Network 18, Orient Paper Industries, Petronet LNG

Network 18, Orient Paper Industries, Petronet LNG

Network 18

Network 18

Network 18

Investors with a medium-term perspective can consider buying the stock of Network 18 Media and Investments (Rs 123.6). The stock's downtrend that commenced from an all-time high of Rs 629 in May 2007 was arrested in March 2009 around Rs 60. It was on a sideways consolidation phase between July 2009 and March 2010, forming an inverse head and shoulders pattern with neck line at Rs 110. This pattern is a bottom reversal pattern, signifying change in major trend. Since November 2009, the stock has been on an intermediate-term uptrend. The stock conclusively broke out of the neckline of the inverse head and shoulders pattern at Rs 110 by gaining 26 per cent last week. We observe an expansion of volume which validates the break-out.

Furthermore, the stock is trading well above its 21-, 50-and 200-day moving averages.

Both the daily and weekly relative strength indices have entered in to the bullish zone, reinforcing the bullish momentum. Signalling a buy, the daily moving average convergence and divergence indicator is featuring in the positive territory. The weekly MACD is steadily rising in the positive territory.

Our medium-term forecast on the stock is bullish. We believe that it has the potential to trend higher to the pattern price target of Rs 150 in the upcoming weeks. Investors can consider buying the stock with stop-loss at Rs 110. Short-term investors can also buy while maintaining stop-loss at Rs 135 and target of Rs 118.

Follow up- Amtek Auto (Rs 194.6)

The stock climbed 2.5 per cent from our recommended level and is in the process of heading higher towards our short-term price target. We reiterate our medium as well as short-term bullish outlook on the stock. Investors can consider buying the stock with the targets and stop-loss mentioned last week.

via BL

Ahmednagar Forgings , Federal-Mogul Goetze (India) , Network 18 Fincap , Apollo Tyres

Ahmednagar Forgings
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs300
Current market price: Rs222

Price target revised to Rs300

Key points

• Ahmednagar Forgings Ltd (AFL), a subsidiary of Amtek Auto, manufactures small- and medium-sized forged components such as connecting rods, gear blanks, shafts, transmission components, flanges and hubs. AFL is a tier-1 supplier to large domestic original equipment manufacturers (OEMs) like Tata Motors, Ashok Leyland, Eicher Motors, Force Motors, Bajaj Auto and Maruti Suzuki.
• In Q4FY2007 AFL’s sales grew by 52.7% to Rs150.7 crore, which was below our expectations. The profit after tax (PAT) grew by 61.9% to Rs16.6 crore in the same quarter. The profit growth was lower mainly due to the slowdown in the domestic market and the impact of the strengthening rupee on its exports.
• For the fiscal ended June 2007, the company has reported a 59.9% growth in its net sales to Rs600.3 crore and a 75.3% growth in its net profit to Rs68.2 crore against our expectations of Rs67.5 crore of PAT.
• Though the company has a strong order book, we would like to take a cautious view on the domestic sales in FY2008 in light of the slowdown in the OEM segment. The outlook on the exports remains bullish with the commencement of the additional lines and increase in the utilisation levels. However, the margins may be hit due to rupee appreciation as around 40% of its exports are in US dollar terms.
• Considering the slowdown in the domestic market and the delay in commencement of the export lines, we are downgrading our FY2008 earnings per share (EPS) estimate by 30% from Rs36.5 to Rs25.3 and introducing our EPS estimate for FY2009 at Rs32.2. At the current market price of Rs222, the stock trades at attractive valuations of 6.9x its FY2009E earnings and an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.4x. We maintain our Buy recommendation on the stock with a slightly reduced price target of Rs300.

Federal-Mogul Goetze (India)
Cluster: Emerging Star
Recommendation: Book Out
Current market price: Rs148

Book out

Key points

• Federal Mogul Goetze Ltd’s (FMGI) performance was much below our expectations. For H1CY2007, the sales grew by 34% to Rs296 crore, however the profit was below our expectations. Despite the fact that the company made a turn around from a loss making company to a profit making company, the profit margin was much below our expectations.
• There was a substantial delay in the ramp up of the exports to the parent company. The export profitability has also been affected by rupee appreciation.
• FMGI has high exposure to the medium and heavy commercial vehicle (M&HCV) and the two-wheeler segments. The two segments were hit the most due to a slowdown in the domestic market as a consequence of the high base of last year and due to the rise in the interest rates.
• Higher costs of raw materials such as aluminium and nickel affected the earnings before interest, tax, depreciation and amortisation (EBITDA) margin. The company was unable to pass on the rising raw material cost to the full extent due to a slowdown in the domestic vehicle sales.
• The rights issue was to help the company to improve its capital structure and financial gearing has been delayed by more than six months. The price band of the proposed rights issue has been revised downwards leading to a 25-30% higher equity dilution than our estimates. Consequently, the profits have been affected by a higher interest cost. The higher dilution will impact the earnings.
• The company’s management has revised its guidance downwards for 2008E. The profit before tax (PBT) guidance has been revised down to Rs30 crore in June 2007 from Rs100 crore in September 2006, in a span of just nine months for the reasons discussed above.
• In view of all the above-mentioned disappointing factors, we advise investors to book out of the stock.

