Supreme Infrastructure India Ltd - Stock Idea

Supreme Infrastructure India Ltd (SIIL)

Supreme Infrastructure India Ltd. (SIIL) has gained its reputation as fastest growing construction companies in India with proven track record in project execution in Road, Real-estate and allied infrastructure segments. Initially started as roads and buildings contractors, SIIL now has successfully diversified its service offering into power, irrigation, railways and sewerage. SIIL projects are scattered across states. Quality asset book, superior return on capital with low valuation offers good opportunity for investor to buy at current level for potential upside of 24%.

ü  Robust and diversified order book to sustain growth momentum

ü  Sustainable higher operating profit margin due to backward integration

ü  Moving up in value chain

Valuation and Outlook

Diversified skill sets with proven execution track record and superior operating profit margins enable SIIL to go aggressively to secure new contracts to maintain its growth momentum.

With RoE of 22% and RoCE of 18.5% in FY13e, stock currently trades at 4x our earning estimates for FY13e, EV/Sales of 0.7x and EV/EBITDA of 4.5x. Revenue and net profit after tax are expected to grow at CAGR of 21% and 12% respectively over FY13. We set price objective of INR 280 (exit PE of 5x its FY13e earning per share of INR 55.4).

Unicon's Recommendation

Keeping its high growth potential and robust fundamentals, you should buy the stock.  

For the full report, click here.

(Subject to Disclaimer at www.unicon.in)

Gross Domestic Product – Q1FY12 Update

Dear investors,

India's economy grew at its slowest pace during the April-June quarter, as rising interest rates crimped the consumption and investment demand in economy. The slower performance in mining and quarrying, manufacturing and construction sector led to deceleration in the GDP growth to 7.7% from 7.8% in Q4FY11 & 9.3% in Q1FY11...

Click on the link for all the details.

Outlook on TATA Steel

TATA Steel Ltd - Q1FY12 Result Highlights

TATA Steel Ltd (TATA) reported its first quarter consolidated results for FY12 and has registered a net sales growth of 21.6% YoY to INR 328,399 mn which was ~9% above our estimates.

Outlook and Valuations

At CMP the stock is available at EV/EBITDA of 4.8x its FY13e and PE multiple of 6x of its FY13e earnings. Considering the expansion plan and the demand scenario, we believe that the company has potential for improved performance. We recommend BUY on the stock and maintain our price target of INR 690.

Click here for the full Q1FY12 report. 

HSIL Ltd. – Q1FY12 Result Update

HSIL announced its Q1FY12 results and reported a very strong performance. Its revenues increased to INR 3280 mn, an increase of 41.5% as compared to Q1FY11. The EBITDA posted by the company was INR 627 mn, an increase of 55.5% YoY. EBIDTA margins increased by 180 basis points to 20.4%

The Profit before Tax (PBT) increased to INR 417 mn, a rise of 130% as compared to the first quarter of the previous financial year. The Profit after Tax (PAT) showed a robust growth of 111% to INR 285 mn. The PAT margins increased substantially by 309 basis points to 9.36% Cash profits showed strong growth of 32% to INR 410 mn.

Outlook and Valuations

At current market price of INR 219, the stock is trading at a P/E of 10.5x for FY12 estimated earnings. Looking at the robust performance by the company in the first quarter and given the expansion plans in place and management capabilities to drive the business, we re-rate and recommend a “BUY” on the stock with a price target of INR265.

(Subject to Disclaimer at www.unicon.in)

Click here for the full report.

YES Bank - Q1FY12 Result Update

Following are some highlights of the first quarter result of Yes Bank

Ø  YES Bank (YES) delivered another strong quarter, with net profits increasing by 38.2% to INR 2163 Mn on YoY basis. This was contributed by higher net interest income (NII) of INR 3.5 bn (35% YoY) & non interest income grew by 15% to INR 1.65 Bn on YoY basis. Growth in the non interest income was led by transaction banking (INR 420 Mn), financial advisory (INR 829 Mn), financial markets (INR 247 Mn) and branch banking fees & others (INR 157 Mn).

Ø  The major highlights were deposits registered a healthy growth of 44.1% along with advances growing by 26.1% on YoY basis. Current and Savings Account (CASA) deposits grew by 49.8% to INR 47.64 bn taking the CASA ratio to 10.9% Q1FY12 from 10.3% in Q4FY11.

