Market Khabar

Outperforming all global markets, Indian markets closed near several months high in the holiday-shortened week. On the BSE, the Sensex gained 2.65 per cent to sail past the psychological 17,000-mark ending the week at 17,135 and the Nifty on the NSE rose 2.5 per cent to close above 5,000-mark at 5,083.

A strong liquidity situation, improving economic data and expectations over strong second quarter res-ults could improve earnings. However, savvy market players are concerned over the way many companies are raising funds either through QIP route or IPO.

Valuations are turning expensive; investors should reshuffle portfolios, separate wheat from the chaff, in terms of good and bad stocks. The road ahead is further zig-zag than the recent rally would imply.

Negative global cues over the weekend may cast their shadow over the markets during the early part of next week. For the week ahead, chartists predict a trading band of 16,740 and 17,460 for the Sensex and 4,900-5,200 for the Nifty.

Supports for the week are at 16,960 and 16,820 on the BSE and 5,020 and 4,900 on the NSE. Cut short term long positions, if indices trade below 16,960 or 5,000 levels.
Experts advice the investors to avoid large positions and trade lightly. Investors need to be wary of getting burned by unsubstantiated takeover chatter. Mergers are starting to make a comeback as the economy and stock market show signs of life. But there is a dark side to the pick up in deals. Takeover rumours with little to no basis in fact have also returned. The GSK-Dr Reddy “takeover” is just one such example of investors getting their hopes up only to have them dashed. Sniff at inside information; it is usually bunk.

SATTA GUPSHUP
* Pidilite Industries manufactures various types of adhesives, sealants and specialty chemicals. Its brands — Fevicol and Dr Fixit — are the market leaders in their segments. Buoyant end user industry and lower raw material prices due to fall in crude oil prices spell good times for the company. Buy for a target price of Rs 250.
* PTL Enterprises or erstwhile Premier Tyres Ltd is a shell company of the Apollo Tyres group. The company owns valuable real estate at Ernakulam and a 500-bed superspecialty hospital in Gurgaon. The value of its assets is reported to be higher than the company’s present market cap. Buy for surprising gains.
* Midcap pharma major Ipca Labs is on the radar of savvy fund managers. It has a strong presence in the semi-regulated markets like Africa and Russia. The growth of its domestic formulation business is outperforming the industry’s growth. Buy for a target price of Rs 1,200.
* Jindal Stainless is the only Indian composite stainless steel plant, which manufactures stainless steel slabs, blooms, HR and CR coils. Sources indicate that it has finalised the restructuring of its huge debt and also report improvement in sales realisations. Buy for a short-term target of Rs 140.
* Select counters like Alkali Metals, NHPC, Nelco, KLG Systel, Sunil Hitech and Henkel India are witnessing keen buying interest. Stay invested and
buy on decline for further gains.

F & O
Spurred by FII inflows, open interest in the derivative segment crossed Rs 90,000 crore. Nifty futures trading at a steep discount of 14 points to spot and the rise in Nifty PCR to 1.36 indicate a build up of short positions in the Nifty. Option activity indicates strong support for the Nifty at 4,900-5,000 level and strong resistance at 5,100-5,200 level.

Among the stock futures, accumulation of longs was seen in Aban Offshore, IDFC, HDIL, ICICI Bank, Wipro, Yes Bank, Rolta, BEL and Jindal Saw counters. A short build up seen in select counters like Hero Honda, Tata Steel, Idea, Grasim, Unitech, Divi Labs and Tata Power. Punters tip Aban Offshore, JP Associates, IDFC and PTC for a price target of Rs 1,800, Rs 265, Rs 168 and Rs 95.

Traders can sell Tata Steel, HDFC, Maruti Suzuki, Tata Motors, Divi Labs and Hindalco Industries for a price target of Rs 465, Rs 2,575, Rs 1,560, Rs 545, Rs 525 and Rs 112. Buy Shree Renuka and Bajaj Hind for a price target of Rs 220 and Rs 200. A jump likely in United Spirits, APIL and Chambal Fertilisers to Rs 955, Rs 588 and Rs 65.
Flavour of the week ended were banking and IT counters. Expectations of better second quarter numbers saw many counters touching 52-week highs. Use discretion to buy selectively on declines.

