Stock Idea: Balmer Lawrie & Company

Balmer Lawrie & Company: Bargain Hunt begins!
21 Dec 2009
Balmer Lawrie & Company (BLC) is a diversified PSU having Mini Ratna status. Its business spans across
Industrial packaging – Manufacturing barrels and drums
Logistics Infrastructure – Container Freight stations and warehousing activities
Logistics Services – Air and related logistics activities
Travels and tours – Ticketing, tours and money changing activities
Greases and Lubricants
Tea blending and packaging
Leather Chemicals
Engineering and Technology services
Stock data (18 Dec 2009) BSE
Share Price (Rs.) 543
52 week high/low (Rs.) 600 / 204
Market Cap (Rs million) 8843
P/S (x) 0.54 P/E (x) 8.75
No. Of Shares (Million Nos.) 16.29
Average Daily Volume (6month) 13,471
The company is aiming to achieve Rs. 2000 crores revenues and Rs. 200 crores in PBT by the end of FY2010.
Amongst the segments, it can be seen that travel and tours contributes ~40% of the total revenues and Logistics Infra and services contribute ~24% of the total.
Considering profit margins, despite tours and travels contributing maximum to the revenues, bulk profits come from Logistics Infra and services (contributing 63% of PBT). This segment has the highest profitability (26% margins) and also the fastest growth whereas travel segment contribute only 14% of PBT and has very low margins of ~3.4%
Greases / lubes and Industrial Packaging segments are moderate growers with growth of ~7% and together contribute ~32% of the revenues.
Tea blending and engineering services are the least contributors to the revenues and profits. As tea blending division is a commodity product their returns are quite low and does not justify the capital allocation, especially for this segment. Even the revenues from this segment have declined by 15% in current financial year. The company may be planning to exit the tea business if these returns do not justify the investments
BLC has grown its sales by 13% CAGR since last 5 years and its net profits by 35% CAGR. The sales and net profits in FY09 were Rs.1636 crores and Rs.101 crores respectively. The company wants to push the sales to Rs.2000 crores by end of FY10 and is also making efforts to achieve PBT of 10% during that time frame.
Since last 5 years, Balmer Lawrie has been able to maintain ROE greater than 22% because of proper cost controls, effective working capital management and better utilization of resources. The company is also an effective cash generator and this can be seen from the fact the cash from operations is equivalent to net profits with minimal capex.
The company also has strong balance sheet with zero debt and has net worth of ~Rs. 390 crores in FY09. It also has substantial cash balance of ~Rs. 248 crores which it can use for expansions or it can payback its shareholders by increasing the dividend. BLC post an attractive dividend yield of ~3.5% and with impressive record increasing dividends.
BLC is setting up a lube and grease manufacturing plant in Indonesia through a 50:50 joint venture with a local company by investing ~US$5m (~Rs. 24 crores)
Key concerns:
BLC is diversified to various businesses and it seems that it requires focusing on its key growth drivers i.e. focusing especially on logistics infra / services, tours and travels, and industrial packaging.
The company also needs to reorganize its business units for better allocation of capital. For example: The returns generated by the tea business do not generate adequate returns on capital.
Valuation:
BLC seems fairly valued with P/E of ~9x, P/S of ~0.6x and P/B of 2.4 (the margin of safety is not there), but when the company is evaluated on segmental basis the stock is valued cheaply especially when the travel business is contributing ~40% (Rs.662 crores) of the revenues. The current IPO of Cox and Kings whose revenues were just ~Rs.155 crores is valued 17 times its sales and similar is the case of Thomas Cook also (5 times its sales). If those companies are getting valuations at this level then Balmer Lawrie should also fetch some decent valuations in the travel business. The price / sales ratio of the whole BLC is ~0.6 indicating that it is largely undervalued.
Other segments like Logistics infrastructure and services, Greases and lubes, and Industrial Packaging should be atleast valued at P/E 10-12 (Gateway Distriparks has P/E of 14, Castrol is available at P/E of 26). So by adding up the numbers, we get the fair value of ~Rs.1500 crore vs. mcap of Rs. ~900 crores for the whole company making a stock at really attractive “BUY”.
Source: Internet (Valuenotes by Rathin Shah)

