In Sharjah ௵(+971)558539980 *_௵abortion pills now available.
Weekly Review
1. Weekly Review
September 25, 2010
Markets rally further FII activity
(Rs crore)
During the week, the Sensex and S&P CNX Nifty continued their positive Cash Futures Net
As on (Equity) Activity
momentum, ending higher by 2.3% each. The BSE mid-cap index
Sep 17 1,716 374 2,090
underperformed its large-cap counterparts for the third consecutive week
Sep 20 1,879 782 2,661
and ended higher by just 0.1%. The BSE small-cap index closed marginally Sep 21 3,313 (1,135) 2,177
positive this week, ending higher by 0.3%. The key benchmark indices opened Sep 22 1,505 (2,578) (1,072)
on a firm note on frenzied buying, outperforming their Asian and European Sep 23 583 (1,758) (1,176)
counterparts. Factors such as higher 2QFY2011 advance tax payment by Net 8,995 (4,315) 4,680
front-line companies, spike in food inflation last week, higher inflows from
FIIs and mixed global cues weighed on investor sentiment during the week. Mutual Fund activity (Equity)
Most of the sectoral indices ended in the green, with the BSE FMCG gaining (Rs crore)
the most by 5.3%, followed by the BSE Auto index, which moved up 2.5%. As on Purchases Sales Net Activity
Sep 16 533 878 (345)
BSE FMCG index outperforms the Sensex Sep 17 549 758 (209)
During the week, the BSE FMCG index outperformed the Sensex by gaining Sep 20 555 1,306 (751)
Sep 21 510 960 (450)
5.3%, driven by good monsoons, strong domestic consumption and a flavour
Sep 22 396 674 (278)
for defensives. Gains were largely driven by heavy weights ITC, HUL and
Net 2,543 4,576 (2,033)
Colgate. While ITC gained 6.2% on the back of its well-entrenched
non-FMCG businesses and expectations of a positive surprise in cigarette
volumes, HUL hit its life-time high, gaining 11.6% on the back of signs of Global Indices
competitive pressures easing, as indicated by price hikes in detergents. Indices Sept. Sept. Weekly YTD
Colgate gained 11.7% (on expectations of a buyback), Marico gained 3.5% 17, 10 24, 10 (% chg)
after it announced that it is contemplating further acquisitions and price BSE 30 19,595 20,045 2.3 14.8
hikes on account of a 12-15% increase in copra prices and Nestle gained NSE 5885 6018 2.3 15.7
1.9% after it announced an investment outlay of Rs230cr to set up its first Nasdaq 2,316 2,381 2.8 4.9
R&D facility in India. We believe most FMCG companies are trading at DOW 10,608 10,860 2.4 4.1
peak valuations, capping their upside potential from the current levels. Hence, Nikkei 9,626 9,472 (1.6) (10.2)
we maintain our underweight stance on the sector and recommend a selective HangSeng 21,971 22,119 0.7 1.1
approach to stock picking, with Marico as our top pick in the sector.
Straits Times 3,076 3,093 0.5 6.7
Inside This Weekly Shanghai Composite 2,599 2,592 (0.3) (20.9)
KLSE Composite 1,467 1,451 (1.1) 14.0
Battery Industry - Sector Report: We estimate the battery sector to post ~19.7%
Jakarta Composite 3,385 3,398 0.4 34.1
revenue CAGR over FY2010-13. While Exide is set to emerge a clear winner
KOSPI Composite 1,827 1,847 1.1 9.7
with earnings CAGR of ~17% due to cost savings on the raw material front,
ARBL is estimated to report ~11% earnings CAGR during FY2010-13. We
believe investing in these stocks at current valuations would fetch good returns Sectoral Watch
for investors as the consumption theme plays out in favour of the Indian Indices Sept. Sept. Weekly YTD
market. We recommend Accumulate on Exide and Buy on ARBL. ARBL. 17, 10 24, 10 (% chg)
Tecpro Systems - IPO Note: Tecpro Systems (Tecpro) will be accessing the BANKEX 13,745 13,914 1.2 38.7
capital market with an IPO of 75.5lac equity shares of Rs10 each at a price BSE AUTO 9,276 9,508 2.5 27.9
band of Rs340-355/share. The issue opened on Sept. 23, 2010, and will BSE IT 5,844 5,973 2.2 15.2
close on Sept. 28, 2010. We recommend a Subscribe view to the IPO.IPO. BSE PSU 10,242 10,313 0.7 8.2
Ashoka Buildcon - IPO Note: Ashoka is tapping the IPO market with an
issue size of Rs225cr in the price band of Rs297-324/share, resulting in a
public issue of 0.69cr and 0.76cr equity shares at the upper and lower price
band, respectively, of face value Rs10, resulting in a dilution of 13.2% and
14.2%. We recommend a Neutral view to the IPO. IPO.
