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A TIME COMMUNICATIONS PUBLICATION VOL. XX No.39

Monday, August 8 - 14, 2011

Pages 18 Rs.12

Weakness to persist

amidst occasional bouts of relief rally By Sanjay R. Bhatia Weakness persisted on the domestic bourses on the back of global market cues. Sustained selling pressure was witnessed as markets tested the Nifty 5200 level. Although occasional bouts of short covering were witnessed, the markets failed to capitalise on lack of follow-up buying support. The volumes recorded were higher amidst negative market breadth, which again is a negative sign. Incidentally, the FIIs remained net sellers in the cash as well as the derivatives segment. The Domestic institutional investors, however, were net buyers during the week and were seen supporting the markets at lower levels. The global economic environment continued to paint a bleak picture. On the domestic front, the inflation rate continued to remain a cause of concern. Technically, the Nifty is placed below the 200-day SMA. Moreover, Nifty’s 50-day SMA continues to remain below the 100-day SMA. The Stochastic, MACD, RSI and KST are placed below their respective averages on the daily charts. The KST and MACD are also placed in the negative territory on the daily and weekly charts. These conditions would result in selling pressure at regular intervals. The -DI line continues to move higher and is placed above the 30 level, indicating that sellers have an upper hand. The +DI continues to move downwards while the ADX line is moving higher. The only silver lining for the markets is that the Stochastic and RSI are placed in the oversold territory on the daily charts. This would result in regular bouts of short covering and buying support at lower levels. The market sentiment remains negative. Now, it is important that the Nifty witnesses buying support at lower levels. Further selling pressure is likely if the Nifty fails to sustain above the 5200 level and closes below it. In the meanwhile the markets would take cues from the news flow on the progress of the monsoon, crude oil prices and the global markets. Technically on the upside, the Sensex faces resistance at the 18314, 18871 and 19100 level. On the downside, the Sensex seeks support at the 16650, 16445 and 16000 levels. The resistance levels for the Nifty are placed at 5364, 5262 and 5225 and the support levels are placed at 5195, 4987 and 4806. Traders and speculators could buy HPCL above Rs.410 with a stop loss of Rs.378.50 and a price target of Rs.480.

A Time Communications Publication

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BAZAR.COM

Economy in doldrums!

By Fakhri H Sabuwala The Prime Minister’s Economic Advisory Council’s (PMEAC) has cut the estimates of India’s GDP growth to 8.2% from 9% earlier. RBI, too, has reduced its growth estimate to 8% this fiscal. It can be safely concluded that India is heading for the worst growth in the last 3 years. Signs of this downturn are visible in the slowdown of car sales, lower 2-wheeler sales, shrinking sales at modern day format retail stores, moderating investments and construction spending due to lack of demand visibility and policy paralysis. Juxtapose this with the persistently high inflation, rising interest rates, poor government spending, expose of new scams, the Lok Pal stalemate and weak global capital markets and we have a perfect recipe for lower economic growth. If this is the state of our economy, no need to ask what’s cooking or what's in store for us. What could the estimates arising out of dismal economic situation forecast for the immediate and distant future. Fall in real incomes, loss of jobs, cut in salaries and fall in capex would be the natural outcome of such a situation. Another indicator that substantiates our fears is the weakest expansion in production at the factory level in the last 20 months. PMEAC Chairman, Mr. C. Rangarajan, and RBI Governor, D. Subbarao, feel that interest rates could rise by another 50 basis points if inflation has to be tamed. Their estimate of inflation ruling at 9% by October 2011 is not unfounded. The flipside to a slowdown is that it reduces the government's income or revenue, as companies make less profit and will therefore pay less tax. Lower sales would also mean lesser indirect taxes too. The revenues thus shrink whereas the expenditure will remain the same giving rise to a higher fiscal deficit. "Higher inflation hurts people's purchasing power, more so the middle and lower classes which is a huge vote bank for the government," says Shubhad Rao, Economist at Yes Bank. The RBI Governor, on the other hand, feels that inflation is driven by three factors: 1. Structural pressure on food prices. 2. Crude and commodity prices 3. Wage and demand pressure. “Across villages in India, incomes have gone up, People are eating better..... shifting from cereal to protein. So there is a structural component to food inflation" he said. The need of the hour, therefore, is to push forth the reforms and policies. Its time to move the bill on land acquisition, foreign direct investments in retail and other key areas so that the sentiment on the economy remains upbeat. It will also help the growth process. Little wonder, the RBI Governor said "You need to restrain inflation in order to ensure that our middle-term growth is sustainable”. Such a statement coming within a week of the 50 basis points interest hike shows that the economy is in the doldrums and the market has just begun to factor it in value terms. India’s purchasing manager's index (PMI) is a measure of whether the manufacturing sector in the economy is growing or slowing down. This index fell to a 20 months low at 53.6 points in July 2011 indicating that it could fall further in August 2011. This is the third successive monthly slide for this index mainly on account of the lower production, fewer new orders for manufacturing or for exports. The weak global and domestic demand is indicative on this count. The PMI reading further reveals that both input and output price indices rose in July 2011 pointing to continued cost pressures and to a higher wholesale price index (WPI) inflation in July 2011 after a flat month to month reading in June 2011. The day this was reported, foreign broking major, Morgan Stanley, revised all its estimates of GDP growth to 7.2% from 7.7% for 2011-12 and from 8.5% to 8% for 2012-13. This year, the PM will have a lot of explanations to give from the ramparts of the Red Fort on 15 August. Who will wipe the tears from the eyes of the middle and lower class? How will the menace of scams be tackled? Can Anna's Hazare’s campaign against corruption make a sizeable difference? A lot of these questions need to be answered and that will depend how soon we come out of this ‘slowdown’ poison. Had we been a less corrupt nation or scam free, we could have been on the top of the ladder of progress. Now the estimates of India attaining the BRIC leadership need to be revisited. But that’s wishful thinking, at least for now, as the country runs RAM-BHAROSEY!

TRADING ON TECHNICALS

Sustained weakness below 16990 can extend the slide

By Hitendra Vasudeo Last week, the Sensex opened at 18352.23 and attained a high 18440.07 and fell to a low of 16990.91 before it finally closed the week at 17305.87 and thereby showed a net fall of 891 points on a week to week basis. A Time Communications Publication

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The effect of the Engulfing Bear and Outbar was seen last week as the Sensex violated the support level of 17900 and moved down to 16990. In last week’s strategy, we had indicated to sell on rise to 18424-18717 and the high registered last week was 18440. Traders who managed to implement a sell at 18440 on the Sensex or on the Nifty at that point benefited. We had also indicated that a fall below 17900 will test the lower range of 17313-17295. The Sensex made a low of 16990. Traders who had the courage and implemented the trade had the opportunity to benefit. Courage, Risk Planning and Management is something that an individual trader or investor has to build, plan and implement. No analyst can do that for you. Our job is to indicate, as per our reading, what a trade or an analyst can do for you. Followers of this column over the years have a clue of the market perspective provided by us. New readers and followers will take time to adapt and adjust, and may also find difficulty in understanding or adapting. A strong, large negative candle has been formed testing the trend line as shown in the chart. The trend line is drawn from 15330 and 15651 on the log scale. The trend line was tested at 15960 and the same is again now tested. It has been violated on closing basis. Another follow-up fall and close below last week’s low of 16990 will confirm the breakdown. After such a large fall, we may at times find an intra-week rise to test the weekly resistance levels before attempting to move below 16990. Weekly resistance will be at 17578-18169-19616. We may also find the Sensex testing 17578-18169 before slipping below 16990. A rise and close above 18441 on a weekly basis may confirm a reversal and the low made will be the bottom. The subsequent objective will be to cross the lower top of 19132. Any bounce back must cross 19132 and any lower top against 19132 spells deeper trouble. Hence, traders need not get excited about a recovery that could be seen on an intra-day or intra-week basis. A fall and close below 16990 may confirm the breakdown. Further, it will also confirm head and shoulder pattern, which will have implications for a slide towards 13219-12256. The retracement levels of the rise from 7697 to 21108 are placed at 15694, 14389 and 12828. The retracement levels of the rise from 8047 to 21108 are placed at 16119, 14521 and 13086. The 61.8% projection of the fall from 21206 to 8047 projected down from 21108 is at 12965. The cluster of 12828, 13086 and 12965 can be rounded off to 13000 as the support base. The retracement levels may offer some bounce backs to lower tops and move towards 13000 in time to come. If the Sensex shows a false breakdown, then a recovery of over 1000 points on a weekly closing basis is needed or must be recovered without sustaining below 16990 level for the long-term to gradually take off to 18441. Weekly support will be at 16717 and 15268. Bounce back and recovery from 16717 or below to subsequently test 17578 could mark the reversal. Hence if the lower range is attained first and then 17578, then in that case avoid selling. Wave Tree: Month

