Stock Idea: Hindalco Ltd

Hindalco Ltd— BUY—142—INR
Sector — Aluminium
Regd.Off.— Century Bhavan 3rd Floor Dr. A.B. Road, Mumbai- 400025
Listed — NSE, BSE.
Company overview—
Company was incorporated on 15th December 1958 at Mumbai to manufacture alumina, aluminium and aluminium-fabricated items. Company was formed by the Birla in collaboration with the Kaiser Organization of U.S.A. Properzi mill plant was set up for the production of redraw rods. An extrusion press and rolling mill for the production of aluminium extrusions and rolled sheets was installed. Company got certification for ISO 9000 and for introduction of TQM in 1992. Company installed vertical ingot casting facility and vertical billet casting facility to use the Air Slip Technology of Wagstaff Engineering Inc., U.S.A. With a view to capitalizing its inherent strength, the Company signed a MoU with the Orissa Mining Corporation (OMC) for setting up of a mega integrated aluminium complex in the state, at an estimated cost of Rs.10,000 crore in 1997. It acquired 12.8 pc stakes in Indian Rayon & Industries. In 2004, Birla Copper acquired two mines in Australia. Company also has an agreement with UAE based Foodco.
Products & Services—
It is a leading domestic player in two non-ferrous metals business segments - aluminium and copper. It manufactures alumina chemicals, primary aluminium, aluminium extrusions, aluminium rolled products, aluminium foils, aluminium alloy wheels, copper, DAP/NPK complexes, precious metals etc. It has a domestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products, 20 percent in extrusions, 44 per cent in foils and 31 per cent in wheels.
In Aluminium, Company has a market share of 48% and it is 1 of the lowest-cost Aluminium producers in the world. It has fully integrated aluminium plant at renukoot (UP), Aluminium wheels plant at Silvassa (Dadra & Nagar Haveli), Foil plants at Silvassa and Kalwa, Foil unit of indal at Kollur. Plants having alumina refining capacity of over 1,145,000 ton par annum and Aluminium metal producing capacity of 424,000 ton par annum. Plants have ISO 9001:2000 and ISO 14001 certification.
In Copper, company has India’s largest smelting and refining plant at Dahej, Gujrat with two copper mines in Australia. It has market share of around 45 percent in copper. It has ISO 9001, 14001 and OSHAS 18001 certified. It is registered on London metal exchange as Grade A Copper Brand. The copper plant produces world-class copper cathodes, continuous cast copper rods and precious metals. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other phosphatic fertilisers and phospho-gypsum are also produced at this plant.
For expanding the market for value added products and services, it has launched several brands in last few years, which include Aura for alloy wheels, Fresh wrap for kitchen foil and “Everlast” for roofing sheets. The “Aluminium Gallery” promotes Hindalco products to its customers. It is a platform for the company to showcase quality products to a quality audience in an appropriate ambience. It includes products like windows, doors, furniture, ladder, roofing sheets and ceiling and cladding panels.
The company's alumina chemical business is a leader in manufacturing and marketing of specialty alumina and alumina hydrate products in the country. It has a market share of 90 per cent in the country. These specialty products find wide usage in diversified industries including water treatment chemicals, refractories, ceramics, cryolite, glass, fillers and plastics, conveyor belts and cables etc. The company also exports these alumina chemicals to over 30 countries covering North America, Western Europe and the Asian region.
Power sector accounts for around 45% of domestic aluminium consumption. Ongoing power sector reforms, focused on transmission and distribution and State Electricity Board restructuring plus increasing usage of captive power plants by industries would further drive higher aluminium consumption in the country. Government’s plan on the development of infrastructure will support aluminium consumption. Housing and construction sectors are also witnessing strong growth.
Valuation—
Company has continuous dividend payout record from 12 years. At current market price, stock is trading at about 7.80 P/E multiple of its FY2011 Estimated EPS. We recommend investors to buy “Hindalco Industries limited” with medium to long-term investment prospective.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Raymond Ltd.

