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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)

Tuesday, April 28, 2009

Saturday, April 25, 2009

STOCK WATCH

As anticipated earlier, SEAMEC (85.00) has once again come out with stunning set of nos for the March’09 quarter. Its topline almost tripled to Rs 100 cr on YOY basis, whereas it recorded a net profit of Rs 62 cr against net loss of Rs 17 cr in the corresponding period last fiscal. Ironically, its Q1 profit alone is substantially higher than the entire FY08 profit of Rs 47 cr. The reason for this bumper performance is due to the fact that all its four vessels were constantly engaged for the whole quarter and that too at a healthy charter rate. Importantly, none of its vessel is expected to go for dry dock in the current fiscal and will be fully deployed thru out the year. However due to slowdown in the oil E&P activities, the vessel hire charges have fallen in the recent past and accordingly company has signed a new contract for SEAMEC-II at a significantly lower rate. But at the same time it has been able to rent out its PRINCESS vessel at quite as healthy rate although only for 2 months. Its not only a debt free MNC but also a cash rich company having potential to generate Rs 60 ~ 70 cr cash thru core business operation. For CY09 it can report revenue of Rs 325 cr and net profit of Rs 125 cr i.e. EPS of Rs 37. Moreover it is expected to get an insurance claim of Rs 25 cr which will straight away add to the bottomline. It will most probably be able to clock a bumper profit for June’09 quarter as well but its H2FY09 may not be as good as H1FY09. Despite this scrip can easily shoot up to Rs 125~130 Rs in short term. Catch it if you can. If the market remains bullish it has the potential to touch Rs 200 in few months.

Gremach Infrastructure’s (25.00) main activity is to provide rental of construction/earthmoving machineries to infrastructure companies including L&T, Punj Lloyd, Shapoorji Pallonji, Gammon India, HCC, Gannon Dunkerley etc. It has a huge asset bank of heavy equipments ranging from compacters, rollers, concrete mixers, dozers, forklifts, loaders to excavators, PTR, dumpers, electronic sensor pavers, kerb laying machine, concrete batching and mixing plant. In addition to renting its owned equipments, it also hires equipments owned by other parties and rent to its own clients. For the first nine months ending Dec’08 it has already registered an EPS of Rs 15 by earning PAT of Rs 23.30 cr on topline of Rs 238 cr. Although company is witnessing lower demand due to slowdown in construction sector, but going forward it is expected to regain normal business. Interestingly, it has got in-principle approval for 100 hectar Metal SEZ at Kolhapur & another at Dhule in Maharashtra. It has also taken 75% controlling stake in 11 Coal mine licenses in Mozambique. To fund its growth plant company has raised almost Rs 200 cr in Feb 2008 thru FCCB route to be converted into equity @ Rs 376 per share. Ironically, share price which hit a high of Rs 504 in Jan’08 is not finding any buyer even at Rs 20. Aggressive investor can buy at current levels.

Bharati Shipyard (75.00), second largest private shipyards in India is engaged in design and construction of bulkers, cargo/container ships, tankers, dredgers, passenger vessels, chemical carriers etc. It has special expertise in construction of offshore support vessel required for oil exploration industry and is the first Indian player to bag an order of an oil rig. However, the shipyard sector is going thru rough phase as no shipping company is placing fresh order for ships. On the contrary, there is the great risk of order cancellation. Secondly the crude oil prices have also fallen substantially forcing the oil companies to reduce their E&P activities. Meanwhile, company has an all time high order book position of more than Rs 5000 cr which is 7x times its FY08 revenue, thereby ensuring a strong revenue visibility. Due to slump in business, it has slowed down its Greenfield expansion and other capex plan. Notably, 50% of its FCCB has already been converted into equity and the balance FCCB of more than Rs 200 cr may come up for redemption in Dec 2010. Recently govt has decided to disburse the pending subsidies to shipbuilding companies although the decision on extension of subsidy scheme beyond 2007 is yet to be taken. For FY09, company is estimated to clock a turnover of Rs 825 cr and PAT of Rs 65 cr without taking govt subsidy into consideration. Promoters are looking to take preferential allotment of warrants at low price. A good bet for long term.

