Tuesday, July 26, 2011
Buy Bharti, Idea and RCom on dips
Shares in Idea Cellular Ltd hit its 52-week high of Rs 94.35 in early trade today. At 12:42 PM, shares in the company were trading 7 per cent higher at Rs 91.25.
Shares in Bharti Airtel hit its 52-week high of Rs 428.20 in early trade. At 12:41 PM, shares in the company were trading 3.6 per cent higher at Rs 426.00. "Bharti Airtel Ltd increased tariff by 20 per cent in six circles which fairly contributes 36 per cent to the revenue of the company", says Karan ofICICI Direct in an interview with ET Now.
"Looking at a 20 per cent hike which should probably on the prepaid side it would result in 50-55 bps increase in EBITA margins for the consolidated entity for FY12 and 70% for FY13", adds Karan
According to media reports, Bharti Airtel Ltd is the second telecom player to increasecall rates afterTata Docomo which raised tariffs in one-two circles two months ago to protect falling margins and increasing revenue. The tariff for Bharti Airtel hiked for the first time since October 2009.
Most analysts expect overall impact of 2-3% on revenue per minute (RPM). The RPM is expected to improve from 45 paise to 46-47 paise forBharti Airtel Ltd.
"I was positive on Bharti Airtel Ltd in that sector and continue to remain bullish on that stock even from here on" adds Mehrab Irani, Investment Manager,Tata Investment Corporation Ltd in an interview with ET Now.
"This move particularly on the prepaid side is more positive because the prepaid service was the point where the lots of ARPUs were not so good and they were actually very low", adds Irani.
Telecom shares were in demand after Bharti Airtel raised call tariffs up to 20 per cent in six circles, triggering expectations other firms will follow soon to protect their eroding margins.
"Idea Cellular Ltd and Vodafone might soon get in line to increase their respective prices in near term", adds Karan.
Reliance Communications Ltd shares jumped as much as 6 percent to their highest level in about two weeks. At 12:30 PM, shares in the company were trading 6.5 per cent higher at Rs 99.70 on BSE.
Trading Calls:
"Bharti Airtel Ltd and Idea Cellular Ltd broke out to their fresh 52-week high on back of large volumes. Bharti Airtel will see levels of Rs 435-440 and traders and keep a stop loss of Rs 390-395", says Ashwani Gujral in an interview with ET Now.
"Idea Cellular Ltd has broken out after being in a tight range for several days and can see target of Rs 95-96 and traders can put a stop loss of Rs 78-80.
ICICI Direct maintains a 'BUY' on Bharti Airtel Ltd with a target price of Rs 398 and for Idea Cellular Ltd the brokerage maintains 'HOLD' with a price target of Rs 70.00.
"In case of Bharti Airtel, even current levels are good enough if you are a slightly long term trader which means if you are prepared to wait for a few weeks, you do not mind buying at current prices also", says Sudarshan Sukhani of Technical Trends in an interview with ET Now.
"For very short term traders, you want consolidation, small dips to enter but Bharti has much higher targets ahead, I am not so upbeat on Idea", adds Sudarshan.
Well not all analysts are upbeat on the stock some warn of caution while trading in Bharti Airtel's shares as the prices have already perked up from its 52-week low of Rs 292.70 on 22nd July, 2010.
"The price hike trigger is positive news for Bharti Airtel Ltd of course but in terms of valuation, we have got to be careful", adds Ajay Srivastava, Dimensions Consulting Pvt Ltd in an interview with ET Now.
"It has already gone up quite substantially, so if they are chasing the valuation now, it is at a risk today", adds Ajay. "We are chasing the last leg of the immediate rally in Bharti Airtel, so we have got to be careful when we are buying the stock", adds Ajay.
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Thursday, July 21, 2011
L & T Buy on dips
Revenue segregation: Its business operations are categorised in three segments, as given below:
a) Engineering & Construction (E & C) segment
b) Electrical & Electronics Segment
c) Material Handling & Industrial Products
L & T has performed robustly in all its parameters over the last 10 years. Its impressive fundamentals in the past form a strong base for its future.