Stock Idea: Bombay Dyeing

The stock has been buzzing on the bourses since the past week and this has nothing to do with the core business of the company – polyster and textiles. It is more on account of its amobitious realty foray which has turned the company into a milch cow.
Its realty arm, Bombay Dyeing Realty is developing two projects in Mumbai. One is located in Dadar, Naigaum. This is spread over an area of 45 lakh sq.feet and it is being developed as a mix of both residential as well as commercial properties. The present value is around Rs.8000/sq.feet. This means, the property is Naigaum is valued at Rs.3600 crore. And here, Bombay Dyeing is selling flats at Rs.16,000 per sq.feet. The other property is in Worli and this is measured at 48 lakh sq.feet. Valued at Rs.12,000/sq.feet, the total value of this Worli property is Rs.5600 crore. For both the properties, contract has been given to L&T, which was 12 months ago and the total deadline for completion is 48 months.
Apart from development, there is really nothing too encouraging happening in the company’s core business. Its financial performance for Q2 ended 30th Sept 2009 continued to remain in the red on the net levels. The only gratifying part was that the net loss had come down and it managed to post profit before interest, depreciation and taxation. Net loss was at Rs.11.05 crore v/s 19.69 crore loss in Q1FY10 and much better than Rs.103.97 crore loss in Q3FY09.
Polyester continues to remain its main fray though the income earned from realty is also getting to be quite substantial. In Q2FY10, realty contributed 33% to the topline, which in Q1FY10 was at 31% and in Q2FY09 was at a meager 6%. Polyester in current Q2 contributed 48% to the topline while textiles contributed 19%.
Realty is giving the fillip to the stock as well as the company. It is expected that the company by 2011 or 2012, would demerge its realty arm and consider listing it too.
Source: Internet (by S P Tulsian)

Intraday Trading Calls for 22nd December

Indian Stock Market may open good positive and remains positive for the day today with very high volatility.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME	TRIGGER	PRICE	TARGET 1	TARGET 2
VOLTAS	Buy Above	164.20	168.45	172.00
	Sell Below	162.55	159.40	156.00
VIDEOCON INDUSTRIES	Buy Above	221.75	226.70	232.00
	Sell Below	219.50	215.20	210.00
IDFC	Buy Above	148.70	152.35	156.00
	Sell Below	147.35	144.20	140.00
IDBI	Buy Above	121.25	124.50	128.00
	Sell Below	120.10	117.40	113.00
KPIT CUMMINS	Buy Above	132.10	136.50	142.00
	Sell Below	130.40	126.55	122.00
APTECH LTD.	Buy Above	177.80	183.55	190.00
	Sell Below	175.00	172.40	168.00
ADSL	Buy Above	224.60	230.45	236.00
	Sell Below	221.45	216.35	210.00

GOOD LUCK

Stock Idea: Thermax Ltd.

The going has been good for this Pune-based energy and environment solutions provider. All those skeptics who had written away the company when the orders were down, due to the slowdown, would now be eating their words. With things improving, the order book of the company has also gone up. The latest was the Rs.477.77 crore orders for constructing and commissioning a turnkey captive power plant for its ferro alloy unit in Orissa. And prior to this, during the fag end of Q2FY10, it had won an independent power project worth Rs.1000 crore from Andhra Pradesh.
The company currently has an order book of Rs.5060 crore of which Rs.4400 crore came from domestic and Rs.650 crore from international. Another Rs.1500 crore to Rs.1600 crore worth of orders are expected to be clocked by end of current fiscal. A look at the distribution of the order book shows that 80% of its revenue comes from energy sector. The balance comes from cement, food, textiles, metals and municipal corporations.
For H1FY10, though the performance remained subdued, QoQ, the numbers have improved. Q2 has been better and this shows that things are slowly but surely improving. For H1FY10, net sales was at Rs.1217.96 crore and net profit was at Rs.100.61 crore. In FY09, net sales was at Rs.3264.35 crore and net profit was at Rs.287.29 crore. Clearly, for FY10, the company will have a topline and bottomline growth at almost the same levels or maybe a tad lower. Though the order book is getting better, the actual translation of these numbers into topline growth would begin only from next fiscal, ie: FY11.

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

Intraday Trading Calls for 21st December

Indian Stock Market may open flat to positive and remains positive for the day today with very high volatility.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME	TRIGGER	PRICE	TARGET 1	TARGET 2
JYOTI STRUCTURE	Buy Above	161.25	165.35	170.00
	Sell Below	159.15	155.40	150.00
VIDEOCON INDUSTRIES	Buy Above	221.65	226.70	232.00
	Sell Below	219.50	215.20	210.00
IDFC	Buy Above	153.75	157.10	161.00
	Sell Below	152.45	149.35	145.00
DCHL	Buy Above	158.75	163.45	168.00
	Sell Below	157.30	152.60	148.00
3I INFOTECH	Buy Above	83.10	86.25	90.00
	Sell Below	81.70	78.35	75.00
APTECH LTD.	Buy Above	178.60	183.55	190.00
	Sell Below	176.45	172.40	168.00
ADSL	Buy Above	230.55	236.45	242.00
	Sell Below	228.40	222.30	216.00

GOOD LUCK

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)