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: Omnitech Infosolutions Ltd

Omnitech Infosolutions Ltd (Rs 120)
(BSE Code – 532882, NSE Code - OMNITECH)
(P/E- 4.5, Market Cap - Rs157 cr, Equity - Rs13.13 cr)
Omnitech Infosolutions (OIS), incorporated in 1990 by engineering graduates, is a niche player offering business availability services including infrastructure management, application management and software testing; business continuity services comprising disaster recovery management and disaster recovery consulting and auditing; offshore-centre services using onsite, offshore and built-operate-transfer (BOT) models; systems integration solutions, and framework solutions and products such as Omni Manage IT, Omni Audit, Omni Transport and Omni Monitor. OIS has 150 active customers currently. Some of them include Kotak group of companies, Birla Sunlife, Philips, Grindwell Norton, Accenture, Patni etc. OIS derives 53% of its revenues from top 10 customers. About 66% of OIS’s business comes from repeat customers.
In its two joint ventures (JV) in Bahrain, OIS holds 24.5% in DRC Gulf LLC and 32.75% in Omnitech Gulf Technologies WLL. DRC Gulf provides data-storage-centre services among other things. Through Omnitech TSB Company, in which it holds a 67% stake, Omnitech has entered into a JV with Sanwell Company from Japan for IT consultancy, software development for embedded systems, infrastructure management with remote management services and performance management services (testing) for telecom, banking, financial services and manufacturing. Looking out for acquisition of about US$ 10 million -15 million in the infrastructure management services (IMS) space, Omnitech has shortlisted a few companies in the US and UK.
For FY09, Omnitech reported 30% rise in net sales to Rs 171.42 cr. and bottom line stood at Rs 33.09 cr.(up 30%) cr. On a equity of 13.13 cr. (Promoter stake- 54.45%), the EPS stood at Rs 25.2 and the dividend declared was 12%. For the half year ended Sept. 2009, OIS has posted net profit of Rs 16.62 cr. (down 7%) on net sales of Rs 93.75 cr.(up 7%). OIS’s order book position stands at Rs 115-120 cr. and for the financial year 2009-10 it expects to grow by 15-20% organically.
OIS is establishing itself as a dominant player in the infrastructure management, disaster recovery and business continuity space. OIS's infrastructure management and application management coupled with performance management and software testing services which have better margins could drive its revenues and profitability going forward. OIS is well placed to tap the opportunities in the IT services and product domain with both organic and inorganic growth in infrastructure management and software testing services going ahead. At current market price of Rs 120, Omnitech stock trades at 4.7 times FY09 earnings(Rs 25.2) and at 4.4 times expected FY10E earnings(Rs 27). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Jaiprakash Associates Ltd

Jaiprakash Associates Ltd— BUY—220—INR
Sector — Construction (others)
Regd.Off.— S. K. Road, Greater Noida City, Lucknow, U.P. -201306
Listed — NSE, BSE.
Company overview—
Jaypee group is a well-diversified infrastructural industrial group of India that commenced its operations in 1972 as a partnership firm then known as Jaiprakash Associates. Three decades later with growth and diversification the group is now engaged in the businesses of Engineering and Construction, Cement, Private Hydropower, Expressways and Highways, Hospitality, Golf Resorts and Information Technology. With a professional management team and a competent technical cadre the group employs a total workforce of over 25000. Jaiprakash Associates Limited the flagship company of the Jaypee Group is leader in the construction of multi-purpose river valley and hydropower projects and has been involved in construction of major engineering projects for the last three decades. Jaiprakash Associates Limited the groups construction arm is the only company to have four modern ferrule workshops one each in Tala, Baglihar, Chamera and Vishnuprayag sites.
Products & Services—
Company is involved in the construction of multi-purpose river valley and hydropower projects and has been involved in construction of major engineering projects for the last 37 years, including complex hydro power / river valley projects, Expressways and Real Estate Development, etc. Company is involved into Design and engineering of works, Controlled earth / rock fill, Concrete manufacture and placement, Fabrication and erection of penstock liners and steel structures, Hydro-Mechanical equipment design, procurement and erection, Expressway Construction, Real Estate Development.
Company has completed several projects in India and abroad as an Engineering Procurement and Construction (EPC) contractor and possesses necessary experience and expertise to carry out such works in a time schedule. Company has acquired ample tunneling experience in the young Himalayan mountains on various projects inter alia, Dul Hasti (Jammu & Kashmir), Baspa-II (Himachal Pradesh), Vishnuprayag (Uttaranchal) and Tala (Bhutan) Hydroelectric Projects under complex conditions including extreme weather conditions, adverse geological conditions. It is simultaneously constructing nine concrete dams, one barrage and twelve powerhouses with a total generation capacity of over 8190 MW. Company owns a huge fleet of modern construction machinery which include ropeways, electronically controlled parallel cable way system, tower cranes, rotec conveyer system, tunnel boring machine, hydraulic jumbos, modern computerized concrete batch plants, ice making machines, in addition to a large complement of earthmoving machinery. Highly qualified professionals and competent technical persons supported by skilled operators and supervisors, Technicians, Skilled and Unskilled Workers form the backbone of the company. Company has been assigned "CR 1" grade by ICRA Ltd, indicating Very Strong Contract Execution Capacity with best prospects of timely completion of projects without cost overruns, etc.
Recent development—
Jaiprakash Associates has raised Rs 10 billion through issue of non-convertible debentures (NCDs) to Standard Chartered India. Company has also decided to raise low cost funds to the extent of Rs. 5 billion by way of private placement of unsecured rated commercial papers. It has also decided to disinvest / offer for sale upon 60 million equity shares out of 1.21 billion equity shares of Rs 10 each held by the company in Jaypee Infratech, a subsidiary of Jaiprakash Associates.
Valuation—
At current market price, stock is trading at 9.74 P/E multiple of its FY2010 estimated earnings. We recommend investors to buy “Jaiprakash Associates Limited” with medium to long-term investment Horizon.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Jain Irrigation

This stock, typically comes to the fore only during the Budget. With the Govt always expected to give sops to the agriculture sector, this is one stock which has always been a big beneficiary. But looks like the poor monsoon and the recession in international markets have played on the sequential numbers, which are clearly under pressure.
Its hi-tech agro input products, which includes micro irrigation systems, PVC piping products, tissue culture plants and agri R&D, on a QOQ has shown a 15% decline in sales. Consequently, EBIDTA on the same has come down from 26% in current Q2 to 22%. Industrial products did well and probably helped shore the margins. Revenue of IP was up 31% and EBIDTA margin was up by 1% at 21%. Overall net sales, has shown a sequential drop of 1.8%.
Apart from fall in revenue, operating expenses rose on a QoQ by 2.56%. So these two factors together pulled down the numbers. Net profit was down 23% at Rs.42.56 crore.
Drip irrigation is actually the bets method to combat a poor monsoon and with more and more states realising this, it would only go to increase business for Jain. Infact, the company which has been concentrating more in southern and western India but it is now making plans to enter central and north India. Apart from concentrating on domestic demand, the company is also looking at exports. It has invested $10 million to set up a new plant to make irrigation systems and plastic pipes in Turkey, production at which will begin this month. It is also planning to expand into Israel and U.S but no real investments for the same have been made yet.
It currently has an order book of Rs.900 crore of which majority is for micro-irrigation. It is also planning to tap Asian and Middle-east markets for selling processed food, where it already sells micro-irrigation.
Its growth in FY10 is expected to be led by micro-irrigation division which, it expects to grow by 40% and next driver being food processing, which it hopes would grow by 20-25%.
Companies which have an agri focus would do well and especially Jain. Stay invested.

