Investor's Eye
[July 07, 2008]
SHAREKHAN SPECIAL
Q1FY2009 FMCG earnings preview
Expect margins to be under pressure
We expect the overall revenues of Sharekhan's FMCG universe to increase by 13.2% year on year (yoy). The revenue growth was on the back of a steady volume growth and hefty price hikes during the quarter and the last twelve months. The volumes and prices were increased primarily to combat the steep increase in the raw material costs. During the quarter, we expect the margins of all the FMCG companies to be under pressure in spite of the price hikes affected by the companies, as the companies would see an increase in their input costs. Thus, we expect the operating profit for Sharekhan FMCG universe to grow only by 6.2% and the adjusted net profit for the quarter to grow by a meagre 6.9%.
STOCK UPDATE
Cadila Healthcare
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs372
Current market price: Rs314Price target revised to Rs372
Key points
Regards,
The Sharekhan Research Teammyaccount@sharekhan.com
Tuesday, July 8, 2008
Re: Sharekhan Investor's Eye dated July 07, 2008
Wednesday, June 11, 2008
Is Oil Really on the Boil ? : A New Perspective to Oil-Mania
It is claimed by all and sundry (government, oil companies, the market) that there is a net subsidy (under-recovery) of about Rs 225,000 crore. And that the poor man's fuel, kerosene, was, until recently, being heavily subsidised. Various facts about the market and domestic price of four energy items (kerosene, LPG, diesel and petrol) are presented for two different assumptions of international oil prices: at $80 and $130 a barrel. The concern here is not what the net tax on oil should be; rather, it is whether the GoI oil policy is transparent.
Five major oil facts are interesting, if not revealing. First, and most unusually, the price of diesel in India is considerably below (25% less) the price of petrol; the world prices diesel at 20 per cent above the price of petrol. Second, the consumer price of petrol in India is more than that in the US (at $4.40 a gallon), and among the highest in the developing world. In China, petrol is priced at only 74 cents a litre, compared to the average Indian price of $1.17 a litre. Third, with oil at $80/barrel, use of kerosene was being taxed by 5 per cent. Most people (including myself) believe that use of kerosene has been heavily subsidised. Fourth, at $80/barrel oil, the total tax gain to the economy was around Rs 91,000 crore; today, at $130/barrel oil, the total loss (subsidy) is only Rs 25,000 crore or only 0.5% of GDP. Fifth, and finally, there is little sign of the 5% of GDP loss figure (Rs 225,000 crore), which is fashionably being touted around as the loss from our oil policy. How is this patently false figure obtained? Via the oiliness of Indian policy, which is to first impose a tax on produced oil, and then sell it at a somewhat lower price, and then sell oil bonds to make up some of the difference! At the end of it, no one knows whether there is actually a subsidy or a tax, and what its cost to the economy is. A numerical example can help illustrate. Assume international oil is at Rs 100; there is first a Rs 50 tax, then a Rs 25 subsidy. The government claims it is subsidising by Rs 25, when it is indeed taxing by the same amount! The figures presented are also disturbing. Why is there not much more scrutiny and discussion about the oily expenditures involved with other non-transparent government policies? Such expenditures are greater, and help the poor less. But a greater problem might be that the government (RBI, Ministry of Finance, etc) may be making policy based on the certainty of $150-170/oil for the next year when there is not enough evidence to warrant this conclusion.
The oil bulls are correct in their explanations of why prices have jumped. It's indisputable that worldwide demand has surged, chiefly driven by strong growth in China, India and the Middle East. It's also true that most of the world's reserves are controlled by governments in places like Russia and Venezuela that mismanage production, thus curtailing supply growth.
But rather than forming a permanent new plateau for prices - as the bulls contend - those forces are causing a classically unstable market that's destined for a steep fall
In a normal oil market, the cost of producing the last, most expensive barrel of oil needed to satisfy worldwide demand sets the price for every barrel the world over. Other auction commodity markets work much the same way.
So even if Saudi Arabia produces at $4 a barrel, if the final, multi-millionth barrel required to heat houses and run cars costs $50, and is produced, for argument's sake, at a flagging field in West Texas, the world price is $50. That's what economists call the equilibrium price: It's where the price that customers are willing to pay meets the production cost, including a cushion, naturally, for profit or "the cost of capital."
But today, the sudden surge in demand and the production bottlenecks have thrown the market radically out of balance.
Almost exactly the same thing happened in the housing market. And both housing and oil supply react to a surge in demand with a long lag. In housing, the lag is caused by restrictive zoning and development laws, especially in coastal markets like California and Florida.
So when the economy roared back in 2002 and 2003, builders couldn't turn out homes fast enough for buyers armed with those cheap mortgages. As a result, prices spiked. They no longer bore any relation to the actual cost of buying and improving land, or constructing and marketing a new house (at some reasonable profit margin). Instead, frenzied buyers were setting the price.
