|Indiabulls is perhaps the only institutional market player barred by Sebi in its original order cracking down on market players in the IPO scam.|
Sebi, in its original report on the IPO Scam, has categorised them as entities who appear to be key operators in various IPOs during 2003 to 2005.
Sebi has also directed them not to buy, sell or deal in the securities markets, including IPOs, directly or indirectly, till further directions.
Sebi has pointed out that many of the 24 master account holders have, in turn, made further off-market transactions to other entities. This, according to Sebi, indicates that they themselves must have acted as intermediaries for their financiers who appear to be the ultimate beneficiers. Sebi has directed them too not to buy, sell or deal in the securities markets including in IPOs.
The 24 account holders identified by Sebi are: Roopalben Nareshbhai Panchal, Sugandh Estates And Investments Pvt Ltd, Dhaval A. Mehta, Arjav Nareshbhai Panchal, Parag P Jhaveri, Kelan Atulbhai Doshi, Ambuja Estate And Holdings Pvt Ltd, Purshottam Budhwani, Dharmesh Bhupendra M, Jhaveri Securities Pvt. Ltd, Biren Kantilal Shah & Shah Biren Kantilal, Kamal P Jhaveri, Devangi Dipakbhai Panchal, Chandrakant Amratlal Parekh, Dharmesh K Katakia, D B Mehta, Pratik Mafatlal Shah, Dhaval K Katakia, Deepakkumar Shantilal Jain, Himani N Patel, Deepak Madhukant Patel, Indiabulls Securities Ltd, Opee Stock - Link Ltd and Manojdev Seksaria.
Sebi has also listed another 85 such entities.
|1. Hasmukhlal N. Vora|
|2. Welvet Financial Advisers Pvt Ltd|
|3. Jayesh P Khandwala HUF|
|4. Gautam N Jhaveri|
|5. Excell Multitech Limited|
|6. Zenet Software Limited|
|7. Tauras Infosys Ltd|
|8. Seer Finlease Private Ltd.|
|9. Devangi Dipakbhai Panchal|
|10. Dipak Jashvantlal Panchal|
|11. Shilpa Rajan Dapki|
|12. Rajan Vasudev Dapki|
|13. Bhargav Ranchhodlal Panchal|
|14. Hina Bhargav Panchal|
|15. Jayantilal Jitmal|
|16. Bhanuprasad Dipakkumar Trivedi|
|17. Umang R Shah|
|18. Sujal Leasing And Finance Pvt Ltd.|
|19. Sarvani Choudhary|
|20. Anand Netanand Choudhary|
|21. Netanand Surjaram Bhambu|
|22. Ramesh Chimanlal Shah|
|23. Netanand Bhambu|
|24. Saumil A Bhavnagari|
|25. Masat Texturising And Twisting Private Ltd|
|26. Chirag Desai|
|27. Bakul Desai|
|28. Hemlata Desai|
|29. Vinita A Choudhary|
|30. Welvet Financial Advisers Pvt Ltd|
|31. Vasudev Gordhandas Dapki|
|32. Sanjay Rameshchandra Shah|
|33. Himanshu Piyushkumar Choliya|
|34. Sanjay R. Shah|
|35. Dushyant Natwarlal Dalal|
|36. Monal Y. Thakkar|
|37. Vinod Modha|
|38. Amadhi Investments Ltd|
|39. Ritaben R. Thakkar|
|40. Jitendra Lalwani|
|41. Veenaben Y. Thakkar|
|42. Parag P Jhaveri|
|43. Puloma Dushyant Dalal|
|44. Rajesh Jhaveri Stock Brokers Pvt. Ltd.|
|45. Patel Rajeshkumar|
|46. Deep Stockbroking Private Limited|
|47. Arth Stockbroking Pvt.Ltd|
|48. Rasila Natwarlal|
|49. Natwarlal Thakordas|
|50. Nimisha Kadakia|
|51. Rajkumar Jain|
|52. Balvinder Gurmukhsingh Purswani|
|53. Jayprakash Girdharilal|
|54. Niranjan Girdharilal|
|55. Gurmukhdas Rameshkumar Giyamalani|
|56. Mehta Bansilal|
|57. Magnum Equity Services Limited|
|58. Meenakshi L Phulwani|
|59. Laxminarain L Phulwani|
|60. L L Phulwani|
|61. Anagram Securities Limited|
|62. Chirag Jayendrakumar Shah|
|63. Bagrecha Ashok K.|
|64. Kelan Atulbhai Doshi|
|65. Ajay Kumar Gupta|
|66. Ashmi Financial Consultancy Pvt Ltd|
|67. Chimanlal Girdharlal Shah|
|68. Sheelu Lalwani|
|69. Pratik Pulp P Ltd|
|70. Sonal N Dadia|
|71. Kiran D Dadia|
|72. Jayesh N Dadia|
|73. Dadia Finvest Limited|
|74. Deepak N Dadia|
|75. Jasmina J Dadia|
|76. Natvarlal N Dadia|
|77. Jasmina J Dadia|
|78. Natvarlal N Dadia|
|79. Neha Narendra Dadia|
|80. Dhaval Narendra Dadia|
|81. Narendra Harilal Dadia|
|82. Kashmira Narendra Dadia|
|83. Rupesh Vipinchandra Shah|
|84. Karvy Stock Broking Limited|
|85. Shah Kantilal Jitmal|
Friday, April 28, 2006
Giving relief to retail investors, Securities and Exchange Board of India (Sebi) today said transactions carried out by barred market players on behalf of their clients will not be affected by the ban.
Sebi, which cracked down on market players including Karvy and Indiabulls for their alleged involvement in the IPO scam, also asked clients of the banned entities to switch over to other depository participants within 15 days.
The directions to the barred brokers not to buy, sell or deal in the securities market, including IPOs "would apply only in transactions in the proprietary accounts of brokers," Sebi said in its clarification, adding that clients of these market players will not be affected by the ban.
The regulator also said that DP transaction of clients would remain unaffected only for 15 days, by which time clients of Karvy DP and Pratik DP should switch over to another DP.
