Monthly PPT Nov 2011 - Equity:: Stock Scrips

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 Hotel Industry

• Indian tourism has been a direct beneficiary of the growing Indian economy. Tourism demand is expected to hit US$ 266.1bn by 2019.

• TAJGVK Hotels, EIH, Indian Hotels are also looking good the on charts for a 5-7% rally from present levels. 

Pick of the month - Tata Sponge

Short-term target – Rs.365                             Long-term target – Rs.414

• A joint venture of Tata Steel and The Industrial Promotion & Investment Corporation of Orissa (IPCOL), Tata Sponge Iron (TSIL) was incorporated in 1982 to produce sponge iron.
• With production of 3.83 lakh tonnes in FY 2011, it achieved capacity utilisation of 98.2%. This is a record for the zero-debt company. With manufacturing capacity of 3.9 lakh tonnes, it is addressing a huge market, estimated at 2.3 crore tonnes of hot briquetting iron and sponge iron in FY 2011.
•  It is installing a boiler-based power plant, of 25 MW, to utilise the solid waste. The project would be financed through internal generation and borrowings. Tata Sponge Iron currently has installed capacity of 26 MW and sells the surplus, which is more than two-thirds of its output. The new plant would further add to profit.
• Q2 FY12 results – Sales, at Rs.168.02 crore, were sluggish. Even with revenue under pressure, margins rocketed 884bp, from 8.93% to 17.77%. Consequently, the operating profit scaled a high of Rs.29.86 crore (up 90.80%). After providing for interest, the company generated cash before depreciation of Rs.36.02 crore.
• TSI’s RoE for FY11 was 21.86%. At present, the stock trades below its five-year average PE. The FY11 EPS was Rs.65.80. The company has a BV of Rs.329.28 and a P/BV of 1x, also below its five-year average P/BV of 2.25x.

Results season in full swing

• Performance of the CNX 500 universe (242 companies declared results) shows a 28.28% rise in revenue and a 32.8% decline in profit.
• The Nifty universe (29 companies declared results) shows a 24.4% rise in revenue and a 1.8% rise in profit.

Nifty View

The Nifty failed to trade above its 200 DMA @ 5404 even after breaking out of its trading range of 4700-5200. If the Nifty can hold above 5200 in coming days, a rally to 5430 and

5700 might be possible. Nifty below 100 DMA 5235 levels for 2-3days on closing below it may again witness selling pressure towards 5000-4750-4400 levels could be possible in

coming months.

Due to the volatality in the markets we prefer  to be stock specific. We like EIH, TAJGVK, IRB INFRA, PTC, CHAMBAL, STANCHART IDR (as it quotes at a discount), TATA SPONGE, TATA ELXSI.