Scripscan:Bhagwati Banquets & Hotels Ltd
Cmp:63
Target:100
Duration:4-6 months
Traded in:Nse-Bse
Business contributor:
Bhagwati Banquets derives revenues from three major sources.Presently more than 1/3rd of its revenues comes from the banquet facility, 25% comes from club management and the rest from outdoor catering. The prime is the Banquets Hall facility and the company has also got four halls in Ahmedabad.BHagwati has been doing club management for three major clubs namely Rajpath Club, Karnavati Club, GCAC and the revolving restaurant called Patang".As these are seasonal businesses, if one of the businesses gets affected, the other two businesses can support them.The company has 1,000 people, consisting of 10 master chefs and a catering staff of 650 for Ahmedabad and 45 for Surat.
Company vision:
The company has set a target to set up 5-star hotels in Ahmedabad,Jaipur,Hyderabad,Lucknow and Mumbai in the coming 10-12 years.It is also evaluating several proposals to acquire property for its new hotel at Ahmedabad. These company dreams really big and if it can acheive its desires then Bhagwati banquets can just become one of the scrips to watch out for in the days to come.
A catering player to boost your wealth:You have been invited to a wedding ceremony or a party or say in any occasion and yup our "Bhagwati banquets" is there to satiate all your desires but at an expense.It charges from Rs 350 to Rs 900 a meal and provides personalized service.A minimum order has to be for 300 people (off-season) and 500 in season, resulting in revenue ranging from Rs 1 lakhs--4.5 lakhs on each order.It would be prudent to note that the catering business generates free cash, as it receives payments in cash and obtains credit from its suppliers. Hence, the working capital required is low.What a satisfaction folks-Just consider,You are the owner of the company and your freind has hired your company for all the meal and party arrangements.
5-star hotel at Surat:
The company is setting up a 5-star hotel at Surat with 65,000 square feet (two halls of 32,500 square feet each) a convention and banqueting hall to accommodate at Least 3,000 people at a time for any event.This hotel will have 100 rooms (deluxe, suites and a presidential suite).It will have two large banquet halls, which can be partitioned into smatter halls as required, to accommodate at Least 3,000 people.The hotel will also have a business center with boardroom, conference rooms, world-class spa, pub, discotheque, etc.The hotel is likely to commence operations in FY10.It expects Rs 50 crores in revenue and Rs 15 crs in operating profit from the Surat hotel in the first year of operation.The typical room rate in Ahmedabad is Rs 5,000 per day and average occupancy is 75-80%.Though construction project is already in process but any delay in implementing the Surat project might affect profitability.
Wow,so much,anything else its planning:-
Watch out...........
1)It has already commenced catering services in Mumbai and plans to branch out to other cities like Jaipur,Jodhpur etc.
2)It has futher plans to enter into tie-ups with clubs for providing its services.
3)It plans to serve companies and MNCs, BPO centres, shopping malls, cinema halls, etc. catering for them and providing food packs.
4)The company plans to develop a separate club adjoining the surat hotel,resulting in additional revenues and thus an increase in profits.Facts to comfort:Its global india and companies having unique business models gave tremendous capital appreciation in the last few years.Few of the notable examples being Educomp,aurion pro,mic tech,Opto circuits,country club and many more.Bhagwati is a tremendously agggresive company and it has got a monopolistic business with high operating profit margin ratio.
Very recently, Morgan Stanley Mauritius bought 467,500 shares at Rs 84 a share and The GMO Emerging Illiquid M. bought 271,000 shares at Rs 82 a share of Bhagwati Banquets and Hotels.The company is expected to find many more renowned takers because of its unique and monopolistic business.
Whats most inspiring is the main promoter of the company and the largest stake holder,Mr Narendra somani-one of the finest vision oriented man bought nearly 13 lakh 50 thousand shares of his own company from open market purchases in the last 2-3 quarters.