Raymond Ltd— BUY—190—INR
Sector — Textiles
Regd.Off.— 156/H No.2, Village Zadgaon, Ratnagiri(M.H.) - 415612
Listed — NSE, BSE.
Company Overview—
Company was incorporated on 10th September 1925 at Mumbai. Raymond Group is a Rs. 2000 crore plus conglomerate having businesses in Textiles, Readymade Garments, Engineering Files & Tools, Prophylactics and Toiletries. The group is the leader in textiles, apparel, & files & tools in India and enjoys a pronounced position in the international market. Raymond believes in Excellence, Quality and Leadership. Raymond Woollen Mills Ltd. was registered in Kenya for manufacturing knitting yarns and price goods of wool and wool mixed with synthetic fibres, and woollen and worsted fabrics. Company also started the research and development for sheep breeding and wool production in India with a view to produce indigenously Merino type wool. Company has a woollen mill unit in Jalgaon in Maharashtra. Company also started a modern Wool Combing Division in collaboration with Sir James Mill & Sons Ltd., Bradford, U.K. Company acquired the files division of the A.V. Birla group company i.e. HGI Industries. The 50:50 joint ventures J K Ansell, between the Raymond and Australia-based Ansell International was formed to improve technology. Company started to manufacture suit lengths in the Super 200’s wool category, which is made by very few companies in the world. Raymond is planning to invest Rs 1 billion to open about 300 more stores across the country by the end of March 2011 as part of its expansion plans. The Raymond Shop will come up in smaller class IV and V cities. The funding for the project would be split equally between the company and franchisors/franchisees. Raymond expects its potential turnover to exceed Rs 2 billion from these stores on an annualized basis.
Products & Services—
Raymond Limited is India’s leading producer of worsted suiting fabric with a 60% market share in its category. Raymond apparel limited has three highly regarded men swear brands in its folio: Park Avenue, Parx & Manzoni. J.K. Helene curtis limited is the marketers of the Park Avenue and Premium brands of men’s toiletries. It’s brand ColorPlus is one of the leading domestic brands for premium casual wear in the country. Company also has presence into the branded kids wear market with “Zapp” range, for 4-12 years age group.
Raymond Shop is a premium retail store offering complete wardrobe solutions for men’s. Raymond Shop has been a pioneer in organized retailing in the country starting around five decades ago. The Raymond Shop’s wide reach and range of products, makes it the largest one stop retail network in the country. It has grown multifold from the beginning with a dedicated team making it the largest retail store in the country having more than 321stores in prime locations, in over 150 cities in India. Company also has overseas network of around 25 shops in 15 plus cities of Middle East, Srilanka, Bangladesh and Nepal. Raymond Shop offers over 3000 qualities, shades and designs of Raymond fabric to its customers.
Company has several well-established brands—
Raymond— The largest and most respected textile brand in India for 'The Complete Man' addressing the inborn need of men to look good and at the same time hold strength of character.
Park Avenue— Formal readymade garments & accessories for men it has got the "Most Admired Brand" and "Most Admired Trouser Brand" awards.
Parx— The semi formal and casual range of cottons, blends and denim wear catering to the smart, fashionable and comfortable clothing segment.
Manzoni—The luxury range of men’s shirts and ties acknowledged for its high quality and international styling.
Be: -- An exclusive prêt-a-porter line of ready-to-wear designer clothing for women and men in western, ethnic and fusion styles.
Premium— The range of cosmetics & toiletries including after shaves, shampoos, cologne, shaving cream, soaps, deodorants, room fresheners, etc.
ColorPlus— Premium casual wear brand in high quality natural fibres like cotton and linen, in superior mixed and performance oriented weaves.
Valuation—
At current market price, stock is trading at 12.45 P/E multiple of its FY2011 estimated EPS. We recommend investors to buy “Raymond Industries Limited” at every dip with long-term investment perspective.
Source: Internet (Valuenotes by Abhishek Jain)

Stock Idea: Cosmo Films Ltd

Cosmo Films Ltd (Rs 104)
(BSE Code – 508814, NSE Code - COSMOFILMS)
(P/E - 4.5, Dividend Yield - 4.8%, Market Cap - Rs202 cr, FY09 Sales - Rs655 cr)
Cosmo Films (CFL) is one of the leading players in production of biaxially oriented polypropylene (BOPP) films. The product is used mainly by FMCG players like Parle, Britannia, Hindustan Unilever, Nestle and Dabur, which use tetra packs and BOPP films for packing their products. Cosmo currently has an aggregate capacity to manufacture up to 96,000 tpa of BOPP films, which will be enhanced to 105,000 tpa by the first quarter of ’10. The company not only supplies to FMCG multinationals operating in India and local players, but has also established its presence in overseas markets like the US and Europe. At present, close to 55% of the company’s net sales are accounted for by exports. In India, the company faces competition from Uflex and Jindal Polyfilms. Apart from BOPP films, the company manufactures thermal films with annual production capacity of 21,000 tpa. This is a value-added product, made out of BOPP films, which carries a higher realisation.
The Indian BOPP market is estimated at 1.70 lakh tonnes and growing at 20% a year, with Jindals being the biggest producer of this product. Cosmo, promoted by Mr Ashok Jaipuria, operates two plants with six lines of production in Aurangabad and Vadodara. The demand for BOPP packaging material is increasing in India due to the retail boom. The major end-users of this product are food, confectionery, cosmetic, toiletries, label films, and cigarettes makers. CFL is now also looking at new geographies, with focus on parts of Africa and Eastern Europe. The global demand for BOPP products is estimated at 4.7 million tonnes and growing at 4-5% annually.
For the Q1 ended June 2009, Cosmo’s domestic sales volume increased by 39% whereas export volume declined by 9% resulting in 5% drop in net sales to Rs 176.06 cr.. Higher interest/Depreciation due to commissioning of new BOPP line in March 2009 lead to 14% lower PAT at Rs 12.41 cr.. The EPS for Q1 stood at Rs 6.4. For the half year ended Sept. 2009, Cosmo’s net profit stood at Rs 21.19 cr. on net sales of Rs 347 cr.. OPM improved to 15.3% from 13.7%.
During FY09, Cosmo’s net sales grew to Rs 655 cr. from Rs 585 cr. in FY08. The slow growth was on account of the company’s conscious decision to go slow on production in anticipation of a possible downturn in the BOPP cycle. The PAT was marginally down to Rs 42.74 cr. from Rs 44.5 cr. in FY08. PAT after extraordinary item (due to change in method of depreciation, there was surplus of Rs 44.72 cr.) was Rs 87.46 cr.. On a equity of 19.44 cr.(Promoter’s stake- 44%), the EPS before extraordinary item stood at Rs 22 and dividend of 50% was declared. CFL also completed the acquisition of GBC Commercial Print Finishing with global revenues of approx. $100 mn. Post this acquisition, CFL is expected to successfully establish itself as the global leader in thermal lamination segment. At the current market price of Rs 104, the scrip trades at 4.7 times its FY 2009 earnings (Rs 22) and 4.3 times its estimated FY 2010 earnings (Rs 24). Cosmo has one of the highest dividend yields among its peers at 4.8%. The stock holds good potential for decent appreciation (35%-40%) in the next six months. Accumulate.
Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: KSB Pumps Ltd.

