India Equity Analysis, Reports, Recommendations, Stock Tips and more!
Search Now
Recommendations
Friday, September 07, 2007
Trading Calls
Nifty (4518) Supp 4493 Res 4544
Buy L&T (2599) SL 2582
Target 2635, 2640
Sell Patni (480) SL 485
Target 470, 468
Buy Bank Baroda (282) SL 278 Target 290, 292
Buy Siemens (1290) SL 1277 Target 1320, 1325
Sell Bharti (847) SL 855
Target 836, 833
Bulls set to extend gains
He who would leap high must take a long run.
Looks like the bulls will not rest till they propel the Sensex and the Nifty to their new highs, which is not too far from the current levels. The new highs are unlikely to materialise today, though the current momentum will push the two main indices past the previous landmarks next week. The resurgence in FII inflows coupled with steady buying by Mutual Funds bodes well for the bulls despite the volatility and uncertainty in global markets. Having said that, after the pull back in the past few sessions, the market does appear to be a little bit top-heavy.
As a result, we may see some consolidation once the Sensex and the Nifty scale new peaks. That will be the ideal time when one should lock in some gains in stocks that have rallied in the last couple of weeks. Use every rise to exit weak stocks and stick to quality scrips, irrespective of the market cap.
Yesterday, we saw the key indices soaring on the back of short covering. Some more of that is not ruled out as the bulls are gradually tightening their grip on the market. Still, one should be careful on account of the worries surrounding the US housing market meltdown and its impact across global economy. Also, the political situation in the country is far from being resolved completely. We expect the market to rise at open and end the week on a strong note, though some resistance is expected at higher levels.
US stocks ended marginally higher as encouraging data on August sales from the retailers overshadowed all the bad news on the housing sector. Wal- Mart, Target and Macy's climbed. Mining companies had their biggest advanced in more than a year after gold topped $700 an ounce.
The Dow Jones Industrial Average added 57.88 points, or 0.4%, to 13,363.35. The Standard & Poor's 500 Index rose 6.26 points, or 0.4%, to 1,478.55. The Nasdaq Composite Index increased 8.37 points, or 0.3%, to 2,614.32.
Higher retail sales, rising productivity and a report showing service industries expanded helped allay concern that credit market losses will cause a recession. In addition, two regional Federal Reserve bank presidents said that the US economy was weathering rising credit costs.
The major indexes had been on both sides of the breakeven point throughout the session, as investors remained jittery ahead of Friday's labor market report. US employers are expected to have added 110,000 jobs to their payrolls in August after adding 92,000 in July.
Wall Street is looking for economic news to add to expectations that the Federal Reserve will cut interest rates at its next policy meeting on September 18, and strong reports would reduce the chances of the central bank lowering its benchmark rate.
COMEX gold for December delivery rose $13.90 to settle at $704.60 an ounce. Treasury prices slipped a bit after Wednesday's big rally, raising the yield on the 10-year note to 4.50 percent from 4.46 percent late on Wednesday. In currency trading, the dollar fell versus the euro and inched higher against the yen.
US light crude oil for October delivery rose 56 cents to $76.29 a barrel on the New York Mercantile Exchange. Oil prices were volatile after the weekly inventory report showed a drop in crude supplies and a big rise in distillates, which are used to make heating oil. The front-month contract was quoting 15 cents up at $76.45 a barrel in extended trading in Asia.
Across the Atlantic, key European markets ended higher as well. The CAC-40 in Paris rose 25 points or 0.45% to 5576, while the DAX in Frankfurt advanced 33 points or 0.44% to 7621.72 and the FTSE 100 in London was up 42 points or 0.68% at 6313.
The European Central Bank pumped 42.2 billion euros ($57.7 billion) into money markets to lower borrowing costs and said there was more to come as it shelved an increase in the benchmark interest rate.
The Bank of England left the benchmark interest rate unchanged at a six-year high, saying it was trying to determine whether a surge in credit costs will harm the British economy.
