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Wednesday, January 17, 2007
Business Today Articles
Business Today - Infrastructure - Mega Projects
Poweryourtrade.com Trading Calls
Ashwani Gujral
Buy India Cement with stop loss of Rs 220 for target of Rs 320
Buy Prism Cement with stop loss of Rs 37 for target of Rs 55
Rajat K Bose
Sell IPCL with stop loss above Rs 291 for target of Rs 279
Buy Engineers India with stop loss below Rs 562 for target of Rs 586.50
Close: consolidation process on as markets absorb the results !
Sensex opened buoyant note with Wipro posting decent numbers. However profit bookings at higher levels set in and the market shed gain early in the session session plunging into negative. Weak global cues also fuelled the profit taking as investors booked profits. However value buying and short covering had the markets back and it remained ranged and volatile. There were occasional spell of selling at higher levels but it kept the market in green. Selling was seen in selective stocks in cross the board but few selective stocks in Auto, Software and Energy sectors while Pharma, Banks and Power stocks were in favor. Buying interest was also seen in Mid and Small caps. Asian indices ended flat while the European indices witnessed a mixed trend.
Sensex ended up by 17 points at 14131.34. It was helped up by gains in RCVL (442.25,+3 percent), ICICI Bk (985.75,+3 percent), L & T (1553.15,+2 percent), NTPC (139.5,+1 percent) and SBI (1222.75,+1 percent). Restricting the gains were HDFC Bk (1060.2,-3 percent), ONGC (894.55,-3 percent), TCS (1305.9,-2 percent), ITC (169.3,-1 percent) and Hindalco (168.2,-1 percent).
Weak crude prices had its impact on ONGC which slipped. Cairns however was bouyant surprisingly despite weak crude numbers. Banking sector saw gains on talks that the RBI would get the power to cut SLR sooner
As per a leading business daily, ABB has won a contract for a turnkey project worth Rs 1.9 bn from the Karnataka Power Transmission Corporation Ltd (KPTCL). ABB will implement Supervisory Control and Data Acquisition, Energy and Distribution management System for KPTCL, with a scheduled completion time of 24 months. This is the second order that ABB has bagged in the recent times. It must be noted that the total order backlog stood at Rs 35.6 bn, which is almost 1.2 times the company's total sales in CY05. The stock closed up 1.67%.
According to a leading business daily, Mahindra and Mahindra (M&M) will set up a medium and heavy commercial vehicle plant in Pune with a 51:49 joint venture with US based International Truck and Engine Corporation (ITEC). The proposed Rs 2.5 bn plant will be spread over 700 acres with a total manufacturing capacity of 250,000 vehicles annually. The JV will produce 70,000 units of medium and heavy commercial vehicles per year, which will be sold in domestic and international markets. The vehicles will be designed and developed with in house capabilities. The company wishes to establish itself as a major player in the heavy commercial vehicles not just in India but also globally. However the stock was down by more than 2% while its peer Ashok Leyland, Tata Motors and Eicher Motor were all up.
Bajaj Auto results did excite much and the margin fall was largely the disappointing factor. The stock ended
Technically Speaking: Market traded in a ranged manner. Sensex rallied between the channels of 14089 - 14185 level. However, the breadth had been in the favor of Advances as they were 1.52 times the Decliners. Volumes were decent at 4719cr. As per now the market seems to be good to touch 14400 levels but we could see a dip till 14k before it touches the 14400 levels.
Sensex gains 17 points
In a listless trading session, the market displayed a range-bound trend amid bouts of buying and selling. After opening one point above its last close at 14116, the Sensex moved down to touch an intra-day low of 14090. The index remained steady around the 14100 mark for a major portion of the session. The Sensex pared some of its gains on buying towards the close and ended the session at 14185, up 17 points for the day. However the Nifty declined five points to close at 4076.
