Best Stocks To Buy For Long Term Investing in SIP Manner

Outlook had recently published best long term stocks to Buy for investing in SIP manner. Buying stocks from this list could fetch good stock investment returns with 3 years horizon. You are suggested to buy small quantities of these stocks at regular intervals to make most of your investment.

Valuations have come down significantly, even for fundamentally sound companies. We are giving you eight such options—take your pick and invest for at least three years. Invest systematically to take advantage of any further price fall.

Methodology.
The companies that have been considered for selection are the ones with a market capitalisation of at least Rs 250 crore. Among them, companies with year-on-year (y-o-y) net sales and net profit growth of more than 10 per cent for the last three years and the last two quarters were retained. From this list, only companies that were able to maintain or increase their operating profit margin (OPM) and operating cash flow in the last three years were kept. The remaining stocks were examined individually based on qualitative and quantitative measures.

Bank of India (BOI)
BOI is perhaps the fastest growing public sector bank in India. Its operating profit and net profit in FY08 grew 53.81 per cent and 78.90 per cent y-o-y, respectively. For the last nine quarters, including the quarter ended September 2008 (Q2 FY09), its net profit grew at 50 per cent plus y-o-y, which indicates its sustained growth. Because of its strong presence in the industrialised states of Maharashtra and Gujarat, BOI has given advances to more productive sectors than its public sector peers. It has reduced its dependency on low-yielding treasury income and has focused on interest income and income from fees. Its gross non-performing assets have gone down from 3.72 per cent in FY06 to 1.68 per cent in FY08. Overseas operations contribute around 20 per cent of its business. The overseas branches help BOI raise deposits at rates lower than the domestic rates. It has some exposure to derivatives instruments overseas, but all of them have highly-rated Indian companies as underlying.

Bharti Airtel
Bharti Airtel is riding high on the overall growth of the telecommunication sector in India. No doubt, It is one of the best stock to buy from Indian telecom sector. Mobile penetration in India is still around 26 per cent, which leaves an enormous opportunity for growth. In this growing and competitive market, Bharti has been on top, in terms of subscriber base since May 2006. It has maintained both y-o-y net sales and net profit growth at around 40 per cent in the last nine quarters. The margins have declined due to stiff competition, but the volume growth from the untapped rural market compensates that. It has outsourced its non-core operations to focus on brand building and increasing subscriber base. In January 2008, it hived off its infrastructure business into a new subsidiary, Bharti Infratel, which will share the capital expenditure burden with other telecom players.
Read: Bharti Airtel - Stock To Buy In Indian Telecom Sector - Stock Analysis
Checkout: Best stocks to buy in Indian telecom sector

Emami
Emami has created a niche in the market by bringing products for its consumers that combine modern production techniques and ayurvedic principles. Its brands such as Boro Plus, Navratna Oil and Fast Relief are leaders in their respective categories. Its recently launched brand, Fair & Handsome, created an altogether new market. In the last eight years, its net sales and net profit registered 19 per cent and 23 per cent CAGR, respectively. Its OPM also improved over this period due to better pricing of products and cost management. The return on equity, which increased from 10.36 per cent in FY2000 to 35.78 per cent in FY08, also reflects its rising profitability. Emami is reaching deep inside rural India, which will lead to volume growth. Modern lifestyle has increased the risk of chronic ailments and consumers will demand natural products backed by research.
Also Read: Best FMCG Companies - Stocks to Invest in 2009

HDFC Bank
HDFC Bank has seen a y-o-y net profit growth of over 30 per cent for the last 34 quarters and has maintained a high OPM of around 60 per cent during the same period. Maintaining the same momentum, it has reported a net profit growth of 43.29 per cent and OPM of 62.61 per cent in Q2 FY09. The bank's merger with Centurion Bank of Punjab has not shown any significant impact till now, but it is expected to yield robust growth for the company in the future. Banks will start showing mark-to-market gain on their bond portfolio with interest rates expected to go down in the coming quarters.
Checkout: HDFC - Best Stock To Buy In Banking Sector - Result Analysis
HDFC - Best stock to invest in Banking sector
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Best stocks to buy now are banking stocks

Also, funds have dried up in the global markets—this will increase demand for credit from domestic banks. This means stable business in the future.

Indraprastha Gas (IGL)
The government's thrust on environment is putting more compressed natural gas (CNG) buses on road and rising fuel prices are prompting people to fit CNG kits to their cars. This is boosting IGL's CNG distribution business. Households and commercial establishments now prefer piped gas supply to conventional LPG cylinders as it is convenient and safe. This means a huge revenue jump for IGL's piped natural gas (PNG) distribution business.

IGL has been enjoying consistently high OPM—over 40 per cent—for the last 21 quarters. As a result, its return on equity has remained higher than 30 per cent in all the financial years, starting 2003. Even if it is not able to sustain such high margins in the long term, the volume growth will more than compensate for any dip. It is unlikely to face any gas supply constraint as it gets it on a priority basis as directed by the government. The IGL stock has limited its fall to 21 per cent as against Nifty's 54 per cent in the last 12 months. It is currently trading at seven times its earnings.

KS Oils
It leads the edible oil market in the north and north-eastern part of India through brands in mustard oil, refined oil and vanaspati. Its share in the Indian mustard oil market is 7 per cent, when 75 per cent of mustard oil is sold loose. Among brands, it has captured 25 per cent of the market. The company has also entered north and central India with an aggressive branding effort and greater retail push. Its net sales in FY08 was Rs 2,044 crore, implying 91.08 per cent growth over the previous year, backed by volume and high edible oil prices. Its y-o-y net sales growth in the first quarter of FY09 remained high—at 91 per cent over the previous quarter, though the margins were flat. KS Oils has secured its raw material supply by acquiring 50,000 acres of palm plantations in Indonesia, which will protect it from any price fluctuation in oil seeds. Also, this kind of backward integration will help improve the margins over sales.

Mphasis
MphasiS derives its revenues from application services, infrastructure technology outsourcing (ITO) and business process outsourcing that span industry verticals, such as banking and financial services, healthcare, transport and manufacturing. In Q2 FY09, Mphasis reported an impressive y-o-y sales growth of 54.59 per cent. It significantly improved the OPM by 273 basis points over the last quarter and, therefore, registered higher PAT growth of 128.74 per cent during the same period.
All its three business segments are registering healthy growth with its ITO business growing at 113 per cent. MphasiS is trying to reduce its dependence on the US, which contributed 67 per cent to its revenue in FY08. The current crisis in the financial sector may impact its revenue, but it will also throw up new opportunities as ailing banks will go for greater outsourcing in order to cut costs.

Titan Industries
Titan watches have built a strong brand and its diverse product range caters to masses as well as the premium segment, which is its success formula. Titan Industries' jewellery business, under the brand Tanishq, too, commands leadership position in the organised retail segment. It is going to smaller towns and rural areas under the brand Gold Plus.
Checkout:Titan Industries - Good Stock To Buy From Consumer Goods Sector
Stock Research Report & Analysis - Titan Industries

In Q2 FY09, Titan Industries' net sales and net profit rose 53 per cent and 88 per cent y-o-y, respectively. In the last six years, Titan and Tanishq recorded a compounded annual growth rate (CAGR) of around 13 per cent and 40 per cent, respectively. Risks to business growth are low. Watch penetration in India is well below 30 per cent. Growth will continue and margins should improve as it sells more watches through its exclusive Titan showrooms, which is more profitable than the dealership model. Rise in gold prices could slow down jewellery sales. But, at higher prices, consumers will become more quality and value conscious and should go to organised stores, such as Tanishq, that guarantee quality, diverse range and standard pricing.

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IVRCL INFRASTRUCTURE

Buy Stocks Recommendation
Recommended Stock To Buy Price: Rs. 112.05
PN Vijay, Portfolio Manager
Report Dated: Jan 19, 2009

Company Profile:
IVRCL operates in infrastructure sectors namely Water & Environment, Transportation, Buildings and Power. It has a large client base, which includes public sector clients (ONGC, BHEL, IOC etc), private sector clients (Birla Institute of technology, Tata projects, Jindal Steel & Power) and Central and State Govt. clients (Airport Authority, Indian Railways, Ministry of Defence etc).



Its operations cut across geographical frontiers of the sub-continent, with headquarters in Hyderabad and administrative offices in Chennai, Cochin, Bangalore, Pune, Kolkata, Jodhpur, Chattisgarh, Ahmedabad and Goa.