KSB Pumps Ltd (Rs 408)
(BSE Code – 500249, NSE Code - KSBPUMPS)
(P/E - 10, Equity - Rs17.4 cr, Market Cap - Rs710 cr)
KSB Pumps(KSB), Indian subsidiary of the German parent KSB AG is a leading producer of pumps and valves for fluid handling including waters in India. KSB Pumps was incorporated in 1960 by KSB AG, Germany, one of the largest pump manufacturers in the world. One of its technical collaborators, Canadian Kay Pump, is the main shareholder, holding a 40.54% stake in the company, the Indian promoters hold 26.28%, taking the total promoter holding to 66.82% on a equity of 17.4 cr. Within the KSB Group globally, KSB India has relatively the highest range of pumps and valves to offer. Even among its competitors in India, KSB India has a large range of pumps to offer under one roof. Both these give the company the required competitive edge over its peers. Pumps and valves form part of large projects across the aforesaid industries. KSB manufactures various pumps and valves of various specifications to enable fluid transportation. It is perhaps the only company that manufactures pumps and valves to support functions of agricultural sector and water and sewage management systems apart from industrial applications such as power, petrochemicals, etc. The growth of the pump and valves sector is driven by the growth and increased investments in power and energy sectors apart from the agricultural sector.
KSB has 5 plants in India – two in Pune that cater to the requirements of irrigation and power projects, one in Nashik that manufactures multistage pumps, water and submersible motor pumps, a valve manufacturing plant in Coimbatore and a foundry in Ahmednagar to support captive consumption of castings. KSB earns 30% of its revenues by way of sales of standard products, 65% through project based (made to order) revenues and the remaining by way of after sales services KSB also takes up project execution on turnkey basis and caters to niche industrial as well as highly competitive low margin agricultural and domestic (residential/commercial buildings) segments. On industrial front the company caters to diverse industries such as chemicals, petrochemicals/ refiners, breweries/distilleries etc and power generation (both thermal and nuclear for feeding water to boilers).
KSB has registered 20% compounded annual growth in revenues in past 5 years, while bottom-line growth for the same period stood at 31%. The government’s increased focus on infrastructure investment led to increase in demand of pumps and valves. Thus, the top-line growth has come in on account of increased volumes. On the other hand, the earnings growth has been supported by improved product mix, cost control measures and introduction of new products in the high growth areas such as submersible business. For the year ended Dec. 2008, KSB posted net sales of Rs 601 cr.(up 29%) and net profit of Rs 64.7 cr.(up 38%). On a equity of 17.4 cr., the EPS stood at Rs 37.2 and the dividend declared was 55%. For the nine months ended Sept. 2009, KSP has posted net profit of Rs 48.87 cr. (up 1%) on net sales of Rs 411 cr..(down 2.6%). Interim dividend of 20% has also been declared.
Going forward, the growth is expected to come in on account of government’s increased investments in industrial sector and increased investments in agricultural sector. KSB Pumps being a leading manufacturer of custom-made pumps and valves is all set to reap the benefit of increased investments in end user industries. The company foresees 10% to 12% growth in top-line. The same would be on account government’s increased focus and investments in agricultural and infrastructural activities to sustain and boost economic growth.. At the current price of Rs 408, the stock is trading at 10 times expected CY09E earnings. Invest in small lots and accumulate on weakness linked to broad markets. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-45% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)