Because builders were reaping huge windfall profits, they rushed to buy and develop land. And sure enough, those new houses were ready just as buyers were retreating to the sidelines because they could no longer afford to buy a home. That vast overhang of unsold homes is what's driving down prices today.
The story is much the same with oil, with a twist. A big swath of the market isn't really paying that $125 a barrel number you hear about seemingly every hour. In China, India and the Middle East, governments are heavily subsidizing oil for their consumers and corporations, leading to rampant over-consumption - and driving up prices even more.
But sooner or later the world won't keep paying those prices: Eventually, the price must fall back to the cost of that last barrel to clear the market.
So what does that barrel cost today? According to Stephen Brown, an economist at the Dallas Federal Reserve, that final barrel costs just $50 to produce. And when the price is $125, the incentive to pour out more oil, like homebuilders' incentive to build more two years ago, is irresistible.
We've learned another important lesson from the housing market: The longer prices stay stratospheric, the worse the eventual crash - simply because the higher the prices and bigger the profit margins, the bigger the incentive to over-produce !
A similar scenario occurred following the price explosion in the 1970s and early 1980s. The price spike caused the world to cut back sharply on oil consumption. By the mid-80s, oil prices had fallen from almost $40 to around $15. They remained extremely low for two decades.
It's impossible to predict how the adjustment this time will take shape, just as it was in housing. There the surge in supply came in places the experts swore there was "no supply," and wouldn't be any. Builders found a way to extend vast tracts of homes into California's Inland Empire and Central Valley, and even build "in-fill" projects near the densely-populated coasts.
An earlier bubble is also instructive. In the early 1980s silver prices jumped from $10 to $50 on the theory that the world was facing a permanent shortage of silver. Suddenly ads appeared asking homeowners to bring their tea sets and jewelry for a big price. Silver supplies poured from seemingly nowhere, out of peoples cupboards, of all places.
And so it will be with oil. We don't know where the new abundance will come from, from shale, or tar sands or coal or an OPEC desperate to regain market share. We just know that it will appear.With prices like these, it always does , as history has the knack of repeating itself !!!
Friday, May 30, 2008
Strong Q4 GDP lifts bourses (Post Market Report:: 30.05.2008)
up throughout the day. Power and oil & gas stocks tumbled.
Information technology stocks were in demand.
Crude oil was trading around $125 a barrel, nearly $5 lower than
its level on Thursday, 29 May 2008. It hit a record $135 last week.
European markets, which opened at Indian markets, were trading
firm. Key indices in UK, France and Germany were up by 0.21% to
0.49%. Asian markets were mostly in the green. Key indices in Hong
Kong, China, Japan, Singapore and South Korea were up by 0.59% to
1.52%. However, the key index in Taiwan was down 0.76%.
India's GDP grew a strong 8.8% in Q4 March 2008 from a year
earlier, led by strong expansion in the services sector, data
released by the government earlier in the day showed. The Q4 annual
GDP growth matched an upwardly revised 8.8% growth in Q3 December
2007. The GDP growth was 9% in FY 2008 (year ended March 2008). The
government had earlier estimated annual growth of 8.7% in FY 2008.
India's inflation based on the wholesale price index rose 8.1% in
12 months to 17 May 2008, the highest reading in more than 3-½
years and above the previous week's annual rise of 7.82%,
government data released today, 30 May 2008, afternoon showed.
Inflation for the week ended 22 March 2008 was revised upwards to
7.85% from 7%.
The 30-share BSE Sensex rose 99.31 points or 0.61% to 16,415.57.
The index climbed 224.23 points at day's high of 16,540.49, hit at
the onset of trading session. Sensex lost 1.27 points at the day's
low of 16,314.99, hit in afternoon trade.
The broader based S&P CNX Nifty rose 34.8 points or 0.72% at
4870.10. Nifty June 2008 futures were at 4848, a discount of 22.10
points against the spot closing.
The NSE's futures & options (F&O) segment turnover was at Rs
35,883.79 crore, lower than Rs 64758.96 crore on Thursday, 29 May
2008. BSE clocked a turnover of Rs 5478 crore in the cash segment
as against Rs 6,230.43 on Thursday, 29 May 2008.
The Securities & Exchange Board of India (Sebi) on Thursday, 29 May
2008, allowed sovereign wealth funds, university funds, endowments
and charitable trusts to register as foreign institutional
investors. (FIIs).
The government on Thursday, 29 May 2008, announced relaxation on
restriction imposed last year on external commercial borrowings
(ECBs). The limit on the amount that a company can borrow by way of
ECB and repatriate, has been raised to $50 million from $20
million. The government has allowed infrastructure firms to borrow
up to $100 million from abroad.
