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T I M E S A TIME COMMUNICATIONS PUBLICATION

VOL. XXIII No. 3 Monday, 25 Nov. – 1 Dec. 2013 Pages 18 Rs.12

Markets turn volatileahead of F&O expiry

By Sanjay R. BhatiaThe markets witnessed a pullback rally during thefirst two of the days of the week helping the CNX Niftymove above the 6200 level. However, lack of follow-up buying support at higher levels and sustainedselling pressure on the back of a depreciating Rupeeled to sharp sell-off on the bourses. Panic selling wasalso witnessed on Thursday. Correction continued onthe bourses on the back of profit booking andsustained selling.

Incidentally, FIIs remained net buyers in the cashsegment but were net sellers in the derivatives

segment. Domestic institutional investors (DIIs),however, continued to press sales and remained net sellers during the course of the week. The breadth of the markeremained weak amidst higher volumes, which is a negative sign for the markets. On the global front, the US FederaReserve Chairman continued to give contradictory statements about tapering of the stimulus package giving heartburnsto global markets. While the US benchmark indices continued to touch new historic highs, Indian bourses were hit bypossible downgrades by global rating agencies and the lack of momentum in the economy.

Technically, the prevailing negative technical conditions weighed on the market sentiment leading to selling pressureand still hold good. The RSI, KST and Stochastic are all placed below their respective averages on the daily and weeklycharts. Further, the MACD is also placed below its average on the daily charts. The Nifty has slipped below its 50-daySMA, which is a short-term negative. These negative technical conditions would lead to selling pressure especially athigher levels.

However, the prevailing positive technical conditions still hold good and are likely to lead to short covering and selective

buying support at lower levels. The MACD is placed above its average on the weekly charts. The Nifty remains placedabove its 50-day SMA, 100-day SMA and 200-day SMA. Further the Nifty’s 50-day and 100-day SMA are placed aboveNifty’s 200-day SMA, which is known as ‘Golden Cross’ breakout. These positive technical conditions would lead tointermediate bouts of short covering and buying support would emerge at lower levels.

The +DI line is placed above the -DI line and is also placed above the 25 level on the weekly charts but the +DI line, -DIline and ADX line are all moving sideways on the weekly charts, which indicates a range bound trend. The markets couldmove in a range of 5950–6250 levels and the sentiment remains cautious as Nifty closed below the 6000 level. The6000-5975 level remains an important support zone for the Nifty. Any breach of this important support zone would see

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the markets falling further to test the 5800-5700 levels. In the meanwhile, the markets would continue to take cues fromthe earnings season, Rupee-Dollar exchange rate, global markets and the crude oil prices.

Technically, on the upside BSE Sensex faces resistance at the 20493, 21206, 21350, 21500 and 22000 levels but seekssupport at the 19379, 18612, 18166 and 17448 levels. The support levels for the Nifty are placed at 6047, 5863, 5809,5688 and 5552 levels and faces resistance at the 6000, 6143, 6230, 6313 and 6357 levels.

Traders and speculators could buy Tata Steel above Rs.396 with a stop loss of Rs.385 and target price of Rs.420.

Rajan Leela!By Fakhri H. Sabuwala

While Sanjay Leela Bhansali's ‘Ram’ is courting ‘Leela’ on thecinema screens and the producer & director attending to the‘Ramleela’ in the corridors of the courts, the RBIGovernor Rajan enacted his leela in the form of a pressconference (a proactive step), which momentarily saved the BSESensex at 20,100 from any further erosion.

The impact of his statement was multi-fold. The Rupee alsogathered strength from his statement that the Rupee had noreason to weaken and that oil marketing companies could be provided with dollars by the RBI.

RBI's open market operation (OMO), which is a buy-back of government securities from the market worthRs.10000 crore, will infuse the much needed liquidity in the system. This came as a big relief to the Banking sector andto the Bank Nifty.

Also Janet Yellen, the incoming US Federal Reserve chief's statement that the US economic situation and the labourmarket were "far short of their potential" was interpreted as delaying the tapering programme and an extended life tothe liquidity influx, which was a positive for world markets.

Rain dance at Dalal Street

This year's bountiful monsoon has generated hopes of greater prosperity in the agricultural and rural segments of oureconomy. The best monsoon in fifteen years not only erases the bad memories of the drought last year but also renewsdemand for key products from rural India. Just watch corporates with deeper rural reach reap bumper sales in comingmonths. Tractor sales during the monsoon months saved the day for Mahindra & Mahindra and the indications are that

two-wheelers, consumer durables, consumer staples, agri based product and banking, too, benefit from this boom.Hero Motocorp, Emami, Godrej Consumers Products, HUL, Maruti, Bajaj Auto, TVS Motor, ITC, M&M, M&M Financial aresome of the names which readily come to mind.

Agro based companies that warrant a relook for creating wealth are Bayer Crop Sience, Dhanuka Pesticides, Excel CropScience, PI Industries, Rallis, United Phosphorous.

What a paradox?

While there may be a reason for a rain dance on Dalal Street, the reality of the retail investors and sub-brokers is painfuif not suicidal! The vanishing tribe of retail investors is evident from India Infoline's decision to shut down the Retaisegment. It is believed that this broking house, which was the front-runner in the numbers game of clients with 8,00,000retail clients asked them to shift their trading as well as depository accounts as its retail income was only 6% of its totalrevenue.

When the going at the retail level is so painful and 13,000 sub-brokers have shut shop in the last six months, breakevenis a distant dream for most intermediaries, yet the market benchmarks scale new highs while the domestic fundamentalsare precariously placed. Is this not a paradox?

Correction with volatility likely By Hitendra Vasudeo

Last week, the BSE Sensex opened at 20570.58, attained a high at 20934.40 and moved down to a low of 20137.69before it closed the week at 20217.39 and thereby showed a net fall of 182 points on a week-to-week basis.

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The high registered last week was 20934 against the weekly resistance of 20511-20660. The weekly close was lowerWe had suggested to exit long positions and those who managed to exit long benefited to an extent as the closing waslower.

The retracement of the rise from 17448 to 21321 is inprogress. The retracement levels are placed at 19837-19387-18917. Resistance will be at 20429-20721-21518.

Once again this week, the objective will be to exit long onthe rise to resistance levels as the lower range orretracement levels are tested with volatility.

Weekly support levels will be at 19925-19128.

BSE Mid Cap Index

BSE Mid Cap index upside momentum can resume on afurther rise and close above 6355. Weakness will be seen in the index if maintains below 6063.

BSE Small Cap Index

The BSE Small Cap index upside momentum can resume on a further rise and close above 6141. Correction in small capwill resume below 5880.

BSE Bankex

Exit long on the rise to 12376-12612 as the opportunity arises. Weakness will be seen below 11800. Upside momentumcan resume above 13410.

Strategy for the week

Exit long and sell on rise to 20429-20721 with a stop loss of 20935. Expect the lower range of 19925-19128 to be testedwith volatility.

WEEKLY UP TREND STOCKS Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy

with whatever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to Level3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value then thetrend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal of the Up

Trend.

Scrips LastClose

StopLoss

Level2

CenterPoint

Level3

Level4

RelativeStrength

WeeklyReversal

Value

UpTrendDate

BuyPrice

BuyPrice

BookProfit

BookProfit

INFOTECH ENTERPR. 286.05 262.6 269.4 279.2 295.8 322.2 75.8 262.7 27-09-13

PERSISTENT SYSTEM 871.50 805.1 825.6 851.0 897.0 968.4 74.5 823.7 16-08-13

ARVIND 125.80 120.9 121.1 125.6 130.4 139.7 73.0 116.7 04-10-13

TATA STEEL 392.00 377.4 381.3 388.1 398.9 416.5 71.0 364.8 11-10-13

IDEA CELLULER 174.30 171.0 171.0 174.3 177.5 184.0 63.8 169.4 14-11-13

WEEKLY DOWN TREND STOCKS Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sellwith whatever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to

Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly ReversalValue then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly

reversal of the Down Trend.