A look at how the indices fared at their closes: Sensex 11835 (-0.87%); Nifty 3508 (1.34%); Nasdaq 2345 (+0.49%); Dow 11383 (+0.25%). On April 26 2006, FIIs were net sellers of stocks to the tune of Rs206.20 crore (purchases worth Rs1,784.70 crore and sales of Rs1,990.90 crore) while domestic mutual funds were net buyers of stocks to the tune of Rs327.67 crore (purchases worth Rs968.11 crore and sales of Rs640.44 crore).
Uncertainty in the market is likely to continue on the back of a strong intra-day volatility and weak Asian indices in the ongoing trades. Reports of the market watchdog Sebi imposing an interim ban on several depository participants, brokers and banks from carrying out activities in the stock market till further notice due to some irregularities in the recent IPO's may keep the investors jittery from taking any fresh positions. Among the banks HDFC Bank, Centurion Bank of Punjab, IDBI Bank and ING Vysya Bank have been asked not to open new demat accounts, while the listed Indiabull Securities has been barred from the securities market. HDFC Bank yesterday closed 1.57% lower at Rs823, while Indiabull Financial Securities rose over 12% at Rs311. Sebi has also asked Karvy and Pratik from carrying out despositary participant and broking activities.
Among the key domestic indices, the Nifty may witness support at 3467 on the downside and a break below this level could see it slip further to 3410. The index faces a resistance at 3555. The Sensex has a likely support at 11710 and could test higher levels of 11965. In the results section, Finolex, GV Films, GE Shipping, Guffic Biosciences, Essar Oil, Cadila Healthcare, FCS Software, Hindustan Construction, Ind-Swift Lab, McDowell, Patel Roadways, Reliance Natural Resources, Sterlite Opticals, Union Bank of India are expected to announce their quarterly numbers.
US indices moved up for the second straight session, after the sentiment received a boost from the Federal Reserve chairman Ben Bernanke that the economy is on a right track irrespective of energy prices scaling to record peaks. While the Dow Jones added 28 points at 11383, the Nasdaq gained 11 points to close at 2345.
News of the market regulator Sebi imposing a ban on several brokers saw the Indian ADRs take a heavy plunge on the US bourses. ICICI Bank, HDFC Bank, MTNL, Rediff and Patni Computers tanked over 6% each, while Infosys, Satyam, Wipro, Dr Reddy's, Tata Motors and VSNL tumbled 2-4% each.
Crude oil prices declined further, with the Nymex light crude oil for June series sliding by 96 cents at $70.97 a barrel. The London Brent crude shed $1.19 to close at $70.70 per barrel. In the commodity segment, the Comex gold for June delivery dropped $5.70 to settle at $636.30 an ounce.
Cluster: Apple Green
Price target: Rs1,050
Current market price: Rs898
- Maruti Udyog (MUL) reported better than expected numbers for Q4FY2006, mainly on account of better profitability. The income from its operations grew by 8% year on year (yoy) on the back of a 5% growth in the volumes and a 2% improvement in the realisations.
- The operating profit margins (OPMs) improved by 120 basis points to 14.9% due to the cost-cutting measures undertaken by the company, the improvement in productivity and lower export sales. A 66% reduction in the interest cost and 35% lower depreciation led to the profit after tax (PAT) for the quarter improving by 39% to Rs360.92 crore.
- For FY2006 the sales grew by 10% to Rs12,052 crore and the earnings before interest, depreciation, tax and amortisation (EBIDTA) margins improved by 90 basis points. The PAT for FY2006 surged by 56% to Rs1,189 crore. The company has recommended a dividend of 70% for FY2006 (Rs3.5/share) from 40% (Rs 2/share) in FY2005.
- MUL, expected to be the biggest beneficiary of the excise duty cut on small cars, has been impacted due to the rising interest rates and higher road tax rates in some states. The merger of Maruti Suzuki Automobiles India (MSAIL) with MUL will add value for the shareholders and eliminate all potential issues relating to inter-company transactions.
- MUL's earnings are expected to grow at a compounded annual growth rate (CAGR) of 23% over FY2006-08, driven by a 13% CAGR in the volumes over the same period. At Rs898, the stock trades at 8.9x its FY2008E enterprise value (EV)/EBIDTA and 14.6x its earnings. We reiterate our Buy recommendation on the stock and revise our price target to Rs1,050.
Godrej Consumer Products
Cluster: Apple Green
Price target: Rs912
Current market price: Rs723
Results in line with estimates
- The revenues of Godrej Consumer Products Ltd (GCPL) grew by a strong 18.5% year on year (yoy) to Rs164.1 crore in Q4FY2006. The growth, driven by a 20% rise in the company's branded business, was in line with our estimate.
- GCPL's operating profit (OP) grew by a whopping 50.6% yoy to Rs35.6 crore in the quarter, with the operating profit margin (OPM) expanding by 460 basis points to 21.7%. The margin improvement too was in keeping with our estimate.
- The soap business reported a revenue growth of 15.7% yoy to Rs101.6 crore, with its profit before interest and tax (PBIT) margin expanding by 120 basis points to 12.9%.
- The personal care business grew by 23.3% yoy to Rs62.5 crore aided by a strong growth in hair colour, hair dye, talc powder etc. The PBIT margin of this business stood at 41.1%, up by 440 basis points.
- Driven by the good performance of the soap and personal care businesses, the company's profit after tax (PAT) grew by 36.3% yoy to Rs30.2 crore. The earnings for the quarter stood at Rs5.3 per share as against Rs3.9 per share a year ago. The growth in the earnings was on expected lines.
- GCPL is currently trading at 23x FY2008E stand-alone earnings and enterprise value/earnings before interest, depreciation, tax and amortisation (EV/EBITDA) of 19.7x FY2008E. We maintain our Buy recommendation on the stock with a price target of Rs912.
Cluster: Ugly Duckling
Price target: Rs552
Current market price: Rs450
Adjusted PAT up 36%
- Wockhardt's Q1CY2006 net sales (on a consolidated basis) grew by 13.4% year on year (yoy) led by a 51% growth in its domestic sales during the quarter.
- The operating profit margin (OPM) showed a small increase of 30 basis points yoy to 19.6% due to lower raw material prices.
- The earnings before interest, depreciation, tax and amortisation (EBIDTA) however rose by just 4.8% yoy due a lower other income, which fell from Rs9.1 crore in Q1CY2005 to Rs3.3 crore this quarter.
- The adjusted profit after tax (PAT) showed an increase of 36% yoy to Rs56.7 crore.
