Intraday Trading Calls for 02nd June

Buy at Lower Levels for Intraday Trading:

Buy PFC Around Rs. 202/- Target Rs. 207-210/- Stop Loss Rs. 200/-

Buy GSS Infotech Around Rs. 188/- Target Rs. 198-205/- Stop Loss Rs. 186/-

Buy Jindal Cotex Around Rs. 105/- Target Rs. 111-116/- Stop Loss Rs. 102/-

Sell Hindalco Ind. Around Rs. 196/- Target Rs. 190-186/- Stop Loss Rs. 198/-

GOOD LUCK

Stock Idea: Garden Silk

This is a value play in the textile segment. This is a company which has got good strong brand Garden Vareli. This is a 30 year old company and the brand is well recognised and has got good brand recall. Company’s manufacturing facilities are located in Vareli and Jolwa in Surat district.

The company has extensive distribution network comprising of about 65 dealers and about more than 300 outlets in about 60-65 cities. The company has been reporting good performance quarter on quarter and also year on year.

For FY11, the company achieved sales of about Rs 3,400 crore, which is up by about 35% over the same period last year. EBITDA is about Rs 290 crore which is up by about 21%.

The company has made profit after tax of about Rs 84 crore which is up by about 33 to 34% compared to FY10. EPS for the full year is about Rs 22 so at about Rs 100 the stock trades a PE multiple of about less than 4.5.

Important thing to be noted is that this company provided about Rs 70 crore towards depreciation which means the cash profit of the company is about Rs 155 crore.

The cash EPS comes close to Rs 40 which means at Rs 100 the business is available at 2.5 years of its cash flow which I believe is small given the fact that this is not a commodity company but this is a company which has got a brand and a good distribution network.

So from the current levels, that downside looks restricted. At the same time I would like to say that this is a stock which may not move up sharply. This is one of those hedges which may not go down too much in case of market fall but it may give you steady returns over the long-term

Source: Internet (Moneycontrol.com by Ashish Chug)

Stock Idea: Spice Jet

I believe that times when the industry is not doing well can be seen as opportunities to buy the stock because you get the stock cheap. This is a company which has; the stock has dropped by 50% over the last seven- eight months. It is consolidating in the range of about Rs 38-45 for the past three-four months.

If you see the Q4 performance of SpiceJet this company has reported a loss of about Rs 60 crore. In spite of the loss of Rs 60 crore in Q4 the company has ended the full year with a profit after tax of about Rs 100 crore. The loss in the last quarter is primarily on account of higher ATF prices.

Looking at the business model of SpiceJet vis-à-vis the other listed aviation stocks, this is a company which follows asset like model, which means that it doesn’t own aircrafts but leases them. This essentially means that the capital which the company requires for business is less which is evident from the debt in the balance sheet.

Companies like Jet Airways and Kingfisher Airlines debt to the tune of about Rs 8,000 crore to Rs 14,000 crore. In comparison to that SpiceJet has debt of just about Rs 400 crore, which is negligible when compared with other aviation stocks.

If you see the full year performance of other airlines stocks Jet recorded a profit after tax of about Rs 10 crore, Kingfisher posted a loss of about Rs 1,000 crore for FY11 whereas Spicejet made a profit after tax of about Rs 100 crore. So, the financial position of SpiceJet vis-à-vis the other listed airline stocks is substantially better.

The company has been on growth path, it has aggressive plans to expand aggressively into tier two and tier three cities where it sees good growth potential. It has plans to increase the number of aircrafts from 30 to about 70 in the next three years.

Most airline companies have been increasing their fares slightly to offset the cost of higher ATF prices but given the trade-off between higher fares and the load factors, the entire cost has not been passed on to the customer but the volume growth has been good.

As the ATF prices and the oil prices stabilise these companies will benefit. But, bad times can be seen as opportunities to buy these stock and SpiceJet looks to be the best out of the lot of aviation stocks to outperform in a good environment.

Source: Internet (Moneycontrol.com by Ashish Chug)