Multibagger: Control Print (India) Ltd.

Control Print (India) Ltd.: Good growth potential
BSE Code: 522295
Book Value: Rs.47.53
EPS: Rs.9.15
P/E: 5.40
Dividend: 20%
Market Cap: Rs.37.18
Performance: Market out-performer
Target: Rs.130-160 in 18 months
Introduction: Control Print (India) Ltd. (CPL) began in 1991 with a dream of bringing Indian packaging at par with the international benchmarks in terms of coding & marking and is the undisputed market leader in the coding and marking machinery with a market share of around 40%. It has a product range of contact coders, superior touch coders, specialized metal marking systems, sophisticated ink jet coders and advanced laser coders that can be used to print on any type of surface like plastic, glass bottle, paper, wood, steel etc. The company operates in a single segment, viz. Coding & Marking machines and consumables thereof.
The company has entered into a technical collaboration with KBA-Metronic AG, Germany for manufacture of Industrial Ink-Jet Printers at Nalagarh, Himachal Pradesh. The company has also entered into technical collaboration for Thermal Transfer Overprinters, Large Character Printers and ink-jet consumables. KBA-Metronic AG, Germany, is the undisputed worldwide technology leader in Coding, Marking and Printing. The venture will lead to Industrial Ink-jet Printers manufactured in India based on the know-how transferred from KBAMetronic. It is worth noting that KBA-Metronic AG is a wholly owned subsidiary of Koenig & Bauer AG (KBA), the world's third largest printing equipment manufacturer.
The company will also be manufacturing KBA-Metronic's wide range of specialized ink formulations for various applications. With this tie-up, the company will be the first Indian manufacturer of industrial inkjet printers. The company has already set up a manufacturing and assembly facility for marking and coding devices at its facility in Nalagarh, Himachal Pradesh and which has already started commercial production from FY08. It shall he expanded for production of the Industrial Ink-jet Printers.
The company plans to export printers to other emerging markets in conjunction with KBAMetronic. The company has launched its ‘Conprint’ range of consumables for ink-jet printers and has also started marketing the full range of products.

Shareholding Pattern: The promoters hold 38.2% while the investing public holds 57.25% of which United India Insurance holds 4.52%, promoters have increased their holding from 36.57% to 38.2% in FY08.
Financials: For Q3FY08, its total income was flat at Rs.9.26 cr. as against Rs.10.45 cr. in Q3FY07 while the net profit was lower at Rs.1.04 cr. as against Rs.1.81 cr. in Q3FY07. This reduction in sales and profit was due to changeover of products.
Investment Rationale:
(1) Earlier, CPL made preferential allotments of 1,25,000 equity shares of Rs.10 each at a premium of Rs.53 per share i.e. Rs.63 per share as per SEBI guidelines to the promoters.
(2) The company declared a dividend of 20% for FY07 and may reward shareholders again in FY08.

(3) CPL plans to develop its land in a prime area of Mumbai, for commercial purpose in FY09. It will first develop its property at Chandivali, Andheri East, Mumbai. In fact, the value of its land is more than its market cap of Rs.37.18 cr. This is an important trigger for re-rating the scrip.
(4) CPL has commenced the commercial production of Conprint Hot Ink Coders and its consumables Ink Rolls at Nalagarh in Himachal Pradesh. The products are at par with similar imported products and it has received repeat orders from the users.

(5) The cumulative margins of printer and consumable sales are expected to expand further in FY09 and FY10.

