J Street Volume 277

Index Market View 1 Company Update 2 Around the Economy 3 Knowledge Corner 3 Mutual Fund 4 Commodity Corner 5 Forex Corner 6 Report Card 7 Editor & Contributor Margi Shah Special Contributors Ashesh Trivedi Aditya Nahar For suggestions, feedback and queries [email protected]

Market View:

Global uncertainties are growing

Last Saturday, we have stated that year 2016 will be a challenging year for the world market. The First day itself, majority of the stock exchanges worldwide fell by 3%. Because of slow down, China is forced to take measure which includes depreciating the value of currency. This depreciation in Yuan is creating havoc in the world market. Many permutation and combinations are getting distorted by this Chinese action. The world is worried as it is hard to predict the extent of problems in China and this fact itself is creating more and more uncertainties. We know that market does not like uncertainties. China is second largest economy of the world and any structural issue in Chinese economy will have cascading effect world over. Locally, we are also passing through uncertain time. We do not know the fate of reforms including GST. There can be many surprises either negative or positive going forward. Under the circumstances, it is advisable to go selective in the market having cash on hand. Technically any fall below 7550 – 7450 range will create panic in the market. This panic may throw some good opportunities for medium to long term investment in the market.

Kamal Jhaveri

MD- Jhaveri Securities

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Vol.: 277 11th January,2016

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Company Basics

BSE Code 509557

NSE Symbol GARWALLROP

EQUITY (` in Cr.) 21.88

MKT.CAP (` in Cr.) 866.53

Financial Basics FV (`) 10.00 EPS (`) 19.17 P/E (x) 20.66 P/BV (x) 2.80 BETA 1.0730 RONW (%) 14.72

Share Holding Pattern Holder's Name % Holding Foreign 1.91 Institutions 2.26 Promoters 50.59 Non Prom. 0.00 Public & Others 39.11 Government 6.14

Company Overview

Garware-Wall Ropes Ltd. (GWRL), is one of India's leading players in Technical Textiles with customers and end-users across the world. The company provides application-focused solutions for various sectors including Deep Sea Fishing, Aquaculture, Shipping, Agriculture, Sports, Infrastructure, Defence and Transportation.

Investment rational

Strong products portfolio and has wide range of end users

GWPL is the largest domestic player in Technical Textile industry that provides application focus solutions to various traditional sectors like Fisheries, Aquaculture and also cater to new and rising sectors like Sports, Defence and Transportation with its wide range of product portfolios. End-users of Company's products include Fishermen, Shipping Companies, Oil Drillers, Agriculturists, Packers, Transporters, Construction companies, Municipalities, Government Organizations, Clubs, Universities and Manufacturing Plants. The company also provide various product and solution for Water management, Waste management, erosion control applications. Apart from being a leading player in the domestic market, GWPL has a dominant share of markets in North America, and parts of Europe and Australia for several products.

Falling crude oil prices and currency devaluation work well for GWRL

Most of the Raw Material (like High Density Polyethylene ,Polypropylene, Nylon Polyester Yarn) consumed by the GWRL is crude based derivatives which constitutes ~50% of total expenditure. RM cost as % of sales remains in the range of 45%-47% in last five years. Falling in crude oil price (Brent crude touched lowest level since 2004) leads to added advantage for GWRL in the form of margin expansion. RM cost as % of Sales fell from 47% in 6MFY15 to 43% in 6M FY16 leads to EBITDA margin expansion of 137bps to 11.80% in H2FY16 (v/s 10.43% in H2FY15). Rupee depreciation help s to maintain top line better due to exports revenue contributes ~49% of top line as company has increased its focus on USA, Canada and Europe.

Valuation : GARWALLROP is trading at `401. We recommend “Buy” with target price of `550, valuing stock

20xFY18E EPS of `27.47.The stock currently trades at 22.27x of FY16E, 18.56x of FY17E and 15.47x of

FY18E.

Company Update : Garware-Wall Ropes Ltd.


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Weekly Market Recap :

• The outcome of a monthly survey on 4 January 2016 showed that incessant rainfall in Chennai in December 2015 impacted heavily on India's manufacturing sector in that month. The seasonally adjusted Nikkei India Manufacturing Purchasing Managers' Index (PMI) slipped to 49.1 in December 2015 from 50.3 in November 2015.

• China's stocks took a plunge on 4 and 7 January 2016 after its central bank set onshore yuan's value lower to the US dollar, deepening concerns about China's economy and after it ushered in 7% limit in the new circuit-breaker system.