Outlook & Valuation

YES Bank has been able to register strong business growth, profitability with stable margins & strong asset quality. Additionally the bank is expanding ~125 branches every year, which would help to improve its CASA ratio to 15% in FY12E. We remain positive on long term prospects of the bank. At the CMP stock trades at 1.9x of its FY12E Book Value. 

We maintain BUY rating on the stock for target price of INR 420.

Click here for the full report. 

Q1FY12 Result of IndusInd Bank

 Few Highlights

Ø  Indusind Bank (IIB) net profit grew by 52% YoY to INR 1802 Mn mainly driven by robust core fee income growth of 44% YoY. The proportion of core fee income increased due to increase in its third party products, trade and remittances, foreign exchange and Investment banking income. IIB’s net interest income has grown by 32% to INR 3900 Mn as compared to INR 2957 Mn in Q1FY11 & other income increased by 34% YoY to INR 2154 Mn.

Ø  Advances grew 31.3% YoY to INR 283.8 Bn & deposits grew by 28.7% to INR 352.6 Bn. This was stronger than the industry’s growth rate of ~20% & ~17% respectively. Improvement in deposit mix along with branch expansion (326 from 224 branches) led to higher CASA ratio of 28.2% in Q1FY12 (24.3% in Q1FY11). Reported NIM improved 9 bps YoY to 3.41%, however, on sequential basis it declined 9 bps due to sharp rise in the cost of deposits (68 bps QoQ) while yield on advances increased by 68 bps.

Ø  IIB continued to improve its asset quality and has brought down the net NPA level to 0.3% in Q1FY12 from 0.38% in Q1FY11. Gross NPA ratio fell to 1.08% in Q1FY12 from 1.26% in Q1FY11, but it increased sequentially by 7 bps and 2 bps. The NPA coverage ratio rose 288 bps YoY to 72.9%. Also the IIB maintained a healthy capital adequacy ratio (CAR) of 14.99% in Q1FY12 as against 13.71% in Q1FY11. The strong traction in CAR is likely to sustain IIB’s growth momentum in coming quarters.

Outlook & Valuation

Going forward IIB in next 3 years is planning to keep NIMs above 3.5% along with healthy bottom-line, this would be possible through 1. scaling up CASA ratio to 35% with 200 bps to 300 bps improvement every year. 2. Bank plans to take the branch network to 550 by Mar ’13. 3.  Bank is expected to expand its product suite and services to achieve higher business growth. At the CMP, stock trades at 3x FY12E BV, we have Accumulate rating on the stock with target price of INR 320.

Click here for the full report.

Tecpro Systems Ltd - Stock Idea

Tecpro Systems Ltd. (TSL) is an established material handling company with presence in the coal handling (19% market share) and ash handling (15% market share) for power, steel, cement and other sectors. TSL has recently forayed into BoP segment and has secured two orders worth INR 29.7bn (68% of its current order-book). We believe TSL would be key beneficiary, given its leadership position in material / ash handling business and strong growth in underlying industry. With revenue and profit expected to grow at CAGR of 25% and 18% respectively over FY13, recommend Buy on the stock for price target of INR 300 (+25%).

Investment Rationale

Ø  Strong positive outlook for core infrastructure industry, directly linked, augurs well for the business prospects of TSL

Ø  Established player (executed highest orders for coal handling during eleventh five year plan) in ash and material handling segment and foray into BoP segment (synchronization and diversification) would lead to growth with diversification

Ø  Having secured orders in Waste heat recovery (WHR) from Cement Industry, order intake momentum in this segment is likely continue

Ø  Strong technical expertise (in-house and through collaborations) enables TSL to offer its product and services on turnkey basis within a stipulated time at competitive rates

Ø  Clientele with strong base mitigates risk of project deferment or cancellation

Ø  Revenue visibility over FY13e on the back of strong order-book of INR 43.7bn (2.2x FY11 sales)

Outlook & Valuation

At the CMP, TSL trades at 6.6x our FY13e earnings estimate, EV/Sales of 0.4x and EV/EBITDA of 3.4x (FY13e). We expect company to generate RoE of 22.1% in FY13e . Given 18% CAGR growth of its net profit over FY13 and RoCE of 27%, we set price objective of INR 300 (exit PE of 8x its FY13e earning per share of INR 37.7).