L&T has clocked an impressive CAGR of 67 per cent in its EPS (earnings per share) which has been possible due to the strong investment back into the business which is evident from its high BVPS (book value per share) CAGR of almost 50 per cent. Also, it has improved its margins over the years from a stagnant average of 10 to 11 per cent from FY 03 to FY 06 to 15 per cent in the last 4 years. In fact in 2010 the company's operating margin has increased to 19 per cent.
It's sales have registered a CAGR of 19.6 per cent over the last 10 years, indicating a good order inflow over the years. Over the past 5 years the CAGR of order inflows has been 33 per cent. This has helped the company register an impressive 67.2 per cent CAGR over the last 10 years.
The company has been witnessing an increase in order inflows since the past few months. Order inflow for the quarter ended June 2010 was Rs 15626 crore, up 63 per cent on y-o-y basis. The company expects increased bidding activities in the next few months and expect this momentum to continue. As of June 2010 the company has a healthy order book of Rs 1,00,239 crore to be completed over the next 2 to 3 years. Recently, the company bagged 2 projects worth Rs. 1200 Cr. from ONGC to set up additional processing units at its plants. Hence, this is expected to ensure good revenue growth in the coming quarters.
L & T is one of the leading players in the Indian engineering industry. It is poised for good growth in future considering the government focus and spending on infrastructure & power, its strategic plans and capacity expansions. But it needs to work on a plan to manage its operating inefficiencies.
The scrip has been a slow performer for the past 1 year and is expected to do better going forward
Time Span | Price | Change | %Change |
Today | 1,790.05 | -8.35 | -0.46 |
Week | 1,800.55 | -2.15 | -0.11 |
Month | 1,658.55 | 139.85 | 8.43 |
Three Months | 1,703.90 | 94.50 | 5.54 |
Six Months | 1,649.05 | 149.35 | 9.05 |
One Year | 1,902.20 | -103.80 | -5.45 |
The company has a strong support around 1600 levels while 2000 range would be huge resistance, getting past it can go to 2500 mark swiftly. Buy for Portfolio and long term !
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Tata Motors Buy on correction
Tata Motors, a leading player in the global and domestic auto industry, benefited from a sharp improvement in the performance of its Europe-based marquee brands Jaguar and Land Rover (JLR) during FY11. Apart from strong vehicle sales growth, especially in China and Russia, the company's cost-saving measures in Europe also paid off.
As a result, the company's JLR operations reported a segment profit of Rs 7,700 crore for FY11, a rise of more than 140 times from a year earlier, while revenues in this segment grew by 42.3 per cent y-o-y to Rs 70, 218 crore. Total JLR sales grew 25 per cent y-o-y to 2.41 lakh units in FY 11 on strong demand.
JLRs operations accounted for nearly 57 per cent of Tata Motor's consolidated revenues of Rs 1,23,133 crore (approximately $27.4 billion) during FY11, and helped the company to deal with higher commodity input costs. Tata Motors has also improved its ranking in the latest Fortune Global 500 list to 359, from last year's rank of 442.
Tata Motors will shortly launch the SUV Evoque in Europe. Consumer interest for this model is understood to be strong. This should help the company to deal with the fallout of the European debt crisis. In addition, there are fears of a slowdown in the fast-growing BRIC countries. This has cast a shadow on its growth momentum in the short term. In the domestic market, auto finance rates are on the rise and there are signs of a slowdown in the broader auto sector. Tata Motors' consolidated vehicles sales (including JLR) grew 11 per cent y-o-y in the first two months of this fiscal.
Tata Motors is understood to have received strong consumer interest for its SUV Evoque, which will be launched soon. This should drive growth in Europe in the short term.
In its domestic operations, however, rising auto finance rates remain a key cause for concern. Also, while commodity prices have shown signs of easing, they still remain at elevated levels. The company has also approached the judiciary with regard to its dispute with the West Bengal government for its Singur land.
