Hyderabad Industries is a C K Birla Group company. It is into the business of producing building products, engineering goods and industrial products and is a market leader in its segments.
HIL markets its product AC and fibre cement sheets under the well-known brand “Charminar”. The total capacity of the cement sheet is 8.55 lakh tpa, prefab building panels at 4.60 lakh tpa, prefabricated autoclaved capacity at 3.05 lakh tpa and thermal insulation capacity is 6,000 tpa.
The commercial production of sheeting line 2 in Uttar Pradesh has started w.e.f. 09 February 2012. HIL is also the largest manufacturer of calcium silicate, insulation blocks, pipe sections and jointing for gasketing, thereby meeting the critical needs of the fertilizer, engineering & chemical industries. Company also makes aerocon prefab panels, autoclaved aerated concrete blocks, which find applications in the construction of buildings, malls, shopping complexes and office partitioning etc.
HIL has a strong & extensive distribution network with nearly 8000 sales points spread across the country which is serviced by its 45 depots across country.
The stock trades at current stock price of Rs.358 at P/E of 4.4 FY12. With expected EPS of 93.5 in FY13E, stock trades at P/E of 3.83 and at P/E of 3.25 with 110 EPS FY14E. With these estimates, stock price target will be Rs. 480 in medium term.
At current stock price of Rs. 358, dividend yield is also very attractive at 4.47%. It's book value is 474 making it a stock available below book value and a good dividend yielding value stock to buy.
Showing posts with label Realty Infrastructure. Show all posts
Showing posts with label Realty Infrastructure. Show all posts
Small Cap Stock To Buy - KNR Constructions
KNR Constructions is an attractive small cap stock from infrastructure sector. The company caters to construction of roads, bridges and water infrastructure businesses.
Low debt and strong execution skills are KNR Constructions (KNRC) key positives as part investment rationale and makes it a good stock to buy from infrastructure space. The company's current order book stands at Rs.2,800 crore. It is 2.7 times its FY11 revenues.
Stock Analysis:
Company's debt-to-equity is 0.48 as in march 2011 and it is one of the lowest ratio among its peers that shows it has the least leveraged balance sheet. Company follows conservative approach for bidding cautiously and selectively for new projects. This conservative approach has helped company when most infrastructure companies have reported huge losses. KNR Constructions gave a decent performance even in troubled times.
In the December quarter, the company had posted a PAT of Rs.16.1 crores compared to Rs.5.5 crores in the same period an year ago. In present high interest rate regime, KNR Constructions with a low leverage would be insulated and benefitted compared to other infrastructure businesses.
KNRC have integrated it's businesses backward for construction activities. This helps company in maintaining a healthy operating margin. KNRC has captive quarrying mines and crusher units that reduces operating expenses for it. The major road developers such as GMR Infrastructure, Sadbhav Engineering and Patel Engineering are among company's clients.
It is expected that significant number of road projects would be awarded over the next few years as infrastructure sector is the sector that needs big improvement in India, KNRC with its execution skills and strong balance sheet will be in a comfortable position to grab at least a few projects. Growth of company seems to be comfortable.
Stock Valuations
At current stock price of Rs.137, the stock trades at a price-to-earnings multiple of 5.85. The stock had a good run since January 2012. Considering above discussed positives for the company, the stock has some potential to run up further. if it corrects from current levels to Rs.100 levels, it is definitely a good stock to buy for medium term.
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How to buy stocks with multibagger potential
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Stock to buy - Tech Mahindra
Goodyear India - Stock To Buy from Evergreen Industry
Infotech Enterprises - Stock Analysis and Recommendation
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Low debt and strong execution skills are KNR Constructions (KNRC) key positives as part investment rationale and makes it a good stock to buy from infrastructure space. The company's current order book stands at Rs.2,800 crore. It is 2.7 times its FY11 revenues.
Stock Analysis:
Company's debt-to-equity is 0.48 as in march 2011 and it is one of the lowest ratio among its peers that shows it has the least leveraged balance sheet. Company follows conservative approach for bidding cautiously and selectively for new projects. This conservative approach has helped company when most infrastructure companies have reported huge losses. KNR Constructions gave a decent performance even in troubled times.
In the December quarter, the company had posted a PAT of Rs.16.1 crores compared to Rs.5.5 crores in the same period an year ago. In present high interest rate regime, KNR Constructions with a low leverage would be insulated and benefitted compared to other infrastructure businesses.
KNRC have integrated it's businesses backward for construction activities. This helps company in maintaining a healthy operating margin. KNRC has captive quarrying mines and crusher units that reduces operating expenses for it. The major road developers such as GMR Infrastructure, Sadbhav Engineering and Patel Engineering are among company's clients.
It is expected that significant number of road projects would be awarded over the next few years as infrastructure sector is the sector that needs big improvement in India, KNRC with its execution skills and strong balance sheet will be in a comfortable position to grab at least a few projects. Growth of company seems to be comfortable.
Stock Valuations
At current stock price of Rs.137, the stock trades at a price-to-earnings multiple of 5.85. The stock had a good run since January 2012. Considering above discussed positives for the company, the stock has some potential to run up further. if it corrects from current levels to Rs.100 levels, it is definitely a good stock to buy for medium term.
You may want to read:
IPO News - Tribhovandas Bhimji Zaveri launching IPO
How to buy stocks with multibagger potential
Stock Research Report - Larsen & Toubro (L&T)
Stock to buy - Tech Mahindra
Goodyear India - Stock To Buy from Evergreen Industry
Infotech Enterprises - Stock Analysis and Recommendation
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
DLF Stock is worth only Rs.100 - Says Veritas
If you have to believe Canada-based independent equity research firm Veritas, DLF stock is only worth Rs.100. The stock trades at Rs.214.65 in BSE as on Thursday.
Veritas Investment Research has said this in its equity research report titled 'A Crumbling Edifice' and also has raised doubts about the company's disclosed book equity and asset base.
The research report, authored by Research Head Neeraj Monga and Analyst Nitin Mangal at Veritas, says,"DLF has undertaken questionable related-party transactions to boost the value of DAL (DLF Assets) prior to its acquisition by DLF, thereby subverting the interests of minority shareholders via a higher purchase price for DAL."
Read the entire detailed news article on Economic Times here.
Check another old warning about real estate sector stocks I discussed in 2010 here: Realty Stocks, Debt And Investors
You may want to read:
Goodyear India - Stock To Buy from Evergreen Industry
Infotech Enterprises - Stock Analysis and Recommendation
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Veritas Investment Research has said this in its equity research report titled 'A Crumbling Edifice' and also has raised doubts about the company's disclosed book equity and asset base.
The research report, authored by Research Head Neeraj Monga and Analyst Nitin Mangal at Veritas, says,"DLF has undertaken questionable related-party transactions to boost the value of DAL (DLF Assets) prior to its acquisition by DLF, thereby subverting the interests of minority shareholders via a higher purchase price for DAL."
Read the entire detailed news article on Economic Times here.
Check another old warning about real estate sector stocks I discussed in 2010 here: Realty Stocks, Debt And Investors
You may want to read:
Goodyear India - Stock To Buy from Evergreen Industry
Infotech Enterprises - Stock Analysis and Recommendation
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
IRB Infra – Stock Analysis and Result Update
IRB Infra is one of the good stocks to buy from Infrastructure space. Let’s take a look at few facts about recent financial result that could make investment in this Infrastructure stock fruitful to investors.
Net result for IRB infra was definitely better that stock analyst’s expectations in market, but this was mainly due to lower depreciation number put on Surat – Dahisar highway. This adjustment made the BOT earnings in line with street’s expectations.
Construction earnings of company are better than expected numbers and this is due to higher EBITDA margins.
For 3QFY12, IRB Infra has reported 11.5% yoy revenue growth but at the same time, PAT has declined 1.2% yoy. National Highway Authority of India (NHAI) is expected to award road construction orders for 7300 kilometers of road in FY12. Similar orders are expected in FY13 as well. IRB Infra is considered to be one of the likely contenders for these orders and it is highly likely that company will achieve it’s annual target of orders worth Rs.5000 crores despite competition being high in this segment.
The stock has run up quite a bit from Rs.125 to Rs.176 in last one month itself. Longer term stock price target for IRB Infra could be Rs.212 to Rs.215 but do not euch to buy stocks of this counter right now. Wait for some price correction and then invest in it for one year time period for above mentioned target price. Price range of around Rs.140 would be ideal for buying stocks of IRB Infra if the stock corrects to those levels.
