Buy Federal Bank Limited For Target Rs.555.00Federal Bank is the fourth largest bank in India in terms of capital base & has Branches and ATMs across India in addition to the Representative
Office at Abu Dhabi.
Bank’s Capital Adequacy Ratio registered at 14.92% as on 31.12.12.
Total business of the Bank reached Rs. 911013.40 mn, showing an increase of 13.95% on a y-o-y basis.
The total income for third quarter went up by 7.53 % on a y-o-y basis to Rs. 17256.20 millions from Rs. 16047.60 millions reported for corresponding period of the previous fiscal.
Net profit for Q3 FY13 was up 4.41% to Rs. 2107.80 mn as compared to Rs. 2018.70 mn for Q3FY12 driven primarily by sustained & diversified revenue growth.
Total deposits of the Bank increased by 10.41% from Rs. 467424.60 mn as on Q3 FY12 to Rs. 516073.10 mn as on Q3 FY13.
The bank holds license for opening 67 new branches at major centers across India.
Federal Bank launched Federal Manipal School of Banking at Manipal University Bangalore Campus to provide student training on various areas of banking & management.
Net Income and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively.
Outlook and Conclusion
According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalized Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent.
At the current market price of Rs.500.50, the stock P/E ratio is at 10.00 x FY13E and 8.93 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs. 50.05 and Rs.56.07 respectively.
Net Income and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively.
On the basis of Debt-Equity Ratio, the stock trades at 9.33 x for FY13E and 9.36 x for FY14E.
Price to Book Value of the stock is expected to be at 1.31 x and 1.14 x for FY13E and FY14E respectively.
We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 555.00 for Medium to Long term investment.
Buy Bliss GVS Pharma Limited For Target Rs.46.00Bliss GVS Pharma Limited has the most modern plant to manufacture Female Contraceptives, Soft Pessaries and Suppositories.
* During the quarter, the robust growth of Net Profit is increased by 8.67% to Rs. 246.94 million.
* Revenue for the quarter rose 32.24% to Rs.1048.66 million from Rs.793.00 million, when compared with the prior year period.
* During the year, the Company has had declared Interim Dividend at the rate of Rs.0.35 per Equity Share. (i.e. 35.00%) Equity share of Rs. 1/- each for the year ended 31st March 2012.
* The Company plans to set up local manufacturing units and Joint Venture and by relating its subsidiary to do better business.
* The company also plans to set up R&D lab to develop newer formulations and support Analytical Development.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 18% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.41.30, the stock P/E ratio is at 7.01 x FY13E and 6.33 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.5.89 and Rs.6.52 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 18% and 18% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.29 x for FY13E and 3.87 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.57 x and 1.26 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.46.00 for Medium to Long term investment.
Buy Arshiya International Limited For Target Rs.188Strong operational performance in Q2FY13 - FTWZ and container rail grows at healthy pace
Arshiya has reported its Q2FY13 net profit at Rs 354 million (+11% YoY). This was on account of increased share of FTWZ revenues in the overall revenues which has increased from 16% in Q2FY12 to 24% in Q2FY13. FTWZ revenues have grown from Rs 387 mn in Q2FY12 to Rs 893 mn in Q2FY13. As FTWZ is a high margin business, the increased share has helped the overall margins expand from 25.6% in Q2FY12 to 29% in Q2FY13.
The company currently operates 4 warehouses at Panvel FTWZ and we estimate the company to ramp it up to 8 warehouses by end of FY13E. ARST has also started its Khurja FTWZ in Q4FY12 with 2 warehouses and we estimate the company to ramp it up to 4 by end of FY13E. The VAS to rental ratio has improved from 1.25 x to 1.4 x sequentially and we estimate it to improve from to 1.5 x by FY13E and further to 2x by FY14E. In the rail segment the company operates 20 rakes currently and we estimate the company to ramp it upto 24 by end of FY13E. Rail segment has reported 55% YoY growth in revenues with EBIT margins expanding to 16.5%. The company wants to integrate its entire rail operations with its logistics business and FTWZ business and run these rakes primarily on the domestic segment. The company continues to grow steadily in its core third party logistics (3PL) businesses. Total revenues have grown to Rs 3.72bn (+50% YoY).