- The company had a one-time extraordinary expense of Rs60.4 crore this quarter which included merger and acquisition (M&A) expenses of Rs22.8 crore and a write-off of Rs37.6 crore for the US business.
- At the current market price of Rs450, the stock is trading at 16.3x CY2007 earnings estimate. We reiterate our Buy recommendation on Wockhardt with a price target of Rs552.
Nicholas Piramal India
Cluster: Apple Green
Price target: Rs325
Current market price: Rs237
Back into the black
- Nicholas Piramal's net sales in Q4FY2006 on a consolidated basis grew by 83% year on year (yoy) due to an increase in the demand for domestic formulations.
- The earnings before interest, tax, depreciation and research (EBITDR) margins increased to 15% this quarter as against –9% in Q4FY2005.
- The research and development expense showed a marked increase of 124% yoy, thus pulling down the operating margin to 7.9%.
- The adjusted profit after tax stood at Rs18.1 crore as against a loss of Rs42.7 crore in the same quarter last year.
- At the current market price of Rs237, the stock is trading at 15x its FY2008 earnings estimate. We maintain our Buy recommendation on Nicholas Piramal with a price target of Rs325.
Cluster: Apple Green
Price target: Rs700
Current market price: Rs450
Results slightly below expectation
- Hyderabad Industries Limited's (HIL) revenues during Q4FY2006 declined by 1.65% year on year (yoy). However, on a like-to-like comparison, the revenues of the building division increased by 13.1% yoy to Rs107.32 crore.
- The weak prices of asbestos cement and the strike at one of the company's plants affected the profitability during the quarter. The operating profit declined by 16.2% to Rs11.7 crore. The building products division reported a profit before interest and tax (PBIT) of Rs14.88 crore during Q4FY2006 as compared to Rs18.29 crore in Q4FY2005. Typically, the March-July period generates strong demand for asbestos. The company has also announced a price hike of 10% in the beginning of April. We, therefore, expect a strong Q1FY2007.
- The heavy engineering division (HED) has been hived off. However, the company reported a loss of Rs9.69 crore due to the discontinued operations of the HED.
- HIL is utilising its strong cash flows from its operations to prepay a large portion of its debt. The reduction in the debt has impacted the interest cost, which has declined by 70% to Rs0.78 crore in Q4FY2006.
- The company has reported a profit after tax (PAT) of Rs37.6 crore in FY2006 as compared to a net profit of Rs9.06 crore in FY2005. However, the FY2005 numbers include a one-time extraordinary write-off of Rs16.04 crore. We expect the company to report a net profit of Rs46.5 crore in FY2007 and of Rs52.9 crore in FY2008. The stock trades at 7.6x its FY2007 and 6.7x its FY2008 earnings. We maintain a Buy on the stock with a price target of Rs700.
Selan Exploration Technology
Cluster: Ugly Duckling
Price target: Under review
Current market price: Rs95
Riding the oil boom
- During the fourth quarter, Selan Exploration Technology (SETL) showed a 28% growth in its net sales to Rs4.4 crore as compared to Rs3.4 crore reported in the corresponding period last fiscal.
- The operating profit margin (OPM) at 43.7% was much higher than 5.2% reported in Q4FY2005 but has declined sharply as compared to 62% shown in Q3FY2006. The sequential decline in the margin was largely due to the development expenditure of Rs1.34 crore written off during the fourth quarter. Excluding the development expenses, the OPM stood at 67.9%.
- However, the company received sales tax reimbursements of Rs1.9 crore from the government nominee, Indian Oil Corporation (IOC), which boosted the other income component to Rs2.2 crore. Consequently, the earnings stood at Rs3.3 crore as compared to Rs1.6 crore in Q3FY2006 and a marginal net loss in Q4FY2005.
- On a full year basis, the net sales have grown by 68.4% to Rs18.7 crore and the earnings have zoomed by 630% to Rs8.7 crore.
- At the current price the scrip trades at 7.8x its FY2008 estimated earnings and enterprise value (EV)/oil reserves (proven) of $1.2 per barrel of oil and oil equivalent (boe). We had recommended the stock at Rs58 with a price target of Rs94, which has been achieved. We will revise the target price based on more clarity in terms of the progress in the development of its oil assets.
In a major crackdown on prime suspects in the demat scam unearthed by Sebi recently, the stock market regulator has come down heavily on Hyderabad-based Karvy DP, one of the players in the misuse of share allotment in about 105 IPOs.
Sebi, in its interim order on the IPO scam, has barred Karvy DP and Pratik DP from acting as depository participant (DP) till the completion of enquiry against the two entities and passing of the final order. Market sources fear that the Sebi action on Karvy would lead to serious consequences as the DP has more than 1000 demat accounts with it. They, however, feel that Sebi has to clarify on certain issues like the time limit, within which beneficiary accounts are to be transferred to another DP. Karvy is also a major share transfer agent and registrar for a number of companies.
The DPs can only effect transfer of beneficiary account to another Sebi-registered DP on request, said Sebi. Repeated efforts to talk to Karvy chairman C Parthasarathy was futile as he did not respond to ET's calls. M Yugandhar, Karvy MD, could not comment on the Sebi order. "I am not aware of the development as I am travelling aboard."
Suspecting that other Karvy group companies would have played a role in the scam, Sebi ordered four companies — Karvy Stock Broking, Karvy Computershare, Karvy Investor Services and Karvy Consultants — not to undertake fresh business as registrar and share transfer agent, except in businesses they have already tied up.
In the order, Sebi said that Karvy DP and Pratik DP prima facie do not appear to be fit to deal in securities market as Sebi-registered intermediaries. The regulator also said that appropriate quasi-judicial proceedings are being initiated against the two DPs.
Thelentless rise of Indiabulls, started by two entrepreneurs, has been checked by the order of the Securities and Exchange Board of India (Sebi) barring the firm from dealing in securities including IPOs till further notice.
Sebi has come down heavily on Indiabulls along with 23 other entities. Of these, about 20 are individuals and besides Indiabulls the only other securities firm which has been named is Jhaveri Securities. These entities have been barred from trading in any kind of securities, in the Indian securities market including IPOs. The order is particularly strong as it does not indicate the timeframe for barring these entities, but it says its an interim order, so another order is expected to come soon.