You may like to read:
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories
Buy Stocks of Bank of Baroda
Union Bank – Stock Analysis with Target Stock Price
Net result for IRB infra was definitely better that stock analyst’s expectations in market, but this was mainly due to lower depreciation number put on Surat – Dahisar highway. This adjustment made the BOT earnings in line with street’s expectations.
Construction earnings of company are better than expected numbers and this is due to higher EBITDA margins.
For 3QFY12, IRB Infra has reported 11.5% yoy revenue growth but at the same time, PAT has declined 1.2% yoy. National Highway Authority of India (NHAI) is expected to award road construction orders for 7300 kilometers of road in FY12. Similar orders are expected in FY13 as well. IRB Infra is considered to be one of the likely contenders for these orders and it is highly likely that company will achieve it’s annual target of orders worth Rs.5000 crores despite competition being high in this segment.
The stock has run up quite a bit from Rs.125 to Rs.176 in last one month itself. Longer term stock price target for IRB Infra could be Rs.212 to Rs.215 but do not euch to buy stocks of this counter right now. Wait for some price correction and then invest in it for one year time period for above mentioned target price. Price range of around Rs.140 would be ideal for buying stocks of IRB Infra if the stock corrects to those levels.
You may like to read:
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories
Buy Stocks of Bank of Baroda
Union Bank – Stock Analysis with Target Stock Price
HCC - Stock Report and 3QFY12 Result Update
Stock report based on 3Q FY12 result update of HCC. Checkout if you should buy stocks of HCC or not.
For 3QFY2012, HCC has reported poor set of results with, revenue and EBITDAM coming in line with stock analyst's estimates but earnings have plunged on account of expected future losses and cost revisions to the tune of Rs.166 cr. These provisions can not be exceptional in nature, as said by the company and pertain to normal course of business.
The total outstanding order book stands at Rs.16,240 cr (excluding L1 orders of Rs. 1,574 cr) with order inflow of ~ Rs.840 cr in the quarter. There are concerns like slowdown in order inflow, high debt and stretched working capital which does not excites on stock.
Provisions leading to huge losses:
On top line HCC’s revenues declined by 6.2% yoy to Rs. 946.0cr (Rs.1,009cr) against street's estimated Rs. 982.0 cr due to slowdown in order inflow and execution bottlenecks. EBITDAM came in at 11.7% (12.6%), a dip of 90bp yoy and marginally lower than street's estimated of 11.9%.
HCC has reported a loss of Rs. 130.4 cr vs. profit of Rs. 7.9cr in 3QFY11, against our estimate of loss of Rs. 25.5 cr owing to decline in revenue, EBITDA margin and provisioning of Rs. 166 cr. Interest cost came at Rs. 104.3cr, a decline of 39.4%/2.9% on yoy/qoq basis.
Outlook and valuation:
As per stock broker's research reports, they value on SOTP basis with a fair value of Rs. 32/share by assigning 6x FY2013E earnings (standalone). The company’s real estate venture has been valued on NAV basis and its BOT assets have been valued on FCFE basis. The fair value of stock implies an upside of at least 30% from current levels, but referring to concerns mentioned above, it is better to not to invest any fresh money in HCC stock.
L&T, Sadbhav Engineering and IVRCL infrastructure look like better stocks to buy than HCC.
You may like to read:
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories
Buy Stocks of Bank of Baroda
IRB Infra – Stock Analysis and Result Update
Union Bank – Stock Analysis with Target Stock Price
For 3QFY2012, HCC has reported poor set of results with, revenue and EBITDAM coming in line with stock analyst's estimates but earnings have plunged on account of expected future losses and cost revisions to the tune of Rs.166 cr. These provisions can not be exceptional in nature, as said by the company and pertain to normal course of business.
The total outstanding order book stands at Rs.16,240 cr (excluding L1 orders of Rs. 1,574 cr) with order inflow of ~ Rs.840 cr in the quarter. There are concerns like slowdown in order inflow, high debt and stretched working capital which does not excites on stock.
Provisions leading to huge losses:
On top line HCC’s revenues declined by 6.2% yoy to Rs. 946.0cr (Rs.1,009cr) against street's estimated Rs. 982.0 cr due to slowdown in order inflow and execution bottlenecks. EBITDAM came in at 11.7% (12.6%), a dip of 90bp yoy and marginally lower than street's estimated of 11.9%.
HCC has reported a loss of Rs. 130.4 cr vs. profit of Rs. 7.9cr in 3QFY11, against our estimate of loss of Rs. 25.5 cr owing to decline in revenue, EBITDA margin and provisioning of Rs. 166 cr. Interest cost came at Rs. 104.3cr, a decline of 39.4%/2.9% on yoy/qoq basis.
Outlook and valuation:
As per stock broker's research reports, they value on SOTP basis with a fair value of Rs. 32/share by assigning 6x FY2013E earnings (standalone). The company’s real estate venture has been valued on NAV basis and its BOT assets have been valued on FCFE basis. The fair value of stock implies an upside of at least 30% from current levels, but referring to concerns mentioned above, it is better to not to invest any fresh money in HCC stock.
L&T, Sadbhav Engineering and IVRCL infrastructure look like better stocks to buy than HCC.
You may like to read:
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories
Buy Stocks of Bank of Baroda
IRB Infra – Stock Analysis and Result Update
Union Bank – Stock Analysis with Target Stock Price
Buy Shares of Sobha Developers for one year
One of the good stocks to buy in construction space is Sobha Developers. Investment research team from one of the stock broker firm, Geojit BNP Paribas, has recommended investing in stocks of Sobha Developers for one year with target stock price.
The investment rationale behind this stock recommendation is:
Stocks To Buy Now in 2012 - Noida Toll Bridge
Concerns
If company slows down the execution of it’s projects and also fails to reduce the debt burden as per guidance, it could dent the profits and guidance on numbers provided by company.
Stock Financials
At CMP of Rs. 208.5, the stock trades at P/E of 12.7 with dividend yield being 1.44%. Book value of the stock is Rs. 189.33 which makes Price to Book value ratio of 1.1. This shows that Sobha developers is available at good stock valuations.
Based on above facts and details, the stock broker firm has advised to buy stocks of Sobha developers for one year with target stock price of Rs.275.
The investment rationale behind this stock recommendation is:
- The company has sold 0.82 million sq ft in 3QFY12, a growth of 16% yoy but 12.5% lower qoq. This shows decline in quarterly sales but it was due to the lack of significant new project launches.
- Company had provided guidance of 3-3.5 Million sq. feet of sale for FY12. It has sold 2.42 million sq ft in first 9 months of FY12 which is an increase of 14% yoy. The company looks like is on track with it’s guidance for sales.
- The revenue guidance out of guided sales were expected to be Rs.1500 crore. The company already had sold worth of Rs.1240 crore by December.
- Average sales price has increased 2% qoq for company except in National Capital Region. At the same time, sales price has increased 16.5% yoy.
- The company has sold 1.02 million sq ft in the newer projects launched in 2HFY12. It is around 31% of these projects and about 45% of its 3Q sales were from the projects launched in 2HFY12.
- The company expects to launch around 0.9 million sq ft in Chennai in 4QFY12.
- Also, the company has provided a guidance for debt reduction of Rs.350 crore in this fiscal year. Debt reduction can be considered as key catalyst for the stock in near future.
Stocks To Buy Now in 2012 - Noida Toll Bridge
Concerns
If company slows down the execution of it’s projects and also fails to reduce the debt burden as per guidance, it could dent the profits and guidance on numbers provided by company.
Stock Financials
At CMP of Rs. 208.5, the stock trades at P/E of 12.7 with dividend yield being 1.44%. Book value of the stock is Rs. 189.33 which makes Price to Book value ratio of 1.1. This shows that Sobha developers is available at good stock valuations.
Based on above facts and details, the stock broker firm has advised to buy stocks of Sobha developers for one year with target stock price of Rs.275.
IRB Infra - Good Infrastructure Stock To Buy
IRB Infra is one of the good stocks to buy from Infrastructure space. The company has just reported numbers for 1QFY12. Here is results analysis and stock outlook with recommendation post this result.
IRB Infra has posted better than expected numbers for 1QFY12. Company reported 1Q revenue at Rs.800 crore, which increased 50% yoy. EBITDA increased 22% yoy to Rs.330 crore. Net profit for company increased 14% yoy to Rs.130 crore. All these numbers are well above market expectations.
This better than expected strong performance was led by the construction division of company. Construction revenue has increased 81% to Rs. 600 crore with better margins.
EBITDA margin of the construction division is at 25.9%. This has been possible due to better margin from Surat – Dahisar project.
