Derivative Picks for Very Short Term

RELIANCE CAPITAL ( Rs.511.80) : The stock made a smart recovery and has closed on a strong note. The 14 day RSI has given a fresh buy signal. Buy above Rs.513 and add more once it crosses the level of Rs.522 . Keep a monetary stop loss of Rs.8. Target of the stock works out to Rs.535.

PUNJ LLOYD ( Rs.798.50) : The stock has broken out of an Inverted Head and Shoulder Pattern which is bullish by nature. The oscillators by giving fresh buy signals has supported the breakout. Buying is advised above Rs.802 with a stop loss of Rs.784 for a target price of Rs.825 and Rs.842.

Current Market Price 385, Short Term Target 430

VENUS REMEDIES
Present Price - Rs.385; Projected Price - Rs.430

This Chandigarh-based company has a WHO-GMP certified state-of-the-art plant for infusions and dry powder-filling injectibles. We expect Venus to grow at 50% for the next five years on the back of new product launches, additional strategic marketing tie-ups with domestic companies, and increased oncology product exports to CIS and other countries. The company's newly built Baddi manufacturing facilities were accredited with ISO certifications, ISO 9001:2000 and ISO 14001:2004, as well as the OHSAS 18001:1999. Venus has been aggressively expanding its marketing team by increasing the number of sales offices in various states. It aims to have around 500 sales offices across India by FY10 from the current 140 plus. The chart structure is looking extremely bullish and one should invest at current evels. Long term investors can expect higher returns.

BUY with target price of Rs 271 - CMP: Rs 200

Dishman Pharmaceuticals and Chemicals Limited     

The acquisition of Carbogen- Amcis has catapulted Dishman into a new league in the CRAMS space. It is estimated to contribute Rs 2.78 and Rs 5.4 to FY07 and FY08 earnings. BUY with a target price of Rs 271.

Dishman Pharmaceuticals recently acquired Carbogen- Amcis (CA). The deal is a win -win situation for both the companies. Dishman gets an access to a wide product portfolio of CA (11 products commercialized and 6-7 products in Phase III trials) most of them in areas of oncology, USFDA approved facilities, strong clientele with 90% of business coming from repeat customers, execute high volume contracts from India and China (currently CA cannot execute such contracts due to capacity constraints) and reduced dependence on Europe for revenue (currently 80% of Dishman's revenue comes from Europe whereas 70% of CA revenue comes from USA). CA has firm orders covering 95% of expected 2006 sales.

By sourcing materials from India & China, Carbogen Amcis would be able to significantly lower its material cost (currently all material is sourced from Europe). In addition, by sourcing low end intermediates from Dishman, CA would be able to free up capacity, which can be further utilized to bag new contracts. CA can get access to Dishman's R&D facilities as both the companies have identified oncology as a focus area for growth. CA can also leverage upon Dishman's strong presence in Europe and Asia and expand its operations further in these regions. Further CA can also outsource non-GMP high volume products to Synprotech UK, Dishman's 100% subsidiary acquired in 2005. Dishman has also said that it would not expatriate dividend from CA for the next two years, which would enable CA to invest funds in capex.

The acquisition has catapulted Dishman into a new league in the CRAMS space. The acquisition of CA would be EPS accretive in the very first year and is estimated to contribute Rs 2.78 and Rs 5.4 to FY07 and FY08 earnings. Dishman is expected to witness revenue CAGR of 75% and earnings CAGR of 65 % over FY06-08. The stock is trading at 19.1x FY07E EPS of Rs10.1 and 11.3x FY08E EPS of Rs17, which is at a significant discount to its nearest peer Divi's Laboratories. Dishman deserves higher valuations considering strong visibility of earnings from CRAMS and QUATs over the next two years. Based on these evaluations, the stock enjoys BUY recommendation with a target price of Rs 271 based on 16x FY08 earnings.

Credits: Nirmal Jain   

Power BUY Calls from Tech Analysts

Reliance Communication can be purchased on declines with a stop loss of Rs 274

Buy ICSA India with stop loss of Rs 703 for short term target of Rs 900

Buy Kesoram Industries below Rs 426 with a stop loss of Rs 420;This is
a day-trading recommendation

Buy Bharti Airtel (Rs 430.45) with a stop loss below Rs 423 for a
target of Rs 449

Buy Reliance Energy (Rs 488.10) with a stop loss below Rs 477 for a
target of Rs 516