Voltas Ltd has informed BSE regarding a Press Release dated May 29, 2009 titled "Voltas' FY 08-09 Operating Profit up by 21%; Sales up by 32%; Board recommends 160% Dividend".
You can read the press release here: (It's impressive, by the way)
Recommended Price: Rs. 50
CMP: Rs. 98.05
Return: 96%
Call: Hold
There was another press release yesterday. Voltas secured orders worth Rs. 300 for airport electro-mechanical works for Kolkata's Netaji Subhas Chandra Bose International Airport and Chennai International Airport. You can read it here.
Our analysis of this company has been spot on in the short run. Let's see how it goes in the long run!
This one is really going fast!
HSIL: Good results this quarter
The market is booming, and how. In this booming market (actually in all bull runs), all kinds of scrips go crazy- share prices of companies that are NOT doing well, and companies that ARE doing well. A long term investor has to pick and choose the latter type of companies. As the great Buffett once said, and i strongly believe as well, a company with good management is the best place for your money- and then it doesn't matter if you've invested in a bull run or during a bear market.
HSIL Limited was established in 1962 with a joint venture of the Somany Group with Twyfords, UK. HSIL Limited is the largest Indian manufacturer of Sanitaryware products with a market share of 40% in the industry. HSIL's products are available across the country and are supported by over 1000 direct dealers and 12000 sub dealers. HSIL Limited was the first Company in India to manufacture Vitreous China Sanitaryware.
HSIL posted its results this (last) Sunday. They were up two fold QoQ at Rs 19 crore. The company's net sales for the March quarter increased by 13.44 per cent to Rs 177 crore. For the year ended March 2009, the company reported a 40.14 per cent increase in net profit at Rs 40.15 crore as against a net profit of Rs 28.65 crore in 2007-08. Although the standalone results are good as they seem, the consolidated profit for the quarter is lower on account of a loss of Rs 7.39 crore incurred by Hindware Home Retail Pvt Ltd- a wholly owned subsidiary of the company.
The company is looking at overseas acquisitions (in Western Europe) and has identified Rs 250 crore in current fiscal for the purpose. There was news recently that it is planning to introduce 125 new products. The company is also planning retail expansion ("exclusive brand megastores" as the company calls it)for which it is planning to invest close to Rs 300 crore. Also, the greenfield plant for Container Glass at Bhongir has started operations on 30th March, 2009.
Now if we analyze the valuations of the company, the consolidated EPS of last year (ending March 09) was Rs. 5.94. The CMP of Rs. 56.5 rupees shows a P/E of 9.5 which shows the share is slightly expensive in this market. There are other companies (in other verticals) that have a lesser P/E ratio. It touched a low of Rs 20 a share, and has bounced back from that level. It's all time high is Rs 119.95 in 2007 (market price of a 2 rs share). The share price at the moment is high, and i am telling this straight. But the growth prospects of this company justify the premium in the share price that has built over this past week (of 29%) after it had announced the results. A month ago, it traded at around Rs. 28.
So, thats our pick this weekend - a sanitaryware major that is eyeing inorganic growth by overseas acquisitions and also planning to increase its market share in the domestic market. If only the share was available at a lower price! (But that's the case everywhere, isn't it?)
HSIL Limited was established in 1962 with a joint venture of the Somany Group with Twyfords, UK. HSIL Limited is the largest Indian manufacturer of Sanitaryware products with a market share of 40% in the industry. HSIL's products are available across the country and are supported by over 1000 direct dealers and 12000 sub dealers. HSIL Limited was the first Company in India to manufacture Vitreous China Sanitaryware.
HSIL posted its results this (last) Sunday. They were up two fold QoQ at Rs 19 crore. The company's net sales for the March quarter increased by 13.44 per cent to Rs 177 crore. For the year ended March 2009, the company reported a 40.14 per cent increase in net profit at Rs 40.15 crore as against a net profit of Rs 28.65 crore in 2007-08. Although the standalone results are good as they seem, the consolidated profit for the quarter is lower on account of a loss of Rs 7.39 crore incurred by Hindware Home Retail Pvt Ltd- a wholly owned subsidiary of the company.
