India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Monday, December 04, 2006
Sharekhan Commodities Buzz dated December 04, 2006
Crude oil: To rule firm
Oil prices moved higher and closed above $63 per barrel on Friday following worries about the weather. Temperatures in the USA reached 60 degrees Fahrenheit on November 29, before plunging on December 1. The forecast is that the temperatures would be below normal over the next few weeks.
Download here
Poweryourtrade.com Trading Calls
Buy UTI Bank with a stop loss of Rs 467 for target of Rs 513/567
Buy Tata Motors with a stop loss of Rs 790 for target of Rs 920/1000
Buy Punj LLoyd below Rs 1115 with stop loss of Rs 1085; This is a day-trading recommendation
Short sell Tata Steel above Rs 467 with stop loss of Rs 473; This is a day-trading recommendation
Buy Bata with stop loss below Rs 198 for target of Rs 215–218
Buy ERA Construction with stop loss below Rs 459 for target of Rs 513, if needed take delivery
Poweryourtrade.com Trading Calls
Buy Era Construction at around Rs 473.20 with stop loss of Rs 468. (Intra-day call)
Buy Godawari Power at around Rs 100.70 with stop loss of Rs 97. (Intra-day call)
Buy Sterling Holiday at around Rs 86 with stop loss of Rs 84 (Intra-day call)
Sensex may test 14,000
Sensex surged 148 points to 13,844.78 on Friday (1 December) following a good rollover in the derivatives segment from November series to December series and on decent to strong auto sales figures for the month just gone by. The barometer index is now just about 150 points short of the next psychologically important level of 14,000. Nifty hit the psychologically important 4,000 mark on 1 December. It ended slightly below that on that day.
Sensex may test 14,000 level this week. But subdued trend in Asian bourses and a surge in crude price to above $63 a barrel may cap upmove on the domestic bourses today.
The market sentiment remains bullish due to strong FII-inflow, continued strong economic data and an upward revision in earnings growth of corporates by brokerages, on the back of strong Q2 results.
The latest data showed FIIs resumed buying after two-day outflow. FIIs bought shares worth a net Rs 258.10 crore on Thursday 30 November, compared to an outflow of Rs 63 crore on Wednesday 29 November. FIIs had pulled out a net Rs 335.30 crore on 28 November. Cumulative FII inflow for 2006 has reached $8.8 billion compared to record inflow of $10.7 billion in 2005.
Asian markets were mostly subdued on Monday (4 December). Key benchmark indices in Hong Kong, Japan, South Korea, and Singapore were down by between 0.1% to 0.3%.
US stocks fell on Friday after a manufacturing index showed its weakest reading in more than three years and a Federal Reserve official said more rate hikes may be required to control inflation. The Dow Jones industrial average fell 27.80 points, or 0.23 percent, to 12,194.13, while the Standard & Poor's 500 Index dropped 3.92 points, or 0.28 percent, to 1,396.71. The Nasdaq Composite Index sank 18.56 points, or 0.76 percent, to 2,413.21.
Nymex crude was hovering at $63.47 after Friday (1 December)’s surge.
Poweryourtrade.com Market Outlook
Rajat K Bose
The movement of the Sensex shows a bearish inside day formation. This formation has earlier led to range-bound activity on the very next day. However, since such an occurrence has been found only twice in the recent past of about one year, we can't say with conviction that this would be the probable market movement for the day.
Going by the international market movements-chances are-we would see an upward swing today at least initially. On the upside, the Sensex would find resistance between 13682 and 13711. This would be the first significant resistance zone. Next, it would gather good upside momentum if it manages to get past 13740. The final hurdle would be a tough 13818 - 13828 supply pressure area. Any major bull charge would be severely resisted by this significant final resistance zone.
On the downside, the Sensex may find support between 13565 and 13526. If it falls further then, chances are, we might see it going down to test even 13450. Any fall below that would make the index look very susceptible to further fall to some where in the region of 13333 to 13295.
Anil Manghnani, Modern Shares & Stock Brokers
The indices have made a fresh break out on Friday and thus should continue to make new highs this week. The Sensex has crossed a major resistance level at 13814 and now is headed towards the next major level of 14017. Once the Sensex crosses and sustains above 14017, it should start another major rally with the immediate targets of 14176 & 14546. The Nifty, on the charts, appears to be stronger than the Sensex and its next targets are placed at 4029-4062-4129.
On the down side, the supports for the Sensex are placed at 13606-13511-13451-13296. For the Nifty the supports are at 3922-3900-3873-3838. One should use any dips to the lower support levels to buy with a trading perspective. One should continue to buy stocks on declines that are making new highs as the upside momentum in these stocks is still very strong.