In emerging markets, the Bovespa in Brazil gained 0.3% to 54,569 while the IPC index in Mexico finished flat at 30,816. The RTS index in Russia advanced 0.8% to 1920 and the ISE National-30 index in Turkey added 0.4% to 62,376.
Asian markets were mixed this morning. The Nikkei in Tokyo lost 100 points at 16,156 while the Hang Seng in Hong Kong gained 32 points at 24,082. The Kospi in Seoul was flat at 1891 and the Straits Times in Singapore rose 31 points to 3498.
Bulls were back on D-Street as firm cues from the European markets coupled with buying interest in the index heavyweights like Reliance Industries, HDFC, ITC and SBI lifted the markets higher. All the key sectoral indices ended in green even the Mid-Cap and the Small-Cap stocks participated in the rally lifting the benchmark Sensex to close above the 15600 mark and NSE Nifty above the 4500 mark. Finally, the BSE 30-share Sensex closed at 15,616 surging 170 points. NSE Nifty added 42 points to close at 4518.
Reliance Energy surged by over 4% to Rs860 following reports that the company may separate its engineering procurement and construction division into a company and sell shares. The scrip touched an intra-day high of Rs865 and a low of Rs817 and recorded volumes of over 33,00,000 shares on NSE.
Hindustan Zinc rose over 2.5% to Rs722. The company announced that it has lowered lead prices by 6% to Rs139,000 per ton. The scrip touched an intra-day high of Rs725 and a low of Rs688 and recorded volumes of over 87,000 shares on NSE.
Sadbhav Engineering edged lower by 0.5% to Rs707. The company secured order worth Rs1.9bn. The scrip has touched an intra-day high of Rs729 and a low of Rs702 and recorded volumes of over 41,000 shares on NSE.
Aurobindo Pharma advanced by 1% to Rs637 after the company announced that it has secured US approval for Sterile Drug Facility. The scrip touched an intra-day high of Rs646 and a low of Rs620 and recorded volumes of over 67,000 shares on NSE.
Mastek slipped 1% to Rs280. The company announced that they would raise Rs1.5bn selling securities overseas. The scrip touched an intra-day high of Rs286 and a low of Rs280 and recorded volumes of over 23,000 shares on NSE.
MSK Projects closed flat at Rs100 the company announced that they have secured new order worth Rs764.5mn. The scrip touched an intra-day high of Rs101 and a low of Rs96 and recorded volumes of over 27,000 shares on NSE.
Auto stocks were in momentum led by gains in the index heavyweights like Tata Motors surged by over 2% to Rs712, Hero Honda gained by 2.8% to Rs655 and Maruti edged higher by 0. 8% to Rs880.
Metal stocks erased its intra-day losses as fresh buying interest lifted the metal stocks higher Tata Steel rose 1.6% to Rs692, JSW Steel gained 1.1% to Rs689 and National Aluminum edged higher by 0.3% to Rs264.
FMCG stocks recorded smart gains. Hindustan Unilever surged by over 2% to Rs216, McDowell gained by 1.2% to Rs1516 and Marico added 0.3% to Rs59.
Cement stocks were in limelight. ACC advanced by 1.3% to Rs1102, Ambuja Cement surged by 2.5% to Rs141, Mangalam Cement edged higher by 0.4%to Rs183 and India Cement rallied by over 4% to Rs274.
Pharma stocks recorded healthy gains. Ranbaxy gained by 3.5% to Rs414, Biocon was up by 1.1% to Rs471, Cipla advanced by 1.8% to Rs185 and Nicolas Dr Reddy’s lab added 0.6% to Rs662.
Fund Activity:
FIIs were net buyers of Rs3.11bn (provisional) in the cash segment on Thursday and the local institutions pulled out Rs82.6mn. In the F&O segment, foreign funds were net buyers of Rs9.08bn.
On Wednesday, FIIs were net buyers to the tune of Rs4.1bn in the cash segment. Mutual Funds were net buyers of Rs674mn on the same day.
