BSE / Nse Shares analysis 22 April 2009

BSE / Nse Shares analysis 22 April 2009

Power stocks can be retained if one is looking at them with a long term view.Stocks like Areva, CESC, NLC, Tata Power, Power Grid Corporation and PFC can be accumulated in a staggered fashion.  Reliance Power can give good returns over a long run, but then, the stock is likely to remain quite slippery in the near term.

Zee Entertainment Enterprises Limited has posted a net profit after tax of Rs 725.40 million for the quarter ended March 31, 2009 where as the same was at Rs 794.50 million for the quarter ended March 31, 2008. Total Income is Rs 3168.10 million for the quarter ended March 31, 2009 where as the same was at Rs 3413.40 million for the quarter ended March 31, 2008. The stock is up nearly 4% at Rs 125.40. One holding the stock with a long term view can stay invested.  Fresh exposure can be considered at Rs 110 - 115 levels.

With as many as 50 stocks set to exit from the derivatives section from May 2009, the midcap space is likely to see some listless action over the next few sessions.  Investors with little or no appetite for risk would do well to stay away from taking fresh exposure in stocks that comprise the list.  A little wait would do no great harm.

Transformers & Rectifiers India Ltd (TRIL) has informed that it has been awarded single order of 55 Nos. of Transformers amounting to by Maharashtra State Electricity Transmission Company Limited.  The order, estimated at Rs 122 crore, will significantly augment the current order book position of the firm.  At Rs 175, the stock is up marginally over its previous closing price. The stock has come a long way up from a low of Rs 102.60 it had touched in late February 2009.

Notwithstanding a few sharp rallies now and then, the market is likely to find the going a bit tough for the next couple of quarters, if not longer.  So, it is better to exit at sharp rallies and stay focused only on a proven blue chip stocks.

Bank, infrastructure, cement and top notch IT stocks are likely to see a significant upmove over the next 12 - 18 months.

One holding Idea Cellular can stay invested for some strong gains over a medium term.  The stock, currently traded at Rs 56, can rise to Rs 60 - 63 in the short run. Investors with a short-term plan can book some profits there and re-enter the counter later at declines.

Marico continues to grow despite economic slowdown.  The company has recorded a turnover of Rs 2388 crore for the year ended March 31, 2009, a growth of 25% over FY08.  The company's profit growth works out to 30% at PBT level and 16% at PAT level if one excludes one time extra-ordinary items from both FY08 and FY09.

Ultratech Cement's net profit for the quarter ended 31 March 2009 rose nearly 16% to Rs 1888.86 crore.  The stock is up by a little over a per cent at Rs 572 now.  Investors holding the stock with a long term view can stay invested and look to increase exposure at declines.  ACC has posted a net profit of Rs 404.76 crore for the quarter ended 31 March 2009.  The cement major had posted a net profit of Rs 357.54 crore for the corresponding quarter last fiscal.

One looking at medium to long term can stay invested in ACC, Ambuja Cements and Ultratech.  Exposure can be increased at sharp falls.  Since construction and infrastructure projects may take off anytime in the next couple of quarters, demand for cement is likely to see a sharp rise later this year.

Indian Hotels (Rs 51.50) can move on to Rs 60 if it continues to trade firm here for a few sessions.  A decisive breakout there can result in a surge to Rs 75.  On the downside, the stock has good support near Rs 43. One can have a stop loss around that level.

BGR Energy Systems has announced that the Environmental Engineering Division of the company has secured a contract for Design, Engineering, Supply, Erection and Commissioning of large "Total Water System" from Maithon Power Ltd, Jharkhand.

The contract is valued at Rs 15.50 crore. The stock is up 1.5% at Rs 176.50.

Forecast of a near normal monsoon is expected to keep fertilizer stocks in focus.  One can stay invested in stocks like Nagarjuna Fertilziers, Chambal Fertilizers, Tata Chemicals, RCF, Deepak Fertilizers and GSFC.  Declines can be treated as opportunities to increase exposure to the sector.

Wipro (up 5.4% at Rs 289) has moved up sharply this morning following a sharp jump in the Group's consolidtated net profit for the quarter ended 31 March 2009.  On a standalone basis, however, the company's net profit has dropped down by around 6.75% to Rs 842.10 crore.  One holding the stock with a long term view can stay invested and pick up more of it at sharp declines.

