Indiainfoline - Kirloskar Oil Engines

Kirloskar Oil Engines

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Indiainfoline - Control Print India

Control Print India

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Motilal Oswal - Indian Card Clothing

Motilal Oswal Recommends Buy On Indian Card Clothing @ 267 Wuth Target Price 476


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Sharekhan Special

Dividend Yield Stocks

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Amar Remedies: Invest at cut-off

Source : Hindu Business Line

AN INVESTMENT can be considered in the initial public offer of the Mumbai-based Amar Remedies. Investors can subscribe to the offer at the cut-off price. The offer is being made through the book-building route in the Rs 24-28 price band. Given the current state of the market, we believe investors should also consider booking profits if the targeted rate of return is attained on the stock's listing.

Company background

Amar operates primarily in the Ayurvedic toothpaste segment, from which it derives 85 per cent of its revenues; toothpowder, a pain relieving ointment and a balm chip in with the rest. Amar intends to launch a set of 24 Ayurvedic products to address the health-, hair- and skin-care segments. The proceeds of the IPO is to be used to set up a facility at Surat for the to-be launched products and an R&D laboratory; a portion of the funds raised would also be used for marketing and branding-related activities for the new products, and for working capital purposes.

Amar has a product portfolio of 15 brands of toothpaste, of which 12 are exported and three sold in the domestic market. In FY-05, the company began exporting its products directly instead of through intermediaries, which was the operating mode to address the export market earlier.

Financials and prospects

Amar is a small outfit and ended FY-05 (the company follows a July-June fiscal) with revenues of Rs 106 crore and earnings of Rs 6.75 crore. Revenues have recorded a compounded growth of 55 per cent over a four-year period, earnings at 74 per cent.

The competitive nature of the business is manifest in the operating margin, which, at close to 10 per cent for FY-05, represents a more than 300-basis-point improvement compared to the prior fiscal. Direct exports, which accounted for Rs 5 crore in FY-05, appear to have played a key role in boosting margins. With Ayurvedic medicines increasingly gaining acceptance, largely due to their purported benefit of not having any side-effects, prospects for companies operating in this space appear good. Such medicines are gradually being accepted in the West too, throwing up exports opportunities.

The domestic market for herbal products (including of other disciplines such as Siddha and Unani medicine) is estimated at close to $1 billion, which represents a significant opportunity for a player such as Amar.

We also note from the offer document that though Amar requires Rs 21.7 crore, it would raise at least Rs 36 crore, assuming the offer goes through at the lower end of the price band. The excess funds at its disposal may be used to repay short-term loans of close to Rs 15 crore, which, in turn, would lead to substantial savings in interest costs (Rs 2 crore in FY-05).

Valuation and view

At the upper end of the price band of Rs 28, the stock would trade at about nine times its expected per-share earnings (on an expanded equity base) for FY-06. Our earnings growth estimates are conservative, as the effect of the capex should reflect higher depreciation, though we expect it to be offset in part by a lower interest outgo. The valuation level is competitive compared to peers such as Zandu, whose stock trades at close to 18 times the trailing four quarter earnings. Amar's return on shareholder funds for FY-05, at 27 per cent, is another positive. At Rs 28, the stock would command a market cap-to-sales multiple of 0.7, which, in our view, provides room for an upside.

What to watch for

Amar's toothpaste facility at Daman enjoys tax breaks, which will be partially withdrawn from FY-07 onwards. The higher incidence of taxation thereafter will compress earnings. The inapplicability of the product patent law for Ayurvedic products, which may spawn several me-too products, is also a key risk.

Offer details

Amar is offering 1.5-crore shares in the price band of Rs 24-28. Post-public issue, the promoter holding in the company will fall from close to 100 per cent to 43 per cent. Allianz Securities is the lead manager to the issue, which opened on August 25 and closes on August 31.

Hindu Businessline Recommendations

BUY   >>  ESAB India, Siemens, SKF India

SELL  >>  Essel Propack

HOLD >>  3i Infotech

Mid-caps: Early to rise and....

