Investment Idea: Chemfab Alkalies

Buy Chemfab Alkalies at current levels, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Chemfab Alkalies manufactures caustic soda. Incidentally this was the first company in the country to have introduced the membrane cell technology which they did way back in 1985. Now there was a small incidence of gas leak in this company in the month of January. Though this was a small incidence but it was probably blown out of proportion and the plant remained closed for more than 3 months. Only after they filed litigation in the high court the plant got reopened in the month of May."

He further added, "Now the effect of closure of plant was reflected in both the March quarter and June quarter numbers wherein it reported a loss of about Rs 1.3 crore in the March quarter and about Rs 2 crore in the June quarter. Now looking at a full year number this company in spite of a loss of Rs 1.3 crore in the March quarter, ended the year with a profit after tax of close to Rs 9.7 crore as against Rs 7.2 crore in FY10."

"In Q2 also this company has reported sales of about Rs 24.25 crore which was up by about 4% and the profit before tax was up by 40% but profit after tax was down by 30% on account of an additional tax provision of Rs 2.5 crore pertaining to the previous years. Now if that provision had not been made, the quarter profit would have been more than Rs 4 crore."

"This company had a debt of about Rs 25 crore 5 years back. The company has been purling its debt and today it's a debt free company. Now looking at the valuations of the company currently the stock trades at about Rs 40 and the market cap is about Rs 37 crore. This is a totally debt free company and as on 31st March 2011 this company had cash and cash equivalents of close to Rs 23 crore which means that you have this business which is available at a business valuation of about Rs 14 crore."

"If you see the numbers of FY11 closely, the cash profit alone was about Rs 17 crore. In a normal year this company is able to make a profit after tax of about Rs 12-13 crore and a cash profit of close to Rs 20 crore. Gross block is about Rs 150 crore. So given all these things of course the numbers for first 3 quarters – the 3 quarters have not been very good but these are because of certain reasons which are not recurring in nature."

"Going forward we can see this company report good profit for the coming quarters and I think at a business valuation of Rs 14 crore, debt free, this company paid a dividend of about 50% for the last two years. Before that some years it had also paid about 100% dividend. It is a Rs 5 paid up stock and dividend yield at the current price comes to about 6.5%. So given all these factors I think this stock looks to be a value buy at the current price and I think it has got minimum downside from these levels."

Source: Internet (By Ashish Chugh)

Investment Idea: EON Electric

Ashish Chugh, Investment Analyst & Author of Hidden Gems shares his view Eon Electric . Chugh told CNBC-TV18, "In this kind of a market you have companies which are trading well below their cash values and Eon Electrics is one of them. This company had the 3 business divisions. This company sold the switchgear division to Legrand of France about a year back and realized an amount of Rs 400 crore from that sale." He further added, "Now after the deal was announced the stock price has fallen by about 75% from about Rs 150 which it touched after the deal got announced and currently trades at close to Rs 38-40. This is primarily on account of the fact that even though this company got realization of more than Rs 200 net of tax per share, the shareholders got just about Rs 10 as dividend." "Now you have one set of companies where there has been a massive increase in shareholders valuation, company like Andhra Paper where the promoters have chosen to sell the company as against selling a business and all the minority shareholders have been benefited by way of the open offer made by the acquirer. On the other hand you have another set of companies where the promoters have chosen to sell a part of their business even though that business was contributing 85-90% of the revenues. Companies like Zicom, GC Venture, Laffans Petro, Smartlink, where the shareholders value has been badly eroded primarily on account of the fact that there is a concern whether the money which has come from the sale will actually flow to the benefit of the shareholders. Eon Electric is no exception." "Eon Electric has got cash and cash equivalents of roughly Rs 300 crore. Company is totally debt free and after the sale of switchgear division, this company is left with cable and lighting business. The gross block is about Rs 58 crore where the market cap of this company is just about Rs 70 crore at the current price and leave aside the residual businesses and the assets which are left, this company has got cash – the market cap is just about less than 25% of the cash it is holding." "I think with these kinds of valuations the investors have probably got reconciled to the fact that this cash, which has come in, may not really flow towards a benefit of the minority shareholders. There is definitely a concern that this cash may not be put to good use but I think at the current market price those concerns have probably got fully factored in on the price." "Any steps now by the management which changes a perception and gives a feeling to the minority shareholders that this money may actually be utilized for value creation and for benefit of all shareholders and not just the promoter, shareholder group or may be if the promoters decide to give more dividend to the shareholders, I think those things may lead to a rerating in the stock price. Whether that happens or not I think only time will tell and that is anybody’s guess at that point of time. I believe the negatives are probably priced in at the current market price of the stock."

Source: Internet (By Ashish Chugh)

Stock Idea: Patni Computer

The company had a dismal Q2, where its operations were affected largely by the change in the management and ownership. And looking at the Q3CY11 performance, it seems most of the integration pain has been absorbed. The results were better than expected with the company posting a net profit of Rs.90 crore v/s a net loss of Rs.51 crore in current Q2. Total income grew by just 2% . To a large extent, net profit was helped due to 16% decline in personnel costs at Rs.519 crore. The company laid off a few employees post its iGate acquisition; with the total employee strength now at 17,853, which is 519 employees lesser than Q2. Forex gain of Rs.36.39 crore also helped. Revenue realization in Q2 was at Rs.44.72/us$ and in Q3 it was at Rs.49.50/us$ which in itself was a huge advantage.

