PYT Trading Calls

Buy HT Media with a stop loss of Rs 570 for a target of Rs 750

Sell Hindustan Lever above Rs 249 with stop loss of Rs 253.50. This is a day-trading recommendation.

Buy IDBI below Rs 85 with a stop loss of Rs 84. This is a day-trading recommendation.

ABN Amro - Tech Mahindra

Recommends a BUY on Tech Mahindra - Target 700

Download here

Thanks Akash

Movers & Shakers

• Visualsoft Technologies flared up on getting the board's
  nod to merge Megasoft with itself.
• Dabur Pharma surged on reports that its UK arm has got the USFDA nod for the Carboplatin molecule.
• Jyoti Structures advanced on winning a consortium order worth Rs180.27 crore from Dubai Electricity and Water Authority.
• Saksoft hit the upper circuit breaker of 5% after the company announced the acquisition of Acuma for $17 million.
• Petron Engineering Construction was frozen at the upper limit of 5% on bagging an order worth Rs12.43 crore from Madras Cements.
• Rasandik Engineering inched lower on reports that the company has invested Rs98 lakh in its subsidiary RACPL.
• i-flex Solutions, which completed the acquisition of Mantas in an all-cash deal for $122.5 million, ended flat.

Sharekhan Eagle Eye (equities) for October 04, 2006

Download here

Sharekhan Investor's Eye dated October 03, 2006

Universal Cables
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs179
Current market price: Rs109

Ready with new power

Key points

• The management of the company sounded very upbeat on the growth prospects of the cable industry in general and that of Universal Cables Limited (UCL) in particular.
• The power, instrumentation and control cables industry is likely to see a huge continued growth in demand backed by the government's thrust on the power generation sector and capital expansion plans of India Inc.
• To take advantage of the same, UCL is implementing a capital expansion plan of Rs64 crore, wherein it will double its capacity of medium tension (MT) cables and put up a new capacity of extra high tension (EHT) cables (>220 KV).
• UCL will be the only player in India to produce EHT cables after Cable Corporation of India. UCL will slowly reduce its focus on the low-tension cable segment (<11>
• During FY2006, UCL merged one of its associate companies, Optic Fibre Goa Limited (OFGL) with itself. The implied consideration of the deal works out to Rs37 crore. UCL is confident about extracting a good return on the investment from this deal.
• We expect substantial improvement in UCL's operating profit margins and return ratios as it moves towards higher end products and OFGL turns profitable.
• At the current market price of Rs109, the stock is quoting at 8.3x its FY2008E earnings per share and 4.4x its FY2008E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We reiterate our Buy recommendation on the stock with a revised price target of Rs179. The reduction in the price target is on account of the equity dilution due to the amalgamation of OFGL where there is not much clarity on the returns on the investment made.

---

SECTOR UPDATE

Automobile

Revving up yet again

• Bajaj Auto delivered a powerful performance in September recording an overall growth of 37.5% year on year (yoy), mainly driven by strong motorcycle sales.
• TVS Motors reported another month of strong performance as the overall sales marked an increase of 33.9% to 162,200 vehicles during September.
• Maruti Udyog sold 59,420 vehicles in September 2006, marking a growth of 20.6%. The company sold 56,606 vehicles in the domestic market while the exports for the month stood at 2,814 vehicles.
• Tata Motors reported a 23.8% growth in its overall sales (including exports) to 49,157 vehicles for the month of September 2006.
• M&M's utility vehicle (UV) sales were up by 5.8%, and the sales of the new Scorpio stood at 3,368, rising by 6.4% yoy.

Download here

Movers & Shakers

• Electrotherm India hit the upper circuit breaker of 5% on reports that the company plans to raise Rs100 crore.
• Rana Sugars slipped despite announcing plans to install an ethanol-manufacturing unit at its existing distillery in Punjab.
• Sakthi Sugars was down despite announcing that it has repaid debts by availing loans at a cheaper rate from the banks and institutions.
• Sri Adhikari Brothers Television Network inched lower despite getting the board's nod to raise $15 million.

