DLF, Banks, L & T, , Philips Carbon Black, CESC, Selan, 3i Infotech, Ramky, PTC :: Reader Technical Queries:: Business Line

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Please discuss the prospects of DLF.

Jyoti Majhi

DLF (Rs 180): DLF could not really recover from the bludgeoning received in the previous market crash when it fell from Rs 1,225 to Rs 124.

The recovery that followed retraced about one-third of the decline only. This structural decline resumed from the peak of Rs 520 recorded in October 2009.

Year 2011 was also pretty difficult with the stock losing 36 per cent this year. It has closed below the critical medium-term support at Rs 275. Next long-term support for the stock is at Rs 140 and Rs 124.

Investors need to divest their holding in this stock if it declines below Rs 170.

Resistances in the months ahead would be at Rs 310 and Rs 392. But long-term outlook will turn positive only on close above Rs 545.

Subsequent targets are Rs 673 and Rs 807. The stock could remain in the zone between Rs 125 and Rs 550 over the next two years.

I would like to buy Bank Nifty. At what price should I buy it?

Ramanuj Marda

Benchmark Bank BEES (Rs 802.1): Exchange traded fund (ETF) on bank stocks is the best way for investors to take an exposure to this sector.

Benchmark Bank BEES is moving down since last October when it recorded the peak of Rs 1,484. This decline has pulled the ETF close to its critical medium-term support at Rs 780.

There are a couple of supports just below at Rs 700 and Rs 650.

Investors can buy the fund in declines as long as it trades above Rs 650.

If this level is penetrated, the slide can accelerate to pull the ETF to March 2009 trough at Rs 335.

There can be a rally to Rs 1,050 or Rs 1,220 in the months ahead. Investors with short to medium-term perspective can divest their holding at either of these hurdles.

Long-term view will turn positive once the ETF moves above the second resistance.

I would like to buy shares of Larsen & Toubro. Please advise on the price range to buy it?

Vishwanath Hadli

Larsen & Toubro (Rs 995.1): Larsen & Toubro was devastated in the September quarter with the stock losing 36 per cent in this period.

The stock is trading well below the key medium-term support at Rs 1,200.

It has also closed the gap that was formed in May 2009.

That said, the stock has psychological support at Rs 1,000.

This is also the floor of the gap formed after the 2009 elections.

Investors with a greater penchant for risk can buy the stock at current levels or in declines with stop at Rs 870.

Breach of this level can drag the stock to the 2009 low at Rs 556.

The short- as well as medium-term trends in the stock are currently down and it is not displaying any inclination to reverse higher.

Should there be an upward reversal from these levels, short-term resistances will be at Rs 1,266 and then Rs 1,450.

Investors with short- to medium-term perspective can divest their holding if the stock reverses lower from either of these levels.

Medium-term view will turn positive only on close above Rs 1,450.

Subsequent resistances are Rs 1,600 and Rs 1,745.

I am holding shares of Phillips Carbon Black purchased at Rs 140 and 3i Infotech at Rs 45. Please advise on future course of action.

Siva Prasad

Phillips Carbon Black (Rs 86.4): This stock is dropping like a stone since mid-November. This decline has pulled the stock well below the medium-term trend deciding level at Rs 109.

Next support on the charts is at Rs 56 and this can now act as stop-loss for investors who are still holding the stock. Next long-term support is way off at Rs 24.

Investors with lower risk appetite can sell the stock at this juncture and consider re-entry once it closes above Rs 107.

Key medium-term hurdle is however at Rs 160. Next targets are Rs 180 and Rs 250.

3i Infotech (Rs 11.7): 3i Infotech also took it on the chin in 2011, collapsing from Rs 60 to Rs 12, loss of 80 per cent. The stock has also declined below its long-term trough at Rs 25.

It is difficult to tell where this downward spiral will halt. Any rally from hereon will face strong hurdle at Rs 25. Investors can switch out of this stock and consider buying it again only on a firm weekly close above Rs 25.

Medium-term view will turn positive only on a close above Rs 52.

I would like to know the prospects of Ramky Infrastructure.