 

Looking ahead, the company will end 2011 with all the integration pain behind it and though YoY performance at the end of the year might seem under pressure, it is good to know that it is entering 2012 with a clean slate, a new management, fully integrated. iGate Corporation acquired a 82.4 per cent stake in Patni Computers in May 2011. During the quarter, the company generated cash flow of Rs.11.64 crorefrom operating activities and net cash flow was placed at Rs.213.26 crore. Q4 could be better and in 2012, the new management is sure to infuse more vigour into the company. The real spike up in the stock will come once the company announces delisitng, which seems like a certainty. This could happen over the next 6 to 12 months and those with the holding capacity can buy into the stock on not just delisitng expectations but also on strong earning outlook.

Source: Internet (By S P Tulsian)

Stock Idea: Narmada Gelatin

Accumulate Narmada Gelatin below Rs 100, says Ashish Chugh, Investment Analyst.

Chugh told CNBC-TV18, "We like the stock of Narmada Gelatin for two reasons. First is this is a debt free co which is available at very attractive business valuation and also provides margin of safety. The second reason is the possibility of the company getting sold in the future and this event as and when it happens may lead to a huge value unlocking for the company in the future.”

He further added, “This is belonging to the Shaw Wallace Group and manufactures gelatin and this is a 50 years company. The user industries for the company’s products are primarily pharma and food industry.”

“If you look at the financials of the company for FY11, this company has achieved sales of about Rs 91 crore, which was up by about 10% in the same period last year. Profit after tax was up by about 15% to about Rs 9.5 crore. This company has got a small equity of about 4 crore. So EPS for FY11 was about Rs 23.50. At the current price of Rs 95 this stock is traded at a PE multiple of just about 4-4.5.”

“The reason I am saying that - the business is available at attractive valuations because if you look at the balance sheet of the company - now this is a totally debt free company. The net current asset in the balance sheet is close to Rs 26 crore - I am talking about FY10 balance sheet. The company has got investment in mutual fund of about Rs 5.5 crore. If you add the profit for FY11 into this - you get total current assets and cash of about Rs 41 crore. As against current assets of about Rs 41 crore the market cap of this debt free company is less than Rs 40 crore, which means that the biz of a company which is 50 years old is available virtually free of cost.”

“The promoter holding is about 75%. The company recently announced a dividend of 40% which at the current price of Rs 95 would result in a dividend yield of more than 4% for the investor. This company caters to a sector which is more steady compared to many other sectors. Pharma and FMCG is a sector, which is not really getting affected by the slowdown. The stock is available at a discount to book value. This is a 50 year old company having gross block of about Rs 50 crore. I think the current valuation will be substantially higher.”

“If you see the Shaw Wallace Group - they have been slowly selling most of their companies. Their flagship company - Shaw Wallace and Company, the other companies like Hindustan Dorr-Oliver, Mather & Platt Pumps, Falcon Tyres, Gordon Woodroffe - I think all these companies have got sold in the last few years. Narmada Gelatin is probably lying unsold mainly because of the fact that management may not have got an attractive valuation. So this is a business which is giving you a dividend yield of 4%.”

“It is steady stock, steady growth in the financials of the company. Whether and when this company gets sold is anybody’s guess. But I think in spite of that, given its steady performance over so many years and the attractive valuation - stock has got the potential to get re-rated. So I think any price below Rs 100 maybe a good opportunity to accumulate the stock."

Source: Internet (moneycontrol.com by Ashish Chug)

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)

Stock Idea: Mahindra Satyam

The market was grossly disappointed with the numbers of Mahindra Satyam for Q4FY11. It posted a consolidated net loss of Rs.327 crore despite a 7.5% rise in revenue. But this loss was mainly on account of the one time exceptional expenditure spent on lawsuit settlement. Exceptional items was to the tune of Rs.571.5 crore in Q4FY11 related to restructuring, forensic investigation and litigation support, class action settlement consideration and provisioning for impairment losses in subsidiaries. And for FY11, exceptional expenditure was placed at Rs.641 crore. So till date the company has paid off US$ 125 million on class action cost, $10 million as US Securities and Exchange Commission (SEC) cost and $70 million for Upaid lawsuits.

The good part is that the company has completed cleaned up its books after the scam. It will now begin FY12 truly on a clean slate. Volumes have started picking up which rose 3.5% in FY11, mainly on the back of business from America and Asia-Pacific. And indicating the turnaround is the fact that it plans to hire around 17,000 people in current fiscal. Its current headcount is at 30,000. Its merger with parent company, Tech Mahindra is still quite far away as it is looking at a horizon somewhere by mid next fiscal. Baring this exceptional expenditure, overall, the company had done well and current fiscal could be its true turnaround year.

Source: Internet (Premiuminvestments.in)

Stock Idea: Arvind Ltd.

