Stock Idea: Rane Madras

Rane Madras (Rs 89)

(Bse Code- 532661 Nse Code- Rml)

(P/E- 6.5, Dividend Yield-5%, Fy10 Sales-415 Cr., Market Cap- 90 Cr.)

Rane Madras (RML), the flagship company of the Rane Group, is a leading manufacturer of automotive components like steering linkages, ball joints, axial joints, suspension joints and manual steering gears. RML, established in 1960, operates in two business segments - steering & suspension linkage products and manual steering gear products. RML’s principal activity is to manufacture components for transportation industry. It manufactures the components for passenger cars, utility vehicles, small commercial vehicles, light commercial vehicles, medium and heavy commercial vehicles, three wheelers, two wheelers and farm tractors. The Company has high standards of manufacturing, which gives it an edge over its competitors. It has five manufacturing plants, one each in Chennai, Kanchipuram, Mysore, Uttarakhand and Pondicherry, with a combined capacity of 10.5 million units for linkage products and 0.6 million units for steering gears. It has a technical collaboration with TRW Inc, USA for linkage products. RML has 20 overseas customers most of them OEM’s including names such as Chrysler.

Subsequent to the restructuring exercise in 2005, RML has positioned itself as a steering gears & linkages company. Earlier, it used to manufacture both, steering linkages and steering columns. RML derives 74% of its revenues from domestic OEMs, 15% from exports and 11% from the replacement market. RML’s key customers in the domestic market include Tata Motors, Ashok Leyland and M&M. RML also exports manual steering gears to Iran for the Kia-Pride platform. RML’s exports to TRW, its technology partner, account for 75% of its total exports. Sustained spending on infrastructure and continued thrust on agriculture are the beneficial factors that would aid LCVs, PVs and tractors. This is turn is expected to result in larger volumes for RML that would result in growth in margins and profits. RML is the supplier of steering components to Tata ACE – a mini truck with sub-one tonne capacity. Tata ACE was launched by Tata Motors in FY06 and has received tremendous response in the market.

For the nine months ended Dec. 2009, RML has posted net profit of Rs 8.8 cr. on net sales of Rs 300 cr.. The company also declared an interim dividend of 25% after the Q3 results. For the year ended March 2010, RML’s figures were net sales of Rs 415 cr.(up 20%) and net profit of Rs 13.8 cr.(against loss of 36 lakhs in FY09). The FY10 EPS is Rs 13.6 on a equity of 10.16 cr.(Promoters’ stake-55%) and a final dividend of 20% has been declared making the total dividend for FY10 at 45%(Rs 4.5 per share) RML has reduced its dependence on manual steering gears. It has shifted focus to Linkage products that are used both in manual and power steerings. Going forward, this ratio will tilt in favour of Linkages and this change in the product mix will improve the Margins. RML is a leading player in the manual steering and linkage products, in the domestic market, with more than 50% market share. With the strong growth momentum in its key customer segments, the Company stands to benefit. At the current market price of Rs 89, the stock is available at PE of 6.5x its FY10 of (Rs 13.6). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-45% over the next 8-10 months. Accumulate

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Federal Mogul Goetze (India)

Federal Mogul Goetze (India) (Rs 112)

(Bse Code- 505744 Nse Code- Fmgoetze)

(P/E- 10, Promoter’s Stake-74.98%, Equity- 55.63 Cr., Market Cap- 623 Cr.)

