The current landed prices of CPO have come down from $602 to $582 per tonne since January, while falling from $728 to $682 per tonne in the case of crude, de-gummed soyabean oil. The retail prices of Palm is at Rs 50 – 60 and the refined oil prices is at Rs 60-70. So the cut in duty prices have positive impact on Ruchi Soya Industries, K.S. Oil Ltd, KSE Ltd, Godrej Commodities and Rasoya Proteins…as raw material cost decreases
FII registrations continue unabated, the last three months throwing up a number of names, many of which have their origins in Europe and America. Close to a dozen were registered in the first three weeks of January.
A discernible number of those registered - the total number of registered FIIs stood at 1,059 on January 24 - can be traced to emerging market funds, pension funds and the like. A section of these are part of operations run by international investment groups.
A few registrations have been secured by institutions in diverse locations including Cyprus, Ireland, Italy and Hawaii. A handful of them are from Asian countries such as Japan, Korea and Taiwan as well.
Among the names listed by SEBI are FIIs close to institutions such as Boy Scouts of America, George Kaiser Family Foundation, Howard Hughes Medical Institute, The J. Paul Getty Trust and University of Wisconsin Foundation.
In the first three weeks of the current month, registrations were granted to a clutch of funds. These include Emirates Bank International PJSC (Dubai), Fimat International Banque SA (UK), Morley Pooled Pensions (UK), Gard Contractual Fund (Ireland), HLG Asia-Pacific Dividend Fund (Malaysia), John Hancock Science & Technology Trust (USA), National Railroad Retirement (USA) and Lazard Freres Gestion SAS (France).
The number of FIIs registered with SEBI was increasing every year, figures released earlier by the regulatory body suggest. There were 882 FIIs registered on March 31, 2006, compared with 685 a year ago, an increase of nearly 200 over the 12-month period.
"A distinctive feature of the profile of the newly registered FIIs relates to increase in registration from unconventional countries," SEBI had mentioned in its 2005-06 annual report. These countries include Australia, Denmark, Saudi Arabia, Canada and Sweden. Incidentally, the net FII investment in equity during 2005-06 was roughly Rs 48,800 crore, the highest ever in a single year, the regulator added.
Players who registered in the past one year included names such as California State Teachers' Retirement System, Kansas Public Employees Retirement System, Policemen's Annuity and Benefit Fund of Chicago and Public Employees Retirement Association of Colorado.
Besides, there were the likes of Pilkington Brothers Superannuation Trustee and Kraft Foods Master Retirement Trust 2. These were registered between April and October last year.
Asians troop in
FIIs are coming in from all over, and those in the Far East are not staying away either.
Institutions, with addresses in Tokyo, Seoul, Kuala Lumpur and Taiwan, have taken registrations in recent months. These include Khazanah Nasional Berhad of Malaysia (Month of registration: December 2006), Nikkociti Trust & Banking Corporation of Japan (August), Nomura International (Hong Kong) Ltd (August), The Mutual Fund Management Co of The Philippines Inc, Shinsei Bank of Japan (July) and Mirae Asset of Korea (March).
In addition, entities such as Shuaa Capital PSC of Dubai and United Securities LLC of Oman have also joined the Asian list in November 2006 and January this year respectively.
Mehta Stock(~Back Up Id~): With a view to reducing the cost of manufacturing and encouraging infrastructure development, the Government has decided to reduce customs duty on cement, various raw materials and capital goods. The customs duty on Portland cements had been reduced from 12.5 per cent to nil while the duty on primary and semi-finished forms of copper, aluminium, zinc, tin and other base metals and ferro-alloys stainless steel has been reduced from 7.5 per cent to 5%. The official notification issued on Monday said that the project import rate of 7.5 per cent has been extended to airport development projects and metro rail projects. Customs duty on inorganic chemicals like halogens, sulphur, carbon, hydrogen, rare gases and alkali metals has been reduced to 5 per cent from 10 per cent.
Buy:
Era Construction,
Madhav Marbles,
Mahindra GESCO,
PSTL.
Infrastructure Sector can witness good buying while cement stocks can see some selling.
