Technicals-Bharti Infratel, SRF, Ador Welding, Vinyl Chemicals :: Business Line

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Please provide technical guidance on SRF and EID Parry both of which are currently trading at 52-week lows.

Ajit

SRF (Rs 199.7): You are right in stating that SRF is trading at a 52-week low. The stock is in a medium-term down-trend since the peak of Rs 444 recorded in November 2010. But it is halting at the key long-term support at Rs 200. This level occurs at 61.8 per cent retracement of the stock’s up-move from February 2009 low.

We can give the stock leeway up to Rs 180. That is long-term investors can hold the stock as long as it trades above Rs 180. But decline below this level will drag the stock to Rs 98 or even further to Rs 62.

Medium-term resistances for the stock would be at Rs 290, Rs 320 and Rs 350. The stock needs to record a strong close above Rs 350 to pave the way for a rally to Rs 444.

SRF ::Ambit India Access, December 2011

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SRF
Consistent build up in operational efficiencies across verticals has enabled
SRF’s market leadership both domestically as well as internationally. With
capex of `13 bn over the last four years and their ongoing capex, SRF is
well positioned to take advantage of the growth coming in from the
automobiles, textiles and mining sectors.
Company Background
SRF is a multi-business entity engaged in the manufacturing of chemical based
industrial intermediates with three main lines of business viz, technical textiles
(54% of FY11 revenues), chemicals and polymers (21% of FY11 revenues) and
packaging films (25% of FY11 revenues). It is world second largest producer of
Nylon 6 tyre cord fabrics and belting fabrics and exports its products to over 60
countries. As part of its growth strategy SRF in the recent past has acquired two
foreign entities, one in Thailand (Thai Baroda Industries Ltd – manufacturers of tyre
cord), and the other one in South Africa (Industex Technical Textiles (Pty) Ltd –
manufacturer of belting fabrics).
Recent Financial Performance
2QFY12 revenues of `9.1bn (22.2% YoY and 9% QoQ growth) were driven by
strong growth in chemicals business revenues (85% YoY and 42% QoQ growth)
which made up 36% of the total revenues but held back by a 24% YoY drop in
packaging film revenues (33% of total revenues). As a result, SRF’s chemicals
business has grown 84% YoY in 1HFY12 although total revenues grew only 28%
YoY due to the 2QFY12 decline in packaging film. Whilst 2QFY12 EBITDA grew
marginally by 2% YoY, PAT declined by `14 crores registering a 12% reduction
impacted by rupee depreciation.
Outlook
Whilst the company has been making investments to augment and upgrade
production facilities mainly in the BOPET film line (packaging), that segment is
witnessing a slowdown since 2QFY12. On the other hand, the chemicals business
accounting for 37% of profits has ensured strong performance by the company.
However, in the recent earnings release, management have highlighted that the
effects of slowdown is likely to adversely impact both volumes and margins of the
chemical segment in the near future.

QUERY CORNER: Long-term uptrend in Tata Motors: Business Line

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Please give the technical view of Titan Industries.

R. Jain

Titan Industries (Rs 3,911.1): In our review of this stock in January, we had indicated that the stock was in a very strong uptrend and that the medium-term correction that began last November could halt in the zone between Rs 2,900 and Rs 3,000. We had given Rs 2,850 as the stop-loss for short-term investors and Rs 2,000 as the stop-loss for long-term investors.

The stock reversed higher from the low of Rs 2,943 formed in February after declining 30 per cent from its peak. As explained earlier, sideways move between Rs 2,950 and Rs 4,250 will be positive from a long-term perspective ushering in a rally to Rs 4,250 and beyond that to Rs 5,150 over the ensuing months. Investors with short- to medium-term perspective can book some profit if the stock stutters around the previous peak around Rs 4,250.