70% Returns expected from this stock on Investment

Indo Asian Fusegears   

Indo Asian Fusegears is expanding capacities in its product segments and developing new product segments. Buy with a target of Rs 240.Current Market Price is Rs 140.

 

Though the current quarter for Indo Asian Fusegears Limited (IAFL) was not very impressive, we believe that with current initiatives like consolidation of the businesses and on-going expansion program, IAFL will be reckoned amongst the world's largest and state-of-the-art producers of Circuit Protection Equipments and Energy Saving Lamps. IAFL has a very good track record and has managed excellent timing by aggressively expanding at the time when the Indian electrical equipments segment is on the fast track growth path

 

The company is expanding capacities in the existing product segments and developing new product segments to take full advantage of the Indian Electrification drive. In the domestic market the company is taking prudent steps to increase its presence with its big network of dealers and distributors. In the export market, it has tied up with some of the most reputed names abroad. It has JV partnerships with companies like Heinrich Kopp (Germany),Nordex (Italy), National Glass Company (Saudi Arabia), etc.

 

As its expansions get operational, we expect IAFL's top line to grow by 74.5% & 57.8% and APAT to grow by 47.7% & 57.9% respectively in FY07E & FY08E. We expect IAFL's fully diluted EPS to increase at a 30.2% CAGR from Rs.10.9 in FY05 to Rs.24.1 in FY08E. At the current market price of Rs.130, the stock is available at 5.4x FY08E earnings of Rs.24.1, on the diluted equity of Rs.153.1 mn, which we believe is very attractive. We are retaining BUY rating on the stock with a target price of Rs.240 (10x FY08E P/E).

Source: SP Tulsian

Expect annualized returns of 25 per cent, for the next two years from this stock

Balrampur Chini

The big sugar mills have bright future ahead. The increased production of ethanol and power shall also improve the company's performance.

Opportunities and Strengths :-

# Due to state elections, approaching in U.P. in February 2007, we expect an increase in SAP (State Advisory Price) of Sugarcane by about Rs.5 per quintal from Rs.115 per quintal to Rs.120 per quintal.

# During season 06-07, we expect ample availability of cane in UP at SAP. This situation is likely to remain better in eastern UP where the mills of the company are located. This will result in higher capacity utilization of mills, as also keeping lower cost of production. Cost of materials were higher due to higher price paid by mills in season 05-06.

# Sugar prices may remain lower in season 06-07 due to estimated production of 23 millions MT in India. We have estimated realization at Rs.17.90 per kg, a drop of about Re. 1 per kg.

# Ethanol prices are likely to get revised from Rs.18.75 per litre to around Rs.23 per litre. This improved realization shall offset the expected lower margin in sugar, due to lower prices.

# The Sugar export is likely to be allowed by the Government of India in January 2007 after reviewing the production of first two months of season of 06-07. This shall improve the Sugar Price in domestic market.

# The company is logistically better placed to export sugar to neighbouring countries, where the demand is likely to remain robust in the next year.

# The global market for Ethanol is likely to remain robust in the coming year with an expected realiasation of Rs.26 per litre and above.

# The UP State Subsidy benefits and carbon credit (Co-generation projects) shall add extra to the bottomline of the company

Concern and Risks :-

# Any extra increase beyond Rs.10 per quintal in SAP may sharply increase the cost of production.

# Any delay in ethanol price revision can be a dampner

Conclusion :-

Due to commencement of Mankapur unit, as also due to expected ample availability of cane in season 06-07, the company is likely to produce 11 lacs plus MT of Sugar. The increased production of ethanol and power shall also improve the company's performance. We have factored in UP State subsidy revenue of about Rs.42 crore in FY07 working. Considering an estimated production of 11.26 lakh MT of Sugar, 85000 KL of Rectified Spirit / Ethanol and 65 crore units of power, we expect company to report a bottomline of Rs.340 crores resulting in an
EPS of Rs.13.70 per share.