Regards,
Bhavin.
FIIs were net buyers to the tune of Rs2.18bn (provisional) in the cash segment yesterday. In the F&O segment too, they pumped in Rs2.53bn. On Friday, foreign funds were net buyers at Rs768mn. Mutual Funds, however pulled out Rs4.02bn from the cash segment on the same day.
Major Bulk Deals: UBS has bought Pyramid Saimira; SBI MF has picked up RPG Transmission.
Results Today:
SBI, Tata Motors, UB, ABG Shipyard, Adlabs, BEML, Bharti Airtel, BEL, Ceat, Cipla, Dabur Pharma, DS Kulkarni, Educomp, Gitanjali Gems, Glenmark, Grasim, GTL, India Infoline, Indian Hotels, IPCA, Kesoram, Mangalam Cement, Mahindra Gesco, Neyveli Lignite, Nitco Tiles and Opto Circuits.
Market Volumes:
The turnover on NSE was down by 16.3% to Rs75.74bn.BSE FMCG index was the major gainers and gained 1.32%. BSE Consumer Durable index (up 0.94%), BSE Auto index (up 0.55%) and BSE Technology index (up 0.49%) were among the other major gainers. However, BSE Oil & Gas index lost 0.51%.
Volume Toppers:
IFCI, Nagarjuna Fertilizers, SAIL, Satyam Computer, DCB, ITC, Hindustan Motors, Ispat Industries, IDFC, Ashok Leyland, India Cements, Polaris, R Com, Ceat, HCC and Tech Mahindra.
Upper Circuit Filters:
Crisil, Flex Industries, Heritage Foods, HOV Services, Nesco Ltd, Ganesh Housing and Suven Life.
Delivery Delight:
Adlabs Films, ACC, Bank of India, BHEL, BRFL, CEAT, Gammon India, Glenmark, HCL Technologies, India Infoline, ING Vysya Bank, INOX Leisure, J B Chemicals, Jet Airways, Maruti, Nagarjuna Construction, NDTV, Pratibha Industries, Punjab National Bank, Suzlon Energy, Taneja Aerospace, Tata Motors, Tata Power, VSNL and Zee Telefilms.
Brokers Recommendations:
Suzlon Energy - Buy from Merrill Lynch with target of Rs1650
Bharti Shipyard – Buy from Emkay with target of Rs554
Long Term Investment:
IVRCL Infrastructures.
Major News Headlines:
Maruti Q3 profit at Rs3.76bn (up 11%), sales at Rs38.64bn (up 18%)
Nalco Q3 profit at Rs5.72bn (up 46%), sales 14.48bn (up 9.3%)
RIL says has no plans to spin off KG basin oil and gas fields
Pratibha Industries gets Rs1.22bn AAI order
Welspun Gujarat wins orders worth Rs10.5bn
Kale Consultants gets order from Yemenia Airlines
Adlabs completes purchase of Synergy Communications
Colgate Q3 profit at Rs503.4mn (up 21%); revenues at Rs3.39bn (up 14%)
Kotak Mahindra Bank Q3 profit at Rs454mn (up 39%), income at Rs4.53bn (up 96%)
JSW Steel Q3 profit at Rs3.62bn (up 160%), sales at Rs23bn (up 160%)
India Cements Q3 profit at Rs797.8mn vs Rs72.2mn; total income at Rs4.74bn (up 35%)
NEWS
•
Larsen & Toubro Ltd (Rs.1551.25) has signed a joint venture (JV) agreement with Saudi Arabia''s A A Turki Contracting and Trading Corporation. The JV will focus on electromechanical construction for the hydrocarbon and power sector and the new venture will be known as Larsen & Toubro ATCO (Saudia) LLC. The joint venture will enable both the companies to benefit significantly from the boom in the oil and gas and infrastructure fields.
•
Tata Motors Ltd's (Rs.964.40) sales have crossed the half-million mark in 2006. With this the company has achieved such a feat for the first time in a calendar year. The company registered a total sales of 5,55,065 vehicles (including exports), a growth of 30 per cent over 4,25,901 vehicles sold in 2005. Exports in 2006 was at 53,540 units in comparison to 45,701 units in 2005.