Year

Sensex

Month

Year

Sensex

Remark

Wave I

Wave Tree -

-

-

-

Dec

1979

113

Feb

1986

656

-

Wave II

-

-

-

-

Feb

1986

656

March

1998

390

-

Wave III

-

-

-

-

March

1998

390

Jan

2008

21206

-

Wave IV

-

-

-

-

Jan

2008

21206

August

2011

16990

In Progress

Wave IV

Wave A

-

-

-

Jan

2008

21206

March

2009

8047

-

Wave IV

Wave B

-

-

-

March

2009

8047

11-Nov

2010

21108

-

Wave IV

Wave C

-

-

-

11-Nov

2010

21108

August

2011

16990

In Progress

Wave IV

Wave C

a

-

-

11-Nov

2010

21108

Nov

2011

18954

-

Wave IV

Wave C

b

-

-

Nov

2010

18954

Jan

2011

20664

Wave IV

Wave C

c

-

-

Jan

2011

20664

March

2011

17792

Wave IV

Wave C

x

-

-

March

2011

17792

April

2011

19811

Wave IV

Wave C

a

-

-

April

2011

19811

June

2011

17314

A Time Communications Publication

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Wave IV

Wave C

b

Wave IV

Wave c

c

-

-

June

2011

17314

July

2011

19132

July

2011

19132

August

2011

16990

In Progress

Conclusion A sustained fall and close below 16990 will confirm the breakdown and head & shoulder pattern, which has severe bearish implications. A rise and close above 18441 could create a false breakdown situation. Strategy for the week Exit long and sell on rise to 17578-18168 with a stop loss of 18450. Cover short positions in the 16717-15268 range. A breakout and close above 19132 may bring about a rally. Till 19132 is not crossed, every rise will be to exit long positions. WEEKLY UP TREND STOCKS Let the price move below Center Point or Level 2 and when it move back above Center Point or Level 2 then buy with what ever low registered below Center Point or Level 2 as the stop loss. After buying if the price moves to Level 3 or above then look to book profits as the opportunity arises. If the close is below Weekly Reversal Value then the trend will change from Up Trend to Down Trend. Check on Friday after 3.pm to confirm weekly reversal of the up Trend. Scrips

Last Close

Stop Loss

Level 2

Center Point

Level 3

Level 4

Buy Price

Buy Price

Book Profit

Book Profit

Weekly Relative Reversal Strength Value

Up Trend Date

INDRAPRASTHA GAS

417.65

389.2

395.3

411.6

433.9

472.5

61.4

406.8

GUJ.MINERAL DEV.C

166.05

158.0

158.9

165.2

172.4

185.9

60.7

162.0

05-08-11

APOLLO HOSPITAL E

536.50

515.0

518.0

533.5

552.0

586.0

57.8

518.2

08-07-11

CHAMBAL FERTILISE EICHER MOTORS

01-04-11

92.45

86.7

87.5

91.7

96.6

105.7

56.9

87.4

01-07-11

1352.00

1292.0

1300.0

1344.0

1396.0

1492.0

55.1

1328.8

01-07-11

WEEKLY DOWN TREND STOCKS Let the price move above Center Point or Level 3 and when it move back below Center Point or Level 3 then sell with what ever high registered above Center Point or Level 3 as the stop loss. After selling if the prices moves to Level 2 or below then look to cover short positions as the opportunity arises. If the close is above Weekly Reversal Value then the trend will change from Down Trend to Up Trend. Check on Friday after 3.pm to confirm weekly reversal of the Down Trend. Scrips

Last Close

Level 1 Cover Short

Level 2

Center Point

Level 3

Stop Loss

Cover Short

Sell Price

Sell Price

Relative Strengt h

Weekly Reversal Value

Down Trend Date

ADANI POWER

90.55

67.4

84.4

95.2

101.4

106.0

22.84

104.01

29-07-11

CROMPTON GREAVE

157.50

123.7

146.7

158.8

169.7

171.0

23.50

188.06

08-07-11

SAIL

115.60

94.2

109.4

118.5

124.7

127.5

23.61

126.10

15-07-11

NATIONAL ALUMINIUM

68.50

55.2

64.7

70.4

74.2

76.1

24.39

76.52

17-06-11

INDIABULL POWER

16.30

13.3

15.4

16.7

17.6

17.9

25.37

17.29

29-07-11

PUNTER'S PICKS Note: Positional trade and exit at stop loss or target which ever is earlier. Not an intra-day trade. A delivery based trade for a possible time frame of 1-7 trading days. Exit at first target or above. Scrips ABM KNOWLEDGE ANUH PHARMA FIEM INDUSTRIES

BSE Code

Last Close

Buy Price

Buy On Rise

Stop Loss

531161 506260 532768

78.85 138.60 161.45

73.20 135.00 156.20

81.90 140.00 165.00

70.00 125.00 152.25

Target 1 Target 2 89.3 149.3 172.9

101.2 164.3 185.6

Risk Reward 1.18 0.78 1.24

EXIT LIST Last Close

Sell Price

Sell Price

Sell Price

Stop Loss

Target 1

Target 2

78.80

80.58

82.47

84.37

90.50

64.5

48.5

ASIAN PAINTS

3052.00

3063.65

3083.00 3102.35 3165.00

2899.7

2735.7

CADILA HEALTH.

853.00

857.21

865.00

898.00

791.2

725.2

GILLETE INDIA

2127.00

2177.58

2200.00 2222.42 2295.00

1987.6

1797.6

Scrip ARVIND

A Time Communications Publication

872.79

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GODREJ CONS. PROD.

419.80

421.99

426.00

430.01

443.00

388.0

354.0

ITC

196.50

198.61

201.02

203.44

211.25

178.2

157.7

MARICO

155.30

158.49

160.67

162.86

169.95

139.9

121.4

PFIZER

1444.00

1470.65

1490.00 1509.35 1572.00

1306.7

1142.7

SIEMENS

892.00

895.01

901.50

907.99

929.00

840.0

785.0

SUN PHARMA

497.70

503.50

508.90

514.30

531.80

457.7

411.9

TATA CONSULT. SER

1056.70

1074.53

1088.90 1103.27 1149.80

952.7

830.9

TOWER TALK * Share price of HCL Infosystems has fallen significantly on account of the CBI probe in case of Common Wealth Games. An excellent opportunity to buy for long-term investors. * The recent addition of Delta Corp to the F&O segment indicates the operators intention. Small investors can buy in cash & hold for a few months. * At a market cap of Rs.1400 crore, IVRCL appears to be a value buy opines a market veteran. Start accumulating at further declines. * Strong tips to buy Artson Engineering a Tata Group company are being floated in the market by interested people. Stay away from the counter as the company has posted a substantial loss for Q1FY12. * One healthcare analyst strongly recommends the shares of Amar Remedies, which is all set to post an EPS of Rs.18 in FY12. * Panama Petrochem is expected to clock an EPS of Rs.75 in FY12.The share is likely to advance by over 50% to Rs.375 in the medium term. * One pharma analyst strongly recommends the shares of Ajanta Pharma, which is doing extremely well and is poised to register an EPS of Rs.58 in FY12. It is foraying into the US markets and its EPS could rise to Rs.70 in FY13. * Hind Rectifiers is expected to clock an EPS of Rs.10 in FY12. The share is going cheap and is expected to appreciate by over 40% in three-to-six months. * An oil and gas analyst is strongly recommending the shares of Shiv Vani Oil & Gas for decent gains. The company is expected to post an EPS of Rs.50 in FY12.

