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Tuesday, August 23, 2011

VISAKA INDUSTRIES LTD: A strong rural play with strong fundamentals !!!!


Scrip Code: 509055 VISAKAIND
CMP:  Rs. 87.15; Buy at current levels.
Short term Target: Rs. 100, 6 month Target – Rs. 150; 
STOP LOSS – Rs. 78.00; Market Cap: Rs. 138.40 cr; 52 Week High/Low: Rs. 173.70 / Rs. 82.55
Total Shares: 1,58,80,952 shares; Promoters : 59,87,530 shares –37.70 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 164.54; Face Value: Rs. 10.00; EPS: Rs. 25.24; Div: 50 % ; P/E: 3.45 times; Ind. P/E: 5.73; EV/EBITDA: 3.37.
Total Debt: Rs. 188.85 cr; Enterprise Value: Rs. 323.74 cr.

VISAKA INDUSTRIES LTD: was incorporated in 1981 in Secunderabad, India. Visaka Industries Limited manufactures and sells corrugated cement fiber sheets in India and internationally. It operates in two segments, Building Products and Textile Synthetic Yarn. The Building Products segment produces asbestos sheets, accessories, and non asbestos flat sheets that are used as roofing materials and interiors. Its accessories include close fitting adjustable ridges, apron piece, north light ridges, barge boards, north light curve, serrated adjustable ridges, roof lights, and ridge finials. This segment also offers V Boards and V Panels, which are used for false ceiling, wall partitions, wall paneling, door panels, mezzanine flooring, back liners, structural glazing back lining, prefabricated buildings, and roofing, as well as for fixed furniture, such as computer tables, black boards, dressing tables, shoe racks, A.C. duct covers, photo frames, and office tables. The Textile Synthetic Yarn segment manufactures yarns out of the blends of polyester, viscose, and other materials to produce various fabrics, including shirting, suiting, fashion fabrics, upholstery, and embroidery laces. This segment also exports its products to Italy, Belgium, the United Kingdom, the United States, Spain, Germany, Australia, Mexico, and Turkey. Visaka Industries markets its products through dealers for the retail market, and directly for projects and government departments.

Investment Rationale:
Visaka industries limited is the second largest manufacturer of fiber cement sheets in India with an estimated market share of more than 15 % by sales. VIL’s high-tech Fiber Cement plant is fully automated factory with the latest sophisticated technology.  The Cement Asbestos segment produces asbestos sheets and accessories used primarily for as roofing material. Visaka industries is a rural sector player which holds tremendous potential for its asbestos division as whenever economic conditions of the rural populations improves, their spending in durable products like asbestos cement sheets is likely to be increased. VIL is growing at a CAGR of 29% for past five years, highest in the industry. Company is making continuous efforts to increase production capacity through new and existing plants. Company’s new product in Reinforced Building Product is accepted in the market as it is preferred over wood/gypsum based products. Company has commenced the commercial production of V-Panel unit from January 01, 2010. V-Panel is a revolutionary building product, which is being manufactured with technical collaboration from M/s Dantotech of Australia. Company has its asbestos cement sheets unit at pune. Visaka industries commenced the commercial production in Reinforced Building Boards division on 1st May 2008. This unit is situated in Miryalguda Taluq, Nalgonda District, in the state of Andhra Pradesh. The product from this unit is branded as “V-Board”. The company exports its products to the countries likes of Srilanka, Bangladesh, and Middle East. VIL has through a special purpose vehicle Visaka Thermal Power Ltd ventured into Coal- based power of 1050 MW at an estimated cost of Rs. 5000 crores in Orissa. The project implementation is spread over a period of 9 years in 3 stages of 350 MW each. Also VIL has Synthetic yarn business, engaged in the manufacturing of yarn using state-of-the-art Twin Air Jet Spinning technology from Murata, Japan, with 28 MTS machines equivalent to 60,000 spindles Visaka has earned recognition as the largest Unit in the world with MTS installation. As of now company produces 10000 MT of yarn per year and exports around 4000 tons across the world.

