Bharat Seats Limited - Buy on declines

Company Background :

Bharat Seats (BSL) a joint venture between Maruti Udyog (MUL) and Indian entrepreneurs, it was promoted by the Relan family with MUL and Suzuki to manufacture car seats . Technical assistance is provided by Houwa Kogyo Co, Japan, the principal supplier of seats to Suzuki Motors Co, Japan. It was having its manufacturing facility at Gurgaon in Haryana.BSL, which is the pioneer in car seat manufacture in the organised sector, has incorporated many design and raw material improvements in its products to cater to the comfort and safety aspects of driving. 

With the launch of the Zen model, it has also gone ahead with the use of ficon free material as per EEC regulations. Bharat Seats, which came out with a public issue in 1988 to set up its manufacturing facilities, is the only ancillary unit of MUL to meet the latters requirement of seat sets for cars, the Gypsy, the Omni and the Zen. With the help of M/s Houwa Kogyo Co. Ltd as a Technical Colloborator the company has developed Seat Sets locally for Marutis latest Vehicle Car-Alto.

Stock Performance:
Company has hit a 52week high of 235 and a low of 75 recently owing to the poor offtake and results below market expectations.   Investors can wait for a further fall to Rs.60 levels and enter with a view to hold long term.  

Investment Rationale :
This is a Joint venture between Maruti and Relan Group.  With a captive customer and turn around the company is likely to do well going forward

Raghav
Equty Research Analyst

Smart Investor 
Equity Research
No.24 Pattamal Plaza
3rd Cross Kammanahalli
BANGALORE 560084

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Buy - Biocon on declines

Company Background :

Biocon Limited is a biopharmaceutical company. The Company focuses to reduce therapy costs of chronic diseases like autoimmune, diabetes, and cancer. Through its products and research services it is enabling access to affordable healthcare for patients, partners and healthcare systems across the globe. The Company has developed and taken a range of Novel Biologics, Biosimilars, differentiated Small Molecules and affordable Recombinant Human Insulin and Analogs from Lab to Market. 

Company’s brands include INSUGEN (rh-insulin), BASALOG (Glargine), CANMAb (Trastuzumab), BIOMAb-EGFR (Nimotuzumab) and ALZUMAb (Itolizumab), an anti-CD6 monoclonal antibody. It has a pipeline of Biosimilars and Novel Biologics at various stages of development, including Insulin Tregopil, an oral insulin analog. Source - Investing.com

Financial Performance :

Biocon is India’s largest biologics company and an established player in research business. In FY17, small molecules, CRO, branded formulations and biologics contributed 41%, 29%, 14% and 12% respectively and the rest 4% came from the licensing fees.  In India, it is the largest biologics company and has products like INSUGEN, BASALOG, CANMAb, ALZUMAb, etc. Geographically, India contributes 30% of total revenue and 70% of revenue comes from overseas markets. 

Biocon’s early entry in the biosimilars business is positive for the company. The company, with its partner Mylan, is developing total 10 biosimilars, of which 3 (Pegfilgrastim Trastuzumab and Insulin Glargine) are submitted for regulatory submission. Company’s research business i.e. Syngene, in the last year has signed two new dedicated clients and has undertaken a capex of $200mn to expand its capabilities and forward integrate. This will help Biocon to grow its profit 6x over next five years. We expect 31.7% and 73.7% CAGR in revenue and PAT over FY18E-20E. Biocon is expected to witness 38.6% EBITDA CAGR during this period. Source 5paisa.com

Stock Performance:

During the last 1 year the scrip has given following returns 

The scrip has touched a low of 247 and a high of 472  

1 year - minus 93.95%
6 months - minus 14.63%
3 months - minus 10.32%
1 month - 22.48%
1 week - 6.15%

Recommendation :

Buy and add to your long term portfolio.  In the short term 700 will be a good resistance point.  The scrip may correct in the short term, and Rs.625 is the support level in case of a correction.  Hold long ter fo ra Target price of 765 in next 12 months and 925 for 18 months holding in view of the revenue and profit visibility.

