ScripScan:Rishi Laser Ltd
Industry:Engineering
BSE:526861
Face Value:10
Cmp:37
Target:60
Target percentage:60%+
Duration:6-9months.
Introduction:-
Rishi laser is a leader in the usage of Laser Cutting for manufacturing components and assemblies.Rishi laser ltd(RLL) set up its first Laser Cutting facility in 1995. Even though Laser Cutting was very popular in Western Countries at that time, Laser Cutting of metals was very new to India.The progress in the first five years was very slow because Laser Cutting was still looked as a very expensive method of processing steel. Also the Indian Engineering Capital Goods Industry was passing through a very difficult period in later nineties. The scenario has completely changed today for the sector and the company. The Engineering and Capital Goods sector is booming in India and Laser Cutting is fast becoming a very standard method of processing flat steel.The fabrication industry is highly fragmented and there are very few organised large Companies in the business.Rishi Laser continues to be the leader in the business in terms of capacity with several CNC steel processing machines.RLL is now embarking on major growth path to add further facilities to enhance capacity.
Initiatives:-
Rishi was earlier concentrating on only being a service provider.The management says," We increasingly found that this was limiting growth since customers were demanding further processes including bending, welding, painting etc. We therefore started moving towards value addition and supplies of assemblies and fabrications and this trend is expected to increase.Since the company is a service provider and a supplier of assemblies it became imperative to move closer to the customers.To move up the value chain the company has acquired the plant & machinery of a British Sheet Metal Fabrication Company and the same has been installed at its existing plants.On last fiscal the company commisioned separate facilities to create a foundation for large exports in coming years by making a small beginning in exports. The welding capabilities of the Company too have been strengthened to ensure capability to service the sector.
.
Outsourcing Oppurtunity:
Due to increasing cost pressures,the European Companies are increasingly being forced to outsource components and assemblies. RLL is well placed to supply light and medium fabrications because of its modern facilities, good Engineering base and experience of similar supplies in domestic industry.We beleive,In the current global economic scenario the trend towards outsourcing will increase. Also it would be important to note that,India has a tremendous cost advantage where the items have a high Engineering content. RLLs products are not mass produced items and require Engineering inputs at all stages.Thus Outsourcing can become a huge growth provider for the company in future
.
Risks And Concerns-
Rishi is a supplier to the Engineering Sector.So any down trend in Engineering Sector will have an adverse effect on the Company's prospects.Interest rate hardening and higher inflation could increase costs, which cannot be passed on to customers. Any appreciation of the Rupee will affect the profitability of the company's exports.Poor export infrastructure could force overseas customers to look at other countries for their sourcing needs.
Prospects:
The Company has continued to consolidate its position in the business by creating substantial additional capacity. The demand for quality steel profiles and fabrications made from such profiles, is very robust. Large capacity is a great competitive strength as deliveries can be made very fast as also greater flexibility/variety of supply is possible. As Indian Companies in' the engineering sector have increasing order backlogs their requirement is for quicker & timely deliveries. RLL is very well positioned to fulfill this demand because of its large capacities as also due to plants at multiple locations.Also it must be noted that the demand for steel is expected to grow substantially in the coming decade. The bullishness in this sector is evident from the huge capacity creation that is being planned by the steel sector. The proportion of sheet steel and plates consumed by the engineering sector will grow proportionately. The processing of this steel into Components, assemblies and fabrications will require huge capacity creation by the fabrication industry. We therefore expect the requirement for the company"s products and services to increase manifold.
Outlook-
The demand has grown for the sector and the company all round as the Engineering Industries have revived and are booming. As per CMIE the ongoing CAPEX by India Inc will be over Rs. 8,00,000 crores.The demand in Electrical Switchgear Industry and the Earth Moving sector has exploded due to increased spending on infrastructure. We believe that this process will get accentuated as India will have to spend increasingly large sums of money on infrastructure if GDP has to grow at 8-9% to p.a.The Company has moved towards more value addition to cut steel. By doing this the potential market that the Company can cater to has increased by 100 times. This has also opened opportunities for RLL to move from light fabrication to medium fabrication.The management adds," We believe that the opportunities in the medium fabrications are substantially higher - especially from the Earth Moving Industry".Thus all things are looking up for rishi laser and this all will take the company to newer heights.
Financials & conclusion:
Rishi has been consistently perfoming well over the last 4 years or so and the same trend is expected to continue in the coming years as well.We expect RLL to deliver a topline of aound 170crs and a bottomline of about 7.2crs for fy09 .With an equity base of 8crs the bottomline results in an EPS about 9rs.At the current price of 37rs RLL quotes at a P.E of slightly above 4 times.Another factor which well may interest our members would be the presence of Rakesh jhunjhunwala in the company.Yes the renowned investor is having 14% stake in the counter bought at 100rs.The company has got a good dividend coverage ratio with dividend yield coming to 5.5% at the current market price.
Present valuation looks very attractive at the moment and considering its leadership in the sector,the export potential,outsourcing oppurtunities and booming exconomy,WE BELEIVE RISHI LASER WOULD BE A SCRIP TO WRITE A NEW SCRIPTURE FOR ITSELF IN THE COMING YEARS.WE ASSIGN A BUY ON THE COUNTER WITH A TARGET OF 60RS.
Results Analysis - Divi's Lab - Everonn Systems - Bannari Amman - Mahindra & Mahindra - GMR Infra
| 1. Divi's Laboratories:  Excellent results as expected. Hyderabad based CRAMS company reported 37% rise in sales and 51% increase in net profit. Divis Labs is a must have stock in every "Growth investor portfolio". Divi's is a favourite stock of Reliance mutual funds. Accumulate on every fall without hesitation for long term gains. CMP: 975; P/E: 15.5 2. Everonn Systems India:  Excellent results and reasonable valuations. Company announced 50% rise in sales and 200% increase in net profit. This stock will give excellent results for long term investors. Buy in SIP and maximize profits. But FIIs may spoil the sentiment over short term. Pick your favourite education stock among Educomp, Everonn and Core Projects. CMP: 157; P/E: 12 3. Bannari Amman Sugars:  Turnaround story. South India based sugar company reported Rs 30 crore profit in Q2 2008 Vs net loss of 1.24 crore in Q2 2007. Excellent performance. Bannari Amman spinning mills also announced good results in this quarter. CMP: 450; P/E: 7.5; Book value: 393. 4. Mahindra and Mahindra: Expected negative results. Company announced 11% increase in sales but 20% fall in net profit. But scrip has excellent future potential for long term investors due to recent acquisitions by aggressive management. Accumulate around 250. Forex losses dented margins. CMP: 302. 5. Vakrangee Software: Good results and good opportunities due to election year. I generally do not recommend software stocks but this is a "stock in limelight" before every major election. Company reported 62% increase in sales and 50% rise in net profit. 6. GMR Infrastructure:  Excellent results but unreasonable valuations. Infrastructure giant announced 158% increase in sales and 170% rise in net profit. One can accumulate this stock from below 40 levels. Bear market may not bear such high valuations despite good growth. GMR Infra is a "must buy" for growth investors at around 35. Will it touch those levels? CMP: 52; P/E: 91; Book value: 31. 7. Bharti Shipyard:  Positive surprise. Company reported 48% rise in sales while net profit increased by 29%. Shipping industry is facing many problems due to drastic slowdown in International economy. Huge order book is a positive point. Value investors may look at this stock due to very cheap valuations. Huge debt is a concern. Shipping companies will face serious problems over short-medium term as Baltic index touched 6-year low. CMP: 68; P/E: 1.5; Book value: 208. 8. TIL (Tractors India Limited): Good performance. Company reported 49% increase in both sales and net profit. 9. Gujarat Fluorochemicals: Safe business and excellent results. Company reported 57% rise in sales and 45% increase in net profit. Huge debt is a big burden. CMP: 73; P/E: 2.3; Book value: 86. Decent results: Britannia Industries (safe stock), National Fertilizer, Assam Company, Karur Vysya Bank, S. Kumars Nationwide, Blue Bird (India), Fortis Healthcare, Bannari Amman Spinning Mills, Tata tea, Adhunik Metaliks and Areva T and D. Poor results: Sical Logistics (worst), Numeric Power Systems (worst), Value Industries, Alok industries, Aksh Optifibre, Bal Pharma, Sundaram Finance, Consolidated Construction, Subex, 3M India, V-Guard Industries, Zenith Computers, Piramal Glass, RPG Cables, Bombay Dyeing, Bosch Chassis Systems India and Pritish Nandy Communications. Must read: 1. Are stocks really cheap? Don't follow Warren Buffett. This is not the time to buy many blue chips. 2. Get a ringside view on American economy and economic crisis. 3. Is it wrong to invest for long term? Final verdict: Overconfident short term investors and traders will get severe shocks in the coming days. DIIs may not succeed to meet FII outflows but falling inflation and crude oil prices are big positives. Job losses will spoil the consumption outlook which will increase NPAs in the banking system. Complete mess-up! New investors should not even look at stock markets in these unpredictable times. Long term investors should concentrate on companies which are posting outstanding results and accumulate them on every major fall. Source: Stock Market Guide |
Results Analysis - Nitin Fire Protection - Kaveri Seed - UTV Software Com - Pratibha industries - Ankur Drugs - TV Today - NMDC - GLENMARK Pharma - ICICI Bank
Q2 results analysis:
1. Nitin Fire Protection: Bumper results. This niche company announced 157% increase in sales and 98% rise in net profit. Nitin Fire is a must have stock in every "growth portfolio".