Investors could consider Tata Motors as an investment on a long-term basis. While 900 acts as a strong support 1200 could be big resistance, getting past it has a potential to reach 1500 in the next 1 year
Time Span | Price | Change | %Change |
Today | 975.55 | 6.85 | 0.70 |
Week | 1,043.65 | -74.95 | -7.18 |
Month | 930.25 | 38.45 | 4.13 |
Three Months | 1,243.85 | -275.15 | -22.12 |
Six Months | 1,188.20 | -219.50 | -18.47 |
One Year | 812.50 | 156.20 | 19.22 |
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Coal India - Buy on dips
Coal India is the largest producer and reserve holder of coal in the world with raw coal production of 431 million tonnes (MT). CIL operates 471 mines across 21 coalfields (this includes 163 open-cast mines, 273 underground mines and 35 mixed mines). The company produces coking and non-coking coal and also undertakes beneficiation of raw coal.
CIL transports approximately 47 per cent of sales volume through railways. Hence, availability of rake is of key importance. Historically, CIL has been facing a lot of issues on availability of rakes, which has led to lower offtake and higher inventory at the pit head.
In FY11, during the first half of the year availability of rakes was slightly lower (approximately 158 rakes per day [rpd]), whereas the full year average was approximately 162 rpd. However, in order to address this issue, the Indian Railways has assured CIL of higher availability of rakes. Rakes availability has improved in April 2011 to approximately 177 rpd from approximately 154 rpd in April 2010.
For May and June 2011 rakes availability has improved to approximately 166 rpd and approximately 161 rpd, respectively, from approximately 150 rpd each in May and June 2010.
CIL plans to add 20 new coal washeries (of which 15 would be non-coking coal and five would be coking coal) with a capacity of 111 MT. It currently has 17 coal washeries with a capacity of 39.4 MT. Washed coal commands higher realisation compared to raw coal. Hence, going forward, higher realisation due to higher sales from washed coal will lead to strong growth in revenues of CIL.
A major cost to CIL is wage cost, which accounts for approximately 47 per cent of the total cost (FY11). The national wage agreement IX is due in July 2011, which will subsequently lead to higher wage cost. However, CIL has been proactive and has undertaken a price hike in February 2011 (increase of approximately 12 per cent in blended realisations as compared to Q3FY11).
Even in case of a steeper increase in wage cost, we believe the company has enough levers & headroom to neutralise the impact. Hence, we expect CIL's EBITDA margin to remain intact at approximately 22 per cent.
Currently, as per Planning Commission estimates, the coal deficit in India in FY12 is expected at approximately 142 MT, indicating huge demand for coal. With the ramp up in production and liquidation of inventory, the revenues and profitability of CIL are slated to post healthy growth, going forward.
Since the listing the scrip has been doing wonders. Buy around 350 levels for a sure target of 450 in the next 6 months
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ITC - Buy
ITC is the market leader in the Indian tobacco space, as its foray into FMCG, particularly foods and cigarettes. The company has been able to build strong positions in completely new businesses such as soaps, packaged staples and snacks over the past few years. This adds another strong leg to the medium-term growth prospects for ITC.
Dominant player in tobacco space: ITC is by far the biggest player in cigarette market with a strong -- 70 per cent market share is more than 5x the size of its nearest competitors.
ITC Ltd., a well-established player in the food space in India with presence across segments such as packaged staples, finger snacks, biscuits and packaged foods.
ITC has significantly invested in expending its food business portfolio and the related supply chain which helped the company to create strong backbone. The company is expected to deliver strong earnings growth in medium term considering packaged and processed food as the next growth driver.
Agri business -- Benefits from continued mix change: The company's conscious decision to focus on higher profitability products and move away from lower-margin products like sesame, rice, pulses, etc., in FY09 resulted in EBIT (earnings before income and tax) margins increasing to 11 per cent in FY09 (vs. 5.2 per cent in FY08).
Leaf tobacco is at present 50 per cent of category sales -- with soya, coffee and wheat accounting for the rest. The company expects to sustain margins, though volumes/revenue growth might decline on account of lower leaf tobacco output due to unseasonal rains.
Time Span | Price | Change | %Change |
Today | 206.50 | 0.75 | 0.36 |
Week | 203.40 | 2.35 | 1.15 |
Month | 186.55 | 19.20 | 10.29 |
Three Months | 190.10 | 15.65 | 8.23 |
Six Months | 168.95 | 36.80 | 21.78 |
One Year | 145.73 | 60.02 | 41.18 |
In spite of high valuations, ITC seems a good long term pick. The retuns table given below shows the scrip performance which has gained 45% during the last one year. Buy around 175 levels for a target price of 250 holding period 6-7 months.
