Tech Mahindra, Navneet Publications, Persistent Systems, KPIT Cummins, Hexaware

 Tech Mahindra, Navneet Publications, Persistent Systems, KPIT Cummins, Hexaware 

Navneet Publications

Navneet Publications

Navneet Publications

 Navneet Publications

Navneet Publications

 Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

Navneet Publications

3i Infotech, Navneet Publications, Andhra Bank, Tata Motors

3i Infotech, Navneet Publications, Andhra Bank, Tata Motors

Navneet Publications

Navneet Publications

Tata Chemicals, Patels Airtemp, Jindal SAW, KSB Pumps, Sanghvi Movers, BL Kashyap, HCL Technologies, BASF India, Navneet Publications, Ranbaxy Labs,

Tata Chemicals, Patels Airtemp, Jindal SAW, KSB Pumps, Sanghvi Movers, BL Kashyap, HCL Technologies, BASF India, Navneet Publications, Ranbaxy Labs, Madras Cement

Navneet Publications

Navneet Publications

Navneet Publications, Tata Chemicals, Sanghvi Movers, IT Sector

Navneet Publications, Tata Chemicals, Sanghvi Movers, IT Sector

Navneet Publications, CEAT, Real Estate

Navneet Publications (India)
Cluster: Emerging Star
Recommendation: Hold
Price target: Under review
Current market price: Rs108

e-learning: Key to growth

Results highlights

• Navneet publications Ltd's (NPL) sales for Q2FY2008 grew by a robust 35.5% year on year (yoy) to Rs82 crore. The sales were primarily driven by the hefty sales growth of the publication segment.
• Sales of the publication segment grew by 47.7% yoy to Rs61.7 crore as the sales in Q1FY2008 got deferred to Q2FY2008. The sales were deferred to Q2 as the publishing of supplementary books by NPL got delayed due to late arrival of government books. The profit before interest and tax (PBIT) margin for the segment improved by 540 basis points to 26.4% due to higher volumes.
• The stationery division had a subdued growth of 8.8% for the quarter primarily on account of decline in exports and strong sales growth witnessed in Q1FY2008. The segment witnessed a PBIT loss of Rs91 lakh in the quarter on account of a one-time write-off of bad debts worth Rs2.57 crore and increase in the advertising expenses. The advertising expense rose on account of aggressive brand building exercise undertaken by the company for the paper stationery and the new non-paper stationery businesses.
• The operating profit margin (OPM) improved by 211 basis points to 16.5% despite a 45.2% year-on-year (y-o-y) increase in other expenditure, which was on account of aggressive advertising by the company. The operating profit thereby increased by 55.3% to Rs13.5 crore. Further, aided by higher other income and a lower tax rate at 24.9% in Q2FY2008 as against 32.9% in Q2FY2007, the adjusted net profit grew by a hefty 98.3% yoy to Rs9.4 crore.
• The company launched e-learning modules in Gujarat in August 2007 and aims at launching the same in Maharashtra by January 2008. To ensure that the product gains acceptability, the company targets installing the product in 500 private schools in each of the states. Post this, it would release the product for retail sales (to students) from March-April 2008.
• We believe, with curriculum changes in Maharashtra and Gujarat being over, NPL's growth prospects depend to a great extent on the success of its new initiatives specifically that of e-learning. However, this venture being in a nascent stage, we would like to monitor the company's progress towards making it an acceptable product for the students. We believe that the current market price of Rs107.6 captures the fair value of the existing business and that of the company's new initiatives (considering the existing visibility). We thereby maintain our Hold recommendation on the stock.