•
Nicholas Piramal India Limited (NPIL - Rs.260.40) has entered into a plant screening agreement with San Francisco-based Napo Pharmaceuticals Incorporated for discovery of novel diabetes therapeutic agents. Both the companies will jointly own all products that are developed under the agreement. Diabetes is a major focus of NPIL and the incidence of diabetes among the populations the company serves has grown significantly over the past decade to where it is a major health concern.
•
Provogue India Ltd (Rs.466.15) has raised Rs.146 crore at Rs.450 a share mainly from private equity investors to fund its realty and retail expansion. New Vernon, Blackstone, Fidelity, Genesis Capital, Artis Capital and UK''s shopping centre owner, Liberty International will subscribe to 32.5 lakh new shares.
•
Welspun-Gujarat Stahl Rohren Ltd (Rs.109.65) has bagged orders for the supply of pipes for critical oil and gas applications. The orders (overseas) are valued at Rs.1,049 crore. This takes the order book position of the company to over Rs.3,500 crore.
ICICI Bank
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,240
Current market price: Rs977
Price target revised to Rs1,240
Result highlights
ICICI Bank's Q3FY2007 net profit at Rs910 crore was much above our and market expectations. The net profit saw a growth of 42.2% year on year (yoy) against our expectation of a 26.1% year-on-year (y-o-y) growth. The robust performance was driven mainly by a very high growth in the fee income and the other income compared with our expectations. Despite a rise of 125.6% in the provisions, the profit growth was very strong on the back of a 65.4% growth in the operating profit.
The net interest income (NII) grew by 31.9% yoy to Rs1,708.8 crore. What's impressive is that in Q3FY2006 the NII included a securitisation income excluding which the y-o-y NII growth stands at 53%.
The other income grew by 68% yoy to Rs1,980.6 crore, of which the core fee income grew by a strong 52.7% yoy to Rs1,345 crore.
The operating profit was up by a strong 65.4% on the back of a good NII growth and a sharp rise in the fee income. The operating expenses increased in line with the business growth.
The provisions increased by 125.6% mainly due to higher provisions for the non-performing assets (NPAs). The asset quality deteriorated as non-collateralised retail loan products like credit cards reported defaults. The gross non-performing asset (GNPA) increased by Rs650 crore on a sequential basis and the net non-performing asset (NNPA) also increased in absolute and percentage terms.
The capital adequacy ratio (CAR) stood at 13.4%, with the Tier-I CAR at 8.63%. Incorporating the Basel II guidelines the Tier-I CAR would be 9.5% and we feel the bank can maintain its current growth rates without any dilution in the medium term.
We have revised our FY2007 and FY2008 estimates based on the bank's improved performance on the non-interest income front. We have also factored in the higher provisions that may be made in future in view of the signs of deterioration in the retail loan book. We have revised the FY2007 and FY2008 profit after tax (PAT) estimates by 2.9% and 2.4% to Rs3,375.7 crore and Rs4,041.9 crore respectively. We have also introduced our FY2009 numbers as we believe that slowly the market would start factoring in the FY2009 financials.
At the current market price of Rs977, the stock is quoting at 17.5x its FY2009E earnings per share (EPS), 7.2x its pre-provisioning profits (PPP) and 2.8x book value (BV). The valuation looks attractive if one considers the value of the bank's subsidiaries which works out to Rs400 per share of the bank. We maintain our Buy recommendation on the stock with a one year price target of Rs1,240.
Maruti Udyog
Cluster: Apple Green
Recommendation: Buy
Price target: Rs1,050
Current market price: Rs939
Loss of new plant impacts reported profits
Result highlights
The Q3FY2007 results of Maruti Udyog Ltd (MUL) re in line with our expectations.
The company's net sales for the quarter grew by 18.5% to Rs3,679.5 crore from Rs3,112.0 crore in Q3FY2006. The growth was led by a volume growth of 18.7% during the quarter and was in line with our expectations.