BEST BETS

Hindustan Dorr-Oliver Ltd. (Code: 509627)

(Rs.42.05)

Established in 1942 as a wholly-owned subsidiary of Dorr-Oliver Inc - a US based mining equipment group, Hindustan Dorr-Oliver Ltd (HDOL) is today a leading manufacturer of engineering equipments and provides engineering, procurement and construction (EPC) solutions. After becoming a public limited company in 2000 and passing through many hands, HDOL was bought over in 2005 by infrastructure giant, IVRCL Ltd., which engaged in providing EPC solutions, development and execution of lumpsum turnkey facilities in water supply, roads, bridges, townships, industrial structures and power transmission. Since then, HDOL operates as a subsidiary of IVRCL Ltd. given the latter’s 55% equity stake and has a pan India presence. With offices in Mumbai, Bangalore, Chennai, Kolkata, Delhi and Ahmedabad, it has talented workforce of about 1,300 people of which over 90% are engineers or hold an equivalent degree. At any given point, it has about 30 active sites at various stages of completion and manages over 14,000 site labour force at various project locations all over India. Broadly, HDOL has divided its business model into three strategic business units (SBUs) for effective operations. 1) EPC (80%): This SBU constitutes the core business of the company and specializes in providing EPC & project management services in: a. Mineral Beneficiation: Backed by its in-depth knowledge of mineral processing techniques, it has made major contributions to bauxite, iron, uranium, copper, lead, zinc and chrome ore processing through its proven solid-liquid separation technologies and continues to be the market leader in this field. b. Water & Waste Water Management: Being a major player in India’s water market, it has capabilities including treatment of all types of water and wastewater - raw water, drinking water, sewage, industrial effluent, brakish water and sea water desalination using any kind of technology - conventional, Sequential Batch Reactor (SBR), Membrane Bio Reactor (MBR), De-mineralization (DM), Reverse Osmosis (RO), etc. HDOL has a good presence in the refineries segment and provides complete water management with zero liquid discharge apart from executing revamp projects. c. Pulp & Paper: It offers the complete range of process and equipment required for any type of pulp mill. In fact it pioneered countercurrent washing and changed the industry from batch production to continuous pulp washing thereby reducing the downtime and improving productivity. A Time Communications Publication

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d. Fertilizer & Chemicals: HDOL boasts of having installed about 70% of all the phosphatic fertilizer plants on a turnkey basis in India. It also claims to have pioneered highly complex NPK and DAP granular phosphatic fertilizers apart from introducing pipe reactor technology in fertilizer plants. 2) Manufacturing (15%): This SBU manufactures equipments like heat exchangers, pressure vessels, storage tanks, columns, reactors and various other proprietary equipments related to solid-liquid separation equipments like filters, classifiers, thickeners, clarifiers etc. It manufactures and supplies custom designed and engineered critical equipment and systems to core sector industries like fertilizers, petrochemicals, chemicals, oil & gas, metals & minerals, pulp and paper, etc. Of late, it has entered into Licence Agreement with Bronswerk Heat Transfer BV of Netherlands to manufacture equipments like Air Cooled Heat Exchangers, C Frame Condenser, HP Shell & Tube Heat Exchangers, Sub Sea Cooler Fans which are used in Thermal and Nuclear Power Plants which is a promising sector with huge growth potential. Its manufacturing plant is in Ahmadabad, Gujarat. 3) Design & Engineering Division (5%): Under this SBU, the company provides engineering solutions to high end technology sectors comprising process design, engineering analysis, engineering process support, production and plant engineering, design automation, etc. It is a key division of the company as it is involved from the bidding stage up to the final completion of any project. In FY10, HDOL acquired 100% stake in UK-based Davy Markham Ltd, which is a 180 year old heavy end equipment fabrication company with capabilities to design, manufacture, fabricate and machine heavy and complex engineering components and assemblies in mining, power generation, nuclear and steel sectors. Its latest state of the art workshop, situated in Sheffield (UK) is unique in Western Europe, in terms of capacity and capabilities for heavy fabrications and machined components. Its products include winders and hoists for mines, rotary casings, valves and water gates for the power sector. It also provides nuclear engineering services in the UK. This overseas acquisition has not only helped HDOL in enhancing its product portfolio & geographical reach but also in terms of technical capabilities to execute complex & larger projects and to tap newer segments like power, oil & gas etc. Although Davy Markham has reported a minor loss in FY11, it is expected to turn around in FY12. It has a healthy order backlog of Rs.175 crore, the management expects a PAT of Rs.7 crore in FY12E. It is also planning to expand in Mexico and in Latin American markets. HDOL is also focusing on organic growth and has identified the following business areas which have synergy with its existing lines of business: Bulk Material Handling, Iron Ore Peptization, Nuclear Power- Manufacture of components / sub-assemblies, Coal Washeries, Power Sector, Hydrocarbons sector and has identified technology partners for each of the above areas and dedicated teams are working on various tenders to bid for. Presently, it has an unexecuted order book position of Rs.1400 crore including the recent Rs.375 crore order awarded by Konkola Copper Mines, Zambia. Going forward, it expects to bag some good orders and is the L1 bidder for the Rs.450 NIFTY & BANK NIFTY crore from UCIL. Fundamentally, it (Live Market) reported a disappointing performance for Identifies intra-day Trading Opportunities and also provides positional Q4FY11 and ended FY11 with sales of calls for a day or two depending on the range of the target. Rs.944 crore (up 10%) but the PAT was flat at Rs.53.75 crore posting an EPS of Rs.7.50 Available daily by SMS and Yahoo Messenger. on its equity of Rs.14.40 crore having face Subscription Rate: Rs.3000 per month or Rs.24,000 for 1 year value of Rs.2 per share. Since the company did not bag any huge orders in FY11 and posted a poor performance for Q4FY, its share price has fallen by over 75% to Rs. 40 from the high of Rs.160. The company has yet to come out with its June’11 quarterly results and is expected to post muted results. Hence the scrip is making new lows daily. However at the current market cap of Rs.300 crore, all the negatives seem to have been factored in and the risk:reward has turned favourable. For FY12, it may clock a turnover of Rs.1000 crore with PAT of Rs.60 crore. Investors are recommended to buy this stock at current levels and add more on sharp declines for a price target of Rs.60 in 12-15 months.

STOCK ANALYSIS

Kanpur Plastipack: Value for money

By Devdas Mogili Kanpur Plastipacks Ltd. (KPL) is a 40-year old Kanpur (Uttar Pradesh) based company established in 1970. The company made a modest beginning manufacturing HDPE/PP Woven Fabrics and Sacks. It manufacturers Flexible Intermediate Bulk Containers (FIBC) also known as Bulk Bags or Big Bags or Jumbo Bags for industrial and bulk transportation of cement, food grains, chemicals, fertilizers, pharamceuticals and such other materials. The company thus provides

A Time Communications Publication

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solutions for industrial packing of commodities. Mahesh Swarup Agarwal is the chairman while Manoj Agarwal is the managing director of the company. KPL started manufacturing food grade bags and Anti-Static and Conductive Bags in 2008 and is now a major player in the manufacture of FIBCs, Jumbo Bags and Big Bags. Producing over 5 million FIBCs per annum, it is one of India’s largest exporters of FIBCs and has a vertically integrated unit. KPL started as a small scale unit and has grown to become a medium sized manufacturer of woven sacks. It had set up its Kanpur plant to manufacture 1425 TPA, which was later enhanced to 1890 TPA. It has additional facilities to manufacture paper lined plastic bags. In October 1986, it came out with a public issue to part-finance the expansion of its capacity from 1890 TPA to 3755 TPA. In 1990, KPL started producing paper lined plastic bags at its plant, which was lying idle for two years. Adverse market conditions and the impact of the Jute Packing Control Order affected the operations of the company as it suffered continuous losses and become a sick company within the purview of the BIFR in 1991. The BIFR sanctioned a rehabilitation package in July 1992 that was implemented by the company. In 1992-93, it formulated a scheme to upgrade its technology further with the installation of balancing equipments to expand its plastic woven sack manufacturing capacity by 25%. The company weathered the storm and has successfully come out of the bad period. In 1999-2000, KPL was granted the ISO 9002 certification by NQA Quality Systems Registrar Ltd., accredited by Dutch Council for Certification (RVC). Clientele: KPL’s client list includes IEL, IFFCO, FACT, J K Synthetics, Straw Products, etc. Awards: The company is recognized as a Star Export House and is a recipient of the Niryat Shree Silver Trophy from the Federation of Indian Export Organizations (FIEO). It has also won AMITY's top 500 SMBs Awards for the second time in a row. Performance: KPL registered a total income of Rs.121.31 crore with PAT of Rs.3.03 crore netting an EPS of Rs.5.70 for the year 2010-11. Financial Highlights: (Rs. in lakh) Particulars Q1FY12 Q1FY11 FY11 FY10 Latest Results: The company has posted Total Income 3808.27 2752.34 12130.89 10276.84 excellent results for the quarter ended 30 June Total Expenditur 3482.83 2610.61 11266.46 9606.12 2011. It recorded a total income of Rs.38.08 crore Interest 127.32 74.84 357.85 273.63 with net profit of Rs.1.98 crore registering an EPS Current tax 74.82 111.00 Deferred tax 84.89 31.05 of Rs.3.73 for the quarter. Earlier Years 14.29 44.70 1.03 Financials: KPL has an equity base of Rs.5.31 Net Profit 198.12 52.60 302.57 254.01 crore with a share book value of Rs.39.57, a Equity (FV: Rs.10) 530.63 530.63 530.63 530.63 Reserves 1270.84 debt:equity ratio of 1.90, RoCE of 14.30% and EPS (Rs) 3.73 0.99 5.70 4.79 RoNW of 14.96%. Share Profile: Its shares with a face value of Rs.10 is listed and traded on the BSE under the B group. Its share price hit a 52-week high low of Rs.48.75/Rs.22.85. At its current market price of Rs.37.15, it has a market capitalization of Rs.19.71 crore. Dividends: The company has been paying dividends as shown here: FY11 - 10%, FY10 - 10%, FY09 - 6%, FY08 - 10%, FY07 - 10%, FY06 - 6%, FY05 - 6%. Enthused by its performance and prospects, the company has also recommended issuance of Bonus Shares in the ratio of 1:2 i.e. 1 equity share for every 2 shares held. Shareholding Pattern: The promoter holding in the company is 69.19% and the balance of 30.81% is with non-corporate promoters and the investing public. Prospects: KPL is on an expansion spree and has started operations at a third location and is well positioned to improve its performance in the coming years. Given the growing demand in the packaging industry, it has bright prospects for growth both in domestic & export markets. Conclusion: KPL is an existing, profit making and dividend paying company that provides industrial packaging solutions and is a major player in the FIBC space with a good clientele. At its current market price of Rs.37.15, the KPL share price discounts its 2010-11 earnings of Rs.6.90 less than 5.5 times. In views of its excellent performance, good clientele, bright prospects and a bonus issue, the KPL share offers good value for money in the medium-to-long-term.

