares were traded on the BSE followed by UTI Bank (70.05 lakh shares), NTPC (38.42 lakh shares), Great Eastern Shipping (37.25 lakh shares) and Adani Enterprises (25.07 lakh shares).

Record closing high for Sensex


Gains in cement, banking, power generation and IT shares took the Sensex to a record high today. Refinery shares edged lower though.

Select side counters surged. The market breadth was positive. 1425 shares rose on BSE as compared to 1129 shares that declined. 64 shares were unchanged. Gainers outpaced losers by a ratio of 1.26:1.

Steady to firm Asian markets and short covering in derivatives ahead of expiry of November 2006 derivatives contracts aided the Sensex’s surge. November derivatives contracts expire on Thursday 30 November.

As per provisional close, BSE Sensex gained 72.74 points to 13,776.07, a record closing high.

Cement shares rose on firm cement prices. ACC gained 3.8% to Rs 1114, Gujarat Ambuja Cements added 3.6% to Rs 143.50, Grasim rose 0.6% to Rs 2690.30 and UltraTech Cement advanced 0.5% to Rs 886.

Tata Power rose 2.3% to Rs 590 after the company today reported 62.4% growth in net profit for Q2 September 2006 to Rs 203 crore (Rs 125 crore). Total revenue rose 13.7% to Rs 1200 crore from Rs 1055 crore.

NTPC rose 2.3% to Rs 153.60 But the stock pared gains, after rising as much as 5.1% to a high of Rs 157.80 at 10:52 IST. A block deal of 10.35 lakh shares was executed in the scrip on BSE at Rs 155 at 14:01 IST.

Bharti Airtel rose 2% to Rs 629.45 after group company Bharti Enterprises agreed to form a joint venture with US retailer Wal-Mart Stores to enter the Indian retail sector.

IT shares were in demand. Wipro rose 1.9% to Rs 602, HCL Tech advanced 1.7% to Rs 640.25, and TCS rose 0.8% to Rs 1157.80. Software major Infosys shed 0.3% to Rs 2226. TCS Chief Executive S. Ramadorai said on Friday (24 November) TCS was getting new contracts at 5-10 percent higher billing rates. He said the existing contracts were being negotiated for renewal at 3-5 percent higher rates.

Tata Steel lost 0.5% to Rs 480.50 in volatile trade. Corus Group PLC said on Monday it is to give Brazilian steel company Companhia Siderurgica Nacional SA (CSN) more time to weigh up a formal offer for the Anglo-Dutch steel group. CSN approached Corus on Nov 17 with an informal takeover offer of 475 pence a share topping the 455p a share bid from India's Tata Steel on Oct 20.

Frontline bank shares were in demand after bond price hit 7-month high on Monday drawing support from lower oil prices. State Bank of India gained 2% to Rs 1282. ICICI Bank was 0.8% to Rs 882. A block deal of 17.6 lakh shares was executed in the FII segment in the scrip on BSE at Rs 885. Lower oil prices may help check inflation pressures.

Oil exploration major ONGC added 1.7% to Rs 871.90 after another exploration firm Carin India set Rs 160 to Rs 190 as price band for its forthcoming IPO.

Reliance Industries (RIL) lost 0.8% to Rs 1251. Reliance Industries is finding more and more gas in the Krishna Godavari basin off southern India, Chairman Mukesh Ambani said on Monday. Reliance made one of the world's largest gas finds at the KG basin in 2002.

Hindustan Zinc jumped 5.6% to Rs 970.65 after the top zinc producer raised zinc prices by 3.5 percent to Rs 2,28,800 a tonne. The firm simultaneously cut lead prices by 3.04 percent to Rs 82,800 a tonne.

GE Shipping was trading at Rs 221.30 compared to the last trading price of Rs 336.70 of 7 November 2006. The scrip was relisted today giving effect to a restructuring scheme whereby its offshore services division has been demered into a separate company which would be listed separately. 37.2 lakh shares changed hands in the counter on BSE.

Lanco Infratech provisionally closed at Rs 240.80 on BSE compared to IPO price of Rs 240. The scrip reached a low of Rs 239.55 and a high of Rs 275. 1.02 crore shares changed hands in the counter on BSE.