The expenditure for the quarter was higher due to higher employee costs, an increase in royalty and a loss with respect to Maruti Suzuki Automobiles India Ltd (MSAIL). Considering all these the operating profit margin (OPM) declined by 52 basis points to 14.36%. The margins were affected due to higher royalty expenses. Consequently, the operating profit grew by 14% to Rs528.48 crore.
The interest and depreciation costs for the quarter were higher due to the commencement of the Manesar plant. The adjusted net profit grew by 14% to Rs384.81 crore. The reported profit after tax (PAT) rose by 12% to Rs376.4 crore.
MUL is expected launch the diesel Swift in January 2007. This is expected to be a big boost for MUL as it would be its first serious attempt to cater to the fast-growing diesel segment. The diesel segment constitutes about 25% of the total car market in India.
We maintain our positive outlook on MUL, considering its leadership position in the Indian car market, planned product launches including the foray into the diesel segment and a strong outsourcing potential. Despite its rising raw material cost, MUL has been able to maintain its margins at commendable levels due to increasing efficiencies and a better product mix.
At the current market price of Rs939, the stock quotes at 14.4x its FY2008E earnings and 9.9x its enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA). We maintain our Buy recommendation on the stock with a price target of Rs1,050.
Orchid Chemicals & Pharmaceuticals
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs390
Current market price: Rs217
Strong growth potential despite poor performance
Result highlights
The net sales of Orchid Chemicals & Pharmaceuticals (Orchid) rose by 0.5% year on year (yoy) to Rs238.7 crore in the third quarter of FY007. The sales growth was slightly below our expectations, partly due to an absence of any significant new product launches in the USA and partly due to the high base of Q3FY2006.
The company maintained its performance in its major market, the USA. Its key products�Ceftriaoxne and Cefproxil�continued to maintain a healthy market share in excess of 20-25%.
The company's operating profit margin (OPM) expanded by 350 basis points to 32.6% as against our expectation of 31.5%. The improvement in the margin was primarily on account of a 27% drop in the raw material cost, as the company continued to derive an increasing proportion of its revenues from the sale of formulations in the high-margin regulated markets. Formulations constituted roughly 45% of its sales, almost 90% of which came from the USA.
Consequently, the operating profit grew by 12.4% to Rs77.8 crore in the quarter.
Despite a substantial improvement in the margins, the high interest cost (up by 19.4% yoy) and the higher tax provisioning as compared to Q3FY2006 dragged down the net profit, which declined by 2.2% to Rs28.3 crore in the quarter. The profit growth was in line with our estimate.
Orchid has just received approval from the UK MHRA for its betalactum API facility at Aurangabad. This development indicates that Orchid is on track to make its big entry into Europe in FY2008, which will add to its growth from FY2008 onwards.
At the current market price of Rs217, the stock is quoting at 8.5x our estimated FY2008 earnings. The valuation is very attractive given the strong growth potential for FY2008 and FY2009 in view of some forthcoming big launches in the USA and a big entry into Europe. Hence, we maintain our Buy call on the company with a price target of Rs390.
Nucleus Software Exports
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs898
Current market price: Rs811
Price target revised to Rs898
Result highlights
Nucleus Software Exports has announced lower-than-expected sequential growth in its revenues at 2% quarter on quarter (qoq) and 50.3% year on year (yoy) to Rs56.2 crore (against the expectations of Rs58.6 crore). The product revenues have grown at a robust rate of 12.8% sequential. However the revenues from the project and services business declined 9.3% sequentially and resulted in a lower-than-expected overall growth in the revenues during the third quarter.
The operating profit margin (OPM) declined by 110 basis points sequentially to 27.9% during the quarter, largely due to the steep increase in the selling, general and administration expenses (SG&A) as a percentage of sales (up from 12.6% of the sales in Q2 to 15.7% in Q3). The huge jump in the SG&A expenses was driven by the additional cost incurred (on travel and other related expenses) in pursuing some of the large deals in the pipeline (including the recently bagged order from ACOM).
Consequently, the earnings were largely flat at Rs13.9 crore on a sequential basis. However, the earnings grew at a robust rate of 58.1% on an annual basis.