Ceat
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs250
Current market price: Rs198

Price target revised to Rs250

• The production has been lower in Q3FY2008 due to festive season holidays and capacity expansion undertaken by the company. To offset the production loss, the company is trying to push its replacement sales and exports and is realigning its strategies. The demand from the Original Equipment Manufacturers (OEM) of commercial vehicles is picking up and is expected to improve further from Q4FY2008. For FY2008, the company expects a volume growth of ~10%.
• Rubber prices have started rising from October 2007 onwards after continuously falling for the last ten months. In view of this rise in the cost of rubber (the main raw material) and rising crude oil prices, the company is expected to announce a price increase of 1-1.5% in the first week of December 2007. Prices have been increased in the export markets also.
• Profit margins in Q3FY2008 may get affected to some extent on a quarter-on-quarter basis due to lower production and higher input costs. However the profit margins are expected to improve in Q4FY2008 on the back of increase in prices, higher production and commencement of additional capacities for off-the-road (OTR) tyres at Bhandup and passenger car tyres at Nasik.
• Relocation of the Bhandup facility to Patalganga is expected to start from FY2009 onwards and will lead to cost savings of ~Rs 30 crore per year.
• The management is planning to outsource low value-added products such as two-wheeler, jeep and tractor tyres, but will continue in-house manufacture of all value-added tyres such as OTR and those for trucks and cars. This should further improve the profit margins in FY2009.
• The high court has recently approved the de-merger of its investments to a separate company named CHI Investments Ltd, with the core tyre business remaining with Ceat. The financial restructuring entails conversion of every 100 shares of Ceat to 75 shares of the existing company and 25 shares of CHI Investments. Thus, the equity capital of Ceat (core tyre business) will reduce by 25% enhancing its earnings per share (EPS).
• The currently listed entity Ceat is expected to get delisted in December 2007 and the relisting of both the new entities is expected in January 2008.
• We maintain our positive outlook on the company, given its smart turnaround and brilliant performance improvement. At current levels, the stock trades at 7.5x its FY2009E and at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.3. We maintain our Buy recommendation with a revised price target of Rs250.

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SECTOR UPDATE

Real estate

ULCRA repeal to unlesh acres of land
The Maharashtra assembly today passed the motion to repeal the three-decade-old Urban Land Ceiling and Regulation Act (ULCRA) that imposed ceiling on the amount of vacant land that an individual could poses in a particular urban area. The ceiling was fixed based on the classification of cities. And with Mumbai being 'A' class city the limit was set at 500 square meters.

Market Close: Upbeat ranged action !

It was a ranged session for Indian markets. Even in absence of global cues, Indian indices started the day on a fair note. The damp Industrial production figures failed to dampen the ethusiasm.. as the markets digested the slower 7% growth blaming it on the low base. Investors' mood remained positive throughout the day. The buying momentum kept the indices to trade ranged in green. However some profit booking set in during mid day but buying emerged and markets managed to close with modest gains. Asian markets ended in green, European markets were trading in red at the time of writing this. Value buying was seen in index heavy weights like Maruti, SBI, HDFC Bank and ACC. Most of the indices closed in green except FMCG. It was Auto, Banking and Cement stocks which witnessed value buying. The Govt postponed the meeting for the subsidy for Fertilizer companies as result of this the stocks came off. This has been a sector which has been rallying quite strongly oflate. Mid and Small caps were closed inline with the front line indices.

Sensex closed up by 109 points at 15614. It was helped up by gains in Maruti (892.1,+4 percent), SBI (1675.85,+3 percent), HDFC Bk (1212.6,+3 percent), ACC (1128.8,+2 percent) and Grasim (3264.45,+2 percent). Restricting the gains are HLL (215,-1 percent), Hindalco (153.95,-1 percent), Dr Reddys (641.55,-1 percent), TISCO (706.6,-1 percent) and Rel Energy (889.55,-1 percent).

SBI's intention to raise money brought in the buyers. Higher equity clearly means that the 20% FII stake will be vacated and fresh buying would get possible. Thats an odd reason for strength for SBI.

