10 November 2012
Kotak 2012 Diwali Picks
After a challenging previous year, Samvad 2068 provided some
cheer to the markets. For much of the year, there was frustration
and near-despair. However, concerted action by US / EU central
banks and the subsequent reforms initiatives by the Indian
Government have provided a much needed boost to our markets in
the last 10 weeks. The benchmarks have recovered from the lows of
2011.
The new Samvad brings with itself, hope of a better future. The
Government is in a mood to bring the economy back on the high
growth path and that, according to us, can be a big positive, if the
Government carries out with further reforms. The US elections have
ensured continuity in and minimal disruption of US economic
policies. The easy monetary policy also seems set to continue. EU
has so far, succeeded in averting any major defaults.
No doubt, there will be periods of uncertainty and anguish and
concerns. There may be corrections in markets. The fiscal cliff in US
is expected to be the first big test for global equities. EU chiefs will
also have to keep on working hard to avoid catastrophes. And more
importantly, the Indian policy-makers will face a big test in the
ensuing winter session. The last budget before 2014 elections will
also be important.
However, we are hopeful of a much better Samvad 2069. Given this
backdrop, we have selected some stocks which look attractive to us
from an investment perspective.
The stocks are :
Cairn India
Cairn India Ltd (CIL) is one of the biggest private exploration and production
companies in India.
MBA have recoverable oil reserves and resources of more than 1 billion barrels,
which includes proven plus probable (2P) gross reserves and resources of 636
million barrels of oil equivalent (Mn boe) with a further 308 Mn boe or more of
enhanced oil recovery (EOR) potential. This is 25-30 years of production.
Based on our estimates, the stock is trading at 5.1x EV/EBIDTA and 6.3x P/E on
FY14E earnings.
ICICI Bank
ICICI bank is better placed vis-à-vis its peers with robust liability franchise (CASA
mix at ~41% at the end of Q2FY13), stable asset quality, improving NIM (3%+
during last 3 Quarters).
Management's focus on stable growth with improving structural profitability (RoE
is likely to improve further with increase in leverage in next 2-3 years) reinforces
our existing positive outlook on the stock.
Retail book, which constitutes ~35% of total loan book, has seen near nil slippage during last couple of quarters; this has made us more confident on its overall asset quality.
After stripping off the value of subsidiaries (Rs.204), stock is trading reasonable
at 1.4x its FY14 ABV.
What's your pick this diwali: Gold ETF, coins or jewellery?:: Moneycontrol
Its that time of the year when Indians indulge in gold shopping. If industry experts are to be believed--the precious yellow metal is likely to hit the Rs 32,000 mark for 10 gms at the onset of Dhanteras, which is considered very auspicious for buying gold. It is also the first day of the five day Diwali fest and is associated with wealth and gifting.
Recent trend suggests there is certainly a revival in gold demand after months of lackluster sales
Holidays in 2012 for NSE, BSE
| CM | Wednesday | ||
| CM | Wednesday | ||
| CM | Tuesday |
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KPIT Cummins Good Quarter, maintains annual guidance; Reiterate Hold:: Sunidhi
KPIT’s Q2FY13 revenue at US$103.4 mn was up 5.5% QoQ, higher than our
estimate. On lower-than-expected SG&A costs, operating margin increased
157bps QoQ to 16.7%. Forex loss of `213mn marred PAT for Q2FY13. Volume
growth for Onsite was ~9% and offshore was ~3% (blended ~4%).We maintain
our HOLD rating on the stock with a Target Price of `140 on account of recent
deal wins providing visibility and KPIT maintaining its FY13 US$ revenue
guidance (31-34% growth), focus on profitability and broad-based growth.
Gati Ltd :Results were below our expectations. Signs of Improvement visible!: Nirmal bang
Results were below our expectations. Signs of Improvement visible!
The company reported Total Income of Rs. 298 crore which was up 3.6% QoQ and down 7% YoY on the back of sluggish performance in the shipping segment. However, EBIDTA margins in Gati KWE saw a significant jump to 10.6% in the quarter and are expected to sustain going forward. The company has sold off one of the vessels in the shipping business and is expected to return to profits in the coming quarters. With synergies in the Gati KWE JV unfolding and management’s thrust on building up the e-commerce business, we expect the EDSC segment to grow by 15% in FY13E. At CMP, the stock is trading at 10.5x its FY13E expected earnings and we continue to have a positive outlook on the stock.
