Our Picks For the Year 2008

On the stocks which are already on our recommended list we feel Orchid Chemicals and Riddhi Siddhi Gluco Biols will emerge as clear winner in this new year.

On the large cap we like

ONGC (CMP Rs. 1236.50/-)

The stock currently trades at 12 times it's FY08E EPS of 105. At the current price the stock is an excellent value buy. Being an Oil Exploration company the high oil prices is set to benefit it's top line and bottom line growth. ONGC's aggressive gas discovery this year provides a positive outlook for re-rating in this counter.

On the Smallcap front our picks are

Shri Lakshmi Cotsyn Ltd (CMP Rs.197/-)

The stock currently trades at less than 6 times it's trailing 12 month EPS. With aggressive expansion plans and strong operating margins among textile stocks, the stock is a good value pick for the coming year.

Himalya International (CMP Rs. 27/-)

The stock currently trades at around 9 times it's trailing 12 month EPS. With growing domestic retail sector this food processing company is expected to see aggressive growth in both top line and bottom line earnings.

On the Midcap stocks we bet on

JK Lakshmi Cement (CMP Rs.198/-)

Coming soon...Watch out our blog for a detailed analysis on JK Lakshmi Cement

Wish you all a very happy and prosperous new year

Year 2007 has been yet another blockbuster year for the stock markets. The market saw a spectacular bull run for the fifth consecutive year.
The sensex this year was up by more than 45%. The broader indices (Midcap and Smallcap) this year posted exceptional returns outperforming the sensex returns.

Year 2008 can be challenging and as per analyst predictions can turn out to be a first bear market after 5 years of spectacular bull run. The questions remains whether the year forward can offset the global economy challenges and continue the bull market running streak.

The challenges that remain ahead in 2008 are

1) Impact due to US Credit Crisis.
2) Deteriorating Consumer Spending in developed economies.
3) Rising cost of commodities and crude oil.

Domestic challenges include

1) High crude oil prices which Indian markets has still not taken into consideration.
2) Continuing Rupee Appreciation.
3) High raw material prices.

Although major challenges are attributed towards developed economy like US, Europe and Japan, we cannot rule out the fact the correction in the developed economy is likely to have a repercussion on the rest of the world. Albeit the fact that the Indian economy has come to stand on stronger structural pillars, the growth trajectory is still highly dependent on the developed economy.

In the upcoming year inspite of the economical challenges we are positive on select pharma stocks, Infrastructure and Energy Sector, Select Automobile counter. We caution our subscriber and readers to take a conservative call on Textile and select metal stocks. We are expecting some revival in International Sugar prices and recommend a wait, watch and pick strategy on this counter. We see a consolidation phase in IT arena with more M&A, at the sametime expect this sector to underperform the broader indices.

Coming soon... Watch out our blog for top picks of the year 2008.

Our performance

As of today our blog completed four months, thanks to the continuing support of our subscribers and readers. Our subscriber feedback has been the main driver in Improving the content of our blog.

All of our recommended stocks have ended this year on a positive note. Neyveli Lignite (241%), Alok Textiles (64%), Chennai Petro (51%), Hotel Leela (46%), Dish TV (41%), Orchid Chemical (33%) and TNPL (27%) have been the star performers.

With this we wish you once again a very happy and prosperous new year and like to start the new year with the quote of Warren Buffet, the greatest investor of the era,
"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"

Warm Wishes,
Srivatsan Srinivasan

Best Tax Saving Mutual Fund (ELSS)

With the Indian financial year around the corner, Tax planing is one activity which comes on everyone's mind. In this article we will cover one of the tax saving instrument, Equity Linked Saving Schemes (ELSS).

Equity Linked Saving Schemes are mutual funds that invest in the stock market and also give tax benefit under Section 80C. Apart from tax benefits these mutual funds have exploited the rally in equity markets very well.

For three years ended Nov'07 most of the top funds in this category have given an average yearly return of around 60%.

Funds like SBI Magnum tax gain, Principal personal tax saver fund, Sundaram BNP Paribas Tax Saver have generated sensation returns of more than 130% per annum during the last 5 years. Not to say most of this is attributed to the exceptional Bull run of the Indian Stock Market.

With the Global economy showing a steep slowdown, the question remains can these mutual funds continue the sensational returns. Below are out top ELSS mutual funds picks which we feel will continue to beat the Index return.

The parameters we have considered in evaluating these mutual funds are

1) Past performance for the last 5 years.
2) Funds Sectoral concentration.
3) Portfolio and Fund management dynamics.

1) SBI Magnum Tax Gain Scheme

NAV: 67.57 (Dividend), 67.62 (Growth)

Absolute Return

Duration Return (%)
2007....... 54
3 year..... 343.8
5 year..... 1,475.9

Top Investment Sectors - Engineering, Banking/Finance, Oil & Gas, Cement, Metal & Mining
Asset Allocation - Equity (87%), Debt (1.32%), Cash (11.15%)

2) Sundaram BNP Paribas Tax Saver

NAV: 21.77 (Dividend), 45.76 (Growth)

Absolute Return

Duration Return (%)
2007...... 65.2
3 year.... 251.3
5 year.... 939.9

Top Investment Sectors - Banking/Finance, Engineering, Metal & Mining, Oil & Gas, Cement
Asset Allocation - Equity (96.30%), Cash (3.70%)

3) Principal Personal Tax Saver Fund

NAV: 213.88

Absolute Return

Duration Return (%)
2007...... 81.8
3 year.... 237.3
5 year.... 674.6

Top Investment Sectors - Engineering, Metals & Mining, Oil & Gas, Banking/Finance, Conglomerates
Asset Allocation - Equity (93.47%), Cash (6.53%)

The returns in the above mutual fund are subject to market performance. These are high risk instrument as entire asset is allocated to equities.
Individuals with Low risk and moderate return can Invest in the below ELSS mutual fund. The fund has an excellent track record and is one of the few funds to withstand the 2000 market crash.