(6) The company’s topline and bottomline is expected to see good growth from marketing of high end digital printers. The digital printers are used to print variable information on the Aluminum foil packaging of pharmaceutical tablet strips or on the packaging labels.
(7) One of the promoters has recently increased his holding in the company.
(8) The company’s clients include Coca Cola, Pepsi, P&G, Shaw Wallace, Cipla, Dr. Reddy’s Laboratories, Novartis, Rane Brakes, Tata Steel, SAIL, Hindalco, Jindal Iron, Aksh Optifibre and the like.
(9) With organized retailing coming off age in India, packaging has assumed importance. As a result, this technology has readymade domestic and overseas markets.
Concerns:
(1) Entry of new players could increase the already strong cut throat competition existing in the industry. With the market set to expand rapidly, many new players can be expected.
(2) Any delay in employing the latest technology could reduce growth targets. While CPL is lready in talks with many large companies for digital printers, the low cost machine sales would depend on its ability to market the product efficiently.
Conclusion: CPL is in a relatively new industry with mammoth growth potential. It is also the only listed company in this segment. This makes comparing valuations difficult and complex. It is worth understanding that CPL derives majority of its revenue from FMCG, Pharmaceutical and the Auto sectors. Since CPL is dependent on these sectors, it ought to get valuations closer to sectors dependent on these sectors. But the fact that it derives revenue from multiple sectors reduces its dependence on one particular sector. As a result stability in earnings is high. Profit visibility is also expected to improve as its printer base continues to grow over the next few years resulting in high consumable sales.
Considering these factors, the CPL share may get a valuation lower than the core sectors but closer to the dependent sectors. At a P/E of only 5.4, Book Value of Rs.47.53, Dividend of 20% and EPS of Rs.9.15, the scrip is available at an attractive CMP of Rs.49.45 and could get re-rated soon. The scrip is near its 52-week low of Rs.41 and thus has a minimum downside. In the short-term if the scrip is able to cross Rs.57 with good volume then the next target could be Rs.70-75. The stock is in the oversold territory and a bounce back could be expected very soon. Please keep a strict Stop Loss of Rs.45.5 in case it starts to slide or if the market dynamics change suddenly. I place a target of Rs.130-160 in 18 months time frame.

By Suman Mukherjee (Source: Moneytimes Internet)

Stock Ideas

Although Accurate Transformers Ltd. (Code: 530513) (Rs.130) is unable to fully capitalise on the boom in the power sector and registered a normal growth it’s still a value buy at the current level. For Q4FY08, it posted 10% rise in sales as well as net profit to Rs.95 cr. and Rs.3.40 cr. respectively. Accordingly for FY08, sales improved by 15% to Rs.197 cr. and PAT grew by 25% to Rs.7.90 cr. This translates into a healthy EPS of Rs.27 on its very tiny equity of Rs.2.97 cr. Due to shortage of working capital funds, the company is running at a very low capacity utilisation. Earlier, it tried to raise capital by a preferential allotment of around 31 lakh warrants at Rs.56 to promoters but it did not get SEBI approval due to some technical reason. The company has huge manufacturing facilities spread across Ghaziabad, Sikandrabad, Greater Noida, Dehradun and Haridwar with an installed capacity to manufacture nearly 8000 MVA of transformers. At a very modest discounting by 6-7 times, the share price can move up to Rs.175 in 6-9 months.
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On an year-on-year (YoY) basis, Q4FY08 results of Tera Software Ltd. (Code: 590020) (Rs.50.50) look very disappointing as revenue declined by nearly 50% to Rs.16 cr. and PAT fell by 40% to Rs.3 cr. But if we examine quarter-on-quarter (Qo Q) basis, it posted the highest sale among all the four quarters of FY08. This implies that the company may have completed some big e-governance project in Q4FY07. Still for FY08, it posted marginal growth in revenue to Rs.59 cr. and 15% increase in PAT to Rs.12.25 cr. after making the highest tax provision of 38%. It reported an EPS of Rs.11 on its equity of Rs.12.50 cr. and may declare 25% dividend for FY08. Of late, the company has been empanelled as a vendor for the rollout of IT services in the government sector through National Informatics Centre Services Inc. for a period of one year, which can be extended by another year. Looking at its strong order book position, it may end FY09 with sales of Rs.75 cr. and profit of Rs.16 cr. i.e. an EPS of Rs.13. Also as per reliable sources, the company is planning to dispose off its 20 acres surplus land in Hyderabad, which is worth Rs.40 cr. Once the deal is finalised, its share price will shoot up.
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Amar Remedies Ltd. (Code: 532664) (Rs.29.40) is a well-known manufacturer of ayurvedic, herbal and cosmetic dental care, personal care, skin care, beauty care & healthcare products like tooth pastes, toothpowders, shampoos, creams, lotions, shaving gels, balm & pain relieving ointments. Besides, it has successfully developed 24 different ayurvedic and herbal medicines and has also obtained the FDA approval for the manufacture and sale of these medicines, which include medicines for hypertension, diabetes, and heart ailments. Recently, it came out with excellent results for the December 2007 quarter as sales jumped by 70% to Rs.73 cr. and PAT increased by 40% to Rs.5.60 cr. However, the company is yet to start commercial production at its newly set up Dehradun facility as it is awaiting the clearance certificate the from pollution control authorities. On the back of aggressive capex, it has tripled its gross block from Rs.35 cr. to almost Rs.100 cr. For FY08 ending 30th June 2008, it can register sales of Rs.300 cr. with PAT of Rs.20 cr. i.e. an EPS of Rs.8 on its equity of Rs.26.20 cr. A safe bet in the current market sentiments.
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Mazda Ltd. (Code: 523792) (Rs.73.35) is among the few engineering companies in the world manufacturing very specialized, high technology and critical equipments for various industries like power, refineries, fertilisers, chemicals, nuclear, sugar, paper, food, pharma etc. Broadly, its product profile is segmented into Vacuum systems, Valves, Air pollution control equipment, Crystallisers and Evaporators. It came out with satisfactory results for Q4FY08 and ended FY08 on quite a buoyant note. For FY08, its sales improved by 15% to Rs.60.50 cr. whereas profit increased by 30% to Rs.6.60 cr. Hence it registered a very healthy EPS of Rs.15.50 on its small equity of Rs.4.26 cr. Importantly, the company has technical collaboration with world renowned Croll-Reynolds Inc., USA, which holds 12% stake in the company. To cater to the increasing demand, it is setting up a third unit at an investment of approx. Rs.5.6 cr. Despite the promising future, this hi-tech engineering company is available very cheap at an enterprise value of around Rs.40 cr. and is a screaming buy.

