Asset quality pressure dents profitability… • South Indian Bank :: ICICI Securities

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Asset quality pressure dents profitability… • South Indian Bank :: ICICI Securities

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Asset quality pressure dents profitability… • South Indian Bank :: ICICI Securities

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South Indian Bank Q3FY14 Results Update - Advances growth target reduced as bank focuses on asset quality improvement:: EIS

Earnings ahead of estimates: South Indian Bank’s Q3FY2014 results were ahead of estimates asthe
earnings grew by 10.6% YoY (11.5% QoQ) to Rs 1.4 bn mainly led by a lower provision expenses
during the quarter.
NIM decline hurts NII growth: NII declined by 3.7% QoQ (flat YoY) led by a 10 bps decline in NIMs.
NIMs declined to 3% led by a 4 bps increase in CoD (8.1% for Q3FY14) and 2 bps decline in YoA
(12.4%forQ3FY14). CASAratio increasedmarginally to 21.7% from21.3% inQ2FY14.
Business growth remains stable: Business growth remained stable as advances grew by 14.7% YoY
(5% QoQ) whereas deposits grew by 14.7% (2.7% QoQ). Bank hasreduced advances growth targetfor
FY14 to 15%.
Asset quality improves: Asset quality improved sharply as GNPA & NNPA declined to 1.66% and
1.18% respectively from 1.92% and 1.39% inQ2FY14. Bank has given a targetto reduce of GNPA and
NNPAto 1.5% and 1% respectively by FY14.
Lower provision expensessupport earnings growth: Provision expenses declined sharply (95.6% YoY
and 89.8% QoQ) led by a reversal in provisionsfromNPA (Rs 107mn) and reversal of depreciation on
investments(Rs 36mn). PCR improvedto 55.8% from53.5% inQ2FY14.
Valuation: SIB hasreduced its advances growth target asit wantsto focus on better quality advances.
We have accordingly reduced our advances growth target for FY14 and FY15 but draw comfort from
the strong asset quality numbersthat the bank hastargeted. NIMs of the bank are also expected to
remain stable and the return ratios are expected to improve. We expect the earnings of the bank to
grow by 9% over FY13-15. We maintain our Accumulate rating on the stock with a target price of Rs
25 (0.9x FY15E BV).

Multiple challenges South Indian Bank (SIB) :: Ambit

Multiple challenges
South Indian Bank (SIB) has a plateful of challenges, with little
diversification outside its home state Kerala, a weak liability franchise,
no improvement on fee income generation, slowing asset growth and
rising credit costs. The bank has a 57% exposure to corporate loans
and a coverage ratio of 29%, and thus, it has a small margin of error
on asset quality. We expect SIB’s financial performance to be volatile
and we expect RoAs to fall below 1% in the near term. We change our
stance to SELL.
Competitive position: WEAK Changes to this position: NEGATIVE
Fares poorly in comparison to peers: As discussed in the thematic section,
SIB emerges as the weakest franchise among its regional bank peers. A high
geographical concentration in the intensely competitive state of Kerala had led
to a weak liability franchise (CA: 3.5%, CASA: 21%). SIB has made little
progress on its longstanding weakness in fee income generation (fee income
to assets below 60bps). With a 57% exposure to corporate loans and a low
provision coverage ratio of 29%, SIB is weakly cushioned to any adverse asset
quality shocks.
Growth slowdown with subdued profitability: SIB’s FY13 loan growth has
slowed down to 17% from an average of 28% in FY08-12. Excluding gold
loans, growth is even weaker at ~12%. With gold loan growth coming to a
halt, we expect further weakness in growth going forward. We do not expect
any near-term improvement in NIM, as the liability franchise would show no
improvement. Similarly, we expect credit costs to remain elevated at ~68bps
(vs 56bps in FY13 and average 27bps in FY08-12) due to a difficult external
environment and high exposure to corporate loans.
Management change due in September 2014: The six-year tenure of the
current MD & CEO, Dr. V. A. Joseph, will end in September 2014. In the year
ahead, the uncertainty on the new MD & CEO and change in strategy post the
transition would add further risk to this franchise.
SELL stance with a target price of `20: We change our stance to SELL with
a valuation of `20 (implied FY14E P/ABV of 0.75x and FY14 P/E of 5.0x) as we
expect profitability to remain subdued (average RoA of ~0.95% over FY14-
15), with slowing asset growth (19% CAGR in FY13-15 vs 25% CAGR in FY10-
13). Our previous valuation for SIB was `29. The 31% drop in our valuation is
driven by lower valuation multiples due to our concerns on multiple structural
issues faced by the bank. Key risks to our SELL stance are a better-thanexpected recovery in the macro-economic environment and takeover interest
from an incumbent or a new banking licence recipient looking to expand in
south India.