Rise in crude price weighed on refinery shares. Indian Oil Corporation lost 3% to Rs 488.05, HPCL shed 1.8% to Rs 310.50 and BPCL shed 1.1% to Rs 371. Nymex crude was up 56 cents at $59.80. It had hit a high of above $60 in intra-day trade today.

Sun shines on Sun TV


The board also approved merging Udaya TV excluding the FM (frequency modulation) radio division, with itself.

1.12 lakh shares were traded on the counter on BSE.

The stock surged 11% in the past week, from Rs 1361.55 on 17 November to Rs 1511.30 on 24 November, as buying momentum continued.

Gemini TV owns five television channels, Gemini TV, Teja TV, Gemini News, Gemini Music and Gemini Cable Vision, and is operating with revenue of Rs 174.69 crore for the year ended 31 March 2006.

Udaya TV owns four television channels, Udaya TV, Udaya Movies, Udaya Varthegalu and Udaya TV II, and is operating with revenue of Rs 94.31 crore for the year ended 31 March 2006.

The company added that with this proposed merger, the companys shareholders would benefit immensely from the highly profitable operations and strong growth plans of both Gemini TV and Udaya TV. Sun TV will have an integrated growth strategy for all south Indian language channels, and thus build a dominant presence in entire south India.

Sun TV currently operates four television channels - Sun TV, KTV, Sun News and Sun Music - in Tamil language and two television channels - Surya TV and Kiran TV - in Malayalam language, and three FM Radio Stations, and another three FM Radio Stations through its subsidiaries. The two subsidiaries of the company, viz., Kal Radio and South Asia FM, jointly holds 41 FM Radio Licences for FM Radio Stations across India.

Recently, Sun TV announced increase in its advertisement rates by 5-27% to be effective from 1 January 2007, because of an increase in viewership. The increase in rates has come after a gap of two years.

For Q2 September 2006, Sun TVs net profit rose 42.7% to Rs 47.96 crore (Rs 33.61 crore). Net sales rose 17.7% to Rs 94.47 crore (Rs 80.24 crore).

Prabhudas: Market Performer - Gateway Distiparks


Gateway Distriparks has acquired 50.2% stake in Snowman Frozen Foods Limited, an unlisted company engaged in the business of cold chain logistic services such as storage, handling, transportation and secondary distribution of frozen foods.

According to Prabhudas, On the current revenue and profit base, this acquisition will add 20% to the top-line and less than 2% to the bottom-line. But it will result in a drop in the existing operating and PAT margins to roughly 51% and 45% as against 57% and 52% currently since margins of the company are much lower than GDL’s.

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Bull rally continues


Sensex Open:13716 High:13799 Low:13716

The market is on a roll in current trades. After resuming marginally higher, the Sensex touched an all-time high of 13799 on across-the-board buying support. Currently, the Sensex has advanced 76 points at 13780 while the Nifty has gained 18 points at 3969.

Among the sectoral indices the BSE Bankex has gained 0.88%, the BSE CD index has added 0.81% and the BSE Metal index has moved up by 0.98%. However the BSE Oil & Gas index has inched lower. The market breadth is firm, with 1,551 stocks advancing as against 837 stocks declining on the BSE.

Among the major gainers on the BSE, Arvind Mills has surged 7.91% at Rs54, Tata Elxsi has advanced 5.64% at Rs256, Pidilite has added 4.90% at Rs122, Hinduja TMT is up 4.61% at Rs598, Cromptom Greaves is stronger by 4.57% at Rs270 and Reliance Capital has soared 4% at Rs602. United Phosphorus, Kotak Bank, Jindal Saw and NTPC are up around 3% each.

SBI touched an all-time high of Rs1,273, and is presently up Rs15 at Rs1270. Over 1.50 lakh SBI shares have changed hands on the BSE.

Karvy - Biocon


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Sharekhan Highnoon dated November 27, 2006


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Sharekhan Commodities Buzz dated November 27, 2006


Crude oil: Firm prices
Crude oil was little changed after rising last week on signs OPEC may lower production for the second time in two months as the peak US winter demand approaches. It appears that the cold temperatures would increase the demand for heating oil.

