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Stock Report - Bajaj Electricals

2012-02-12T07:46:00.001+05:30

Bajaj Electricals (BEL) has posted strong growth in 3QFY12. This stock research report by Angel Broking recommends to buy stocks of Bajaj Electricals.
Bajaj Electricals (BEL) posted strong top-line growth of 15.1% yoy to Rs.794cr (Rs.690cr) in 3QFY2012. The company’s OPM fell by 212bp yoy but improved by 66bp qoq to 8.2%. PAT for the quarter came in at Rs.33cr (Rs.41cr), down 19.1%
yoy.

Stock Valuations:
The trend of strong top-line growth is expected to continue going ahead as well. Further, company’s margin is expected to improve from these levels on the back of easing commodity prices and closure of lower-margin E&P projects. Overall, it is expected that the company will post a top-line CAGR of 15.7% over FY2011–13E. Stock analysts's expect adjusted PAT to register a CAGR of 18.5% to Rs.183cr over FY2011–13E. With the recent sharp correction, the stock is available at attractive valuation on just 9.3x FY2013 earnings, against its five-year historical average of 11x one-year forward earnings. It is recommended to Buy stocks of Bajaj Electricals for target price of Rs.201, valuing the stock at 11x FY2013 earnings.

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Union Bank – Stock Analysis with Target Stock Price
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Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
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Buy Stocks of Bank of Baroda
IRB Infra – Stock Analysis and Result Update

Union Bank – Stock Analysis with Target Stock Price

2012-02-09T06:09:00.003+05:30

Here is stock analysis based on recent results of Union Bank in 3Q FY12 and target stock price.

The bank has reported NII increase of 7.2% yoy and net profit of Rs.150 crore, which is 74.4% down yoy. Net profit is impacted by one-off NPV (net present value) loss of Rs.380 crore from restructuring of accounts worth Rs.2040 crore.

Net Interest Margin (NIM) improved to 3.31% in 3Q from 3.21% in 1Q as yield on funds improved 37 bps qoq to 9.62% while cost of funds increased 18 bps qoq. Slippages decreased to 1.7% from 5.8% in 2QFY12. GNPA declined to 3.33% FROM 3.49% IN 2QFY12.

CASA deposits ratio improved to 32.5% in 3Q from 32.1% in 2Q and the bank has been reducing high cost deposits. Advances grew at healthy 16.8% yoy and 6.1 % qoq.

As per guidance form management, 16% advance growth for FY12 is expected. GNPA is expected to bring down to 3% by 4QFY12 end.

It is expected that government is going to infuse equity of Rs.270 crore in Union Bank in 4Q. This will improve Tier -1 capital for bank from the current level of 8%.

At current stock price of Rs.238, the stock trades at P/E of 9.38. Dividend yield for stock stands at 3.36% which is very good and makes Union Bank a good dividend yielding stock. The stock has gone from 160 levels to 238 in past 50 days quickly. If it corrects from here to 200 levels which can not be ruled out, it will be a good stock to buy from banking sector for target price of Rs.255 in medium term.

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Buy Stocks of Bank of Baroda
IRB Infra – Stock Analysis and Result Update

Stocks To Buy in 2012 - Noida Toll Bridge

2011-12-29T05:54:00.000+05:30

A stock of a company which has already made it’s investment, done all the work and now just collects revenues with minimal operational expenses should be on your list of stocks to buy in 2012 for sure. Any value investor should buy stocks of Noida Toll Bridge in 2012 for excellent returns on investment looking at future developments in company. Here is the reasoning.

Business
Noida Toll Bridge Company Ltd. (NTBCL) has constructed and now operates a bridge (popularly known as DND flyway) that connects South Delhi to Noida. It is an 8 lane world class highway with toll plaza. NTBCL is promoted by IL&FS. NTBCL has only one business, to collect toll revenues form DND flyway which it has already constructed. The bridge is like cash machine for company. The company just have to spend money on minimal operational needs and maintenance of bridge. Operational expenses are not very high. And that is the reason behind company’s operating profit margin of 76% in FY11. Company has to pay big portion of this for debt repayment and interest costs associated with it.

Thousands of vehicles travel everyday on DND flyway out of need to commute between Delhi and Noida. And DND flyway is the only time and energy saving route that vehicle commuter has. Other two routes (via Nizamuddin bridge and Okhla bridge) are free to use but are time consuming and traffic laden. I have travelled a lot on DND flyway and of course on other two mentioned bridges myself by car and at any given day, I have preferred to use DND flyway paying toll. This was to save my time (approximately 20-30 minutes if I use other routes) and of course to save fuel. As per my calculations, with an increased driving distance of 4-5 kilometers per trip if I use alternative free routes and not DND flyway, I would burn more than 1/4th liter of petrol or more in driving, spending at least Rs.18-20 extra in petrol (petrol at Rs.70/liter). And then, extra travel time, hassle of very slow moving big traffic (that burns more fuel than mentioned earlier). Any sensible car driver would use DND flyway so NTBCL may never face slowdown in terns of traffic. Traffic is in fact bound to increase due to huge business infrastructure and residential developments in Noida, Greater Noida and along the sideways of Noida-Greater ay. Visit DND Flyway site for more details on business.

May be, Delhi metro should prove competition to DND flyway (two wheeler riders may opt for metro) but chances of travelers using cars being diverted to metro are very less in my opinion.

Stock Financials
Now, just imagine a company which has operating profit margins of like 76%, will make how much profit once it becomes debt free! NTBCL had debt of Rs. 358 crores in March 2005. As on Sept. 2011, the debt is down to Rs. 126 crores. At this speed, company may repay entire remaining debt within 2 years. And there after, you would have a company which is debt free, generates cash on the spot from toll collections with big operating profit margins.

Along with toll revenues, NTBCL also collects revenues by placing advertisements along side the entire bridge. And advertisement revenues are growing every year (up 20% in FY11 from 10 in FY10 to 12 crores). Under the project agreement with Noida authority, company has right to earn assured returns of 20% on total project cost through toll collection for 30 years from Jan 1999 onwards. The total project cost also includes major maintenance expenses on top of which the profit would be earned.

As in FY11, the total project cost with profit projections that NTBCL management has estimated stand at Rs.2021 crores. And to recover this money, NTBCL will have possession of DND flyway for 40 more years additional to 30 years in contract! There is an alternative using which company can recover these costs. The alternative is that Noida authority would award development rights of land along DND flyway to NTBCL. And this land is very precious and at prime location between Delhi and Noida. So there is a real estate play for company in future.

Stock Valuations
5 year median P/E ratio for NTBCL stands at 22. The stock trades at CMP of RS. 20 with P/E of just 10. Company’s EPS growth for last five years (CAGR) is about 25%. The PEG (Price earnings to Growth) ratio stands at 0.4. Any stock with PEG ratio lower than 1 can be considered as value stock. NTBCL can be called as a good value stock. Company has started paying dividends in 2010. Dividend was 50 paise per share which puts stock dividend yield at 2.5% annually at CMP of Rs. 20. As the debt would reduce in future, net profit would increase and so the dividends. You can expect NTBCL to be a good dividend yielding stock in future for long term.