Outlook and Valuation:
Real estate and construction and infrastructure dominate the growth for Cement product industry. With the initiatives made by the government in various infrastructure projects, road networks and housing facilities the cement product industry especially the asbestos cement manufacturers cheer on the importance given to rural infrastructure in the union budget especially on the thrust given on rural housing by the government through Indira Awaas Yojana and increased allocation to rural housing is a positive sign. Fiber cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials. Asbestos cement industry is growing at 10- 12%, at this growth VIL can significantly be able to service its debts. In my view VIL could report EPS in FY11 FY12E of Rs. 28.30/sh and Rs. 22.70/sh, respectively. I would buy VISAKA INDUSTRIES LTD which is currently available at a discount to its Book Value of Rs. 164.54; I would buy VIL for the long term with a price target of Rs. 15o and for the SHORT TERM PLAYERS it would be Rs.100.00 

KEY FINANCIALS FY10 FY11 FY12E FY13E
SALES (Rs. Crs) 600.90 653.40 712.90 823.60
NET PROFIT (Rs. Crs) 60.00 45.10 36.10 46.90
EPS (Rs.) 37.70 28.30 22.70 29.50
PE (x) 3.50 3.70 4.60 3.50
P/BV (x) 0.90 0.60 0.60 0.50
EV/EBITDA (x) 2.60 3.50 3.00 2.40
ROCE (%) 28.30 18.10 13.10 15.30
RONW (%) 26.50 16.90 15.50 18.00

I would buy VISAKA INDUSTRIES LTD with a price target of Rs. 100 for the short term and Rs. 150 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 78.00 on your purchase.

Saturday, August 13, 2011

RELIANCE CAPITAL : Long Term Bet !!!

Scrip Code: 500111 RELCAPITAL
CMP:  Rs. 437.40; Buy at Rs. 400 - 415 levels.
Short term Target: Rs. 475, 6 month Target – Rs. 550; 
STOP LOSS – Rs. 370.00; Market Cap: Rs. 10,751.04  cr; 52 Week High/Low: Rs. 882.30 / Rs. 388.40 ; Total Shares: 24,56,32,800 shares; Promoters : 13,29,82,274 shares –54.14 %; Total Public holding : 11,26,50,526 shares – 45.86 %; Book Value: Rs. 282.70; Face Value: Rs. 10.00; EPS: Rs. 9.31; Div: 65 % ; P/E: 46.91 times; EV/EBITDA: 13.46.
Total Debt: Rs. 11,958.14 cr; Enterprise Value: Rs. 23,213.03 cr.

RELIANCE CAPITAL LIMITED: RCAP was incorporated in 1986, in India. The company engages in lending, investing, asset management, insurance and broking activities. It operates as a Non Banking Financial Company. Reliance Capital Asset Management (RCAM) manages money under the New Pension Scheme (NPS), it has been selected to manage funds for both EPFO & NPS. Reliance Consumer Finance offers products like personal loans, auto loans, housing loans & SME loans. Reliance Money is one of the top leading brokerage houses in India serving 3o lakhs customers approximately. Reliance General Insurance is considered one of the top player in general insurance businesses in India. In the year 2008, Reliance Equities International its institutional broking arm and Reliance Asset Reconstruction business commenced its operation. Company has an initiative named Reliance Capital Services which cross sell its products to the other customers of Reliance ADAG which also got operational from 2008 onwards. RCAP subsidiaries include Reliance Capital Trustees Co.ltd., Reliance Gilts Ltd, and Reliance Capital Research Pvt. Ltd. among others.

Investment Rationale:
The Reliance Capital has an AUM size of Rs. 1,01,600 Cr with an income of around Rs. 250 -290 Cr. Income continues to be strong as the retail proportion in debt AUM is rising. Commercial finance to be a game changer which contributes around Rs. 269 Cr, its loan book grew 34 % YOY to Rs. 1,230 Cr with 97 % book fully secured. Loan books are expected to grow by 25 % - 30 % for next two years. The General Insurance has been slower which reported a loss of Rs. 309 Cr, this includes Reliance Capitals share of Rs. 183 Cr in the total motor pool provision of Rs. 7000 Cr which the entire General Insurance industry had to provide. It’s AMC, Commercial finance and broking & distribution business generated approximately Rs. 620 Cr of profit. The company could be a contender for the banking license as RBI is in the process of finalizing guidelines for issue of new banking license; it is believed that ADAG group through RCAP could bid for banking license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. RCAP is among others who has the eligibility to win the license as it has a market cap of over Rs. 10,000 Cr & also has strong professional management to its side. Debts will be a concern, but I believe that with good professionals on board it is taken care off. IRDA recently said that a 10 year lock in guidelines does not apply for Reliance life insurance’s 26 % stake sale to Japan based Nippon Insurance, RCAP is likely to peg $680 million or Rs. 3,062 Cr once the deal is complete it would be biggest offshore investments in an Indian insurance company. Under the insurance law promoters of life insurance companies looking to offload 26 % stake the maximum permissible limit of their holding can do it only after completing 10 years of operation. It’s heard that RCAP is in talks with Axis Bank and Syndicate Bank to sell 23 % in its life insurance business to boost distribution network. This will be the second deal after Nippon deal if approved by the regulators.