Source: Internet (www.premiuminvestments.in by S P Tulsian)

Stock Idea: Andhra Bank

Company snapshot
Andhra Bank, founded by the freedom fighter Dr. Bhogaraju Pattabhi Sitaramayya, commenced business on 28 November 1923. The bank is headquartered in Hyderabad and has a concentrated network in the state of Andhra Pradesh with major proportion of its advances being generated from the branches located in the state.
The Bank has posted whopping qtrly result during the qtr ending Sept’09. The return on Asset of bank stood at 1.54% as compare to 1.12 %( Q2FY09) & 1.44 %( Q1FY10).The bank has also shown rise in Return on Equity as it stood at 30.05% as compare to 19.89%(YoY) & 25.60%(QoQ).The Provision coverage ratio of bank stood at 81.12% as compare to 76.65 %( Q2FY09) &
72.26 %( Q1FY10) The cost ratios of the bank depicted the firm trend as cost of funds shown drop to 5.88% from 6.21% (YoY) & 6.13%(QoQ)The cost to income ratio of bank has also shown great improvement to 39.45% from 50.27%(YoY) and 48.78% (QoQ).The Net Interest Margin of bank increased to 2.90% form 2.50% in qtr ended June’2009.The growth was mainly attributed
to drop in cost of funds and higher credit to deposit ratio during the qtr ended Sept’09.
Business Details
Andhra Bank, founded by the freedom fighter Dr. Bhogaraju Pattabhi Sitaramayya, commenced business on 28 November 1923. The bank is headquartered in Hyderabad and has a concentrated network in the state of Andhra Pradesh with major proportion of its advances being generated from the branches located in the state. Andhra Bank is a fast growing public sector bank in the country with a total business size of Rs.110460 crore as on 30 Sept 2009. It renders services through 2421 delivery channels consisting of 1536 branches, 798 ATMs spread over 22 states and 2 Union Territories. The bank played an important role towards developing and expanding self help groups (SHGs). It continued to focus on agriculture and allied activities ensuring a steady flow of credit to this sector. Finance to Agricultural sector by bank stood at Rs 7482 Crores .All Branches of the Bank are under CBS. Bank has also launched Online Tax payment (eTax) along with Internet Banking (Retail as well as Corporate). Bank also provides facilities like SMS Alerts over Mobile Phones for certain type of transactions and account balances are made available to clientele registered for this facility.
As on 30th September 2009, 7.53 Lakh customers got registered for this facility. Bank is also providing its customers facility to request for account information through SMS-pull facility. Customer can seek balance enquiry, mini-statement, cheque status, etc through this facility. Bank also offers customers the facility to subscribe to Initial Public Offers of corporate using Applications Supported by Blocked Amount Scheme. Bank's Internet Banking Customers can participate in Online Trading via M/s Religare. Bank has also launched a web based fast forex remittance facility (AB Speedway) for the benefit of NRIs of U.S.A .
Industry Outlook

Indian banking industry faced many uncertainties during 2008-09 in the face of tight market liquidity in the global financial markets. The RBI's prompt and relevant measures ensured adequate domestic and foreign liquidity to Indian banking industry so that the flow of credit to productive sectors would not suffer much. Yet, on account of the severe global economic slowdown and its spillover effects on India, growth of bank credit to commercial sector decelerated in 2008-09. Moreover, expansion in net foreign exchange assets of the Indian banking industry moderated to a large extent. However, the Indian banks, in general, posted healthy financial results during 2008-09 compared to their global peers despite challenging economic conditions. The outlook for Indian banking industry remains positive in 2009-10 on the backdrop of its stricter prudential regulation by the RBI, sound financial indicators and stable political regime.

Investment Rationale
Bank has recently received R2 approval for the insurance Joint Venture with Legal & General and Bank of Baroda. Also, Bank has signed MOU for launching a banking subsidiary in Malaysia jointly with Bank of Baroda and Indian Overseas Bank. This will help the bank in expanding its presence in Malaysia. Bank has tied up with Piaggio Vehicles aimed at offering a highly competitive retail financing scheme that ensure low interest rates to the customers which will in turn provide boost to the credit offtake of bank. Also, the new corporate slogan ‘Andhra Bank….for all your needs’ is introduced during the first quarter reflecting good recall and visual value. Bank has opened 104 branches during the Half year taking the total number of branches to 1536. With 49 ECs, 38 Satellite Offices and 798 ATMs the total number of delivery channels of banks has increased to 2421. Also, number of ATMs of the Bank increased to 798 as on 30-09-2009. Besides Banks owned ATMs, the ATM/ Debit Cards issued by Bank are accepted on NFS Network, VISA Network and under bilateral arrangements numbering in all 45000 ATMs Number of ATM/Debit Cards issued by the bank increased from 35.4 Lakhs as on 31-03-2009 to 45.52 Lakhs as on 30-09-2009. For remote branch connectivity for CBS, Bank has deployed 251 VSATs. Retail credit registered robust growth of 34.73% over previous year and reached Rs. 7149 Crs as at the end of September-09 Also, lending to MSME sector has gone up by 52.19% and reached Rs. 6835 Crs. All other advances including Corporate credit moved up to Rs. 25645 Cr from Rs. 19800 Cr, year on year. Bank aims to attain a business mix of Rs.1,30,000 Crs by the end of March 2010 at a growth rate of 30% and Rs.1,50,000 Crs by September 2010. Bank is also targeting to reach CASA percentage of 33% of total deposits by March2010. Bank shall be rolling out the insurance products of its own Joint Venture for sale by July 2010. Banking subsidiary in Malaysia jointly with BoB and IOB expected to function next year.
Valuation
At the current price of Rs 117, the Bank is trading at 6.01times to its TTM eps of Rs 19.45. The bank has posted whopping results for qtr ended Sept’09. With the plans of strengthening its network and customer base while focusing on further enhancement in the customer service through innovative products and services, bank will continue to leverage technology for an all-round performance. Looking at the strong financial performance, the bank looks undervalued at the current price of Rs 117. Hence we recommend investors to “BUY” the stock with the price target of Rs 155 in medium term which is 32% above from the current price of Rs 117.

Source: Internet (Valuenotes by Hem Securities)

Stock Idea: Nagarjuna Construction Co. Ltd.