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Bharti Airtel - Buy
The company provides services to all 23 telecom circles of India. Bharti's mobile network covers approximately 81 per cent of the country's population. Bharti Airtel has been the leader in market share (on subscriber base) as well as on turnover basis. Also, it generates the maximum Average Revenue Per User.
Bharti vs the telecom industry:
Outperformed the industry's net profit margin in the last 3 years.
Where the industry profit margin has shown a declining trend since 2007, Bharti has mantained a stable net profit margin
Inspite of intense competition, it mantained 20 per cent+ net profit margin in the last 8 quarters
Bharti Airtel has proved itself in the past by performing better than all its peers. It is well-poised for growth in the long term due to the growing telecom market, the competitive advantage of its leadership position and opportunities available in the 3G space.
Competition is giving it a bumpy ride right now, but it is well-armed to fight and remain successful.
Time Span Price Change %Change
Today 395.20 -0.05 -0.01
Week 394.05 1.20 0.30
Month 389.30 5.95 1.52
Three Months 376.60 18.65 4.95
Six Months 336.60 58.65 17.42
One Year 297.00 98.25 33.08
The has been performing well during the last 6 months and is likely to post decent returns. Long Term investors should buy the scrip around 350 levels for a target price of 425 levels
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Sunday, January 9, 2011
NSE Review 7th Jan 2011
Nifty recorded the peak at 6181 on Monday before ending the week 230 points lower. The short-term trend in the index is down and it will face resistance at 5998 and 6068 in the days ahead. Traders can initiate fresh shorts if the index fails to rally beyond the first resistance. Downward targets would be 5801 and 5721 for the short-term.
The medium-term downtrend from the 6335 peak appears to be continuing in the Nifty and this leg of the down move has the targets of 5801, 5567 and 5332 over the medium term. It however needs to be borne in mind that the index receives strong support in the zone between 5700 and 5800 from where a rebound is possible.
A strong close above 6068 will negate the bearish medium-term view and take the Nifty to 6167 or 6343 in the upcoming sessions.
Global CuesGlobal markets have ended the first week of 2011 on a mildly positive note. There were no runaway rallies in any market but most benchmarks managed to close in the green. CBOE Volatility Index closed a tad lower at 17.4 indicating a status quo as far as investor sentiment is concerned. As we have written earlier, a strong close below 15 in this index will imply that global stocks are in a raging bull market.
But the VIX reversed higher from this level in the last week of December.
The Dow closed on a very strong note, up 119 points last week. Medium-term targets for this index remain at 11,867, 12,000 or 12,444. Close below 11,450 is required to make the near-term outlook negative for Dow.
Many of the Asian benchmarks such as Hang Seng, Karachi 100, Malaysia's KLSE Composite, Nikkei, Seoul Composite, Straits Times Index and so on put up a strong performance last week.
Thursday, January 6, 2011
Apollo Tyres Sell
We recommend a sell in the stock of Apollo Tyres from a short-term perspective. It is seen from the charts of the stock that after recording an all-time high of Rs 88.8 in September 2010, it changed direction and has been on a medium-term downtrend. In early December, the stock encountered resistance at Rs 72 — a significant intermediate-term resistance level and resumed its downtrend. Moreover, the stock once more encountered resistance just below this key level around Rs 71, where its 200-day moving average also provided resistance and tumbled 4.7 per cent with good volumes on Wednesday.
With this decline, we observe that the stock has formed a bearish engulfing candlestick pattern that implies bearish reversal. The daily relative strength index has re-entered in to neutral region from the bullish zone and weekly RSI is hovering in the neutral region. Daily moving average convergence divergence oscillator is featuring in the negative territory and weekly MACD is on the verge of entering this territory, indicating a downward momentum. Our short-term forecast on the stock is bearish. We expect it to decline further until it hits our price target of Rs 65 or Rs 63 in the approaching trading sessions. Traders with short-term perspective can consider selling the stock with stop-loss at Rs 69.5.
Yoganand D.
BL Research Bureau
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