MARKET REVIEW

Global recession in proximity? By Ashok D. Singh

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The shadow of a global economic crisis is looming large and affecting the markets severely. The BSE Sensex declined 891.33 points or 4.9% to settle at 17,305.87 for the week ended Friday, 5 August 2011 its lowest closing since Friday, 11 June 2010. The CNX Nifty tanked 270.75 points or 4.93% to end at 5,211.25 its lowest closing level since Monday, 14 June 2010. Both the key indices hit close to 14-month lows. The Sensex has slumped 1,565.42 points or 8.29% in 9 trading sessions from a recent high of 18,871.29 on Monday, 25 July 2011. Out of the 5 trading sessions, the Sensex declined in 4 and gained in 1. The BSE Small-Cap index fell 5.91% and underperformed the Sensex. The BSE Mid-Cap index fell 4.72% and outperformed the Sensex. On Tuesday, 2 August 2011, the Reserve Bank of India (RBI) tightened the rules on sales of derivative products in a move aimed at preventing the mis-selling of these complex products to local firms. The RBI said in a notification that no bank can be a ‘market maker’ in a product that it cannot price independently even if it covers the risk from the deal with another bank immediately. A market maker is a financial middle man, typically a bank that helps the price discovery process and adds liquidity to the market by quoting both bid and ask prices for financial products. The new rules prevent foreign banks from being market makers in a product if they cannot price it locally. Banks must also now make sure that officials to whom they sell derivative products are backed by the board to execute such transactions, the RBI said. But it did not specify what derivatives are covered by the new rules. Monsoon rains were 22% below normal for the week to Wednesday, 3 August 2011, recording a marginal improvement from the 23% below average showers in the previous week. Gross rainfall since the beginning of the June to September monsoon season has been 6% below average. The rainfall has been normal or above in 73% of the country so far while 27% of the country is facing a deficit. In some parts of eastern India such as Orissa, Bihar and Jharkhand rainfall is below normal. However, in the key rice growing state of West Bengal rainfall is above normal. A rainfall deficit in the southern state of Andhra Pradesh, a top rice producer has largely been bridged. In the northern grain bowl region of Punjab the monsoon rain deficit is 26%. However since most farmland in Punjab is irrigated rice production may not be adversely affected. Low rainfall in the western regions, however, is likely to adversely affect the output of groundnut the second biggest summer sown oilseed crop after soyabean. In Gujarat rainfall is 37% below average. Trading for the week began on an optimistic note. A rally in world stocks triggered by US President Barack Obama's announcement over the weekend that he and Senate leaders had agreed on a ‘framework’ debt deal to cut spending and raise the debt ceiling aided Indian shares edge higher on Monday, 1 August 2011. The Sensex rose 117.13 points or 0.64% to close at 18,314.33. Indian stocks ended lower on Tuesday, 2 August 2011 due to anxiety of global economic crisis. The Sensex fell 204.44 points or 1.12% to close at 18,109.89. The key index on Wednesday, 3 August 2011 tanked with concerns about higher interest rates will crimp corporate profit growth. The Sensex fell 169.34 points or 0.94% to close at 17,940.55. On Thursday, 4 August 2011 concerns about corporate earnings growth, high food inflation and data showing stepping up selling by foreign institutional investors spooked the market. The Sensex tanked 247.37 points or 1.38% to settle at 17,693.18. Rising fears of possible US double-dip recession and the worsening European sovereign debt woes pushed Indian stocks lower on Friday, 5 August 2011. The Sensex lost 387.31 points or 2.19% finally to settle at 17,305.87. The Sensex declined 891.33 points to settle at 17,305.87 last week. The market seems to remain under pressure caused by the RBI’s aggressive interest rate hike at a credit policy review on Tuesday, 26 July 2011 and also by weak global economic scenario hovering over markets. The Q1FY12 earnings season is drawing towards a close. Investors are focusing on the post Q1FY12 result management commentary to gauge the future earnings outlook at a time when Indian firms are witnessing cost pressures amid rising interest rates and staff costs. On the global front, investors eyeing on the US Federal Reserve's 1 day policy meeting on Tuesday, 9 August 2011. At their last meeting in June 2011 Fed officials decided to keep the central bank's balance sheet at a record to spur the slowing economy after completing $600 billion of bond purchases. The Fed has held its target for the short term federal funds rate inside a lowest ever range of 0% to 0.25% since December 2008. The USA averted a debt default on Tuesday, 2 August 2011 when President Barack Obama signed a bill raising the country's debt ceiling into law.

GURU SPEAK

Markets melt on weak global cues

By G. S. Roongta The BSE Sensex took a heavy toll of 891 points last week ever since the Reserve Bank of India (RBI) raised the repo and reverse repo rates by 50 basis points (bps).