Derivative contracts for May 2008 series expired yesterday. As per
reports, rollover of Nifty positions from May 2008 series to June
2008 series stood at 66% as compared to 71% in the previous expiry.
Marketwide rollovers were 82% as compared 81% in the previous
series.
US markets advanced for a third straight day yesterday, 29 May
2008. The rally was led by strength in the financial sector and a
big decline in oil prices.The Dow Jones industrial average advanced
52.19 points, or 0.41%, to 12,646.22. The Standard & Poor's 500
index rose 7.42 points, or 0.53%, to 1,398.26, and the Nasdaq
composite index gained 21.62 points, or 0.87%, to 2,508.32.
The market breadth was weak on BSE with 1008 shares advancing as
compared to 1701 stocks that declined. 58 stocks remained
unchanged.
The BSE Mid-Cap index rose 0.28% to 6,760.54, while BSE Small-Cap
index fell 0.59% to 8,133.04. Both these indices underperformed the
Sensex.
India's largest private sector firm by market capitalisation and
oil refiner Reliance Industries fell 2.63% at Rs 2401.65.
India's largest private sector bank by assets ICICI Bank was down
1.13% at Rs 788.30.
The top Sensex gainers were, Housing Development Finance
Corporation (up 5.59% at Rs 2569.15), Ranbaxy Laboratories (up
4.77% at Rs 528.65), Bharat Heavy Electricals (up 3.89% at Rs
1662.15), HDFC Bank (up 2.53% at Rs 1357.85).
India's largest engineering & construction firm by revenue Larsen &
Toubro soared 3.19% at Rs 2981.35. The company, on Thursday (29 May
2008) recommended a liberal 1:1 bonus issue and a total dividend of
Rs 17 per share for the year ended March 2008. The company reported
a 37.95% rise in net profit to Rs 966.76 crore on a 34.79% increase
in total income to Rs 8715.92 crore in Q4 March 2008 over Q4 March
2007.
The top Sensex losers were, Jaiprakash Associates (down 5.39% at Rs
213.20), Ambuja Cements (down 2.66% at Rs 95.20), Mahindra &
Mahindra (down 2.26% at Rs 592.50), State Bank of India (down 1.43%
at Rs 1443.35), and Reliance Infrastructure (down 1.25% at Rs
1230.75).
The BSE IT index outperformed the Sensex, gaining 2.11% at
4,643.79. Infosys Technologies (up 3.64% at Rs 1,957.55), TCS (up
3.41% at Rs 1,029.25), and HCL Technologies (up 0.92% at Rs
312.90), gained. However, Wipro (down 0.88% at Rs 508) and Satyam
Computer (down 0.485 at Rs 523.75), slipped.
The BSE Power index underperformed the Sensex, falling 3.69% at
2,936.24. Power Grid Corporation of India (down 3.48% at Rs 98.50),
GVK Power & Infrastructure (1.85% at Rs 47.75), Torrent Power (down
1.45% at Rs 115.50) and Tata Power (down 0.65% at Rs 1,356.65),
slipped.
Reliance Power traded ex-bonus on a bonus of 3:5 at Rs 235.85. The
record date for bonus issue is on Monday, 2 June 2008.
State-run oil firms, which were marginally up earlier in the day,
fell even as the Reserve Bank of India (RBI) raised banks'
borrowing limit to state-run refining companies to 25% keeping in
mind the current situation in the oil sector. The BSE Oil & Gas
index underperformed the Sensex, falling 1.65% at 10,396.85. HPCL
(down 1.94% at Rs 244.655), BPCL (down 0.33% at 357.70), declined.
Among the private sector oil firms, Essar Oil (down 2.78% at Rs
223.65), Reliance Petroleum (down 1.02% at Rs 174.55) and Cairn
India (down 0.64% at Rs 285.65), slipped.
AIA Engineering galloped 5.95% to Rs 1559.15 after the company
scheduled a board meet on 4 June 2008 to consider stock split
proposal.
Stock brokerage firm Geojit Financial Services vaulted 4.09% to Rs
56.05 on reports the Reserve Bank of India has cleared French bank
BNP Paribas' open offer for Geojit Financial Services shareholders.
Steel products maker Sujana Metal Products surged 4.42% to Rs 24.80
after the company announced the acquisition of three steel units
with an investment of Rs 180 crore.
Pharmaceuticals firm Cadila Healthcare gained 1.35% to Rs 295.50
after the company said it has acquired 100% stake in Laboratories
Combix, a Spanish pharmaceutical company, for an undisclosed
amount.
Real estate developer Sobha Developers gained 2% to Rs 498.85 after
posting 13.23% rise in net profit to Rs 228.3 crore on 32.77%
increase in total income to Rs 476.50 crore in Q4 March 2008 over
Q4 March 2007.
