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!!! W E L C O M E !!!
In INDIA, people generally relate to stock market as “EASY MONEY” or “SATTA BAZAAR”. For them it’s purely a GAME or matter of sheer LUCK and nothing more than that. But seldom do they know, by following certain PRINCIPLES and taking INFORMED decision, this same platform has the power to take them from rags to riches. No doubt, it has a certain amount of RISK attached to it. But every business or investment has it. What more, the Finance Ministry has already made the long term capital gain as TAX FREE whereas the short term capital gain is taxed at merely 10%. On the economic front, India’s GDP is growing and is expected to grow at scorching pace of more than 8%. Unfortunately, even today our market is being ruled and dominated by FIRANGI’s money. But I can see, the day is not far when our general PUBLIC will change its perception and start putting MOST of their savings in equities as an ** Investment **.
Remember, "K N O W L E D G E" and "P A T I E N C E" are the key to success.
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SAARTHI

Sensex (LIVE- Intraday)

Sensex (LIVE- Intraday)

Saturday, May 30, 2009

STOCK WATCH

Couple of days back Shanthi Gears (40.00) announced encouraging set of result for the March quarter. Its topline remained flat at Rs 69.50 cr but bottomline witnessed an increase of impressive 20% to Rs 14 cr despite industrial slowdown. Incidentally, company had taken an exceptional hit of nearly Rs 7 cr as interest and forex loss towards redemption of FCCB during the Dec Qtr. Hence for the entire FY09 its sales was well as profit remained almost flat at Rs 253 cr and Rs 44 cr leading to an EPS of more than Rs 5 on the equity of Rs 8.20 cr having face value as Rs 1/- per share. It has announced 120% dividend i.e. Rs 1.20 per share for FY09 which gives a yield of 3% at CMP. But most importantly, company has reported an operating margin of above 40% for FY09 due to lower raw material cost. Even for the latest March’09 quarter it clocked an OPM of 43% which is a very positive sign. However at the same time, company has informed that it is in the process of revamping and restructuring the entire operational and organisational structure which may lead to slowdown in production in all units for a short tenure. Thus H1FY10 performance may be lack luster. Despite this, investors are strongly recommended to accumulate the scrip at sharp declines as company is the second largest player in industrial gear segment with 20% market share. Of late, company has even started manufacturing gearboxes of 250 KV for windmills which has great potential.

Taking the benefit of recent notification related to AS-11 amendment, JK paper (25.00) opted to capitalize the foreign exchange loss retrospectively w.e.f. July 01, 2007. Hence purely on the account of write back of forex loss to the tune of Rs 10 cr (which it had provided in the first three quarters) company was able to post healthy net profit of Rs 15 cr for March’09 quarter. Effectively, for the entire FY09 company has clocked a turnover of Rs 1077 cr and PAT of Rs 38 cr leading to an EPS of almost Rs 5 on equity of Rs 78 cr. The most interesting aspect of the company is the high dividend payout ratio. Company has announced a dividend of 17.50% (against 15% last year) which translates into payout ratio of more than 35%. The dividend yield works to 7~8% at CMP. Operationally company is facing some pressure on margin front due to rise in raw material cost due to which its OPM for FY09 stood lower at 16.50% (against 18% last fiscal). However the margin is expected to improve in coming quarters due to softening of coal and pulp prices. With more than dozen of popular brands, company is India’s largest producer of branded papers and commands 40% market share in branded cut size papers. It is engaged in production of writing & printing paper and has recently ventured into high-end coated packaging boards. It operates two integrated plants in India with an total installed capacity of 180,000 TPA. Of late it has setup Rs 300 cr state-of-the art multi layer packaging board plant with an installed capacity of 60,000 TPA, thereby taking the total installed capacity to 240,000 TPA. Despite tempting dividend yield sell now and buy later between 18~20 levels.

For the March’09 quarter, JK Cement (80.00) has come out with excellent set of nos. Sales improved by 12% to Rs 433 cr but PBT shot up 25% to Rs 107 cr. However due to very high tax provisions in this qtr, net profit remained flat at Rs 60 cr. Remarkably, company’s operating margin for the March’09 quarter improved dramatically to above 30% due to sharp fall in power and fuel cost. Incidentally it had reported an OPM of 19%, 14% & 22% for the preceding three quarters respectively. But for the full year it reported 30% fall in PBT to Rs 234 cr and 45% decline in net profit to Rs 142 cr depisuite marginally increase in sales to Rs 1502 cr. Thus it posted an EPS of Rs 20 on current equity of Rs 70 cr and announced 35% dividend for FY09 leading to an yield of more than 4% at CMP. JK Cement is among the largest grey cement manufacturers in North India and the second largest manufacturer of white cement in the country. It boast of having 4.4 million TPA of cement manufacturing capacity along with 43MW captive power generation facilities. It is in the midst of setting of up another 3 million TPA Greenfield cement plant in Karnataka. Incase company is able to maintain the current margin for coming quarters as well, scrip may see a sharp re-rating.

J Kumar (100.00) has once again reported decent set of result for the March’09 quarter. Total revenue increased by 55% to Rs 148 cr but net profit grew by only 15% to Rs 12 cr due to declined in operating margin. Still on the full year basis it recorded 85% growth in topline to Rs 389 cr and 70% jump in bottomline to Rs 33 cr which translates into EPS of Rs 16 on equity base of Rs 20.70 cr. Last fiscal company bagged huge order from MMRDA & MSRDC to the tune of Rs 560 cr for construction of 16 skywalks in Mumbai. Recently, in last couple of months it won another Rs 130 cr order for construction of nallah & Railway Bridge (Jogeshwari) in Mumbai. In order to fund the project, company recently approved to make preferential allotment of 40 lac convertible warrants to promoters and others. Although the conversion price is yet to be finalized, it is expected to be around 70~75 Rs. Post conversion equity will get diluted by nearly 20% to Rs 24.72 cr. As the scrip has seen smart rally in short time, investors are advised to accumulate it between Rs 80~90.

