Buy Bajaj Hindusthan between Rs 20.35 to Rs 19.80. Stoploss at Rs 18.50 :: HDFC Securities

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Outlook-Bajaj Hindusthan, JB Chemicals, Graphite India, UFLEX, PC Jeweller, Parabolic Drugs :: Business Line :: Business Line

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Technicals-Bajaj Hindusthan, JB Chemicals, Graphite India, UFLEX, PC Jeweller, Parabolic Drugs :: Business Line

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SREI infra, TTK Prestige, BHEL, Bajaj Hindusthan, Assam company, Taj GVK Hotels:: Business Line

Technicals: Sundram Fasteners, Gammon Infrastructure, Bajaj Hindusthan, S.E. Investments, Symphony, JM Financial, Dewan Housing, :Business Line

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I am holding shares of Dewan Housing Finance bought at Rs 275 and JM Financial bought at Rs 35. Should I continue to hold or sell at current price?

Pragdas Mathuradas

Dewan Housing Finance Corporation (Rs 218.5): Dewan Housing still appears to be on strong foundation. It has key long-term support at Rs 155 and the stock bounced off the low at Rs 176 last December. Investors with long-term perspective can continue to hold the stock as long as it trades above this level.

If it manages to hold above Rs 176 in the upcoming months, investors can look forward to a rally to the previous peak at Rs 347 or even higher over the long term.

The near-term prospects for the stock are, however, under a cloud. Medium-term resistance for the stock is at Rs 280. Since the stock is reversing lower from this level, it can decline to Rs 175 or Rs 155 in the upcoming months. If your investment horizon is short-term, then exit the stock on a close below Rs 210.

JM Financial (Rs 13.5): This stock is in a vicious downtrend and it is advisable to switch over to some other stock. JM Financial recorded its long-term trough around Rs 19 in March 2009.

This trough was breached last September, and the stock is currently trading below this level. Since the stock is currently close to its multi-year low, it is hard to predict where the downward spiral can halt.

Immediate support for the stock is at Rs 11.6. If this level is breached, it may fall to Rs 5.1. Medium-term resistances will be at Rs 32, Rs 45 and Rs 65.

Please advise on the outlook for Symphony and S.E. Investments. Are these stocks worth holding?

Rakesh Duggal

Symphony (Rs 250.8): This stock moved out of wilderness, below Rs 20, in 2010 to move to the peak of Rs 334 in April 2011. Since then, the stock is moving sideways in a broad band between Rs 200 and Rs 300.

Long-term outlook is positive for the stock and investors can hold with stop at Rs 190. If the stock holds above this level, it will open the possibility of break out to Rs 400 over the next two years.

That said, breach of the support at Rs 190 will drag the stock down to Rs 168 or Rs 130. Therefore, investors should divest their holding on fall below Rs 190.

The medium-term trend in the stock is, however, sideways.

It could continue to oscillate in the band between Rs 200 and Rs 300. Investors with a shorter investment horizon should, therefore, exit the stock close to Rs 300 and look for buying opportunities near the floor of the current range.

S.E. Investments (Rs 319.9): This is an extremely volatile stock recommended only for the brave-heart. It is currently close to its long-term resistance between Rs 350 and Rs 400. S.E. Investments has reversed sharply from this band twice in the last two years.

Since the reversals can be very sharp giving little opportunity to investors to exit, it would be best to take some money off the table, if you have some in front of you.

Hold the rest with stop at Rs 285.

What is the long-term view on Bajaj Hindusthan?

R.N.B. Rao

Bajaj Hindusthan (Rs 29.2): Bajaj Hindusthan is hardly in a sweet spot, wallowing close to eight-year low. Needless to add that the long-term view on the stock is currently down.

Decline below the December 2011 low at Rs 24 will take the stock below the Rs 10 mark.

The stock needs to do a lot of work before it moves to a position of relative stability. The first requirement would be a strong close above Rs 60.

Investors with lower risk-taking ability should exit the stock at current juncture and consider re-investing on a strong close above Rs 60. Subsequent medium-term targets would be Rs 93 and Rs 136.

Long-term outlook for the stock will turn positive only on weekly close above Rs 200. Inability to move beyond this level will keep the stock in the Rs 25-200 band for a few more years.

