!!SAI PARSADAM!!

BIG BOSS

VIKAS PARSHURAM SAMWATSARE

SHARE MARKET SHORT MEDIUM AND LONG TIME INVESTMENT TIPS

DATED 17/12/2012

Buy NTPC for target of 162 - 165 with stop loss of 148. . . . . . Comments - After making high of 175 (12/09/12), scrip was in correction mode & on Friday after making low of 149 scrip closed positive at 153, forming bullish Piercing pattern at bottom, supported by positive indicators & increasing volume. From here near term possible target comes to 162 – 165. In between 157 will act as intermediate resistance levels.Comments After making high of 175 (12/09/12), scrip was in

Buy HCL TECH for target of 659 with stop loss of 617. . . . . . Comments - From the bottom of 504, scrip is in rising trend forming higher tops & higher bottoms. After making high of 659 (30/11/12) scrip again went down to make new higher bottom & made a low of 608 (12/12/12) & started moving upward. On Friday it closed positive above its DMA at 630 forming bullish candle with increasing volume & positive indicators indicates possible uptrend. From here short-term target pri

Buy DLF for target of 229 with stop loss of 213. . . . . . . Comments - After a substantial rise from 197 to 229, scrip started coming down & gave around 50% correction of the rally & made low of 213.55. On Friday it closed positive at 218 levels, forming Harami pattern at bottom indicates possible up trend. From here near term possible target comes to 229.

 Buy Pidilite Industries Ltd. For Target Rs.256

  We rate Pidilite Industries a BUY. Pidilite, incorporated in 1959, has been a pioneer in the Consumer and Specialities Chemicals in India.  Pidilite Industries is the market leader in adhesives and sealants, construction chemicals, hobby colours and polymer emulsions in India.  Its brand name Fevicol has become synonymous with adhesives to millions in India and is ranked amongst the most trusted brands in  India.
Investment Highlights
Established Brand name: Pidilite has strong brands like Fevicol, Dr.Fixit, Fevi Kwik, m-seal, hobby ideas, moto max, Fevi stik etc. Fevicol has  become the household name in india and is the largest selling white adhesive brand in india. With established brand name in the field of adhesives and construction chemical, the prospect of the company appears promising in the future.
Strong Financials with Consistent Growth :
The company’s net sales and profit have grown at 10 year CAGR growth of 18% and 21% respectively. With Strong ROE of 26.9% and D/E  ratio of 0.24, the fundamental of the company looks strong.
Adding new products to strengthen its product line :
Fevicryl Hobby Ideas, a leading hobby acrylic colours brand, added to its wide range of products by launching Sparkling Pear Colours. These colours give a unique sparkling shine to hand painted articles on fabric and non-fabric surfaces. Also Dr. Fixit Kwikflor Cementitious  Flooring Solutions was launched specifically to level and renovate industrial floors that are exposed to heavy loads and frequent abrasions.  Wudfill, a cynoacrylite adhesive, was launched for the first time in India for the woodworking segment. This product is used to fill holes and knots in wood.

Announcement of any positive development on Elastomer project will add a new positive trigger to the stock:
Though the elastomer project where the company has already incurred a capex of INR350 crore is currently on hold from 2 years but any  positive development on the project will add a new positive trigger to the stock.
Business Segment of the company
The Business Segment of the company is divided into two broad segments
A. Consumer & Bazaar Products: :
Branded Consumer & Bazaad products Segment contributes 79% of the total sales of the company and have grown at a 5Yr CAGR of  17.6%. This division includes Adhesives & Selants, Construction Chemical and Art Materials.
B. Speciality Industrial Chemical: :
Speciality Industrial Chemical Segment contributes 21% of the total sales of the company This division includes Industrial Resins, Industral Adhesives and Organic Pigments.
FCCB Redemption of USD 40 million
The company had issued total FCCBs (Foreign Currency Convertible Bonds) of USD 40 million in December 2007 which are due to be  redeemed on December 2012. The company has successfully completed the redemption process by partly converting the bonds into shares and by partly making the payment in cash for the purpose of redeeming the total FCCB amount. This successful redemption of  FCCB may further provide strength to the stock.
VALUATION
At the CMP of INR212, the stock discounts its FY13E EPS of INR7.6 by 27.9x and its FY14E EPS of INR9.5 by 22.4x. With Strong Brand Value,  Consistent financial growth, Strong ROE and innovated product line, the prospect of the company looks bright. The Stock has historically traded at a 3Yr average P/E of 28x as per Bloomberg. We Assign a P/E multiple of 27x to its FY14E EPS of INR9.5 to arrive at the  target price of INR256 for the stock.
Key Concern
Vinyl Acetate Monomer (VAM) is the main raw material, and its price is linked to crude oil. High volatility in raw material prices can impact  margins if the company is unable to pass on the price increase to the end customer.
Negative development or announcement on the Elastomer project will have a material impact on the price of the stock,b
  Accumulate Apollo Tyres For Target Rs. 95.00
 