Templeton India Pension Plan

NAV: 18.02

Absolute Return

Duration Return (%)
2007....... 25
3 year..... 74
5 year..... 176.9

Top Investment Sectors - Banking/Finance, Engineering, Conglomerates, Oil & Gas, Telecom
Asset Allocation - Equity (40.59%), Debt (51.73%), Cash (7.68%)

The above stock (Templeton India Pension Plan) has a lock in period of 3 years and a Exit load of 3% if redeemed before the age of 58 years.
This fund can also be considered as an additional pension plan if vested till the age of 58. Consider for a person with average age of 30, Investing Rs. 10,000/- per year for 20 years (Rs. 2 Lakhs), with a average return of 12% per annum can yield you around Rs. 20 Lakhs at the terminal year of the policy.

For Individuals who have already exhausted their tax eligibility, watch out this page for multibagger stock recommendation.

Tata Steel - A fundamental play

Tata Steel is one of the lowest cost and most cost-efficient steel producing companies in the world.

After a series of acquisition, Tata steel this year acquired 100% shares of corus group, a 21 million tonne capacity steel producer with plants in UK and netherland. The acquisition of Corus has transformed Tata Steel from a domestic steel producer to an international steel company with global scale.

Even though the acquisition was a very high bid compared to it's initial offer the company seems to be doing things in the right manner. Raw material security is a significant imperative for the long-term sustainability of Steel company success. Tata Steel is actively exploring operations in resource-rich countries for iron ore and coal, as also seeking fresh leases for iron ore and coal at various locations in India. On this path tata recently entered in to JV with riversdale.

The company main challenges ahead is the integration of corus. Currently the combined entity Operating margin is around 13% in compared to it's standalone Operating margin of around 40%. The key is to improve the combined entity Operating margin to atleast around 28%.

Other risks we foresee in the medium term are

1) High debt instrument incurred on account of corus acquisition together with corus existing debts in place.
2) Increase in equity capital to fund the acquisition.
3) Commodities prices including steel has shot up enormously in the past few years. With the world economy seeing a recession the prices of commodity is expected to fall drastically.
4) Demand-Supply in steel seen neutral due to huge steel capacity expansion seen in china.
5) Raw material security has reduced to 17% from 80% with corus acquisition.

At the current market price of Rs. 833/- the stock trades at around 12 times it's fully diluted FY08E EPS of Rs. 68. We are not seeing any exceptional rise in the bottom line current year and at this price the stock seem to have a over run up. We expect the stock to correct and stabilize around Rs. 680/- in the medium term (6-8 months). At around Rs. 680/- we initiate a buy call on Tata Steel with a horizon of 3 years for investor with medium to high risk profile. The stock can turn on to be a potential multi bagger for long term investors.

Expansion Details

1) Tata Steel had initiated steps to establish three green field steel plants with captive iron ore mines in Orissa, Chattisgarh and Jharkhand, which would add an additional capacity of 23 million tonnes. In addition the company is planing to increase these capacities to 56 mpta by 2015.
2) The expansion project in it's Jamshedpur works to produce 6.8 mtpa is expected to complete by June 2008.
3) The company is subsequently increasing it's Jamshedpur crude steel production to 9.7 mtpa by FY2010.
4) The company is setting up a coke (main raw material for steel) making facility, with a production capacity of 1.6 mtpa. The production is expected to commence in 2008.

Other expansion details are not covered as part of our current analysis.

Positives

1) Tata Steel branded products Tata Pipes, Tata wiron, Tata Shaktee, Tata Tiscon, Tata structura, Tata bearings, Tata agrico to add exponentially to it's topline and bottom line growth.
2) Domestic steel demand to fuel up companies topline.
3) Tata Steel is the preferred supplier of steel to major auto manufactures including Toyota, Honda, Hyundai, Ford etc.
4) By 2015, the company plans to increase it's steel production capacity to 50 mpta which is around 8 times it's capacity on a standalone basis.

Buy Riddhi Siddhi Gluco Biols Ltd

Riddhi Siddhi Gluco Biols Ltd (RSGB) is the largest manufacturer of starch, liquid glucose, dextrose monohydrate and other derivatives, high maltose corn syrup and byproducts like corn gluten meal and enriched fibre, which are used in various applications such as chocolates, processed foods, glass and medicines, paper, glucose and textiles.

RSGB controls about 17 per cent of the total starch market. With the current expansion in place the market share is expected to increase around 25% by FY09. Currently exports constitutes around 10% of it's revenue and the company is projecting exports to increase 25% of it's revenue by FY10.

RSGB major revenue comes from clients like Nestle, HUL, Ranbaxy, Ballarpur, ITC, Grasim, Indian Rayon and Godrej.