South Indian Bank- Risks wellrecognised;Upgrade to BUY! - Prabhudas Lilladher,

We upgrade South Indian Bank (SIB) to ëBUYí after remaining cautiousfor the last
nine months as (1) Some of the structural issues we have been highlighting have
played out with the impactrunning through the P&L now (2) We do notseeNBFCs‐
like risk to SIBís gold book and Infra book risks also seem limited (3) Moderation of
return ratios and possible asset quality risks have been more than factored in with
~30% drop in P/B multiples. Upgrade to ëBUYí with a PT of Rs28/share implying
1.1x Sep‐14 book (~30% upside).

Technicals- HDIL, CORE Education, Godrej Ind, Zee Entertainment, Indraprastha Gas, SIB, :: Business Line

Outlook- HDIL, CORE Education, Godrej Ind, Zee Entertainment, Indraprastha Gas, SIB, :: Business Line :: Business Line

ABB, union bank, Corporation Bank, SIB, Angel Broking - Multiple Scrips - Result Updates

Forwarding you the Multiple Scrip’s Result Updates. Kindly click on the links to view the report.

                  

ABB India  - RU1QCY2013

 

Union Bank of India - RU4QFY2013

 

Corporation Bank - RU4QFY2013

 

South Indian Bank  - RU4QFY2013

South Indian Bank - Q3FY13 Result Update - Centrum

Q3FY13 Result Update

South Indian Bank

Buy

Target Price: Rs31

CMP: Rs28         

Upside: 10%

Well rounded performance

SIB’s earnings performance for Q3FY13 was well rounded with PPP surprising positively though bottomline was in line. Absence of interest reversal and benefit of capital raising led to NIM expansion. Asset quality improved as 1) slippage rate came off to 0.75% 2) %GNPA improved by 10bps and 3) restructured assets were largely stable at 4.6% of loans. We maintain Buy rating and tweak our price target upwards to Rs31 (1.3x FY14E ABVPS).

South Indian Bank - Management Interaction - Centrum

Management Interaction Takeaways

South Indian Bank

We have interacted with the management of South Indian Bank and following are the key takeaways from  the same:-

m  Asset quality stable: After the double whammy (NAFED & branch fraud) in Q2FY13 earnings, Q3FY13 has been a quieter quarter on asset quality front according to the management implying less likelihood of major deviations in terms of slippages or restructuring. The management expects to report improvement in GNPA on a sequential basis (%GNPA had risen to 1.74% in Q2FY13 and 68% QoQ). The management expects the Q3FY13 GNPA to come down to 1.5-1.6% led by one account (exposure of Rs 500mn) which was recognized as NPA previously but has been restructured subsequently. On the restructuring front, the bank has already restructured the entire lending to Rajasthan and UPSEB and there has been regular interest servicing till date. The TNSEB exposure continues to remain a standard asset.