As expected, the company ended FY11 on a high note. Despite a 33% rise in raw material costs and 16% rise in interest outgo, the company, on a 25% rise in consolidated net sales, posted a whopping 211% rise in net profit. Call it is the base effect or better realisations, the company has done well. Even sequentially, for Q4FY11, though the growth is not as trailblazing as on the annual basis, topline grew 19% and bottomline by 31%. Interestingly, raw material cost for the quarter was down 7%. This shows that cotton prices are on the decline.

Arvind holds 54% stake in another listed group company, Arvind Products and this company is now to be merged with Arvind. The merger ratio is 1 share of Arvind for every 11 shares of Arvind Products. The company is banking big on its realty business in current fiscal. It has already formed a JV for a large township project with Tatas for its 134 acres into a SPV. 50% of the value of land, Rs.125 crore is expected to accrue to the company in current fiscal. For FY12, the company hopes to notch up a turnover of around Rs.4800 crore and if it is able to maintain the same margins, then a net profit of around Rs.195 crore. On an equity of Rs.257.81 crore (includes Rs.3.41 crore from merger with Arvind Products) the FY12 EPS of Rs.7.55 discounts the current price by around 10 times. A good bargain for the largest denim making company in the world.

Source: Internet (Premiuminvestments.in)

Stock Idea: Lakshmi Vilas Bank

Lakshmi Vilas Bank can move to Rs 145 in the next four-six months time, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "Lakshmi Vilas Bank has shown a very good performance for Q4. If you take their overall FY11 performance, the bank had posted an EPS in double digits that is Rs 10 plus and their fall in the NPA was at 4% plus as of March 31, 2010 and has fallen to less than 1% to be precise at 0.91%. They have a total 273 branches with presence in 16 states. If you take the marketcap of the bank which is at Rs 440 crore that means each branch is valued at a valuation of Rs 1.5 crore."

He further added, "If you see the financials or the provisioning coverage ratio which is at 77% against the stipulation of 70% and apart from improvement in working in Q4, the bank will be aggressive in opening more branches going forward. The same kind of profitability is likely to continue and I won’t be surprised if I see an EPS of over Rs 12 plus for the bank in FY12. The stock looks quite good at Rs 112. I am expecting that probably it can move to about Rs 145 in the next four-six months time."

Stock Idea: Mayur Uniquoters

Mayur Uniquoters can test Rs 400 in the next six-eight months time, says SP Tulsian of sptulsian.com.

Tulsian told CNBC-TV18, "Mayur Uniquoters is a very established company which makes synthetic leather. If you see their financials, the company has posted an EPS of close to Rs 45 for FY11 with PAT margin of close to about 10%. Presently, the company is operating with a plant capacity of 1.4 running million meters per month. Now they are raising their production capacity from 1.4 million per month to 1.9 million per month with the increased capacity operational from July."

He further added, "Their topline has seen a growth of 50% in FY11. Their total income was about Rs 250 crore while the bottomline grew by about 56-57%. The best part is that they are debt free and have a cash balance of about Rs 24 crore in the books. The expansion will get implemented in this cash balance and since their EPS for FY11 is Rs 44-47, I am expecting the expansion to happen by July. That will also contribute for about eight-nine months working in FY12. One can safely assume that they should be able to post an EPS of at least Rs 60."

"The product has very good demand and is supplied largely to auto seats and in furnishing. Their customers are Maruti, Honda, Hero Honda which they supply synthetic leather too. The share is viable at a PE multiple on historic earning at about 5 PE multiple. If I take the forward earnings it is ruling at 3.5-4 PE multiple and debt free status with promoter stake of 75%, this is quite a safe and good growth oriented stock. I expect a price of Rs 400 in the next six-eight months time."

Stock Idea: Su-Raj Diamonds

Ashish Chugh, Investment Analyst & Author of Hidden Gems is of the view that Su-Raj Diamonds looks good at the current level.

Chugh told CNBC-TV18, “There are a couple of reasons why Su-Raj Diamonds looks good at the current level. First is that if you see the financials of the company, there has been an improvement quarter-on-quarter (QoQ) in the both sales and profitability of the company. Second is the promoters of Su-Raj Diamonds took warrants at Rs 70 about six months back, the stock currently trades at about Rs 50-51. The third reason is that the promoters have been acquiring the stock through open market purchases in the month of March 2011 alone they have increased their stake by about 3% and I think the short-term trigger for the stock is that in the past 3-4 months, the diamond prices have seen a sharp upsurge. We all know about the increase in gold prices but the fact that diamond prices have gone up is a lesser known fact to most individuals and that is probably the reason that stocks like Su-Raj Diamonds have not reacted to this information. To give you a background, this is a company, which is into manufacture and export of polished diamond and also diamond studded jewellery.”

He further added, “This company in the past nine years has grown its revenues from about 500 crore to approximately 3,800 crore expected for FY11. Profits have increased from 9 crore to expected profit of about Rs 110 crore for FY11. For first nine months of the current financial year sales are about 2,700 crore, which is up by about 25% over the same period last year, PAT is about 78 crore, which is again up by more than 100% over the same period last year. Full year sales is expected to be about 3,800 crore with a profit after tax of about 110 crore, which results in an EPS of about Rs 16-17. So at the current price of about Rs 51, the stock is trading at a P/E multiple of just about 3. Diamond prices have gone up by about 30-40% in the past three-four months and the trend is still continuing. So I believe that the numbers for March quarter and June quarter could be very good. Infact March could be a quarter when the company makes its highest ever sales and profits for any quarter in the history of the company. So company having a sale of 3,800 crore and profit after tax of about 110 crore is available at a marketcap of just about 350 crore. Again the downside looks extremely restricted and I believe that as the numbers for March and June start pouring in, I think the stock can witness a rerating.