ICSA(115.00) boasts of developing innovative products suitable for power utilities in the field of energy management, energy audit, control application which identifies distribution losses, and help the power utilities reduce their costs & streamline their operations. The list of its popular product includes Intelligent Automatic meter reading, Distribution transformer monitoring system, Theft detection device, Energy audit services, Pole top & Micro remote terminal unit to name a few. Company doesn’t face any significant competition as it enjoys virtual monopoly for few of its product. It also undertakes electrical infrastructure projects in power generation, transmission and distribution sectors both in India and abroad. Notably, it follows an asset light business model under which it designs and develops prototype models of the product and outsources manufacturing. Currently it is estimated of having an unexecuted order book position of more than Rs 800 cr. This includes the recent order of Rs 460 cr bagged by the company from Bihar and Maharashtra State Electricity Boards. Financially, for the first nine months its sales jumped up 80% to Rs 825 cr and NP shot up 50% to Rs 134 cr thereby surpassing the the sales and NP of entire FY08 by decent margin. Infact it is estimated to end FY09 with sales of Rs 1100 cr and PAT of Rs 170 cr leading to an EPS of Rs 36 on current equity of Rs 9.40 with face value as Rs 2/- per share. Buy at sharp declines.

Wednesday, April 22, 2009

Royal Orchid Hotels Ltd - Rs 45.00


Founded in 1973 by Chender K Baljee, the Baljee Group which has been re-branded as Royal Orchid group is soon becoming one of India’s most recognized names in hospitality with major presence in Bangalore. Royal Orchid Hotels Limited (ROHL) - the flagship company comprises of hotel assets, their management and the branding & marketing activities of these hotels. Apart from having ownership of hotels company also undertakes management contract with third party owners, so as to encourage the development of hotels and simultaneously provide with them with the benefit of professional management and a well recognized brand. From a modest beginning of owning single hotel in Bangalore, ROHL currently manages following twelve hotels.

Name Place No of rooms Category
Royal Orchid Banglore 195 5 star Business hotel
Royal Orchid Central Bangalore 130 4 star Business hotel
Royal Orchid Resort Bangalore 54 4 star Resort
Royal Orchid Suite Bangalore 92 4 star extended stay hotel
Hotel Ramada (Harsha) Bangalore 83 4 star Business hotel

Royal Orchid Metropole Mysore 30 4 star Heritage hotel
Royal Orchid Brindavan Garden Mysore 25 4 star Heritage hotel

Royal Orchid Golden Suites Pune 71 4 star extended stay hotel
Royal Orchid Central Pune 115 4 star Business hotel

Royal Orchid Central Jaipur 70 4 star Business hotel
Royal Orchid Galaxy Resort Goa 69 4 star Beach Resort
Hotel Peppermint Hyderabad 60 Budget hotel

Importantly, company follows a unique ‘asset light’ business model of taking properties on lease or entering into a contract for managing & operating the existing hotel instead of owning them outright. Majority of its properties are on long term lease, management contracts or in joint ventures which help the company in keeping its investments low. This has helped the company manage its funds efficiently, have lower payback period on its projects, earn attractive operating margins which eventually lead to higher ROCE. Moreover company is having presence mainly in the premium four / five star categories, where not only margins are lucrative but demand is also witnessing maximum growth. To de-risk its revenue model, company is expanding geographically and setting its foothold in other cities as well.

ROHL has entered into an agreement to acquire 100% stake of Satkar Realties Private Limited, in connection with acquiring a 104 room hotel at Ahmedabad. As per terms of the agreement, it has already acquired 26% stake as of date. It will refurnish and upgrade the hotel to four star category and launch it under ‘Central’ brand name. ROHL is also looking to operate a four star property in Mumbai which is expected to get ready by end of 2010 thru lease. However company’s biggest project is a 180 room five star hotel which it is constructing under joint development in Hyderabad. It has also signed a management contract to operate 90 suites property adjacent to its project. Further company has entered into a joint venture with few developers for putting up a 160 room five star hotel in Jaipur. Apart from all these, it has formed a 30:70 JV company with Parsvanath group to establish 10 hotels with an investment of about Rs.500 cr, in the next 5 years. Earlier ROHL has also signed an agreement with New Jersey based Wyndham Hotel group which operates Ramada hotels globally. Under this agreement company will develop and manage 10 hotels over five year under Ramada brand in India. Meanwhile, ROHL has recently completed the major renovation work at three of its properties ­- Goa Resort, Bangalore Resort & Hotel Ramada which will improve the occupancy rate as well ARR going forward.