CMP: 130; P/E: 15.7; Book value: 75.
2. Kaveri Seed Company: Believe in agriculture. Hybrid Seed Company reported 32% rise in sales and 71% increase in net profit. Other seed companies are also announcing good results.
3. UTV Software Communications:
Bumper results and a turnaround story. Company announced 81% increase in sales and a net profit of 4 crore Vs a loss of 2.8 crore. Very high valuations are a big concern.
4. Pratibha Industries: Positive surprise. Company reported 171% increase in sales and 57% rise in net profit. Keep a close eye on this scrip.
5. Ankur Drugs: Excellent results. More than 140% increase in both sales and net profit.
6. TV Today Network: Excellent performance from this media house. It outperformed other media houses with a sterling performance. Company announced 40% rise in both net profit and sales.
7. NMDC: Good Results. Mining PSU announced 46% rise in both sales and net profit. Cash rich Sesa Goa outperformed but high Government stake is a NMDC advantage.
8. Creative Eye: Television software and mythological serial maker announced excellent results. Company reported 187% increase in sales while net profit rose by 195%.
9. Glenmark Pharma: Unbelievable negative surprise. This Pharma Company which is growing on steroids suddenly reported negative growth in sales. Glenmark will make new lows until next quarter.
10. ICICI Bank: Next 2 quarters are very crucial for this bank which will face increase in NPAs along with decrease in credit growth.
11. Solar Explosives:
Good results. This niche company announced 183% rise in sales and 24% increase in net profit. High valuations are a concern.
CMP: 322; P/E: 26
Decent results:
FDC, MSK Projects, Indraprastha Gas, Timken, Nagarjuna Construction, Allied Digital Services, Kajaria Ceramics, Bhushan Steel, Genus Power, Eveready Industries, Gitanjali Gems and Electrotherm.
Poor results:
Karuturi Global, Videocon, Valecha Engineering, Godrej Industries, RSWM, Indus Fila, Tata Communications, Bhagyanagar India, Mahindra Forgings, D-Link (India), Savita Chemicals, Rico Auto, Nerolac Paints, Tata Tele Services, MRPL, Tayo Rolls, Blue Star, Radha Madhav Corporation, JK Cement, Amtek India, Global Vectra, Nelcast, Apar Industries, NRB Bearings, R Systems International, Amtek Auto, Cinemax India, Lumax Automotives and Mahindra and Mahindra Financial Services.
"Can we enter/exit a Company just by basing on one quarter results?"
Answer: One quarter results will never give a complete idea about future performance of a Company. But they will give some idea about creeping problems in the Company and relative performance with peers. Just compare Larsen, BHEL, Punj Lloyd and Crompton Greeves. Current Q2 results give some idea on how Companies are performing high interest rates atmosphere. But some sectors like IT, Real Estate and some commodity stocks will underperform in the next 2 quarters. As we don't know much about how Companies will perform in Q3, it is better to depend on Q2 results and guidance. Stock investments depend on sector, results, growth plans, valuations and cash-debt position.
1. Nitin Fire Protection: Bumper results. This niche company announced 157% increase in sales and 98% rise in net profit. Nitin Fire is a must have stock in every "growth portfolio".
CMP: 130; P/E: 15.7; Book value: 75.
2. Kaveri Seed Company: Believe in agriculture. Hybrid Seed Company reported 32% rise in sales and 71% increase in net profit. Other seed companies are also announcing good results.
3. UTV Software Communications:
Bumper results and a turnaround story. Company announced 81% increase in sales and a net profit of 4 crore Vs a loss of 2.8 crore. Very high valuations are a big concern.
4. Pratibha Industries: Positive surprise. Company reported 171% increase in sales and 57% rise in net profit. Keep a close eye on this scrip.
5. Ankur Drugs: Excellent results. More than 140% increase in both sales and net profit.
6. TV Today Network: Excellent performance from this media house. It outperformed other media houses with a sterling performance. Company announced 40% rise in both net profit and sales.
7. NMDC: Good Results. Mining PSU announced 46% rise in both sales and net profit. Cash rich Sesa Goa outperformed but high Government stake is a NMDC advantage.
8. Creative Eye: Television software and mythological serial maker announced excellent results. Company reported 187% increase in sales while net profit rose by 195%.
9. Glenmark Pharma: Unbelievable negative surprise. This Pharma Company which is growing on steroids suddenly reported negative growth in sales. Glenmark will make new lows until next quarter.
10. ICICI Bank: Next 2 quarters are very crucial for this bank which will face increase in NPAs along with decrease in credit growth.
11. Solar Explosives:
Good results. This niche company announced 183% rise in sales and 24% increase in net profit. High valuations are a concern.
CMP: 322; P/E: 26
Decent results:
FDC, MSK Projects, Indraprastha Gas, Timken, Nagarjuna Construction, Allied Digital Services, Kajaria Ceramics, Bhushan Steel, Genus Power, Eveready Industries, Gitanjali Gems and Electrotherm.
Poor results:
Karuturi Global, Videocon, Valecha Engineering, Godrej Industries, RSWM, Indus Fila, Tata Communications, Bhagyanagar India, Mahindra Forgings, D-Link (India), Savita Chemicals, Rico Auto, Nerolac Paints, Tata Tele Services, MRPL, Tayo Rolls, Blue Star, Radha Madhav Corporation, JK Cement, Amtek India, Global Vectra, Nelcast, Apar Industries, NRB Bearings, R Systems International, Amtek Auto, Cinemax India, Lumax Automotives and Mahindra and Mahindra Financial Services.
"Can we enter/exit a Company just by basing on one quarter results?"
Answer: One quarter results will never give a complete idea about future performance of a Company. But they will give some idea about creeping problems in the Company and relative performance with peers. Just compare Larsen, BHEL, Punj Lloyd and Crompton Greeves. Current Q2 results give some idea on how Companies are performing high interest rates atmosphere. But some sectors like IT, Real Estate and some commodity stocks will underperform in the next 2 quarters. As we don't know much about how Companies will perform in Q3, it is better to depend on Q2 results and guidance. Stock investments depend on sector, results, growth plans, valuations and cash-debt position.
Results Analysis - Allcargo global logistics - Mundra Port - Deepak fertilizer - K S Oils - SUN Pharma - Moser Baer
Shocking statistic:
Japan's Nikkei hits 26-year low. What's the 26-year low for BSE Sensex? I don't want hear that statistic. Nikkei touched 1982 levels during intraday trading on Monday.
Analysis of Quarterly results: Q2 results are giving clear idea about the real gems that outperformed competitors with their competitive performance and inspiring results. Public sector companies like SCI, Container Corp, REC, PFC, PTC announced good results while regular giants like NTPC, BHEL and Maruti reported poor results.
1. Allcargo global Logistics: Excellent results. Logistics Company announced 76% increase in sales while net profit rose by 130%. Growth investors need to watch out.
CMP: 456; P/E: 15.5; Book value: 170.
2. Mundra Port and SEZ:
Bumper results. Company announced more than 84% rise in sales while net profit rose by 163%. Mundra port is a must have stock in every "growth investor portfolio". Keep it up. High valuations and huge debt are a concern. Mundra may find it difficult to sustain such high valuations like Educomp and Punj Lloyd despite announcing bumper results.
CMP: 375
3. Deepak Fertilizers:
Excellent results. Company outperformed competitors by announcing 67% rise in sales and 91% increase in net profit. Keep it up. Deepak fertilizers is a safe buy for value investor.
CMP: 47; P/E: 3; Book value: 80.
4. KS Oils:
Wonderful results. Company announced 67% rise in sales while net profit increased by 60%. KS Oils got value creator award from Outlook Money-NDTV Profit. Excellent stock for "growth portfolio".
CMP: 40; P/E: 9 Book value: 20
5. Sun Pharma: Wonderful results. Pharma major announced 24% increase in sales and 56% rise in net profit.
6. Adani Enterprises: Good results. Company reported 76% increase in net profit while sales rose by 21%.
7. Usha Martin: Positive surprise. Comapny announced 40% rise in both sales and net profit.
8. Shipping Corporation of India (SCI): This cash rich giant announced decent results despite turbulent atmosphere in the sector. Company announced 27% increase in sales and 50% rise in net profit. Good value stock like other PSUs.
9. Moser Baer: Company reported 42% rise in sales. Net loss of Rs 42 crore Vs net profit of 3 crore. As I mentioned in my previous posts, this is a not a stock for short term investors as it posts losses for some more quarters. Only long term visionary investors should accumulate this stock on every fall. Positives are Photovoltaic business sales and less losses than Q1.
Decent results: Torrent Power, PSL, Page Industries, Zicom Electronic Systems, Jai Corp, Godawari power, Unity Infraprojects, Bata India, ICRA, Union bank,
Poor results: TV18 India, KLG Systel, Kalpataru Power transmission, Thermax, SPEL Semiconductor, ADLABS, United Breweries, Godrej Consumer Products, Phillips Carbon Black, Batliboi, IL&FS Investment, Binani Cement, Central Bank of India, REI Agro, Minda Industries, Jet Airways, INOX Leisure, Su-Raj Diamonds, Arvind, Dish TV, Bharat Forge and Pidilite industries.
Important dates:
1. Record date for Jindal Drilling stock split: November 14.
2. Crucial results: State Bank of India and ICICI Bank will announce results which will give some idea about the ICICI financial status.
