Tuesday, February 28, 2006

Nifty on B-Day

It was an all-time closing high for the Sensex and Nifty. BSE FMCG index was up 2.7%. Capital Goods Index was up 2.4%.

The Nifty index reacted positively to the budget 2006-07.It touched an all time high of 3090 ,while closing at 3071.95, with a change of 15% over previous day.The Nifty index reacted negatively to proposals like increase in Securities Transaction Tax (STT) and was quoted at the day's low of 3031 at mid-session even as the overall budget was termed as excellent by market players.

The budget also announced measures to boost spending on infrastructure such as roads, ports and airports and cut excise duty on small cars, boosting construction and auto shares.

Shares in top car maker Maruti Udyog Ltd.,rose nearly 6 percent to a record 834.20 rupees after the excise duty was cut to 16 percent from 24 percent.Tata Motors Ltd., India's number three car maker,rose nearly 4 percent to an all-time high of 816 rupees.

The budget proposed to raise service tax rate from 10 to 12 per cent and widen the net to double the collections to Rs 34,500 crore in 2006-07.

The Top gainers on Nifty were BHEL,ACC,Grasim,and Maruti Udyog,while ONGC,HPCL,BPCL and Ranbaxy Labs were the top losers.The Sectors which are seen to be affected by the budget are Handloom,Automobile,FMCG etc

Looking at the budget right now,feels that it is a budget for the long-term investor in the Indian economy.

Monday, February 27, 2006

Budgets & Nifty

With annual budget to be announced on Feb 28 and markets on all time historic high, it will be interesting to know what kind of impact budget announcements have on markets.

If we take the data from last five years: In 2001, nifty was approximately 1300 just before budget but plunged down to 1150 at the end of march. In 2002, it went down from 1142 to 1123 within the same period. In 2003, it came down to 1000 from 1050. In 2004, it went down to around 1770 from 1850 and in 2005, it went down to 2005 from app 2060.

Looking at this trend it seems pretty clear that markets usually correct themselves after budgets. Also looking at recent rise of nifty, the index seems on a high and set up for a correction.And there are no significant expectations from the budget. Our current outlook is that nifty is going to come down by at least 50 points over next one month.

Thursday, February 23, 2006

Cipla Ltd

Sector:- Pharmaceutical
Cipla Ltd
CMP:-551
Target Price:- 650
Recommendation:- Buy

The Q3FY06 results for cipla reported decent figures and growth quarter on quarter.
The total turover for the third quarter Q3FY06 reported a impressive growth of 26% over the corresponding quarter of previous year.The net sales for the third quarter 06 rose to 781.9 crores as against 620.69 crores in the corresponding quarter of previous year.Exports also showed a remarkable growth rate of almost 34% and domestic segment showed a growth rate of about 18%.The Net profit also recorded a growth of 39% qoq.The company posted a net profit after tax of Rs 175.3 crores for the quarter ended December 31, 2005 (Q3 FY 05-06) as compared to Rs 125.67 crores for the quarter ended December 31, 2004 (Q3 FY 04-05).

Anti-retrovirals, anti-inflammatory and anti-ulcerant segments have shown good performance in the domestic market,while the anti-malarials, anti-asthmatics, anti-depressant and anti-epileptic segments along with anti-retrovirals have performed well in the exports markets.

The recent news of the launching of the anti bird flu drug will have a positive impact on the sales of the comapny.Also according to a report the indian pharmaceutical industry is well set for a rapid exapnsion at a rate of 9% year.

We expect the company sales to grow 15% for the year FY-06.Net Profit is also expected to grow for the year 2006.At the current market price of Rs 551 the stock trades at 35.5x FY-06E earnings.Maintaining similar growth we expect the stock might reach a target price between Rs 625-650.So it is a good buy.

Wednesday, February 22, 2006

Hindalco Industries Ltd


Sector:- Metal
Hindalco Industries Ltd
CMP:- 156.50
Target Price:- 200-205
Recommendation:-Buy

The Q3FY-06 results for Hindalco Industries reported a very good performance.
The company’s revenues moved up 15% qoq to Rs. 2873.7 crore from Rs 2,490.1 crore. Net Profit, however, declined 13 per cent to Rs. 300.6 crore from Rs. 347.3 crore, as the performance of the copper business was impaired due to production losses.The aluminium business reported revenues of Rs.1564.4 crore, a 16 per cent growth over the corresponding quarter. Copper business revenues also rose 14 per cent from Rs.1145.4 crore to of Rs. 1308.4 crore.

Global aluminium consumption is anticipated to grow 4.5-5 per cent during 2006, based on support from across various regions.We expect the domestic metal demand to grow at double digits for this year.We expect better results in both aluminium and copper business this year.

We expect the FY06 EPS at Rs 13 and Rs 15 for FY07.At the current price of 156 the stock trades at 11.5x FY06E earnings.So we expect the stock to perform well in the coming quarter and reach a price in the range of Rs180-200.

Tata Teleservices Ltd Update

Here is a link to the article appeared in the reuters regarding Tata Telesrvices Ltd which also states that the company expects to break even in mid-2006.