Tamil Nadu Newsprint & Papers rose 1.11% to Rs 100.10 after posting
26.1% rise in net profit to Rs 27.38 crore on 10.9% increase in net
sales to Rs 250.22 crore in Q4 March 2008 over Q4 March 2007.
Among the side counters, Spice Communication (up 10% at Rs 59.65),
Bhushan Steel (up 8.67% at Rs 909.15), Hindustan Construction
Company (up 7.25% at Rs 119.10) and Sintex Industries (up 7.06% at
Rs 418.55) and Sun TV Network (up 6.81% at Rs 354.35), soared.
Indian Overseas Bank (down 5.93% at Rs 115.75), Adani Enterprise
(down 5.79% at Rs 794.05), Indiabulls Financial Services (down
5.56% at Rs 367.15), and Dish TV (down 5.50% at Rs 46.40), lost
ground.
Reliance Power clocked a highest turover of Rs 354.21 crore on BSE.
Reliance Industries (Rs 290.11 crore), larsen & Toubro (Rs 224.07
crore), Piramal Life Sciences (Rs 169.61 crore) and IFCI (Rs 166.31
crore), were the other turnover toppers on BSE in that order.
IFCI reported a highest volume of 2.62 crore shares on BSE.
Reliance Power (1.44 crore shares), Spice Communication (1.35 crore
shares), Ispat Industries (1.20 crore shares) and Reliance Natural
Resources (88.22 lakh shares), were the other volume toppers on BSE
in that order.
Thursday, May 29, 2008
Sharekhan Investor's Eye dated May 28, 2008
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Entering the stock market? Be warned
The market on Wednesday witnessed short covering a day before F&O expiry tomorrow. Taking a cue from the Asian markets, the Sensex opened flat today. In a day when volatility ruled supreme, the Sensex swayed between the positive and negative. What strategy should you adopt? Which sectors look promising? Which stocks to buy, sell and hold? In a chat on rediff.com on Wednesday, stock market expert Pranav Sanghavi, director, Jitendra Harjivandas Securities (P) Ltd, replied to many such readers' queries. Here is the transcript:
hiformVIz asked, Hi Pranav Good afternoon, please tell me your view on DLF,GMRinfra,IndianBank,IndionOil,AurobindoPharma,UcoBank,VijayBAnk, I am keep on averaging but these stocks going down day by day,I have following stocks:andrabank, ashokley,aurbindopharma,balrampur chini,dlf,gmrinfra,hindalco,indianoil,indianbank,ispat,ITC,JP associt ,L&T,nagfertilize,,NTPC,,Powergri,rel natural,rel patrolem,rel power,seimens,uco bank,vijaybank.Please suggest me which stocks to sell ,which stocks to avrg or buy.
PRANAV SANGHAVI answers, at 2008-05-28 16:09:20You have mentioned a lot of stocks. I would hold on to most of the stocks that you have mentioned. In the short term the markets still look weak. A couple of stocks like Indian Oil [Get Quote], RNRL and RPL could be churned.
riyas asked, Hi Pranav,Is it wise to buy Bhushan Steel [Get Quote] shares at current price. Which steel share is good for 1 to 2 years outlook among Tata steel [Get Quote], JSW steel [Get Quote], Jindal saw [Get Quote], SAIL [Get Quote] and bhushan steel. Bhushan 52 week high price is Rs.1730.
PRANAV SANGHAVI answers, I would rater look at TISCO, JSW and SAIL.
Ritesh asked, I have thermax of Rs.460, and Andhra Cement of Rs. 25. Can I Hold this ?
PRANAV SANGHAVI answers, You could hold on to them fo 6 to 12 months.
Shakti asked, Hi, I have invested in REL POWER with 100 shares. What should be the strategy now? old or sell?
PRANAV SANGHAVI answers, You would have to hold on for 2-3 years to see any material benefit. I don't think the stock would see new highs very soon. You could switch to say a NTPC or Tata Power [Get Quote] but get in to these stocks also at lower levels.
kaake asked, WHAT DO YOU THINK PRICE OF RPL AND RNRL BY DEC 2009.
PRANAV SANGHAVI answers, By Decembe 2009 RPL should have appreceiated substantially from it's current levels. RNRL would only depend on the outcome of the court battle with RIL [Get Quote] for the gas fields.
sameer asked, What is your take on hindustan zinc, Kotak mahindra bank [Get Quote], Guj. Minerals and Adlabs [Get Quote]. Does these company have lot of potential to do better in the future? Shall i buy these stocks at current prices and hold it for 1 year outlook. Thanks
PRANAV SANGHAVI answers, Hind Zinc and GUj Min are cyclical metal commodity stocks so you will see a lot of price swings over a one year time frame. Kotak had an extremely high exposure to the capital markets and even RBI had asked them to prune their exposure. So this current quarter results will give more insight in to how they will fare over the next year.