I am holding shares of Gammon India purchased at Rs 123. Please advise on the prospects of this stock.

P.M. Rao

Gammon India (Rs 44.4): Gammon India has given up all the gains recorded in the 2009 rally and is currently trading near its 2009 trough. The trend across time frames — long, medium and short — are currently down for this stock.

Investors can hold the stock with stop at Rs 40. But given the fact that many stocks are currently trading well below their 2009 lows, the stock can head lower to Rs 33 or Rs 19 in the upcoming months.

Resistances in the upcoming months will be at Rs 130, Rs 180 and Rs 271. The long-term trend will, however, turn positive only if the stock manages a close above Rs 270.

Please advise on the future outlook of Sundram Fasteners.

Sajahan

Sundram Fasteners (Rs 53): Sundram Fasteners faces strong long-term resistance in the zone between Rs 65 and Rs 75.

The rally from 2009 lows halted in this zone and the stock is currently consolidating in the band between Rs 45 and Rs 65. Key long-term supports for the stock are at Rs 44 and Rs 36.

If the stock manages to hold above Rs 44, it will denote the propensity to break out higher to Rs 85 or Rs 94 in the next couple of years.

Bajaj Hindusthan: Profit impacted by lower sales and rise in cane price :Centrum

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Profit impacted by lower sales and rise in cane price
Bajaj Hindusthan’s Q1SY12 result was significantly below our estimates with
Revenue at Rs5.6bn (49.6% below our estimates of Rs11bn), EBITDA at
Rs633mn (71.5% below our estimates of Rs2.2bn) and adjusted loss at
Rs444mn (vs. estimated profit of Rs117mn). The primary reason for lowerthan-
estimated revenue and profit was a steep decline in sugar sales volume.
Sugar sales volume declined 54.3% YoY (and 35.7% QoQ) to 16.5 lac quintals
(est. 33 lac quintal). Led by a significant decline in sales volume, Sugar
segment reported EBIT level loss of Rs846mn against a profit of Rs1,189mn in
Q1SY11. Revenue from distillery segment too declined 61.5% YoY (and 46.1%
QoQ) to Rs5.4bn primarily due to 54.3% YoY (and 53.7% QoQ) decline in sales
volume to 68.5 lac litres. We believe that the profitability of the company
would be under pressure given the higher State Advised Price (SAP)
(Rs240/quintal vs. Rs205/quintal in SY11) fixed by the Uttar Pradesh State
government and pressure on sugar prices as higher production is expected in
SY12E. The stock has appreciated by 21% since our last update post Q4SY11
results driven by positive news flows like a) allowance of further export of
1mt by the Central government (approval of poll committee is needed due to
ongoing state elections in Uttar Pradesh) and b) A committee formed by the
Prime Minister to look into the sugar de-control issue. However, we expect
that in the near-term the stock could be under pressure as we expect the
company to report losses in SY12E and SY13E due to higher sugarcane prices
and lower realization as the sugar inventory in India is expected to increase in
SY12E We downgrade our rating on the stock to Sell from Hold with a target
price of Rs30 (earlier: Rs31), downside of 12.7% from CMP.
􀂁 Disappointing performance of the sugar segment: Revenue from the sugar
segment declined 61.5% YoY (and 46.1% QoQ) to Rs5.4bn primarily due to
significant 54.3% YoY (and 53.7% QoQ) decline in sales volume to 16.5lac
quintals. Realization of open market sugar increased 5.8% YoY (and 6.5% QoQ)
to Rs30.1/kg. Led by lower sales volume and rise in sugarcane price, the
segment reported EBIT level loss of Rs846mn against a profit of Rs1,189mn in
Q1SY11. Recovery rate of sugar was at 8.1% against 8.5% in Q1SY11.
􀂁 Lower sales impacts distillery business’ performance: Led by 78% YoY (and
75.8% QoQ) fall in distillery sales volume, revenue from the distillery segment
declined 72.8% YoY (and 72.1% QoQ) to Rs220mn. Realization of Alcohol
increased 24.3% YoY (and 8.8% QoQ) to Rs31.4/litre. EBIT of the distillery
segment declined 80.7% YoY (and 64.3% QoQ) to Rs65mn and EBIT margin
declined 12pp YoY (and 6.4pp QoQ) to 29.5%.