-- 

South Indian Bank: Buy ::Business Line

Within the banking space, old private sector banks appear to be an attractive investment option today. Public sector banks are beset by bad loan problems. New private banks trade at rich valuations. But the South Indian Bank stock is a good ‘buy’ for investors who can wait for two-three years.

A low valuation compared to peers, a low proportion of bad loans at a time when asset quality problems are rampant and proposed capital raising which should power growth, make this a good business to own. Here are five reasons to buy the stock.

South Indian Bank (SIB) Buy Target Price: Rs27 :Centrum

South Indian Bank (SIB)

Buy

Target Price: Rs27

CMP: Rs23          

Upside: 20%

A re-rating candidate

South Indian Bank (SIB) has consolidated its position during last few years resulting in impressively consistent return ratios. Inroad into relatively higher business potential locations (outside Kerala) is expected to enhance liability profile and branch productivity. This along with strong asset quality position should drive re-rating of the stock. At current valuation (0.9x FY14E ABV), street is not fully appreciating strong RoE, consistency in return ratios and anticipated improvement in future. We initiate coverage with a Buy.

South Indian Bank Ltd Q1FY13 result

South Indian Bank Ltd has announced its Q1FY13 result on 16^th July 2012. The bank’s total income increased by 1.28% QoQ and 44.88% YoY to INR371.76 crores mainly, because of the robust growth in bank’s Net Interest Income (NII) and Other Income by 44.79% and 45.23% YoY to INR296.76 and 74.98 crores respectively. The Profit After Tax (PAT) increased by 0.89% QoQ and 49.16% YoY to INR123.04 crores.

South Indian Bank Ltd.-Target Price (Rs.) 27.00- ACChoksey

Query Corner: TCS, SIB, Godrej, IndusInd Bank, Aurobindo Pharma, Syndicate Bank, Lovable Lingerie, Valecha Engineering:: Business Line

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Please advise me on the long-term outlook for South Indian Bank. I purchased the share at Rs 18.

T.V.S. Sai

South Indian Bank (Rs 22.9): The long-term outlook for South Indian Bank is positive. The correction from the last quarter of 2010 that devastated many stocks has not affected this stock much.

The stock has displayed resilience by hanging on to the first long-term support at Rs 20. Continued movement in the band between Rs 20 and Rs 30 will retain the positive outlook for the long-term.

The stock then has the potential to break out to Rs 36 or Rs 45 over the long term. Investors can hold the stock as long as it trades above Rs 20. Subsequent supports are at Rs 17 and Rs 14.

Please advise on Godrej Industries and IndusInd Bank.

Priya Vaswani, Sanjay Vaswani

Buy South Indian Bank ; Target : Rs 26 :ICICI Securities,

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C o r e   b u s i n e s s   s t e e r s   P A T   g r o w t h …
South Indian Bank (SIB) recorded splendid business growth of 27.5% YoY
to | 58,884 crore. Incremental NII of | 68.7 crore YoY (33.5% YoY growth)
led the incremental PBT and PAT of  | 43.8 crore YoY and | 26.9 crore
YoY, respectively. The bank posted non-interest income of | 59.9 crore in
Q3FY12, thereby registering 20.4%  YoY growth. Trading income was
muted, excluding which non-interest income growth  stood at 35.7%.
Operating expenses surged 29.3%  YoY while provisions were flat
sequentially. SIB recorded highest ever PAT of | 102.2 crore (35.7% YoY
growth) in line with our estimates.
ƒ Credit growth clocks ~30% YoY for ninth consecutive quarter
Gold loan (71% YoY growth to  | 6513 crore) & corporate credit
(~40% YoY growth to | 4352 crore) were major drivers for credit
reaching | 25,050 crore in Q3FY12. Agriculture credit may pick up
pace and support Q4FY12E growth. We have revised both our
FY12E & FY13E credit growth target from 23% YoY to 25% YoY.
ƒ NIM expected to remain stable at 2.8-3.0%
SIB improved NIM by 2 bps YoY in 9MFY12 to 3.1%. Deregulation of
NRE deposits interest rate is likely to inch up CoD  (| 831 cr NRE Term
deposits exposed). Also, the shorter duration of gold loans could
mean re-pricing at lower rates as RBI cuts rates. Even rising
corporate exposure (low yielding credit) may keep NIM under check.
ƒ GNPA ratio showcasing downward trend
GNPA has increased by | 4 crore sequentially in absolute terms to
| 234.4 crore while the GNPA ratio has consistently improved from
2.20% in Q4FY09 to 0.94% in Q3FY12. Increasing exposure to the
corporate book in the current environment remains a downside risk.
V a l u a t i o n
A consistent all-round performance makes SIB a safer bet in the current
uncertain scenario. We have revised our PAT estimates from | 430 crore
to | 469 crore (26.6% CAGR over FY11-13E). SIB is planning capital
raising of |  1000-crore  as the market improves (CAR of 12% in
Q3FY12). We expect SIB to deliver RoA of 1% and RoE of 17.6% in
FY13E. We maintain our target price of | 26.