At the current market Rs. 237/- the stock trades at around 10 times it's trailing 12 month diluted EPS of 24. Investor with medium to high risk profile can consider investment into this stock with a horizon of 20 to 24 months. We expect the stock to do EPS of around 38 in FY09E. Based on our FY09E the stock has a target of around Rs. 440/-

Positive on

1) The company recently added 500 tpa of starch capacity which is expected to be reflected in FY09 earnings.

2) Roquette which has around 14.95 per stake in RSGB and is also the world 5th largest starch manufacturer. Roquette will help RSGB add more value added products in its portfolio by way of providing technology and knowhow. The new products will be for nutrition, biotech and health and dextrose for sugar free goods.

3) The new value added product will help RSGB realize better margins.

Risks

1) Increase in Raw Corn Prices. Corn prices are in Increase due to US policy on using corn as alternate fuel.

2) There has been under utilization in the first two quarters of FY07 due to fire in one of it's plant. The company seems to be back in business after 5 months of severe disruption.

Orchid Chemicals - A Value Buy

Orchid is a globally recognized, integrated pharmaceutical company with core competencies in the development and manufacture of Active Pharmaceutical Ingredients (APIs) and Finished Dosage Forms as well as in drug discovery.

Orchid product range for the US market comprises 21 antibiotics and 20 non-antibiotic dosage forms, many of which are also aimed at European as well as other regulated and emerging markets.

Currently regulated markets like US, Europe and Japan contributes to around 77% revenue, while the less regulated market like Hongkong, China, India etc contributes to around 23%.

At the current market price of Rs. 222/- the stock trades at around 13 times it's 12 month diluted EPS of 17.08. Last two quarters the company saw a good spurt in their Operating Margin. The EBITDA margin improved significantly to around 35% during the quarter. This was made possible due to their new product Cefixime and Cefdinir. We expect the company to do EPS of around 21 in FY08. Based on it's FY08E EPS, Orchid has a target of around Rs. 340/- with a horizon of 12 to 15 months.

Betting On

In the antibiotics space Orchid expect to launch new products in the cephalosporins, betalactams and carbapenem spaces between 2007 and 2010 in US, EU and Japan. In the non-antibiotic space, Orchid is developing a robust pipeline of over 80 products covering diverse therapeutic segments.

Orchid is done with it's investment phase and hereon the investment is expected to get translated into revenues. Orchid has invested in and completed projects for expansion and diversification in the cephalosporin, betalactam and non-penicillin, non-cephalosporin (NPNC) or lifestyle drug spaces. Cephalosporin projects have already been translated into revenues; betalactam, carbapenem and NPNC projects will translate into revenues in this fiscal and beyond.

Orchid has also entered into the CRAMS (Custom Research and Manufacture Segment) with two agreements under execution

1) With Pfizer Inc. for animal healthcare products
2) With Biovitrum AB to undertake medicinal chemistry

Fundamentals

1) Cephalosporin and betalactam dosage form facilities would start generating remunerative generic business in Europe from the second half of 2007-08.

2) The Company intends to establish a marketing presence in Japan, the second largest pharmaceutical market in the world (estimated at around US$ 60 billion).

3) Entered into marketing alliances for antibiotics as well as non-antibiotics dosage forms with major pharmaceutical players in the US and Europe, strengthening its regulated market position.

Risks

1) Orchid further dilution of Equity can reduce the Earnings visibility.

2) Rupee appreciation against the dollar can impact the Operating Margins.

3) Cost control and taxes imposed by government can reduce the profitability of the firm.

Buy Alok Industries - A hidden gem in Textile Arena

Alok Industries Operates in a diversified business portfolio ranging from Home Textiles, Retail (Home and Apparels), Garments, Spinning, Yarn and Apparel Fabrics.

Alok revenue mix comes from Home textiles (18%), Textursing (26%), Apparel Fabrics (49%), Garment (2%) and Cotton Spinning(5%).

Currently Exports account for 35% of the total revenue. Out of which exports to US account for 53% and Asia 24%.

At the current market price of Rs. 66/- the stocks trades at around 6 times it's trailing 12 month EPS. Investor with a Low to medium risk profile can consider investment into this stock with a horizon of 18-24 months. Since the company has major additions coming up across it's businesses, it is too early to set a target price for the stock. The company seems to me a multibagger in the making.

Inspite of the rupee appreciation the company current quarter Operating margin were flat at 26.35%. This was made possible due to the mix of it's high margin business and diversified geographical portfolio. The Net profit margin were not impressive but it is expected to increase with the current expansion in place.

Alok's current significant customer base include Walmart, Kohls, Bed Bath and Beyond, GAP, CK, Ambercrombie & Fitch and others.

Expansion Details

1) Alok is scaling up it's Home Textile capacity from 60 to 82.5 million meters p.a. This is expected to get completed by end of FY2008.

2) Alok is adding a Terry towel manufacturing unit of 6,700 TPA and expected to commence operation by end of FY2008

3) Alok is currently increasing it's garments capacity from 8 to 15 million pieces p.a by FY08. The company is expected to get better realization on garments as 80% of it's garment is exported to EU territories.

4) Expansion of it's Texturising capacity from 75,500 TPA to 118,000 TPA is on the way and is expected to add in FY09 revenues.

The company has further expansions to it's plate which will be effective FY09. The details of these expansions are not covered in the current analysis.