Bajaj Hindustan: Disappointing results ::Kotak Sec

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Bajaj Hindustan (BJH)
Sugar
Disappointing results. BJH reported 4QFY11 EBITDA at Rs553 mn versus our estimates
at Rs1.7 bn. Profitability was lower (EBITDA margin at 5% versus estimate of 19%) as
higher amount of high-cost inventory (FY2011 production) was sold. 9MFY11 margins
(21%) were higher on sale of low-cost inventory of raw sugar. Company has raised
Rs14.7 bn through rights issue out of which Rs11 bn has gone towards reduction of
debt. With SAP at Rs2,400 per ton, we expect profitability to remain under pressure in
FY2012E. We have reduced our estimates. Maintain REDUCE with a TP of Rs30 (Rs60
earlier) at 5.5X March 2013E EBITDA.

Sell Bajaj Hindusthan; Target : Rs 25 ::ICICI Securities,

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H i g h e r   r a w   m a t e r i a l   c o s t   e r o d e s   m a r g i n …
Bajaj Hindusthan (BHL) reported a subdued set of Q4SY11 results. The
company’s topline grew 9.8% YoY to | 1071.1 crore vs. | 975.1 crore in
Q4SY10. Margins took a significant hit by 1155 bps to 5.2% against 16.7%
on the back of a substantial increase  in  raw  material  (RM)  cost.  The  RM
cost in Q4SY11 was at 91.4% of net sales compared to 77.2% of net sales
in Q4SY10. Interest cost during the quarter was up ~14% to | 136.4
crore. Hence, backed by a moderate increase in sales, lower EBITDA and
higher interest cost, earnings took  a considerable hit with the company
reporting a loss of | 119.8 crore vs. a loss of | 50.3 crore in Q4SY10.
ƒ Highlights of the quarter
BHL announced a rights issue for its shareholders on September29, 2011
offering two new shares for an existing share at a price of | 36/share (face
value of | 1 and a premium of | 35). The company raised | 1479.8 crore
by issuing 41.1 crore shares, thereby increasing its share capital to | 63.9
crore. Of the funds raised, | 1145 crore has been utilised to repay its
working capital debt, | 190 crore is held as liquid funds while | 100 crore
is held in fixed deposit receipts.
ƒ Segmental performance for quarter
BHL  sold  3.57  lakh  tonnes  (lt)  of  sugar  during  the  quarter  at  an  average
realisation of | 25.8/kg. Distillery sales stood at 282.4 lakh litres with a
higher average realisation of | 27.7/litre. Power sales realisation was
marginally higher at | 4.2/unit. Hence, the total segment wise sales from
sugar, distillery & co-generation stood at | 453.4 crore, | 33.6 crore and |
22.2 crore, respectively.
V a l u a t i o n
At the CMP, the stock is trading at 16.4x and 14x its FY12E and FY13E
EPS of | 1.8 and | 2.1, respectively. With higher cane prices (state advised
price for UP mills) announced at | 240/quintal and coal supplies for power
still remaining due for the company, we remain cautious on the
company’s performance in the coming quarters. Further, the lingering
debt on the books continues to weigh down earnings led by higher
interest cost. Hence, we maintain our SELL rating on the stock.