All in all, Noida Toll Bridge is one of the very good stocks to buy for long term investment portfolio. It will pay you good stock dividend too. It has good scope for capital appreciation in future looking at current stock valuations. One may buy stocks of NTBCL at CMP (Rs.20) or below, which has limited downside.

Disclaimer: I own this stock at 22-23 levels and determined to add more at CMP and below for long term.

Safe Mid Cap Stock Idea

2011-07-29T08:14:00.000+05:30

Here is one mid cap stock that is relatively safer compared to mid cap stocks space. NIIT Technologies, an IT stock with good growth rate could provide you very good investment returns in next 2-3 years.

NIIT Technologies is a mid-tier IT company providing IT solutions to customers aross North America, Europe, Middle East, Asia and Australia. It's services and solutions include application development and maintenance, managed services, cloud computing and business process outsourcing space to organisations across verticals. Revenue wise, Travel and transportation segment is single largest contributor(29%) while financial services and insurance contributes 37%, government segment contributes 18%, manufacturing and distribution 8% and rest is by all other segments.

Stock Financials
Company has reported almost 9% CAGR growth in topline and bottomline for past four years. Company's order book stands 15% higher at $169 million at the beginning of FY12 against the start of previous year. The maximum order intake was during the March 2011 quarter when company received fresh orders at $116 million were more than double the total number of orders in Dec.10 quarter.

Travel and transportation segment was the key growth driver during March 11 quarter with 12% sequential increase in total revenues to Rs 107 crore. Even with good growth, the company's operating profit margin was flat at 19.9%. Comapny has provided, on average, a 13% offshore and 3% onsite salary hike which could stress the margins in near future. But company operates at a utilisation level of above 80% which is higher compared to that of other IT companies.

Stock Valuations
NIIT Technologies is a consistent dividend paying stock with dividend yield of more than 4%!

At current stock price of Rs. 228, the stock trades at P/E of 12.11 for trailing four quarters EPS. Looking at the healthy order book lined up for execution in next one year, its' expected EPS in FY12 and FY13 is Rs.25 and Rs.35 resply. With same P/E of 12, NIIT technologies could touch Rs.300 in one year and Rs.400 in 2-3 years time frame if nothing drastically goes wrong for company.

One may buy stocks of NIIT Technologies at every dip in small quantities. It becomes very attractive if the stock trades around or below Rs.200.

Mid Cap Stock To Buy - RIIL

2011-06-17T06:15:00.001+05:30

I recently came across a discussion on this mid cap stock recommended as multi bagger stock to buy. What is in Reliance Industrial Infrastructure that it has potential to be a multi bagger stock for investors?

Reliance Industrial Infrastructure (RIIL) is a Reliance group company from Mukesh Ambani’s stable. Reliance Industries directly holds 45.45% stake in RIIL. Reliance Industries is the promoter of company and they created this entity around 5 - 6 years back.

If you look at the financial numbers, company has no exemplary performance in past that may indicate towards possibility of bright future performance. It is a company with completely flat financials for past 5 years and no growth achieved at all.

What does RIIL do? Company owns roughly 56 kilometers of pipeline to transport the crude oil from Chembur to Patalganga plant. Company does not do anything except managing this pipeline as on today. It was doing same thing for past 5 years in a row with almost same revenue and profits. The EPS was around Rs 15 steady. At current stock price, RIIL has market cap of less than Rs 1,000 crore.

So essentially RIIL is a sleeping company doing only one business at the same scale for years. But that seems to be changing now. Recently Reliance Industries has acquired 74% stake in Bharti AXA Life and Bharti AXA General Insurance. Out of this 74%, 17% stake is acquired by RIIL. RIIL as a company has net worth of Rs 200 crores, out of this, Rs 170 crores is a cash.

Taking this development as a trigger, Reliance group management should have some plan for this company now. Being a Reliance company, RIIL cannot stay lagging for long for sure. When they start getting into such new businesses for growth, we would see the movement in company and so financials.

If the RIL plans more for RIIL in near future, this company can be well on it’s path to become a large cap soon. And so would grow the numbers with appreciation in stock price. RIIL stock trades at P/E of 35 for these hopes. It had touched almost Rs 3000 on such hopes in past. If business starts moving, stock price would certainly fetch big investment returns for sure. One may buy stocks of RIIL on these hopes for long term portfolio investment.

Mid cap stock to buy - Manaksia Ltd.

2011-06-12T22:53:00.001+05:30

Here is a stock report on this good mid cap value stock with good dividend yield and promising growth prospects too.

Manaksia Limited manufactures metal, packaging products, value-added metal products, made of aluminum and steel. It also manufactures mosquito repellent coils and vaporizers. Four segments company operates in are packaging product, mosquito coils, metal product, and engineering & others.

Packaging takes care of manufacturing/sale of pilfer proof (PP) cap, crown closures, metal containers, EP Liners, washer, EP sheets. Metal product consists of manufacturing/sale of aluminum and steel galvanized sheets, coils etc. Engineering and others consists of manufacturing and sale of machine, spare parts etc. Company manufactures in India and Nigeria.

Manaksia is well in position to take advantages of growing consumerism in emerging markets with operations in India, Africa and West Asia. Looking at company's expansion plans and restructuring initiatives, the stock looks to be a value stock to buy for long-term investment.

Manaksia has good set of clients including Dabur India, Jyothy Laboratories, Eveready Industries, and McDowell Group. Their metal product division is the main contributor to its revenues and profits.

Growth Prospects:
Company's presence in multiple countries enables it to capitalise on growth in construction, engineering, and transportation sector growth in emerging markets. Expansion in company's balance sheet and steady cash flow over the years proves this and it will continue in similar manner. The company has achieved vertical integration for a number of products that lowers the manufacturing costs. With management's restructuring plans materialization, operating efficiency should improve further.

Stock Valuation:
Over the past three years, the company's consolidated net sales grew by 12% and net profit by 10% when compounded annually. Sales from its metal products division, which contributes about 80% to its topline, grew 11%.

The management has been efficiently using its strong cash flows to reduce its debt burden. With Rs 75.77 crore cash on its books and a debt-equity ratio of 0.3, the company has ample room for fund raising to support expansion plans. It gives a return-on-capital of 12% and a dividend yield of 3.23% at current stock price of Rs.74.

12 month trailing P/E ratio stands at 16.54 for company. This is certainly not cheaper. But with book value if Rs.83 and price to book value ratio of 0.89, Manaksia looks like a good value stock with good growth prospects. For these factors, it could be a stock to buy for horizon of two years at any dips in it's stock price from current level.

Stock Analysis - GIPCL

2011-05-31T05:24:00.001+05:30

Quarterly result and stock analysis on GIPCL for 4QFY2011 with target stock price for one year. It is certainly a good dividend yielding stock to buy for safe investment returns.