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Motilal Oswal - Gulshan Sugars & Chemicals FPO


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Motilal Oswal - Bharti & IOB


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Motilal Oswal - Ruchira Papers - IPO Note


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Motilal Oswal - Sobha Developers - IPO Note


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Poweryourtrade.com Trading Calls


Buy Adani Enterprises around Rs 202.15 with stop loss of Rs 199.(Intra-day Call)

Buy Avaya Global around Rs 236 with stop loss of Rs 232.(Intra-day Call)

Buy Deccan Aviation around Rs 143.80 with stop loss of Rs 141.(Intra-day Call)

Poweryourtrade.com Trading Calls


Buy Sadbhav Engineering with stop loss of Rs 400 for target of Rs 510

Buy Patel Engineering with stop loss of Rs 400 for target of Rs 496

Sell Tata Chemicals above Rs 224 with stop loss of Rs 228; This is a day-trading recommendation.

Buy Bombay Dyeing below Rs 825 with stop loss of Rs 805; This is a day-trading recommendation.

A muted debut from Lanco Infratech


Lanco Infratech was trading at Rs 256, a 6.6% premium over IPO price of Rs 240.

The stock hit a low of Rs 255 and high of Rs 275. 2.05 lakh shares changed hands in the counter on BSE.

The company had priced its IPO at the higher end of the Rs 200 to Rs 240 price band.

The company has a large equity base of Rs 222.36 crore. Face value is Rs 10 per share.

Post issue FII holding is 6.35%.

Lanco Infratech is an infrastructure development company with interests in power, construction and property development. The company currently owns 11 power projects, of which five are in operation and six are under development. Its power generation capacity will increase seven times the existing capacity in the next four years. As a result, revenue and profit from power business will increase significantly. The company has also been qualified to bid for two ultra mega power projects: Sasan and Mundhra.

Its construction division had an order book of Rs 1611.83 crore on 30 September 2006. This includes contracts worth Rs 1229.95 crore with affiliates of Lanco Infratech. The entire order book will be executed by 2010.

Lanco Infratech is also obtaining approvals for a large integrated IT park and township on a 100-acre plot on which it proposes to develop 18.5 million square feet of saleable area in Manikonda, Hyderabad. The company also owns land banks, aggregating about 21.8 acres, close to Ocean Park in Hyderabad, where it intends to develop a residential housing project with one million square feet of saleable area. In addition, it has won a bid to develop an IT park and township on a 10.7-acre plot, on which it proposes to develop two million square feet of saleable area, in Vishakhapatnam, Andhra Pradesh.

Due to the nature of the business, Lanco Infratech’s projects typically require a long gestation period and substantial capital outlay before completion. It may be months or years before positive cash flows can be generated. Further, power, property development, and infrastructure and construction projects are capital intensive and will require high levels of debt financing. They will also lead to continuous dilution of equity.

Contingent liabilities of Lanco Infratech amounted to Rs 755.92 crore on 30 September 2006. Apart from these, the offtake of the Kodapalli power plant has resulted in court proceeding related to Rs 224-crore charges paid by the offtaker to Lanco Kodapalli Power (LKPPL). Lanco Infratech is in the process of raising its stake in LKPPL to 59% from current 33.9%.

Genus Overseas Electronics Ltd.


CMP Rs210

Rating: BUY

Genus Overseas Electronics Ltd. (GOEL) is amongst the largest electronic meters manufacturers and the pioneer in implementing AMR technology in metering. GOEL stands to be the largest beneficiary of the on going Accelerated Power Development and Reform Programme (APDRP), under which the government intends to implement 100% metering. It recently announced its Q2FY07 results with its topline and bottomline registering growth of 105.2% and 88.1% respectively. Its order book stands at Rs4.9bn, which comfortably covers it for remaining two quarters of FY07 and partially for FY08. Huge investments announced by the government in the sector coupled with the company’s foray into execution of power distribution projects provides clarity to our belief of robust growth for the company in future. With the company’s focus being on selling more of three phase meters we expect margins to improve to about 13.9%.

Recently the company announced the formation of a JV with Mobix, a Brazilian company, for setting up a base in Latin America. The transaction involves an investment of US$15mn of which about US$9mn will be raised through debt from banks in Brazil and the rest will be through equity by both firms. Mobix is a leader in communication technology. This JV will enable the company to improve upon its AMR solution for meters, as it requires the backing of communication technology. At present Mobix Wireless Solutions sells GOEL’s products in North and South America as well as in other countries. At a CMP of Rs210, the stock is currently trading at 10.5x and 7.2x its FY07E and FY08E earnings of Rs19.6 and Rs28.9 respectively. We initiate coverage on the stock with a BUY rating and a price target of Rs289 over the next 12 months.