Sell Bajaj Hindusthan; Target : Rs 39 ::ICICI Securities,

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R i g h t s   i s s u e   t o   p a r e   d e b t …
Bajaj Hindusthan (BHL) has announced a rights issue for its shareholders.
It is offering two new shares for an existing share (ratio of 2:1) at a price
of | 36/share (face value of | 1 and a premium of | 35). The record date
for the same is September 22, 2011. Hence, through the issue BHL plans
to raise | 1644.2 crore and utilise the amount for repayment of its debt.
ƒ Scenario 1: If rights issue is fully subscribed
If the rights issues is fully subscribed, then there will be a dilution of 200%
of the share capital and the adjusted price would be | 41/share. Hence,
the diluted equity share capital for the company would become | 57.3
crore.
ƒ Scenario 2: If rights issue is subscribed up to 50%
If the rights issue is subscribed partially (~50%) then the adjusted price
would be ~| 44/share and diluted equity share capital will be | 43.5 crore.
According to the management, the entire funds from the issue would be
utilised for repayment of the debt (| 6350 crore) on the books of BHL.
Hence, the current long-term debt of | 5100 crore would come down to |
3500 crore (100% subscription), thereby helping the company to save on
interest cost to the extent of ~| 140 crore per annum.
V a l u a t i o n
At the CMP of | 52, the stock is trading at 5.9x its SY12E EPS of | 8.8 and
5.0x its FY13E EPS of | 10.5. However, post dilution (considering 100%
subscription) the stock would trade at 15.5x and 13.5x its estimated SY12
and SY13 EPS of | 3.3 and | 3.9, respectively. Considering the company’s
lack of execution capability in the power segment and issues like coal
supplies remaining a snag for power companies, we will await the
company’s performance in power. Moreover, an expected higher
sugarcane cost in SY12 (due to election in the state) could further keep
earnings from the sugar business subdued. Therefore, we advise our
investors to avoid the rights issue and remain negative on the stock with a
target price of | 39/share

Bajaj Hindustan: Maintain REDUCE:: Kotak Sec,

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Bajaj Hindustan (BJH)
Sugar
Maintain REDUCE. BJH has had a meaningful correction but according to us, it is still
too early to take a positive view on account of: (1) Sugar production estimates for the
next sugar year (October 2011 to September 2012) point to a surplus of ~3 mn tons
which would lead to subdued prices even in the next year. In our view, government will
continue with its policy of allowing exports in small tranches which has been insufficient
to shore up domestic prices, and (2) high debt on the balance sheet is a worry keeping
in mind that the down-cycle in the commodity may persist. We maintain REDUCE rating
with a revised target price of Rs60 at 5.2X March 2013E EBITDA (5.5X earlier).


Stock has corrected – still too early to change our negative stance
In our view, it is still too early to change our negative stance on BJH despite the stock having
corrected by ~50% YTD on account of the following reasons: Sugar production estimates for the
next sugar year (October 2011 to September 2012) point to a surplus of ~3 mn tons which would
lead to subdued prices even in the next year. Also, the fact that monsoons have been normal (all
India area weighted rainfall at 716 mm versus normal rainfall level of 713 mm) means the
probability of actual production numbers being very high. A surplus production of ~3 mn tons of
sugar will mean subdued prices in the next year (October 2011 to September 2012) which would
be a repeat of the current year.
Government policy on exports – more focused on reducing inflation
The government policy of allowing exports in small tranches (0.5 mn tons each) has failed to shore
up the domestic price of sugar to remunerative levels. In our view, the aim of the policy is to
provide just enough slack to the sugar companies so that the cane arrears (due to the farmers) are
minimized and the price of sugar also remains in check. In our view, the government policy would
remain the same even in the next year as the focus won’t shift from controlling inflation in basic
commodities.
We maintain our REDUCE rating
We are maintaining our REDUCE rating on the company as in our opinion it is not advisable to play
the upturn in the cycle by taking exposure to a highly leveraged company in the sector when the
turnaround itself could take a long time. We have revised our target price to Rs60 (Rs65 earlier)
based on 5.2X March 2013E EBITDA (5.5X earlier).


Valuation
We value BJH at Rs60 per share
Valuation table for BJH, March 2013E basis (Rs mn)
March-2013E
EBITDA 7,980
EV/EBITDA (X) 5.2
EV 41,498
Net Debt 32,059
Equity value 9,439
Fully diluted shares (mn) 228
Treasury shares (mn) 31
Effective no. of shares 197
Value per share (sugar business) (Rs) (a) 48
Power business valued at book value (b) 1500
Valueper share (power business) (Rs) (c) 7.6
Total value per share (a)+(c) 56
Notes:
(b) We have assumed 26% stake of BJH in the power business.
Source: Kotak Institutional Equities

Bajaj Hindusthan- Worsening outlook; „Maintain Underperform ::BofA Merrill Lynch

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Bajaj Hindusthan Ltd.
   