Construction Sector:
Construction is the second largest economic activity after agriculture in India. Construction sector can be classified into three segments: -

1. Real Estate: The sector has suffered a meltdown in 2008 due to high interest rates and demand destruction. However we believe it will improve in the coming months due to the decrease in property prices, falling interest rates on home loans and favorable tax treatment.

2. Infrastructure: This constitutes roads, water, ports, airports, freight corridor, power, etc. Investment in the infrastructure is robust and is at the center of the various stimuli that the Government is offering.

3. Industrial Construction: This constitutes sectors like steel, textiles, fertilizers, and oil and gas refineries. This is where the maximum fall in demand is taking place and worries remain.

Construction sector uses raw materials like steel, cement apart from using large working capital. The stock prices of leading companies dropped by an average 84% for the 6-months to early September 2008 due to the credit crises, slump in the housing market, increase in the prices of construction material, increase in rate of interest and increase in the prices of oil. But due to the decrease in interest rate, inflation and cut in the prices of steel, the sector is beginning to gain strength and deserves an upgrade.

Financial Position:
For the FY’08 the Net sales increased by 54% to Rs 3867 crore from Rs 2506 crore. The company derived Rs 3693 crore of its revenues from Engineering and Construction and about Rs 259 crore from Real Estate in the FY’08. The EBITDA also showed an improvement by 91.5% to Rs 572 crore. The Net profit registered a growth of 74% to Rs 283.4 crore from Rs 163 crore.

For the second quarter of FY’09 the net revenue increased by an impressive 65% to Rs 1137 crore, due to faster execution of projects. The EBITDA grew by 69% to Rs 91.28 crore. The net profit showed an excellent improvement by 90% to Rs 67 crore from Rs 35.25 crore. This was due to high revenues and lower tax rate. Interest cost however more than doubled during the quarter due to high borrowings. The order booked during the second quarter FY’09 was worth Rs 2586.6 crore and backlog of orders during the same period was worth Rs 13,800 crore.

The total net worth in FY’08 increased to Rs 2480 crore. The company also has stock options worth Rs 1 crore. The secured and unsecured loans, which the company has, were worth Rs 1725 crore. On the asset side a major portion consisted of current assets. The Debt/Equity ratio as on 31st Mar 08 stood at 0.66.

During the year, some of the Foreign Currency Convertible Bond (FCCB) holders have exercised their option of converting their bonds into equity shares. Till the date of the Balance Sheet, amounts aggregating to US $ 18.10 million worth of bonds were converted into 3,545,284 equity shares of the face value of Rs.2 each. Rs 7.1 crore has been debited to the Profit and Loss account during the year towards foreign exchange translation difference on Foreign Currency Convertible Bonds and deposits in foreign currency.

Subsidiaries:
IVRCL’s major subsidiaries are:-

IVR prime Urban Developers Ltd: IVR Prime is dedicated to creating luxury-intensive urban infrastructure. Its net profit for the FY’08 increased by a spectacular 750% to Rs 176 crore from Rs 20.6 crore in FY’07.

Hindustan Dorr-Oliver Ltd (HDO): Hindustan Dorr Oliver Limited (HDO) is an Indian EPC company having its core business activities in providing Engineered Solutions, technologies and EPC installations in Liquid-Solid Separation applications. The company’s core business focus is on Water Management. Its net profit for the FY’08 increased by 47% to Rs 22.64 crs. Sector wise order booked in FY 2007-08 accounts for 54% in environment, 27% in minerals, 14% in fertilizers and 5% in pulp and paper. IVR Prime and HDO are listed subsidiaries on NSE.

Chennai Water Desalination Ltd: Executing the most prestigious contract of Chennai Sea Water Desalination Plant Project at Minjure, Chennai.

Alkor Petroo Ltd: is a Hyderabad based subsidiary of IVRCL engaged in Oil & Gas Exploration & Production. It has an association with Gujarat State Petroleum Corporation Ltd (GSPCL).

Investment Positives:
IVRCL has a very strong order book, making it an attractive investment. The order book remains extremely healthy at Rs 15500 crore. Recently the company bagged a few more orders, latest being from Bangalore Metro Rail Corp, IOC and Karnataka Water Supply Board in the first week of Jan 09. This will inflate the order book to a massive Rs 16000 crore approx. It has the best Order book to Turnover ratio in the industry. Also, NHAI has been going slow on orders in the last two years and it is expected to complete orders for more than 6000 kms in the one or two months- thrice the orders placed in 2007-08. IVRCL is expected to be one of the biggest beneficiaries of this.

Steel companies announced a price cut during Sep 2008, which will help reduce the cost of material for construction companies. The price of the cement is also expected to ease in the future. This will shore up margins considerably.

Decreasing rates of interest and easing inflation is bound to create a positive impact on the construction companies. With the decrease in rate of interest the cost of borrowing has reduced to a great extent, making the condition favorable for taking more debt to finance the projects.

Mid cap stocks such as IVRCL are exposed to infrastructure segment, which is expected to grow in the coming future. India, which is Asia’s 3rd largest economy, is in need of greater infrastructure spending for the next 10 years for economic expansion. India has allocated huge expenditure for the building of airports, highways and for the Commonwealth Games in 2010.

Concerns:
Any delays in implementation of the projects undertaken by the company may affect its profitability.

For more funding requirement the company has to depend on leverage, which will cause increase in the rate of interest to be paid on debt. Increasing interest costs may have a dampening affect on the profits.

There is a risk that the government could change certain regulations for the construction sector. The biggest threat relates to availability of 80IA benefit to construction companies. IVRCL has got an award from IYAT in this regard. We believe the government is not likely to enact unfavorable regulations for the sector given the present environment.


The table clearly places IVRCL as one of the most attractive bets in the Construction space. The company is growing at a phenomenal pace (change in Net profit of 74%) vis-à-vis its competitors and boasts of some fantastic orders in its kitty.

Valuation:
IVRCL has shown a good financial performance for the FY’08 and for the second quarter FY’09. The company has a strong order book and currently it is undervalued, making the stock a good investment. In our view it is one of the best plays in the Indian infrastructure. We recommend the stock as with a target price of Rs 250.

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Yes Bank - Say Yes To Buying Stock - Result Update

The Bank reported Net Profit growth of 95% yoy to Rs106cr (Rs54cr), ahead of estimates on account of huge trading gains being booked during the quarter. Angel Stock broking firm have put targets and rated as stock to buy.

Yes Bank reported net profit of Rs 1.1 billion for Q3FY09. NII growth moderated during the quarter led by relatively slower advance growth and 16bps contraction in NIM’s. The bank cautiously reduced the balance sheet size by 5% qoq looking at the liquidity squeeze during the quarter and to conserve tier I capital. The net profit growth was driven by 29.4% growth in NII and higher other income.

Important Stats
Shareholding Pattern
Promoters: 32.5
MF/Banks/Indian FIs: 5.2
FII/ NRIs/ OCBs: 52.8
Indian Public: 9.5
Mkt Cap 1,802.66
P/E 6.25
Div 0.00
* EPS (TTM) 9.71
B/V: 44.45
Mkt Lot 1.00
FV 10.00

Outlook and Valuation
At the CMP, the stock is trading at 5.7x FY2010E EPS of Rs11.9 and 1.0x FY2010E
Adjusted Book Value of Rs65. While we were earlier factoring in Equity dilution of around 8% in FY2010E, with an evolving macro environment and consequent slow down in
Balance Sheet growth expected, we have changed our estimates reducing credit growth
expectations for FY2010E to 25% and not factored dilution in FY2010E. While falling
Interest rates should help improve the Operating environment for the Bank, the headwinds being faced by the Bank have set back its business expansion, possibly by up to a year and led to slowdown in several Fee Income streams.

Accordingly, we are revising the Bank’s Target P/ABV multiple to 1.5x – implying around 40% discount to the Target multiple assigned to Axis Bank – to arrive at a revised Target Price of Rs98 (Rs166).We maintain a Buy on the stock.
Source: Angel Stock Trading & broking firm
Click Here to download stock research report PDF

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Kirloskar Oil Engines - Attractive Valuations - Buy Stock Research Report

A Stock trading firm have come up with buy stock rating report on Kirloskar Oil Engines with price target based on recent quarterly results.