Source: Internet (Moneycontrol.com by Ashish Chug)

Stock Idea: Brandhouse Retails

Brandhouse Retails is looking undervalued, says Ashish Chugh, Investment Analyst.

Chugh told CNBC-TV18, "Brandhouse Retail is a part of S Kumar group. This company is involved in developing and managing exclusive brand outlets for foreign brands in India. The companies, which are in the brand portfolio, include Reid & Taylor, Stephen Brothers, Carmicheal House, Belmonte and Dunhill. This company has got a store network of close to 800 stores, which are spread over 90 cities in India and a total covered area of about nine lakh sq feet. Besides the metropolitan cities, this company has got stores in tier 2 and tier 3 cities also in India."

He further added, "The company has set up a JV with the Italian brand called OVC, under which Brandhouse Retail will hold about 62.5% and 37.5% will be held by OVC. The plan is to open about 200 exclusive retail outlets for OVC brand over a period of the next five years."

"If you look at the financials of the company, FY10 sales were about Rs 660 crore, which were up by about 20% of FY09. Profit after tax (PAT) was about Rs 16.2 crore, which was again up by about 20%. In the first nine months of the current financial year, sales are about Rs 570 crore, which is up by 12% over same period last year. The PAT is almost flat at about Rs 19.5 crore. EPS on an annualised basis is expected to be about Rs 4.5-5. The stock currently trades at about Rs 25, which means that it is trading at a P/E multiple of about five-six."

"This company is a play on India’s consumption story. This is a play on the retailing of international brands in the domestic market and taking them to not just the metropolitan cities, but also tier II and tier III cities. I think the opportunity in the business is very big because there are a number of brands, which want to have a presence in India, given India’s rising consumption theme. There are many foreign companies interested in establishing a presence here."

"Brandhouse has got the knowledge and experience of the local markets. It has already handled business for a number of international players. I think it is a fit company for any foreign brand to employ for creating a brand network or the store network in the India domestic markets."

"If you look at the valuations of the company, I think at a P/E multiple of about five-six for a company where the opportunity is very large, I think the stock is currently available at very reasonable valuations. Also, a current marketcap of about Rs 135 crore as against expected sales of about Rs 700 crore, it is available at just about 20% of one year sales. I think this is a stock where the potential of growth is good. It is a niche stock; you don’t have too many peer companies listed on the exchanges having this kind of a business model. I think at a P/E multiple of five-six and a marketcap of about Rs 130-135 crore, the stock looks undervalued."

Source: Internet (moneycontrol.com)

Stock Idea: Pitti Lamination

Pitti Lamination can be a big outperformer, says Ashish Chugh, Investment Analyst.

Chugh told CNBC-TV18, "For Pitti Lamination, the numbers for the past few quarters have been pretty good. Also, in December quarter, there has been a significant increase in both revenues and profitability of the company. This company provides ancillary support to power, transportation and capital goods sectors. This company manufactures electrical laminations used in electrical motors, pumps, alternators and other electrical machines."

He further added, "If you look at the financials of the company, for the first nine months of the current financial year, the company has registered 80% increase in revenues to about Rs 183 crore. The operating profit is up by almost 100% from Rs 11 crore to Rs 22 crore. The company has registered profit before tax (PAT) of about Rs 5.6 crore as against the loss of roughly Rs 2.5 crore for the same period last year. Its full year earning per share (EPS) is expected to be between Rs 8-9. That means that at the current price of about Rs 35, the stock is trading at a P/E multiple of just about four. Cash EPS this year is expected to be between Rs 14 and 15, which means that stock is available at a price to cash EPS of about 2.5."

 

"This company has learnt a lot from global slowdown, it was more of a soul searching and learning experience for the company. The company, which was focused mainly on the export market before the global meltdown, started exploring the Indian markets where they realised that there is a lot of potential and also the operating margins are much better compared to the exports markets. So, right now the mix of the Indian business in the total revenues of the company has increased much more than it was about two years back. The growth in revenues is on account of growth in both the domestic business as well as the export business."

 

"This company has got orders from various domestic and international companies. Besides the smaller orders, this company has got about Rs 170 crore of order from GE, which is to be executed over the next few quarter. So that is something which provides revenue visibility to the company atleast for the next couple of quarters."

"If you look at the valuations of the company, at the current market price of about Rs 36, this company has got a marketcap of about Rs 35 crore. This company is expected to do operating profit of about Rs 30 crore this year. So, for a company doing an operating profit of Rs 30 crore, marketcap of Rs 36-35 crore looks very cheap."