Source: moneytimes (internet)

Stock Idea: Unichem Lab

Karvy Stock Broking has maintained its buy rating on Unichem Laboratories with a traget price of Rs 225 in its May 16, 2008 research report. "The company's net revenues for the quarter were up by 3.2 % to Rs 1383 million. The growth has been driven by a 11 % growth in domestic formulations business revenues which has been offset by degrowth in exports. Operating margins were lower by 500 bps to 14.2 % mainly on account of lower gross margins and higher excise. Profits for the quarter were higher by 13 % to Rs 153 million."
"We upgrade our FY 2009E EPS nos by 7.3% to Rs 22.1 and maintain our FY 2010E nos at Rs 31.3. We upgrade our price target by 10 % to Rs 225 based on 10.2x FY 2009E. The Company is quoting at attractive valuation of 6.6X FY09E. We maintain our BUY rating on Unichem," says Karvy's research report.

Market This Week

Market This Week
Sensex up 4%; Nifty up 3.5%
CNX Midcap Index up 2.5%; BSE Small Cap Index up 1.2%
BSE Metal Index up 9.5%, BSE IT, Bank Index up 5% each
BSE Cap Goods Index up 4.2%, BSE Healthcare Index up 4%
Nifty Gainers: Hindalco up 19%, Suzlon up 13%, SAIL, RComm up 12%, PNB up 13%
Nifty Gainers: Ranbaxy up 8.3%, Nalco up 19%, Tata Steel up 5.6%, TCS up 6.7%
Nifty Losers: ONGC down 8%, BPCL down 4.2%, ACC down 4.8%, Bajaj Holdings down 4.6%
Midcap Gainers: Chambal Fert up 21.7%, JSW Steel up 25%, Mercator Lines up 16%
Midcap Gainers: Lanco Infra up 15%, NIIT Tech up 10%, Orchid Chem up 10%, BILT up 8.5%
Source: moneycontrol.com

