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Friday, October 24, 2008

Quarterly results analysis - Educomp - Core projects - NOCIL - Manglore chemicals

Niche companies are announcing good results while old horses like Cipla and TCS reported poor results. Q2 results are giving signals about economic slowdown and shrinking margins due to high interest rates. Next quarter results will indicate about decrease in consumption.

1. Educomp Solutions:

Bumper results but high valuations which is a risky thing in bear market. Company announced 118% rise in sales while net profit net profit increased by 86%. Accumulate in small lots. Ideal bear market price even by Educomp standards is around 1200-1500. Will it touch those levels? This is a must have stock in every "growth investor portfolio".

CMP: 1811; P/E: 39.

2. GEI Industrial Systems:

Wonderful results. Company reported 56.5% increase in sales while net profit rose by 70%.

CMP: 40.3; P/E: 5.5; Book value: 44.7

3. Core Projects:

Bumper results. Company reported 82% increase in sales while net profit rose by 81%. This stock was corrected (250-45) heavily due to selling by both promoters and Kotechas. I will buy now and continue to accumulate without hesitation for long term. I believe in the future prospects of education domain.

CMP: 45; P/E: 8.2; Book value: 37.4

4. Transformers and Rectifiers:

Wonderful results and positive surprise. Company announced 56% increase in both sales and net profit.

CMP: 147.4; Book value: 150.

5. Harrisons Malayalam: Company announced very good results due to high rubber prices in the last quarter. 74% increase in sales and 234% rise in net profit.

6. Mangalore Chemicals: Wonderful results. Company announced 106% increase in sales while net profit rose by 77%. Huge debt is a problem.

CMP: 11.9; P/E: 3.6; Book value: 23.6

7. NOCIL: Bumper results. Company announced 57% rise in sales while net profits rose by 873%.

CMP: 14; P/E: 10.9; Book value: 21.

8. TFCI: Wonderful results. Company announced 45% increase in sales and 257% rise in net profit. Can it tackle the slowdown in tourism projects?

CMP: 13.6; P/E: 4.3; Book value: 33.

Decent results: Agro Tech Foods, Hikal, Indraprastha Medical Corporation, Himatsingka Seide IDFC, Cadila Healthcare, AIA Engineering, Reliance Infrastructure, Oriental Bank of Commerce, Yes Bank, PSI Data Systems, Bank of India, Pantaloon Retail, Jindal Saw, Jindal Drilling and Bajaj Auto Finance.

Poor Results: Cipla, TCS, Piramal Healthcare, Bajaj Electricals, Max India, SKF India, Orient Paper, Kirloskar Oil Engines, Gillette India, ABC Bearings, Sona Koyo Steering Systems, Prime Focus, KPR Mills, Sparsh BPO and Trent.

Worst results: Hinduja Foundries, Century Textiles, NELCO and GATI.

Must read:

1. When will this crisis end? Read about opinions of professional analysts.

Final verdict: New small investors should stay away from markets until things clear out. These investors may be tempted by seeing bear market rallies. It is very difficult for ordinary investors to spot those rallies and exit in time. But current market is suitable for SIP based investments. Invest 20% of your income at current levels and add 20% on every 500 point fall. Niche stocks are announcing good results and are ideal for long term investors with 2-3 year horizon.

Unless some dramatic turnaround occurs due to aggressive steps by central banks and Governments, Sensex may reach 8,000 levels within 2 months due to heavy fall in consumption. Short term rallies will continue and it is impossible to predict bottom when people lost confidence on economy. This is the ideal market for those investors who don't need money for 15-20 months and can invest in SIP manner. Investors should stay away from sectors like Real Estate, IT, Commodities, Airlines, hotels and other high end consumption sectors.

When economical decisions like rate cuts will not yield desired results, disaster will occur. Till now, bailout packages and rate cuts failed to yield significant results.

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