Large Cap Stock To Buy - Dr. Reddy’s Laboratories

I recently read thru stock research report from a stock broker on Dr. Reddy’s laboratories and thought to share key reasoning behind this stock recommendation.

Growth Concerns
For some time, there are a few doubts investors have regarding the growth prospects of Dr. Reddy’s beyond FY13 but these doubts look to be unwarranted. There are many growth triggers which still would be there for company beyond FY13. The growth triggers going forward could be limited competition, complex generic products in the US, Russia and in India; biosimilar products. These growth triggers and proprietary products would ensure and trigger growth of the company beyond FY13.

It looks like execution is the key concern over the next few years. Historically, execution record of the company in India ahs not been very good. But the company has delivered well on monetizing limited competition opportunities in the US. It has also been scaling up operations in Russia and the potential of its biosimilar products pipeline is yet to be realized fully in markets.

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Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Gloomy Indian Economy? No worries. Future Can Be Ours
Blue Chip Stock Analysis - Infosys
RIL's Target Stock Price is Rs.650

All above mentioned growth drivers would create growth opportunities for Dr. Reddy’s Laboratories even beyond FY13 for sure.

Stock Financials
It is expected in the medium term that the earnings momentum for company would remain strong. Earnings estimates for FY13 has been increased by 6% based on higher sales in the US and rupee depreciation against the US dollar.

Core earnings of the company are expected to grow at a strong CAGR of 27.7% over FY11-14.

Estimations based on these numbers suggest the target stock price for Dr. Reddy’s Laboratories can be revised to Rs.1800 levels over one year. Hence, medium term investors may buy stocks of Dr. Reddy’s with one year time frame in mind.

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RIL to buy back shares at Rs.870

Reliance Industries Limited (RIL) is going to buy back it’s shares at Rs.870 per share.

The Board of Directors of RIL have approved the buyback of upto 12 crore fully paid up equity shares of Rs.10/- each at a price not exceeding Rs 870 per equity share, payable in cash, upto an aggregate amount not exceeding Rs.10,440 crore from the open market through Stock Exchange(s). This decision was made at its meeting held on January 20, 2012.

RIL stock trades at CMP of Rs.792.65 as on 20th January, 2012. This maximum buyback price of Rs.870 indicates almost 10 % premium over CMP.

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Stock Market Options Tips - Buy ITC Call

Here is one of the tip I came across today for options trading for some of you who might be looking for stock market options tips.

Sudarshan Sukhani of s2analytics.com was talking to CNBC-TV18, transcript of which is published on moneycontrol.com.

As per Sudarshan Sukhani, ITC has been neglected for some time now and it may surprise on the upside. ITC could be on the verge of a breakout. He has advised to buy an 210 call for ITC and wait patiently for options trading in Nifty.

You may read a bit of educational information on "Buy Call" Option investment strategy here.

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Share Market Stock Tips - Buy Stocks of Chambal Fertilisers

If you believe some of the technical stock analysts, fertiliser stocks in general and Chambal fertiliser shares are witnessing some stock buying at lower levels since past few sessions. Here is a stock tip that some of the high risk taking stock traders may be interested in for short to medium term.
If you look at the stock chart of Chambal fertiliser, it looks like the stock has support around Rs.75 levels.

Also, company is expected to report benefit of higher urea production above cut off in Q4FY12. Expected policy announcement on new urea investment should also have positive impact on company. EPS estimations for FY12/FY13 are at Rs 9.0 / 8.9 for the stock.

with a 3 to 5% stoploss from current stock price of Rs.76.5, the target stock price could be in the range of Rs.95 to Rs.100 in short to medium term time frame.

You may read a stock research report from one of the stock brokers here.

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Gloomy Indian Economy? No worries. Future Can Be Ours

I just read an article that talks about "Why India could be a superpower" despite current gloomy situation in Indian economy. This article is written by William H Avery, a former American diplomat and is the author of "China's Nightmare, America's Dream: India as the Next Global Power"; the article is published by Economic Times.

This article tries to explain why you shouldn't be crying fault due to current gloomy situation of Indian economy against growing China's might. And of course what we can think of when we think in context of Indian stock markets is that, the same old phrase, believe in India's long term growth story to make money from investments.

Without much ado, here is the article. Why 21st century can well be India's

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Blue Chip Stock Analysis - Infosys

Here is stock analysis and report on Infosys published by Angel stock broking. Stock broker has recommended to buy stocks of Infosys for one year time period with target stock price.