"Also, P/E multiple of about four and price to cash EPS of about 2.5, I think is very reasonable for a company where the user industry is witnessing a good growth. The company has got a book value of about Rs 65 as against that the market price is about Rs 35-36 which means that it is traded at almost 50% of the book value. A marketcap of Rs 35 crore against expected revenues of Rs 250 crore, I believe the stock looks extremely cheap from all counts."

"I think what is happening is that the good performance of the company has been ignored by the markets mainly because of the uncertainty prevailing for some time. Also because of the fear psychosis in the minds of investors, people are not willing to look at smaller companies. But I think that the company has been consistent in delivering performance, there is growth which is taking place in the user industry. I think as sanity returns to the market and people start again looking at smaller companies, I think these are the kind of stocks, which can really go up very fast.

"Also, the stock is trading at very close to its 52-week low of about Rs 32. So, I think from the current levels of Rs 35-36, the market is uncertain, it may drop by 10-15%, but I do not see a fall more than that. In the event of the markets recovering and midcaps performing, I think the stock can be a big outperformer."

Source: Internet (moneycontrol.com)

Stock Idea: Uflex Ltd.

Uflex continues to look like a no-brainer at the current market price, says Ashish Chugh, Investment Analyst & Author of Hidden Gems.

Chugh told CNBC-TV18, "Uflex has plummeted from a high of about Rs 325 to the current price of about Rs 155 in about three months time. This has been on account of negative newsflow. The first was the news of the arrest of the chairman of the company in the month of December. Then was the Egypt crisis, where Uflex has got its manufacturing operations. Inspite of the company’s profit rising five fold from Rs 46 crore to Rs 250 crore in the quarter ending December, the stock fell from about Rs 325 to Rs 155."

He further added, "It is the largest integrated flexible company in India and one of the largest in the world. The company has got manufacturing operations in India, Egypt, Mexico and Dubai. They have aggressive plans to setup operations in other countries and are currently undertaking expansion projects at Mexico, Egypt, Jammu and Poland. Mexico phase II is going operational in the month of June 2011. In Jammu, the expanded capacity is going operational in September 2011 and Egypt is going operational in December 2011. It may get delayed because of the current situation in Egypt."

"For the first nine months of the current financial year, this company has registered sales of about Rs 2,600 crore, which is up by about 50%. Profit after tax (PAT) for nine months, is up by close to 250% from Rs 144 crore to Rs 515 crore. The current equity of the company is about Rs 72 crore."

"I am taking a conservative scenario, on the impact of the Egypt crisis on the operations of the company and also the impact of the softening finish product prices, they can conservatively do a PAT of about Rs 150 crore in the quarter ended March 2011 which means that the full year EPS is going to be on a conservative basis at about Rs 90."

"My hunch is that the EPS can be anywhere between Rs 95 to Rs 100. At the current price of Rs 155, you are getting the stock at PE multiple of just about 2. Having a profit of Rs 700 crore and marketcap of just about Rs 1,100 crore, it looks to be at least for the short-term. In future, the impact of the softening finish product prices will be more than made up for the expanded capacities, which are going on-stream in the next one year."

"This company has been a regular dividend payer. In the past, the policy has been to distribute about 15-20% of the profit as dividend. They paid a dividend of 50% in FY10 and given an EPS of close to Rs 100 this year, even assuming a 10% dividend payout, it would lead to a dividend of about 100% which at the current market price gives you dividend yield of about 6.5% to 7%."

m taking a reverse calculation just to be safe on whether to buy this stock or not. In a normal market, this stock should command a PE multiple of about 5. At the current price of Rs 150-155 the market is assuming that the EPS of the company is going to drop to about Rs 30. From a level of Rs 90-100 EPS, something has to be drastically gone wrong with the company or the economy or the market for the stock to stay at these levels."

"In the month of October, promoters have taken 1 crore 35 lakh warrants to be converted at a price of about Rs 300. Out of this, 35 lakh warrants have already been converted in the month of December, which shows the confidence of the promoters in the company."

"I believe that the fall from Rs 325 to Rs 155 is largely overdone but given the state of the market as of now and the negative sentiment prevailing, I don’t rule out the possibility of the stock dropping by another 5-10% from these levels. More or less, however, the stock trading at a PE multiple of just about 1.5 and dividend yield of about 6.5% to 7%, it looks to be a no-brainer at the current market price."

Source: Internet (moneycontrol.com)

Stock Idea: Diamines and Chemicals

This is a small company based in Vadodra. This company manufactures ethyl amines and is a leader in ethyl amines. The user industry of ethyl amines includes pharmaceuticals, FMCG, dyes and chemicals and also agro chemicals. Besides ethyl amines, this company also gets revenues roughly of Rs 2 crore from wind power.

If you look at the financials of the company for FY10, this company did sales of about Rs 45 crore. On sales of Rs 45 crore, the operating profit was about Rs 18.5 crore and a profit after tax (PAT) of about Rs 9.5 crore.

In Q1, there has been a 40% increase in sales to about Rs 15.5 crore. Operating profit is about Rs 4.6 crore and a PAT is Rs 2.3 crore. This company has got a very small equity of about Rs 6.5 crore, which means the effective market cap is just of about Rs 42 crore at the current market price of about Rs 63-64. The promoter holding is high at about 65%.