Scrips LastClose

Level1

Level2

CenterPoint

Level3

StopLoss

RelativeStrength

WeeklyReversal

Value

DownTrendDate

CoverShort

CoverShort

SellPrice

SellPrice

STATE BNK OF BIKAN. 316.35 290.6 309.6 321.8 328.6 334.0 29.82 327.53 14-11-13

ESSAR PORTS 56.45 52.1 55.2 57.1 58.3 59.0 32.84 58.03 27-09-13

CASTROL INDIA 291.95 273.1 286.8 295.3 300.5 303.9 35.22 300.49 25-10-13

STATE BANK OF MYSO. 428.60 407.9 422.9 432.3 438.0 441.7 35.65 434.39 08-11-13

BANK OF MAHARASHT. 38.15 35.4 37.3 38.4 39.2 39.5 35.91 39.07 08-11-13

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PUNTER'S PICKS

Note: Positional tr ade and exit at stop loss or target whichever i s earli er. Not an in tra-day trade. A deli very

based trade for a possibl e time frame of 1-7 tradi ng days. Exi t at fi rst target or above.

ScripsBSECode

LastClose

Buy PriceBuy On

RiseStop Loss Target 1 Target 2

RiskReward

INDIA INFOLINE 532636 62.05 60.00 63.00 58.00 66.1 71.1 1.00

NAVNEET EDUCATION 508989 56.45 55.55 57.80 52.60 61.0 66.2 1.19

SYMPHONY 517385 402.70 395.00 414.00 385.00 431.9 460.9 1.65

PACHELI ENT 513359 235.50 235.15 240.00 234.70 243.3 248.6 9.72

EXIT LIST

ScripLast

CloseSell Price

SellPrice

SellPrice

StopLoss

Target1

Target2

DABUR INDIA 161.15 165.44 168.20 170.96 179.90 142.0 118.6

ZEE ENTERTAINMENT 253.60 264.34 268.15 271.96 284.30 232.0 199.7

As US Federal tapering woes prevail, FIIs are in the mood to slow down buying and may go. If that happens, Sensexmay fall to 18K.

If the BJP wins 4 out of the 5 States in the assembly polls, it will not allow the Winter Session of Parliament to run

and seek the PM’s head. Sun Pharma on the downside can touch Rs.500-525, which would be a time to make an entry.

Swaraj Engines is heading for the 4-digit mark. A liberal bonus and payouts expected.

Bayer Cropscience is a fancied stock in the agri segment. Buy back response was lukewarm. Scrip is heading for 2Kmark.

Apollo Tyres has slowly and steadily risen on the bourses on accumulation by people in the know while smallplayers have exited due to the controversy surrounding Cooper Tires. The stock may touch the 3-digit mark inDecember 2014.

Cipla has been hammered down f rom Rs.450 a month back to Rs.385 due to its Q2FY14 results. It’s a great buy atthis level for decent appreciation in the medium-to-short-term looking at its long-term prospects.

HPCL and BPCL have again come down to mouth watering levels as the government has no option but to raise fue

prices to reduce the subsidy. Since LPG cylinders have begun to cost Rs.900+, this part of the subsidy burden andinterest cost stands reduced for them.

After consolidating for long, the stock of Dr. Reddy’s is ready for a fresh upmove to Rs.2700.

VST Tiller has reported excellent Q2 results and FY14 EPS may be Rs.85/100. Stock is with strong investors andmay touch Rs.800 mark.

Major selling by some funds in Jyoti Structures is over. Stock needs to close above Rs.26.5. Accumulate on dips.

Superhouse reported a Q2 EPS of Rs.9.9. The stock may touch Rs.100 mark.

Deepak Nitrite’s exports to rise in coming quarters. Its Agrochemical Division is also doing well and the stock islikely to touch the Rs.400 mark.

PTC India is likely to earn surcharge income of around Rs.70 crore in H2FY14 apart from its normal profits. FromJanuary 2014, it expects some spike in short term trading volumes due to the upcoming elections and end FY14

upwards of 33 billion units. Buy this stock for a price target of Rs.80. Liberty Shoe is attracting buying by knowledgeable investors. Accumulate this stock for a target price of Rs.150.

Mirza International is underpriced as the industry P/E ratio is around 15.15 while it is trading at a P/E of just 4.5.Its price:book value ratio is very low at 0.8 while Relaxo is trading at 4.37 and Bata is quoting at 8.06 even though itsexport 67% contribution is much higher than BATA & Relaxo. Once it gathers fancy, it may touch Rs.50 levels.

MPS Ltd’s Q2 working is encouraging. Buy for Rs.225 levels.

After the spurt Ceat, JK Tyre may also move up to Rs.250 mark. With an expected EPS of Rs.80, the stock is verymuch underpriced.

TOWER TALK

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phase. To develop and scale up the business, 3M has augmented manufacturing capacities, set up new plants, establishedthe branch network and invested in the leadership pipeline all of which have taken a heavy toll on margins in the short-term and was only to be expected. The scaling up of operations will continue over the next few years after which the trueoperating leverage would begin to yield results.

3M has recorded robust growth in sales over the last 10 years as revenues grew from a mere Rs.239 crore to Rs.1630crore and its net worth has risen from Rs.109 crore to Rs.656 crore. With its growth plans and recently launched anoffensive, the company is all set to reach a revenue target of Rs.6000 crore over the next 5 years. To achieve this, it hasspent almost Rs.450 crore in capital expenditure over the last 4 years apart from expanding its manpower anddistribution network.

All these initiatives have dented the margins and profitability over thelast, three years as it recorded declining profitability despite growingsales. In 2012-13, it reported a top line growth of 12.57% at Rs.1630crore despite the overall slowdown in the economy. But the profitbefore tax slipped to Rs.75 crore from Rs.96 crore, which was onexpected lines because of the scaling up of initiatives. Such reduction inprofitability is only an aberration as the margins are likely to improve significantly once the economy bounces back.

The company has also undertaken certain key measures to improve its performance, which is in line with the growthinitiatives. Some of them are:

1) To expand its presence by opening branch offices across the country.

2) 3M Car Care Centres-a retail initiative across major cities in India becoming the most visible customer touch point

for the 3M brand.3) Venturing into consumer healthcare with the launch of ‘Nexcare’ range of products.

4) Accelerate market penetration and develop customer intimacy.

5) Building on its ‘In India for India’ strategy, it has set up two R&D Centres and approved 17 patents for filingrecording a healthy new product vitality index of 37%.

6) It has launched more than 20 new products catering to diverse industries like retail, healthcare, automotive &infrastructure.

7) It has recently invested in new manufacturing processes at Ranjandgaon near Pune to manufacture indigenousproducts for the Indian market.

8) It has further invested in a world-class learning centre to provide sustained leadership development to its peopleand prepare them for future growth.

All these initiatives are a clear confirmation of 3M’s long-term commitment to India while it builds its capabilities acrossinfrastructure, processes and people to achieve this growth.

Margins are expected to gradually improve on account of its operating leverage and the scaling up of initiatives. The 3Mscrip currently trades around Rs.3200 and offers excellent long-term prospects. Its EPS is likely to exceed Rs.200 in thenext couple of years based on its growth plans and new initiatives and the stock is a potential multi-bagger over the next3 to 4 years.

Shivam Autotech: Promising auto stockBy Devdas Mogili

Shivam Autotech Ltd (SAL), formerly known as Munjal Auto Components Ltd., is an 8-year old New Delhi based companybelonging to the Hero Group. The other group companies include the flagship company Hero Motocorp Ltd (HMCL) HeroCycles Ltd, Munjal Showa Ltd., etc. to name a few. The company manufactures and markets components for the AutoSector to Original Equipment Manufacturers (OEMs). Its current product offering includes different kinds of Gear BlanksSpline Shafts, Finished Gears & Plungers. Mr. Sunil Kant Munjal is the chairman while Mr. Neeraj Munjal is the managingdirector of the company.