The company is looking at overseas acquisitions (in Western Europe) and has identified Rs 250 crore in current fiscal for the purpose. There was news recently that it is planning to introduce 125 new products. The company is also planning retail expansion ("exclusive brand megastores" as the company calls it)for which it is planning to invest close to Rs 300 crore. Also, the greenfield plant for Container Glass at Bhongir has started operations on 30th March, 2009.
Now if we analyze the valuations of the company, the consolidated EPS of last year (ending March 09) was Rs. 5.94. The CMP of Rs. 56.5 rupees shows a P/E of 9.5 which shows the share is slightly expensive in this market. There are other companies (in other verticals) that have a lesser P/E ratio. It touched a low of Rs 20 a share, and has bounced back from that level. It's all time high is Rs 119.95 in 2007 (market price of a 2 rs share). The share price at the moment is high, and i am telling this straight. But the growth prospects of this company justify the premium in the share price that has built over this past week (of 29%) after it had announced the results. A month ago, it traded at around Rs. 28.
So, thats our pick this weekend - a sanitaryware major that is eyeing inorganic growth by overseas acquisitions and also planning to increase its market share in the domestic market. If only the share was available at a lower price! (But that's the case everywhere, isn't it?)
Opinion: Which industry will do now what IT did then?
The thing is a lot of rupees have been bought by paying dollars (the price of the dollar went significantly lower from 49-50 to 47-48). Such transactions are not normally done for a shorter term, ie, no one would bring in their money to short sell. They have p-notes for that!!
Having said that, there are a lot of expectations from the new govt. In my opinion, they should not overly spoon-feed the sectors of the economy who've only now started making losses (when they earlier have made killings) such as real estate- bailing out of companies in the US and stimulus packages worldwide have happened as the economy there was totally doomed and out. In india, this is not the case. As far as real estate is concerned, prices are not the problem. Lack of customers is the problem. Lack of buyers is the problem. In other sectors like steel & co, the businessmen could do without those chinese dumps- otherwise, they're fine.
What the govt should focus on are issues like domestic security, poverty eradication, provision of better basic services and employment; while providing a level playing field wherever possible. Industries like Shipbuilding, Biotechnology and Healthcare have the potential of putting Indian on the global roadmap- they have already been buzzing, but have not made any major, out of the box achievements if we compare to what IT has done to India. These three sectors, in my opinion can and will be the "next big things". Another major focus for the government should be R&D. R&D leads to innovations, and innovations lead to new products and services. There is huge scope for R&D in Shipbuilding, Biotech and Healthcare. India is yet to become the outsourcing hub for Shipbuilding that it can become. Lower costs and the R&D potential back my case. As far as R&D in (agri) Biotech and Healthcare is concerned, there has been a lot of noise in the previous decade; but there haven't been overly successful results. If you consider Monsanto- the $11 billion american biotech company, and you consider its Indian counterparts such as partner Mahyco, you would know the difference that lies and the potential in the field. Similar is the case with HC. If you know about the relationship between Pfizer’s growth and R&D, you would know what I mean. (And if you know about the love of major Indian pharma companies towards off patent drugs and the recently over hyped “generics”, you would be convinced of what I am implying!)
So, as an investor, where would you put your money? My suggestion would be the above discussed (albeit briefly) 3 sectors. Plus one. IT (Yup!) Why IT? E-Governance. The beauty about IT is that it is never short of newer avenues. The beauty about E-governance solutions clientele is that it is the government! There would be no Obama to churn out those Buffalo policies (that don’t go well with the Indian IT bull!). And there is immense scope in e-governance as well. Imagine putting a billion people on the mainframes! And it’s not just about the mainframes. Subsidiary and complementary e-Governance solutions has a long market potential as well. So while Shipbuiding, Biotech and Healthcare can do what IT did in the last decade, IT can further its advance and example in this decade!