Riding on the strength of realty, bank, metal, auto and capital goods stocks, the market moved up and posted sharp gains in early trade this morning.  Positive global cues have contributed to the early surge today.

The Sensex, which opened at 10,968.80, edged up to 10,992.21 and is currently up with a sharp gain of 77.84 points or 0.71% at 10,975.95.  The Nifty is up 23.70 points or 0.7% at 3389.  Suzlon, PNB, ICICI Bank, DLF and Tata Steel are up 3% - 6% now.

Unitech, RComm, Axis Bank, Tata Motors, Reliance Capital, Wipro, Siemens, Hindalco and L&T have posted sharp gains.   Heavy weight stocks, RIL, SBI and HDFC also trade firm.

Market Outlook

The market is expected to open on a firm note on positive global cues. There may be some profit taking at higher levels but the undertone is likely to remain fairly positive right through the session today.

Sector Watch

Cement stocks will see plenty of action with industry majors ACC and Ambuja Cements scheduled to announce their quarterly results during the course of the day.

Realty and bank stocks are likely to find support. Information technology stocks are expected to surge higher. Selective buying is seen in metal, pharma and capital goods sectors.

Scrip Watch

Wipro has posted a consolidated net profit of Rs 10100 million for the quarter ended March 31, 2009 as compared to Rs 8800 million for the quarter ended March 31, 2008. On a standalone basis, Wipro has posted a net profit of Rs 8421 million for the quarter ended March 31, 2009 where as the same was at Rs 9029 million for the quarter ended March 31, 2008. Total Income is Rs 53966 million for the quarter ended March 31, 2009 where as the same was at Rs 53681 million for the quarter ended March 31, 2008.

HCL Technologies Limited has posted a net profit of Rs 1525.70 million for the quarter ended March 31, 2009 as compared to Rs 2630.80 million for the quarter ended March 31, 2008. Total Income has decreased from Rs 13291.30 million for the quarter ended March 31, 2008 to Rs 10930.70 million for the quarter ended March 31, 2009.

GTL,Hindustan Zinc, Yes Bank, Marico, Macmilan Industries and Zee Entertainment will be announcing their results.

ICICI Bank is likley to be in focus following the bank reducing benchmark lending rates by 50 basis points.

Sesa Goa is likely to attract attention on reports that the company is looking at options of bidding for the controlling stake in an iron ore mine that has been put on the block by Brazil's mining exploration company GME4.

Hero Honda may attract attention following the company reporting a sharp 34.6% jump in net profit for the quarter ended 31 March 2009.

Macro and Market Factors

Stock prices rebounded on Wall Street yesterday after suffering some big losses in the previous session. The US Treasury Secretary's assurance to the Congressional Oversight Panel that there is enough money left in the government's $700 billion financial rescue program to stabilize the financial system brought the bulls back to the ring.

Asian markets are trading mixed now after a positive start. Despite a 25 basis points cut in Repo and Reverse Repo rates, the Indian market had drifted lower yesterday. The RBI governor feels that banks needed to lend to ensure economic activity continues unhindered, reminding banks that in the current environment their challenge was to keep credit flowing, while, at the same time, maintaining portfolio quality.

Compiled and Brought to you by 

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting

Bangalore India

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Buy - Reliance Energy for target price of 1000 +

Further progress in existing projects, bifurcation of businesses into separate entities and new orders should prove positive for Reliance Infra.

The stock of Reliance Infrastructure (Reliance Infra), which had underperformed the BSE Sensex for most of the last 12 months, has significantly outperformed in the last one month. Among reasons that could be attributed to the outperformance is it’s recently completed share buyback programme, which partly reflects the management’s belief that the company’s assets are undervalued.

Analysts also attribute some recent developments to the stock’s outperformance. Reliance Power, a 45 per cent subsidiary of Reliance Infra, won the bid to develop the 4,000 mw Tilaiya ultra mega power project (UMPP) in February 2009. The financial closure of the Delhi metro project and Reliance Infra emerging as lowest or sole bidder for three road projects worth Rs 9,440 crore are among other triggers.