Please refer to important disclosures at the end of this report
2. Fundamental Focus | September 25, 2010
Focus
Volume ‘Lead’ growth
Battery Industry
Strong performance by the battery industry: The ~Rs9,700cr High returns profile drives higher valuation, caps downside
Indian storage batteries sector (as estimated in FY2010) has risks: Over the last few years, the battery manufacturers have
an organised market pegged at around ~Rs7,300cr. Over clocked significant increase in return ratios on the back of
FY2005-10, the battery sector received a boost with industry sustained volume growth and high margins. On an average,
revenues recording strong ~30% CAGR and net income these stocks delivered CAGR returns of ~50-60% over the last
registering ~50% CAGR on the back of changing five years. We attribute the steady earnings CAGR of ~50-60%
demographics, which in turn supported the secular growth in as the key factor behind this outperformance. Over the next
consumption in the Indian markets. couple of years, profitability of the battery manufacturers would
continue to be determined by growing demand. With the
Growth momentum to sustain: Overall, we estimate the
industry operating at higher capacity utilisation levels and
battery sector to register ~19.7% CAGR in revenues over
apparent pricing flexibility would result in RoCE and RoE
FY2010-13. For the battery manufacturing companies in
improving going forward and cap downside risks. We believe
India, auto and industrial growth remains the key revenue driver.
that investing in these stocks at current valuations would fetch
Industrial segment revenues are estimated to increase at
good returns for investors as the consumption theme plays out
~19.4% CAGR during FY2010-13, while we expect the auto
in favour of the Indian market. We recommend Accumulate on
battery segment revenues to post a CAGR of ~20% during the
ARBL.
Exide and Buy on ARBL.
mentioned period. Moreover, we believe that next few years
will continue to be an investment phase for these companies, Exhibit 1: Indian battery market - Growth trend
as they are operating at almost ~95% utilisation levels in the (%) (%)
80 76 25
automotive battery segment and around ~75% in the 70 65
57 20
industrial segment. 60 50
50 15
40 29 29 30
Robust volumes to drive earnings growth: Going ahead, we 30 21 24
1816 18 19
22 20
16
10
20 14
expect margins to contract with the LME lead prices estimated 10
7 5
to increase by around 10% annually, which would gradually be 0 0
FY08
FY09
FY10
FY01-10*
FY05-10*
FY11E
FY12E
FY13E
FY10-13E*
passed on with a lag effect. We expect Exide Industries (Exide)
to outperform Amara Raja Batteries (ARBL) on the earnings front
Revenue growth (%) Net income growth
following the increase in the contribution from the in-house Operating margin (RHS)
lead smelter to total consumption of lead (almost ~50%). While Source: Bloomberg, Angel Research; Note: *CAGR
Exide is set to emerge a clear winner with earnings CAGR of
~17% due to cost savings on raw material front, ARBL is ex-
pected to report ~11% earnings CAGR during FY2010-13.
Exhibit 2: Valuation Summary
Rating CMP Target
Target P/E (x) P/BV (x)
P/BV EV/EBITDA (x)
EV/EBITDA EV/Sales (x) RoE (%)
(Rs) Price (Rs) FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E FY11E FY12E
Exide Accumulate 158 171 20.4 17.8 4.9 4.0 11.2 9.5 2.5 2.0 26.4 24.5
ARBL Buy 213 261 11.9 9.2 2.7 2.1 6.8 5.6 1.0 0.8 24.8 25.5
HBL Power* Not Rated 28 - 7.8 6.4 1.2 1.0 5.8 4.8 0.9 0.7 16.0 17.0
Source: C-line, Bloomberg, Angel Research; Note: *Consensus, Market price as of September 20, 2010, Refer detailed Sector Report to be released shortly.