Must read:
1. Business Standard analysis on Q2 results.
Final verdict: Small and new investors should stay away from stock markets. If you underestimate this market, no one will save you. 9 out of top 10 highest one day rallies occurred during 1929 depression. Experienced investors should patiently wait for such rallies as long as this bear market exits.
Source: Stock Market Guide
Japan's Nikkei hits 26-year low. What's the 26-year low for BSE Sensex? I don't want hear that statistic. Nikkei touched 1982 levels during intraday trading on Monday.
Analysis of Quarterly results: Q2 results are giving clear idea about the real gems that outperformed competitors with their competitive performance and inspiring results. Public sector companies like SCI, Container Corp, REC, PFC, PTC announced good results while regular giants like NTPC, BHEL and Maruti reported poor results.
1. Allcargo global Logistics: Excellent results. Logistics Company announced 76% increase in sales while net profit rose by 130%. Growth investors need to watch out.
CMP: 456; P/E: 15.5; Book value: 170.
2. Mundra Port and SEZ:
Bumper results. Company announced more than 84% rise in sales while net profit rose by 163%. Mundra port is a must have stock in every "growth investor portfolio". Keep it up. High valuations and huge debt are a concern. Mundra may find it difficult to sustain such high valuations like Educomp and Punj Lloyd despite announcing bumper results.
CMP: 375
3. Deepak Fertilizers:
Excellent results. Company outperformed competitors by announcing 67% rise in sales and 91% increase in net profit. Keep it up. Deepak fertilizers is a safe buy for value investor.
CMP: 47; P/E: 3; Book value: 80.
4. KS Oils:
Wonderful results. Company announced 67% rise in sales while net profit increased by 60%. KS Oils got value creator award from Outlook Money-NDTV Profit. Excellent stock for "growth portfolio".
CMP: 40; P/E: 9 Book value: 20
5. Sun Pharma: Wonderful results. Pharma major announced 24% increase in sales and 56% rise in net profit.
6. Adani Enterprises: Good results. Company reported 76% increase in net profit while sales rose by 21%.
7. Usha Martin: Positive surprise. Comapny announced 40% rise in both sales and net profit.
8. Shipping Corporation of India (SCI): This cash rich giant announced decent results despite turbulent atmosphere in the sector. Company announced 27% increase in sales and 50% rise in net profit. Good value stock like other PSUs.
9. Moser Baer: Company reported 42% rise in sales. Net loss of Rs 42 crore Vs net profit of 3 crore. As I mentioned in my previous posts, this is a not a stock for short term investors as it posts losses for some more quarters. Only long term visionary investors should accumulate this stock on every fall. Positives are Photovoltaic business sales and less losses than Q1.
Decent results: Torrent Power, PSL, Page Industries, Zicom Electronic Systems, Jai Corp, Godawari power, Unity Infraprojects, Bata India, ICRA, Union bank,
Poor results: TV18 India, KLG Systel, Kalpataru Power transmission, Thermax, SPEL Semiconductor, ADLABS, United Breweries, Godrej Consumer Products, Phillips Carbon Black, Batliboi, IL&FS Investment, Binani Cement, Central Bank of India, REI Agro, Minda Industries, Jet Airways, INOX Leisure, Su-Raj Diamonds, Arvind, Dish TV, Bharat Forge and Pidilite industries.
Important dates:
1. Record date for Jindal Drilling stock split: November 14.
2. Crucial results: State Bank of India and ICICI Bank will announce results which will give some idea about the ICICI financial status.
Must read:
1. Business Standard analysis on Q2 results.
Final verdict: Small and new investors should stay away from stock markets. If you underestimate this market, no one will save you. 9 out of top 10 highest one day rallies occurred during 1929 depression. Experienced investors should patiently wait for such rallies as long as this bear market exits.
Source: Stock Market Guide
Top 10 fastest growing small companies in India
Growth is the only way listed companies generate wealth and value for their shareholders and other stakeholders, including employees. The younger and smaller the company, easier it is to grow. And the earlier you are able to pick future leaders, the better it is for you. In fact, during the last bear run, which ended in early 2003, many small companies gave double-digit annual returns on a consistent basis, even as frontline companies remained grounded.
ETIG has come out with its 2008 edition of fastest-growing small companies. Last year's list was dominated by companies from the then hot sectors such as real estate, capital goods and construction, with a sprinkling of IT companies. However, the toppers this time are now from less cyclical and asset-light sectors, especially infotech.
Take a look at the top 10 fastest-growing small companies:
ICSA India
This is the new face of the Indian IT industry — companies offering niche product and services with a clear differentiating factor. ICSA offers supervisory control and data acquisition (SCADA)-based IT solutions to power companies.
ICSA India had a market cap of Rs 1,305.2 crore (the average for September '08), besides having an average return on capital employed (RoCE) of 67.8% and interest coverage ratio (ICR) of 132.7, for the preceding three years.
Also, its compound average growth rate (CAGR) in sales and net profit for the preceding three years stood at 214.8% and 210%, respectively.
It is also engaged into merchant export of iron ore fines to China. The company is a member of CAPEXIL, FIEO and FIMI and is a recognized star trading house. At present, the company has run-of-mines contracts for two mines situated at Nuagaon and Maharajpur in Orissa.
Resurgere Mines' market cap (average for September '08) stood at Rs 733.5 cr, while the three-year average RoCE was recorded at 100.2% and ICR at 32.8. Its sales recorded a three-year compound average growth rate of 81%, while the CAGR of profit after tax stood at 561.4%.
The success of Sharon Bio-Medicine lies in its ability to expedite pace of product development by streamlining the processes and inculcating a culture of operational excellence. It offers contract research and manufacturing services for global pharmaceutical companies.
Since its inception, the company has carved its niche by offering a distinct value proposition to its customers.
Sharon had a market cap of Rs 101.7 crore (the average for September '08). Its three-year average RoCE stood at 30.8 % and ICR at 747.8. Its sales recorded a three-year compound average growth rate of 93.3%, while the CAGR of profit after tax stood at 254.2%.
Tanla Solutions develops value-added solutions for mobile phones. It offers end-to-end mobile commerce, mobile entertainment, mobile internet and mobile advertising solutions.
Tanla is a global provider of mobile commerce, mobile entertainment, mobile marketing and advertising solutions to the telecommunications, media and digital content industries. It has the distinction of being one of the first Indian companies to focus on integrated solutions and products for the wireless world.
With an average market cap of Rs 1,906.9 crore in September '08, the company's three-year average RoCE stood at 51.1% and ICR at 15.8. Moreover, its sales recorded a three-year CAGR of 173.8%, while the CAGR of profit after tax stood at 189.8%.
Northgate Technologies Limited
The corner stone capabilities of Northgate Technologies' business are infrastructure (high capacity, highly scalable server farm), services (internet advertising tracking tool, instant messaging, short messaging, net telephony, global content delivery, video streaming, social networking, file sharing and downloading, gaming and many more), and monetization (mass monetization through fast growing global internet advertising industry).
Its core strengths of world-class server farm infrastructure, a rapidly-expanding global content distribution platform, popular internet properties, partnership with large web communities and own advertising network differentiates it from other peers who operate in only sector, the company claims.
Northgate Tech's market cap (average for September '08) stood at Rs 904.9 crore, while the three-year average RoCE was recorded at 31% and ICR at 1141.4.
Its sales recorded a three-year compound average growth rate of 102.1%, while the CAGR of profit after tax stood at 110.9%.
Venus Remedies India is a research and development driven, pharmaceutical manufacturing company. The company is constantly working to broaden the pipeline of products and to make a impact in the international markets.
It has two manufacturing locations in India and one in Germany. Venus is a manufacturer of oncological and cefelosporine injectable products following EU-GMP norms for all is activities.
The company had a market cap of Rs 316.9 crore (the average for September '08), besides having an average return on capital employed of 43.2% and interest coverage ratio of 59.5, for the preceding three years.
Also, its compound average growth rate in sales and net profit for the preceding three years stood at 84.4% and 117.5%, respectively.
Geodesic Limited
ETIG has come out with its 2008 edition of fastest-growing small companies. Last year's list was dominated by companies from the then hot sectors such as real estate, capital goods and construction, with a sprinkling of IT companies. However, the toppers this time are now from less cyclical and asset-light sectors, especially infotech.
Take a look at the top 10 fastest-growing small companies:
ICSA IndiaThis is the new face of the Indian IT industry — companies offering niche product and services with a clear differentiating factor. ICSA offers supervisory control and data acquisition (SCADA)-based IT solutions to power companies.
ICSA India had a market cap of Rs 1,305.2 crore (the average for September '08), besides having an average return on capital employed (RoCE) of 67.8% and interest coverage ratio (ICR) of 132.7, for the preceding three years.
Also, its compound average growth rate (CAGR) in sales and net profit for the preceding three years stood at 214.8% and 210%, respectively.
Allied Digital provides remote infrastructure management and systems integration in the domestic market. It is a leading IT Infrastructure management and technical support services outsourcing company.
It enables global, large and medium enterprises and service providers to reduce their total cost of ownership using a combination of onsite and remote services.
With an average market cap of Rs 1,239.2 crore in September '08, the company's three-year average RoCE stood at 62.8% and ICR at 103.5. Moreover, its sales recorded a three-year CAGR of 79.2%, while the CAGR of profit after tax stood at 211.6%.
As the name suggests, Prime Property Development Corporation is a real estate developer in India, based in Mumbai.
Its properties include information technology parks; commercial units comprising show rooms, shops, and offices; mall projects with anchor shop, shopping complex, multiplex, food court, entertainment area, and a hotel; and commercial-cum-residential projects.
