DCM Shriram Consolidated ltd and Indage Vintners Ltd:Future growth prospects and outlook,buy/sell?

Story:Diversified companies is a category of stocks that fund managers don’t like. DCM Shriram Consolidated Limited has interests in sugar, fertilisers, chemicals, hybrid seeds, building systems and cement. All of these segments are doing well. Its agribusiness comprises fertiliser, sugar and seeds and contributes to over 50% of the turnover. It also has a rural business centre – Hariyali Kissan Bazaar with 301 outlets throughout the country. Agro-input business produces urea and markets other brands of fertilisers and pesticides. The company has started procuring gas from Krishna-Godavari Basin for its urea production. It has four sugar plants with crushing capacity of 33,000 tonnes per day (tpd) and a power generation capacity of 70.5MW. All the sugar plants are self-sufficient in meeting their power requirement from the captive plants.The chemical division (contributes 23% to the turnover) manufactures chlor-alkali and related chemicals like caustic soda lye and flakes, liquid and gaseous chlorine, hydrochloric acid and stable bleaching powder. The manufacturing facility is in Kota (Rajasthan) and Bharuch (Gujarat). It has completed the chlor-alkali expansion from 200tpd to 440tpd at its Bharuch facility along with commissioning of the 48MW coal-based power plant. It manufactures multiple grades of PVC resins. The total capacity is 70,000tpa. It uses the calcium carbide route to manufacture PVC resins, whereas all other manufacturers use the ethylene route. The surplus calcium carbide produced in its plant is sold to chemicals and steel industries after its own requirements are met. It manufactures unplasticised PVC windows and doors. DCM is into building systems too; Fenesta has become a leading brand. DCM is a turnaround story in a year that has been tough for many companies. For 2008-2009, its turnover was up 36% and operating profits have been accelerating. In the March 2009 quarter alone, operating profit and net profit were Rs120 crore and Rs81 crore, respectively. Given the growth momentum, DCM Shriram Consolidated can end FY09-10 with a profit of Rs180 crore which will mean an EPS of Rs11. At the current price of around Rs51, the stock is available at five times its estimated profit for this year. Its market-cap to sales is 0.25 times and operating profit to market-cap is 2.44 times. Even if the valuation remains the same, the stock could go up by 60%-70%, thanks to possible profit growth. Buy the stock at Rs40.

Grasim board approves cement biz demerger into Samruddhi

The Grasim board that met today has decided to demerge its cement business into Samruddhi Cement, a wholly-owned subsidiary of the company. Grasim’s shareholders would receive one equity share of Samruddhi for every one share they held in Grasim.
Samruddhi’s share post demerger would be in addition to that of Grasim’s and Grasim shareholders would own 35% of Samruddhi. “Post demerger, Grasim will own 65% of Samruddhi,” stated the company’s press release adding that Samruddhi would be listed post the demerger scheme is made effective.

Samruddhi is yet to make formal consolidation proposal to UltraTech Cement board.

For the company's complete press release, click here.

Kumaramangalam Birla Chairman of Aditya Birla Group says that the board considered various other options before approving the structure and only proposals ensuring continued control and strategic interest were considered. “The move reaffirms the continuing interest in the cement business.”

Grasim’s management, while addressing a press conference, says the transfer from the company will not include investment in UltraTech Cement.

Buy Subros, target of Rs 50: Sharekhan

Sharekhan has maintained its buy rating on Subros with a target price of Rs 50 in its September 30, 2009 research report. On Thursday, the share was quoting at Rs 41.10, down Rs 0.25, or 0.6%.

"In line with the increase in our estimates, our price target stands revised to Rs 50 (based on 10x FY2011 earnings estimate). At the current market price the stock is trading at 8.2x its FY2011E earnings and enterprise value (EV)/earnings before interest, tax, depreciation and amortisation (EBITDA) of 3.6x. We maintain our 'Buy' recommendation on the stock," says Sharekhan's research report

Buy Ratnamani Metals, target of Rs 133: Sharekhan

Sharekhan has maintained its buy rating on Ratnamani Metals and Tubes with a target price of Rs 133 in its September 30, 2009 research report. On Thursday, the share closed at Rs 106.15, down Rs 1.25, or 1.16%.

"The company has been witnessing gradual improvement in its business environment. RMTL’s specialty products consumed in high-growth sectors like power would drive the volumes going forward. Further, meaningful revival in orders from the refinery sector could add to incremental orders. At the current market the stock trades at 4.8x its FY2011 estimates, which we feel is attractive and thereby reiterate a 'Buy' on the stock, target of Rs 133," says Sharekhan's research report.