Q3FY12 Result Update :: Sintex Industries; South Indian Bank; Dewan Housing Finance :: Emkay

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Q3FY12 Result Update (January 17, 2012)

Result Update Sintex Industries Ltd Reco: BUY CMP: Rs 70 Target Price: Rs 93 Cut earnings; maintain buy on valuations ·      Sintex’s 3Q12 APAT was lower than est. due to lower monolithic (25% yoy revenue decline and fall in EBITDA margins) and subsidiaries performance (59% drop in PAT) ·      Given FCCB repayment next year and working capital requirements increasing, Mgmt in the call sounded cautious on growth and has reserved its comments on FY13E for now    ·      Working capital has gone up by Rs2.5bn vs. Sep11 (mainly due to monolithic), cash has gone down by Rs1.9bn vs. sep11 and debt remains at the same level. We Adj. FY12 capex to Rs4bn vs. Rs5bn earlier….   ·      Estimates cut by 23/28% for FY12/13E. Current valuations pricing in negatives - free cash-flow, part FCCB repayment likely through debt, business momentum. Maintain buy with revised TP of Rs93/Share   South Indian Bank Reco: HOLD CMP: Rs 23 Target Price: Rs 25 Risk to margins; Downgrade to HOLD ·      SIB’s Q3FY12 results inline with expectation with NII at Rs2.7bn and Net profit at Rs1.02bn. The growth was also aided by 20.4%yoy growth in Non interest income to Rs599mn ·      The NII grew by 33.5%yoy to Rs2.7bn led by strong ~30.6%yoy growth in advances, and 8bps qoq expansion in NIM’s to 3.05% ·      High concentration of gold loan at 26% of the book, a concern. Change in mgmt strategy to shift focus from gold loan to corp loan, could put pressure on margins ·      Elevated risks coming out of concentration in gold loan portfolio in terms of loan growth as well as NIMs. Downgrade to HOLD with revised PT of Rs25 Dewan Housing Finance Reco: BUY CMP: Rs 205 Target Price: Rs 275 Growth momentum continues ·      Dewan Housing Q3FY12 NII at Rs1.8bn and PAT at Rs750mn – as expected. Healthy loan growth with improvement in asset quality reaffirms our +ve stance on the business model ·      40%+ growth in sanctions/disbursements depicts resilience to interest rates / property prices. Higher dependence on bank term loans remains a key catalyst ·      First Blue Home Finance (FBHF) – Inorganic growth well on track with 18% loan growth, improved leverage and stable asset quality. Merger of DHFL+ FBHF around the corners ·      Strong business model with immense growth potential, stable asset quality and decent return ratios remain key positives. Maintain BUY with target price of Rs275

South Indian Bank: Buy :: Business Line

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Investors with stomach for risk can consider fresh exposure to the stock of South Indian Bank (SIB). This old private sector bank has over the last few years managed to improve its return ratios and asset quality.