The company had a market cap of Rs 120.2 crore (the average for September '08). Its three-year average RoCE stood at 48.1% and ICR at 394.7. Its sales recorded a three-year compound average growth rate of 86.4%, while the CAGR of profit after tax stood at 185.3%.
Resurgere Mines and Minerals India Ltd
Resurgere Mines and Minerals India Ltd is engaged in the business of extraction and processing of iron ore products, ie lump ore and size ore, and is predominantly a manufacturer of calibrated lump ore (CLO) and iron ore fines.It is also engaged into merchant export of iron ore fines to China. The company is a member of CAPEXIL, FIEO and FIMI and is a recognized star trading house. At present, the company has run-of-mines contracts for two mines situated at Nuagaon and Maharajpur in Orissa.
Resurgere Mines' market cap (average for September '08) stood at Rs 733.5 cr, while the three-year average RoCE was recorded at 100.2% and ICR at 32.8. Its sales recorded a three-year compound average growth rate of 81%, while the CAGR of profit after tax stood at 561.4%.
The success of Sharon Bio-Medicine lies in its ability to expedite pace of product development by streamlining the processes and inculcating a culture of operational excellence. It offers contract research and manufacturing services for global pharmaceutical companies.Since its inception, the company has carved its niche by offering a distinct value proposition to its customers.
Sharon had a market cap of Rs 101.7 crore (the average for September '08). Its three-year average RoCE stood at 30.8 % and ICR at 747.8. Its sales recorded a three-year compound average growth rate of 93.3%, while the CAGR of profit after tax stood at 254.2%.
Tanla Solutions develops value-added solutions for mobile phones. It offers end-to-end mobile commerce, mobile entertainment, mobile internet and mobile advertising solutions.Tanla is a global provider of mobile commerce, mobile entertainment, mobile marketing and advertising solutions to the telecommunications, media and digital content industries. It has the distinction of being one of the first Indian companies to focus on integrated solutions and products for the wireless world.
With an average market cap of Rs 1,906.9 crore in September '08, the company's three-year average RoCE stood at 51.1% and ICR at 15.8. Moreover, its sales recorded a three-year CAGR of 173.8%, while the CAGR of profit after tax stood at 189.8%.
Northgate Technologies LimitedThe corner stone capabilities of Northgate Technologies' business are infrastructure (high capacity, highly scalable server farm), services (internet advertising tracking tool, instant messaging, short messaging, net telephony, global content delivery, video streaming, social networking, file sharing and downloading, gaming and many more), and monetization (mass monetization through fast growing global internet advertising industry).
Its core strengths of world-class server farm infrastructure, a rapidly-expanding global content distribution platform, popular internet properties, partnership with large web communities and own advertising network differentiates it from other peers who operate in only sector, the company claims.
Northgate Tech's market cap (average for September '08) stood at Rs 904.9 crore, while the three-year average RoCE was recorded at 31% and ICR at 1141.4.
Its sales recorded a three-year compound average growth rate of 102.1%, while the CAGR of profit after tax stood at 110.9%.
Venus Remedies India is a research and development driven, pharmaceutical manufacturing company. The company is constantly working to broaden the pipeline of products and to make a impact in the international markets.It has two manufacturing locations in India and one in Germany. Venus is a manufacturer of oncological and cefelosporine injectable products following EU-GMP norms for all is activities.
The company had a market cap of Rs 316.9 crore (the average for September '08), besides having an average return on capital employed of 43.2% and interest coverage ratio of 59.5, for the preceding three years.
Also, its compound average growth rate in sales and net profit for the preceding three years stood at 84.4% and 117.5%, respectively.
Geodesic LimitedGeodesic operates in a niche area of developing various innovative products in the information, communication and entertainment space. Its product-list is versatile and all-encompassing when it comes to offering choice of communication and collaboration solutions to its users, whether it is the inherently simple hand-held Simputer to web-based mobile & wireless applications to the intricately complex Engage Spyder applications.
Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year, according to the company.
With an average market cap of Rs 1,511.5 crore in September '08, the company's three-year average RoCE stood at 31.1% and ICR at 1027.3.
Moreover, its sales recorded a three-year CAGR of 98.9%, while the CAGR of profit after tax stood at 98.2%.
Info Edge (India) Ltd
Geodesic's mix of innovative products and high performance solutions has driven the company to profit right from its first year, according to the company.
With an average market cap of Rs 1,511.5 crore in September '08, the company's three-year average RoCE stood at 31.1% and ICR at 1027.3.
Moreover, its sales recorded a three-year CAGR of 98.9%, while the CAGR of profit after tax stood at 98.2%.
Info Edge (India) LtdThe company is a leading provider of online recruitment, matrimonial & real estate classifieds and related services in India.
Its business is managed primarily through four divisions, which comprise online recruitment classified division, online matrimonial classified division, online real estate classified division and offline executive search division.
Info Edge's market cap (average for September '08) stood at Rs 2,056.7 crore, while the three-year average RoCE was recorded at 60.4% and ICR at 11.4.
Its sales recorded a three-year compound average growth rate of 70.6%, while the CAGR of profit after tax stood at 451.8%.
Its business is managed primarily through four divisions, which comprise online recruitment classified division, online matrimonial classified division, online real estate classified division and offline executive search division.
Info Edge's market cap (average for September '08) stood at Rs 2,056.7 crore, while the three-year average RoCE was recorded at 60.4% and ICR at 11.4.
Its sales recorded a three-year compound average growth rate of 70.6%, while the CAGR of profit after tax stood at 451.8%.
Source: Economic Times
Similar Articles:
Defensive Investment Strategy - Best to adopt in Bear Market
With the Indian equity markets on a downhill, investors are left with no other option but to be on the defensive. And why not? Defensive sector stocks are the safest place to park your funds in these volatile times.The growth prospects appear bright and the consumer discretionary sector has been least impacted by the current slowdown. History is also on its side. Consumer stocks have always performed better when the times have been uncertain and journey tough. Here's an insight into why it makes sense to invest in consumer stocks, and how they can help you sail through the rough waters ahead.
For the uninitiated, defensive stocks are essentially companies that tend to perform steady under complex economic conditions. The stocks are usually from sectors such as FMCG and healthcare that are considered to be less risky than sectors such as capital goods, banking and automobile. Elaborates Mukesh Gupta, director of Wealthcare Securities: "These stocks generally belong to diverse sectors and are difficult to define. They can be divided on the basis of products into personal care, processed food and household products.
Inherently, these stocks are less volatile, don't get influenced considerably by short-term market trends and their prices fall less in the event of a downturn." Take for instance, the performance of consumer stocks such as Hindustan Unilever, Colgate-Palmolive (India), Nestle India and Sun Pharmaceutical Industries in the last three months. These stocks have all delivered single or double digit three-month returns on the BSE, even as stocks from other sectors are offering negative or little returns during the said period. Analysts advise that investors should typically increase their exposure to consumer stocks during bear attack, since these stocks tend to underperform during a bull run. Currently, most of the consumer stocks are quoting at one-year lows.
The numbers are pretty encouraging. The FMCG market has been growing more than 10% growth since 2005 and is expected to grow at a compounded annual growth rate of 10-12 % over the next few years.
The penetration of many product categories in the segment is still low, and thus, the growth potential of the FMCG industry looks promising.
Growth of agricultural income year-on-year ensures bright prospects for penetration into the rural areas as that segment has been by far the least penetrated. With a constant increase in the per capita income over the last five years, the Indian consumer is headed for a better life-style.
Since the per capita income in India is much lower than the other developed world, the potential for growth is very high.
According to financial planners, investors should ideally allocate around 20% of their core portfolio in consumer discretionary stocks in current times. The portfolio allocation, however, is subject to change depending on the market dynamics.
Considering the bloodbath has punished sectors across the board, consumer stocks have provided a safe haven for investors in the last few months.
This is one sector, feel analysts, which will not disappoint in major turbulence. CNX FMCG index has given an average return of around 18% in the last five years. You can expect a return of 15-18% in this sector. However, keeping in mind the current scenario, when investing in equity, you should have a minimum investment horizon of three to five years.
Favourable demographics, higher income level, low penetration and growing per capita consumption.
India's per capita consumption remains the lowest in the world across categories.
Strong rural growth backed by higher agricultural incomes and increase in the value of land which is leading to more money in the hands of farmers.
The good monsoon augurs well for the sector as it would help keep rural growth intact.
Increase in pricing power as most companies have passed on the cost push inflation to consumers via a judicious blend of price hikes, package size reduction and change in product mix.
Proliferation of retail trade which currently accounts for 5% of sales but is growing at around 25-30%.
For the uninitiated, defensive stocks are essentially companies that tend to perform steady under complex economic conditions. The stocks are usually from sectors such as FMCG and healthcare that are considered to be less risky than sectors such as capital goods, banking and automobile. Elaborates Mukesh Gupta, director of Wealthcare Securities: "These stocks generally belong to diverse sectors and are difficult to define. They can be divided on the basis of products into personal care, processed food and household products.
Inherently, these stocks are less volatile, don't get influenced considerably by short-term market trends and their prices fall less in the event of a downturn." Take for instance, the performance of consumer stocks such as Hindustan Unilever, Colgate-Palmolive (India), Nestle India and Sun Pharmaceutical Industries in the last three months. These stocks have all delivered single or double digit three-month returns on the BSE, even as stocks from other sectors are offering negative or little returns during the said period. Analysts advise that investors should typically increase their exposure to consumer stocks during bear attack, since these stocks tend to underperform during a bull run. Currently, most of the consumer stocks are quoting at one-year lows.