Support & Resistances, F&O


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Indiainfoline - STRATEGY INPUTS FOR THE DAY


Can bulls handle the bounce?

“A hard fall means a high bounce... if you're made of the right material.”

The Indian cricket team may be finding it hard to handle the bounce in South Africa. In stark contrast, the bulls on the street so far have been unperturbed by the talk of expensive valuations and possibility of a correction. As we have been reminding you, make sure your stock is made of stuff, which can bounce back in case of any eventuality. Bulls are presently like the Australian team; more like the kangaroos just hopping ahead. The good innings could extend for a while as there is no dearth of FII powered strokes.

There may be some more volatility ahead of Thursday's F&O expiry. We are beginning the expiry week with record Open Interest in the derivative segment. The short-term direction of the market will hinge on whether the bulls rollover F&O contracts into the next month series or decide to play safe. Fresh buying at this juncture is best avoidable though the positive bias will continue as there is not much of bad news on the horizon. One should not get carried away and build up a lot of long positions as December could see some slowdown in foreign capital inflows. As for today, we expect a cautious opening, on the back of mixed global cues.

FIIs have been quite gung-ho in the past few months, especially in November. They pumped in Rs11.79bn in the cash segment on Thursday. This may include inflows towards recent big-ticket IPOs like Parsvnath and Lanco Infratech and some major bulk as well. They have poured in $1.75bn this month so far after investing over $1bn each in the past three months. In Friday's trade, foreign funds were net buyers to the tune of Rs2.99bn (provisional) in the cash segment. In the F&O segment, they were net sellers of Rs3.46bn. Mutual Funds on the other hand have been more cautious. They pulled out Rs2.76bn on Thursday.

GE Shipping shares will re-list on the exchanges today after the demerger of its offshore business. Investors will get 1 share of Great Offshore for every five shares of GE Shipping. Great Offshore will list after a month. The shares are likely to list between Rs225-250.

Shares of Lanco Infratech Ltd. will also get listed today. The issue was oversubscribed 11.88 times. The offer price was fixed at Rs 240 per share.

Hindalco could be under some pressure as it has temporarily halted operations at a copper smelter at Dahej in Gujarat after declining global copper ore supplies reduced processing and refining charges

Sun TV's Board will meet today to consider the proposed merger of Satellite Television Broadcasting Companies with itself. Bharti Airtel will be in focus amid reports that the Bharti Group is likely to announce a partnership with Wal-Mart for its retail venture.

M&M might also attract some attention as it has entered into an agreement to acquire 66% stake in DGP Hinoday Industries Ltd. UTV Software could advance as the company has entered into a term sheet with Astro Multimedia International (BVI) Ltd. for establishing a television channel joint venture business in India, South Asia and South East Asia.

US stocks slipped on Friday in a shortened post-Thanksgiving session, as investors focused on rising oil prices and reports from the nation's retailers about the start of the crucial holiday shopping season.

The Nasdaq was down 5.72 to 2,460.26, after ending Wednesday's session at its highest point since February 2001. The Dow Jones fell 46.78 to 12,280.17, and the broader S&P 500 dropped 5.14 to 1,400.95. The S&P ended last Wednesday's session at a six-year high.

For the week, the Nasdaq gained 0.6%, the Dow lost 0.5% and the S&P was barely changed.

US light crude oil for January delivery rose 26 cents to $59.50 a barrel in after-hours electronic trading in Asia. Treasury bond prices rose, lowering the yield on the 10-year note to 4.55% from 4.56% late on Wednesday. In currency trading, the dollar slipped versus the euro and yen.

European stocks dropped on Friday, ending lower for the third straight session after the dollar reached its lowest level against the euro since April 2005. The pan-European Dow Jones Stoxx 600 index lost 0.8% at 355.98. The German DAX Xetra 30 dropped 1% to 6,411.96, the French CAC 40 shed 0.7% to 5,389.46 and the UK's FTSE 100 slipped 0.3% to 6,122.10.