Major Bulk Deals:
Merrill Lynch has bought Amtek Auto; ILFS Investsmart has purchased Goldstone Tech; Crown Capital has sold IVRCL Infrastructures; Merrill Lynch has picked up; HDFC Core has sold Rico Auto; Merrill Lynch has bought Shree Precoated Steels; Bear Stearns has picked up Unity Infra Projects; A slew of deals on both sides took place in Proto Infosys.
Lower Circuit:
Yashraj Securities.
Upper Circuit:
Zuari Industries, Tourism Finance, Bag Films, Aarti Industries, Bombay Burmah, Saregama Industries, GTC Industries, Bank of Rajasthan, Hindustan Oil and Nirlon
Delivery Delight (Rising Price & Rising Delivery):
Adlabs, Birla Corp, Gateway Distriparks, Hindustan Zinc and Indiabulls Financial.
Abnormal Delivery:
NDTV, Sterlite, FT, Kesoram and Rolta.
Major News & Announcements:
KS Oils enters in to Joint venture in Malaysia
Sadbhav Engineering gets Rs1.9bn orders
Mastek to raise Rs1.5bn selling securities overseas
Ashok Leyland August sales at 6055 units (down 6.6%)
MSK Projects secures new order worth Rs764.5mn
Hindustan Dorr secures Rs770mn order from Nalco
Aurobindo Pharma gets US nod for Sterile Drug Facility
Salzer Electronics
HDFC Securities came out with a buy and add recommendation on Salzer Electronics (on falls, if any) at Rs 95 for medium term gains. “Salzer Electronics ZEL manufactures electrical equipment products like CAM-operated rotary switches, load break (isolators), proximity & modular switches, cable ducts, terminal connectors & toroidal transformers. The electrical equipment industry has been growing at a very rapid pace with the switchgear segment reporting a growth of 37 per cent in the first nine months of FY-07. We expect SZEL to continue to record a healthy growth in revenue and PAT over the next two years,” a HDFC Securities note said.
Sun Pharma
Our technical stock pick today is Sun Pharmaceutical Industries. We recommend a buy in this stock at the current price level. It is evident from the daily chart that the stock has been declining after recording a life-time high at Rs 1,196 in April. It halted around Rs 900 in early August, which is a historically strong support level. After hovering around the aforesaid support level for a month, the stock started rallying recently. Sun Pharmaceuticals has conclusively penetrated the short-term downtrend line as well as the 50-day moving average on September 5, recording a gain of Rs 38 on that day. The daily momentum indicators signify bullishness. Short-term investors can buy the stock at current levels with a stop at Rs 955. We expect the stock to move towards the immediate target at Rs 1,050 and then to Rs 1,080 in the short-term. Investors can book profits at either of these targets.