Weakness in global prices may trigger selling in metal counters. Short term players advised to book profits. Industry watchers say worst is over for realty. Use sharp declines to buy DLF, HDIL and IBRL. Stock specific activity indicated ahead of second quarter earnings season. Avoid uncertainty. Stay out when the trend is in doubt.

C. Kutumba Rao is a Hyderabad-based stock market analyst. The views expressed and the recommendations made are those of the author. Readers are strongly recommended to consult their financial advisors before making any financial investments. This newspaper is not liable for investment decisions made on the basis of recommendations in these columns.

Source : deccan.com

Cairn - Buy around 165

Source :businessline 03-05-09

Cairn India (Rs 185.4): 

Cairn India has limited trading history that makes it difficult to pronounce a long-term view on the stock. But the stock appears to have strong support around its listing price of Rs 140.

Though there was a sharp decline below this level in the mayhem of October 2008, it rebounded strongly to close above this level in just two sessions. Next long-term support below Rs 140 would be the panic low of Rs 88 formed on October 27, 2008. Investors can hold the stock as long as it does not record a weekly close below Rs 125.

Key long-term resistance is at Rs 245. Reversal from this level can pull the stock lower towards Rs 165 or Rs 135. Investors with a medium-term perspective can divest some their holdings on a failure to move above this resistance.

That said, a break-out above Rs 245 will give the next long term target of Rs 342 for the stock. Stop loss for medium-term investors can be at Rs 165.

Our Research Team Views :

Day High Low Rs.188-180 on 29th April 2009
Monthly High Low Rs.210-169
6M H/L Rs. 208-131

Sectoral Trend - Neutral

This share has risen sharply more than 80% in the last 2 months. The following are the ideal ranges for buying and selling :

Buying Range : Rs.165-175
Selling Range : Rs. 225-230 short term

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

Holding period : 12-18 months
Returns expected : 100% plus


Equity Research Team

Intelligent Investor - Invest Advisory Arm of

Ravina Consulting
Bangalore India

Read - www.intelligentinvestor1.blogspot.com
Follow - www.twitter.com/SmartInvestor

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.

GSK Consumer - Buy on dips

GSK Consumer Products

Aarati Krishnan

businessline 03-05-09

With a limited product portfolio and unexciting historic growth, GlaxoSmithkline Consumer Healthcare (GSK Consumer) has traded at a significant valuation discount to FMCG peers, in the stock market. However, the company’s stock now merits a re-rating, after renewed efforts by the company to enter new categories, an accelerated pace of new launches and strong profit growth in recent quarters.

Investors can consider accumulating the stock even after its 33 per cent gain from the March lows, as the stock’s discount to peers offers upside potential.

At its current price of Rs 828, the GSK Consumer stock trades at a PE of 16 times trailing 12-month earnings while multiples hover at 22-24 times for Nestle India, Colgate Palmolive, Godrej Consumer and Dabur. The stock is at about 14 times its estimated earnings for 2009, again at a sizeable discount to most rivals.

Strong volumes

After managing a 14 per cent compounded annual growth in sales in the three years to 2007, GSK Consumer’s sales growth shot up to 21 per cent for 2008. Strong volume growth in the Horlicks franchise driven by higher offtake and brand extensions, higher realisations due to price increases and a surge in export revenues aided this improvement.

A sharp increase in input costs prevented the expansion in topline from being mirrored in net profits, which rose by a muted 15 per cent. 2008 saw a sharp upward spiral in prices of inputs such as wheat, malt extracts and milk.

Numbers for the March 2009 quarter show that the company has sustained its growth momentum this year. Net sales were higher by an impressive 31.4 per cent in the first quarter.

