IndianStocksNews.com: March 2011

Lull in Power Sector - time to Buy Stocks?

Just read a news on internet. People in Varanasi got angry and were highly unhappy with government. They had all rights to! Local authorities had a long power cut on the day of India-Pakistan world cup semi final match!

Such is the condition of power sector in India today. You have power shortages across India but demand from power distribution companies is decreasing! Yes you read it right and I am not drunk celebrating Indian victory over Pakistan. Power Sector Stocks are largely affected by this situation and so the lull in Power Sector in Indian Stock Markets.

Sheetal Refineries IPO - DRHP filed

Sheetal Refineries is a South-India based edible oil refiner. Company has filed draft red herring prospectus with SEBI for its initial public offering issue of upto Rs 60 crore.

Would you Buy Stocks of Koutons at 92% discount?

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

Buy Stocks of Praj Industries for price target Rs.102

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

Lovable Lingerie IPO Price fixed at Rs.205

Lovable Lingerie, India’s one of the biggest women’s innerwear manufacturers, fixed the IPO price at higher end of price band which was Rs 195-205. So the IPO price is fixed at Rs.205 per share for their initial public offer of 45,50,000 equity shares with Rs.10 face value per share.

Cals Refineries Latest News Update

New Delhi, March 18: Cals Refineries, which is setting up a refinery in Bengal, plans to induct Hardt Group affiliates as a strategic investor with management control to overcome its resource crunch.

Multibagger Stock Analysis - Bilcare Limited

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

Buy stocks of Reliance Industries - Motilal Oswal

Buy stocks of Reliance Industries is the recent recommendation from Motilal Oswal, one of the stock trading and brokerage firms. Checkout the stock valuations of RIL as on today.

Mid cap stock analysis - Gati logistics

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

Mid cap stock analysis - JK Cement

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

Large cap stock analysis-Bank of Baroda

Bank of Baroda (BoB) is a state owned bank with operations in 26 countries. Let's have a look at it's stock analysis to figure out why it is a good large cap stock to buy from public sector banking space.

Mid cap sugar stock to avoid - Balrampur Chini Mills Ltd

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

Small cap stock analysis - INOX Leisure ltd

Here is a small cap stock from entertainment business I thought is worth spending some time on it's stock analysis.

INOX Leisure is one of the well known movie multiplex operator and exhibitor. It is a subsidiary of another listed company, Gujarat Flurochemicals. INOX leisure has expanded its business in 25 cities with 38 operational properties and 144 multiplex movie screens. INOX leisure has diversified into other businesses, like power, distribution and movie production.

In recent past, company has acquired Calcutta Cinema which owns nine multiplexes in West Bengal and Assam. Company has plans to expand in two and three tier cities such as Jodhpur, Ahmedabad, Bhopal, Mangalore, Coimbatore, Kanpur, Hubli and Bhubaneswar.

Acquisition & Growth
Inox Leisure has recently acquired Fame India. After this acquisition, Inox Leisure now holds more than 50% stake in Fame India. Fame India has 25 operational properties with 95 movie screens in 12 cities. With this acquisition, INOX and Fame India collectively have properties in 37 cities with 240 movie screens. This makes Inox Leisure biggest movie exhibitor in India after Big Cinemas in terms of number of movie screens.

This acquisition would provide increased presence and better pricing power to INOX leisure. In FY10, Fame India had revenue of Rs 18 crore from film distribution. A bit more than by Rs 2 crore of Inox Leisure. Fame India has locations where INOX was not present, thus the acquisition give strategic advantage to INOX for wide presence and stronger distribution network. This should translate into increase in earnings.

Read: Stocks To Buy In 2011

Stock Financials:
INOX leisure had debt of Rs.184 crores in FY10 compared to Rs.44 crores in FY09. Compnay has used this debt to fund the acquisition of Fame India, expansion of screens and acquisition of CCPL multiplexes in West Bengal.

Due to higher debt, interest costs have increased from around Rs 1 crore in the September 2009 quarter to Rs 3.5 crore in the September 2010 quarter. Company's net profit fell 37% on a y-o-y basis to Rs 3.3 crore due to this high interest cost, more employees and other expenses.

Stock Valuation:
At the current share price of Rs 45, Inox leisure stock trades at a price-earnings (P/E) ratio of 8. Compared to its peers like PVR (22) and Cinemax (15), it is much lower. Due to acquisitions and growth that comes with these acquisitions, company is definitely going to show strong improvement in earnings. It’s an attractive investment opportunity in entertainment business for long term investors at Rs.45.

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Stock analysis - Areva T&D

Cut your exposure of Areva T&D (Areva) is the recommendation by stock broker Angel stock broking.

Areva T&D (Areva) reported better-than-expected results for 4QCY2010. Revenue for the quarter increased by 14% yoy to Rs.1,327cr and (est. Rs.1,177cr) and PAT grew by 29% yoy to Rs.88cr (est. Rs.75cr). Order inflow for the quarter was down by 9% yoy due to delays in customer ordering and price fall. Going forward, the pricing scenario is expected to be grim on account of delayed ordering and increasing competition. Angel stock broking has recommended to reduce exposure.

