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Friday 30 October 2015

Q2 RESULS OF ITC LTD;

CNBC estimates sales at Rs 9420 crores. However, we feel that sales of ITC in Q2 may decline to Rs 8805 crores (9023 crores in Sept 14 quarter). PAT may be Rs 2431 crores as against CNBC estimate of Rs 2550 crores.  Degrowth in sales is a negative which may pull down the price. 
TP Rs 314-322

Tuesday 27 October 2015

Aegis Logistics -- Buy


Aegis Group, claims to be "a leader in Oil, Gas and Chemical Logistics and has a strategy to build a necklace of terminals around India’s coastline enabling it to offer comprehensive facilities at every gateway into and out of India for a large number of cargoes to its customers.” The company was recently allotted additional 5 acres of land in Kandla Port making a total of 20 acres. Further, the company was allotted 3 acres of land in New Mangalore Port on 30 year lease by the MPT. With these land allocations, Aegis Logistics will expand its presence to Six Ports of India – Mumbai, Pipavav, Kandla, Kochi, Haldia, and New Mangalore. These ports together manage 70% of POL Traffic handled by the Major Ports in India.  


The Q2 results are to be announced on  Nov 3rd along with a proposal to pay interim dividend. This indicates that the working of the company for Q2 is likely to be robust. In the last 2 quarters, the promoters shareholding has
gone up marginally which shows their confidence in the business. The share price has come down from Rs.900 to Rs.88 on stock split (10:1).The P/V action has more than doubled which shows buying from interested quarters.
The share can be bought at the present market rate for an initial target price of Rs.120 over a 3 months time frame. However, with growing emphasis on infrastructure, the share can be bought & held on a longer time frame (9 - 12 months), subject to further review. The broader market is likely to remain robust on both domestic & global cues with the Nifty going above 8,300, reduction of lending rate by China and more stimulus expected from ECB. However, F&O rollover and Fed meet on OCT 28, can keep the market on a subdued level with intermittent profit booking.

Contributed by a friend Analyst Mr G R CHARI

Thursday 22 October 2015

Price Updates on our 2 Recommendations:

1. Jindal Polyfilms Ltd : In August 2015, we had recommended this stock for investment @ Rs 347. Since then stock has gone upto Rs 550.It means 65% appreciation in less than 3 months. We advise fellow investors not to sell even at current price. QIP price is likely to be fixed @ Rs 700/ and stock price of JPL should be in 4 digits in 2016

2. Gujarat Ambuja Exports Ltd: GAEL was recommended by us in August 2015 @ Rs 47. Now stock has touched Rs 61. It means appreciation of
30% in less than 3 months. Fellow investors are advised to hold and not to book profit at present level. We estimate stock price to cross Rs 75 by Decemeber 2015 and can be in 3 digits by May 2016

Monday 19 October 2015

UPDATE ON SKS MICRO Q2 RESULTS

As estimated by us, PAT is 78 crores. Major highlights of Q2 results are:

1. Cost to Income has gone down by 5.3% QoQ basis to 47%
2. SKS has increased its guidelines of PAT for FY16 from 235 crores to 290 crores.
3. Gross Loan Portfolio for Q2 has increased by whopping 80% YoY and 14% QoQ.
4. Loan disbursement have increased 57% YoY to 2665 crores
5. GROSS LOAN DISBURSEMENT HAS REACHED ALL-TIME HIGH OF 5434 CRORES
(previously achieved in Q2/FY11)
6. Networth now stands at 1203 crores
7. Capital Adequacy Ratio is 24.6%
8. Cash/equivalients stand at 834 crores

We feel that SKS can cross Rs 500 by October Expiry (as forecast by us before announcement of results). Hence, investors are advised not to book profit in .
BREAKING NEWS:  SKS MICROFINANCE Cmp Rs 439/ ( 440 strike Call @ Rs 16)

SKS Micro is set to announce bumper nos for Q2 Wherein its PAT should be Rs 78 crores which will be around 37% higher YoY basis and around 27% higher QoQ basis. These nos are also substantially higher than market / bloomberg estimate of 66 crores

Stock had climbed to Rs 589 after Q1 results.

