Query Answered: Dabur, Oil India, Ester Ind, Kilburn, Jyoti Structures, Surya Roshni, Meghmani, GVK, :: Business Line

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 I hold Dabur India purchased at Rs 100 and Oil India at Rs 1,150. What is technical view on these stocks?

R.N B Rao

Dabur (Rs 97.5): You seem to have purchased the stock recently since it is still trading close to your cost. The long-term trend in the stock is up since 2003 and it is still going strong. If you are in the stock for the long-haul, the level that you need to watch is at Rs 70. The healthy long-term view will be under threat only if this level is breached.

If the stock manages to hold above Rs 90 in the months ahead, it we can assume that the bulls continue to have the upper hand in this counter.

It can then spend few months moving in a sideways band between Rs 90 and Rs 120 before breaking higher. Break-out targets are Rs 142 and Rs 175. These will, however, be achieved over the long-term, that is in the next two to five years.

Investors who have a shorter perspective can hold with stop-loss at Rs 90. Next supports are at Rs 80 and Rs 70.

Oil India (Rs 1,156.9): Oil India does not have a long trading history, so it is not possible to give a long-term view on this stock. The stock is moving in a wide band between Rs 1,100 and Rs 1,600 over the last two years.

Since it has moved close to the lower end of its long-term trading range, you have bought the stock at the apt juncture. The stock can reverse higher from here to move on to Rs 1,310 or even Rs 1,372 and Rs 1,435.

Long-term trend will turn positive on a rally above Rs 1,435.

Next target is Rs 1,600.

Investors can hold the stock with stop at Rs 1,050. It would be best to divest your holding on a move below this level since it is hard to pin-point where the next halt can be given the stock's short history.

Please let me know the prospects of Ester Industries and Kilburn Engineering.

Amol

Surya Roshni:: Angel Broking Top Pick: June 2011

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Higher capacity utilisation to drive sales growth: Surya Roshni
has expanded its capacity across products in the lighting and
steel divisions, including a capacity increase of 358% in compact
fluorescent lamps (CFL) and 29% in steel pipes. Higher utilisation
of this capacity is expected to result in high growth of 17.8%
CAGR in sales and 19.4% CAGR in operating profits over
FY2011-13E. Post the substantial capex, sales contribution from
the high-RoIC lighting division is expected to increase, thereby
increasing the company's RoCE from 10.7% to 12.7% over
FY2011-13E.


Strong brand name: Surya Roshni has a strong brand name
and substantial market share in the lighting industry. In the GLS
and FTL segments, the company has a market share of ~25.0%.
In the CFL segment, we expect the company to increase its market
share to 15.0% by FY2013 from 10.7% in FY2010. The company
maintains an advertisement spend of ~2.0% of the lighting
division's top line. The company has a strong distributor network
as well, with presence in over 100,000 retail outlets.
Promoters are hiking their stake substantially: Surya Roshni's
promoters have subscribed to three rounds of warrant
allocations, amounting to a total investment of `194cr. The three
rounds of warrants were allocated at a price of `59/share, `83/
share and `111/share. The first two tranches have already been
converted into equity, increasing the promoters' stake to 55.0%
from 24.1%. In the consequent open offer, the promoters'
shareholding increased further to 62.3%. We expect the
remaining warrants to be converted by FY2012, which will
increase the promoters' stake further.


PAT growth boosted by lower interest, higher margins: Going
ahead, the company's net debt-to-equity is expected to reduce
to 0.8x in FY2013E from 1.2x in FY2011, thereby saving on
interest cost. Besides, margins would improve because of higher
contribution from the high-margin lighting division. As a result,
we expect PAT to increase at a 30.3% CAGR to `113cr by
FY2013E.
Currently trading at attractive valuations: At the CMP, the stock
is trading at attractive valuations of 3.9x FY2013E EPS and 0.5x
FY2013E BV. We have valued the company using the SOTP
method to arrive at a target price of `137. We have a Buy rating
on the stock.

Angel Broking, Surya Roshni announces revised dates for the open offer

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Surya Roshni announces revised dates for the open offer
Surya Roshni has announced the revised dates for the open offer that was triggered by the
substantial increase in promoters’ stake on account of conversion of warrants. Originally, the
open offer was scheduled from December 8, 2010, to December 27, 2010. However, there
was a delay in obtaining the necessary regulatory clearances. Now, the company has
obtained the clearances and has announced the revised dates for the open offer. The offer
will remain open from February 23, 2011, to March 14, 2011. At the CMP, the stock is
trading at 6.0x its FY2012E standalone EPS of `18.1. We have a Buy view on the stock with
a Target Price of `135.