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Motilal Oswal - Syndicate Bank

Syndicate Bank Recommends Buy On Syndicate Bank @ 71 With Target Price 130

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Motilal Oswal - HCL Tech

Motilal Oswal Recommends Buy On HCL Tecnologies @ 436 With Target Price 452

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TTK Prestige: a new RETAIL kid on the block

TTK Prestige: a new RETAIL kid on the block

BSE Code 517506   Rs 113

Equity Rs 11.3 Res 32 crs, Book Value Rs 41, Sales Rs 189 crs, EPS Rs 8.83 adjusted to write offs, PEx05 13       

BACK GROUND

TTK Prestige Ltd. a TTK Group company was incorporated in Oct 1955 and commenced the manufacture of pressure cookers in 1959 with technical support from Prestige Group, UK. It became a deemed public company in Jun.'88. Its name was changed to the present one in Jun.'94. It established facilities at Bangalore to manufacture a wide range of domestic and industrial appliances.

"Prestige" is India's leading kitchen appliances brand that symbolizes safety and reliability. The company is consolidating its existing strengths and is launching newer product categories and markets that it had not ventured into before.

With state-of-the-art facilities, the company has successfully launched its pressure cooker under the Manttra brand name in the US market, thus becoming one of the first organized Indian corporate entities to sell pressure cookers in the US under Indian-owned brand names.

The company entered into a tie-up with the world-renowned Braun , Germany, for marketing its products in India.

Readymade kitchens have taken the world by storm. Scrupulously designed to fulfil individual needs and adapt to available space, modular kitchens that have become the common way of life. Standardized modules, pre-fabricated in a varied range of materials, colours and finishes graciously fit the bill of fare to suit the modern kitchen. With the convenience and comfort of ready modules, one can avail of modern facilities and maintain a consistency in décor that defines one's personal statement of style. This has placed the modern housewife and working woman on the threshold of hand convenience where all one needs to do is order for one and before you blink your eye the ready kitchen is fitted into your house.

The basic modules are characterized by standardized units for the floor and wall, deep units to accommodate electrical appliances and gas trolleys, and a wide choice of accessories in the form of wire baskets, carousels, adjustable shelves and pull-out units.

Materials used are just as varied. You could choose from natural or lacquered wood, combinations of wood and laminate, laminate and granite, or even aluminium and marble, or just flow freely with the tide of ingenious material at hand and explore your creative flair for a custom built one.

No matter what the size and the shape of the kitchen, the two basic preferences have always been wood and laminate for the cabinets and shutters, along with sturdy material like marbles or granite for the worktops. All other options are generally designed around these.

Advantages of a modular kitchen are

They look good.

Optimize space.

Are made of durable material.

Selection of different materials for different uses is a difficult decision to make which is easily solved by a modular kitchen.

A modular kitchen takes care of things like exhaust hoods/chimneys which otherwise is ignored.

Replacement/repairs are easy.

Kitchen work/equipment/utensils get proper definition, role and place to function.

Person gets motivated to work in such kitchens.

Almost all over the world, in most homes, both husband and wife go out to work either out of necessity or out of choice and as such time spent in the kitchen is minimal giving rise to a demand for a well designed and convenient kitchen. Modular kitchens can very well fulfill this demand. With modular kitchens gaining popularity more manufacturers will jump into the field and the increased competition will result in prices becoming more affordable.

MANAGEMENT:

 

The Board of Directors is headed by Executive Chairman Mr.TT JAGANNATHAN

 

Name	Designation
T T Jagannathan	Executive Chairman
S Ravichandran	Managing Director
T T Raghunathan	Vice Chairman
Ajay I Thakore	Director
Latha Jagannathan	Director
Vandana R Walvekar	Director
R Rajagopalachari	Director
R Srinivasan	Director
K Shankaran	Director & Company Secretary

 

FINANCIAL HIGHLIGHTS

(Rs. crores)