"Our role as alleged in the Sebi order is limited to the fact that Indiabulls demat account has received 13,939 shares of TCS from 559 accounts. We have received these shares in our client margin account from the 559 clients as margin for their trading purposes. Sebi has assumed that these clients have given these shares to Indiabulls because they were used by Indiabulls for cornering TCS IPO shares. The order is factually incorrect. It would have been better if Sebi had at least asked us as to why we received shares from 559 accounts. If we are a retail broker then we receive shares from clients as margin and receive shares in margin as per the Sebi laws that provide that we can not trade for clients without receiving margin from them," Gagan Banga founder of Indiabulls said.
Indiabulls was started by Samir Gehlot and Mr Banga a few years ago. The company's rise was meteoric. It went public in September '04, within three months of its IPO, the FII holding in the company was 50%, possibly the highest for any publicly traded stock broking firm in that time.
The rise of Indiabulls is reflected in the dark glass facade building which houses the firm in Gurgaon. The office is situated in one of the most expensive real estate in Gurgaon and rivals the glass facade office of MNCs, like Nestle, American Express, and Convergys.
Indiabulls built up an huge client base of more than 50,000 accounts in a very short period of time. The trick to attracting these clients was to use the lure of margin trading. Basically the credit arm of the broking firm would extend a loan against securities to the clients of the broking firm. In a rising market, margin trading helps investors get higher exposure, but it is considered a huge risk.
Indiaulls has been attracting not only clients but foreign investors in droves. The US fund Farallon paid Rs 88 crore for a 33% stake in Indiabulls arm in January 3, '05. Indiabulls raised $45m from the GDR market in February 25, '05.Merrill Lynch acquired 2% in Indiabulls on June 8, '05. and increased it to 5% in February, '06
LN Mittal also picked up a stake in Indiabulls Credit, while Farallon also increased it stake to 60% in Indiabulls Credit in February, '06.
Indiabulls Financial Services (IBFSL) claims to be a diversified financial services company offering, directly and through its various subsidiary companies, consumer loans, housing loans, personal secured & unsecured loans, securities brokerage & depository services, and distribution of insurance and mutual funds.
And through its group companies, IBFSL has projects of over Rs 2,000 crore in real estate development.
IBFSL boasts an employee strength of over 10,000 employees, spread across more than 400 branches in over 100 cities of India, and consolidated net worth exceeding Rs 1,800 crore.
Indiabulls stopped in its tracks
Thursday, April 27, 2006
FUND buying was seen in Glenmark Pharma, Ashok Leyland, Colgate, Dabur India, Century Textile and Nalco. On the other hand ONGC, Arvind Mills, VSNL,
GE Shipping, BPCL, i-flex Solutions, Mahindra & Mahindra, Infosys and HCL Technologies witnessed fund selling.
Orient Paper and Industries
Cluster: Vulture's Pick
Price target: Rs675
Current market price: Rs425
Price target revised to Rs675
- The revenue of Orient Paper and Industries Ltd (OPIL) grew by 26.2% to Rs278.4 crore in Q4FY2006, aided by the good performance of the company's cement and paper divisions. The top line of the cement and paper divisions grew by 40.3% and 14.6% respectively during the quarter.
- The company's operating profit, however, increased by 243.3% to Rs50.1 crore in Q4FY2006 as compared with Rs14.6 crore in Q4FY2005. The operating profit margin (OPM) improved from 6.6% in Q4FY2005 to 18% in Q4FY2006. The margin improvement was driven by a substantial rise in the profitability of the cement business.
- The profit before tax and extraordinary items increased from Rs1.52 crore in Q4FY2005 to Rs38.02 crore in the quarter. The company accounted for the previous years' unprovided gratuity liability of about Rs18.47 crore in Q4FY2006. The reported net profit in Q4FY2006 therefore stood at Rs10.11 crore as compared with a loss of Rs1.5 crore in Q4FY2005.
- During FY2006, the company reported net sales of Rs857.6 crore, a growth of 18.4%. The operating profit increased by 71.5% to Rs107.4 crore during the quarter. The performance of the company would have been much better but for the maintenance shut-down it undertook for its cement and paper divisions in Q2FY2006.
- OPIL is a cost-efficient manufacturer of cement and will be one of the key beneficiaries of the uptrend in cement prices. We are revising our FY2007 estimates and introducing our FY2008 estimates for the company. We expect OPIL to report a net profit of Rs74.1 crore in FY2007 and that of Rs100.2 crore in FY2008. Its cement division is currently valued at FY2008 enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 4.9x as compared with the industry average of 10x. We are revising our price target for OPIL to Rs675. At our price target the stock will be trading at 10x FY2008 earnings and EV/EBIDTA of 4.3x.
Price target: Rs300
Current market price: Rs262
Blow out results
- The net sales of Cipla rose by 62.7% year on year (yoy) to Rs870.6 crore in Q4FY2006 due to the strong growth in the domestic market and the exports of bulk drugs.
- The earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 36.1% led by the strong sales growth and an increase in the other income, despite the continuing pricing pressure for the company's products.
- The tax saving due to the new plant at Baddi and the export oriented unit (EOU) status of its plants in Bangalore and Kurkumbh led to the profit after tax (PAT) increasing by 62% yoy to Rs171.1 crore.
- The company received insurance claims of Rs19.7 crore in the quarter for the damage to the goods during the Mumbai floods.
- At the current market price of Rs262 the stock is trading at 21.5x its FY2008 earnings estimate. We maintain our Buy recommendation on Cipla with the revised price target of Rs300.
Cluster: Ugly Duckling
Price target: Rs720
Current market price: Rs602
Price target revised to Rs720
We expect the strong growth in the investment banking and broking divisions of JM Financial Ltd (JMFL) to continue due to the buoyancy in the Indian capital market. We believe that at a valuation of 24.0x FY2006P earnings, JMFL is trading at a good discount to its peers. Even on a price/book value of 3.1x, JMFL is trading at a discount to its peers if one considers that the company proposes to make a preferential issue at Rs639 per share. We believe the preferential issue would be highly accretive to the book value. We are therefore revising our price target for JMFL to Rs720 per share.
Cluster: Apple Green
Price target: Rs634
Current market price: Rs538
Results in line with estimates
- The consolidated revenues of Marico for Q4FY2006 grew by 17.3% year on year (yoy) to Rs297.7 crore as compared to Q4FY2005, on the back of the robust performances from both its domestic and international businesses.