Buy Surya Roshni – 3QFY2011 Result Update :: Angel Broking

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Surya Roshni – 3QFY2011 Result Update

Angel Broking maintains a Buy on Surya Roshni with a Target Price of Rs. 135.

For 3QFY2011, Surya Roshni reported a top-line increase of 20.5% yoy to `597cr
(`496cr), which was below our estimate of `659cr. OPM came in at 6.0% (5.9%),
again below our estimate of 7.2% mainly on account of the higher-than-expected
raw material costs. Owing to the strong increase in top-line and OPM expansion,
net profit increased by 55.8% to `11cr. The company has expanded its capacity
across products in the recent years. Going ahead, we expect this additional
capacity to start contributing to sales and drive growth. At the CMP of `108, the
stock is trading at attractive valuations. We maintain a Buy on the stock.

Surya Roshni – 2QFY2011 Result Update Angel Broking

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 Surya Roshni – 2QFY2011 Result Update

Angel Broking maintains an Buy on Surya Roshni with a Target Price of Rs143.

Surya Roshni (Surya) reported top-line growth of 12.4% yoy to `597cr (`532cr)

which was below our expectations. However, there was a 52bp improvement in

OPM to 5.5% (5.0%), which was in line with our estimates. However, there was an

increase in interest cost and tax rate. Overall, net profit increased 45.3% to `7cr

(`5cr). The company has expanded its capacity across products in recent years.

Going ahead, this expanded capacity is expected to start contributing to sales,

thereby driving the company’s growth. At current levels, the stock is trading at

attractive valuations. Hence, we maintain a Buy on the stock.

Top-line growth sluggish; margins expand: Surya reported sluggish

top-line growth for the quarter mainly because of slow yoy growth of 8.3% in the

steel products division. However, the lighting division sales increased a healthy

21.2% yoy. Overall, contribution from the lighting division to sales increased to

34.0% in the quarter. As a result, OPM improved to 5.5%. Net profit increased

45.2% owing to the 12.4% growth in sales and expansion in margins.

Outlook and Valuation: We remain bullish on the company’s business prospects,

given completion of its recent expansion and strong presence in the lighting

space. Higher contribution from the lighting division is expected improve the

company’s margin going ahead. We expect the company to post revenue CAGR

of 23.8% over FY2010-12, while net profit is expected at `97cr in FY2012,

increasing at a CAGR of 46.6% over the period. Our bullish stance on the

company is further reinforced with the promoters’ hiking their stake from 29.1%

to 55.0%. Currently, the stock is trading at 8.9x and 5.7x FY2011E and FY2012E

standalone EPS, respectively. We maintain a Buy on the stock with an SOTP

Target Price of `143.

Other Developments

􀂄 Management is confident of achieving strong growth in sales over the coming

years. The money infused from the warrant conversion would be used to meet

working capital and other requirements.

􀂄 The promoters converted the warrants issued earlier; during the quarter, fresh

warrants worth `60.8cr, convertible at `111/share were also issued.

􀂄 The conversion of warrants during the quarter triggered an open offer to

acquire up to 20% of the company outstanding equity at the offer price of

`111/share. The offer would remain open from December 08, 2010 to

December 27, 2010.

􀂄 Owing to the conversion of warrants, the promoters’ stake has increased to

55.0%. When the fresh warrants are converted, promoters’ stake would further

increase to 60.0%, assuming there is no tendering of shares in the open offer.

Investment Arguments

Large capacity expansion to lead to high sales growth: Surya has completed its

capacity expansion across products, including capacity increase of 358% in

compact fluorescent lamps (CFL) and 29% in steel pipes. This is expected to result

in high sales growth at a 23.8% CAGR over FY2010–12. Post the substantial

capex, sales contribution from the high-RoIC lighting division is expected to

increase, thereby resulting in RoE of 19.2%. In the same period, net debt-to-equity

is expected to reduce from 2.5x to 1.0x. The company has delivered strong yoy

growth of 17.7% in top line and 70.5% in net profit in 1HFY2011, indicating its

strong prospects.

Strong brand in the lighting industry: Surya has been a household name in the

lighting space for over two decades. The company has presence across more than

100,000 retail outlets. Surya has maintained its brand identity through substantial

advertisement spend and a strong retail network. In FY2010, the company spent

more than `11cr on advertisements, which is 2.0% of its lighting division sales.