The Mid-cap Index is also showing some signs of strength and thus could rally up to 5252. However, here one needs to be more selective when picking stocks.
Ashwani Gujral, Techncial Analyst
The Nifty closed at 3997 for the week ended December 1st Nov 2006, up about 1.18% from the previous week. The market is gaining momentum as it makes new highs and participation increases. A more serious correction may start only below 3915. Next target is 4090 and then the mid term target of 4700.
The midcaps are showing strength increasingly on certain days, very select group is attracting consistent money. Realty, construction, media sectors, capital goods and banking are attracting consistent money. In the next week banking, cement and auto sectors are expected to show buoyancy.
Metals and sugar remain weak and people should avoid getting into them before they bottom out.
Overall all dips should be used to buy into the market both at an index level and at the stocks level in the mid cap space. Retail should keep low leverage and try to ride larger moves, as follow through is patchy and higher holding period is required.
Indiainfoline - Trading Calls
NIFTY (3997) SUP 3977 RES 4021
BUY APTECHT (150.90) SL 146
T 158, 160
BUY BATAINDIA (203.70) SL 198
T 213, 215
BUY SRF (219.30) SL 214 T 228, 231
BUY BANKBARODA (272.75) SL 268
T 280, 283
BUY KRBL (145.05) SL 141
T 153, 156
Indiainfoline - Simplex Infrastructures Ltd.
Simplex Infrastructures Ltd.
BUY
CMP: Rs400
Simplex Infrastructures Ltd (SIL) is a 82-year contracting company with a profit making track record since inception. The reveals the quality of management and its focus on consistent bottomline generation. The company has also had the same auditor, ‘Price Waterhouse’, since the year 1947 when the Mundhras’
took charge, which could be seen as an indication of healthy accounting practices.
Well diversified with Rs47bn order book SIL’s order book is a well diversified one with no vertical accounting for more than 30% of the company’s turnover. The order book/FY06 sales at 3.5x offers visibility given the average execution period of 1.5 years. Backed by a healthy order book and an estimated order intake/execution of 1.7x in FY07, we expect
SIL to witness a CAGR of 45.4% in topline during FY06-08.
Big plans for the overseas market SIL earns close to 10% of its total revenues from work overseas and plans to increase this proportion to 40% in the next four years, in order to diversify geographically as well. It also expects margins to be higher by 100-200bps overseas. The company is presently executing orders in Doha, West Indies and Bahrain and has presence in many other countries too.
Targeting new verticals SIL is planning a foray into road BOTs, mainly for annuity projects. It will also work on the feasibility of BOT/EPC projects in power T&D, power generation, ports, railways, real estate development and industrial construction, in its bid
to become a US$1bn company in the next five years.
The company raised close to Rs1bn through a preferential allotment to Chrys Capital and plans for another GDR/FCCB worth US$200mn, not factored into our workings, to meet its future fund requirements.
The SIL stock is trading at a P/E of 15.5x FY08E earnings. These are attractive valuations for a company expected to witness a CAGR of 63.2% during FY06-08. The market capitalization is at 0.3x its order
book, which is low and leaves scope for an increase. We recommend a BUY with a one-year price target of Rs459.
Indiainfoline - Strategy Inputs of the Day
Cautious start...bulls on defensive!
There is always more spirit in attack than in defence.
The spirit of attack or defence seems to be lacking for our 'Men in Blue' in South Africa. The stock market is a different ball game and betting on the bulls seems to be only picking up steam. After an attack for the last couple of months, the bulls may get on the defensive and lose a few wickets. Though they appear to be in total control, some hiccups are not ruled out. We expect a cautious opening due to weakness in US and Asian markets. But, the bulls may regain their confidence as the day wears on.
With the foreign funds pumping up the volume, the main indices are unlikely to face any major resistance. What's more, every fall is likely to be used as an opportunity to buy for the long-term. A lot of money is waiting on the sidelines to make way into the market. Mutual Funds too are sitting on a huge pile of cash. As a result, the market has rebounded with a vengeance after every big fall. Global concerns like a slowing US economy and higher oil prices aside, the domestic factors are fairly bullish. Among the key worries include rich valuations and expectations of further increase in interest rates.