- Marico's high-margin portfolio witnessed a healthy volume growth of 17% yoy and a revenue growth of 26%, contributing 76% to the total turnover as against 71% in Q4FY2005.
- The operating profit for Q4FY2006 grew by 62.2% yoy to Rs36.4 crore. The operating profit margins (OPMs) expanded by 338 basis points to 12.2%, due to the reduction in the key raw material prices and the stable product prices.
- The profit after tax (PAT) for Q4FY2006 grew by 39.3% to Rs24 crore. The PAT could have grown at a faster rate but for the higher depreciation charge and the interest burden for the short-term loan taken for the acquisition of Nihar.
- We have factored the first phase of the company's fund raising programme through equity in our estimates for FY2007E and FY2008E. Accordingly, the company will raise a total sum of Rs250 crore at a price of Rs540 per share. Considering the 8.0% dilution in its equity, the earnings estimates stand at Rs17.9 (FY2007E) and Rs22.8 (FY2008E).
- The stock is trading at PER of 22.8x FY2008E and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (Ebidta) of 13.8x FY2008E. We continue to remain bullish on Marico and maintain a Buy with a price target of Rs634.
Cluster: Ugly Duckling
Price target: Rs370
Current market price: Rs206
Get ready for a cool ride
- Play on huge growth plan of Maruti and Tata Motors: Subros is a strong play on the huge growth plan of two of the stalwarts of the domestic automobile industry, Maruti Udyog Ltd (MUL) and Tata Motors Ltd (TML). Both MUL and TML are expanding their capacities which augurs well for Subros, as the latter meets 65% of MUL's and 50% of TML's automobile air conditioning (AAC) system needs.
- Diversifying client base to de-risk portfolio: Subros intends to tap the huge potential of the AAC system market for commercial vehicles (CVs) and utility vehicles, thereby de-risking its client portfolio. It has already received an order from M&M to supply AAC systems for its new model, Scorpio. It has also received a letter of intent from Ashok Leyland Ltd (ALL) and Eicher Motors Ltd (EML).
- Expanding capacities to cater to future growth: The company has undertaken a Rs150-crore expansion plan to be implemented in two phases. In the first phase its installed capacity would be increased by 50% to 7.5 lakh units by April 2006. In the second phase the total capacity would be raised to 10 lakh units by 2008.
- Earnings to grow at 33.8% CAGR: We expect Subros' revenues to grow at a CAGR of 12%. This coupled with a 340-basis-point rise in the operating profit margin to 14.4% shall result in a 32% growth in the net profit over FY2006-08. Outsourcing orders from its collaborator, Denso Corporation, shall provide further upside.
- Buy with a price target of Rs370: At the current levels the stock is discounting its FY2008E earnings by 5.7x and its FY2008E EBIDTA by 2.8x. We believe its valuations are attractive compared with that of its peers, who are trading at 13.5x their FY2008E earnings. We recommend a Buy on Subros with a 12-month price target of Rs370, expecting an upside of 80% from the current levels.
Wednesday, April 26, 2006
Cluster: Apple Green
Price target: Rs410
Current market price: Rs298
The growth pill
- Elder Pharmaceuticals (Elder) has a diversified product portfolio that includes pharmaceuticals, consumer products and bulk drugs. It plans to launch new molecules and line extensions in the coming years. With big brands like Shelcal and Tiger Balm in its fold, the company has the ability to develop and grow big brands. Its bulk drug sales are also expected to pick up from FY2007 onwards. We expect its net sales to grow at a compounded annual growth rate (CAGR) of 20% over FY2005-08.
- Last year, Elder took concrete steps to boost its exports. The benefits of these initiatives will be seen over the next few years, as we expect its sales in the African and South-East Asian countries to start picking up. We expect the exports to grow at a CAGR of 46% over FY2005-08.
- Elder has more than 25 marketing alliances with foreign companies to market their products in India. We expect these alliances to grow into contract research and manufacturing service (CRAMS) and marketing agreements in the long term.
- The company is setting up manufacturing plants in excise-and tax-free zones to reduce the outsourcing of its finished products. As a result, its raw material cost will decrease sharply. We expect the tax savings to improve the net profit margin (NPM) significantly over the next two years.
- We expect the net profit to grow at a CAGR of 49% over FY2005-08. At 7.8x FY2008E earnings, Elder is trading at a deep discount to its peers. Considering the strong growth prospects in domestic as well as export markets and cheap valuations, we initiate coverage on Elder with a 12-month price target of Rs410, expecting a 38% upside from the current levels of Rs298.
The dizzy rise in the equity markets has resulted in the danger that many investors will make decisions that might not be prudent from the investment perspective because they feel left out as everyone earns money while their portfolio seems to be going nowhere.
This is especially true for investors investing directly in equity, where a large number of shares are showing a negative return since the beginning of this calendar year.
The ETIG examined the prices of shares to see the kind of performance that has been delivered in the last few months. The period selected for the purpose was between the beginning of January '06 and the last traded price on April 20, when the sensex hit the 12,000 point mark.
There is data available on a total of more than 2,400 companies and out of these, 1,100 actually ended up causing a loss for their investors during this time. During the same period, the sensex has gained 28%. This means that many of those investing directly in individual scrips could have lost money.
Companies, whose prices have fallen, are evident across all groups of companies on the BSE. Among the A group shares, several of the public sector banks are not returning positive figures for their investors and this has added them to the losing list.
Vijaya Bank (-14%), Oriental Bank of Commerce (-12%), Andhra Bank (-10%), Allahabad Bank(-6%), Punjab National Bank (-5%) and Bank of Baroda (-3.5%) have been joined on the negative list by some private banks like ING Vysya Bank(-12%) and Indusind bank (-9%).
The technology majors might be going great guns as far as the frontline stocks are concerned but quite a few of them are also being hit by a fall in their prices.
Visualsoft for example, is down by nearly 48% while HCL Infosys has fallen by about 37% since January. On the fertilizer front, National Fertilizer as well as RCF have witnessed a fall in terms of share price.
On the oil refining and marketing side, Bongaigaon Refinery is down 4% while the situation is only slightly better for Kochi Refineries, HPCL, IOC and BPCL, but they still ended up with negative returns for their shareholders.