Natural Rubber prices have been correcting over the past few months and more so over the past few days. Correction in natural rubber prices  augur well for APTY in the current weak demand environment. Given weak demand for tyres, revenues may not grow significantly, but margin expansion looks a real possibility given the recent correction in natural rubber prices. Company has approved fund raising through QIP and  warrant to promoters to fund future capex plans. Impending dilution on account of this could however remain an overhang for the stock price  until more clarity emerges on this issue. We retain our ACCUMULATE rating on the stock with unchanged price target of Rs95.
Outlook and Valuations
*  Volume outlook remains subdued over the near to medium term. On the other hand, softening of natural rubber prices should aid margin  expansion, going ahead.
*  At the CMP of Rs85, the stock trades at 6.3x its FY14E consolidated EPS of Rs13.6.
*  We retain our ACCUMULATE rating on the stock with price target of Rs95. We have valued the stock at 7x FY14E consolidated earnings to  arrive at our target price.
  Buy KPIT Cummins Infosystems Ltd For Target Rs.128.00
 
* KPIT Cummins Infosystems Ltd, a global IT consulting & product engineering partner, is focused on co-innovating domain intensive  technology solutions for manufacturing corporations.
* During the quarter, the company acquired additional 17.5% stake in SYSTIME for which the consideration was INR 386 million.
* During the first quarter ended the robust growth in the Net Profit of the company and it is rose by 360.04% to Rs. 440.99 million.
* KPIT Cummins Infosystems has approved the merger of Sparta Infotech India Private Ltd (step down subsidiary) with KPIT Cummins Infosystems Ltd.
* KPIT wins Oracle Excellence Award for Specialized partner of the year- North America in the Regional System Integrator/ Reseller  Applications momentum category. 
* Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2011 to 2014E respectively. 
* KPIT Cummins semiconductor hardware solutions business entered into partnership with Sankalp Semiconductor Pvt. Ltd., to create  Sankalp & KPIT Semiconductor Pvt. Ltd.
Outlook and Conclusion
* At the current market price of Rs.113.00, the stock P/E ratio is at 19.45 x FY13E and 17.28 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.81 and Rs.6.54 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 19% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 11.33 x for FY13E and 10.24 x for FY14E.
* Price to Book Value of the stock is expected to be at 2.81 x and 2.42 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also.  We recommend ‘BUY’ in this particular scrip with a target price of Rs.128.00 for Medium to Long term investment.
  Buy Greaves Cotton Ltd. For Target Rs.85
 

GCL earnings were flat for the quarter given decline in 3W industry volumes. EBITDA margins were lower due to margin decline in core business
of engines as well as due to continued loss in infrastructure equipment division.
* Valuations are attractive for a company with high return ratios of ~ 20%. We maintain BUY with a revised target price of Rs 85 (Rs 84 earlier)
* Risks and Concerns: Upgrade by customers to 4W LCVs may cannibalise 3W LCV volumes which is the stronghold of GCL. We would remain
watchful about this emerging threat.
Valuation
GCL is currently trading at 12.0x and 11.2x FY13 and FY14 earnings respectively. While industry outlook remains weak, we believe valuations are reasonable at this price. Hence maintain BUY with an revised DCF based price target of Rs 85 (Rs 84 earlier).

 Buy Zee Entertainment Enterprises Ltd. For Target Rs 273
 Outlook

Zee Entertainment Enterprises Ltd (ZEEL) continued to reported better than expected top-line growth of 33.8%. However, it recorded a decline in margins on account of increased investments (new channel launches – Zee Alwan & Zee Bangla Cinema and sports properties). ZEEL’s market share continues to remain robust led by strong showing of flagship channel Zee TV and stable performance in regional markets. We remain positive on its new ventures i.e. a) launch of HD channels, b) Zee Bangla Cinema (already leading cinema channel in Bengali market, complementing Zee Bangla), c) Zee Alwan, d) Ditto TV and e) ZeeQ (a edutainment channel to be launched in Q3FY13).

Furthermore, expected surge in subscription revenues due to the new digitization reforms, higher than expected ad-revenue growth and enhanced reach from the MediaPro venture should help revenues to grow at a CAGR of ~15.7% to Rs 4,711.3 crore from Rs 3,040.5 crore. At a CMP of Rs 191, ZEEL is trading at 19.1x and 14.1x its estimated earnings for FY14 and FY15 and we reiterate a BUY with the price target of Rs 273 representing a potential upside of ~43%.

Key Takeaways

* ZEEL reported a robust revenue growth of 33.8% YoY to Rs 953.5 crore in Q2FY13 as against Rs 712.8 crore in Q2FY12 with all round performance across major revenue streams i.e. advertising revenues and subscription revenues which grew by 33.7% YoY (Rs 528.1 crore v/s Rs 394.9 crore) and 35.7% YoY (Rs 394.9 crore v/s Rs 291 crore) respectively.

* During the quarter, advertising revenues grew sharply by 33.7% at Rs 528.1 crore despite seasonally weak advertising quarter. The ad-revenue growth was primarily driven by (a) India-Sri Lanka series and (b) ~18% advertising growth from ex-sports business (led by flagship channel Zee TV).

* Subscription revenues recorded 35.7% YoY growth to Rs 394.9 crore in Q3FY13 as against Rs 291 crore primarily driven by domestic  subscription revenues. Domestic revenue grew by 43.9% YoY to Rs 280.8 crore on the back of continued traction from MediaPro and International 
subscription revenue grew by 19.0% YoY to Rs 114.1 crore largely due to rupee depreciation.

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SAI PARSADAM AND VIKAS PARSHURAM SAMWATSAE cOPYRIGHT 2012 DEC 
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