Nagarjuna Construction Co. Ltd— BUY—166—INR
Sector — Construction (Infrastructure)
Regd.Off.— 41, Nagarjuna Hills, Hyderabad, A.P.-500 082
Listed — NSE, BSE.
Company Overview—
Nagarjuna Construction Company was incorporated in 1978. The company has consolidated its presence in high growth infrastructure sector such as Roads, Water supply, and Electrical Transmission Systems. Company went public in 1992 and is engaged in industrial construction, housing development projects, plant and non-plant construction for nuclear projects, construction of hospitals, construction of roads and bridges including national highways, fabrication, erection of structural steel works etc. Apart from the conventional construction methods, the company adopts the NBS Cellular System, which was developed in collaboration with Byyging Uddheman AB of Sweden and NCC Pre Fab System, which was developed in house. Strategic tie-ups with leading multinational companies keep NCC abreast with latest developments in the field of construction and also put it on par with international companies in terms of standards of performance and quality of projects.
Products & Services—
Company is involved into construction of Industrial & Commercial buildings, Roads, Bridges & Flyovers, Water Supply & Environmental projects, Housing, Power transmission lines, Real Estate development, Irrigation and Hydropower Projects, Social amenities etc. Company has presence & capabilities in all area of construction activities. Company has ISO 9001:2000 certifications.
Industrial Structures & Buildings— Company provides long lasting buildings and industrial structures at optimum cost and in minimal time. Construction of large factory and workshop structures has been made speedier and more economical by the use of modern construction methods including folded plate and shell roofs, precast and prestressed roof elements etc. The largest Cardiac hospital in Asia; a record seven month turnaround time for a turnkey Airport project; the largest single concrete slab in Asia, Company has notched up many firsts to its credit.
Transportation— Indian Government is actively building world-class infrastructure facilities in the country, to place it on par with developed economies elsewhere in the world. High density corridors have been identified and the exercise of strengthening and four laning of highways has already been started. Company has been chosen to execute highways, bridges, flyovers and road projects all over the country. The carriageway of a ring road, Bangalore; the construction of an international quality six lane highway in Samalkha, Haryana; the Kalina-vakola junction flyover, Mumbai; the Grade separator at Bangalore; the Subway and Flyover at Latur, stand for company's expertise in infrastructure projects.
Water & Environment— Company executed major water supply projects, drainage schemes, construction of water and sewage treatment plants, turnkey solutions in water supply and UGD schemes, including survey and design. It has capabilities in the areas like - Turnkey implementation of rural, urban and industrial water supply projects from concept to commissioning, implementation of waste water collection systems for urban communities and industrial waste disposal, implementation of water treatment plants and sewage treatment plants from concept to commissioning.
Housing— Company has developed and deployed innovative operational methods including the highly effective: 1) NBS Cellular Construction System - It replaces all conventional methods of building construction by incorporating load bearing RCC shear walls. Roof slab is cast monolithic with RCC walls, eliminating construction joints and thus reducing the possibility of cracking and dampness, while enhancing the speed of construction manifold. 2) NCC Precast Construction System - It involves the manufacture of precast building components at site to achieve larger volumes of built-up area and greater quality levels in the least possible time.
Electricals— Company has expertise in the engineering and construction of EHV/HV sub-stations, transmissions and distribution lines, distribution system improvement projects, internal and external electrification of multi-storeyed utility buildings & commercial complexes and township electrification.
Property Development— Company has acquired properties for the construction and sale of independent houses, multi-storyed apartments and commercial complexes. The initial ventures have been undertaken in Bangalore/Mysore. Residential flats in JP Nagar, Bangalore; residential apartments at Mysore; Nagarjuna Elysses, deluxe apartments coming up in Richards Town, Bangalore; Nagarjuna Gardens, Sahakarnagar; Nagarjuna Spectrum, at Indiranagar, Bangalore; Nagarjuna Green Ridge at HSR layout, Nagarjuna Maple Heights at Marthahalli Bangalore, Nagarjuna Green Woods at Marathahalli Bangalore, Nagarjuna Pearl Bay at Kochi, Bangalore speak of NCC's determined efforts to excel in this area of construction.
Irrigation & Hydropower— with good presence in various sectors of the construction industry and looking to the emerging opportunities the company is working on various water supply and power plants projects around the country.
Recent developments—
In July 2009, Company has obtained three new orders aggregating Rs 7.76 billion. The first order valued at Rs 6 billion is secured from Employees State Insurance Corporation, New Delhi for construction of medical college and related works at Mandi, Himachal Pradesh to be completed over a period of 24 months. The second order is from general manager, Mezgon Dock, Mumbai for Mazdock Modernization Project works in Mumbai valued at Rs 1.36 billion to be completed over a period of 28 months and the third is from National Institute of Technology, Assam for construction of 500 capacity boy’s hostel valued at Rs 400 million to be completed over a period of 16 months.
In September 2009, Company has bagged two new orders aggregating Rs 4.81 billion. The first order valued at Rs 4.49 billion is obtained from Water Resource Department, Bihar for execution of restoration of Eastern Gandak Canal system to be completed over a period of 25 months. Meanwhile, the second order is from MRF, Chennai for construction of proposed radial tyre plant and easy tyre plant in Andhra Pradesh valued at Rs 320 million to be completed over a period of 6 months.
In Nov 2009, Company has secured five orders aggregating Rs 7.22 billion. The first order is valued at Rs 3.28 billion from Water Supply & Sewerage Board, Bangalore for water supply and sewerage project at West Bangalore to be completed over a period of 26 months. The second is order from Water Resources Department, Bihar for construction of Bituminous Road worth Rs 1.43 billion to be completed over a period of 24 months. The third, fourth and fifth orders are worth Rs 1 billion, Rs 910 million and Rs 600 million respectively.
Valuation—
At current market price, stock is trading at 19.57 P/E multiple of its FY2010 estimated earnings. We recommend investors to buy “Nagarjuna Construction Company Ltd” with medium to long-term investment horizon.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Gammon India Ltd.

Gammon India Ltd— BUY—247—INR
Sector — Construction (Infrastructure)
Regd.Off.— Gammon House, Veer Savarkar Marg, Prabhadevi, Mumbai- 25
Listed — NSE, BSE.
Company Overview—
Gammon India was incorporated in 1922 and converted into a public Ltd. company on 31st April 1962. At the time of incorporation, the name of the Company was J.C. Gammon (Mumbai) Ltd. The first work carried out by Mr. J. C. Gammon was the construction of reinforced concrete pile foundations for Gateway of India. The name was changed to Gammon India Ltd. In 1975, Gammon Nirma Ltd. was incorporated as a subsidiary of the company. Another subsidiary Gammon Turnkeys Ltd. was formed. In 1977 company associated with Gammon Eastern Union Ltd., Hong Kong, which promoted Gammon Mideast Ltd. joint venture Company in Sharjah, United Arab Emirates. This joint venture company was incorporated to undertake construction and service contracts in the Middle East and elsewhere. A new joint venture company, Heitkamp Gammon Ltd., was being established with Gammon India Ltd., and Heitkamp Rohrbau GmbH, West Germany as the principal promoter shareholder. In 1989 R&D Division of the company undertook development of energy efficient GFRP bladed fans for ID Cooling towers and PP splash grid modular packing system for ND/ID covering towers, alternative packing systems etc. Company’s R & D division developed, fabricated and put into commission the headmast and tail-mast for 700 m span cable ropeway for Alamatti Dam as also 1500 mm dia. double-wall casing for executing the pile foundations for transmission towers at Tezpur for 60 m deep piles. It also designed and manufactured a special reverse circulation-pilling rig for 1500 mm diameter piles capable for depths upto 75 m. This division also developed special techniques for installation of 1500 mm diameter piles for a Bridge across Brahmaputra River at Jogighopa. Sikkim Hydro Power Ventures Ltd, a Special Purpose Vehicle Company was incorporated for the development of 60 MW Rangit - II Hydro Electric Power Project in Sikkim is a subsidiary of Gammon Infrastructure Projects Ltd.
Products & services—
Company has presence in all areas of civil construction. Company has executed many multifarious civil engineering works from Cotton Godowns, Bridges, flyovers, bitumen & concrete Roads, Marine Structures, Cooling Towers, Chimneys, Tunnels, Dams etc. Company has specialization in tunnel engineering, marine structures, bulk storage structures, energy projects & high-rise structures, ground engineering & environmental protection, hydraulic works & irrigation projects, industrial structures, public utility structures, transport engineering, bridge engineering. Gammon has established strong presence of pre-stressed concrete in India. Company can claim for the largest numbers of bridges and flyovers built in India.
Company provides start-to-end solutions like the Builders and contractors, reinforced concrete specialists, engineers, architects, surveyor’s estimators and designers. Gammon is the only Indian Construction Company to have been accredited with ISO 9001 certification for all fields of Civil Engineering Works including design, stands out as gateway for Technological and Engineering excellence in Civil Engineering fields. Company has dedicated and experienced team of planners, designers and construction engineers are ever ready to contribute their expertise together and turn vision into reality. Company made the longest river bridge in the world across the mighty Ganges at Patna. The tallest bridge in Asia, the longest span cantilever bridge in India across river Jadukata, the longest road bridge in India across the open sea and first cable stayed bridge in India. As builders to the nation, Gammon has made concrete contributions by designing and constructing bridges, ports, harbours, thermal and nuclear power stations, dams, high-rise structures, chemical and fertilizer complexes environmental structures, cross country water, oil and gas pipelines.
Valuation—
At current market price, stock is trading at 14.72 P/E multiple of its FY2011 estimated earnings par share. We recommend investors to buy “Gammon India” at every correction with medium to long-term investment prospective.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: TVS Motor Company Ltd