The market breadth was positive. Of the 2,685 stocks traded, 1,600 stocks advanced, 1,023 stocks declined and 62 stocks ended unchanged. Among the sectoral indices, the BSE Bankex, the BSE CD, the BSE CG, the BSE HC, and the BSE Teck indices gained slightly. On the other hand, the BSE Auto, FMCG, Metal and OIL & Gas indices finished lower.
Among the front-line stocks, Reliance Communication led the upmove and soared 2.75% at Rs442. ICICI Bank surged 2.71% at Rs989, L&T advanced 2.16% at Rs1,533, NTPC jumped 1.12% at Rs140 and SBI added 1.12% at Rs1,223. Dr Reddy’s, Tata Motors, Satyam Computers, BHEL, Reliance Energy, Grasim, HLL, and Tata Steel ended in positive territory. However, HDFC Bank dropped 3.26% at Rs1,060, ONGC fell 2.75% at Rs895, TCS dropped 1.65% at Rs1,306, ITC tumbled 1.34% at Rs1.03 and Hindalco was down 1.03% at Rs168.
The stocks which touched new all-time highs on the BSE were Bhushan Steel at Rs417.65, Crisil at Rs2,485, SAIL at Rs101.90, Titan India at Rs987, Flex Industries at Rs2,899, Grasim Industries at Rs2,899 and Nirlon at Rs72.60.
Over 4.39 crore IFCI shares changed hands on the BSE followed by Reliance Natural Resources (2.15 crore shares), Himadri Futures (1.74 crore shares) and Harig Cranks (1.27 crore shares).
Redington India
Redington India is promoted by Redington (Mauritius), an investment holding company, which in turn, is a subsidiary of Kewalram Chanrai Holdings (a company incorporated in Jersey).
Redington distributes IT products in India, Middle East and Africa. Recently, the company started distributing mobile handsets and accessories in Nigeria and in limited territories of India. Besides distribution, it also provides support services for IT hardware and mobile phones. Domestic business contributed 54.4% and international business 45.6% to its revenue in FY 2006.
Redington started with distribution of HP peripherals and continued adding new products/brands to its portfolio, growing from five employees, three branches and 25 dealers in 1994 to over 30 global brands and a few local brands, more than 750 permanent employees (only for distribution business), 35 branches and 10,474 channel partners. In 2003, GTL (formerly Global Telesystems) announced its intention to acquire the Redington group. However post-due-diligence, the takeover was abandoned.
Strengths
- IDC 2006 estimates for demand for IT products outlines that PC shipments (units) in 2005-10 are expected to show a CAGR of 23%. Revenue from the datacom and peripherals markets is expected to grow at 20% and 19%, respectively, in 2005-2010. Packaged software revenue is expected to grow at a 21% CAGR in the same period. India’s domestic IT market is projected to be the fastest growing market in the Asia-Pacific region over the period 2005 – 2010 with a CAGR of 17.5% to Rs 74,657 crore.
- Redington has relationship with over 30 vendors, and with many for more than 10 years. Over the years, the company has serviced vendors including HP, Microsoft, Intel, IBM, Samsung, Canon, Cisco, and Acer. Its ability to provide a host of services such as logistics, after-sales support, and demand generation has helped in building such a diverse vendor base.
Weaknesses
- Redington had negative cash flows of Rs 124.38 crore from operating activities in FY 2005 and Rs 137.70 crore in FY 2006 mainly due to higher debtors and inventory.
- As a result of intense price competition in the IT products industry, Redington has a very low operating profit margin of 1.9% and a lower net operating profit margin of around 1%. The company expects them to continue to be low in the future. Increased competition arising from industry consolidation and low demand for certain IT products may hinder its ability to maintain or improve margin. Low gross margin magnifies the impact of variations in revenue, operating costs and bad debts on operating results.
Valuation
Between FY 2002 to FY 2006, consolidated sales registered a CAGR of 49.1% and net profit a CAGR of 63.4%. The consolidated FY 2006 EPS on the post-equity works out to Rs 9.2. At the price band of Rs 95 - 113, PE is 10.3 – 12.2. The first-half annualised consolidated EPS stands at Rs 10.2, and PE 9.3 – 11.1. The nearest comparable company, HCL Infosystems, is trading at consolidated TTM PE of 9.4.