Click on the link for the full report  

Are Your Aware of the Power of SIPs?

We all have heard of the saying “Little drops of water make the mighty ocean”. Just like little drops of water can make the mighty ocean in the long run, a Systematic Investment Plan (SIP) makes you reach your long term investment goals conveniently. SIP is a simple yet a powerful tool used by investors worldwide as a method for savings and wealth accumulation. Investing through the SIP facility empowers you to plan and save for your future by inculcating in you the discipline of investing regularly.


In order to invest in a mutual fund via SIP, a pre-decided amount of money is debited from an investor's bank account, by way of post-dated cheques or ECS mandate, for the purchase of units of a desired mutual fund scheme. An investor has the flexibility of purchasing mutual funds units on a quarterly, monthly, weekly or daily basis, hence helping one to build wealth in the long run.


SIP investment is very advantageous. Investing a hefty sum at one go is not a feasible option for most of the people, but investing small amounts of money at regular durations is not a bad idea for anyone. This also lets the compounding principle work on it. For instance, if Mr. X invests Rs. 1200000 lumpsum for 10 years and Mr. Y invests Rs. 5000 by way of SIP for 20 years, and if the rate of return is 15% p.a., then Mr. Y will earn Rs. 2600000 more than Mr. X.


Another principle working on it is that of rupee cost averaging that is an automatic market timing mechanism. Rupee cost averaging enables an inevstor to purchase more number of units when they are low-priced and buy lesser number of units when they are high-priced. This proves quite beneficial later on. 


SIP also enable the mutual fund investors to benefit from diversification. Mutual funds returns are variable and are affected by numerous market risks. Diversification helps in lowering the overall affect on a portfolio's return.


So go ahead and start taking small steps. You will definitely reach your long term objectives.

Highlights of the Credit Policy 2011

The highlights of the Credit Policy announced today are as follows:

• Repo rate is increased by 50 basis points to become 7.25% from 6.75%.
• Reverse repo, which no longer be an independent variable, is increased to 6.25%.
• Cash Reserve Ratio (CRR) remains unchanged at 6%
• Savings bank deposit interest rate increased from 3.5% to 4%.
• Interest rate cap on MFI loans fixed at 26%. RBI will be appointing a committee for reviewing priority sector lending.

 Following are the expectations of the RBI:

• GDP for FY12 is expected to range between 7.4% to 8.5%, with 90% probability.
• Inflation is expected to remain high for the initial half of this fiscal year, after which it is anticipated to cool down to 6%. 

The monetary policy was based on the following three factors: 

• Global commodity prices, which surged in the recent months, are expected to remain more or less stable, with chances of increasing over the course of the fiscal. This has led to the belief that inflation will remain high or even go higher. 
• Core and headline inflation have considerably overshot even the most conservative projections made in the last few months, again hinting toward high inflation. 
• In contrast, the expected moderation in demand would induce reduction in pricing power as well as the scope of 'pass-through' of commodity prices.

Invest in Gold on Akshay Tritiya!! Call 1800 3000 200

Traditionally, people in our country have a natural flair for investment in gold. This liking for gold peaks during the Akshay Tritiya celebration. Akshay Tritiya is falling on 6th May 2011 that is bound to attract large number of people to make investment in gold this year also.

To join the celebrations, Bench Mark Mutual Fund has come up with India's first Gold ETF (Exchange-Traded Fund). Unicon has joined Bench Mark in order to make more and more individuals realize in the importance and invest in this NFO (New Fund Offer).

This instrument gives them an opportunity to buy gold without the need of possessing gold in physial form. This ETF will give you an option of easily purchasing and selling the instrument whose underlying is gold price.

The scheme is valid till 11th May 2011 only. So Hurry!! Call 1800 3000 200 for all the details NOW.
 

RBI policy meet on May 3rd - An Update

Consensus estimates are of a hike in repo and reverse repo to the tune of 25 bps and CRR to be maintained at the same rate.

On the other hand, market rumors are of a 50 bps hike in repo and reverse repo. This could bring in short term weakness in interest rate sensitive stocks. For the current year despite higher inflation, consumption story has remained intact and we have not seen any significant slowdown. However incremental rise in inflation could hurt and that could affect interest rate sensitive stocks.  

RBI has maintained its hawkish stance on inflation and overall we have seen structural inflation climb higher.