Positives

1) The company subsidiary is planing to add around 100 stores as part of it's retail wing (H&A) by end of March' 2008. Currently it operates around 14 stores in major metros.

2) Alok has entered in to a agreement with "Aisle 5 LLC", under which it will manufacture and distribute home decor, bath, sleeping and dining home products in US and Canadian Market.

3) Acquisition of 60% stake in Mileta, a czech company to add to revenues.

4) Alok has signed a trademark license with peacock alley to market it's home linen products in the domestic market.

Risks

1) High Debt/Equity ratio.

2) Frequent increase in equity base which inturn has dampened the Earnings Per Share

3) Further rupee appreciation can impact profit margins of the company.

Novartis India - Value Buy

Novartis India is a 51 per cent subsidiary of Swiss giant Novartis, One of world`s leading pharmaceutical and consumer health company. Novartis main businesses in India include pharmaceutical (70%), Animal Health (7%), Generics(8%) and OTC(15%).

Novartis pharmaceutical segment includes therapeutic medicines like hypertension, anti inflammatory and anti fungal. Generic segment includes gynaecology and anti-TB. OTC includes vitamins and minerals. Animal health includes drugs for cattle.

Novartis top leading product portfolio includes Voveran, Methergin, Regestrone, PZA Ciba, Otrivin, Calcium Sandoz and others.

Investor with a medium risk appetite can consider investment into this stock with a horizon of 12 months. At the current price of Rs. 336/- the stock trades at 11 times it's 12 month trailing EPS of 30.72. In the current quarter Q2' 07 the company saw a healthy operating margin of 33.64% as compared with a average of 24% in the earlier few quarters. This translated in to around 22% increase in net profit growth q-o-q. This seems to me a surprise number for a company which has been growing at a rate of 10% for the last 5 to 6 quarters.

Betting on current valuation

As of now there is no data available to compute it's forward earnings. But at the current price the stock is availabe at a discount to it's MNC peers. The stock has a target of Rs. 410/- which translates to 14 times it's 12 month trailing EPS on par with it's MNC peers of equal cader.

The company will get a even better re-rating if the current quarter performance continues in the forward earnings.

Fundamentals

1) Excellent product portfolio and diversified business operation
2) Fifth largest MNC pharma in India by profit.
3) Looking for new global brands to be introduced in India, which will increase the topline further.
4) One of the few players in the growing Animal health arena in India.
5) Decent dividend paying company.

Risks

1) Uncertainty about price control regime looms large
2) Changes in regulatory environment e.g. VAT, MRP based Excise, Service Tax etc
3) Evolution and enforcement of Intellectual Property Rights (IPR) in India
4) counterfeiting of Novartis drugs by Indian pharmaceuticals and selling at an cheaper rate.

Result Snapshot and Analysis Q2' 07 (Sept' 07) - Part 3

Till Date: 27-Oct-07

Large Cap/Midcap/Smallcap Results Analysis

Hits

1)
Dalmia Cement net rises 59.17% in Sep`07 qtr

Snapshot:

Net sales up 42.08% y-o-y
Operating margin at 43.93% as compared to 37.39%
EPS for current quarter at Rs.10.56

Summary:

At the current market price of 515.50 the stock trades at 12.27 times it's Annualized FY08E EPS of 42

2)
Tamilnadu Newsprint (TNPL) net rises 43% in Sep`07 qtr

Snapshot:

Net sales almost flat y-o-y
Operating margin at 30.41% as compared to 23.42%
EPS for current quarter at Rs.4.80

3)
NTPC net up 30.64% in Sep`07 qtr

Snapshot:

Net sales up 17.66% y-o-y
Operating margin at 30.41% as compared to 23.42%
EPS for current quarter at Rs.2.34

Summary:

At the current market price of 228.75 the stock trades at 23.17 times it's Annualized FY08E EPS of 9.87

4)
Colgate-Palmolive Q2 earnings jump 2.36 times

Snapshot:

Net sales up 13.70% y-o-y
Operating margin at 20.89% as compared to 6.33%
EPS for current quarter at Rs.4.02

Summary:

At the current market price of 385.95 the stock trades at 24.24 times it's Annualized FY08E EPS of 15.92

5)
Tulip IT Services Q2 earnings climb 30.29%

Snapshot:

Net sales up 21.46% y-o-y
Operating margin at 22.43% as compared to 15.58%
EPS for current quarter at Rs.10.79

Summary:

At the current market price of 886.85 the stock trades at 21.42 times it's Annualized FY08E EPS of 41.39

6)
Elecon Engineering Q2 net up 5.90%

Net sales up 4.70% y-o-y
Operating margin at 16.49% as compared to 17.60%
EPS for current quarter at Rs.6.67

Summary:

At the current market price of 297.15 the stock trades at 14.27 times it's Annualized FY08E EPS of 20.82

Misses

1)
Shipping Corporation (SCI) net declines 43.26% in Sep`07 qtr

Snapshot:

Net sales down 14.34% y-o-y
Operating margin at 34.99% as compared to 37.29%
EPS for current quarter at Rs.6.48

Summary:

At the current market price of 268.55 the stock trades at 8.42 times it's trailing 12 months EPS of 31.87

2)
Moser Baer net declines 87.40% in Sep`07 qtr

Snapshot:

Net sales down 10.83% y-o-y
Operating margin at 35.13% as compared to 29.04%
EPS for current quarter at Rs.0.19

