27/05/2013 
 





Buy Zee Entertainment For Target Rs.232

Zee Entertainment has reported in-line financials for 4QFY13, with PAT growth 12.2% y/y. We believe Zee Entertainment's valuation prospects  have, we believe, improved since our last update, as DAS-2 rollout has met with reasonable success. We also think that with some changes in  programming, Zee TV's ratings path is likely to be smoother in the near future. Rising competitive intensity remains the key risk, and valuations  do not allow for upsides. We retain REDUCE but raise our price target to Rs 232 (Rs 217 earlier).
Outlook
*  For the past few quarters, we have held a negative view on ZEEL as we are uncomfortable with valuations of the company, and we believe  that the company's assets are fairly well-monetized (other than in the case of analogue subscription revenues). DAS has two parallel  implications: 1/ the exposed companies shall see higher revenues from subscribers, and lower carriage fees, 2/ the lower carriage fees  and higher transparency means lower entry barriers. It is our belief that the latter is of significant relevance to ZEEL, and has been largely  ignored by the market.
*  ZEEL' s advertising revenues have seen significant growth in FY13, on account of stronger position in several channels. In more recent  quarters, the gains have been seen in Hindi and Marathi; in period FY11-FY13, Zee has made significant gains in Bengali as well. We  believe that gains in these markets shall be difficult to obtain in the coming quarters - Hindi markets have seen a fairly steady viewership  share for the past few quarters, and Marathi, Bengali, are likely to see significant competitive pressure from ETV channels (owned 50% by TV18 Broadcast). Further to these, Hindi markets have seen steady inroads being
*  ZEEL must either respond to these pressures (we  believe it will), or lose viewership share (and along with, share the subscription pie to  a greater extent with competitors). The same may have significant negative impact on ZEEL margins, and represent significant risks to our/ consensus estimates.
*  Ignoring these issues, ZEEL's advertising revenue growth is likely to cool off, the company is set to invest in content to a larger extent in  the coming year, and sports business losses are likely to be larger in the coming year. Near-term earnings are unlikely to surprise positively.  e forecast 11% growth in advertising revenues and 16% growth in subscription revenues for the company. We expect the company to deliver a 1.3 ppt expansion in EBITDA margin in FY14 on account of stronger subscription revenues, and lower carriage fees.
*  We note that DAS rollout for Phase - 2 has been smoother than what might have been expected. With certain exceptions, 80%+ digitization  as been achieved in Phase- 2 cities. This shall have positive impact on Zee Entertainment's valuations. Also, Zee TV's ratings in the recent past have been fairly robust (as compared with a year ago), and the company has developed new properties that may have implications in smoothening out ratings. Further to this, the channel is likely to see some benefits of blockbuster screenings in the coming weeks (Race- 2, Kai Po Che, Barfi coming up).
*  ZEEL enjoys benefits of being the broadcaster with the most comprehensive set of broadcasting assets to play DAS. As DAS rolls out,  valuations are expected to remain elevated until such a point that competitive strains become very apparent. On this count, we raise our  price target (multiple raised by one turn) to Rs 232 (Rs 217 earlier). Maintain REDUCE.
 

 Buy Nagarjuna Construction Company For Target Rs.42


Revenues of the company were in line with our estimates but operating margins came lower than our expectations due to exceptional  expenses booked in the current quarter. Profitability has witnessed a sharp improvement in comparison with last year mainly due to low  base of last  year but it continues to get marred by higher interest expenses. We tweak our estimates and due to decline in stock price, we upgrade the stock to BUY.
Valuation and recommendation
*  At current price, stock is trading at 12.1x P/E and 7.1x EV/EBITDA on FY14 estimates.
*  We tweak our estimates and upgrade the stock to BUY from ACCUMULATE earlier with a revised price target of Rs 42 (earlier Rs 45).
* We believe that further progress on asset monetization and debt reduction are expected to be positive for the company.Buy Jammu & Kashmir Bank For Target Rs.1403