The return on equity improved from 14 per cent in FY07 to 17.6 per cent for the half year ended September 2011. Gross NPA ratio is down from 3.94 per cent in FY07 to 0.99 per cent in September 2011. There is further scope for improvement in its other operating metrics once the full benefits of the management's initiatives are realised over the long-term. This may warrant a valuation premium to SIB over its old private sector bank peers.

At the current price of Rs 24, the SIB stock trades at 1.1 times its estimated FY13-end adjusted book value and 6.7 times its estimated FY13 earnings. Despite out-performing most banks on a year-to-date basis, SIB's valuations continue to be attractive. Its valuations are inline with other old private banks despite its metrics being better than those of its peers.

The second largest branch network among old private banks (which is largely under-utilised), rising proportion of high-yielding gold and SME portfolios supporting margins, superior asset quality, thanks to majority of the asset book being secured, are key positives for the bank. The bank's net interest margin (NIM) improved from 2 per cent in FY08 to 3 per cent in September 2011. While Kerala accounts for 56 per cent of the bank's branches, it is slowly diversifying into other areas with more than 50 per cent of incremental branches being set up outside the state.

BUSINESS

SIB has a well-diversified loan book. However, gold loan portfolio has taken the centre stage in recent times with the management planning to increase its focus on high-yielding loans (including SMEs).

Gold loans currently account for 26 per cent of the loan book. The rates on SIB's gold loans are lower, which may prompt borrowers to shift from gold-financing companies. The portfolio is also relatively protected with loan to value in the 73-76 per cent range.

The bank's overall business, thanks to a low base, has grown at 27 per cent compounded annually during FY07-FY11. Net profit during the same period grew at 30 per cent. The September-end business (deposits plus advances) of the bank stood at Rs 56,386 crore. Given its high historical rate of growth, even after considering some moderation in loan book growth, SIB may still achieve its internal target of Rs 75,000 crore of business by FY13 end.

To fund its future business growth, SIB plans to raise Rs 1000 crore of capital once the market scenario improves. Raising close to 50 per cent of the existing net worth is indicative of bank's aggressive business plans. SIB plans to increase its branch network from the present 644 branches to 750 branches by FY13.

SCOPE FOR IMPROVEMENT

Old private banks, in general, and SIB, in particular, suffer from low business per branch. For the year ended March 2011, the business per branch was low at Rs 77 crore as against the all-bank average of Rs 129 crore.

The profit per employee of the bank is also low at Rs 5 lakh per employee as against the all-India average of Rs 7 lakh due to low fee income contribution. SIB plans to use its branch network for distribution of third-party products, which will enhance its fee income.

Low business per branch, while improving, is partly due to relatively low credit-deposit ratio of 70 per cent. SIB has always been conservative in terms of credit-deposit ratio despite having high levels of capital.

This move has also limited margin expansion in spite of the bank moving to high-yielding businesses. As credit-deposit ratio improves, in addition to balance-sheet growth, the business per branch would improve automatically.

Improvement in credit-deposit ratio would also neutralise strain from rising costs due to savings rate de-regulation, thereby allowing the bank to maintain margins at 3 per cent. The net interest margin for the second quarter of FY12 was 3 per cent, an improvement of 10 basis points from the June quarter.

Even as SIB's low-cost deposits (including NRI deposits) account for close to 30 per cent of its total deposits, the bank has one of the highest cost of funds (7.66 per cent) in the system. Given that the states of Kerala and Tamil Nadu are crowded in terms of banks, high interest rates need to be offered to attract depositors. As the bank moves into more under-penetrated areas, it would have the flexibility to price its products more economically.

GOOD ASSET QUALITY

The bank is positioned among the best in the system in terms of asset quality, with net NPA ratio of 0.25 per cent as of September 2011.