Summary:

At the current market price of 302.10 the stock trades at 60.66 times it's trailing 12 months EPS of 4.98

3)
Nagarjuna Fertilizers Q2 net falls 52.18%

Snapshot:

Net sales up 10.80% y-o-y
Operating margin at 11.41% as compared to 14.91%
EPS for current quarter at Rs.0.20

Summary:

At the current market price of 56.30 the stock trades at 28 times it's trailing 12 months EPS of 0.50

4)
BEML`s net down 33.49% for Sep`07 qtr

Snapshot:

Net sales down 21.79% y-o-y
EPS for current quarter at Rs.5.95

Summary:

At the current market price of 1612 the stock trades at 30.7 times it's trailing 12 months EPS of 52.34

5)
Asahi India Q2 consolidated net falls 71.47%

Snapshot:

Net sales up 42.25% y-o-y
Operating margin at 21.64% as compared to 24.73%
EPS for current quarter at Rs.0.35

Summary:

At the current market price of 105.45 the stock trades at 34.57 times it's trailing 12 months EPS of 3.05

6)
Jindal Stainless net declines 56.91% in Sep`07 qtr

Snapshot:

Net sales down 1.49% y-o-y
Operating margin at 14.62% as compared to 20.60%
EPS for current quarter at Rs.2.62

Summary:

At the current market price of 162.55 the stock trades at 7.74 times it's trailing 12 months EPS of 21

Neutral

1)
Arvind mills net up 89% in Sep '07 qtr

Snapshot:

Net sales up 43.36% y-o-y
Operating margin at 14.18% as compared to 20.81%
EPS for current quarter at Rs. 0.47

Summary:

At the current market price of 75.20 the stock trades at 68.36 times it's trailing 12 months EPS of 1.10

For Live Result updates visit the Market News page @ http://profitfrommarketnews.blogspot.com

Note :
The information above is just an update on the current quarter results. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein.Please perform your analysis before entering into these scripts.

Result Snapshot and Analysis Q2' 07 (Sept' 07) - Part 2

Till Date: 20-Oct-07

Midcap/Smallcap Results Analysis

Hits

1)
Grindwell Norton net jumps 7.19 times in Sep`07 qtr

Snapshot:

Net sales up 6.04% y-o-y
Operating margin at 21.40% as compared to 20.22%
EPS for current quarter at Rs.16.49 (Includes extra ordinary item of Rs. 775 million)

Summary:

At the current market price of 133.75 the stock trades at 5.77 times it's trailing 12 months EPS of 23.16.

2)
State Bank Of Mysore net rises 53.49% for Sep`07 qtr

Snapshot:

Net sales up 45.41% y-o-y
profit margin at 14.83% as compared to 14.05%
EPS for current quarter at Rs. 253

Summary:

At the current market price of 7600 the stock trades at 9.03 times it's trailing 12 months EPS of 841.

3)
Uttam Galva net rises 10.84% for Sep`07 qtr

Snapshot:

Net sales up 32.54% y-o-y
Operating margin at 8.47% as compared to 10.90%
EPS for current quarter at Rs.2.90

Summary:

At the current market price of 39.60 the stock trades at 3.15 times it's trailing 12 months EPS of 12.56.

4)
Accentia Technologies net up 12.02 times for Sep`07 qtr

Snapshot:

Net sales up 1227% y-o-y
Operating margin at 33.11% as compared to 32.31%
EPS for current quarter at Rs.17.54

Summary:

At the current market price of 231.85 the stock trades at 6.08 times it's trailing 12 months EPS of 38.11.

5)
Godavari Fertilisers net up 47.56% in Sep`07 qtr

Snapshot:

Net sales up 24.03% y-o-y
Operating margin at 9.17% as compared to 7.97%
EPS for current quarter at Rs.15.22

Summary:

At the current market price of 149.55 the stock trades at 5.85 times it's trailing 12 months EPS of 25.55.

Note: Godavari Fertilisers sales is on a seasonal basis and the same performance may not continue in the quarters to come

6)
Prakash Industries net rises 74.31% for Sep`07 qtr

Snapshot:

Net sales up 38.43% y-o-y
Operating margin at 23.09% as compared to 23.68%
EPS for current quarter at Rs.5

Summary:

At the current market price of 128 the stock trades at 7.83 times it's trailing 12 months EPS of 16.34.

7)
Petronet LNG net up 74.31% in Sep`07 qtr

Snapshot:

Net sales up 21.48% y-o-y
Operating margin at 13.56% as compared to 11%
EPS for current quarter at Rs.1.54

Summary:

At the current market price of 73.20 the stock trades at 13.26 times it's trailing 12 months EPS of 5.52.

8)
Orchid Chemicals net doubles in Sep`07 qtr

Snapshot:

Net sales up 20.10% y-o-y
Operating margin at 34.37% as compared to 31.76%
EPS for current quarter at Rs.6.46

Summary:

At the current market price of 229.70 the stock trades at 10.32 times it's trailing 12 months EPS of 22.25.

9)
Chettinad Cement Q2 net jumps 48.55%

Snapshot:

Net sales up 25.77% y-o-y
Operating margin at 34.15% as compared to 34.97%
EPS for current quarter at Rs.16.16

Summary:

At the current market price of 436.10 the stock trades at 9.89 times it's trailing 12 months EPS of 44.07.