GIPCL was incorporated in 1985 as Public Limited company under the Government of Gujarat. The company is engaged in business of Electrical Power Generation. The total present capacity of Vadodara and Mangrol plants is 810 MW. The company has a vision to transform itself into a national level power sector enterprise. The company has its registered office at P.O. Petrochemical, Vadodara, Gujarat.

GIPCL has posted 124.9% yoy growth in net profit to Rs 81.2cr in 4Q FY2011. This was due to a substantial reduction in fuel costs and write-back of taxes related to previous years. During this quarter, 165MW Vadodara Station II that company owns was shut down for maintenance. This lead to low PLF of 30.8% ( against 80.8% in 4Q FY2010), which is the reason behind low fuel costs. However, Vadodara Station II achieved the requisite PAF for FY2011 as a whole and, hence, the company’s top line was not impacted majorly in 4Q FY2011. Consequently, OPM surged to 39%. The company indicated that operations of the newly commissioned SLPP Units 3 and 4 (250MW) have stabilized and are currently operating at healthy PAFs of ~80%.

Result Analysis
GIPCL’s 4Q FY2011 revenues grew by 24.1% yoy to Rs 315cr. OPM for this quarter rose by 1,457 basis points yoy and 1,236 basis points qoq to 39% due to lower fuel costs at 49% of net sales.

Net profit of the company rose by 124.9% yoy to Rs 81.2 cr on account of a surge in operating profit and net tax gains of Rs 21.4cr for the quarter due to tax adjustments of earlier years and deferred tax income.

Stock Valuation
GIPCL’s revenues and net profits are expected to show CAGR growth of above 20% over next 2 years.

At the current stock price of Rs 84, the stock trades at P/E ratio of 7.7 for trailing four quarters. The book value of stock is at Rs 93.16. It is trading at Price/Book value of 0.90. The stock dividend yield comes at healthy 2.99% that makes it a good dividend yielding stock.

If we consider the expected growth, the EPS in one year could reach Rs 13. Valuing the stock at similar valuations after one year, stock price target could be Rs 95-100 i.e. roughly 15-20% investment returns in one year with almost 3% dividend yield as additional returns. All in all, GIPCL is a good stock to buy at dips from current stock price levels.

Buy Stocks of Everonn Education for long term

2011-05-23T05:13:00.002+05:30

This is one of the stock to buy where you invest in it only for long term and see the value being created over the years. Buy stock of this company only if you have patience to wait for a few years (not days and months).

Everonn Education is a Chennai-based Education and training company incorporated in year 1987. Creation of knowledge resources, designing and delivering learning and training programmes and setting up infrastructure for these services are the areas company caters to. It has presence across the country in all states and operates 9,897 learning centers and offers services to over 3 million students. Everonn education operates in two segments namely instructional and Computing Technology (ICT) and Virtual Technology Enabled Learning Solutions (ViTELS).ViTELS contributes over 60% of the company's total revenue and ICT forms 22% and rest of the revenues come from the business through it's subsidiaries – EDURES and Toppers.

Growth Outlook
The company has a scalable and replaceable technology platform to impart training to create educational entrepreneurs – EDUPRENEUR. This initiative is to expand its reach at the district level in entire country. Everonn already has signed up seven such deals and expects to end FY2012 with 100 districts integrated within its reach. As part of the initiative called Educating India, Everonn will act as a facilitator, aggregator and the manager of the schools and colleges. These projects can be co-owned by retail investors by investing in as low as Rs.5 lakhs. It expects to end FY12 with the setting up of 50 schools and colleges in all.

The company is constantly investing in its subsidiaries, including Everonn Skill Development and Everonn Business Education. While the former is likely to break even by this quarter, the latter is expected to start generating revenues within next three quarters.

Stock Financials
Everonn has witnessed decent financial growth over the quarters. During the 12 months ended in December 2010, the company's revenue and net profit grew by over 75% each.

Profitability is seen to be improving. During the December 2010 quarter, operating margin stands at 38.1%. The company has invested Rs.40 crores towards its two new subsidiaries. Both these businesses are likely to break even in coming quarters.

Stock Valuation
At the current stock price of Rs.567.4, this mid cap stock trades at 17.9 times its earnings (P/E) for the trailing 12 months. Although Price to book value at 4.16 looks higher in valuations, company's future growth looks promising being in education sector. With government's emphasize on better education and sector is being looked as sunrise sector, one my buy stocks of Everonn for long term value creation. It is not a stock to buy for short and mid term but strictly for long term investors.

Stock analysis post results - Patel Engineering

2011-05-20T08:36:00.000+05:30

Here is the quarterly results update and analysis on Patel Engineering for 4Q FY2011. The stock recommendation on this stock remains Neutral until any further trigger.

Patel Engineering (PEL) posted disappointing numbers on consolidated and standalone basis for 4Q FY2011. Company’s current order book is running with delays in execution. New order inflow scenario is not encouraging for company so recovery to growth path looks difficult and may take some time. The company recently had an IT raid on their office. This would accrue in the next few months, increasing the tax rate in near future. Another negative trigger is the loss incurred due to project cancellations. This would materialize and impact the company’s financial numbers. All these creates a negative scene for company and suggests to not to buy stocks in near term unless we see any positive development in company.

Result Analysis
It was yet another disappointing quarter on the operating front. For 4Q FY2011, on a consolidated basis, PEL posted growth of 33.4% yoy and 267.4% qoq in net sales primarily due to real estate revenue booking and low margin outside work. EBITDA margin came in at 8.1% (450/530bp yoy/qoq decline) due to Jogeshwari property sales – adjusting this, EBITDA margin would have been at 3–4%. Reported PAT declined by 50% for the quarter.

Stock Valuation and outlook
PEL’s core business is C&EPC. It is facing problems with its large projects facing delays. Company has disappointing order inflow. Another most important factor to consider is the longer gestation nature of its order book, macro headwinds and increasing debt levels create a doubt on company’s growth visibility for the next few quarters. Considering blurred visibility in future, one should not buy stocks until any big trigger.

Stock Report - KEC International

2011-05-15T09:27:00.002+05:30

BP Equities, a stock broker firm has recommended to buy stocks for KEC Internation for target of Rs.99 in it's recent stock research report. Checkout the stock report here.

KEC International’s (KECI) Q4 FY 2011 results reported sales of Rs. 15,589 mn. It is up 14.9% YoY and it's net profit of Rs. 786 mn up 25% YoY. The increase in profits was due to margin improvement and higher execution.

KECI has huge order book size of Rs ~78 bn as on April 2011 (around 1.75x its FY10 revenues) executable over period of 18 to 24 months providing optimistic future revenue visibility for coming period. With diversified order book geographically the company is insulated from slow down in order flows from any particular region.

