Global Economic and Political News and It's Impact:-
1. FIIs pumped in close to Rs 21000 crore :-
While the RBI has begun the rate cut cycle, there is plenty of headroom for further cuts going forward, which would help in boosting growth and reviving the investment cycle in Asia's third largest economy.
India remains in a sweet spot as the macro-economic environment is expected to improve further, which will drive earnings and the Sensex higher in the near future.
"We might expect that the markets will track earnings growth, which is likely to be about 18% to 20% over the next couple of years," says Dhiraj Sachdev, Sr VP & Fund Manager-Equities, HSBC AM.
"So, our sense is that 18% to 20% is a reasonable kind of earnings growth that can be expected from next year onwards because of the fall in interest rates and the fall in raw material prices etc.," he adds.
With valuations looking reasonable, the Indian markets still have a long way to go and mid and small cap stocks are likely to outperform the markets in the year 2015.
Investors in top mid-cap mutual fund schemes have raked in big money in the past year as the sharp rally in smaller shares helped this category outperform others
Large-cap schemes have returned 49.81%, while diversified funds - which invest in both large and midcaps - fetched about 60%, ET reported.
Fund and wealth managers remain optimistic about the prospects of mid and small-cap stocks over the next three years, but do not rule out a breather for them in 2015.
Vineet Bhatnagar, MD, PhillipCapital, is of the view that the trend is likely to continue. "There will be lull periods, where midcap or quality midcaps with multi-bagger kind of potential will start doing well," he says.
But the key to get multibagger returns is how long you hold the stock. If an investor books profit at an early stage, he would not be able to reap benefits of multibaggerr returns which would happen over time.
Enduring multi-baggers are those companies whose wealth creation is long-lasting. Great businesses run by good managements purchased at huge 'margin of safety' will create enduring multi-baggers, says the Motilal Oswal report.
We have spoken to various analysts and here are their multibagger ideas:
Sun Pharma Advanced Research Ltd:
This is closest that you can get to a stock which is into something as risky and rewarding as oil exploration. The stock has already doubled investors' wealth so far in the month of January alone.
Even if one out of something like 27 molecules make it commercial, they would actually get rewarded for all that efforts. The best part is that the promoter has been funding the business from its own wealth consistently, because it needs money, wages to be paid out etc.
"Also, there is nothing much in infrastructure, but if you see the facility, it is a very small facility which moved out of Baroda when the group split itself and came to Andheri and they still operate out of the same place," says Prakash Diwan, Director, Altamount Capital Management.
"It was fascinating to see that there is nothing else except for just believing that they will get rewarded, and that started happening. This could continue to be a multibagger even many fold from here. So it is not like a limit," he adds.
PTC India Financial Services:
This stock, 'PFS', is one of the best among non-banking financial services (NBFC) names. The company saw healthy set of numbers last quarter, with disbursements rising to around 70 per cent. In addition, the renewable space in which the company is a master is growing at an excellent space.
The parent of this company, PTC, which is into short and long-term power trading, will ensure that its financing arm would tend to get a lot of new projects going forward. If the company's NIMs were at around 6.2 per cent, it has capital adequacy ratio of 26 per cent. The return ratios are fantastic.
"We expect 21 per cent return on equity (ROEs) by FY2016-17, and we feel that the stock is currently hugely undervalued. At Rs 87 per share, which is our target price, the stock would be somewhere around 2.5 times its price to book value," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.
Suven Life Sciences:
Suven Life Sciences is an excellent high-growth, high-margin business which operates out of the new chemical entity-based, contract research-manufacturing space.
Typically, it is a pharma stock which enjoys very high margins. In addition, it has a huge monetisation opportunity for one of its molecule - SUVN-502. The molecule is in the advance stage.
Other than this, the company has no working capital issues; it has superb balance sheet, and good return ratios.
"We feel that this stock can probably be a dark horse going forward. We have a very conservative price target of around Rs 336 for Suven Life Sciences," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.