Particulars	200503	200403	200303
Sales	189.37	138.54	104.82
Other Income	0.25	6.35	-0.21
PBIDT	12.19	11.59	-6.11
Interest	6.36	9.21	9.54
PBDT	5.83	2.38	-15.65
Depreciation	1.87	1.83	1.77
PBT	3.96	0.55	-17.42
Tax	0.04	0.04	-
Deferred Tax	---	0.3	-5.95
PAT	3.81	0.21	-11.47
Equity Capital	11.33	11.33	11.33
Book Value Rs.	41.00	35.10	34.40
Earnings Per Share           Rs.	3.40	0.2	-----

Comments on Financial Performance:

The company has turned around from loss of Rs.11.47 crores to profits of Rs. 3.81 crores. Reduction of excise duty from 16% to 8% and pick up in the disposable income spurred the demand of the company's products and helped to turnaround in FY 05. However effective 1^st April 2005, since company has come under VAT regime the effective reduction from 16% to 4% will add both to the top line as well as bottom line.  

FY 2005 profit excludes one-time non-recurring expense of Rs.5.02 crores without which the profits would have been Rs 8.83 crores.

Investment Rationale:

The company has just turned around and returns from such stocks are generally far superior to the market returns over medium to long term. The PE multiple is required above 20 in case of growth driven secular stories. TTK is in the process of building a largest retail story in India. Pentaloon has got advantage of early mover though its valuations are not reflected in the earnings whereas  

TTK is successfully recouped its lost market share in last two years. TTK has braced aggressive plans for modular kitchens only in the current fiscal which will add to the top line substantially.               

TTK has entered into retail segment with a smart kitchen retail format.  TTK has opened 55 exclusive stores through franchise mode and the company plans to open 100 stores by March 2006. The company will be offering modular kitchens and complete kitchen solutions apart from its regular kitchen appliances like Pressure Cookers, Non-stick Cookware, Kitchen Electrical Appliances and Gas Stoves. With improved life style and disposable income, modular kitchen has become indispensable part of any modest kitchen. Even with modest investment of Rs 20 to 25 lac on the house by a middle and upper class segment the hobson's choice is now a modular kitchen. Even if one store is able to sell 5 modular kitchen a month it will add at least 60 to 70 crs to the top line which will take TTK in the fast lane of growth the real driver of the stock.  

The changing lifestyle, double income family structures, rising income levels and preference for the safe and branded products will be sales drivers for the company. Its foray into retail will also drive future growth, as there is a good recall and high regard for its "prestige" brand, which signifies quality and safety.  

TTK Prestige Ltd had launched the new range of products "Modular Kitchens" during the month of June 05 which are being sold through the Company's exclusive outlets "Prestige Smart Kitchens".  The initial response is very encouraging. TTK is ready to explore its relationship with Wallmart and K Mart for modular kitchen is 07.  

The company's US subsidiary Manttra Incorporation is growing at around 20% per annum. The "Mantrra" brand pressure cookers are sold through US major Retail chains like Wal-Mart, K-Mart, Fred Meyer, and Target etc.

The company is part of the TTK group that is a 76-year-old group. The group has build and operated some of the most trusted brands in the country like Prestige, Kiwi, Durex, Kohinoor, Brylcream, Eva etc. The promoters are holding 72.41% stake in the company that shows the confidence of the promoters in the company.

The company exports directly to UK, Europe, Middle East, Africa, Australia and SAARC countries. 86% sales are domestic while 14% is exports.

The company had been a consistent profit making and dividend paying company till FY 2003 when it had made loss for the first time in its history of 47 years. The company went into trouble due to increase in the excise duty from 8% to 16%, competition from the unorganized sector and higher staff costs, the company has restructured since then and started paying dividend from the current year.

Key Concerns:

The company is experiencing turnaround and runs a risk of not successfully completing the whole process of restructuring.

The company faces competition from the unorganized sector.

The liquidity of the stock on the markets is not very good.

The company operates in only kitchen appliances segment.

Recommendation:

The company has restructured and cleaned its balance sheet using the big bath behavior i.e providing for all the expected and some of the unexpected losses in the bad years so the future performance is better. Considering the business model of the company, we feel the earnings will increase manifold in the coming years.