Outlook and Valuation:
As told RCAP deal with Nippon Insurance is awaiting approval and if capital gains from the deal are factored then ROE to be around 10 % - 11 % , but since the deal is not approved yet it is expected that ROE to be around 8 % - 9 %. It is believed that the core profit to grow at 25 % CAGR over FY11 – FY13E. Also post profit of the life insurance may also get consolidated with the parent RCAP like other subsidiaries. General Insurance has been a slower in overall profits for many quarters which is expected to have a turn around. Broking and Distribution combined generated about Rs. 223 Cr due dip in average daily volumes to Rs. 1,400 Cr leading to market share decline to 0.9 % with a profit before tax of Rs.34.5 Cr. In my view RCAP could report EPS in the FY11 FY12E of Rs. 11.60/sh and Rs. 26.30/sh, respectively. RCAP TO DECLARE ITS RESULT ON 13 AUG 2011. RCAP’s stock price has corrected from its recent high on the back of the bad news on US economy, but I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 475

KEY FINANCIALS FY10 FY11E FY12E FY13E
SALES (Rs. Crs) 6,140.60 5,498.10 6,433.20 7,592.60
NET PROFIT (Rs. Crs) 434.60 291.50646.20739.70
EPS (Rs.) 17.70 11.60 26.30 30.10
PE (x) 34.90 53.10 23.50 20.50
P/BV (x) 2.0 1.9 1.7 1.6
ROCE (%) 5.70 3.70 7.70 8.20
RONW (%) 2.00 1.20 2.50 2.60

I would buy RELIANCE CAPITAL with a price target of Rs. 475 for the short term and Rs. 550 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 370.00 on purchase.

Wednesday, August 3, 2011

COAL INDIA : Enjoying the whole Cake, best Investment !!!

Scrip Code: 533278 COALINDIA
CMP:  Rs. 397.30; Buy at Rs. 370 for long term & at Current levels for short term
Short term Target: Rs. 415, 6 month Target – Rs. 435; 
STOP LOSS – Rs. 340; Market Cap: Rs. 2,50,949.15 cr; 52 Week High/Low: Rs. 422.35 / Rs. 289.00.
Total Shares: 631,63,64,400 shares; Promoters : 568,47,27,960 shares –90.00 %; Total Public holding : 63,16,36,440 shares – 10.00 %; Book Value: Rs. 52.7; Face Value: Rs. 10.00; EPS: Rs. 17.20; Div: 35 % ; P/E: 23.09 times; Ind P/E: 24.18; EV/EBITDA: 13.50.
Total Debt: Rs. 3,663.49 cr; Enterprise Value: Rs. 2,54,612.64 cr.

COAL INDIA LIMITED: CIL was incorporated in 1973 in Kolkata, India. It was formerly known as Coal Mines Authority Limited. CIL is a leading public sector undertaking engaged in coal mining & selling coal fines in India and is working on establishing its footprint globally through acquisitions. Company operates 471 mines in 21 coalfields across 8 states in India, which includes 163 open cast mines, 273 underground mines & 35 mixed mines – open & underground mines. CIL operates through its 9 wholly owned subsidiaries, of which 1 subsidiary is engaged in exploration and feasibility study analysis. Its subsidiaries include Eastern Coalfields Ltd (ECL), Bharat Coking Coal India Ltd (BCCL), Central Coalfields Ltd (CCL), Northern Coalfields Ltd (NCL), Western Coalfields Ltd (WCL) and South Eastern Coalfields Ltd (SECL). CIL has total reserves of 64.3 billion tons and proved reserves of 52.4 billion tons, of which extractable reserves stands at 21.7 billion tons. The company also provides middlings used by fuel plants, brick manufacturing units, cement plants, industrial plants, as well as for power generation. CIL coal fines/coke fines are used in industrial furnaces, as well as for domestic purposes. It serves primarily power, steel, cement, and fertilizer industries.