Toll revenue has increased 14% yoy to Rs.230 crore, mainly due to 18% toll hike in Mumbai – Pune expressway. Surat – Dahisar project reported 6.8% increase in toll revenue to Rs.94.2 crore, Bharuch – Surat project reported 12.8% yoy increase in toll revenue to Rs.33.6 crore. Tumkur – Chitradurga project has become operational since June and also contributed Rs.11.4 crore to toll revenue.
On the negative side, interest expenses were 33% higher than market estimates which has led to 33% miss in tolling PAT.
In Infrastructure space, four major projects worth of Rs.9300 crore are coming up for bidding in the near term. It includes Rs.5400 crore Kishangarh – Ahmedabad project and Rs.1900 crore Jabalpur –Rewa project. Any of these project win will be a major catalyst for the stock price.
IRB Infra is one of the good stocks to buy in infrastructure due to its execution capabilities and their relatively comfortable access to finance.
One may buy stocks of IRB infra for a target price of Rs.250 for medium term investment for an year’s time.
IRB Infra has posted better than expected numbers for 1QFY12. Company reported 1Q revenue at Rs.800 crore, which increased 50% yoy. EBITDA increased 22% yoy to Rs.330 crore. Net profit for company increased 14% yoy to Rs.130 crore. All these numbers are well above market expectations.
This better than expected strong performance was led by the construction division of company. Construction revenue has increased 81% to Rs. 600 crore with better margins.
EBITDA margin of the construction division is at 25.9%. This has been possible due to better margin from Surat – Dahisar project.
Toll revenue has increased 14% yoy to Rs.230 crore, mainly due to 18% toll hike in Mumbai – Pune expressway. Surat – Dahisar project reported 6.8% increase in toll revenue to Rs.94.2 crore, Bharuch – Surat project reported 12.8% yoy increase in toll revenue to Rs.33.6 crore. Tumkur – Chitradurga project has become operational since June and also contributed Rs.11.4 crore to toll revenue.
On the negative side, interest expenses were 33% higher than market estimates which has led to 33% miss in tolling PAT.
In Infrastructure space, four major projects worth of Rs.9300 crore are coming up for bidding in the near term. It includes Rs.5400 crore Kishangarh – Ahmedabad project and Rs.1900 crore Jabalpur –Rewa project. Any of these project win will be a major catalyst for the stock price.
IRB Infra is one of the good stocks to buy in infrastructure due to its execution capabilities and their relatively comfortable access to finance.
One may buy stocks of IRB infra for a target price of Rs.250 for medium term investment for an year’s time.
Mid Cap Stock To Buy - RIIL
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?
Real Estate Stocks - To Buy Or Not Now?
With CBI taking action against guilty real estate companies, tainted banks and middle men for arranging loans for these companies, finance minister directing banks on NPA quality and the music real estate firms are facing in bribery scam, should you buy stocks of these companies since almost all real estate stocks are correcting significantly in ongoing market turmoil?
It was a big shock to real estate companies, banks and of course stock markets when CBI raided few banks and financial service providers and arrested key people like CEO, CMD and MD's from these banks and institutions for bribery cases. The entire real estate industry, banking space and overall India was shaken like 10 Richter scale earthquake has hit India.
Indian stock markets were shaken from top to bottom loosing all the steam when markets were trying to sustain the 20,000 levels. At one point of time, markets went below 19,000 levels today but recovered later.
Almost all real estate stocks have corrected more than 25% in last 2-3 days. So should you rush to buy stocks of real estate companies?
Indian stock markets have overreacted to this situation, which is a bribery case. These things were always there since long but it is just that this time it has come in light. While approving big loan amounts, bank officials are always bribed/pleased by loan seekers. These things are behind curtains. Loans are not going to go anywhere unless some real estate company fails to repay it. BUT ... yes there is a but ... banks would become overcautious now while sanctioning loans to real estate developers. This is going to create a liquidity crunch in market and this is going to pinch all real estate developers.
Real estate sector is well known for worst corporate governance and perhaps this is one of the most corrupted businesses running around. So whatever is happening is not new. Since it is a bribery case, hope so, guilty people would be punished and everything should be fine unless money has not been diverted to non existing participants (duplicate companies/stock market players etc.).
Real estate developers keep huge inventory (flats/properties) at their disposal which they want to sell at high rates. All the property prices in India are artificially maintained at higher levels by all property developers. They don't get entire cost of their product(flats/properties in this case) unless they actually build and deliver it to consumers. So where do they get money to construct properties till they deliver? Banks is the answer. Real estate developers get loans from banks for almost each project they plan for. And then they manage to not to lower the property prices even if they add up units to their inventories.
This is going to be difficult now. Real estate developers will have to get rid of their inventories (unsold flats/properties) since they would face difficulties in getting cash from banks. And you know what happens when everyone wants to sell in markets. Market gets oversupplied resulting in price crash. Property prices are going to correct which means real estate developers would get lesser money resulting in lesser revenues and even lesser profits.
Read more: Realty Stocks, Debt And Investors
Stock markets look only at topline and bottomline and for real estate companies, these two lines are definitely going to be damn difficult to maintain. This would result in unstable stock prices and growth in near future.
Conclusion: Let this turmoil settle, take a re-look at real estate stocks on stock to stock basis and then decide whether you should buy stocks of real estate companies in this correction or not.
If you have some good stocks researched, it could be a good opportunity to buy stocks of those companies since markets are in correction mode. Real estate stocks are exception to this suggestion.
It was a big shock to real estate companies, banks and of course stock markets when CBI raided few banks and financial service providers and arrested key people like CEO, CMD and MD's from these banks and institutions for bribery cases. The entire real estate industry, banking space and overall India was shaken like 10 Richter scale earthquake has hit India.
Indian stock markets were shaken from top to bottom loosing all the steam when markets were trying to sustain the 20,000 levels. At one point of time, markets went below 19,000 levels today but recovered later.
Almost all real estate stocks have corrected more than 25% in last 2-3 days. So should you rush to buy stocks of real estate companies?
Indian stock markets have overreacted to this situation, which is a bribery case. These things were always there since long but it is just that this time it has come in light. While approving big loan amounts, bank officials are always bribed/pleased by loan seekers. These things are behind curtains. Loans are not going to go anywhere unless some real estate company fails to repay it. BUT ... yes there is a but ... banks would become overcautious now while sanctioning loans to real estate developers. This is going to create a liquidity crunch in market and this is going to pinch all real estate developers.
Real estate sector is well known for worst corporate governance and perhaps this is one of the most corrupted businesses running around. So whatever is happening is not new. Since it is a bribery case, hope so, guilty people would be punished and everything should be fine unless money has not been diverted to non existing participants (duplicate companies/stock market players etc.).
Real estate developers keep huge inventory (flats/properties) at their disposal which they want to sell at high rates. All the property prices in India are artificially maintained at higher levels by all property developers. They don't get entire cost of their product(flats/properties in this case) unless they actually build and deliver it to consumers. So where do they get money to construct properties till they deliver? Banks is the answer. Real estate developers get loans from banks for almost each project they plan for. And then they manage to not to lower the property prices even if they add up units to their inventories.
This is going to be difficult now. Real estate developers will have to get rid of their inventories (unsold flats/properties) since they would face difficulties in getting cash from banks. And you know what happens when everyone wants to sell in markets. Market gets oversupplied resulting in price crash. Property prices are going to correct which means real estate developers would get lesser money resulting in lesser revenues and even lesser profits.
Read more: Realty Stocks, Debt And Investors
Stock markets look only at topline and bottomline and for real estate companies, these two lines are definitely going to be damn difficult to maintain. This would result in unstable stock prices and growth in near future.
Conclusion: Let this turmoil settle, take a re-look at real estate stocks on stock to stock basis and then decide whether you should buy stocks of real estate companies in this correction or not.
If you have some good stocks researched, it could be a good opportunity to buy stocks of those companies since markets are in correction mode. Real estate stocks are exception to this suggestion.
Realty Stocks, Debt And Investors
I just read a news about Realty stocks and the amount of debt they are carrying on their balance sheets. Realty companies normally carry big amount of debt for execution of real estate projects. Checkout how much debt these big real estate companies carry and what should be investor's stand on buying stocks of these companies.
Here is the amount of debt that big real estate companies in India have on their balance sheets. Economic times has published this list on 24th Nov. DLF, the biggest real estate company in India, is the leader of all, carrying more than twenty one thousand, six hundred crores of debt.
As per the news in Economic times, SEBI is worried about debt repayment ability of these real estate companies and so SEBI has told asset management companies (AMCs) to avoid exposure to real estate debt in their certain schemes. All regulators, including the RBI, are nervous about real estate, says this news.