Due to strong cash flows of the company, from its working (Rs.320 Crores, net off dividend in 18 months ending 30.09.06) in FY06 and FY07, the company may not be required to go for any equity dilution or to leverage its balance sheet by huge borrowing.

Hence, the share at levels of around Rs.100 appears to be a safe bet which can give an annualized return of 25 per cent, for the next two years. The big sugar mills have bright future ahead and company falls in that category.

Sensex ends below 11,700 on derivatives unwinding

The market finished lower on unwinding of positions in the derivatives segment due to expiry of August 2006 contracts. Market talk that Stock Holding Corporation of India had sent letters to brokers asking them to bring cash as collateral in place of shares in the futures and options (F&O) segment pulled the market lower in the latter part of the trading session.

The market-breadth was quite weak. For 1,688 shares that declined on BSE, just 827 rose. As many as 72 shares were unchanged. Losers outpaced gainers by a ratio of 2:1.

The 30-shares BSE Sensex lost 24.87 points (0.21%), to settle at 11,699.05. It moved in a narrow range for a better part of trading. The S&P CNX Nifty shed 16.45 points (0.48%), to settle at 3,413.90.

ITC, HDFC Bank, Reliance Petroleum (RPL), and Tata Power edged higher due to short covering in the derivatives segment and due to expiry of August 2006 contracts. ITC gained 2.2% to Rs 191.50, RPL rose 4.6% to Rs 66, HDFC Bank rose nearly 2%, to Rs 857 and Tata Power advanced 1.2% to Rs 532.50.

IT bellwether Infosys rose 0.3% to Rs 1,805 and software major TCS rose 0.6%, to Rs 990. However, Wipro shed 1.8% to Rs 516 and Satyam Computer shed 1% to Rs 811.

Panic gripped TV broadcasters after Telecom Regulatory Authority of India issued a tariff order prescribing rates for pay channels in CAS areas. Zee Telefilms lost 4.4% to Rs 277, TV 18 India shed 8% to Rs 595, Sun TV lost 2.4% to Rs 1,195 and NDTV was down 2.9% to Rs 194.90. Trai has fixed the maximum retail price at Rs 5 per channel per subscriber per month (excluding taxes).

Steel shares were weak on reports that producers are likely to cut prices beginning September 2006. Sail lost 4% to Rs 71.70 and Tata Steel shed 1.7% to Rs 497.65.

Cement shares dropped on profit-taking. ACC shed 1.4% to Rs 909, Gujarat Ambuja Cements shed 1.6% to Rs 112.75 and Grasim lost 0.3% to Rs 2,253.

Index heavyweight Reliance Industries shed nearly 1% to Rs 1,191.

The rollover from August to September contracts was about 55% till Wednesday (30 August).

Asian markets edged higher today after the US government on Wednesday reported that gross domestic product grew at a pace that was slightly faster than first reported in the second quarter. Japan's Nikkei 225 average jumped 1.6% to 16,140.76 and Hong Kong's Hang Seng was up 0.7% to at 17,393.

 

Source: Capitalmarket

Housing finance firms bulge

Shares of housing finance companies surged today on a report that home loans saw strong growth in the past one year.

GIC Housing Finance jumped 6% to Rs 38.75, LIC Housing Finance rose 4.4% to Rs 165, Dewan Housing Finance gained 4.9% to Rs 65.70 and Canfin Homes rose 5% to Rs 51.85. However, housing finance major HDFC declined 0.7% , to Rs 1,292.

As many as 7.1 lakh shares changed hands in LIC Housing Finance and 4.5 lakh shares were traded in Dewan Housing. A total of 1.1 lakh shares changed hands in GIC Housing.

Home loans have expanded 54% in 12-months to June 2006, driving the growth in retail lending. There have been talks that home loan growth may slowdown amid rising interest rates.

Home loans have become a lot more expensive. In the last 12 months, interest rates on home loans have moved up from about 7-7.5% to about 9-9.5%.