Though excise duty savings brought in about 3 per cent of this expansion, this was also backed by an impressive volume growth of 20 per cent (21 per cent in Horlicks, 8 per cent for Boost and 27 per cent for biscuits).

A 13 per cent growth in domestic offtake of malted drinks led mainly by Horlicks, a 3.5-4 per cent pipeline filling for new products and a surge in exports helped drive this growth.

Given that malted drinks remain an under-penetrated category, promotional efforts, better distribution reach and a value-oriented strategy hold further potential to increase domestic sales.

Leg up from exports

GSK Consumer’s exports to neighbouring markets such as Sri Lanka, Nepal, Bangladesh and West Asia have also been a key driver, seeing a 45 per cent expansion in the first quarter.

A shifting of the manufacturing base for some products to India (by the parent) and market share gains for brands for Horlicks and Boost in these markets have both helped this growth. The latter ties in with the headway made by many Indian FMCG brands in the neighbouring markets.

Exports, which have been a key contributor to GSK Consumer’s growth in recent quarters, also hold further potential for scaling up.

The March 2009 quarter saw GSK Consumer’s net profits expand by a higher than expected 48 per cent, on the back of higher operating profit margins.

Higher realisations resulting from price increases (of 5.5 per cent) taken in January 2009 and benefits from excise duty cuts (about 60 per cent of the company’s manufacture is subject to excise duty) triggered margin expansion.

Though input cost pressures did not abate materially (material/packaging costs up by 28 per cent over last year), they were more or less offset by the price increases and a cutback in advertising and promotional spends for the quarter, as the company temporarily “tightened its belt” on ad spend.

While inflationary pressures are likely to subside a little in 2009 (malt extract and packaging prices have corrected, while milk and sugar remain upward bound), the company is unlikely to see substantial savings in input costs, as will some other FMCG makers.

However, that is not a big concern, given GSK Consumer’s dominant share of malted drinks market (70 per cent, straddling brands such as Boost, Viva and Maltova and Horlicks) which endows it with strong pricing power.

While the company has delivered exceptional profit growth in the latest March quarter, growth of this order is unlikely to be sustained in the coming months and may moderate to the 20 per cent range.

As GSK Consumer steps up its pace of product launches and supports them with brand building efforts, ad spends may climb back to 13-14 per cent of sales, from the current 11.5 per cent.

Broadening the basket

GSK Consumer has already embarked on a two-pronged strategy to expand its somewhat narrow product portfolio.

First, it plans to leverage the Horlicks brand to launch a wider range of nutrition products and functional foods. Second, it plans to draw more actively on its parents’ portfolio for the Indian markets.

Junior Horlicks and Mother’s Horlicks have already captured key niches in the beverage market and Horlicks Lite (suited to Diabetics) Women’s Horlicks (specially formulated for women) have added to this set of extensions in 2008.

The first quarter of 2009 has seen GSK Consumer’s foray into functional foods through the launch of Horlicks Nutribar, a healthy snacking option for young adults. ActiGrow, a high-protein baby food, was also rolled out this quarter. These supplement Horlicks and Lite Bite biscuits which are targeted at children.

The brand Horlicks has also been extended into the ready to drink (RTD) segment, through tetra packs. While a foray into RTD has already been attempted in the past, the foray into functional foods holds considerable promise for broadening the company’s portfolio.

While the new category forays will peg up advertising and brand building spends over the next two years, they have the potential to reduce the company’s significant reliance on one brand (Horlicks) and one category (malted drinks) for growth and profitability. That may remove a key impediment to better valuations for the stock.

Our Research Team Views :

Day High Low Rs.840-806 on 29th April 2009
Monthly High Low Rs.840-600

6M H/L Rs. 840-490

Sectoral Trend - Neutral

This share has risen sharply more than 80% in the last 2 months. The following are the ideal ranges for buying and selling :

Buying Range : Rs.650-675
Selling Range : Rs. 925-930 short term

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

Holding period : 12-18 months
Returns expected : 100% plus


Equity Research Team

Intelligent Investor -
Invest Advisory Arm of

Ravina Consulting
Bangalore India

Read - www.intelligentinvestor1.blogspot.com
Follow - www.twitter.com/SmartInvestor

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.

