Update on Bajaj Auto:
Denofwealth estimate has gone wrong ( 1st time in 3 years). But spike in share price due to panic short covering
Actual results are ordinary, nothing great
NP is 924 cr vs 970cr YoY. And 924 cr NP consists of *higher other income 319cr vs 242cr*
Denofwealth feels that stock should come down to 2830-2850 levels
Good opportunity to *ShortSell*
Bajaj Auto Ltd Q3 today:
Bajaj Auto , as per denofwealth estimates, may report NP of 810 cr vs CNBC est of 888cr
Our estimate of 810 cr is also significantly lower vs 901 YoY (Dec15)
If compared with QoQ( 1122cr Sep16), huge slide
_1 month Low Rs 2565_
Huge short covering expected as big Long position built ( Whatsapp rumour that NP will be 924 cr)
Bajaj Auto, in fact, worst hit by Demonetization
Stock should plunge
Results update: Triveni Glass Ltd
Q3FY17
Sales. 17.30
NP. 2.39
Equity. 12.61
EPS Rs. 1.90
TGL has reported good nos for Q3 and remained unaffected by Notebandi. Q3 EPS stands at 1.90. However , co has changed its year ending from FY to CY
For CY17, TGL should achieve Eps of Rs 10+
Stock price should be 100+ in 18-24 months. Our Top pick in Dark Horse category
Update on Goldiam International Ltd:
Subsequent to our recommendations at 71, stock had spurted to 83. Now quoting at 76-77, Goldiam International is highly undervalued with estimated EPS of 17 for FY17
Company has convened Board meeting to declare Interim Dividend. It shows that co is doing extremely well.
Our TP 140-150 in CY17. A strong buy
Dear Investors
Normally in FnO, 99% or even higher no of Investors do trading for penny gains by trading intraday or BTST or STBT. However denofwealth is endeavouring to give new meaning to derivative segment. Our reliance on Technicals is almost zero.
Rather we look at derivative stocks from investment angle wherein we present so-ignored/ unknown strengths of companies
With due regards, even the biggest of financial powerhouses didn't present fundamental facts in REC PFC etc, which we brought to your notice. And we rarely give intraday/next day TP. Rather our TP for derivative stocks range from 1 month to 6-12 months.
Those who followed our ideas on IOC BPCL etc must have minted big wealth by staying invested for a week or so. And if Investors bought CALLs in these stocks, earnings/profits as high as 500%-1000% in just a week
In coming week we may present to you 4-5 investment ideas in Derivative/Options. So keep aside money chest for One & Only Denofwealth ideas
Update on Sankhya Infotech:
SIL has bagged from Defense single biggest order of Rs 100 crores. This breakthrough is really big.
Similarly, SIL has also bagged some big orders from aviation industry.
_Sankhya is only profit making IT co available at Mktcap of 50 crores_
We are fairly confident that stock can be in *3 digit in CY17 itself*
Buying strongly recommended
BPCL: *TP 728 Feb Expiry*
Recently Govt of India has demanded 1700cr Dividend from BPCL. Immediately, analyst/ brokerage world translated it into Rs 11.70/ share Div ( and that yield only 1.8%) as equity of BPCL is 1446cr.