Coming back to domestic security, poverty eradication, provision of better basic services and employment. The first point needs no elaboration. The second point - poverty eradication would actually come as a huge stimulus to the economy as the general consumer base would have grown manyfold. Employment is the solution and the NREG schemes are the benchmarks. The UPA govt has done its homework in the past 5 years, and knows what is to be done now. That’s the advantage of a good continuing government that actually wants to do something. And boy, we have another advantage. Dr. Singh- an economist as a prime minister in this hour (or should it be year, or decade, err.. time will tell) of crises!
Having said that, there are a lot of expectations from the new govt. In my opinion, they should not overly spoon-feed the sectors of the economy who've only now started making losses (when they earlier have made killings) such as real estate- bailing out of companies in the US and stimulus packages worldwide have happened as the economy there was totally doomed and out. In india, this is not the case. As far as real estate is concerned, prices are not the problem. Lack of customers is the problem. Lack of buyers is the problem. In other sectors like steel & co, the businessmen could do without those chinese dumps- otherwise, they're fine.
What the govt should focus on are issues like domestic security, poverty eradication, provision of better basic services and employment; while providing a level playing field wherever possible. Industries like Shipbuilding, Biotechnology and Healthcare have the potential of putting Indian on the global roadmap- they have already been buzzing, but have not made any major, out of the box achievements if we compare to what IT has done to India. These three sectors, in my opinion can and will be the "next big things". Another major focus for the government should be R&D. R&D leads to innovations, and innovations lead to new products and services. There is huge scope for R&D in Shipbuilding, Biotech and Healthcare. India is yet to become the outsourcing hub for Shipbuilding that it can become. Lower costs and the R&D potential back my case. As far as R&D in (agri) Biotech and Healthcare is concerned, there has been a lot of noise in the previous decade; but there haven't been overly successful results. If you consider Monsanto- the $11 billion american biotech company, and you consider its Indian counterparts such as partner Mahyco, you would know the difference that lies and the potential in the field. Similar is the case with HC. If you know about the relationship between Pfizer’s growth and R&D, you would know what I mean. (And if you know about the love of major Indian pharma companies towards off patent drugs and the recently over hyped “generics”, you would be convinced of what I am implying!)
So, as an investor, where would you put your money? My suggestion would be the above discussed (albeit briefly) 3 sectors. Plus one. IT (Yup!) Why IT? E-Governance. The beauty about IT is that it is never short of newer avenues. The beauty about E-governance solutions clientele is that it is the government! There would be no Obama to churn out those Buffalo policies (that don’t go well with the Indian IT bull!). And there is immense scope in e-governance as well. Imagine putting a billion people on the mainframes! And it’s not just about the mainframes. Subsidiary and complementary e-Governance solutions has a long market potential as well. So while Shipbuiding, Biotech and Healthcare can do what IT did in the last decade, IT can further its advance and example in this decade!
Coming back to domestic security, poverty eradication, provision of better basic services and employment. The first point needs no elaboration. The second point - poverty eradication would actually come as a huge stimulus to the economy as the general consumer base would have grown manyfold. Employment is the solution and the NREG schemes are the benchmarks. The UPA govt has done its homework in the past 5 years, and knows what is to be done now. That’s the advantage of a good continuing government that actually wants to do something. And boy, we have another advantage. Dr. Singh- an economist as a prime minister in this hour (or should it be year, or decade, err.. time will tell) of crises!
Update on Previous Pick: Spanco Ltd
The price of shares allotted to the promoters on preferential basis has been revised from Rs. 35 to Rs. 40. Also, the limit for FII investment in the share capital has been raised to 49%.
You can read the entire announcement here.