TVS Motor Company Ltd— BUY—59—INR
Sector — Automobiles
Regd.Off.— Jayalakshmi Estates, Haddows Road, Chennai - 600006
Listed — NSE, BSE.
Company overview—
Company was incorporated as Indian Motorcycle Pvt. Ltd. on 15th July 1982 and it was converted into a public limited company on 12th January 1984. Mr. N. Krishnan promoted it in collaboration with Suzuki Motor Co. Ltd. Japan. Company entered into a technical know-how and assistance agreement with Suzuki Motor Co. Ltd., of Japan. As per the terms of the Collaboration, Suzuki agreed to furnish complete technical information and know-how, trade secrets and other data. In 1992 company launched two new models of motorcycles "Samurai" and "Shogun". In 1993 company launched a new model of moped viz. "TVS Scooty". TVS-Suzuki, a joint venture between the TVS group and Suzuki Motor Corporation, Japan was the first company to launch a 100-cc motorcycle in the Indian market. Company also launched its new moped model, the XL Super. Its new generation state-of-the-art four-stroke scooter "Spectra" was launched in spectacular fashion at the TVS Millennium Show on October 1 in New Delhi. In 2000, Company launched Suzuki Fiero and later it launched its indigenously developed 4-stroke motorcycle, TVS Victor 125 cc. Company launched 4 new mobikes including a new brand 100-cc mobike called the Centra and Fiero F2 and Scooty Pep models. Company has tie up with SBI, UBI, Andhra bank and other banks for scooter and Motorcycle financing. The subsidiaries of the company are namely Sundaram Auto Components, TVS Motor Singapore, TVS Motor Company (Europe), PT TVS Motor Company, Indonesia.
Products & Services—
Company is one of the largest two-wheeler manufacturers in India. TVS Motor currently manufactures a wide range of two-wheelers from mopeds to racing inspired motorcycles. In Motorcycles it has various brands like Apache RTR, Fiero, Metro, Victor, Flame SR 125, StaR City, Sport etc. In Variomatic Scooters it has Scooty Streak, Scooty Pep+, Scooty Teenz etc. and in Mopeds it has TVS XL Super, TVS XL Heavy Duty. Company also provides various variants of these models for different class of consumers. Company has two state-of-the-art manufacturing plants in Mysore and Hosur.
Company has achieved world class levels in quality as well as improvements in design and processes; the company has formed special task forces to monitor quality related performance. The basic tenets of TQM, including Daily work management, Policy management, Kaizen (continuous improvement), Training and standardization are followed across the organization. TVS Motor Company awarded the prestigious and coveted Deming Prize, instituted by JUSE (Union of Japanese Scientists and Engineers). Company was also awarded the prestigious "TPM Excellence award - First category" by Japan Institute of Plant Maintenance (JiPm), rated as the benchmark in TPM excellence in India.
Company has one of the most extensive networks with over 541 dealers, 2500 Customer touch points and 1500 authorized service centers. Currently, more than 400 engineers work on developing radically new products and cutting edge engine technologies. R&D team has developed the revolutionary Variable Timing Intelligent (VT-i) Engines, one of the most innovative technologies developed in the two-wheeler industry.
Recent Development—
TVS Motor is planning to launch the country’s first motorcycle with automatic clutch by the end of this calendar year. It is learnt that this motorcycle will spare the rider of constantly having to engage the clutch to shift gears, which would be a welcome relief in choked traffic conditions. Only the gears need to be changed and there would not be any compromise on pickup or speed so that thrill and joy of biking are intact. Sources say that the company has been working over the last 18 months on this motorcycle.
Valuation—
At current market price, stock is trading at 12.4 P/E multiple of its FY2010 Estimated earnings. We recommend investors to buy "TVS Motor" with medium to long term investment horizon

Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Kaveri Seed Company Ltd.

Kaveri Seed Company Ltd (Rs 215)
(BSE Code- 532899, NSE Code- KSCL)
(Equity - Rs13.7 cr, P/E - 10, Market Cap - Rs294 cr)
The prices of food and feed products are on an upward spiral, stoked by rising demand, shortfalls in output and expanding export opportunities. This has put producers of agricultural inputs such as hybrid seeds in a sweet spot. Kaveri Seed Company(KSC), an established producer of hybrid seeds for crops such as corn (maize), sunflower and paddy, may be one of the key beneficiaries of this trend. The nascent Indian market for hybrid seeds is set to expand strongly, given the rapid rate of hybrid adoption and buoyant produce prices. This suggests that the company may be well placed to deliver a 20 per cent-plus annual growth over the next two-three years A small-sized company with a sizeable portfolio of sunflower, maize, cotton, and paddy hybrids, KSC has sustained strong financial performance since its IPO in September 2007. With a two-decade presence in the seeds business, Kaveri Seed has a portfolio of about 40 certified hybrids in corn (12 hybrids), sunflower (5), cotton (6) and paddy (13). Building a product portfolio of this size requires a fairly long gestation period, as development of each hybrid strain usually takes four-six years. Production of hybrid seeds also calls for access to proprietary germplasm (genetic material) with the required traits making for high entry barriers to the business. The company also sells crop micronutrients under the brand name Microtek; another business with good potential The bright demand prospects for domestic seed companies arise from the huge shortfall in availability of quality seeds and increasing adoption of hybrids, given the need to improve agricultural yields on food and feed crops (Indian yields are far below world standards). The Indian market has been seeing a substantial deficit in the supply of certified seeds over the past few years. Data put out by the Agriculture Ministry for kharif 2009 suggests that crops such as paddy (shortfall of 28 lakh quintals for the season), maize (2.2 lakh quintals), sunflower (0.59 lakh quintals) and cotton (1.15 lakh quintals) saw persistent shortfalls over the past four years. All of these crops feature in Kaveri Seed’s portfolio. The policy regime for the sector is likely to be friendly over the next few years, given the incumbent government’s stated intention of improving seed availability In terms of financials, Kaveri Seed has managed to deliver impressive and yet consistent growth over the past four years, with a compounded annual growth of 22% in sales and over 100% growth in profits in this period, albeit on a low base. Operating profit margins over this period have expanded from the low single-digits to well over 25% for the past three years; the bulk of this improvement coming from a backward integration move into foundation seeds in 2006-07. That performance was sustained over the past year. For the year ended March 2009, net profits rose 64% to Rs 22.9 cr. while net sales grew 27% to Rs 123 cr., driven by a higher contribution from the seeds business and overall margin expansion. The micronutrients division despite more sedate growth than seeds managed improved margins. The FY09 EPS on a equity of 13.7 cr. (Promoters holding- 60.98%. FII/MF holding- 20%) stood at Rs 16.71 and the dividend declared was 20%. For the half year ended Sept. 2009, KSC has posted 26% growth in net profit to Rs 25.82 cr. on 50% rise in net sales to Rs 126.84 cr. Going forward, the company appears well placed to sustain margins at healthy levels, mainly due to pricing power. Focussed on lucrative cash crops such as sunflower, maize and cotton, the company may be comfortably placed to pass on any cost increases to consumers, given the strong demand. The upward bias in farm product prices and the sharp hikes in the minimum support prices of key crops last year are likely to have lifted the purchasing power of farmers and may lend support to both volumes and pricing power for Kaveri’s target crops. Kaveri’s balance sheet remains quite strong, with near zero debt (thanks to the IPO proceeds of Rs.68 crore), healthy ROCE and RONW (22% and 16% respectively).
The nascent Indian market for hybrid seeds is set to expand strongly, given the rapid rate of hybrid adoption and buoyant produce prices. This suggests that the company may be well placed to deliver a 20% plus annual growth over the next two-three years. At current valuations, the stock trades at 10.2 times its FY 2010E earnings (Rs 21) and 8.6 times its estimated FY 2011 earnings(Rs 25). Given the bright growth prospects for the seeds and micronutrients business, the company’s growth history and established presence, the stock deserves a better valuation. The risks to earnings arise from the company’s current crop and geographic concentration, agro-climactic risks and the stock’s low liquidity and small-cap status. Invest in small lots and accumulate on weakness linked to broad markets for decent returns over the medium-long term.