IAMSUNIL asked, hI PRANAV, Your take on BHEL & SBI [Get Quote] if one wants to purchase at this level
PRANAV SANGHAVI answers, I would wait for a mild correction ad dips to get in to the stocks. I would surely look at them with a 1 year outlook.
jkl asked, view on jmc projects, GMDC, Saamya Biotech, Jetking
PRANAV SANGHAVI answers, GMDC could be looked at. Jetking is one of the leading training institutes spread accross India. That stock could be looked at on corretions.
sameer asked, Is there any bad news about IDBI as the share prices have fallen deeply recently.? Thanks
PRANAV SANGHAVI answers, The hgher interst costs, the higher consumer price index and probable lower corporate performance is being perceived as potential higher NPA's in the future and also thebanks profitability ould be hit if there is a low credit off take.
ravs asked, I want to invest 50k in stock for short tesrm. pls suggest right stock to invest
PRANAV SANGHAVI answers, When the market corrects you could look at stocks like RIL , SBI & L&T.
RamDongre asked, Should I buy LIC [Get Quote] Housing,Crompton at this level ?
PRANAV SANGHAVI answers, With the property markets expected to slump byt 10 to 20%, plus high nterest rates makes it a tough proposition for housing financ companies. Crompton could surely be lookd at with a 6 to 12 month outlook.
mnb asked, I had bought NTPC at 216.00. It is around 180.00 at present. Should I hold on ?
PRANAV SANGHAVI answers, I would look at buying more at these levels.
Phil asked, Hi Pranav,Can we hold onto SAIL and Gujarat Ambuja [Get Quote] in the current scenario.
PRANAV SANGHAVI answers, Yes you could. The Government has just relaxed the export norms and the major beneficiary should be Guj Ambjua due to its location in Gujarat. I would surely hold on. SAIL also can be held on.
jai asked, Hi pranav, When buying shares, how the 52 week high and low price value significant. Thanks.
PRANAV SANGHAVI answers, It gives you an idea what level are you buying in to the stock at its yearly low or high.
Sunitha asked, Good Evening. I hold 500 shares of IFCI @65.What will be target of IFCI in a week. Shall i hold for better returns or exit with min.losses?
PRANAV SANGHAVI answers, I would switch the stock once I see marginal profit. You could minimize your losses and switch to a better stock.
Manish asked, Please inform your views on Brokerage firms Geojit, India Infoline [Get Quote] and Edelweissis. ALso, Is it right time to enter Gujrat Ambuja Cement [Get Quote] for long term ?
PRANAV SANGHAVI answers, The brokerage firms may have seen their worst quarter in the past couple of yars. So I would wiat for the quarter ended March 2008 to take a call. The volumes have also fallen drastically so their profitability will be affected. Companies like Edelweiss may balanc their income through other activitie like Investment Banking and Merchant Banking. Yes you could look at Guj Ambuja Cement wth along termoutlook too.
KUMAR asked, Whichsectors look promising? Which stocks to buy, sell and hold?
PRANAV SANGHAVI answers, With the dollar appreciating steadily against the Ruppee that sector could be looked at but with a short term outlook till the dollar appreciation continues. You could also look at cement and engineering stocks.
atufa asked, i have 220 ntpc@186,54 ongc@920 & 60 bhel@1620,when can get decent profit,atleast 15-20 %
PRANAV SANGHAVI answers, You would have to hold on for 6 to 9 months.
Gnan asked, Holding 100 nos of Powergrid @ Rs. 135 and 50 nos of RPL @ Rs. 215. when do u see the stocks reach above these levels with the present market conditions????
PRANAV SANGHAVI answers, t would surely be some time before you see those prices.
bhatkuly asked, what about sesa goa prospects
PRANAV SANGHAVI answers, I have liked the stock for some time. I would hold on to take benefit of the bonus. I think the stock will only rise post bonus too.
Pavan asked, I have MTNL [Get Quote] and IDBI is it ok if i hold onto them..
PRANAV SANGHAVI answers, Both could remain underperformers in this market scenario.
Balaji asked, HCL [Get Quote] Tech bought at Rs. 270/- should I sell or hold - what price it can reach in 3-6 months
PRANAV SANGHAVI answers, You could surely hold on to HCL with 3 to 6 month outlook.
gopi asked, when nifty crosses 5300 plus
PRANAV SANGHAVI answers, It looks difficult in the near term. THe Nify may take a downward turn once it breaches the 5100 range.
Chanakya asked, What is your view on ITC ?
PRANAV SANGHAVI answers, ITC is a fundamentally strong stock. Even in the Jan and Mar crash ITC did not correct in correlation to the market. It has shownsome good delivery based buying from institutions and I would surely hold on to the stock.