Research Analyst - Vaishali Jajoo/Yaresh Kothari
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 2
3. Fundamental Focus | September 25, 2010
Focus
Exide Industries - Accumulate Price - Rs158
Target Price - Rs171
Company Update
Defensive appeal Capacity expansion to increase volumes: Exide has been
operating at ~90% utilisation levels over the past five years. To
Exide Industries is a leader in the domestic battery industry.
cater to growing demand, Exide plans to increase its battery
Strong brand image and capacity addition will enable Exide to
capacity with an investment of Rs400cr in FY2011E, increasing
cater to the burgeoning demand for automotive and industrial
its two-wheeler and four-wheeler capacity by 28% and 60%,
batteries, offering a clear growth visibility going ahead.
respectively. Thus, we believe Exide is well placed to meet the
Moreover, the increase in lead sourcing from captive smelters
rising automotive battery demand. We estimate the overall
and focus on higher margin replacement business will improve
utilisation level to remain at 78-80% in FY2013E. We expect
profitability and return ratios.
Exide to post volume CAGRs of 13.9% and 15.6% in the auto
Robust demand scenario for auto and industrial batteries: Over and industrial battery segments, respectively.
FY2010-13E, led by our estimates of ~13%, ~12% and ~11%
Outlook and valuation
volume CAGRs in PV, CV and two-wheelers, respectively, and
increasing vehicle base in India, we expect the auto battery We estimate Exide to post a 21.1% CAGR in gross revenue
segment to post a 20% revenue CAGR. We also expect the over FY2010-13E, backed by 20.9% and 21.7% CAGRs in the
industrial battery segment to post a 19.4% revenue CAGR, driven auto and industrial battery segments. Thus, we expect the bottom
by strong demand for power back-up applications. As such, line to post a substantial 16.9% CAGR over the same period.
demand for batteries is expected to remain strong. We expect At Rs158, the stock is quoting at 20.4x FY2011E and 17.8x
Exide to post revenue CAGRs of 20.9% and 21.7% in the auto FY2012E earnings. We maintain Accumulate on the stock with
and industrial battery segments, respectively. an SOTP Target Price of Rs171. Owing to its defensive appeal
SOTP Target Price
and healthy and consistent business fundamentals, we are
Market leader with wider reach and strong pricing power: Exide
valuing Exide at 17.3x (20% premium to its historical average
enjoys a superior pricing power, with a market share of
of 14.4x) FY2012E earnings at Rs154. We have valued Exide's
60-65% and 40-45% in the auto and industrial battery market,
stake in ING Vysya at Rs11/share on FY2012E NBAP and have
respectively. A well-entrenched pan-India distribution network
assigned a value of Rs6/share to lead smelters (10x PAT).
helps the company to retain this competitive advantage. With
an eye on maintaining its leadership position, Exide plans to Key Financials
increase the number of primary distributors to ~500 (from ~200 Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
in FY2010) over the next 2-3 years. Exide is in a position to
Net Sales 3,393 3,794 4,788 5,682
leverage its market leadership and pricing power to pass on
% chg 19.3 11.8 26.2 18.7
cost increases, thus improving realisations. We expect average
realisation to grow at a ~6% CAGR over FY2010-13E. Profit
Net Profit 283 537 659 757
% chg 14.2 89.7 22.6 14.9
Captive lead sourcing reduces impact of lead price volatility:
Exide expects to increase lead sourcing from captive smelters EBITDA (%) 16.1 23.5 22.2 21.4
to ~70% in FY2012E from ~50% in FY2010. As captive sourcing EPS (Rs) 3.6 6.3 7.7 8.9
from smelters is cheaper (we estimate it to be 10-15% cheaper P/E (x) 44.6 25.1 20.4 17.8
than market rates), we expect a ~50bp expansion in EBITDA
P/BV (x) 10.4 6.1 4.9 4.0
margins for every 10% increase in sourcing from captive
RoE (%) 25.0 31.0 26.4 24.5
smelters. We believe in-house sourcing will reduce Exide's
exposure to volatile lead prices. We model EBITDA margins to RoCE (%) 31.7 40.8 36.6 34.3
be at 20-22% in FY2013E (23.5% in FY2010), after factoring EV/Sales (x) 3.9 3.2 2.5 2.0
in ~10% annual increase in lead prices until FY2013. EV/EBITDA (x) 23.9 13.7 11.2 9.5
Source: Company, Angel Research; Price as on September 20, 2010
Research Analyst - Vaishali Jajoo/Yaresh Kothari
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 3
4. Fundamental Focus | September 25, 2010
Focus
Amara Raja Batteries - Buy Price - Rs213
Target Price - Rs261
Initiating Coverage
Catching up batteries and advanced batteries for hybrid and electric vehicles.