Investment Rationale:
The Group of Ministers (GoM) has approved the Draft Mines and Minerals Development Regulation (MMDR) bill which states that coal mining companies will have to share 26 % of their profits after tax of the previous year with the local public where the mining takes place. The current draft states that profits which is to be distributed should be calculated on Net Profit of each of the mining company including their subsidiaries, more clarifications on the matter is awaited and is believed that there could be significant impact of the bill on the EPS of the mining stocks (See the Table below). There are good chances of CIL to able to adjust prices over a period of time. It is believed that CIL will be able to acquire land & mines easily after the law in enacted. Coal India’s 26 % net profit will be 5 % – 5.5 % of its net sales and an impact of 10 % in FY12 EPS. Complete pass through of the wage hike and mining tax is a challenge and could act as an overhang on the stock performance in the medium term. CIL has access to 64.3 billion tons of reserves, the largest in the world. From this, 52.4 billion tons are based on Indian Standard Procedure (ISP) guidelines, representing 6 % share of the global proven reserves. CIL's profitability and earnings growth are strong, demand from power and other industries ensure favorable return, with upside from e-auction and washed coal. CIL is ramping up its washed coal capacity from 39.4 million to over 111 million tons, with the addition of 20 new facilities. Washed coal earns superior returns for CIL and volume is expected to grow from 16 million tons in FY11 (4 % of total) to 65 million tons by FY 16 (12.5 % of total).

IMPACTED COMPANY IMPACT ON EPS (%)
COAL INDIA 10.00
HINDALCO 1.00
JSPL3.00
JSW STEEL2.00
NALCO1.00
SAIL 11.00
SESA GOA9.00
STERLITE IND6.00
TATA STEEL6.00

Outlook and Valuation:
India's coal demand for FY 10 stood at 600 million tonnes as against the domestic availability of 535 million tonnes; this gap was filled up by the import of 65 million tonnes. CIL is well positioned to capitalize the widening gap of demand & supply as it controls 80 % of the coal supply in India. CIL has been facing problems for its planned expansion, due to delays in requisite environment and forest clearances and land acquisition issues. In FY11 Coal dispatches to be at 425 million tonnes & 455 million tonnes for FY12E; Realisation to be of Rs. 1,183/tonne in FY11 & Rs. 1,321/tonne for FY12E; EBITDA to be Rs. 318/tonne in FY11 & Rs. 392/tonne in FY12E. Company to hold board meeting on 12th August 2011 for quarterly results; To hold AGM on 20th September 2011; Final dividend of 4 % (Rs. 0.40) on 8th September 2011; Book Closure for dividend from 12th September to 16th September 2011 
In my view CIL could report EPS of Rs. 22.10/sh and Rs. 26.50/sh, respectively. CIL’s stock price has corrected from high of Rs. 422/sh, on the back of the development on profit sharing. I maintain a positive view on the stock & believe that any further correction would be a good buying opportunity for long term holders, as for short term, stock could be bought with a price target of Rs. 415.

KEY FINANCIALS FY11 FY12E FY13E
SALES (Rs. Crs) 50,233.60 60,578.60 65,494.70
NET PROFIT (Rs. Crs) 10,867.40 13,905.9516,742.73
EPS (Rs.) 17.30 22.01 26.50
PE (x) 22.70 17.97 14.90
P/BV (x) 6.80 5.69 4.50
EV/EBITDA (x) 13.50 11.40 9.70
ROCE (%) 26.40 37.80 33.90
RONW (%) 54.20 53.40 50.90


MAJOR EVENTS OF COAL INDIA
DATE KEY EVENTSMKT.CAP (Rs. Cr) PRICE (Rs.)
4thNOV 2010 Listed on NSE/BSE2,16,240.58342.55
15thMAR 2011 Positioned no.3 in market cap2,13,335.06338.45
23rdMAY 2011Positioned no.2 in market cap2,31,020.87365.40
8thJULY 2011 Fell down to 4th positon in market cap  2,28,652.23 362.65
12thJULY 2011Regained 3rd position in market cap2,30,673.47365.30
27thJULY 2011Regained 2nd position in market cap2,52,117.51398.95
8thAUG 2011Will be included in SENSEX-----------


I would buy COAL INDIA LTD with a price target of Rs. 415 for the short term and Rs. 435 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 340.00 on your purchase.
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