Stock Martket BSE » Stock Market Advice

GlaxoSmithKline Pharma- Religare, Hitchens and Harrisons Stock Tips

admin — Mon, 22 Feb 2010 03:45:16 +0000

Reco price: Rs 1,580
Current market price: Rs 1,649.65
Target price: Rs 1815
Upside: 10%
Brokerage: Religare, Hitchens & Harrisons

GSK Pharma launched five products (including one vaccine – Cervarix) in CY09. The vaccine portfolio has seen a positive surprise in terms of demand. Going ahead, the company is expected to launch 6–8 products per year. Some of these will be positioned in the niche segment. In addition to the in-house product range, the company will have access to the dermatology portfolio of Stiefel.

The management has guided for revenue growth of 12–13 per cent for CY10 and CY11, up from the 9–10 per cent run-rate posted in the past two years. New product launches are expected to underpin the growth shift. GSK Pharma’s EBITDA margin increased 10 basis points to 36 per cent in CY09. The company intends to increase its field force and raise promotional expenses to support its new product basket. However, these incremental costs will be offset by an improving product mix and stronger operating leverage. In addition, niche product opportunities will offer a margin upside. The brokerage has revised its earnings estimates for Glaxo by 2–3 per cent for CY10 and CY11 to reflect the upbeat growth prospects, and maintains buy on the stock, which is currently trading at a P/E of 23 times its estimated CY10 earnings.

FAG Bearings – Short Term Investment

admin — Mon, 22 Feb 2010 03:43:21 +0000

Reco price: Rs 554
Current market price: Rs 525
Target price: Rs 600
Upside: 14.3%
Brokerage: HDFC Securities

FAG Bearings India (FBIL) has reported poor results for fourth quarter ending December 2009. The company reported a growth of 17 per cent in net sales to Rs 219 crore on the back of demand from auto and industrial segments. However, the company’s EBIDTA margin dropped by 710 basis points to 12.4 per cent due to increase in material cost. Material costs as a percentage of net sales jumped by 830 basis points from 54.9 per cent to 63.2 per cent due to higher metal prices and FAG’s inability to pass on this increase to customers. As a result of the decline in EBIDTA margins, net profits declined by 23 per cent year-on-year to Rs 16.5 crore.

For the year ending December 2010, net sales is expected to rise by 13 per cent and net profit by 29 per cent due to improvement in EBIDTA margin from 15.2 per cent in CY09 to 17 per cent in CY10. FAG Bearings, which is debt-free, is poised for rapid growth led by demand from the auto and industrial sector. The brokerage maintains a ‘HOLD’ rating on the stock with a target price of Rs 600 (10 times CY10 earnings).

HDIL – Analyst’s Corner

admin — Mon, 15 Feb 2010 03:40:39 +0000

Reco price: Rs 307
Current market price: Rs 312.65
Target price: Rs 436
Upside: 39.5%
Brokerage: IIFL

Our channel checks indicate that TDR prices have increased 5-8 per cent since December 2009 and currently trade at Rs 2,600-2,900 per sq feet. The rate of increase in TDR prices has slowed down. For instance, in Bandra-Khar area, TDR price had increased from Rs 2,450 per sq feet on October 2009 to Rs 2,750 in December. The same is currently hovering around Rs 2,800-2,900.

Volumes have been weak and no large transactions were reported in January 2010. TDR prices are closing in on the previous peak of Rs 3,000-3,200 per sq feet recorded in late 2007, as residential volumes in suburban Mumbai continue to be strong. The brokerage estimates HDIL’s NAV at Rs 436 per share. The NAV estimates assumes long-term TDR price of Rs 2,200 per sq feet, which is significantly lower than current rates. It maintains a buy on the stock with a 12-month price target of Rs 436.

Liberty Shoes – Short Term Investment

admin — Mon, 15 Feb 2010 03:20:04 +0000

Market experts see 25 per cent upside in Liberty Shoes, which is currently quoting at Rs 100 levels, after touching a 52-week high of Rs 119 on January21. Average volumes over the past seven trading sessions at 2.28 lakh shares are 78 per cent higher than 14-day average volumes.