Asian stocks were mixed Monday morning. The Nikkei was up 69 points at 15,803 while the Hang Seng was down 51 points at 19,209.

Taiwan's Taiex gained for a 10th day, heading for its highest in more than six years. Singapore's Straits Times climbed as much as 0.9% to a record. Markets rose around the region, except in China, New Zealand and the Philippines. South Korea's Kospi and the Hang Seng in Hong Kong swung between gains and losses.

The Morgan Stanley Capital International Asia-Pacific Index added 0.4% to 133.06 as of 11:35 a.m. in Tokyo.

In the emerging markets, the Bovespa in Brazil lost 0.7% to 41,757 while the IPC index in Mexico gained 0.25% to 24,792 and the RTS index in Russia put on 0.6% to 1722.

Major Bulk Deals:
UBS has bought Bank of Baroda and sold JHS Svenguard; Prudential ICICI MF has picked up Prithvi Info; ABN Amro and Merrill Lynch have sold Rohit Ferro; T. Rowe Price has sold SREI Infrastructure; Templeton MF has bought TVS Motor.

Insider Trades:
Rajshree Sugars & Chemicals Ltd: Raja M J Abdeen, Director has purchased from open market 300000 equity shares of Rajshree Sugars & Chemicals Ltd on 24th November 2006.

IL&FS Investsmart Limited: Vibhav Kapoor, Director has sold in open market 69000 equity shares of IL&FS Investsmart Limited on 22November & 23 November 2006.

Market Volumes:
The turnover on NSE was down by 7.7% to Rs81.95bn. BSE Metal index was the major gainer and gained 1.36%. BSE PSU index (up 1.40%), BSE Consumer Durable index (up 0.86%) and BSE Pharma index (up 0.65%) were the other major gainers. However BSE Capital Good index lost 1.31%.

Volume Toppers:
SAIL, NTPC, DCB, Siemens, IVRCL Infrastructure, Yes Bank, Hindustan Construction, Zee Telefilms, Tata Steel, India Cements, HLL, Ashok Leyland, ITC, MTNL, Dabur, Hanung Toys, Sterling Biotech.

Delivery Delight:
Aftek Infosys, Arvind Mills, BEML, BRFL, Cipla, Dabur India, Dr Reddys Laboratories, Era Constructions, Gammon, Gujarat Heavy Chemicals Ltd, Hero Honda, HLL, HDFC, India Infoline, Indiabulls, IPCL, Jyoti Structures, ONGC, Pidilite Industries, PNB, Titan Industries and Zee Telefilms.

Brokers Recommendations:
Infosys – Outperform from CLSA

Long Term Investment:
Hanung Toys

Major News Headlines:

Essar Oil to spend $2.4bn to build new refinery
Usha Martin acquires Agra based company
Hindustan Zinc denies Congo mines acquisition news
Jupiter Bioscience to raise funds up to Rs950mn
Subex Azure wins contract from Middle East company
Ranbaxy to increase sales by increasing business, acquisitions
Emco gets order worth Rs380mn from Power Grid Corp
HDFC Bank gets RBI approval to open new branches

Indiainfoline - NEWS ROUND UP


India's inflation, based on the Wholesale Price Index (WPI) stood at 5.29% in the week ended November 11, the Government said on Friday. In the previous week it was at 5.3%. Average expectation was for a level of 5.34%.The WPI rose marginally by 0.05% to 208.9 from 208.8, and the Government has revised inflation for the week ended Sept . 16 to 5.27% from 4.56%.

The Government has cleared the proposal by Hilton International Company, USA and DLF Ltd. to form a Joint Venture for perusing hospitality business in India. Hilton will own a 26% stake in the JV while real estate giant DLF will hold the rest. Hilton will invest US $143mn in the JV, which will build hotels and service apartments in India.

The Government has approved a plan to sell stake in three public sector power companies through the public issue route, reviving the otherwise moribund and politically sensitive disinvestments programme. The Cabinet Committee on Economic Affairs (CCEA) approved the sale of shares in Power Grid Corp. of India Ltd. (PGCIL), Power Finance Corp. (PFC) and Rural Electrification Corp. (REC).