The numbers are pretty encouraging. The FMCG market has been growing more than 10% growth since 2005 and is expected to grow at a compounded annual growth rate of 10-12 % over the next few years.
The penetration of many product categories in the segment is still low, and thus, the growth potential of the FMCG industry looks promising.
Growth of agricultural income year-on-year ensures bright prospects for penetration into the rural areas as that segment has been by far the least penetrated. With a constant increase in the per capita income over the last five years, the Indian consumer is headed for a better life-style.
Since the per capita income in India is much lower than the other developed world, the potential for growth is very high.
According to financial planners, investors should ideally allocate around 20% of their core portfolio in consumer discretionary stocks in current times. The portfolio allocation, however, is subject to change depending on the market dynamics.
Considering the bloodbath has punished sectors across the board, consumer stocks have provided a safe haven for investors in the last few months.
This is one sector, feel analysts, which will not disappoint in major turbulence. CNX FMCG index has given an average return of around 18% in the last five years. You can expect a return of 15-18% in this sector. However, keeping in mind the current scenario, when investing in equity, you should have a minimum investment horizon of three to five years.
Favourable demographics, higher income level, low penetration and growing per capita consumption.
India's per capita consumption remains the lowest in the world across categories.
Strong rural growth backed by higher agricultural incomes and increase in the value of land which is leading to more money in the hands of farmers.
The good monsoon augurs well for the sector as it would help keep rural growth intact.
Increase in pricing power as most companies have passed on the cost push inflation to consumers via a judicious blend of price hikes, package size reduction and change in product mix.
Proliferation of retail trade which currently accounts for 5% of sales but is growing at around 25-30%.
Reliance Industries Limited (RIL) - Results Analysis - Buy
BUY
Price Rs : 1,215
Target Price : Rs1,880
Investment Period : 12 months
Sector : Oil & Gas
Market Cap (Rs cr) : 1,91,255
Beta : 1.1
52 WK High / Low : 3252 / 1197
Avg Daily Volume : 1121594
Face Value (Rs) : 10
Refining boosts Revenues:
Reliance Industries (RIL) delivered good set of numbers for 2QFY2009, which exceeded our expectations. RIL Net Sales clocked yoy growth of 39.8%, while Net Profit increased 7.4% yoy. RIL reported Net Sales of Rs44,787cr (Rs32,043cr) primarily on the back of better realisation registered during the quarter. Realisation improved due to higher crude oil prices. Segment-wise, the Refining and Petrochemical segments’ Gross Sales yoy grew 54.4% and 20% to Rs36,393cr and Rs15,549cr respectively, during the quarter. Crude processing during the quarter was 8.21mn tonnes (8.09mn tonnes), which was marginally higher by 1.48% yoy.
Refining Margins holds on; Petrochemical Margins take a dip:
During the quarter, RIL reported stronger-than-expected GRMs of US $13.4/bbl (US $13.6/bbl). Benchmark complex Singapore Margins, during the quarter, stood at US $5.8/bbl. Thus, RIL managed to earn a spread of US $7.6/bbl, in line with its previous performance. However, Petrochemical Margins declined by 340bp yoy largely due to a significant increase in naphtha prices over the period. However on sequential basis, petrochemical Margins
increased by 160bp qoq resulting in better-than-anticipated Profitability for the segment. Overall Operating Margins were under pressure declining by 359bp yoy to 14.5% during the quarter due to higher raw material prices.
Refining and Marketing (R&M):
The R&M segment continued its good performance and was the key driver of the company’s operating performance. R&M Revenues yoy jumped significantly by 54.4% to Rs36,393cr (Rs23,575cr) primarily on the back of higher crude oil prices. Crude processing during the quarter stood at 8.21mn tonnes (8.09mn tonnes), which was marginally higher by 1.48% yoy. EBIT Margins were under pressure both on yoy and sequential basis, declining by 220bp and 170bp, respectively. RIL reported GRM of US $13.4 per barrel compared to benchmark Singapore Margins of US $5.8 per barrel, resulting in premium of US $7.6 per barrel. In spite of the significant reduction in crude oil prices from its peak during the quarter, RIL did not clock inventory losses on account of superior inventory management.
Petrochemicals:
Petrochemical segment revenues increased 20% yoy to Rs15,549cr (Rs12,961cr) primarily due to the increase in raw material prices during the quarter. Naphtha prices, during the quarter jumped significantly, which is the base raw material for all petrochemical products. Thus, higher naphtha prices impacted RIL’s Petrochemical EBIT Margins, which declined by 340bp to 12.2% (15.6%) though sequentially it moved up by 160bp. Production of petrochemical products increased from 9.8mn tonnes to 10.0mn tonnes, registering a yoy increase of 2%.
Exploration and Production (E&P):
RIL made two gas discoveries in KG basin during the quarter and commenced production of crude oil from KG D6 in mid September. Initial production was 5,000 barrels per day, which has now increased to 10,000 barrels per day. Development work of the gas from D1 and D3 fields (from KG-D6 block) is underway and production is likely to commence from 4QFY2009.
Increased capex towards E&P: During 3QFY2008, RIL incurred capex of Rs11,401cr, majority of which is spent on the Oil and Gas business.
RPL Refinery – 97% work completed: RPL’s upcoming refinery has achieved 97% completion, although the deadline is set for December 2008. The refinery is progressing rapidly and in expected to get operational ahead of schedule.
Reliance Retail: Reliance Retail launched two new formats during the quarter: Reliance Living Homeware and Reliance Home Kitchens. RIL has entered into exclusive pan-India franchise arrangements with ‘Hamleys’ toy maker.
Outlook and Valuation
RIL 2QFY2009 results exceeded expectations. Though the company managed better-than-expected numbers in both the Petrochemical and Refining segments, going ahead, anticipated slowdown in the global economy is expected to drag down Margins of both the segments. However, given the superior refining slate and relative strength in middle distillate cracks, we expect premium over Singapore margins to continue going forward. Similarly, due to integrated nature of operations, RIL is likely to be lesser affected due to anticipated slowdown in the Petrochemical segment.
Crude oil production has already commenced in the KG basin and the gas is likely to start flowing from 4QFY2009. Given the demand-supply equation of gas in the country along with low domestic gas prices, we believe there will be no impact of lower crude oil prices on the company’s gas business. In fact, the company’s gas business reduces its overall risks.
In the E&P segment, RIL expanded its international E&P footprint to Kurdistan, Oman, Yemen, Columbia, East Timor and Australia in addition to its rich domestic acreage. We believe that the upcoming E&P and Retail business will further enhance the company’s value.
We are valuing RIL on P/E basis shifting from SOTP-based valuation. We believe P/E-based valuations tend to capture fair value amidst the scenario of economic downturn. Based on our FY2010E EPS of Rs170.9 per share and Target P/E multiple of 11x, we ascribe fair value of Rs1,880 to the RIL stock. We maintain a Buy on RIL.
Zee News - Results Analysis - Buy Recommendations
Zee News
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs61
Current market price: Rs33
Price target revised to Rs61
Result highlights
*
For Q2FY2009 Zee News Ltd (ZNL) has delivered an excellent performance, which is in line with our expectations. The company's portfolio of channels continued its stupendous performance with the overall revenues for the quarter growing by a smashing 60% year on year (yoy) to Rs127.7 crore.
*
The advertising revenues grew by 60.8% yoy to Rs101.3 crore and the subscription revenues surged by 56.1% to Rs23.4 crore during the quarter. A break-up of the revenues into the existing and new channel (Zee Telugu, Zee Kannada, Zee 24 Taas and Zee Talkies) baskets shows that the revenues of the former grew by 44.7% and that of the latter zoomed by 226.4%. The revenue growth for the quarter was thus broad-based.
*
The operating profit margin (OPM) improved by 328 basis points yoy to 16.6%. Hence, the operating profit grew by a handsome 99.5% to Rs21.1 crore. The margin of the existing business basket continues to be healthy at 31.1% whereas the operating loss in the new business basket has come down from Rs16.8 crore in Q1FY2009 to Rs11.2 crore for the quarter. The lower loss for the quarter is commendable as it includes the start-up losses to the tune of Rs5.46 crore incurred towards Zee Tamil (launched on October 12, 2008) and Zee 24 Ghantalu (a Telugu news channel to be launched in November 2008). Zee Telugu broke even during the quarter and Zee Kannada is expected to break even by the end of FY2009. Both the channels witnessed a sharp increase in viewership during the quarter. As a result, the net profit of ZNL grew by a good 105.1% yoy to Rs11.5 crore during the quarter.
*
We believe the improvement in the profitability of Zee Telugu and Zee Kannada augurs well for the overall profitability of the company, as Zee Tamil and Zee 24 Ghantalu would add to the losses from the new business basket on account of their gestation periods.
*
We like ZNL for its presence across Indian regional language markets in the news and general entertainment space. Its regional channels are increasingly becoming popular with the masses on account of which ZNL shall experience a strong traction in its advertisement and subscription revenues going ahead.
We also like ZNL’s strategy of expanding step by step (first stabilising the existing channels and then launching new channels). We believe ZNL is the best pick in the media and entertainment space, and maintain our Buy recommendation on the stock with a revised price target of Rs61. At the current market price the stock trades at attractive valuation of 10.7x FY2010E earnings per share (EPS) of Rs3.1.