The company reported fiat performance in the quarter ending December 2009 as sales slipped 5 per cent to Rs 67 crore, while net profit was flat at Rs 3 crore. The performance for the nine months ending December 2009 was slightly better. Though net sales gained 9 per cent to Rs 189 crore, net profit was up 46 per cent to Rs 7 crore. Despite the tepid performance so far, the company still looks grossly undervalued with market cap to annualised nine monthly sales of 0.74 times, say analysts. Also, technically, the stock, which is up down 3 per cent in the last fortnight, holds good. The stock has already crossed the 200-week moving average with good volumes. The monthly moving average convergence! divergence (MACD) has inched up in the positive territory and is moving upwards, indicating positive momentum, according to a report from Anagram Stock Broking.

Heidelberg Cement India Ltd – Stock Investments

admin — Mon, 19 Oct 2009 02:59:23 +0000

Heidelberg Cement India Ltd (Rs 42)
(BSE Code- 500292 NSE Code- HEIDELBERG)
(P/E- 5.2, Market Cap – Rs950 cr, Promoters’ stake – 68.55%)
A MNC cement stock available at the P/E of 5.2

Heidelberg Cement India Ltd(HCL)(earlier know as Mysore Cement) is now owned 68.55% by Heidelberg Cement AG, Germany. The parent Euro MNC Heidelberg Cement is one of the three biggest cement producers in the world along with Holcim (which owns ACC, Ambuja) and La Farge, which has an unlisted presence in the country. HCL has two units – one at Ammmsandara in Mysore and another at Damoh in Madhya Pradesh. With up gradation and balancing at Damoh, the total capacity of MCL increased to 23 lac tpa in 2004-05
In 2006, Heidelberg took over the co. from Birlas, infused a sum of Rs 360 crore by making a preferential allotment of 6.5 crore shares to itself at a price of Rs 54 per share and cleared the debts, making the co. debt free. Thus not only has HCL become debt free, it has come out of the purview of the BIFR as well., with long term institutional and bank debts paid off. The stake was taken at Rs 54 per share. In December 2006, Heidelberg made an offer to the shareholders of Mysore cement to acquire 22.15% stake at Rs 58 per share. Within a short period of 3 months the Heidelberg led team accomplished a clean turn around at Heidelberg Cement India Ltd.

From Rs 10 cr, loss in calendar year 2006, the company posted a 29% YoY rise in net profit to Rs 125.55 cr, in the year ended Dec. 2008. Sales rose 35.36% to Rs 804.49 cr. The company posted a EPS of about Rs 7.94 on a equity of 158 cr. for CY2008. For the half year ended June 2009, the company posted a net profit of Rs 93.47 cr. (up 53%) on net sales of Rs 531.52 cr.(up 53%). The half yearly EPS on a expanded equity of 226.62 cr. stands at Rs 4.13. The 2 mn tpa cement producer Heidelberg cements sells for Rs 950 cr. in market cap(Equity Rs 226 cr, CMP Rs 42), and cash in deposit accounts of Rs 170 cr.-Heidelberg Cements sells for a net value of Rs 780 cr – one of the cheapest cement stocks in India.

The stock looks a good investment pick at current levels considering its fundamentals, CY09E earnings (Rs and future prospects. With Heidelberg at the helm of operations, the performance is bound to improve in coming years. Going forward, more measures for efficiency increase and cost reduction will be implemented, and focus will be on further, gradual expansion in capacities. All in all it’s a cement MNC stock available at the P/E of 5.25. The financials, debt free status of the company, its parentage and plans to raise capacity to over 6 mn tpa makes it the most interesting cement stock around. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.