"Also, the regulator is not satisfied with the reporting standards of most real estate companies. Balance-sheet strength, landbank valuation, authenticity of titles and project standards and execution are areas of concern for SEBI."
What does this development tells us as an individual small investor in stock markets? We need to be cautious on real estate stocks. Value investing principles talk clearly about debt and what my understanding is, if company id debt free, it has good potential to generate profits to share among shareholders. If company has a large debt, major portion of profits would go towards interest on debt and profits would be eroded, in which case, neither investors would get dividend nor stock price appreciation. Forget about such stocks being multibagger stocks and multiplying returns for their investors.
Click here to read related news in Economic Times.
Here is the amount of debt that big real estate companies in India have on their balance sheets. Economic times has published this list on 24th Nov. DLF, the biggest real estate company in India, is the leader of all, carrying more than twenty one thousand, six hundred crores of debt.
As per the news in Economic times, SEBI is worried about debt repayment ability of these real estate companies and so SEBI has told asset management companies (AMCs) to avoid exposure to real estate debt in their certain schemes. All regulators, including the RBI, are nervous about real estate, says this news.
"Also, the regulator is not satisfied with the reporting standards of most real estate companies. Balance-sheet strength, landbank valuation, authenticity of titles and project standards and execution are areas of concern for SEBI."
What does this development tells us as an individual small investor in stock markets? We need to be cautious on real estate stocks. Value investing principles talk clearly about debt and what my understanding is, if company id debt free, it has good potential to generate profits to share among shareholders. If company has a large debt, major portion of profits would go towards interest on debt and profits would be eroded, in which case, neither investors would get dividend nor stock price appreciation. Forget about such stocks being multibagger stocks and multiplying returns for their investors.
Click here to read related news in Economic Times.
Stock To Buy Now - Noida Toll Bridge Company
I had recommended to buy stocks of Noida Toll Bridge Company earlier this year as well as in year 2009 from long term perspectives. It is definitely a stock to buy now looking at the valuations it is available at.
Business: Noida Toll Bridge company was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river. The Company's principal source of revenue is from the levy of tolls on commuters on this facility.
Outlook: It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.
The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. These projects have thrown up fresh opportunities for NTBCL.
All this development could fetch huge returns for company and shareholders. Company's current valuation stands at Rs. 11 Billions. This calculates per share cost as on today at Rs. 55-60 and qualifies it as a stock to buy now.
Company has contract with NOIDA to recover the original total cost of project PLUS 20% returns on total cost of project. If in certain financial year, company can not achieve 20% returns due to lower traffic, the shortfall amount would be added to total cost of project which would form the new total cost of project as base cost for next years calculations. NTBCL’s annual report says this amount is Rs. 17 Billions. That comes at Rs. 91 per share. Although NOIDA would not pay it in cash to company, there is a provision in agreement that company has rights to operate the bridge and collect toll till company does not recovers this shortfall. Company management has estimated that it would take 70 years to recover all the shortfall of past and future!
The longevity of business is more than lifetime of a human being and that too assured one. Intrinsic value is very good which makes it a stock to buy. The assurance of income in the form of toll fees is there to remain. Company has all rights to increase toll rates in accordance with inflation rate with approval from NOIDA. Toll rate hike was not approved by NODIA due to recession in 2009, which is going to be reviewed soon by approximately 20% in near future.
Company has paid dividend of 0.50 paisa/share in 2010 which makes dividend yield at 1.5%. This should increase in future.
All in all, NOIDA Toll Bridge Company is a stock to buy now for long term. I would advice you to buy stocks of this company for at least 5 - 10 years.
P.S. I have used this bridge many times and it is truly a world class construction. I have seen the land around it and I consider it personally as one of the most prime land in Delhi and NOIDA area.
Disclaimer: I am buying stocks of NTBCL at CMP.
Business: Noida Toll Bridge company was promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to construct, operate and maintain the Delhi - Noida Bridge on a Build Own Operate Transfer (BOOT) basis. The Delhi Noida Bridge is a tolled facility connecting Noida to South Delhi across the Yamuna river. The Company's principal source of revenue is from the levy of tolls on commuters on this facility.
Outlook: It should be prudent to note that the company's operating income comprises revenues from the toll it collects and hoardings/advertisements on the routes it has developed.The outlook for growth in traffic on the Delhi Noida Bridge is very positive. Traffic levels on the Delhi Noida Bridge are expected to increase as Noida and Greater Noida experience development and population growth. In their review, Halcrow Consulting estimate that by 2021 the population of Noida and Greater Noida areas will increase by 2 million and the daily vehicle trips on the Delhi Noida Bridge will increase to 200,504.
The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. These projects have thrown up fresh opportunities for NTBCL.
All this development could fetch huge returns for company and shareholders. Company's current valuation stands at Rs. 11 Billions. This calculates per share cost as on today at Rs. 55-60 and qualifies it as a stock to buy now.
Company has contract with NOIDA to recover the original total cost of project PLUS 20% returns on total cost of project. If in certain financial year, company can not achieve 20% returns due to lower traffic, the shortfall amount would be added to total cost of project which would form the new total cost of project as base cost for next years calculations. NTBCL’s annual report says this amount is Rs. 17 Billions. That comes at Rs. 91 per share. Although NOIDA would not pay it in cash to company, there is a provision in agreement that company has rights to operate the bridge and collect toll till company does not recovers this shortfall. Company management has estimated that it would take 70 years to recover all the shortfall of past and future!
The longevity of business is more than lifetime of a human being and that too assured one. Intrinsic value is very good which makes it a stock to buy. The assurance of income in the form of toll fees is there to remain. Company has all rights to increase toll rates in accordance with inflation rate with approval from NOIDA. Toll rate hike was not approved by NODIA due to recession in 2009, which is going to be reviewed soon by approximately 20% in near future.
Company has paid dividend of 0.50 paisa/share in 2010 which makes dividend yield at 1.5%. This should increase in future.
All in all, NOIDA Toll Bridge Company is a stock to buy now for long term. I would advice you to buy stocks of this company for at least 5 - 10 years.
P.S. I have used this bridge many times and it is truly a world class construction. I have seen the land around it and I consider it personally as one of the most prime land in Delhi and NOIDA area.
Disclaimer: I am buying stocks of NTBCL at CMP.
Lavasa Corporation IPO - SEBI Clears Rs 2000 Cr IPO
Lavasa city developer Lavasa Corporation has received SEBI clearance for Rs 2,000 crore initial public offering (IPO).
Lavasa Corporation is Hindustan Construction Company's arm formed to develop Lavasa city.
HCC Real Estate (HREL), a 100% subsidiary of Hindustan Construction Company HCC holds 64.99% stake in Lavasa. Avantha Realty Limited and Venkateshwara Hatcheries Private Limited hold 16.25% & 12.79% stake in Lavasa.
ICICI Securities Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited and Axis Bank Limited are the book running lead managers to the issue.
Lavasa Corporation is Hindustan Construction Company's arm formed to develop Lavasa city.
HCC Real Estate (HREL), a 100% subsidiary of Hindustan Construction Company HCC holds 64.99% stake in Lavasa. Avantha Realty Limited and Venkateshwara Hatcheries Private Limited hold 16.25% & 12.79% stake in Lavasa.ICICI Securities Limited, Kotak Mahindra Capital Company Limited, Morgan Stanley India Company Private Limited and Axis Bank Limited are the book running lead managers to the issue.
Stock report : Jaiprakash Associates - a big conglomerate in making
This stock report on Jaiprakash Associates was requested by long time reader and follower of Indian Stocks News, Mr. Janak Soni. He has sent me a small list of large cap stocks he wants to invest in for 2 - 3 years time frame. I am going to write on each of them one by one.
The first stock report from his list was on Punj Lloyd.
The Jaypee Group is a 27,700 crore market cap diversified infrastructural industrial conglomerate. It operates through its various subsidiaries in different business segments.
Jaiprakash Power Ventures Limited (JPVL)
The company with its operational power plants - 300 MW Baspa-II (Himachal Pradesh) and 400 MW Vishnuprayag (Uttarakhand) is India’s largest Private sector Hydropower producer and is on its way to be an integrated power producer with expansion in Thermal & Power Transmission.
www.jppowerventures.com
Jaypee Karcham Hydro Corporation Limited (JKHCL)
The Government of Himachal Pradesh again invited the group for the Karcham Wangtoo a 1000 MW project. The group formulated JKHCL for this project. Still under execution, the project is to commence its operations in the year 2011. View details
Jaypee Arunachal Power Limited
The company is setting up two hydropower projects - Lower Siang Project (2700 MW) and the Hirong Project (500 MW) in Joint Venture with the Government of Arunachal Pradesh.