Until last year, company’s management was very excited about setting up budget hotels across India as it had targeted to operate 50 budget hotels under the brand name ‘Peppermint’ in the next 5 years. It had even tied up with IRCTC for 11 locations. But now, it seems company has put the plan under back burner and is focusing on niche segment only. It is quite contended with single budget hotel in Hyderabad and has no expansion plan for Peppermint brand. Few months back company acquired Royal Orchid Central, Bangalore property at a consideration of Rs 82 cr which was being managed by itself. Besides, ROHL has made an international foray, by acquiring a Tanzania based company, Multi Hotels Limited, which owns 30 acres of prime beach front property in Dar-e-salaam, the economic centre of Tanzania, for a consideration of Rs. 8 cr. It plans to develop a beach resort in next 2 years with an investment of about Rs 100 cr.

India, with its diverse landscape, offers huge scope for various theme-based travels like medical tourism, adventure tourism, heritage tourism, wellness tourism, pilgrimage tourism, eco-tourism, wildlife tourism along with business travels. Besides, the domestic national tourism is also on a rise. As per unconfirmed reports the estimated number of required hotel rooms is around 240,000, whereas the current availability is just 90,000 rooms, leaving a shortfall of 150,000 rooms. Recognizing the untapped opportunity, government declared hotel and tourism industry as a high priority sector and with a provision for 100 % FDI offered an additional impetus in attracting investments into this industry. Although, the Indian hospitality industry is going thru a temporary slowdown due to various factors but over the longer run it is expected to record a healthy double digit growth. ROHL with constant expansion backed by asset light model and strong goodwill is slated to do well in coming years. Hence company along with eight of its subsidiaries is expected to end FY09 with total revenue of Rs 140 cr and NP of Rs 20 cr leading to an EPS of Rs 7 on equity of Rs 27.25 cr. Ironically, company had raised Rs 112 cr @ Rs 155 per share thru IPO route in Jan 2006 and the issue was oversubscribed 40x times. Today company is available at a market cap of Rs 125 cr with no buyer even at Rs 50. Since listing company has given handsome dividend @ 50%, 60% & 60% consecutively. But for FY09 it may have to cut down to 30% or less. Considering the company’s, operational capabilities, strong brand value and future growth plan investors are recommended to accumulate at declines for a price target of Rs 75 in 12~15 months.


Saturday, April 18, 2009

STOCK WATCH

XL Telecom & Energy (40.00) has been the pioneer in solar module manufacturing since last 15 years. Due to gaining popularity of this non conventional energy, company is in advanced stage of implementing the 120 MW solar cell manufacturing facility in Fab City SEZ, Hyderabad with a capital outlay of Rs 360 cr. For this it has also inked a five-year contract with Chinese firm LDK Solar to supply multi-crystalline solar wafers which is a key component for solar cell and panel manufacturing. It is also adding another 40 MW module manufacturing capacity thereby taking its total module manufacturing capacity to 220 MW. Remarkably, company has even got itself forward integrated in solar value chain by entering into EPC segment of solar farm establishment and has already succeeded in setting up its first solar farm in Majorca, Spain with an installed capacity of 1.6 MW. With this it has become the world’s first and only solar company to capture the complete solar value chain from manufacturing of solar cell to solar module to setting up of solar farm. After getting this success, company is now exploring the opportunities to establish such solar farms in Italy, southern France and other European countries in next 3 years totaling about 300 MW. Meanwhile, company has registered very poor performance for the Dec’08 quarter. Its bottomline is getting hit due to significant interest cost on the loan which it has borrowed for expansion. However for the year ending June’09 it may report sales of Rs 700 cr and PAT of Rs 25 cr leading an EPS of Rs 13 on current equity of Rs 18.80 cr. Although company has reset the FCCB conversion price to Rs 160 from Rs 260, still no equity dilution is expected in near future. Keep a close watch