Results Update
In 3QFY2012, Infosys’ financial results were lower than stock broker's and market analyst's expectations on USD revenue front. But since rupee has been depreciating against USD for some time now, company's margin and bottom-line are improved.

Also, Infosys has lowered FY2012 USD guidance below stock analysts's expected estimates to 16.4% from earlier 17-19% yoy. The company has provided tepid revenue guidance for 4QFY2012 which is almost flat in terms of growth.

Quarterly highlights
For 3QFY2012, Infosys reported revenue of US$1,806mn, up 3.4% qoq, aided by 3.1% qoq volume growth and 0.8% qoq blended pricing growth. In INR terms, revenue came in at Rs9,298cr, up by whopping 14.8% qoq. The company’s EBITDA and EBIT margin increased by 265bp and 302bp qoq to 33.7% and 31.2%, respectively, largely gaining from INR depreciation. PAT came in at `2,372cr, up 24.5% qoq.

Growth Outlook
Infosys management has provided cautious outlook for next year’s budgets. Management expects growth to be flat or marginally negative. Company is witnessing delays in ramp-ups of the deals being signed. This is reflected in the muted 4QFY2012 and FY2012 guidance provided by management. This clearly indicates challenging visibility in business volumes and management’s future expectations.

The company would record USD revenue growth of 16.4% and 13.1% yoy in FY2012 and FY2013, respectively. Considering revised INR assumption would go downwards for 4QFY2012 and FY2013 to `51.0 and `50.0, respectively, following a steep 15% depreciation against USD over the last four months. This has led to INR revenue growth for Infosys to be higher than USD revenue growth at 24.1% and 16.5% yoy for FY2012 and FY2013, respectively.

Stock Valuations
Over FY2011–13E, we expect a CAGR of 19.2% and 19.0% in EBITDA and PAT, respectively. Valuing the company at 18x FY2013E of Rs.169. It is recommended to Buy Stocks of Infosys with a target price of Rs.3,047.

Detailed stock report from Angel stock broking can be downloaded here.

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RIL's Target Stock Price is Rs.650

Recently I came across news about stock report on RIL from Investment banking firm Morgan Stanley. Morgan Stanley has revised its target stock price for Reliance Industries from Rs. 921 to Rs.650. Investment banking firm has sighted fall in RIL’s gross refining margin and production volume as primary causes.

As per Morgan Stanley, the gross refining margins for RIL were at peak in 2011 due to shut downs in Japan and low production volumes in China. They are expecting that Japan will ramp up its production in 2012 which was devastated due to tsunami in 2011. Also, China and India as well are adding up new refining capacities in 2012 to increase production. This could push margins lower.

RIL’s Exploration and Production unit had produced 80 mmscmd in Dec.09 against 40 mmscmd today. It’s a fall of 50% in production. The world is fearful of European debt crisis which has potential to slow down world economies thereby reducing demand for fuel and that would lead to drop in fuel prices. Also, RIL has sold 30% stake in its exploration and production business to BP. So revenues would be lesser from this unit in RIL’s balance sheet for next financial year.

RIL have huge pile of cash which it is not using for expansion of it’s core refining business but will be used to establish Reliance Industries as a big player in other sectors such as Retail, SEZ, Telecom, Financial services, Hotels, Media and Processed Food. As per Morgan Stanley analysts, this move will make Reliance Industries a conglomerate to which, financial markets apply some discount when it comes to it’s share price.

Read more: RIL - A giant seating on huge cash

Establishing these other businesses in Retail, telecom and other domains mentioned above will take time to bare fruits in terms of profits for Reliance Industries.

Considering all above reasons, Morgan Stanley stock research analysts have evaluated the RIL stock and has reduced the target stock price to Rs. 650.

In my opinion, long term investors should consider RIL a good stock to buy with intrinsic value and growth at discounted stock price and wait for the investment to bear the fruits as part of long term investment portfolio. One should definitely buy stocks of RIL if it comes around target stock price given above (Rs.650) by investment banking firm.

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Infosys shares fall 8.4 percent - why?

Infosys Ltd. has cut it’s annual revenue growth guidance second time this year. Also it has warned lower spending from it’s clientele in euro zone due to ongoing debt crisis in Europe. This particular forecast was good enough to send the Infosys stock down by more than 8 percent today on Bombay Stock Exchange.