Notwithstanding the muted performance (sequentially) during the quarter, the company has shown an exponential growth in its order backlog that is likely to boost the overall revenue growth in the coming quarters. The pending order book jumped to Rs335 crore, up from Rs135 crore at the end of the previous quarter. The order backlog includes the multi-million multi-year order from ACOM, a leading consumer finance company in Japan.
To factor in the impact of the huge fresh order intake, we are revising upwards the revenues and earnings estimates by 7% and 9% respectively, for FY2008. At the current market price the stock trades at 22.8x FY2007 and 16.5x FY2008 earning estimates. We maintain our Buy call on the stock with a one-year revised target price of Rs898 (15x its rolling four-quarter earnings).
India Cements
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs315
Current market price: Rs242
Net profit up 1,000%
Result highlights
India Cements achieved a net profit of Rs79.77 crore for Q3FY2007, clocking a year-on-year (y-o-y) growth of 1000% , though it was below our expectations on account of higher-than-expected increase in the costs.
The top line grew by a robust 36% year on year (yoy) to Rs472 crore on the back of a 4% y-o-y growth in the volumes to 1.75 million metric tonne (MMT) and a 32% growth in the realisations to Rs2,700 per tonne.
The company's operating expenditure increased by 13% yoy to Rs339 crore on the back of a 20% increase in the raw material costs and an 18% rise in the distribution costs. Sequentially, the freight cost and the power & fuel cost increased by Rs30 per tonne and Rs15 per tonne respectively.
The company's high leverage to the cement prices resulted in an operating profit growth of 185% yoy to Rs133 crore whereas the operating margin expanded by a mammoth 1,40 basis points to 28%.
The earnings before interest, tax, depreciation and amortisation (EBITDA) per tonne tripled to Rs761 though it was down 12% quarter on quarter (qoq) on account of lower volumes due to the monsoons in the southern region namely Tamil Nadu and Andhra Pradesh.
The interest expenditure and the depreciation cost remained flat qoq at Rs34.7 crore and Rs19.82 crore respectively. These factors coupled with a negligible tax provision helped the company's net profit to register a 1,000% year-on-year jump to Rs79.77 crore.
The company's plan to augment its capacity by 2MMT at its existing facilities (namely Sankaridurg and Vishnupuram) is well on schedule. One million tonne of the capacity is expected to come in June 2007 whereas the balance one million will kick in by December 2007.
We expect the company's volumes to bounce back in the fourth quarter and also expect the prices to firm up further by Rs5-10 per bag.
At the current price of Rs242, the stock trades at 12.2x its FY2007E and 8.5x its FY2008E earnings. On an enterprise value (EV)/tonne basis, the company is trading at USD115 per tonne, which is a steep discount to its peer Madras Cement, which is trading at USD155 per tonne. We continue to maintain our positive outlook on the company with a price target of Rs315.
Indo Tech Transformers
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs335
Current market price: Rs288
Price target revised to Rs335
Result highlights
The Q3FY2007 results of Indo Tech Transformers Ltd (ITTL) are above our expectations.
The company has reported strong quarterly results. The revenues for the quarter grew by 130% to Rs45.04 crore as against our expectations of Rs40 crore while the net profit grew by 166% to Rs7.3 crore against our expectations of Rs5.3 crore. The volume growth was 89% as the company sold 672 mega Volt Ampere (MVA) during the quarter as against 355MVA in Q3FY2006.
The above performance was due to the fact that the company executed some high-margin orders during the quarter under review and hence the operating profit for the quarter grew by 153% to Rs11.86 crore. The operating profit margin (OPM) for the quarter improved by 240 basis points to 26.3% as against 23.9% in Q3FY2006. Going forward the company expects to maintain its OPM in the range of 19-20%.
The interest expense for the quarter stood at Rs0.23 crore while the depreciation cost for the quarter was Rs0.28 crore.
The order backlog at the end of Q3FY2007 stood at Rs153 crore as against Rs79 crore at the end of the previous quarter, showing a growth of 94%.
The S&P CNX Nifty (last 4,080) has set a new bull-market high following five
volatile weeks; further gains are anticipated as the market completes the
advancing phase from the 2003 low. We expect an approximate 10% advance,
but a speculative surge above 5,000 (up 20%+ from current levels) is a
possibility.