The company has entered into water business and secured breakthrough order of Rs. 310 mn in April. The company intends to mark its presence in complete value chain of Water treatment and Water waste management. It has also received order in Balance of plant (BOP) segment. As the company is entering these segments it would not enjoy high margins as compared to other players.

Stock Valuations
At current stock price of Rs.80, the stock trades at P/E of 13.99 with EPS of 5.72. With expected EPS of Rs.9.07 in FY 2012, the stock trades at forward P/E of 8.8. With this consideration, one may buy stocks of KEC for the target of Rs.100-110 for medium term investment.

Download the detailed stock report here.

Buy Stocks of Jubilant Foodworks for long term investing

2011-05-11T17:06:00.002+05:30

One of the stock broking firm executive, Gopinathna Natarajan from IIFL is of opinion to buy stocks of Jubilant Foodworks whenever the stock dips due to correction. Why so?

Do you buy stocks for investment? Do you eat Domino's pizza? If answer is yes to both, probably you might want to take "a piece" of "share" from Domino's pizza, not only from their pizza center but in stock markets too!

Jubilant Foodworks is a company that franchises and owns the network of Domino's pizza in India. It has a good theme to play on. It is from one of the fastest growing industries i.e. fast food industry. Indian middle class is growing and growing and growing. And so it's purchasing power and desire to spend. Western fast food is one of the items middle class is turning to at rapid space. Domino's and Pizza hut Pizza, Mcdonald's Burgers etc.

So Jubilant foodworks provides you an opportunity to play on this demographic shift by middle class Indian consumers. They have a market share of almost 70% in market. The total size of market amounts to roughly a USD 2 billion in India. The break-even point (starts generating profits after meeting the initial setup costs) in this market is very short.

The pizza business in India is experiencing very high growth rate for some time now and it is going see the same phenomenal growth for coming time looking at the huge growing middle and upper middle class income group.

The stock at current stock price is not cheap at all at P/E of 75 which breaks principles of value investing. But if stock corrects in case of stock market corrections, it is a good stock to buy at dips for it's growth story.

Mid cap FMCG Stock to Watch for - Jyothi Laboratories

2011-05-09T20:52:00.002+05:30

I just came across a news that FMCG firm Jyothy Laboratories Ltd (JLL) , that makes and sells UJALA fabric wash detergents, has offered to acquire up to 20 per cent more stake in Henkel India in an open offer value at around Rs 96 crore.

This open offer at Rs 41.20 per share, would start on June 24 and end on July 14.
Jyothy Laboratories had declared last week that it would acquire 50.97 per cent stake in Henkel India Ltd (HIL) from Germany-based Henkel AG & Co for Rs 118.7 crore.

After owning that the 20 per cent thru open offer (if it gets fully subscribed), JLL will own 85.87 per cent in Henkel India.

It is one more incident that Indian company is buying out a unit from an MNC. Although it is a small buyout, it is significant for a mid cap company like Jyothi Laboratories. It should significantly make additions in topline of the company. Bottomline impact in future needs to be scrutinized. What needs to be looked at is, Jyothi Laboratories has been growing at a decent pace as a business.

It's stock has zoomed from Rs 50 levels to Rs 200 levels in past 2 years which indicate growth that company is experiencing.

One should watch this small FMCG stock from future perspectives. It might prove to be a good bet.

I will soon post stock analysis of Jyothi Laboraties to see if we can benefit from this mid cap stock and it's growth. Watchout.

Mid Cap Stock To Buy - Paper Products Limited

2011-05-08T00:23:00.004+05:30

Paper Products Limited is a Mumbai based leading consumer packaging company. It is a high dividend yield stock with very good fundamentals and growth. This is what makes it a mid cap stock to buy.

Paper Products Limited (PPL) is consumer packaging company with product offerings such as Flexible Packaging, Labeling Technologies, Specialized Cartons, Packaging Machines, Holographic Options, Gravure Cylinders, Polyethylene Films and Coated Materials. Offerings from company also includes decoration technologies that includes Shrink Sleeves, Heat Transfer Labels, Pressure Sensitive Labels, Metalized Paper and Wrap Around Labels. Products such that can act as inputs to finished packaging materials and may also be offered as stand-alone products that include gravure cylinders, high-barrier metalized films and co-extruded blown films.

Company has good set of clientele such as Britannia, Cadbury, Castrol, Coca-Cola, Dabur, Emami, Eveready, GSK, Godrej, Hindustan Unilever, ITC, Marico, Nestle, Pepsi, Perfetti, P&G, Tata Tea, TTK-LIG and Wipro. Paper Products limited has a joint venture since long time with the global packaging major, Huhtamaki Oyj that owns nearly 60% of its equity. Huhtamaki Group is Finland-based top 10 consumer packaging multinationals in world.

Growth Potential
Growth of the company is completely dependent on growth of consumer goods industry. Economic growth and rising personal disposable income are growth drivers for the consumer goods sector. This would create a very good growth potential for the future of the packaging industry. Paper Products Limited is looking for growth through expansion of capacities and increasing it's productivity.

Stock Valuation
Paper Products Limited has recorded annual CAGR growth of ~9% steadily for past few years. Earnings per share (EPS) has been on growing path continuously. EPS was Rs3.40 for FY08, Rs5.96 for FY09, Rs7.67 for FY10.

At current stock price of Rs70, the stock trades at P/E ratio of 10.4 for trailing four quarters earnings. It's dividend yield at current stock price stands at 3.11% which is good. It is a steady business with good growth potential. It is a consumer industry related business that links it to FMCG sector which is considered as less volatile business vertical.

To conclude, Paper Products Limited is a steadily growing, relatively safe stock that can fetch good returns over the long period of time with lesser risk. Long term investors may buy stocks of Paper Products around Rs.60 for steady growth of their investment portfolio. While considering it for your portfolio, do not forget this is a mid cap stock, so allocate appropriate portion (not more than 5%) of your total investment corpus.

Stock Report - IL&FS Transportation Networks

2011-04-18T08:23:00.001+05:30

Here is stock report on another mid cap stock to buy that I felt could be a good mid cap stock choice for long term investment portfolio. IL&FS Transportation Networks Ltd. (ITNL) gives you an opportunity to ride on infrastructure growth story in India.

IL&FS Transportation Networks Ltd. (ITNL) is a surface transportation infrastructure company, and is one of the largest private sector BOT road operators in India. ITNL develops, operates, maintains and facilitates road transportation infrastructure projects. ITNL was incorporated in 2000 by IL&FS, an infrastructure development and finance company to consolidate their existing road infrastructure projects and to pursue various new project initiatives in the area of surface transportation infrastructure.

ITNL has order mix of 50% BOT and 50% annuity based project mix. 70% of their orders come from NHAI so they are not much dependent on the state highways or state contracts where one could see a lot of difficulties and lower margin because of the stiff competition by the local players.

With high concentration from Indian government on building road network infrastructure is one of the most important factor in Indian growth story. IL & FS Transportation is definitely going to be a big beneficiary of these road infrastructure projects.