Mayur Uniquoters Ltd:
Over the years, Mayur has successfully created its moat within a competitive industry and is working towards widening it. Mayur is a professionally-run company investing in R&D with a focus on value added products, while the other 5-6 organized players have languished much like the unorganized sector, Motilal Oswal said in the report
Over the last 4 years, Mayur has acquired clients such as Ford and Chrysler in the US and is currently in discussions with Mercedes, BMW, Toyota and GM. The top 6-7 auto OEMs in the US purchase synthetic leather worth INR5b each annually which translates into an addressable market of INR30b.
Given the robust revenue visibility with global OEM clients coming on board, improving realizations with rise in share of exports and visionary top management, Motilal Oswal believes that Mayur can sustain 25% CAGR in profits over FY14-17E and beyond along with core ROE of 30%.
They value the business at 25x FY17E EPS (PE/G of 1x) and recommend a BUY rating on the stock with a target price of INR600/share
Technocraft Industries Ltd:
Technocraft commands 36% market share of the Global (ex-China) steel drum closure industry having a size of INR 700 cr. With the largest player being Greif, having over 50% market share, the top two players together command over 86% of the global (ex-China) market share, thus making the industry a duopoly.
Given Technocraft's superior industry positioning in drum closures, incremental growth being driven by the scaffolding division and increasing contribution from the IT division, we believe Technocraft is available at attractive valuations of 4.7x FY17E EPS, Motilal Oswal said in a report.
"Our SOTP-based price target for Technocraft is at INR 300 providing for an upside of 54% over the next one year," added the report.
Indian Economic and Political News and It's Impact:-
1. Mining Sector Reform :-
New Deals and It's Impact:-
Market Outlook:-
Big Bulls Entry & Exit:-
29th January 2015, Rakesh Jhunjhunwala bought a chunk of stock in a small cap company called “Man Infraconstruction”. The Badshah bought 30,00,000 shares at Rs. 36 each, making an investment of Rs. 10.80 crore.
The unique aspect of Man Infra is that it is involved in both activities, real estate and contracting. It is an integrated EPC (Engineering, Procurement and Construction) company with strong focus on Road, Port, Residential, Commercial and Industrial construction segments.
In the real estate segment, the Company has a number of on-going projects, including one for Tata Housing of 8 towers at Mulund, Mumbai. There are a couple of other residential and commercials building projects being executed.
In the contracting segment, Man Infra appears to have only one on-going BOT project, which is the Hadapasar-Saswad road in Pune. The length of the road is 41 km and the estimated cost of the project is Rs. 424 crore.
The other remarkable aspect of Man Infra is that it is a near zero debt Company with cash and cash equivalent of Rs. 111 crore as on March 31, 2014.
The future prospects for Man Infra appear to be bright if you bear in mind the fact that the entire construction and road space will open up. It is expected that there will be Rs. 600 billion investments in new ports and airports, power projects, waterways, urban and rural infrastructure and road building. Another area of opportunity is that of redevelopment of old buildings. According to a report in the DNA, about 17,000 old buildings in South Mumbai alone are going in for redevelopment. There are thousands of other buildings all over the city which can be candidates for redevelopment.
One indication that Man Infra is on a strong footing comes from its Q2FY15 results.
Of course, the unanswered question is why Rakesh Jhunjhunwala would be interested in Man Infra given its small size. The amount invested by him in the Company is not even equal to petty cash by the Badshah’s standards. Even if the stock triples or quadruples, it won’t “move the needle” for Rakesh Jhunjhunwala.
1. FIIs pumped in close to Rs 21000 crore :-
While the RBI has begun the rate cut cycle, there is plenty of headroom for further cuts going forward, which would help in boosting growth and reviving the investment cycle in Asia's third largest economy.
India remains in a sweet spot as the macro-economic environment is expected to improve further, which will drive earnings and the Sensex higher in the near future.
"We might expect that the markets will track earnings growth, which is likely to be about 18% to 20% over the next couple of years," says Dhiraj Sachdev, Sr VP & Fund Manager-Equities, HSBC AM.
"So, our sense is that 18% to 20% is a reasonable kind of earnings growth that can be expected from next year onwards because of the fall in interest rates and the fall in raw material prices etc.," he adds.
With valuations looking reasonable, the Indian markets still have a long way to go and mid and small cap stocks are likely to outperform the markets in the year 2015.