Also there is expectation that post the state elections we could see government increasing petrol and diesel prices. This will further add to the inflation and thus hawkish stance by RBI is expected to be maintained in the short term to keep a lid on inflation. Overall expectation of some correction in crude combined with the prospect of some relief in terms of diesel price and petrol price rise could bring some contra rally in oil refining psu stocks.

(Subject to disclaimer at www.unicon.in)

Who will be Narayan Murthy's Successor

Narayan Murthy, Chairman of Infosys Technologies Ltd., is on a look out for someone who can succesfully take the legacy forward once he retires this August. The decision of choosing a new mentor was taken at a board meeting that was held for finalizing the 2010-11 financial results of Infosys, including the fourth quarter. It has been decided in the meeting that the successor would be decided upon in their next board meeting to be held on 30 April 2011.

According to an IT bellwether, the upcoming board meeting would have a major role in the finalization of the succession plan.

In addition, T. V. Mohandas Pai, one of the Infosys board members, and K. Dinesh, co-founder and another board member, have also resigned from their positions.

The company has appointed Ravi Venkatesan, former chairman of Microsoft India, as an additional director on its board.

2G Scam - Tata Calls Himself a 'Victim'

Niira Radia, Vaishnavi Communications head, and Ratan Tata, chairman of Tata Sons, have denied charges of manupulating government policy as well as of influence-peddling when they appeared before the Parliament's Public Accounts Committee (PAC) for the 2G spectrum scam probe. On the contrary, Ratan Tata claimed that his company has been victimized by this government policy. according to him, the company had to keep waiting for about 85 days for getting GSM licence, while the other three companies had already licences, thanks to the first-come-first-serve policy.

CEO of S-Tel Shamik Das, chairman of Reliance Communications Anil Ambani, managing director of Unitech Wireless Sigve Brekke, and Atul Jhamb, CEO of Etisalat DB Telecom, would also be appearing before PAC this week.

Just to rewind, taped conversations between Radia and Tata as well as with various journalists, corporate heads and bureaucrats regarding were leaked couple of months ago. Ratan Tata, who has been co-operative all through out the probe unlike Radia, has accepted that the voice in the leaked tape in indeed his. Questions regarding the INR1,600 crore payment to Unitech were also raised during the probe. Tata claimed the money to be a soft loan.

However, Radia said that the tapes were partially true and tehy contain conversations that are out of context. Radia was found to urge journalists and others to influence some others for appointing certain persons as ministers, apart from trying to make a deal between the family of M Karunanidhi, DMK chief, and conetnders of 2G licences.

Corporates Paying More Advance Tax Than Before

Numerous major corporates have given more advance tax in the fourth quarter of 2011 financial year, when compared to the previous year, thus, indicating a positivity in their financial performances. For information sake, advance tax payment is considered as a barometer of corporate performance as such payments are made according to the profit anticipations.


Among the Indian hotshots, both Reliance Industries and Tata Steel have paid about INR1,054 crore and INR 987 crore, respectively, as advance tax this quarter. In the fourth quarter of 2010 fiscal, both the companies had paid INR770 crore and INR513 crore, respectively. An engineering and construction major, L&T, has paid about INR300 crore as advance tax in the fourth quarter this year as against INR270 crore in the last year.
In the automotive sector, Bajaj Auto paid INR250 crore as compared to INR175 crore in the previous fiscal, while M&M shelled out INR307 crore as compared to INR226 crore in the previous year.

However in the FMCG sectors, two major players Hindustan Unilever Limited and Tata Motors have paid less. While HUL shelled out INR150 crore as against INR170 crore in the last year, Tata Motors paid only INR50 crore as compared to INR115 crore in the last fiscal.
 

As far as Banking sector is concerned, the private banks like HDFC Bank and ICICI Bank also paid higher advance tax this time. While HDFC Bank paid INR540 crore as compared to the last fiscal's INR300 crore, ICICI Bank paid INR475 crore as against INR350 crore .

Even the major Public sector life insurance company, LIC, shelled out INR931 crore as compared to INR864 crore in the previous fiscal. Hindalco paid INR160 crore as against INR110 crore in the previous year, while MRPL paid INR296 crore as against INR180 crore.

What the Union Budget is Expected to Be Like?