The Nifty is in a powerful wave ! advance from the May 2003 low of 920, the
break above the early December peak of 4,046 should lead to another
consistent rally phase. The market’s structure since the 2003 low shows a
number of relationships that support our preferred view:
• Wave 2/ resulted in a 36% decline (Fibonacci 38%) and an
approximate Fibonacci 62% retracement of the wave 1/ advance (on a
log-scale basis).
• Wave 3/ advanced 192% or a Fibonacci 1.618 times the wave 1/ 119%
gain.
• Wave 4/ resulted in a 31% decline (a third and close to the magnitude
of wave 2/) and an approximate Fibonacci 38% retracement of the
wave 3/ advance (on a log-scale basis).
In a five-wave sequence, when wave three is the longest wave, there is a
tendency for wave five to be equal in size to wave one. This setup would result
in the Nifty gaining almost another 40% to 5,685. Another common occurrence
is for wave five to be a Fibonacci.618 times the length of wave one, this gives a
Nifty target of 4,505, 10% above the current level.
Examining the structure of wave 5/ (of wave !) on the daily chart shows that
waves 1 to 3 of 5/ are complete but there are too many alternate wave counts
to state with any certainty that wave 4 of 5/ is finished - so that 3,658 may not
represent the end of the corrective process from the December peak of 4,047.
Interestingly if wave 4 is complete at 3,658, wave 5 of 5/ would equal wave 1
of 5/ in percentage terms at 4,520, and very close to the 4,505 target derived
above from the weekly chart.
TOWER TALK
* Gujarat Reclaim & Rubber Products has finally decided to dematerialise the equity shares of the company. Scrip is set to witness a vertical rise and hit non-stop circuits. Catch it if you can!
* The sharp fall in crude oil prices will have a positive impact on polyester yarn manufacturers like Garden Silk, Sarla Polyester, Surylata Spinning, JBF Industries, Rajasthan Spg. & Wvg. Mills etc. These scrips may see some action in coming days.
* Winsome Textiles is once again hitting new highs. A group of HNIs is continuously accumulating this scrip from the open market. Scrip can even shoot upto Rs.75 once its Dec.’06 numbers are out.
* A savvy Mumbai operator is betting on Phoenix International. The scrip is tipped to rise multifold in future.
* Some positive news is expected for the hospital sector from the Union Budget. Traders can accumulate Kovai Medical, Indraprastha Medical, Apollo Hospitals for short-term till the budget.
* Vishal Exports Overseas given its wind farms a natural contender for the Carbon Credits and expects to generate at least Rs.3-4 cr. from the Carbon Trading each year.
* Aventis Pharma is being accumulated by shrewd investors amid talk of a possible Bonus.
* Indian Hume Pipes has huge potential in turnkey construction apart from sizeable land assets in various locations in the country.
* Kernex Microsystem has huge orders from the Indian Railways and is exploring orders from SAARC countries.
* Sunil Hitech is a quiet performer in the infrastructure industry. While its present is performance is subdued, there are expectations of good performance in FY08.
* Premier Explosives has bagged a Rs.70 cr. order from ISRO at Sriharikota.
* Marketmen suspect that there is something purposely amiss in the Q3 results of Satyam Computers, which has not stood upto the promise of Infosys or TCS. They expect some big announcement in the near future.
* Panacea Biotec is being bought by 2/3 investment brokers with a price target of Rs.565-600.
* Bharat Electronics could double from its present level of Rs.1300 in about a year given its strong working and future prospects.
* Dabur India, Hind Lever, P&G and Godrej Consumer will post a robust top-line growth in the coming quarter due to a price hike in all their products.
* Tata Elxsi could go the CMC way. God alone knows what’s happening?
* Investors who participated in the buyback offer of Ingersoll Rand must be repenting as the price has almost doubled. What would be worse if the company make a second buy-back offer around Rs.850/900 level!