We expect the company to deliver revenue CAGR of 24% over FY12 to FY14E to ~ Rs 16.4 bn with improvement in operating margins from 25.7% in FY12 to 27.3% in FY13E and 29.3% in FY14E. With improvement in margins and benefits of aggressive capex accruing to the company going ahead, we expect the return ratios of the company to improve. High leverage, execution delays and poor acceptability of the key FTWZ concept are some of the pitfalls and can be a drag for the company. Consequently we value the company at 30% discount to the one year forward multiple of 8 x of peer group companies in the Logistics space which comes at Rs 188. The discount captures the risks on account of the high leverage position of the company. We re-iterate BUY with a price target of Rs 188.
Valuation and recommendation
AIL is getting transformed from a 3PL player to becoming an integrated service provider, and its Free Trade Warehousing Zone (FTWZ) foray, if successful, can lead to a significant re-rating. We expect 24% sales growth over FY12 to FY14E driven by FTWZ segment and an increasing presence in container haulage and 3PL logistics. Adjusted PAT is expected to increase over FY12 to FY14E driven by a 170 bps expansion in EBITDA margin as high margin FTWZ expands and contributes about 25% to revenues in FY13E and 33% in FY14E.
We expect sizeable value accretion from the FTWZ business from FY13E. Consequently we value the company at 1/3rd discount to the one year forward multiple of 8x of peer group companies in the Logistics space which comes at Rs 188. The discount captures the risks on account of the high leverage position of the company, nascent FTWZ concept and slowdown in the economy. We rate the stock BUY with a price target of Rs 188.
Buy Axis Bank Ltd For Target Rs.1579.00Axis Bank is the 3rd largest private sector bank in India which offers services to customer segments covering large & SME, Mid-Corporate, Agriculture & Retail Business.
* Bank’s Capital Adequacy Ratio registered at 15.17% as on 31.12.12.
* Savings Bank Deposits recorded a healthy growth of 22% Y-O-Y to touch Rs. 575210 mn as on 31st December 2012.
* The total assets under overseas operations were USD 6.41 billion as on 31st December 2012, a growth of 18%.
* The bank had a network of 1787 domestic branches and extension counters & 10,363 ATMs situated in 1,139 cities & towns as on Q3 FY13.
* The shareholders’ funds of the Bank grew 22% Y-O-Y and stood at Rs. 270270 million as on 31st December 2012.
* During the nine months ended 31st December, 2012, the Bank allotted 1,861,681 equity shares pursuant to the exercise of options
under its Employee Stock Option Scheme.
* Net Income and PAT of the company are expected to grow at a CAGR of 33% and 21% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY1
The company’s net profit jumps to Rs. 13472.20 million against Rs. 11022.70 million in the corresponding quarter ending of previous year, an increase of 22.22%. Revenue for the quarter rose 20.56% to Rs. 69649.30 million from Rs. 57769.60 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 31.54 a share during the quarter, registering 17.98% an increase over previous year period. Net Interest Income is Rs. 85803.00 millions as against Rs. 72067.70 millions in the corresponding period of the previous year.
Outlook and Conclusion
According to the RBI's 'Quarterly Statistics on Deposits and Credit of Scheduled Commercial Banks', September 2011, Nationalised Banks, as a group, accounted for 52.2 per cent of the aggregate deposits, while State Bank of India (SBI) and its associates accounted for 21.8 per cent.
* At the current market price of Rs.1410.00, the stock P/E ratio is at 11.89 x FY13E and 10.14 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs. 118.61 and Rs.139.07 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 33% and 21% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 10.48 x for FY13E and 9.94 x for FY14E.
* Price to Book Value of the stock is expected to be at 2.16 x and 1.78 x for FY13E and FY14E respectively.
* We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 1579 .00 for Medium to Long term investment.