Core strengths

Reliance Infra operates in some of the high growth potential sectors. It has presence in the entire value chain of the power sector including EPC, generation, transmission and distribution. In the infrastructure space, it is focused on roads, urban infrastructure, airports, real estate and SEZs.

In power, Reliance Infra currently has generation assets of 940 mw. About 80 per cent of its power division’s revenue is on account of generation and distribution of power in different cities including its biggest circles, Mumbai and Delhi. Its Mumbai distribution circle is considered to be most efficient, with Aggregate Technical and Commercial (AT&C) losses of less than 11 per cent, compared to country’s average of about 35 per cent.
 

VALUATION: SUM OF PARTS
in Rs per share	Low	High
Power *	120	150
Cash and equivalents	180	210
EPC	40	50
Infra projects	80	90
Stake in Reliance Power	350	450
Total value	770	950
* Distribution, Generation & Transmission Analysts estimates

Leveraging its expertise in the business, the company has gradually lowered the AT&C losses in its Delhi distribution circle to about 20 per cent as compared to 55 per cent in FY02. Apart from the usual growth in existing circles, expect growth rates to perk up as and when the company bags new distribution circles. It is now pursuing opportunities in this space given that various states are showing willingness to privatise their electricity distribution operations; about 20 cities in three states are expected to see their distribution operations get privatised.

In power generation, the company is looking at increasing the capacity of its Dahanu power station by 1,200 mw to 1,700 mw, which interestingly will be a part of Reliance Infra’s power generation portfolio (and not Reliance Power).

The huge power generation capacities being added in India will also translate into equally big investment in transmission infrastructure, to evacuate power from the generation point to the customers. The company is currently executing three transmission projects worth Rs 4,000 crore. These projects typically offer a fixed return of 16 per cent on equity, and would ensure sustained cash inflows. Meanwhile, existing operational assets generate annual cash profits of over Rs 1,300 crore, which will help towards financing the company’s ongoing projects and further strengthen its balance sheet.

EPC

The ongoing capacity addition in the power generation business (including Reliance Power) is also providing opportunities for the company’s EPC business, which has seen its order book rise 159 per cent year-on-year to Rs 21,500 crore as on December 31, 2008. Reliance Infra has recently started work on Reliance Power’s 3,960 mw (Sasan) and 300 mw (Butibori) projects.

In totality, the company is currently executing seven projects of totalling 7,200 mw. “In FY08, about 80 per cent of the revenues came from electrical business and remaining was from EPC. However, over the next two years, the revenue contribution from EPC will substantially increase,” says Lalit Jalan, CEO & Whole-time Director, Reliance Infrastructure.

The company believes that the work for several large projects like Sasan will start in full swing in FY10, and double its EPC revenues in FY10 (annualised revenues of EPC for FY09 is Rs 2,200 crore). In terms of future opportunities, the project pipeline should remain robust given that Reliance Power itself has 14 power projects (32,200 mw) to be set up in the long-run. In the near-term, the Krishnapatnam UMPP (EPC value of Rs 12,000 crore) could further push up its order book.

Infrastructure

Among other growth potential segments is the infrastructure space mainly, roads and metro projects. Till now, infrastructure has not contributed in any significant way to revenues, but its contribution is seen increasing gradually. “We are currently having six road projects covering 467 km, of which two projects are almost complete and will start contributing to revenues from FY10. The next three road projects will be operational by Q2 FY11,” says Lalit Jalan.

Off late, the company has emerged as the sole or lowest bidder in three road projects worth Rs 9,440 crore.

Meanwhile, the company’s two metro projects (one each in Mumbai and Delhi) with total cost of Rs 5,250 crore would drive the growth in the future. For both these projects, it has completed the financial closure, ordered critical equipments, awarded contracts and started construction. These two metro projects, which are expected to start operations from Q2 FY11 onwards, have a concession period ranging 30-35 years.
 

STEADY NUMBERS
in Rs crore	FY09E	FY10E	FY11E
Sales	10,000.0	9,800.0	11,700.0
EBITDA (%)	12.2	9.8	9.5
Net profit	1,045.0	990.0	1,010.0
EPS (Rs)	46.1	44.0	45.0
PE (x)	13.9	14.6	14.3
E: Analysts estimates

Investment rationale

The company is in the growth phase and is investing aggressively in its various businesses, the benefits of which should start reflecting over the next 2-3 years. It’s annual cash flow of about Rs 1,300 crore along with cash equivalents of Rs 5,000 crore (adjusted for debt of Rs 5,000 crore) should help meet its medium-term equity funding needs of Rs 2,800 crore.