Worsening outlook
„Maintain Underperform with reduced earnings and PO
We reiterate our Underperform rating on Bajaj Hindusthan, owing to weak sugar
prices in India. We have cut PO from Rs74 to Rs60, based on a 25% discount to
replacement cost. We expect the stock to be adversely impacted by an earnings
decline driven by weaker margins due to adverse govt regulations. We have cut
our EPS for FY11e from Rs2.75/sh to a loss of Rs0.77/sh and for FY12e to a loss
of Rs10.2 per share from loss of Rs0.9, driven by lower margins and raw sugar
exports.  
Govt regulations restraining domestic sugar prices
Sugar prices in India continue to be 20% below global sugar prices owing to
quantitative restrictions on exports. A likely rise in the production surplus, from
3.5mt in FY11 (Year ending Sep) to 4.5mt in FY12, and sustained govt control on
exports in order to tame inflation could keep sugar prices in check in India.  
Higher cost of sugarcane & lesser export to hurt
Bajaj Hindusthan is likely to see a decline in the PBT margin from -0.5% in FY11e
to -4.5% FY12e, owing to (1) a 6% rise in sugar cane prices despite the lack of an
increase in sugar prices owing to govt policy, and (2) lesser profit from the export
of raw sugar following depletion of stock in FY11.
Upside from sugar decontrol unexciting
Bajaj Hindusthan’s EPS could rise by Rs3/sh due to the removal of the levy on
sugar by the govt, as per thet sugar decontrol policy now being considered by the
govt. However, the benefit may not come through if the price of the remaining
sugar declines by 4% owing to the  increase in supply.

Hold Bajaj Hindusthan; Target :Rs 60 ::ICICI Securities

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H i g h   i n t e r e s t   c o s t   c o n t i n u e s   t o   r ema i n   a   c o n c e r n
Bajaj Hindustan posted dismal results for Q3SY11. Net sales witnessed a
16.1% decline QoQ on the back of a dip in power sales. This also resulted
in a decline in EBITDA margins from 25.3% to 21.4%. Interest cost
increased 8.5% to | 141.8 crore on the back of high working capital
requirement and increase in the cost of debt. The company posted a net
profit of | 1.1 crore, a significant decline due to lower EBITDA and high
interest cost.

Operational highlights
Sugar revenues witnessed de-growth from | 1169 crore in Q2SY11 to |
974 crore as the company has not exported any quantity this quarter. The
distillery segment reported | 86 crore  of sales as against | 89 crore in
Q2SY11. However, sales from power witnessed a sharp decline from |
135 crore in Q2SY11 to | 12.5 crore on the back of lower sales volumes.
The company produced 10.37 lakh tonnes (lt) of sugar in the current
season, which includes 9.51 lt from sugarcane and the rest from raw
sugar. The company has sold 3.45 lt in the current quarter at an average
realisation of | 27.6 per kg. The company has sold 3.25 crore litre of
ethanol/alcohol at an average price realisations of | 27.1 per litre. The
company has sold 1.7 crore units at an average tariff price of | 4.1/unit.
Valuation
At the current price of | 55, the stock is trading at 6.3x its SY11E EPS of |
8.8 and 5.2x its FY12E EPS of | 10.4. With the sugar production expected
to rise to 26.5 million tonnes (MT) in SY12, inventories after the season
would remain at high levels. However, we expect the government to
continue to allow sugar exports in trenches, which would result in lower
inventories at the end of the season. We believe due to high debt and
high interest outgo, earnings in the next few quarters would remain under
pressure though most of the negatives are in the prices. Hence, we
maintain our HOLD rating on the stock.

Bajaj Hindustan F3Q11: Strong Distillery Volumes but High Interest :: Morgan Stanley Research,