Growing concerns regarding the environmental impact of
Amara Raja Batteries (ARBL) is India's second largest player of
carbon dioxide emissions and significant investments to develop
lead batteries with a market share of ~26%. Although the
alternative fuel base vehicles by auto majors across the globe
company has always traded at a discount to Exide (due to Exide's
offer a tremendous opportunity in the future. We believe ARBL,
leadership position, scale of operations, superior margins and
through its existing relationship with JCI, is well placed to tap
return ratios), ARBL is well placed to tap the rising demand
the demand for new generation auto batteries (lithium ion and
from the auto and industrial segments with its innovative
hybrid) in the long run.
products, increased capacity and widening reach.
Outlook and valuation
Auto batteries to drive growth: ARBL derives ~14% and ~33%
of its revenue from the auto OEM and replacement segments, On the valuation front, ARBL is trading at 11.9x and 9.2x
respectively. We expect the auto battery market to post a 20% FY2011E and FY2012E EPS, respectively. We feel that the stock
revenue CAGR over FY2010-13E, led by a robust ~12% CAGR is available at attractive valuations. At present, ARBL is trading
in new vehicle sales volume across segments and growing at ~35% discount to Exide (adjusted for insurance business).
vehicle population. Further, with a strong focus on strengthening The gap is due to Exide's leadership position, higher margins
its distribution network, we believe ARBL is well placed to serve and low dependence on the telecom battery segment. The
the replacement market effectively and increase its penetration discount commanded by ARBL compared to Exide would reduce
level in rural and semi-urban markets, which will increase its with a) increasing scale of operations, b) sustainable revenue
market share to ~30% in the next 2-3 years from the current and earnings visibility and c) improving return ratios. We We
27%. As such, we expect ARBL to post a 30.8% revenue CAGR Initiate Coverage on ARBL with a Buy rating and a 12-month
for the auto battery segment, aided by robust growth. Price
Target Price of Rs261, representing a ~23% potential upside.
At our target price, the stock will trade at 11.3x (35% discount
UPS/Inverter batteries to boost volume growth: With the power
to Exide's multiple of 17.3x) FY2012E EPS of Rs23.1.
deficit situation (expected to be 7.0% in FY2013E) in India
expected to continue over the medium term, demand for
UPS/Inverter batteries is expected to remain strong amidst power Key Financials
cuts and load shedding. We expect the industrial battery Y/E March (Rs cr) FY2009 FY2010 FY2011E FY2012E
market’s revenue to grow at a 19.4% CAGR over
Net Sales 1,313 1,465 1,871 2,267
FY2010-13E. ARBL commands a ~28% market share in the
% chg 21.2 11.6 27.7 21.2
UPS/Inverter battery segment. We expect ARBL's industrial battery
segment to post a 15.9% revenue CAGR over FY2010-13E. Profit
Net Profit 80.5 167.0 152.4 197.1
% chg (14.7) 107.5 (8.8) 29.3
Capacity expansion to provide scale: ARBL plans to increase
its auto battery capacity by FY2011E, incurring total capex EBITDA (%) 11.5 19.2 14.6 14.4
Rs150cr. The two-wheeler and four-wheeler battery capacity EPS (Rs) 9.4 19.6 17.8 23.1
would increase by 100% and 21%, respectively, because of the P/E (x) 22.6 10.9 11.9 9.2
expansion. We expect the auto and industrial battery business
P/BV (x) 4.5 3.3 2.7 2.1
to operate at utilisation levels of 85-90% by FY2013E. Thus,
RoE (%) 21.8 35.2 24.8 25.5
we expect ARBL to post a 23% revenue CAGR over
FY2010-13E, aided by robust volume growth. RoCE (%) 16.8 34.9 28.5 28.6
Well long-term EV/Sales (x) 1.5 1.2 1.0 0.8
JV with JCI - Well placed to chase long-term growth
opportunities: ARBL has technical collaboration with EV/EBITDA (x) 13.2 6.5 6.8 5.6
Johnson Controls (JCI), a global leader in lead-acid auto Source: Company, Angel Research; Price as on September 20, 2010
Research Analyst - Vaishali Jajoo/Yaresh Kothari
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 4
5. Fundamental Focus | September 25, 2010
Focus
Tecpro Systems - Subscribe
IPO Note - Power Packed
Objects of the issue track record and ability to successfully market its services to
Particulars Estimated net proceeds (Rs cr) existing and new clients.