Network 18 Fincap
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs651
Current market price: Rs411

Files amended rights issue document

Key points

• After the transfer of Studio18’s business to Viacom18, Network18 has filed the amended draft offer document for its rights issue. The old draft document stated the earlier objects of the issue to raise a part of the funds for film projects under Studio18.
• We maintain our valuation of the right issue at Rs133.6 per share.
• Network18 proposes to use a part of the rights issue proceeds towards capex on television content production. We believe, the investment in content production business will cater to the content requirements of the forthcoming channels of Viacom18.
• HomeShop18 is going great guns with business spreading over 2000, towns and cities across India, and with average sales of approximately 20 lakh per day just a few months after its launch. A full-fledged home shopping channel is in the offing.
• Issue of preferential warrants in TV18 and GBN will lead to increase in Network18’s holding in TV18 to 53.3% and in GBN to 45.1%.
• We maintain our buy recommendation on the stock based on our sum-of-the-parts price target of Rs651.

Apollo Tyres
Cluster: Apple Green
Recommendation: Buy
Price target: Rs47
Current market price: Rs39

Price target revised to Rs47

Key points

• A strong demand for tyre replacement in the commercial vehicle (CV) segment is triggering a healthy growth for Apollo Tyres, which is the market leader in this segment.
• We expect Apollo Tyres to be one of the top performers in the coming Q2FY2008 results. We expect the revenues of the company to grow by 8.5% and the profit to rise by 99.4% for the forthcoming quarter.
• With improved performance of its subsidiary Dunlop as a result of better utilisation, price hikes and debt restructuring the consolidated picture for the company looks even better.
• We maintain our positive outlook on the company considering strong growth potential and sustainable margins. We are revising upwards our earnings estimates for the company by 5.3% for FY2008 and by 10.5% for FY2009. We maintain our Buy recommendation on the stock with a revised price target of Rs47.

ICICIDirect - Network 18 Fincap

ICICIDirect - Network 18 Fincap

Network 18 Fincap: Sharekhan Stock Idea dated June 20, 2007

Network 18 Fincap
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs651
Current market price: Rs476

Striking the right(s) note

Key points

News businesses to flourish: Network 18 Fincap (Network 18) controls the front-line business channels CNBC-TV18 and Awaaz, and the fast growing general news channels CNN-IBN and IBN 7. With the digitalisation of cable and advent of DTH platform, the subscription revenues would substantially boost the profitability of the group. Also, Awaaz, CNN-IBN and IBN 7 have shown good viewership gains and should drive the growth as they mature over the coming years.

Web properties to add tremendous value: Network 18 through its associate companies Television Eighteen India (TV18) and Global Broadcast News (GBN; together the two hold 100% in Web18) owns several web properties like moneycontrol.com, poweryourtrade.com and yatra.com among others, covering the news, e-transaction, travel, recruitment, shopping and e-ticketing genres. It has added many new web properties over the last year and started spending heavily on enhancing these sites and popularising them.

Taking big steps in entertainment: Through GBN it has entered into an alliance with Viacom Inc to launch a Hindi general entertainment channel. The alliance also gives it part ownership of MTV India, VH1 and Nickelodeon. The group’s movie business would derive synergies from Viacom Inc’s world-famous studios.

Group builds war chest for growth: Sensing the opportunities provided by the booming Indian media & entertainment industry and allied sectors, the TV18 group is building a war chest for exponential growth. While TV18 has raised Rs200 crore through a QIP, Network 18 proposes to raise a similar amount through a rights issue of partly convertible preferential shares. GBN aims to raise $200 million through an overseas offering while its board members have approved a plan to raise a debt of Rs1,500 crore. We believe with all these funds the TV18 group aims to become one of the big wigs of the Indian media and entertainment business.

Rights issue adds Rs133.6 per share to value: The company proposes to raise Rs200 crore via a rights issue of 5% partly convertible cumulative preference shares (PCCPS). It will offer one PCCPS for every five equity shares held. Our calculations suggest that the rights add Rs133.6 to the value of each existing equity share and make the Network 18 stock even more attractive.

Valuations suggest a 37% upside: Our valuation of the Network 18 scrip based on its holdings gives us a value of Rs517.8 per share before the rights issue. The rights issue adds Rs133.6 to the price of the existing float, giving us a fair value of Rs651 for the scrip and indicating a good 37% upside from the current market price of Rs475.5. We initiate a Buy recommendation on the stock with price target of Rs651.

Network 18 Fincap: Sharekhan Stock Idea dated June 20, 2007

Sharekhan Reports

Monetary policy review: Sharekhan Special dated January 31, 2007Network18: Sharekhan Special dated February 01, 2007Sharekhan Investor's Eye dated February 01, 2007Sharekhan Daring Derivatives for February 02, 2007Sharekhan Eagle Eye (equities) & Derivatives Info Kit for February 02, 2007Indian Bank: Sharekhan IPO Flash dated February 01, 2007Sharekhan Investor's Eye dated January 31, 2007Sharekhan Investor's Eye dated January 29, 2007Sharekhan Investor's Eye dated January 25, 2007Monetary policy preview: Sharekhan Special dated January 25, 2007Power Finance Corporation: Sharekhan IPO Flash dated January 29, 2007