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Bajaj Hindustan
F3Q11: Strong Distillery
Volumes but High Interest
Quick Comment – Strong profitability across
businesses: BJH reported F3Q11 results with revenue,
EBITDA, and PAT of Rs10.6bn, Rs2.2bn, and R11mn,
respectively.
Key highlights of the results: 1) Sugar sales were up
39% driven by volume growth (39%); 2) Free sugar
realizations improved by 3% YoY and EBIT margin
improved 950bp YoY; and 3) interest costs increased
9% QoQ and 101% YoY on higher working capital
requirements and higher borrowing costs; management
expects the interest cost to be lower in F4Q11.
Strong profitability in sugar division: Margins in the
sugar business increased 950bp YoY driven by a 3%
improvement in realizations, lower cane costs, and
better absorption of fixed costs. Sugar business
reported strong EBIT of Rs2,940/MT of sugar sold, up
2% qoq. BJH holds 0.49mn MT of sugar inventory with
free sugar inventory valued at Rs28,010/MT.
Strong performance in Distillery division: Distillery
revenue growth (+139%) was driven by volumes
(+125%). Profit/ltr was up 80% YoY driven by lower
bagasse costs and better absorption of fixed overheads.
Margins in the Distillery business were up 20% YoY
(47% in F3Q11). Interestingly, BJH distillery division’s
realization at Rs26.3/ltr (down 3% QoQ) was better than
Balrampur Chini’s Rs23.8/ltr (down 9% QoQ).
Retain EW on BJH: BJH has underperformed (Sensex)
by 33% YTD. In our view, BJH is most levered to sugar
prices, and hence it might reverse its recent
underperformance as markets discount tighter sugar
balance. Even so, we would not chase the stock. At this
stage of the cycle, we do not feel the need to build an
aggressive scenario to justify a more positive rating on
the stock despite our positive industry view.

Interest cost remains a concern… Bajaj Hindusthan in Q1SY11:: ICICI Securities,

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Interest cost remains a concern…
Bajaj Hindusthan reported its Q1SY11 results that were above our
expectations. Net sales surged ~140% to | 1475.7 crore against | 615.4
crore in Q1SY10 led by higher sales volume though realisations
witnessed a dip. The company’s raw material costs during the quarter
increased considerably to 73% of sales (| 1077.4 crore) compared to
53% (| 324.1 crore) in Q1SY10, consequently pulling down margins to
18.2% from 34.8% in Q1SY10. Further, the company’s interest cost in
Q1SY11 increased to | 106.9 crore (~134% rise) against | 45.6 crore in
Q1SY10. Therefore, in spite of higher sales the exceptional increase in
costs dragged the bottomline by ~32% to | 57.9 crore.

Bajaj Hindusthan :: 2QSY11 results --CLSA

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2QSY11 results
Bajaj Hindusthan’s 2QSY11 standalone net profit came above estimate at
Rs729mn. With Bajaj selling 72% of its estimated annual sugar sales
whereas a much higher proportion of its fixed costs have not yet been
booked, 1H is likely to be much better than 2H in SY11. The board’s
decision to look at a rights issue of upto Rs20bn will further exacerbate
the already dismal ROEs earned by the company. We maintain our U-PF
rating and target price of Rs80/sh on the stock based on 0.65x P/book.

Query Corner: United Spirits in medium-term slope- Business Line

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I have brought United Spirits at Rs 1,565. Should I hold or exit at current price?

H.P. Swamy

United Spirits (Rs 1,026.7): United Spirits was on a long-term uptrend from its January 2009 low of Rs 425 until it encountered resistance in the band between Rs 1,680 and Rs 1,700 in October 2010. However, the stock changed its trend and has been on a medium-term downtrend since. While trending down, it penetrated its significant long-term supports at Rs 1,400 and Rs 1,200 emphatically. Next long-term support is at Rs 900. Reversal from this support is possible in the medium-term. This can take the stock higher to Rs 1,200. Only a conclusive break through of this level will lift the stock higher to Rs 1,400 and then to Rs 1,500 in the long-term.

Long-term investors can hold the stock with stop loss at Rs 850. A strong tumble below Rs 850 can drag the stock down to Rs 700 and then to Rs 500 in the long-term. Inability to move beyond Rs 1,100 will pull the stock down to Rs 900 in the short-term.

Please provide long-term analysis on Bajaj Hindusthan purchased at Rs 240.

R.M. Kumarappan

Bajaj Hindusthan (Rs 72.2): After encountering resistance at its long-term resistance level of Rs 240 in January 2010, the stock price started to decline. And since then, Bajaj Hindusthan has been on a long-term downtrend, shaping lower peaks and lower troughs. Medium-term trend is also down for the stock from its November 2010 peak of Rs 144. This downtrend got accelerated and witnessed sharp declines after it breached its key support at Rs 98 in this January. The stock is currently testing its key long-term support at Rs 70.