Misses

1)
Geometric Software consolidated net drops by 10.11% in Sep`07 qtr

Snapshot:

Net sales down 0.77% y-o-y
Operating margin at 21.09% as compared to 27.16%
EPS for current quarter at Rs.0.83

Summary:

At the current market price of 123.90 the stock trades at 17.48 times it's trailing 12 months EPS of 4.97.

Neutral

1)
Welspun India net down 8.36% in Sep`07 qtr

Snapshot:

Net sales up 6.27% y-o-y
Operating margin at 20.97% as compared to 19.94%
EPS for current quarter at Rs.2.28

Summary:

At the current market price of 62.05 the stock trades at 8.65 times it's trailing 12 months EPS of 7.17.

For Live Result Analysis visit the Market News page @ http://profitfrommarketnews.blogspot.com

Note :
The information above is just an update on the current quarter results. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein.Please perform your analysis before entering into these scripts.

Rallis India - Value Buy

Rallis India is one of India's leading agrochemical companies. The company deals with pesticides, speciality fertilisers, micronutrients and seeds.

Rallis has an extensive distribution system with more than 1,500 distributors and 30,000 dealers nationwide. It also has marketing alliances with several multinational agrochemical companies, including FMC, Nihon Nihyaku, Dupont, Syngenta, Makhteshim Agan and Bayer.

Investor with Low to Medium risk horizon can consider investment into this stock with a horizon of 12 months. At the current price of Rs. 465/- the stocks trades around 5 times it's trailing 12 month EPS of 95. The current quarter results includes a one time profit from sale of land of Rs.873.8 million. Taking into account the income from company core business, excluding the one time payment on sale of land the company trades at 13.7 times it's 12 month trailing EPS of 34. At the current valuation the stock is available at a discount to it's peers like Bayer. Buy the stock with a target price of Rs. 660/- based on it's FY08E EPS of 44.

The company currently has a good domestic presence and the international business currently accounts for just 22% of the company’s revenues. The company currently is taking aggresive initiative to grow it's international business in the short to medium term. Rallis is also looking for strategic acquisitions and licensing deals in the international market to enhance it's global presence. Currently the global agrochemical business accounts for a huge $35 billion of which more than two-thirds is off-patented (without patent exclusivity) products. Rallis initiative of tapping into the off-patented international business can prove better earnings visibility and margins in the future.

Fundamentals

1) In the domestic market, Rallis is the second largest player after Bayer CropScience Ltd.
2) International business expected to grow at a faster rate in days to come.
3) Rallis currently enjoys about 14% market share in the local pesticide and crop-protection market.

Risks

1) The Company´s business is seasonal in nature and the performance can be impacted by weather conditions.
2) Delay in the initiative to increase it's international business.

Result Snapshot and Analysis Q2' 07 (Sept' 07)

Till Date: 15-Oct-07

Midcap/Smallcap Results Analysis

Hits

1)
Shri Lakshmi Cotsyn Q2 net profit up nearly 3 folds

Snapshot:
Net sales up 134% y-o-y
Operating margin at 14.58% as compared to 7.98%
EPS for current quarter at Rs.10.16

Summary:
At the current market price of 123.90 the stock trades at 3.5 times it's trailing 12 months EPS of 35.50.

2)
Bliss GVS Pharma Limited net rises around 48 times

Snapshot:
Net sales up 1900% y-o-y
Operating margin at 42.88% as compared to 27.16%
EPS for current quarter at Rs.19.38

Summary:
At the current market price of 392.80 the stock trades at 13.5 times it's trailing 12 months EPS of 29.

3)
Compact Disc net rises around 2.26 times

Snapshot:
Net sales up 74.52% y-o-y
Operating margin at 19.86% as compared to 15.33%
EPS for current quarter at Rs.4.41

Summary:
At the current market price of 67.55 the stock trades at 4.65 times it's trailing 12 months EPS of 14.5.

4)
Mangalam Timber continues to be in profit

Snapshot:
Net sales down 5.5%
Operating margin at 22.72% as compared to 3.10%
EPS for current quarter at Rs.1.29

Summary:
At the current market price of 27.75 the stock trades at 8 times it's trailing 12 months EPS of 3.5.

5)
Himalya International net jumps around 91%

Snapshot:
Net sales up 31.88%
Operating margin at 30.23% as compared to 23.92%
EPS for current quarter at Rs.1.15

Summary:
At the current market price of 17.55 the stock trades at 6.1 times it's trailing 12 months EPS of 2.86.

5)
Rallis India Limited

Snapshot:
Net sales up 16.55%
Operating margin at 49.23% as compared to 30.29%
EPS for current quarter at Rs.83.39

Summary:
At the current market price of 497.60 the stock trades at 5.23 times it's trailing 12 months EPS of 95.

Misses

1)
Abhishek Industries

Snapshot:
Net sales up 36.8%
Operating margin at 15.89% as compared to 24.85%
EPS for current quarter at Rs.0.39

Summary:
At the current market price of 20.60 the stock trades at 11.31 times it's trailing 12 months EPS of 1.82.

For Live Result Analysis visit the Market News page @ http://profitfrommarketnews.blogspot.com

Note :
The information above is just an update on the current quarter results. This information is neither an offer to sell nor solicitation to buy any of the securities mentioned herein.Please perform your analysis before entering into these scripts.