Buy M&M Financial Services, target of Rs 275: FinQuest Sec

FinQuest Securities has recommended a buy rating on Mahindra & Mahindra Financial Services with a target price of Rs 275 in its October 1, 2009 research report. On Thursday, the share closed at Rs 233.35, up Rs 3.30, or 1.43%.

"The company's asset quality risk is already priced due to aggressive provisioning policy. Currently the stock is trading at 1.6x FY10 ABV, a significant discount to Shriram Transport finance. We believe that MMFSL will make 17% RoE's by FY11 (15.4% in FY09) led by strong earnings growth and should trade at 1.7x FY11 ABV. We initiate coverage with a target price of Rs 275," says FinQuest Securities' report.

Buy Sesa Goa, says Anu Jain

VP-IIFL Private Wealth Management at India Infoline is of the view that one can buy Sesa Goa.

Jain told CNBC-TV18, "We have seen Sesa Goa quite buoyant despite the fall in the world markets or the metal prices of the last two weeks. Despite the last three days of our market, its consistently stayed over its ten day moving average and its giving a breakout and that too a far larger kind of a level in the medium term. You will probably see somewhere around Rs 320 in this and it's a good stock to buy. In the short term it can go upto Rs 256-257, in the long term I see this as one of the leading metal stocks, which has continued to kind of outperform."

Buy cement stocks at lower level: R Shah

Angel Broking is of the view that one can buy cement stocks at lower level.
Shah told CNBC-TV18, "Cement companies have put in very good numbers for the June quarter actually and surprised most of the analysts. They are quoting at really interesting levels but a poor monsoons, so shortage of water is going to be there and we are not going to feel that right now. But probably next year in the month of March-April-May we could see a construction activity taking a hit because I have never seen such kind of situation – I mean 11 days of August have passed and there is absolutely no rain in a place like Mumbai, so I have never seen this kind of August in my entire lifespan of 39 years. The impact is going to be there, so I would rather be cautious and may be wait for lower levels to get into the market and cement stocks."

Experts see 10% Sensex fall; recommend stocks to buy!!!

The markets snapped their three-day losing streak. The indices managed to shrug off a weak start but remained volatile through out the session. The markets survived a late sell-off and the Nifty shut shop at 4,471, up 34 points, while the Sensex ended at 15,074 up 65 points. Auto, realty, and metals were the star sectors clocking gains of up to 3%. The pullback was on muted volumes with the total turnover hovering around the Rs 85,000 crore.

Rajat Bose of rajatkbose.com says the Nifty has found an intermediate bottom at 4,400 today. "4,420-4,387 has been a good support level. Today is the first day of the recovery, so volumes are not there. Volumes would come once 4,516-4,520 range is crossed. But bulls will get back the initiative only after 4,585 is crossed. That still is a tall order.

Ajay Loganadan, Head-Investment Advisory Group, HSBC Private Banking, feels after a significant rally, India should really move sideways or consolidate over the next few months. "This has been driven with significant amount of liquidity." In the short-term, he sees liquidity, global newsflow, and fund flows coming into India impacting markets.

According to him, there are strong fundamentals to keep our markets from really falling back to March or 8,000-9,000 levels. "Those look highly unlikely, but could we see another 2,000 points cut on the Sensex. That is something we could expect given this newsflow on the monsoons. On a daily basis, there seems to be resistance coming up at higher levels. You are getting very sharp sell-offs at the later part of the day which could be trading but could also be institutions sitting in Europe who decide on what they are going to do in India."

Rajen Shah, CIO, Angel Broking, is a bit cautious on the markets at present. "We strongly believe that poor monsoons will have a significant impact though many refuse to believe that already 161 districts have been declared drought hit. That will have a significant impact without taking into account this Swine Flu outbreak. May be we could see about 10% downside and could go down to about 13,700-14,000 kind of levels. We have just corrected by about 800 points from the top, and need to correct a little more than what we have corrected. So, another 1,000 points from here should not be difficult in coming down from those levels." Shah says investors could think of getting into the market around 13,500-14,000 levels.

Monsoon Impact:

Loganadan said a 2% output reduction in agriculture, actually impacts our GDP by only 1%. "Given the fiscal stimulus policies and the policy measures that have been announced, which are largely geared towards the rural sector, we believe that should really offset the negative impact of monsoons."

Sector Watch:

Shah says he would invest in companies which are into agri-commodities like sugar or tea. "Farmers who make money from the high prices of agri-commodities may go in for aggressive buying of fertilisers, pesticides, and agro chemicals. Hence, I would certainly be very bullish on anything related with agriculture. Also, I would get into some irrigation companies, which are into manufacturing of PVC pipes because only 30-35% of the total cultivable land in the country is irrigated. Looking at what has happened this year, a number of initiatives would go towards irrigating the farm fields in a very aggressive manner over the next few months and years."