BSE / NSE Shares analysis 28 April 2009

Bears on a rampage and pushed the benchmark Indian indices Sensex and Nifty down to a dismal close today.  The Sensex went crashing down to 10,961.76 and ended the day at 10,996.28 (provisional) with a huge loss of 375.57 points or 3.3%. The Nifty closed at 3360.10, down 109.90 points or 3.17%.  On concerns over the damage the swine flu could cause on global economy, investors across Asian and European markets were seen pressing heavy sales today.

Realty, metal, bank and capital goods stocks tumbled.Power, telecom, oil, FMCG and pharma stocks also suffered sharp losses.

It was a weak outing for several auto and IT stocks as well.  Midcap and smallcap stocks went sliding down on sustained selling pressure.  The market breadth was very weak at close.

DLF, Reliance Infra, Sterlite, Tata Steel and RComm lost 7% - 8%.  HDFC, ICICI Bank, Tata Motors, BHEL, Hindalco, L&T, SBI, Wipro, HDFC Bank, Tata Power, Bharti Airtel, ITC, RIL, HUL and ACC also declined sharply.  PNB, Reliance Capital, Suzlon, Power Grid, Axis Bank, Siemens, SAIL, Cairn India, ABB, Nalco, RPL, Ambuja Cements and Tata Comm finished with sharp losses.

BPCL bucked the trend and posted a sharp gain.

Syndicate Bank has posted a net profit of Rs 2066.40 million for the quarter ended March 31, 2009 as compared to Rs 1262.60 million for the quarter ended March 31, 2008. Total Income has increased from Rs 23764.00 million for the quarter ended March 31, 2008 to Rs 28756.70 million for the quarter ended March 31, 2009.  At Rs 56, the Syndicate Bank stock does look attractive. But a fall from this level looks likely in the very near term. One holding the stock can stay invested and look to buy more at sharp declines from here.

After running high for seven weeks at a stretch, the market appears to be facing some real pressure now.  There may be a recovery of sorts over the next few sessions, but it is advisable to stay cautious and refrain from taking big chances for the near run.  Long term investors, holding quality stocks, can stay invested with proper stop loss triggers in place.

The World Health Organization, acknowledging the growing threat of swine flu, raised its global pandemic alert, saying the disease is no longer containable.  The alarm level, increased to 4 from 3, is at its highest since the warning system was adopted in 2005, and the virus has been confirmed in the U.K., Mexico, the U.S., Canada and Spain.  With concerns over the impact of the deadly virus on the economy taking front seat now, markets across the globe have suffered sharp losses today. It is advisable to refrain from building up big positions for the time being.

Aditya Birla Nuvo's net profit for the January - March 2009 quarter has come down sharply.  The Company has posted a net profit of Rs 263.90 million for the quarter ended March 31, 2009 as compared to Rs 704.80 million for the quarter ended March 31, 2008. Total Income has increased from Rs 11569.50 million for the quarter ended March 31, 2008 to Rs 11937.40 million for the quarter ended March 31, 2009.  The stock has plunged 8.65% to Rs 535 on heavy selling at the counter.

ABB, the power and automation technology firm, has won substation orders worth around Rs 425 crore from Power Grid Corporation, to boost capacity and help improve grid reliability.  At Rs 490, ABB looks good for long term. One can take a modest exposure now and go in for more at sharp declines.  The stock had touched a low of Rs 344 in early March this year. For now, a stop loss can be placed near that level.

Jubilant Organosys has slipped by over 3% to Rs 116 on weak quarterly results.  The stock is likely to drift further down in the near term.  One holding the stock for long term, can stay invested with a stop loss near Rs 85, its 52-week low.

Fresh buying can be considered later.