Strong volume driven growth:
Despite the price erosion on orders accrued during CY2009 and CY2010, Areva managed to register 14% yoy rise in revenue to Rs.1,327cr backed by strong volume growth. Areva also managed to retain its leadership position for the third year, even with the fall in market size and prices.

EBITDA margin for the quarter also expanded by 142bp to 13.4% as fixed manufacturing and production costs were spread over large volumes. Expanded margin and higher sales volume enabled the company to post a 29% yoy increase in PAT.

Outlook and valuation:
Post the acquisition of Areva’s global T&D business by Alstom-Schneider Electric consortium, the two business segments viz., transmission and distribution, are likely to be separated and operated independently by Alstom Grid and Schneider Electric, respectively. The modalities of the split and the associated valuations are yet to be finalised. Absence of large orders from central utilities and pricing pressures has been adversely affecting the company’s revenue and profitability growth.

Management continues to maintain a cautious outlook given the pricing pressures and expects the current scenario to last for the next couple of quarters. At current stock price of Rs.267, the stock trades at 27.5x CY2011E EPS. It is advisable to reduce on the stock with a target price of Rs.243.

Small cap stock to buy - Bliss GVS Pharma

I came across a small cap stock discussed in ET Investor's guide. After reading the reasoning and some stock analysis, I thought it could be a good small cap stock to buy for long term investing.

Bliss GVS Pharma is a mumbai based 26 year old export oriented fast growing company. The Company is engaged in manufacturing of female contraceptives, soft pessaries and suppositories. The products are marketed under the brand name 'Today'. Company's products include nonoxynol 9 vaginal contraceptive, 100 milligram (MG) clotrimazole vaginalpessaries and suppositories, and hydrocortisone anal suppositories.

The Company also manufactures to United States specification vaginal pessaries of Clotrimazole and Povidone Iodine in addition to anal suppositories for treatment of piles. During FY10, exports to unregulated markets contributed over 95% of the total revenues of the company. Bliss has a significant presence in most African markets through selling branded suppository dosages and anti-malarial formulations. Company is the largest manufacturer of suppositories and pessaries in India — selling them under its own brands and manufacturing them for other pharma companies.

Growth opportunities for company
The company is ramping up its manufacturing capacities to cater to the increasing demand for suppositories. Its new plant in Thane would be in full capacity production mode by September 2011. The company is planning capex of Rs 35-40 crore in FY11 and FY12. They intend to commission an R&D centre in this year.

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Stock valuation
As on March 2010, company had reserves of 122 crores. For a company with 245 crores market cap, it is very good amount of reserve funds. Company had debt of only 7.64 crore. Company has constantly increasing sales turnover with constant growth in net profits too.

At current stock price, Bliss GVS Pharma is available at P/E multiple of 5 which is below industry average. Dividend yield comes at 2%. The stock is available near it's 52 week low. One may invest in it for long term (2-3 years minimum).

IPO Information and valuation - Lovable Lingerie

Here is the IPO information on Lovable Lingerie Initial public offering. Checkout IPO valuation and recommendation if you should buy IPO of this company.

Lovable Lingerie Ltd was incorporated in year 1987. It is one of India's leading women's innerwear manufacturers. Company had licensed the brand "Lovable" from Lovable World Trading Company, USA in 1995. "LOVABLE" is India's First Premium International Lingerie Brand.

This Initial public offering, which opens on March 8 and closes on March 11, would constitute 27.08 percent of the post issue paid-up capital of the company.

The company is raising around Rs 88 to Rs 93 crore thru this initial public offering. Company's plans include to set up a manufacturing facility to create additional capacity at Bengaluru, expenses to be incurred for brand building, brand development expenses for "College Style" brand, investment in Joint Venture, setting up exclusive brand outlets, setting up retail store modules for "shop-in-shop", up gradation of design studios, general corporate purpose, and public issue expenses.

IPO valuation
CARE has assigned an IPO Grade 3 to Lovable Lingeries Ltd IPO. This means as per CARE, company has 'Average Fundamentals'. A lingerie brand entering markets with average fundamentals.

Indian stock markets are very volatile at the moment due to increasing oil prices, political unrest. Since company is leaving hardly anything on table for investors (which reflects from it's IPO rating of 3), IPO investment in Lovable lingerie is not recommended at offered price levels. IPO valuation does not look as lovable for investors as company's products are! You might get it at lower prices post IPO.

Power sector stock to buy – Kalpataru Power Transmissions

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

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

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

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

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

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

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

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

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

Stock analysis - Glenmark Pharmaceuticals

Stock analysis of a large cap stock, Glenmark Pharmaceuticals Limited (GPL). Check out from medium to long term investment perspective.

Glenmark Pharmaceuticals is an India-based pharmaceutical company engaged in R&D of new molecules. Glenmark Pharma is focused in the areas of inflammation, including asthma/ chronic obstructive pulmonary disease (COPD), metabolic disorders, dermatology, anti-infectives, respiratory, gynecology, pediatrics, diabetics, Oncology. The Company has 12 manufacturing facilities in four countries that lists India, Latin America, Central Eastern Europe and Semi Regulated Markets of Africa/Asia/ Commonwealth of Independent States (CIS). It also has five R&D centers, three in India and two overseas.

