Outlook-Amara Raja Batteries, Nelco, Neyveli Lignite, DCB, Hero Honda, Strides Arcolab ::Business Line

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Please share your technical view on Amara Raja Batteries bought at Rs 207.

Kaushalendra Pratap Singh

Amara Raja Batteries (Rs 284.3): Amara Raja Batteries ceased its upward charge in January this year when it reversed lower from the peak at Rs 327. This decline ended after the stock lost 23 per cent from this peak with the bottom at Rs 249.

The significant point to note here is that the stock retraced around 30 per cent of the rally from the February 2011 low, during this correction. The stock has significant long-term support in the zone between Rs 230 and Rs 250. Long-term investors can hold the stock as long as it trades above Rs 230.

Sideways movement in the zone between Rs 230 and Rs 330 is possible for a few more months but this is conducive for the stock’s long-term prospects. It will imply that the stock could move beyond Rs 350 over the long-term.

Long-term supports below Rs 230 are at Rs 200 and Rs 170.

Please advise on the medium- and long-term outlook of Nelco. Can these be bought at current levels?

Anil

Nelco (Rs 42.1): The medium as well as the long-term trend in Nelco are currently down. The stock is, however, halting above key long-term support around Rs 40. Investors with a greater penchant for risk can buy the stock at these levels with stop-loss at Rs 36. Fresh purchases should, however, be avoided on a breach of this level since the target on a breach of this support is quite some way off, at Rs 21.

Key medium-term resistance is placed at Rs 65. Investors can offload part of their holding if the stock is unable to move beyond this level. Medium-term view will turn positive only on a close above Rs 80.

Kindly give your view on Neyveli Lignite Corporation bought at Rs 108 and Development Credit Bank at Rs 52. I can hold the stocks for six months.

P.S.R. Murthy

Neyveli Lignite Corporation (Rs 74.8): The trends along all time-frames are down for Neyveli Lignite Corporation. Investors can, however, draw solace from the fact that the stock is now close to its key support zone around Rs 70. This level has cushioned the stock twice already since November 2011.

Investors can, therefore, hold the stock only as long as it trades above Rs 60.

If the stock breaches this level emphatically and closes below it on a weekly basis, it will imply that the stock is heading lower to the October 2008 trough at Rs 44.

Medium-term resistances are at Rs 90 and Rs 110. The trend along this time-frame will turn positive only on a close above Rs 110.

Failure to do so will imply that the stock will continue to be under pressure. Targets on move above Rs 110 are Rs 124 and Rs 136.

Technicals-Amara Raja Batteries, Nelco, Neyveli Lignite, DCB, Hero Honda, Strides Arcolab ::Business Line

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Please share your technical view on Amara Raja Batteries bought at Rs 207.

Kaushalendra Pratap Singh

Amara Raja Batteries (Rs 284.3): Amara Raja Batteries ceased its upward charge in January this year when it reversed lower from the peak at Rs 327. This decline ended after the stock lost 23 per cent from this peak with the bottom at Rs 249.

The significant point to note here is that the stock retraced around 30 per cent of the rally from the February 2011 low, during this correction. The stock has significant long-term support in the zone between Rs 230 and Rs 250. Long-term investors can hold the stock as long as it trades above Rs 230.

Sideways movement in the zone between Rs 230 and Rs 330 is possible for a few more months but this is conducive for the stock’s long-term prospects. It will imply that the stock could move beyond Rs 350 over the long-term.

Long-term supports below Rs 230 are at Rs 200 and Rs 170.

Please advise on the medium- and long-term outlook of Nelco. Can these be bought at current levels?

Anil

Nelco (Rs 42.1): The medium as well as the long-term trend in Nelco are currently down. The stock is, however, halting above key long-term support around Rs 40. Investors with a greater penchant for risk can buy the stock at these levels with stop-loss at Rs 36. Fresh purchases should, however, be avoided on a breach of this level since the target on a breach of this support is quite some way off, at Rs 21.

Key medium-term resistance is placed at Rs 65. Investors can offload part of their holding if the stock is unable to move beyond this level. Medium-term view will turn positive only on a close above Rs 80.

Kindly give your view on Neyveli Lignite Corporation bought at Rs 108 and Development Credit Bank at Rs 52. I can hold the stocks for six months.

P.S.R. Murthy

Neyveli Lignite Corporation (Rs 74.8): The trends along all time-frames are down for Neyveli Lignite Corporation. Investors can, however, draw solace from the fact that the stock is now close to its key support zone around Rs 70. This level has cushioned the stock twice already since November 2011.

Investors can, therefore, hold the stock only as long as it trades above Rs 60.