Q3FY09 Results Analysis
Kirloskar Oil reported its Q3FY09 results which were below our estimates, primarily due to higher than expected forex loss on outstanding ECBs. The company reported revenue of Rs.4.9bn in Q3FY09, decline of 7.9%. Engine segment revenue declined by 8.0% to Rs.4.7bn. Auto Component segment reported revenue of Rs.243mn, de-growth of 28.5%. However, EBITDA during the quarter increased by 24.2% to Rs.605mn, with EBITDA margins expanding by 310bps to 12.2%. EBITDA margins improvement was primarily due to extra ordinarily higher operating costs in the auto components segment in the same quarter last year. Interest cost increased from Rs.52mn to Rs.269mn; however of this Rs.193mn is due to currency depreciation impact on its outstanding foreign currency loans. Reported net profit declined by 54.1% to Rs.100mn. However, adjusting for forex loss net profit increased by 34.7% to Rs.293mn.

Taking into account slowdown in volumes in the power engine segment we are revising our FY09 revenue estimates from Rs.24.3bn to Rs.22.4bn. We expect the company to maintain net profit of Rs.1.3 bn in FY09 due to improved EBITDA margins. For FY10, we expect the company to report revenue of Rs.23.1bn and net profit of Rs.1.3bn. The stock trades at 5.5xFY09E earnings and 0.7xFY09E book value. We upgrade our recommendation from Accumulate to BUY and maintain our target price of Rs.72.

IMPORTANT STATS
Shareholding Pattern
Total promoters shareholding: 60.8%
Total public shareholding (Institutions/FII/General Public):39.2%
Mkt Cap 650.48
P/E 6.32
Div 100.00
EPS (TTM) 5.30
B/V: 47.12
Mkt Lot 1.00
FV 2.00

Drop in revenues; but maintain margins
The engine segment reported sales of Rs.4.7 bn (95% of total revenues) in Q3FY09, decline of 8%. Auto components segment reported sales of Rs.243 mn, a decline of 28.5% over the same quarter last year. The engine segment reported a PBIT of Rs.432 mn, a decline of 3.9% but a PBIT% of 9.2% which is 40 bps expansion of margins. Whereas, the auto components segment has reported a PBIT of Rs.14.6 mn with a PBIT% of 6% as compared to a loss of Rs.5.5 mn in the sale quarter last year.

Margins expansion due to lower operating costs
Despite a 7.9% decline in revenues (led by an 8% decline in engine revenues), the company reported higher EBITDA and EBITDA margins for the quarter. EBIDTA for the quarter increased by 24.2% to Rs.605 mn, with EBITDA margins expanding by 310 bps to 12.2%. This increase in EBITDA margins is primarily due to extra ordinarily higher operating costs in the auto components segment in Q3FY08.

Currency depreciation inflates interest costs
Despite of reporting EBITDA growth in Q3FY09 of 24.2% to Rs.605 mn, the company has reported a drop in profits of 54.1% to Rs.100 mn. The drop in profits is primarily due to interest costs which have increased from Rs.52 mn in Q3FY08 to Rs.269 mn in Q3FY09. However of this Rs.193 mn is due currency depreciation impact on its outstanding foreign currency loans. Adjusting for forex loss, net profit increased by 34.7% to Rs.293 mn.

Attractive Valuations, target price of Rs.72
At CMP of Rs.37 stock trades at 5.5xFY09E earnings (adjusted for forex loss), 0.7xFY09E book value and 3.4xFY09E EV/EBITDA (1.8x adjusted for investments), which we believe is attractive. We upgrade our recommendation from Accumulate to BUY and maintain our target price of Rs.72.

Reorganizing of Investments – Positive for Valuations
The company is considering the reorganization of the investments of the company by way of restructuring and/or de-merger of the company. Investment currently account for about 30% of the companies capital employed. We believe, de-merger of investment to be positive for the stock and could lead to re-rating as the return ratios shall improve substantially.
Click Here to download the Stock Report PDF

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Titan Industries - Good Stock To Buy From Consumer Goods Sector

The consistent growth model of Titan Industries makes it a good long-term buy in the consumer goods space. Buy stock on dips. Rakesh Jhunjhunwala, a legendary investor in Indian stock market have been buying stocks of Titan since long and he is till holding on to it and adding more.

IMPORTANT STATS
Beta: 0.09
Institutional Holding: 6.57*
Current dividend Yield: 0.88
Current P/E 19.21
Current m-cap: Rs 4,047 cr
Current Market Price: Rs 911.80
Mkt Cap 4,032.55
* P/E 19.14
Div 80.00
EPS (TTM) 47.46
B/V: 98.26
Mkt Lot 1.00
FV 10.00
*Dec’08

THE economic slowdown in India is expected to affect the sales and profitability of the consumer goods companies. However, Titan Industries, with strong branding and wide retail presence, is less likely to be beaten down by the same. Titan Industries is India’s leading manufacturer of watches and jewellery and world’s sixth-largest manufacturer of branded watches. It dominates the domestic watch and the organised jewellery markets with a market share of 60% and 40% respectively.

BUSINESS
The Bangalore-based company designs, manufactures as well as retails watches, jewellery, sunglasses, clocks in Indian and international markets. Watches are sold under four main brands, namely Titan, Sonata, Fastrack, Xylus as well as a range of sub-brands like Raga, Edge, Octane, and many others. The company has a strong retail presence with a network of 260 ‘World of Titan’ showrooms and nearly 750 service centres. In 1995, the company forayed into the organised jewellery market with its brand ‘Tanshiq’. It is now India’s largest and fastest growing jewellery brand with 120 boutiques. The company ventured into mass jewellery through ‘Gold Plus’ brand that sells plain gold jewellery at its 30 showrooms. Titan has diversified into fashion eyewear by launching Fastrack eye-gear, sunglasses as well as prescription eyewear, sold through its 50 stores under Titan Eye+ brand. In 2003, the company ventured into precision engineering and machine building. The division supplies precision components to the avionics and the automotive industries. Titan is the OEM (original equipment manufacturer) of dashboard clocks and is a supplier of the same to car manufacturers in Europe and America.



FINANCIALS
Titan Industries’ topline has been growing consistently. It has clocked a compounded annual growth rate (CAGR) of 33% in the last five years ending March 2008. Operating profit during the same period grew by a CAGR of 23%, while net profit galloped at the rate of 90% per annum. In the last four quarters, the jewellery business contributed 70% to the company’s total revenues, whereas watches business accounted for around 27%. While the jewellery segment dominated the topline, watch segment accounted for nearly 60% of company’s profit before interest and tax in FY08. In the September ‘08 quarter, the company’s operating margin rose to its highest level, in more than seven quarters, as gold prices breached through a key $600 an ounce.

GROWTH DRIVERS
The company plans to take advantage of its strong brand positioning by launching innovative and theme-based products in both the watches and jewellery segments to drive up sales. So far, it has managed to show a steady growth in its retail expansion in FY09 with the launches of new showrooms for brands Tanishq, World of Titan, and Goldplus in line with its growth targets. The expansion plan for the eyewear segment, Titan Eye+ that right now contributes little to the topline is also on track with an addition of nearly 40 stores this financial year. The company has also signed distribution and marketing deals with Tommy Hilfiger and Hugo Boss for their range of watches and eye wear products.

RISKS / CONCERNS
The company’s considerable size of inventories is leading to a sharp rise in working capital requirement. In the last four financial years, net cash flow from operations declined by a CAGR of 3% against a rise in cash profit by a CAGR of 53%. In the same period, the inventories grew at a CAGR of 98%, which is very significant. While we believe that this rise, in recent quarters, could be to shield against volatile gold prices, it can put pressure on profitability. The company also needs to revive its eyewear and precession-engineering businesses, which contribute less than 3% to its revenues. However, they are still making losses.

VALUATIONS
In the past one year, while the Sensex has lost more than 50% of its m-cap, Titan Industries lost about 35%. On the other hand, since 2003, its m-cap has increased 10 times against a fourfold increase of the Sensex. At the current market price, the P/E is down 60% from its five-year average of 49. Considering that P/E could tick towards the lower side of its last twomonth range, of 17-21, the stock can be bought on dips. The consistent growth model of the company makes it a good long-term buy in the consumer goods space.

ALSO READ: Stock Analysis - Titan Industries

TICKING FACTS
==> In the last six quarters, Titan saw an average growth of 11% in net sales, 32% rise in operating profit and 35% in net profit

==> In the last four quarters, the jewellery business contributed 70% to the company’s total revenues, whereas, watches business accounted for around 27%

==> Plans to launch innovative and theme based products in both jewellery and watches segments

==> There has been a steady growth in retail expansion of showrooms for all brands in FY09

==> In last five years Titan’s mcap increased ten times outperforming a four fold increase in Sensex m-cap.