Markets Today

Markets Snapshot
Markets end in the green amid volatile trade
Sensex ends up 81.4 pts at 17435; Nifty up 42.5 pts at 5158
CNX Midcap Index up 0.8%, BSE Small-cap Index up 0.86%
BSE Metal Index up 2%; SAIL up 7.5% post results
BSE Bank Index up 1.8%; PNB up 6.5% on back of good numbers declared yesterday
Index gainers; BPCL up 5.8%, Suzlon up 5.2%, Cairn India up 4.6%, Tata Power up 3.6%, Ranbaxy up 3.25%
BSE IT Index down 0.5%; HCL Tech down 2.3%, Infosys down 1.1%
Result Impact: SAIL, Bongaingaon Refinery
Buzzers: Assam Co up 10%, Harrisons Malayam up 11.6%, Tamilnadu Petro up 20%, Hyderabd Ind up 20%
Buzzers; Chambal Fert up 8.5%, Guj NRE Coke up 6%, BOI up 5.7%, Dish TV up 5.5%, Nag Fert up 5.5%
Losers; Welspun India down 5.3%, Megasoft down 6.2%, BF Utilitiues down 5%
NSE Advance Decline at 2:1
Total market turnover at Rs 57402 cr Vs Rs 58476 cr on Thursday
Total NSE F&O turnover at Rs 37877 cr Vs Rs 38196 cr on Thursday
F&O Snapshot
Nifty futures discount at 12 pts; add 7.3 lakh shares in OI
Traders buying 5100 call option and hedging it by shorting Nifty 4900, 5000 witness put wriitng and 5100 witness call writing
Long positons witness in momentum stcoks like Chambal Fert, Nag Fert, Ispat and stcoks like SAIL, Suzlon
Sugar stcoks witnmess unwinding of long positons and fresh shorts
Long Positions
Brigade Ent up 14.5%; add 1.68 lakh shares in OI
Chambal Fert up 9.5%; add 44.2 lakh shares in OI
Nag Fert up 5.2%; add 32 lakh shares in OI
Ispat up 2.3%; add 22.7 lakh shares in OI
HCC up 3%; add 10.5 lakh shares in OI
SAIL up 7.8%; add 7.2 lakh shares in OI
Suzlon up 4.6%; add 6 lakh shares in OI
HDIL up 4.35; add 4.3 lakh shares in OI
Short Covering
India Cement up 2%; shed 5.3 lakh shares in OI
Petronet LNG up 4.7%; shed 3.5 lakh shares in OI
Aptech up 2%; shed 2.6 lakh shares in OI
BOI up 5.25%; shed 1.6 lakh shares in OI
Sugar Stocks
Bajaj Hind down 2.4%; shed 1.6 lakh shares in OI
Triveni Eng down 2%; shed 2.8 lakh shares in OI
Shree Renuka down 1.5%; add 12.5 lakh shares in OI

Source: moneycontrol.com

Intraday Trading Calls for 16th May

Market may open positive but face profit booking at higher levels. It may remains positive but with very high volatility and again a positive closing expected.

Today's Intraday Trading Picks:

MERCATOR LINES
VOLTAS
CHENNAI PETRO
INDIABULLS SECURITIES
YES BANK
HIND OIL EXPLORATION

For Levels and Targets download the file by CLICK HERE.
Others: IT Sector: Infosys Tech, Satyam Computer, 3i Infotech & Prithvi Info.

Good Luck

Stock Idea: FSL, Redington India

PINC Research has maintained its buy rating on Firstsource Solutions with a 12-month price target of Rs 66 in its May 14, 2008 research report. "Firstsource Solutions Ltd. (FSL) reported sales of Rs 3.8 billion in Q4FY08, a flat QoQ growth. However, operating profits posted a 7.4% QoQ rise to Rs 622 million, as the previous quarter had one-off items. Net profit growth, though was subdued due to a provisioning for FCCB’s (Rs 195.6 million) which resulted in only a 1.9% QoQ growth to Rs 210 million."
"At the CMP of Rs 40, FSL is trading at a P/E of 14.3x and EV/EBIDTA of 7.6x. Though FSL could face short term uncertainties in key segments we continue to believe that its offerings are expected to witness greater traction due to the under penetration of outsourced BPO services. Hence, as FSL possesses proven capabilities to capture these opportunities, it has the potential to report robust earnings growth and stable free cash flows which should enable its valuations to align with that of its global peers. Thus, we maintain our ‘BUY’ recommendation with a 12-month price target of Rs 66," says PINC's research report.

PINC has maintained buy rating on Redington India with target price of Rs 445 in its May 13, 2008 research report. "For Q3FY08, Redington posted consolidated net sales of Rs25.9 billion, a 14% YoY growth. This was on back of consistent growth in the distribution business across geographies. While domestic revenues (52% of net sales) grew 18.4% YoY at Rs13.5 billion, overseas revenues rose 7.9% YoY to Rs 12.4 billion. Scale up in volumes has improved its operational metrics and its PBIT margins have expanded 50bps in two years to 2.3%. Net profit contribution ratio from both markets is at 50/50, because of low effective tax rate overseas i.e. 5%, where as Indian business attracts highest tax rate at 35%. Going forward, we expect higher contribution from India because of higher growth prospects in same."
"Considering the track record and consistent ability to deliver SCM and support services solutions for IT and consumer lifestyle products, we believe Redington is well positioned to maintain its market share in highly competitive scenario. At CMP of Rs 351, the stock is ruling at a P/E of 9.3x and EV/EBITDA of 7x in FY10E. Assuming a terminal growth rate of 6% and 13% cost of equity, we arrive at a DCF value of Rs 445 for the stock excluding NBFC valuations. We initiate coverage with a ‘BUY’ recommendation on a 12-month perspective" according PINC report.