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Ashok Leyland Ltd.

Ashok Leyland Ltd— BUY—52—INR
Sector — Automobiles
Regd.Off.— Gateway Building, Apollo Bunder, Mumbai, M.H., 400001
Listed — NSE, BSE.
Company Overview—
Company was incorporated on 7th September 1948 at Chennai. In 1948, company was set up for the assembly of Austin Cars. British Leyland and Ashok Leyland commenced manufacture of commercial vehicles in 1955. In 1987, the overseas holding by Land Rover Leyland International Holdings Limited (LRLIH) was taken over by a joint venture between the Hinduja Group, the Non-Resident Indian transnational group and IVECO. (Since July 2006, the Hinduja Group is 100% holder of LRLIH). In the journey towards global standards of quality, Ashok Leyland reached a major milestone in 1993 when it became the first in India's automobile history to win the ISO 9002 certification. The more comprehensive ISO 9001 certification came in 1994, QS 9000 in 1998 and ISO 14001 certification for all vehicle manufacturing units in 2002. It has also become the first Indian auto company to receive the latest ISO/TS 16949 Corporate Certification (in July 2006) which is specific to the auto industry. In collaboration with Leyland Vehicles, Ltd., the Company embarked on a program of manufacture of integral buses. A technical collaboration agreement was entered into for the manufacture of synchromesh transmissions to the designs of Azhnradfabrik Friedrichschafen AG of West Germany. Company entered into an agreement for a joint venture in Sri Lanka for the assembly and progressive manufacture of Ashok-Leyland vehicles. In 1998, company introduced "The Panther", a low floor bus, which has been indigenously designed to cater to the needs of the common masses and is based on the parameters set by the Central Institute of Road Transport and the Association of State Road Transport Undertakings. The ministry of defense’s vehicle factory in Jabalpur has manufacturing agreements with Ashok Leyland. Company supplied buses to Afghanistan as a part of Indian Government's Assistance to the war-ravaged Afghanistan. In 2003 it got $46 million truck supply contract from the United Nations also. Company has collaboration agreement with ZF of Germany for local manufacturing of ZF's 9-speed synchromesh gearbox. Company has BS7799 certification for information security management system. Company has a joint venture (JV) with the US-based agriculture equipment maker John Deere for manufacturing and marketing construction equipment. The joint venture will initially manufacture backhoes and wheel loaders and will market these in India and abroad. The range will subsequently be expanded to include a full line of construction equipments.
Products & Services—
Company is working from last 6 decades as an Indian transport solution company. Company’s product portfolio includes buses, trucks, special application vehicles and engines. In buses, company has different brands like Viking BS-I, Viking BS-II, 12 M bus, Cheetah BS- I, Panther Luxury, Cheetah BS- II, Stag BS-II, Vestibule Bus, Airport Tarmac Coach, 222 CNG Bus, Lynx, Double Decker etc. In Trucks, it has 4 X 2 Haulage models, 4 X 2 multixled Tippers, Multiaxle Vehicles, Tractors and Ecomet etc and some other loading models for construction and mining sector. Except this, Company is the reputed supplier of defense vehicles for Indian army. Company has long been in the manufacture of defense and specialty vehicles. In special vehicles it has Rapid Intervention vehicle 4 X 4, Hippo Tractor, Beaver Tractor, Beaver Haulage, Hippo Haulage, Stallion MK III Tipper, Hippo Tipper etc.
From 18 to 82 sit double-decker buses, from 7.5 tonne to 49 tonne in haulage vehicles, from numerous special application vehicles to diesel engines for industrial, marine and genset applications, Ashok Leyland offers a wide range of products. Ashok Leyland vehicles have built a reputation for reliability and ruggedness. The 5,00,000 vehicles company have put on the roads have considerably eased the additional pressure placed on road transportation in independent India. In the populous Indian metros, four out of the five State Transport Undertaking (STU) buses come from Ashok Leyland. Some of them like the double-decker and vestibule buses are unique models from Ashok Leyland, tailor-made for high-density routes.
Valuation—
At current market price, stock is trading at 12.5 P/E multiple of its FY2010 Estimated earnings. We recommend investors to buy “Ashok Leyland” with long term investment horizon.

Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Ballarpur Industries Ltd

Ballarpur Industries Ltd— BUY—21—INR
Sector — Paper
Regd.Off.— Dist. Chandrapur, Ballarpur, Maharashtra - 442701
Listed — NSE, BSE.
Company overiew—
Ballarpur Industries (BILT), Thapar Group Company is India’s largest manufacturer and exporter of paper and paper products. The company was incorporated in 1945 as Ballarpur Paper and Straw Board Mills and changed its name to Ballarpur Industries Limited in 1975. Gautam Thapar is the chairman and R.R. Vederah is the managing director of the company. It is the largest manufacturer of writing and printing paper with a leading 45% market share in the coated paper segment. BILT enjoys a 25% market share for maplitho, 50% for common bonds. Company has technical agreements with a South Korean and Japanese company for the manufacture of coated and lightweight-coated paper. BILT has decided to exit all non-core businesses and focus on core areas of paper and chemicals. Consequently, BILT is divided into two companies BILT Paper and BILT Chemicals. BILT Chemicals comprises of three units Karwar, Khavda and Singach and five mills with a total capacity of over 242780 tpa.
Products & services—
The company operates in the business segments of coated wood free paper, uncoated hi-bright paper (maplitho), business stationery, copy paper and specialty and fine paper. Its products include writing and printing paper, industrial paper, specialty paper, coated and uncoated wood free paper, uncoated hi-bright paper, business stationery, tissue paper, packaging paper, and copy paper. Complementing this is a diversified production infrastructure with six manufacturing units spread across the country. Manufacturing units are located at Shreegopal (Yamunanagar), Ballarshah (Maharashtra), Sewa (Orissa), Bhigwan (Pune) and Kamalapuram (Andhra Pradesh). With the acquisition of Sinar Mas’ Indian operations, BILT has acquired world class coated paper capacities that find widespread application in the high end of the Indian usage market as well as developed overseas markets. The company is backward integrated with its caustic soda/chlorine manufacturing facility, which is a vital raw material in the production process of paper. Strategically implemented enterprise resource planning (ERP) system, real-time logistics and just-in-time (JIT) inventory solutions enable highly effective and efficient distribution of localized BILT products across urban, semi-urban and rural consumption centers nationwide with a network of 126 dealers.
BILT has 10 year contract with the government of Maharashtra for the supply of Bamboo that ensures cheap and regular supply of raw material. The company has also initiated farm forestry for cheaper raw materials and has cornered Indonesia and Malaysia for this activity due to its strategic geographic location. Company has an agreement with its calcium carbonate supplier, Emirys (France) to manufacture the chemical requirement for its coating paper.
Recent development—
Ballarpur Industries planning to invest USD 1 billion in overseas acquisitions and enhancing plant capacity in five years. India’s biggest paper maker will double its production capacity to 2 million tons by the year 2013. The expansion will be financed by loans and share sales.
Valuation—
At the current market price stock is trading at 5.67 P/E multiple of its FY2010 Estimated EPS. We recommend investors to “buy” “Ballarpur Industries Limited” with a medium to long-term investment prospective.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Mukand Ltd.