If the stock breaches this level emphatically and closes below it on a weekly basis, it will imply that the stock is heading lower to the October 2008 trough at Rs 44.

Medium-term resistances are at Rs 90 and Rs 110. The trend along this time-frame will turn positive only on a close above Rs 110.

Failure to do so will imply that the stock will continue to be under pressure. Targets on move above Rs 110 are Rs 124 and Rs 136.

Sizzling Stocks - Neyveli Lignite; Havells India ::Business Line

Hold Neyveli Lignite; Target : Rs 94 :: ICICI Securities, (pdf link)

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http://content.icicidirect.com/mailimages/ICICIdirect_NeyveliLigniteCorp_Q3FY12.pdf


P A T   b e l o w   e s t i m a t e s …
Neyveli Lignite reported in line sales for Q3FY12. However, higher fuel
costs QoQ despite a decline in generation led to lower EBITDA margin
(21.8% vs. our estimate: 30%) and PAT in Q3FY12. While we like the
regulated nature of its business (with no merchant power exposure); 1)
sluggish capacity addition (coupled with delays) and 2) increased debtor
days (using surplus cash to fund working capital requirement). We
maintain our HOLD rating on the stock with a revised target price of | 94
due to a decline in WACC from 12% to 11.5%.
ƒ Capacity addition of 500 MW in FY13
For FY12, we expect no capacity  addition. For FY13, the capacity
addition for the company stands at 500 MW. The 1000 MW Tuticorin
expansion will be commissioned in FY14. The Barsingsar unit (250
MW) was operating at sub–optimal PLF due to operational/technical
issues with the turbine. In December 2011 and January 2012 both
units commenced commercial production.
ƒ Increase in debtor days a cause for worry
The company sells ~100% output  to Tamil Nadu  SEB (loss of |
11353 crore in FY10). Accumulated debtors level till date is ~| 1600
crore from TNSEB. The management maintained that the company
is receiving ~|100 crore every month from TNSEB. However, we
believe that deterioration in the working capital cycle in the coming
quarters will persist unless banks give short term lending or TNSEB
is able to raise bonds.
V a l u a t i o n
At the CMP of | 96, the stock is trading at a P/E of 12.9x and 13.1x on
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 1.4x FY12E and 1.3x FY13E, book value. Delay in capacity
additions and worsening finances of off taker (Tamil Nadu SEB) – in spite
of a proposed tariff hike of 40% restricts the future outperformance of the
stock. We maintain our HOLD rating

Neyveli Lignite Corporation (Rs 79.2): BUY :: Business Line

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 Investors with short-term perspective can consider buying the stock of Neyveli Lignite Corporation. It is seen from the charts of the stock that it appears to have bottomed out in November 2011, after taking support at its long-term base level at around Rs 68. Since then, the stock has been on a short-term uptrend.

The stock's reversal was triggered by positive divergence in daily as well as weekly moving average convergence divergence indicator and weekly relative strength index. Moreover, we notice formation of a falling wedge pattern, which acts as a bottom reversal pattern in this scenario.

On Wednesday, the stock emphatically broke out of the falling wedge pattern by jumping five per cent with extraordinary volume. The stock also penetrated its 50-day moving average conclusively. The daily RSI has entered into the bullish zone from the neutral region and weekly RSI has entered into the neutral region from the bearish zone.

The daily price rate of change indicator is featuring in the positive area implying buying interest. We are bullish on the stock from a short-term perspective. We anticipate the stock's up move to prolong and touch our price target of Rs 82 or Rs 84 in the upcoming trading sessions. Short-term perspective traders can buy the stock with stop-loss at Rs 77.