Numeric Power (230.00) has eight world class manufacturing facilities spread across Pondichery-TN, Chennai-TN, Parvanoo-HP and Colombo-Srilanka, thereby emerging as the biggest integrated manufacture of UPS in India. It also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. It has an enviable and high profile clientele including Infosys, Siemens, Intel, Philips, Microsoft, Veritas, HDFC, Citibank, ICICI, RBI, NIC, Reliance, ABB, BMW, NCR, Nokia, major stock exchanges etc. As per rough estimates, around 75% of the ATMs in the country are fitted with UPS supplied by the company. Recently, company ventured into solar power generation using Photo Voltaic Modules and initially intends to develop solar hybrid UPS systems. To become more efficient, it is backward integrating into batteries and is scouting for a technology partner to set up a battery manufacturing unit. For nine months ending Dec 2008, company’s sales increased marginally to Rs 296 cr but PAT declined by 20% to Rs 23 cr. Hence it may end the current year with a topline of Rs 400 and bottomline of Rs 25 cr i.e. EPS of Rs 50 on current equity. However, it has the potential to clock a turnover of Rs 450~475 cr and NP of Rs 35 cr i.e. EPS of Rs 70 for FY10. A solid bet.

Elecon Engineering (40.00) is a leading manufacturer of bulk Material Handling Equipment (MHE) and Asia’s largest producer of industrial gear with 26% market share in India. For more than five decades, it has been supplying hi-tech equipment to core sectors such as steel, fertilizer, cement, coal, petrochemicals, lignite and iron are mines, power stations, defense and port mechanization in India and abroad. With a strategy of diversification, last fiscal company started a new business of setting up of Wind Turbine Generator (WTG) farms and manufacturing of WTG gear boxes. It has started manufacturing of WTG gear box having capacity of 1 MW to 2 MW, which is the import substitute, thereby becoming the first Indian company to manufacture gearboxes of such sizes. Currently, it has an pending order in hand of Rs 1800 cr comprising of Rs 1570 cr for MHE division and Rs. 240 cr for gear division. For the latest Dec’08 quarters, its revenue grew by 35% to Rs 245 cr but its net profit fell by 25% to Rs 12.50 cr on the back of substantial forex loss. Hence it may end FY09 with sales of Rs 950 cr and PAT of Rs 50 cr i.e. EPS of more than Rs 5 on current equity of Rs 18.60 having face value as Rs 2/- per share.

Jyoti Structure (65.00) has an expertise to take on turnkey projects for transmission lines from 33 kV to 800 kV and substations upto 400 kV irrespective of terrain, location and requirements of power utilities within and outside India. In order to provide end-to-end solutions company has two manufacturing facilities which are capable of making proto types, fabricating and galvanizing transmission towers and structures, microwave towers, wind mill tower, railway electrification structures, etc up to 76,000 MTPA. Besides, its wholly owned subsidiary JSL Structures is having a capacity to manufacture another 19800 tons of transmission line towers. On the back of huge flow of investments in the power transmission and distribution segment, it has an all time high order book position of more than Rs 3500 cr. Meanwhile, company has reported encouraging set of nos for current year till date and is expected to end FY09 with topline of Rs 1650 cr and PAT of Rs 70 cr leading to an EPS of Rs 9 on current equity of Rs 16.35 cr with face value as Rs 2/- per share. Apart from above, company is betting on international market and has formed a couple of joint venture companies in UAE and South Africa. Keep accumulating at sharp declines.

Monday, April 13, 2009

International Combustion (India) Ltd 140.00


Established in 1936, International Combustion India Ltd (ICIL) is recognized to be a leading manufacturer of sophisticated plant and machinery for core sector industries such as mining, steel, cement, petrochemical, construction, sugar, power, textile, paper, rubber, pharma, chemicals etc. From a modest beginning as a trading house, ICIL today boasts of manufacturing specialized range of engineering products under technical collaboration and license agreement from various global leaders. It has an enviable list of clientele including corporate giants like Tata, Essar, Jindal, Aditya Birla, Ashok Leyland, SAIL, NALCO, Atlas Copco, NTPC, HLL, Nirma, P&G, ABB, Alstom, Bajaj Hindustan, LMW, ITC, TNPL etc. According to its product profile, company has broadly segmented its business model into following two divisions:-

I. Heavy Engineering Division :
This is the main division as nearly 80% of total revenue comes from it whereas it contributes more than 95% of earnings. This division has been further divided into following three categories:-




  • Vibrating equipments: ICIL manufactures and markets a wide range of mechanical and electro-magnetic vibrating screens, feeders, sizers, & conveyors which can handle all types of bulk solids, whether large lumps or very fine grains, wet or dry, or whether abrasive such as scrap, flux and sinter. As accessories it also makes exciters, DC brake unit & monitoring system for vibrating machines.