With close to 85 per cent of its portfolio being secured, asset quality pressures may be limited for the bank. The restructured asset proportion is also low at less than 2 per cent of the loan book.

Reader Query Corner: South Indian Bank, Jet Airways,Dishman Pharma, Engineers India, PFC, CanFin Homes, MTNL, GMR:: Business Line

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Please let me know the short- and medium-term targets for South Indian Bank and Jet Airways.

John

South Indian Bank (Rs 23.6): After retracing 38.2 per cent Fibonacci retracement level of the stock's prior up move from its lifetime high of Rs 29.7 in November 2010, the stock found support at around Rs 19 in February. The price band between Rs 19 and Rs 20 is a significant support band from a long-term perspective.

This support band cushioned the stock from declining further in late August this year. Building a strong base at around Rs 20, the stock resumed its long-term uptrend that has been in place ever since bottoming out in the first quarter of 2009.

The stock is presently testing a key medium-term resistance level around Rs 23.5. Emphatic breakthrough of this level will take the stock northwards to Rs 25.5-26 range in the short-term. Investors with short-term horizon can hold the stock with stop loss at Rs 22. However, a fall below Rs 22 will mar the short-term positive view and pull the stock down to Rs 20.

Strong move beyond Rs 26 will pave the way for a rally to Rs 30 in the medium-term. Investors with a medium-term perspective can consider holding the stock with stop-loss at Rs 20. On the other hand, breach of Rs 20 can drag the stock down to Rs 17 or to Rs 15 in the coming months.

Jet Airways (Rs 251.3): Ever since encountering resistance in the range between Rs 900 and Rs 925 in November 2010, Jet Airways resumed its long-term downtrend. Following a sideways consolidation phase between February and August in the band between Rs 400 and Rs 515, the stock breached southwards.

Subsequently, the stock landed at its long-term significant support at around Rs 220 in early October and is reversing upwards. The stock is currently testing its immediate short-term resistance (late August trough) at Rs 253. Decisive jump above this level will give short-term targets of Rs 285 and Rs 308.

Short-term investors can hold the stock with stop-loss at Rs 230. Medium-term investors can hold the stock with deeper stop-loss at Rs 215. Strong move beyond Rs 308 will take the stock higher to Rs 335, Rs 373 and Rs 400 in the medium-term.

Nevertheless, dive below Rs 215 will pull the stock down to Rs 178 or even further down to its long-term support at around Rs 130.

I got PFC (Power Finance Corporation) through the FPO (Follow-on Public Offer). Please advise if I can buy more shares now.

Srinivasan

PFC (Rs 155.1): In our previous review of this stock in July this year, we had mentioned that inability to move above Rs 250 will mean that the stock can head lower to Rs 150 or Rs 125 over the ensuing months. In line with our view, the stock failed to rally and declined to Rs 150 and then found support just above Rs 125, at Rs 130 in late August 2011.

The support zone between Rs 125 and Rs 130 is an important zone from a long-term perspective. The short-term trend is a sideways consolidation. Investors with higher penchant for risk can consider buying the stock with stop-loss at Rs 125. Strong penetration of resistance at Rs 170 will lift PFC higher to the Rs 215-220 range in the ensuing quarters. The next target is at Rs 250.

However, breach of Rs 125 downwards will reinforce the downtrend that has been in place from its lifetime peak of Rs 383; the stock can roll down to Rs 107 or even to Rs 86 in the long-term.

Kindly let me know the long-term prospects of CanFin Homes and MTNL.

Shantha.D. Pai

CanFin Homes (Rs 103.7): After retracing 61.8 per cent Fibonacci retracement level of the prior up move (from the October 2008 low of Rs 37.5 to August 2010 peak of Rs 172), CanFin Homes took support at its long-term support zone between Rs 85 and Rs 90 during February to August this year, and bounced upwards. Subsequent supports are at Rs 77 and Rs 67.