Via Businessline
Stock Recommendations
| Thermax Reco price: Rs 611 Current price: Rs 635 Target price: Rs 740 Broking firm: Reliance Money |
| Engineering major Thermax’s order balance as on June 30, 2007 remained at Rs 2,726 crore compared to Rs 2,449 crore for the corresponding period last year. |
| The research firm believes that strong capex announcement made by user industries such as cement, steel, chemicals, textiles and oil and gas would continue to drive the order book of Thermax. |
| At the recommended price of Rs 611 the stock traded at a price-earnings multiple of 28 times and 22 times on Reliance Money’s estimated FY08 and FY09 earnings respectively. |
| Although the stock is trading at high price-earnings multiple, Reliance Money remains positive on the it mainly because of the growth prospects and growth in its user segments. |
| The firm estimates Thermax to report compound annual growth in net sales and net profit of 33 per cent and 34 per cent respectively over FY07-09E. |
| Thermax’s return on equity is also expected to go up from 28 per cent in FY06 to 38 per cent in FY09E. Reliance Money recommends investors a BUY on the stock with a price target of Rs 740. |
| HDFC Reco price: Rs 1986 Current price: Rs 1976 Target price: Rs 2406 Broking firm: Enam |
| Enam believes that HDFC offers the best mix of growth, quality and returns. Its loan disbursements are up 29 per cent annually for the last ten years and 42 per cent since inception with gross non-performing assets (NPAs) at around one per cent. |
| Over this period, ROE doubled from 16 per cent in FY97 to an estimated 31 per cent in FY07. Despite rising interest rates there was no pressure seen on growth or profitability with spreads likely to be maintained at over 2 per cent. The sector too has potential. |
| Mortgages remain under penetrated despite having moved up to 9 per cent of GDP against around 2 per cent five years back. Banks have started going slow on the mortgage business, which will help HDFC and affordability is far better– average cost of house to annual gross income is at about 5 times against 15-20 times a decade ago. |
| HDFC’s investment in the insurance business is estimated at Rs 826 per share. Net of the value of investments, at the recommended price HDFC quotes at 3.2 times estimated FY09 book value and 13.2 times estimated FY09 earnings. Enam maintains a sector outperformer rating and has given a target of Rs 2406. |
| Unitech Reco price: Rs 242 Current price: Rs 241 Target price: Rs 315 Broking firm: Motilal Oswal |
| Unitech is shifting focus to emerging profitable segments such as premium apartments, commercial offices, retail and hotels, which enjoy higher yields and have significant entry barriers. |
| In FY08, the company intends to commence construction on ~10msf of ‘Grade A’ retail mall space and roll out plans for the hotel segment encompassing 4,800 rooms. Unitech’s business model focuses on early monetisation for commercial projects. |
| In FY07, the company sponsored Unitech Corporate Park (raised Rs 3,200 crore), primarily intended towards monetisation of under development commercial office space. |
| Going forward, we expect Unitech to adopt a similar strategy for retail and hotels. Post completion, it could also sponsor REIT structures to acquire constructed projects. The fee structure will also lead to substantial value creation by the fund management business, as assets under management (AUM) expand. |
| The research firm expects Unitech to report a compounded annual growth in revenue and earnings of 80 per cent and 75 per cent respectively, over FY07-10E. |
| This growth would be driven by increase in revenue bookings from nearly 7.2 msf in FY07 to around 24msf by FY10. The target price for Unitech is Rs 315 per share - a 20 per cent premium to estimated FY09 NAV of Rs 262. Upsides to NAV exists from land bank augmentation and changes in development plans. |
| JK Lakshmi Cement Reco price: Rs 145 Current price: Rs 147.35 Target price: Rs 215 Brokerage firm: UTI Securities |
| Recommended a “buy”, JK Lakshmi Cement is diversifying into value added products such as ready mix concrete and plaster of paris. |
| The company has a manufacturing facility at Jaykaypuram, Rajasthan with a capacity of 3.4 million tonne a year. JK Lakshmi Cement also has a 1,500 strong dealer network spread across the northern region in states of Rajasthan, Gujarat, Delhi, Haryana, Uttar Pradesh and Punjab. |
| The company is expected to record a compounded annual growth of 15 per cent over the coming two years as it reaps the benefits of the capacity expansion to 5 million tonne which is expected to be commissioned by October 2008. As a result, the company is expected to grow its top line by 22.4 per cent. |
| Add to this, the company is commissioning a 36 MW captive power plant which would reduce its per unit power cost from Rs 4.3 a unit in FY07 to Rs 3.4 a unit by FY08. |
| The cost saving from this power plant would be to the tune of Rs 25 crore, which would be earning accretive to the extent of Rs 2.7 per share in FY08 and Rs 3.8 per share in FY09. |
| At Rs 145, the stock traded at a price earnings ratio of 3.4 and 3.1 times estimated FY08 and FY09 earnings, respectively. |
Power Grid IPO: Right pricing
Most broking houses are recommending the IPO of the country’s principal electric power transmission to their clients, citing assured returns on its incremental investments would provide steady earnings growth in future.