SAL started production of Machined Gear Blanks from Hot Forgings in 1999-2000 and started the production of SplineShafts Cold Extrusion with imported toolings from Japan and production of Hot forgings with imported toolings fromJapan in 2000-01. In 2001-02, it set up the second Hot Forging Line. Model Parts like P40, P60, P70, CDN were developedduring the same period.

Financials: (Rs. in croreParticulars 2012-13 2011-12 2010-11

Sales 1630 1448 1219

Profit Before Tax 75.20 96.11 148.06

Profit After Tax 52.27 64.77 98.81

Equity 11.27 11.27 11.27

Net worth 656.44 604.17 593.40

STOCK ANALYSIS

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In 2002-03, it started the supply of Plunger to Mico Bosch for its Fuel Pumps. In 2003-04, SAL was recognised as a directon-line supplier by Hero Honda and it also started Shaping and Carburising finished gears and Shafts.

HMCL, which has been the World’s No.1 two-wheeler manufacturer for 12 consecutive years is the main customer of thecompany.

Performance: SAL reported a Total Income ofRs.271.69 crore with a Net Profit of Rs.28.21lakh netting an EPS of Rs.28.21 for 2012-13.

Latest Results: For Q2FY14, while sales rose

11% to Rs.89.41 crore from Rs.80.65 crore inQ2FY13 net profit zoomed 261.68% to Rs.7.74crore from Rs.2.14 crore in Q2FY13. It thusrecorded an EPS of Rs.7.74 in Q2FY14 VsRs.2.14 in Q2FY13.

Financials: SAL has an equity base of Rs.10crore with a share book value of Rs.137.94. The company has a debt:equity ratio of 1.19 with RoCE of 20.41% and RoNWof 22.38%.

Share Profile: The company’s share with a face value of Rs.10 is listed on the NSE and the BSE under the ‘B’ group. Itsshare price touched a 52-week high/low of Rs.114.90/Rs.64.40. At its current market price of Rs.110.25, the companyhas a market capitalization of Rs.110 crore.

Dividends: The company has been paying dividends as follows: FY13 - 40%, FY12 - 32%, FY11 - 25%, FY10 - 15%, FY09- 15%, FY08 - 15%, FY07 - 25%.

Prospects: The global auto components industry is a highly diversified sector that involves engine and auto componentmanufacturers including aftermarket parts manufacturers, suppliers, dealers and retailers. The manufacturing of autocomponents is gradually shifting to Asian countries like China and India because of the higher market potential and thelow-cost manufacturing options available. In China and India, OEMs are focused on helping the suppliers improve andgrow their businesses.

The Indian automobile industry has emerged as the 7th largest in the world. According to the Society for IndianAutomobile Manufacturers (SIAM), the automobile industry has already invested Rs.70,000 crore over the past fouryears in building new factories, adding fresh capacity to help launch new products apart from regular production.

The auto components industry, too, is gearing up to complement the growth of the vehicle industry. About $6 billion hasbeen invested over the past 4 years according to Automotive Component Manufacturers Association of India (ACMA). It

is driven by a sustained increase in vehicle population with increased preference to higher-end vehicles in tune withrising consumer aspirations. Presently, the automotive industry is in a phase of both rapid growth and broadtechnological innovation. Given the range of innovations, it’s exceedingly difficult and costly for OEMs to adopt alltechnologies.

Also, the long-term fundamentals of the Indian economy are robust. The government plans to drive the economic growththrough infrastructure development and rural development is likely to be the driving force for the automobile industryGrowth in auto sales would be driven by improved macro economic conditions on the domestic front, moderation ininterest rates and revival in consumer confidence.Above all, SAL’s main customer, HMCL, continues to be the market leader and has achieved a growth of 13.82% inoperating performance in 2012-13 by selling 60,75,583 two-wheelers. This augurs well for Shivam Autotech, which nowplans to add new products and new businesses in the coming years.Conclusion: Shivam Autotech is an existing, profit making, dividend paying company with a good track record o

performance and payment of dividends. The company has carved out a niche for itself as a supplier of automotivecomponents to reputed companies.

At its current market price of Rs.110.25, the Shivam Autotech share discounts less than 4 times its 2012-13 EPS ofRs.28.21. In the light of its robust performance, reputed pedigree, good dividend payouts, low price:book ratio andmarket cap:sales ratio, the share is a smart pick for decent appreciation in the medium-to-long-term.

US cues erode market sentiments

Financial Highlights: (Rs. in lakh)

Particulars Q2FY14 Q2FY13 H1FY14 H1FY13 FY13

Total Income 8940.67 8064.76 18838.66 18032.50 27169.13

Total Expense 7894.00 7089.86 16325.75 15264.07 31519.88

Other Income 3.86 (0.01) 8.60 5.31 7.99

Finance Cost 492.17 642.54 1003.62 1305.21 2482.30

Tax Expense (215.46) 117.89 (61.28) 490.42 353.46

Net Profit 773.82 214.46 1579.17 978.11 2821.48

Equity (FV: Rs.10) 1000.00 1000.00 1000.00 1000.00 1000.00

Res Ex Re Reserves - - - - 12793.76

EPS (Rs.) 7.74 2.14 15.79 9.78 28.21

MARKET REVIEW

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By Devendra A. Singh

The BSE Sensex (30-share index) settled at 20,217.39 declining 182.03 points while the CNX Nifty closed at 5,995.45moved lower by 60.70 points for the week ended Friday, 22 November 2013.

On the last day of trading session, the BSE Small-Cap index edged higher 2.91 points to close at 5,994.11 andoutperformed the Sensex whereas, the BSE Mid-Cap index edged lower 7.73 points to close at 6,154.28 andunderperformed the Sensex.

Anxiety over the US Federal Reserve’s QE tapering worries pulled down the markets last week. Indian and global

financial markets will remain uncertain in coming months due to this tapering hanging fire. Key indices fell in 3 out ofthe 5 trading sessions for the week.

The Fed is buying bonds worth $85 billion every month to keep the interest rates at low and boost US economic growthbut its October 2013 board minutes signal a stop to its bond-buying programme during the Q1FY14.

On India’s macro-economic scenario, RBI data showed that services exports worth $12.29 billion in September 2013was marginally lower than $12.31 billion in August 2013 while imports of services rose to $6.79 billion in September2013 from $6.30 billion in August 2013. The services sector contributes about 55% to the country’s GDP.

During the first half of FY13-14 ended 30 September 2013, services exports were at $75.53 billion while total servicesimports stood at $40.29 billion.

The HSBC Services Purchasing Managers’ Index (PMI) compiled by Markit climbed to 47.1 last month from 44.6 in

September 2013, which was the weakest reading since April 2009.On t he other side, India’s headline inflation surged to an 8-month high of 7% for October 2013 driven by higher fue

and manufactured goods prices.

The consumer price index (CPI) or retail inflation rose to 10.09% (combined) in October 2013 as compared to 9.84% inSeptember 2013. The corresponding inflation rates for rural and urban areas are 10.11% and 10.20%.

Finance Minister, P Chidambaram said, “India is likely to achieve an economic growth of between 5 -5.5% in FY14.” “am confident that the green shoots that arevisible here and there will multiply and thatthe economy will revive. There will be anupturn in the second half of this year”, headded.

India’s growth slowed to 5% in the FY13 -its worst performance since it grew 3.9% inFY03 and many economists said that growthin the current fiscal may slip below 5%.

HSBC Global stated “Although the storm hasabated as the Fed deferred tapering of its QEstimulus and the new RBI Governor tooksteps to contain rupee fall, structuralimbalances and the election uncertaintyshould keep the outlook for 2014 clouded.”