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The market thus closed in the red for 9 days till Friday, 5 August 2011 with the exception of Monday, 1 August 2011 when the Sensex rose 117.13 points. Banking, Realty and Automobile sectors reacted the most on account of the RBI action but the banks were quick to raise lending rates to safeguard their bottomlines, which stands threatened by such a steep rate hike. This high rate of interest also enlarges the risk of higher NPAs as feared by some bank CEOs. The government has been shaken with the onslaught of inflation and has been trying to tame it over for over a year now but has utterly failed. This led the RBI Governor to turn aggressive and hike the interest rates for the eleventh consecutive quarter and that too by a stiff 50 bps when the market was least expecting it or the usual 25 bps at most. That it is seized by inflation is evident by the RBI Governor’s statement that taming inflation even at the cost of growth was his priority. Accordingly, the growth rate of 9% stands revised to 8.2% or even lower if necessary so long as inflation is brought down to 5-6%, which is not an easy task. Because of these economic factors, the stock markets are sandwiched between the bull and bear forces. The poor handling of these economic developments has led the market to turn indecisive and devoid of any interest by retail investors, who have suffered the most on account of an indefinite trend. The BSE Sensex has been revisiting the 18K level and CNX Nifty below 5400 time and again perhaps for the sixth time in the last 6 months notwithstanding the occasional relief rally of over 1000-1500 points on account of value buying at lower levels. This has, however, not helped change the market sentiment on either side proving that 18K on the Sensex and 5400 on the Nifty are strong support levels and attract buying by long-term investors. Similarly, Sensex 19K attracts profit-booking by investors as well as short-selling by punters who wish to book trading profits from the change in trend of 1000-1500 points time and again. But this time it’s a new story. The Sensex, which offered strong support at 18K or the Nifty at 5400, stands breached thanks to the all-round weakness in global markets on Friday, 5 August 2011. The benchmarks closed the week at Sensex 17305.87 with a loss of 891 points while the Nifty closed at 5211.25 after losing 257 points during the week. This has obviously created new levels of resistance and support in which the benchmarks will oscillate. Friday’s closing was in sharp contrast to the week’s beginning on Monday, 1 August 2011, as the benchmarks closed in a positive territory. Thereafter from Tuesday, 2 August 2011, the markets have gone downhill and slipped below Sensex 17.5K level and below Nifty 5250 level. It is indeed an irony that there are great distortions in the stock market as stock prices continue to slide despite a company’s fundamentals or improved quarterly performance. Majority of stocks are now ruling below their 52-week highs in FY10 despite the addition of a full year’s profit for FY11 and the current Q1FY12. For example, Ashok Leyland, recommended in this column 3 weeks back, was trading between Rs.60 and Rs.80 for nearly 8 months between April and November 2010 before it hit G. S. Roongta a high of Rs.81.90 in November 2010. Post its 1:1 bonus on 3 August 2011, it is now trading at Rs.24.50 (Rs.49 pre-bonus). Despite 100% higher dividend compared to the previous year and nearly 50% higher net profit at Rs.631 crore compared to Rs.424 crore in FY10. The current share price thus proves to be disincentive for better performance but an advantage to sellers in the cash segment or the F&O segment. The stock is from the Automobile sector and one of the few companies to record 16% rise in sale of vehicles in July 2011 while Tata Motors, Maruti, etc. have recorded a declining trend. If better performance, 100% higher dividend, 50% higher net profit and 1:1 bonus cannot boost the share price of a stock, then what can? Similarly, Bajaj Holdings & Investment has outperformed posting better-than-expected numbers for FY11 and Q1FY12 with an annual EPS of Rs.100. Yet, its share price on a year on year (YoY) basis is subdued despite the higher dividend payout of 350%! Shanthi Gears, which was recommended under this column more than two times, also reported an excellent performance by over 100% and higher dividend, is trading below its 52-week high. This is thus a big question mark before investors whose investments have been unfruitful despite better growth and higher prospects of the stocks that they hold while short-sellers are reaping a good harvest. Phillips Carbon Black also came out with flying colours as its Q1FY12 net profit was up by over 50% quarter on quarter (QoQ) basis. Yet the market price of the share, which was ruling above Rs.240, is now trading 100 points lower at Rs.139. Gujarat Alaklies, which also posted 168% higher net profit of Rs.46.40 crore for Q1FY12 compared to Rs.17.26 crore in Q1FY11, has not shown any significant spurt in its market price and is trading at Rs.142 as against Rs.190 two years ago. Interestingly, analysts sought 20-25% growth YoY for the markets to improve whereas these companies have posted much higher growth and still their stock prices did not rise. The market basics are now display a completely reverse trend and behaviour compared to the earlier trend which saw good performances, higher EPS, higher dividend distribution, better bonus issues but these have now become things of the past. This is because it is now important to trade in the F&O segment against sale in the cash segment or be in Nifty

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Futures where volumes & trades are at rampant as against the cash segment where volumes are dwindling year after year and month after month. F&O volumes and trades per day have hit over Rs.2,40,000 crore as against Rs.70,000-80,000 crore per day a few years back while the cash segment turnover, which was ruling around Rs.20,000 crore per day on both BSE & NSE, has now fallen by nearly 50%. The government and SEBI both have not had the time to look into these distortions despite all the data being readily available to them. They will not bother until things get worse or turn into a big scam as in the case of the CWG scam, 3G scam etc. The stock market is no different as the earlier scams were played will full knowledge of the stock exchanges and it will be no surprise if a new scam unfolds in the form of excess speculation in the F&O segment. The buybacks announced by companies at higher prices do have great lacunae as the benefits are derived by the promoters and the company itself at the cost of shareholders who are flattered by the high buyback price but which tends to go down subsequently. For example, SRF Ltd. announced a buyback at Rs.380 whereas the market price of the share is currently ruling at Rs.310. So why is the company not buying back shares from the market at the discounted rate? Why should they wait till the last minute or expiry of the buyback period in the hope of a further fall in the share market price? What is the charm of announcing a buyback at a higher price? The government and SEBI must block such loopholes in such buyback offers or ask the company to complete their buyback when the stock is available at a discount on the bourses. Otherwise, there is no meaning in fixing higher buyback prices. Buybacks, as a matter of fact, increases the promoters’ holding at the cost of shareholders. A similar lacuna also persists in allowing promoters to buy shares on a preferential basis by paying 25% in advance and wait for a long time to complete the offer. Earlier, companies like Hindalco and Tata Motors backed out of their offers when the market price of their shares fell below the conversion price of shares in 2008 Investment Advisory Service protecting the interest of promoters to get by G.S. Roongta out of their commitments in adversity. Is Money Times is pleased to introduce Investment Advisory Service there any such protection for investors? (IAS) by our renowned columnist Mr. G. S. Roongta, who has over 25 Public participation in listed companies years of experience and is well-know for his accurate forecasts since continues to drift lower year after year and 1986. the stakeholders in listed companies are big Interested investors can visit Money Times office between 4 p.m. to 6 players such as promoters, domestic p.m. on Tuesday or Thursday every week after prior appointment institutions and FIIs with a large number of with our office. Outstation readers can consult him by e-mail or mutual funds that trade between themselves phone. in bulk quantities, which hardly impacts the A minimum one time charge of Rs.1000 has to be paid in advance share price. Compare this to the earlier times favouring ‘Time Communications (India) Ltd.’ against which a when trading in shares among retail maximum of 5 scrips will be recommended for investment and investors used to be many times more even reviewed up to a period of three months. in the limited two hours of trading. Other services like portfolios analysis/restructuring will be charged The market is thus becoming hollow with extra depending on the size of the portfolio & service. range bound fluctuations despite increasing Contact Money Times on 022-22654805 or volumes as trades have reduced. Besides, the interest of the general public is fast switching Telefax: 022-22616970 or email us at moneytimes@vsnl.com. to short-term trading or the F&O segment for quick gains. But this will ultimately lead them to losses forcing them to sell their holdings to pay for their losses!

STOCK WATCH Venus Remedies (Code: 526953) (Rs. 223.90) is another scrip that is being ignored by investors despite the company faring exceedingly well. Couple of months ago, its share price had corrected significantly to make a low of Rs.175 but subsequently it also recovered sharply to trade above Rs.250. Recently, the company has announced encouraging Q1FY12 results wherein sales grew by 20% to Rs.99 crore and profit rose 25% to Rs.13.60 crore. Thus it clocked a quarterly EPS of Rs.15 on its current equity of Rs.9.10 crore. Even for FY11, the company had recorded double digit growth with total revenue of Rs.358 crore and net profit of Rs.49 crore posting an annual EPS of Rs.54. Importantly, it is among the very few companies with consistent focus on injectables - the highest end of the formulation value chain marked by stringent manufacturing standards, demanding deep domain knowledge and low competition. In fact, it is the first & only company in India to manufacture fixed-dosage combination (FDC) injectables and among the 10 leading FDC A Time Communications Publication

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manufacturers in the world. The company possesses an active range of over 75 generic and innovative products in different therapeutic segments (largely through injectables) like oncology, cardiovascular, antibiotics, neurology, antiinfective, anti cancer, etc. It has set up a full fledged clinical research division that specializes in conducting phase I, II, III and IV trials and bio equivalence studies. A few months ago, it successfully completed the Phase I & II clinical trials of TUMATREK (VRP162O) cancer detection molecule. Also last month, it launched its research product ACHNIL - a once a day painkiller in the Indian market, for which it was recently awarded the European patent. Importantly, last week it was awarded its first US patent for its novel research product ‘Vanbcoplus’, which it claims to be the only remedy after vaccination to treat MRSA & multi drug resistant microbes that cause meningitis, pneumonia, typhoid, septicemia, skin infection, urinary tract infections etc. Now it is planning to launch the drug in USA and bag a fair share of this market in the next 3 years. Earlier this year, it became the first Indian company to obtain the cGMP/GCC approval to market its Oncology & Carbapenem injectable products in the Gulf. Till date, the company is reported to have filed over 341 patents in over 50 countries. Financially, the company is doing well and is expected to end the current fiscal with sales of Rs.425 crore with PAT of Rs.58 crore. Buy & hold.

