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Mutual Funds Review

HDFC Portfolio Churn in June – 2007

July 10, 20071 min read

Here is a quick snapshot of how the portfolio of our recommended funds changed during June-2007.

HDFC Equity Fund:
The fund manager reduced exposure to ONGC, Exide Industries and Infosys Technologies. He bought large quantity of of SBI. Significantly added L&T, United Phosphorous and HT Media. Also added Glaxo Smithkline Consumer Healthcare, Dishman Pharma and Pidlite Industries. Complete Exit from ITC and Century Textiles and Industries.

HDFC Top-200 Fund:
The fund manager bought Infosys Technologies and ITC in small lots. Drastically reduced positions in ONGC and Wipro. Also sold Bharti Airtel, Reliance Petroleum, TCS, Maruti and GAIL.

HDFC Prudence Fund:
Significantly added SBI and Ahmednagar Forgings [Amtek Auto group company]. Also added Nestle, Shanti Gears and Divis Labs. Sold small chunks of Punj Lloyd and Eveready Industries.
Complete exit from Century Textiles and Industries and Ceat Tyres.

So in all, SBI is bought across the board. ONGC and Century are sold heavily. Check back, will update on the SIP performance for the quarter ended June-2007.

Economy, Markets and Macro Views

BSE Sensex Short Term View – Citi

July 10, 20071 min read

This is according to Citigroup’s Technical Research [Click on the chart to expand]

Taking price extreme at 12,316 (16 March 2007), the index completed Wave (1) at 14576 (30 May 07). Wave (2) corrected the advance in Wave (1) towards 13,946 (low of 12 June 07). Currently we are into Wave (3) of the advance, which has a minimum price target of 16,206 (taking Wave (1) = Wave (3) in “Price Movement”. Wave (3) target of 16206 is derived as 2,260+ 13,946.The levels of 2,260 is derived as the distance between start of Wave (1) at 12,316 and end of Wave (1) at 14,576: [i.e. 14,576-12,316=2,260].The level of 13,946 is the assumed end of corrective Wave (2).

Technically, the sensex is headed towards 16,206.

Equity Research

BUY Tech Mahindra – Citigroup

July 10, 20071 min read

Citigroup in a research report released just a while ago has put a BUY recommendation Tech Mahindra with a price target of Rs 1920.

TechM is the largest Indian IT services player in the TSP space. IT spend by TSPs is expected to remain robust – and TechM should be a prime beneficiary given its strong relationships with the likes of BT (which owns 31% of the company) and AT&T.

Target FY09E P/E multiple of 21x represents a 10% premium to our fair-value multiple for Satyam – which Citi believes is justified by TechM’s 32% recurring EPS CAGR over FY07-FY10E (vs. 20% for Satyam).With superior growth prospects, TechM should continue to trade at a premium to more diversified players like Satyam / HCL Tech and i-Flex.

Tech Mahindra is likely to report a fully diluted EPS of Rs 63.55 and Rs 91.23 for FY08 and FY09 respectively.

If you would like to read the entire report drop a line to feedback @ dalalstreet.biz

Equity Research

Buy Amtek India+ Auto – Citigroup

July 10, 20072 min read

Citigroup in an exclusive research report released just a while ago on Indian Auto sector has a BUY on Amtek Auto and Amtek India. They are neutral on Bharat Forge Ltd.

Our internal research analyst had recommended Amtek Auto a year ago. Citigroup has put a BUY recommendation Amtek Auto Ltd with a price target of Rs 521 up from Rs 458. Amtek Auto is expected to report fully diluted EPS of Rs 29.05 and Rs 34.76 for FY08 and FY09 respectively. Target price of Rs521 is based on 15x FY09E fully diluted EPS estimates. The current multiple is well supported by earnings CAGR of 25% over FY07E-09E.

Citi has also put a BUY-1M on Amtek India [Amtek Auto group company] with a price target of Rs 221. Amtek India is expected to report fully diluted EPS of Rs 13.32 and Rs 18.46 for FY08 and FY09 respectively. Citi forecasts consolidated fully diluted earnings to grow at 38% CAGR over FY07E-09E driven by top-line growth and moderate expansion in margins.

Target price of Rs221 for Amtek India, implying c30% upside from current levels, is based on 12x FY09E EPS estimate of Rs18.5 (fully diluted). Target price implies a one-year forward P/E of 16.6x on our FY08E EPS, c30% premium to current levels, which we believe is well supported by strong earnings CAGR over the next two years.

Economy, Markets and Macro Views

BSE Sensex Target of 18,400 for DEC-08

July 9, 20071 min read

The Indian market bounced back during 1H07 after jitters caused by inflation,
rate hikes, tightening liquidity and currency appreciation, but it still lagged
regional peers. Citi believes the worst is over on the above concerns and growth remains robust (though less spectacular than recent years), Citi is positive on Indian equities over the next 6-12 months. Citi sets a Sensex target of 16,000 for Dec-07 (at the upper end of our earlier 14,700-16,000 target) and 17,500-18,400 for Dec-08, the market would be trading at a 12-month forward P/E of 17.3x and 16.3-17.1x for Dec-07 and Dec-08, respectively.

The average growth of EPS for SENSEX stocks is expected to be 15.08% for FY08 and 12.4% for FY09. Here is Historical Chart of BSE Sensex Stocks based on their forward Earnings Projections. If you want to read the full report send an e-mail to feedback @ dalalstreet.biz

NOTE:
In our view Sensex is a notional value. Keep BUYING wherever you find value. Small investors should take the Mutual Fund SIP route.

Economy, Markets and Macro Views

JK Cement + Tata Chemicals – BUY

July 9, 20072 min read

ICICI Research has an Outperform recommendation on JK Cements Ltd and Tata Chemicals Ltd.

JK Cement Ltd:
JK Cement is a play on the booming cement market in the northern region. The company’s aggressive expansion-cum-cost-cutting plan coupled with low valuations make the stock a good medium to long-term investment.

On EV/tonne basis, JK Cement is quoting at $65 per tonne, which is lowest compared to the deals that have happened recently ($150-$200 per tonne). The scrip currently quotes at 3.29x EV/EBITDA of FY09E. ICICI has valued JK Cement at 4.83x EV/EBITDA of FY09E, which yields a value of Rs 255 per share. At the target price, the stock would be valued at an EV/tonne of $107, which is still at a considerable discount to the market. Buy with a 12 Month target price of Rs 255, 71% upside potential from current levels. JK Cement is expected to report an EPS of Rs 27 for FY08 and Rs 33 for FY09.

Tata Chemicals Ltd:
Tata Chemicals Q3FY07 results were in line with expectations. Standalone net sales grew 4% y-o-y to Rs 1307 crore while standalone net profit was 19% higher (y-o-y) at Rs 117 crore on the back of better realizations and higher volume.

Tata Chemicals consolidated revenue to grow at a CAGR of 25% to Rs 6,044.01 crore over FY05-FY08E. Consolidated net profit should grow at a CAGR of over 20% to Rs 593.10 crore during the same period.

Tata Chemicals is trading 8.32x FY08E consolidated EPS of Rs 27.57 and 9.58x FY07E consolidated EPS of Rs 24. ICICI is not changing estimates and sticks to sum-of-parts valuation, wherein the fair value is Rs 374. Target price gives us an upside of 65% from the current levels. ICICI reiterates an OUTPERFORMER rating.

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