==> At the current market price, the P/E is down 60% from its five-year average of 49, making it a good pick

==> Titan showed a steady growth in its retail expansion in FY2009 with the launches of new showrooms for brands Tanishq and World of Titan Titan Eye+ contributes little to the top line is also on track by adding nearly 40 stores in the fiscal
Source & Reference: Economic Times

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Ahluwalia Contracts - Good Stock To Buy From Construction Sector

A company that has a good track record, strong balance sheet and positive cash flows is the key to success in buying stocks for long term investing. Ahluwalia Contracts is changing its order mix to buck the slowdown and continue the growth story in the long run.

IMPORTANT STATS
Shareholding pattern
Total shareholding of Promoter and Promoter Group (A): 74.49%
Total Public shareholding (B) (Institutional / FII / General public): 25.51%

One year Beta 0.68
Institutional Holding 7.67%*
Dividend Yield 2.1%
Current P/E 3.79
Current Mcap Rs 221.24 cr
CMP Rs 35.25
Mkt Cap 224.06
P/E 3.88
Div 25.00
EPS (TTM) 9.21
B/V: 20.71
Mkt Lot 1.00
FV 2.00
* As on 31st December 2008

FINDING
Above mentioned strategy to buy stocks for investing works across sectors. One such company in the construction sector is Ahluwalia Contracts. Though it is primarily dependent on the real estate sector, it has a strong order book and the mix is expected to change for the better. While, the company’s CAGR in sales stood at 31%, both operating profit and net profit posted a rise of 40% between the fiscal 2000 and 2008. Also, the firm has generated positive cash flows from operations in eight out of the past 10 fiscals. Its debt to equity ratio was less than one for the past few years. The company is expected to continue with its growth story, albeit at a slower pace in the future. Ahluwalia Contracts is a cash contractor and also caters to industries such as healthcare , hotels, educational institutions, etc. It produces ready mix concrete (RMC) on a small scale. The company caters to a wide range of players from government organisations to private sector developers.

GROWTH PROSPECTS:
Ahluwalia Contracts is going to reap the benefit of positive macro-economic and demographic factors in the long term. The company’s order book of Rs 4,150 crore as of December 2008 stands comfortable at 3.85 times trailing its four quarter sales ending September 2008. It has bid for projects worth Rs 1,200 crore including L1 stage orders of Rs 200 crore whereas its strike rate is 20-25%. The company is planning to include more of government contracts, which now include 20% of the total order book, and work for projects such as multi-level car parking, bus/railway terminal, airport,etc. This will enable it to diversify its client base and cut the risk of default.

CONCERNS:
Real estate and IT oriented projects, which form more than 70% of the company’s order book, are going through tough times and it is expected to continue for some more time. The company has experienced some strain in its receivables owing to the downturn in the real estate space. Its average debtor days have gone up from 45-60 days four-five months back to 60-90 days, now. Also, payments are delayed or overdue for 50-55% of the projects. If the situation persists for a longer period, it will impact the liquidity position and cash flows of the company. The company’s average cost of debt at 12% is quite high. Though general interest rate scenario shows a downward bias, it will take some time for benefits to trickle down to users of debt.

FINANCIALS:
In the first half of the current fiscal, net sales rose 55% to Rs 555.7 crore, while operating profit grew 45% to Rs 64.3 crore on sharp rise in raw material and employee costs. Net profit growth was slower at 32.5% due to higher fixed costs at 79.5%. We expect the firm’s growth to slowdown to sub-30% in FY09 and FY10. Margin, particularly net margin, is expected to come under pressure in FY09 owing to higher interest costs. We expect a 190 basis point hit on the net margin from 5.9% in FY08. However, we expect things to slightly improve especially on the margin front in FY10 on lower input prices and interest costs.Thus 25 basis point improvement in both operating profit and net profit margin is expected.

VALUATION:
The stock trades at 3.8 times its trailing four quarter (TTM) earnings ending September 2008. This is on the lower side of 2.83-57.12 times price to TTM earnings multiple band since its listing in February 22, 2007. The stock looks cheap given the visibility in the business. It can be rated among one of the stocks to buy for 2009 - 2010 in current stock market.

Also Read:
Multi Bagger Stock - Ahluwalia Contracts (India) Ltd
The stock has seen a sharp fall from a high of Rs 393 touched in January 2008 to its current price of Rs 32.

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HDFC - Buy Stock From Banking Sector - Result Update

Buy Stock research report from stock research firms based on analysis of latest results. Provides revised target price.

RESEARCH: BANK OF AMERICA/MERRILL LYNCH
RATING: BUY

IMPORTANT STATS
Mkt Cap 44,133.59
P/E 19.04
Div 250.00
* EPS (TTM) 81.47
B/V: 420.03
Mkt Lot 1.00
FV 10.00
CMP: RS 1388
Target: Rs 1980

Bank of America cuts HDFC’s target pric for 2009 to Rs 1,980 from Rs 2,450 owing to lower sum of parts value and factoring in moderation in growth. However, the stock can still trade at 2.5-3.0x FY10E given the comfort in asset quality; earnings growth of 16-17% through FY10-11E and ROE (return on equity) of 29% on its core business.

CHECKOUT: HDFC - Best stock to invest in Banking sector

HDFC’s 3QFY09 earnings were down 2% y-o-y and 4-5% lower than market estimates. This was primarily due to the absence of Rs 100 crore of high investment gains and extraordinary income and Rs 50 crore of exchange losses booked by HDFC in its convertible bond. Adjusting for these factors, both topline and pre-tax earnings grew by about 19% y-o-y. The other disconcerting feature was the 8% contraction in approvals - which appears to be a more conscious decision, as HDFC had been reluctant to lend in October-November ‘08 as conditions worsened. Bank of America has cut the FY09-10 reported earnings by 6-11% to capture the lower investment gains.

Also Read:
Best Stocks For 2009 - Stocks To Buy Now
Top 10 Banking Stocks for best investment

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Reliance Power - Stock Report - Should You Buy Stocks Now?

Reliance Power (RPower), part of the Reliance Anil Dhirubhai Ambani Group (ADAG) disclosed a phenomenal rise in standalone net profit for the quarter ended December 2008.

During the quarter, the profit of the company rose up to 2.28 times to Rs 1,070.70 million from Rs 472.09 million in the quarter ended September 2008.

During the quarter, total income of the company rose 99.10% to Rs 1,275.62 million as against Rs 640.69 million in the previous quarter.

The company posted earnings of Rs 0.45 a share during the quarter, a 2.25 times rise over the previous quarter.

The company has started posting earnings and EPS too. Looking at 0.45 Rs per share EPS, PE stands out to be 217 at CMP of Rs.98 Total income rose by 99.10 % compared to just previous quarter. Now, as company would progress with planned projects, revenues would grow at faster pace. Rosa phase 1 is suppose tobe completed 6 months ahead of it's planned commissioning date. Revenues expected from this power plant stands at INR 3100 million. The forward PE with these earnings comes to 76. Compare this with current PE of 217 in current stock market (which is bearish). Verdict: As revenues would grow (which are bound to), investing in this counter can reap rich dividends and growth in coming years.

Key Takeaways
*** Net Profit for Q3 09 stands at INR 10.6 billion against INR 3.7 billion in Q2 09.

*** Other Income for Q3 09 stands at INR 13.1 billion against INR 5.7 billion in Q2 09.

*** Rosa Phase I, RPower's first power project is expected to commence operations from December 2009, 6 months ahead of schedule. 60% of the project work is completed and the balance is on track. We expect revenues from the project to stand at INR 3100 million approximately for FY10E.

*** The 600 MW Rosa Phase II project has been awarded coal linkage. The company is expected to achieve financial closure by Q4 2009.

*** Commissioning schedule of Sasan project has been advanced by three years from year 2016 to 2013. Supplementary Power Purchase Agreement has been signed in this regard with the procurers.

Checkout:Best stocks to buy from Indian power sector

Valuation
With commencement of projects targeted before schedule, fuel linkage for Rosa Phase II acquired, financial closures of 3 projects expected in Q4 09, getting clearances on a faster pace, we believe RPower is well on track to achieve its ambitious plan to become the second-largest power generator in India by adding about 30,840MW of capacity by FY16. The stock is currently trading at 74x FY10E EPS. We rate RPower as Outperformer.