Stock had risen sharply on Friday and today but fell due to news that CBI has registered case against Dilli Raj. Mr Raj was working for First Leasing few years back and currently employed with SKS Micro. It may be noted that this CBI case is pertaining to some fraud done by promoters of First Leasing. Hence, such a case is completely unrelated to SKS Micro and should not in any way affect fortunes of SKS.

We estimate that stock can rise to Rs 490-500 by October expiry.

Buying strongly recommended.

Friday 9 October 2015

NATH BIOGENES (I) LTD Rs 90/: UnderValued/Bright Prospects

Rationale for Recommendation;


a) Amongst the oldest in Hybrid Seed industry.
b) Balanced Product Portfolio
c) Strong R&D centres over 5 locations

d) FY15 Eps Rs 15.85.  PERatio only 5.68 (LOWEST in peer group Kaveri Seeds, JK Agri etc)
e) Cmp significantly lower than 52 week High (Rs 174).
f) Bright prospects for the Industry, almost recession proof as
Agriculture continues and will continue to play dominant role in
Indian economy which in turn ensures ever-increasing demand for Hybrid
seeds

PRODUCTS and FINANCIALS:

Aurangabad based NBIL is amongst the oldest Hybrid seed company in India, having headquarters at Aurangabad and belonging to Nath group of industries. Hybrids have undergone seachange in last few years as it is no longer good enough to offer high yield hybrids. Now, hybrids carry additional built-in value through seed embedded technologies/genes for protection against specific diseases/pests and  vagaries of ature. NBIL is pursuing Genetically Engineered Technologies as well as Molecules-aided Selection Systems to enrich crop breeding.

NBIL offers choice of Bt-cotton technologies and also has wide range of Bt-cotton hybrids, incorporating Fusion-Bt technology of Chinese Academy of Sciences. NBIL also offers BG-II (of Monsanto) version of elite cotton hybrids

Besides Cotton, NBIL also has in its product portfolio Paddy, Bajra, Jowar, Wheat, Maize and in Oil segment, Mustard seeds

NBIL is increasing its focus on Vegetable seeds like Okra, Tomato, Chillies, Brinjal, Gourds etc

NBIL is pursuing the strategy of balanced product portfolio comprising of Cotton, Food crops, Vegetable crops, as also Plant Nutrition Supplements.

NBIL has 12 acre campus near Hyderabad for its R&D activities, apart
from another 4 centres in Bihar and U.P.

Stock is trading at 5.68xFY15 Eps

PROSPECTS:

                               2015-16         2016-17
                                Rs/Cr           Rs/Cr

Sales                           190               220

Net Profit                       26                32

Eps Rs                         16.25             20

For Q1, NBIL has reported sales of 109 crores as against sales of 119 crores in corresponding quarter of previous year. Sales have declined due to little higher sales-return. Profit after Tax too has come down from 30 crores to 24 crores, partly caused by higher provision for depreciation and Interest cost.  In seed industry, Q1 is peak season and accounts for 65-70% of full year's revenues.

NBIL has strong pipeline of new products due to strong emphasis on R&D
activities, full impact of which will be felt in FY17.

VALUATIONS/RECOMMENDATION:

1. NBIL is trading at 5.68xFY15 earnings which is quite low considering that seed industry has bright prospects. Moreover, these valuations are lower than peer group companies like JK Agrigenetics, Kaveri Seeds (deserves higher valuation due to bigger size). Even when Sensex is between 26,000-28,000 levels, such PE Ratio is definitely low for a regularly profit making company

2. NBIL is available at PE Ratio of 5.54 against FY16E earnings and PERatio of 4.50 based upon FY17E earnings.

3. Downside is very low considering that stock has already reacted from 52 week high of Rs 174.

4. Hybrid seed industry has extremely bright prospects and is almost recession proof. In such a scenario, NBIL valuations are definitely very low as NBIL will have assured demand for its product portfolio.

Even if NBIL gets modest PERatio of 10, its stock price should be Rs 160 in next 12 months. If held for 2-3 years, stock may cross even Rs 350 mark.