More good news!
You can read the entire announcement here.
More good news!
Crew BOS Products
Crew BOS Ltd manufactures and exports fashion accessories and home decoration products. The company’s product profile ranges from belts, bags, portfolios, business cases, footwear, wallets, boxes, furniture to home furnishings.
From the company's website:
"
It was rated as top exporter from North India by Council of Leather Exports for the financial year 1999-2000 and 2001-02 in the category of leather goods and accessories. The company operates from its seven facilities in Gurgaon and Manesar for manufacturing various fashion products. The company’s revenue model is based on catering to the outsourcing requirements of the leading international brands in U.S. and Europe. The company has a highly scalable business model and there is tremendous scope for ramping up every individual client account. The company’s customer profile comprises reputed international retail brands like NEXT PLC, ESPIRIT, ZARA,, MASSIMODUTTI, ARMANI EXCHANGE, TESCO, H& M in Europe. The customers in USA include GAP, BANANA REPUBLIC, OLD NAVY, CHICO’s, FOSSIL.
"
The company has business that is export oriented. It is understood that it handles manufacturing of fashion accessories, and has clients as described above. It is planning to enter the domestic market by creating its own brand and products range. But given the nature of this market, and the fact that these products are not actually for the masses - it will be very difficult for the company to profitably market its goods. Where i see potential for the company is its core outsourcing business. With margins decreasing in their homelands for manufacture of such items, major fashion brand owners have turned to outsourcing their manufacturing activities, concentrating on distribution and marketing. The other distinct advantage, which the Company has, is the presence of strong tie-ups with the suppliers and vendors for supply of raw materials and consumables both locally and abroad. This is being further strengthened by the setting up of a finishing leather unit in Manesar.
The company claims:
"
Outsourcing has picked up rapidly in the recent past due to convergence of Purchasing Power Parity across continents resulting in De-construction of production chain. Over a period of next 5-10 years, the entire fashion accessory industry is expected to be dominated by countries endowed with cheap labor. According to the principle of International flow of goods, the original innovator or exporting country ultimately becomes the net importer of goods as production shifts to other lower cost destinations.
"
In 2004, the company opened an office in Hong Kong to facilitate joint ventures and alliances with parties in Hong Kong, China and the far East - countries that are favorites for outsourcing of work. The fashion industry world wide has not been as hit as the other industries. Demand for fashion accessories is renewable, and with the global economy recovering, at the fastest rate ever, there will be soon more business for this company.
FII-holding in Crew BOS Products was 21.4% at end September 2006. In March 2008, it was 21.01 %. This fell to nill in Jan '08. It also has GDRs trading in the Luxembourg Stock Exchange. Now if this holding rises even marginally, the impact on the stock price can be imaginable. Currently trading at around Rs. 33.5, the stock was given to the public @ Rs. 35 in an IPO in 2004. It has an all time high of Rs. 290 in 2007, when things were all bright. And with the situation apparently returning to normal, we could witness similar trading levels (at least Rs. 100 upwards), and that is significant upside from the current levels.
For short term investors, i do not recommend this stock, since volumes are low. For long term investors, this can be a multi multi bagger!
From the company's website:
"
It was rated as top exporter from North India by Council of Leather Exports for the financial year 1999-2000 and 2001-02 in the category of leather goods and accessories. The company operates from its seven facilities in Gurgaon and Manesar for manufacturing various fashion products. The company’s revenue model is based on catering to the outsourcing requirements of the leading international brands in U.S. and Europe. The company has a highly scalable business model and there is tremendous scope for ramping up every individual client account. The company’s customer profile comprises reputed international retail brands like NEXT PLC, ESPIRIT, ZARA,, MASSIMODUTTI, ARMANI EXCHANGE, TESCO, H& M in Europe. The customers in USA include GAP, BANANA REPUBLIC, OLD NAVY, CHICO’s, FOSSIL.