FINANCIAL STATS
Shareholding Pattern (%)
Promoters 85.0
MF/Banks/Indian FIs 2.0
FII/ NRIs/ OCBs 4.0
Indian Public: 9.0
Mkt Cap 23,488.84 Cr.
P/E: 217 (cmp: Rs. 98)
Div: 0.00
EPS: (TTM) 0.45
B/V: 57.16
Mkt Lot: 1.00
FV: 10.00
Reliance Power - Stock To Buy ?
Download Detailed Source Report PDF

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Best stocks in 2008. Should we buy these for 2009?

These stocks were the best stocks to buy in Indian stock market in year 2008 (based on their annual rate of returns). Even as the current stock market stands at half in value since touching an all-time high on January 10, 2008, there were nine stocks among India’s top 500 companies which delivered gains to their shareholders over a period of one year. Here is a stock report published in ET. Can we buy stocks which were best performing stocks in 2008 for 2009 as well?

Should you buy stocks based on their performance in past? Most of the times buying stocks is influenced on past performance of company. Especially new investors are bound to make such investing decisions. To an extent this is true. eg. Reliance, Infosys are performing consistently for past more than a decade now and their past performance can be taken as guideline to their future performance.

Stock trades at cheap brokerage and buying stocks online or online stock trading have made stock trades a very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.

Following are few stocks which have performed well in 2008 and in past few years too.

CADILA HEALTHCARE
Cadila Healthcare, one of the five largest drug makers in India, is the winner by a long way in the top performers roll, delivering a whopping return of almost 65% to its shareholders.

Verdict: Healthcare sector is one of the emerging sectors in India. It is the sector being looked for future. Groowth in healthcare has been relatively slow till now but it can take off soon. Can be part of safe portfolio.


HERO HONDA MOTORS
Hero Honda Motors is second on the list with returns of nearly 17%.

Verdict: Best performer in slowing automotive industry in recession time. Safe Auto sector major.

HINDUSTAN UNILEVER
One of India's leading FMCG companies, Hindustan Unilever ranked third in the major gainers' line up. The stocks gave returns of 15.27% to their investors.

Verdict: FMCG has always been preferred in current stock market scenario. HLL is undoubtedly best FMCG stock in Indian Stock Markets.
CHECKOUT: Best FMCG Companies - Stocks to Invest in 2009

GODREJ CONSUMER PRODUCTS
Another leading FMCG company, Godrej Consumer Products ranked fourth in the major gainers' line up. The stocks gave returns of 12.44% to their investors.

Verdict: Same FMCG Sector. Relatively safe stock.

BOC INDIA
BOC India, the arm of BOC Group, which is the second largest industrial gases company in the world, is fifth in the star line-up. The stock posted returns of over 12% during the above mentioned period.


CASTROL INDIA
Castrol India occupies sixth place with 6.62% returns.


GlaxoSmithKline Pharmaceuticals
GlaxoSmithKline Pharmaceuticals occupies seventh place with 4.04% returns.


Sun Pharmaceutical
Sun Pharmaceutical Industries occupies eighth place with 3.50% returns.

READ: Sun Pharmaceutical - Best stock in Pharmaceutical ...

NESTLE INDIA
Nestle India occupies ninth place with 2.18% returns


CHECKOUT:
Best stocks to buy for 2009 - Stocks to buy now
9 Best stocks to buy for 2009
Value stocks to buy in 2009
Best stocks to buy now are banking stocks

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SPEL Semiconductor - Good Small Cap in Semiconductors - Stock Idea

Announcing its unaudited results for FY Q3 2008-09, SPEL Semiconductor Limited reported revenues of Rs.193.1 lakhs with a PBT of Rs.49.06 lakhs and PAT of Rs.8.18 lakhs.

We will try analyzing results of this small cap growth stock in semiconductor industry and decide if one should buy stock from long term investing purpose. Buying stocks of good small cap company in small portion of portfolio is advisable to aggressive investment style.

Compared to the corresponding quarter of the last fiscal, Revenues grew by 8% from Rs.179.1 lakhs. In spite of the global recession, SPEL was able to sustain PAT due to implementation of various cost reduction measures.

Business Promoters Background
SPEL Semiconductor Ltd. is a company belonging to SPIC group of Tamil Nadu. Their other group companies are SPIC (earlier Southern Petro Chemical Industries Ltd.), Tamil Nadu Petroproducts, Manali Petro Chemicals Ltd., Henkel India Ltd., SICAL Logistics, to name a few.

The company was initially called SPIC Electronics but has since been renamed as SPEL Semiconductor Ltd. SPEL Semiconductor Limited is the leading one-stop turnkey Wafer Sort, IC Assembly & Test subcon facility in India. Established in 1988 and headquartered in Chennai, SPEL had been serving the local market from 1988 to 1994. Having established a track record at home, SPEL turned its attention to the more demanding global market in 1995. It has since been exclusively serving the Silicon Valley and other parts of the world for over 12 years now. SPEL focuses on Lead frame based Packages - both Surface mount & Through hole.

The stock is in semiconductor industry where target consumers are from consumer electronics segment. Consumer electronics segment business is low with sentiments of recessinary times which is a part of economic cycles. Once the times would start turning with recession going away, maybe a year or two later, consumer electronics is bound to perform better and so the semiconductor industry. So if one would like to buy stocks for long term investments of small cap company, SPEL Semiconductor can be a good bet.

During the quarter there was steep drop in demand for Computing, Consumer Electronics & Communications products. This hence brought down the demand for semiconductors which was visible across the worldwide semiconductor industry.

CHECKOUT: Earlier recommendation on SPEL Semiconductor

Coupled with this, the power cost also increased drastically due to severe power supply restrictions leading to frequent use of our DG sets. Booking of forward exchange contract losses also affected the results. These contracts were towards ForEx contracts that were signed during early 2008 when the Rupee was appreciating. There is however no further ForEx cover for FY 2008-09.

Being compliant with SEBI norms though ESOS 2007 related expenses were booked, considering the present stock market conditions Employees exercising their ESOS is remote. If this exercising does not happen, then the booked expenses would get reversed. Also, continuous focus on cost reduction models & adoption of latest Lean Manufacturing practices are expected to yield results from FY Q4 2008-09. These are expected to improve the annual results.
September marked the start of the 11th semiconductor industry downturn. According to industry analysts, there was -4% drop for 2008 compared to 2007. The industry is expected to stabilize during the FY Q2 2009-10. But the recovery should start to kick in by FY Q3 2009-10, making the full-year market down ~17% on a year-on-year basis.

SPEL proposes to invest an additional $7 million in its capacity expansion to capitalize on the expected industry upturn during FY Q3 2009-10. This would increase revenues by Rs.35 crores on a full year basis. The sustained performance will drive SPEL to further excel due to the strong demand experienced by its existing Customers, thereby making the outlook bright.

Continuing to be India’s first & only IC Assembly & Test Company, SPEL has been constantly exceeding expectations. SPEL is committed to firmly establishing itself as the Natural Destination for global Customers seeking cost effective Assembly & Test services.

VITAL STATS:
ShareHolding Pattern
DEC. 2008
Total shareholding of Promoter and Promoter Group (A): 55.97%
Total Public Shareholding (Institutions/FII/General Public): 44.03%
Mkt Cap: 40.12 Cr.
P/E: 6.04
Div: 0.00
EPS (TTM): 1.44
B/V: 12.97
Mkt Lot: 1.00
FV: 10.00

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Moser Baer Ltd - Good Mid Cap Stock - Good results awaited?

Referring to today's (20th January 2009) Economic Times News, It is being said that a broker known as "PINK PANTHER" and his team are accumulating this stock since some time and expecting Moser baer to post very good results compared to it's past two loss making quarters. What is in Moser Baer as a Value Stock which makes it best mid cap stock to buy in current stock market?

Moser Baer Ltd.
CMP: - 110
BSE Code: 517140
Market Cap: 1884.09
52 week H /L: 254 – 50

Summary:
Moser Baer India Limited is an India-based company that is principally engaged in the business of manufacture and sale of optical storage media. The Company also has presence in business areas, such as solar energy, entertainment, information technology (IT) peripherals and consumer electronics. In the home entertainment segment, the Company has commenced film production in multiple languages. The Company’s Photovoltaic domain commenced its commercial operations during the fiscal year ended March 31, 2008. In the home entertainment segment, the Company has commenced film production in multiple languages. As of March 31, 2008, it offers home video titles in Hindi, English, Tamil, Telugu, Malayalam, Kannada, Marathi, Gujarati, Bengali and non-film categories. Its products are sold in approximately 80 countries. As of March 31, 2008, it had introduced new products, such as BDR 1X-6X, DVDR 8X Dual Layer, Double sided recordable discs, Diamond CDR and Archival Media.