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs61
Current market price: Rs33
Price target revised to Rs61
Result highlights
*
For Q2FY2009 Zee News Ltd (ZNL) has delivered an excellent performance, which is in line with our expectations. The company's portfolio of channels continued its stupendous performance with the overall revenues for the quarter growing by a smashing 60% year on year (yoy) to Rs127.7 crore.
*
The advertising revenues grew by 60.8% yoy to Rs101.3 crore and the subscription revenues surged by 56.1% to Rs23.4 crore during the quarter. A break-up of the revenues into the existing and new channel (Zee Telugu, Zee Kannada, Zee 24 Taas and Zee Talkies) baskets shows that the revenues of the former grew by 44.7% and that of the latter zoomed by 226.4%. The revenue growth for the quarter was thus broad-based.
*
The operating profit margin (OPM) improved by 328 basis points yoy to 16.6%. Hence, the operating profit grew by a handsome 99.5% to Rs21.1 crore. The margin of the existing business basket continues to be healthy at 31.1% whereas the operating loss in the new business basket has come down from Rs16.8 crore in Q1FY2009 to Rs11.2 crore for the quarter. The lower loss for the quarter is commendable as it includes the start-up losses to the tune of Rs5.46 crore incurred towards Zee Tamil (launched on October 12, 2008) and Zee 24 Ghantalu (a Telugu news channel to be launched in November 2008). Zee Telugu broke even during the quarter and Zee Kannada is expected to break even by the end of FY2009. Both the channels witnessed a sharp increase in viewership during the quarter. As a result, the net profit of ZNL grew by a good 105.1% yoy to Rs11.5 crore during the quarter.
*
We believe the improvement in the profitability of Zee Telugu and Zee Kannada augurs well for the overall profitability of the company, as Zee Tamil and Zee 24 Ghantalu would add to the losses from the new business basket on account of their gestation periods.
*
We like ZNL for its presence across Indian regional language markets in the news and general entertainment space. Its regional channels are increasingly becoming popular with the masses on account of which ZNL shall experience a strong traction in its advertisement and subscription revenues going ahead.
We also like ZNL’s strategy of expanding step by step (first stabilising the existing channels and then launching new channels). We believe ZNL is the best pick in the media and entertainment space, and maintain our Buy recommendation on the stock with a revised price target of Rs61. At the current market price the stock trades at attractive valuation of 10.7x FY2010E earnings per share (EPS) of Rs3.1.
Deepak Fertilisers & Petrochemicals - Good Dividend Yield with growth - Buy
Deepak Fertilisers & Petrochemicals CorporationCluster: Ugly Duckling
Recommendation: Buy
Price target: Rs169
Current market price: Rs46
Q2FY2009 results: First-cut analysis - Result highlights
*
Deepak Fertilisers & Petrochemicals Corporation Ltd (DFPCL) has reported a strong set of numbers for Q2FY2009 on the back of a significant improvement in realisations in both its business segments.
*
The company’s net sales increased by 70.5% year on year (yoy) to Rs375.1 crore in Q2FY2009 owing to a robust increase in the realisations in both the chemical and fertiliser segments.
o
Chemical segment: The revenues from the chemical segment increased by 62.9% yoy to Rs253.9 crore from Rs155.8 crore in Q2FY2008. The revenues saw a high growth during the quarter primarily because of a significant improvement in the realisations across product categories.
o
Fertiliser segment: The revenues from the fertiliser segment rose by 71.4% yoy to Rs121.2 crore from Rs70.7 crore in Q2FY2008 due to a manifold increase in the manufacturing activity.
o
Realty: During the quarter, the company’s specialty mall for interiors and exteriors, Ishanya, earned revenues of Rs4.0 crore, which was higher compared with the Rs3.1 crore earned in Q1FY2009.
#
The other income declined by 30.2% to Rs4.7 crore in Q2FY2009 from Rs6.8 crore in Q2FY2008 on account of a drop in the interest income. The interest income fell due to the non-availability of surplus funds during the quarter.
#
DFPCL’s operating profit grew by 112.8% yoy to Rs83.8 crore as its operating profit margin (OPM) came in at 22.3%, marking an increase of over 470 basis points compared with 17.6% in Q2FY2008. However, the earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 91.7% yoy to Rs88.5 crore due to a 30% decline in the other income.
*
Chemical segment: The profit before interest and tax (PBIT) of the chemical segment almost doubled to Rs74.9 crore from Rs37.3 crore in Q2FY2008 with the PBIT margin increasing by 550 basis points to 29.5% in Q2FY2009 from 24.0% in Q2FY2008. However, sequentially the PBIT margin declined from 34.7% in Q1FY2009.
*
Fertiliser segment: The fertiliser segment registered a segmental profit of Rs9.5 crore during the quarter as against a loss of Rs1.5 crore in Q2FY2008 and a profit of Rs4.0 crore in Q1FY2009.
#
During the quarter the company booked a foreign exchange (forex) loss of Rs13.0 crore on account of the outstanding external commercial borrowing of $15 million. Cumulatively, the total forex loss for H1FY2009 stood at Rs32 crore.
#
In the second quarter, the interest expenses increased fourfold to Rs13.0 crore as compared with Rs3.1 crore in Q2FY2008 on account of the rising interest rates.
#
During the quarter the company booked an extraordinary loss of Rs1.6 crore; of this Rs1.45 crore was towards the expenditure incurred for brand launching activity and Rs0.16 crore was towards voluntary retirement scheme compensation.
#
Though the H1FY2009 results have been above expectations, the outlook for the second half of FY2009 remains bleak due to the softening in the prices of chemicals, as it may lead to contraction in the company’s realisations going forward.
#
In addition, for FY2009 the company had guided for a revenue target of Rs18 crore from the real estate business. However, the revenues from the real estate business during H1FY2009 stood at Rs7.1 crore. The ongoing slowdown in the real estate sector raises concerns over the company’s ability to achieve its revenue target for FY2009.
#
At the current market price of Rs46, the stock is trading at 3.4x its FY2009E earnings per share (EPS) and 2.6x its FY2010E EPS. At the current market price and dividend (Rs3.5 per share in FY2008), the stock provides a dividend yield of over 7%, offering a healthy margin of safety for the investor. We maintain our Buy recommendation on the stock.
BHEL - Results Analysis - Safe stock in bear market - Buy Recommendation
Bharat Heavy ElectricalsCluster: Apple Green
Recommendation: Buy
Price target: Rs1,546
Current market price: Rs1,100
Result highlights
*
The Q2FY2009 results of Bharat Heavy Electricals Ltd (BHEL) were a mixed bag. While the revenues reported were higher than our estimate, the profit was in line with our expectation.
*
The revenues of the company grew by 34.7% to Rs5,342.6 crore during the quarter led by a strong 33.4% growth in the power segment revenues. The industry business has reported a 20.4% growth in its revenues to Rs1,496.1 crore. A favorable exchange rate movement also contributed positively (about 7-8%) to the sales.
*
The operating profit of the company increased by 2.2% to Rs710.7 crore. The operating profit margin (OPM) stood at 13.3%. The OPM contracted by 423 basis points on a year-on-year (y-o-y) basis mainly due to a sharp 498-basis-point y-o-y increase in the raw material cost as a percentage of sales to 59.5%.
*
The company would be providing Rs1,313 crore during FY2009 for the wage revision. Of this, Rs547 crore has already been provided for in H1FY2009 and the remaining amount would be provided in H2FY2009.
*
The adjusted net profit of the company was up by 8.6% to Rs615.8 crore during the quarter as against our estimate of Rs635.3 crore.
*
The company has booked Rs14,798 crore worth of orders in the quarter under review taking the total outstanding order book of the company to Rs104,000 crore, which translates to a book to bill ratio of 4.8x based on FY2008 revenues.
*
We have changed our earnings estimates for BHEL mainly to factor in the higher revenue growth and a higher employee cost on account of wage revision. Consequently we have revised downwards our earnings estimate for FY2009 by 8.8% to Rs67.1 per share and the earnings estimate for FY2010 by 4.7% to Rs96.6 per share.
*
We maintain Buy recommendation on the stock with a revised price target of Rs1,546 per share. At the current market price the stock is trading at 16.4x and 11.4x FY2009E and FY2010E earnings respectively.
ITC - FMCG Giant - Results Analysis - Buy Recommendation
ITCRecommendation: Buy
Price target: Rs247
Current market price: Rs159
Q2FY2009 results: First-cut analysis
Result highlights
*
Q2FY2009 results of ITC were marginally ahead of our expectations. The top line achieved a robust growth of 16.4% year on year (yoy) to Rs3,862.7 crore (in line with our expectation of Rs3,815.7 crore) on account of strong revenue growth in the cigarette and paper boards, paper & packaging businesses.
*
The operating profit margin (OPM) contracted by 109 basis points yoy to 31.5% during the quarter. The OPM fell mainly because of a 401-basis-point surge in the other expenses as a percentage to sales and a 35.8% year-on-year (y-o-y) growth in the employee expenses. However a 380-basis-point decline in the raw material cost as a percentage to sales has prevented a steeper decline in the OPM. Thus the operating profit grew by 12.5% to Rs1,215.4 crore during the quarter.
*
However a 31% y-o-y drop in the other income led to measly 4.1% growth in the adjusted net profit to Rs802.7 crore (ahead of our expectation of Rs779.4 crore).