In addition, a few pharma companies from the A group, like Nicholas Piramal, Novartis, Abott and Wyeth, have also ended up with negative returns.
The list gets slightly bigger when one moves to the B1 and B2 group shares, where around 160 and 260 companies respectively, have taken a hit in their prices.
This covers a wide spectrum of sectors and industries The big chunk of such companies is present in the Trade to Trade segment, where more than 350 companies find themselves ending up with a negative return for shareholders.
Expanding its footprint
The first among the many real-estate developers presently waiting to tap the capital markets
Pune-based D S Kulkarni Developers (DSKDL) constructs residential (accounting for 90% of the revenues) and commercial complexes since its inception in 1991. The company has till now completed 23 projects. Its major focus has been Pune (21 projects) and Mumbai (two projects). DSKDL has completed over 12.5-million sq ft of construction in Mumbai and Pune together.
DSKDL follows Accounting Standard 9 for recognition of revenue. Revenue is recognised after the construction of the project is completed in every respect. Inventories under work-in-progress are valued in accordance with the proportionate completion method: at the estimated cost incurred on the project at the time of finalising the accounts and the proportion of estimated profit earned on it.
In the nine months ended December 2005, sales revenue amounted to Rs 14.22 crore and the increase in inventories of complete tenements/work-in-progress was Rs 52.05 crore. As profit accrued from ongoing projects are accounted even though sales is accounted at a later date, the operating profit margin shows wild swings.
The DSK group claims to have a good land bank, which is a big asset for any developer. The group has been collecting land at low prices over the years. Group companies buy the land and then transfer it to DSKDL for development. The company has not disclosed the value of the land held by the group.
DSKDL is coming out with a composite rights issue (0.55 crore shares)-cum-public offer (0.55 crore shares) of 1.10 crore shares. Shares on rights basis will be issued to the existing shareholders at a fixed price of Rs 110. Post the composite rights issue and public offer issue, the company's share capital will double to Rs22 crore.
DSKDL plans to invest the proceeds of the composite issue for the development of nine new properties: seven in Pune, one in Mumbai, and one in Bangalore. The estimated cost by the company for development of these projects is Rs 550 crore. The nine projects and their locations are: Vishwa IT Park, DSK Garden Enclave, DSK Vishwa Saptapur, DSK Sayantara, DSK Sundarban, DSK Roshan, and DSK Vishwa V, VI, VII in Pune; DSK Madhuban in Mumbai; and DSK Bangalore Project in Bangalore
* With increasing earning population, rising disposable income, expansion of retail and IT/ITES sectors in Pune, Mumbai and Bangalore, housing demand in these cities is growing.
* DSKDL claims to have delivered on time possessions for all its projects undertaken till date.
* DSKDL has been making profit since incorporation and paying dividend since FY 2003.
* Land bank is an important parameter to evaluate a real-estate developer. However DSKDL does not own any land bank. Out of the issue proceeds (rights and public), the company is investing Rs 110.99 crore (Rs 12 crore for transfer of development rights) for purchase of land from its group companies, which are holding the land.
* Two non-resident Indians (Chandar T Bhatia and Asha C Bhatia, with a shareholding of 18.18% and 17.73%, respectively) have a stake of 35.91%, i.e., more than that of the promoter group's 24%.
* DSKDL had a negative net cash from operations in FY 2004 and FY 2005 of Rs 17.62 crore and Rs 22.75 crore, respectively, mainly due to the projects in progress.
The 52-week high/low of DSKDL has been Rs 434.45 (12 April 2006) and Rs 60.67 (13 April 2005). The current market price of the stock is Rs 392 (ex- rights).At the offer price band of Rs 250-275, DSK's PE works out to 149.5- 164.4 x FY 2005 EPS on a post-issue equity and 34.7 – 38.1 x 9-month FY 2006 annualised earning on the post-issue equity of Rs 22 crore. TTM PE for the construction sector is abnormally high at 42.7. Delhi-based Ansal Housing with an equity of Rs 14.60 crore and a net sales for FY05 of Rs 79.80 crore trades at a TTM PE of Rs 32.7
Aban Loyd Chiles Offshore
Cluster: Emerging Star
Price target: Rs1,760
Current market price: Rs1,325
Price target revised to Rs1,760
- Aban Loyd Chiles Offshore's Q4FY2006 net profit at Rs22 crore is in line with our expectations. The net revenues for the quarter grew by 17% to Rs120 crore. The growth was due to the deployment of all the company's vessels in the quarter as compared to the partial deployment in Q4FY2005.
- During the quarter the operating profit margin (OPM) of the company declined by 2% year on year (yoy) to 57.3%, primarily because of the increase in the other expenditure and stores consumed. However the pleasing thing was that the margins of the drilling segment have improved by 2.8% to 37.1%.
- The company's interest cost has declined by 14.6% on a year-on-year (y-o-y) basis and by 27% on a sequential basis, as the company has substituted its high cost debt with the funds mobilised through its recent $100 million foreign currency convertible bond (FCCB) issue.
- The net profit for the quarter stood at Rs22.1 crore, a growth of 11.3% on a y-o-y basis and a growth of 20% on a quarter-on-quarter (q-o-q) basis.
In the wake of such high earnings visibility, drilling companies the world over are being valued at their FY2009 earnings potential. Similarly, Aban Loyd's full earnings potential will only be visible in FY2009 when it operates its full arsenal of 10 rigs and all of them are fully re-priced at today's high rates. Hence we shall ideally be valuing Aban Loyd on its FY2009 earnings. At the current market price of Rs1,325 the stock is quoting at 9.8x the company's FY2009E earnings per share (EPS) and 5x the company's FY2009E earnings before interest, depreciation, tax and amortisation (EBIDTA). Considering the high visibility of Aban Loyd's earnings and the possibility of the company going in for another acquisition in FY2007, we believe the stock's valuations are attractive. We maintain our Buy recommendation on the stock with a revised price target of Rs1,760. At our price target the stock will be discounting its FY2009 E by 13x and its FY2009 EBIDTA by 6.3x.
Tuesday, April 25, 2006
Reliance Mutual Fund bought 4.2 lakh shares at Rs 1,207 per share on the NSE
The IPO of 68,89,000 equity shares was subscribed 46.92 times.