Tata Steel Ltd. has said that it has not taken any decision on a possible revised bid for acquiring UK-based Corus Group Plc as has been reported by certain section of the media. " Tata Steel is not making any other comments on this matter and all media comments remain speculations," the company said.

elgium based financial services company, Fortis has entered into agreement with IDBI and Federal Bank to set up a life-insurance company in India. As per the agreement Fortis and Federal Bank will hold a 26% stake each while IDBI will own 48% of the insurance JV which will offer a full range of life insurance and long-term savings products. The joint venture is expected to be operational by the middle of next year.

Microsoft Corporation has signed a tripartite investment agreement to be a strategic investor in TCS China, with the TCS and the Chinese Parties, The shareholding of the JV will now be altered with TCS APAC owning 65% stake and three Chinese partners holding the remaining 25%. The entry of Microsoft follows the granting of the business operating license to TCS China. It also signals the culmination of the process to get the joint venture operational after an MoU was signed between the three parties in June 2005.

Tata Consultancy Services has launched the TCS science-to-software program which is designed to be a hi-tech, hi-touch learning module that aims to transform B.Sc./BCA degree holders into best-in-class IT professionals. The on-going pilot is currently underway at Chennai with 500 graduates selected from across the country. TCS plans to scale up and make offers to 2,000 science graduates during this academic year as a part of this initiative.

Market may move sideways


The presense of a intra-day volatile trend due to lack of clarity may see the market remain edgy and move on the either side of the zone. The Nifty could test higher levels at 3985 and may find supports at 3920, while the Sensex has a likely support at 13625 and may face resistance at 13780.

US indices witnessed a broad-based sell-off on friday and nearly erased all its previous session gains as inflation fears came back to haunt the investors. While the Dow Jones dropped 47 points to close at 12280, the Nasdaq declined by 6 points at 2460.

Indian floats largely had a mixed trend on the US bourses. Dr Reddy rose 1.28% at $16.61, HDFC Bank gains 1.18% at $75.23 and Tata Motors advances 0.32% at $18.60. Among the laggards Rediff was the major loser with loss of 4.1% at %18.47, and Patni Computers with loss of 2.84% at $20.50. While Infosys dropped 1.05% at $53.56, Satyam Computers tumbled 1.94% at $23.77, VSNL losses 1.48% at $19.30 ICICI Bank slumped over 4% each while Satyam, Wipro, HDFC Bank and MTNL were down over 2-3% each.

In the crude oil front, the Nymex light crude oil for January series lost 93 cents to close at $59.24 per barrel. The bullion Comex gold for February delivery gained 30 cents to settle at $635.40 a troy ounce.

PYT Market Outlook


Ashwani Gujral, Technical Analyst

The Nifty closed at 3852 for the week ended 18th Nov 2006, up about .47% from the previous week. The market is The market rallied sharply in the first 3 days of last week and consolidated sideways on the last two days of the week. The bulls have time and again shown that they can turn the market around in matter of hours. The market closed the week at 3950.

We believe that the consolidation process is more or less complete and in the next week the market would try to scale upto 4005, 4100. The market is likely to find strong support at 3900, 3934.

Midcap space is participating much more than before. Interest is increasing but is not at frenzied levels, which is what precedes intermediate tops. So the guesstimate on a market top has to be more subjective than objective. When signs euphoria are seen, when public interest becomes very high, that is the time for a top, that time does not seem to have reached. Our medium term target on Nifty are 4700 and on Sensex are 15,500-16,000.

The outperforming sectors remain capital goods, construction reality, banking, telecom, media. Underperformers continue to be FMCG, Metals, Sugar and Autos.


Rajat K Bose,

Now that we are already above 13700, we have come very close to some major resistance zone. This is between 13724 and 13760. We still need to monitor 13760 for the Sensex and 3976-80 for the Nifty. If these two levels are decisively breached and we get two closes above that (this would also mean that we close above these levels on a weekly basis as well) then the bullishness is likely to continue. Else, there could be good amount of selling led initially by profit taking and/or aggressive short-sellers. We must keep in mind that the open positions in the F&O are above Rs 57000 crores.

While the cautionary tale needs to be kept in mind being trend followers we still would advocate buying with proper risk control meaning implementing lower position sizes and strict stop-losses. Advance stop losses as the counters move upwards. Do not attempt rebuilding a long position where you have already booked profits but the counter is still moving up. It pays to be a bit cautious here.