Fund the working requirements 200
Outlook and Valuation
Fund expenditure for general
corporate purposes* 13-22 Tecpro's track record of project execution and its ability to report
Total 213-222 rapid growth in revenues and profitability has been its hallmark
Source: Company RHP; Note: *At lower and upper price band respectively in recent years. When compared with peers, Tecpro's profitability
margins are the highest in the MHE industry. Considering the
Incorporated in 1990, Tecpro Systems (Tecpro) was promoted
cyclical nature of the MHE industry and its vulnerability to
by Ajay Kumar Bishnoi and Amul Gabrani, who have more
economic slowdown, Tecpro has been able to comfortably sail
than 25 years of experience in the material handling industry.
through and register growth in both good and bad times. As
The company designs, engineers, manufactures, sells,
increasing investments get committed to Indian infrastructure,
commissions and services a range of systems and equipment
we expect companies like Tecpro to benefit on the back of rising
for the core infrastructure related sectors like power, steel, cement
requirements for material handling systems across various
and other industries. Leveraging its capabilities in coal and ash
industries that support infrastructure building. Currently, Tecpro
handling, the company has also taken up turnkey BoP contracts
provides coal and ash handling solutions and outsources the
in the thermal power generation sector.
remaining portion of the BoP packages to other vendors. The
Rationale for our Subscribe view long-term strategy would be to broaden its capability and
Established track record of project execution: Since execute associated BoP packages, which would enable the
commencement of operations in 2001, Tecpro has successfully company to independently (without the need for consortium)
executed over 694 material handling projects across core place bids for turnkey BoP projects.
sectors. In the power sector, Tecpro provides turnkey material At the upper price band, Tecpro is projected to trade at a P/E
handling solutions in several thermal power projects and EV/EBDITA of 16.5x and 8.3x its FY2010 earnings,
aggregating 10,800MW of installed capacity. Its project respectively. When compared with its immediate competitors,
execution capabilities have enabled the company to establish viz., Mcnally Bharat and TRF the scrip is available at a discount
,
long-term relationships with its clients and receive repeat orders. of ~10-15% on FY2010 earnings. In addition, over the past
Foray into Balance of Plant (BoP) contracts five years the company has grown at a scorching pace along
with successfully entering the BoP-EPC segment. As and when
Leveraging on its project management track record in both
Tecpro begins to accumulate and execute larger size BoP projects
material and ash handling solutions, Tecpro recently began
going ahead, it will be able to command premium valuations
undertaking BoP contracts. Tecpro received its first BoP order
on superior growth and profitability margins. The successful
of Rs993cr in August 2009 from CSPGCL for the 1x500MW
execution of few BoP projects over the next couple of years may
Korba West Thermal Power Project (Extension Stage -III).
also result in Tecpro exploring the feasibility of taking up
Robust order book provides revenue visibility: The company's complete EPC for power plants (ie BTG + BoP), which would
order intake has consistently grown at a significant pace on place it in league with BGR Energy. We recommend a Subscribe
sustained investments in the cement, steel and power sectors. IPO.
view on the IPO.
The company's consolidated order book, as at July 31, 2010,
stood at Rs2,311cr (1.6x FY2010 sales) as compared to
Rs2,014cr as at March 31, 2010, Rs1,253cr as at March 31,
2009 and Rs965cr as at March 31, 2008. The consistent growth
in order book bears testimony to the company's performance
Research Analyst - John Perinchery/Hemang Thaker
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 5
6. Fundamental Focus | September 25, 2010
Focus
Ashoka Buildcon - Neutral
IPO Note - Richly valued
Issue Details: Ashoka is tapping the IPO market with an issue FY2010 P/BV on the upper and lower price bands respectively,
size of Rs225cr in the price band of Rs297-324/share, thus which again is at a premium to its peers, Sadbhav Engineering
resulting in a public issue of 0.69cr and 0.76cr equity shares at and NCC. Hence, on account of being fairly priced and with
the upper and lower price band respectively, of face value Rs10, most positives factored in, we recommend a Neutral view to
resulting in a dilution of 13.2% and 14.2%. The company plans IPO.
the IPO.
to use the IPO proceeds for investment in capital equipment,
Key risks: 1) Ashoka's business model is vulnerable to interest
meet working capital requirements, repayment of loans and
rate fluctuations and traffic growth, and 2) Concentration of
funding the subsidiaries for prepayment/repayment of their
projects in Maharashtra and Madhya Pradesh.
loans.