Sensex at new peak
The market ended with marginal gains. Shares from the banking and capital goods sector were in demand. The 30-shares BSE Sensex rose 16.61 points, to end at 14,131.34, an all-time closing high. It had opened higher, at 14,133.78, after Wipro announced fantastic results. The benchmark index also struck a high of 14,185.12, its low being 14,089.63.
The S&P CNX Nifty was down 4.15 points, to settle at 4,076.35.
The market-breadth was strong on BSE, with over 1.5 gainers for every single loser. Analysts expect buying to shift to the small-cap and mid-cap space, anticipating robust results for the December quarter. Against 1,608 shares advancing, 1,054 declined, and 56 remained unchanged.
The total turnover on BSE amounted to Rs 4719 crore, compared to Rs 4068 crore on Tuesday.
Among the 30-Sensex pack, 15 advanced while the rest declined.
Shares from the banking sector witnessed renewed buying, with the BSE Bankex gaining the most from among sectoral indices, by 86.68 points (1.17%), to 7,505.68.
Private sector banking major ICICI Bank was the top gainer, up 2.74% to Rs 986, on a volume of 2.21 lakh shares.
India’s largest commercial bank SBI advanced 1.14% to Rs 1223, on 3.44 lakh shares.
Other banking stocks - Bank of India (up 0.12% to Rs 202.30), Punjab National Bank (up 1.50% to Rs 526), Kotak Mahindra Bank (up 1.98% to Rs 431), Oriental Bank of Commerce (up 3.94% to Rs 230), Vijaya Bank (up 0.51% to Rs 49.45) and Canara Bank (up 0.73% to Rs 270.60) also advanced.
Reliance Communications gained 2.63% to Rs 441.70, on a volume of 15.70 lakh shares. The scrip also struck an intra-day high of Rs 445.45.
Engineering and construction major L&T rose 2.29% to Rs 1555. The company has convened a board meeting on 29 January 2007, to consider financial results for the third quarter ended December 2006.
NTPC (up 1.25% to Rs 139.60), Dr Reddy’s (up 0.98% to Rs 817) and REL (up 0.66% to Rs 536) were the other gainers from the Sensex pack.
Wipro slipped from its high of Rs 651, and finished 0.82% lower at Rs 631.60. The company reported 40% year-on-year rise in net profit in December 2006 quarter as per US accounting standards, to Rs 745 crore in December 2006 quarter. Total revenue surged 43% to Rs 3964 crore. Global IT services and products revenue was Rs 2867 crore, an increase of 35% over the same period last year.
Global IT services and products earnings before interest and tax (EBIT) was Rs 683 crore, an increase of 32% over the same period last year. Global IT services and products added 37 new clients during the quarter. Wipro expects revenue from its global IT services & products business to be approximately $685 million in March 2007 quarter. The segment had grossed $640.5 million in the December 2006 quarter.
Index heavyweight Reliance Industries (RIL) rose 0.26% to Rs 1350.45, on a volume of 5.89 lakh shares. It will announce the December quarter results on Thursday (18 January). Promoters have raised their stake by 1.6%, to 50.62%. India's top private oil refiner is expected to report 26% rise in quarterly earnings due to strong margins in petrochemicals. Analysts estimated Reliance's petrochemical margins in October-December to increase by more than 35% from a year earlier. Analysts forecast 39.5% rise in net sales to Rs 25300.40 crore.
IT bellwether, Infosys Technologies, slipped 0.62% to Rs 2203.15 and was the second highest grosser, notching up Rs 144.50 crore in turnover, boosted by a block deal of 5 lakh shares in the counter at Rs 2218 per share at 10:22 IST.
HDFC Bank was the top loser, down 3.52% to Rs 1057.30, on a volume of 71,338 shares. It had recovered from a low of Rs 1053, the high being at Rs 1095.