• Latest data on 6 January 2016 showed that the Caixin China services purchasing managers' index (PMI) fell to a 17-month low of 50.2 in December 2015 from 51.2 in November 2015.

Market Eye Week ahead : • On macro front, data on industrial production for November 2015 will be announced by the government on Tuesday, 12

January 2016. Growth in industrial production surged to 60-month high of 9.8% in October 2015 over a year agocompared with the revised growth of 3.8% in September 2015.

• The data on inflation based on the consumer price index (CPI) for December 2015, is due to be announced by thegovernment on Tuesday, 12 January 2016. CPI spiked to 5.41% in November 2015 from 5% in October 2015.

• The government will unveil the data on wholesale price index (WPI) for December 2015 on Thursday, 14 January 2016.WPI stood at negative 1.99% in November 2015 compared to a reading of negative 3.81% for October 2015.

• Shares of public sector oil marketing companies (PSU OMCs) will be in focus as a regular fuel price review is due duringthe middle of the month.

KEY EVENTS/FACTORS TO WATCH 1. Tue: CPI data for the month of December, IIP data for the month of November, TCS, DCB bank, Indusind bank, Federal bank

earnings

2. Wed: Everest Industries, RIIL earnings

3. Thu: WPI data for the month of December, Infosys, Cyient earnings

4. Fri: Gruh finance, HUL, Tide water oil, ZEEL earnings

5. Sat: LIC housing finance earnings

Relative Strength Index - RSI'

• A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought

and oversold conditions of an asset. It is calculated using the following formula: • RSI = 100 - 100/(1 + RS*) • When RSI goes above 70 or below 30, it indicates that a stock is overbought or oversold and vulnerable to a trend reversal.

Around The World


Knowledge Corner :

Mutual Fund Corner

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Source : - www.valueresearchonline.com

Fund Name Scheme Name UTI MNC Fund

AMC UTI Asset Management Company

Type Others

Category Open-ended and Equity

Launch Date July 1998

Fund Manager Swati Kulkarni

Net Assets (` In crore ) Rs. 1806.3 crore as on Dec 31, 2015

Top 10 Sector Break-Ups Fund (%)

FMCG 27.27 Automobile 17.39 Engineering 16.13 Construction 8.32 Healthcare 7.52 Technology 5.51 Financial 3.03 Metals 2.66 Chemicals 1.56 Energy 1.38

Composition (%) Equity 92.96

Debt 0.10

Cash 6.94

Risk Analysis Volatility Measures Standard Deviation 15.82 Sharpe Ratio 1.16 Beta 0.91 R-Squared 0.62 Alpha 14.56

History 2013 2014 2015 2016 NAV (Rs) 82.41 134.28 151.27 146.41

Total Return (%) 10.61 62.94 12.65 -3.21

+/-Nifty 50 3.85 31.55 16.71 1.13

+/- Nifty MNC 2.87 20.47 5.20 2.00

Rank (Fund/Category) 5/32 - - -

52 Week High (Rs) 82.41 137.74 163.93 -

52 Week Low (Rs) 67.48 76.85 134.33 -

Net Assets (Rs.Cr) 278.62 538.80 1716.20 -

Expense Ratio (%) 2.69 2.81 2.60 -

Fund Style

Investment Style Growth Blend Value Large

Medium

Small

Capitalization


Fund Performance v/s S&P CNX Nifty

—– Fund —– CNX Nify (Rebased to 10,000)