Tuesday, February 21, 2006

Maruti Udyog Ltd


Sector:- Auto
Maruti Udyog Ltd.
CMP:-Rs 788
Target Price:- Rs 850-900
Recommendation:-Buy

Maruti Udyog Ltd Q3FY06 result showed a 12% growth yoy with increased sales. The net sales Q3FY06 showed a growth of 11% to 31043.1 million as against the previous Q3FY05 result of 27964.6 million.PAT improved by 41.5% to Rs 3390 million in Q3 FY06 from Rs 2396.6 million in Q3 FY05.The net profit rose by 41.5% yoy.

Maruti Udyog Ltd sold 48,526 units in the domestic market in January 2006. This is a growth of 7.1 per cent over January 2005.In all,the Company has sold 50,109 units, including 1,583 units of exports,during January 2006.The Company's volume in the domestic A2 segment (Alto,WagonR, Zen, Swift) grew by 21.2% compared to January 2005.

The company's growth looks good with the increase in sales of the existing products. Also if the excise duty is cut on passenger cars in the forthcoming budget then it will have a positive impact on Maruti Udyog Ltd.

We expect the FY06 EPS at Rs 38 and Rs 45 in FY07. At the current price of Rs 788, the stock trades at 20x FY06E earnings and 17.5x FY07E earnings.So we expect a target price in the range ofRs 850-900 for Maruti Udyog Ltd.

Monday, February 20, 2006

Tata Teleservices(Maharashtra) Ltd


Sector:-Telecom
Tata Teleservices (Maharashtra) Ltd
CMP: 25.40
Recommendation : Buy

Industry outlook
As of January 2006, tele-density of India has reached around 12%. Total subscriber base has now reached the figure of around 130 million with 80 million mobile and 50 million fixed line subscribers. Jan 2006 has witnessed record growth in subscriber numbers of around 5 million. Considering that developed economies like Japan & US have tele-densities of between 115-120 %, India still has a long way to go. Most of the recent growth in telecom sector all over the world has come via mobile telephony and the trend in India conforms to that.

Based on past few year’s data and continued economic growth of the country, telephony sector in India should continue growing at the rate of more then 35% for next five years at least. Currently the share of CDMA providers is less then 25% of total mobile subscriber base. Considering the fact that only Reliance & Tata are major players in this field, we expect the share to remain same or decline in the future.

Company outlook
Tata Tele had approximately 3.68 subscribers in Dec 2005. This is an increase of 15% in one month. The company has presence all over India and occupies second position among the CDMA service providers. But overall the position is sixth among all the mobile service providers. Though it is lagging behind Idea and Hutch at present, it has presence in more circles then these two companies and can be forecasted to be among the top five companies over next five years behind BSNL/MTNL, Bharti, Reliance & Hutch.
As of Q3 06 Tata Tele has started making profits from operations but their finance & treasure charges are disproportionately high. This needs to be further investigated. Based on their previous two financial years, the company should make announce profit after tax in FY 2007.

Our View
Company currently has negative EPS of -3.75 over trailing twelve months. But we expect company to go into black starting second quarter 2007. Considering the valuations in telecom sector, we expect Tata Tele to reach 40 by Dec 2007 & 75 by 2010.

Dabur India Ltd

With the markets having more volatility before the budget there is a chance to buy some good stocks maintaining a long-term view.Here are stock Pics which can have a outperformer rating.

Sector:-FMCG
Dabur India Ltd
CMP:- 108
Target Price:- 135-140
Recommendation:- Buy

The Q3FY06 Results for Dabur show 26% yoy sales growth ,driven by Foods,Balsara and CHD.

Dabur India – which includes the Consumer Care Business and Consumer Health business - posted a growth of 30 per cent in its net profit, up from Rs 106.79 crore to Rs 138.86 crore, during the nine month period. The turnover, during the same period, registered a growth of 8.5 per cent, up from Rs 955.95 crore to Rs 1036.99 crore.

During the third quarter, the company recorded a growth of 34.4 per cent in its net profit, up from Rs 43.13 crore to Rs 57.97 crore, on a turnover that increased by 10.3 per cent, up from Rs 367.13 crore to Rs 404.84 crore. Profit after tax before minority interest rose 40% yoy, to Rs 661 million, led by higher sales and improved profitability.

The comapny launched a new variant -Chyawanshakti which got good consumer response in its initial launch phase.With the launch of the Dabur Vatika Soap the comapny entered the soap business. Dabur is aggressively trying to expand its home care portfolio which it acquired from Balsara.

We expect the company sales to grow 20% for the year FY-06,driven by growth in Foods,Balsara.The FY-07 sales are expected to rise 15% yoy due to higher growth and international business. Net profit in FY-06 is expected to grow 40% yoy to Rs 2.16 billion.The operating profits are also expected to improve due to the hike in prices planned by the company.

Currently at CMP of Rs 108,the stock trades at 30x FY-06E earnings. Maintaning the growth in sales,backed by the acquisition of Balsara and the improving profitability of the company the stock is surely a good buy.
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