*
The net revenues of the cigarette business registered a healthy growth of 15.1% to Rs1,812.1crore during the quarter. We believe the growth in the cigarette revenues is on account of the price hikes implemented across the portfolio and due to substantial up-gradation of the non-filter cigarette smokers to filter cigarettes, which restricted the de-growth in volumes. The profit before interest and tax (PBIT) margin of the cigarette business improved by 135 basis points yoy to 27.8% during the quarter.
*
On the other hand the non-cigarette fast moving consumer goods business registered a below-par revenue growth of 29.8% for the quarter. The segmental loss increased to Rs116.6 crore in Q2FY2009 (a margin loss of 15.3%) as against Rs36.5 crore in Q2FY2008 primarily due to spends on building scale in the newly-launched personal care product category and due to overall input cost inflation.
*
We believe the cigarette business has performed satisfactorily in H1FY2009 considering the fact that the company has exited from the non-filter cigarette business. However the government’s measures to curb cigarette consumption (such as ban on cigarette smoking in public places and carrying pictorial warnings on cigarette packs) does not augur well for ITC’s cigarette business.
*
At the current market price of Rs159 the stock trades at 16.8x its FY2009E earnings of Rs9.5 and 14.0x FY2010E earnings of Rs11.4. We maintain our Buy recommendation on the stock. We shall come up with a detailed update after an interaction with the management.
Hindustan Unilever (HLL) - Financial Results Analysis and Buy Recommendation
Hindustan UnileverCluster: Apple Green
Recommendation: Buy
Price target: Rs280
Current market price: Rs225
Q3CY2008 results: First-cut analysis
Result highlights
*
The Q3CY2008 performance of Hindustan Unilever Ltd (HUL) is better than expectations. The net sales of the company are in line with our estimate whereas the operating profit margin (OPM) is above our estimate.
*
During the quarter, the net sales grew by 21.1% year on year (yoy) backed by a 6.8% volume growth in the domestic fast moving consumer goods (FMCG) business as well as a price led growth.
*
The home and personal care (HPC) segment (accounting for 74% of HUL’s total sales) registered a strong growth of 23.1% in sales to Rs3,035.9 crore. Within the HPC segment, the soap and detergent sales grew by 26% yoy to Rs1,986 crore driven primarily by price increases. The personal care business registered a sales growth of 18% yoy to Rs1,049.6 crore with a much higher growth in the volumes.
*
However, the profit margin was under pressure during the quarter and the same was expected in view of the raw material price escalation. Consequently, the profit before interest and tax (PBIT) margin of the HPC segment declined from 19.4% in Q3CY2007 to 17.3% for the quarter, with the margin in the soap and detergent business sliding by 315 basis points yoy to 13.5% and that in the personal care business dropping by 21 basis points yoy to 24.3%.
*
The sales of the food segment (contributing 16.2% of total sales) grew by 18.7% yoy to Rs662.7 crore with the sales of processed foods, ice creams and beverages increasing by 34.5%, 25.3% and 12.9% respectively. The overall PBIT margin of the foods portfolio declined by 56 basis points to 10.2%.
*
As a result, the OPM of HUL stood at 13.6% in Q3CY2008 against 14.1% in Q3CY2007. The drop in the margin is attributable to a higher raw material cost and an increase in the other expenses during the quarter. However, the advertising spends were kept under control and the same increased by only 14% yoy. As a result, the operating profit for the quarter grew by 16.5%. *
A 35.3% lower other income at Rs47.4 crore restricted the growth in the adjusted net profit to 12.2%.
*
An extraordinary gain (after tax of Rs87 crore) primarily on sale of properties led to a 34% jump in the reported profit to Rs546.6 crore.
*
We believe with the considerable softening in the prices of the key commodities (inputs for HUL) in recent weeks, the pressure on the margin of the company would ease in the coming quarters, thereby boosting the company’s profitability. At the current market price of Rs225 the stock trades at 20.3x its FY2010E earnings per share (EPS) of Rs11.1. We maintain our Buy recommendation on the stock. We shall follow this report with a detailed note after our interaction with the company. Keep visiting www.IndianStocksNews.com for more information on HLL and stock market related information.
Results analysis - Dolphin Enterprises - Tata Steel - Alstom Projects - PTC - Meghmani - KSB - LUPIN
| Negative surprises came from heavy weights like BHEL, Maruti and JSW Steel etc. Positive surprises are coming from mid caps and niche stocks. FMCG is a safe bet in any bear market.  1. Dolphin Offshore Enterprises: Bumper results. Company announced 148% rise in sales and 1452% increase in net profit. Good scrip for "growth portfolio". CMP: 128; P/E: 4.8; Book value: 80. 2. Alstom projects India:  Wonderful results. Company announced 47% increase in sales while net profit rose by 143%. Very good performance. Punj Lloyd, Crompton Greeves and Larsen are other good picks. BHEL gave a negative surprise in Q2. CMP: 210.5; P/E: 19 3. Shriram transport Finance:  Good results. NBFC reported 58% increase in sales and 79% rise in net profit. Keep it up. CMP: 206.6; P/E: 8.8; Book value: 90. 4. Rural Electrification Corporation (REC):  Safe investment. PSU announced 35% increase in both sales and net profit. REC is a must have scrip in every "Value investor portfolio". CMP: 63.3; P/E: 6; Book value: 65. 5. Gujarat State Petronet: Good results. Sales rose by 24% while profit increased by 74%. 6. Tata Steel: Good results. Steel giant reported 43% rise in sales and 50% increase in net profit. Steel prices and demand will decline in the coming months. How will it tackle? Good performance but other income is the main reason. 7. PTC India:  Good results. PSU announced 38% increase in sales and 187% increase in net profit. PTC is a must have stock in every "value portfolio". CMP: 47.8; P/E: 18; Book value: 65. 8. KSB Pumps: Good results. Company reported 26% rise in sales and 167% increase in net profit. 9. Meghmani organics: Wonderful results. This pigment company announced 47% increase in net sales while net profit rose by 67%. CMP: 10.75; P/E: 6; Book value: 16 10. Lupin announced 53% increase in net profit. Safe pharma stock in bear market. Decent results: Hindustan Unilever, Zee News, Asian Paints, AP Paper Mills, Webel Sl Energy, Punjab Chemicals, Graphite India, SRF, Monsanto India, Sterling Bio-tech, PVR, Torrent Pharma, Colgate-Palmolive, Dishman Pharma, CRISIL, Aditya Birla Nuvo, Usha Martin, Tamilnadu Newsprint, Fulford and Jyothi Structures. Disappointments: NTPC, BHEL, ABB, Maruti Suzuki and ITC. Positive surprise: HCC and GE Shipping. Will they keep up this good performance? GE shipping may find it difficult. Poor results: GSK Pharma, Rain Commodities, Jain Irrigation, GMDC, Kalyani Steels, HEG, Great Offshore, Gammon India, Nirma, JMC Projects, Greaves Cotton, Bank of Maharashtra, Balaji telefilms, Insecticides India, Tata Metaliks, Bharat Electronics, Garware Offshore, Ambuja Cements, JSW Steels, Shah Wallace, MIRC Electronics, Varun Shipping and Eastern Silk. Must read: 1. 5 myths about the election and the stock market. Where is the bottom? 1. Fundamentals and growth prospects justify 8,000-8,500 levels as most of the companies are announcing poor results and this bad performance will continue in the next quarter also. Only positive aspect is even good companies are also falling along with bad stockss. Concentrate only on those stocks. SIP based investment is better. One should not have a single bad stock in the portfolio. 2. FIIs: Fundamentals will not play any role in this market. Future market course will depend on FIIs. They are just selling with huge losses means they are in desperate need for money. They will sell whenever a opportunity is available. They just need money to pay back at home. Stock markets will find bottom when they stopped selling. When will they stop selling? No one knew including FIIs. 3. Gold: Generally gold rises when stock markets fell. But gold is also falling. It indicates either liquidity problems or crisis in confidence. Cash is king. People just want to sit on cash. Final verdict: Don't try to find logic in this market. Everything will depend on foreign investors and their desperate need for money. No new FII will enter into India when our rupee is at Rs 50 levels. Hedge funds are another problem. Things are changing at an alarming pace. Monitor the situation on day to day basis. New investors should stay from stock markets. Stock Market prediction: BSE Sensex will touch 21,000 levels may be in late 2011. Those who entered at 21,000 levels in January, 2008 need to wait for another 30-40 months. We will get a clear picture by January, 2009. Except stock investors, Indians have not seen the real effects of current economic crisis. Real crisis will be unfolded on Indians in the next 2 months. Stock markets always act earlier than other investment segments. Lucky people who are sitting on cash and those who can wait for 2-3 years will get unbelievable investment opportunities across all financial segments in the coming months. These people are the next millionaires. Do you have cash? Where is the investment opportunity? Many niche stocks are corrected by more than 80% and these companies announced wonderful results in this quarter. FIIs will continue to sell their holdings in these stocks just out of necessity. Long term investors should concentrate on these scrips and accumulate them in SIP manner. When will you get outstanding companies at such a very low valuations? 100% growth stocks at a P/E of 4-5. But these scrips are only for long term investors. They will not participate in the short term rallies but provide good investment opportunities for long term. Very few stocks in other sectors like Punj Lloyd, Crompton Greeves, Sintex, Titan, Texmaco and Axis Bank etc also announced good results in the September quarter. Closely follow the Q2 results and pick 20-30 best scrips that includes value stocks, growth companies and niche companies and build a great portfolio by accumulating on every fall. Big hope: Indian Government asked LIC, UTI and other Public Sector investment institutions to buy stocks aggressively to arrest stock market fall. Will they succeed? Big negative: There will be an unimaginable meltdown in the real estate sector which will erode the wealth of big and small investors. Speculative investors are the worst sufferers. Some people in this generation may pay heavy price for their greed or lack of knowledge on the cyclic nature of real estate sector. China is already suffering from real estate meltdown. Source: Stock Market Guide |