Conclusion:
In April '07, Bhagwati came out with a public issue of 2.3 crs shares at Rs 40 each, aggregating Rs 92 crs.Simultaneosly equity capital then rose–-from Rs 6.3crs to Rs 29 crs.The issue got decent response and was oversubscribed.The catering service has done well in the past five years. The number of meals supplied per day has jumped from 200/300 in FY03 to 1,500/2,000 in FY07.At the CMP of Rs 63,the stock trades at 8x FY09E EPS of Rs 8.A great business model backed by a very strong and ambitious pedigree,a market leader with hardly any competition,A pure play on indian consumption and growth story,anything else is required to ventitale for inspiring?To me its a great buy at the present levels.
Friday, February 22, 2008
Range Bound moves to continue.........
Sensex Technical View :
Sensex should continue to remain range bound qith 18300-18500 band as resistance on upside and 17200-17500 on the lower side. Traders will have a tough time taking directional calls for some more days. Investors should wait for dips near to 17200-17500 zone to again deploy some cash. Those who played the earlier bounce and pulled back cash can again start looking for dips.
Stocks to watchout for :
Infosys can give a nice move if it sustains above 1600 levels can toucch 1660-1750 on higher side ...
K S Oils looks good for long term as promoter buying is seen for last few months ...
http://www.bseindia.com/Insidetrade.asp
There are whole lot of stocks in the mid caps which look exciting on fundamental basis but investors will need lot of patience as they will take more time . So the strategy should be take only an initial exposure and then wait for a change in trend or reversal or stable mkt conditions as it is better to buy the stock at extreme panic levels when there is a good reversal as currently the holding period seems longer and only patient investors . Till then do ur homework find a good list of stocks with nice fundamentals , good mgmt and do ur research to shortlist a few of them and look for attractive levels.
Sunday, February 17, 2008
Grabal alok impex:-The next emperor of the indian textile industry
Scripscan:-Grabal Alok Impex Ltd
Bse code:-532909
CMP:99
Target:200
Duration:9-12 months
Expected return:100%
Introduction:-
Grabal Alok Impex Limited (Grabal Alok), part of the Alok Group, is amongst the largest global manufacturers of embroidered products. Grabal Alok is a well known name in the Indian embroidery market and is mainly an export oriented company.The company has a wide product range within the embroidered fabrics segment which includes edgings, allovers on any base fabrics and embroidery designs which find usage in dresses of African & Arabian Nationals besides Indian sarees and salwar kameez.The company is also a preferred supplier to the key garment & made-ups exporters and has presence in the indian market through wholesalers & retailers.Over the past few years Grabal has established its direct presence in Africa and some EU countries .The company has created it own markets and is also benefiting from its increased participation in international fairs.Much of the companies current production is sold to the big export houses for sale to Gulf, Africa and European countries.
Assitance of Alok industry:-
Grabal Alok has close synergies with Alok Industries which currently has the best processing facilities in the country. Alok is the naturally preferred supplier of fabrics to Grabal. Besides, Grabal sends the unprocessed fabrics to Alok on jobwork basis.Grabal is uniquely placed in the international markets on accounts of its ability to manufacture the Swiss quality (of highest regard) embroidery at Indian prices. Besides the latest technology in embroidery, Grabal is also a beneficiary of the highend processing offered by Alok. The modern processing technology including the soft flow processing made available by Alok, enables Grabal to make the best quality embroidered goods.Essentially, it also has a key focus to expand on the home textiles front,thanks again to its strong pedigree in Alok Industries.The newer additions to the product portfolio serves the dual benefits of diversification as well as higher margins. Grabal certainly will be able to cater to a sizable requirements from Alok in the home textiles segment.
'QS'acquisition:-
During FY 2006, the company through its wholly owned subsidiary Grabal Alok International Ltd.(GAIL.)has taken 20.09% stake in Hamsard 2353 Ltd.,(HS) a UK based retail chain having 207 retail outlets across England,Scotland and Wales.These stores are run under the brand name 'qs'.The stores offer value for money ranges of garments for women, men, children and home ware.The stake has since increased to 75% in HS in FY 2008 at an aggregate cost of GBP 16.37 mn.HS also stands renamed as Grabal Alok (UK) Ltd(Grabal- UK).
