Investment Idea: Divis Lab

The company’s main forte is its R&D, with the main focus on developing new processes for the production of Active Pharma Ingredients (APIs) & Intermediates. The company in a matter of short time expanded its breadth of operations to provide complete turnkey solutions to the domestic Indian pharmaceutical industry.
Divis also undertakes FTE/Contract Research on process development for discovering new compounds for leading MNCs across the world and partners with them for the supply of APIs. The manufacturing facilities started much later. It has four R&D centers and two pilot plants
The company’s first manufacturing plant came up on a 300 acre land at Hyderabad, and its second facility is at Visakhapatnam, on a 314 acre site. It has also set up a SEZ at Chippada in Visakhapatnam. It manufactures API's for generics, intermediates, chiral synthesis and carotenoids.
The company recently concluded a successful inspection by the US-FDA, without any observations, for its Unit-1 near Hyderabad. The purpose of this inspection was for product pre-approval and general cGMP (Current Good Manufacturing Practices). The fact that the company did not have a single negative factor mentioned against it in the process of inspection, bodes well. Hopefully we will soon hear the company having secured a USFDA approval for its products, which will mean exports will burgeon.
The manufacture of niche segments such as the peptides and carotenoids products are expected to dominate the earnings in the coming months. Peptide drugs are one of the emerging areas of drug discovery, mainly in cancer medicines, with Western companies completely outsourcing the peptide segment to Asia. Divi’s currently has exposure to around 90 peptide building blocks.
In case of carotenoids, which are basically pigments important in human nutrition as a source of vitamins and preventive agents for cancer and heart diseases, the company’s manufacturing facility has been put up at its Rs.102 crore SEZ. Its two 100% subsidiaries — Divi’s Laboratories (USA) Inc and Divi’s Laboratories Europe AG (Switzerland) are specifically constituted for marketing its nutraceuticals. This again is expected to be a major revenue earner for the company as the key production facilities have been set up recently.
The shareholding pattern of the company also instills a lot of confidence in the company. The promoters hold 53.54%. Institutions hold 29.47% of which 16.78% is held by FIIs like Merrill Lynch, Oppenheimer and JP Morgan. Public holding is just 17%, which is a very big positive in favour of the company.
Now the most interesting part is that 12.63% is held by mutual funds and of this 7.22% is held by Reliance Capital Trustee Company and 4.25% by HDFC Trustee Company. The fact that mutual funds have bought so heavily in the stock, reiterates the potential of the stock.
The financial performance of the company has been more than exuberant. For the third quarter ended 31st December 2007, on a YoY, the consolidated total income for the quarter grew by 90% at Rs.284.13 crore. Custom chemical synthesis vertical (where it provides custom-made compounds) witnessed over a 100% growth, and the generics bulk drugs business clocked nearly a 60% growth.
It earned a PAT of Rs.99 crore on a consolidated basis for Q3 ended 31st December, 2007, as against Rs.31.39 crore in Q3 FY07, an unbelievable rise of 215%. On an equity of Rs.12.91 crore, basic EPS on a face value of Rs.2 per share is at Rs.15.35 for Q3 FY08.
For the 9-month period of the current year, Divi’s earned a PAT of Rs.255 crore on income of Rs.764 crore as against a PAT of Rs.87 crore and income of Rs.482 crore during the corresponding period last year. EPS stands at Rs.39.
Going by the present trend, even on a conservative basis, the company is expected to post a consolidated turnover of around Rs.1000 crore and PAT of Rs.400 crore for the fiscal FY08. This means, that we are looking at a sure EPS of over Rs.60 for FY08.
With more income expected to come from its carotenoids unit, which is high margin, the company, for FY09 is expected to post a PAT of around Rs.600 crore, giving an EPS of over Rs.90 and this discounts the current price of Rs.1355 by just 15 times.
Pharma stocks have been relegated to the background since the past few months. It is only now that analysts and investors are realizing the value of these pharma stocks. Moreso, after the Union Budget of 2008-09, which has been very kind to the pharma units, especially those with R&D facilities. Excise duty was reduced on all pharma goods from 16% to 8% This cut in the duties is expected to benefit Divis further in the coming fiscal.
Currently quoted at Rs.1355, Divis is an excellent buy at this level for some sure 40-50% returns over the next 12 months.