However, ALL are 100% wrong
_Govt of India owns only 55% of BPCL and not 100%_
In order for Govt to get 1700 cr on its 55% stake, *BPCL will have to declare minimum/roughly Rs 3100 cr Dividend which means Rs 22/share and Div yield in BPCL will be 3.6%*
_For Q3, we estimate PAT to rise 75% YoY to 2600 cr_
FY17 Pat is estimated at 8600 cr, translating in EPS of Rs 60(H1 EPS 27.15)
We feel FY17 actual total Dividend could be as high as Rs 25/share
Fundamentally, stock trading at 11xFY17Eeps is definitely underpriced
*BPCL had acquired stake in Mozambique oilfield, value of which has risen manifold*
_BPCL stands out among OMCs for its superior RoE and fair value of its investments is roughly Rs 150/share_
BPCL can be in 4 digits in CY17 itself
Den Of Wealth:
Indian Oil Corpn: *Very low floating stock*
Name. %
Govt. 58
ONGC. 14
Oil India 5
IBP Trust. 4
LIC. 8
MF. 2
FII 6
*PUBLIC*. 3
Public holding just 3%
With deregulation of oil industry a permanent reality and IOC being a global giant, stock will maintain its upward journey and _valuations can be at par with global giants_
Paradip Refinery: Has achieved throughput of 1 MN tonnes in Dec 16, 80% capacity. Perhaps Investors are not aware that this refinery *refines heaviest/ worst crude which will enhance IOC overall refining margins substantially*. Paradip Refinery is one of its kind in India. As a result, FY18 can be still better vs FY17
Indian Oil Corpn: *TP 400 Feb Expiry*
Recently Govt of India has demanded 5000cr Dividend from IOC. Immediately, analyst/ brokerage world translated it into Rs 10.30/ share Div ( and that yield only 3%) as equity 4856cr.
However, ALL are 100% wrong
_Govt of India owns only 58% of IOC and not 100%_
In order for Govt to get 5000 cr on its 58% stake, *IOC will have to declare minimum/roughly Rs 9000 cr Dividend which means Rs 19/share and Div yield will be massive 6%*
_For Q3, we estimate PAT to rise 100% YoY as well as QoQ_
We feel FY17 total Dividend could be as high as Rs 25/share
Technically also, IOC set to touch 400.
Fundamentally, stock trading at 7xFY17Eeps is definitely underpriced ( global peers trade at 11-12 times)
For long term Investors, this Fortune 500 co ( amongst biggest refineries in the world), stock can be in 4 digit in 24 months
Stay tuned for more revealing updates to know REAL worth of IOC
JKPAPER Ltd: *Q3 PAT spurts 273%*
Installed capacity 4.55 lac TPA
Pulp: Capacity 2.76 lac TPA
Q3FY17
Net Sales. 722cr
PAT 35.89cr
Equity. 149cr
JKPaper has reported fabulous nos for Q3 with NP of 35.89cr vs 13.14cr YoY
For 9months, NP stands at 106.51 cr, translating into EPS of 7.15.
Q4 normally is best for paper industry. We estimate Q4 NP to be 50-55 cr
Top Indian brand in India
Integrated, efficient, cost reduction ongoing process
We feel stock is worth buying for steady appreciation
Barring unforeseen, JKPaper Can be 140-150 in 6-9 months
TP Rs 95-105 March Expiry
*Worst Behind: Can regain past Glory*
IDBI Bank Ltd:
_Once stake sale is done to IFC ( arm of World Bank), many triggers wait for IDBI_
(1) IDBI has been suffering mainly due high NPAs, particularly by getting stuck in few LARGE accounts.
Bank has massive exposure of *3000 cr to Haldia petro and 2000 cr to Dhabol Power ( now Ratnagiri power)* These NPA accounts may turn as Standard Assets in 1-2 quarters as RECOVERY from these 2 accounts has started. _Partial impact of same will be reflected in March17 quarter_
*Big improvement in NPA reduction in FY18, mainly due to Haldia and Dhabol*
(2) Further bank holds *massive* investments in
NSE
SIDBI
ARCIL
NSDL
Stock Holding
Gradual sale of these stakes will be undertaken to raise resources
Bank with bad past but possibility of glorious future
Some facts about 20Microns:
(1) With Mktcap of just 145 crores, 20Microns has lowest Mktcap amongst all Mining companies
(2) Out of 6 mines, *2 mines are owned by company*. Only 4 mines on lease from Govt
Currently, company operating it's mineral/ speciality chemicals mfg plants at less than 50% capacity.