Investors in top mid-cap mutual fund schemes have raked in big money in the past year as the sharp rally in smaller shares helped this category outperform others
Large-cap schemes have returned 49.81%, while diversified funds - which invest in both large and midcaps - fetched about 60%, ET reported.
Fund and wealth managers remain optimistic about the prospects of mid and small-cap stocks over the next three years, but do not rule out a breather for them in 2015.
Vineet Bhatnagar, MD, PhillipCapital, is of the view that the trend is likely to continue. "There will be lull periods, where midcap or quality midcaps with multi-bagger kind of potential will start doing well," he says.
But the key to get multibagger returns is how long you hold the stock. If an investor books profit at an early stage, he would not be able to reap benefits of multibaggerr returns which would happen over time.
Enduring multi-baggers are those companies whose wealth creation is long-lasting. Great businesses run by good managements purchased at huge 'margin of safety' will create enduring multi-baggers, says the Motilal Oswal report.
We have spoken to various analysts and here are their multibagger ideas:
Sun Pharma Advanced Research Ltd:
This is closest that you can get to a stock which is into something as risky and rewarding as oil exploration. The stock has already doubled investors' wealth so far in the month of January alone.
Even if one out of something like 27 molecules make it commercial, they would actually get rewarded for all that efforts. The best part is that the promoter has been funding the business from its own wealth consistently, because it needs money, wages to be paid out etc.
"Also, there is nothing much in infrastructure, but if you see the facility, it is a very small facility which moved out of Baroda when the group split itself and came to Andheri and they still operate out of the same place," says Prakash Diwan, Director, Altamount Capital Management.
"It was fascinating to see that there is nothing else except for just believing that they will get rewarded, and that started happening. This could continue to be a multibagger even many fold from here. So it is not like a limit," he adds.
PTC India Financial Services:
This stock, 'PFS', is one of the best among non-banking financial services (NBFC) names. The company saw healthy set of numbers last quarter, with disbursements rising to around 70 per cent. In addition, the renewable space in which the company is a master is growing at an excellent space.
The parent of this company, PTC, which is into short and long-term power trading, will ensure that its financing arm would tend to get a lot of new projects going forward. If the company's NIMs were at around 6.2 per cent, it has capital adequacy ratio of 26 per cent. The return ratios are fantastic.
"We expect 21 per cent return on equity (ROEs) by FY2016-17, and we feel that the stock is currently hugely undervalued. At Rs 87 per share, which is our target price, the stock would be somewhere around 2.5 times its price to book value," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.
Suven Life Sciences:
Suven Life Sciences is an excellent high-growth, high-margin business which operates out of the new chemical entity-based, contract research-manufacturing space.
Typically, it is a pharma stock which enjoys very high margins. In addition, it has a huge monetisation opportunity for one of its molecule - SUVN-502. The molecule is in the advance stage.
Other than this, the company has no working capital issues; it has superb balance sheet, and good return ratios.
"We feel that this stock can probably be a dark horse going forward. We have a very conservative price target of around Rs 336 for Suven Life Sciences," says Devang Mehta, senior VP & head of equities sales at Anand Rathi Financial Services.
Mayur Uniquoters Ltd:
Over the years, Mayur has successfully created its moat within a competitive industry and is working towards widening it. Mayur is a professionally-run company investing in R&D with a focus on value added products, while the other 5-6 organized players have languished much like the unorganized sector, Motilal Oswal said in the report
Over the last 4 years, Mayur has acquired clients such as Ford and Chrysler in the US and is currently in discussions with Mercedes, BMW, Toyota and GM. The top 6-7 auto OEMs in the US purchase synthetic leather worth INR5b each annually which translates into an addressable market of INR30b.
Given the robust revenue visibility with global OEM clients coming on board, improving realizations with rise in share of exports and visionary top management, Motilal Oswal believes that Mayur can sustain 25% CAGR in profits over FY14-17E and beyond along with core ROE of 30%.
They value the business at 25x FY17E EPS (PE/G of 1x) and recommend a BUY rating on the stock with a target price of INR600/share
Technocraft Industries Ltd:
Technocraft commands 36% market share of the Global (ex-China) steel drum closure industry having a size of INR 700 cr. With the largest player being Greif, having over 50% market share, the top two players together command over 86% of the global (ex-China) market share, thus making the industry a duopoly.