You have a company, which has got a leadership position in the industry; they are the leaders in Ethyl amines in the country. The company enjoys high operating profit margins of between 30-35%. The user industry that is pharma, FMCG, dyes and chemicals, agro chemicals are doing extremely well. The company has been a consistent dividend payer and they have been giving dividend for the past five-six years on a regular basis. Promoter’s holding is high at about 65%. If you see the growth, which the company has witnessed in the past three years, they are registering a growth of 40-50% on an annualised basis. So, at an earning per share (EPS) of Rs 15 and market price of Rs 63-64, you have a leader which is available at a PE multiple of just about 4-4.5. I think given its high operating margins and other fundamentals, I think the stock is bound to get re-rated.

Source: Internet (Moneycontrol.com by Ashish Chug)

Stock Idea: 3i Infotech

Business Profile
3i Infotech is a global IT company which offers a comprehensive range of software and IT solutions, including packaged applications, for the banking, financial services & insurance (BFSI), manufacturing, contracting, and retail & distribution industries. In addition, it offers a broad range of software services such as custom software development, IT consulting, IS and IT security consulting, enterprise application integration (EAI), and specialized services such as product reengineering, compliance consultancy, application rehabilitation and egovernance, among others.
Technical Analysis
The Stock has been trading in a consolidation phase for the past few sessions. In the last 3 sessions the stock has perform showing decent gains. A clear breakout above the level of 90 has occurred and it is expected to trade in the uptrend for the coming sessions.
Technical History After bottoming out at 26 in march09 the stock has made a high of 105. All the trends are giving bullish indication (Long term, Short term, Immediate term).The volumes are important aspect. Increasing volumes are confirming the uptrend. The Ascending triangle formation on the daily chart with rising trend line gives the immediate target of 117..The RSI on the weekly chart trading at 64 .The stock is trading above its 200EMA. The resistance is seen at 118-120.At these levels some correction is expected .Strategy for short term traders would be to book profit at these levels while long term investors can stay invested for the next target of 136.

Source: Internet (Valuenotes)

Sugar Sector

We have seen sugar stocks correcting in last 7–8 days, which has made even the investors, who have kept view till March 10, get disturbed. Traders are also disturbed, which is expected of them. Infact, sugar stocks have been rising continuously for last 2 months and that has raised the expectations of the investors and traders, expecting the same trend to continue. Expecting this, even the behaviour of sugar stocks were linked with Sensex and Nifty, and questions were raised in last 7 days that why they are not moving up, inspite of benchmark indices going up? When it was converse, nobody really asked this question.

To cut the long story short, bullish tone of sugar sector will continue to remain on domestic as well as global front. Season 08-09 will be ending on 30th September, 09, in which, the estimated domestic sugar production is expected to be 146 lakh MT. We had an opening stock of about 80 lakh MT on 01-10-08 and had an import of about 30 lakh MT in this season. This has made available, an aggregate quantity of 256 lakh, in the country against our estimated consumption of 230 lakh MT, thus leaving an expected closing stock of 26 lakh MT, on 30-09-09.

In season 09-10, India’s domestic production is not likely to exceed more than 140 lakh MT, lower than what we had in season 08-09. The reason for lower sugar production, in this year, could be diversion of sugarcane for Gur and Khandasari, as also about 10% of the crop going for seeding, as more planting of sugarcane will be done by the farmers, due to better realizations expected for sugarcane. Though poor monsoon will also have marginal impact on lower production of sugarcane in coming season, but won’t be seen to have much impact in Karnataka, Tamil Nadu, U.P. and Maharashtra. It may affect, to some extent, in Andhra Pradesh.

So, Season, 09-10, with opening stock of 26 lakh MT and expected production of 140 lakh MT is estimated to have a deficit of 70 lakh MT, expecting the consumption to be at 236 lakh MT. Obviously, closing stock requirement of atleast 20 lakh MT has not been considered in this deficit. This shortfall can only be made good by import of raw- sugar.

To meet this shortfall, some of the mills have contracted to import raw-sugar, which will be seen arriving mainly in the coming season, as it is not likely to be more than 30 lakh MT in this season. Renuka has contracted to import 150 lakh bags, at an average rate of Rs. 19 per kg., Sakthi about 90 lakh bags at Rs. 20 per kg., Bajaj Hindustan 70 lakh bags at Rs. 23 per kg., Balrampur Chini about 8.50 lakh bags at Rs. 21 per kg, Dhampur Sugar about 21.50 lakh bags at Rs. 23 per kg, Dharani Sugar about 20 lakh bags at Rs. 22 per kg, Simbhaoli Sugar about 13.50 lakh bags at Rs. 22 per kg, Triveni Engg. about 10 lakh bags at Rs. 22 per kg and EID Parry about 20 lakh bags at Rs. 22 per kg, for its standalone refinery, in 50:50 JV with Cargill. The cost of refining is Rs. 3 per kg, with 5% processing loss, would add about Rs. 4.50 to Rs. 5 per kg, to the cost of white sugar of all these companies.