Bina Power Supply Co. Limited
BPSCL shall set up a 1250 MW (two phase of 625 MW each) coal fired Thermal Power Plant at Bina in the State of Madhya Pradesh.
Jaypee Power Grid Ltd.(JPL)
JPL has been formed for execution of the transmission system between Wangtoo in Kinnaur district of Himachal Pradesh & Abdullapur in Yamuna Nagar district of Haryana for evacuation of 1000 MW power from Karcham Wangtoo HEP in Himachal Pradesh.
www.jaypeepowergrid.com
Bhilai Jaypee Cement Limited (BJCL)
Incorporated in the state of Chhattisgarh as a Joint Venture with Steel Authority of India Ltd. (SAIL). The said company is to produce a 2.2 MTPA split-located Cement Plant at Bhilai in the State of Chattisgarh and at Babupur, Satna in the State of Madhya Pradesh.
www.bjcl.co.in
Gujarat Jaypee Cement & Infrastructure Limited (GJCIL)
The Group has signed an Agreement with Gujarat Mineral Development Corporation Limited (GMDCL) for setting up of a 2.4 MTPA capacity cement manufacturing plant with captive power station and captive Jetty in district Kutch of Gujarat.
Bokaro Jaypee Cement Limited (BOJCL)
BOJCL, the second joint venture between the Company and SAIL with management control vested in the Company, is incorporated to set up a 2.1 MTPA capacity cement plant at Bokaro in Jharkhand.
Madhya Pradesh Jaypee Minerals Limited (MPJML)
A Joint Venture company between JAL and the Madhya Pradesh State Mining Corporation Limited (MPSMCL) to develop the Amelia (North) Coal block.
Jaypee Infratech Limited (JIL)
A subsidiary of Jaiprakash Associates Ltd. which would undertake the implementation of prestigious Yamuna Expressway Project comprising of 165 KM, 6 Lane Access Controlled Expressway connecting Greater Noida with Agra.
www.jaypeeinfratech.com
Jaypee Ganga Infrastructure Corporation Limited (JGICL)
JGICL a wholly owned subsidiary of the Company for implementation of the prestigious 1047 km, long 8-lane Access-Controlled Expressway connecting Greater Noida with Ghazipur- Ballia.
Himalayan Expressway Ltd.
The Company will undertake the construction of Zirakpur-Parwanoo Highway connecting Punjab, Haryana & Himachal Pradesh on BOT basis. The total length of the highway would be 28.690 kms.
JPSK Sports Pvt. Ltd.
JPSK Sports Pvt. Ltd. is incorporated for developing a Greenfield state-of-the-art Sports Complex including Car Race track for motor sports with related integrated support infrastructure including townships, cricket stadium, go karting track and auxiliary facilities.
Why should one buy stocks of Jaiprakash associates, if at all?
Let's have a look at where the group businesses are contributing in growth:
Cement business This is the cash cow for group. Jaiprakash Associates’ (JPA’s) current capacity stands at 22.8m tonnes has an attractive realization and EBITDA/tonne on account of savings in terms of tax, captive power and market positioning. The company is expected to add another 9-10m tonnes in the next two years, making it a ‘33.5m tonne giant’ (This is only next to giants Holcim and UltraTech Group).
Power business: The next cash cow. JPA’s 76.3% subsidiary, Jaiprakash Power Ventures, (JPVL) (current operational hydro power capacity of 700MW), has capacity addition plans of 8x under construction. JPVL is expected to reach an installed capacity of 5590MW in FY15E, with a 70:30 hydro-thermal mix.
Jaypee Infratech (JPI) is creating long term value. The biggest expressway, Yamuna Expressway (YEW), is expected to create a virgin 530 million sq.ft civilization development around it which is likely to establish JPI as one of the biggest real estate players in India. The company has sold close to 23.5m sq.ft out of this 530m sq. feet till now at an average rate of Rs2,900/sq.ft.
Concerns over investing
Before rushing to make a decision to buy stocks of company, let's have a look at few concerns.
All the above mentioned growth targets are tremendous and if achieved, would certainly create huge value for company and shareholders. But, yes there is a but, to achieve this huge growth, company needs huge cash. Huge amount of money is needed to realize all these plans. Total requirement of funds by JPA stands at
Rs 99bn for power, cement and YEW. The company is dependent on external funds for hydro power projects (till the present plants under construction get operational) and higher internal accruals for cement business. Inability in raising this money would dampen the future projects and pose a setback to all 0aggressive growth targets.
Any delay in power plant commissioning would increase the initial cost and prolong the benefits and cash flow. Interest cost would be rising and eat away profits.
Then there is a real estate play in picture. NCR region, where company has most of it's real estate, have seen oversupply of housing by various real estate companies. Most of the land company has for development is around the expressway which is slightly remote to the main city of Delhi and Noida. I was in Greater Noida for some time recently and I have seen most of the area around myself. Greater noida has still a long way to go to be called as big city. Reports of airport in Jewar (still in dreams and air!) to be moved to Meerut might dampen the real estate prices further. Any fall in real estate prices would lead to lower realizations of all land.
Stock price target
Looking at all the numbers, (recent results are here) , and at historic values, if we expect a growth of on an average 25% in revenue and profit numbers, one can expect the upside of 15% in stock price in an years time. So at current stock price of Rs 130, the target price comes to be around Rs 150. The stock could do even better year on year in long term over the period of 4 - 5 years considering all the projects lined up.
The first stock report from his list was on Punj Lloyd.
The Jaypee Group is a 27,700 crore market cap diversified infrastructural industrial conglomerate. It operates through its various subsidiaries in different business segments.
Jaiprakash Power Ventures Limited (JPVL)
The company with its operational power plants - 300 MW Baspa-II (Himachal Pradesh) and 400 MW Vishnuprayag (Uttarakhand) is India’s largest Private sector Hydropower producer and is on its way to be an integrated power producer with expansion in Thermal & Power Transmission.
www.jppowerventures.com
Jaypee Karcham Hydro Corporation Limited (JKHCL)
The Government of Himachal Pradesh again invited the group for the Karcham Wangtoo a 1000 MW project. The group formulated JKHCL for this project. Still under execution, the project is to commence its operations in the year 2011. View details
Jaypee Arunachal Power Limited
The company is setting up two hydropower projects - Lower Siang Project (2700 MW) and the Hirong Project (500 MW) in Joint Venture with the Government of Arunachal Pradesh.
Bina Power Supply Co. Limited
BPSCL shall set up a 1250 MW (two phase of 625 MW each) coal fired Thermal Power Plant at Bina in the State of Madhya Pradesh.
Jaypee Power Grid Ltd.(JPL)
JPL has been formed for execution of the transmission system between Wangtoo in Kinnaur district of Himachal Pradesh & Abdullapur in Yamuna Nagar district of Haryana for evacuation of 1000 MW power from Karcham Wangtoo HEP in Himachal Pradesh.
www.jaypeepowergrid.com
Bhilai Jaypee Cement Limited (BJCL)
Incorporated in the state of Chhattisgarh as a Joint Venture with Steel Authority of India Ltd. (SAIL). The said company is to produce a 2.2 MTPA split-located Cement Plant at Bhilai in the State of Chattisgarh and at Babupur, Satna in the State of Madhya Pradesh.
www.bjcl.co.in
Gujarat Jaypee Cement & Infrastructure Limited (GJCIL)
The Group has signed an Agreement with Gujarat Mineral Development Corporation Limited (GMDCL) for setting up of a 2.4 MTPA capacity cement manufacturing plant with captive power station and captive Jetty in district Kutch of Gujarat.
Bokaro Jaypee Cement Limited (BOJCL)
BOJCL, the second joint venture between the Company and SAIL with management control vested in the Company, is incorporated to set up a 2.1 MTPA capacity cement plant at Bokaro in Jharkhand.
Madhya Pradesh Jaypee Minerals Limited (MPJML)
A Joint Venture company between JAL and the Madhya Pradesh State Mining Corporation Limited (MPSMCL) to develop the Amelia (North) Coal block.
Jaypee Infratech Limited (JIL)
A subsidiary of Jaiprakash Associates Ltd. which would undertake the implementation of prestigious Yamuna Expressway Project comprising of 165 KM, 6 Lane Access Controlled Expressway connecting Greater Noida with Agra.
www.jaypeeinfratech.com
Jaypee Ganga Infrastructure Corporation Limited (JGICL)
JGICL a wholly owned subsidiary of the Company for implementation of the prestigious 1047 km, long 8-lane Access-Controlled Expressway connecting Greater Noida with Ghazipur- Ballia.