Given Technocraft's superior industry positioning in drum closures, incremental growth being driven by the scaffolding division and increasing contribution from the IT division, we believe Technocraft is available at attractive valuations of 4.7x FY17E EPS, Motilal Oswal said in a report.
"Our SOTP-based price target for Technocraft is at INR 300 providing for an upside of 54% over the next one year," added the report.
Indian Economic and Political News and It's Impact:-
1. Mining Sector Reform :-
When he took over the reins last year, Prime Minister
Modi gave us two mantras — ‘minimum government, maximum governance’ and
‘Make in India’. His philosophy is to reduce inefficiencies and delays,
put the economy on fast track and turn India into a global manufacturing
hub. In the past seven months of his governance, several policy
decisions taken by the government tells us that it really walks the
talk.
In its last winter session, the Rajya Sabha
came to a standstill and did not pass key bills such as the Insurance
Laws (Amendment) Bill and the Coal Mines (Special Provisions) Bill,
which were cleared by the Lok Sabha.
However, in
accordance with the commitment to improve governance and enhance the
overall investment and business environment, the government issued
Ordinances to start coal auction and allow foreign direct investment in
insurance, apart from promulgating an Ordinance on land acquisition.
Right direction
The
Mines and Minerals (Development and Regulation) (MMDR) Amendment
Ordinance, 2015, is another example of the government’s intent to ensure
ease of business and encourage economic growth.In this respect Sesa Sterelite , 20 Microns could have been a good buy as they are trading in a very low PE.
While
there is a debate on whether the ordinance route is valid or not, the
MMDR Ordinance is an important step to ensure that the nation’s mineral
reserves are used judiciously and safeguard investments already made by
steel and cement industries.
With vast reserves of
iron ore and other favourable economic factors, the steel industry is
poised to become a leading global exporter. However, recent policy
uncertainty and the delay by certain state governments in renewing
mining leases led to the closure of many mines, impacting not only the
industry reliant on domestic iron ore, but leaving state exchequers
empty and leading to an increased reliance on iron ore import.
With
the date of last renewal of mining leases extended to March 31, 2030
(for captive miners) or till March 31, 2020 (for merchant miners), the
fate of mining leases is no longer uncertain.
The
transition time of five or 15 years allowed for the present lessees is a
positive move to ensure that the momentum of growth is sustained and
allows both the industry and the government to prepare for auctions more
adequately.
The Ordinance provides for a
transparent, auction-based allocation mechanism, wherein mineral
administration will be streamlined to feed the government’s vision of
manufacturing-led growth.
Planning long-term
Steel
plants are high investment projects with long gestation periods. It is,
therefore, necessary to streamline the supply of raw material such as
iron ore at competitive prices to maintain the economic viability of
existing projects and incentivise investment in expansions.
Further,
the life of capital-intensive steel plants is much longer than the 20
or 30-year lease periods for which captive mines are allocated. Hence,
the government policies need to take a long-term view to support
industry operations. The Ordinance has acknowledged this concern and has
introduced 50-year leases for all mines.
It is
estimated that 500,000 people are employed by the steel industry today,
with a 3 mtpa (million tonne per annum) steel plant generating direct
employment for nearly 3,000 workers and indirect employment for another
16-20 thousand people.
Mines supplying to these
steel plants have also invested substantially towards developing
sustainable mining practices along with the infrastructure, investing in
skill development, education and medical interventions over the years.
Historical reasons
The
Ordinance acknowledges these investments and offers a solution to the
renewal issue that safeguards the investments incurred by these miners.
There is a background and a rationale to this provision. In eastern
India, end-use facilities for the steel industry were established
decades ago in geographically challenging areas, on the basis of
proximity to raw material sources as an effort to address logistics
concerns at those times. The government has, accordingly, taken a
decision with regard to the transition periods.
End
use facilities were set up decades ago in India’s eastern region on the
basis of proximity to raw material sources despite the logistical
disadvantages and high freight cost due to the distance from the market
as well as customer.