Commodity Corner

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FUNDAMENTAL: Bullion prices last week rallied where gold prices ended with over 4 percent gains followed by around one and half percent gains in silver prices as investors sprinted to safe-haven assets due to jitters over the Chinese economy and tumbling stock markets. In a move that deepened concerns over China's economic health, the People's Bank of China set the yuan midpoint rate lower for an eighth consecutive day. The 0.5 percent decline was the biggest between daily fixings since August. China's central bank is under increasing pressure from policy advisers to let the yuan currency fall quickly and sharply, by as much as 10-15 percent, as its recent gradual softening is thought to be doing more harm than good. The Labor Department said U.S. job growth surged in December, and revised employment for the prior two months sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary. That surprisingly strong payrolls report initially lifted stocks but they later lost ground. A strong report could be seen as prompting the Federal Reserve to lift interest rates at a faster pace. The unemployment rate remained un-changed at 5.0%, in line with consensus estimates. The U-6 unemployment rate, a broader gauge of the national employment situation, also stayed unchanged at 9.9%, remaining near its lowest level since May, 2008. Last month, average hourly earnings were flat, falling below consensus estimates of a 0.2% increase. Rising rates typically weigh on gold, as they lift the opportunity cost of holding non-yielding assets, while boosting the dollar. Jitters over the Chinese economy had spooked global stock markets earlier this week, sending investors sprinting to safe-haven assets, and pushing gold sharply higher. Investment appetite for bullion showed signs of picking up this week. Holdings of the world's largest gold-backed exchange-traded fund, New York-listed SPDR Gold Shares, rose 4.46 tonnes, data from the fund showed. Premiums on the Shanghai Gold Exchange, the platform for all physical gold trade in China and a good indicator of demand in the country, held at a healthy $4- $5 for most of the week. RECOMMENDATION : BUY GOLD @ 25850 SL 25600 TGT 26150-26400. BUY SILVER @ 33600 SL 32900 TGT 34200-34800 FUNDAMENTAL: Base metals prices last week ended with weak trend as investors focused on the deteriorating outlook for China and its impact on the global economy. There is little hope of clarity on demand prospects for industrial metals in China until after the Lunar New Year holiday in February. Adding to risk aversion, the People's Bank of China set its official yuan midpoint rate lower compared with Wednesday's fix. It was the largest daily drop in the midpoint rate since last August, when an unexpected almost 2% devaluation of the currency sparked a broad based selloff in markets. Some market players see the tactic as an attempt by China to shore up growth, while others are concerned over a currency war that could destabilize the global economy. Some support for copper could come from China's state stockpiling agency, the State Reserve Bureau, which is expected to start buying domestic copper supply this month after local smelters urged it to intervene, industry sources said. China's consumer inflation barely edged up in December while companies' factory-gate prices continued to fall, adding to concerns about growing deflation risks in the world's second-largest econ-omy. In line with sluggish activity, China's consumer inflation quickened slightly to 1.6 percent year-on-year in December, as expected, compared with 1.5 percent the previous month. Business activity in China's manufacturing sector booked the lowest level in three months in December, driven in part by a further fall in total new work, the latest report from the Caixin Insight Group revealed. At the end of the fourth quarter, Caixin China General Manu-facturing PMI measure edged down to 48.2, compared to a reading of 48.6 in November, well below the 50-point level that separates growth from con-traction. Combined zinc inventories in Shanghai, Tianjin and Guangdong added 8,900 to 335,200 tonnes this past week. Shipments arriving in the three regions increased significantly after the New Year holiday. Goods releases after the holiday added to inventories in Tianjin and Guangdong, with out-ward shipments stable. Alcoa announced production cuts this past week, and supply in China is tightening as more smelters cut output. In domestic spot market, more aluminum processors will enter the market to replenish stocks after prices stabilize. Japan's aluminum imports are expected to shrink for a second year running in 2016, after buyers skipped or trimmed purchases for January-March shipments due to still-high levels of local inventory. RECOMMENDATION : SELL COPPER @ 305 SL 314 TGT 298-290. SELL ZINC @ 102 SL 105 TGT 99-97. SELL NICKEL @ 570 SL 585 TGT 555-545. BUY ALUMINIUM @ 97 SL 94 TGT 100-103. Lead BUY LEAD @ 107 SL 105 TGT 110-115 FUNDAMENTAL: Crude oil prices ended with heavy losses on dismal news from China, a variety of geopolitical tensions and brimming oil supplies. Goldman Sachs said more losses were needed to force producers to cut supplies adequately to balance the glut and bleak demand outlook in the mar-ket. Goldman, which has said oil could hit $20, said in a note the market needs to see sustained low prices through the first quarter "so producers will move budgets down to reflect $40 a barrel oil for 2016." The note, based on interactions between oil producing companies and investors at a old man conference in Miami this week, concluded that producers were not ready to slash output at current prices. In its weekly petroleum status report, the US EIA reported a draw of 5.1mbls in U.S. crude inventories for the week ending on January 1, significantly below forecasts for a build of 500kbpd. At 482.3mbls, U.S. crude oil inventories remain near levels not seen for this time of year in at least the last 80 years. Although a significant draw has typically provided upside pressure for crude prices in recent months, inventories are generally drawn down in the final weeks of the year as companies look to avoid year-end tax burdens. Iran expects to raise its crude oil exports by 1mbpd in 2016, after a wide range of economic sanctions against the Gulf state are eased later this year. Natural gas prices ended with over four percent gains on improving signs of demand as cold weather creeping back into forecasts for the eastern U.S. Frigid conditions in the Midwest will reach the East Coast next week, lingering through Jan. 22, according to an update to the government’s Global Forecast System weather model. The lower temperatures have stoked heating demand and curtailed production, limiting the size of weekly stockpile gains. A stockpile surplus to the five-year average has been expanding since the week ended Dec. 11. Inventories totaled 3.643 trillion cubic feet as of Jan. 1, 14.6 percent above the norm. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 1 fell by 113 billion cubic feet, more than expectations for a decline of 99 billion. RECOMMENDATION : SELL CRUDE OIL @ 2280 SL 2400 TGT 2120-1980. BUY NAT.GAS @ 158 SL 150 TGT 165-175