Daily indicators are displaying positive divergence, suggesting that a trend reversal may be on the cards. A strong move above the immediate resistance at Rs 85 can take the stock higher to Rs 100, Rs 120 and then to its key long-term resistance level of Rs 150. The stock may find it difficult to surpass your purchase price of Rs 240.

We suggest you to switch from the stock. An emphatic close below Rs 66 is the indication of resumption of the downtrend and the stock can decline to Rs 50 and then to its March 2009 low of Rs 39 in due course.

I have bought shares of Essar Shipping at Rs 98. Can I hold the stock for six months?

Suresh Kumar Yadav

Essar Shipping Ports and Logistics (Rs 87.9): Essar Shipping has been trending higher since its March 2009 low of Rs 19.4. However, following a corrective decline from the resistance level of Rs 115, the stock found support at Rs 70 in late February 2011. Triggered by positive divergence, the stock resumed its uptrend and is currently testing resistance at Rs 90. Breakthrough of this level can take the stock higher to Rs 100, Rs 110 and then to Rs 120 in the medium-term. Investors with medium-term horizon can hold the stock with stop-loss at Rs 78. Subsequent, support for the stock is at Rs 70.

Long-term investors can hold the stock as long as it hovers above Rs 64. Decisive move beyond Rs 120 will lift the stock higher to Rs 140-Rs 150 range. However, slump below Rs 64 will drag the stock down to Rs 50, Rs 40.

I would like to purchase stocks of PVR. Please advise if the current price is a good price to buy for long-term investment? Also give target price for next 2-3 years.

Kumar T.K.

PVR (Rs 101): The stock has been on a long-term downtrend from its January 2008 peak of Rs 376 levels. After encountering resistance at Rs 193 in September 2010, the stock resumed its downtrend and has been on a medium-term decline since. However, the stock is now taking support above its long-term support band between Rs 85 and Rs 90. Reversal from this support band can lift the stock higher to Rs 115, Rs 132 and Rs 150 in the medium-term. Investors with a medium-term perspective can consider buying the stock with stop loss at Rs 85. Next resistance above Rs 150 is at Rs 200, and it is difficult to envisage a move beyond this level over the next two years. Long-term investors can hold the stock with stop loss at Rs 85 and exit it around the said resistance level.

On the other hand, inability to move higher from the support band will signal weakness and a strong close below Rs 85 can drag the stock to Rs 70 and then to its all-time low of Rs 57.5 in the medium-term.

Please let me know the medium- and long-term outlook for Moser Baer India and Lakshmi Vilas Bank.

Aboobacker

Moser Baer India (Rs 43.7): After peaking out around Rs 115 in June 2009, the stock started to decline and has been on an intermediate-term downtrend. Long- and medium-term trends are also down for the stock. On February 11, the stock recorded a multi-year low of Rs 37.3 and has been moving sideways forming a base in the range between Rs 37 and Rs 40. The stock's five per cent jump on Friday with extraordinary volume signals that the stock appears to have bottomed-out from a short-term perspective. It can rally to Rs 47 and then to Rs 52. Reversal from the second target will pull the stock down to its key support range mentioned above.

To mitigate the medium-term downtrend, the stock has to emphatically close above Rs 63. In that case, the stock can move higher to Rs 75. Significant long-term resistances are positioned at Rs 90 and Rs 115. Long-term outlook remains bearish for the stock as long as it trades below Rs 150.

Lakshmi Vilas Bank (Rs 96.7): The stock has been on a long-term uptrend from its all-time low of Rs 37 recorded in early 2009. In February 2011, the stock tested its significant long-term support level of Rs 90 and bounced up. As long as the stock trades above Rs 76, the long-term outlook remains positive and investors can stay invested while maintaining stop at this level. Immediate resistance for the stock is at Rs 105. Strong move above this level can take the stock higher to Rs 120 in the medium-term. In the long-term, the stock can rally to Rs 130 and then to its key long-term resistance level of Rs 140.

Failure to exceed above Rs 105 will pull the stock down and it can remain trading sideway between Rs 90 and Rs 105 before moving higher. A strong slump below Rs 90, however, will pull the stock down to Rs 84 and Rs 76 in the medium-term.

I bought Allied Digital Services at Rs 234 and Geodesic at Rs 119 respectively. Please let me know the long-term outlook for the stocks.