Nonetheless, the company has lately undertaken a re-organisation plan to transfer its various businesses to seven different 100 per cent subsidiaries. These include Dahanu, Samalkot and Goa power stations, transmission, distribution, EPC, toll-roads and real estate. This move should lead to a transparent structure, enhanced focus and enable the company to unlock value, if required, say analysts.

Meanwhile, analysts expect some near-term pressures, which may lead to a small dip in FY10 earnings. But, since the company operates in different businesses, they prefer to value it on a sum of parts basis and have pegged a value ranging Rs 770-950 per share, which is 20-47 per cent higher than its current market price of Rs 644.

Source : business-standard 20-04-09

Our Recommendation :
Our Research Team Views :

Day High Low Rs.662-712
Monthly High Low Rs.472-733
6M H/L Rs. 426-733

This share has risen sharply more than 50% in the last 2 months. The following
are the ideal ranges for buying and selling :

Buying Range : Rs.550-575
Selling Range : Rs. 1150-1250

Wait for the price to the buying range on correction in the stock markets.

Holding period : 12 months
Returns expected : 100% plus

For best investment ideas get in toch with us we give - One week, One Month, One
Quarter, 6 M / 12 M picks
Get in touch with us for Portfolio Advisory Services.

Equity Research Team

Intelligent Investor -
Invest Advisory Arm of

Ravina Consulting
Bangalore India

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TA - GAIL

GAIL (Rs 254.9): The long-term trend in GAIL continues to be up since the stock is still poised above its long-term trend-line. Moreover, it has retraced only half of the gains it recorded between 2000 and 2008. The market decline of 2008 halted around Rs 200 and after moving in a range between Rs 200 and Rs 220 between November 2008 and March 2009, the stock is currently in a medium-term up-trend.

This up-trend will face resistance in the band between Rs 290 and Rs 300. A reversal from this zone will take the stock lower to Rs 210. Long-term investors can hold the stock as long as it trades above Rs 200.

Conversely a rally past Rs 300 would imply that the stock can progress towards the previous peak at Rs 370.

Source : Businessline 19-04-09

Our Recommendation :

Our Research Team Views :

Day High Low Rs.263-249

Monthly High Low Rs.220-285

6M H/L Rs. 185-285

This share has risen sharply more than 50% in the last 6 months. The following

are the ideal ranges for buying and selling :

Buying Range : Rs.200-210

Selling Range : Rs. 270-280

Wait for the price to the buying range on correction in the stock markets.

Holding period : 12 months

Returns expected : 100% plus

For best investment ideas get in toch with us we give - One week, One Month, One

Quarter, 6 M / 12 M picks

Get in touch with us for Portfolio Advisory Services.

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting - Bangalore India

Read - www.intelligentinvestor1.blogspot.com

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Technical Analysis - Infosys

Infosys

It was a volatile week for Infosys as the stock plunged to Rs 1300 following earnings announcement and then rebounded to close the week with less than 3 per cent loss. As we have explained earlier, there is a strong medium-term resistance between Rs 1400 and Rs 1450 since the 200-day moving average is poised here and it is also the upper boundary of our medium-term trading range. A reversal from here can pull Infosys lower towards Rs 1100 over the medium term.

The stock can continue to face resistance at Rs 1450 over the near-term. If it reverses lower from current levels, a decline to Rs 1300 and Rs 1256 would be on the cards. Target on a break above Rs 1450 is Rs 1492.

