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).

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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.