A lot of stock specific action is expected. TCS and Wipro could gain amid reports that they have bagged orders from Cable & Wireless. TCS is also believed to have won a big contract from the Bank of China. Videocon Industries is likely to be in the limelight as it is reportedly eyeing LG.Philips Displays. Britannia may benefit from the cooling of temperatures with joint venture partner Danone over the Tiger brand. GHCL could rise amid reports of another acquisition in the textile business, this time in the US. Four-wheeler companies such as Tata Motors, M&M and Maruti are likely to advance after all of them reported robust volume growth in November. Maruti is also likely to launch a new Zen this week.
Nirlon is witnessing some pick-up in buying. The company is all set to build an IT park inside its complex at Goregaon in Mumbai. Tyre stocks too appear to be back in favour with surging domestic automobile sales and stable raw material prices. Adani Enterprises' Board has decided to raise up to $250mn through issue of securities. Gujarat State Petronet has commissioned the Kalol-Mehsana Pipeline. Essar Shipping is seeking the approval of its shareholders on January 2 for delisting the company's equity shares from BSE. Havells India is entering into a collaboration with a leading European motor manufacturing company for its new project of Electric Motors at Nimrana, Rajasthan.
FIIs were net buyers to the tune of Rs1.95bn (provisional) in the cash segment on Friday. In the F&O segment, they poured in Rs4.22bn. On Thursday, foreign funds were net buyers of Rs2.58bn. Their net inflows in November stood at $2bn, taking the total for the year to $8.85bn. Mutual Funds were net sellers of Rs884.3mn on Thursday.
US stocks closed lower on Friday after a report showed a surprising contraction in the manufacturing sector and a measure of inflation jumped, raising fears of excessive slowdown in the world's largest economy.
The S&P 500 Index lost 3.92, or 0.3%, to 1396.71. The broader index had its worst first trading day in December since Dec. 3, 2001, when it dropped 0.8%. The Dow Jones lost 27.80, or 0.2%, to 12,194.13. The Nasdaq declined 18.56, or 0.8%, to 2413.21.
For the week, the S&P 500 dropped 0.3%, the Dow lost 0.7% and the Nasdaq retreated 1.9%. Both the S&P 500 and Dow fell for a second week, the first back-to-back losses since July, as oil prices rallied.
Crude futures rose 30 cents or 0.5% to US$63.43 per barrel on the New York Mercantile Exchange. This was the highest close since Sept. 18. The front-month crude contract was trading nearly unchanged at $62.42 a barrel in extended trading in Asia this morning.
The dollar tumbled to the lowest level since March 2005 against the euro following the release of the manufacturing report. Against the British pound, the US currency declined to the lowest in 14 years.
COMEX gold lost 50 cents to end the day at US$415.40 an ounce. Treasury bond prices ended the session higher, with yield on the benchmark 10-year note falling to 4.05% from 4.08% late on Thursday.
Among the Indian ADRs, Patni was down 3.3%, VSNL gained 2.4%, Infy lost 1%, Wipro dropped 1.3%, Satyam was down 0.6%, Tata Motors surged 4.65%, Dr Reddy's climbed 2.5%, HDFC Bank and ICICI Bank closed flat while MTNL rose 1.85%.
Asian stocks fell Monday morning, snapping a three-day rally, after a report showed that manufacturing in the US unexpectedly shrank for the first time in more than three years. Toyota and LG.Philips LCD led exporters down.
The Morgan Stanley Capital International Asia-Pacific Index dropped 0.5% to 136.03 as of 10:55 a.m. in Tokyo, halting a three-day, 3.4% rally. Indexes open for trading elsewhere in the region declined, apart from in China and Malaysia.
Japan's Nikkei 225 Stock Average fell by 52 points to 16,269 while the Hang Seng in Hong Kong was down 10 points at 18,680. The Kospi in Seoul dropped 3 points to 1430. Japanese exporters including, Sony also declined after the dollar weakened against the yen.
European shares fell on Friday following the release of the weak report on US manufacturing sector. A rapidly strengthening euro and pound added to the sell-off.
The pan-European Dow Jones Stoxx 600 index slipped 0.6% at 349.53. The French CAC-40 closed down 1.4% at 5,254.05 and the German DAX Xetra 30 fell 1.1% at 6,241.13. The UK's FTSE 100 was down 0.5% at 6,021.50.
In the emerging markets, the Bovespa in Brazil was down 1.4% to 41,327 while the IPC index in Mexico shed 0.75% to 24,962 and the RTS index in Russia gained 0.2% to 1780.
Insider Trades:
Simplex Infrastructures Limited: Franklin Templeton Mutual Fund (through its various schemes) (i) Franklin India Smaller Companies Fund (FISCF) (ii) Franklin India Prima Fund (FIPF) (iii) Franklin India Opportunities Fund (FIOF) (iv) Franklin India Flexi Cap Fund (FIFCF) has purchased from open market 3241350 equity shares of Simplex Infrastructures Limited on 29th November, 2006.