The stock has been on an intermediate-term downtrend from its August 2010 peak. This trend remains in place as long as the stock trades below Rs 130. Strong weekly close above this level will strengthen the stock's long-term uptrend and take the stock higher to Rs 150 and then to Rs 170. Nonetheless the stock has immediate resistance at Rs 110.

MTNL (Rs 30.9): MTNL has been on a long-term downtrend from its January 2008 peak of Rs 219. Medium- as well as short-term trends are also down for the stock. However, after recording an all-time low at Rs 29.15 on October 24, the stock found support around this level and is on the brink of reversing, triggered by positive divergence in weekly indicators. Only a strong move above Rs 37.5 will signal that the stock has bottomed out, and it can then rally to Rs 41, Rs 48 and 52.

Next significant resistance is at Rs 68. Emphatic breakthrough of long-term key resistance at Rs 90 will reverse the stock's intermediate-term downtrend and lift the stock higher to Rs 110 or Rs 124.

Conversely, inability to rally beyond Rs 37.5 will pull the stock down to Rs 29. On a breach of immediate support level at around Rs 29, will drag the stock to new lows.

I purchased GMR Infrastructure at Rs 70, and Engineers India at Rs 300. I see the prices of both the stocks going down. Could you please let me know the latest supports and resistances?

Pavan

GMR Infrastructure (Rs 27.7): Ever since peaking out in June 2009 at Rs 91, the stock resumed its long-term downtrend. Trends in all time frames are down for the stock, and it is still in the bear's grip. Nevertheless, last week the stock found support just above its long-term support level of Rs 23 (October 2008 trough), and bounced up sharply.

The stock has resistance ahead at Rs 30; a conclusive penetration of this level will take the stock northwards to Rs 34 and Rs 37. Strong rally above its long-term resistance at around Rs 45 is needed to alter its intermediate-term downtrend and take the stock higher to Rs 55-58 range.

Investors can consider switching from the stock in rallies. Tumble below Rs 23 will drag the stock down to Rs 20 and to fresh lows.

Engineers India (Rs 239.8): After peaking out in May 2010 at Rs 538, the stock has been on an intermediate-term downtrend forming lower peaks and lower troughs. In April this year, the stock resumed its downtrend after testing important long-term resistance in the band between Rs 310 and Rs 315.

Since then, it has been on a medium-term downtrend. The stock has retraced 61.8 per cent Fibonacci retracement level of its prior up move from October 2008 low of Rs 50, to its May 2010 peak. Investors with long-term perspective can hold the stock with stop-loss at Rs 215.

A reversal from current levels will face resistance at Rs 260, Rs 290 and Rs 315. Decisive breakthrough of Rs 315 will pave the way for an up move to Rs 350-360 band in the long-term; investors can take partial profits off the table at that juncture. On the other hand, fall below Rs 215 can pull the stock down to Rs 180 and then to Rs 150 levels in the ensuing months.

Please review the long-term prospect of Dishman Pharmaceuticals and Chemicals as earlier stated (May 2011).

Mukesh Kumar

Dishman Pharmaceuticals and Chemicals (Rs 53): In our review of this stock in May this year, we had mentioned that there are no signs of reversal in the stock as yet, and it is likely to breach a low at Rs 87, and decline to the 2004 low of Rs 72 or even Rs 61. Investors should have divested their holding on a decline below Rs 87.

In line with our expectation, the stock breached Rs 87 and continued to decline. It has even declined below Rs 61 to register its lifetime low at Rs 52.3 on October 28. The stock is in a longer-term downtrend. Upward reversal will encounter resistances at Rs 61, Rs 72 and Rs 87.

Dynamic move above Rs 87 will take the stock higher to Rs 110 or Rs 120. Failure to surpass Rs 87 will reinforce the downtrend. Investors can make use of rally to switch out of the stock. Only on a strong close above Rs 250 will reverse the long-term downtrend.