According to the ITNL management, the good thing for ITNL is that it has strong order pipeline for execution till FY'14. And for this reason company is not bidding very aggressively by compromising on margins which some other players in industry are doing right now to have the orders booked in pipeline.

The management has indicated for existing projects that margins will not be compromised since there are sufficient arrangements built in the projects to accommodate for the increase in raw materials and other costs.

By FY 13-14, it is expected that many toll/annuity projects would be operational and after that size of balance sheet, interest costs, etc will not be an issue. And so the company is not in a hurry to participate in irrational competition to bag orders at lower margins. Some state governments like Karnataka, Madhya Pradesh are coming up well and company expects some BOT orders in CY'11 from them.

Stock valuation
IL & FS Transportation has Rs 12000 crore of the projects under implementation. Out of these some of the road projects are operational.

As per their March 2010 annual financial results, they had Rs 845.48 crores sales turnover with net profit of Rs 324.73 crores. Their OPM% (operating profit margin) was at 76 and NPM% (net profit margin) at 38.41 which is very good for business. EPS was Rs 18.93.

Till Dec.2010 for 9 months, sales was Rs 855.68 crores with Net profit of Rs 215.09 crores. Their EPS stands at 11.07 for these 9 months. This is as I have seen on BSEINDIA.COM. Other analysts on TV have talked about numbers that I could not find.

Looks like ITNL would post annual EPS around Rs 15-16. With this expected EPS for FY11, at current stock price of Rs 237, the stock trades at PE ratio of ~16. This is reasonable but not cheap. If you look at the order book in pipeline for next 3-4 years and earnings visibility with good growth prospects due to bright future of infrastructure sector in India, one may buy stocks of ITNL in investment portfolio from 3 – 4 years perspectives. It can fetch you good investment returns Y-O-Y.

Stock To Buy in 2011 - Texmaco Rail & Engineering Limited (TREL)

2011-04-01T06:47:00.002+05:30

Texmaco Rail & Engineering Limited (TREL) is on strong growth path. It has very good potential of growing immensely in sector it operates in which makes it a Mid Cap Stock To Buy in 2011.

TREL is into core engineering business including Heavy Engineering that comprises of Rolling Stock for Railways, Hydro-Mechanical Equipment, Steel Structural, Agriculture Machinery and Steel Foundry. All these business segments are on high growth trajectory due to booming infrastructure needs in India.

Rolling Stock division of TREL manufactures wagons for Indian Railways and private players like CONCOR, NTPC. Railway intends to buy 18,000 wagons during FY 2011-12 , a jump of 24% compared to 14,500 in FY 2010-11.

Vision 2020 of Indian Railways proposes average investment of Rs 140,000 crore per annum over next 10 years for expansion of rail infrastructure. TREL is a market leader in this business and with its low-cost operations, massive infrastructure, and engineering skills will benefit at large from Railway's investments.
TREL is forming Joint Ventures with global leaders to cater needs if railways. These include UGL, an Australian company for designing, manufacturing & supplying locomotive bogies, wagons and related components.

A JV will be formed with Bombardier if Bombardier gets tender from Indian Railway for setting up locomotive factory and electric loco components manufacturing facility. Siemens is the only other major MNC contender for this project. These projects could add ~ Rs 5,000 crore worth sales every year in foreseeable future.

Hydro Mechanical division manufactures equipment for mega Hydro Power, Irrigation & Flood Control projects. TREL is the only company supplying Hydro Mechanical gates for Hydel plants with capacity above 500 MW. India plans to spend over Rs 180,000 crore on power plants of this, 7% i.e. Rs 12,600 crore would be addressable business for TREL.

Steel Foundry of TREL is the only foundry in India qualified to export railway castings to North America. At present 70-75% of foundry output is used internally for wagon division but with modernization drive, this sales proportion is going to change. More products exported would fetch much higher price and its margin is expected to expand.

Agro Machinery division proposing to add new Agricultural Machines, Tractors and Reapers. It will benefit from growing Indian agricultural sector.

Company has taken up assembly and marketing of Infrared Recycling Pothole Repairing Machine for roads with Nu-Phalt U.K. First machine has been delivered to Delhi Municipal Corporation and company expects to receive substantial orders in FY 2012.
Texmaco Rail & Engineering is cash rich company with almost Rs.10.69 per share in cash.

At current stock price of Rs. 70, the stock trades at 10.2 times FY 2011 expected EPS of Rs 6.80 and 7.7 times FY 2012 expected EPS of Rs 9.10. TREL is a definite Stock To Buy in 2011 for long term investment portfolio (2-3 yrs).

Would you Buy Stocks of Koutons at 92% discount?

2011-03-25T20:10:00.003+05:30

This is one apparel retailer I have been thinking about since I had seen their store first time in DT Mega Mall, Gurgaon. They were first as such retailer offering good looking fashion apparel clothes at 70% and 80% discounts to MRP. Now their stock in stock market is available at whopping 92% discount to it’s IPO price of Rs.415 (sounds to me like clearance item) and at even bigger discount of 97% to it’s high of nearly Rs.1100 after listing. Would you like to Buy Stocks of Koutons Retail India with more than 90% discounts? It is available at current stock price of Rs.33 !

Had it been apparel, everyone would have rushed to but this is a stock I am talking about and you should do thorough stock analysis before you touch it looking at discount banner.

Recently Koutons Retail admitted that huge debt is hanging over the company’s head. They do not have money to get rid of it and that no option is left other than debt restructuring to recast debt. What does this indicates? A sick company with loads of debt on it’s balance sheet which it cannot pay back to lenders.
Koutons Retail has total debt of Rs.660 crores, out of which Rs.460 crores will go in corporate debt restructuring (CDR) and remaining Rs 200 crore is non-CDR as per CNBC-TV18 reports.

SBI Capital is acting as their consultant for debt recasting. They have prepared a rough package for the company that includes debt repayment over a period of 9 years including a 2 year moratorium (Company will not have to pay any money to the bankers for first 2 years in terms of interest of principal).

Now, 9 whole years Koutons is going to repay the debt to its lenders. What does that mean for an investor? Company will use all its earnings in profits to pay back the loan and interest on it. What would it pay back to investors? Gha*ta? Stock at more than 90% discount? It will take years for the company to come back with good numbers along with repayment of debt.

Promoters of Koutons Retail own about 98 lakh shares, which is 32% of the company and remaining 96 lakh shares are pledged with the lenders. This is where integrity of promoters comes in question. They sold the big chunk in IPO and must have made money. Shown big numbers on back of debt, took the stock to more than double within a few months, made money and now unable to pay back the debt to lenders. What did promoters loose? A common man who would have invested in Koutons retails at Rs.1000 must be crying looking at that 97% discounted price of his “stock” of apparels!

I am sure clearing this debt and paying back to investors will take more than a decade for this company but promoters would enjoy their “share” thru big fat salaries, bonuses and company paid expenses.