The company has adopted a multi pronged strategy to improve the performance of Grabal-UK:
i)Change the sourcing of merchandise from UK and other European countries to India, China and other low cost Asian countries.Grabal-UK has also opened sourcing offices in Mumbai, New Delhi and Tirupur in India and also in Bangladesh China and Sri Lanka.
ii) Enhancing the management band width by inducting professionals to manage the operations.
iii)Refurbishing of the stores and improving brand image.
iv) Introduction of New Products and shift towards a profitable product mix and reduction in expenses.
Locational advantage:-
Grabal alok enjoys a noteworthy locational advantage as its manufacturing facilities are concentrated in the Navi Mumbai and Silvassa region.The raw materials requirements of the company are met from the Vapi - Silvassa textile belt.The export oriented company also gets the benefits of proximity to the ports.
Indian embroidery market:-
Indian embroidery market is growing both on the domestic and the export fronts at an estimated CAGR of 14%. India is expected to be the second largest supplier of embroidered products after China.Embroidery being a labour intensive industry, India has the competitive advantage in terms of skilled and relatively low cost labour - for Grabal Alok Impex Ltd. and most of the Asian manufacturers cost of labor is 5% of sales; for European manufacturers it would be around 30%-40% of the sales.
Prospects:-
The prospects for the domestic market are very promising with a healthy GDP growth, rapidly increasing middle income group accompanied by a rise in aspirations and purchasing power.The per capita textile consumption is expected to increase to 30 meters by 2010 from the present level of about 20 meters. The same should propel humangous growth in domestic textile market to USD 50 bn by 2010 from the present USD 33 bn(CAGR of 9% p.a).
Industry Outlook:-
The Indian textile industry after long time is again being perceived as a sunrise industry, thanks to the removal of quotas in December 2004 and the booming Indian economy.Since removal of quotas, textile manufacturing is continuing to shift from high cost western economies like USA, Europe to low cost Asian countries like China and India. This is resulting in increase in global textile trade which is expected to grow from USD 480 billion in 2005 to USD 650 billion by 2010.It should be also prudent to note that,"India's exports are expected to grow from the present level of USD 19 bn to USD 45 bn by 2010".
Expansion Projects:-
The company possesses amongst the most modern and versatile embroidery facilities consisting of 21 Schiffli machines, 14 Multihead machines and 1 Quilting machine out of its two plants situated at Mahape, Navi Mumbai and Vasona, Silvassa. Over a period, the company has developed goodwill for its superior quality, versatile product range and strong designing capabilities and has created a wide and niche customer base and enjoys an order book position of over 4-5 months.To meet the growing demand for its products and widen its market, the company has undertaken expansion of its embroidery manufacturing capacity in phased manner.
Phase I:-Under the Phase I of expansion project, the company has installed 4 Lasser make Schiffli embroidery machines and 16 Barudan make Multihead machines at its existing unit at Silvassa. This has increased the embroidery manufacturing capacity by 7015 mn stitches p.a. and total capacity to 16263 million stitches p.a. The total cost of project has been funded by a term loan of Rs. 20 crores from State Bank of India under TUFS and balance by internal accruals.
Phase II:-Under Phase II,company is increasing its embroidery manufacturing capacity by 17737 mn stitches p.a. at Silvassa taking the total embroidery capacity to 34000 mn stitches p.a.The company is installing 60 single deck Lasser maker Schiffli embroidery machines and 30 Multi head embroidery machines at an estimated cost of Rs.150 crores. The same is being financed by a term loan of Rs. 115 crores under TUFs and balance by internal accruals.
Entrance of Reliance:-
Few months back sonata investments,a subsidary of reliance capital entered the counter by buying out huge quantities(over 10 lakh shares at a price range 118-131) through numerous bulk deals.It entails tremendous confidence as we all are aware of the brand name of reliance.With reliance looking to magic again with "Vimal",i cant rule more equity participation by the large behemoth.If that happens the company should see itself in a new orbit.Given the strong prospects of the Indian textile industry and the ideal positoning of the company, the future looks extreamly bright.
Risks and the solutions:-
Risk of Competition:
The company is subject to competition both in the domestic and international market.