Buy Hotel Leela venture

Investor with medium to high risk appetite can consider investment into Hotel Leela venture with a horizon of 24 months+. Hotel Leela venture operates in the premium 5-star deluxe category owning 4 hotels in Bangalore, Goa, Kovalam and mumbai with a total of 1086 rooms.

At the current market price of Rs. 49 the stock trades at 15 times it FY08E EPS. Offlate hotel industry in Bangalore is witnessing decline in ARR (Average Room Rate) and Bangalore accounting 46% of it's revenue can impact the company's topline. On the other hand the declining ARR will be offset by better realization from the mumbai property which contributes to 32% of it's revenue.

Since there is no major additions coming on before FY09, the current market price justifies it's forward earnings. Investor considering investment into this stock can buy on declines.

Betting on upcoming projects as below

1) The company is Expanding operation by developing projects in Delhi, Chennai, Pune, Hyderabad and Udaipur.
2) Entered into a Contract for management of The Leela Kempinski Gurgaon, Delhi (NCR) 319 room, and The Leela Residences Kempinski gurgaon 90 serviced residences.
3) Additional 29 more rooms are being added in Goa and also setting up an IT park and a Commercial Complex in Chennai.

The above projects are expected to be completed by FY09 and FY10. The company plans to double it's room count after the implementation of the above projects. The company has opened sales and marketing offices in London, Dubai and appointed GSA in singapore.

After the complete expansion in place the company's revenue is set to grow @75% p.a. The stock can prove on to be a good multibagger play.

Fundamentals

1) The average occupancy rate is around 80%.
2) Strong presence in 5-star deluxe category.
3) Aggressive capex to add exponentially to the revenues.

Risks

1) A slowdown in economy can reduce the occupancy rate and also the ARR.
2) Bangalore accounting for 45% of its revenues, earnings remain vulnerable to decline in tariffs and occupancies.
3) With number of luxury service apartments increasing in last couple of years, corporate occupancy is set to decline.
4) Strong rupee appreciation can offset the margin's partially for dollar based room tariff's.

Dish TV - A Turn around story

Before I begin, If you are a short term trader please skip this recommendation.

Dish TV is one of the early entrant in the Direct-to-home (DTH) arena and currently the only listed player in this segment. As of 30th June'07 Dish TV has a strong 2.1 million subscribers. The company is currently investing to acquire subscribers and is yet to break even. The average cost of customer acquisition currently is around Rs. 2000/- per subscriber. Dish TV currently enjoys a market share of 75% in the DTH business which is going to provide a better edge for the firm when competition steps up with new entrants. The company currently has 170 channels in it's basket, which is the highest in the industry.

Dish TV is currently present in 4300 towns through more than 30000 dealers and 400 distributors. There are over 10000 service personals and 1000 call center agents to deliver more value to customers. Currently top 50 cities accounts to 33% of the subscriber base which shows the demand is equally distributed across pan India and not only in metros.

Based on the Estimates the company is expected to generate Operating profit by FY09 and net profit by FY10. Considering the current demand scenario analyst estimates the subscriber base to grow at compounded annual growth rate of 25% till FY12. The existing subscriber investment is expected to add on to the revenue growth by around 20-35% q-o-q.

The company is currently moving around it's 52 week low of Rs. 69/-. Adopt a invest on decline strategy on this stock. Invest in smaller chunks at regular intervals rather than having it brought in lots.

Fundamentals

1) Market share of 75% in the DTH segment.

2) The company has a established dealers and distributors network and wide coverage across pan India.

Risks

1) The company is currently a loss making firm. It has a negative operating profit till date.

2) Stiff competition expected from new entrants like Reliance, Sun, Barathi etc. in the years to come.

3) Initial investment being made currently per customer acquisition and advertisement costs is likely to impact the operating profit for sometime.

4) The company is planing an additional capex of Rs. 1300 crores through debt and equity. This inturn will increase the interest expense and can further dampen the earnings visibility.

5) Customer service being a key to this industry, the firm is expected to increase the on call personals and call center executive for faster and prompt service. This inturn is going to add to the expenses of the company.

Buy Chennai Petroleum

Despite it's strong underlying business, Chennai Petroleum (CPCL) has always maintained a low profile as compared to it's peers like BRPL and MRPL. With strong GRM's and refinery capacity expansion CPCL outlook seems to be positive and is expected to fetch better valuation going forward.

At the current market price of Rs. 280/- the stock traders at 7.3 times it's trailing 12 month EPS. The net profit in Q1 FY08 increased by 27% y-o-y despite 4% drop in revenues. The decrease in revenue seems to be attributed to the 15 days shutdown of one of CPCL's distillation unit. The Gross Refining Margin during the first quarter was an impressive US $8.76 per bbl as compared to US $6.64 per bbl during the corresponding quarter of the previous year. CPCL Q1 FY08 OPM stands at 7.28% as compared to FY07 OPM of 4.89%, thanks to the strong GRM's.

CPCL expects the Q2 GRM to be around the range of US $7.5 per bbl and the whole FY08 GRM in the range of USD $5.5-7. Based on the long term crude price assumption of USD 60/bbl and Re/USD assumption of USD 40 the stock trades around 5.8 times it's FY08E EPS of 48. Based on the factors discussed earlier CPCL has a target of Rs. 355/- with a time frame of 12 months.