Chandrasekkar

Ramky Infrastructure (Rs 205.9): This stock does not have sufficient history to enable us to come to a conclusion on its long-term prospects. But it is currently trading close to its life-time low.

That the stock is unable to break the sequence of lower troughs and peaks since its listing also implies that the stock is in a long-term down trend.

There is no semblance of reversal in either short- or medium-term time-frames. Investors with lower risk appetite can switch out of this stock and consider re-investment on a weekly close above Rs 250.

Next hurdles for the stock are at Rs 330 and Rs 360.

Please discuss the medium- and long-term out look of PTC and Selan Exploration.

A Parameswaran

PTC India (Rs 38.8): The long-term trading band for PTC is between Rs 40 and Rs 200. The stock is vacillating in this band since 2004. The stock is currently near the floor of this long-term trading zone.

Its life-time low of Rs 31 recorded in April 2004 should serve as the next long-term support and the stop-loss for investors.

Investors can continue to hold on to the stock since a reversal from here has the potential to take the stock all the way back to Rs 150 or even Rs 200. Medium-term targets on an upward reversal are Rs 80 and Rs 108.

The ceiling between Rs 150 and Rs 200 will continue to act as an obstacle for long-term uptrends.

Selan Exploration Technology (Rs 229): Selan Exploration is also southward bound since the beginning of this year. The stock is currently ruling at its 52-week low. That said, the long-term trend in the stock continues to be up.

It is still trading above its long-term trend deciding level of Rs 216. Investors can continue to hold the stock as long as it trades above this level.

Breach of this level will drag the stock to Rs 140, Rs 118 or Rs 90. Medium-term resistances will be at Rs 300 and Rs 350. Key long-term resistance is at Rs 425.

What does the technical chart say about CESC? Can I enter at current level of 204?

Shankar Mayuram

CESC (Rs 203.4): The long-term uptrend that began from January 2008 peak continues to be in force in CESC.

The stock is currently nearing its long-term base at Rs 165 recorded in October 2008. Investors can continue to hold the stock as long as it holds above this level.

Resistances for the medium-term will be at Rs 276 and Rs 375. Long-term trend will however turn positive only on close above Rs 500.

52 week Flop: 3i Infotech::Business Line

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Among the mid-tier IT companies, 3i Infotech has been a prolonged underperformer, with revenues not ramping up significantly after the 2008 slowdown.

Being focussed on the BFSI (Banking Financial Services and Insurance) segment alone, it did see some traction in its IT software and products division, though not to the extent of top-tier players or even some mid-tier ones. The company had anaemic single digit revenue growth in revenues, when most IT players — mid and large, had much better top-line expansion in FY11.

Its transaction processing division which was expected to be immune to fluctuations in discretionary spends did not quite deliver as anticipated. Its foray into the space was driven by two acquisitions — J&B Software in 2007 and Regulus in 2008, for a total of over $105 million. This increased the debt on its books substantially.

Volumes did not take off as anticipated and margins were anyway low for this segment. As a result, the management sold these two companies in May for a consideration of $137 million.

In the recent June quarter, the company had a 24.7 per cent decline in revenues and a similar fall in profits compared to the same period in the previous fiscal, partly due to the sale of these businesses.

Despite being available at rock bottom valuations, the stock has not enthused the markets, in light of its own growth challenges as well as the cautious environment prevalent as a result of the debt woes of the developed markets

KIFS Result update of Sesa Goa-3IINFO-KPIT-Rallis-CCI

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KIFS Result update of:

SESA GOA

OVERVIEW

Sesa Goa is engaged in iron ore mining and has diversified into manufacture of pig iron and metallurgical coke. The company exported 89% of its production in FY11; of this, exports to China were 77%. In 2010, iron ore imports by China declined by 1.5% y‐o‐y due to a 21.7% y‐o‐y increase in Chinese iron ore production. Any decline in iron ore imports or steel production in China could adversely impact SESA’s exports. The company has initiated work for widening the mine to jetty routes in Goa, railway siding in Karnataka and setting up of dedicated road corridors for movement of iron ore traffic. This is likely to support the expanded mining capacity.

