Dalal Street :: India Equity Research, Investment Analysis

BUY Finolex Industries – ICICI

May 25, 20072 min read

Finolex Industries is the largest PVC pipe and second largest PVC manufacturer in India.
Demand-supply mismatch for PVC
During 2001-2006, capacity addition grew at a miniscule CAGR of 2%, whereas demand continued to surge in double digits at a CAGR of 11%. This has resulted in firm PVC prices and high capacity utilisation rates for domestic manufacturers.

Robust demand for PVC pipes
Finolex is the leader in PVC pipes with a 20% market share in the domestic organised market. PVC pipes are used for irrigation as well as in sanitation and plumbing systems in the construction sector.

Timely capacity expansions, cost reduction initiatives
Finolex has doubled its PVC resin capacity from 130,000 to 260,000 tpa in 2006 by setting up a VCM (vinyl chloride monomer)-based new facility

ICICI expects the company to report net sales of Rs 1282.50 crore in FY08 and net profit of Rs 78 crore, translating into an EPS of Rs 6.29. At the current price of Rs 78, the stock trades at a P/E multiple of 13.8x its FY07 earnings of Rs 5.64 and 12.4x its FY08E EPS of 6.29. On an EV/EBIDTA basis, the stock is available at 6.7x FY08E earnings. ICICI believes that the stock is attractively valued and set a price target of Rs 93.6, for 3-6 months, an up-side potential of a 20%

Breaking Corporate India Earnings News

Banking Stocks under Pressure.

May 25, 20071 min read

Banking stocks were under selling pressure on rumors of the Reserve Bank of India (RBI), which has already raised the cash reserve ratio thrice since December 2006, contemplating another hike, though only on incremental deposits this time.

There is a buzz in the market that the decision can come today evening. CRR is the percentage of deposits that banks are required to keep with the RBI.

Shares from the banking and financial space were down. ICICI Bank (down 1.16% to Rs 899.10), HDFC (down 0.99% to Rs 1737.50), and HDFC Bank (down 1.24% to Rs 1075.10) declined.

RBI is particularly concerned about absorbing excess liquidity since it has lowered the inflation target from 5-5.5% to 4-4.5% for 2007-08.

Economy, Markets and Macro Views

BUY Ansal Properties and Infra – Merill Lynch

May 24, 20071 min read

Merill Lynch has initiated coverage on India’s leading Real Estate Giant, Ansal Properties and Infrastructure Ltd [APIL] with a BUY recommendation and a target price of Rs 425, with potential returns of 27%. Recommendation is based on 1) Scope for strong earnings growth. 2) Potential upside of Rs127/sh to from Hi Tech City project at Greater Noida, is not included in current valuation. So effective Valuation will be Rs 425 + Rs 127 = Rs Rs 552.

APIL is expected to report an EPS of Rs 35.8 and Rs 70.7 for FY08 and FY09 respectively. EPSW growth rates are nearly 100%. APIL trades at a forward P/E of mere 9x and 5x. APIL has enough land bank to develop for the next 7 to 8 years. You may download and read the entire research report from here. [PDF]

Breaking Corporate India Earnings News

Smallcap World Fund Inc raises stake in GVK Power

May 23, 20071 min read

Smallcap World Fund Inc(SWF) has acquired an additional 2.94 lakh shares of GVK Power & Infrastructure. The shares were acquired on 18 May 2007 through open market purchase.

Following the acquisition,SWF’s stake in GVK Power has gone upto 5.41% from 4.93%.

Mutual Funds Review

SIP Amount reduced to Rs 100

May 23, 20071 min read

Reliance, ICICI and Lotus Mutual funds have reduced the minimum SIP investment to Rs 100 to enable more Indians to save and invest in the Indian Equities, one of the best asset class in the world. The number of investors investing through SIP route in India is mere 1.2 Million.

So you can now contribute Rs 100 as SIP amount to any of the Reliance / ICICI or Lotus AMC managed funds. I will be really happy if they let us invest Rs 100 on every trading day to take advantage of the volatile markets.

Economy, Markets and Macro Views

Sun TV under a cloud; Raj TV Shines

May 23, 20072 min read

Kalanithi Maran, who is the brother of Dayanidhi Maran, holds a majority 90% stake in the south-based media major. Maran is related to Tamilnadu chief minister and DMK supremo K Karunanidhi.

The Sun TV stock had plunged 7.2% on 14 May 2007 after Maran had resigned from the Union cabinet late evening on Sunday, 13 May 2007, following a directive from the DMK boss. The stock is off from a high of Rs 1,700 to Rs 1,300 currently. Read about the Dark Side of Dayanidhi Maran here.

The stock is currently trading 1:1 cum-bonus and also cum stock-split in the ratio of 2-for-1. As a result, the face value of the scrip will become Rs 5 instead of the present Rs 10.

Sun TV’s integrated growth strategy is to build a dominant presence in south India. It is a leading television broadcaster in all southern states of India. It offers four Tamil language channels Sun TV, Sun News, Sun Music and KTV as also two Malayalam channels Surya TV and Kiran TV, apart from Telugu and Kannada language channels.

The stock of Raj TV is consistently moving up after the fall of Dayanidhi Maran. From Rs 186 on May 14th currently the Raj TV stock is locked in upward circuit at Rs 318. It is rumored that the Karunanidhi Family is now backing Raj TV as DMK channel to counter any challenges from Jaya TV.

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