Monday, May 25, 2009

Supreme Infrastructure India Ltd - Rs 58.00


Incorporated in 1983, Supreme Infrastructure India Ltd (SIIL) is predominantly engaged in construction of roads, highways and other allied projects for clients like NHAI, MCGM, MMRDA, MSRDC, MUTP, PWD, BMC, AAI, BPT, TMC and also private agencies like Hiranandani, K. Raheja, Pratibha Ind, RCF, BARC, Sadbhav Eng, Mundra Port etc. Its area of operation is mainly concentrated in Mumbai region and few parts of Maharashtra & Bangalore. Although company’s core competency lies in construction/widening of roads & highways etc it also undertakes other infrastructure projects like integrated nallah development, drainage work, laying of railway tracks, construction of minor bridges, development of IT Park, residential tower, RCC building, strengthening of sea wall and laying of tetra pods etc. As SIIL is registered with PWD & BMC, it is eligible to bid for their tenders without any restriction in terms of value. Infact company is also eligible to bid for tenders of construction of runways at airports, for jobs related to tidal area projects, construction of small jetties and port connectivities which require special skills. Remarkably, till now no penalties have been levied on the company for any of the projects due to any delay in completion on its part. For executing all types of civil works, company even possesses various latest machinery like vibratory rollers, sensor pavers, excavators, road rollers, paver finishers, tippers, motor grader, compressors, weigh bridge, concrete pumps etc.

Notably SIIL is among the few companies of its size having its own captive ready mix concrete plant, asphalt mix plant, quarrying and crushing unit & paver block manufacturing unit. Apart from consuming these for its own projects, company also produces & supplies to other contractors as per order. Brief summary of the plants are:

· Asphalt Mix plant: SIIL has three asphalt plants spread across Powai (Mumbai), Padgha (Thane) & Chitradurga (Bangalore) with a combined production capacity of 330 MT per hour. The plants are equipped with machineries from Lingtech, Linoff & Apollo.

· Ready Mix Concrete (RMC) plant: Company has four RMC plants each located at Powai, Padgha, Chitradurga & Thane. These plants have total capacity to produce 180 CUM of concrete per hour. Incidentally two of the plants are capable of producing concrete as well as wet mix macadam

· Wet Mix Plant: Company possesses a Unicon make wet mix macadam plant at Powai, Mumbai with a production capacity of 180 MT per hour.

· Quarrying & Crushing unit: SIIL boast of having four crushing plants – two at Padgha and one each at Powai and Chitradurga having total installed crushing capacity of 470 MT per hour.

· Paver Block unit: Though the concept of paver block is very old its usefulness has been realized recently and hence the manufacturing of paver blocks seems to be a new industry in India. SIIL has set up a paver block manufacturing unit at Padgha and is manufacturing nearly 10,000 sq. mtrs of paver blocks per month for the roads of varying thickness as 60 mm, 80 mm & 100 mm in unipaver shape in grey cement shade and in red colour. It also makes lacquer coated 60 mm paver blocks for the footpaths for which its monthly production capacity is 5,000 sq. mtrs.

Importantly, all the above units have adequate infrastructure in terms of manpower, material handling equipment, machinery/equipment required for transportation of products to various sites, power connection and water. This enables mobilization of the finished products to the various sites in and around Mumbai in a very convenient manner. Couple of months ago company has bagged three projects to the tune of Rs 225 cr with two work orders for road and bridge construction in marine conditions at Thane and the third contract involves construction of flyover in Jaipur in consortium with Petron Engineering. With this, SIIL’s order book stands at more than Rs 600 cr. Further, company is exploring the possibility of new orders in the range of Rs. 500~800 cr from the Indian railways and also for building construction contracts from private sector players. To cater the increasing demand for RMC, company is contemplating to almost double its RMC capacity to 300 cum. per hour by adding two new RMC plants in Mumbai and other city.

After spending 25 years of focus on road, SIIL is now using its experience and expertise to enter into the entire gamut of infrastructure services. To begin with it is betting high on railway projects and real estate development. Recently, SIIL reported decent set of nos for the March’09 quarter. Its revenue zoomed up 180% to Rs 145 cr, whereas operating profit jumped up 85% to Rs 19.50 cr. However due to high interest cost and major tax provisioning in the last quarter, its report a decline of 15% in PAT to Rs 4.80 cr. Despite this, for the full fiscal its bottomline has increased by impressive 40% to Rs 27 cr on 145% higher sales of Rs 383 cr thereby posting an EPS of Rs 19.50 on current equity of Rs 13.90 cr. Thus scrip is currently trading at a P/E ratio of merely 3x times. On the dividend front company is expected to declare 20% for FY09 against 15% last year. To funds its working capital and other project cost, SIIL has decided to raise capital by issue of 20 lakh convertible warrants on preferential basis. Although company should have tried to place the shares at much higher price but it seems they may fix the conversion at Rs 40~50 per share which is quite low. During Oct’07 company had raised round about Rs 40 cr thru IPO route @ Rs 108 per share. Considering the market condition and other factors, investors are advised to accumulate this scrip at sharp declines to get 50% return within 12 months.