Hold Neyveli Lignite; Target : Rs 104:: ICICI Securities

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H i g h e r   o t h e r   i n c o m e ,  l o w e  r   i n t e r e  s t   m a s k
m u t e d   e a r n i n g s …
Muted sales growth (that were in line with estimates), lower raw material
costs (despite increase of 1.2% in generation), higher employee expense
(which dented operating margins), higher other income and lower interest
cost (in spite of 125 MW of capacity addition) were key highlights of
Neyveli Lignite’s Q1FY12 results. While we like the regulated nature of its
business (with no merchant power exposure), sluggish capacity addition
(coupled with delays) is a worrying factor for the stock in addition to the
proposed disinvestment by the government (93.56% stake). Valuations at
FY13E P/BV of 1.2x (cheaper than NTPC – 1.8x) are justified given the
company’s history of capacity addition miss and disinvestment overhang
on the stock.
ƒ Generation of 4,804 million units, PLF of 87.91%
In Q1FY12, the generation stood at 4804 million units (MU) (down
6.7% QoQ, up 1.2% YoY). PLFs for the quarter stood at 87.91%,
increase of 81 bps YoY and decline of 557 bps QoQ. Interest income
of | 138.09 crore for the difference between the billing rate and
finalised rate from 01-04-2009 has been included in other income. In
addition, sales worth | 54.59 crore were deducted from this
quarter’s sales (as this is the difference between estimated & actual
tariff approved by CERC with respect to thermal power station II).
ƒ Capacity addition of 250 MW in FY12, 1250 MW in FY13
In FY12, we expect capacity addition of the first unit (250 MW) of
Neyveli TPS – II to come in Q3FY12 (the entire project of 500 MW
has slipped from the Xth Five Year Plan). In FY13, we expect the
company to add 1250 MW of incremental capacity.
V a l u a t i o n
At the CMP of | 100, the stock is trading at P/E of 16.3x and 14.8x on
FY12E and FY13E EPS, respectively. Similarly, on P/BV multiple, the stock
is trading at 1.3x and 1.2x FY13E, respectively. Capacity will be the likely
trigger for a re-rating which we believe is some time away. Hence
maintain Hold with a Target price of | 104

Buy Neyvellii Liigniite: Fully integrated power player, captive mines eliminates fuel risk: Centrum

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Investment arguments
Fully integrated power player, captive mines eliminates fuel risk: Neyveli
Lignite Corporation (NLC) is a fully integrated power generation player with a
current capacity of 2,740 MW. NLC is the largest owner of lignite mining
capacity in India of 30.6 mn MTPA and lignite reserves of 735 mn MT
(produces ~ 80% of the total lignite production in India). Its own mines
cater to 100% of the fuel requirement, thus, insulating the company from
price increases in the raw material. Secondly, the lignite mines are located
near the power plants thus providing cost advantage to the company.
Further, lignite mines’ proximity to power generation plants and raw
material supply based on transfer pricing (fixed by CERC) result in
favourable EBITDA margins for the company.

McNally bags order worth `116cr from Neyveli Lignite - Angel Broking

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McNally bags order worth `116cr from Neyveli Lignite
McNally Bharat Engineering’s MHE division has bagged an order worth `116cr from
Neyveli Lignite Corp. Ltd., which is to be delivered over 30 months. The company’s
consolidated order book at the end of 3QFY2011 stood at `4,370cr (2.4x FY2010
revenue), which currently stands at `4,160cr (2.3x FY2010 revenue).
We believe an improving economic scenario, continuous government focus on
infrastructure spend and pick-up in private capex augur well for companies providing EPC
solutions to the core sectors of the economy.
At `219, the stock is available at attractive valuations of 7.5x FY2012E earnings and 4.5x
FY2012E EV/EBITDA. We maintain our Buy rating on the stock with a Target Price of `337.

Neyveli Lignite: Delays in capacity addition continue- ICICI Securities

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Delays in capacity addition continue…
Neyveli Lignite (NLC) reported its Q3FY11 result below our expectations.
The topline came in at  | 869 crore (our estimate:  | 900 crore). The
company reported PAT of | 96 crore (our estimate: Rs 207 crore). On the
volume front, NLC has delivered de-growth of ~3.5% YoY to 3,644 MU
(3777 MU in Q3FY10). The realisation stood at | 2.34/Kwh. The company
reported EBITDA of | 111 crore (margin of 12%) down sharply YoY and
QoQ due to higher other expenditure.

Neyveli Lignite Corp. -Monsoon and Capex delay hit 3Q : Morgan Stanley

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Neyveli Lignite Corp. -Monsoon and Capex delay hit 3Q 

„Weak 3Q led by Monsoon and capex delay; Maintain Neutral
Neyveli had weak 3Q11 - Rec PAT fell 11%YoY led by an excessive monsoon
impacting its lignite mines linked power stations. Power generation fell by 3%YoY
despite +5%YoY in capacity on lower PLF 63% (vs 69%). We cut our FY11-12E
EPS by 3-6% to factor in delay in commissioning of 125MW Barsingsar TPS Unit
2 and 500MW Neyveli TPS 2 expansion. We also cut our PO to Rs132 (Rs137)
on EPS/BV cut, de-rating of multiple 1.7x (vs 2x) FY13E P/BV on delay in
catalysts and de-rating of power sector/NTPC. We see the stock moving sideways
on a) lack of near term catalysts and b) expensive valuation 14x FY12E EPS
inline with NTPC for lower EPS growth and 360bps lower RoE vs NTPC.