Haridas asked, Good Afternoon sir, I have 2 Shares of MMTC @29,000/-, Shall I want to hold it
PRANAV SANGHAVI answers, Yes wait for the bonus and split. I think the stock will move us subsequently.
GAURAV DOSHI asked, NTPC SHOULD BE BOUGHT OR NOT AND IF YES TILL WHEN IT SHOULD BE HOLD?
PRANAV SANGHAVI answers, Yes you could surley buy NTC on every dip and you could hold on for 6 to 12 months.
GANGAL asked, PL ADVICE ON ACC, INFOSYS [Get Quote] , SBI, GE SHIPPING ,HOTEL LEELA,RELIANCE INFRA ,BHEL,SAIL,RNRL. POWER GRID .
PRANAV SANGHAVI answers, HOld on to all the stocks you mention barring may be RNRL and Rel Infra.
Ganesh asked, How about oswal chemical and fert ? Is it good level to buy ?
PRANAV SANGHAVI answers, In the current market scenario I would probably not.
Chanakya asked, I have invested in City Union Bank [Get Quote] and Karnataka Bank [Get Quote]. At what rate can I buy more ?
PRANAV SANGHAVI answers, You would have to wait for a 6 to 12 month period to see gains. You could buy more if the price corrects by another 4-5%.
aditya12 asked, I have United spirits [Get Quote] 200 shares. WIll it reach 2000 again in next 6 months ?
PRANAV SANGHAVI answers, You could see that price in9 to 12 months.
Chanakya asked, Mr. Pranav are you there. We are waiting for you to come online.
PRANAV SANGHAVI answers, Yes very much here and answering your queries.
GAURAV DOSHI asked, WHEN NTPC WILL CROSS 220?
PRANAV SANGHAVI answers, If you take a longer term view then yes it should.
kishor asked, are realty stocks worth buying at this time for period of one year or more?
PRANAV SANGHAVI answers, I would wiat for them to correct further as there is a general feel in the markets that the property markets may correct by 10to 20% in about 9 months period.
ASHISH asked, HMT LTD [Get Quote]. BOUGHT @86RS. SHOULD I SELL OR HOLD
PRANAV SANGHAVI answers, Hold.
rrrr asked, what is your outlook about idfc and chambal fertiliser?
PRANAV SANGHAVI answers, I like IDFC [Get Quote] as a stock. It is fundamentally strong and has performed well over the past fw years. Chambal also shoudl benefit form the governmet subsidies for the frtilizer sector.
ASHISH asked, Hiiii
PRANAV SANGHAVI answers, Hi Ashish and what is your query?
satish asked, hi pranav ihave invested in L&T POWER GRID RIL RPL ALOCK ICICI HDIL PFC RELINCE POWER ITC ICAN HOLD THE STOCK FOR 5 YEARS THANKS
PRANAV SANGHAVI answers, I think you have made a good choice of stocks. Over five years you should see agood profits on your investments.
Reddy asked, Hi, I bought Reliance Capital [Get Quote] on 1210 RS and IDFC on 151 RS can I hold or sell?
PRANAV SANGHAVI answers, You could hold on to both with a 6 to 12 month outlook though.
MPRAO asked, Hello sir iam planning to invest in alok industries for future as a invesment long term can you advise me whether this company is good for long term and you can specify any good companies for investment
PRANAV SANGHAVI answers, I would like to know wh have you chosen Alok Ind from all the other blue chip stocks available in the market?
hiformVIz asked, Can buy grasim,SBI,BHEL ,Rel Ind at current levels
PRANAV SANGHAVI answers, Yes you could but I would wait for a minor correction before I get in.
Chanakya asked, Can you recommend other good diversified stocks like ITC ?
PRANAV SANGHAVI answers, You could look at HUL, Nestle [Get Quote] from the FMCG segments and Indian Hotels from the hotel sector.
qurious asked, should i hold Gujrat NRE coke? i bought it at 162, 200 shares
PRANAV SANGHAVI answers, You can surely hold on but witha 6 to 12 month outlook.
Shailendra asked, Hi Pranav, I have brought 5000 shares of Chemplast Sanmar [Get Quote] at 22.25. Today it has a rate between 9-10 Rs. What is the future of Chemplast Sanmar?
PRANAV SANGHAVI answers, I don't follow that stock so I wouldn't be able to help you sorry.
sivaram asked, Hi Pranav, I have Rel Pet 800@160, Panacea Biotech 100@297.1, Dishman [Get Quote] Pharmacetical 100@286, Teledata Info 1000@16.8, ICICI Bank [Get Quote] 50@840, Yes bank [Get Quote] 480@204.38, NTPC 200@189.5, Power Grid 350@93.1, Suzlon [Get Quote] 100@291, Idea Celluear 200@97.5, GMR Infra 400@137.4, SAIL 100@163.4, Indian Hotels 200@110.5, L&T 50@2794.5, Jain Irrigation 25@590 and Zee Entertainment 200@243. Please advice which to hold and which to sell? Thanks
PRANAV SANGHAVI answers, You have mentioned too many stocks for me to reply within a minute. I would hold most of the stocks you have mentioned as your rates are pretty low.