ONGC (down 2.92% to Rs 893), TCS (down 1.72% to Rs 1305) and ITC (down 1.52% to Rs 169) were the other eminent losers.
Dabur India rose 0.71% to Rs 155, as 27.55 lakh shares changed hands, which also included a deal for 25.55 lakh shares at Rs 156 per share.
The BSE Capital Goods index rose 77.56 points ( 0.83%), to 9,438.66. Siemens (up 2.69% to Rs 1224.85), Bharat Electronics (up 1.97% to Rs 1305.85), Praj Industries (up 3.30% to Rs 279) and Alstom Projects (up 3.91% to Rs 498.70) advanced anticipating a strong set of December quarter results.
Refinery stocks surged following a sharp decline in global crude oil prices, which dived to a 19-month low on Tuesday as warmer-than-normal temperatures prevailed in the Northeast US, and after Saudi Arabia said further production cut was unnecessary. New York's main oil futures contract, light sweet crude for delivery in February, fell 1.78 dollars to close at 51.21 dollars a barrel. In London, Brent North Sea crude for delivery in February lost 86 cents to settle at 52.26 dollars a barrel.
State-run oil marketers were upbeat as a result. HPCL (up 5.55% to Rs 315), BPCL (up 3.11% to Rs 358) and IOC (up 3.26% to Rs 476.90) had posted considerable gains.
Shares from the aviation sector also got a boost from falling crude. Jet Airways jumped 5.33% to Rs 704, Deccan Aviation rose 3.20% to Rs 158.20 and SpiceJet rose 2.56% to Rs 60.20.
CMC jumped 17.52% to Rs 1227.35, extending its stupendous surge after Q3 results. It had surged to an all-time of Rs 1245. Analysts say re-rating is what the counter is experiencing. Earlier this Tata group firm was perceived as a hardware company focussed on domestic business, but is now seen as a services company with its heart set on the international market.
CMC’s consolidated net profit jumped 69% in December 2006 quarter, to Rs 20.40 crore (Rs 12.07 crore). Consolidated sales jumped 44% to Rs 298.63 crore (Rs 207.25 crore). For 9-months April-September 2006, CMC’s net profit rose 26% to Rs 48.50 crore (Rs 38.59 crore). Consolidated revenue rose 30% to Rs 790.69 crore (Rs 609.24 crore).
Mid-cap software stocks surged sharply on high volumes, on expectations of strong results. 3i Infotech jumped 9.20% to Rs 276.90 on a volume of 41.90 lakh shares, Tech Mahindra advanced 8.80% to Rs 1967 and Rolta India surged 9.20% to Rs 305.90 on 15.89 lakh shares. Rolta unveils December quarter results on 24 January 2007.
i-flex solutions advanced 6% to Rs 2152.75, after the company announced that People’s Bank (Bridgeport, Connecticut) has selected the company's core banking solution, Flexcube, for its core deposits system replacement. It was the fourth biggest gainer from BSE’s A group. i-flex unveils its December quarter results on 19 January 2007.
NIIT Technologies jumped 9.5% to Rs 341, after it reported 92% y-o-y rise in net profit for the December 2006 quarter. NIIT Technologies’ consolidated net profit rose 92% in December 2006 quarter to Rs 34.60 crore (Rs 18 crore). Topline growth was led by a corresponding growth in bottomline. Consolidated revenue rose 46% to Rs 231.50 crore from Rs 157.40 crore.
RNRL gained 0.55% to Rs 27.55, on a huge volume of 2.14 crore shares. It had surged to a high of Rs 29.50, in early trade.
ABG Shipyard jumped 20% to Rs 376.70, after the firm said it had received an order valued at Rs 1030.50 crore from Singapore's Pacific First Shipping for building 12 vessels. With the latest win, the company’s order-book rises to about Rs 3475.50 crore. ABG Shipyard builds a wide range of ships for bulk goods transport, coast guard and the oil industry.