Source: Sptulsian.com

Market Whispers

IDBI is a decent bet at Rs.96 as the same may show a rise to Rs.110 levels in the short to medium term.
Mundra Port may witness informed buying at Rs.600 levels and share looks a safe bet at the current levels.
Kumar Infra, a recently listed stock have grabbed contracts for new flyovers in Mumbai. The company is projecting a topline of Rs.450 crores and an EPS of Rs.22 for FY 09. Share now ruling at Rs.84 may soon touch three digit mark.
MRO Tek at Rs.59 looks a safe bet for the short term as share has potential to touch Rs.75 mark soon. The company is likely to have an EPS of Rs.10 for FY 09. Share has potential to touch three digit mark in the next 6 months.
Aban Offshore is recommended at Rs.3,470 for short term gain of about Rs.150 in the near term.
Buying is advised in Reliance Capital at Rs.1,335 levels for a short term rise of about Rs.150 to Rs.165.
Alembic Ltd. is recommended a risk free buy at Rs.46 in view of an EPS of close to Rs.10 for FY 08 and over Rs.12 for FY 09 for this pharma company.
Amara Raja Batteries is likely to move to Rs.200 in the near term, mainly on renewed buying interest of institutional investors. Share at Rs.185 makes a good short term buy.
Government has not agreed to continue with operations of old Hyderabad and Bangalore airports, post commencement of new airports on 16th March and 30th March respectively. Share of GMR Infra would come on radar of high net worth investors post starting Hyderabad airport on 16th March 08. Share at Rs 155.
Divis Lab at Rs.1,330 is recommended a safe bet for short to medium term. Share may cross Rs.1,500 mark by May 08.

Source: sptulsian.com

Intraday calls for 11th March

Market may see high volatility with positive bias. Midcap & Small cap may starts moving up now.
Today's Intraday Picks:
Cairn India, Bank of Baroda, RNRL, HDIL.
For details download the file by Click Here
Also keep watch on Videocon Industries, Mphasis BFL, Noidatoll Bridge.

Good Luck

Analyst Views: GMR Infra, JPAssociates, L&T

Technical Analyst, Ashwani Gujral is of the view that GMR Infrastructure can go back upto Rs 185.
Gujral told CNBC-TV18, Jaiprakash Associates just ran into a strong support of about Rs 190. I think it needs to get past Rs 255-260 before one could say that it's bottomed out. There is s a good opportunity for the people those who are stuck in the stock will probably get out, all of last year’s heroes, the stocks that went up like crazy they have lots of ownership and they are not going to bottom out in a hurry."
He further added, "As long as GMR Infra can sustain Rs 140-145 levels, rallies back upto Rs 185 are possible but again same problem here. We have seen what’s happened to RNRL and RPL same over ownership and that’s going to provide lot of resistance. Again, I have been saying that get into under owned sectors and you’ll probably do very well this year instead of trying to go back into those same stocks."

Mehraboon Irani of Centrum Broking feels that at 2,500-2,600 despite the negative, which has come right now Larsen and Toubro, L&T looks like decent value buy.
Irani told CNBC-TV18, "When L&T came down very sharply and lowered by around 10% as compared to the Friday’s close, temptation was there to buy but the problem is that disclosures if they are not met and the market in which we are right now where even a stray selling here and there could push down prices further. There is always a fear that we could possible shed some more as far as that particular script goes but looking at all the negatives right now, hopefully that is final negative, which we have heard on the L&T front at Rs 2,500-2,600 it looks a decent buy. Because even if we look at the down grades as far as earnings estimate goes by couple of brokerage houses even they are talking of price target of Rs 3,100-3,200-3,300."
He further added, "I am quite confident that we will see a price much higher than this in the next 12 months because if not for this negative news, even if it was at Rs 3,100, I would have said L&T now definitely looks possibly going in for value buying. So Rs 2,500-2,600 despite the negative, which has come right now, assuming we don’t any other negative news coming in for L&T, looks like decent value buy."