Chanakya asked, Should I buy/sell or hold Ballarpur Industries [Get Quote] ?
PRANAV SANGHAVI answers, It is one of the largest paper players in the country. I would hold on to the stock.
Ganesan asked, What are the future prospects of Hdfc [Get Quote],hdfc bank and Thermax?
PRANAV SANGHAVI answers, I like both HDFC and HDFC Bank. But with the high interest rates both the housing finance and banking stocks are being hammered over the past couple of weeks. They have lost nearly 15 to 25% off their price.
Chanakya asked, Hi Pranav Do you think the oil rally will put speed breakers on our stock market ?
PRANAV SANGHAVI answers, Its not only the Oil rally but the high infltion numbers, potential slow down of profitability of the corporates which is scaring the markets right now.
kkp asked, WANT TO BUY DLF & ICICI BANK TELL ME SCOPE
PRANAV SANGHAVI answers, I would wait for a minor corrction to get in.
PranavSanghavi asked, ADLABS is a tremendous buy opportunity at CMP.
PRANAV SANGHAVI answers, Adlabs has corrected nearly 50% off its highs. I think the stock will take a very long time to reach it's previous highs. You could look at the stock witha 6 to 12 month outlook.
Chinku asked, Pranav what is your take on the current market levels - is it a good time to invest ?
PRANAV SANGHAVI answers, Wait for a minor dip before making investments.
suresh123 asked, Sir i am holdinh HCC @144, NTPC@195 & IDFC @ 160, Yes bank @187 & Canara bank [Get Quote] @ 275 levels... what is your views on these in shrttermm.. when can i expect atleast a break even????
PRANAV SANGHAVI answers, You would have to hold on for atleast 6 months to see some profits.
ranjita asked, I have ABB @1350/- Bhel @2200/- L& T @3500/-Bharat Forge @335/-Spanco Tele @245/-&NTPC@210/-What to should I average or Book Loss & enter at lower level
PRANAV SANGHAVI answers, You could average ABB, BHEL, L&T and NTPC at lower levels.
ManishS asked, hi.. I would like to know the future of RPL. I have purchased 200 shares of RPL @ 250. I can hold the stock for 6-8moneths. thanks
PRANAV SANGHAVI answers, RPL will only tart moving when its commercial production begins or is soon to begin. Once that happens the stock will see an upward movemen again.
sachinkw asked, Hi Pranava, I have reliance power 60@350 should I sell them now or wait for bonus? Thanks Sachin
PRANAV SANGHAVI answers, Wait for the bns so your cost is lowered. You could then look to switch to anther stock.
Kris asked, How is the outlook for GMDC, GVK, GMR, Mundra & FirstSource?
PRANAV SANGHAVI answers, Firstsource is one of the largest players in the outsourcing market and with the dollar appreciating it will only benefit them positively. GMR is a long term infrastructure bet.
prav_001 asked, I have BHEL at 1690. Whats ur say?
PRANAV SANGHAVI answers, I would dive in to the stock between 1350 and 1450 levels.
sunilkrsehgal asked, what is the future of teledata informatics?
PRANAV SANGHAVI answers, Some months back they had applied to the high courts for a demerger scheme. Each shareholder would get 1 shre of 3 to 4 new companies each against each share held of Teledata. I have not rechecked on the company but one should wait to receive the free shares before taking a call on the stock.
PRANAV SANGHAVI says, Well it hs been great chatting with you all. Hope to see you next week. Bye for now.
Wednesday, February 6, 2008
Sharekhan Investor's Eye dated February 06, 2008
Ratnamani Metals and Tubes
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs1,440
Current market price: Rs1,070
Steady growth momentum
Result highlights
For Q3FY2008, Ratnamani Metals and Tubes Ltd (RMTL) reported a growth
of 14.3% year on year (yoy) in the net sales to Rs214.4 crore. The net
sales were however marginally below our expectation.
The operating profit grew by 13.9% to Rs48.1 crore and the operating
profit margin (OPM) remained flat at 22.5%. The OPM remained flat on
the back of stable raw material prices and improved operational
efficiency.
The other income showed a steep increase on a year-on-year (y-o-y)
basis and came in at Rs3.3 crore. The increase in other income is
attributed to the foreign exchange (forex) gain.
The interest cost was up 28.1% to Rs4.4 crore, while the depreciation
charge jumped by 85.9% to Rs6.2 crore.