Solution)The company since inception focused technology, quality, innovation and attaining right size. Today it has a large and loyal customer base in domestic as well as overseas market and enjoys on an average a healthy order book position of 4-5 months.It is also geographically expanding its market reach.
Risk of Currency fluctuation:-
With increasing exports, the company is subjected to adverse fluctuations in the foreign currency.
Solution)The company relies on a combination of external advise through a reputed consultant and in house treasury department to manage the currency risks.
Risk of Interest rate hike:
The company's debt profile is primarily on a floating interest rate and hence vulnerable to interest rate hikes.
Solution)The company's long term borrowings for expansion projects are under Technology Upgradation Fund Scheme, at a concessional rate of interest. The company through suitable financial instruments like Foreign Currency packing credit, CP linked rates etc., reduces the interest cost on the working capital front.
Conclusion:-
The company ranks amongst the large embroidery players in the world.Market diversification, capacity expansions and synergies with Alok to auger well to elevate Grabal's performance over the coming years.Grabal stands tall in terms of efficiency, reduced downtimes and quality besides being the most reputed player in the industry using the most modern machineries.Also the ambitious acquisition of UK retail chain lends an ideal platform for the company to widen its global presence.I expect the company to create considerable value by turning around the performance of Grabal -UK.
Valuation&Recomendation:-
The company has de-risked its business operations over the past few years.The CMP of Rs. 99 discounts the FY09E earnings by 11x.Turnover is expected to bloster to 175-180crs in 09 from 93crs on 07.The company has been overlooked by the retail fraternity just for no reason.Textile sector on a whole never really performed over the last 2 years.But i am talking about a company which is one of the world leaders in its business.I am talking about a scrip which is doing every stuff needed to position itself in the top few league.I am recomending something which has been a institutional favourite backed by a strong pedigree with a great business model.The company has consolidated for a fairly long time in the bourses and now with things looking up,"Maybe the shareholders of grabal alok are here in for gala days".Go for it guys and enrich your lives .
Bse code:-532909
CMP:99
Target:200
Duration:9-12 months
Expected return:100%
Introduction:-
Grabal Alok Impex Limited (Grabal Alok), part of the Alok Group, is amongst the largest global manufacturers of embroidered products. Grabal Alok is a well known name in the Indian embroidery market and is mainly an export oriented company.The company has a wide product range within the embroidered fabrics segment which includes edgings, allovers on any base fabrics and embroidery designs which find usage in dresses of African & Arabian Nationals besides Indian sarees and salwar kameez.The company is also a preferred supplier to the key garment & made-ups exporters and has presence in the indian market through wholesalers & retailers.Over the past few years Grabal has established its direct presence in Africa and some EU countries .The company has created it own markets and is also benefiting from its increased participation in international fairs.Much of the companies current production is sold to the big export houses for sale to Gulf, Africa and European countries.
Assitance of Alok industry:-
Grabal Alok has close synergies with Alok Industries which currently has the best processing facilities in the country. Alok is the naturally preferred supplier of fabrics to Grabal. Besides, Grabal sends the unprocessed fabrics to Alok on jobwork basis.Grabal is uniquely placed in the international markets on accounts of its ability to manufacture the Swiss quality (of highest regard) embroidery at Indian prices. Besides the latest technology in embroidery, Grabal is also a beneficiary of the highend processing offered by Alok. The modern processing technology including the soft flow processing made available by Alok, enables Grabal to make the best quality embroidered goods.Essentially, it also has a key focus to expand on the home textiles front,thanks again to its strong pedigree in Alok Industries.The newer additions to the product portfolio serves the dual benefits of diversification as well as higher margins. Grabal certainly will be able to cater to a sizable requirements from Alok in the home textiles segment.
'QS'acquisition:-
During FY 2006, the company through its wholly owned subsidiary Grabal Alok International Ltd.(GAIL.)has taken 20.09% stake in Hamsard 2353 Ltd.,(HS) a UK based retail chain having 207 retail outlets across England,Scotland and Wales.These stores are run under the brand name 'qs'.The stores offer value for money ranges of garments for women, men, children and home ware.The stake has since increased to 75% in HS in FY 2008 at an aggregate cost of GBP 16.37 mn.HS also stands renamed as Grabal Alok (UK) Ltd(Grabal- UK).