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After declaring an impressive performance for Q4FY11, Andhra Sugar (Code: 590062) (Rs.106.50) has once again posted stunning performance for Q1FY12. Sales zoomed 75% to Rs.180 crore whereas profit almost quadrupled to Rs.18.60 crore posting an EPS of Rs.6.90 for the single quarter. Thus it has already earned over 50% of the entire FY11 profit of Rs.36 crore. The company operates in six segments sugar, caustic soda, power generation, industrial chemicals, soap and others. Of these, sugar and caustic soda are the major segments and it is the largest manufacturer of caustic soda in South India. As of now, its sugar division is a loss making unit due to market conditions but has the potential to generate good profits. Its caustic soda & industrial chemicals division are doing well. As a strategy of forward integration, the company has planned for a full-fledged foray into pharmaceuticals for production of bulk drugs and has purchased land in the Jawaharlal Nehru Pharmacity in Visakhapatnam to set up a manufacturing unit there. Interestingly, the company has diversified into other industries through its various subsidiaries. It has presence in petrochemicals through Andhra Petrochemicals Ltd., an associate company that produces 30,000 TPA of oxo-alcohols. Besides, it has interests in the power business with investments in the Andhra Pradesh Gas Power Corporation Ltd. One of its subsidiary, Andhra Farm Chemicals Corporation Ltd. is the largest manufacturer of hydrazine hydrate, which finds extensive application in drug intermediates and thermal power stations. Another subsidiary Jocil–Guntur produces fatty acids, glycerine, soaps etc. Hence on a consolidated basis the company is performing much better. For FY11, it declared 55% dividend which gives a yield of over 5% at CMP. The scrip is trading cum dividend and is expected to go ex-dividend on 15 September 2011. It may end FY12 with sales of Rs.650 crore and profit of Rs.55 crore. At the current market cap of Rs.290 crore, the scrip is trading reasonably cheap and can appreciate 50% in the medium-term.

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Geometric Ltd. (Code: 532312) (Rs.44.20) is one stock that is trading fairly cheap as investors evaluated the company based on its standalone performance and ignored the consolidated figures. For FY11, on a consolidated basis, it had recorded 20% growth in the topline to Rs.621 crore (standalone Rs.235 crore) with 25% rise in bottomline to Rs.57.50 crore (standalone Rs.22 crore) registering an EPS of Rs.9.25 (standalone Rs.3.50) on its equity of Rs.12.50 crore having face value of Rs.2 per share. Part of the reputed Godrej group, the company specialises in engineering solutions, services and technologies. Its portfolio of global engineering services and digital technology solutions for product lifecycle management enable its clients to formulate, implement and execute global engineering and manufacturing strategies to achieve greater efficiencies in the product realization lifecycle. With over two decades of experience in CAD/CAM/CAE, PDM and MPM, it offers global solutions to varied industries like automotive, aerospace, fashion, hi-tech and heavy engineering among others. Its solutions helps businesses leverage technology throughout the product lifecycle-from concept and implementation to sales and maintenance. As of now, the company employs over 3900 people across 10 global delivery locations in the US, Romania, India and China. Importantly, the company derives over 90% of its revenue from overseas. It is CMMI 1.1 Level 5 for its software services and ISO 9001:2008 certified for engineering operations. For the recent June’11 quarter, its consolidated revenue grew by 30% to Rs.173 crore but PAT rose by 10% to Rs.12 crore posting an EPS of Rs.1.90 for the quarter. Accordingly for FY12, the company is estimated to record total revenue of Rs.750 crore with net profit of Rs.60 crore. Thus at the current market cap of Rs.285 crore, the stock is available reasonably cheap. Investors can buy it for a price target of Rs.60 within a year or 33% gain. ******

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Last week, Phillips Carbon Black Ltd. (Code: 506590) (Rs.139.30) came out with a terrific set of numbers for Q1FY12 but the scrip remained flat. Sales jumped 40% to Rs.568 crore while net profit shot up 45% to Rs.41.60 crore posting an EPS of Rs.12.50 for the single quarter. The reason for such an excellent performance is that the company has completed the capacity expansion project of 50,000 MT at its Mundra plant and commenced production from 1 April 2011. Simultaneously, it also completed the project to augment the power generation capacity at its Cochin plant by 10 MW. For 2010-11, the company had reported 40% growth in sales to Rs.1696 crore and 15% rise in net profit to Rs.116 crore i.e. an EPS of Rs.35 on its equity of Rs.33.20 crore. Today, the company is the world’s 8th largest and India’s largest producer of carbon black having an installed capacity of 410,000 TPA and co-generation power capacity of 70.5 MW spread over 4 locations across India. To emerge as a transnational player, it is setting up its first overseas carbon black manufacturing project in Vietnam through a joint venture (JV) with initial capacity of 55,000 TPA along with captive power plant of 12 MW at an investment of Rs.300 crore. PCBL will hold 80% in this JV that is expected to commence production by December 2012. To fund its expansion plans, the company raised Rs.100 crore in 2010 via QIB Placement of about 50,00,000 equity shares at Rs.200 each share. Besides, it also allotted 12,50,000 convertible warrants at Rs.196 per share. Considering its recent expansion and Q1FY12 performance, the company may end FY12 fiscal with sales of Rs.2350 crore and PAT of Rs.150 crore. This translates into an EPS of Rs.45 on its current equity. Traditionally, this scrip has been trading in a P/E multiple band of 4-5 times. Hence investors can buy it at current levels and hold it for a price target of Rs.210 (i.e. 50% appreciation) within 12-15 months.

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FIFTY FIFTY By Kukku * Asahi Songwon Colors (Rs.103.30) is doubling its Beta Blue pigment capacity to 4,000 TPA from the existing 2,040 TPA by FY13 at a capex of Rs.25 crore over the next two years funded by internal accruals with a comfortable debt:equity ratio of 0.6:1. The company has done well in Q1FY12 as sales have shot up from Rs.44.71 crore to Rs.55.63 crore while net profit zoomed by almost 50% from Rs.4.17 crore to Rs.6.15 crore yielding an attractive EPS of Rs.5.02 for the quarter. Based on this full year FY12 EPS may be around Rs.23/24, which is likely to go up to Rs.30/32 by next year on the back of capacity expansion. Investors can keep a watch on this stock for buying on dips. * GNFC’s (Rs.97.05) sales have jumped 75% to Rs.644 crore while it reported a net profit of Rs.41.65 crore against a loss of Rs.22.67 crore during the previous corresponding period. Investors can safely accumulate this stock in the current uncertain times. Book value of the share is Rs.147 and the stock is cum 32.5% dividend at the current market price. * J K Tyre’s (Rs.96) profits are down due to higher rubber prices. Investors can take advantage of the current fall to accumulate this stock as prices of raw material likely to remain at lower levels for longer time. * We had warned from time to time that margins of Ferro Chrome & Ferro Alloy stocks are likely to remain under pressure due to low price realisations in the sector. Thus results of IMFA & Facor Alloys are below expectations. Since prices of ferro alloys have weakened further, we may see a further fall in profits. Hopefully, readers have made a timely exit at higher levels. * Mahindra Ugine (Rs.49.85) - We had advised that margins are likely to remain under pressure in view of increased input costs. The results of its alloy steel division are below expectation while the stamping division has done well. Investors can continue to hold the remaining lot with a long-term view. * Balaji Amines (Rs.37.95) has reported sales of Rs.115 crore in Q1FY12 as against Rs.79 crore in Q1FY11. Net Profit has shot up from Rs.6.22 crore to Rs.7.17 crore for the quarter. During the period, interest burden went up sharply from Rs.2.66 crore in Q1FY11 to Rs.4.96 crore in Q1FY12 due to new capacity which came up during the last quarter. Investors can continue to hold this stock. Risk factor is the high interest rate that will put pressure on margins till we see full utilisation of new capacity. * Pondy Oxides (Rs.31) has increased the dividend from 12% to 14% for Q1FY12. It has reported net profit of Rs.1.5 crore on sales of Rs.72 crore. Based on Q1 results, full year EPS is likely to be around Rs.7 to 8. Investors can continue to hold the stock or even accumulate on dips around Rs.30 level. * Action Construction Equipment (Rs.45.10) has reported better results compared to other companies in the same field. Investors can keep a watch to accumulate it on dips. Please note that the market has corrected well during the week. Investors can take advantage to accumulate good stocks on sharp falls.