Key Financial:
EPS and PE both running negative making no financial sound.
The development will surely change the phase of the company.
This will be seen on the balance sheets of the company.

Development :
Lots of development happening around. the recent 6.5% stake sale is a good tactic to raise funds.

I feel this will surely benefit. The amount raised would go towards capacity expansion of the firm’s crystalline silicon and thin film solar verticals, largely at its Greater Noida facility. While the crystalline silicon cell manufacturing capacity would go up from 80 mega watt (MW) to 180 MW, thin film capacity would be increased from 40 MW to 120 MW by next year.

The firm plans to spend about $400 million on capex this fiscal, which would be part funded by the amount raised. The PV business had earlier received Rs 400 crore in private equity funding in November 2007. The business reported revenues of $43 million in 2007-08. With the latest round of funding Moser Baer will holds 93.5% stake in the PV subsidiary.

Moser Baer’s thin film PV business comes under PV Technologies India, while the crystalline silicon business is operated by another arm, Moser Baer Photovoltaic Ltd. Though crystalline silicon is more widely used in PV market, Moser Baer is banking more on the thin film technology.

So, its thin film capacity would be ramped up to 600 MW by 2011-12, while crystalline silicon capacity would go up to 200 MW. “Thin film has the potential to capture 15-20% of the global PV market in the next three years. It has lower cost compared to crystalline silicon and efforts are on to increase its efficiency, which is currently lower than crystalline silicon,” said Moser Baer CFO Yogesh Mathur. The solar market has grown from $13 billion in 2005 to an estimated $40 billion this year. It is further expected to grow to $50-70 billion by 2010.

This stock is only for long term Investors.
CHECKOUT: Detailed analysis on Moser Baer in another stock report

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Buying Stocks For 2009 - Top Stocks To Buy Now

As uncertainties prevail and a revival expected only post second quarter of 2009, looking at current stock market situation it will pay to buy stocks of large cap companies with a proven track record, high earnings visibility, low leverage, good book value and low debt. Buying stocks with strong promoter holdings looking at recent Satyam fiasco could be one one of the considerations for stock buying.

Read: Best Stocks To Buy In 2010

Stock trades at cheap brokerage fees and buying stocks online or online stock trading have made trading stocks very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.

In the aftermath of economic slowdown and fall in markets, and also uncertainty over the next few quarters, it is advisable to play safe and practice stock buying of large companies with a consistent track-record. Stock trades are best to be avoided for retail investor. Online stock trading have made it very easy for retail investors to trade stocks very frequently. It is complete no-no in current stock market situation.

Sandeep Shenoy, strategist, Pinc Research says, “Companies with integrated operations, strong balance sheets, low leverage or ability to complete financial closure for capex, and low working capital requirements are preferred.”

Beyond that, interest rate sensitive sectors are finding favour. Says Srivastava, “We are favourably inclined towards rate-sensitive sectors like banking, auto or even in real-estate on a selective basis. But, as the market is expected to be range bound, a trading strategy could prove helpful.”

Defensive plays like FMCG and utilities, too, figure among the preferred lot even as there is already some amount of premium built in their valuations, due to the stability they provide. Additionally, users of commodities are expected to outperform. Says Manish Sonthalia, senior VP Research & Strategy, Motilal Oswal Securities, “Now, the consumption side, like auto (two wheelers) will get more importance. Among other preferred sectors are FMCG and telecom.” Commodity user industries like construction, which may get a fillip on account of increased infrastructure spending, also figure in the list, although there are some issues pertaining to funding of projects.

Checkout:
Best stocks to buy in Indian telecom sector...
Best FMCG Companies - Stocks to Buy in 2009
How to buy stocks ? Buy stocks with confidence (Good book value and low debt stocks)

The laggards in 2009 will be commodities (metals), capital goods (due to order slowdown), real estate and IT (weak demand).

With respect to return expectations from the market (Sensex), it ranges 10-12 per cent on the conservative side to as much as 35 per cent, by December 2009.

Regarding investment worthy companies, The Smart Investor looked at the BSE 500 (94 per cent of total market capitalisation) and excluded companies with high debt levels or weak financials. Only those with a proven track record, good earnings visibility, strong cash flows and ability to raise debt were considered, as they will be in a better position to withstand tough times. Notably, many of them are leaders in their respective businesses, and their stocks capable of delivering 18-20 per cent returns over the next one year.

Have a look at these best large cap stocks to buy in 2009.

Tata Power - Got the power to be best
Sun Pharmaceutical - Best stock in Pharmaceutical sector
State Bank of India (SBI) - Elephant in Banking sector
Reliance Industries (RIL) - Best safe investment
IVRCL Infrastructures - Good stock with strong order book
ITC - Best stock in cigarettes business - Major in FMCG Too
Hero Honda - Best stock to invest in two wheeler auto industry
HDFC - Best stock to invest in Banking sector
Bharti Airtel - Best stock in telecom for definite investment returns
Apollo Hospitals - Good large cap stock in Healthcare

Investment worthy stocks- Best stocks to buy in 2009



Click on image to enlarge

Other investment worthy stocks to buy in 2009


Reference: Business Standard

>> Return To: Stock Market in 2009 - Stocks to Buy

Also Read:
Value Stock Investing - How To Buy Top Stocks
Best stocks to buy in Indian telecom sector...
Indian Stock Markets : Which stocks to buy in 2009?
Best FMCG Companies - Stocks to Buy in 2009
Economy will bounce back faster - Rakesh Jhunjhunwala
Promoters investing money in own companies
Stock Markets in 2009 would be volatile - Marc Faber
Nifty Target would be 2000 - Weakness developing in stock markets
10 Biggest Wealth Creators (Best stocks for safe Investments)

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How to buy stocks ? Buy stocks with confidence

Current stock market, as we all know, is in an uncertain situation with ups and downs in stocks every week. Every investor may be wondering about how to buy a stock as buying stocks for long term investment has become difficult when there are no clear market trends.

We advise investors to keep the following factors in mind in order to make safe and sensible investments.

Stock trades at cheap brokerage and buying stocks online or online stock trading have made stock trades a very frequent practice for normal investor, they should understnad that stocks mentioned here are for long term investing and will be fruitful if they hold for longer time durations.

1. Low Debt-Equity ratio stocks
This is the ratio shows that how much equity and debt is used by the company to finance its assets. Debt-equity ratio above one shows that the company has resorted to debt for financing its assets rather than equity. If the ratio is lower than one, it means the company has a lesser debt burden. The positives of such companies are that they need only a lesser amount to be kept aside to pay the interests that arise out of loans. The fluctuations in interest rates during high inflationary situations may have little impact on the financials of such companies. So companies that have zero debt should be targeted with a medium to long-term perspective.

CHECKOUT:
Best stocks to buy for 2009 - Stocks to buy now
Top 9 Best stocks to buy for 2009
Value stocks to buy in 2009

2. Stocks trading below their book values
Another factor to be kept in mind while investing in shares is the book value. The book value of a company is the cost of an asset minus accumulated depreciation. In other words it is the total value of the company’s assets that shareholders would theoretically receive if a company is liquidated. So, if a stock is trading below its book value, then it is underpriced, and should therefore be seen as an opportunity to make an investment in that stock.

3. Buying ‘A’ group stocks
An investor with a medium to long-term perspective can, without any hesitation, go for stocks in the ‘A’ group, even if the situation is not very favourable. Once the markets consolidate and pick up, the first stocks to move up will be the ‘A’ group stocks as they form the index. When the index moves up, obviously these stocks will be the movers. One main thing to keep in mind is that, never make your whole investment in a single sector or a stock. Instead, investors should create a diversified portfolio including more than one stock belonging to different sectors.

4. Following the averaging pattern of investment
Investors should follow the averaging pattern of investment when the markets are volatile and not giving any trends. This will put the investors in a better position. The investor has to enter the market at three or four different times which will help the investor to reduce the per share price of his holdings.