What has really helped this Bajaj company shore up its margins is the aggressive reduction in operating expenses. Despite a 11% (YoY) fall in net sales at Rs.518.81 crore, the company managed to show an over 11 times rise in net profit at Rs.16.31 crore. The operating expense of the company was reduced by 15% and this helped shore up the profit margins substantially. It managed to bring down costs on raw material, employee costs and power and fuel expenses, which helped the overall performance.
Reduction is excise duty during the stimulus package almost halved the excise duty collection of company from Rs.78.48 crore to Rs.40.92 crore and this in turn got down the gross sales. Lower realisation on steel products also reduced the overall sales.
The company has completed its Rs.350-crore expansion of capacity from 300,000 tonnes to 500,000 tonnes of high-quality speciality steel during Q2FY10 and by end of FY10, it would be able to stabilise the operations and start production at its full enhanced capacity. The full impact of this would be seen in the performance of FY11.
Reduction in raw material prices would have been easier in Q2 but now it would be difficult. The company has already started witnessing a surge in its raw material prices and has, in tandem, increased the prices of its specialty steel by 5-7% in October.
The company currently has a debt of around Rs.1500 crore and over the next 12 months, it plans to bring it down through sale of its surplus land, around 60-100 acres at its plant in Kalwa, Thane, which is estimated to fetch around Rs.700-800 crore. The company has a substantial land bank - 42 acres at Sinnar (Nashik), 40 acres at Lonand (Pune), 210 acres in the Thane-Belapur area and around 250 acres at Giningera in Karnataka.
The stock price has soared yesterday and then settled at Rs.49 as against its 52-week high of Rs.69.10. Stay invested or for long term, one can buy on dips.
Source: Internet (www.premiuminvestments.in by S P Tulsian)

Stock Idea: Jindal Steel & Power Ltd (JSPL)

Jindal Steel & Power Ltd (JSPL) financial performance for the second quarter ended 30th September 2009 has not been as encouraging as expected. Net Profit on consolidated basis increased by just 6.05 % (YoY) at Rs. 808.36 crore. But what was more disappointing was that consolidated net sales dropped 14.48% at Rs.2445.28 crore.
DRI and pig iron production rose 5.01% but sales was down 21.94%. Steel products production grew 32.31% but sales was up by a marginal 2.14%. Net realisation from sale of steel products dropped during the quarter mainly due to drop in steel prices and this affected the overall performance. Steel prices on a YoY are down 43%. Production of power rose 2.57% at 701 kWh. And it is this division which really helped the company shore up the performance – sales was up 21.88%, which was 36% of the overall net sales earned by the company for Q2FY10. But net profit from the power unit was at Rs.514.71 crore, which was 64% of the net profit earned in current Q2. Clearly, power is what makes the company powerful today.
PLF (Plant Load Factor) was down at 84% in current Q2 compared to 96% in Q1FY10. This was because it two units were shutdown and due to the monsoon, power generation was lower. So this performance of the power unit could have been much higher than what it has come in Q2.
The power unit, Jindal Power is a wholly-owned subsidiary of JSPL and this company is planning on an IPO in early Jan 2010, to partly fund its 2,400 megawatt superthermal power project in Chhattisgarh. It already has 1000 MW operational. It has 10 units of 135 MW each of which the first unit would go on stream in January 2010 and then one unit every two months. It is also expanding its capacity by another 2400 MW which is scheduled to get operational in 2012-13. So by the end of 2013, Jindal Power will have 4750 MW.
Second half is expected to be better as the two units which were shutdown have re-opened. Realisations in steel are expected to be more volume driven. Stay invested.

Source: Internet (By S P Tulsian)

Stock Idea: Seamec

Investment Argument
SEAMEC - is a MNC outfit of Technip Group of France. Its leader in operating MSVs/DSV in India, with 4 out of 6 vessels belonging to it and balance 2 are with ONGC. There are just about 30-35 MSV’s operating in the world. They are specialized vessels used for undertaking any kind of underwater engg, maintenance and developmental works. The company has strategy of deploying vessels on long term charters as against in the spot market, therefore the cash flow for the future is better predictable.
All the ships are fully deployed right now and charter rates are also strong, due to strong demand for such vessels. In past due to focus on spot market and also due to some kind of accidents etc, the performance of company was quite erratic and thus valuations of stock suffered too much. Company’s balance sheet is quite robust with Zero debt, huge cash balances and it is also likely to generate almost Rs. 265 cr for year ending Dec.’09. With market Cap of just Rs 680 Crs, this stock with likely [for Dec’09] NAV of Rs 350 per share and EPS of Rs 70 appears dam cheap at Rs 200/-. We think by the time annual results for Dec’09 are announced, stock can easily reach 260-280. BUY.
Background
South East Asia Marine Engineering & Construction (SEAMEC), was promoted by Peerless General Finance & Investment Company, but latter on acquired by MNC giant Technip Group of France. The company operates in Multi support vessels (MSV) for diving and provides under water/sub sea engineering and construction, maintenance, inspection of under water structures construction, rescue operations and fire fighting and other support services for offshore oil/gas installations located in India or abroad.
The company started operating on a single DSV in Indian Offshore market, grown subsequently to own and operate 4 Vessels. Seamec-I with 1700DWT, Seamec-II with 2100DWT, Seamec-III with 2100DWT and SEAMEC Princess. All vessels are deployed on various contracts. As demand for such vessels is strong, during intermediate period of contract also, they can undertake short term charters. The oil and gas sector in India as well as abroad, is witnessing significant investment activity and potential still appears to be huge. With oil prices recovering from lows of $30 to current $80, the E&P activities in oil & Gas sector will remain robust. Plus most of the E&P activities are in deep sea, so need of such support vessels is growing much faster.

Risks and concerns
Fluctuating crude oil prices causing downturn in oil exploration and production activities can affect the revenue stream of the company. Dry docking of vessels at regular interval will have loss of working days and may put pressure on OPM in later years. Company usually adopts the policy of conserving cash for asset creation and don’t give dividends.
Recommendation
Looking to the attractive earnings of Rs. 70/- and cash generation of around Rs 265 Crs in this year and with a debt free status; the stock looks quite attractive. Mostly company uses cash generation to buy fresh vessels, with huge cash it can buy more vessels, which can shore up earnings in future. With promoters holding of 75%, chances of delisting can’t be ruled out, but in that case also, buy back price could be quite attractive [over 350/-].

Source: Internet (Valuenotes by Anand Rathi)

Stock Idea: Century Enka Ltd.

This BK Birla group company has continued with its stellar performance which it had shown in Q1FY10. Infact, it has bettered the performance.
Just like in Q1, in Q2 also the topline on a YoY has declined but profitability has gone up. On a YoY, net sales was down 4% at Rs.311.47 crore. The company continues to bring down its costs. Raw material costs were down by 22% and employee cost was down 20% and this helped boost the overall margins.
Net profit was up by an unbelievable 6 times on YoY at Rs.32.76 crore. QoQ, net profit was up 15%. Q2 also saw the company post one of its highest profit margins in recent times. OPM was at a very healthy 21.84% as against 12.55% in Q1FY09. NPM was up at 10.52% compared to 1.55% in previous first quarter.
Net profit for the first half of FY10 stands at Rs.61.11 crore and this is already 3.6 times the net profit of Rs.16.62 crore it posted in 12MFY09.
The company's equity capital is Rs 20.05 crore and the annualized EPS on the face value of Rs.10/share stands at Rs.65.36.
This is a company which will be managed by Kumaramangalam Birla as that is his grandfather’s (BK Birla) wish. BK Birla group holds 25.23% stake in the company. In the AGM of the company, the patriarch BK Birla stated that promoters stake in the company would be increased to 40% within the next three years. LIC has a 8.24% stake in the company.
We had recommended this stock on 21st Aug 2009 at Rs.140 and today it is at Rs.195. Even at the current rate, the stock is a good buy at it discounts the annualized EPS by a PE of merely 3.35 times.
Source: Internet (By S P Tulsian)