 

TTK Prestige, whose main line of business is manufacturing and marketing of pressure cookers, is now entered into the modular kitchen segment. With the spurt in demand for high-end housing and interiors a significant chunk of future revenues could come from this line of business.

 

AFTER TTK Prestige's entry into the modular kitchen market last week, the latest entrant to join the fray is German major Hacker. The 196-million euro company has forged a tie-up with a local distributor and will sell its products through a newly formed company called Kanu Hacker Kitchens Pvt Ltd. And in keeping with the extreme price sensitivity of the Indian market, the company has decided to start its modular kitchen range at a lower price range, beginning with Rs 2 lakh. Mr Mukesh Kumar, Chairman and Managing Director of Kanu Hacker Kitchens, said that unlike its competitors, Hacker manufactures each and every accessory for a modular kitchen. TTK stand out with cost advantage here being an established player in the industry with 60 years's experience and brand loyalty consumers. At the same time Kanu Hacker will help this segment to expand at a much faster space. Aurora another Italian brand is roaring to enter India.

TTK has a US subsidiary Manta for its pressure cooker which has tie up with  Wal-Mart, K-Mart, Fred Meyer, and Target etc the largest retail stores in US and going forward TTK is set to explore the export possibility of modular kitchens to them being existing patronage. However, TTK has enough space in India itself due to the changing test of Indian housewife's. It is also believed that TTK may expand the fleet of stores to more than 500 to 1000 in next three years and then probably look for the export market.

Though Pentaloon Retail has succeeded in targeting the right audience in right spot at the right time, we believe it is time to switch some your gains to this upcoming retail kid. Citibank has put a sell recommendation in Pentaloon Retail whereas we would suggest switch to TTK.

Navneet Publications - Sharekhan

Navneet Publications (India) 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs405
Current market price: Rs284

Publishing powerhouse

Key points

• Navneet Publications (India) (Navneet) is the leader in supplementary and reference book markets in Gujarat and Maharashtra with a share of 60% in each market. 
• Navneet is all set to reap the benefits of the change in the syllabus in Gujarat (currently underway) and the same to begin in Maharashtra from FY2007, where it is overdue for two years. 
• As a result of the changes in the syllabus the revenue from the company's publication business will grow at a compounded annual growth rate (CAGR) of 24% over the next three years from Rs167.52 crore in FY2005 to Rs315.25 crore in FY2008. 
• In June 2005 Navneet—through its wholly-owned subsidiary in Spain—acquired the publishing business and brand of Grafalco, a Spain-based children's book company, for 459,000 euros. 
• Navneet Edutainment, a wholly-owned subsidiary in the business of educational CD ROMs, would be merged with Navneet. Navneet would continue with the existing product portfolio of the edutainment business. 
• The company's top line will improve at a CAGR of 17% from Rs274.54 crore in FY2005 to Rs434.28 crore in FY2005 and its bottom line will grow at a CAGR of 24% from Rs30.92 crore in FY2005 to Rs59.00 crore in FY2008.
• At the current market price of Rs284 Navneet's stock trades at a price/earnings ratio (PER) of 11x FY2007 (9x FY2008) and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 7.12x FY2007 (6.05x FY2008). We recommend a Buy on Navneet with a price target of Rs405

FCS Software Solutions: Avoid

Source : Hindu Business Line

INVESTORS can avoid the initial public offering being made by FCS Software Solutions at Rs 50 per share. Since the overall software services business is booming, FCS Software's focus on application maintenance, e-learning and product engineering services will continue to offer opportunities for revenue growth. However, being a small player in a sector where even the medium sized players are finding thegoing tough, represents a significant risk.

In the absence of niche focus and committed revenue streams, vendor consolidation, scale-up difficultiesand pricing pressure at the lowerend of the software value chain will be the key challenges.

