Happy Investing..this Diwali…with Inventure’s Muhurat Picks Stock Picks.pdf · M & M 4 CHAMBAL...

Happy Investing..this Diwaliwith Inventures Muhurat Picks

4-Nov-10 2

Stocks to Pick

Table of Contents Page No.

M & M 4

CHAMBAL FERTILIZERS 6

ORIENTAL BANK OF COMMERCE 8

IDFC 10

BHEL 12

ACC LTD 14

VIP INDUSTRIES 16

TORRENT PHARMA LTD 18

BHUSHAN STEEL LTD 20

AMARA RAJA BATTERIES LTD 22

ONGC LTD 24

4-Nov-10 3

As Sensex approaches its all time high & overall market valuations no longer cheap, we believe, that key to generating returns will largely be a function of selective stock picks approach.

Although, Indian markets underperformed the US and European markets in the month of October (Nifty ended close to 0.70%), on YTD basis Indian markets are still among the best performing markets offering ~15% returns since January 2010. Furthermore, series of key economic data from the developed countries will keep the markets volatile.

With equity indices close to life-time highs, our strategy would be to buy on any dips in the markets as we are cautiously optimistic as the uptrend in the markets continue with strong FII inflows. We have identified few value picks based on an in depth fundamental analysis to invest in this years Diwali Muhurat trading. The cherry picked stocks still have an upside potential and are likely to do well from current levels. All the stocks recommended in this special report require a minimum of one year investment perspective and strategy for buying should be in staggered discipline.

On the sectoral front, we believe BFSI, Pharma, Oil & Gas, and infrastructure would be a good buy.

On this Muhurat trading, we recommend eleven stocks mainly from the large and mid cap universe.

4-Nov-10 4

Industry Automobiles

Stock Metrics BSE Group A

BSE Code 500520

Bloomberg Code MM IN

Face Value 10

Market Data

Market Cap (` Crs) 46125

52 week High/Low 772/439

Average Volume 232128

CMP ` 777.70

Shareholding Pattern

Index Comparison

Mahindra & Mahindra Ltd. The US $6.5 billion Mahindra Group is among the top 10 industrial houses in India. Mahindra and Mahindra Limited (M&M), producing automobiles and tractors, remains the groups flagship company, with a 49% share of groups revenue. It enjoys a leadership position in utility vehicles and tractors with a significant and growing presence in financial services, tourism, infrastructure development, trade and logistics. The Mahindra group today is an embodiment of global excellence and enjoys a strong brand image.

Recent Updates:

Mahindra & Mahindra's net profit rose 7.9% to ` 758.49 crore on 19% increase in net sales to ` 5311.26 crore in Q2 September 2010 over Q2 September 2009.

M&M had signed a memorandum of understanding

to buy a majority stake in the company in August 2010. Last week, the Korea Fair Trade Commission had cleared M&M's plan to acquire Ssangyong.

Ssangyong acquisition on course, expected to be

completed by February/March 2010.

South Korea-based Ssangyong's total vehicle sales rose 61% to 7,445 units in October 2010 over October 2009.

Q2FY11 performance exceeds expectations

M&M reported 19.5% YoY growth in its top-line at ` 53.6bn. This was mainly on account of a 13% YoY growth in tractor volumes and 25.2% YoY growth in automotive segment volumes. Overall volumes for the quarter increased by 20.8% YoY, driven by a strong traction for both its new products i.e. Gio and Maximmo.

Raw material/sales ratio declined by 150bps QoQ, whereas other expenses and employee cost increased by 60bps

4-Nov-10 5

QoQ. As a result, EBITDA margins improved by 80bps QoQ at 15.8% (we saw 15.3%). Other income grew by 49.9% on account of dividend from subsidiaries.