  • Bulk Material Handling: Under this category, ICIL deals in spiralling belt elevators, scooping belt conveyers, girdle pocket elevators, apron feeder, mining haulages etc. as an intelligent solutions to suit even difficult to handle materials.



  • Grinding, Classfication and Drying system: ICIL offers complete grinding mill systems designed to pulverise and classify various kinds of material, including non-metallic minerals, fertilisers, chemicals and many other manufactured products. Importantly, it markets ‘Raymond” American brand roller mill, pulverisers, grinding mills, mechanical air separators and flash drying system, which can reduce many products by 95~98% or refine them below 10 microns


II. Gear Motors & Gear Box Division
Under license from Danfoss Bauer, Germany, ICIL offers a comprehensive range of geared motors, gear boxes and electric motors manufactured on specially designed inter-linked CNC production lines. It also exports these products to neighboring markets including Iran and Sri Lanka. Besides company has been chosen as the outsourcing partner by Danfoss Bauer itself and has even started exporting cast iron machine parts to them.

Currently, ICIL is having three fully equipped manufacturing facilities spread across Calcutta, Nagpur and Aurangabad. To have a cutting edge technology for manufacturing premium quality equipment, ICIL has made several tie-ups with international majors like Danfoss Bauer(Germany), Mogensen(Germany), IMS Engineering(South Africa), Alstom Power(USA), Gummi Kuper (Germany) and Tredomen Eng (UK) for each product group. It has also entered into a license agreement with Ecutec(Spain) to manufacture microfine classifiers. Ironically, all the players in user industries are ramping up their capacities which translates into a huge opportunity for company's products. To meet the increasing demand, an expansion programme has been initiated by the company for augmenting the manufacturing capacity of the gear box/geared motor division. It is also upgrading the manufacturing capacity of the Heavy Engineering Division. On the back of its wide product range and high engineering skill, ICIL is contemplating to enter the lucrative turnkey project segment in future.

Fundamentally, ICIL is on a strong footing with an reserves of around Rs 50 cr i.e. book value of nearly Rs 220 as on March 2009. Importantly it’s a debt free company and has never even raised any significant money thru equity route. In other words, there is no major equity dilution since 1995. It has been funding its capex plan thru internal accrual only. Being a seven decade old company, it has a conservative approach and believes in slow but consistent growth. In the last five years, it has recorded a topline CAGR of 30% whereas bottomline has grown at a CAGR of 140%. Besides it has an impressive ROCE of 40% and ROE of 25% on a very tiny equity of Rs 2.40 cr. On the back of poor performance for the Dec’08 quarter, it has posted marginal growth in sales to Rs 71 cr and 20% decline in net profit to Rs 6.50 for the first nine months. Accordingly for entire FY09 it is estimated to clock a turnover of Rs 95 cr and PAT of Rs 8.50 cr leading to an EPS of Rs 35 on current equity. Although management can declare 50% dividend but on a conservative note 35% dividend is expected for FY09. ICL is expected to benefit from the sharp fall in metal prices being its main raw material. It has the potential to earn a profit of more than Rs 12 cr for FY10 i.e. EPS of Rs 50. Hence with expected CEPS of more than Rs 60, and EV/EBIDTA of less than 2x, company is available fairly cheap at current market cap of merely Rs 35 cr. Ironically, scrip which crossed Rs 900 in Dec’07 tumbled down to as low as Rs 80 in March’09. However now it has marginally recovered to Rs 140 in a very short span. So investors are strongly recommended to accumulate it at sharp declines for a price target of Rs 280 (i.e. 100% appreciation) in 12~15 months. Moreover its a strong bonus candidate as well.