Sundaram Finance Ltd – Stock Investments

admin — Mon, 19 Oct 2009 02:57:52 +0000

Sundaram Finance Ltd (Rs 302)
(BSE Code- 590071, NSE Code- SUNDARMFIN)
(P/E- 10, Equity – Rs55.55 cr, Market Cap – Rs1,665 cr)
Sundaram Finance Ltd (SFL) was established in 1954 by Mr TS Santhanam. SFL, based at Chennai, has 10 subsidiaries including SBNP Home Finance and SBNP Paribas AMC. SFL is involved in the following operations: Investments – Deposits, Mutual funds, Retail Finance – Car finance, Retail finance, Business finance – Commercial vehicle, Equipment finance, Tyre finance, Fleet card and Services – Infotech solutions, BPO, Logistics services, Insurance. Following the opening up of the insurance sector, SFL formed a joint venture company with Royal & Sun Alliance Insurance Plc (now a subsidiary) named Royal Sundaram Alliance Insurance Company (RSAIC) for non-life insurance business. It commenced operation in March 2001 and offers a full range of insurance products including fire, motor, personal accident, home, health, travel and rural insurance. In FY06, SFL sold 49.90% of its stake in Sundaram AMC to BNP Paribas. SFL’s 2 JVs – Royal Sundaram Alliance Insurance Company Ltd and BNP Paribas Sundaram Global Securities Operations Pvt Ltd – are doing extremely well as reflected in SFL’s FY09 annual report

From FY06 to FY09, Total Income has increased by a CAGR of 23.22%, but PAT has decreased at a marginal rate of 4.04% respectively. This decrease in PAT as well as the issue of bonus shares makes the ROE appear unimpressive. For FY09, SFL posted net profit of Rs 167.88 cr. on total income of Rs 1,742 cr. on consolidated basis. On a equity of 55.55 cr.(after 1:1 bonus issue in Aug’08) (Promoters’ stake- 41.15%), the EPS stood at Rs 30.24 and the dividend declared was 65%. SFL posted net profit of Rs 150.73 cr. on total income of Rs 1,082 cr on standalone basis. SBNP Paribas Home Finance has a lion’s share in consolidated sales as well as consolidated PAT. Going forward, SFL has ventured into the financing of cars and multi-utility vehicles, which is a growing market. An increase in freight movement would revive both new and used commercial vehicles sales, triggering the need of their financing. Foreseeing the slump in commercial vehicles sales in FY09, SFL reduced its exposure on commercial vehicles which highlights the foresight of the management. For the Q1 ended June 2009, SFL has posted net profit of Rs 61.23 cr. on total income of Rs 271.1 cr. on standalone basis. The net profit for Q1 is higher due to exceptional item which represents sale of 10,17,998 Equity shares of face value Rs 5/- each in WABCO – TVS India Ltd.

SFL has got one of cleanest and high quality asset books as Gross and net NPAs are only 1.64% and 0.75% of the total assets. Its philosophy of building sustainable, long-term relationships ensures that growth is not achieved at the cost of quality. As high as 89% of the total assets are net current assets, indicating a strong balance sheet. Only 6.89% of the total assets are held up as investments. Further, only 50.62% of these investments are into equities indicating neglibible exposure to market risk. At the current price of Rs 302, the stock trades at about 10 times FY09 earnings and about 1.4 times Book Value (Rs 207.5). Accumulate on declines for good gains over the medium-long term.

Piramal Life Sciences Limited – Stock Investments

admin — Sat, 17 Oct 2009 02:56:09 +0000

Piramal Life Sciences Limited (PLSL) is an independent research driven drug company that was recently demerged from Piramal Healthcare Limited (Formerly know as Nicholas Piramal India Limited). PLSL was formerly the R&D division of NPIL. PLSL has state-of-the-art R&D laboratories built over 200,000 square-feet of space in Mumbai, India and over 300 scientists engaged in drug discovery and development.

The company, as expected remains in the red and in Q2FY10, the net loss has only increased. For Q2FY01, the company reported a net loss of Rs.31.47 crore v/s Rs.28.12 crore in Q1FY10 and loss of Rs.26.31 crore in Q2FY09. The only good part about the loss is that it does not have to pay income tax!Despite the loss, the stock price has moved up sharply and this was mainly on account of the rise in revenue at Rs.2.55 crore as against Rs.1.73 crore in Q1FY10. This rise in revenue is very much in line what was expected since the first quarter. Right now, all that is happening in the company is development and no product is yet being sold commercially, so there arises no question of any major surge in income as such.

The company is focused on four therapeutic areas – cancer, diabetes, inflammation and infectious diseases. It currently has a pipeline of fourteen compounds. In cancer, it has three products that are in three Phase-II trials. In inflammation, three products are in Phase-II. In diabetes, the drugs are all in Phase-I and in infection, it has three Phase-II drugs.