Snapshot
Jammu & Kashmir Bank has emerged as one of the handful (quasi) Government Banks to have registered consistent growth in earnings while maintaining the asset quality. We expect this to lead to a re-rating in the stock price.
Investment Rationale
Strong performance to lead to re-rating: The Bank has reported a consistent growth in financial performance with Net Interest Income and
PAT registering a growth of 19.1 per cent and 24 per cent respectively during FY’07-12 period. The Bank has strong return ratios with a RoE in excess of 20 per cent and RoA in excess of 1.5 per cent.
Play on the economy of J&K: Being a dominant player in the state of Jammu & Kashmir, the Bank should mirror the performance of the state’s economy, which is showing signs of stability.
Adequately funded to pursue future growth opportunities: Jammu & Kashmir Bank is adequately funded to pursue future growth opportunities over the next 2-3 years.
Consistent dividend pay-out ratio: The Bank has a consistent dividend pay-out policy. J&K Bank distributes ~20 per cent of the earnings as
dividends. Extrapolating this trend, we expect the dividend to be minimum Rs.40 for FY’13E and Rs.48 for FY’14E.
Valuation & Recommendation
Jammu & Kashmir Bank posted Net Interest Income of Rs.1089 crore compared to Rs.871 crore, an increase of 25 per cent y-o-y. The Bank
registered a pre-provisioning profit of Rs.837.8 crore compared to Rs.629.1 crore, an increase of 33.2 per cent y-o-y. Profit after tax for H1FY’13 stood at Rs.515.6 crore. EPS for the half-year stood at Rs.106.4.
Considering the improving prospects, consistent growth in earnings, we expect a strong re-rating in terms of valuation. We value J&K Bank  at 1.45x FY’14E adj. book value to arrive at a price target of Rs.1710 over the next nine months (an upside potential of 22 per cent).

 Buy Entertainment Network India Ltd. For Target Rs. 325


Outlook
ENIL continues to remain market leader with ~35% of market share in private radio industry and a robust volume growth of ~22.4% in  Q4FY13. We maintain a positive outlook on the company with the sustainable volume augmentation primarily led by upcoming elections and  increasing ad spends by corporate sector as well as retail clients. Besides, Govt. campaigns are also expected to be considerable contributor towards volume growth across 32 stations.
Moreover, with the approval of union cabinet, the long waited Phase III auction is expected to roll out in Q4FY14. Consequently, the radio  industry is expected to grow at a CAGR of ~17% to ~1,500-1,600 crore by FY14. ENIL, being the market leader, is expected to be biggest  beneficiaries of Phase III. Its war chest of ~ Rs 321 crore of cash will stand it in good stead when the auctioning process kicks off. At the  CMP of Rs 245, ENIL is trading at 13.9x and 11.9x its estimated earnings for FY14E and FY15E and we reiterate a BUY with the price target  of Rs. 325 representing a potential upside of ~31%.
Key Takeaways
• ENIL reported ad revenue growth of 9.3% YoY to Rs 101.9 crore in Q4FY13 as against Rs 93.3 crore in Q4FY12, outperforming the overall   industry growth. The rise in the revenue was primarily driven by increase in volumes in smaller stations, which was backed by growing ad spends by retail business and corporates in order to spread their brand awareness.
• The net profit of the company has shown robust growth of 30.8% YoY to Rs.25.7 crore in Q4FY13 as against Rs.19.6 crore in Q4FY12, led  by lower production expenses (on account of re-negotiation of terms with TSeries) and write off in tax expenses of ~2.9 crore (related to earlier assessment years).
• The EBITDA margins, during the quarter, declined by 170 bps YoY to 36.9% as against 38.6% in Q4FY12 on account of considerable rise in  he employee cost by 67.0% YoY to Rs 20.8 crore in Q4FY13 (v/s Rs 12.5 crore in Q4FY12) led by periodical incentives offered to employees.
• Moreover, ENIL has announced price hikes on selective basis in few markets, which is expected to be effective by Q2FY14. This will help the company to a large extent in overcoming the saturation in inventory level. ENIL’s inventory utilization for the quarter stood at 103% in top 8 stations and 86% (+26.5% YoY; 68% in Q4FY12) in other 24 stations, making the blended utilization of 93% (+22.4% YoY; 76% in Q4FY12).
• During the quarter, ENIL has re-negotiated the terms of royalty agreement with T-series, under which the payment of royalty would be on  revenue sharing basis. This will bring the royalty cost of ENIL at par with other music providers, leading to lower royalty expenses in FY14  onwards.
• During the quarter, ENIL has launched Mirchi Marathi Award for the first time, which resulted in improving Radio Mirchi’s TRP to 2.1 as against 1.4 earlier. Buy Birla Corporation Ltd For Target Rs.352