The company has adopted a multi pronged strategy to improve the performance of Grabal-UK:
i)Change the sourcing of merchandise from UK and other European countries to India, China and other low cost Asian countries.Grabal-UK has also opened sourcing offices in Mumbai, New Delhi and Tirupur in India and also in Bangladesh China and Sri Lanka.
ii) Enhancing the management band width by inducting professionals to manage the operations.
iii)Refurbishing of the stores and improving brand image.
iv) Introduction of New Products and shift towards a profitable product mix and reduction in expenses.
Locational advantage:-
Grabal alok enjoys a noteworthy locational advantage as its manufacturing facilities are concentrated in the Navi Mumbai and Silvassa region.The raw materials requirements of the company are met from the Vapi - Silvassa textile belt.The export oriented company also gets the benefits of proximity to the ports.
Indian embroidery market:-
Indian embroidery market is growing both on the domestic and the export fronts at an estimated CAGR of 14%. India is expected to be the second largest supplier of embroidered products after China.Embroidery being a labour intensive industry, India has the competitive advantage in terms of skilled and relatively low cost labour - for Grabal Alok Impex Ltd. and most of the Asian manufacturers cost of labor is 5% of sales; for European manufacturers it would be around 30%-40% of the sales.
Prospects:-
The prospects for the domestic market are very promising with a healthy GDP growth, rapidly increasing middle income group accompanied by a rise in aspirations and purchasing power.The per capita textile consumption is expected to increase to 30 meters by 2010 from the present level of about 20 meters. The same should propel humangous growth in domestic textile market to USD 50 bn by 2010 from the present USD 33 bn(CAGR of 9% p.a).
Industry Outlook:-
The Indian textile industry after long time is again being perceived as a sunrise industry, thanks to the removal of quotas in December 2004 and the booming Indian economy.Since removal of quotas, textile manufacturing is continuing to shift from high cost western economies like USA, Europe to low cost Asian countries like China and India. This is resulting in increase in global textile trade which is expected to grow from USD 480 billion in 2005 to USD 650 billion by 2010.It should be also prudent to note that,"India's exports are expected to grow from the present level of USD 19 bn to USD 45 bn by 2010".
Expansion Projects:-
The company possesses amongst the most modern and versatile embroidery facilities consisting of 21 Schiffli machines, 14 Multihead machines and 1 Quilting machine out of its two plants situated at Mahape, Navi Mumbai and Vasona, Silvassa. Over a period, the company has developed goodwill for its superior quality, versatile product range and strong designing capabilities and has created a wide and niche customer base and enjoys an order book position of over 4-5 months.To meet the growing demand for its products and widen its market, the company has undertaken expansion of its embroidery manufacturing capacity in phased manner.
Phase I:-Under the Phase I of expansion project, the company has installed 4 Lasser make Schiffli embroidery machines and 16 Barudan make Multihead machines at its existing unit at Silvassa. This has increased the embroidery manufacturing capacity by 7015 mn stitches p.a. and total capacity to 16263 million stitches p.a. The total cost of project has been funded by a term loan of Rs. 20 crores from State Bank of India under TUFS and balance by internal accruals.
Phase II:-Under Phase II,company is increasing its embroidery manufacturing capacity by 17737 mn stitches p.a. at Silvassa taking the total embroidery capacity to 34000 mn stitches p.a.The company is installing 60 single deck Lasser maker Schiffli embroidery machines and 30 Multi head embroidery machines at an estimated cost of Rs.150 crores. The same is being financed by a term loan of Rs. 115 crores under TUFs and balance by internal accruals.
Entrance of Reliance:-
Few months back sonata investments,a subsidary of reliance capital entered the counter by buying out huge quantities(over 10 lakh shares at a price range 118-131) through numerous bulk deals.It entails tremendous confidence as we all are aware of the brand name of reliance.With reliance looking to magic again with "Vimal",i cant rule more equity participation by the large behemoth.If that happens the company should see itself in a new orbit.Given the strong prospects of the Indian textile industry and the ideal positoning of the company, the future looks extreamly bright.