*At optimum capacity, company can achieve topline of 750+crores. And it's mined have reserved for 25 years*
Investors with patience can reap multibagger appreciation
Few Interesting Facts:
_Sankhya Infotech Ltd_
Being in *defense and Aviation Simulations and training* company counts
Indian Army
Air Force
Indian Railways
Bharat Electronics
*DRDO*
as its major defense customers
+ Sankhya was first co in the world to launch web based simulation for Aviation industry
+Company's e-learning product is used by more than 40% of all bank employees
+Sankhya is also 1st Indian IT co to sell a software product to American Defense Organization
+Company successfully completed Mumbai Rail Vikas Corpn Simulation project ( most complex rail network in the world)
Sankhya's cash generation is superior to its peer *Zen Technologies*( which is in same verticals though different product)
_Sankhya is available at 49 cr Mktcap which is just 0.31xFY16 revenue_
_Sankhya is quoting at just 0.63times it's Book Value_
*Sankhya is grossly undervalued, especially if one considers that Zen Tech is trading at 13 times it's FY16 revenue and 5.35 times book value*
Moreover for H1, Sankhya had NP of 2.47cr whereas Zen had Loss of 7.78cr. Valuation gap is huge and expected to narrow down significantly which itself could turn Sankhya as multibagger. Other product companies are trading at astronomical valuations, niche product co like Sankhya is available at dirt cheap Valuations.
BIG TRIGGER: Sankhya Infotech Ltd:
SIL has signed multimillion dollar contract with Etihad airways for 5 years.
SIL confident of signing long term contracts with more airlines. Co has recently opened office in Singapore
_SIL also likely to make big announcement/ big tie up for its defence software division
*SIL is entering a new growth territory. Stock can be 150 in 18-24 months as major beneficiary of aviation industry growth and Make in India thrust for Defense industry*
High volume and very high delivery ratio indicates that stock being cornered by HNIs
20Microns:
*Launches Construction Chemicals*
1) NANOSIL: 20Microns has introduced NANOSIL which is waterproof agent, developed to provide water repellency to construction materials such as Cement, mortar, plaster, painted surface as it penetrates deep into voids
2) MICRONSIL30C: Suitable for mortar and plastering. It saves cement consumption upto 20%
Launch of above should help co to enhance its topline and bottom line in a big way
_20Microns is already catering to Paint industry which is growing rapidly as all paint companies setting up new plants. All major paint companies are its customers_
*It's industrial minerals and speciality chemicals* are also used by Ink mfrs, PVC pipe/Cable industry, Paper industry, SMC moulding etc
*With diversified user industry base, 20Microns is poised for decent growth*
_MINING to MICRONISING to SUBMICRON to NANOSIZING_
*20 Microns Ltd*
Stock is being recommended as 20Microns is engaged in Mining to Minerals and Chemicals
20Microns has _Calcite mines and Kaolin mines at SIX locations with reserves of 76000000 tonned_
Company is producing Ultrafine Calcium carbonate, Aluminium Silicates and Synthetic Barium Sulphates for Paint and Construction industry
20 Microns has *7 mfg locations with capacity of 125000 tons*
Financial Performance;
H1FY17 H1FY16
Sales. 200. 179
NP. 9.44. 3.76
Equity. 17.64
FV RS. 5
EPSRs. 2.70. 1.08
20MICRONS has reported bumper results for H1.
*Sales up only 12% but NP has spurted by 150% to 9.44 cr, despite more than 100% rise in income tax*
_H1 NP is more than NP of entire FY16_
20Microns is only listed co in this space
With diversified plant locations and mines also located at different locations, co has unique logistics advantage. With user industry growing at rapid pace, 20MICRONS has *bright future*
20MICRONS should report EPS of 6.50 for FY17 and Rs 8.50 for FY18
*TP Rs 125 in 18 months*
Management Interview : REC Ltd
We are looking at very robust growth in power sector demand
Mr. PV Ramesh - Chairman
Firstly, just a general outlook on what you are expecting from the power sector demand per se for the year ahead?