Results below expectations: Birla Corporation's (BCORP) 3QFY13 performance was marginally below expectations. Net sales grew 2.4%  YoY (8.7% QoQ) to INR6.7b (v/s our est. of INR6.8b) and EBITDA declined 17% YoY (29%QoQ) to INR663m (v/s our est. of INR706m).  EBITDA margin expanded 1.6pp YoY (contracted 2.3pp QoQ) to 10%. Higher other income and lower interest cost resulted in PAT of  INR726m (v/s our est. of INR433m).
*  Cement volumes higher than expected: Cement volumes grew 4.6% YoY (9.1% QoQ) to 1.71m tons (v/s our est. of 1.61m tons). Growth in  FY13 dispatch volumes was above par (on low base of FY12), despite ban on limestone mining at its Rajasthan (Chanderia) plant. Full-year olumes grew 8.5% to 6.47m tons, including 2.5m tons at Chanderia plant (78% utilization).
*  Profitability lower than estimated: Realizations declined 0.9% YoY (4.5% QoQ) to INR3,581/ton (v/s our est. of INR3,959/ton). Cement  revenue grew 3.7% YoY (4.2% QoQ). EBITDA/ton was INR507 (v/s our est. of INR606/ton, INR447/ ton in 3QFY13). Lower than expected  profitability is attributable to sharp decline in realizations (INR8.5/bag QoQ), albeit partially offset by QoQ moderation in variable cost and positive operating leverage.
*  Resolution of mining ban crucial: CBRI has sought further time for submitting report on the impact of mechanized mining at Chanderia on  Chittorgarh Fort, with next hearing scheduled on July 2013. Resolution of mining ban is critical for future volume growth, capacity addition and normalization of profitability.
*  Downgrading estimates; maintain Buy: We are downgrading our EPS estimates for FY14/15 by 15.7%/5.3% to INR30/INR47.3, to factor in  for INR6/bag price decline in FY14 and INR15/bag improvement in FY15. The stock trades at 5.6x FY15E EPS, and EV of 2.7x FY15E EBITDA  and USD26/ton. Maintain Buy, with a target price of INR352. The board has announced a dividend of ~INR7/share (including interim dividend of INR2.5/share) as against INR6/share last year.
 

 Buy Camlin Fine Sciences Ltd for Upper Target Of Rs.25.50-26.50 & Rs.30+


Company Profile:
Camlin Fine Sciences Limited manufactures and exports bulk drugs, fine chemicals, and food grade products in India and internationally. It offers food ingredients, including antox tert-butyl hydroquinone, and antox butylated hydroxyanisole. The company also offers sweeteners, such as sucralose; absorbent polymers; and active pharmaceutical ingredients comprising miconazole nitrate USP, clotrimazole USP, amlodipine besilate EP, amlodipine salts, advance intermediate of amlodipine, and intermediate of miconazole nitrate. In addition, it
provides a range of industrial products consisting of TBC, technical grade TBHQ, and MEHQ for industrial applications. Further, the company  evelops NanoFresh, a formulation for coating fresh/cut fruits, vegetables, some processed foods, and flowers to enhance their  shelf life without altering inherent attributes of taste, color, and nutritional composition. The company was formerly known as Camlin Fine  Chemicals Limited and changed its name to Camlin Fine Sciences Limited in August 2011. Camlin Fine Sciences Limited was founded in  1931 and is based in Mumbai, India.
Equity & Share Holding Pattern:
It has an equity base of Rs.9.36 cr. that is supported by reserves of around Rs.43.55 cr., which is 4.65 times its equity. It has a share book  value of Rs.10.50. The promoter holding in CFSL is 52.79% while investing public holds 47.21% stake in the company.
Share Profile:
Its shares with a face value of Rs.2 are listed on the BSE under the B group. Its share price touched a 52 week high/low of Rs.29.20\20. At its current market price of Rs.22.05, the company has a market capitalization of Rs.103crore.
Financial Performance:
Net profit of CFSL decline 12.67% to Rs.4.26crore in the quarter ended September 2012 as against Rs.4.80crore during the previous  quarter ended September 2011. Total turnover rose 19.32% to Rs.83.29crore in the quarter ended September 2012 as against Rs.69.80crore during the previous quarter ended September 2011.
In the H1FY13, the company has reported net profit of Rs.8.54crore  against Rs.7.34crore in previous corresponding year. Total sales reported to Rs.155.52crore in the H1FY13 as against Rs.121.60crore  during the H1FY12. The company reported EPS of Rs.0.91 for Q2FY13 while for H1FY13 it has reported EPS of Rs.1.82.
 