Fundamentals

1) The company is expected to increase their refining capacity to about 12 million tonnes from the current 10.5 million tonnes by mid 2009.

2) Excellent and consistent financial track record.

3) Good track record of consistent and high dividend payment.

Risks

1) Stronger rupee can offset the realization by better GRM's.

2) Drop in price of CPCL products in International Markets.

Venkys India

At the current market price of Rs. 180/- the stock trades at 6 times it FY08E earnings of 30 per share. Investor with a medium risk profile can consider position in this stock for a duration of 9 to 12 months with a target of Rs.250. The company has seen a substantial increase in Operating margins during the last two quarters and is expected to maintain the same margin levels in the current year.

Venky's India is engaged in poultry breeding, processed chicken, poultry medicines, producing eggs and hatching layer. Venky's has a strong domestic presence and the domestic sales is expected to grow 15% this year. The company has annual service contracts with multinational giants like Domino's, Pizza Hut, KFC and McDonald's. Venky's has strong export presence in middle east and Asia pacific region. The revenues from export is expected to grow at around 30% this year.

Fundamentals:

1) Diversified product portfolio.

2) Government policy initiatives for agricultural projects.

3) Strong client portfolio.

Risks:

1) Bird flu which has been off late seen frequently appearing in some of the Asian countries can dampen the revenue forecast.

2) Competition from countries like Thailand, Vietnam and china which operate on lower cost.

Buy Tamil Nadu Newsprint (TNPL)

Investors with medium to low risk profile can consider investment in TNPL with a horizon of 18-24 months. At the current market price of Rs. 99 the stock trades at 8 times it's 12 months trailing EPS of 12.5. Despite the firm raw material prices, the company saw a marginal increase in the operating margin during the first quarter of 2008.

The company is in the process of completing it's Rs. 565 crore mill development plan which is slated to go on stream by October '2007. After the mill development plan in place the paper production is expected to raise to 2.45 lakh tpa from the current 2.3 lakh tpa.

The company margins are further set to raise in second half of FY08 after the mill development plan in place. The stock is currently trading at 6 times it's FY08E EPS of 16. Based on it's FY08E earnings the stock has a target of Rs. 132.

The company is planing to set up a mini cement plant with lime sludge generated as a waste product at it's paper unit. This is expected to be operational by march 2009. The company is also evaluating option to build a IT park at it's vacant Ambattur plot.

Fundamentals:

1) Modernization and Capacity increase of paper production.

2) Building Cement plant to utilize the waste generated out of paper production.

3) The company is sitting on an vacant land in chennai. Evaluating IT park to be constructed over there.

Risk:

1) Increasing raw material prices.

2) Rupee appreciation to crunch margins on paper exports.

3) Decline in International paper prices can impact the Operating margin of the firm.

Buy HCL Technologies

At the current market price of Rs. 284, the stock trades at 17 times it's trailing 12 months EPS. The stock is currently available at a huge discount compared to other large cap IT shares such as Infosys, Wipro etc.

The company Jun'08 quarterly results were good compared to Tier 1 companies due to it's pro-active hedging strategy. The company has hedged around 85 percent of revenues which should partly mitigate the risk of rupee appreciation.

Based on Jun'08 EPS, the stock trades at 13 times it's FY08E earnings. Investment can be considered in this stock with a horizon of year to two. Based on it's FY08E earnings the stock has a target of Rs. 390.

The company has seen good increase in business from the Asia-Pacific and European region. This together now constitutes to around 30 percent of it's revenue and provides a better geographical spread of revenues.

Fundamentals:

1) Better geographical spread and pro-active hedging strategy against rupee appreciation.

2) Strong multi million dollar clients with repeat business.

3) The company has unique client profile in aerospace and automotive which contributes to 25 percent of it's revenue.

Risks:

1) Further rupee appreciation.

2) US economic slowdown and also MNC's like accenture and IBM offering services comparing to the billing rates of Indian companies.

3) Very high employee attrition.

Buy Neyveli Lignite

At the current market price of Rs. 73, the stock trades at 19 times it's trailing 12 month earning per share. This makes the stock sufficiently valued at this level.

On the other hand the stock is available at a discount to it's peers based on it's Annualized quarterly June' 08 EPS of 6.72. The stock is trading at 11 times it's FY08E earnings. Neyveli had taken an hit on it's financials for the last two years due to delay in acquisition of land which had taken an hit in lignite production and due to the order passed by CERC on lignite transfer pricing upto 2004. Having the above two already taken care this must not impact the earnings in the quarter's to come.

Based on FY08 earnings Neyveli has a target of around Rs. 105 at a one year time horizon. Not to mention the massive expansion going on which will start reaping benefits in FY09. If the investor has patience to hold the stock for three years this can turn out to be a multibagger stock.

Fundamentals:

1) Good financial track record.
2) High profit margins (more than 30%)
3) High cash reserves and low debt position
4) Massive expansion ahead.
5) Disinvestment of additional stake a bonus.

Risks:

1) Any New order affecting the pricing of power and lignite.
2) Delay in getting the project approval for expansion, which is happening now.

Updated on 24-Sep-2007

Target 1 of Rs. 105/- as recommended above crossed today. Return of 50% within one month of recommendation.

Stock Long term growth story still intact. Hold on if you are a long term investor.
Short term traders can book partial profits at current levels and re-enter on dips.