Ashoka Buildcon (Ashoka) is in the business of undertaking Exhibit 1: Peer Comparison (Rs cr)
engineering, procurement and construction (EPC) contracts in Under NW P/BV
Mkt. P/BV
roads, bridges, commercial and industrial buildings, and power
Oper.
Oper. Devel. Total FY10 cap (x)
transmission and distribution (T&D) projects.
Sadbhav Eng. 647 4,594 5,241 660 1,400 2.1
Integrated business model: Ashoka undertakes all activities
Nagarjuna Const 394 659 1,054 374 560 1.5
related to a BOT road project right from tendering for the project
IVRCL Assets 1,493 7,854 9,347 483 1,364 2.8
till the collection of tolls. We believe that its integrated structure
enables it to bid for BOT projects with confidence to complete Madhucon Projects 1,043 1,432 2,475 326 408 1.3
and operate the project on a profitable basis. It also results in Average 894 3,635 4,529 461 933 2.0
capturing the entire value in the BOT development business, *Ashoka 1,284 2,676 3,960 687 1,705 2.5
including EPC margins, developer returns and operation and
**Ashoka 1,284 2,676 3,960 687 1,582 2.3
maintenance margins.
Source: Company, Angel Research, Note: Ashoka numbers are post
factoring the dilution, *at upper price band, **at lower price band
Early entrant in BOT space: Ashoka was one of the early entrants
BOT
in the road BOT segment with its first project bagged in 1997,
resulting in 13 years of experience in the road sector. We believe Exhibit 2: Key Financials (Consolidated)
that this rich experience will allow Ashoka to further enhance Y/E March (Rs cr) FY2007 FY2008 FY2009 FY2010
its presence in the BOT space. The company is also credited Net Sales 403.1 322.8 518.4 795.6
with executing projects on time, which we believe is critical for % chg - (19.9) 60.6 53.5
maintaining the required IRR's as this offers extended period of
Profit
Adj. Net Profit 24.3 36.5 38.3 85.9
toll collection, thereby increasing overall revenues.
% chg - 50.1 4.9 124.2
Decent order book: Ashoka's outstanding order book, as on
FDEPS (Rs) 4.6 6.9 7.3 16.3
May 31, 2010, stood at ~Rs1,615cr or 2x FY2010 revenues.
This excludes the two recently bagged road projects of Rs1,600cr EBITDA Margin (%) 26.2 38.2 31.6 26.9
which are awaiting financial closure. P/E (x) 70.1 46.7 44.5 19.9
Outlook and Valuation RoAE (%) 8.5 12.2 11.6 21.2
Ashoka is a pure play on the road segment and with the sector RoACE (%) 7.5 8.9 10.3 10.7
in sweet spot the company is well placed to reap the benefits P/BV (x) 5.9 5.5 4.9 3.7
going ahead. However, we believe that the company is not EV/Sales (x) 5.0 6.6 4.6 3.4
comparable to market leaders IRB Infra and ITNL on account
EV/EBITDA (x) 19.0 17.2 14.4 12.8
of having smaller scale of operations in spite of being an early
Source: Company, Angel Research
entrant in the space. The IPO is available at 2.5x and 2.3x
Research Analyst - Shailesh Kanani/Nitin Arora
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 6
7. Technical Picks | September 25, 2010
Outlook still bullish
Sensex (20045) / Nifty (6018)
In our previous Weekly report, we had mentioned that in spite Exhibit 1: Sensex Daily chart
of the momentum oscillators being in an overbought zone, prices
could move higher and indices could test 19800 - 19950 /
5950 to 6000 levels. The week began on a positive note and
indices made a high of 20105 / 6037 and finally closed
marginally above the mentioned levels. The Sensex and the
Nifty ended with net gains of 2.3% vis-à-vis the previous week.
Pattern Formation
On the Daily chart, the prices have closed above the
Source: Falcon
5-days EMA. This suggests that the undertone is still bullish
and upward momentum from current levels may continue going
forward (refer Exhibit 1).