I don’t see promoters acting efficiently enough to the benefit of shareholders and I see no reason to Buy Stocks of Koutons retail unless company shows some good real progress towards repayment of debt.

Buy Stocks of Praj Industries for price target Rs.102

2011-03-25T06:02:00.003+05:30

Here is a Buy Stocks report on Praj Industries with target stock price of Rs.102. This recommendation is on the back of rising demand of ethanol processing refinery and related technologies. Check out this Stock Report on Praj Industries published by KRChoksey, a stock broker.

Praj Industries is one of the few companies engaged in solutions research and development for ethanol, biodiesel, brewery plants and process equipment and systems. They have customers spread around the globe. Business line of company includes alcohol/fuel ethanol plants, biodiesel plants, brewery plants, environmental engineering, bionutrients, customized engineering and manufacturing, and agri services. The Company supplies a range of nutrients to the fermentation industry like distilleries and breweries, which is consumed in the course of production.

US senate has passed legislation for 15% ethanol mixing mandatory. This will create market and demand for additional bio refinery capacity of approx 4 billion gallons p.a. This creates opportunity of USD 6-8 billion for Praj Industries in US alone and company has started receiving enquiries too.

Order book trend for Praj Industries is quite encouraging thru Q3 FY11. The company received new orders of Rs.250 crores during Q3FY11. Order book for comapny, as on December 31, 2010 stands at Rs.700 crores. These order will be executed in next 1 year.

As stated above about business opportunity of USD 6-8 Billions, if Praj Industries gets even 7-10% of the estimated USD 6 billion, it would translate into fresh order of USD 400-600 million i.e. Rs.1890-2700 crores. Ever rising crude oil prices have made ethanol blending all the more attractive for OMCs to reduce the losses on subsidized fuels as ethanol price has been capped at Rs.27/litre. This will create additional demand for ethanol refineries from OMCs and sugar manufactures.

Fresh orders due to revival in global economies and rising crude oil will bring business back to Praj Industries. At current Stock Price of Rs.70, the stock trades at a PE of 13.7x FY12E EPS. The Stock Report recommends to Buy Stocks of Praj Industries with 1 year price target of Rs.102 valuing the stock at 20x FY12E earnings. This is upside of 46%. Download detailed Stock Report PDF here.

Multibagger Stock Analysis - Bilcare Limited

2011-03-18T06:25:00.004+05:30

I heard about Bilacare being discussed as Multi Bagger Mid Cap Stock To Buy recently. So I thought to do some research on it. Here is the Stock Analysis of Bilcare and conclusion.

Bilcare Limited is engaged in pharmaceutical packaging and solution research. Bilcare provides solutions for global Pharmaceutical and Health Care industry. It is an MNC with R&D and manufacturing plants in USA, India, Europe and Singapore. Various solutions that company provides includes Pharmaceutical Packaging, Global Clinical Supplies, and Bilcare Technologies for brand authentication and security. Packaging solutions from company include Bilcare Ultra R, Bilcare Ultra TX, Bilcare Protect R and Bilcare Secure.

Bilcare has major share in Indian blister packaging markets. It's share of pie is as much as 60% that shows it's leadership in this business.

One important factor being discussed for Bilcare by Stock Analyst was company's business dependence on crude oil. This stock is favorite stock of Stock Traders due to it's dependence on crude oil prices. Look at below Stock Chart of Bilcare.

Stock Chart of Bilcare Limited

When crude prices were high (July-August 2010), Bilcare was trading a bit above 400. Then crude prices cooled off and Bilcare went on trading upto 773 within 6 months. In past 3 months crude prices have again started rising toward $100 and Bilcare started it's downward journey. Currently it is trading at Rs.420 company's business dependence is a lot on crude prices that could result in instability in stock prices.

Stock Financials
Company's sales turnover has shown constant steady growth (although not on steroids!) for past 4 quarters. Same we can say for net profits for past 3 quarters. Company's book value is 332 which puts it's price to book value ratio at 1.26

Stock Valuations
EPS for trailing 4 quarters is 36.66. At current Stock Price of Rs.420.7 price to earning (P/E) ratio comes to be 11.47

Looking at volatility in prices due to crude price factor and moderate valuations, this is certainly not the level to Buy Stocks of Bilcare. If crude oil prices ease of and stock corrects below Rs.400, it could be a good stock trading opportunity for mid term, but after keeping an eye on crude prices and company performance.

Mid cap stock analysis - Gati logistics

2011-03-16T07:41:00.002+05:30

Logistics sector is expected to pick up in coming future with revival in economy. Here is a stock analysis of mid cap stock, Gati logistics, that could benefit from increased demand in logistics sector.

Gati logistics is a express distribution and supply-chain services provider. It is one of the leading service provider in it's business. Domestic and international markets are slowly picking up and so the logistics business is experiencing increased demand since recession period of 2009-2010. It has quiate a good solution portfolio for domestic as well as international logistics sectors.

Gati logistics has recently started operating it's own offices in East Asia. It will benefit from growing trades between India and East Asian countries.

Gati Logistics Business Infrastructure
Gati Logistics, as in June 2010, had network of 432 depots at 20,000 locations in India. It had 193 company-owned vehicles and 1,072 rented vehicles from different vendors for its logistics chain. Company had handled 43 million packages in FY10, this was a number higher by 30.3% over FY09.

Gati logistics has recently launched cold chain solution under it’s supply chain management. Name of the division is “RedSun”. This division will also cater SME logistics and allied services. This is going to be an asset light model driven division.

Company also has a shipping sector division that caters sea route logistics. This division has recently lost big chunk of its profits compared to last year profits due to difficulties in that market. Gati is going to separate it as wholly owned subsidiary in near future.

Stock Financials and valuations
If we look at Gati’s trailing 4 quarters EPS, it is 3.06. At current stock price of Rs.54.50, the stock trades at P/E of 17.81. Similar stock Blue Dart express trades at P/E of 24.89 at trailing four quarters EPS.

The stock is certainly not trading at discounts in market. Looking at picking up demand in logistics sector and good future of cold storage chain business, Gati logistics could be a good long term bet. One may buy stocks of Gati logistics at any dips in stock price for long term investment.

Mid cap stock analysis - JK Cement

2011-03-14T03:17:00.003+05:30

Let's have a look at a mid cap stock JK cement, which is turning around from the losses it posted in previous quarter. Here is stock analysis of JK Cement for medium to long term time horizon.

JK Cement is mid-sized cement producer in India. JK Cement has recently put up and started production in south India based plant with three million tonne (mt) capacity. This was as part of of company's plans to expand business in South India.

Company was mainly catering to North Indian market till now. It is expecting that demand in cement sector will be back and grow in medium term future and so preparing to cater the growth in northern as well as southern areas.

Cement sector outlook
The cement sector, for some time now, is running sluggish for some time now. If you look at the time period from November-December till monsoon i.e. June, it is the peak period of construction and so the demand in cement sector is expected to pick up. Rising costs of power and transportation on account of rising fuel costs remains a major concern for cement sector though.