Only 10 per cent of its stake has been offered in the IPO.
Shares of Sun TV Ltd made their debut at Rs 1,111 on the Bombay Stock Exchange, 27 per cent premium to the issue price of Rs 875. The share price moved up to a high of Rs 1,500 and ended the trading session at Rs 1,466.05.
On the NSE, the shares were listed at Rs 1,000, moved up to a high of Rs 1,502.90 and closed at Rs 1,464.65.
Brokers and analysts tracking the sector said the stock price moved up on quick buying by institutional buyers.
Reliance Mutual Fund bought 4.2 lakh shares at a price of Rs 1,207 per share in a bulk deal on the NSE.
"Sun TV share price would settle at a realistic price in a couple of days. The IPO attracted a fairly good demand from institutional buyers. Those who got lesser allotment in the IPO were buying from the market today," said Mr Deepak Jasani, Head of Retail Research, HDFC Securities.
The IPO of 68,89,000 equity shares was subscribed 46.92 times. The retail portion was subscribed 2.9 times, that of non-institutional buyers 35.48 times and the portion for qualified institutional buyers, 70.8 times.
However, only 10 per cent of the company's stake has been offered in the IPO.
"As floating stock is very low, the share price moved up very sharply on buying support,'' said an analyst. "The share price at today's level looks quite stretched. Very few players barring FIIs would buy at these levels. The issue price of Rs 875 itself appeared big,'' said the analyst.
Nevertheless, Sun TV would be seen as an attractive media and entertainment stock for investors, analysts said. It has a profile close to the media and entertainment heavyweight Zee Telefilms Ltd, though the latter is considerably bigger and has a national presence.
Sun TV is part of the Sun Network, which runs 14 TV channels, four FM radio stations, two daily newspapers and four magazines.
The issue proceeds would be used to beef up Sun TV's subsidiaries, launch more TV channels, construct its own corporate office, set up studio facilities and up-linking infrastructure, purchase new equipment and upgrade existing ones.
"Sun TV's listing at a huge premium would definitely have a rub-off effect on other media stocks such as ZTL and NDTV. Media is one of the many sectors that appear buoyant at this juncture,'' said Mr Rahul Rege, Senior Vice-President, Sharekhan.
According to him, the fast moving consumer goods sector's upbeat performance would help the media industry, as there is a link between the two.
In Monday's trade, ZTL shares moved up by Rs 4.95 to Rs 247.05 on the BSE. NDTV moved up Rs 8.30 to Rs 270.35. TV Today rose by Rs 5.35 to Rs 105.50.
Navneet Publications (India)
Cluster: Emerging Star
Price target: Rs405
Current market price: Rs332
Results in line with expectations
- The Q4FY2006 results of Navneet Publications (India) (NPIL) are in line with our estimates. The FY2006 earnings per share (EPS) were Rs19.41, in line with our estimated EPS of Rs19.21.
- The net sales grew by 13.21% from Rs39.28 crore in Q4FY2005 to Rs44.47 crore in FY2006, helped by a 22.12% growth in the stationery segment. The same stood at Rs26.5 crore in Q4FY2006 as against Rs21.7 crore in Q4FY2005.
- The operating profit grew by 20% from Rs3.1 crore in Q4FY2005 to Rs3.72 crore in Q4FY2006. The operating profit margin (OPM) improved by 48 basis points from 7.89% in Q4FY2005 to 8.37% in Q4FY2006.
w Unlike in the last reported two quarters, the forex loss did not take its toll on the other income and ultimately the bottom line.
- The profit before tax grew by 50.71% from Rs1.40 crore in Q4FY2005 to Rs2.11 crore in Q4FY2006 and in the same period, the profit after tax (PAT) stood at Rs1.52 crore as against Rs1.21 crore in Q4FY2005, a growth of 25.62% year on year (yoy).
Cluster: Ugly Duckling
Price target: Rs1,000
Current market price: Rs828
Cement prices does the trick
- UltrarTech Cement's (UTCL) Q4FY2006 net profit at Rs81.8 crore was above our expectation.
- The net sales for the quarter have improved by 41% to Rs1,022 crore, helped by a 16.3% growth in the cement volumes and a 21% growth in the cement realisations.
- The operating profit margins (OPMs) for the quarter increased by 380 basis points to 18.8% primarily driven by the improvement in the cement realisations, which brought the operating leverage into play.
- Helped by a 41% increase in the revenues and a 380-basis-point improvement in the OPMs, the operating profit for the quarter soared by an impressive 77% and stood at Rs192 crore.
- With a 15% drop in the interest cost, the pre-exceptional profit before tax for the quarter jumped by a whopping 238%.
- During Q4FY2005 there was a tax write back of Rs45.8 crore on account of the reduction in the corporate tax rate. Adjusting for the same the pre-exceptional net profit for Q4FY2006 surged by 127%. The reported net profit, which stands at Rs81.6 crore for Q4FY2006, registered a jump of 1,528%.
At the current market price of Rs828 the stock is discounting its FY2008 earnings by 20x and its earnings before interest, depreciation, tax and amortisation (EBIDTA) by 12x. On enterprise value (EV) per tonne basis the stock is trading at attractive valuations of US$136 as compared to its peers, which are trading at close to US$160-180 per tonne of cement. With firm cement prices and the company's modernisation drive, we expect UTCL's earnings momentum to gather pace and register a compounded annual growth rate (CAGR) of 76.5% over FY2006-FY2008E. We believe the valuations are attractive in the wake of the strong earnings growth and the sharp improvement in the return ratios. We maintain our Buy recommendation on the stock with a revised price target of Rs1,000. At our price target UTCL will be trading at US$160 per tonne of cement, which is still at a discount to its peers
Monday, April 24, 2006
Newsletter Dated 23/04/2006 (MidCaps.In)
S.No. Scrips BSE Code Rate Target
1. Jagsonpal Pharma. (FV Rs.5) 507789 30.20 38.00
2. Kanishk Steel 513456 32.00 40.00
3. Carol Info Services 500446 42.35 53.00
4. Bal Pharma 524824 49.80 63.00
5. Gei Hamon Industries 530743 59.90 75.00
Newsletter dated 23/04/2006 (10Paisa.com )
S.No. Scrips BSE Code Rate Target
1. Central India Poly. 500099 10.88 14.00
2. Vikash Metal 532677 12.10 16.00
3. Tamil Nadu Petro 500777 21.15 27.00
4. Natural Capsules 524654 29.40 37.00
5. Abhishek Industries 521064 29.55 37.00
Hero Honda Motors
Research: UBS Investment
CMP: Rs 853 (Face Value Rs 2)
12-Month Price Target: Rs 1,010
Over the past two months, the Hero Honda stock has declined 11%, against 10% rise in the sensex. While part of the underperformance may be a result of concerns on demand slowdown due to rise in interest rates and margin compression due to hike in raw material prices, a major part of the underperformance is due to the recent strike at Hero Honda's Gurgaon plant.