EXPERT EYE By Vihari

Surana Corporation: Bright prospects ahead Surana Corporation Ltd. (SCL) (Code: 531102) (Rs.94.90) has posted good number in Q1FY12 achieving 18% higher net profit (YoY). Going by this quarterly result, SCL is expected to clock an EPS of Rs.30 in FY12. The share trading at a P/E multiple of just 3.3 is going cheap given a target price of Rs.130. The Surana Group came into existence as a result of the merger of Surana Financial Corporation (India) with its twogroup companies viz., the Rukma Industries and Surana Jewellery. SCL has received the Certificate of Recognition as a One Star Export House from the Government of India. SCL’s impeccable quality and exquisite craftsmanship in jewellery manufacturing helped it achieve growth. SCL houses a full-fledged manufacturing unit along with a self-owned jewellery retail outlet. It manufactures carefully crafted, exquisite range of gold and studded jewellery like gold chains, bangles, earrings, bracelets etc. and specializes in creating exclusive, made-to-order designs crafted to suit the demands of the customers. The jewellery pieces are designed in modern design-studios using the latest designing software like 'Arteam Jewel Smith' that give it a contemporary and innovative look. SCL also deals in the import and export of gold items and has emerged as the second largest importer of gold bullion in the country. It manufactures gold and studded jewellery from the imported bullion, which is mostly exported. SCL’s turnover in FY11 rose 31% to Rs.5,320 crore against Rs.4,062 crore in FY10. Its exports zoomed by 92% to Rs.1,451 crore in FY11 from Rs.755 crore in FY10. Domestic sales increased by 17% to Rs.3,865 crore from Rs.3,303 crore in FY10. A Time Communications Publication

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The rising export turnover and profitability of the SEZ unit, however, led to lower tax outflows. Revenues from wind energy in FY11 amounted to Rs.3 crore as against Rs.3.4 crore in FY10. As a result, the company was able to earn its highest ever PAT amounting to Rs.58.2 crore in FY11 compared to Rs.40.5 crore in FY10. The EPS for FY11 stood at Rs.27 and a dividend of 18% has been declared. SCL’s equity capital is Rs.21.9 crore and with reserves of Rs.214.6 crore, the book value of its share works out to Rs.108. The debt:equity ratio is 1.1:1. The promoters hold 55.9% in its equity capital. Foreign holding is 12.3%, PCBs holding is 21.1% leaving 10.7% with the investing public. SCL has completed the purchase of about 14,000 sq. ft of land with an existing factory building of about 11,000 sq. ft set up a state-of-the-art jewellery manufacturing unit at Ambattur Industrial Estate, Chennai and plans to commence production of jewellery this fiscal. It has also acquired space at NSC Bose Road, Chennai, for another showroom and renovation work is in progress. It has also opened a branch at Mumbai and delivery centres at Coimbatore, Madurai and Trichy for sales and service. This move will help it in reaching out a larger customer base and enhance its turnover. SCL has planned a rights issue to finance its future growth plans. Over the last few years, Gold as an investment destination has become increasingly popular. Holding of Gold is an old tradition deeply ingrained in Indian culture and society. Traditionally, apart from being an article of consumption in the form of jewellery, the high demand for gold stems from hedging against inflation and as a source of savings. Consequently, India accounted for 32% of the global gold purchase in 2010. The total annual consumer demand in India reached 963.10 tonnes in 2010. The World Gold Council (WGC) (an international forum funded by the producers and miners of gold) research shows that by 2020, the cumulative annual demand for gold in India will exceed 1200 tonnes or approximately Rs.2,50,000 crore at current price levels. As per a study, India has over 18,000 tonnes of above-ground gold stocks (all physical and gold holdings, including private, Reserve Bank of India and institutional) worth around US$ 800 billion. Jewellery demand in India grew by 36 % in 2010 - 2011, according to the WGC. Gold import is likely to rise by 15% in 2011 to around 805 tonnes, as compared to 2010 due to the growing demand for gems and jewellery. India stood at 11th position with 557.7 tonnes of gold reserves as of October 2010 in the world official gold holdings ratings. India's continued rapid economic growth For F&O Traders will have a significant impact on income Profitrak Daily Fresh Futures and savings and will lead to higher gold purchasing by about 3% p.a. over the Highlights of Profitrak Daily Fresh Futures: next decade. In view of this scenario, a 1) One Buy Per Day (If available as per our ‘Buy’ criteria) shift from gold to other forms of savings How a ‘Buy’ is decided? is unlikely to happen in a hurry. India's ‘Fresh Buy’ as per our trading signal. But the trading signal must be fancy for gold is steadfast. Hence, the supported by increase in open interest and volumes and the candle demand for gold and silver will continue movement (Close>Open) is positive. The stock with the highest relative unabated. During FY11, the performance strength will be selected as the daily fresh buy from the F&O segment. of silver was also aggressive, with its 2) Follow up on an earlier Uptrend or ‘Buy’. These stock futures remain price recording almost 100% increase in an uptrend till the prices are above the Daily Reversal Value. over the previous year. The sharp growth 3) Exit Long position indication 4) One Sell Per Day (if available as per our ‘Sell’ criteria) in bullion also explains the demand for 5) Follow Up of earlier Downtrend or ‘Sell’ exchange traded funds (ETFs) on the 6) Exit Short indication bourses. As a recognized Nominated Agency, SCL Subscription: Rs.4000 per month. is permitted to import bullion directly Visit www.moneytimes.in for sample copy. and supply like MMTC, STC and other For further details contact us on 022-22654805 or email us at RBI nominated banks. This will improve moneytimes@vsnl.com its volumes and working results substantially. SCL is likely to post an EPS of Rs.32 in FY12 and Rs.40 in FY13. At the CMP of Rs.94.90, the share is trading at a P/E multiple of 2.9 on its FY12 estimated earnings and 2.3 times on FY13 projected earnings. A conservative P/E ratio of 4 will take its share price to Rs.128 in the medium-term and Rs.160 in the long-term.

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Lumax Auto Technologies: Potential blue chip The share of Lumax Auto Technologies Ltd. (LATL) (Code: 532796) (Rs.172.80) is recommended because of it improved Q1FY12 results and for decent gains in the long-term. A Time Communications Publication

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LATL is part of the DK Jain group of companies whose flagship company is Lumax Industries. Lumax is the leader in automotive lighting systems and has a technical and financial collaboration with Stanley Electric Co (Stanley) of Japan. LATL’s eight manufacturing units are located at Bhosari, Chinchwad, Chakan, Pantnagar in Uttarakhand and Waluj in Maharashtra. It tapped the capital market in December 2006 with an issue of 30.12 lakh shares at Rs.75 per share aggregating Rs.22.6 crore to part-finance the project cost of Rs.50.2 crore. The IPO proceeds were utilised for setting up a chassis assembly at Bhosari besides expansion and modernisation of manufacturing facilities at Chakan and Waluj and modernisation of a development centre at Chinchwad. LATL has recently raised Rs.23.8 crore from the promoters and FIIs at Rs.119.1 per share for expansion. In the lighting space, LATL manufactures headlamps, tail-lamps, blinkers, fog lamps, engine lamps. In sheet metal & fabrication segment it makes chassis assembly, silencers, petrol tanks, fork assemblies, handle bar assemblies, stand assemblies and frame sub assemblies, gear shift levers and parking brakes. In exhaust systems it manufactures silencers and mufflers for two three and four wheeler vehicles. Lighting products account for a 61% in sales followed by sheet metal at 13%, adjustor leveller motor 10%, gear shifter 9% and the balance 7% from other products. Lumax DK Automotive Systems, a 100% subsidiary of LATL, manufactures gear shifter assembly for automobile manufacturers with technology support from CIMAR, Spain, and GHSP, USA. LATL has formed a 50:50 joint venture with Turin-based Cornaglia group to manufacture emission systems (air intake systems). This JV already has orders from Tata Motors, Fiat and Bajaj Auto. LATL’s Uttarakhand plant commissioned in FY09 at a with capital outlay of around Rs.23 crore supplies products to Baja Auto. The plant has a production capacity that can cater to automotive parts for one million two-wheelers. The company’s main OEM customers include Bajaj Auto (50%) and Maruti (10%). Other customers include Tata Motors, Ashok Leyland, Force Motors, Eicher Group, Swaraj Mazda, Nissan, Hyundai, Volvo, John Deere, Piaggio, Ford, Mahindra & Mahindra, Hero Honda, TAFE and Lumax Industries. During FY11, the consolidated net profit surged 164% to Rs. 7.9 crore on 50% higher sales of Rs.340.8 crore, and the EPS was Rs.35.2 on its expanded equity capital of Rs.13.6 crore. A dividend of 60% was paid. During Q1FY12, the consolidated net profit further shot up by 61% to Rs.13.4 crore on 35% higher sales of Rs.187.4 crore. The EPS for Q1FY12 alone stands at Rs.9.9. Its equity capital is Rs.13.6 crore and with reserves of Rs.127.9 crore, the book value of its share works out to Rs. 104. The promoters hold 51% in the equity capital, foreign holding is 16%, and with institutional holding of 3% and 13% held by PCBs leaves 16% with the investing public. In FY10, LATL’s new trading unit at Manesar, Haryana, for adjustor leveller motor business, a new plant for auto bulbs in March 2010 at Kaleamb in Himachal Pradesh, non-auto LED based lightings and seat frames for the OEM segment started contributing to the revenue. LATL spent Rs.35 crore Capex in FY11 for expanding capacities and on a new plant. The capex for FY12 and FY13 is pegged at Rs.40 crore and Rs.45 crore respectively to be financed through internal accruals and debts. In tandem with the surge in vehicle production, the country's auto parts industry is aiming for a fourfold growth to around Rs.5,00,000 crore (to $110 billion from $26 billion) by 2020 according to Automotive Component Manufacturers Association of India (ACMA). Of this, domestic demand is expected to account for around Rs 4,00,000 crore. According to the vision document, the auto components industry will require an investment of at least Rs.1,60,000 crore over the next decade to achieve the target. According to the report, jointly prepared with consultancy firm Ernst & Young, the auto parts industry is expected to contribute 3.6% to India's gross domestic product (GDP) in a decade from 2.1% now. The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. The entry of foreign vehicle manufacturers in India, the growing cost pressures in the global automotive market, the huge exports potential, the growing middle class from 50 million to 550 million by 2025, the low domestic penetration of 7-8 cars per 1000 persons and infrastructure development of $500 billion in the next 5-6 years are the key growth drivers for the auto components industry in India. The expansion plans laid down by Maruti Suzuki, Hyundai, Tata Motors, GM India and the presence of MNCs like Nissan, Toyota, Nissan-Renault, Volkswagen, Honda Motors and Ford Motor will only increase the demand for quality components in India. The easy finance schemes for vehicle purchase, the shift from two-wheelers to four-wheelers and the growing concept of a second vehicle in urban areas augurs well for the automobile and auto component industries. As per industry estimates, India's passenger vehicle sector will grow to about 90 lakh units and the commercial vehicle segment will exceed 22 lakh units by 2020. At present, around 20 lakh passenger vehicles and some 5.3 lakh commercial vehicles are manufactured in India.