Segmental performance Automotive segment reported a 23.7% YoY growth in the revenues at ` 33.2bn and a 13.5% PBIT margin (12.7% in Q1FY11). Farm equipment segment (FES) reported a revenue growth of 12.4% YoY at ` 20.8bn, with PBIT margins at 18.3% (17.1% in Q1FY11). Capex update M&M guided for a capex on the standalone books at ` 40bn spread over FY10-FY13E. M&M is likely to launch 6-7 variants of Maximmo and Xylo put together in the next few quarters. The new SUV will go into commercial production by Q4FY11 and will be launched by Q1FY12E. Likely to launch pick-ups in US market M&M is expected to launch the Scorpio UV and compact pick-ups in the U.S. market in end FY11. It is believed that this gives significant growth opportunities for M&M given the vast volumes in the US market. M&M eyes Sonalika group M&M is planning to acquire Sonalika group, Indias fourth-largest tractor manufacturer. The acquisition will allow M&M to strengthen its position in the highly consolidated tractor market in India. Our View: We believe M&M would post EPS of ` 52 and ` 63 for FY11 and FY12 respectively. The stock is currently trading at P/E multiple of 13x as per FY12 earnings estimate. We recommend Accumulate on Dips rating on the stock with a revised target price of ` 850 with stop loss below ` 700/-

Particulars Quarter Ended (in Crs) Sep. 2010 Sep. 2009 % Var.

Sales 5311.26 4465.00 19

OPM % 16.85 18.62 -9

PBDT 1103.79 951.73 16

PBT 1006.79 862.54 17

NP 758.49 702.94 8

4-Nov-10 6

Industry Fertilizers

Stock Metrics BSE Group B

BSE Code 500085

Bloomberg Code CHMB IN

Face Value 10

Market Data


52 week High/Low 95.65/70.20


CMP ` 93.80


Index Comparison

Chambal fertilizers Ltd. Chambal Fertilizers and Chemicals Limited is one of the largest private sector fertilizer producers in India. Chambal Fertilizers has three divisions - agri-inputs, shipping and textiles. It has diversified into other sectors through its subsidiaries in the software and in the infrastructure sector. It also has a joint venture in Morocco for manufacturing phosphoric acid.

Recent Updates:

Chambal fertilizers reported good performance in Q2FY11. Net profit rose 33.20% to ` 86.06 crore in the quarter ended September 2010.

Sales rose 60.32% to ` 1535.06 crore in the quarter ended September 2010 as against ` 957.48 crore in corresponding previous quarter.

The company's margins in trading of specialized

fertilizer micronutrients and other agrochemicals have expanded to 7-8% from 3-4%.

Q2FY11 performance exceeds expectations

Chambal Fertilizers & Chemicals Ltd showed a strong top line growth of 60% YoY and QoQ each to ` 15,453 mn. Strong growth in fertilizer trade and expansion in textile revenues helped the top line growth. Fertilizer trade increased to ` 7,182 mn from ` 1,383 mn in same period last year.

EBITDA increased by 23% YoY and 22% QoQ to ` 2,131 mn. EBITDA margin stood at 13.8%, down 412 bps on YoY basis. Growth in EBITDA was supported by higher trade volume besides significant contribution from shipping and textile segments.

Net Profit increased by 33% YoY and 35% QoQ to ` 861 mn, contrary to the drop in Net Profit margin by 113 bps

4-Nov-10 7

YoY to 5.6%. EPS improved by 34% YoY in the quarter to INR 2.1.

Change in policyScope for Re Rating According to the current policy (New Pricing Scheme III), urea realizations are at $250-425 per metric tonne. The fertilizer manufacturers are seeking upward revision of this floor price realization. If that happens Chambal Fertilizers would be interested in putting new facilities. Furthermore, there has not been any significant capacity addition in the sector for the past 10 years. Hence, their valuations are lower. With this kind of investment coming in, there is scope for re-rating of the sector. Thus, the sector can see 10-20 per cent upside. Better than expected monsoons This year's monsoon in the country has been normal. According to the India Meteorological Department (IMD), India received 2% more rainfall. The season recorded 912.8 millimeter (mm) rainfall compared to the normal of 892.2 mm. On the contrary, last year was one of the worst droughts since 1972. The country had a rainfall deficit of 23% in 2009. Hence with better than expected rainfall we expect a modest growth in sales volumes. Our View Chambal would benefit from de-bottlenecking of urea capacity and higher utilization rate going forward. The company is also focused on expanding its urea capacity through green/brown field project, depending on firms allocation of gas by the government. Higher demand for Phosphate and Potash fertilizers would continue to keep the trading volumes higher. We remain positive on future prospects of the company and recommend Accumulate on Dips on the stock with a target price of ` 110/-. And stop loss below ` 70/-

Particulars Quarter Ended (in Crs) Sep. 2010 Sep. 2009 % Var.