Emkay - Manugraph

Download here

Thanks Ashis

Indiabulls Monthly Report

Download here

Citigroup - Sugar

Download here

Sharekhan Eagle Eye - Sept 29 - GDL

Download here

Sharekhan Investor's Eye - Sept 28

India Cements Cluster: Ugly Duckling Recommendation: Buy  Price target: Rs315 Current market price: Rs220 Back in the reckoning Key points   Prime beneficiary of upturn in south: In FY2006 cement consumption in the southern region grew by 25%. With large infrastructure projects and manufacturing bases of MNCs coming up in the region, consumption is expected to grow at a CAGR of 11% for the next few years. Also fresh capacities here shall come up only in H1FY2009. Hence cement prices are expected to remain firm for the next two years. Thanks to its high leverage to cement prices, India Cements Ltd (ICL) shall benefit the most from this boom. More growth from capex plan: Encouraged by the improvement in its financials and considering the scope for more improvement, ICL plans to raise its capacity by 2 million tonne by December 2007 at a cost of Rs350 crore. This shall take its total capacity to 11 million tonne. The entire capex shall be funded by the proceeds of a recent FCCB issue.  Balance sheet transformed: With bouts of capital infusion through various routes, viz private placement, debt replacement and GDR issue, ICL's balance sheet has improved in the past few years. Its debt/equity ratio has come down to a much respectable 1.8:1 in FY2006 from 6:1 in FY2005. With a strong free cash flow, we expect the ratio to drop further to 0.3:1 in FY2008. The RoNW should also improve from 4.3% in FY2006 to 27.7% in FY2008. Trading at a huge discount to peers: At the current market price of Rs220, ICL is trading at 8.8x its FY2008E earnings and 6.1x its EV/EBITDA. On an EV/tonne basis, it is trading at USD109 per tonne of cement. That's a huge discount of 30% to some of its peers who are trading at an average valuation of USD150 per tonne of cement. In view of the steep growth expected in its earnings and the improvement in its balance sheet, the discount is not justified. We recommend a Buy on ICL with a price target of Rs315. Download here

Mphasis BFL - ML & Alembic - Anand Rathi

Download here

Thanks Akash

Hanung Toys and Textiles

Hanung Toys and Textiles (HTTL) manufactures and exports stuff toys and home furnishings. Incorporated in 1993 as a stuff toy manufacturer in technical collaboration with a South Korean company, it began to independently manufacture stuff toys five years later. In 2002, HTTL entered home furnishings and textile processing.

Presently, HTTL has capacity of produce 1,10,00,000 pieces per annum of stuff toys and 12,50,000 pieces pa of home furnishings. The company mainly exports to Europe, the US, Latin America and Middle East. But now it is increasing its focus in the domestic market and has launched its stuff toy brands Play-n-Pets and Muskan and home furnishing brand Splash.

HTTL is to set up an integrated home textile unit with a total cost of Rs 153.44 crore, which includes 72 airjet looms with superior quality wider width weaving capacity of 21,000 meters per day and processing capacity of 1,05,000 meters per day in addition to the existing processing capacity of 60,000 meters per day. The company also plans to part substitute its existing working capital requirement of around Rs 15 crore. The expansion is to be funded with a term loan of Rs 90 crore under the TUF (Technology Upgradation Fund) scheme and the balance through an IPO.

Strengths

• HTTL is the largest player in the organised market of stuffed toys and its co-branding initiatives with Walt Disney Company and Percept Picture Company (for Hanuman) can fuel growth in the domestic market due to the retailing boom in India.
• The project is to be located in Uttaranchal, where the company enjoys various tax benefits.

Weaknesses

• The inventory-holding period is around 150-180 days, which is considered to be very high. This is attributed to the fact that the raw material (in case of stuff toys) is imported and the company has to maintain finished goods stock for its buyers. Moreover, of the total expansion of Rs 168 crore, around Rs 48 crore will be used for meeting existing and future working capital requirement. Even though net profit in FY 2006 was Rs 12.98 crore, cash flow from operating activities was a negative Rs 2.07 crore.

• The capacity utilisation in the home furnishing sector has been 12%, 26% and 53% in FY 2004, FY 2005 and FY 2006, respectively, which is considered to be significantly low.

• Post expansion, processing facilities will meet only 12% of its fabric requirement in-house as HTTL has a 21,000-meter per day weaving capacity and 1,65,000-meter per day processing capacity.

• Chinese competition is a key threat to its business.

Valuation

HTTL has allotted shares to Bennett Coleman and Company (BCCL) at Rs 150 in February 2006. The current offer price band is Rs 85-95.

The FY 2006 financials do not include financials of two group companies Hanung Furnishings and Hanung Processors for the period April- October 2005. However, the financials for the first quarter ended June 2006 includes the financials of both companies that have been merged with the flagship company. Because of these, financials are not comparable.

The first quarter of FY 2006 gives an annualised EPS of Rs 7.7. Considering this EPS, PE will be 11 to 12 times on post-issue equity. Due to HTTL’s presence in stuffed toys (which fetches 60% of its profit), there is no comparable listed company. However, Alok industries and Welspun India, which are much larger and integrated players in home textiles, trade at a TTM PE of around 9 and 17 times, respectively.

Sharekhan Eagle Eye - Sept 28

Download here

Sharekhan Investor's Eye - Sept 27

Orient Paper and Industries
Cluster: Vulture's Pick
Recommendation: Buy 
Price target: Rs800
Current market price: Rs579

Capex plan on track
After an exceptional first quarter performance, Orient Paper and Industries is all set to cash in on the booming cement cycle. It has lined up a capital expenditure (capex) plan of Rs205 crore for the next two years. As part of the capex plan, it is augmenting its cement capacity to 3 million tonne and paper capacity to 30,000 tonne per annum. Further, to rationalise its fuel cost the company is also setting up a 30-megawatt captive power plant. 

---

VIEWPOINT

Zenith Infotech

Stock value at its zenith
Zenith Infotech's revenues are expected to grow at a robust compounded annual growth rate of 60% over the two-year period FY2006-08. However, the stock appears to be fully priced after considering the huge (possible) equity dilution planned to raise resources. At the current market price the stock trades at 25.2x FY2007 and 14.7x FY2008 estimated earnings (on a diluted equity base).