We reran a note on Navneet Publication. The company seems headed the Educomp way. It has managed to develop content which it has already sold to 20 schools in Gujarat. The e-content for Maharashtra is slated to be online by November. This e-initiative should change the face of the company from being a laid back one to one that is leveraging its position in the Education space using all available media. Do read the note We had a Wow call on this and the stock is now at Rs 78 . The stock has delivered more than 30% with in a short span of time.

Suzlon Energy Ltd the world's fourth largest wind turbine maker plans to invest about Rs 5600 cr to triple its production capacity by 2009. The expansion would raise Suzlon's turbine production capacity in India to 5,700 megawatt (MW) by March 2009 from 2,700 MW now. It recently acquired subsidiary Germany's REpower Systems would have increased its capacity to 1,200 MW from an existing 700 MW. The total investment in this three year plan is about Rs 5600 cr and most of this investment would be financed by debt. The company also plans to raise its capacity to produce wind gearboxes, made by its unlisted Belgian subsidiary Hansen Transmissions to 9,300 MW by 2009. The company's order book stands at around Rs 14000 cr up from Rs 13200 cr in July with most orders for exports. It also informed that in June it might seek a listing in London or Frankfurt in the next 12-24 months. The expansion plans are aggressive and certainly impressive.. But the valuations certainly leave a lot to be desired. The acquisition of RE power was not an attractive one financially and that we believe could impact earnings The stock closed up by 3.27%.

We had a note on Bharat Fertiliser. This is after many months of waiting for the company to announce its real estate projects. The value of the property itself is couple of times the market cap. But what is more and what are the risk factors is something which will be known only on reading the note.

Technically Speaking: It was a ranged session for the whole day before closing. Sensex touched an intraday high of 15650 and low of 15548. Overall breadth was in favor of Advances, where the Advances stood at 1647, while Declines at 1123. The turnover was good at Rs 5257 cr. Sensex is facing resistance at 15700 but we believe it is just a matter of time before we cross it and move towards our target of 16100. On the lower side supports at 15490 and 15350.

Sharekhan Investor's Eye dated May 09, 2007

Orchid Chemicals & Pharmaceuticals
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs390
Current market price: Rs259

Results in line with expectations

Result highlights

• Orchid Chemicals (Orchid) reported a year-on-year (y-o-y) increase of 3.4% in its net sales to Rs248.0 crore in Q4FY2007. The sales growth was above our expectations. The sales growth was marginal due to the absence of any significant new launches in the US market during the quarter.
• The company maintained its performance in its major market, the USA. Its key products—Ceftriaoxne and Cefproxil—continued to enjoy a healthy market share in excess of 20-25%. Further, being the sole generic supplier of Cefoxitin and Cefazolin in the USA, Orchid maintains its high market share for these products.
• Orchid's operating profit margin (OPM) improved by 190 basis points to 30.7% in the quarter. The improvement in the margin was driven by a 14.5% decline in the company's material cost on account of an improved product and geographical mix. The resultant improvement in the margin has caused the company's operating profit to grow by 10.2% to Rs76.1 crore in Q3FY2007.
• For FY2007, Orchid's stand-alone revenues grew by 5.1% to Rs934.2 crore. The revenue growth was below our estimates. Despite higher interest cost and tax outgo, the net profits grew by an appreciable 16.6% to Rs96.6 crore. The net profit reported by the company was higher than our estimate of Rs92.3 crore. On a consolidated basis, Orchid's revenues rose by 3.5% to Rs985.1 crore in FY2007. The company's consolidated profits grew by an impressive 37.2% to Rs78.6 crore. The consolidated profits were higher than our estimate of Rs75.3 crore.
• Orchid has already repaid $138 million of its total $290-million debt. Our back-of-the-envelope calculations indicate the repayment of debt will result in savings of approximately Rs56 crore in FY2008 for Orchid. The resultant cleaning up of the balance sheet will also help to improve the sentiment towards the stock.
• Based on the FY2007 performance of the company and the outlook provided by the management during the recently held earnings call, we are reviewing our estimates for Orchid and will come out with an update shortly. At the current market price of Rs259, Orchid is quoting at 10.1x its estimated FY2008 earnings. The valuation is very attractive given the strong growth potential for FY2008 and FY2009 in view of some forthcoming big launches in the USA and an entry into Canada and Europe. Hence, we maintain our Buy call on the company with a price target of Rs390.