Risks and the solutions:-
Risk of Competition:
The company is subject to competition both in the domestic and international market.
Solution)The company since inception focused technology, quality, innovation and attaining right size. Today it has a large and loyal customer base in domestic as well as overseas market and enjoys on an average a healthy order book position of 4-5 months.It is also geographically expanding its market reach.
Risk of Currency fluctuation:-
With increasing exports, the company is subjected to adverse fluctuations in the foreign currency.
Solution)The company relies on a combination of external advise through a reputed consultant and in house treasury department to manage the currency risks.
Risk of Interest rate hike:
The company's debt profile is primarily on a floating interest rate and hence vulnerable to interest rate hikes.
Solution)The company's long term borrowings for expansion projects are under Technology Upgradation Fund Scheme, at a concessional rate of interest. The company through suitable financial instruments like Foreign Currency packing credit, CP linked rates etc., reduces the interest cost on the working capital front.
Conclusion:-
The company ranks amongst the large embroidery players in the world.Market diversification, capacity expansions and synergies with Alok to auger well to elevate Grabal's performance over the coming years.Grabal stands tall in terms of efficiency, reduced downtimes and quality besides being the most reputed player in the industry using the most modern machineries.Also the ambitious acquisition of UK retail chain lends an ideal platform for the company to widen its global presence.I expect the company to create considerable value by turning around the performance of Grabal -UK.
Valuation&Recomendation:-
The company has de-risked its business operations over the past few years.The CMP of Rs. 99 discounts the FY09E earnings by 11x.Turnover is expected to bloster to 175-180crs in 09 from 93crs on 07.The company has been overlooked by the retail fraternity just for no reason.Textile sector on a whole never really performed over the last 2 years.But i am talking about a company which is one of the world leaders in its business.I am talking about a scrip which is doing every stuff needed to position itself in the top few league.I am recomending something which has been a institutional favourite backed by a strong pedigree with a great business model.The company has consolidated for a fairly long time in the bourses and now with things looking up,"Maybe the shareholders of grabal alok are here in for gala days".Go for it guys and enrich your lives .
Reliance power and "Chor" promoters
Has anybody ever thought why majority of brokers/promoters/punters/investment bankers wish that always, market should keep on going up and attain new high every month, every year. Like in the storm, iron cauldron also flies, in irrationally bull market, even dud scrips start flying. Dirty/dishonest operators manipulators can do business only in hyper markets. In calm markets, such elements will be out of business and unemployed because in stable market, investors will do only value buying. Similarly, in irrational bull markets, promoters can make placement of shares at highest possible premia, float IPOs at wrong prices taking advantage of bull euphoria with complete disregard to fundamentals. Ponzi game is played wherein even wrong pricing of IPO is justified because it was listed at premium and investors could make 20-40% instantly. It encourages more IPOs at more wrong/aggressive pricing and investors still flock to it as they made money in earlier/another issue. Investment bankers walk away with hefty fees and patting their backs for managing billions worth IPOs . However, nobody can fool everyone for all times or even for a long time.
IPOs of Emaar MGF and Wockhardt Hospitals bombed badly, leading to withdrawal of IPO. It is despite the fact that literally, who's who of investment banking world were involved in the process of selling chalk for the price of cheese. Now, no one is admitting the mistake of wrong pricing. Rather, they are blaming unsuitable market conditions. It clears shows the greed and collusion on part of promoters and investment bankers. Emaar has issued a statement that 'projects wont be affected as enough funding is available' .It means that they did not need more funds and were just taking advantage of investors' madness for IPOs. If so was the case, why they planned for an IPO? This community has become sort of megalomaniac who think no end of themselves and who want to leave nothing on the table for common investors. They wont reprice their IPO at realistic levels and prefer to wait for another euphoric run on the bourses to make the killing. Lion wants to eat only the meat and not grass. Excessive hype and speculation in IPOs can be partially curbed if all classes of investors (no exceptions) have to put 100% money alongwith application. Moreover, it should be made obligatory on part of promoters to subscribe at least 5% or even 10% of IPO amount at same price which promoters are planning to extract from gullible public. Many Promoters have been hooked to the thinking that public/investors' 1 rupee is worth 10 paise whereas promoters 10 paise is worth One rupee.