Promoters hiking their stake: The promoters have subscribed to three rounds of

warrant allocations, amounting to a total investment of `193cr. The first was at

`59/share, the second at `83/share and the third at `111/share. The first two

tranches have been converted into equity recently, increasing the promoters’ stake

to 55.0% from 24.1%. We expect the third round of warrants to be converted by

FY2012, which will increase the promoters’ stake to 60.0% from 55.0% currently.

Outlook and Valuation

We remain bullish on the company’s business prospects, given completion of its

recent expansion and strong presence in the lighting space. Higher contribution

from the lighting division is expected to improve the company’s margin going

ahead. We expect the company to post revenue CAGR of 23.8% over FY2010-12,

while net profit is expected at `97cr in FY2012, increasing at a CAGR of 46.6%

over the period. Our bullish stance on the company is further reinforced with the

promoters’ hiking their stake from 29.1% to 55.0%. Currently, the stock is trading

at 8.9x and 5.7x FY2011E and FY2012E standalone EPS, respectively. We

maintain a Buy on the stock with an SOTP Target Price of `143.

Surya Roshni (CMP: `.115/ TP: `.143/ Upside: 24%): Angel Broking Top Pick

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Surya Roshni (CMP: `.115/ TP: `.143/ Upside: 24%)
􀂄 Surya Roshni has completed a large capacity expansion program across all
products in the lighting and steel division. The new capacities are expected to
contribute to strong top-line growth of 23.8% CAGR over FY2010-12E.

Surya Roshni (CMP: Rs.113/ TP: Rs.143/ Upside: 25%) -Angel Broking

Surya Roshni (CMP: Rs.113/ TP: Rs.143/ Upside: 25%)
􀂄 Surya Roshni has completed a large capacity expansion program across all
products in the lighting and steel division. The new capacities are expected to
contribute to strong top-line growth of 23.8% CAGR over FY2010-12E.
􀂄 The contribution of the high-margin lighting division to sales is expected to
increase from 29.5% to 33.6% over FY2010-12E. This asset-light nature of the
expanded capacity would marginally improve the RoE of the company from 19.7%
to 20.4% over FY2010-12E, despite the reduction in the D/E ratio of the company
from 2.5x to 1.3x over the same period.
􀂄 The promoters have subscribed to two rounds of warrants, one of which has
already been partially converted. We expect the outstanding warrants also to be
converted into equity, thereby increasing the promoters’ stake to 55.0% by
FY2012E from 29.1% currently. The promoters would infuse Rs133cr into the
company through these warrant conversions.
􀂄 We believe attractive valuations of 5.7x FY2012E EPS provides a good entry point
for investors. We have valued the stock at 6.6x FY2012E EPS which result into
target price of Rs143.

Target Price of Rs143 for Surya Roshni - Buy says Angel broking

Surya Roshni - Buy
Surya Roshni is a diversified company manufacturing steel pipes
and branded lighting products. During FY2010-12E, we expect
the company's top line and bottom line to register CAGRs of
23.8% and 39.0%, respectively. At the current price of Rs113,
the stock is trading at 5.7x its FY2012E standalone EPS.
Strong capacity expansion to lead to high sales growth: Surya
Roshni has completed its capacity expansion across products
in the lighting and steel divisions (including capacity increase
of 358% in CFL and 29% in steel pipes). Post the substantial
capacity expansion, sales contribution from the high-RoIC
lighting division is expected to increase, thereby increasing the
company's RoE from 19.7% to 20.4% over FY2010-12E, despite
an improvement in net debt-to-equity from 2.5x to 1.3x over
the same period. As an indication of its strong prospects, the
company has already delivered strong yoy growth of 24.6% in
its top line and 99.5% in net profit in 1QFY2011.
Strong brand in the lighting industry: Surya Roshni has been a
household name in the lighting space for over two decades.
The company’s CFL market share surged from 2.4% in FY2007
to 10.7% in FY2010, reflecting its increased dominance in the
space. The company has presence across more than 100,000
retail outlets. The company has maintained its brand identity
through substantial advertisement spend and a strong retail
network. In FY2010, the company spent more than Rs11cr on
advertisements, which is 2.0% of its lighting division's sales.
Promoters hiking their stake: The company's promoters have
subscribed to two rounds of warrant allocations. The first was
at a price of Rs59/share and the second at Rs83/share. The
first tranche was partially converted into equity in FY2010,
thereby increasing the promoters' stake to 29.1% from 25.3%
at the end of FY2009. We expect the remaining warrants to be
converted by FY2012, which will increase the promoters' share
to 55.0% from 29.1% currently. Overall, the promoters would
invest Rs133cr through these two rounds of warrant conversion.
Financial outlook: Surya Roshni is poised for strong growth
over the next few years, led by higher production from its
expanded capacities across products. The company's top line
is expected to grow to Rs2,751cr in FY2012E from Rs1,794cr
in FY2010, registering a 23.8% CAGR over FY2010-12E.
Quick Take
Research Analyst - Jai Sharda
Price - Rs113
Target Price - Rs143
Going ahead, since the contribution of the high-margin lighting
division to the top line is expected to increase, the company's
overall margins are also expected to expand to 7.5% in FY2012E
from 7.2% in FY2010. Surya Roshni's Kashipur unit is exempt
from income tax, as it is located in Uttaranchal, where it gets
tax benefits due to local regulations. We expect the tax rate to
remain at the current levels of ~16.0% in FY2011E, before
increasing marginally to 18.0% in FY2012E.
Valuation: Currently, Surya Roshni is trading at 5.7x and 1.0x
its FY2012E EPS and book value, respectively. Historically, it
has traded in the range of 3.4x to 9.5x its one-year forward
EPS, with the average of 6.6x one-year forward EPS. We have
valued the company on an SOTP basis, valuing the standalone
business at the five-year average P/E of 6.6x FY2012E EPS of
Rs19.9 and valuing the investment in subsidiary at 1.0x. We
assign a Buy rating to the stock with a Target Price of Rs143.Surya Roshni - Buy