"
The company has business that is export oriented. It is understood that it handles manufacturing of fashion accessories, and has clients as described above. It is planning to enter the domestic market by creating its own brand and products range. But given the nature of this market, and the fact that these products are not actually for the masses - it will be very difficult for the company to profitably market its goods. Where i see potential for the company is its core outsourcing business. With margins decreasing in their homelands for manufacture of such items, major fashion brand owners have turned to outsourcing their manufacturing activities, concentrating on distribution and marketing. The other distinct advantage, which the Company has, is the presence of strong tie-ups with the suppliers and vendors for supply of raw materials and consumables both locally and abroad. This is being further strengthened by the setting up of a finishing leather unit in Manesar.
The company claims:
"
Outsourcing has picked up rapidly in the recent past due to convergence of Purchasing Power Parity across continents resulting in De-construction of production chain. Over a period of next 5-10 years, the entire fashion accessory industry is expected to be dominated by countries endowed with cheap labor. According to the principle of International flow of goods, the original innovator or exporting country ultimately becomes the net importer of goods as production shifts to other lower cost destinations.
"
In 2004, the company opened an office in Hong Kong to facilitate joint ventures and alliances with parties in Hong Kong, China and the far East - countries that are favorites for outsourcing of work. The fashion industry world wide has not been as hit as the other industries. Demand for fashion accessories is renewable, and with the global economy recovering, at the fastest rate ever, there will be soon more business for this company.
FII-holding in Crew BOS Products was 21.4% at end September 2006. In March 2008, it was 21.01 %. This fell to nill in Jan '08. It also has GDRs trading in the Luxembourg Stock Exchange. Now if this holding rises even marginally, the impact on the stock price can be imaginable. Currently trading at around Rs. 33.5, the stock was given to the public @ Rs. 35 in an IPO in 2004. It has an all time high of Rs. 290 in 2007, when things were all bright. And with the situation apparently returning to normal, we could witness similar trading levels (at least Rs. 100 upwards), and that is significant upside from the current levels.
For short term investors, i do not recommend this stock, since volumes are low. For long term investors, this can be a multi multi bagger!
Spanco Ltd: Sowing productive seeds
Spanco Telesystems and Solutions Limited is a leading software solution provider and integrator in the field of Telecom, Enterprise, Retail, Transport, Security and Public utilities. Spanco is poised with a technically strong and talented Instrumentation and Software Integration team, and has designed and developed many successful Value added solutions, for the same. With clients such as IRCTC, MTNL, Air India, Bharti Airtel, HUL, Mumbai Police – just to name a few, Spanco is on its own distinguished road towards better business avenues and the subsequent shareholder value creation.
Recently, Spanco bagged a Rs 7500 crore order from BSNL. The contract is towards building and maintenance of passive cellular infrastructure including towers, shelters, diesel generators, air-conditioning and associated services, the source added. It is expected that the order will fetch Rs. 1000 crores for the first year and with 12-13% EBIDTA margins, this looks positive. For a company with total revenues every year being around Rs. 500 crore, this is a major development. Subsequently, the share price of the company is expected to rise from the CMP of around 45 rupees to the levels of 100-115 in the short time frame of 3-4 months (provided all remains well around the world and Citi doesn’t sleep!). With a stable government now seen at the centre, the markets will not be negatively influenced in the shorter term at least. Coupled by (what I perceive to be a dead cat bounce) the global rally, the Indian markets are seen to outperform all other major markets. And in such a scenario, Spanco Telesystems is a great place for your investments. The only negative about this stock is the recent low of around Rs. 16 that it has tested. It means there can be some profit booking at higher levels, but that is unlikely because sensible investors would stay put in a company that has very high growth potentials.
There has also been recent news of Spanco BPO looking to acquire JV partner Spice Group’s stake in Bharat BPO. It has 8 centers and employs more than a 1000 employees. So, I am not talking about a small IT company. This one may not be known to many, but there’s more to it than meets the eye. The mere fact that it is an S group company in BSE should not be a deterrent to investment decisions.