Sales 1535.06 957.48 60

OPM % 13.88 18.01 -23

PBDT 197.90 166.89 19

PBT 130.21 100.08 30

NP 86.06 64.61 33

4-Nov-10 8

Industry Banking


BSE Code 500315

Bloomberg Code OBC IN

Face Value 10

Market Data


52 week High/Low 542/224.50


CMP ` 523.75


Index Comparison

Oriental Bank of Commerce Oriental Bank of Commerce is a mid-sized PSU bank, with the 11th largest branch network and 10th largest asset book among Indian Banks. Historically, the bank had a strong presence in northern and western India and with the merger of Global Trust Bank it has provided the bank strong southern presence. The bank has over 1,300 branches across India, all of which are on CBS platform.

We believe that the current stage of economic growth in India, offers immense opportunities in financial intermediation business. In support to our belief is the fact, that over the next ten years nominal GDP is expected to grow at ~13%, and revenues from the financial services sector are expected to grow at 22% by FY20E.

The banks 1QFY11 exhibited strong core operating performance. The margins continued to surprise positively. Though, the margins are believed to have peaked at current level and might stable in this range. The current performance has improved the banks return ratios.

Recent Updates:

OBC Life enters group insurance

Tripartite life insurance joint venture Canara HSBC Oriental Bank of Commerce (OBC) Life Insurance announced on Tuesday its entry into the group insurance business. The venture has a presence in retail or individual life insurance business. The insurer now hopes to get a larger segment of customers by targeting the corporate segment through the three partner banks.

Oriental Bank launches microfinance products

Oriental Bank of Commerce (OBC) has launched a special microfinance product to provide hassle free credit to micro entrepreneurs for setting up new units or enhancing existing units. In addition, OBC also launched a new micro thrift product targeted at small depositors in villages that have been assigned for financial inclusion coverage.

4-Nov-10 9

Oriental Bank raises ` 500-crore capital

Oriental Bank of Commerce (OBC) has raised capital of ` 500 crore to fund business growth and strengthen its capital adequacy. This is the first time in the current fiscal that the bank has mobilized capital. Of the Rs 500-crore capital raised, the Tier-I capital component stood at Rs 300 crore and the Tier-II capital was ` 200 crore.

Our View

The stock currently trades at 1.3x FY12E BV and we expect the bank to post good results in future and continue to outperform in near term, though sustainability of NIMs could be a key concern for the bank. We recommend a BUY rating on the stock at CMP of ` 530/- with a target price of ` 604/- and stop loss below ` 495/-

4-Nov-10 10

Industry Finance


BSE Code 532659

Bloomberg Code IDFC IN

Face Value 10

Market Data




CMP ` 214.95


Index Comparison

IDFC

IDFC is a specialized financial intermediary with existing businesses in project finance, principal investments, asset management (for third party funds), investment banking, etc. The company has a strong management and has put up a consistent performance with 19% CAGR in PAT during FY08-10. We expect advances to grow at ~25% CAGR PAT at ~20% CAGR over FY10-12E.

Adequately capitalized to sustain growthcoupled with healthy RoA

The bank has consistently delivered RoA of 3%+ in the last few quarters. However, RoE is expected to be in the 15-16% range due to higher Capital Adequacy Ratio of 19.6%. Leverage continues to be low at 5.3x as on Q1FY11 giving cushion for future growth.

Asset quality remains robust

Asset quality continues to remain positive at 0.15% NNPA and 0.27% GNPA. With economic activity picking up, we expect delinquencies to remain low for next couple of years.

Consistently strong business growthModest growth in fee-based income

Due to Asset Growth we expect the companys NII to grow at modest pace over FY10-12E. NIM has remained stable at 3.6% though we believe the same will come under slight pressure with rising rates. However, infrastructure status, on the other hand, should help in maintaining cost of funds.