BULLION

BASE METALS

ENERGY


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Commodity Corner

USD/INR

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Forex Corner

EUR/INR

GBP/INR

JPY/INR

Market Eye Week ahead :

• USD-INR pair finally closed the week at 66.82 levels showing some some strength from previous week. The rupee is further expected to trade on weaker note today on bleak fundamental data on fiscal balance released recently. Also, FII outflows and weak equities may keep pressure on the rupee in coming week. We suggest to buy the pair on decline.

Level S2 S1 CP R1 R2 High Low Close

USD/INR 66.47 66.12 66.81 67.16 67.50 67.15 66.46 66.82


JPY/INR 55.57 54.68 56.33 57.22 57.98 57.10 55.45 56.45


GBP/INR 97.18 96.66 98.08 98.60 99.50 98.97 97.55 97.71

Level S2 S1 CP R1 R2 High Low Close EUR/INR 71.94 71.18 72.55 73.31 73.92 73.17 71.80 72.69

Market Recap :

• The Indian rupee edged lower at commencement on Monday, 11 January 2016 owing to dollar strengthened overseas.

• The domestic currency opened at Rs 66.91 against

the dollar but managed to bounce back to a high of 66.78 so far during the day. In the spot market, the Indian unit was last seen trading at 66.7825.

• On Friday, the rupee had gained 30 paise to end at

66.63 against the American currency following a heavy dollar selling by banks and exporters.

• The U.S. dollar index, which measures the

greenback's strength against a trade-weighted basket of six major currencies, was quoted down 0.27% to 98.19.


• Nifty finally closed the week at 7601.35 thereby showed a net fall of 361 points on week to week basis. Last week, we had revised

the stop loss up to 7850 with the objective that if breakout above 7979 failed the slide could happen sharply. We saw that Nifty fell sharply without making any attempt to cross 7979. As a result of which a crash to7556 was witnessed. The last bottom support cluster is at 7530 and 7420. It times for passive investors to look at panic points to accumulate and only at panic points (7500-7400).

• Macroeconomic data, Q3 results of India Inc., trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), the movement of rupee against the dollar movement will dictate trend on the markets in the near term.

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J Street Recommendations Report Card

Top Fundamental Stocks

Stocks Rec. Date CMP on Rec. CMP Target Absolute Return @

CMP Status

Garware‐Wall Ropes 28/12/2015 425 401 550 -6% Buy

Welspun syntax Ltd. 23/11/2015 121 138 223 14% Buy

Natco Pharma 02/11/2015 509 587 636 15% Buy

SRF Ltd. 21/09/2015 1140 1295 1374 14% Accumulate

Ahluwalia contracts 24/08/2015 235 275 368 17% Buy

Sun Pharma 03/07/2015 831 782 1041 -6% Buy

Infinite Computer Sol. 20/07/2015 190 244 255 28% Buy

Nitin Spinners Ltd. 06/07/2015 79 84 94 7% Buy

Bank of Baroda 01/06/2015 163 139 217 -15% Buy

Ambika Cotton Mills 18/05/2015 880 864 1149 -2% Buy

Sadbhav Engineering Ltd.

04/05/2015 298 314 430 5% Buy

Omkar speciality Chemicals

16/03/2015 152 234 251 54% Buy

DHFL 16/02/2015 252 222 368 -12% Buy

TV Today Network 27/01/2015 222 340 337 53% Buy

M&M 12/1/2015 1238 1163 1452 -6% Buy

Havells India 27/10/2014 274 296 346 8% Buy

PTC India Fin. Ser. 07/07/2014 39 39 45 0% Buy

Adani Port 05/07/2014 280 234 347 -16% Buy

It's not important whether you are right or wrong, It’s about how much money you make when you're right and how much you lose when you're wrong.”


J Street Volume 277

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