One major sector Spanco is pioneering is mobile banking and mobile commerce. SBI launched its service in association with Spanco recently. There is tremendous scope here in this field as it is yet to take off (most mobile companies are constantly finding ways to commercialize applications, and Spanco can offer outsourcing opportunities for the latter part – for Spanco, there is a dual opportunity of providing end to end support). Apart from the conventionally known mobile services, Spanco is also into RFiD, GPS/GIS, E-governance(as is corroborated later in this analysis by the example of the ration card contract), ERP, and other such services. This is a budding venture in a budding industry.
Although Spanco is only a CMM level 3 company (most major IT companies are level 5 – eg, TCS). The SEI CMM provides a measure of the global effectiveness of a company’s software engineering practices. When Spanco develops gradually to a full fledged CMM level 5 company (here’s when my “end to end” reasoning culminates), it would have developed into a full grown mature company, and having thus generated wealth for its shareholders.
Another important project that Spanco has undertaken is the digitization of ration cards for Maharashtra. The company has invested around Rs 40 crores in this project. As is evident from this and the above discussions, Spanco has mainly its clients in the domestic market, and thus should not be very affected by the US anti outsourcing policies which may be passed by Obama (even the BPO business has potential domestic clients like Bharti Airtel).
Recently, Spanco decided to raise funds up to Rs 350 million by issuing 10 million equity shares of Rs 10 each at a price of Rs 35 a share which is inclusive of a share premium of Rs 25 share on preferential basis to promoters, foreign venture capital investors, foreign institutional investors. This lets one know about the real valuation of the company. The share is a hot pick at any price below Rs 35. But at the current level, it is not bad as well for long term and short term investors both. Yup, this is one scrip that has something in store for everyone!
Note: Spanco trades only in BSE.
Recently, Spanco bagged a Rs 7500 crore order from BSNL. The contract is towards building and maintenance of passive cellular infrastructure including towers, shelters, diesel generators, air-conditioning and associated services, the source added. It is expected that the order will fetch Rs. 1000 crores for the first year and with 12-13% EBIDTA margins, this looks positive. For a company with total revenues every year being around Rs. 500 crore, this is a major development. Subsequently, the share price of the company is expected to rise from the CMP of around 45 rupees to the levels of 100-115 in the short time frame of 3-4 months (provided all remains well around the world and Citi doesn’t sleep!). With a stable government now seen at the centre, the markets will not be negatively influenced in the shorter term at least. Coupled by (what I perceive to be a dead cat bounce) the global rally, the Indian markets are seen to outperform all other major markets. And in such a scenario, Spanco Telesystems is a great place for your investments. The only negative about this stock is the recent low of around Rs. 16 that it has tested. It means there can be some profit booking at higher levels, but that is unlikely because sensible investors would stay put in a company that has very high growth potentials.
There has also been recent news of Spanco BPO looking to acquire JV partner Spice Group’s stake in Bharat BPO. It has 8 centers and employs more than a 1000 employees. So, I am not talking about a small IT company. This one may not be known to many, but there’s more to it than meets the eye. The mere fact that it is an S group company in BSE should not be a deterrent to investment decisions.
One major sector Spanco is pioneering is mobile banking and mobile commerce. SBI launched its service in association with Spanco recently. There is tremendous scope here in this field as it is yet to take off (most mobile companies are constantly finding ways to commercialize applications, and Spanco can offer outsourcing opportunities for the latter part – for Spanco, there is a dual opportunity of providing end to end support). Apart from the conventionally known mobile services, Spanco is also into RFiD, GPS/GIS, E-governance(as is corroborated later in this analysis by the example of the ration card contract), ERP, and other such services. This is a budding venture in a budding industry.