Tata Motors:: Results in line at operating level:: Nomura Research
Results in line at operating level
JLR's positives offset by weak
domestic business
Pantaloon Retail (Buying Range: |200-|190) ••Muhurat Picks - 2012 :: ICICI Direct
Pantaloon Retail (Buying Range: |200-|190)
• Pantaloon Retail (PRIL), India’s largest domestic retailer, has a
total operational space of 16.7 million sq ft. Through a series of
stake sales (including de-merger of the flagship ‘Pantaloon’
format, Future Capital stake sale, etc) the company plans to
raise ~ | 2,500 crore, which will be used towards debt
reduction. This will lead to an annualised interest savings of
~ | 120 crore, thereby boosting profitability by ~30% in FY14E
• PRIL is currently in the space consolidation phase and is closing
down unviable stores, thereby saving costs. Prudent space
addition, going forward, and cost rationalisation will enable PRIL
to maintain its operating margin in the 8.5-9.5% range despite
the high margin business (Pantaloon) being hived off. Also, a
higher churn due to increasing share of food will ease the
working capital requirements of the company
• Going forward, the stake sale in the insurance business
(expected to be announced by December 2012), sale of weaker
performing business like Ezone and HomeTown, long term
benefits of FDI in multi-brand retail and roll out of Goods &
Services Tax (GST) will work in PRIL’s favour. While we expect
PRIL’s topline to grow at a CAGR of 7.8% (FY11-14E), PAT is
expected to grow at a CAGR of 41.5% owing to reduced interest
costs. We have valued Pantaloon Retail at 0.7x FY14E EV/Sales
to arrive at a target price of | 248.
Glenmark Pharma (Buying Range: |430-|410) • •Muhurat Picks - 2012 :: ICICI Direct
Glenmark Pharma (Buying Range: |430-|410)
• The company is the one of the few generic companies, which
enjoys a substantial foothold in therapies like Derma and oral
contraceptives in the US market, which has caused strong CAGR
of 21% between FY08 and FY12 in the US. We believe the growth
story will only get better on the back of robust pipeline of 81
ANDAs approved and 43 ANDAs pending for approval from
USFDA. The 43 pending applications include 19 are Para IV filings
• As per latest AIOCD data, Glenmark is the second largest player in
the dermatology space after GSK Pharma in the domestic market
with a market share of 11%. It also enjoys decent market share in
therapies like respiratory and cardiac. The company keeps on
introducing at least 20 new products and line extensions in the
domestic market to strengthen the market share. Sales in the
domestic market grew at a CAGR of 18% between FY08 and FY12
• We expect sales, EBITDA and profit to grow at a CAGR of 19%,
18% and 28%, respectively, between FY12 and FY14E. The
company is currently trading at ~21x FY13E EPS of | 20.7 and
~15x FY14E EPS of | 27.9
Marico (Buying Range: |205--|195) •Muhurat Picks - 2012 :: ICICI Direct
Marico (Buying Range: |205--|195)
• With falling copra prices, margins for the company should
expand, going forward. Marico has high susceptibility to copra
(CP) and safflower oil (SO) prices as they constitute ~40% and
~15%, respectively, of its raw material (RM) costs. With CO
witnessing ~40% YoY decline, margins would expand, going
forward. We believe Marico would be able to sustain 14%+
margins
• With the acquisition of Paras's personal care (Set Wet, Zatak and
Livon) business, the company has added new category within its
fold. we believe the company would continue to witness robust
volume growth on the back of shift in consumer preference for
Branded products. We believe the company the company would
continue to witness healthy volume growth in future.
• The stock has been trading in the range of 23x-28x two year
forward PE, which is discount to FMCG index. With the
sustainable volume growth and healthy margins, the company
would start commanding higher multiple in future. We remain
positive on the stock.
JK Lakshmi Cement (Buying Range: |127-|120) • Muhurat Picks - 2012 :: ICICI Direct
JK Lakshmi Cement (Buying Range: |127-|120)
• JK Lakshmi Cement is a North India based cement company
having an integrated cement plant with the capacity of 4.2 MTPA
at Sirohi, Rajasthan and 0.55 MTPA each at Kalol (Gujarat) and
Jhajjar (Haryana). JKLC is expanding its cement capacity by
2.7MTPA at Durg, Chhattisgarh over next one or two years
• On account of strong demand growth expectations in northern,
central and western regions, we expect cement volumes to grow
at ~7% CAGR during FY12-14E to 5.6 MT in FY14E from 4.9 MT in
FY12. Also, improvement in utilisation rates, going forward,
would help in sustainable pricing. We expect realisation to grow
~16% YoY in FY13E and ~6% in FY14E. Margins are expected to
improve in FY13E/14E, led by improvement in realisations and
operating leverage benefits
• We remain positive on the stock on account of capacity expansion
led volume growth, improvement in margins and return ratios and
cheap valuations. It is trading at $54/tonne at FY14E capacity of
8.1 MT, which is ~55% discount to the current replacement cost
Lupin (Buying Range: |590-|565) •Muhurat Picks - 2012 :: ICICI Direct
Lupin (Buying Range: |590-|565)
• Lupin is well poised to register strong growth in the US generic
space as the gap of filing and launches (176 approvals and just 42
launches cumulatively) assures sales traction for a sizable future,
add to this, the potential upsides from FTFs and limited
competition products (at least 10). The branded space is expected
to get a boost from the launch of Suprax drops and chewable
version.