Goetze (India) Limited was established in 1954 as a joint venture with Goetze-Werke of Germany. Goetze-Werke of Germany is now owned by Federal-Mogul Corporation, a $6.3 billion global company and one of the leading manufacturers of automotive components in the world. In 2006, US-based Federal-Mogul acquired the Indian promoters’ stake, raising its holding to 50.11%, to take control of the company after which the name of the company changed to "Federal-Mogul Goetze (India) Limited"(FMG). Federal Mogul, one of the promoters of Goetze (India) and a US auto-parts major acquired 62,30,000 equity shares of the company at Rs 222.50 per share, constituting 24.64% of the equity share capital. There was rights issue in 2008 at Rs.56 per share, which did not get adequate response from the investors and promoters subscribed to the Shares and increased their holding to 74.98%. FMG has a paid-up equity capital Rs 55.63 cr. of which promoters hold 74.98%., FII/MF’s hold 12.07%, Bodies corporate hold 3.24% and Public holds 9.71%

FMG is the largest manufacturer of pistons and piston rings in India. The parent Federal-Mogul is a leading auto-ancillary company with a very strong presence in the diesel vehicles segment. FMG is involved in the manufacture of auto components like pistons, piston rings, sintered parts and cylinder liners covering a wide range of applications including two/three-wheelers, cars, SUVs, tractors, light commercial vehicles, heavy commercial vehicles, stationary engines and high output locomotive diesel engines. FMG has 4 manufacturing facilities at Bengaluru (Karnataka), Parwanoo (Himachal), Bhiwadi (Haryana) and Patiala (Punjab) and 22 pan India marketing offices. It makes the widest range of piston rings and pistons varying from 30mm to 300mm diameter. It also manufacturers sintered parts light metal castings and cylinder liners covering a wide range of applications including two/three-wheelers, cars, SUVs, tractors, light commercial vehicles, heavy commercial vehicles, stationary engines and high output locomotive diesel engines. It is market leaders both in OEM and aftermarket. Besides, about 10% of its business is from exports. Within the original equipment manufacturing (OEM) segment, FMG’s revenues are spread across all auto players including Tata Motors, M&M, Bajaj Auto and TVS. There are also expectations that the US based auto parts major parent may use FMG as an outsourcing hub.

For the Q1 ended March 2010, FMG has posted 31% rise in net sales to Rs 209.1 cr. whereas net profit increased 29% to Rs 11.35 cr. on standalone basis. For the year ended December 2009, FMG had posted net sales of Rs 785.32 cr. and net profit of Rs 54.52 cr. on consolidated basis. On a equity of 55.63 cr. the EPS stood at Rs 9.8. For the year ended December 2008, FMG had posted net sales of Rs 706.6 cr. and net loss of Rs 6.89 cr. The Indian automobile industry is on fast revival after tough period. 2-Wheelers and passenger cars sales are already in “Topgear”. With confidence returning in economy, CV and Capital goods sales are likely to see upward trend after almost 2 years of slow down. Increased focus on rural economy can boost tractors sales in a big way. Going forward, FMG is expanding its capacity, by installing a new plant at Chennai, which is likely to begin operations next year. At CMP of Rs 112, the FMG stock trades at 11.4 times CY09 earnings (Rs 9.8) and at 9.3 times expected CY10 earnings(Rs 12), which is attractive for a company that is the biggest player in its line of business. From Rs 449 on 5 January 2007, the scrip tumbled to Rs 28 by 9 March 2009. In view of the improved results, strong parent and good medium term prospects, Investors can start accumulating the stock at current levels and add more on declines for decent returns of 45%-50% over the next 8-12 months.

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Ideas: Fortis, GMDC, Aban, Mphasis

Fortis Healthcare (Rs. 147.00) (Code : 532181) : Fortis Healthcare jumped more than 6% on Friday after Malaysia's sovereign wealth fund Khazanah offered to raise its stake in Singapore healthcare firm Parkway Holdings to 51.5% for $835 million. Khazanah's Integrated Healthcare unit has offered Singapore dollar 3.78 a share for Parkway, a premium of 25% over Parkway's last traded price. This will allow it to raise its stake in the Singapore firm to 51.5%. Currently, it has a stake of nearly 24%. Khazanah's offer price represents a 6.17% premium to the price at which Fortis had acquired stake in Parkway in March 2010. Fortis had acquired 23.9%  stake in Parkway Holding at Singapore dollar 3.56 per share from US buyout firm TPG, aggregating in a deal worth $685 million. The stock has corrected quite a bit after it touched record high of Rs. 188 on 12th March. Buy the stock immediately.