Investors may please note that investment in NBIL should fetch decent appreciation if broader markets remain stable. If broader markets fall sharply, then NBIL may or may not give appreciation

Thursday 1 October 2015

RESULT UPDATE ON TANTIA CONSTRUCTION LTD: HUGE TURNAROUND



As anticipated by us, TCL has achieved HUGE TURNAROUND in its operations for Q1. TCL has reported negligible loss of 11 lacs as against Loss of 24.58 crores in corresponding quarter of previous year. Thus there is TURNAROUND OF 24.70 Crores. Finance cost for the quarter have plunged from 23.47 crores to 11.71 crores. It is a major positive for  TCL. Normally H2 is peak for infra companies. Due huge broadbased selling in equity markets, share price of TCL has come down from our recommended level. Now, it provides great opportunity to add more in big quantity.

We are confident that TCL should post reasonably good PAT for current year and sharp jump in PAT for FY17. If markets do not crash and remain stable, TCL should be quoting in 3 digits in 2016. 

 BUY MORE



Recommendation before Results:

Order Book Rs 3600 Crores, Mcap Rs 50 Crores: TANTIA CONSTRUCTIONS LTD (CMP Rs 27)

Rationale for Recommendation:


1. Amongst the oldest Construction/Infrastructure co of W Bengal, making profits until FY14.



2. Book Value Rs 103 as against Cmp Rs 27.



3. Order Book around Rs 3600 Crores and Mcap only Rs 49-50 Crores.



4. All time high share price Rs 250.



5. After incurring losses in FY15, co will again reports profits for FY16.



6. A good case of bottom-fishing which may provide multiple-fold appreciation over next 6-24 months

BACKGROUND: 

TCL is engaged in host of infrastructure and construction activities which include construction, widening, conversion, maintenance, strengthening & beautification fo roadways, road bridges, highways and flyovers. 

TCL also provides infrastructure services, including surveys, fixing of alignment & designing of track embankment, steel girder fabrication and erection, construction of bridges, tunnels, buildings, railway station terminals and MRTS infrastructure. 

TCL also engages in building tunnels, jetties, steel girders along rivers,  beam foundation, lattice structure erection, cable laying operations and control systems at airports.

Some of recently completed projects include:

a) 37 km long RCC NP3 Sewer pipeline for KEIP Kolkata worth 116 crores.

b) 1.8 km long tunnel for Udhampur Rail Link worth Rs 100 crores.

c)Sewerage & drainage for borough XV KEIP Kolkata worth Rs 106 crores.

PAST PERFORMANCE:

               

From the above, it is clear that TCL had been consistently profitable. In FY11, TCL had achieved PAT of 27.25 crores which translated into Eps of Rs 16.63. However, subsequently, decline in profits started as TCL bagged some big projects and as its order book was swelling, company borrowed heavily which increased its interest burden but topline almost stagnated due high gestation period projects and increased debtors due to delayed payments from clients.

YEAR 2014-15:


FY15 proved worst in TCL's history as its topline declined to 518 crores and TCL made big loss of 54.47 crores. Due to delay in recovery of dues from its clients, execution of projects got hampered/delayed which led to reduced sales resulting in big loss for the year. However, Q1 and Q3 were particularly bad which accounted for 90% of losses of FY15. TCL had provided 21.47 crores for depreciation which means CASH LOSS was lower at 33 crores.

FUTURE OUTLOOK:

TCL has order book of Rs 3600 crores which gives revenue visibility for next 3-4 years . Worst is behind and company is on recovery path as evident from the fact that its losses for Q4 were 7.43 crores as against losses of 29 crores in Q3. Decline in steel prices should help TCL to report profitable nos in current year. 



TCL is trading at:

1)  0.26xFY15 Book Value

2. Stock is available at 5.64xFY16E Eps

3. TCL is trading at 3.63xFY17E Eps

4. Finally and most important, Mcap of TCL is 0.14xOrder Book i.e. MARKET CAP IS ONLY 14% OF TOTAL     ORDER BOOK

Overall, investment in infrastructure in India is likely to improve which has led to huge valuations for profitable infrastructure companies. In such a scenario, TCL with Book Value of Rs 103 appears a good case of bottom fishing. Current market price offers good risk-to-reward ratio as downside form current levels is limited/low but if TCL can achieve guidelines, share price can be in 3 digits in 2016. In infrastructure business, sometimes there is  quarterly lumpiness of revenues or wide variatIons at net level ( e.g. one quarter may witness losses due to completion of some old low margin contract whereas next quarter can see sharp jump in profits) Hence, investors with patience (6 months to 24 months) can buy TCL.