Although Spanco is only a CMM level 3 company (most major IT companies are level 5 – eg, TCS). The SEI CMM provides a measure of the global effectiveness of a company’s software engineering practices. When Spanco develops gradually to a full fledged CMM level 5 company (here’s when my “end to end” reasoning culminates), it would have developed into a full grown mature company, and having thus generated wealth for its shareholders.
Another important project that Spanco has undertaken is the digitization of ration cards for Maharashtra. The company has invested around Rs 40 crores in this project. As is evident from this and the above discussions, Spanco has mainly its clients in the domestic market, and thus should not be very affected by the US anti outsourcing policies which may be passed by Obama (even the BPO business has potential domestic clients like Bharti Airtel).
Recently, Spanco decided to raise funds up to Rs 350 million by issuing 10 million equity shares of Rs 10 each at a price of Rs 35 a share which is inclusive of a share premium of Rs 25 share on preferential basis to promoters, foreign venture capital investors, foreign institutional investors. This lets one know about the real valuation of the company. The share is a hot pick at any price below Rs 35. But at the current level, it is not bad as well for long term and short term investors both. Yup, this is one scrip that has something in store for everyone!
Note: Spanco trades only in BSE.
Indraprastha Gas Ltd: An investment pick
It is time I picked a company for those investors who are not greedy, and are looking for a conventionally good stock with good fundamentals to keep their money in. For the same purpose, I pick Indraprastha Gas Ltd.
Indraprastha Gas is yet to turn in its Q4 and FY09 results. For those who know nothing about this company, Indraprastha Gas Ltd (IGL) is a joint venture of Bharat Petroleum Corporation Ltd (BPCL) and the Gas Authority of India Ltd (GAIL). It has 170 CNG stations, and supplies cooking gas to more than 1.7 lakh households in the capital.
That said, the company pays good dividends as well; paid Rs. 4 per share last year. The share price had a low of Rs 92 on 27 Oct 08 and a high of 132 on 22 May 08. It currently trades at Rs 118.70 per share. If you look at the current market volatility, this stock is very stable. The EPS has risen steadly YoY. Have a look at this:
EPS over the years:
March '05: Rs. 6.62
March '06: Rs. 7.58
March '07: Rs. 9.85
March '08: Rs. 12.46
March '09: ?
Reserves over the years:
March '05: Rs. 172.4 crores
March '06: Rs. 238.6 crores
March '07: Rs. 327.5 crores
March '08: Rs. 436.4 crores
March '09: ?
With focus shifting from petrol/diesel to CNG and other economical eco-friendly gases, companies like IGL have a lot to win over the table. The company has no debt. And that is good, indeed.
Coming over to the valuations, in 2003, the company offered shares in the band of 40-48 rupees. That's six years ago, and the EPS and the reserves of the company have increased as already discussed above. I would recommend the following:
1) The stock is only slightly expensive at P/E of 12.88. FIIs hold 17% in this company - God forbid if they have to sell out of compulsion!
2) If you think the market is not going to fall big time now, you may buy this stock at the current levels with a long term view.
3) If you're sceptical about the market at the moment, you can wait for the company to declare its results in Jun '09, which would be a good time to buy since you would have a better view at the way the company proceeded in this (past) quarter which is seen to be the worst for many.
(even though this stock is not volatile, you may pick it at Rs. 90 or thereabouts as seen in Oct 08 crash, in case the market crashes)
4) The negative: there is relatively less upside in the short term. This one's a really slow moving stock, with very less volatility - at least that's how it has behaved till now:
So, in either case, keep an eye on this one. It's one of the safer bets in these very difficult times.
Indraprastha Gas is yet to turn in its Q4 and FY09 results. For those who know nothing about this company, Indraprastha Gas Ltd (IGL) is a joint venture of Bharat Petroleum Corporation Ltd (BPCL) and the Gas Authority of India Ltd (GAIL). It has 170 CNG stations, and supplies cooking gas to more than 1.7 lakh households in the capital.