Investors and promoters may remember that it may be possible to hold share price to unrealistic levels for 1 hour or 1 day or few days but not for a long long time.
IPOs of Emaar MGF and Wockhardt Hospitals bombed badly, leading to withdrawal of IPO. It is despite the fact that literally, who's who of investment banking world were involved in the process of selling chalk for the price of cheese. Now, no one is admitting the mistake of wrong pricing. Rather, they are blaming unsuitable market conditions. It clears shows the greed and collusion on part of promoters and investment bankers. Emaar has issued a statement that 'projects wont be affected as enough funding is available' .It means that they did not need more funds and were just taking advantage of investors' madness for IPOs. If so was the case, why they planned for an IPO? This community has become sort of megalomaniac who think no end of themselves and who want to leave nothing on the table for common investors. They wont reprice their IPO at realistic levels and prefer to wait for another euphoric run on the bourses to make the killing. Lion wants to eat only the meat and not grass. Excessive hype and speculation in IPOs can be partially curbed if all classes of investors (no exceptions) have to put 100% money alongwith application. Moreover, it should be made obligatory on part of promoters to subscribe at least 5% or even 10% of IPO amount at same price which promoters are planning to extract from gullible public. Many Promoters have been hooked to the thinking that public/investors' 1 rupee is worth 10 paise whereas promoters 10 paise is worth One rupee.
Investors and promoters may remember that it may be possible to hold share price to unrealistic levels for 1 hour or 1 day or few days but not for a long long time.
Saturday, February 9, 2008
HBL Power Systems:-The scrip to rock in the coming days
Scripscan: HBL Power Systems Ltd
CMP:349
Target:560
Returns expected:60%
Duration:6-9 months
Traded in Bse-nse
Introduction:
HBL power is engaged in the business of making specialised batteries, electronics and DC power systems and caters to a variety of end-user requirements across industries.The customer segments include telecom, railways, defence, power, solar energy, petroleum, oil and gas, and uninterrupted power supply systems.
"10 points which justifies and favours my bullishness in the scrip".
1)A secured communications product,(a gateway encryptor) developed by HBL has passed all the tests required and is likely to be used widely by several government agencies,beginning early 2008.The product can prove to be a blockbuster for the company.
2)The company made 2 bids during early 2007 for defence electronics contracts, totaling over 500 crores. The time lines in defence are such that the final result will be known only in end of 2008.The products are already in field trials.Further, Its JV with IAI-ELTA of Israel has commenced exports recently.Two bids were made by the JV to the Ministry of Defence.Results may be known in mid 2008.
3)Railway field trials for signaling products developed by the company commenced late and has just been completed,Almost a year behind expected schedule.Orders are expected to pour in going ahead.Also,Several export enquiries have been received by the company for contract manufacturing of Power Electronics equipment.The management sounded very confident in bagging at least one of the significant orders these year.
4)The batteris market share for the company in Telecom segment continued to be about 50% and its growing all the time.New markets for Military use (Thermal, Reserve and Torpedo batteries) have emerged last year mostly in the international markets, these are ultra high specialties with very few producers in the world. The number of export customers for passenger and military aircraft batteries has also grown for the company.
5)The companys main raw material Nickel prices had gone up to unprecedented levels last year but have already declined considerably.Lead prices seem to have hit their peak in mid July 2007,and appears to be coming down.The both factors should further boost the bottomline for the company.
6)The management expects to increase its margins as each and every contracts of the company are now on variable cost and the price hike has been pass on to the clients.Last year the company faced several problems because of the high volatility of input cost prices, this fiscal they have given a decent check in managing the raw material procurements.
7)In these sort of competitive environment where most companies are struggling to grow by 20-25%,Hbl is going to double its turnover and Profit these fiscal.The company has guided a turnover of in excess of 1000crs these year vs 511crs last year.Profit after tax should touch around 70crs vs 32crs last fiscal.It should be prudent to note that the company guided 500crs revenue in 07 and ended up doing 511crs.