Matrix Laboratories Limited: Dr. Hari Babu, Senior Vice President (Manufacturing) has sold in open market 34375 equity shares of Matrix Laboratories Limited on 30th November, 2006.
Gujarat Ambuja Cement Ltd: Shri Anil Singhvi (Managing Director) has sold in open market 101000 equity shares of Gujarat Ambuja Cement Ltd on 28th November, 2006.
Apollo Tyres Ltd: HDFC Trustee Company Limited A/C - HDFC Prudence Fund has purchased from open market 406414 equity shares of Apollo Tyres Ltd on 28th November 2006.
Market Volumes:
The turnover on NSE was down 55% to Rs82.00bn. BSE Auto index was the major gainer and gained 2.84%. BSE Capital Good index (up 1.84%), BSE FMCG index (1.61%), BSE Pharma index (up 1.33%) and BSE Technology index (up .98%) were among the other major gainers.
Volume Toppers:
IFCI, Parsvnath Developers, Indiabulls, Reliance Comm, ITC, Indian hotels, Dena Bank, HLL, SRF, DCB, Ashok Leyland, IVRCL Infra, MTNL, NTPC, APIL, Reliance Inds, EKC and JP Associates.
Delivery Delight:
3i Infotech, ABB, AIA Engineering, APIL, Bata India, BHEL, Bombay Dyeing, BRFL, Educomp Solutions, Era Constructions, EKC, Hero Honda, Indiabulls, Jaiprakash Associates, Mahindra Gesco, Maruti Udyog, Punj Lloyd, SRF, SBI, Tata Motors and Tata Power.
Brokers Recommendations:
Dr Reddy’s Laboratories – Buy from Motilal Oswal
Long Term Investment:
Tata Motors
Major News Headlines:
Inflation was 5.45% in week ended Nov 18 vs expectation of 5.6%
ACC Nov cement sales nearly flat at 1.52mn tons
TVS Nov sales at 118157 units (up 4.3%)
Maruti Nov sales rises 16% to 55033 units
M&M Nov vehicle sales up 11.5% at 13600 units
Tata Motors Nov sales up 43% to 49061 units
Bajaj Auto Nov sales up 32.8%; to expand motorcycle capacity
Punj Lloyd group company signs a large contract
Ranbaxy buys South African Company for $70mn
Color Chips to build new facility at Vishakhapatnam
Mcleod Russel to acquire Moran Tea for Rs414.9mn
Thomas Cook India is acquiring Travel Corporation India
Market may move sideways
The market is likely to open strong on the back of a strong domestic fundamentals and healthy FII buying support. While the domestic indices, the Nifty could target 4020 on the upside, it has supports at 3975 and 3940 on the downside. The Sensex has a support at 13800 and a resistance at 13880.
Amomng the indices the US indices posted marginal loss on Friday and the Asian indices were weak in early session. While the Dow Jones declined 29 points to 12194, the Nasdaq moved down 19 points to close at 2413.
Indian ADRs witnessed mixed trend. Patni led the downfall with a slump of 3.31% followed by Rediff down by 2.11% while Wipro and Infosys dropped over 1% each. Satyam and ICICI Bank were down 1% each However, Tata Motors gained 4.65%, Dr Reddy soared 2.51%, VSNL up with 2.36% and MTNL advanced 1.85% while HDFC Bank reported steady gain.
In the crude oil space, the Nymex light crude oil for January 07 series advances by 30 cents at $63.43 a barrel while the London Brent crude spurted by 62 cents at $59.46 per barrel. The commodity segment saw the Comex gold for February delivery declined $2.30 to settle at $650.60 respectively.
Hidden Gems By Ashish Chugh
Frontier Springs Ltd.
CMP - Rs.17.00 BSE Code -522195
The stock trades in `Z' Group of BSE and is thus advised for investors with an appetite for HIGH RISK.
Frontier Springs Ltd. is a part of Kanpur based Frontier group and manufactures Helical Coil Springs for Automobile & Railway Suspension, Helical Coil Springs for Railway Rolling Stock for their wagon, carriage & loco and Laminated Leaf Springs for Light commercial and heavy duty vehicles including Railway Rolling Stock.
The FRONTIER GROUP consists of different professionally managed companies having varied product mix. The present product range includes Helical Coil Springs, Laminated Leaf Springs, Steel Castings, Bogie Fasteners, Metal Bonded Rubber Products for Rail Stock.