Stock Idea: GMR Infra

The stock lost 3.83% yesterday to close at Rs.66.50. Post announcement of the results, punters battered down this stock. YoY, for current Q2, GMR Infra reported a 40% drop in net profit and that is all the market looked at and just remained sellers.
We, on our website have been recommending this stock right since the time we launched this site and continue to have conviction in the stock. Take a closer look at the performance we have analysed for GMR Infra and you will realise that the company remains very strong.
For second quarter ended 30th September 2009, net revenue rose 41% (YoY) and by 1% at Rs.1194.29 crore. Sector wise, on a YoY, the highest growth in net revenue was seen in the EPC division at 347%, followed by roads (151%), energy (25%) and airports grew 5%. And in terms of growth in EDIBTA, it was the airports sector which showed the highest growth on a YoY at 170%, followed by roads at 128%, EPC 70% while energy sector showed a de-growth of 1%.
EBIDTA was up by a healthy 54% (YoY) and 18% (QoQ) at Rs.380.06 crore. Given the kind of projects it has undertaken, it comes as no surprise to see higher depreciation outgo and interest costs have increased due to large borrowings for the various huge projects. Interest cost was up 70.86% (YoY) and 11% (QoQ) at Rs.177.14 crore. Depreciation rose 65% (YoY) and 3% (QoQ) at Rs.140.82 crore. Cash profit of the company was up 6% (YoY) and 23% (QoQ) at Rs.190.30 crore.
PAT on a YoY was down 40% but QoQ was up by a whopping 138% at Rs.53.61 crore. The growth in the topline and the EBIDTA levels indicate that the company continues to remain on solid ground. Just as the management of the company has indicated, when companies like GMR Infra take on large infra building projects, they usually build projects with capacities which are larger than the requirement. The Hyderabad airport project has been built by the company to handle a traffic of 12 million capacity but as against this, the current utilisation is around 6.5 million. And at this stage, costs overtake the earnings and it is this under utilisation of the infra capacity which drives down the PAT. And this is a phenomenon typical of all large infra companies and they start showing returns only after the initial 2-3 years.
During Q2, the company acquired 100% ownership interest in EMCO Energy Ltd (EMCO),which is developing a 600 MW coal based power plant, in two phases (of 300 MW capacity each) in the state of Maharashtra. This project has a 15-year debt component of Rs 2,610 crore. Axis Bank has arranged and syndicated the debt, for which the finances were tied up on October 21. Land acquisition, evacuation plans and water allocation for the two-phase project had been completed. Barge relocation work from Mangalore to Kakinada is on and the plant would be operational by end of current fiscal.
What indeed qualifies as ‘breaking news’ is that it will be inaugurating the airport at Istanbul, Turkey on 31st October 2009 and will be ready for commercial operations by second week of November, which is 12 months ahead of schedule.
GMR Infra is a long term stock. Such dips in PAT will be temporary and once it’s infra projects achieve better capacity, the returns would be equally baffling. Stay invested.

Source: Internet (by S P Tulsian www.premiuminvestments.in)

Stock Idea: Blue Bird India Ltd

Blue Bird India Ltd (Rs 33)
(BSE Code- 532781 NSE Code- BLUEBIRD)
(P/E- 5.5, Market Cap- 116 cr., FY09 Sales- 502 cr., BV-Rs 57)
Blue Bird (India)(BBIL) is a leading manufacturer of paper based notebooks and stationery under its Blue Bird brand. The company's products i.e notebooks and stationery, are designed for educational use, office use and for home and personal use. The Company derives more than 80% of the revenue from the notebook category. Besides this, the company undertakes commercial printing services in a wide variety of areas like product brochures, catalogues & instruction materials, diaries & calendars, magazines & other publications, business forms, and annual reports. The "Blue Bird" brand has a strong presence in western and southern India. BBIL's products principally cater to Western India, including the State of Maharashtra. BBIL is also present in Southern India and is expanding its presence there. AC Nielsen ORG-MARG has estimated that Blue Bird enjoys the highest market share of 48% in the organized notebook market. In November 2006, BBIL came with an IPO of 87.8 lakh shares at Rs 105 per share to finance its two major expansions: one in south and the other in west India

The fortune of the notebook industry is closely tied with the evolving and growing national economy and population. This holds true for BBIL products, since most of the end-users are students, as the Company derives more than 80% of the revenue from the notebook category. With literacy level on the rise, the 7-24 age group (the education pursuing population), which currently has a literate population of 257 million, is estimated to grow to 342 million by 2011, as per the AC Nielsen report. As a result, the notebook market is set to grow from the current Rs 5,100 cr. to Rs 8,208 cr. by 2011.

In an industry dominated by the unorganized sector, the company has been able to post consistent growth in the past. Net profit of BBIL rose 42.40% to Rs 7.12 cr. in the Q1 ended June 2009 whereas Sales rose 77.03% to Rs 210.47 cr. in the quarter. For the year ended March 2009, the company had posted net sales of Rs 502.47 cr. and net profit of Rs 15.16 cr.. On a equity of 35 cr.(Promoters' stake- 52.6%) the EPS stood at Rs 4.33. At Rs 33, the stock is available at a P/E of about 5.5 times expected FY10 earnings (Rs 6). The mkt. cap of the company stands at just 116 cr. against expected sales of Rs 600 cr. for FY10


Going forward, the key to company's success is the growth in student population. With literacy level on the rise, the notebook market is set to grow from the current Rs 5,100 cr. to Rs 8,208 cr. by 2011. This bodes well for companies like blue bird. The blue bird stock at current levels looks undervalued, given its leadership status and also as an education play. Blue Bird India appears a pure value pick, trading at close to one fifth its FY09 sales with a market capitalization (m-cap) of Rs 116 cr. and sales of Rs 500 cr. The company is among the largest manufacturers of notebook and printing stationery. It is currently available at a P/E of 5.5x. Further growth could come from the fresh capacities being put up, which is expected to see bottom line contribution starting H2FY10 onwards. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: ICRA Ltd.

ICRA Ltd (Rs 790)
(BSE Code- 532835 NSE Code- ICRA)
(P/E- 15, Market Cap- 790 cr., Moody's Group stake-28.5%)
ICRA, incorporated as Investment Information and Credit Rating Agency of India Ltd in 1991, is one of the recognized credit rating agencies in India with a wide portfolio of products and services. In close association with the Moody's group of the US, the company is engaged in the business of providing rating and grading services, research-based information services and also outsourcing services. ICRA has three wholly owned subsidiaries: ICRA Management Consultancy Services (IMaCS), ICRA Techno Analytics Ltd (ICTEAS), and ICRA Online Ltd (ICRA Online). IMaCS provides management consulting services to clients based in India and abroad. ICTEAS provides business solutions and computer-aided engineering services. ICRA, the No. 2 credit rating agency in the country enjoys a strong market position, brand recognition and creditability. Moody's Group, one of the global credit rating majors, holds a 28.5% equity stake. This will help ICRA to leverage the US company's expertise in newer products. Also, ICRA provides certain outsourcing services to Moody's Investors Service. The credit rating business in India is in a sweet spot as it is on the cusp of robust growth potential driven by three triggers a) strong CapEx cycle in Indian economy b) lower penetration of corporate bond market and c) regulatory push due to implementation of Basel II norms. ICRA, one of the four leading rating agencies in India, is likely to benefit from this favorable scenario with its strong parentage (Moody) and its domain expertise.

The near-term revenue driver for Indian rating agencies is the mandatory requirement of ratings for bank loan exposures. Industry estimates suggest that about 30 per cent of the current loan exposures of banks by value and about 55% in number remain unrated as of now. The RBI requires all commercial bank loans of above Rs 10 cr. to be rated by end of 2008-09. Alternatively they will have to set aside more capital for such un-rated loans (through higher risk weights). That may prompt banks to obtain ratings on the residual loans to free up capital for lending. ICRA has already signed MoUs with more than 23 banks, including SBI, Canara Bank, Central Bank of India and Andhra Bank for providing rating services and can be expected to reap revenues from their mandates. With India's corporate debt market in a nascent stage, corporate credit ratings will be the key medium to long-term revenue driver for rating agencies such as ICRA.