Lakshmi Energy will be declaring its Q3FY07 results today. We expect the company
to register a strong performance considering that the third quarter typically
outperforms the preceding two, as bulk paddy procurement begins during this
period. Moreover, Lakshmi has raised its rice processing capacity by 80 MTPH, the
beneficial impact of which would be felt from Q4FY07 onwards. In view of the
added capacity coming onstream, we have revised our financial projections for
FY07 and FY08. Our target price now stands revised upwards by 7% to Rs 280. BUY.
The board of Tata Steel is set to empower the group chairman and
managing director to take a final decision on the proposed revised
acquisition of Corus. The meeting may enable the management to take
the bid up to 600 pence per share. (ET)
ICICI Bank has taken a hit on loans given against warehouse receipts. The
fraud unearthed in the quarter ended December 2006 is estimated at
around Rs 1bn.5bn. (ET)
HPCL is in talks with Total of France and Kuwait Petroleum to take them
on as partners in the Vizag refinery in Andhra Pradesh. Total may pick up
a stake in the expansion of the refining capacity of the Vizag plant,
adjacent to the existing refinery. (ET)
Reliance Industries (RIL) has surprised analysts with an impressive 58%
increase in Q3 PAT to Rs 28bn, compared with Rs 1.8bn in Q3FY06. (FE)
Pantaloon Retail India has entered into a joint venture with US-based
Staples Inc and its new business unit, Future Office. (Hindu)
Bharti Airtel has announced an investment of over US$2bn (Rs 90bn) in
2007-08 to expand its network, but wants state-run BSNL to share
infrastructure. (The Statesman)
Nicholas Piramal has reported a consolidated net profit of Rs 555mn for
the third quarter ended December 31, 2006 as against Rs 96.8mn in
Q3FY06. (BS)
Ranbaxy Laboratories is considering setting up a special purpose vehicle
(SPV) for launching a bid on Merck’s generic business. Merck is looking to
sell its generics division, in a deal that could be valued at US$5.2mn. The
generics business clocks revenues of around US$2.5bn and if Ranbaxy is
able to acquire it, the Indian company’s revenues could nearly triple to
around US$3.8bn. (ET)
McLeod Russell India Ltd. (MRIL), the largest tea producer in the country has been formed by
demerger of bulk tea division of Eveready Industries India Ltd. Being it the largest player, the company
will get immensely benefited by the expected up move in the tea prices. It has 52 tea gardens with
aggregate area of more than 18,805 hectares located in Assam and Dooars producing around 74m
Kg of tea on consolidated basis. The company is open for further acquisition across the globe in
order to become a global player.
Going forward, we expect the PAT to increase more than 5 folds over next two fiscals induced by
top line CAGR of 17% over FY06 through FY08. The current market price is 5.3x the FY08E EPS of
Rs.17.4. Assuming a conservative P/E, we expect MRIL to trade at 7x its FY08E EPS. We recommend
‘Buy’ with the target price of Rs.120, which is 10% discount to our DCF valuation.
Overiview:
An SME player in the construction sector, Pratibha Industries has its core competency in designing to distribution of water covering laying of pipelines, WTPs, pump house, etc. This business currently occupies 80% of its 13.2bn order book position. The balance revenue is from urbhan infrastructure project specializes in steel structures for air port, high rise buildings where company wants tot focus on going forward and remaining from real estate projects, thermal power plant construction contracts. With experience in water projects and manufacture of LSAW pipes within the group, Pratibha Industries is setting up a HSAW pipe manufacturing unit with a installed capacity of 90 MTPS at Wads, Near Mumbai. This will also help company to enter the most promising Oil&Gas Pipelines supply and laying business in a year’s time. With the present order book position and foray into pipes manufacturing, the company’s revenues are expected to grow at 62% CAGR over FY06-FY09E.
VALUATION:
To fund the aforesaid projects Pratibha would need around Rs100cr which is expected to get via convertible or nonconvertible debt. Assuming the entire amount is raised through convertible at current market price fully diluted equity would be
Rs18.4cr. At the current market price PRATIBHA is trading at 8xFY08E and 5.5xFY09E earnings which doesn’t factor in its growth in future. ‘BUY’ with 12 months
target price of Rs380 which shows 55% upside to its present price.