— Lokeshwarri S.K.

businessline 19-04-09

Bata - Step into this share on declines

Bata India, the Indian arm of global shoe major, Bata Shoe Organization, trades at Rs 115.7, 12 times its trailing four quarter earnings, at a premium to retail as well as footwear peers. It stands at an enterprise value of 0.8 times its trailing four quarter sales, and 0.7 times estimated sales for the year ending December 2009. Having firmly established itself as a footwear retailer with a sizeable market share, Bata has moved on to designing footgear for institutions, wholesale trade of footwear and, recently, protective industrial shoes. In a largely unorganised fragmented market, Bata has a sizeable brand advantage and a presence across a range of price points. However, Bata faces competition from imports and the unorganised sector, which also has a cost advantage. Majority of the consumers, too, are not yet brand-conscious when it comes to footwear. With valuations being comparatively on the high side, exposure to the stock need not be taken at this level, but investors may hold the stock. Varied footprint Primarily a footwear retailer, Bata holds 35 per cent of the organised footwear market; its retail footprint spans more than 1,250 stores. Bata has licensed brands (Hush Puppies and Dr Scholl, licensed respectively from Wolverine Worldwide and Dr Scholl’s) besides those of its parent (such as Power, Marie Claire and Bubblegummers). With the men’s segment hogging more than half the market, women’s footwear remains largely untapped. Bata aims to capitalize on this by focussing on designer women’s footwear. Bata’s institutional division caters to corporates, designing footwear according to industry specifics such as hospitals. Other divisions are the wholesale urban and branding divisions. Under the former, it supplies retail stores through 150 distributors while the latter uses 15 distributors in major cities, concentrating on Bata’s brands alone. Bata is targeting a 15 per cent contribution from these divisions. The latest sales stream explored is Bata Industrials, offering protective footwear to industries, backed by the expertise of its parent’s own industrial footwear division. To better utilise its surplus land, Bata is developing, via joint ventures, a 262-acre township at its Batanagar premises with commercial and residential zones, including a 25-acre IT SEZ (notified). Funding for this foray will be undertaken by the respective developers and Bata’s own capital investment here has been minimal. Turnaround story Bata has had a prolonged period of poor performance; it posted net losses between 2002 and 2004, slipping into operating level losses in 2004. During this period, the company had a troubled relationship with its labour, with lock-outs and suspension of employees and high staff costs. Leaving out raw material, the biggest contributor to expenditure was staff costs, taking up more than 25 per cent of sales . Recovery from troubles has taken time, but the company managed a complete write-off of losses by 2007 (utilizing part of its securities premium following an approved scheme of reduction of the account). Number of unviable stores was cut by 105 ; a further 74 may be on the block. About 118 stores were remodelled, manufacturing and staff costs were brought under control. New stores were opened on a franchise model thus limiting the capital required. Currently, franchise stores number 143. Expansion on the cards After the above restructuring efforts, Bata remains ambitious about its network expansion; it plans to open 240 stores in a span of three years calling for a minimum investment of Rs 400 crore. With a low leverage at 0.3 times, and an improving interest cover from 2.1 times in 2005 to the present 12.1 times it may not run into funding roadblocks. Financials holding up Bata India’s three-year sales growth has been at 13 per cent while profits have grown at a CAGR of 51 per cent largely due to a lower base. Since turning profitable in 2005, net margins have improved steadily from 1.5 per cent to 6.1 per cent in 2008. In its financial year ending December 2008, Bata posted a 13 per cent growth in sales and a 28 per cent growth in profits. Interest costs actually declined on the backs of retirement of long-term debt. Staff costs, too, fell by 5.5 per cent on a year-on-year basis. With debt-equity being on the low side from the start, interest costs do not significantly impact margins. Bata has been positive on cash flows for the past two years. It plans to restrict credit period to a maximum of 45 days; debtors turnover has increased from 19 to 40 times in a three-year span. With streamlining of costs still being actively pursued along with new streams of revenue, margin expansion may yet continue. Source : Businessline 19-04-09 Our Research Team Views : Day High Low Rs.130-115 Monthly High Low Rs.130-90 6M H/L Rs. 76-130 This share has risen sharply more than 45% in the last 1 month. The following are the ideal ranges for buying nd selling : Buying Range : Rs.90-100 Selling Range : Rs. 125-130 Wait for the price to the buying range on correction in the stock markets. Holding period : 12-18 months Returns expected : 100% plus For best investment ideas get in toch with us we give - One week, One Month, One Quarter, 6 M / 12 M picks Get in touch with us for Portfolio Advisory Services. Equity Research Team Intelligent Investor - Invest Advisory Arm of Ravina Consulting Bangalore India Read - www.intelligentinvestor1.blogspot.com Follow - www.twitter.com/SmartInvestor