8)Further the company is expected to post turnover worth 1650crs in 09 and profit is expected to inch to around 120crs.Eps for 08 and 09 are expected to be 29 and 50 respectively.At present price of 349 the company is quoting at 12 times its 08 and just 7 times its fy09 earnings.
9)Reliance via its subsidary sonata investments has been holding over 7% stake in the company for quite some time now.Everyone is aware what brand relaince can prove for a company to be and it entails tremendous confidence in the mind of investors.
10)The company as on march 2007 has got over 215crs reserves in its book which is around 9 times its equity capital.Its of one"s easy assumption that HBL remains one of the primate candidates for a liberal bonus issue.If the assumptions vindicates that can certainly as a big trigger for the company.
Conclusion:
Given the many opportunities in core applications such as telecom and power, the company has huge growth prospects.At 349rs its quoting at 27 times its 07 trailing earnings,12 times its 08 earnings and just 7 times its 09 earnings.Now folks you certainly can differentiate between 7 and 27,isnt it?Take out your calculator and value the company.I have valued it at 11.2 times its 09 expected earnings and can only say its a screaming buy.
Stock market:Analysis of IT,Automobile,Textile,Fertilizer,Power,Telecom,Power equipment and Metals in short
Analysis of some important sectors in short:-
1. IT Sector:
Due to strong rupee, earnings growth of IT companies has slowed down and hence, leading IT scrips have been underperforming. Since, rupee is unlikely to weaken in near future, IT companies will not report outstanding growth.
2. Automobile sector:
This sector is already witnessing slowdown in growth. Further, rising metal prices will not allow big profit growth and hence, vauations of this sector are not compelling anymore. Further, no sharp growth is expected in this sector for next 1-2 years at least.
3. Textile Industry:
This sector is passing thruough one of the worst times. Even if Govt doles out any benefits, it wont lead to significant improvement in its dire position. In fact, textile industry may post dismal results for next 2-3 quarters.
4. Fertlizer sector:
Share price of many fertilizer stocks had been ramped up brazenly althoughthis sector has always underperformed. Even Govt is coming with some new policy for this industry, fertilizer industry should not expect any path-breaking changes and fortunes/profits of fertilizer companies may change only in a minor way.
5. Power sector:
This sector has witnessed never-before ( and i pray never-again) hype which led to mindless valuations.
6. Telecom sector:
Yes this sector continues to exhibit big growth. But companies at PE Ratio of 40-60 are not screaming buy.
7. Power equipment industry:
Valuations of this sector still appear to be attractive (comparatively).
8. Metals:
Prices of various metals have already risen steeply and further rise may be very slow and infact, there can be even reaction in metal prices. Hind zinc has already reported huge decline in its profits.
1. IT Sector:
Due to strong rupee, earnings growth of IT companies has slowed down and hence, leading IT scrips have been underperforming. Since, rupee is unlikely to weaken in near future, IT companies will not report outstanding growth.
2. Automobile sector:
This sector is already witnessing slowdown in growth. Further, rising metal prices will not allow big profit growth and hence, vauations of this sector are not compelling anymore. Further, no sharp growth is expected in this sector for next 1-2 years at least.
3. Textile Industry:
This sector is passing thruough one of the worst times. Even if Govt doles out any benefits, it wont lead to significant improvement in its dire position. In fact, textile industry may post dismal results for next 2-3 quarters.
4. Fertlizer sector:
Share price of many fertilizer stocks had been ramped up brazenly althoughthis sector has always underperformed. Even Govt is coming with some new policy for this industry, fertilizer industry should not expect any path-breaking changes and fortunes/profits of fertilizer companies may change only in a minor way.
5. Power sector:
This sector has witnessed never-before ( and i pray never-again) hype which led to mindless valuations.
6. Telecom sector:
Yes this sector continues to exhibit big growth. But companies at PE Ratio of 40-60 are not screaming buy.
7. Power equipment industry:
Valuations of this sector still appear to be attractive (comparatively).
8. Metals:
Prices of various metals have already risen steeply and further rise may be very slow and infact, there can be even reaction in metal prices. Hind zinc has already reported huge decline in its profits.
Subscribe to:
Posts (Atom)