Key highlights:

· Total income fell by 11% Y-o-Y to Rs. 1698 cr. v/s Rs. 1917 cr in June-10

· Operating Profit fell by 13% Y-o-Y to Rs. 1047 cr.  v/s Rs. 1204 cr in June-10

· OPM fell by 173 bps Y-o-Y to 61.08%  v/s 62.8% in June-10

· Net profit fell by 34% Y-o-Y to Rs. 673 cr.  v/s Rs. 1026 cr in June-10

· NPM fell by 1424 bps Y-o-Y to 39.25%  v/s 53.49% in June-10

· Interest cost grew by 263% to Rs 49 cr. v/s Rs 14 cr. In June-10.

 3I INFOTECH

OVERVIEW

3i Infotech provides IT solutions  to various market segments such as banking, insurance, manufacturing, contracting, retail and distribution and government. The company is promoted by ICICI Bank, which is India’s largest private sector bank. The company is hoping that the Government, along with its main stay BFSI sector, will pull it out of its difficult times and reduce the debt-to-equity ratio to 1.1 by March 31, 2012. The company is also hoping 40-50% of its revenue will come from Government spending in FY12.

Key highlights:

· Total income grew by 32% Y-o-Y to Rs. 170 cr. v/s Rs. 128 cr in June-10

· Operating Profit grew by 3% Y-o-Y to Rs. 68 cr.  v/s Rs. 66 cr in June-10

· OPM fell by 1137 bps Y-o-Y to 39.7% v/s 51.1% in June-10

· Net profit grew by 20% Y-o-Y to Rs. 25 cr.  v/s Rs. 21 cr in June-10

· NPM fell by 153 bps Y-o-Y to 14.7%  v/s 16.3% in June-10

· Interest grew 47% Y-o-Y to Rs. 39 cr.  v/s Rs. 27 cr in June-10

KPIT CUMMINS

OVERVIEW

KPIT Cummins is focused on co-innovating domain intensive technology solutions for manufacturing corporations and Diversified Financial Services to help its customers become more efficient, integrated and innovative enterprises. KPIT Cummins Infosystems (KPIT) has acquired 50% stake in Systime Global Solutions (Systime), the world’s largest JD Edwards (JDE) solution provider, for a consideration of Rs 103cr (all cash deal). The company has vertical mix in which revenue come from manufacturing and BFSI industry constitute almost 92% but with the help of this deal the company will expand its vertical mix to health care, energy and CPG.

Key highlights:

· Total income  grew by 42% Y-o-Y to Rs. 150 cr. v/s Rs. 106 cr in June-10

· Operating Profit grew by 99% Y-o-Y to Rs. 33 cr.  v/s Rs. 17 cr in June-10

· OPM grew by 635 bps Y-o-Y to 22.06%  v/s 15.71% in June-10

· Net profit grew by 198% Y-o-Y to Rs. 19 cr.  v/s Rs. 6 cr in June-10

· NPM grew by 669 bps Y-o-Y to 12.78%  v/s 6.09% in June-10

RALLIS INDIA

OVERVIEW

Rallis India mainly deals in Agri Business and has emerged as one of the leaders in the Indian Agrochemical Industry. The company is also in the Institutional business providing technical and bulk of various molecules to leading companies like Bayer, Syngenta etc. Apart from this the company is having significant presence in International Business and Contract Manufacturing. Rallis had acquired Metahelix, an agro-biotech company focusing on developing technologies for crop improvement, in December last year.

Key highlights:

· Total income  grew by 16% Y-o-Y to Rs. 1796 cr. v/s Rs. 1553 cr in June-10

· Operating Profit grew by 28% Y-o-Y to Rs. 269 cr.  v/s Rs. 210 cr in June-10

· OPM grew by 144 bps Y-o-Y to 14.9 %  v/s 13.5% in June-10

· Net profit grew by 31% Y-o-Y to Rs. 159 cr.  v/s Rs. 121 cr in June-10

· NPM grew by 105 bps Y-o-Y to 8.87%  v/s 7.82 % in June-10

CONTAINER CORPORATION OF INDIA

OVERVIEW

Container Corporation of India popularly known as CONCOR, is engaged in the business of transportation through containerization. The company is the market leader that has the largest network of 58 ICDs/CFSs in India. CONCOR also provides services such as cover management of Ports, air cargo complexes and establishing cold-chain and for International & Domestic containerization and trade in India the company has built-up multimodal logistics support.