All the Companies of the Group have Modern Manufacturing facilities and strive to provide its customers with highest quality product at most competitive prices. The Group has made sizable exports in its business with the export of Leaf Springs & Coil Springs to U.K., Holland, & U.S.A. The present turnover of the GROUP is R. 500 Million. The group has already developed Coil Springs for various cars like, FORD, OPEL, DIAMLER, BENZ, and BMW.
Rapid Expansion
The company has undertaken expansion by setting up production facilities for manufacture of Air Suspension Springs. The company has also established another assembly line for Heavy & Light Coil springs, catering mainly to the Auto segment. The company is finalizing orders for Leaf Springs with some foreign buyers and shall expand capacities of Leaf Spring once the orders are finalized.
The expansion projects will give a substantial boost to the revenues and profitability of the company in the years to come.
The company is seriously exploring collaboration/ tie ups with foreign companies for the manufacture of Air Suspension Springs to meet the requirements of Indian Railways and the growing demand from the Automobile Industry.
Research & Development
Research and Development is a key strength of the company. The company has developed various products in-house and has made key modifications in the products to suit customer's requirements and to improve bring about functional improvements. The company's R&D facilities are well equipped with most modern instruments including Tensile Testing Machines, CAD/ CAM facilities and Spectrometer.
Financials
The latest financials of the company are given as under :-
| QUARTERLY - LATEST RESULTS - Frontier Springs Ltd (Curr: Rs in Cr.) | |||||||||
| Particulars | Quarter Ended | Quarter Ended | Quarter Ended | YTD / Latest Half | YTD / Latest Half | YTD / Latest Half | Year Ended | Year Ended | Year Ended |
| Sales | 6.1 | 3.67 | 66.2 | 10.57 | 6.6 | 60.2 | 15.52 | 14.44 | 7.5 |
| Other Income | 0.02 | 0.03 | -33.3 | 0.04 | 0.05 | -20 | 0.08 | 0.07 | 14.3 |
| PBIDT | 0.77 | 0.38 | 102.6 | 1.23 | 0.78 | 57.7 | 0.97 | 0.64 | 51.6 |
| Interest | 0.07 | 0.07 | 0 | 0.13 | 0.14 | -7.1 | 0.28 | 0.31 | -9.7 |
| PBDT | 0.7 | 0.31 | 125.8 | 1.1 | 0.64 | 71.9 | 0.69 | 0.33 | 109.1 |
| Depreciation | 0.09 | 0.07 | 28.6 | 0.16 | 0.14 | 14.3 | 0.29 | 0.27 | 7.4 |
| PBT | 0.61 | 0.24 | 154.2 | 0.94 | 0.5 | 88 | 0.4 | 0.06 | 566.7 |
| Tax | 0.24 | 0.09 | 166.7 | 0.35 | 0.18 | 94.4 | 0.21 | 0.02 | 950 |
| Deferred Tax | 0 | 0 | - | 0 | 0 | 0 | -0.06 | -0.03 | -100 |
| PAT | 0.37 | 0.15 | 146.7 | 0.59 | 0.32 | 84.4 | 0.25 | 0.07 | 257.1 |
The company has an Equity Capital of Rs.3.96 crores with the promoters holding 52%. For the first half of the current FY, the company has reported a 60% increase in its revenues to Rs.10.57 crores and 84% increase in its PAT.
Conclusion
Frontier Springs is a low priced stock catering to both the Locomotive and Auto Ancillary sectors - the company is well placed to encash the boom in the Locomotive and Auto sector. The company is rapidly scaling up its operations by expanding its capacities which will substantially boost the revenues and profits in the future.
With huge expansion and modernization plans of the Indian Railways by way of replacement and modernization of wagons, the company is expected to benefit immensely. The company caters to the Auto Ancillary sector where the demand for springs is shooting up. Moreover, with India emerging as a major outsourcing base for Auto components, exports are growing at a fast pace.
With the various expansion projects of the company going on stream, the company is expected to log substantial growth in revenues and profits in the times to come. There is thus a visibility of future earnings of the company.
The current market cap of the company is just Rs.7 crores. The company has been reporting increased revenues and profits for the last few quarters. With the new capacities going on stream, the pace of growth will increase in the future, which will provide a big impetus to the stock price of the company.
Frontier Springs is a low priced fundamental company operating in the Locomotive and Auto Ancillary segment and could turn out to be a potential multibagger over 2-3 years period.
Sunday, December 03, 2006
Subscribe to:
Posts (Atom)