Earlier, these raw sugar, post refining could have been sold in the market within 3 months, which has now been reduced to 1 month by the government, to keep the check on the rising price of sugar. Due to this, for September 09, Renuka and Sakthi has been given a release quota for levy, of 8 lakh bags each. Dharani has been given of 1.70 lakh bags. This is over and above the normal release of levy and non-levy manufactured sugar. Also, this non-levy monthly quotas have also been made mandatory to be released in equal parts, in first and second half of the month. Due to this, sugar prices have corrected from Rs. 33 per kg, ex-mill, in U.P. to about Rs. 30 per kg, now.

Due to this, the Indian sugar companies have also stopped contract to import raw sugar from global markets due to which, raw sugar prices fell from 24 cents per pound to 20 cents per pound and of white sugar from $ 610 per MT to $ 510 per MT. However, now it has been moved back to 22 cents per pound for raw and $ 540 for white. Even 3 months white futures is ruling at $ 574, while for raw, it is ruling at 22.75 cents per pound.

As stated above, due to release of higher quantity of imported sugar, for September, these companies will have a profit of atleast Rs. 10 per kg and hence Renuka and Sakthi is likely to have a pre-tax profit of atleast Rs. 80 crores each, for this month, in addition to gain to be made on normal sale of inventory held by them. So, September 09 quarter, will show huge improvements in the bottomline of all these sugar companies.

Though this move of the government is not seen pragmatic by the mills, as the similar move was taken by the government in April 09, whereby all the buffer held by the government, were released, to keep an artificial check on the sugar price, ahead of elections. Effect of this was seen later, with sharp rise in sugar prices. So same thing may get repeated in March 10, once the crushing stops in U.P., Maharashtra, Karnataka and A.P.

There is not going to be much comfort on the domestic front, even for season 10-11, as estimated production of sugar is not likely to be more than 240 lakh MT, which will take care of our domestic consumption only. So India will continue to be an importer for the next 2 years.

Even on the global front, for 2009-10, production is likely to be 152 million MT against estimated consumption of 157 million MT, thus depleting the closing stock to an all time low of 20 million MT, which is equivalent to 45-50 days only.

The government is also not likely to hurt the mills in coming period to ensure adequate availability of sugar in the market. In view of increase in MSP of wheat and rice, it has become unviable for the farmers to move to sugarcane, unless Rs. 180 per quintal is paid to them, against Rs. 160 per quintal having paid by the mills in U.P. in this season, inspite of SAP having been fixed at Rs. 140 per quintal. So low sugarcane price will keep the deficit continuing, which government would not be interested to see and happen.

Hence, all this correction in the sugar stock prices are temporary in nature and looks to have reached its near term bottom. Those who have 6 months view, can look to buy Renuka, Sakthi, EID Parry, Ugar, Dharani and Balrampur Chini, without taking day to day calls.

Source: www.premiuminvestments.in (By S. P. Tulsian)

Stock Idea: Jagatjit Industries, Taneja Aerospace Aviation

Jagatjit Industries

Jagatjit Industries is a 60 year old liquor company famous for Aristocrat brand Whisky. They also had brands like Maltova, etc. which they sold to SmithKline a couple of years back. This company was dragged in problems between the promoters of the group and a wide order in the month of March by CLB, that problem has not been resolved. CLB ordered the company to buy back the shares of other promoter group and they have already brought back the shares which led to reduction in equity from about Rs 52 to about Rs 44 crore. If you look at the valuations of the company, at the current price the market cap of the company is just about Rs 200 crore, the gross of the company is Rs 540 crore and this being a 60 year old company and the market cap just being 50% of gross the real value of the assets must be much more.
This company has done sales of about Rs 800 crore on the last year, so even if you compare this company with the drop on the basis of sales and brand equity this looks grossly undervalued compared to the peer group.
On Taneja Aerospace Aviation
If we see the price pattern of this stock, this stock has been primarily rangebound between Rs 30–40 for a long period of time. Promoters picked-up about 5% of the stake in the company they increased the stake by about 5% in the month of November at about Rs 28 and the stock has been primarily rangebound mainly because of the negatives which surround the sector and also the company. Last year there were rumours of a Delhi based infrastructure company wanting to take a stake in their air strip project and the valuations being talked about are very high, and at that time the stock touched a high of about Rs 250–270.
The company has a 250-acre land where they have made an airstrip which is largely unutilized and I see that as an opportunity, the reason that we are getting the stock at a market cap of just about Rs 100 crore is primarily because of the reasons which are mentioned. When things look rosy and everything starts looking good. When they are fresh with orders for aircraft and the value unlocking which people are expecting that airstrip will have that happens and you won’t get the stock for Rs 35-40. The reason you are getting the stocks at current valuations is only because of the negatives which are surrounding and the good thing is that the promoters themselves have increased their stake at about Rs 28 in the month of November. At that time there was pessimism all around and the stock has also been range bound for a very long period of time and that’s a reason you are getting this stock for Rs 35, when there were rumours of someone big buying that airstrip business and fancy valuations being talked about at that time the stock was not available for Rs 35 and it was available for Rs 250–270. So this is the one for the patient investors who can just sit on the stock and wait for company to unlock the value for the shareholders.