 

source: capitalmarket

Deepak Fertilizer jumps as new plant starts to function

Deepak Fertiliser & Petrochemicals Corporation rose 1.05%, to Rs 81.50 on commissioning an isopropyl alcohol plant at Taloja.

As many as 76,527 shares were traded on the BSE.

The stock has rallied from the low of Rs 67.10 on 10 July to Rs 85.50 on 21 August, only to slip to Rs 80.65 by 30 August 2006.

At the current market price of Rs 81.50, Deepak Fertiliser trades at 10.80 times its FY06 EPS of Rs 8.

Deepak Fertilisers & Petrochemicals Corporation has commissioned its IsoPropyl Alcohol (IPA) plant at Taloja and commenced delivery of the product to customers from 28 August 2006. The plant has been completed within the targeted investment of Rs 154 crore, making the company a very cost-effective IPA producer. The company is currently the only manufacturer of IPA in India.

The plant's capacity is 70,000 TPA. At full capacity utilisation, IPA could potentially contribute about Rs 300 crore to the company's topline. The current market size of the product in India is about 65,000 TPA, and growth rates are about 6-7% per annum.

In mid-July, Deepak Fertilisers had set up a greenfield integrated complex for nitric acid and ammonium nitrate at Paradip, Orissa, the land (39 acres) for which was allocated by Paradip Port Trust (PPT) in May.

Deepak Fertilizers manufactures ammonia, fertiliser, concentrated nitric acid, ammonium nitrate and diluted nitric acid. The company has also commissioned a methanol plant.

Deepak Fertilizers and Petrochemicals has posted a net profit rise of 10% to Rs 24.79 crore in Q1 June 2006 compared to Rs 22.62 crore in Q1 June 2005. Net sales during the same period under consideration increased to Rs 166.67 crore from Rs 138.27 crore.

 

source: capitalmarket

Impending stock-split stands Voltas in good stead

Impending stock-split stands Voltas in good stead. Voltas surged 6% to Rs 940, extending its recent surge. As many as 53,468 shares changed hands in the counter on BSE.

Voltas witnessed a sharp surge since late July 2006, partly because of the forthcoming stock-split and partly on the back of decent Q1 results. From Rs 652.25 on 24 July, it has risen 44% to current Rs 940.

Early this month, company shareholders approved a liberal 10-for-1 stock-split. However, the company is yet to announce a record date for the stock-split, which may raise liquidity in the counter. The average daily volume in the scrip on BSE in the past one year was 62,970 shares.

Recently, Voltas formed a strategic partnership with Netherlands based CA/ULO storage technology specialist Besseling-Group to gap the Rs 5,000 crore agro-storage solutions market in India.

Voltas has transformed itself into a major engineering company from a consumer durables firm making air-conditioners. It is now undertaking large electromechanical projects in India and also in the Middle East. Voltas also provides engineering services to the world's major engineering equipment manufacturers.

For Q1 June 2006, Voltas reported 31% growth in net profit to Rs 21.75 crore (Rs 16.55 crore). Sales rose 33% to Rs 580.40 crore (Rs 436.71 crore).

The order-book position of Voltas for electromechanical projects was Rs 1,900 crore as on 30 June 2006. Of these, orders worth Rs 600 crore are from domestic firms whereas the rest are from overseas, mostly from UAE.

FIIs held 24.08% stake in Voltas as on 30 June 2006.