The net profit increased by 25.7% to Rs27.3 crore inline with our
expectation of Rs28.5 crore.
The order book stood at Rs532 crore executable over the next six-month
period. Orders worth Rs132 crore came in from direct exports.
Canara Bank
Cluster: Apple Green
Recommendation: Hold
Price target: Rs315
Current market price: Rs308
Margins continue to remain under pressure
Result highlights
Canara Bank reported a profit after tax (PAT) growth of 26.4% year on
year (yoy) to Rs458.8 crore. The PAT growth was mainly due to a 92.4%
year-on-year (y-o-y) jump in the non-interest income driven by higher
treasury profits. The core-operating performance was however
disappointing with the net interest income (NII) down by 10% (which is
a slight improvement over Q2FY2008, when it was down 19.8% yoy).
The NII was down by 10% yoy, but up 18.7% quarter on quarter (qoq) to
Rs934.4 crore. Canara Bank is perhaps the only public sector bank
(PSB), which reported a y-o-y decline in its NII. The calculated net
interest margin (NIM) for Q3FY2008 stood at 2.2%, down 63 basis points
yoy from 2.83% for the year ago period. The significant y-o-y
contraction in the NIM was mainly due to the higher cost of funds
offsetting the yield improvement.
However, the reported non-interest income increased by a whopping
92.4% yoy though down 4.5% qoq to Rs554.6 crore. The rise in the
non-interest income was mainly from higher treasury income and cash
recoveries.
The operating expenses grew by 13.5%, as the bank has not yet provided
for the revised AS-15 transitional liability expenses. Hence the AS-15
related costs are likely to keep the operating costs high in Q4FY2008.
Overall the operating performance remained weak with the operating
profit up by only 10.5% yoy to Rs757.8 crore.
The business growth moderated with the advances up by 8.7% yoy
compared with 24% for FY2007. The deposit growth was also moderate at
9.4%. The management has put in place a strategy of repaying the
high-cost deposits and reducing the low-yield advances.
Asset quality levels showed some marginal improvement with the gross
non-performing assets (GNPA) in percentage terms down by 12 basis
points to 1.54% sequentially (and down from 2.06% in December 2007).
The net NPA (NNPA) were down by 10 basis points to 0.89% sequentially
(and down from 0.96% in December 2006). The coverage ratio of the bank
continued to remain low at 42.8%.
The core operating performance of the bank was disappointing during
Q3FY2008 with pressure on NIM and slowdown in the growth of deposits
and advances. However the directors have put in place a strategy of
repaying the high-cost deposits and reducing the low-yield advances.
This strategy is likely to show results after a few quarters. The
pressure on NIM is also likely to continue for a couple of quarters
before the same stabilises. The operating expenses are likely be back
ended, as the bank is expected to provide for the revised AS-15
transitional expenses during FY2008, which would restrict the earnings
growth in the fourth quarter.
At the current market price of Rs308, the stock is trading at
inexpensive valuations of 7.1x its FY2009E earnings per share (EPS),
3.6x pre-provisioning profit (PPP) and 1x book value (BV). We don't
foresee a major downside for the stock considering its inexpensive
valuations. We therefore continue with a Hold recommendation with a
price target of Rs315.
Mahindra Lifespace Developers
Cluster: Ugly Duckling
Recommendation: Buy
Price target: Rs1,096
Current market price: Rs629
Q3FY2008 results—in line with expectation
Result highlights
Please note that Q3FY2008 numbers are standalone numbers, which does
not give a complete picture, as the company's major SEZ projects
(Chennai and Jaipur SEZ projects) are executed through its
subsidiaries. The consolidated numbers are eported on an annual basis.
Mahindra Lifespace Developer's (MLD) revenues grew by 3.8% year on
year (yoy) to Rs43.4 crore in Q3FY2008. During the quarter, the
revenues were booked from Mahindra Eminente in Goregaon, Mahindra
Royale in Pune and Sylvan County in Chennai. In M9FY2008, MLD's
revenues declined by 7.4% yoy to Rs112.5 crore, due to delay in the
projects launches for the standalone properties in the previous
quarters.
The operating profit margin (OPM) contracted by 329 basis points yoy
to 19.1%. Consequently, the company's operating profit declined by
11.5% yoy to Rs8.3 crore.
MLD's net income grew by 17.6% yoy to Rs11.2 crore primarily due to
the increase in the other income to Rs5.2 crore in Q3FY2008 from Rs3.1
crore in Q3FY2007. The other income rose on account of higher interest
income generated on cash surplus. In M9FY2008, MLD's net income grew
175.8% yoy to Rs10.6 crore primarily due to higher other income on
account of dividend income received from its subsidiary, Mahindra
World City Developers.