PV Ramesh: We are looking at a very robust growth in the power sector demand across the value chain. We have today per capita consumption of about 1000KW we expect this to double in the next five years. The Government of India’s objective is to provide 24x7 quality power at a competitive price to every citizen of this country and in this direction major efforts are being made in both generation, transmission and especially the distribution network. The new UDAY scheme has a far reaching influence on restructuring and rejuvenating the discoms. There are further efforts that are being made in extending electricity to every single village in the country by end of this year and to provide power to every household and there are nearly 5 crore households without power. So we foresee a very robust growth across the value chain of the power sector and especially with the goal of adding another 261GW generation capacity of which 175GW is to come from green energy investments. These are especially interesting times for all players in the power sector and the Rural Electrification Corporation, has been a major player for nearly 50 years in this sector, with investments across the country, across the value chain, and has been the coordinator for implementing UDAY and also the Deen Dayal Upadhyaya Gram Jyoti Yojana and range of other programmes of Government of India. We have offices across the country working with all the state electricity boards, the power utilities and we have strategic position in terms of working with both the public sector, private sector and from the generation II village level. We see the very robust growth in the coming years.
So I am guessing you are banking on market share gains in the SEB financing segment as well sir?
PV Ramesh: Yes, absolutely because with the state we have been working with the state electricity boards for the last 48 years and we have a major share and the number of interventions that are being taking place as you are well aware in terms of the generation there is a rationalisation in terms of coal supply, the quality of coal, the goal of the Coal India to double its production as well as productivity. Now all this would contribute to further modernisation of generation but major investments are taking place in transmission, network and especially at the distribution network. The goal is to reduce the technical and commercial losses of the distribution companies from 22% at present to 15% by 2019 so that is a major effort that is being made. The first step in that is the UDAY where the debt of the discoms across the country has been substantially redeemed and now the major efforts are being made in terms of reforming governance and also investing in technological upgradation. So our close proximity to the state electricity boards in this regard really helps us both in terms of modernising and in terms of achieving 24x7 power for all by turn of this decade.
So which is good to know, now the other aspect is and I think you made a brief reference or somebody else was making a reference this morning about how impactful the UDAY scheme seems to be. What is your thought of the UDAY bonds on the loan book for a company like yours. Anything that you would want to share here?
PV Ramesh: Let me clearly explain this. Actually, there is no UDAY bond as such. It is actually 75% of the UDAY debt is now transferred to the government books of accounts. I mean there was an outstanding debt of about Rs 4.3 lakh crores of which Rs 3 lakh crores is what was meant to be redeemed but some of the states like Karnataka and Gujarat they said they are financially well so they would not be opted for the operational efficiency part of the UDAY and not for the financial restructuring. But overall we received a pre-payment from Discoms to the tune of about Rs 30,500 crores and we are expecting another Rs 12,000 crores from the last from Tamil Nadu and Telangana which have come on board very recently. This has not affected our books of accounts. Actually our loan book was showing Rs 2.01 lakh crores on March 31. At the end of September, it is Rs 1,96,000 crores. What we have done basically is the pre-payment we have received, we have stepped up sanctions in disbursements so we have had an additional disbursement of about Rs 28,000 crores additionally compared to the first half year of 2016 and compared to 2015 first half year. So what it meant is an accelerated disbursement because the demand for investment is growing and so overall our books are very healthy and then we further planned to step up in the coming year, coming second half of this year and the 2017-2018 you would see that the major investments would flow into two sectors. One, of course, is the renewables and creating the green energy corridor and on the other side is the modernisation of the distribution network, I mean whether it is feeder separation, whether it is smart metering and smart grid management and the transmission network modernisation so there is a substantial addressing of the value chain of the power sector. So we are quite robust in our operations.
Would you say then that this will translate on higher margins as well from you guys for the entire year. I know you would be in a silent period so do not give me exact numbers but would it be safe to assume that it would be a higher trajectory?
PV Ramesh: Yes. I mean higher trajectory from two things. One of course is the volume of business. I mean the level of investments we are making and the second one of course is the quality of investments that we are making in the assets and also third is the quicker project execution and management. Actually REC has two subsidiaries which are involved in providing services across the power sector value chain. So we are working with the state utilities especially the Discoms and of course is the transmission, the generation companies to really address the quality of investments and timely completion of the projects. So this should translate into much higher margins in terms of the returns notwithstanding the fact that there is a trend towards lowering of the interest rates which we as public financial company have been very responsive to.