HSBC expects Indian equities to deliver abelow average return of 3% in 2014, whileearnings should grow by 8-10%. Itunderweight on India within the regioncontext with a Sensex target of 21,750 for endFY14.

Key indices surged on Monday, 18November 2013, on strong buying by foreignfunds. The Sensex rallied 451.32 points(+2.21%) to close at 20,850.74. The Nifty

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climbed 132.85 points (+2.19%) to close at 6,189.00.

Key indices edged higher on Tuesday, 19 November 2013, on positive corporate quarterly earnings. The Sensexclimbed 40.08 points (+0.19%) to close at 20,890.82. The Nifty was up 14.35 points (+0.23%) to close at 6,203.35.

Consolidated profit booking by market participants dragged the key indices lower on Wednesday, 20 November 2013The Sensex fell 255.69 points (-1.22%) to close at 20,635.13. The Nifty was down 80.45 points (-1.30%) to close at6,122.90.

Key indices moved lower on Thursday, 21 November 2013, over US tapering worries. The Sensex slumped 406.08

points (-1.97%) to settle at 20,229.05. The Nifty tumbled 123.85 points (-2.02%) to close at 5,999.05.Market performance settled on a lower note for the third-day in a row on the last trading session Friday, 22 November

2013, on global cues. The Sensex fell 11.66 points (-0.06%) to close at 20,217.39. The Nifty was down 3.60 points (0.06%) to close at 5,995.45.

The Sensex lost 182.03 points to close at 20,217.39 last week. On the macro-economic front, the Q2 of India’s GDP datais scheduled to be revealed on Friday, 29 November 2013.

On Asian scenario, China’s macro-economic data of HSBC PMI for November 2013, is due on 2 December 2013.

Market participants will keep focusing on crucial developments in the United States and any further decision taken bythe US Fed regarding the stimulus program of bond-buying that will certainly have an impact on global financialmarkets.

Volatility returns SCI could doubleAs forecast, the stock market recovered last week after a brief lull that followed the 7 days of continuous decline afterthe Diwali Muhurat. While there was no particular reason for the market to bounce back on Monday, 18 November 2013,the same holds good for the undue retreat witnessed in the earlier week. However, the interim correction has helped themarket consolidate and, therefore, turn healthier.

The tapering of the quantitative easing (QE) of $80 billion bond buying every month by the USFederal Reserve hangs like a sword ever since September 2013. The fear of it being implemented

turns the market jittery leading to a bearish outlook while any relief in the tapering being delayed tothe later part of 2014 cheers the markets. This see-saw has been continuing for the past five monthsand will continue till the US Federal Reserve makes a firm decision and implements it.

This tapering effect is very similar to the Euro zone crisis that kept our markets on tenterhooks in2011-12 but ceases to have any impact now even though Europe has to fully recover economicallyThe same may happen to the QE tapering as its impact gets worn out.

Because of this, last week was very volatile as the BSE Sensex rebound by 451.32 points to close a20850.74 while the CNX Nifty soared 132.85 points to touch 6189 on Monday, 18 November 2013. The intra-day gainswere even higher. Thus the market recovered nearly 50% from its low of Sensex 20161.41 made on Wednesday, 14November 2013. On Tuesday, 19 November 2013, there was a marginal gain of 40.08 points on the Sensex at 20890.82while the Nifty was up by 14.35 points at 6203.35.

The market was agog with fresh reports of the tapering to begin early 2014 with the US economy improving. This sent

cold waves in global markets and took a toll of 662 points on the Sensex on Wednesday & Thursday, 20 & 21 November,wiping out the gains of Monday & Tuesday and strengthened the bears. The Sensex closed at 20229.05 on Thursday, 21November, which is not far off from the low of 20161 it hit recently a week earlier.

Actually, the volatility has been created by the contradictory statements of the US Federal Reserve about QE taperingand the F&O expiry due on Thursday, 28 November 2013. Punters are genuinely worried about the market going againstthem given the heavy outstanding positions of both the bulls and the bears. Issue based news adds to their woes becauseof their huge positions.

Thus there is no rationale for the markets’ steep rise or fall and is ruled by the speculative position of the bulls andbears, which is played out aggressively on a daily basis. However, stock specific action is making waves. Apart from

GURU SPEAK

G. S. Roongta

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heavyweights, a mid cap like Ceat Ltd has proved to be a star performer. Escorts, too, is witnessing good support athigher levels.

The market is likely to remain volatile till the end of the November 2013 F&O expiry this week.

Shipping Corporation of India (SCI)

About four months ago, I had identified the Steel industry as having bottomed out but nobody believed me. Stocks likeTata Steel and SAIL were recommended at Rs.198 and Rs.45 respectively in our Investment Advisory Service (IAS). Sincethen, SAIL has gained nearly 45% while Tata Steel is nudging Rs.400 and yield 100% returns soon.

Similarly, the Shipping industry, which has been suffering for the last 3 years, is likely to witness an up cycle and stocks

of SCI & GE Shipping are almost at their bottom levels keeping the up cycle in mind.SCI has been successful to maintaining its revenue level over the last two financial years even in difficult times whenfreight rates both for dry bulk and tankers, were on a decline due to the recession in the global economy.

The decline in the bottomline for this reason was quite justified. But even then, the company was able to make a cashprofit before interest, depreciation & taxes in both the years. The depreciation provision of Rs.609 crore in FY12 &Rs.760 in FY13 is indeed the highest because shipping is highly capital intensive. But the market has overlooked thisfactor altogether.

The market has also overlooked the positive factors like its high book value of nearly Rs.140. Thus its share price atRs.35 discounts the book value abysmally low by 400%, which does no justice for a company that is the leader of theShipping industry.

Dividend: Besides, SCI has been a good paymaster in its pink years with a good

track record of distribution if we look at the past 10 years.The highest dividend at 170% was paid in 2003 followed by 70% in 2004-0585% in next three years 2005-06, 2006-07 & 2007-08, 65% in 2008-09 and 50%in 2009-10 & 2010-11.

Bonus: Besides, the company made a bonus issue in the ratio of 1:2 three yearsback.

Asset Value: The company has a good asset value in the form of vessels, landbuildings and investments. The company’s gross assets have risen year after yearfrom Rs.6073 crore a decade back to Rs.16557 crore in 2012-13, a rise of nearly160%. The working capital also shot up from Rs.668 crore to Rs.1550 crore in thesame period. Interest cost, however, rose from Rs.56 crore to Rs.387 crore in

2011-12 and Rs.162 crore in 2012-13. Depreciation has shot up from Rs.280 crore to Rs.760 crore more steeply.

Conclusion: This fundamentally strong Mini Ratna PSU has been languishing for the past two years, which is indeed anirony.

The worst period of Shipping industry on the last leg after a 3-year cycle of. The global economy has started to improvebecause of which the Shipping industry will take a ‘U’ turn over the next few months. SCI’s Rs.10 paid-up share wasquoting over Rs.120 three years back, Rs.56 a year back and Rs.68 in July 2012 but it is currently available at Rs.35. Itcan rise 100% in the next one year to yield a decent profit to those who hold it for the short-to-medium-term.

The Central Government along with LIC holds 77.88% equity stake in this PSU. FIIs hold 2.28%, Mutual Funds hold5.23%, private corporate bodies hold 3.37% while the investing public holds about 11% equity stake.

The Re.1 paid-up share of Dish TV, which was also loss making till now, is Rs.55 and Hindustan Construction, lossmaking for the last two years for Re.1 paid-up share, is traded at Rs.13. There are several other stocks of loss makingcompanies, which are similarly highly priced. Then why should SCI not move up over Rs.70? The stock has been severely

beaten due to the pessimistic outlook of analysts, which cannot last as recently proven by Tata Steel & SAIL.The story of Tata Steel and SAIL will be repeated in shipping stocks in due course of time.

Readers may take position in this stock as per their comfort levels as this share is sure to double in a year or so.