Quarterly results analysis - Punj Lloyd - Everest Kanto - Gail - Selan Oil - Birla Power - Tanla Solutions
|
1. Punj Lloyd: Bumper results. Company announced 52% rise in sales while net profit increased by 180%. Punj Lloyd is a must have stock in every "Growth investor portfolio". CMP: 164.7; P/E: 17.5; Book value: 80.  2. Everest Kanto Cylinder: Superb results. Company announced 35% increase in sales while net profits rose by 56%. This is a must have stock in any "Emerging portfolio". High valuations are a big concern. Buy on dips. CMP: 178; P/E: 34; 3. GAIL: Superb results. Company reported 36% rise in sales while net profit increased by 78%. GAIL is a safe bear market stock and must have stock in every "value portfolio".  4. Selan Exploration Technology: Outstanding results. Company announced 326% rise in sales and 578% increase in net profit. Only problem with scrip is "It is a Z category stock". Risk is high- returns are high. Take your call. This stock will become a Multibagger if it comes out of Z category. CMP: 164.5; P/E: 6.5 5. Birla Power: Positive surprise. Company announced 24% increase in sales while net profit rose by 58%.  6. Tanla Solutions: Wonderful results. This mobile VAS Company announced 60% rise in sales and 42% increase in net profit. Tanla is a must have stock in any "Emerging portfolio". Strong balance sheet with zero debt but this scrip is not for short term investors. CMP: 91.5; P/E: 8.5; Book value: 58. 7. Reliance Industries: Decent results. Petrochemical giant reported 40% rise in sales while net profit increased by 7%. Unless it resolves court case with RNRL, this stock may find it difficult to make new highs. Like Larsen and Toubro, subsidiaries are Reliance strength. When will they unlock value? CMP: 1217; P/E: 9.5; Book value: 510. 8. Jindal South West Holdings: This NBFC announced good results. 82% increase in sales and 90% rise in net profit. CMP: 286; P/E: 10.5; Book value: 523. Decent results: BOC India, Voltas, Unichem Laboratories, Sesa Goa, Gateway Distriparks, Exide Industries, Malar Hospitals, Zee News, Garware Offshore, Monnet Ispat, Praj Industries, ICI (India), Cummins India, Infotech Enterprises, Ajantha Pharma, Dena Bank, City Union Bank, Wyeth, Indowind Energy, Kalindee Rail Nirman, 3i Infotech, Patni Computer Systems, Hercules Hoists, Rajshree Sugars and TCI. Poor Results: Dabur Pharma, Rajesh Exports, Jaiprakash Hydro-Power, Sadhbav Engineering , Bharat Bijlee, Kirloskar Brothers, ACC, Grasim, Jyothy Laboratories, Vijaya Bank, Edelweiss Capital, Dr Reddys, Essel Propack, KEC International, Morepan Labs, Apollo Tyres, Gujarat Alkalies, Hindustan Oil Exploration, Sterlite Industries, Hotel Leela, CEAT, Hinduja Ventures, Alfa-Laval (India), Lanco Industries and Madras Cements. Note: Concentrate only good companies which are announcing outstanding results. But forget about the results of real estate and IT companies. Source: Stock Market Guide |
Quarterly results analysis - Educomp - Core projects - NOCIL - Manglore chemicals
Niche companies are announcing good results while old horses like Cipla and TCS reported poor results. Q2 results are giving signals about economic slowdown and shrinking margins due to high interest rates. Next quarter results will indicate about decrease in consumption. 1. Educomp Solutions:  Bumper results but high valuations which is a risky thing in bear market. Company announced 118% rise in sales while net profit net profit increased by 86%. Accumulate in small lots. Ideal bear market price even by Educomp standards is around 1200-1500. Will it touch those levels? This is a must have stock in every "growth investor portfolio". CMP: 1811; P/E: 39. 2. GEI Industrial Systems:  Wonderful results. Company reported 56.5% increase in sales while net profit rose by 70%. CMP: 40.3; P/E: 5.5; Book value: 44.7 3. Core Projects:  Bumper results. Company reported 82% increase in sales while net profit rose by 81%. This stock was corrected (250-45) heavily due to selling by both promoters and Kotechas. I will buy now and continue to accumulate without hesitation for long term. I believe in the future prospects of education domain. CMP: 45; P/E: 8.2; Book value: 37.4 4. Transformers and Rectifiers:  Wonderful results and positive surprise. Company announced 56% increase in both sales and net profit. CMP: 147.4; Book value: 150. 5. Harrisons Malayalam: Company announced very good results due to high rubber prices in the last quarter. 74% increase in sales and 234% rise in net profit. 6. Mangalore Chemicals: Wonderful results. Company announced 106% increase in sales while net profit rose by 77%. Huge debt is a problem. CMP: 11.9; P/E: 3.6; Book value: 23.6  7. NOCIL: Bumper results. Company announced 57% rise in sales while net profits rose by 873%. CMP: 14; P/E: 10.9; Book value: 21. 8. TFCI: Wonderful results. Company announced 45% increase in sales and 257% rise in net profit. Can it tackle the slowdown in tourism projects? CMP: 13.6; P/E: 4.3; Book value: 33. Decent results: Agro Tech Foods, Hikal, Indraprastha Medical Corporation, Himatsingka Seide IDFC, Cadila Healthcare, AIA Engineering, Reliance Infrastructure, Oriental Bank of Commerce, Yes Bank, PSI Data Systems, Bank of India, Pantaloon Retail, Jindal Saw, Jindal Drilling and Bajaj Auto Finance. Poor Results: Cipla, TCS, Piramal Healthcare, Bajaj Electricals, Max India, SKF India, Orient Paper, Kirloskar Oil Engines, Gillette India, ABC Bearings, Sona Koyo Steering Systems, Prime Focus, KPR Mills, Sparsh BPO and Trent. Worst results: Hinduja Foundries, Century Textiles, NELCO and GATI. Must read: 1. When will this crisis end? Read about opinions of professional analysts. Final verdict: New small investors should stay away from markets until things clear out. These investors may be tempted by seeing bear market rallies. It is very difficult for ordinary investors to spot those rallies and exit in time. But current market is suitable for SIP based investments. Invest 20% of your income at current levels and add 20% on every 500 point fall. Niche stocks are announcing good results and are ideal for long term investors with 2-3 year horizon. Unless some dramatic turnaround occurs due to aggressive steps by central banks and Governments, Sensex may reach 8,000 levels within 2 months due to heavy fall in consumption. Short term rallies will continue and it is impossible to predict bottom when people lost confidence on economy. This is the ideal market for those investors who don't need money for 15-20 months and can invest in SIP manner. Investors should stay away from sectors like Real Estate, IT, Commodities, Airlines, hotels and other high end consumption sectors. When economical decisions like rate cuts will not yield desired results, disaster will occur. Till now, bailout packages and rate cuts failed to yield significant results. |
Sejal Architectural Glass Ltd - Multibagger
Sejal Architectural Glass Ltd (Rs 24 Buy)
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
Sejal Architectural Glass Ltd (SAGL) is in the business of processing glass and has processing facilities for insulating, toughened, laminated and decorative glasses. SAGL has an integrated processing unit, having processing lines for all specialty glasses (Insulating, Toughened and Laminated) under one roof.
SAGL has three distinct SBU’s i.e. Processing, Retail and Float glass manufacturing. Till FY07 the revenues were purely generated from the processing division. The retail division commenced its operations from April, 2007. Further the float glass plant which is the main inflexion point is under construction and would be operational in Q1FY10.
With this SAGL becomes a complete value chain providing company from manufacturing of glass to selling of high end lifestyle products for home décor(art & artifacts, lights & luminaries, sanitary - ware & bath fittings and glass products).
Investment Rationale:
Net Profit to grow 11x by FY12
The 550tpd capacity float plant is likely to transform this Rs55 Crore company into a Rs450 crore company by FY12; i.e. a whopping 8x growth. As a result of backward & forward integration, bottom line is expected to grow over 11x by FY12 to Rs49 crore.
Trading at close to Book value
The book value per share of SAGL is currently Rs50. This translates into a P/BV ratio of 0.48, which is significantly lower than P/BV ratio of 3.6 for its peer. Moreover, if we consider the replacement cost, implied value per share turns out to be approx. Rs135.
First fully integrated Indian player in architectural glass
SAGL is currently having a processing unit and is now setting up a new float glass manufacturing facility. This initiative of backward integration would help the company in procuring raw material for its processing unit. This will reduce raw material cost, dependence on imports and other domestic players for glass, thereby improving operating margins from 16% in FY08 to 34% by FY12.
Demand for glass to remain robust
The per capita consumption of glass in India is about 0.55 kg, which is much lower than 11 kg in USA and 2-5 kg in South-East Asian countries. It clearly shows the growth opportunity in the under-penetrated market. The demand for processed glass has also grown by more than 35% annually, in last 2 years.
Financials and Valuation:
We initiate our coverage on SAGL with a BUY rating and twelve months price target of Rs124 based on our DCF model. The stock is currently trading at P/E of 5.63x its FY09 earnings of Rs4.26. Company’s EV/EBITDA and EV/Sales of FY08 is 16.7x and 2.7x respectively.
Subscribe to:
Posts (Atom)