Future Outlook
With the F&O derivative expiry in the coming week, markets
are likely to witness volatile sessions. On the Daily chart, after
a steep rise, we have seen some consolidation but prices have
managed to close above the 5-day EMA. This suggests that we
may witness continuation of the up-trend or a sideways
consolidation of the previous up-move. On the upside, if the
indices trade above 20105 / 6037 levels, they are likely to test
20450 / 6150 or even extend their gains to test an all-time
high over the next couple of weeks. On the flip side, a correction
up to 19150 - 18990 / 5750 - 5700 levels could be expected
if the indices breach 19770 / 5930 levels.
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 7
9. Derivatives Review | September 25, 2010
Liquidity continues to drive the market. 5900 is new support
Nifty spot has closed at 6018 this week, against a close of 5885 last week. The Put-Call Ratio has increased from 1.75 to 1.93 levels
and the annualized Cost of Carry (CoC) is positive 16.43 The Open Interest of Nifty Futures has decreased by 4.51
16.43%. 4.51%.
Put-Call Ratio Analysis Futures Annual Volatility Analysis
The Nifty PCR has increased from 1.75 to 1.93 levels. The Historical Volatility of the Nifty has increased from 16.95%
Week-on-week the 6000 put options added 1,48,808 to 16.97%. IV of at the money options has decreased from
contracts. Barring the 5400 strike put, the 6000 put option has 15.00% to 12.00%. Some liquid counters where HV has
highest open interest in it. On the call front, the 6100 call options increased significantly are FINANTECH, HINDUNILVR,
has highest open interest and added 80,153 contracts in the JINDALSWHL, PUNJLLOYD and FSL. Stocks where HV has
week gone by. The 5900 level looks as a new support for the decreased are UNIPHOS, GAIL, STER, BIOCON and
market. CHENNPETRO.
Open Interest Analysis Cost-of-Carry Analysis
The total Open Interest of the market is Rs2,13,687cr, as against The Nifty Sep. Future closed at a premium of 16.25 points
Rs2,07,907cr last week, and the Stock Futures' open interest against a premium of 19.10 points last week. The Oct future
increased from Rs51,124cr to Rs53,077cr. Over the week, FIIs closed at a premium of 30.25 points. Few liquid counters where
booked some of their profits in the Index futures and did some CoC turned from negative to positive are PATELENG,
shorting in the stock futures. Some liquid stocks where open STERLINBIO, DCHL, MARUTI and BHARATFORG. Stocks where
interest has increased significantly are JINDALSWHL, CoC turned from positive to negative are EDUCOMP,
FINANTECH, PFC, BGRENERGY and LITL. Stocks where open INFOSYSTCH and ADANIENT.
interest has decreased significantly are IDEA, CIPLA, ITC,
BHUSHANSTL and TATAPOWER.
Derivative Strategy
Scrip : RELIANCE CMP : Rs. 1001.65/- Lot Size : 250 Expiry Date (F&O) :
30th Sep, 2010
View: Mildly Bullish Strategy: Long Call Expected Payoff
Buy/Sell Qty Scrip Strike Series Option Buy Rate Price
Closing Price Expected
rofit/Loss
Profit/Loss
Price Type (Rs.)
Buy 250 Reliance 1000 Sep Call 15.00 Rs. 960.00 (Rs. 15.00)
Rs. 980.00 (Rs. 15.00)
BEP: Rs. 1,015.00/-
BEP:
Rs. 1000.00 (Rs. 15.00)
Max. Risk: Rs. 3,750.00/- Max. Profit: Unlimited
Profit: Rs. 1020.00 Rs. 5.00
If RELIANCE closes on or below Rs.1000 on expiry. If RELIANCE continues to trade above BEP
.
Rs. 1040.00 Rs. 25.00
NOTE: Profit can be booked before expiry if Stock moves in the favorable direction. Rs. 1060.00 Rs. 45.00
For Private Circulation Only | Angel Broking Ltd: BSE Sebi Regn No : INB 010996539 / CDSL Regn No: IN - DP - CDSL - 234 - 2004 / PMS Regn Code: PM/INP00000154 6 Angel Securities Ltd:BSE: INB010994639/INF010994639 NSE: INB230994635/INF230994635 Membership numbers: BSE 028/NSE:09946 9