Proportion of non-interest income has been hovering around ~45% of total income. We believe that with the loan book building up, this proportion will decline in future. The AUM size stands at $6.9 billion generating hefty fee-based income boosting the net Profits.

4-Nov-10 11

Recent Updates:

Lukewarm retail response to IDFC bond issues

IDFC's maiden retail bond sale failed to draw investors as the issue got bidded for just about 13% of the maximum on offer as rival issues with higher returns snatched away investors. The biggest specialized funder of ports and roads got subscriptions of around ` 425 crore when it aimed to rise as much as ` 3,400 crore.

Valuation

We expect IDFC to grow its balance sheet by ~20% CAGR over FY10-12E. Asset quality continues to remain buoyant. We expect IDFC to outperform in future and recommend a BUY rating on the stock at CMP of ` 215/- with a target price of ` 262/- and stop loss below ` 175/-

4-Nov-10 12

Industry Capital Goods


BSE Code 500103

Bloomberg Code BHEL IN

Face Value 10

Market Data




CMP ` 2526


Index Comparison

BHEL

BHEL is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure sector, today. BHEL manufactures over 180 products under 30 major product groups and caters to core sectors of the Indian Economy viz., Power Generation & Transmission, Industry, Transportation, Renewable Energy, etc. BHEL's operations are organized around three business sectors, namely Power, Industry which includes Transmission, Transportation and Renewable Energy coupled with Overseas Business. This enables BHEL to have a strong customer orientation, to be sensitive to his needs and respond quickly to the changes in the market.

Robust Order-book at `1.54tn

BHEL order-book now stands over `1.54tn providing revenue visibility over FY13. During 1HFY11, company has secured several contracts aggregating to `265bn, 23%+ YoY. The company bagged `200 bn order during Jul-Oct10. Some of the major orders received include Karnataka Corporation Bellary III - 1x700 MW, Raichura Power Plant 1x800 MW, Visa Power 2x600 MW, AP Genco Rayalseema 1x600 and lastly Indiabulls Power Nasik II

Q2FY11 Result Highlights:

Bharat Heavy Electricals Ltd (BHEL) Q2FY11 result came above consensus and surprised on all parameters, positively. Revenue at ` 85bn was higher by 26.2%, YoY. The operating profit grew 32.5% YoY to `16.3bn. Other income at ` 1.6bn was lower by 17%, YoY. Interest expenses grew significantly by 31.1% to `59Mn.

The company reported net profit at `11.4bn mainly on the back of lower staff cost and other expenditure as a percentage of sales.

4-Nov-10 13

Our View

We like BHEL for its strong performance QoQ and also due to its robust order book. We recommend Accumulate on Dips rating on the stock with a price target ` 2,800/-.

4-Nov-10 14

Industry Cement


BSE Code 500410

Bloomberg Code ACC IN

Face Value 10

Market Data


52 week High/Low 1062.80/686.20


CMP ` 1088.55


Index Comparison

ACC Ltd.

ACC Ltd. is India's foremost manufacturer of cement and concrete. ACC's operations are spread throughout the country with 16 modern cement factories, more than 40 Ready mix concrete plants, 20 sales offices, and several zonal offices. It has a workforce of about 9,000 persons and a countrywide distribution network of over 9,000 dealers.

ACC is adding 3 million ton (MTPA) at Chanda, Maharashtra, which will take its installed capacity to 30 MTPA. Cement realizations are expected to be under pressure in CY10E on account of a decline in capacity utilization led by oversupply scenario during CY09-10.

Key Investment Criteria:

ACC produced 1.98 million ton of cement and dispatched 1.92 million ton of cement during October 2010 as compared to 1.71 million ton produced and 1.69 million ton dispatched during October 2009.

Work at the 3 MTPA clinkering plant in Chanda is on track and is expected to be commissioned by December, taking the cement capacity to 30 MTPA.

Its captive power capacity will increase 25 Mw to

346 Mw, which will lead to strong volume growth in FY11-12.

A series of price rises since September, coupled with a pick-up in construction activity after the monsoon, are expected to bring respite. However, sustaining higher prices may be difficult due to excess capacities

4-Nov-10 15

Particulars Quarter Ended

Sep. 2010 Sep. 2009 % Var.