JK Cement's total cement production capacity was 7.9 mt at the end of March 2010. This is 80% more from what it was three years ago. With new cement plant in Karnataka which also has has a 50 megawatt captive power capacity.

JK Cement is planning to expand its grey cement capacity by 2.2 mt at its existing plant in Rajasthan. Company is also planning to add 1.8 mt of grinding facilities in north India. The capital expenditure is estimated at Rs.1,500 crores including additional captive power facilities. This would be on stream within 2 years.

Stock Financials
In December 2010 quarter, net sales of JK cement was Rs.476.34 croes, marginally up from previous and Dec.09 quarters. Company's net profit was Rs.1.83 crores against loss of Rs.20.84 crores in previous quarter. Company had hardly posted losses in near past which it did in September 2010 quarter on account of increase in power and fuel costs. This shows stock is recovering from these losses with positive measures and growth in realizations.

More mid cap stocks discussed

Stock Valuation
At current stock price of Rs. 134 per share, JK Cement stock trades at P/E of around 12 trailing four-quarter basis. India Cements is a leading player in cement sector of India is trading at a P/E of more than 45 times on a trailing basis. So purely on valuations basis, JK cement is trading at discount to it's actual valuations. It has a good chances of growing it's financial numbers in coming quarters. One my consider buying stocks of JK Cement for medium to long term.

Mid cap sugar stock to avoid - Balrampur Chini Mills Ltd

2011-03-11T07:01:00.002+05:30

Why should you avoid buying stocks of Balrampur Chini Mills ltd. even though the stock has corrected a lot in recent stock market correction? Checkout...

Balrampur Chini Mills (BCL) is one of the largest sugar producing mills India. It has cane crushing capacity of 73,500 tonnes per day and will be producing 63 lakh quintals by Sept 2011.

As stated, Balrampur Chini mills is an integrated sugar player. It has distillery capacity of 320 kilolitres per day and can generate power capacity of 179 megawatt (MW). The company has recently expanded capacities for ethanol and power businesses. This would help it increasing its volumes and margins.

Sugar Industry Scenario
Sugar industry as a whole is expected to produce 25 million tonnes for the seasonal end in September 2011. This is more than expected 23 million tonnes which will make a surplus season after two deficit sugar seasons. This is going to put pressure on sugar prices and so the margins of sugar manufacturers. With this fact in consideration, sugar prices have fallen sharply after observing all-time high prices in January 2011.

But at the same time, Brazil, the world's largest sugarcane producer, has observed a dry weather and low production of sugarcane. So the sugar prices would not trade below Rs 28-30/kg (cost of production is at Rs 26/kg).

This should confirm sustainable operating margin of Rs 2-3/kg for sugar sales for Balrampur Chini. And since BCL is an integrated player with ethanol and power businesses, it should be in comfortable position with these margins and revenues from ethanol/power businesses.

Stock Financials
Net sales of Balrampur Chini has grown at compounded annual growth rate (CAGR) of 12% from 2006-07 onwards and has reach to Rs 1,950 crore in September 2010. Net profit was Rs.36 crores in the last fiscal, which is a lot lesser than Rs.226 crores in previous year. This was mainly due to fall in commodity prices and higher cost of sourcing cane which is basic raw material for sugar. Sugar price is trading at Rs.30/kg due to increased supply in the markets.

Concerns
Balrampur Chini earns half of the operational profits from the sugar business. Declining sugar prices due to upward revision in sugar production could result in lower earnings. If government decides to revise sugarcane price in upward direction, which is fixed at Rs 20/kg as on today, would certainly put pressure on operating margins of company.

Stock Valuations
Sugar prices are at very low levels compared to the prices for same period last year. Sugar prices are a lot volatile and company has posted average earnings with EPS of Rs.0.90 for December 2010 quarter. Annualized EPS could not be more than 3. At the current stock price of Rs.69, the stock trades 23 times this EPS. At this P/E, Balrampur chini stock looks very expensive especially due to average/NIL growth prospects. It is advisable to not to buy stocks of Balrampur chini for medium term unless sugar/cane scenario changes majorly.

More mid cap stocks discussed:
Power sector stock to buy – Kalpataru Power Transmissions
Mid cap stock analysis - Deepak fertiliser

Power sector stock to buy – Kalpataru Power Transmissions

2011-03-05T09:50:00.004+05:30

Power sector is a key sector to help Indian economy grow further. It is one of the sector in which big power projects are being planned for execution in next few years. Kalpataru power transmissions is attractively valued at current levels and has good prospects to benefit from growth in power sector which makes it a stock to buy.

Kalpataru Power Transmission (KPT) is a more than 30 years old company founded by Mofatraj P. Munot. The company has four operating business segments: power transmission and distribution, infrastructure, biomass energy and real estate.

Transmission & distribution division (T&D).
This division makes up 75 per cent of company’s revenue and profits and so is the key focus area. Company is an engineering, procurement and construction (EPC) contractor and sets up transmission networks and substations projects on a partnership basis. Power Grid Corp. of India Ltd (PGCIL) plans to float tenders worth around Rs.64,000 crores for nine high-capacity corridors during 12th five year commission. This will surely create huge opportunity for company’s EPC division. The company’s largest international contract from MEW, Kuwait is on good progress track and on time for scheduled completion. It has some repeat international orders in this year.

Infrastructure.
Infrastructure division had earned revenues of Rs.172 crores in FY09. In FY10 this has more than doubled to Rs.361 crores. Infrastructure division contributed almost one fourth of FY10’s profits.

Infrastructure division completed and commissioned the Vijaipur-Dadri Pipeline Project of Gail India and the Chennai-Bangalore Pipeline Project of Indian Oil Corporation in FY10. Company has successfully completed laying down 1,800 kilometers of pipeline. It has captured its first order for setting up a gas distribution network for Gail Gas in the city of Kota. This experience & expertise will enable company to bid and fetch more such orders in similar projects.

Bio-mass energy division.
It is a small division. Two power generation plants situated in Rajasthan generate 7.8 MW each. They generate power from non-conventional energy resources such as agricultural waste. This division earned Rs.50.8 crore in revenue in FY10, which was 6.25 per cent higher than its revenue of Rs.47.6 crore in FY09.

Real estate division. Hardly makes any contribution to the company’s profits.

Future Prospects
The company’s biggest strength is in its project portfolio including BOT road projects. The Indian government’s policy of inviting private sector into the power generation and distribution sector is opening up significant opportunities. The company focuses on maintaining good profit margins in whatever projects it bids for and takes up for development. This makes it one of the players that have a consistently high operating profit margin.

Stock valuation
If we look at past 5 year performance of company, sales growth (CAGR) stood at 36%. Compounded annual profit after tax growth is at 43% and EPS growth is at 26%. At current stock price of Rs.120, stock trades at P/E of 10 with EPS of 12 in 2010. This puts PEG (Price to earnings growth) ratio at less than 0.4. Stock of Kalpataru power transmission is available at very attractive valuations. Looking at growth prospects in power sector, you may buy stocks of Kalpataru power in your long term investment portfolio (3-years).