E.g. if an investor is desirous of making an investment of Rs 40000, he should invest the money at three or four different times with an investment of Rs 10000 each. When the stock which the investor wants to invest in is trading at Rs 100, he can make his first entry by investing Rs 10000 and purchasing 100 shares of the stock. When the share price comes down to Rs 80, he can make his second entry by investing Rs 10000 and purchasing 125 shares. When the share falls to Rs 70 and then Rs 60, the investor can make his third and fourth entries by investing Rs 10000 each, and purchase 143 and 167 shares, respectively. When the market moves up from lows, the average rate of the stock in the investor’s portfolio will be Rs 74.7 which will be the investor’s BEP.

The following table shows the stocks that are trading below their book value and with zero debt. Investors also can go for stocks in the ‘A’ group segment which are/are not given in the table given below. Investment should be made in these stocks in the above said averaging pattern.





Source: Geojit Securtiy research house

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Rallis India - Turnaround Small Cap Growth Stock To Buy

IF STABILITY in growth and fundamental strength were considered as the most important virtues in the current stock market scenario, Rallis India, a growth stock with good dividend yield can be an attractive option for long-term investment.

Beta 0.47
Institutional Holding (%) 26.11
Dividend Yield (%) 4.72
P/E 5.9
Mcap (Rs crore) 406
CMP (Rs) 339.1

The agrochemicals product manufacturer is likely to maintain the growth momentum visible in the last four years. The valuations and dividend yield appear attractive for long-term investors.

BUSINESS:
Rallis India is predominantly an agrochemicals manufacturer, which also sells other farm inputs such as hybrid seeds and specialty fertilisers. The company undertakes manufacturing work on contract for leading agrochemical majors. This ensures that its plants works at higher capacity utilisation levels throughout the year besides providing a consistent cash flow. Apart from innovating agrochemicals business, Rallies India is also exploring new areas for growth.

Through its contract manufacturing agreement with US-based Cytec Engineers, the company has emerged as the sole manufacturer of specialty polymer PEKK (poly ether ketone ketone), mainly used in aerospace industry, in the world.

Last year, the company launched an enterprise value-creation programme — Disha — aiming at bringing in improvements in manufacturing and procurement, through plant modernisation, capacity de-bottlenecking, process improvements and cost reduction.

Its efforts towards targeted growth in its international business are also paying off well. Following the success of Disha phase 1, the company has initiated Disha phase 2 for creating value in sales and marketing.

Revenues from the new products were 30% for the financial year 2008 and Rallies India is taking conscious efforts to maintain the proportion. It plans to set up additional manufacturing facilities at Dahej in Gujarat.

GROWTH DRIVERS:
The global agriculture industry is facing challenges to improve productivity to cater to the food as well as the energy requirements of the ever-increasing population. This coupled with higher agro-commodity prices, is likely to maintain a healthy demand for pesticides in the coming years.

Rallis India has recently closed down its plant at Patancheru in Andhra Pradesh to unlock value in the land bank. Meanwhile, it is also setting up agrochemical plants in Dahej and Jammu, which will commence production in 2010. At Dahej, the company has secured land in special economic zone (SEZ) and notified chemicals zone (NCZ) and it also plans to spend over Rs 150 crore in two phases there. Besides, another captive power plant at Ankleshwar will also developed by the company.

Rallis India’s focus on specialty products is helping it earn better margins. The company is expected to continue its new product launches to keep its innovative sales above 30% of its total revenues.

FINANCIALS:
Rallis India, which was making operating losses till FY2004, has made a strong turnaround and posted PAT of Rs 125 crore in FY08. As part of the turnaround strategy, the company has liquidated several assets raising Rs 244 crore in the last five years, including Rs 87 crore of profit on sale of land in FY08.

It has consistently reduced its debt-equity ratio over the last five years to 0.15 by the end of FY08, while the return on employed capital has jumped to 23.7%. The company’s operating margins grew strongly last year.

For the 12-month period ended December 2008, the company reported a 21% growth in sales to Rs 813 crore. Its operating profit margins rose by 350 basis points, resulting in 73% spurt in PBT to Rs 103 crore. However, the extraordinary income of Rs 87 crore on sale of land in the previous year makes the current PAT at 45% lower.

The company no longer has the benefit of carry forward losses and started paying tax at full rate applicable to corporates from the December 2008 quarter. Once its plants in Dahej and Jammu become operational, the effective tax rate may decline.

VALUATIONS:
Rallis India has outperformed broader market and has maintained its price-toearnings ratio (P/E) intact over the last one year. We expect the company to finish FY09 with EPS of Rs 59.5 and FY10 with EPS of Rs 71.3 excluding any extraordinary income. At the current market price, the scrip is trading at 5.7 times its expected net profits for FY09 and 4.8 times its estimated FY10 earnings. It paid Rs 16 per share as dividend in FY08 and is likely to maintain it in future. At its current price, the dividend yield works out to 4.7%, making it a safe bet for risk adverse investors.

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Small Cap Stock with High Dividend Yield - MANUGRAPH India

The stock is down more than 80% in last one year but the dividend yield (based on FY08 dividends) has shot up to 12% nearly. This makes it an interesting bet for risk averse investors as company is expected to maintain the pay-out at last year’s level.

Beta: 0.71
Institutional Holding: 14.04%
Dividend Yield: 12.80%
P/E: 1.58
M-Cap: Rs 95 cr
CMP: Rs 31.25

MANUGRAPH India has emerged as the country’s leading manufacturer of web offset printing machines. These machines are used for printing newspapers and periodicals and the company has benefitted greatly from a media boom in India in the last few years. Manugraph claims to control nearly two-thirds of the domestic market. Right now it is in the process of further augmenting its product portfolio.

However, the stock has taken a heavy beating on account of global economic slowdown, which has adversely affected the growth plans of print media and depressed the demand for new printing machines. The stock is down more than 80% in last one year but the dividend yield (based on FY08 dividends) has shot up to 12% nearly. This makes it an interesting bet for risk averse investors as company is expected to maintain the pay-out at last year’s level.

Business
The manufacture of printing machines of different configurations is only business line of Manugraph India. The company derives close to 30% of its business from its export sales and rest from domestic business. There is hardly any competition in the organised sector, and most of the competition comes from either the unorganised segment or foreign manufacturers. In the past six months or so, the company has suffered some setback due to the global recession, and the management has admitted cancellation of few orders by some of its overseas clients. This has led to piling up of inventories and higher inventory carrying costs, thereby forcing the company to operate its two units in Kolhapur for five days a week, instead of six days. This would affect the profitability of the company in the second half of current financial year.

Financials
An adverse impact arising out of above reasons was visible in September ’08 quarter as company’s net sales slipped by 15.3% to Rs 93.4 crore on a year-to-year basis. Even the company’s income from other sources saw a major decline and it fell to Rs 4.2 crore from Rs 11.6 crore in the corresponding quarter a year ago. The company suffered a mark-to-market foreign currency loss of around Rs 5.4 crore during the quarter. The company’s net profit slipped to Rs 13.7 crore from Rs 19.66 crore in the second quarter of FY08.

Valuation
In the light of the global economic slowdown, Manugraph is likely to close FY09 with net profit of around Rs 50 crore, which would be at least 20% below its last year’s net profit of Rs 62 crore. The second half of FY ’09 is likely to be tougher than the first half. However, considering its low debt-to-equity ratio of less than 0.5 and strong cash flows from operations, the company appears to be well-positioned to withstand the current slowdown and emerge stronger when upturn comes.

At its current stock price, the stock has a dividend yield of nearly 13%, more than current yield on bank deposits. Even with estimated net profit of Rs 50 crore, the company is likely to sustain a 200% dividend payout (same as last year) even in FY ’09. This makes Manugraph a good bet from dividend yield point of view. The only risk, being a faster than anticipated deterioration in the global economic environment.

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Good Large Cap Stock in Metals - Hindustan Zinc (HZL)

Buy stock with Low-cost production, higher liquid investments, cash & bank balance and strong operational cash flows.

Beta 0.73
Institutional Holding 33.14%
Dividend Yield 1.4%
P/E 3.8
M Cap Rs 14,750 Cr
CMP 349

The prices of almost all nonferrous metals have declined to their multi-year low levels. At current prices, many global producers are either making losses or have shut down production. As per reports, the world’s zinc production has declined 30% and stock prices of these metal producers have also taken a hit. Though it is very difficult to find the exact bottom, prices of these commodities are close to their sustainable historic average of $1,000 (please refer the chart for detail). This is why we believe that the downside for zinc from here onwards is limited.