Utpal Choudhury, IDBI Capital

The markets continue moving up despite a lot of skepticism around. The skepticism resulting into lot of short positions in the Futures, is what has been supporting the markets from a correction. That is backed by buying in the cash. The risk arises when long positions accumulate in the future side. Our new hedging level stands at 3830 of Nifty. December series looks fine as yet. However, we are not comfortable with the November futures and wait till the expiry.

Volatility may heighten ahead of derivatives expiry


Market men will eye the extent of rollover to December 2006 contracts from November contracts ahead of expiry of November contracts this Thursday (30 November). Derivatives positions are quite large. On 22 November, the open interest in NSE’s futures & options segment hit an all-time high of Rs 57,158 crore. The previous record high was Rs 56,991 crore of 27 April 2006. 46% of the open positions are stock futures and 22% are index-based futures.

Meanwhile, large daily FII figures indicate that there have been simultaneous entries and exits. This in turn indicates of different strategies being adopted by various FIIs operating in India. This also suggests churning of portfolios.

On a net basis, there has been stepping up of inflow by FIIs over the past two months. Their inflow totaled Rs 8378.20 crore in November 2006 (till 23 November). The inflow was Rs 8013 crore in October 2006. The inflow was Rs 1145 crore in July, Rs 4643.10 crore in August and Rs 5425 crore in September. The cumulative inflow for calendar 2006 has totaled $8.5 billion. The inflow was a record $10.7 billion 2005.

In the near term, the market would take cue from as to what extent the ruling government is able to pass some of the financial sector reforms. The winter session will debate, among other things, the Banking Regulation (Amendment) Bill, which proposes to increase the voting rights of foreign stakeholders in private banks presently capped at 10%. However, the Left parties are opposed to the amendment fearing that it will lead to a takeover of private banks by foreign entities. The winter session has just begun, and will last till 19 December 2006.

Asian markets were mixed on Monday. Key benchmark indices in Japan, Singapore and Taiwan were up by between 0.4% to 0.8%. Key benchmark indices in Hong Kong and South Korea were down by between 0.2% to 0.5%.

Oil eased back on Monday from gains made late last week. NYMEX crude for January delivery was at $59.55 a barrel, down from $59.90 at the end of an electronic-only trading session on Friday, and London Brent crude fell 29 cents to $59.74.

Stocks you can pick up this week


Sterlite Industries
Research: Enam Securities
Recommendation: Outperformer
CMP: Rs 542 (Face Value Rs 2)
12-Month Price Target: Rs 725

Sterlite plans to raise Rs 12,500 crore mostly for its commercial power venture, Sterlite Energy. The company has also filed a F1/preliminary prospectus with the US SEC for raising $2 billion.

The ADS proceeds will be used for the following: (a) A $41.9-billion investment in a 2,400-mw power project in Orissa through Sterlite Energy; (b) Acquisition of the government of India’s balance 26/29.5% stake in Hindustan Zinc — the value of which will be around $2.3 billion; and (c) Repay $50 million in debt.

The entry into the commercial energy business will be based on Sterlite’s existing strength of running the captive coal-based power plant for its aluminium smelters and zinc refinery. The existing power capacity of the company is 1,040 mw.

Sterlite Energy plans to build a 2,400-mw power plant in Orissa. Enam believes Sterlite is well-placed to benefit from additional funds that will be deployed for the new growth/high-return business — energy, with captive coal resources.

Apollo Tyres
Research: BRICS PCG
Recommendation: Buy
CMP: Rs 339 (Face Value Rs 10)
12-Month Price Target: Rs 475

Apollo Tyres has set a target of becoming a $1-billion (Rs 4,600 crore) company by FY07-end from its current turnover of Rs 3,000 crore, and plans to grow into a $2-billion player by ’10. It has charted out an aggressive growth blueprint, involving an investment outlay of Rs 600 crore over the next four years.

The management has set a target of doubling revenues to Rs 9,200 crore ($2 billion) by ’10. It is exploring organic and inorganic routes to achieve these objectives, and the recent acquisition of Dunlop Tyres, South Africa is in line with its strategy for growth. At the current market price, ATL is trading at 11.6 times EPS, 7.1 times cash earnings and 5.7 times EV/EBIDTA on 12-month forward basis.