Stock analysis of Sesa goa after budget 2011

2011-03-02T23:16:00.001+05:30

Sesa goa is a mid cap stock that many people follow and trade in. As Union Budget 2011-12 proposed raising the export duty on iron ore, the stock was dumped by investors. Here is the stock analysis of Sesa goa post budget.

Union Budget 2011-12 has proposed raising the export duty on iron ore to ad valorem 20% on lumps and fines. At present , lumps are taxed at 15% and fines at 5% on ad valorem basis.

Higher export duty would impact profitability:
Sesa Goa generates most of its net sales from iron ore exports (90%). Budget proposal would definitely increase company’s export duty expenses. Comparing this to earlier numbers, esport duty expenses for Sesa Goa would be Rs.1,903cr for FY2012. EBITDA estimates for FY2012 would be at Rs.4,008cr.

Stock valuation:
Sesa Goa’s iron ore sales volume growth is expected to remain at same levels in FY2012. Spot iron ore prices are rising steeply at present due to improved demand from China. It is safer to assume that the rising export duty expenses would be offset by rising iron ore prices. There are a few concerns in medium term like lumpiness in iron ore demand, big swings in the iron ore prices, logistical issues in Goa and stricter regulations being imposed by Indian government to protect country’s natural resources.

At current price of Rs. 270, Sesa Goa stock trades at 1.8x FY2011 and 1.5x FY2012 estimates on P/BV basis. With estimated EPS of Rs.42 in FY2011 and Rs. 34 in FY 2012, the stock trades at forward P/E of 6.4 and 7.9 for FY11 and 12. If you value it at P/E of 10 which is reasonable, target price could be Rs.300-320 within one year time period. One may buy stocks of Sesa goa at dips for medium term.

Mid cap stock analysis - Deepak fertiliser

2011-02-22T08:38:00.001+05:30

Mid cap stock analysis report of Deepak Fertilizer. Market leading positions for products it manufactures makes it a mid cap stock to buy among fertilizer sector stocks.

Deepak Fertilizers and Petrochemicals Corporation Limited operates mainly in 3 segments: chemicals, agri-business & specialty retailing. Major products of company are methanol, various grades of nitric acid, iso propyl alcohol, carbon dioxide and hydrogen. Company also have explosives division which manufactures low density ammonium nitrate, used to make ammonium nitrate-fuel oil (ANFO), blasting agents and emulsified ANFO (HANFO).

Agri-business division of Deepak fertilizer manufactures 23:23:0 prilled nitrophosphate fertilizer, the brand name is Mahadhan. Company has dealer network of more than 1000 dealers to market Mahadhan. The Company subsidiaries include, Smartchem Technologies Ltd., Deepak Nitrochem Pty. Ltd. and Deepak Mining Services Pvt. Ltd.

Deepak fertilizer is a leading manufacturer of products mentioned above and enjoys good market share in India for these products. Technical Ammonium Nitrate (TAN) is the main product which enjoys 30% share with leadership in market. Company’s another product, Iso Propyl Alcohol (IPA), has 75% market share in India. It is used in industries such as pharma, agro-chem, organic chemicals, imaging chemicals, healthcare sector and paints.

Recently Deepak fertilizers has announced their plans to setup a plant with investment of Rs. 100 crores. This expansion will ramp up its production capacity and further strengthen its revenues.

Stock valuation
Estimated revenues for company in FY 11 are at Rs. 1545 crores, a 16% growth over previous year. Similarly, estimated revenues for FY 12 are at Rs.2082 crores, a jump of 35% over FY 11 estimates. This would take EPS at Rs.25 in FY 12. So at current stock price, Rs.160, the stock trades at forward P/E (FY 12) of only 6.4 which makes it a good bargain.

One may buy stocks of Deepak fertilizer in 1-2 years investment portfolio for target price of Rs.200. Any dips in current price can be considered as a good opportunity to invest in it.

Buy stocks of Exide Industries at every dip in its stock price

2011-02-17T20:06:00.003+05:30

Why should you buy stocks of Exide Industries at every dip in its stock price? Let’s have a look at this mid cap stock, it’s stock valuations and why should you invest in it.

This is another stock in my list of "Stocks to buy in 2011". Exide Industries Limited (EIL) is undisputed the number one battery manufacturer in India. And do you know Exide is one of the top five battery manufacturers in world? Yes it is.

If you own an automatic vehicle (Truck, car or bike) in India, checkout your vehicle’s battery and there are high chances that you would see the name “Exide” on it. I am sure don’t need to open it, you would probably know it. Overall Indian battery market is more than Rs.10,000 crores. It has grown in past 5 years (2005-2010) at 30%. Average profits for battery industry grew at 50% every year, thanks to ever growing demand from automotive sector in India.

Target markets for battery industry are mainly divided into two segments, automotive and industrial. Automotive sector (cars/trucks/bikes etc.) is expected to grow at 20%. The same is for industrial segment. Leading stock broker firm, Angel stock broking has mentioned in it’s industry report that revenues for battery industry are expected to grow at 19.7% compounded (CAGR) for next 3 years. In automobile, new cars as well as battery replacement for old cars is what drives the volume for batteries. In industrial segment, it is railways and power sector. All the entities mentioned here are on growth curve and not expected to slow down their growth for sure.

Exide industries has very strong distribution network with presence at 206 locations and they are expected to grow to 250 by mid 2012. Company has plans to make it’s presence in small 3-tier cities where battery market is dominated by unbranded and unorganized sector batteries.

Being market leader, company has full control and power for pricing it’s products. Company revises it’s prices whenever need arises which helps maintaining it profit margins.

Company has a plan to invest Rs.400 crores and expand the capacity for growing two wheeler and 4 wheeler markets. Exide has already launched batteries for electric bikes. It is researching and developing batteries for electric and hybrid cars which is going to be next big growing sector looking at ever rising petrol and diesel prices. So huge growth ahead if Exide comes up with good products for this market.

A few concerns
Last two years have been slow due to recession but economies are recovering and India is growing at pretty good rates now. Many new competitors are entering this segment, recent example being Tatas. Another concern is competition from cheap imports from China. These could take away some market share from this industry leader. Amara Raja is making it’s moves fast to capture more and more market share.

Stock valuation
One of the best part I liked about Exide is that it is a zero debt company. It has very good cash flow which would help it expand without any debt. Company has observed high returns on networth (RONW) ratio which is good. At current ock price, stock trades at P/E ratio of 17.40. Company’s EPS has grown at more than 40% CAGR (Compounded Annual Growth Rate). The Price to Earnings growth ratio stands at 0.6. All this makes Exide a high growth and value stock to buy. One may buy stocks of Exide at every dip in it’s stock price for long term investment.