Himalayan Expressway Ltd.
The Company will undertake the construction of Zirakpur-Parwanoo Highway connecting Punjab, Haryana & Himachal Pradesh on BOT basis. The total length of the highway would be 28.690 kms.
JPSK Sports Pvt. Ltd.
JPSK Sports Pvt. Ltd. is incorporated for developing a Greenfield state-of-the-art Sports Complex including Car Race track for motor sports with related integrated support infrastructure including townships, cricket stadium, go karting track and auxiliary facilities.
Why should one buy stocks of Jaiprakash associates, if at all?
Let's have a look at where the group businesses are contributing in growth:
Cement business This is the cash cow for group. Jaiprakash Associates’ (JPA’s) current capacity stands at 22.8m tonnes has an attractive realization and EBITDA/tonne on account of savings in terms of tax, captive power and market positioning. The company is expected to add another 9-10m tonnes in the next two years, making it a ‘33.5m tonne giant’ (This is only next to giants Holcim and UltraTech Group).
Power business: The next cash cow. JPA’s 76.3% subsidiary, Jaiprakash Power Ventures, (JPVL) (current operational hydro power capacity of 700MW), has capacity addition plans of 8x under construction. JPVL is expected to reach an installed capacity of 5590MW in FY15E, with a 70:30 hydro-thermal mix.
Jaypee Infratech (JPI) is creating long term value. The biggest expressway, Yamuna Expressway (YEW), is expected to create a virgin 530 million sq.ft civilization development around it which is likely to establish JPI as one of the biggest real estate players in India. The company has sold close to 23.5m sq.ft out of this 530m sq. feet till now at an average rate of Rs2,900/sq.ft.
Concerns over investing
Before rushing to make a decision to buy stocks of company, let's have a look at few concerns.
All the above mentioned growth targets are tremendous and if achieved, would certainly create huge value for company and shareholders. But, yes there is a but, to achieve this huge growth, company needs huge cash. Huge amount of money is needed to realize all these plans. Total requirement of funds by JPA stands at
Rs 99bn for power, cement and YEW. The company is dependent on external funds for hydro power projects (till the present plants under construction get operational) and higher internal accruals for cement business. Inability in raising this money would dampen the future projects and pose a setback to all 0aggressive growth targets.
Any delay in power plant commissioning would increase the initial cost and prolong the benefits and cash flow. Interest cost would be rising and eat away profits.
Then there is a real estate play in picture. NCR region, where company has most of it's real estate, have seen oversupply of housing by various real estate companies. Most of the land company has for development is around the expressway which is slightly remote to the main city of Delhi and Noida. I was in Greater Noida for some time recently and I have seen most of the area around myself. Greater noida has still a long way to go to be called as big city. Reports of airport in Jewar (still in dreams and air!) to be moved to Meerut might dampen the real estate prices further. Any fall in real estate prices would lead to lower realizations of all land.
Stock price target
Looking at all the numbers, (recent results are here) , and at historic values, if we expect a growth of on an average 25% in revenue and profit numbers, one can expect the upside of 15% in stock price in an years time. So at current stock price of Rs 130, the target price comes to be around Rs 150. The stock could do even better year on year in long term over the period of 4 - 5 years considering all the projects lined up.
Mid Cap Infrastructure Stock To Buy - Sanghvi Movers
Sanghvi Movers is a reasonably priced stock to take advantage of India’s infrastructure growth. This makes it a stock to buy from Infrastructure space.
Sanghvi Movers has a fleet of 300 medium-sized, heavy-duty hydraulic and crawler cranes with capacities ranging between 20-800 tonnes which it hires to customers that include Reliance Industries, Tata Power, NTPC, ONGC, L&T and BHEL. Since its customer base comes from a wide variety of sectors, risk of downturn in any sector is low. As Sanghvi leases out its cranes on a fixed monthly contract, it is relatively de-risked from the erratic earnings which characterise infrastructure companies. Also, it is in a capital-intensive industry which imposes high entry barriers leading to lower competition.
It is estimated that crane hiring by power, petrochemicals, metals and mining companies would rise sharply to Rs2,600 crore—from Rs1,700 crore at the beginning of 2007; the largest contribution will be from the power sector. Indian power companies plan to add 75,000MW power capacity in the 11th Five Year Plan period which will cost Rs245,000 crore. As crane rental is about 0.5% to 0.6% of the cost of setting up a power plant, and assuming a 50% market share for Sanghvi, this translates to revenues of Rs1,250 crore up to FY11-12.
Checkout: Stocks To Buy For 2010 - Let's Share Ideas
A concerted effort has been made by Sanghvi in the past few years to increase its revenue from the power sector. This is visible in its performance in the nine months of FY09-10. The power sector contributed 41% of the total revenues and wind power, cement and refinery & gas contributed 19%, 18% and 10%, respectively. A slowdown in the capex of industries other than the power sector has affected its performance in recent quarters. Sales declined in the September and December 2009 quarters to 16% and 7%, respectively, while operating profit declined 17% and 7% for the same period. However, it is planning a capital expenditure of Rs360 crore in FY10-11 on the expectation of continued economic recovery.
Market Cap 872.25
EPS (TTM) 20.89
* P/E 9.65
* P/C 5.16
* Book Value 111.99
* Price/Book 1.80
Div(%) 100.00%
* Div Yield(%) 0.99
Market Lot 1.00
Face Value 2.00
Industry P/E 25.37
Sanghvi has a fantastic operating margin of 77% and RoE of 26%. Its market-cap is 2.8 and 3.7 times its sales and operating profit, respectively. It is definitely a reasonably priced stock to buy for long term investment.
Sanghvi Movers has a fleet of 300 medium-sized, heavy-duty hydraulic and crawler cranes with capacities ranging between 20-800 tonnes which it hires to customers that include Reliance Industries, Tata Power, NTPC, ONGC, L&T and BHEL. Since its customer base comes from a wide variety of sectors, risk of downturn in any sector is low. As Sanghvi leases out its cranes on a fixed monthly contract, it is relatively de-risked from the erratic earnings which characterise infrastructure companies. Also, it is in a capital-intensive industry which imposes high entry barriers leading to lower competition.It is estimated that crane hiring by power, petrochemicals, metals and mining companies would rise sharply to Rs2,600 crore—from Rs1,700 crore at the beginning of 2007; the largest contribution will be from the power sector. Indian power companies plan to add 75,000MW power capacity in the 11th Five Year Plan period which will cost Rs245,000 crore. As crane rental is about 0.5% to 0.6% of the cost of setting up a power plant, and assuming a 50% market share for Sanghvi, this translates to revenues of Rs1,250 crore up to FY11-12.
Checkout: Stocks To Buy For 2010 - Let's Share Ideas
A concerted effort has been made by Sanghvi in the past few years to increase its revenue from the power sector. This is visible in its performance in the nine months of FY09-10. The power sector contributed 41% of the total revenues and wind power, cement and refinery & gas contributed 19%, 18% and 10%, respectively. A slowdown in the capex of industries other than the power sector has affected its performance in recent quarters. Sales declined in the September and December 2009 quarters to 16% and 7%, respectively, while operating profit declined 17% and 7% for the same period. However, it is planning a capital expenditure of Rs360 crore in FY10-11 on the expectation of continued economic recovery.
Market Cap 872.25
EPS (TTM) 20.89
* P/E 9.65
* P/C 5.16
* Book Value 111.99
* Price/Book 1.80
Div(%) 100.00%
* Div Yield(%) 0.99
Market Lot 1.00
Face Value 2.00
Industry P/E 25.37
Sanghvi has a fantastic operating margin of 77% and RoE of 26%. Its market-cap is 2.8 and 3.7 times its sales and operating profit, respectively. It is definitely a reasonably priced stock to buy for long term investment.
Noida Toll Bridge Company Stock Analysis
Stock investment research team of Firstcall has recommended to buy stocks of Noida Toll Bridge Company with a price target of Rs 45 as against the stock price (CMP) of Rs 34.05 in its latest report.
Stock analysis and Investment Rationale from stock broking house:
``The Noida Toll Bridge Company (NTBCL) has been promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to develop construct, operate and maintain the DND Flyway on a Build Own Operate Transfer (BOOT) basis.