Raghav
Equity Research Analyst

Smart Investor 
Equity Research
No.24 Pattamal Plaza
3rd Cross Kammanahalli
BANGALORE 560084

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Mail - intellinvestor@gmail.com
Whatsapp - 90083-77660 

Tejas Networks

Company Background :

Tejas Networks Ltd. is a provider of carrier grade communications equipment and solutions for telecom industry. The Company is a supplier of optical networking equipment to telecom carriers across the world. Its equipment is used by various service providers to build broadband networks, in addition to support traditional voice networks. The Company offers various products, such as TJ1400, TJ1600, TJ1400P, TJ1400 PTN, TJ1100, TJ1270, TJ100ME, TJ1500, TJ1600 and TJ5500. 

The Company offers various solutions for third generation (3G) backhaul; enterprise connectivity, including Ethernet Private Line (EPL), Ethernet Virtual Private Line (EVPL), E-Tree and Ethernet Virtual Private Tree (EVP-Tree); cable multi system operators; government broadband; campus applications, and Wholesale Ethernet, among others. It offers a portfolio of Carrier Ethernet aggregation equipment for Ethernet wholesale. Its technology facilitates various applications, such as video calls and mobile television. Source - Investing.com

Financial Performance :

Tejas Networks Ltd (TNL) is the second largest company in the Indian optical equipment market. It sells products to internet service providers and telecom, defence companies and government entities. TNL would be a beneficiary of increased data traffic for telecom operators, thus requiring continuous optical capex in a bid to remain competitive in an increasing competition environment. It also stands to benefit from being the only Indian optical network equipment company. 

Government’s capex under initiatives like BharatNet Project should aid its revenues, as project SPV, Bharat Broadband Network Ltd, is a key contributor to TNL’s revenues. Allocated spends of Rs10,000cr on the project in this Budget would also support revenue growth. TNL has advantages vs. global companies owing to low cost manufacturing. Higher revenue growth and resultant operating leverage should aid EBITDA margins. Overall, we estimate revenue CAGR of 17.2%, EBITDA margin expansion of ~160bps and PAT CAGR of 27.8% over FY18E-20E.

Stock Performance:

During the last 1 year the scrip has given following returns 

The scrip has touched a low of 247 and a high of 472  

1 year - minus 23.95%
6 months - minus 20.63%
3 months - minus 1.32%
1 month - 28.48%
1 week - 10.15%

Recommendation :

Buy and add to your long term portfolio.  In the short term 175 will be a good resistance point.  The scrip may correct in the short term, and Rs.150 is the support level in case of a correction.  Hold long term for a Target price of 200 in next 12 months and 250 for 18 months holding in view of the revenue and profit visibility.

The scrip will have wild movements on either side.  No point in buying on peaks, wait patiently for declines and buy.

Raghav
Equity Research Analyst

Smart Investor 
Equity Research
No.24 Pattamal Plaza
3rd Cross Kammanahalli
BANGALORE 560084

www.twitter.com/smartinvestor
Mail - intellinvestor@gmail.com
Whatsapp - 90083-77660  

JK Cement - A must buy for Portfolio

Company Background :

J.K. Cement Limited is an India-based holding company. The Company is engaged in manufacturing cement and cement products. Its product portfolio includes grey cement, white cement and wall putty. It offers a range of grey cement, which include Portland Pozzolana cement (PPC), ordinary Portland cement (OPC) and Portland slag cement. Its white cement portfolio includes J.K. White Cement, J.K. Wall Putty, J.K. Waterproof and J.K. Primaxx. 

White cement is used for decorative and architectural applications. J.K. Wall Putty is a white cement based fine powder, which provides a base for concrete/cement plastered walls and ceilings. J.K. Water Proof is a water repellant powder, which prevents passage of water through pores and capillaries of the concrete. JK PRIMAXX is a product used for interiors and exteriors. Its grey cement plants are located in Rajasthan and Karnataka. Its white cement and white cement-based wall putty plants are located in Rajasthan and Madhya Pradesh. Source - Investing.com

Financial Performance :

JK Cement (JKCEM), with total grey cement capacity of 10.8mtpa, would benefit from expected volume growth in North India. JKCEM sells 64% of volumes in the northern and western regions. We expect JKCEM to register strong revenue CAGR of 12.3% over FY18E-20E led by improving utilization level in North India (government spending on roads and affordable housing) and strong performance of white cement (pricing 2.5x grey cement). 