Sales 1637.18 1969.40 -17

OPM % 13.51 35.75 -62

PBDT 234.59 705.25 -67

PBT 143.53 625.67 -77

NP 100.04 453.63 -77

Quarterly Result update:

Net profit of ACC declined 77.04% to ` 100.04 crore in the quarter ended September 2010 as against ` 435.63 crore during the previous quarter ended September 2009. Sales declined 16.87% to ` 1637.18 crore in the quarter ended September 2010 as against ` 1969.40 crore during the previous quarter ended September 2009.

In the consolidated results, the company reported net profit of ` 86.31 crore in the quarter ended September 2010 as against ` 415.51 crore during the previous quarter ended September 2009. Sales decreased to ` 1759.18 crore in the quarter ended September 2010 as against ` 2077.38 crore during the previous quarter ended September 2009.

Our View:

Going forward, we expect the stock to perform. There has been constant increase in cement prices since September along with a pick-up in construction activity after the monsoon. ACC is expected to benefit from the same. Company is also aiming at capacity expansion to be completed till the next quarter. In October Companys production and dispatches has improved tremendously boosting the stock prices. We recommend the stock to 'ACCUMLATE' with a target of ` 1220/- and stop loss below ` 980/-.

4-Nov-10 16

Industry Moulded Luggage


BSE Code 507880

Bloomberg Code VIP IN

Face Value 10

Market Data


52 week High/Low 801.40/116.00


CMP ` 635


Index Comparison

VIP Industries Ltd.

VIP Industries is engaged in the travel product business. The Company operates in two business segments: luggage & accessories and furniture. The product manufactured by the Company includes: plastic moulded suitcase, plastic moulded briefcase and vanity case. The Companys portfolio of brands includes V.I.P., Carlton,Delsey, Footloose, Alfa, Aristocrat and Skybags. The Companys subsidiaries include Carlton Travel Goods Ltd. and Blow Plast Retail Ltd.


Soft luggage will account for more than 60% of turnover. Soft luggage includes- lap-top bags, satchels, back packs.

For the first time in 2009-10, VIP`s soft luggage sales matched its hard luggage sales. In the current year, soft luggage will account for more than 60% of the turnover.

VIP industries enjoy 60% share in the organized luggage market. Around 10% of the business is from exports.

Company intends to launch new product variants in hard luggage category.

Company enjoys good set of margins from soft luggage market (In this company has to import from China and sell the product), whereas, in hard luggage market the company manufactures the products in-house.

VIP Industries has reduced debt burden from ` 1.35bn in FY09 to ` 870mn in FY10. The current outstanding debt stands at ` 500mn. The management is hopeful that it will be a debt free company by the year end.

4-Nov-10 17


Sep. 2010 Sep. 2009 % Var.

Sales 146.20 119.30 23

OPM % 12.24 10.90 12

PBDT 17.50 11.00 59

PBT 13.80 6.70 106

NP 11.40 5.60 104

Quarterly Result update: Net profit rose 103.57% to ` 11.40 crore in the quarter ended September 2010 as against ` 5.60 crore during the previous quarter ended September 2009. Sales rose 22.55% to ` 146.20 crore in the quarter ended September 2010 as against ` 119.30 crore during the previous quarter ended September 2009. VIP to go Footloose' with new luggage brand The company is getting ready for the next-stage evolution. The company eyes lot of potential in the domestic market and is positioning each of its brands separately. It intends to introduce the Carlton brand in India likely by next quarter, which will be positioned in the premium category. The flagship brands like VIP and mass market brand Alpha will continue to remain the key focus area. The company is also looking to increase its presence in small ticket items laptop bags, hand bags, accessories. Future Plans To gain market share, the company is increasing its advertising spends on its brands, Alfa and Skybags. Alfa is a ` 160 crore brand and clocks 12 lakh units in sales annually. The company will be investing about ` 50-60 crore on brand building and retail expansion. On upping its retail presence, the company has 100 exclusive VIP lounges and the company is looking to increase it to 150 by the end of the current fiscal. Our View: Strong set of margins and plans to foray into international market especially Europe will help company in retaining its market share. Furthermore, the company is aiming to be debt- free by year end. Based on the strong fundamentals we expect the company to outperform and continue its bull run with a target of ` 767/- with a stop loss of below ` 550/-

4-Nov-10 18

Industry Pharmaceuticals


BSE Code 500420

Bloomberg Code TRP IN

Face Value 5

Market Data

Market Cap (` Crs) 4741.15

52 week High/Low 600.00/312.25


CMP ` 560


Index Comparison

TORRRENT PHARMACEUTICALS LTD.