Key highlights:

· Total income grew by 4% Y-o-Y to Rs. 949 cr  v/s Rs. 916 cr in June-10

· Operating Profit grew by 13% Y-o-Y to Rs. 319 cr. v/s Rs. 283 cr. in    Jun-10

· OPM grew by 268 bps   Y-o-Y to 35.56 % v/s 30.88 % in June-10

· Net profit grew by 21% Y-o-Y to Rs. 234 cr.  v/s Rs. 194 cr. in June-10

· NPM grew by 354 bps   Y-o-Y to 24.67 %  v/s 21.13 % in June-10

3i Infotech signs agreement to sell Regulus Group and J&B Software for US$137mn :: Angel Broking,

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3i Infotech signs agreement to sell Regulus Group and J&B Software for
US$137mn
3i Infotech Financial Software, Inc., a subsidiary of 3i Infotech Ltd., has signed an
agreement to sell its US-based global billing and payments unit, consisting of Regulus
Group and J&B Software, to an affiliate of Cerberus Capital Management, L.P. for
US$137mn. The transaction is expected to close within the next 60 days, subject to
customary closing conditions and any regulatory approvals.
3i Infotech acquired Regulus Group in 2008 for a consideration of US$100mn; this deal
was valued at 0.7x its CY2007 sales. The company acquired J&B Software for a
consideration of US$25.25mn in 2007; this deal was valued at 1x its CY2006 sales.
Both these firms are into the transaction processing business, majorly in the US, which is
witnessing heavy ramp down since 1QFY2011 mainly due to a decline in cheque
processing volumes rather than client loss. Revenue from the transaction services business
of 3i Infotech declined by 10.3% yoy to `819.9cr in FY2011 from `915.5cr in FY2010.
Gross margin of this segment also declined by 170bp yoy to 30% in FY2011.


Revenue contribution of Regulus Group and J&B Software in FY2010 was US$156.6mn
and US$36.5mn, respectively. So the current deal with Cerberus is valued at 0.8x sales.
This divestment reduces the leverage and strengthens the balance sheet of 3i Infotech,
taking gross debt-to-equity ratio to 1.38 from 1.85 previously. However, we are concerned
about the management’s flip-flop M&A strategy. We await further clarity on the future
growth strategy. The stock is currently under review and we may revisit out target price of
`55 post interaction with the management.

Buy 3i Infotech – 3QFY2011 Result Update- Angel Broking

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3i Infotech – 3QFY2011 Result Update

Angel Broking recommends a Buy on 3i Infotech with a Target Price of Rs. 68.

For 3QFY2011, 3i Infotech reported dismal numbers due to the drop in cheque

volumes in the US yet again. However, management expects transaction

processing volumes to stabilise and return to 5-7% yoy growth in FY2012 and IT

Solution to gain strong momentum. At the CMP of `56, the stock is trading at

dearth cheap valuations of 4.1x. We recommend a Buy on the stock, with a

Target Price of `68, valuing the company at 5x FY2012E EPS of `13.5.

3i Infotech – 2QFY2011 Result Update- Angel Broking

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3i Infotech – 2QFY2011 Result Update

Angel Broking maintains a Buy on 3i Infotech with a Target Price of Rs78.

For 2QFY2011, 3i Infotech reported dismal set of numbers with meager

1.0% qoq top-line growth. Due to improvement in operating margin, net profit

grew by 4.6% qoq in 2QFY2011 to `64cr as against `61.2cr in 1QFY2011.

Muted revenue growth due to ramp down in transaction services: For 2QFY2011,

3i Infotech posted mere 1.0% qoq top-line growth to `643.4cr (v/s our estimate of

`666.3cr), primarily on the back of steep ramp down in volumes in the

transaction services segment (largely in the US), which declined by 10.9% qoq.

Growth was, however, led by the IT solutions segment, which posted 8.4% qoq

revenue growth to `426.4cr.