At the current market price of Rs.34.05, the stock is trading at 21.27 x FY10E and 16.04 x FY11E respectively. Price to Book Value of the stock is expected to be at 1.51 x and 1.38 x respectively for FY10E and FY11E. Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs.1.60 and Rs.2.12 respectively.Net Sales of the company is expected to grow at a CAGR of 13% over 2008 to 2011E respectively.
The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. The contribution of the construction sector to India`s GDP is likely to increase in the coming years in light of the Government`s highway projects. These projects have thrown up fresh opportunities for NTBCL. On the basis of EV/EBITDA, the stock trades at 10.01 x for FY10E and 8.98 x for FY11E.
Firstcall, the stock trading broker expects that the company will keep its growth story in the coming quarters also. Hence recommendation to buy stocks of this particular scrip with a target price of Rs.45.00 in Medium to Long term investment portfolio.
Stock analysis and Investment Rationale from stock broking house:
``The Noida Toll Bridge Company (NTBCL) has been promoted by Infrastructure Leasing and Financial Services Ltd. (IL&FS) as a special purpose vehicle (SPV) to develop construct, operate and maintain the DND Flyway on a Build Own Operate Transfer (BOOT) basis.
At the current market price of Rs.34.05, the stock is trading at 21.27 x FY10E and 16.04 x FY11E respectively. Price to Book Value of the stock is expected to be at 1.51 x and 1.38 x respectively for FY10E and FY11E. Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs.1.60 and Rs.2.12 respectively.Net Sales of the company is expected to grow at a CAGR of 13% over 2008 to 2011E respectively.
The company has set up a 100% subsidiary, DND Flyway, for the implementation of development rights. Part of the surplus land on the Noida side has been transferred to the subsidiary. The contribution of the construction sector to India`s GDP is likely to increase in the coming years in light of the Government`s highway projects. These projects have thrown up fresh opportunities for NTBCL. On the basis of EV/EBITDA, the stock trades at 10.01 x for FY10E and 8.98 x for FY11E.
Firstcall, the stock trading broker expects that the company will keep its growth story in the coming quarters also. Hence recommendation to buy stocks of this particular scrip with a target price of Rs.45.00 in Medium to Long term investment portfolio.
SREI Infrastructure Finance - Small Cap Infrastructure Sector Stock To Buy
Equity investment research team of Firstcall has advised to buy stocks of SREI Infrastructure Finance medium to long term investment horizon on the back of cheap stock valuations and strong order book.
Firstcall has given a `Buy Stocks` rating on SREI Infrastructure Finance with a stock price target of Rs 90 as against the market price (CMP) of Rs 74.85 in its recent stock research report.
Stock Analysis:
At the current market price of Rs 74.85 the stock is trading at 5.51 times and 4.39 times for FY10E and FY11E respectively. Price to Book Value of the stock is expected to be at 0.67 times and 0.58 times respectively for FY10E and FY11E. Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs 13.60 and Rs17.06 respectively.
The top line and bottom line of the company are expected to grow at a CAGR of 13% & 14% over 2008A to 2011E. SIFL is the only private sector Infrastructure financing NBFI. The company has a customer base of over 150, over Rs 80 billion in assets under management and total capital base of over Rs 7 billion.
The company has a network of 61 offices in India and 3 offices in Russia to conduct international operations.
Srei Infrastructure Finance was awarded with an order to develop a light-rail transit system in Kolkata. The project is worth USD1.2 billion and will be completed within four-five years. Srei has taken the initiative of building rural infrastructure in the country on an information and technology platform under the National e-Governance Plan of the Government of India.
On the basis of EV/EBITDA, the stock trades at 1.12 times for FY10E and 1 times for FY11E.
It is a recommended infrastructure sector stock to buy for a target price of Rs 90 in medium to long term investment portfolio.
Firstcall has given a `Buy Stocks` rating on SREI Infrastructure Finance with a stock price target of Rs 90 as against the market price (CMP) of Rs 74.85 in its recent stock research report.
Stock Analysis:
At the current market price of Rs 74.85 the stock is trading at 5.51 times and 4.39 times for FY10E and FY11E respectively. Price to Book Value of the stock is expected to be at 0.67 times and 0.58 times respectively for FY10E and FY11E. Earning per share (EPS) of the company for the earnings for FY10E and FY11E is seen at Rs 13.60 and Rs17.06 respectively.
The top line and bottom line of the company are expected to grow at a CAGR of 13% & 14% over 2008A to 2011E. SIFL is the only private sector Infrastructure financing NBFI. The company has a customer base of over 150, over Rs 80 billion in assets under management and total capital base of over Rs 7 billion.
The company has a network of 61 offices in India and 3 offices in Russia to conduct international operations.
Srei Infrastructure Finance was awarded with an order to develop a light-rail transit system in Kolkata. The project is worth USD1.2 billion and will be completed within four-five years. Srei has taken the initiative of building rural infrastructure in the country on an information and technology platform under the National e-Governance Plan of the Government of India.
On the basis of EV/EBITDA, the stock trades at 1.12 times for FY10E and 1 times for FY11E.
It is a recommended infrastructure sector stock to buy for a target price of Rs 90 in medium to long term investment portfolio.
IRB Infrastructure - Stock Report
A stock research report from Angel broking on IRB infrastructure with target price. Checkout..
The stock research team has maintained a "buy stocks" rating on the stock with a target price of Rs 289.
IRB has one of the largest domestic BOT project portfolios in the Road and Highway Sector comprising 16 projects of which 10 are operational. In light of the immense opportunities that exist in the Road Sector in the near future, IRB’s vast experience and inter-dependent business model, we maintain our bullish stance on the company’s performance.
Moreover, IRB’s Construction arm has a robust Order Book of Rs 9,238cr (8.7x FY2010E Revenues), which lends the Segment high Revenue visibility. We have valued IRB's inter-dependent business model on SOTP basis. Individual Road BOT SPVs have been valued on NPV basis (FY2012E) using the Free Cash Flow to Equity (FCFE) approach (Rs165/share); the Construction Segment has been valued at 8x FY2012E EV/ EBITDA (Rs116/share); the company's investments in land (adjoining Mumbai- Pune Expressway) and its equity stake in the Sindhudurg Airport project have been valued at 1x FY2009 Book Value (Rs 8/share). Buy stocks with a Target Price of Rs 289", according to report.
The stock research team has maintained a "buy stocks" rating on the stock with a target price of Rs 289.
IRB has one of the largest domestic BOT project portfolios in the Road and Highway Sector comprising 16 projects of which 10 are operational. In light of the immense opportunities that exist in the Road Sector in the near future, IRB’s vast experience and inter-dependent business model, we maintain our bullish stance on the company’s performance.
Moreover, IRB’s Construction arm has a robust Order Book of Rs 9,238cr (8.7x FY2010E Revenues), which lends the Segment high Revenue visibility. We have valued IRB's inter-dependent business model on SOTP basis. Individual Road BOT SPVs have been valued on NPV basis (FY2012E) using the Free Cash Flow to Equity (FCFE) approach (Rs165/share); the Construction Segment has been valued at 8x FY2012E EV/ EBITDA (Rs116/share); the company's investments in land (adjoining Mumbai- Pune Expressway) and its equity stake in the Sindhudurg Airport project have been valued at 1x FY2009 Book Value (Rs 8/share). Buy stocks with a Target Price of Rs 289", according to report.
DB Realty IPO Information & Analysis
Angel Broking, stock trading broker, has come out with an IPO research report on DB Realty IPO.
The stock investment research team of Angel has recommended to avoid the issue. The issue of Mumbai-based DB Realty has opened for subscription. The company plans to raise around Rs 1,500 crore from the issue. The price band is at Rs 468-486 per share and the issue will close on February 2, 2010.
DB Realty (DBRL), a leading realty player in the Mumbai Metropolitan region, has firmed up development plans for 100mn sq ft with a total saleable area of 60.9 million sq ft (DBRL's share). Around, 65% (40 million sq ft) of its total saleable interest is concentrated in the outskirts of Mumbai (Dahisar, Mira Road, Mahul, Mankhurd, Pune), 6.6% in South Mumbai, 21% in Western Suburbs and rest in Central Mumbai.
We have assumed average realisation of Rs 6,000 per sq ft on DBRL's salable interest based on its geographical presence, which gives us a Fair NAV of Rs 412/share. Hence, we believe that the IPO is expensive and recommend an Avoid. However, investors could consider alternate, existing listed realty players like Anant Raj and HDIL.
The stock investment research team of Angel has recommended to avoid the issue. The issue of Mumbai-based DB Realty has opened for subscription. The company plans to raise around Rs 1,500 crore from the issue. The price band is at Rs 468-486 per share and the issue will close on February 2, 2010.