UBS Investment has upgrading the rating from Neutral to Buy. The strike by contract labourers at the Gurgaon plant was resolved in six days. The strike is unlikely to have any negative impact on the company's sales volumes in April and in FY07 as it has adequate pipeline inventory and has increased production at its other (Dharuhera) plant to compensate for production loss at Gurgaon.
UBS maintains the sales volume and earnings estimates for Hero Honda. UBS estimates already take into account the other risks faced by Hero Honda, i.e. entry of HMSI into executive segment and success of Bajaj's products.
UBS has factored in 1.5-2% market share loss for the company in FY07. However, the current valuations are over-discounting the negatives. UBS price target is based on DCF with WACC of 12%, medium-term growth rate of 12% and terminal growth of 5%.
Dr Reddy's Laboratories
CMP: Rs 1,481 (Face Value Rs 5)
12-Month Price Target: Rs 1,650
Dr Reddy's has received USFDA approval for generic Allegra and has launched the product as the third generic after Teva and Prasco. CLSA expects Sandoz to be the next generic in the market on or after June 9, '06.
This will give Dr Reddy's 2-3 months in a three-player generics market. For a $1.4-bn blockbuster, this should be a substantial opportunity (potential of 30-40% pricing and 15-25% marketshare). Dr Reddy's could generate Rs 7-14 of EPS from the opportunity in FY07.
CLSA expects Dr Reddy's to launch the authorised generic of Merck's Proscar in June '06. Cipla/Ivax are the 'real' generics which will get 180-day exclusivity on the product. Since Dr Reddy's authorised generic is contingent on other generics getting 180-day exclusivity, CLSA does not expect Dr Reddy's to get an upside from Zocor's authorised generic.
Zofran ($900m) is another wild card, for which Dr Reddy's could get potential 180-day exclusivity. It could also settle out of court with GSK and launch the product with 180-day exclusivity in December '06 (potential authorised generic).
CLSA continues to be ahead of consensus on the estimates and expects the stock to perform with consensus upgrades. With several near-term triggers like Allegra generics, Proscar authorised generics, as well potential upsides like Zofran's 180-day exclusivity, CLSA expects current valuations to sustain and raise their target to Rs 1,650 (23x Mar08EPS).
Andhra Pradesh Paper Mills
CMP: Rs 142 (Face Value Rs 10)
12-Month Price Target: Rs 224
APPM is part of the fast-growing paper sector that is expected to grow higher than 6% annually. Industry has already achieved a growth rate of 6% in FY05 and is ready to reap the benefit of strong GDP growth of ~8% and improving economic fundamentals of the country.
Low per capita consumption of paper at 5.5 kg in the country vis-à-vis average global consumption of 53 kg and 11 kg in the south Asian market indicates the scope for future demand growth of paper in the domestic market.
Further, upcoming elections in five states during the year will trigger growth for low-end paper. APPM's net sales are expected to grow with a CAGR (FY05/08E) of 15.2% to Rs 680 crore and PAT at 38% to Rs 66.7 crore. Sharp improvement in EBIDTA margins from 13.5% in FY05 to 26.2% in FY08E will gear up the EBIDTA by 196% to Rs 180 crore (Rs 60 crore in FY05).
EBIDTA margins expansion will lead to improved return ratios. Emkay expects RoCE to improve 13.7% (12.8%) and RoE to 15.1% (11.8%) by FY08E. APPM at current price is trading at 5.8 times EPS Rs 21.5 in FY07E and 4.4 times EPS Rs 28 of FY08E.
EV/EBIDTA of 6.2 times and 4.0 times of FY07E and FY08E, respectively, and P/BV of 0.7 times and 0.6 times respectively are very much favourable and indicates the potential upside for the stock.
In light of the quantum jump in EBIDTA margins and strong return ratios, Emkay values the stock at Rs 224 based on 8 times of FY08E earnings in 12-18-months period, i.e. 81% upside from current levels.
Historically, the stock has been traded at these levels. At Emkay's target price, the stock quotes at P/BV of 1.13 times of FY08E and EV/EBIDTA of 5.3 times of FY08E estimated earnings.
Research: Angel Broking
CMP: Rs 344 (Face Value Rs 10)
12-Month Price Target: Rs 410
UTI Bank reported an overall strong performance for the quarter ended March '06. The bank registered a y-o-y net profit growth of 30.2% to Rs 152 crore in the quarter under review, beating expectation of Rs 129 crore.
UTI Bank's balance sheet continued to grow at a rapid pace, led by the strong growth in business volumes. The bank's balance sheet grew by around 32% to Rs 49,700 crore in FY06. Its net advances surged by around 43% to Rs 22,300 crore, led by strong growth in both corporate and retail advances.
Corporate advances were up 38.6% to Rs 15,800 crore, while retail advances witnessed a rapid growth of 55.1% to Rs 64,900 crore. Combined, they constituted around 29.1% of the bank's total advances. In retail advances, housing loans constituted around 41%, while auto loans made up around 39%.
The bank's strategy of Retail Asset Centres (RACs) has led the way for strong growth in its retail portfolio. It has retail distribution centres across 43 towns and cities and plans to extend the centres to additional 30 towns and cities.
UTI Bank's investment portfolio also registered a strong growth of 43% to Rs 21,500 crore. (Rs 15,000 crore). UTI Bank has leveraged on its widespread network and RACs to expand its low-cost deposits, retail portfolio and improve margins.
The bank has also maintained the robust growth in core business and balance sheet. At the current market price, the stock is trading at 16.1 times FY07E EPS of Rs 21.5, 2.4 times FY07E book value of Rs 143.1 and 2.5 times FY07E adjusted book value of Rs 136.8.