GMDC (Rs. 121.00) (Code : 532181) : Gujarat Mineral Development Corporation reported jump of 28.2% in its net profit. The profit rose to Rs 90.49 crore on 9.3% increase in net sales to Rs 345.82 crore in Q4 March 2010 over Q4 March 2009. Gujarat Mineral Development Corporation (GMDC)'s net profit rose 18.4% to Rs 279.87 crore on 9% increase in net sales to Rs 1065.22 crore in the year ended March 2010 over the year ended March 2009. The board of directors of the company recommended a dividend of Rs 2.50 per share (125%) for the year ended March 2010. The stock hit a high of Rs 124.45 and a low of Rs 122.05 so far during the day. The stock had hit a 52-week high of Rs 187.70 on 19 January 2010 and a 52-week low of Rs 68.30 on 13 July 2009. It is very safe at current level. Buy.

 

Aban Offshore (Rs. 716.00) (Code : 523204) : Drilling services firm, Aban Offshore, on Tuesday reported a consolidated net profit of Rs 39.26 crore for the March quarter against a consolidated net loss of Rs 93  rore in the same period previous fiscal. Total income rose to Rs 1,020.98 crore in the fourth quarter of the past fiscal, from Rs 774 crore in the same period last year. The company board has proposed a dividend of Rs 3.60 per share, or 180 per cent, on the face value of Rs 2 each to the shareholders. The company has approved fund raising of USD 400 million through issue of FCCBs, GDRs, ADRs etc and QIP of upto Rs 2500 crore. Earlier, Aban Offshore had secured an order for deploying a jack-up rig in the Middle East. The estimated revenue from the contract with an estimated duration of approximately four years is around $187 million. The rig will be deployed in the second quarter of calendar year 2010. The stock has corrected from

Rs. 1200 plus to Rs. 650 within one month. It has now become attractive. There is very less to lose and huge to gain.

Mphasis (Rs. 580.00) (Code : 526299) : Angel Securities has maintained a buy on this stock with a target price of Rs 872, in its report dated May 27, 2010. The report says, "Mphasis reported strong performance for 2QFY2010 with revenue growing by 2.4% qoq to Rs 1,221 crore, in line with our estimate of Rs 1,223 crore. Revenue in dollar terms grew by 5.3% to US $270mn. Growth was largely contributed by robust volume growth in the ITO (up 10.5% sequentially) and application services (up 3.8% qoq) segments. The company continued to witness strong deal wins, with an addition of 22 clients, including 14 through the HP channel." The company will maintain its revenue outperformance in the industry because of its robust business flow from the HP channel. Buy.

Source (Internet Smartinvestments)

Stock Idea: Garware Polyester

Garware Polyester (Rs. 89) (Code : 500655)

Mumbai based Garware Polyester Ltd is the largest manufacturer of Polyester films in India. In fact, GPL is the first Indian company to start production of polyester films. Its brand ‘Sun Control” film has become a household name in India and it is patented in 16 countries and is exported to over 40 countries. Main application of polyester films are: · Solar control · Packaging · Reprographic Surplus Land: GPL has its office in Mumbai, very close to domestic and international airport. GPL is likely to shift its office elsewhere and sell this land in near future. Sale of Mumbai land alone should fetch more than Rs 400 cr.
Stock is available at 3.85xFY10E Eps which is extremely low considering  pioneering status of GPL in polyester film industry. Recently, share price had  gone upto Rs 110/. Investors may buy big quantity of GPL as scrip can appreciate at least 60- 80% in stable market conditions in less than 1 year. If land sale materialises, then scrip can give more than 200% appreciation.

Source: Internet (SmartInvestmetns)