K. Parthasarathy

Allied Digital Services (Rs 90.9): Following a broad sideways consolidation in the range of Rs 200-Rs 270 from August 2009, the stock made a downward break through in November 2010. The stock's downtrend accelerated in February 2011 and retraced its entire up move formed in first half of 2009 before finding support at Rs 71. The stock has an important long-term support in the band between Rs 70 and Rs 80. It is currently trying to reverse from the support band.

The stock will face immediate resistance at Rs 100. A break through of this level will push the stock higher to Rs 120 and then to Rs 150, which is a key long-term resistance. We don't envisage a move beyond Rs 150 in the long-term. Investors can consider switching from the stock. Next key resistances are positioned at Rs 170 and Rs 190.

Geodesic (Rs 79.9): Geodesic has been broadly consolidating sideways in the range between Rs 70 and Rs 150 since early 2009. The stock can continue to move within the range in the long-term and investors can hold the stock with deeper stop at Rs 60, and exit there — the upper end of the sideways range. Medium-term trend is down for the stock from its 2010 peak of Rs 140. However, the stock found support around Rs 70 in early February and is attempting to move upwards. Medium-term investors can hold the stock with a stop at Rs 67. It can rally to Rs 90 and 100. Strong move above Rs 110 is required to mitigate the current downtrend

Bajaj Hindusthan – 1QSY2011 Result Update - Angel Broking

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   Bajaj Hindusthan – 1QSY2011 Result Update

            Angel Broking maintains a Neutral on Bajaj Hindusthan.

Bajaj Hindusthan (BJH) reported poor performance for 1QSY2011 (consolidated)
on the back of higher cane costs and lower sugar realisation. BJH reported 141%
surge in total revenues to `1,483cr for the quarter, while PAT declined by 32% to
`58cr. We are rolling over to SY2012 estimates. At current levels, with BJH
trading at fair valuations, we remain Neutral on the stock.

Bajaj Hindusthan -Interest cost remains a concern… ICICI Securities

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Bajaj Hindusthan -Interest cost remains a concern… 
Bajaj Hindusthan reported its Q1SY11 results that were above our
expectations. Net sales surged ~140% to | 1475.7 crore against | 615.4
crore in Q1SY10 led by higher sales volume though realisations
witnessed a dip. The company’s raw material costs during the quarter
increased considerably to 73% of sales (|  1077.4 crore) compared to
53% (| 324.1 crore) in Q1SY10, consequently pulling down margins to
18.2% from 34.8% in Q1SY10. Further, the company’s interest cost in
Q1SY11 increased to | 106.9 crore (~134% rise) against | 45.6 crore in
Q1SY10. Therefore, in spite of higher sales the exceptional increase in
costs dragged the bottomline by ~32% to | 57.9 crore.

Bajaj Hindustan - Higher volumes drive profits:: Kotak Securities

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Bajaj Hindustan 
Sugar
Higher volumes drive profits. BJH reported 1QFY11 EBITDA at Rs2.67 bn (+25% yoy,
+140% qoq) vs our estimates at Rs1.77 bn. The outperformance is led by (1) Higher
sales volumes in the sugar segment (0.36 mn tons vs our estimates at 0.3 mn tons), and
(2) marginally higher volumes (vs our estimates) in the distillery and power business.
EBITDA margins in 1QFY11 at 18% were lower than our estimates at 19%. We have
reduced our estimates for FY2012E and maintain SELL with a target price of Rs80.

Debt remains an overhang for Bajaj Hindusthan…ICICI Sec

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Debt remains an overhang…
Bajaj Hindusthan reported subdued Q4SY10 results on the back of huge
interest cost concerns. Though net sales for the quarter jumped by
214% to | 1302.9 crore, margins declined significantly from 43.4% in
Q4SY09 to 7.6% in Q4SY10. This was mainly due to high cane prices
paid (~| 240 per quintal) in the beginning of the year followed by a fall
in sugar prices to around | 24 per kg during the quarter. Also, interest
costs surged drastically by 616% YoY from | 26.1 crore to | 186.8 crore
in Q4SY10. Consequently, the bottomline remained under pressure.
Hence, the company reported a loss of | 60.9 crore against a profit of |
69 crore in the corresponding quarter last year.