Den Of Wealth:
*All-Time High Loan Sanction*
POWER FINANCE CORPN:
Sanctioned Loan Book of PFC stands at whopping 1.72 LAC CRORES. If same is compared against Loan DISBURSAL in FY16, PFC has strong *pipeline for next 45 months ( almost 4 years)*
How many other NBFCs have such huge Loan Sanction book and pipeline for 45 months? Perhaps none.
_Still PFC trading @ 4.40xFY17Eeps_
Further mgtmnt has stated:
*Discoms Turnaround under UDAY will have positive impact on overall power sector improving ASSET QUALITY of PFC loans. 72% of Pfc loans are to Generation sector. With Discom financial health improving, stress on loans given to Generation sector will reduce considerably*
*94% equity with Govt/DIIs/FIIs. Only 6% with public. We estimate PFC to be 155-160 Feb Expiry*
*Can any other NBFC/Bank/Financial Institutions have similar Ratios?*
_Rural Electrification Corp_
PERatio. 3.85
Yield on Assets. 11.71%
Cost of Funds. 8.32%
Net Interest Margin 4.69%
Interest Spread. 3.39%
*Cost to Income ratio( Lowest)*. 1.68%
*Business per Employee 314.73 crores*
*Profit per employee 10.57 crores*
Perhaps Highest Dividend Yield
Rural Electrification Corp:
For FY 16, REC had paid Rs 17.90 as Dividend
As per our reliable source in Finance Ministry, *total Dividend for FY 17 can be Rs 12 per share*
It means _Dividend Yield of 9%+_
No other stock on Indian bourse may give such high Dividend Yield.
Stock also finds Top place in IDBI capital's High Quality High Dividend Yield list
Stock can be 161 March17 expiry
Hold for 2 months in FnO for real multibagger gains
Zero impact of demonetization on this NBFC:
_REC Ltd_: MOST UNDERVALUED
*Q2 NP rises 23.3% QoQ*
H1. Q2.
EpsRs.16.06. 8.87.
_FY17Eeps Rs 34_
PERatio 3.75 *Lowest amongst all NBFCs*
Book Value Rs 161
_Only NBFC avlbl @ 0.80 PricexBook as against 3-6 times PricexBook of NBFCs like LIC, IBHOUSING etc_
Due to huge emphasis on power sector by NDA govt, biz and prospects of REC will continue to EXPAND. Valuation of recession proof REC to expand whereas valuation of NBFCs in housing/retail finance to shrink
*TP Rs 139-142 January Expiry*
_HDFC Sec has given TP Rs 200 ( 2017)_
Our TP Rs 225 in 2017
Sankhya Infotech:
Huge volumes since last 2 weeks with 70-95% delivery ratio. It means stock being cornered by informed Investors.
HBL Power group co was holding 18% stake and have been selling aggressively. Once HBL exits completely from Sankhya, stock will spurt to much higher levels. Good opportunity to accumulate NOW
SANKHYA INFOTECH LTD:
*IT co available at Mktcap of just 41cr*
*Only IT co available at 0.28xRevenue*
*Big big big developments taking place*
_FY18 topline to witness 35% growth and EPS can be 10_
*Stock can be in 3 digits in CY17 itself*
IT Co with _play of Defense and Aerospace_
Hyderabad based Sankhya Infotech Ltd, a small software company may witness HUGE UPSURGE in its business in coming years due to strong emphasis of Modi govt on Make In India, domestic production of Defense equipment and growing clout of Aerospace in India. It is major challenge to provide high value, result oriented and immersive
training solutions for Aerospace and Defense industry. SIL designs training solutions that are customer driven.
Its solutions are used by many Aviation schools and Aerospace companies.
SIL offers several innovative products and services for Aerospace and Defense industry. SIL is catering to following segments:
DEFENSE
AEROSPACE
BFSI
TRANSPORT
ENERGY
HIGHER EDUCATION
.SIL is world's FIRST company which offered remote training facility for any airlines in the world.
SIL has partnered with various Defense PSUs and Defense Labs . And its solutions of advanced training programs suitable for ALL 3 arms of defense forces i.e. Army, Airforce and Navy.