 

source: capitalmarket

BUY and SELL Calls from Rajat Bose, E Mathew, Ashwani Gujral and Deepak Mohani

Deepak Mohoni

 

Buy Union Bank below Rs 121.50 with stop loss of Rs 119.50; This is a day-trading recommendation

 

Buy Sterlite Opticals below Rs 179.50 with stop loss of Rs 176.50; This is a day-trading recommendation

 

Rajat K Bose 

 

Buy IDBI with stop loss below Rs 64.40 for a target of Rs 72

 

Buy LIC Housing Finance with stop loss below Rs 156 for a target of Rs 166

 

E Mathew 

 

Buy ITC with a stop loss of Rs 178 for short-term target of Rs 204

 

Buy Amtek India with stop loss of Rs 113, for short-term target of Rs 150

 

Ashwani Gujral 

 

Sell Tata Steel with a stoploss of Rs 520, for a target of Rs 460

 

Sell Hind Zinc with a stoploss of Rs 600, for a target of Rs 500

 

 

80% Upside possible in this stock - Read the details

Ahmednagar Forgings

BUY: Price : Rs 186; Target Price : Rs 335

We believe Ahmednagar Forgings Limited (AFL) to be a compelling value and growth play within the auto components space. We believe AFL enjoys excellent product delivery capabilities and strong skill sets developed by it over a time. This is strongly reflected from the fact that AFL's topline and bottomline growth in the last 3 years have grown at a CAGR of 43% and101% respectively. We expect faster momentum to continue considering the continued strong growth from both the domestic and export markets, with ROCE and RONW of 26% and 13% respectively for FY07E and  net profits estimated to grow at a CAGR of50% over the next 2 years. (FY06-FY08E).   

Investment Highlights 

Strong domestic automotive demand to fuel  topline growth – AFL is a Tier I supplier to large domestic OEMs like Bajaj Auto, Tata Motors HMSI (Honda Motorcycles & Scooters India Pvt Ltd), L & T John Deere, BEML, Eicher Motors catering largely to the Commercial Vehicle, Two Wheelers and Tractor segments. Incidentally AFL derived about  14%  of its revenues from Two Wheelers, 45% from HCVs and 29% from the LCV segments. Our assessment is that both the Two Wheeler and CV segments are likely to maintain the strong growth momentum over the next 12-15 months which would continue to drive topine growth for AFL.  

Exports offer a good outsourcing opportunity – In FY06A AFL's exports totaled Rs 200 mn – up by 51%yoy. Exports customers include Cummins India, Fair Field Atlas,GWK Amtek Group, and Zelter Germany . During FY06A, AFL acquired one forging production line of Anvil Inc, which is a part of Tyco International, at a total cost of Rs350mn which has a installed capacity of 40,000MTPA. AFL is installing this production line in its Pune plant and expects to generate revenues from October 2006 onwards. AFL would continue to supply these forging products to auto and petroleum sector customers and out source production for a major portion of Anvils existing customersbased a aboard. We estimate AFL to report exports of Rs1800mn in FY07E and Rs2700mn in FY08E.

Strong earnings growth; sharply improving fundamentals – Moving forward we expect AFL to consolidate its position in the domestic forging  markert space with EBIDTA margins continuing to remain attractive between19% to 20% over the next 2 years. With increased machining capacity coming by end of FY07A,  the full impact of incremental topline and EBIDTA growth and margin improvement is likely to be reflected in FY08E.

Risks & Concerns –

Any significant downturn in the domestic Commercial Vehicle, Two Wheeler markets and export markets could impact AFL's earnings negatively.

Potential for Re-rating – The AFL stock trades at a P/E of 10xFY07E & 7 x FY08E, and a EV/EBIDTA of 5x  FY07E . We expect AFL to double its revenues in the next two years that is by FY08E largely led by exports, acquisition of new domestic customers and higher share of value added machined products.  Going ahead we estimate AFL to record a 50% CAGR growth in net revenues, with EBIDTA growing by 55% over the next 2 years between FY06-FY08E.  With an EPS CAGR growth of  50% estimated over FY06-08E, and extremely attractive valuations of10x FY07E and 7x FY08E makes us initiate a BUY on the stock with a target price of Rs. 335 Based on the DCF approach. At our target price the stock will be valued at 17x and 13x P/E and 8x and 6x on EV/EBITDA basis for FY07E and FY08E respectively.