From agri-commodities, he likes McLeod Russell, Bayer Cropscience, Rallis India, and ITC. "McLeod Russell is showing a lot of strength. It is quoting hardly about 10-11 times earnings and tea prices are going pretty firm. Bayer Cropscience and Rallies India are quoting a P/E of 10. I would certainly not hesitate to get into companies like ITC which are into rural retailing at about Rs 200-210 kind of levels."

He is also bullish on Finolex Industries from the irrigation pack. "Finolex Industries is quoting just about 5 times compared to Jain Irrigation which is quoting about 20 times. This company has also got a subsidiary joint venture with an Israeli company which is significant player in the drip irrigation and the micro irrigation business."

Source: Moneycontrol

Buy Bank of Rajasthan above Rs 70: Bose

Technical Analyst, Rajat K Bose is of the view that one can buy Bank of Rajasthan above Rs 70.

Bose told CNBC-TV18, "Bank of Rajasthan is moving up from the bottom. When a stock starts getting re-rated from the bottom, you see this kind of performance. Of course unless and until you see it crossing Rs 65-70 decisively, not just an intra-day hit around those levels, I would say that one should hold purchasing this stock at this point of time. Only when it crosses that Rs 70 mark then you buy otherwise you can get a decline because the rise has been pretty sharp.”

Buy JSW Steel on dips: Sukhani

JSW Steel:

Technical Analyst Sukhani told CNBC-TV18, "JSW Steel is an excellent chart and you really need to buy such stocks on dips. It is another stock that you can put in your portfolio and say okay I won’t eve trade, I will just hold it. But either ways it’s a good stock to trade in."

Buy Suzlon Energy with target of Rs 110: Bose

Suzlon for Monday :-)

Technical Analyst, Rajat K Bose is of the view that one can buy Suzlon Energy with target of Rs 110.
Bose told CNBC-TV18, "One can buy Suzlon Energy. This looks pretty good to me and my target for this stock would be Rs 110 on Monday."

Buy Satyam Comp with target of Rs 120: Bose

Satyam: In safe hands now :-)

Technical Analyst, Rajat K Bose is of the view that Satyam Computer Services is a buy with target of Rs 120.
Bose told CNBC-TV18, "It’s a buy and it was a buy, the next target is Rs 120 and probably that target will be met sooner or later and once that level of Rs 120 is crossed then it is going to move further up, so if you ask me what are the sectors that I think in the next leg of upswing, IT is definitely one and Mahindra Satyam will definitely do well there."

wiLL rEmaiN mArkeT GianT :-)

Buy Infosys:

Strong balance sheet: The Company has a very strong financial position
with USD 2.5 bn of cash, despite the current weak market scenario. This, in
our view, would come handy in opening overseas business centres as well
as to fund any strategic acquisition required to strengthen its service
offerings.

Upgrade from Hold to Buy with a TP of Rs. 2,257: Factoring its recent
better-than-expected financial performance, proven execution and cost
management abilities, strong cash flow in challenging times, and 18%
valuation upside, we upgrade our recommendation to Buy.
The stock is trading at a forward P/E multiple of 20.3x and 18.8x for FY10E
and FY11E, respectively. Moreover our DCF valuation, assuming a 12% of
WACC and a 5% of terminal growth rate, gives a target price (TP) of
Rs. 2,257, an upside of 18% over the CMP.

Infosys’ revenue in Q1’10 remained stable on sequential basis at
USD 1.12 bn and was substantially higher than its guidance of
USD 1.06–1.08 bn largely on account of lower-than-expected volume decline
of 1.1% and favourable cross currency movement which contributed around
USD 23 mn to USD 24 mn. However, in INR terms, revenue declined 2.9%
qoq to Rs. 54.72 bn as rupee appreciated by 3% against the dollar.
The revenue contribution from the US and Europe has moved up in this
quarter and the trend is likely to continue as IT/ ITES sector is slowly gaining
strength in these regions with improving global scenario. Moreover, with
signals of improvement in the BFSI segment, we find Infosys well-positioned
to gain from the recovery with its well-diversified portfolio of financial
softwares and support offerings. In the telecom vertical, which consists of its
top client, British Telecom (BT), Infosys has started to diversify and bag new
clients. However, revenue from retail and manufacturing verticals is likely to
remain sluggish due to the reduction in discretionary spending. We expect
the growth in volumes to remain subdued in the first half of FY’10 and expect
it to pick up in the second half. Overall, we expect the revenue to grow at a
CAGR of 5–6% during FY09–FY12, in rupee terms.