That said, the company pays good dividends as well; paid Rs. 4 per share last year. The share price had a low of Rs 92 on 27 Oct 08 and a high of 132 on 22 May 08. It currently trades at Rs 118.70 per share. If you look at the current market volatility, this stock is very stable. The EPS has risen steadly YoY. Have a look at this:
EPS over the years:
March '05: Rs. 6.62
March '06: Rs. 7.58
March '07: Rs. 9.85
March '08: Rs. 12.46
March '09: ?
Reserves over the years:
March '05: Rs. 172.4 crores
March '06: Rs. 238.6 crores
March '07: Rs. 327.5 crores
March '08: Rs. 436.4 crores
March '09: ?
With focus shifting from petrol/diesel to CNG and other economical eco-friendly gases, companies like IGL have a lot to win over the table. The company has no debt. And that is good, indeed.
Coming over to the valuations, in 2003, the company offered shares in the band of 40-48 rupees. That's six years ago, and the EPS and the reserves of the company have increased as already discussed above. I would recommend the following:
1) The stock is only slightly expensive at P/E of 12.88. FIIs hold 17% in this company - God forbid if they have to sell out of compulsion!
2) If you think the market is not going to fall big time now, you may buy this stock at the current levels with a long term view.
3) If you're sceptical about the market at the moment, you can wait for the company to declare its results in Jun '09, which would be a good time to buy since you would have a better view at the way the company proceeded in this (past) quarter which is seen to be the worst for many.
(even though this stock is not volatile, you may pick it at Rs. 90 or thereabouts as seen in Oct 08 crash, in case the market crashes)
4) The negative: there is relatively less upside in the short term. This one's a really slow moving stock, with very less volatility - at least that's how it has behaved till now:
So, in either case, keep an eye on this one. It's one of the safer bets in these very difficult times.
CEAT Ltd : Back to profits!
What a year it has been for CEAT! CEAT had a very eventful year 2008. Starting from the relisting of the company in early 2008, CEAT first posted a profit of around Rs. 76 crores, owing to sale of property, with the price of the share skyrocketing to levels of Rs. 175. It declared dividend of Rs. 4 per share, and then the recession effects started. The auto industry was hit, demand was down, rubber prices spiked, and all hell broke loose. Orders from OEMs (Original Equipment Manufacturers) slumped.Meanwhile, CEAT had opted for a makeover, focusing on the youth to trigger growth at a period when exports were taking the big hit. It took the route of advertising in cricket tournaments, reality TV shows (Roadies), and what not - to engrave the impression of a tyre maker for the youth; a clear attempt to boost sales in a new market. Betting on rapid truck radialisation in India, it is also pacing up the setting up of a radial tyre plant at Vadodara. Slogging through Layoffs on two occasions, CEAT came of age in the last quarter where it finally posted profit before exceptional items of Rs 36.5 crores in Q408, an increase of 70 % over the same quarter last year, and an operating profit increase of 42% YoY.
Hopefully, this should be a sign for a good, new beginning for CEAT tyres. According to the recent press release, high efficiency and exemplary working capital management has yielded to high profitability. EBIDTA margin to net sales surged to 9.2% from 7% up by 220 basis points. As far as the Baroda plant is concerned, it is expected to start production in 18 months. Keeping thrust on exports and increasing focus on domesting markets is what is needed out of a tyre manufacturing company of such size ideally. I suggest a long term investment into CEAT, entering at the current level (or waiting for Rs 30-35 levels if you foresee a market crash).
The negatives for this company are in the form of the volatility of the rubber markets, death of the big US automakers (Chrysler, GM), and the recession as a whole. But, at the same time I am opinionating big time on the exports and domestic (new tyre segments) prospects of the company in any case. This may just prove to be a multibagger!
Kudos! And Happy Earnings!
Subscribe to:
Posts (Atom)