Cadila Healthcare (Code: 532321) (CMP: Rs.748, TGT: Rs.875)

Cadila Healthcare Ltd. is a pharmaceutical company focused on cardiovasculars, gastro-intestinals, respiratory andwomen’s healthcare. Its commercial operations are in the United States, Europe and Japan. During FY12, the companylaunched more than 90 new products of which over 40 were line extensions. Its subsidiaries include Zydus

Financial Highlights: (Rs. in crore)

Particulars FY12 FY13

Total Income 4500 4496

PBIDT 623 492

Depreciation 609 760

Interest 387 162

Profit/Loss before Tax - 300

Extraordinary items (373) (430)

Prior year income 33 62

Taxation 88 46

Net Loss (428) (114)

Equity capital 466 466

Reserves & Surplus 6268 6150

Book value (Rs.) 145 140

STOCK WATCH - By Amit Kumar Gupta

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Pharmaceuticals Ltd., Dialforhealth India Ltd., DialforhealthUnity Ltd., Dialforhealth Greencross Ltd., German Remedies Ltd.,Liva Healthcare Ltd., Zydus Healthcare (USA) LLC and ZydusTechnologies Ltd. During FY12, the company acquired 100%stake in Biochem Pharmaceutical Industries Ltd.

For Q2FY14, Cadila reported a 13.6% YoY rise in net sales toRs.1,756 crore, which was 5% higher than market expectation.The OPM, however, slipped by 410 basis points YoY to 14.9%due to the lower contribution by the high-margin branded

formulation business in India and a fall in revenue from the jointventures. Nonetheless, the reported net profit zoomed 92.7%YoY to Rs.183 crore, mainly on account of foreign exchange(forex) gain of Rs.12 crore during the quarter as compared to aforex loss of Rs.76 crore in Q2FY13. Excluding the forex loss/gain the adjusted net profit was flat at Rs.171 crore, whichis in line with the market estimate of Rs.173 crore.

Valuation: The growth of the company was driven by: (1) new product launches in the USA and European marketsincluding some niche products wherein product approvals are awaited from the US market; (2) the Hospira jointventure is likely to add one more product in FY15; and (3) the domestic branded business, which is likely to normalisetowards the end of FY14 including better growth of the new chemical entity, Lipaglyn.

We maintain our estimates for FY14 and FY15 and the price target of Rs.875, which implies 15x FY15E EPS and maintaina ‘Buy’ recommendation on the stock.

Technical Check: The Cadila stock is in a strong uptrend on the daily chart making higher highs and looks good forinvestment. The stock has broken out of an ascending triangle pattern on the daily chart and on bigger frames it istrading in a downward channel at a neckline of Rs.750. The stock is trading above all the moving averages 50-DMA, 100-DMA and 200-DMA.

Start accumulating at CMP Rs.748 and on dips to Rs.700 for medium-to-long-term investment for a price target of Rs.875in 12 months.

********

Jyothy Laboratories (Code: 532926) (CMP: Rs.177, TGT: Rs.250)

This stock was earlier recommended on 13 May 2013 at Rs.181 and achieved our short-term target of Rs.210.

Those who missed it last time can accumulate it now.

Jyothy Laboratories Ltd. manufactures and market household products like fabric whiteners, soaps, detergentsmosquito repellents, scrubbers, bodycare lotions and incense sticks. It operates in two segments: Soaps & Detergentsand Homecare products. Soaps & Detergents include fabric whiteners, fabric detergents, dish washing bars and soapsincluding ayurvedic soaps. Homecare products include incense sticks, scrubbers, dhoop and mosquito repellents. Theother products include bodycare lotion, tea and coffee. Its wholly-owned subsidiary is Associated Industries ConsumerProducts Pvt Ltd. and the other subsidiaries include Jyothy Fabricare Services Ltd., Jyothy Kallol Bangladesh Ltd., JyothyConsumer Products Ltd, Jyothy Consumer Products Marketing Ltd, and Diamond Fabcare Private Ltd.

Jyothy Labs’ revenue grew 33% YoY to Rs.306.1 crore in Q2FY14. The strong revenue growth can be attributed to a 25%YoY volume growth and an 8% YoY price-led growth during the quarter. Its flagship brand, Ujala Fabric Whitener,maintained its leadership in the fabricare category and registered a strong value growth of around 77% YoY while Maxoregistered a growth of 33% YoY during the quarter.

Although the gross profit margin (GPM) improved by 91 basis points YoY to 46.9%, it was lower than with the previous

quarter (QoQ) due to a change in the sales mix and the impact of the Rupee depreciation that resulted in higher inputcosts. Employee cost as a percentage of sales declined by 358 basis points YoY to 9.3%. Hence the OPM rose 466 basispoints YoY to 13.9% and the operating profit doubled YoY to Rs.42.7 crore in the quarter. At Rs.22.2 crore, the adjustedPAT was ahead of market expectations of a profit of Rs.16.7 crore.

Outlook & valuation: We have marginally revised the earning estimates for FY14, FY15 and FY16 by 3%, 1% and 4%respectively. In line with this revision in earning estimates, we have revised upwards our 18-month price target of thestock to Rs.250. At the current market price, the stock trades at 23.2x its FY15E EPS of Rs.8.2 and 15x its FY16E EPS oRs.12.6. We maintain this stock as a top pick in the mid-cap FMCG space and put a ‘Buy’ on it.

Technical Check: The Jyothy Labs stock is very strong on the daily chart and looks good for short-term and medium-term investment. It has been making higher highs and higher lows on the daily chart and is consolidating from the last 5

Review

Tech Mahindra recommended at Rs.1536 under ‘Best

Bet’ on 21 October 2013 has surpassed our target of

Rs.1750 at Rs.1762.

Bata India recommended at Rs.884 under ‘Stock

Watch’ on 21 October 2013 has crossed out target of

Rs.940 and made a new high at Rs.1055 in just one

month!

Aurobindo Pharma recommended at Rs.188 under

‘Stock Watch’ on 8 July 2013 has surpassed our target

of Rs.210+ and touched Rs.287!

8/13/2019 pid_14_MT3_251113



months in the range of Rs.150-210 forming an elongated trading range pattern. The stock is also trading above theimportant moving averages of 200-DMA & 100-DMA.

Start accumulating at CMP and on dips to Rs.160 for a price target of Rs.225 in the next 6 months and Rs.250+ in oneyear.

By Rupesh M. Daga

* CARE Ltd. (Code: 534804) (Rs.682) provides a wide range of credit rating services and offers credit assessment o

companies and credit ratings off all types of debt instruments. It serves investors, issuers of debt and other participantsin the global capital markets. It has also emerged as the leading agency covering many rating segments for banks, subsovereigns and IPO gradings. The company commenced operations in 1993 and has been around for nearly two decadesand is currently the second largest credit rating agency in India. It is the only rating agency in India that operates with anexternal rating committee comprising senior, reputed professionals.

The company came out with an IPO in December 2012 at a price of Rs.750 and the stock made a high of close to Rs.1000thereafter. Its FY13 Total Income stood at Rs.227 crore with Profit After Tax of Rs.115 crore, translating into an EPS ofRs.40. Its Net Profit Margin stood at a whopping 52%. When compared to its peers like ICRA, which is the No.3 ratingagency in India, and CRISIL, which is No.1, Care Ltd. is trading at a steep discount. Although CRISIL is trading at a P/Eratio of 33x and ICRA is trading at a P/E ratio of 27x, CARE Ltd is trading at a P/E ratio of 16x only, which limits thedownside to the stock.

With majority shares held by leading banks and financial institutions in India, CARE’s strength has also attracted manyother investors. At a conservative P/E ratio of 20x, its share price works out to be Rs.900+. BUY this stock at CMP and atdeclines for 50% appreciation.