DB Realty (DBRL), a leading realty player in the Mumbai Metropolitan region, has firmed up development plans for 100mn sq ft with a total saleable area of 60.9 million sq ft (DBRL's share). Around, 65% (40 million sq ft) of its total saleable interest is concentrated in the outskirts of Mumbai (Dahisar, Mira Road, Mahul, Mankhurd, Pune), 6.6% in South Mumbai, 21% in Western Suburbs and rest in Central Mumbai.
We have assumed average realisation of Rs 6,000 per sq ft on DBRL's salable interest based on its geographical presence, which gives us a Fair NAV of Rs 412/share. Hence, we believe that the IPO is expensive and recommend an Avoid. However, investors could consider alternate, existing listed realty players like Anant Raj and HDIL.
SSPDL or Srinivasa Shipping and Property Development Limited
Investment analyst, Ashish Chugh has recommended to buy stocks of Srinivasa Shipping and Property Development Limited or SSPDL in his stock analysis report. This article is from series "Stocks To Buy Below Rs.50 in 2010"
SSPDL is a very interesting real estate company where the current market cap of the company is very small compared to the kind of projects this company is doing. SSPDL is basically a play on the realty market in South India. This company is executing projects in Chennai, Bangalore, Kerala, Hyderabad and Vizag. The company has recently completed one project called Alpha City in Chennai, which is an IT park and also part rented that project.
Incidentally, Alpha City project was nominated for the category of Best Commercial Property by CNBC-Awaaz Crisil Real Estate Award in 2008. Besides this, company is also doing some other projects called Chennai Central, which is a shopping mall covering an area of 1.27 lakh square feet in Chennai, construction of which is expected to commence shortly. Then it is doing Matrix Tower in Chennai, which is again an IT park of 2 lakh square feet. It is doing a project called Promenade on 10 acres in Chennai covering an area of 11 lakh square feet, which besides mall and office complex will also house Novotel and Ibis brand of hotels.
This company is doing Northwoods in Hyderabad on 42 acre land, which comprises of 200 villas. The company is doing Retreat, which is a 120 acre gated community in Hyderabad. Then Retreat project in Bangalore covers about 48 acres and is located at Devanahalli, which is close to a new airport and it is also doing Retreat in Kerala on an area of close to about 320 acres. Besides these real estate projects, the company has also taken building contracts.
The company has got close to Rs 100 crore of construction contracts for buildings. Major ones being TCG IT park valued at about 36 crore, NSIC office complex about Rs 25 crore and one more group housing project worth about Rs 18 crore.
Another interesting thing is that Indiareit Fund Advisors, which is a company promoted by Ajay Piramal group, has also invested in some of the projects of this company. So I believe that at the current market cap of Rs 40 crore and the current price of Rs 35 per share, I think this does not reflect the full potential of the company.
The expected sales revenues from these various projects can be many times more than the current market cap of the company. Of course, there could be concerns over the short-term, which we saw with the most real estate companies. So at the current price of about Rs 35 per share, I don’t see too much of downside from these levels and if all goes well with the company, the stock has the potential to be a multiplier in the years to come.
Go back to series "Stocks To Buy Below Rs.50 in 2010"
SSPDL is a very interesting real estate company where the current market cap of the company is very small compared to the kind of projects this company is doing. SSPDL is basically a play on the realty market in South India. This company is executing projects in Chennai, Bangalore, Kerala, Hyderabad and Vizag. The company has recently completed one project called Alpha City in Chennai, which is an IT park and also part rented that project.
Incidentally, Alpha City project was nominated for the category of Best Commercial Property by CNBC-Awaaz Crisil Real Estate Award in 2008. Besides this, company is also doing some other projects called Chennai Central, which is a shopping mall covering an area of 1.27 lakh square feet in Chennai, construction of which is expected to commence shortly. Then it is doing Matrix Tower in Chennai, which is again an IT park of 2 lakh square feet. It is doing a project called Promenade on 10 acres in Chennai covering an area of 11 lakh square feet, which besides mall and office complex will also house Novotel and Ibis brand of hotels.
This company is doing Northwoods in Hyderabad on 42 acre land, which comprises of 200 villas. The company is doing Retreat, which is a 120 acre gated community in Hyderabad. Then Retreat project in Bangalore covers about 48 acres and is located at Devanahalli, which is close to a new airport and it is also doing Retreat in Kerala on an area of close to about 320 acres. Besides these real estate projects, the company has also taken building contracts.
The company has got close to Rs 100 crore of construction contracts for buildings. Major ones being TCG IT park valued at about 36 crore, NSIC office complex about Rs 25 crore and one more group housing project worth about Rs 18 crore.
Another interesting thing is that Indiareit Fund Advisors, which is a company promoted by Ajay Piramal group, has also invested in some of the projects of this company. So I believe that at the current market cap of Rs 40 crore and the current price of Rs 35 per share, I think this does not reflect the full potential of the company.
The expected sales revenues from these various projects can be many times more than the current market cap of the company. Of course, there could be concerns over the short-term, which we saw with the most real estate companies. So at the current price of about Rs 35 per share, I don’t see too much of downside from these levels and if all goes well with the company, the stock has the potential to be a multiplier in the years to come.
Go back to series "Stocks To Buy Below Rs.50 in 2010"
Contrarian View on Stock Markets By Marc Faber
Investment guru Marc Faber, likes Japanese stocks and banks, real estate in India, wheat and natural gas as the New Year approaches.
"I think as a contrarian, you really want the contrarian play," Faber told The Economic Times. "You should buy Japanese stocks and Japanese banks.”
“(Banks in India) did not play in the CDO market and mortgage backed securities market … so for the banks that are well run, there is a huge opportunity,” he notes. “I can see in that in India urbanization will accelerate and there will be entirely new cities coming up,” he observes. “So I think there is a big opportunity in Indian real estate in the long run."
As to commodities, Faber notes he was “very positive about sugar,” which he still thinks may go up, but believes that wheat and natural gas offer better opportunities.
“In real terms inflation adjusted (wheat) is at 200 years low,” Faber says, and natural gas is “very cheap” … but it is not so easy for investors to play these commodities.”
The tightening of Tier I quality standards recently proposed by the Basel Committee on Banking Supervision is “overall negative for the Japanese banks,” Stephen Church, a research partner at Japaninvest KK, told Bloomberg.
Mark Mobius said plenty of opportunities still exist in emerging markets, BusinessWeek reports.
Mobius, a longtime Templeton Asset Management manager, said stocks of emerging markets are selling at good rates. Stock buys in Brazil, China and other smaller markets are still abundant since their economies are growing at a quicker pace, he said.
“Their economies are growing faster, four times faster [than the U.S. and global markets]. They were building up reserves, keeping their currencies low and reducing debt,” he said. Investors should seek buys in large emerging market countries such as India and Russia, Mobius said. Other countries such as Jordan, Lebanon, Qatar, Saudi Arabia, Dubai, and even Pakistan are also good investments. Mobius is making investments in consumer and commodities.
"I think as a contrarian, you really want the contrarian play," Faber told The Economic Times. "You should buy Japanese stocks and Japanese banks.”
“(Banks in India) did not play in the CDO market and mortgage backed securities market … so for the banks that are well run, there is a huge opportunity,” he notes. “I can see in that in India urbanization will accelerate and there will be entirely new cities coming up,” he observes. “So I think there is a big opportunity in Indian real estate in the long run."
As to commodities, Faber notes he was “very positive about sugar,” which he still thinks may go up, but believes that wheat and natural gas offer better opportunities.
“In real terms inflation adjusted (wheat) is at 200 years low,” Faber says, and natural gas is “very cheap” … but it is not so easy for investors to play these commodities.”
The tightening of Tier I quality standards recently proposed by the Basel Committee on Banking Supervision is “overall negative for the Japanese banks,” Stephen Church, a research partner at Japaninvest KK, told Bloomberg.
Mark Mobius said plenty of opportunities still exist in emerging markets, BusinessWeek reports.
Mobius, a longtime Templeton Asset Management manager, said stocks of emerging markets are selling at good rates. Stock buys in Brazil, China and other smaller markets are still abundant since their economies are growing at a quicker pace, he said.
“Their economies are growing faster, four times faster [than the U.S. and global markets]. They were building up reserves, keeping their currencies low and reducing debt,” he said. Investors should seek buys in large emerging market countries such as India and Russia, Mobius said. Other countries such as Jordan, Lebanon, Qatar, Saudi Arabia, Dubai, and even Pakistan are also good investments. Mobius is making investments in consumer and commodities.
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