Buy VA Tech Wabag Ltd For Target Rs.695We initiate coverage on VA Tech Wabag Ltd as a BUY with a Price Objective of `695 (target 14x FY15 P/E). At the CMP of ` 562, the stock is trading at 16.5x, 13.5x and 11.3x its estimated earnings for FY13, FY14 & FY15 respectively, representing a potential upside of ~24% over a period of 18 months. Being a leading player in the water space with in-house technology, VA Tech Wabag is expected to be a key beneficiary of the increased opportunities in India and abroad. With improving scale there is ample scope for margin expansion driven by employee cost rationalization and higher share of O&M revenues. However we have built in a modest 100 bps EBITDA margin expansion. We expect VA Tech Wabag revenues and earnings to post a CAGR of 13.3% and 21.6% to `2,089 crore and `132 crore, respectively by FY15 driven primarily by the swelling order book (`5,006 crore by FY15) and ramp up in global operations.
* Technology – the key differentiator with over 100 patents
The key strength of VA Tech Wabag lies in its technology wherein the company undertakes in house engineering for projects. The company outsources civil construction to third parties enabling the company to be asset light. With R & D centres in Austria, Switzerland and India, the company holds over 100 patents in water space. The technological expertise differentiates the company from its competitors and enables it to pre-qualify for certain hi-tech projects thus giving it a technological edge.
* A pure play on the opportunity in the water space
Rapidly dwindling pure water resources and the exploding population have brought “water” to the centre stage of the global economy. Both within India and abroad the size of water opportunity is huge. The Global Water market is growing at 5-6% p.a. and in countries like China, Saudi Arabia and India size of opportunity is anywhere between USD 5.9-47 billion.
In India itself, the estimated size of the addressable EPC opportunity over the period 2012-2031 as per the High Powered Expert Committee (HPEC) is estimated at ~ ` 3,20,908 crore (` 16,000 crore p.a.) and the O & M (high margin) portion pegged at ` 5,46,095 crore (` 27,000 crore p.a.).
In order to hasten and expand its global footprint, VA Tech Wabag has entered into strategic tie ups with international players of repute like Sumitomo Corporation. VA Tech is the technological partner in these tie ups and besides getting global recognition this enable the company to get large orders (particularly in the desalination space) in the international arena.
Backed by the strong technological standing and vast experience, we believe VA Tech Wabag being the largest Indian player in this space, is expected to be one of the biggest beneficiaries.
Order inflow to pick up from FY13E onwards
Over the last two years, VA Tech Wabag has witnessed a moderate growth in its order book. However, we expect order inflow to gain traction from FY13E under NI JNNURM schemes. These projects are driven by rapid expansion of the urban population (which has put pressure on existing water resources) and growing realization of treating waste water because of environmental concerns. Similarly in international markets the company expects orders in the desalination space to be the growth driver (particularly in countries in MENA region). YTD, the company has received orders worth `1,100 crore and we expect the company’s order inflow to grow at rate of CAGR of 18.3% to `2,906 crore over the period of FY12-FY15E. Accordingly, the company’s order book is expected to grow at a CAGR of 10.3% to `5,006 crore over the same eriod.
* Consistent revenue growth with scope for margin expansion
We expect revenues of the company to grow at a CAGR of 13.3% to `2,089 crore from `1443.5 crore over the period of FY12- FY15E. With O & comprising 35% of current order book, we expect share of O & M revenues to sustain at 15-16% of the total revenues over the same period. While margins in the international business are ~3%, we believe there is scope for substantial improvement on account of employee cost rationalization as different geographies scale up. However, we have built in conservative 100 bps margin expansion (at a consolidated level) through FY15E.
Valuation
At the CMP of ` 562, VA Tech Wabag is trading at 16.5x, 13.5x and 11.3x its estimated earnings for FY13E, FY14E and FY15E, respectively. As compared to its international peers like Veolia, Acciona Suez etc. VA Tech Wabag is trading at slight discount for FY13E and FY14E earnings. However, considering the expansion in margins, focus on large orders, and improvement in order intake apart from strong cash flows, low capex and improvement in return ratios, we believe the discount is unjustified. We initiate coverage on VA Tech Wabag Ltd as a BUY with a Price Objective of `695 (target 14x FY15 P/E) representing potential upside of 24% over the next 18 months.