Future outlook & Conclusion:
At its current market price of Rs.22, the share price discounts less than 6.5 times its FY2013 EPS (E)  of Rs.3.64. in the light of its highly  encouraging performance in last FIVE year, bright prospects going ahead, the shares of CFSL is likely to provide steady growth to the  portfolio. Therefore we recommend a buy in the stock of CFSL from a short to long term perspective with stop loss of 20 levels for the target of Rs.25.50-26.50 & 30+….
 

The rupee fell against the dollar for a second straight day this week, due to dollar demand by oil importers.

The dollar gained against other Asian currencies amid speculation that the US Federal Reserve would trim its bond purchases, known as quantitative easing, sooner than expected.

The rupee had opened at Rs 54.98 against the dollar today and during intra-day trades, it touched a high of Rs 54.95 before closing at a near-six month low at Rs 55.42. The rupee had ended at Rs 55.11 yesterday

Stocks and commodities have historically moved in opposite directions. Each asset class typically has a 16-18 year bull market followed by an equally long bear market. Just Read This studied commodity and stock market cycles and confirmed these correlations

Just being aware of these cycle patterns and understanding where in the cycle you are will give great insight. The smart investors will buy into these long bull market cycles early and ride them out until the end. There is a lot of money for contrarian investors to be had as the price of assets rise during a bull market cycle. Even a novice investor can look like a genius by buying into a secular bull market early.

You don’t have to be a genius to make money in a bull market. Simply buying an index can give you great return in bull market cycle. More ambitious investors can make extraordinary returns by speculating in specific commodities or stocks during a bull market cycle.

The chart below shows relative price strength, of stocks vs. commodities, for the last 140 years. As you can see the result is remarkably consistent with a bull market in stocks and commodities taking turns every 16-18 years on average.

1906----1923

The commodity bull market began just before the stock market crash of 1907. The commodity bull market lasted until after WWI

1929----1949

In 1929 the stock market crashed. The stock market went from DOW 380 in 1929 to DOW 40 in 1932. A 90% drop in price. During this time commodities were in a bull market and stocks were in a bear market. The bull market in commodities only intensified during World War II. Commodities were in short supply and prices went through the roof.

1950----1965

World War II was over and the depression had ended. Commodities were plentiful, as they were no longer needed in the war effort, and the economy was on fire. It led to a secular bull market in stocks that lasted for 15 years.

1966----1982

During this bear market in stocks the DOW went nowhere for 16 years. The market lost 22% in price during this period. However, the decline in the market was much larger if you factor in inflation. The CPI index went from 95.4 to 308.6, increasing by 203%. Interest rates went up to double digits and commodities boomed. Stocks had been stagnate throughout the late sixties, and all of the seventies with the exception of a few bear marker rally’s 1967-1968, 1970-1973, 1974, 1976, and 1980. By 1979 business week had printed “Equities are dead” on their cover page. Not many investors wanted to touch stocks. By the time the bear market ended in 1982 stocks had become dirt cheap.

1982----2000

The cycle repeated again. Former Fed chairman Paul Volker had just stepped in and end inflation with high double digit interest rates which caused a sever but short recession and laid the foundation for economic growth. By 1982 stocks were dirt cheap and as the economy took off an 18 year secular bull market in stocks was created. It ended with a .com mania and a crash in 2000.

2000----Till Date

The new commodity bull market starts. During year 2000 shortages of commodities started developing as China, India, and the other emerging markets started using more and more of them. We don’t know when this commodities bull market will end but it will probably be around 2014-2018. By the end of the commodity bull market commodities will no longer be in shortage and the bull market will come to an end.

From a Birdseye view this chart looks very consistent and predictable. It is almost as God was playing the market and switching between stocks and commodities every 16-18 years. Use this knowledge to your advantage and invest in the current bull market.