Jaiprakash Associates (Rs 132) looks to be a good long term option.  Investors holding the stock can stay invested with a stop loss near Rs 90.  Fresh exposure can be considered if one is looking at long term. More can be bought at declines.

Dena Bank (Rs 38.90) can give fairly good returns over a medium run.  One can go in for this stock at current levels and add more of it at declines.  Vijaya Bank, Indian Bank, Andhra Bank, UCO Bank and Syndicate Bank can also be bought at declines.

Asian markets have suffered sharp losses today.  Earlier, after opening on a weak note, most of the Asian markets had rebounded sharply into the positive zone.  On fears the impact of swine flu will hamper global economic recovery, investors are seen pressing sales in global markets today.

Accumulate cement stocks in small quantites at sharp declines.  Ambuja Cements, Ultratech, Rain Commodities, ACC and Dalmia Cement can give fairly solid returns over a medium to long run.

One holding L&T can stay invested but fresh buying can be avoided for now.  The stock, currently traded at Rs 897, is likely to see a few weak spells in the near run.  Sharp declines can be treated as opportunities to buy this quality stock. However, buying in a staggered manner is advisable.

Pharma major Glaxo Smithkline Pharmaceuticals Limited has posted a net profit of Rs 1432.70 million for the quarter ended March 31, 2009 as compared to Rs 1212.70 million for the quarter ended March 31, 2008.  Total Income has increased from Rs 4342.50 million for the quarter ended March 31, 2008 to Rs 4609.80 million for the quarter ended March 31, 2009.  The stock is up nearly 2% at Rs 1190 now. One holding the stock with a long term view, can stay invested with a stop loss near its 52-week low of Rs 930.

KPIT Cummins has hit the 10% upper circuit at Rs 44.25 today.  The company has reported strong results for the quarter ended 31 March 2009.  A further upmove looks very likely and one willing to wait patiently can go in for the stock at current levels or slightly lower.

Biocon Limited has posted a net profit of Rs 241.40 million for the quarter ended March 31, 2009 as compared to Rs 620.30 million for the quarter ended March 31, 2008. Total Income has increased from Rs 2367.10 million for the quarter ended March 31, 2008 to Rs 2398.40 million for the quarter ended March 31, 2009.  The stock, up 3.4% at Rs 151 at present, is likley to see some weakness in the near run.  One looking at fresh exposure to the stock can wait for now. Investors holding the stock with a long term plan can stay invested with a stop loss near Rs 110.

Compiled and Brought to you by 

Equity Research Team

Intelligent Investor -

Invest Advisory Arm of

Ravina Consulting

Bangalore India

Read - www.intelligentinvestor1.blogspot.com

Follow - www.twitter.com/SmartInvestor

TA - Yes Bank

Yes Bank (Rs 70.3): Yes Bank reached its nadir when it recorded the low at Rs 40.8 in March this year. Though the stock has almost doubled in value since then, the medium-term view continues to be negative. A firm weekly close above Rs 90 would be the minimum requirement to turn the medium-term view positive for this stock.

Since both the long-term downtrend-line as well as the 200-day moving average are present here, this region is a formidable resistance for the rest of the year.  That said, a sustainable trough appears to be in place at Rs 40 and corrections could halt at Rs 63 or Rs 55. Long-term investors can buy the stock in declines with a stop at Rs 50.  Medium-term investors can buy with higher stops at Rs 60. Risk-averse investors can buy on a strong close above Rs 90.