JKCEM will benefit from cost rationalization through economies of scale, commissioning of railway siding and grid connection at the UAE plant. Cost rationalization and increasing share of white cement in total revenue (33%) will aid margin expansion; EBITDA margin is estimated at 20.8% in FY20E (410bps expansion over FY18E-20E). We see PAT CAGR of 43% over FY18E-20E. - Source - 5paise.com 

Stock Performance:

During the last 1 year the scrip has given following returns 

The scrip has touched a low of 251 and a high of 398.  

1 year - minus 14.12%

6 months - minus 20.63%

3 months - minus 13.32%

1 month - 0.48%

1 week - minus 0.15%

Recommendation :

Buy and add to your long term portfolio.  In the short term 840 will be a good resistance point.  The scrip may correct in the short term, and Rs.700 is the support level in case of a correction.  Hold long ter fo ra Target price of 865 in next 12 months and 1025 for 18 months holding in view of the revenue and profit visibility.  

The company has brand and memory recall and is a monopoly in white cement and is uniquely positioned to get best sales of the products.

Raghav

Equty Research Analyst

Smart Investor 

Equity Research

No.24 Pattamal Plaza

3rd Cross Kammanahalli

BANGALORE 560084

www.facebook.com/SmartInvestor3/

www.twitter.com/smartinvestor

Mail - intellinvestor@gmail.com

Whatsapp - 90083-77660  

CDSL - Buy on declines

Company Background :

Central Depository Services (India) Limited operates as a securities depository in India. The Company offers service for a range of clients, such as depositary participants and other capital market intermediaries, corporates, capital market intermediaries, insurance companies and others. The Company offers dematerialization for a range of securities, including equity shares, preference shares, mutual fund units, debt instruments, government securities. 

As a securities depository, the Company facilitates holding of securities in electronic form and enable securities transactions (including off-market transfer and pledge) to be processed by book entry. The Company provides services for capital market intermediaries by offering know your customer (KYC) services in respect of investors in Indian capital markets to capital market intermediaries including mutual funds. It also offer other online services, such as e-voting, e-Locker, easi (electronic access to security information).

Financial Performance :

Central Depository Services Ltd. (CDSL) is the leading securities depository in India offering dematerialization (demat) services to Depository Participants (DPs) and other capital market intermediaries. CDSL’s primary segments consist of annual fees, transaction fees, annual maintenance charges and other charges contributing 39%, 21%, 2% and 38% to revenues respectively. The duopolistic nature of this industry with high entry barriers and constant rise in market share (increasing demat accounts) from 46% in FY12 to 64% in Q3FY18 bodes well for the company. 

We expect sales CAGR of 20% over FY18E-20E. The penetration in stock market at mere 2-3% provides significant opportunity to CDSL. The increase in volumes along with efforts to improve efficiency through offering single demat account to investors and enabling centralized billing system and complete bouquet of products / services will support EBITDA growth. Hence, we expect EBITDA CAGR of 22% over FY18E-20E. We see PAT CAGR of 18% over FY18E-20E.

Stock Performance:

During the last 1 year the scrip has given following returns 

The scrip has touched a low of 251 and a high of 398.  

1 year - minus 39.12%
6 months - minus 14.63%
3 months - minus 12.32%
1 month - minus 4.48%
1 week - minus 4.15%

Recommendation :

Buy and add to your long term portfolio.  In the short term 300 will be a good resistance point.  The scrip may correct in the short term, and Rs.230 is the support level in case of a correction.  Hold long term for a Target price of 365 in next 12 months and 425 for 18 months holding in view of the unique business model and booming primary & Mutual Fund markets.

Investment rationale :
The companies IPO oversubscribed 70 times in June 2017 and had peaked out at 398 it has been declining ever since and is now hovering near 52 week low of 250.  A further slide is not ruled out from current levels.

Raghav
Equty Research Analyst

Smart Investor 
Equity Research
No.24 Pattamal Plaza
3rd Cross Kammanahalli
BANGALORE 560084

www.facebook.com/SmartInvestor3/
www.twitter.com/smartinvestor
Mail - intellinvestor@gmail.com
Whatsapp - 90083-77660