* Torrent Power (Code: 532779) (Rs.101), a leading brand in the Indian power sector, is promoted by the Torrent

Group of Torrent Pharma fame, which is the flagship company of the group. The company foresaw the prospects in thepower sector much before the liberalization, when it took over an ailing power cable company in 1989, which is nowknown as Torrent Cables and successfully turned it around. Torrent Power made acquisitions of two of India’s oldestutilities – The Surat Electricity Company Ltd and the Ahmedabad Electricity Company Ltd and has a power generationcapacity of close to 1700 MW, which it distributes to over 3 million customers in Ahmedabad, Gandhinagar, Surat,Bhiwandi and Agra. It is currently implementing a 1200 MW gas based power project at Dahej in Gujarat.

Recently, the company authorized its Board to appoint appropriate consultants/advisors for appropriate reorganization including merger, demerger, forward/backward integration, sale of any division, etc. in view of the

declining profits. Another positive for the company is that a few weeks back there was a judgement by a GujaratRegulatory body that allowed for a pass through of the variance in the fuel supply, which is very positive for Torrent. ItsImpact is close to Rs.600 per year over the next two years, which resulted in the stock appreciating from Rs.80 level toRs.110. However, even at the current valuation the market has not factored in the huge positive and the stock can easilyappreciate by 50% from current levels and is very safe investment for the long-term horizon.

* Summit Securities (Code: 533306) (Rs.79), which was formerly known as RPG Itochu Finance Ltd., is an Non-

Banking financial company (NBFC) engaged in investments in quoted and unquoted securities. It is the flagshipinvestment company of the RPG group. The company holds more than Rs.500 crore of quoted investments in shares oCeat, Zensar Technologies, KEC International, RPG Life Sciences, CFL Investments, etc. Apart from the quotedinvestments, it holds unquoted investments worth Rs.300 crore according to its latest annual reports.

If we look at the companies it has invested in like Ceat, KEC, Zensar, RPG Life Sciences all the above companies are doingwell operationally and financially. With investments worth close to Rs.800 crore, Summit Securities market cap stands at

Rs.84 crore, which is only 1/10th of the current valuation. Even if we allow 80% discount on its investments, the shareprice can easily double from the current level. Since holding companies are usually traded at a discount close to 50%, thestock is a screaming BUY.

* Established in 1991, Granules India (Code: 532482) (Rs.165) is a leading manufacturer of Active Pharmaceutica

Ingredients (APIs), directly compressible granules, intermediates, and modified drug delivery systems. It is among thetop global manufacturers of Paracetamol & Lbuprofen. Exports contribute over 70% of its total revenue and it exportsits products to 300 customers in 50 countries through offices in India, US, UK, China and Cambodia.

From being a manufacturer of bulk drugs, the company has transformed itself into a complete solutions provider toglobal pharma majors offering all three components of the pharmaceutical value chain which gives its customers

FIFTY FIFTY

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flexibility and choice. The company also has its own ANDAs and dossiers enabling the pharma MNCs to quickly enter themarket instead of filing their own applications.

With, integral global alliances and strong technological expertise and manufacturing capabilities, Granules India is likelyto emerge as a strong supplier of Finished Dosages in the global market. Its stock trades at an attractive valuation of 6.5xof FY14E earnings. When seen from the Mkt Cap/Sales ratio, the stock trades very cheap at 0.37x. Past performance,strong management team, and operational capabilities should enable the stock to command higher valuations. It’s amust BUY at every dip.

Aarti Drugs: Profitable prescriptionThe share of Aarti Drugs Ltd. (ADL) (Rs.193.55) (Code: 524348) was earlier recommended at Rs.158 on 15 April

2013 with a medium-term target of Rs.240. Thereafter, the stock hit a new 52-week high of Rs.262 on 23 July 2013

registering a gain of 66% in less than 3 months!

This share is once again recommended at the current level for decent gains in the medium-term as this pharmaceuticacompany has posted good Q2FY14 & H1FY14 results, based on which an EPS of Rs.45 can be anticipated for FY14.

Incorporated in 1984, ADL is a part of the Rs.3,000 crore Aarti Group of Industries engaged in manufacture and sale ofbulk drugs and its intermediates. It manufactures vitamins, anti-arthritis, anti-fungal, antibiotics, ACE inhibitors, besidesits range in anti-diabetic, anti-cholinergic, sedatives and anti-depressant drugs. Its product profile includes activepharmaceutical ingredients (API), steroids, pharma intermediates and speciality chemicals.

The APIs include Cardioprotectant, AntiBPH and Traquilizar. API products include Aceclofenac, Diclofenac SodiumClopidogrel Bisulphate, Metronidazole, Ornidazole and Tinidazole. Steroids include Glucocorticoid Steroid, whichconsists of Hydrocortisone Sodium Succinate Sterile, Hydrocortisone Acetate and Hydrocortisone HemisuccinateSpeciality chemicals include Benzene Sulphonamide, Benzene Sulphonic Acid, Benzene Sulphonic Acid Methyl Ester andBenzene Sulphonyl Chloride.

Manufacturing in accordance with GMP norms, pilot plants, process development labs, in – process Quality Control labsand dedicated product processing areas are common features at every ADL plant. Unit processes for milling, sieving,blending, micronising and packing areas are well in place. As a part of the pre-approval processes, these facilities havebeen inspected and approved by large end users and customers who are rated amongst the largest companies in theworld.

In the domestic market, ADL has a diversified client mix including customers like Cipla Ltd, Dr Reddy’s LaboratoriesCadilla Healthcare, Ranbaxy Laboratories, Alembic, Piramal Healthcare, Unichem Laboratories, Unimark Remedies

Glaxo Smithkine, Deepak Fertilizers & Petrochemicals etc.ADL facilities maintain high-standards and are approved for the supply of APIs to many ready-formulations exported tothe regulated markets. Recently, ADL also got cGMP certification from ANVISA of Brazilian authorities and COFEPRIS ofMexican authorities to cater to the Latin American market for two of its major products. There is also a shift in demandfrom drugs treating hygiene related diseases to drugs treating lifestyle related diseases in the urban sector.

During Q2FY14, net profit rose 19% to Rs.13.8 crore on 15% higher sales of Rs.248 crore and the quarterly EPS stood atRs.11.4. For H1FY14, net profit rose 25% to Rs.25.6 crore on 15% higher sales of Rs.466 crore and the half-yearly EPSstood at Rs.21.2 and it has already declared an interim dividend of 30% for FY14.

During FY13, ADL’s net profit zoomed 100% to Rs.45.2 crore on 25.1% higher sales of Rs.824.8 crore and the EPS stoodat Rs.37.4 Vs Rs.19.50 in FY12 and a total dividend of 100% was paid.

ADL’s equity capital is Rs.12.1 crore and with reserves of Rs.196 crore, the book value of its share works out to Rs.171With borrowings of Rs.296 crore as on 31 March 2013, the DER worked out to 1.42:1 as against 1.54:1 in FY12. The

value of its gross block stands at Rs.491.6 crore. The promoters hold 57.2% in the equity capital, foreign holding is 1%and PCBs hold 2.6% leaving 39.2% with the investing public.

Since inception, ADL has been exporting to 97 countries worldwide indicating its strong logistics set up and geographicalspread. During FY13, exports rose 20% to Rs.296.4 crore from Rs.246.1 crore in FY12.

ADL has two R&D centres near Mumbai, one at the MIDC Industrial area, Tarapur and the other at Turbhe, Navi MumbaiThe company’s R&D programmes are focused on new products in therapeutic categories such as AntipsychoticAntitussive, Antifungal, Antihypertensive, Anticonvulsant, Alcoholism treatment and Anti-inflammatory.

With its focus to access potential US generics business, ADL has already commissioned, its new multipurposemanufacturing facility strictly designed and built in accordance with USFDA requirements. Such USFDA approved plants

EXPERT EYE - By Vihari

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will help increase the regulated market share for drugs that recently went off-patent. ADL already has 14 US drug masterfiles (DMFs) assigned and 8 European COS approvals, which have opened up opportunities in North American &European markets. Entry into regulated markets will be a steady and systematic process as ADL will have to go throughdifferent stages of product approvals.