FCS Software is makingthis IPO to finance the creation of IT infrastructure to house 300 new developers and meet working capital requirements. Of the project cost of Rs 19.9 crore, Rs 17.5 crore is to be met through this offer. Of the total revenues of Rs 85 crore for 2004-05, IT consulting has been the key contributor with 55 per cent, and e-learning and product engineering, the other two segments,
chipping in with 25 per cent and 20 per cent respectively.

The operating margin at 13.5 per cent appears to be in line with that clocked by other small-sized companies. But sustaining and enhancing these margins in the face of stiff competition, pricing pressures in the application maintenance business and vendor consolidation, especially among the Fortune 500 companies, will be a key challenge. If one adds the yearly wage hikes ranging from 13-15 per cent and
industry-wide attrition, the risks associated with being a small player are quite high.

To top it all, the lower end of the application management business, accounting for over 50 per cent of the company's revenues, is getting commoditised. Since the frontline software companies are focussed on achieving significant productivity improvements in application maintenance work through automation and offshoring, smaller firms will remain exposed to the risk of getting marginalised in the medium term.

Though e-learning and product engineering will be relatively high growth areas in the coming years, intense competition from large and medium-sized companies and the lack of long-term contracts can resultin margin pressures in the near term.

In this backdrop, though the price-earnings multiple works out to 7.5 times its 2004-05 per share earnings on an expanded equity base, the risks outweigh the scope for attractive returns in the medium term.

Investors can give this offer a go by.

The minimum lot for application is 100 equity shares. The offer price of Rs 50 is payable in two instalments, of Rs 25 each on application and allotment. The issue opens on August 22 and closes on 26. The leadmanager is Allianz Securities.

Motilal Oswal - IDFC

Motilal Oswal recommends Buy On IDFC @ 65 With Target Price 78

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Sharekhan - Kirloskar Brothers

Kirloskar Brothers  
Cluster: Apple Green
Recommendation: Buy
Price target: Rs600
Current market price: Rs517

Revising price target

Taking into consideration the increased visibility of the company's earnings, its strong order inflow and the overall positive outlook for its business, we have revised our price target to Rs600 per share post split.

Stockmarkets: Count of death? - Equitymaster

1, 2, 3, 4.....13, 14, and 15! No, these are not the number of scams unearthed in Indian politics in the past eight months (there might be many more!). Instead, these are the number of weeks in the recent past when the Indian equity markets have risen incessantly. In terms of months, while the gains have not been consistent since he markets went on a northbound trajectory since the mid of 2003, the tone has been overly bullish. And the movement has been rather fast.

While many factors seem to have changed in the field of equity investing over the years, two factors that remain the same, and would continue to cling to sentiment on the stock markets are greed and fear. These factors have played crook on investments made by small investors in the past and, we fear, the way Indian markets are moving up, greed and fear may cause heartbreaks once more.

Wait! We are not here to spoil the party (or the hangover!) that is making rounds in the Indian equity markets, we are only reiterating our cautious stance. We completely concur with the long-term growth story of the Indian economy and on the fact the India has finally 'appeared' on the global scale. However, our concern relates to the fact that we (in the equity markets) seem to be moving rather too fast. And thus, the chances to trip are high.

Consider the facts, apart from the companies that have a long-history of being listed on the bourses, even those that are just appearing on the public scene and about whose fundamentals investors have no (or less) clues, are gaining substantially in this period of intense optimism. While some call it the 'IPO boom' and some call it 'the emergence of a new India Inc.,' we would like to caution investors from investing in these new kids on the block without having ideas about their performances in the past. To take a leaf from Benjamin Graham's thoughts, the abbreviation 'IPO' does not only stand for 'initial public offering.' More properly, and especially at these times, this might mean either of the following:

• It's Probably Overpriced
  
  

• Imaginary Profits Only
  
  

• Insiders' Private Opportunity, or
  
  

• Idiotic, Preposterous, and Outrageous

Finally, while the greed factor is much responsible for this merry-making on the bourses, even a small hint of fear taking over can end up in a contagion, hurting the sentiment of those for who believe that there is no stopping markets from going up, and up, and higher up! And that would be unfortunate for small investors who would have invested their hard-earned money as guided by the 'ever-optimist' forecasts.