Surya Roshni is a diversified company manufacturing steel pipes
and branded lighting products. During FY2010-12E, we expect
the company's top line and bottom line to register CAGRs of
23.8% and 39.0%, respectively. At the current price of Rs113,
the stock is trading at 5.7x its FY2012E standalone EPS.
Strong capacity expansion to lead to high sales growth: Surya
Roshni has completed its capacity expansion across products
in the lighting and steel divisions (including capacity increase
of 358% in CFL and 29% in steel pipes). Post the substantial
capacity expansion, sales contribution from the high-RoIC
lighting division is expected to increase, thereby increasing the
company's RoE from 19.7% to 20.4% over FY2010-12E, despite
an improvement in net debt-to-equity from 2.5x to 1.3x over
the same period. As an indication of its strong prospects, the
company has already delivered strong yoy growth of 24.6% in
its top line and 99.5% in net profit in 1QFY2011.

Strong brand in the lighting industry: Surya Roshni has been a
household name in the lighting space for over two decades.
The company’s CFL market share surged from 2.4% in FY2007
to 10.7% in FY2010, reflecting its increased dominance in the
space. The company has presence across more than 100,000
retail outlets. The company has maintained its brand identity
through substantial advertisement spend and a strong retail
network. In FY2010, the company spent more than Rs11cr on
advertisements, which is 2.0% of its lighting division's sales.

Promoters hiking their stake: The company's promoters have
subscribed to two rounds of warrant allocations. The first was
at a price of Rs59/share and the second at Rs83/share. The
first tranche was partially converted into equity in FY2010,
thereby increasing the promoters' stake to 29.1% from 25.3%
at the end of FY2009. We expect the remaining warrants to be
converted by FY2012, which will increase the promoters' share
to 55.0% from 29.1% currently. Overall, the promoters would
invest Rs133cr through these two rounds of warrant conversion.
Financial outlook: Surya Roshni is poised for strong growth
over the next few years, led by higher production from its
expanded capacities across products. The company's top line
is expected to grow to Rs2,751cr in FY2012E from Rs1,794cr
in FY2010, registering a 23.8% CAGR over FY2010-12E.

Going ahead, since the contribution of the high-margin lighting
division to the top line is expected to increase, the company's
overall margins are also expected to expand to 7.5% in FY2012E
from 7.2% in FY2010. Surya Roshni's Kashipur unit is exempt
from income tax, as it is located in Uttaranchal, where it gets
tax benefits due to local regulations. We expect the tax rate to
remain at the current levels of ~16.0% in FY2011E, before
increasing marginally to 18.0% in FY2012E.

Valuation: Currently, Surya Roshni is trading at 5.7x and 1.0x
its FY2012E EPS and book value, respectively. Historically, it
has traded in the range of 3.4x to 9.5x its one-year forward
EPS, with the average of 6.6x one-year forward EPS. We have
valued the company on an SOTP basis, valuing the standalone
business at the five-year average P/E of 6.6x FY2012E EPS of
Rs19.9 and valuing the investment in subsidiary at 1.0x. We
assign a Buy rating to the stock with a Target Price of Rs143.