Emerging markets currently represent 16% of the global market (Source: IMS Health), but are expected to contribute40% of growth by 2014. India produces 20% of the generic drugs in the world and is the third largest producer of drugsand 14th largest by volume. Overall, it is expected that the Indian Pharmaceutical Industry will grow by 17-18% in FY13.

The domestic pharmaceutical industry is currently pegged at $20 billion (Rs.1,10,000 crore) and is expected to touch$75 billion (Rs.4,125,000 crore) by 2020 with a CAGR of 15-20% at a scorching pace. ADL facilities are cGMP approvedwith certifications like USFDA, WHO GMP, EUGMP, TGA and ISO. ADL is constantly growing its presence in regulatedmarkets by offering series of products from its USFDA; TGA certified plants, as well as Japanese accredited plants.

The Indian pharmaceutical industry has a huge export potential as exports grew 25% (YoY) to $13 billion (Rs.78,000crore) in FY12 and is estimated to reach $18 billion (Rs.1,08,000 crore) in FY13 and $25 billion (Rs.1,50,000 crore) inFY14.

Techno Funda Plus ReviewTechno Funda Plus subscribers have booked profit in 58 stocks between 3rd June 2013 and 24th November 2013

when the stock markets were in a very challenging phase.

We are bullish on the Indian equity market for the long-term and this is the golden time for investing in

fundamentally sound scrips, which are poised for a rise.

If you are a keen investor, subscribe to Techno Funda Plus now to earn good returns.

New Year Offer: On 1 year subscription of Rs.18000, get 3 months subscription worth Rs.6000 FREE!

No. StockRecom.

Rate

Profit

Booked

at

Gain

%

High After

Profit

Booking

No. StockRecom.

Rate

Profit

Booked

at

Gain

%

High Afte

Profit

Booking

1 Arvind Ltd 98 130 32.65% 130 30 Granules India 125 165 32% 187

2 NIIT Techno 270 315 16.66% 323 31 Aurobindo Pharm 178 215 20.78% 278

3 ENIL 280 360 28.57% 365 32 Cipla 387 450 16.27% 450

4 Banco Products 37 55 48.64% 66 33 Gujarat Gas 190 260 36.84% 296

5 Finolex Cable 56 72 28.57 76 34 FSL 12.25 17 38.77% 23.65

6 J B Chemicals 83.5 115 37.77% 116 35 Mindtree 9051125-

130043.64% 1440

7 Zensar Techno 247 300 21.45% 331 36 LIC Housing 165 210 27.27% 2328 Kalpataru Power 66 85 28.78% 87.5 37 Suven Life 33 48 45.45% 83.4

9 Zee Enter 235 275 17% 285 38 Persistent Systems 505 590 16.83% 858

10 Himatsingka Seide 33 46 39.39% 46 39 Aditya Birla Nuvo 1017 1250 22.91% 1290

11 Tube Investment 143 175 22.37% 176 40 Escorts 70 95 35.71% 120

12 Page Industries 4212 5100 21% 5100 41 Ceat Ltd. 108 132 22.22% 250

13 Finolex Industries 112 150 33.92% 150 42 Tech Mahindra 955 1250 30.89% 1716

14 CESC 335.5 400 19.22% 408 43 Biocon 288 335 16.31% 387

15 Genus Power 11 17 54.54% 17.75 44 KPIT Cummins 104.5 140 34% 160

16 R S Software 127 156 22.83% 159 45 Hexaware Tech 82.50 110 33.33% 139

17 APM Industries 20 25 25% 28.40 46 Finolex Cables 48.50 65 34% 73

18 KRBL 24 30 25% 33.2 47 Dhanuka Agri 127 155 22% 167

19 Indoco Remedies 66 80 21.21% 104 48 CMC 1230 1400 13.82% 1474

20 RSWM 125 165 32% 176 49 DCB Bank 43 54 25.58% 56

21 Alembic Pharma 132 175 32.57% 223 50 Polaris Soft 116 140 20.69% 155

22 Vardhman Textile 290 350 20.68% 398 51 Torrent Pharma 693 825 19.04% 1002

23 Tata Motors 335 390 16.4% 401 52 Kaveri Seed 1350 1600 18.51% 1720

24 AIA Engg. 315 410 30.15% 475 53 LT Foods 54.50 65 19.26% 91

25 Thinksoft Global 92 125 35.87% 242 54 Exide Industries 127 142 11.81% 143

26 VST Tillers 405 510 25.90% 529 55 Britannia Inds. 545 700 28.44% 972

27 P I Industries 132 165 25% 228 56 Titan Industries 268 303 13.05% 303

28 Nucleus Soft 80 110 37.5% 116 57 Greenply Inds. 384 500 30.20% 524

29 Eclerx Services 705 1000 41.84% 1175 58 Glaxo Pharma 2295 2550 11.11% 2899

Contact Money Times on 022-22616970 or [email protected]

for a free sample copy and subscription details.





8/13/2019 pid_14_MT3_251113



The industry has been a front-runner in a wide range of specialties involving the technology to develop and manufacturecomplex drugs. Being a highly organized sector, several pharmaceutical companies are expanding their operations inIndia.

ADL continues to harness the strength in high volume products by focusing on process improvement of its existingproducts as well as by introducing new blockbuster molecule in its product line. With nearly three decades ofmanufacturing experience and strength of nine manufacturing units, ADL has transformed into a multi capacity, multilocation GMP complaint with the state-of-the art facilities. Strategically located at Tarapur (Maharashtra) and Sarigam(Gujarat), the units are currently capable of making over 50 bulk actives, several key intermediates/speciality chemicals

Based on the current going, ADL is expected to notch an EPS of Rs.46 in FY14 and Rs.52 in FY15. At the current marketprice of Rs.193.55, the share is trading at a forward P/E of 4.2 on FY14 earnings and 3.7 times on FY15E earnings. Aconservative P/E of just 6 will take its share price to Rs.276 in the medium-term and Rs.312 thereafter. The 52-weekhigh/low of the share has been Rs.241/95.

*******

Sintex Industries: Underpriced scripThe share of Sintex Industries Ltd. (SIL) (Code: 502742) (Rs.30) (FV Rs.1) is recommended for decent gains given thesteady numbers it has achieved despite the difficult period.

SIL was incorporated as Bharat Vijay Mills (BVM) at Kalol, Gujarat in 1931 and was engaged in the textile businessduring 1931-74. In 1975, the company diversified into manufacturing plastic moulded liquid storage tanks includingwater tanks and introduced new plastic products like doors, window frames and pallets. In 1995, the company wasrenamed Sintex Industries and commenced manufacturing of SMC moulded products, undertook modernization and

expansion of the textile unit and commenced the structured yarn dyed business.SIL entered the prefab structures business in 2001 and started the monolithic business in 2005. The Sintex group has 36manufacturing plants in India and abroad spread in 9 countries across 4 continents. SIL has subsidiaries like ZepInfratech India, Sintex Holdings BV, Netherlands and six other subsidiaries in UK, USA, India and France.

Sintex started its monolithic construction business in 2005. The Key drivers of the business is the need for low-cost masshousing and rapid urbanization in India. The method involves making formworks made either from plastic, aluminiumor wood. At the site, a mixture of concrete is poured into the formwork to build walls. After the concrete settles, theformwork is removed and the process is repeated for the next block. Under the brand name of BVM, its textiles divisionis the largest producer of corduroy and structured fabrics in India and specialises in distinctive products catering to theupper segment of the fashion industry.