• Things are also improving in Japan where we expect
improvement in gross margins once product supplies from Goa
facility kick in. The India business is also slated to grow above
industry average with chronic focus and new launches
• The management has guided for ~100 bps improvement in
EBITDA margins every year on the back of continuous
improvement in product mix and cost rationalisation. We expect
sales, EBITDA and PAT to grow at a CAGR of 24%, 27% and 29%,
respectively, in FY12-14E. The stock is currently quoting at 18x
FY14E EPS of | 32.5.
Coal India (Buying Range: |348-|335) •Muhurat Picks - 2012 :: ICICI Direct
Coal India (Buying Range: |348-|335)
• Coal India (CIL), the largest coal producing company in the world,
also enjoys a monopoly status in the Indian domestic market. CIL
contributes ~80-85% of the country’s total coal output and on the
demand side meets ~65-70% of domestic consumption
requirements. Coal India produces ~90% of its coal through open
cast mining and witnesses low stripping ratio, which ensures that
reserves are easily extractable thereby helping it position itself
among the lowest cost coal producers in the world
• On the back of massive capacity addition anticipated in the power
sector over the next few years, majority of which is expected in
the thermal segment there exists an imminent demand of coal,
which augurs well for Coal India and the company is well placed
to cater to the rising demand
• CIL has a strong balance sheet with robust cash flow and a
healthy liquidity position, which augurs well for the company.
Going forward, CIL is well poised to deliver healthy performance
and is a priced asset to be held in one’s portfolio.
State Bank of India (Buying Range: |2210-|2150) •Muhurat Picks - 2012 :: ICICI Direct
State Bank of India (Buying Range: |2210-|2150)
• SBI is the market leader (~18% market share) by a wide margin
with a gross advances of | 9.45 trillion. It has led the rate cuts and
is offering one of the lowest lending rate across the industry. In
spite of this, it is maintaining one of the highest NIM at ~3.7%. A
strong operational performance led by NII enables SBI to cover up
for higher provisioning and post decent profitability
• Although NPAs are expected to remain elevated for couple of
quarters and stay between 4% and 5%, it is mainly factored in the
price. Considering the large size of SBI, its exposure to stressed
sectors is relatively low compared to its peers
• Besides, the economy and investment cycle is near bottom and
interest rates are expected to come down. A few reform
measures (like fast environmental clearance, land clearance, etc.)
may surprise positively. Such a scenario remains positive for high
beta stock like SBI to outperform
IFIN’s Diwali Stock Picks
IFIN’s Diwali Stock Picks
Nifty ETF
BAJAJAUTO
ICICIBANK
RAYMOND
JUBLFOOD
BIOCON
Nifty ETF
BAJAJAUTO
ICICIBANK
RAYMOND
JUBLFOOD
BIOCON
Balrampur Chini Mills (Buy, Target Rs.85) ::LKP
Balrampur Chini Mills (Buy, Target Rs.85)
Balrampur Chini Mills Ltd – BCML is one of the largest integrated sugar producer in India with a crushing capacity of 76500 TCD spread across 10 units in UP, 320klpd distillery and 126mw of saleable power to the state grid.
BCML is presently carrying one of the highest sugar inventory among its peers at 2.25lac tons valued at under Rs29 per kg as it has one of the most healthy balance sheets in the sector with long-term debt of only Rs6bn half of which would be repaid during the next one year.
BCML in our view is slated to record its highest volumes ever in co-generation and distillery operations this fiscal and we expect that the second half numbers would reflect higher profitability from the sugar operations as well with realizations hovering around Rs35 per kg presently for the company. We recommend a BUY on BCML at the CMP of Rs65 with a price target of Rs85
TECHNICAL VIEW
Technically, the stock has started an uptrend from the start of this year, as seen from the rising channel. In the process of this rising channel formation, it has also managed to break the downward sloping trendline which is a positive indication for the stock.
The stock is currently trading at the support zone of the channel at around 65 levels. We believe once the consolidation process completes the stock would resume its uptrend and may probably test the high’s of the channel around 85 levels.
Thanks and Regards
LKP Advisory
2012 Diwali Picks:: Kotak Securities
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Money spinners: 40 Phataka stocks for a 'bomb'astic Diwali:: Moneycontrol
Moneycontrol Bureau
If experts are to be believed, then the market is all set for a cracker of a Diwali by testing 6000 level. Moneycontrol.com spoke to a slew of experts and selected 40 phataka stocks that can be traded this Diwali to beckon the Lakshmi.
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