Company also has good presence in US generic drugs market on it’s own and on partnership model. Company’s business in US is growing at very healthy growth rates. Revenues there have grown at CAGR of 89% in past 4 years. Moreover, company is focusing on specific niche areas in US with lesser competition that would further fuel the growth.

Glenmark pharma is also concentrating on Europian markets. They have acquired a Czech company Medicamenta which operates in Czech republic and Slovakia with branded generic drugs. Company has entered in Romania, Bulgaria, Poland and central, eastern and western European countries.

In Indian pharmaceutical markets, Glenmark is one of the very strong players with R&D capabilities and products at par with Ranbaxy, Dr. Reddy’s and SUN pharma. Dermatology has been the strong niche for Glenmark in India and it is carrying the same strength in international markets too.

Stock valuation
Considering the past growth records of company, we can expect that company sales revenue would grow at ~20% (CAGR) for next 3 years. Net profits for company had grown at over 20% CAGR. With acquisitions in Europe and growth with new product development in pipeline, we can safely expect net profits to grow at least at CAGR 25% for next 3 years. The EPS for FY 12 and FY 13 can safely be estimated at Rs.20 and Rs. 25 against full year estimated EPS of 16 in FY11.

At current stock price of Rs. 300, the stock trades at P/E of 10 times estimated FY13 EPS. You may buy stocks of Glenmark for 2 years with target price of Rs. 400

Stock analysis of Sesa goa after budget 2011

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

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

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

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

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

Small cap growth stock analysis - Kabra extrusion technik

Here is one lesser known and less discussed small cap stock, Kabra Extrusiontechnik. This is a steadily growing company and can generate good returns in 2011 and beyond.

Kabra Extrusion Technik is engaged in the capital goods sector, manufacturing plastic extrusion machinery, specializing in manufacturing of plants to produce a range of plastic pipes like polyvinyl chloride (PVC), high-density polyethylene (HDPE), low-density polyethylene (LDPE), polypropylene (PP) and composite pipes.

The Company's major products are plastic processing machineries and parts of plastic processing machinery. These products cater two types of industries: Pipe and Films. Company is a domestic leader in extrusion machinery.

Company recently launched new product for manufacturing drip irrigation tube lines in collaboration with Drip Research Technology Services from US. They are in planning stage to launch new high-speed multi-layer blown films plants in FY 2011.

The company is also planning to make an investment of Rs.85 crore. This investment will more than double its gross block by FY 2012. India’s plastic consumption could double in next six years.

Industry experts believe that investment of nearly $10 billion would be required in the plastic processing industry to meet the future demands. Such big investments in the plastic processing industry will be a key growth driver for sector and so for the company.

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Stock valuations
Kabra Extrusion Technik has been growing at 15.5% (sales) for 3 years CAGR. At the same time profit after tax (PAT) has shown 3 year CAGR growth of 43.5%.

At current price of Rs.59.5, stock trades at P/E of around 8. Dividend yield comes at healthy 5.8%. Kabra extrusion has paid dividend consistently for last 7 years in a row. This makes it a good dividend yielding stock.

Considering all above mentioned facts, I am adding it to my list of stocks to buy in 2011.

One may buy stocks in small quantities at all dips for long term investment. It has potential to at least double from current levels in 12-18 months.

Should you buy stocks of telecom companies now?

Telecom, especially mobile phone companies, as a sector is going through a rough patch for some time now. Primary reason being spectrum allocation scam that dates back to years (2G spectrum). Most of the telecom stocks have corrected significantly. Should you buy stocks of telecom companies in such conditions?

I just read opinion of Brics securities on this. If we go by their opinion, we should not be buying stocks of telecom companies for long term at all. The dream run in telecom businesses has already happened. In near future, it is going to probably stay in a trading range for a long time. Reliance Communications has got its own problems to deal with. Bharti telecom is near to stagnating revenues.

Most importantly, average revenue per users (ARPUs) is going to stagnate in telecom sector. At some point of time even the subscriber base is going to stagnate. No growth at all in these bread and butter areas!

In my opinion, with so many new telecom operators fighting for sectoral pie, competition is fierce and companies do not have pricing power. Have you seen those 1/2 paisa per second ads from MTS? And the recent 0 paisa per second from Videocon! What? You haven't heard of 0 paisa per second from Videocon? visit this http://www.zeroishere.com. Next, I guess, new telecom companies would pay subscriber to use mobile phones!

Anyways, what all I want you to pay attention is the fierce competition between these players. Companies who does not have pricing power can not sustain their growth.

Read more: Telecom stocks - Any takers?

All Telecom stocks may be good for trading occasionally but for long term gains, new growth drivers seems lacking. With 2G and 3G spectrum scams haunting them, you shouldn't be buying stocks of telecom companies at this point if you are looking for long term gains.