Source : Businessline 19-04-09

Our Recommendation :
Our Research Team Views :

Day High Low Rs.75-67
Monthly High Low Rs.42-75
6M H/L Rs. 40-75

This share has risen sharply more than 90% in the last 6 months. The following
are the ideal ranges for buying and selling :

Buying Range : Rs.45-50
Selling Range : Rs. 70-80

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

Holding period : 2 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

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

Grasim - Add to your portfolio - Blue Chip Category

Rajalakshmi Sivam Investors in the stock of Grasim Industries can hold the stock. The company’s impressive capacities post-expansion are set to support its topline growth, even as cement despatch numbers suggest that the sector has managed to sidestep the worst of this slowdown. The sharp correction in global coal prices from $193 last year to $62 now will help the company expand margins by saving significantly on fuel cost. Grasim Industries imports nearly one-fourth of its coal requirements. At Rs 1,634, the stock trades at an attractive price-to-earnings ratio of 8 times (lower than ACC that trades at 10 PE). The demand-supply situation is also conducive now for the cement manufacturers. Higher demand from government-backed infrastructure projects and supply shortage in some pockets of the country are contributing to a firm trend in cement prices. Between February and April this year, prices have increased, on an average, by Rs 15-20 per 50 kg bag. Expansions sweep capacity issues Grasim Industries recently commissioned work at its new 3.3-million tpa clinker capacity at Kotpuli, Rajasthan. With this, the company’s total capacity has risen to 21.3 mtpa. This would help the company improve volumes tonnes and retain market share as demand revives. There are already signs of demand picking up with all-India despatches for the March quarter up by 8.5 per cent. In the Northern region, particularly, the industry estimates despatches to have grown by 16.8 per cent. Grasim has outlined a capex of Rs 940 crore in 2009-10, of which Rs 757 crore would be spent on putting up grinding units, RMC plants, waste heat recovery systems, power plants and on modernising and upgrading plants. With capacity additions and related higher borrowings, interest expenses have been on the rise for Grasim. Till last December (for the nine months of FY-09), the company’s interest expenditure had risen 30 per cent over the corresponding previous period. But what is comforting is that the company’s interest coverage ratio is still a comfortable 13 times, superior to most Sensex companies. Even if the company’s interest cover comes down to half the present (six times) levels, the company would still be well-placed to service debt. The company’s debt-to-equity ratio stands at a moderate 0.4. Cash profits for the first nine months of 2008-09 sttod at Rs 1,743.5 crore, lower by just 8 per cent compared to the previous year. Cost pressures to reduce Grasim’s cement division, which contributes nearly 80 per cent of the group’s earnings, is set to see cost benefits from the sharp fall in global coal and pet coke prices, which are key inputs. One-fourth of the company’s fuel requirements are met by imported coal and another one-fourth by pet coke and waste fuel, with the balance by coal from linkages and auctions. Power and fuel expenses, which are 20 per cent of the company’s sales, were higher by over 45 per cent year-on-year during the third quarter of 2008-09. Lower thermal coal prices, which had already fallen by 45 per cent from their July 2008 peak, did not reflect in the numbers as the company had locked into long-term contracts. High-cost inventory eroded savings made from the company’s cost-cutting efforts. The effect of reduced coal price will, however, be seen from this quarter as coal stock piles have been substantially reduced. The cut in diesel prices by Rs 2 per litre will also to an extent bring down freight expenses for Grasim. Realisation inches UP In the third quarter of FY-09, realisations across Grasim’s divisions were higher but for the VSF business, which remained a drag on profits. Realisation in the cement division was up 6 per cent and RMC up 2 per cent over the corresponding quarter last year. The Viscose Staple Fibre division saw realisations dropping by 11 per cent on a fall in domestic and export demand. Cement prices have been inching higher since the beginning of this year; prices have risen by around Rs 10-15 per bag between January and March this year. The improved demand follows increased orders from government infrastructure and rural housing projects Higher prices with despatches growth of around 9 per cent in the March quarter are expected to support sales growth in the period. While the VSF division might not post encouraging numbers following the fall in VSF prices globally, one can expect decent sequential growth in earnings for the March quarter. Source : Businessline 19-04-09 Our Research Team Views : Day High Low Rs.1675-1570 Monthly High Low Rs.1250-1675 6M H/L Rs. 900-1675 This share has risen sharply more than 70% in the last 6 months. The following are the ideal ranges for buying nd selling : Buying Range : Rs.1200-1350 Selling Range : Rs. 2400-2700 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