Margin dilutive investment plan
Contrary to our expectation of weak margins, the EBITDA margin climbed up
367 bps yoy to 34.1% in Q1’10 due to a 347 bps yoy decline in software
development expenses as percentage of sales and a deferral of planned
investment in local hiring at its overseas operations.
However, we forecast a fall in FY10 EBITDA margin by around 180bps,
which implies significant margin contraction in subsequent quarters due to
the expected increase in cost per employee and sales and marketing
expenses. The cost per employee is likely to increase in the coming quarters
as the Company has elongated the training period from four months to six
months and it is planning to add more headcounts locally in all the markets
which could be expensive. The company is also planning to spend more on
sales and marketing over the subsequent quarters to increase its clientele
and win new deals.

Expiration of STPI tax holiday benefit will hit profitability margin
The Company’s effective tax rate has increased from 17% in the last quarter
to 20% in Q1’10 and is expected to remain at this level for FY10. From FY11,
it is expected to increase to the level of 24%. This is so, as the Software
Technology Parks of India (STPI) benefits for most of the facilities will expire
in the current year and the existing work cannot be shifted to tax-exempted
special economic zone (SEZ) units soon. However, the Company is actively
engaged in the process of shifting some work to SEZ to tackle this issue.
Consequently, we expect the net profit margin to decline by 220 bps to
25.4% in FY10.

Key Risk
The following factors can pose a threat to our rating:
· A prolonged recession in the developed markets
· Any adverse currency movement
· Worse-than-expected volume decline

a sTroNg bEt !!!

UltraTech Cement :

Sharekhan has upgraded its rating on UltraTech Cement from hold to buy with a revised target price of Rs 850 in its July 21, 2009 research report.
"For Q1FY2010 UltraTech Cement (UltraTech) has reported a net profit of Rs 417.8 crore, as against our estimate of Rs 333.6 crore. The net profit for the quarter improved by 57.6% year on year (yoy). We are also upgrading our recommendation on the stock from 'Hold' to 'Buy' with a revised target price of Rs 850 (EV/tonne of $87 on expanded capacities, which is at 13% discount to replacement cost of $100)," says Sharekhan's research report.
Source: Sharekhan

dOn'T miSS thIs 1 :-)

Crompton Greaves :

Crompton Greaves posted a 8.0% yoy growth in its consolidated Top-line to Rs 2,198 crore (Rs 2,035 crore) for 1QFY2010. During the quarter, consolidated net profit registered strong growth of 30.8% to Rs 160 crore (Rs 123 crore). During FY2009-11E, we expect the company to register Top-line and Bottom-line CAGR of 12.2% and 16.4%, respectively. At the current price, the stock is quoting at 17.3x and 14.6x FY2010E and FY2011E EPS respectively, which we believe is attractive compared to its peers ABB and Areva T&D, which are quoting at 25.7x and 24.4x CY2010E EPS, respectively. We advise investors to add stock on dips and maintain our Accumulate recommendation, with a target price of Rs 311.
Source: Angel Broking

tHis wILL bE a moNeY SpiNNer !!

Jai balaji industry:

Target:340
Duration:12-15months
Traded in:Nse-bse

The company is going to be a 25000crs turnover company by 2014-15. It ended fy08 with a sales of around 1400crs. The company stunned everyone by recently announcing a mega invstment of 16000crs within the next few years. Over the next 10 months expect the commissioning of power plant, coke oven plant, rolling mills, pallet plant and ductile pipes. The company is doing everything that it can to make itself a company to reckon.A big giant in the making. Jai Balaji, at present is an integrated 1.2 million tpa steel manufacturer. It expects to add 2 million TPA in another 34 months (first phase) and another 5 million TPA in the following 24 months (5 million tonnes steel, 3 million tonnes cement and 1,215 MW power plant in Purulia, for Rs 16,000 crore). So Jai balaji is going to be a 8 million TPA company by 2014.At that time it should be the 4th or 5th largest integrated steel company of india.

Management is aggresevily buying the shares from the open market. Check out the below given link of bse to get aware of the confidence the management is having(http://www.bseindia.com/Insidetrade_ScripWise.asp?scripcd=532976)

Conclusion:The company is in no mood to dilute its equity and assured its shareholders to have a equity cap of not more than 65crs. Now the last point which should tempt anyone to have a pie of the company-It guided an EBITDA margin of 40% by the next 6 years. You can surely calculate 40% of rs 25000crs isnt it? Now do onething more, cut back 20% from the total 40% for taxes,interests,depriciation etc. Its the most conservative estimate-So whats the figure coming like? Dont tell me 5000crs of profit-750rs EPS....or it so? Steel companies trades at an average PE of 2-8.Now make your own target based on the estimates. Go for it guys.