Torrent Pharmaceuticals Limited is a dominant player in the therapeutic areas of cardiovascular (CV) and central nervous system (CNS) and has achieved significant presence in gastro-intestinal, diabetology, anti-infective and pain management segments. Torrent Pharma has six marketing divisions, each catering to defined therapeutic segment. A 2300 strong field force caters to around 2, 00,000 doctors across the country, which makes it rank fifth in terms of market reach. Torrents manufacturing plant at Chatral has a capacity to manufacture approx. 3,000 million Tablets, capsules and vials and 15000 kgs of Bulk Drugs/API. The facility has already been approved by authorities from regulated markets like US, UK, Germany, Australia and South Africa. The manufacturing plant at Baddi has a capacity to manufacture 3,600 million tablets, 150 million capsules, 10 million Oral Liquid bottles and 12 million sachets per annum. Key Investment Criteria:

The pharma industry is expected to grow 12-14% over next few years on the back of rising instances of lifestyle-related chronic diseases, better medical facilities and increasing awareness apart from improving per capital income.

Torrent Pharma has a strong presence in the European countries, Russia and Brazil.

Its branded formulations segment, which accounts for half of its revenues, is expected to grow by a fifth over the next two financial years, both from the domestic market as well as from Brazil, where it is the largest Indian player.

It is expected that the Brazilian business is to grow on the back of new launches and contribute about

4-Nov-10 19


Sep. 2010 Sep. 2009 % Var.

Sales 452.82 352.62 28

OPM % 29.94 33.44 -10

PBDT 134.22 112.64 19

PBT 120.20 102.12 18

NP 97.32 80.32 21

18 per cent to revenues in 2011-12 from about 16 per cent in FY10.

Astrazeneca the second largest drug maker in UK has inked a long term supply deal with Torrent Pharma earlier this year for 18 products in nine countries. The deal is estimated to be worth $ 32.8 billion.


Torrent Pharma reported ~21per cent increase in net profit for the second quarter ended September 30 to ` 97.32 crore. Total income for the period under review stood at ` 452.82 crore, as against ` 352.62 crore in the same quarter last fiscal. In the consolidated results, the company reported net profit of ` 76.19 crore in the quarter ended September 2010 as against ` 73.99 crore during the previous quarter ended September 2009. Sales increased to ` 551.92 crore in the quarter ended September 2010 as against ` 454.48 crore during the previous quarter ended September 2009.

Our View:

It has moved strongly in last one year. Along with it Company has reported strong quarterly numbers. The industry expects overall growth of around 12%-14% in next few years on the back of rising instances of lifestyle-related chronic diseases, better medical facilities and increasing awareness apart from improving per capital income. Company is currently trading at 561 with a PE multiple of 22.90 and EPS of 24.51. We recommend Accumulate the scrip on any dips from the current level with a target price of ` 676/- and stop loss of ` 500/-.

4-Nov-10 20

Industry Steel


BSE Code 500055

Bloomberg Code BHUS IN

Face Value 2

Market Data

Market Cap (` Crs) 11130.8



CMP ` 524


Index Comparison

Bhushan Steel Ltd.

Bhushan Steel Limited is engaged in the steel business. Its principal products include corrugated coated with zinc cold-rolled products of iron or non-alloy steel of a width of 600 millimeter or more; flat coated with zinc cold-rolled products of iron or non-alloy steel of a width of 600 millimeter or more, and flat cold-rolled products of iron or non-alloy steel of a width of 600 millimeter or more of a thickness of less than 0.5 millimeter.