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According to the ACMA report, the two-and-three wheelers are expected to double to 2.2 crore units by 2015 and reach 3 crore units by 2020 driven by the low penetration level, expanding rural sales and the growth in exports. The LATL promoters are established players in the automotive lighting and component sector and are in this business for last 25 years. Its strategic business model, product development capability, sustainable operational integration and understanding of OEM customers ensure its growth in future. For FY12, LATL is expected to post an EPS of Rs.42. At the CMP of Rs.182, the share is trading at a P/E multiple of around 4 on FY12 estimated earnings as against the industry average forward P/E of 18 for FY12. The share LATL is recommended with a target price of Rs.230 in the medium-term. The 52-week high/low of the share has been Rs.223/123.

TECHNO FUNDA By Nayan Patel

Simplex Castings Ltd. BSE Code: 513472 Last Close: Rs.83 Simplex Castings Ltd. (SCL) started as a partnership firm in 1970 as a small Grey Iron Foundry. Subsequently, it was converted into a private limited company on 30 January 1980 with its registered office at Mumbai. The company went public in 1993. Its shares are listed on the BSE. SCL is a well-managed, dividend paying company making profits since inception. It has two units in Chhattisgarh (mineral rich State of India). One unit is situated at 5 Industrial Estate, Bhilai and the other at Urla Industrial Estate, Raipur. The company is engaged in manufacturing Heavy Engineering Castings in various grades in cast, machined & assembled conditions for all industrial sectors like Steel Plants, Power Plants (Thermal, Hydro, Wind), Railways, Mines, Cement, Chemical, Oil, Defence, Sugar, Earth Moving, Machine Tools, Heavy Valves & Pumps Castings, Ship Building etc. in India and abroad. It has an equity base of Rs.5.98 crore that is supported by huge reserves of around Rs.49.09 crore (which is more than 8.20 times the equity). The promoters hold 55.01%, non-promoter corporate bodies hold 7.43% while the investing public holds 35.20% stake in the company. For Q1FY12, it recorded net sales of Rs.54.44 crore with net profit of Rs.2.78 crore against net sales of Rs.38.72 crore with net profit of Rs.1.94 crore in Q1FY11 (Net sales zoomed 40.59% while net profit zoomed 43.29% on a quarterly basis). For FY11, it recorded net sales of Rs.203.46 crore with net profit of Rs.12.91 crore against net sales of Rs.164.37 crore with net profit of Rs.10.64 crore FY10. The Q1FY12 EPS is (for the busy investor) Rs.4.64 while FY11 EPS was Rs.21.57. At the PROFITRAK is pleased to announce the launch of ‘Fresh One Buy - Daily’ current level, the stock is available at forward (formerly Daily Fresh Buy) for investors/ traders who are keen to focus and P/E multiple of just 4. It is a regular dividend gain from a single stock every trading day. paying company. For FY07, it paid 10%, for With just one daily recommendation selected from stocks in an uptrend, FY08 it paid 15%, for FY09 it paid 20% you can now book profit the same day or carry over the trade if the target dividend, for FY10 it paid 22.5% and for FY11 is not met. it has declared 25% dividend. This shows that Our review over the next four days will provide new exit levels while the it is an investor-friendly company. stock is still in an uptrend. Investors can buy this stock with a stop loss This low risk, high return product for the busy investor is available for of Rs.77. On the upper side, the stock will subscription at Rs.2500 per month. For details contact zoom to Rs.105 level in medium-term and moneytimes@vsnl.com or phone on 022-22616970/ 22654805. Rs.125 levels in the long-term.

Fresh One Buy - Daily

MARKET FOLIO

IOB operating profit up 73% in Q1FY12

Indian Overseas Bank (IOB), in its 75th year has booked record level of business exceeding Rs.2,70,000 crore as on 30 June 2011, an increase of 40.49% growth over 30 June 2010. Deposits grew by 38.11% and advances by 43.64% over 30 June 2010. Operating Profit for the Q1FY12 rose 73.01% to Rs.802.60 crore from Rs.463.90 crore in Q1FY11. Net Profit for the quarter Q1FY12 was Rs.205.58 crore as against Rs.200.44 crore in Q1FY11, which was brought about due to provisioning and restructuring. Total Income for the quarter Q1FY12 was Rs.4,331.77 crore as against Rs.2,882.38 crore in Q1FY11. A Time Communications Publication

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Interest income for Q1FY12 rose 49.67% to Rs.3,992.58 crore from Rs.2,667.52 crore in Q1FY11.

Indowind Energy expands capacity Indowind Energy Ltd. has enhanced its power generation from the pre-IPO capacity of 16.825 MW in 2007 to 43.92 MW in 2011 with the help of funds raised from the IPO & FCCB issues. Subsequent to the GDR issue, the company is in the process of setting up a 28 MW wind farm which is expected to further enhance the capacity to 71.92 MW by March 2012. To capitalize on the sale of its power in Tamil Nadu, the company has floated a subsidiary, Indowind Power Private Limited (IPPL) for selling 12.175 MW in Tamil Nadu. The contracted sale price per unit of Rs.5 for 18.1 million units will boost revenues substantially. It has added new clients like Apollo Hospitals, Green Park Hotels, AR Foundation, Oracle, Reuters Thomson, Netlink, RR Donnely etc. for selling its power.

IIISL’s NCD issue closes on 12th August India Infoline Investment Services Ltd. (IIISL) an NBFC subsidiary of the listed India Infoline Ltd. (IIFL) has opend its maiden public issue of Secured Redeemable NCDs of face-value of Rs.1,000 each aggregating Rs.375 crore with the option to retain over subscription up to Rs. 375 crore aggregating to a total of Rs.750 crore. The NCD Issue with 3 investment options and yield on redemption of up to 11.90% per annum opened on Thursday August 4, 2011 and will close on Friday August 12, 2011. The NCDs will be listed on the NSE and BSE and will have a tradable lot size of 1 NCD. The face value of NCD is Rs.1,000 and minimum application is for Rs.5,000. The proposed NCDs have been rated ‘[ICRA]AA- (stable)’ by ICRA, and ‘CARE AA-‘ by CARE, indicating their high degree of safety for timely servicing of financial obligations and very low credit risk.

Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed to be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column are solely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.

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A Time Communications Publication

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