Hindustan Zinc (HZL), the largest integrated producer of the metal in the country, is one of the low-cost zinc producers, at around $750 a tonne, in the world. Such low-cost production, almost zero debt and high liquid investment, makes the stock, which has been more than halved from its peak, a very attractive buy. Long-term investors with a horizon of 2-3 years can add this stock to their portfolio.

BUSINESS:
HZL has its own mines, smelting capacity and power plants. The company’s total mining reserve and resources is estimated at around 225 million tones (MT), which contain 5-12% of zinc and 1.5-2% of lead. The company produces around 7 MT zinc and lead mine metal from its mines in Rajastan. Similarly, it has a smelting capacity of 0.75 MT and last year, the company operated at a capacity utilisation of around 65-70%. HZL also produces around 100-120 tonnes of silver, which is a by-product of the core operation. The company exports around 20-30% of its products to overseas destinations.

FINANCIALS:
HZL has significantly ramped up its operation after being acquired by Sterlite Industries in 2002. Net sales of the company have more than tripled over last three years, whereas net profit increased by more than seven times during the same time period. Its backward integration plan puts it on the top decimal of the lowcost zinc producers in the world. And, this has translated into superior operating margin. Its core operating margin rose to 75% in the financial year 2007, when the zinc prices were at their peaks. With the commodity prices falling, current operating margin has come down to around 50-55% level. Even if the prices fall by 20-30%, its operating margin will be maintained at around 30% much higher than many companies across industries. Its cash flow from operations is in sync with the movement in net profit over the last five years. HZL has very little debt outstanding, and hence, a very low debt-equity ratio of close to zero.

FUTURE GROWTH PLANS:
HZL aims to be the largest integrated zinc producer in the world and plans to augment its zinc and lead production capacity to around 1 MT by 2010. The company also plans to set up a 160 MW power plant and increase its mining capacity to 10 MT a year. Once, its production capacity increased, silver production would also rise to 500 tonnes a year, boosting its top line. The total investment required for this is estimated at around Rs 3,600 crore, which would be financed through internal accruals.

RISK:
The company bears less business and operational risk owing to the low-cost production, negligible debt and higher liquid investment and cash/bank balance. However, any drastic fall in zinc prices below $750 would significantly affect the company’s operating performance.

VALUATION:
HZL has huge liquid investments in debt funds, at around Rs 6,700 crore and cash/bank balance of around Rs 1,360 crore. The discounted cash flow from operations for the next four years and the sum-of-parts from investment and cash and bank balances yield a value of around Rs 14,000 crore, very close to current market capitalisation. We have taken into account of lower zinc prices and new capacities from mid-2010 while arriving at the future cash flows. However, we have not included the terminal cash flow, which would definitely add much more to it. Even in 2002-03 when the zinc prices were at the lowest level, the stock was trading at around 6-7 times of price-earning multiple compared to current P/E of 4. We believe the stock has good upside potential and investors with 2-3 years of horizon are advised to add it to their portfolio.
Source: Economic Times

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Best Large Cap Stock With Strong Business Model - Larsen & Toubro (L&T)

Larsen & Toubro (L&T) is a leading player in the Indian capital goods space. Its stock has been badly hit last year. The company’s market capitalisation fell by nearly 60% compared to a 50% fall in the Sensex in the same period.

Beta: 1.06
Institutional holding: 51.06*
Current dividend yield: 2.43
Current P/E (standalone): 17.5
Current m-cap: Rs 42,151cr
Current market price: Rs 718 *Dec’08

Larsen & Toubro (L&T) is a leading player in the Indian capital goods space. Its stock has been badly hit last year. The company’s market capitalisation fell by nearly 60% compared to a 50% fall in the Sensex in the same period. However, L&T’s 2-year and 3-year returns are still better than the Sensex, and with a longer-term perspective, the stock is promising. This is backed by the fact that though infrastructure seems to have lost its flavour among the investors now, it is going to remain a key to the country’s growth.

Further, the company has taken concrete steps over the last two years to expand its areas of operations. The stock is a good buying proposition and investors may accumulate the stock with a long-term view.

BUSINESS:
L&T’s business spans across fairly large areas of operations. The three major business segments are: engineering & construction, electrical & electronics and machinery & industrial products. The first segment accounts for nearly 75% of its revenues, and the other two segments contribute the rest. Total order book position stands at Rs 63,000 crore as on September ‘08, up by 59% over last year and is almost two-and-a-half times its trailing four quarters sales ended September ‘08.

The company plans to develop its businesses as separate entities to enable faster execution and bring in flexibility. With that aim, it is planning to create 12 operating companies within the existing company. With average revenues of about Rs 2,000 crore for each operating unit, this looks quite acceptable. L&T has also sold off its ready mix concrete unit earlier this financial year, where it had about 25% market share.

FINANCIALS:
For the quarter ended September ‘08, the company recorded sales growth of nearly 40%, and its net profit grew 32%. Cost of inputs, including purchased goods, grew 24%, significantly lower than sales growth. While a sharp rise of 62% in other expenses reduced the growth in operating margin. However, this expense may remain low for the December ‘08 quarter, improving the operating margin further. While at the operating level, the performance was reasonable, interest and depreciation cost together more than doubled and now account nearly 17% of its operating cost, up from 10% last year. With increase in debt, these costs will remain high over the next few quarters.

Over the last six quarters, the company has shown average sales growth of 43%, operating profit growth of 54% and net profit growth of 59%. While profit growth rate has now come down to 30-35% level, it is still significant, and now with easing of raw material and crude prices, it can move up a notch or two.

OUTLOOK:
L&T has entered into ship-building industry. It has set up of a shipyard in Tamil Nadu, and has the capacity to build complex ships and very large crude carriers. The company has also won some orders for construction of ships. Moreover, the company has tied-up with some global companies in the power sector to manufacture heavy machinery for generating power. The company is also looking to enter the power generation sector, but that may take time to yield results. The stock is currently trading at a PE of about 17, the lowest over the last four years. Its P/E took a beating in the aftermath of the Satyam Computer crisis. The ratio of L&T’s P/E to Sensex P/E is at its lowest since October ‘05, though the relative growth prospect favours L&T.

IMPORTANT FACTS

==> L&T has a capex of Rs 1,500 crore during FY09 and FY10 each

==> The company is continuously expanding and upgrading its existing manufacturing facility

==> Engineering & construction business accounts for 75% of its revenues

==> There is a move to increase its footprint across international operations. It’s focussing on West Asia. L&T is setting up of joint ventures and execution centres in these regions

==> In the last six quarters L&T has maintained an average growth of 43% in sales, 54% in operating profit and 59% in net profit

==> L&T’s stock is currently trading at a PE of about 17.5, lowest in the last four years

==> There is a clear focus to exit non-core business and to provide operational freedom to core businesses. It has already sold its ready mix concrete unit earlier this financial year

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Good Mid Cap Stock in Automotive Batteries - EXIDE INDUSTRIES

Merrill Lynch maintains `Buy’ rating on Exide Industries, however, it has cut the target price to Rs 62 on a weak Q3.

RESEARCH: MERRILL LYNCH
RATING: BUY
CMP: RS43
Target: Rs. 62

Exide Industries reported 30% below estimated PAT in 3QFY09 largely due to Rs 20 crore FX loss and in small part due to weaker sales. Merrill Lynch has cut EPS on slower demand, however, it maintains `Buy’ as
(1) FY10E EPS to grow 22% on falling cost and
(2) FY10E PE of 9.9x is close to trough valuation.

Exide Industries, the largest lead acid battery manufacturer of India, reported a net profit of Rs 56.1 crore, a growth of only 1.8% y-o-y in 3QFY09. This was the slowest growth in the last 15 quarters and is driven by
(1) volume growth of only 11% and
(2) foreign exchange loss of Rs 20 crore that reduced profit by 23%.

Volume growth weakened considerably from the recent trend of over 15% growth due to slowdown in automobile demand. With FX loss accrued due to unhedged payables of over Rs 450 crore, Merrill Lynch still expects strong EPS growth of 220% in FY10E driven by
(1) lower cost of lead along with rupee appreciation could help expand EBITDA margin by 200 bps and
(2) demand growth of over 12% driven by market share gain in the relative secular segment of the automotive after market.

Thus far, FX loss on account of sharp depreciation of the rupee has been negating the impact of decline in lead cost.

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