Buy Castrol India For Target Rs.349Geared For Growth
Castrol India has so far ably defended its market share in the lube oil industry despite its premium product offerings by leveraging on its strong brand. We view the street’s concerns over continued pressure on volume/market share as overdone as we expect:
(1) Stagnancy in the industrial segment to be offset by robust retail demand, thus keeping overall volume stable, and
(2) Pressure on margins in the coming quarters to ease with a judicious product mix. We expect volume CAGR at 1.9% over CY11-CY14E driven by retail/workshop channel, while adjustment in product pricing and launch of low-premium products are likely to help it recapture market share. We have assigned a Buy rating to Castrol India with a target price of Rs349 using weighted average methodology.
Renewed focus to capture market share:
Our interaction with industry experts/dealers/mechanics/lube companies revealed that the company has regained market share at ~22% in September 2012 after shedding almost 200bps last year as a result of its premium product offerings (premium touched 30%-35%). The gain is on account of:
(1) Premium pricing versus rivals stabilising in the band of 20%-25%,
(2) Castrol being relatively immune to cost pressures, considering the company’s positioning as price leader,
(3) Launch of low-premium products like Activ Go for bikes and RX Super for commercial vehicles to mark its presence in the mid-size segment.
Volume growth, palpable signs of recovery visible:
We expect volume to grow 2.4%/3.4% in CY13E/CY14E, respectively, after posting negative growth in CY11/CY12E. We expect it to report volume of 208mn/213mn/220mn litres in CY12E/CY13E/CY14E, registering volume CAGR of 1.9% over CY11-CY14E compared to 0.5% likely over CY09-CY12E. We believe volume growth would be driven by:
(1) Rising exposure of the company towards the personal mobility segment,
(2) Retail/workshop volume growth (on YTD basis volume grew 7% though industrial volume declined),
(3) The company’s renewed focus on capturing market share by offering lowpremium products,
(4) Growing penetration of Hub & Spoke model in commercial vehicles, where volume growth in light commercial vehicles (LCVs) arrests the decline in volume from heavy commercial vehicles (HCVs), and
(5) Increased focus on small towns and rural areas, a key growth market in the personal mobility space, in conjunction with its plan to capture the business from the tractor segment.
Assign Buy rating to the stock:
We have assigned a Buy rating to the stock with a target price of Rs349 using weighted average methodology to capture medium to longterm potential. We assign 60% weight to PE and a 20% weight each to DCF/Gordon dividend discount methodology. We believe a PE multiple of 30xCY14E earnings (two year average of 27x) will sustain to reflect:
(1) Volume CAGR of 1.9% over CY11-CY14E compared to 0.5% over CY09-CY11,
(2) Expansion in margins of 300bps over CY12ECY14E,
(3) The company regaining market share with the launch of low-premium products and
(4) MNC parentage aiding the launch of innovative products to compete with Shell and Petronas
(5) Company’s price leadership position
(6) Earnings growth at 13%/16% in CY13/14, which would result in RoE to improve to 72.7%/78.8% compared to 69.5% in CY12E.
Buy NESCO Limited For Target Rs.889.00NESCO Ltd provides forging hammers and presses, blow room lines & high production cards for the textile industry; and sucker rod pumps for on-shore oil recovery.
• The Company IT building 3 is completed and is expected to start generating revenue from the current financial year. Company expects significant growth in revenues in 2013-14.
• During the quarter, the robust growth of Net Profit is increased by 12.21% to Rs. 200.56 million.
• Revenue for the quarter rose 8.74% to Rs.378.35 million from Rs.347.94 million, when compared with the prior year period.
• The Company plans to invest in construction of a new building & other capital expenditure to set up a Research and Development Centre for Indabrator, its Industrial Capital Goods Division.
• The Company has initiated steps to secure required approvals for starting construction of IT building 4, admeasuring about 1,200,000 sq ft.
• Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 6% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q2 FY13,
Established in 1939 April as the New Standard Engineering Co. Ltd. (NSE), the company is known as a pioneer in the tool manufacturing segment, as it brought into the country, world class processes and designs for the manufacture of a number of engineering products, reported its financial results for the quarter ended 30 Sep, 2012.