BIG DEVELOPMENT: One American defense Contractor has tied up with SIL to integrate SIL's solutions with their own solutions.
For Aeropace industry, SIL offers following solutions:
TMIS
LMS
LCMS
Crew Rostering
Desktop Simulations
For Defense industry, SIL offers the following:
TMIS Defense
LMS
Simulators
Video integration
SIL's other portals of BFSI, Higher education are also doing well. However, SIL expects HUGE HUGE growth in its size from Aerospace and Defense segment.
Another Wealth Creator for 2017:
_Goldiam International Ltd_
100% EOU. No domestic sales. Hence, zero impact of Notebandi. *Big profit margin expansion due to weak Re*
Exports diamond jewellery directly to Retailers
Avlbl at 0.70x Book
Tdg @ 5.90xFY16 EPS
Avlbl @ 4.58xFY17Eeps
*Investments ( at cost, mkt value much higher) RS 108.40 cr works out to Rs 43/ share. Hence, biz avlbl just for Rs 44*
Mumbai based Goldiam belonging to Bhansali family, is engaged in production and exports of designer diamond jewellery. Co is exporting directly to big retailers in USA. Goldiam has been improving its financials ( DEBTFREE, takes short term borrowings only for working capital against security of its investments) and is definitely underpriced
H1FY17. H1FY16
Sales 152. 160
PAT 17.14. 160
Equity. 24.94
EPSRs 6.84. 4.17
BValueRs. 112
For FY16, Goldiam had reported NP of 33 cr on sales of 330cr, translating into EPS of 13.03.
*For H1 it's Pat has leapt by 60% with H1 EPS of 6.84*
_Goldiam can easily report Eps of 16 for FY17 as (a) H2 is always better due to Christmas/NY demand (b) to benefit from strong dollar_
It may be noted that co don't hedge it's dollars( of export revenue), hence full benefits of weak rupee will lead to margin expansion
But hedges dollar for gold imports
Co also benefits from rising gold prices( inventory gain). Family one of the oldest in this business, hence understand gold biz ( volatility) extremely well
*Investments in current, non-existent current asset class AT COST 108.40 cr which means RS 43/ share*
Goldiam trading at 0.70x,Book, PERatio 4.58, debt free, consistently profit making is grossly underpriced.
_Even if Goldiam gets modest PERatio of 12, stock price can be 170-200 in 12-15 months_
Definitely worthy of investment. Stock still below its recent high of 94 makes it safe buy at cmp
HUGE TRIGGER IN OFFING:
_Triveni Glass Ltd_
Andhra Pradesh govt is building huge township name AMRAVATI to be state capital. This new city entails huge huge demand for building materials.
*Triveni Glass will be big big beneficiary as it's plant is just 80km away from AMRAVATI and there is no other plant within 200 km radius*
Such huge demand will change fortunes of TGL completely as TGL will wield strong pricing power.
If all goes well, TGL can become 400 cr company by 2020 by which time stock should cross 200
Cmp still lower than recent high of 33
_Cheapest building materials stock_
Update on Triveni Glass Ltd:
Earlier only 1 production line was operational and 2nd production line was shut. However due to improved liquidity and higher demand, TGL has made 2nd line also operational. With this production capacity stands doubled. Present utilization of 2nd line is 40% which should go upto 80% after 1-2 quarters. Hence FY18 should be significantly better vs FY17
Q2 PAT up 1000%: Cheapest Textile Stock(Uninterrupted Dividend track record)
Kamadgiri Fashion Ltd:
Q2/FY17 Q2FY16
Sales. 86. 71
PBT 1.80. 0.18
PAT 1.21. 0.12
Equity. 5.87
Q2 PAT has risen 1000% YoY as co has increased sales of its *OWN BRAND fabrics(True Value,True Linen)* and cost cutting
KFL is largest supplier of garments to FUTURE group and also supplies to all major Garment brands in India
*Kishore Biyani thru Pvt firms holds 28% stake*
_Watch for some big corporate action_
Stock is trading at just 10%xFY18 sales
TP Rs 120-130 in short term
( Low liquidity means faster rise in share price)