The domestic markets bucked the trend that was being witnessed by the international markets and reacted negatively during this phase. In the last six months, market have been gyrating and experiencing extreme volatility, losing almost 15% since November after reaching a 52-weel high. This has been a conscequence of several factors. The commencement of high interest rate regime for combating inflation and buoyant commodity and crude prices acted as serious detriments. On top of this, political uncertanity spoilt the market enviroment further.


As a result of all this, the emphasis in the upcoming Union Budget is expected to be on maintenance and even acceleration of growth and employment rate. The ensuing budget is anticiapted to take note of the current scenario and announce policies and reforms for supporting and forming a suitable base for the economy to continue to grow at 8%+ levels. The budget is likely to be skewed towards investment rather than consumption. Agriculture & related activities would continue to be the focus area as inflation and food security is high on the government agenda. Government would allocate higher amounts towards infrastructure (logistics, rural infrastructure and water management), education and technology to give a multiplier effect to the economy to sustain high GDP growth in the coming years.


The Union Budget 2011-12 might be a key from a policy stand point and may provide incremental direction to markets. There is an inherent value in India economy given the growth story and favorable demographic, but catalysts are required at macro level to deleverage the underlying value.

Stock Idea- Ceat Ltd.

The investment rationale of Ceat:

• Robust auto sales outlook to boost demand for tyres
• Acquisition of global brand rights to provide huge potential for growth
• Capacity expansion would enable Ceat to focus on higher margin replacement segment

Outlook & Valuation

As said by Unicon Investment Solutions, "We have used the discounted cash flow (DCF) method to value Ceat due to its huge capex plan, the benefits of which would accrue over a longer period. We have arrived at a target price of INR 149 based on a discount rate of 10.1% and a terminal growth of 2%. The target price implies a potential upside of 37% from current levels for an investment horizon of 12 months. Thus, we recommend a Buy on the stock."

Bharti Airtel Announces Q3 Results

Bharti Airtel, a leading Telecom player, announced its third quarter results wherein it registered a decline of 40.62% in its net income, mainly due to the rise in spectrum charges as well as the costs recently incurred by the company for relaunching its brand. The net income decreased from INR2,194.9 crore in the third quarter of previous fiscal to INR1,303.3 crore.

However, the company's total revenues have increased from INR10,305.3 crore in the previous fiscal to INR15,576 crore, a 51.14% jump. Furthermore, the verage revenue per person (ARPU) of Bharti Airteldecreased from INR202 in the previous quarter to INR198 in this quarter.


In terms of QoQ (quarter on quarter), profit before tax of Bharti Airtel was majorly affected by brand relaunching costs, which was about INR340 crore. And in terms of YoY (year on year), the profit before tax plunged again due to higher spectrum charges and net interest outgo, which are INR80 crore and INR471 crore respectively, along with the forex losses and brand relaunching costs. The exchange losses, valued at INR151 crore, were due to the negative fluctutations in the foreign currencies in India and Africa.

 On this Wednesday, the company's share prices increased by 3.52% to reach INR325.70 on Bombay Stock Exchange.

Egypt Crisis Hits Indian Stock Market Badly

The ongoing unrest in Egypt is raising concerns all over the world. Here in India, the crisis is prompting the retail investors and fund managers to surrender to selling pressure consecutively for the fourth session. As a result, Sensex, the benchmark index of Bombay Stock Exchange, dipped by more than 300 points on Monday's opening trade.


The 30-share index, which had already lost 755 points in the earlier three sessions, plummeted by 1.68%, or 301.70 points, to reach 18,094.27 points during the initial few minutes of Monday's trade. Nevertheless, the Sensex then picked up some pace and is presently at more than 18,200 points.


Likewise, National Stock Exchange's benchmark index, Nifty, plunged by 1.44%, or 79.55 points, to reach 5,432.60 on the opening trade. The wide-based index has currently gained some momentum.


According to market experts and brokers, the dampened trading sentiment in Indian Stock markets is being mainly driven by not only the ongoing protest in Egypt but also by the blue-chip companies' dissapointing results. Other reasons behind dismal performance of Indian stock markets can be the continued positions offloading by retail and other investors, and weakening trend in other Asian markets, induced by the US market losses which is again due to the Egypt unrest.

Among various Asian markets, Hang Seng index of Hong Kong declined by 1.20% and Nikkei index of Japan dipped by 1.63%.