Kirloskar Oil Engines (KOEL) plunged 6% to Rs 263, as Q3 bottomline was boosted by huge extraordinary income during the quarter. The company’s net profit rose sharply to Rs 35.38 crore from Rs 21.28 crore in December 2005 quarter. Data on BSE website showed that there was a huge extra-ordindary income of Rs 14.04 crore in December 2006 quarter. The extra-ordinary income was the profit KOEL made by selling shares of G G Dandekar Machine Works. Sales rose 32.9% to Rs 456.42 crore (Rs 343.28 crore).
Kale Consultants surged 9.39% to Rs 137.50, after a multinational logistics provider asked the company to automate its ocean, air and multi-modal freight operations. Direct Logistics, a multinational freight-forwarding & logistics group, selected Kale Consultants to develop a web-enabled solution to facilitate automisation of operations.
Engineering firm Batliboi jumped 10.90% to Rs 125.65, on reporting 133.7% surge in net profit for December 2006. Batliboi’s net profit jumped 133.7% to Rs 3.95 crore (Rs 1.69 crore). Net sales rose 42.9% to Rs 36.23 crore (Rs 25.36 crore).
Agro-processor Gujarat Ambuja Exports surged 4.5% to Rs 33.70, after the company reported an 84% surge in net profit to Rs 14.21 crore (Rs 7.71 crore) for December 2006 quarter. Net sales went up to Rs 393.86 crore from Rs 343.90 crore. The company’s board approved a buyback of equity shares aggregating to Rs 26.25 crore, and not exceeding 10% of the paid-up share capital and free reserves, at a maximum of Rs 38 per share, through the open market.
Krebs Biochemicals jumped 5% to Rs 99.05, amid reports that Ranbaxy had acquired 14.95% stake in the company.
Madhucon Projects rose 1.88% to Rs 313.90, after its unit achieved financial closure for a road project in south India, valued at Rs 920 crore.
The Nikkei average gained 0.34% on Wednesday, as real estate firms including Mitsubishi Estate Co, advanced on fading expectations of any imminent interest rate hike, offsetting losses in banking stocks. The Nikkei ended 58.89 points higher, at 17,261.35.
FIIs resumed selling after being net buyers on 11 January and 12 January. Foreign funds were net sellers to the tune of Rs 238.90 crore on Monday (15 January), the day when the Sensex gained 73 points. Before their two-day purchases worth Rs 366 crore (on 11 January and 12 January), FIIs had been offloading heavily causing a sharp fall in the market.
As per provisional data, FIIs were net buyers to the tune of Rs 190 crore on Tuesday (16 January), the day when the Sensex lost 15 points. They were net buyers to the tune of Rs 102 crore in index-based futures and net sellers to the tune of Rs 134 crore in individual stock futures.
Mutual funds are buying. They were net buyers to the tune of Rs 103.51 crore on 15 January. On 12 January they made whopping purchases, to the tune of Rs 637 crore.
US blue-chips rose on Tuesday on earnings optimism, while the broader market ended little changed as gains were offset by a sharp drop in oil prices that hurt energy shares. The Dow Jones industrial average was up 26.51 points, or 0.21%, at 12,582.59. The Standard & Poor's 500 Index was up 1.17 points, or 0.08%, at 1,431.90. But the Nasdaq Composite Index was down 5.04 points, or 0.20%, at 2,497.78.
Crude oil in New York plunged to the lowest price in more than 19 months after Saudi Arabia's oil minister rejected calls for more production cuts. The Organization of Petroleum Exporting Countries (OPEC) must wait to assess the effect of supply curbs that start 1 February.
Crude price has plunged 16% this year. Venezuela and Algeria want OPEC to restrain output. Crude oil for February delivery fell $1.78, or 3.4%, to $51.21 a barrel on the New York Mercantile Exchange, the lowest close since 26 May 2005. Futures touched $50.53, the lowest intraday price since 25 May 2005. Prices are down 23% from a year ago.
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