On consolidated basis for the Q1 ended June 09, ICRA has reported topline growth of 30.5% to Rs 33.2 cr.. Net Profit surged 72% to Rs 12.36 cr.. Margins at the EBITDA and PAT levels have increased considerably to 60% and 37% in Q1 FY10 as compared to 44% and 28% for Q1FY09 respectively. On the segmental front, ICRA's rating business for Q1FY10 stood at Rs. 20.9 cr., showing a growth of 28%. IT Services and Outsourced Services business have also seen high Y-Y growths, increasing by 43% and 69% respectively as against the corresponding quarter of last year. During the period under review, Current Investments have been marked to market as on June 30, 2009 and a reversal of 6.63 cr. has been made to reflect the diminution in the carrying value of the investments. This has been credited to the P&L account and is not on a recurring basis. In the consolidated performance for the year ended March 09, top line grew 36.6% to Rs 135.8 cr.. Net profit was up 36.6% to Rs 38.89 cr.. On a equity of 10 cr. the EPS stood at Rs 38.9 and the dividend declared was 120%(Rs 12 per share).

ICRA has over past three years used its strong cash flows and domain expertise to expand its services offering beyond main bread and butter rating business. The IT and outsourcing services have given further boost to revenues. The boost to profitability will be more meaningful as once it achieves commendable scale in these new businesses. Being an established player in rating industry, ICRA is raising its presence in other business segments like consultancy, information technology service and outsourcing activities. Having consistently delivered a high rate of earnings growth, ICRA is expected to manage growth at a fair clip over the next two-three years, given the sizeable opportunities in the credit rating business. The sector's oligopolistic nature, strong brand equity and higher demand for rating services likely from India Inc's increased domestic capital raising plans, offer a sizeable opportunity for the company. The strong cash flows and low debt requirements of the business, impressive operating profit margins for the ratings business (51 per cent), also make the stock a stable addition to one's portfolio, despite a small cap status.

At CMP of Rs. 790, the stock is trading at 15.8x FY10E earnings of Rs. 50 and at 12.7x FY11E earnings of Rs 62, at a discount to the lone listed competitor CRISIL. The discount may be justified by CRISIL's more diversified business profile, even as ICRA is highly reliant on rating services. Considering the growth potential in the ratings business and ICRA's presence in high growth consulting and outsourcing services, the company is well placed for future growth. With Moody's Investor Services as the sole promoter of ICRA, with a 28.5% stake, the possibility of new business opportunities from an expanding relationship with Moody's, and a possible stake hike by the promoter at a later date, also remain possibilities. Investors can accumulate the ICRA stock at this level and add more on declines.
Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: HCL Infosystems Ltd

HCL Infosystems Ltd— BUY—179—INR
Sector — Computer Hardware
Regd.Off.— E4, 5,6, Sector- XI, Noida - 201301
Listed — NSE, BSE.
Company overview—
Incorporated in April 86, HCL Infosystems previously known as HCL Hewlett-Packard is promoted by group of technocrats. In 86 company took over, Hindustan Computers, Hindustan Reprographics, Hindustan Instruments and Indian Computer Software Co. In 1991, the company entered into a joint venture with Hewlett-Packard Co, US, for combining the computer manufacturing, marketing and servicing activities of the company and Hewlett Packard India Pvt Ltd. In 1997-98, the company acquired the business of HCL Infosolutions, HCL Peripherals, and the customer support activities of HCL office Automation Ltd. In 1998-99, it entered into a relationship with Samsung, Korea to market and supports their range of key telephone systems. It also tied up with Novell to become the largest Novell authorised support centre. The company has tied-up with Pitney Bowes, a Fortune 500 company and global provider of integrated mail messaging and document management solutions, to provide world class mass mailing solutions. The alliance with Sun Microsystems India Pvt Ltd forged during 2002, to distribute the complete line of Sun Enterprises Products, will surely enhances the spectrum of services provided by the company to the customer. In dec2008, ICRA has reaffirmed the A1+ rating to Rs 3.25 billion Commercial Paper (CP)/Short-Term Debt (STD) Program of HCL Infosystems (HCL). A1+ is the highest-credit-quality rating assigned by ICRA to short-term debt instruments. The reaffirmation of the rating takes into account HCL’s established position in the networking market and the company’s strong liquidity position as reflected by its low gearing, substantial liquid investments and un-utilised bank limits.
Products & services—
HCL Infosystems Limited is India's premier information enabler and country's leading ICT system integrator and Distribution Company. Leveraging its three decades of expertise in total technology solutions, HCL Infosystems offers value-added services in key areas such as system integration, networking consultancy and a wide range of software and support services. HCL Infosystems is among the leading players in all the segments comprising the domestic IT products, solutions and related services, which include PCs, Servers, Imaging, Voice & video solutions, Networking Products, TV and FM Broadcasting solutions, Communication solutions, System Integration, ICT education & training, Digital lifestyle Solutions and Peripherals. Company has presence in the following areas-
DESKTOPS & NOTEBOOKS-- Business PCs, Home PCs, Infiniti Powerlite Notebooks
WORKSTATIONS-- Infiniti Challenger Workstations, SUN Workstations
SERVERS-- Intel Servers, Infiniti GL Servers, Infiniti Solutions, Infiniti Xcel Line Servers,
SUN Servers, HP Risc Servers & Workstations
THIN CLIENTS – Winbee Thin Clients, SUN Thin Clients
NETWORKING PRODUCTS
SECURITY PRODUCTS -- HCL InfoWall, HCL InfoSecuAccess, HCL InfoVPNe, HCL InfoSecuMon, HCL InfoNetMon, HCL InfoSurveillance, HCL InfoSecuDesk, Biometric Logon, HCL InfoSecuDesk, SmartCard Logon, HCL InfoSmartCard, HCL InfoLoadBalancer, HCL InfoSMS, HCL InfoDashboard
STORAGE SOLUTIONS
HCL Storage Solutions, IGL NAS 1400 BT, - IGL NAS 2700 SP, - IGL NAS 2700 BD,
SUN Storage Solutions, EMC Storage Solutions
Company’s hardware manufacturing plant is well located in the Union territory of Pondicherry and jharkhand. Company factories are ISO 9001:2000 and ISO 14001 certified. PMO was also Awarded MAIT Level 2 - by European Foundation for Quality Management in the year 2001. HCL was also awarded ELCINA's (Electronic Component Industries Association) Quality Award for the year 2002- 2003.
Recent developments—
Nokia Corporation is planning to set up a joint venture with HCL Infosystems to sell mobile value added services and entertainment content directly to consumers In India. The joint venture is subject to customary regulatory approvals. Once the requisite approvals are received, the joint venture will be primarily engaged in selling value added services for mobile devices.
HCL Infosystems tied-up with Korean major Nautilus Hyosung to launch customized automated teller machine (ATM) solutions for India banks with a special emphasis on service-offering for rural areas. The company said that with just 38,000-plus ATMs in India serving a population of over 1.2-billion, there is going to be a huge demand for ATMs in India. The company said that initially, it will import ATMs as semi-knocked down (SKD) kits, then move to completely-knocked down (CKD) kits, and eventually as a part of indigenization start manufacturing the whole units in India. The initial assembly will be done at HCL’s plants in Pondicherry and Uttarakhand.
HCL Infosystems received an order from BSNL for a rollout of over 60,000 ERP licenses. The value of the order is Rs 2.40 billion. The contract includes configuration, business process reengineering, hardware, networking, operations & maintenance customization, training to BSNL employees and program management for seven years.
Valuations—
We expect company’s operating margins to remain under pressure, given intensely competitive nature of the industry, but healthy cash accruals and low debt repayment obligations will help the company to perform better in coming quarters. India is the third fastest growing Notebook-PC market in the ASEAN region with a CAGR of around 22 per cent. At current market price, Stock is trading at only 11.96 P/E multiple of its FY2010 estimated earnings. We recommend investors “buy”, “HCL Infosystems” for medium to long-term investment horizon.

Source: Internet (Valuenotes by Abhishek Jain)