Dunlop Tyres, at 10x CY07E earnings, works out to Rs 390 crore or Rs 77 per share of ATL. Excluding the fair value of Dunlop, ATL is trading at FY07E multiples of 8.7x EPS, 5.3x cash earnings and 4.5x EV/EBIDTA, which is almost 30% discount to the industry average.

Cranes Software
Research: Angel Broking
Recommendation: Buy
CMP: Rs 109 (Face Value Rs 2)
12-Month Price Target: Rs 125

Cranes Software started off as a distributor of third-party mathematical/scientific software products, and has since evolved to become a niche provider of such products to the global scientific and engineering community. The company has achieved this through its strategy of ‘acquire, enhance and expand’.

Through this evolution, Cranes now has a large addressable market in the region of around $40 billion, thus giving significant growth potential to the company going forward. Cranes enjoys one of the highest operating margins in the industry, at 54.5% (H1 FY07).

This is because the proportion of proprietary products in total sales has increased. Products enjoy significant operating leverage, and after recovery of associated fixed costs, all additional revenues flow straight to the profit before tax (PBT).

Gateway Distriparks
Research: CLSA
Recommendation: Buy
CMP: Rs 186 (Face Value Rs 10)
12-Month Price Target: Rs 215

Margins at Gateway Distriparks’ (GDL) Mumbai facility seem to be bottoming out with the start of the third container terminal. Additionally, the company’s attempts to geographically diversify are already visible, with the volume share of the Mumbai unit already dropping to 75% from more than 96% in FY05. JNPT CFS volumes and margins have now stabilised.

GDL’s container freight station (CFS) facility at Mumbai accounts for 90% of total profits and margins, and the facility has been under pressure due to competition from some of the new entrants. Margins dropped by nearly seven percentage points during Q4 FY06.

However, with the commencement of the third container terminal at the port, H1 FY07 volumes at the port grew by 21% y-o-y. Further ramp-up in the operations of the third container terminal will gradually remove supply overhang, improving margins, initial signs of which are already visible.

Garware Offshore
Research: Darashaw Equity Research
Recommendation: Buy
CMP: Rs 149 (Face Value Rs 10)
12-Month Price Target: Rs 200

Garware Offshore Services (GOSL) is in the business of providing offshore support vessels on a lease basis to companies involved in oil and gas exploration. The company’s only two clients are ONGC and British Gas.

Due to sky-rocketing oil prices, oil and gas exploration activities across the globe have seen huge investments. India, too, is encouraging public and private participation under its NELP policies.

Rise in exploration activities has made offshore industry very lucrative, with scaling demand for support leading to higher lease prices. GOSL is on an expansion spree. High debt-to-equity ratio is a growing concern.

At the current price of Rs 133, the stock is trading at a forward P/E of 10x and 6x of CY07 and CY08 earnings. Despite EPS growing at a CAGR of 48% over next the two years, the stock should trade at a modest P/E range of 14-16 due to its high leverage buyouts. Over a 12-month investment horizon, the stock can give returns of 48% with a price target of Rs 200.

Ranbaxy
Research: CLSA
Recommendation: Underperform
CMP: Rs 385 (Face Value Rs 5)
12-Month Price Target: Rs 320

Driven by poor organic profitability and a stretched balance sheet, Ranbaxy has underperformed the Sensex by 153% in the past two years. Cost-cutting initiatives and inorganic growth have contributed to a significant turnaround in profitability in CY06.

Future cost-cutting opportunities will be limited and a stretched balance sheet does not leave much room for further acquisitions. With 45% of the business being commoditised, Ranbaxy faces challenges in organic revenue growth.

Valuations on a price/sales basis may appear cheap at 2.3 times, but are not undemanding in comparison to global peers. Teva and Par Pharma trade at 2.7 times and 1.1 times respectively. Ranbaxy trades at a 50% P/E premium to Teva and valuations at 21.3x CY07CL are not cheap, given the low level of confidence in the company’s future earnings.

Expensing the interest on $440-million FCCBs will impact reported CY07 profits by 13%. Based on historical stock price behaviour, CLSA believes valuations based on price/sales may provide support at Rs 350 and provide a trading opportunity to play on news flows.

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