Source: moneycontrol.com

Markets Today

It was a dramatic day for markets as they opened in red slipped further but showed smart recovery towards the end of the day. Recovery was led by PSU bank, metal, oil stocks. Hang Seng showed recovery of 600 points and ended in green up 200 points. Sensex has recovered nearly 550 points from the day's low and Nifty has recovered 170 points.
Among the gainers were Bharti, ACC, Cipla, Tata Steel, Reliance Petro, Sterlite Ind, JP Associate, M&M, Cairn India and HCL Tech.
SBI, PNB ended in positive terrain. Heavyweight ONGC is also helped in the recovery.
Punj Loyd, HCC, GMR Infra are the midcap stocks closed in green.
L&T might book hedging losses in UAE arm and the stock was down over 8% followed by BHEL, Unitech, Dr Reddy's Labs, Tata Power, Reliance Energy, Siemens, Tata Motors, Wipro, ABB and ICICI Bank.
The BSE Midcap Index ended at 6,767.92 down 0.54%.
The BSE Smallcap Index ended at 8,248.73 down 1.9%.
Sensex closed down 51.80 points or 0.32% at 15923.72, and the Nifty up 28.80 points or 0.60% at 4800.40.
About 886 shares have advanced, 2095 shares declined, and 67 shares are unchanged.
The BSE Bankex ended at 8,438.99 down 0.5%. SBI, PNB closed up; ICICI Bank, Kotak Mahindra, Oriental Bank, Allahabad Bank moved downwards.
The BSE Capital Goods Index closed down 4.5% at 13,341.09. L&T, BHEL, Siemens, Astra Microwave, BEML, Crompton Greave, Thermax, Greaves Cotton, Areva T&D closed lower.
The BSE Auto Index closed at 4,653.96 up 0.4%. Escorts, TVS Motor, Amtek Auto, Bajaj Auto closed higher.
The BSE Metal Index closed at 15,799.61 up 2%. Sterlite, NALCO, Shree Precoated, Mah Seamless, Jindal Steel, Jindal Saw, JindalStainless closed higher.
The BSE FMCG Index closed down 1% at 2,190.26. Colgate, ITC, Bata India, Godrej Consumer, HUL, GlaxoSmith Con closed lower.
BSE Oil and Gas Index closed at 10,225.67 up 2%. Reliance Petro, Cairn India, ONGC ended in green BSE power index closed at 3,112.34 down 1.3%. Torrent Power, NTPC, Reliance Energy, Tata Power, Power Grid Corp, Crompton Greave ended in red.
The BSE IT Index was down 2% at 3,570.84. I-Flex Solution, Patni Computer, Financial Tech, Mphasis, Tech Mahindra, TCS, Infosys closed lower.
The NSE cash turnover was at Rs 16437.42 crore and the NSE F&O turnover was at Rs 42402.3 crore. The BSE cash turnover was Rs 6877.8 crore. Total market wide turnover was at Rs 65717.52 crore.

Investment Idea: Stone India

Stone India is a part of Duncan Goenka group, the undisputed leader in locomotive brake systems and has a huge range of mechanical and electrical products for the railroad industry. It also manufactures few critical products for defence tanks and armoured vehicles.

Despite all these illustrious credentials, unfortunately, it has not got translated into good profit margins for the company. For the third quarter ended 31st December 2007, the company has shown an overall dip in the performance. On a qoq basis, the net sales dropped by 6% at Rs.18.60 crore. 90% of the company’s sales come from the railways but obviously; it has taken a beating during Q3. Expenditure was more or less consistent at Rs.15.73 crore, yet the lower sales led to the drop in the EBIDTA by 28% at Rs.2.88 crore. OPM dropped from 20.13% to 15.46%. PBT fell down further by 40% at Rs.1.89 crore and due to no provision for taxation; this was its PAT also. NPM slipped down from 15.98% to 10.18%.

The company is putting up a new facility at Nalagarh, Himachal Pradesh, expected to go on stream by end of March 2008. It is also contemplating putting up another new facility in Southern India, though all the plans yet only on the drawing board.

The stock of the company has taken quite a beating after the declaration of the Q3 results and the ongoing bearish trend also added on. Q2 results had also showed signs of a slowdown and this fall in Q3 is also worrisome.

With the Indian Railways planning to expand its network all over India and with the huge allocation earmarked for modernizing and expanding the railways network, clearly the company would stand to benefit. Being a supplier to the defence sector also, whose allocation has been increased in the Budget 2008-09, clearly the company could look ahead for some good times.
Despite the slowdown, given the expansions of the Indian Railways, the company might be able to get some better orders in the coming months. Based purely on this optimism, one can stay invested at the current rate of Rs.95.

Intraday Calls for 10th March

Markets may open weak as all global markets are trading deep in red. But A bounce back expected in mid-session from lowerl levels.
Today's Intraday Picks: GMR Infra, RCOM, JP Associates, Yes Bank.

For Details download the file by Click Here
Good Luck