However, the relatively new
players, especially those who established their end-use projects post
liberalisation, did not face this disadvantage as they were able to
establish their plants close to the ports as well as in close proximity
to the customer and the market. Hence, these new players have been able
to enjoy lower freight costs with respect to raw material procurement as
well transportation of the finished products to customers.
The
new generation end-use projects did have an opportunity to own and
operate captive mines at the time they set up their plants. However, as
the cost of raw material was low at the time, there appeared no
competitive advantage of owning these mines. Owning and operating
captive mines also included the challenge of higher logistic costs,
development of remote areas including the creation of infrastructure in
and around mines, civic amenities and dealing with trade unions. Thus,
at that point in time, the decision to purchase raw material appeared
rationale.
It was only at the start of the 21st
century, when the prices of raw materials such as coal and iron ore saw a
significant rise as a result of the exponential growth of China, that
most end-use companies realised the importance and need for owning and
operating captive mines.
A level-playing field
The
Ordinance has drawn a perfect balance between investments already made
and the ones that are yet to be made, creating a level playing field.
The provision to establish a District Mineral Foundation (DMF) in the
interest of affected communities is another positive from the ordinance.
Industry must support the development of mineral rich districts and
should widely welcome the clarity in the Ordinance, which specifies that
the DMF contribution will now not exceed a third of the royalty rate in
the respective minerals.
Overall, the MMDR Ordinance
looks at boosting transparency in mining while streamlining the
delivery development mechanism, which have been the biggest issues with
the sector in the past. It paves the way for an effective and efficient
framework with regard to the grant and renewal of mining leases. But it
can succeed only if it is widely supported by state governments and
industriesNew Deals and It's Impact:-
Market Outlook:-
Big Bulls Entry & Exit:-
29th January 2015, Rakesh Jhunjhunwala bought a chunk of stock in a small cap company called “Man Infraconstruction”. The Badshah bought 30,00,000 shares at Rs. 36 each, making an investment of Rs. 10.80 crore.
| Man Infra Q2FY15 Results | |||
|---|---|---|---|
| Particulars (Rs cr) | Sep 2014 | Sep 2013 | %Chg |
| Net Sales | 66.63 | 88.53 | -24.74 |
| Other Income | 33.5 | 10.87 | 208.19 |
| Total Income | 100.12 | 99.41 | 0.71 |
| Total Expenses | 62.13 | 83.78 | -25.84 |
| Operating Profit | 37.99 | 15.63 | 143.06 |
| Net Profit | 23.16 | 7.7 | 200.78 |
| Equity Capital | 49.5 | 49.5 | – |
The unique aspect of Man Infra is that it is involved in both activities, real estate and contracting. It is an integrated EPC (Engineering, Procurement and Construction) company with strong focus on Road, Port, Residential, Commercial and Industrial construction segments.
In the real estate segment, the Company has a number of on-going projects, including one for Tata Housing of 8 towers at Mulund, Mumbai. There are a couple of other residential and commercials building projects being executed.
In the contracting segment, Man Infra appears to have only one on-going BOT project, which is the Hadapasar-Saswad road in Pune. The length of the road is 41 km and the estimated cost of the project is Rs. 424 crore.
The other remarkable aspect of Man Infra is that it is a near zero debt Company with cash and cash equivalent of Rs. 111 crore as on March 31, 2014.
The future prospects for Man Infra appear to be bright if you bear in mind the fact that the entire construction and road space will open up. It is expected that there will be Rs. 600 billion investments in new ports and airports, power projects, waterways, urban and rural infrastructure and road building. Another area of opportunity is that of redevelopment of old buildings. According to a report in the DNA, about 17,000 old buildings in South Mumbai alone are going in for redevelopment. There are thousands of other buildings all over the city which can be candidates for redevelopment.
One indication that Man Infra is on a strong footing comes from its Q2FY15 results.
Of course, the unanswered question is why Rakesh Jhunjhunwala would be interested in Man Infra given its small size. The amount invested by him in the Company is not even equal to petty cash by the Badshah’s standards. Even if the stock triples or quadruples, it won’t “move the needle” for Rakesh Jhunjhunwala.
No comments:
Post a Comment