During the fiscal year ended March 31, 2010 (fiscal 2010), the Company manufactured 804,231 million tons of cold-rolled steel strips/sheets/coils; 386,120 million tons of cold-rolled galvanized steel strips/sheets/coils; 76,393 million tons of color coated galvanized steel strips/sheets/coils, and 72,916 million tons of precision tubes. The Company has manufacturing plants in Ghaziabad, Uttar Pradesh; Dhenkanal, Orissa, and Khopoli, Maharashtra.


Company has received a prospecting license for an iron ore mine at Barbil in Orissa. Exploration work has initiated and supply is likely to start by the fiscal year 2012-13.

Company has also been allotted a coking coal mine, which has grades of primary soft coking coal with estimated reserves of about 55 million ton.

Company has also been allotted thermal coal mines at Patrapara with reserves of about 325 million tonne. The supply from this mine is expected by the fiscal year 2012-13.

To ensure long term supply of quality coking coal, the Company has already made a strategic tie-up with Bowen Energy, Australia. Bowen Energy has licences to explore 3 coking coal blocks in Bowen basin in Queensland, Australia.

4-Nov-10 21

.

Japans Sumitomo Metal to hold 40% in Bhushan's West Bengal project The Japan's third-largest steelmaker, Sumitomo Metal Industries, will acquire a 40 percent stake in the company's six million ton steel plant in West Bengal. Steel plant is situated in the Asansol-Durgapur belt of Bardhaman. The six-million ton steel plant is likely to entail an investment in excess of ` 20, 000 crore. Once the land is acquired there is a possibility that the deal with Sumitomo will be finalized and announced. Future Plans Company has added 2.2 MTPA of steel manufacturing in past 5 years, it is expected that company will be able to add another 3.0 MTPA in next 2 years. This will increase total capacity to 5.2 MTPA primary steel by fiscal year 2012-13. Along with 1.7 MTPA of processed steel and 840 MW of power, Company will emerge as a truly integrated Steel and Power major.

Source: Company

Our View: The company is poised for a strong growth. Company has increased its manufacturing capacity and proposed capacity is expected to be completed till FY13-14. Bhushan steel Ltd. is trading with a PE of 12.5 and EPS of 39.8 with a price of 501. Furthermore, we expect the stock to gain momentum on plans of capacity expansion and strategic tie-up with Sumitomo Metal Co. We recommend ACCUMLATE on the stock with a target of ` 613/- and stop loss below ` 490/-

4-Nov-10 22

Industry Electric Equipments


BSE Code 500008

Bloomberg Code AMRJ IN

Face Value 2

Market Data


52 week High/Low 228.05/139.00


CMP ` 198


Index Comparison

AMARA RAJA BATTERIES LTD.

AMRJ has emerged as the preferred supplier to almost all major cellular service providers, multinational telecom and power companies in the industrial business. In the automotive business, the Company commenced supply to five new platforms of OE customers and also tapped potential markets in Bahrain and Qatar. The Companys industrial battery unit witnessed double-digit growth in sales during 2009-10. The automotive battery unit revenue grew over 20% over 2008-2009 in FY10.


AMARON has a strong franchisee network. Company has around over 200 franchisees and 18,000 retailers; it strengthened its presence through 700 outlets in semi-urban and rural locations.

The auto sales numbers have jumped up on the backdrop of global economies showing signs of recovery and strong inflow of FIIs in Indian market. Along with this there has been new car variants launched in India.

Company has shifted its focus from OEM sales to replacement market as the average battery life being around 3-4 years. It is increasing its distribution network in this segment.

AMRJ currently has a capacity of 4.2mn four- wheeler, 1.8mn motorcycle and MVRLA and 900mn AH LVRLA batteries. AMRJ is aiming to add another 1.8mn capacity to existing MVRLA battery segment to double it to 3.6mn units.

During the year the capacity of MVRLA was increased from 1.20mn to 1.80mn per annum. It also intends to increase four- wheeler capacity from 4.2mn units to 5mn units by the end of this fiscal. The company plans to enter the tubular batteries segment in the next couple of years.

The telecom segment contributes 30% of the revenue in industrial segment.