The Mini Ratna category-I public sector undertaking owns and operates most of the India’s inter-state and inter-regional electric power transmission system.
Analysts feel that the company that has excellent operational availability (above 99%), and has not had any grid disturbances since January 2003, has been reasonably priced at Rs 44-52. Its monopoly position in the power transmission sector is another of the key positive, they say.
There is consensus that the company’s planned capital expenditure (Rs 55,000 crore) in the next five years and aggregate projects (of Rs 24,800 crore) till date will be implemented effectively, due its strong financial position. Mix of diversified business of transmission system, consultancy in transmission related projects and telecommunication business also bodes well.
However, there are a few negatives, the current regulations do not give the company leverage to increase tariff on the basis of efficiency and market opportunity. The transmission income of the company is dependant on State Power Utilities, which usually have weak credit histories. Most analysts have recommended subscribing at the higher end of the price band.
Indowind IPO hit by QIB exodus
Another small-sized initial public offering (IPO) has fallen prey to uncertain market conditions and overpricing. Indowind Energy is the latest victim of last minute withdrawal of large-sized bids by qualified institutional bidders (QIBs).
The IPO had attracted a bidding of about 1.3 times just before the offer closed on August 24. But, a sudden bout of withdrawals resulted in a fall in subscription to below 90% as the bidding was coming to a close, which raised concerns, particularly among retail investors.
Merchant bankers believe small investors are being misled by the initial ‘positive’ response from QIBs, who can spoil the equation if they opt to withdraw.
Sources said on the very first day around 63 lakh shares of Indowind were bid on behalf of 2-3 FIIs, leading to a 100% subscription of the QIB portion. Another lot of 49 lakh shares was bid by a few other institutional investors on the same day.
However, the application for the 63 lakh shares was withdrawn just before the closing of the issue, resulting in a fall in the QIB subscription. This prompted retail investors to also withdraw their applications before the allotment was finalised.
On the poor response to the IPO, a merchant banker told ET, the pricing of Indowind was slightly aggressive and the market conditions were also uncertain at the time of the issue. Despite a firm Sensex during the bidding period, investors remained unconvinced about the recovery and remained cautious, he said.
Indowind offered a total of 1.25 crore shares of Rs 10 in the price band of Rs 55-65 per share. UTI Securities was the book-running lead manager for the issue, while Canara Bank was the co-book running lead manager
Thursday, September 06, 2007
Motilal Oswal Allotment
Forbes Asia 'Fabulous 50' list
China may be the 'world's factory,' but Indian companies, led by software giants TCS and Infosys, continue to outshine and dominate the annual ranking of big-cap, profitable companies in Asia.
A total of 12 Indian companies made it to the third annual Forbes Asia Fabulous 50 List, followed by Taiwan with 10 and China with seven, Forbes Asia said in a press release.
Four of India's IT outsourcing companies made the cut including the biggest, Tata Consultancy Services (TCS) that writes software for leading American firms. Its revenues leapt 45 per cent in the last year and its market capitalisation has doubled since listing three years ago to cross the $27 billion mark, the release said.
Tata earns nearly all of its revenues overseas but will move some of its work back to India, it said.
The 12 Indian companies on the Forbes Asia 'Fabulous 50' list are: Bharat Heavy Electricals, Bharti Airtel, Grasim Industries, HDFC Bank, ICICI Bank, Infosys Technologies, Larsen & Toubro, Reliance Industries, Satyam Computer Services, Tata Consultancy S ervices, Tata Steel and Wipro.
Most of the Indian firms on the list, however, did not have to leave home to find success, the release noted. With a relatively young population of 1.1 billion, India has its own huge market.
Companies such as ICICI Bank, HDFC Bank and Bharti Airtel are growing fast by reaching out to the country's rural customers, not to Western markets.
Others, such as Grasim, Larsen & Toubro and Reliance, are shoring up the country's infrastructure at a furious pace
Subscribe to:
Posts (Atom)