Navneet Publications (India)
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs67
Current market price: Rs55

Results in line with expectation

Result highlights

• Navneet Publications reported a growth of 5% in its revenues to Rs46.8 crore during the fourth quarter. The fourth quarter, which is usually a lull period for the publication business, showed a growth of 3% to Rs16.9 crore. However, the stationary business continues to grow at 7% (Rs28.3 crore in the fourth quarter). This growth was mainly due to the higher domestic sales.
• The operating profit margin (OPM) of 10% is 200 basis points higher than the 8% OPM reported in Q4FY2006. Consequently, the operating profit grew by just 27% to Rs4.71 crore.
• The profit after tax (PAT) was lower by 13% to Rs1.33 crore primarily due to a lower other income and higher taxes. In FY2006, the company had a tax shield due to its merger with Navneet Edutainment.
• On a full-year basis, the revenues and earnings have grown by 11% to Rs326.7 crore and by 23% to Rs43.5 crore respectively. The OPM has improved by 200 basis points to 22%, largely due to the better profitability in the publication business. The company has declared a dividend of Rs2 for FY2007 which as resulted in a dividend yield of 3.6%.
• The company had announced that it would invest Rs25 crore to set up a windmill-based power generation plant in Gujarat. This power project is expected to get functional by the end of July 2007. This will help the company to save income taxes as well as generate additional source of revenue.
• At the current market price the stock trades at 12x FY2007 and 10x FY2008 estimated earnings. We maintain our Buy recommendation on the stock with a one-year price target of Rs67 (12x FY2008E earnings).

UltraTech Cement
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs935
Current market price: Rs816

Price target revised to Rs935

Result highlights

• A strong realisation growth of 28% year on year (yoy) and a volume growht of 12% yoy helped the top line of UltraTech Cement to grow by 43% yoy to Rs1,465 crore. The domestic volume grew at a slower rate of 6% to 4.18 million metric tonne (MMT) whereas exports witnessed a 28% growth yoy to 0.86MMT.
• The expenditure grew by 27% yoy to Rs1,057 crore whereas the expenditure per tonne increased by 13.6% yoy and 7% sequentially to Rs2,097.
• The company's high leverage to cement prices led the operating profit to zoom by 113% yoy to Rs409 crore whereas the earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne almost doubled to Rs811.
• Helped by a flat interest cost, depreciation provision and a stable tax rate, the net profit increased by 184% yoy to Rs231 crore.
• The 4MMT project is on schedule and the facility is expected to come up by the end of FY2008. It would scale up the capacity of the company to 21.5MMT.
• The company is also putting up a 92-megawatt (MW) lignite-based captive power plant (CPP) at Gujarat and a 46MW coal-based CPP at Hirmi, Chattisgarh. On account of these CPP projects the company's per unit cost of power will come down to Rs2 in FY2009 from Rs5.28 now, resulting in a saving of Rs120-130 crore.
• We expect the company's earnings to grow at a compounded annual growth rate (CAGR) of 11% over FY2007-09 to Rs77.2 per share. At the current market price of Rs816 the stock is trading at 11.3x its FY2008 and 10.6x its FY2009 estimated earnings. The enterprise value (EV) per tonne stands at USD 112. Looking at the positive triggers for the stock, we maintain our Buy recommendation on it with a reduced price target of Rs935.

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MUTUAL GAINS

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Sharekhan Investor's Eye dated May 09, 2007

Prabhudas Lilladher - Navneet Publications

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Thanks Ashis