4-Nov-10 23

Our View

The company has seen a turnaround in last two years. The telecom segment has been a tremendous source of generating revenue for the company. It contributes ~30% of the Industrial revenues. Company is expected to increase its manufacturing capacity in both small VRLA and Medium VRLA along with strong and improved distribution channel. Maintenance free batteries provided by AMRJ have been a revolution for the industry overall.

AMRJ is currently trading at price of ` 195/- with a multiple of 10 and Earnings multiple of 19.5. Company is at discount to the market leader Exide Industries. Exide has been producing good set of numbers based on its low dependence on telecom battery segment, high margins and large scale distribution network.

We recommend Accumulate on Dips rating on the stock with a price target of ` 270/- with an assigned PE multiple of 11.97 (at 31% discount to Exide multiple of 17.5) with FY12E earnings of 22.57. Stop loss below ` 180/-

4-Nov-10 24

Industry Crude Oil & Natural Gas


BSE Code 500312

Bloomberg Code ONGC IN

Face Value 10

Market Data


52 week High/Low 1472.00/997.35


CMP ` 1371


Index Comparison

ONGC LTD

ONGC ranks 3rd Oil & Gas Exploration & Production (E&P) Company in the world and 23rd among leading global energy majors as per Platts 250 Global Energy Companies List for the year 2009. It holds largest share of hydrocarbon acreages in India. It has maximum number of Exploration Licenses, including competitive NELP rounds. ONGC has bagged 120 of the 238 Blocks awarded in the 8 rounds of bidding, under the New Exploration Licensing Policy (NELP) of the Indian Government. ONGC has begged 17 out of 31 blocks awarded in NELP round VIII (14 as operator).


ONGCs performance depends strongly on reforms in the Indian oil and gas sector. The government has recently increased the price of the APM gas and has brought it on par with the KGD6 gas prices. The development is positive for ONGC, as it will substantially improve their earnings. However, the APM gas price hike would considerably increase the price of automotive fuel and cooking gas and could lead to a marginal hike in power tariff. Hence, we also expect an upward revision in the compressed natural gas (CNG) and piped cooking gas prices.

ONGC is Indias premier exploration company with 45% of the Indias NELP acreage (prospective blocks). Company is expected to increase focus in the NELP block over the next 2-3 years. ONGC has drilled only 13 NELP blocks and has established commercial prospects in the same, which implies potential for future discoveries and reserve accretion.

ONGC reported good set of numbers for operating performance during the current quarter; however

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Sep. 2010 Sep. 2009 % Var.

Sales 18193.59 15080.59 21

OPM % 62.23 59.55 4

PBDT 12227.08 9970.25 23

PBT 7827.01 7614.19 3

NP 5388.77 5089.64 6

the bottom-line was impacted because of higher DD&A expenditure.

ONGC is in line for a FPO which is expected late this fiscal or perhaps next fiscal. It is also expected that company may split the share value before the FPO. This move will strengthen the process of reforms in the oil sector.


Net profit of ONGC rose 5.88% to ` 5388.77 crore in the quarter ended September 2010 as against ` 5089.64 crore during the previous quarter ended September 2009. Sales rose 20.64% to ` 18193.59 crore in the quarter ended September 2010 as against ` 15080.59 crore during the previous quarter ended September 2009.

Our View:

We expect the trend of strong numbers to continue on account of impact of the gas price hike, along with decline in subsidy burden with deregulation of petrol prices and increase in diesel prices. We recommend Accumulate on the stock with a target of ` 1591/-. And stop loss below ` 1270/-

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For Any Queries please feel free to contact us

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Chetan Patel Ravinder Kasliwal

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Head Institutional Sales

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40751515*637

40751565/66

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Anshuman Jain Research Analyst 40751515 * 562 [email protected]

Divya Kant Research Analyst

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Kanu Dave Research Coordinator 40751515*577 [email protected]

Disclaimer Inventure Growth & Securities Ltd has prepared this Document. The information, analysis and estimates contained herein are based on Inventures assessment and have been obtained from sources believed to be reliable. Neither Inventure Growth & Securities Ltd nor any of its employees or associates accepts any liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for its completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This document is for circulation only

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