Source: Moneycontrol.com (By Ashish Chug)

Multibagger: Unity Infraprojects

Multi Bagger: Unity Infraprojects Recommended Price Rs 73.85
S.P.Tulsian, Investment Advisor Report Dated: Mar 31, 2009
Unity Infraprojects is a Mumbai based engineering and construction company providing integrated engineering and construction services on a turnkey basis including electrical, fire prevention and control, plumbing and air conditioning which is resulting in a higher margin. The company has been undertaking projects across the country for road projects, PWD. Municipal Corporations, State Govt and local authorities and have orders in hand of close to Rs 2,000 crores which would get completed in next two years. To execute the projects in time and to maintain its smooth implementation with better margins the contracts are taken of safe and remunerative projects only by the company.
The company went public in May, 2006 and paid up equity of the company is quite low at Rs 13.37 crores with face value of Rs 10 each. Promoters stake is at 70% while mutual funds, banks and FIIs hold about 20% while 10% is held by the general public. For FY 08 the total income of the company was at Rs 862 crores with PBT of Rs 91 crores and PAT of Rs 60 crores resulting in an EPS of Rs 45. Dividend of 40% was paid by the company for the year. For first 9 months of FY09, the total income of the company was at Rs 756 crores with PBT of Rs 71 crores and PAT of Rs 49 crores giving an EPS of Rs 37. Though there is drop in the margin it is more than compensated with increase in the topline. Hence, FY09 is likely to have an EPS of Rs 50 with expected PAT at Rs 67 crores. Topline for the year is likely to above Rs 1,000 crores. Share had its 52 week high/low of Rs 641 and Rs 67 and now ruling at Rs 73.85. This implies a PE multiple of close to 1.5 times. Book value per share will be over Rs 300 as at 31-3-09 even after presuming a dividend payment of Rs 5 per share. The company has a net debt of close to Rs 200 crores which is considered quite low, considering the level of activity. The company has a strong presence in Mumbai City and are known for timely completion, which are keys to success for any civil contracting company. Share at Rs 73.85 qualifies a risk free and safe buy for those who have a 6 months view, in which share has potential to touch three digit mark with virtually no downside risk.

Source: Internet (By S P Tulsian)

Sugar Sector: Good Investment

We have been maintaining our bullish view on the Sugar sector since Nov.08, mainly on the expectations of lower production in the country. When the Govt. has been estimating country’s production at 22 million tonnes (mt) for season 08-09, in Nov. 08, we expected it to be 18.5mt. On collecting details of production on all India basis, upto 15-3-09, it is estimated at 13.1 mt. Season 08-09(expiring in Sept 09) is not likely to see a production of more than 15mt.

The reason for lower production is low yield per hectare of sugarcane crop, lower sugar recovery by the mills, farmers migrating to other crops like wheat, rice and potato and lesser number of running of mills across the country due to lower availability of sugarcane, even after paying higher rate above SAP in U.P.

If we consider opening stock of 8mt and an expected import of 2mt of raw sugar with estimated domestic production of 15mt, we will be having 25mt against our annual domestic consumption of 23mt. Therefore, as at 30-9-09, we will be left with a closing stock of just 2 mt which would be very alarming.

Though the Govt. is contemplating allowing import of white sugar at 0 duty against present rate of duty at 60%, but the same is not feasible and workable. Taking a price of $395 per tonne and a freight of $35 per tonne and adding a cost of Rs. 1,000 per tonne as port handling, insurance and transport the landed cost of white sugar works out at Rs. 23 per kg. against ex-mill price of Rs. 20 per kg. in Maharashtra and Rs. 21 per kg. in U.P.

Even import of raw is now not feasible unless the importer is confident of realising above Rs.23 per kg. Due to the lower raw price in Dec. 08, importers have contracted to import about 9 lakh tonnes of raw sugar. These include 5.25 lt by Shree Renuka Sugars, 90,000 tonnes by NCS Sugars, 50,000 tonnes by Dalmia Sugars, 40,000 tonnes each by Simbhaoli, Dharani and Rana Sugars, 25,000 tonnes each by Dhampur Sugar and the EID Parry-Cargill refinery at Kakinada, and 22,000 tonnes by the KK Birla Group. Since February 20, not a single new contract has been entered into.

Realising this shortage and hoping that this does not spoil the mood of the voters due to an expected steep rise in the price of sugar (as sugar , onion and potato are very sensitive items during elections, making Govt. to loose it) the Govt is making all the efforts to keep retail price within Rs. 25 per kg. till elections get over. This price control is achieved with free market release mechanism, releasing buffer stock created by the Govt. last year, inventory limits having imposed on the traders and by asking mills to go slow on price hike for a month or so.

Once the last phase of election gets over by 13th May it is certain that ex-mill price of sugar will rise to about Rs. 24 per kg. in next couple of months. This in turn will see a retail price of Rs. 28 per kg. Hence, mills carrying stock will reap windfall gain on its inventory. Also, Tamil Nadu mills will be at an advantage as they will continue to produce with estimated number of crushing of about 220 days. Those mills also have the benefits of lower cane price and higher realisation of Molasses.

Hence, sugar companies with higher inventory held by them will be making good profits which would get reflected in its share price from mid May. It is expected that all the sugar stocks would be able to rise by about 50% from its current levels in the next 5-6 months.

Source: sptulsian.com (By S P Tulsian)