Most of the European clients are refraining from awarding new projects due to their own problems which are out of concerns over European debt crisis and macroeconomic headwinds developing in European and American economy. Infosys earns its majority of revenues from US and Europe.

Infosys has provided dollar guidance down to $7029 million – 7033 million against $7060 million - $7090 million in last quarter. Earnings Per Share (EPS) stands at Rs. 41.51 against Rs.33.36 QOQ. Full year EPS has been hiked to Rs.147.13.

Also, Infosys management has provided a forecast about future which is not encouraging for investors. As per them, problems in US and European debt crisis could affect company’s growth in near future.

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Buy Shares of Sobha Developers for one year
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Buy Shares of Sobha Developers for one year

One of the good stocks to buy in construction space is Sobha Developers. Investment research team from one of the stock broker firm, Geojit BNP Paribas, has recommended investing in stocks of Sobha Developers for one year with target stock price.

The investment rationale behind this stock recommendation is:

• The company has sold 0.82 million sq ft in 3QFY12, a growth of 16% yoy but 12.5% lower qoq. This shows decline in quarterly sales but it was due to the lack of significant new project launches.
• Company had provided guidance of 3-3.5 Million sq. feet of sale for FY12. It has sold 2.42 million sq ft in first 9 months of FY12 which is an increase of 14% yoy. The company looks like is on track with it’s guidance for sales.
•  The revenue guidance out of guided sales were expected to be Rs.1500 crore. The company already had sold worth of Rs.1240 crore by December.
•  Average sales price has increased 2% qoq for company except in National Capital Region. At the same time, sales price has increased 16.5% yoy.
•  The company has sold 1.02 million sq ft in the newer projects launched in 2HFY12. It is around 31% of these projects and about 45% of its 3Q sales were from the projects launched in 2HFY12.
•  The company expects to launch around 0.9 million sq ft in Chennai in 4QFY12. 
•  Also, the company has provided a guidance for debt reduction of Rs.350 crore in this fiscal year. Debt reduction can be considered as key catalyst for the stock in near future.

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Concerns
If company slows down the execution of it’s projects and also fails to reduce the debt burden as per guidance, it could dent the profits and guidance on numbers provided by company.

Stock Financials
At CMP of Rs. 208.5, the stock trades at P/E of 12.7 with dividend yield being 1.44%. Book value of the stock is Rs. 189.33 which makes Price to Book value ratio of 1.1. This shows that Sobha developers is available at good stock valuations.

Based on above facts and details, the stock broker firm has advised to buy stocks of Sobha developers for one year with target stock price of Rs.275.

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Trend That Could be Threat To Indian Economy

While browsing through various business and economy related news, one news headline caught my eyes which could have serious impact on India's growing and new middle class "consumer base" and consumption story. And of course the consumption story related sectors and stocks such as realty/property, FMCG and many more as such.

As the news says, many medium size IT/ITeS companies are shifting their operations and bases from Hyderabad and Bangalore to Philippines! This is mainly because of concerns pertaining to infrastructure, cost of doing business and availability of skilled labor.

Check the news article in Economic Times "Medium companies IT/ITeS may shift base from Hyderabad, Bangalore to Philippines"

This could be just a beginning and as these jobs landed in India 10 - 15 years back, they might start flowing out of India to countries such as Phillipines and Vietnam and it is a growing trend. These jobs came to India only due to lower costs of labor and operations which is not true anymore in India.

This trend, if grows further in future, could seriously dent consumer related sectors in India such as Realty/property, FMCG, auto, processed food and entertainment to name a few. IT/ITes workers are one of the big spenders when it comes to realty, FMCG, food and entertainment. So when these type of high paying jobs would go out of India to some other countries, IT/ITes workers and their growth would be stalled in terms of income and their disposable income would be lower and lower. Also the number of IT/ITes jobs itself would lower.

And where would this impact? Companies relying on such "consumer base"! Companies which are trying to sell flats/apartments to this consumer, fast and processed food, FMCG, auto companies who are selling bikes and small cars. These are a few to name. If not big, this development would certainly have some impact on growth of such companies and then of course on stocks of these companies. Certainly, there would be more sectors impacted indirectly due to demand supply chain.

I will publish more of my understanding and analysis on this topic here on Indian Stocks News. Let me know what do you think using below comment form.

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