The company’s net profit jumps to Rs.200.56 million against Rs.178.74 million in the corresponding quarter ending of previous year, an increase of 12.21%. Revenue for the quarter rose 8.74% to Rs.378.35 million from Rs.347.94 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.14.23 a share during the quarter, registering 12.21% increase over previous year period. Profit before interest, depreciation and tax is Rs.286.77 millions as against Rs.267.38 millions in the corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.794.20, the stock P/E ratio is at 14.84 x FY13E and 13.81 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.53.53 and Rs.57.52 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 2% and 6% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 10.02 x for FY13E and 9.34 x for FY14E.
* Price to Book Value of the stock is expected to be at 3.12 x and 2.54 x respectively for FY13E and FY14E.
The Company is plan to investing in construction of a new building and other capital expenditure to set up a Research and Development Centre for Indabrator, its Industrial Capital Goods Division. Construction of this new building is progressing well, besides several new equipment and facilities will also be installed.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.889.00 for Medium to Long term investment.
Buy Dr. Reddy's Laboratories Ltd For Target 2044.00Dr. Reddy's Laboratories Ltd. is an integrated global pharmaceutical company which provides affordable & innovative medicines for healthier lives.
Dr. Reddy's & OctoPlus jointly announced that with an agreement of intended public offer by Dr. Reddy’s, for all issued and outstanding ordinary shares in the capital of OctoPlus at an offer price of € 0.52 (cum dividend) in cash for each OctoPlus share.
Dr. Reddy's Custom Pharmaceutical Services (CPS) business has expanding its manufacturing operations in Mirfield, UK.
During the quarter, the robust growth of Net Profit is increased by 32.37% to Rs. 4074.40million.
Dr. Reddy’s Laboratories Ltd and Merck Serono, a division of Merck KGaA, Darmstadt, Germany, announced a partnership to codevelop a portfolio of biosimilar compounds in oncology, primarily focused on monoclonal antibodies (MAbs).
The company has shown a steady growth by 15-20 new launches annually with launchyear revenues in the range of $100-200mn.
Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 17% over 2011 to 2014E respectively.
Outlook and Conclusion
At the current market price of Rs.1825.00, the stock P/E ratio is at 19.25 x FY13E and 17.45 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs 94.79 and Rs.104.60 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 21% and 17% over 2011 to 2014E respectively.
On the basis of EV/EBITDA, the stock trades at 16.49 x for FY13E and 13.86 x for FY14E.
Price to Book Value of the stock is expected to be at 4.70 x and 3.70 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.2044.00 for Medium to Long term investment.
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Rajiv Gandhi scheme :
Govt plans to allow tax benefits every year
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Investors may soon be allowed to avail themselves of tax benefits in
Rajiv Gandhi Equity Savings Scheme (RGESS) every year. A formal
announcement is expected in the Budget.
The present scheme allows an individual, with annual income up to Rs 10
lakh, to invest up to Rs 50,000 in certain equities and mutual fund
schemes to get tax benefits for the first year. The investor gets a 50
per cent deduction of the amount invested from the taxable income for
that year. This benefit is given only once under Section 80CCG of the
Income-Tax Act 1961.
The new thinking has twin purposes — first to attract more investors
into the equity market and second to provide an alternative for saving
income tax.
“The Finance Ministry is actively considering making this scheme a
regular tax-saving instrument rather than just for first-time retail
investors with once in a lifetime tax savings,”
“A final decision on the modalities will be taken just before the Budget,” he added.
RGESS prescribes money to be invested in stocks listed under the BSE-100
or CNX-100, or those of public sector Navratnas, Maharatnas and
Miniratnas. Follow-on public offers of such companies would also be
eligible under the scheme.
The investment ideas of Warren Buffett is most basic and simple to
implement. The beauty of his investment ideas is that they are so easy
and logical that at times people overlook the
same ideas even though it must have crossed their mind. These investment
ideas of Warren Buffett has not only help the maestro to make billions
but also stands as a guiding principles for every other investor of this
world.
Warren Buffett’s investment ideas asks us to buy stocks of
only those companies whose “fundamentals” are very strong and its stock
is available at “undervalued price”. When we say strong fundamentals we
mean a healthy financial report, unique product line which is run by
exceptional managers.
Think Big TO EARN BIGGG
MEGASOFT
(Bse Ticker-532408@ Rs.12/-)
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BLUCHIP COMPANY OF DOTCOM BOOM NOW READY FOR REFGAIN ITS LOST GLORY
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