Sintex made four acquisitions in India and overseas to enhance its presence in the composites segment. Globally, thecomposites industry is around US $67 billion with the USA, Europe and Japan as the biggest users. As per companyestimates, the Indian market is close to US $1 billion and is expected to grow by 25% in transportation, infrastructure,wind energy, and in the oil & gas sectors. Its acquisitions in the composites segment include Wausaukee Componentsand Nero Plastics in USA, Bright Autoplast in India, and NIEF Plastics in France. These acquisitions have strengthenedSintex’s position giving it access to technology and customers. The company has been restructuring the subsidiarieswhich should enhance value going forward.

In FY13, Sintex’s consolidated net profit rose 10% to Rs.324 crore on 14% higher sales of Rs.5079 crore. The EPS stoodat Rs.10.4 on its enhanced equity and a dividend of 70% was paid.

During Q2FY14, net profit was flat at Rs.73 crore on 21% higher sales of Rs.1360 crore and the Q2FY14 EPS stood atRs.2.3. For H1FY14, too, net profit was almost flat at Rs.119.5 crore on 10% higher sales of Rs.2483 crore. The H1FY14EPS stood at Rs.3.8.

The promoters hold 36.2% in its equity capital, foreign holding is 11.8%, institutions hold 8.3% and PCBs hold 12.9%

which leaves 30.8% with the investing public. Its tiny equity of Rs.31.1 crore is supported by huge reserves of Rs.3066crore, which gives its share a book value of Rs.99.6. The gross block has multiplied almost 5 times from Rs.897 crore inFY07 to Rs.4400 crore in FY13. Its net worth of Rs.3097 crore gives the DER of 1:1. The cash on hand as at FY13 wasRs.464 crore or Rs.14.9/share whereas the value of investments was Rs.60 crore. Thus Sintex has sound financials andseizes every opportunity of expansion and capital spending. The capex for FY13 was Rs.170 crore, which may be aroundRs.250 crore in FY14.

Sintex raised Rs.946 crore in December 2012 with Rs.176 crore raised through the QIP route and Rs.770 crore throughFCCBs at a conversion price Rs.75.6 per share, which provided relief on the liquidity front. It has, however, increased itsequity capital to Rs.31.1 crore from Rs.27.1 crore in the previous year. The company raised $225 million in 2008 and

http://www.business-standard.com/india/prof_page.php?search=FCCBs&select=1

http://www.business-standard.com/india/prof_page.php?search=liquidity+front&select=1

http://www.business-standard.com/india/prof_page.php?search=liquidity+front&select=1

http://www.business-standard.com/india/prof_page.php?search=FCCBs&select=1

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treated the FCCBs as debt on the balance sheet but had unutilized funds of $150 million, which along with above fundsraised helped it tide over payment dues.

Sintex’s India construction (monolithic and prefab) business (39% of revenue) is geared towards social sector spendingby the central and state governments on low-cost housing, slum rehabilitation, schools and rural healthcare centerconstruction in remote areas. The company’s monolithic business has been suffering due to sluggish from governmenactivity and consequent delays in execution and receivables, which have pulled down its overall performance. Things areexpected to get better as Sintex has reduced the number of slow moving sites from 7 to 5 and this will soon come downto 3 in the near future.

According to Sintex, the recent spate of reforms by the government will help gradually revive the domestic economy andaugurs well for the company as a buoyant social spending and an improved Capex from the private sector will ensure astrong revival in the company’s fortunes. But, even before the benefits of the reforms start trickling in, the company iswitnessing improvement in the business.

Sintex’s customised moldings business caters to Fortune 500 customers across continents and sectors. It intends toleverage this business to enhance domestic manufacturing and outsourcing, which will significantly improve its marginin the business over the next couple of years. Sintex enjoys an early-mover advantage in businesses that are tied to sociasector spending (schools/low cost housing/ healthcare centers), funded almost entirely by the government. Thisspending will continue given the socio-economic context.

Despite the economic adversities across the globe, Sintex grew its topline by about 15% in FY13 and 10% in H1FY14 andhas strengthened its balance sheet. It achieved this through a disciplined approach by streamlining business systemsand processes to maximise efficiencies and improving the business mix. Now, the company is now poised to accelerate

profitable business growth maintaining a lean balance sheet.With the management projecting 15% growth in the topline, sales are expected to touch Rs.5840 crore in FY14 with netprofit of Rs.362 crore, which would fetch an EPS of Rs.11.6 on its enhanced equity.

The Sintex share has recently fallen 15% after the National Stock Exchange announced that the counter was beingexcluded from its derivatives segment.

At the current market price of Rs.30, the Sintex share is available at a P/E multiple of just 2.6 on its estimated EPS ofRs.11.6 for FY14. A conservative P/E of just 4.5 will take its share price to Rs.52 in the medium-term and fetch a decentgain of over 70%.

Kalyani SteelsBSE Code: 500235

NSE Symbol: KSL

Last Close: Rs.50.55

Kalyani Steels Ltd (KSL) is a part of the over $2.1 billion KalyaniGroup of Pune. Established in 1973, it is a leading manufacturerof forging and engineering quality carbon & alloy steels using theBlast Furnace route and was set up to meet the requirements offorging quality steel of the group flagship company, Bharat ForgeLtd. In 1997, it set up a new plant to manufacture steel using the less power intensive mini-blast furnace route atGinigera in the Hospet-Bellary region of Karnataka, where iron ore is abundantly available. This 400,000 TPA integratedsteel complex is being expanded to 650,000 TPA. The Forging industry is its primary customer and manufacturers of

various components for commercial vehicles, two-wheelers, diesel engines, bearings, tractors, turbines and railwayproducts are its clients.

KSL has an equity base of Rs.21.86 crore that is supported by reserves ofaround Rs.332.73 crore, which is 15.22 times its equity leading to a sharebook value of Rs.81.22. The promoters hold 59.85% while the investingpublic holds 39.96% stake in the company.

KSL’s net profit zoomed 124% to Rs.11.84 crore in Q2FY14 from Rs.5.27crore in Q2FY13. The Q2FY14 turnover was Rs.247.56 crore as againstRs.201.73 crore in Q2FY13. For H1FY14, net profit zoomed 165% to

TECHNO FUNDA - By Nayan Patel

Last 5 years performance: (Rs. in crore)

Year Net Sales Net Profit EPS (Rs.

2008-09 1196.76 3.31 0.75

2009-10 1058.12 43.33 9.92

2010-11 1236.82 54.70 12.53

2011-12 989.54 22.04 5.04

2012-13 809.07 23.87 5.47

2013-14 (E) 1010 45 10.30

Review* Last week, we recommended Asahi Songwon

Colors at Rs.67. In just one week in a negative market

sentiment, the stock zoomed to Rs.85 level and

recorded 26.86% appreciation.

* Two weeks back, we recommended Flex Foods at

Rs.25. Within just 2 weeks in negative market

sentiments, the stock appreciated 8% to touch Rs.27.

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Rs.21.98 crore from Rs.8.28 crore in H1FY13 while total turnover rose to Rs.492.29 crore in H1FY14 from Rs.432.45crore in H1FY13.

It thus reported an EPS of Rs.2.71 for Q2FY14 and an EPS of Rs.5.04 for H1FY14.

The company has paid regular dividends as follows: FY10: 25%, FY11: 40%, FY12: 20%, FY13: 30%.

KSL may declare Rs.1010 crore turnover with Rs.45 crore profit in FY14. At its current market price of Rs.50, the shareprice discounts less than 5 times its FY14(E) EPS of Rs.10.30, which is much lower than its peers. The stock thus appearsundervalued and is likely to attract value buying at this level.

Technically, the stock has made a strong double bottom around Rs.32 level and shows a strong higher top-higher bottom

formation on the chart. Group company stock like Bharat Forge, B F Utilities also display an uptrend these days.Investors can buy this stock with a stop loss of Rs.43 on a closing basis. On the upper side, it will zoom to Rs.66-70 levelin the medium-term and Rs.100+ in the next 12-15 months. Its all-time high price is Rs.196.50.

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Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed tobe reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of

this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column aresolely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.

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