Medical R&D is stated to be the ‘next big thing’ for India, given the lower costs on drug development. Compared to the USA or any other developed country, the R&D cost in India is just one-tenth. Hence, in the long run, it would be very good business for R&D units.

PLSL is expected to commercially launch its drug in fiscal 2011-12 and till then, it will continue to remain in losses. But once the drug is out and proves to be successful, it will become a goldmine.

Essel Propack Limited – Stock Investments

admin — Sat, 17 Oct 2009 02:54:29 +0000

Essel Propack Limited—Buy—38
Sector — Packaging
Regd.Off. — Vasind P.O., Sahapur Taluka, Thane – 421604
Company overview—
Essel Propack Limited was incorporated in year 1982 is one of the largest manufacturers of laminated tubes in the world. Company is a part of the Essel Group, whose other interests include satellite communication, amusement parks. The company was started in technical collaboration with American National Can Company of US, Karl Magerle Kusnacht of Switzerland, and Kaito Chemicals of Japan. The company supplies tubes for toothpastes, cosmetics, pharmaceutical products, grease, adhesives and almost all segments of the packaging industry. Essel supplies the basic laminate or the web to its operations in Nepal, Egypt and China. Apart from this export revenue company also get royalty income of the sales and dividend from its overseas ventures. The laminated tubes manufacturing major is also looking at capacity expansion in its existing units in China, Egypt and Latin America, with an estimated investment of about $10 million. In the overseas operations the focus is going to be on the cosmetics and the oral care segment, so as to achieve critical mass. Company sees huge potential for laminated tube packaging in the pharmaceutical sector.
Products & services—
Essel Propack has state-of-the-art manufacturing facilities in 15 countries through 25 plants. Packaging products in a laminated tube gives it that competitive edge in the marketplace. Any product that requires attractive, safe and hygienic packaging can be packed in a laminated tube. Laminated tubes find applications in Toothpastes, Cosmetics & Toiletries, Pharmaceuticals, Food & Diary Products, Industrial Products and other products. In terms of growth engine, Company has got several successes in new segments such as cosmetics and pharmaceuticals. Company generates around 90% of its turnover from FMCG sector and 10% from pharmaceutical products.
Coextruded Seamless Tubes: Co-extruded seamless tubes make product stand out on a shelf and enhance its personality as a premium product.
Speciality Laminates and Webs for Laminated Tubes: Essel offers a wide range of laminates for several applications. Continuous innovation has enabled Essel to develop laminates that enable efficient running of tube making lines. The quality and performance of these laminates are top-notch.
Company plants are highly automated with the best technological machinery and systems available anywhere in the world. Company has put in place, two teams at its Technological Innovation Center. While one team focus on new products, the second works on process management. Primarily involved in developing new and improved products for customers, the first team works in close co-ordination with customers to enhance the product by experimenting with the various specifications associated with it. The second team works more with the existing product range. This team monitors machine efficiencies in all the manufacturing units and provides suitable recommendations. Together, the teams combine efforts with the marketing arm of the organization. Company also upgrades its testing facilities constantly to maintain its position at the frontier of technology.
China will be the major contributor in terms of volumes growth in future. Company has considerably enhanced its capacity in China. Except China, Western Europe and eastern European will be future growth drivers. Company has a manufacturing plant in US, East Germany, well positioned to serve western and Eastern Europe.
Recent Developments—
Essel Propack in april announced an acquisition of US based company Catheter & Disposables Technology (CDT), a supplier of specialized disposables medical devices. EPL has acquired 100% equity of CDT in an all cash deal through its US subsidiary, Tacpro. The buyout of CDT is in line with EPL’s strategic expansion plan, and will enable its medical business to establish and expand operations in Minnesota, the second largest medical device manufacturing region in USA.
Essel Propack and Ess Dee Aluminium, have joined a global race to acquire the packaging unit of Rio Tinto Alcan in april. The mining-to-metals major said it would sell the USD 5 billion packaging business as part of a move to focus on core areas. The joint bid is also being planned so that the two companies may split Rio Tinto’s unit subsequently, to merge with their own areas of operations. Morgan Stanley, the financial advisor to Rio Tinto, had suggested dividing the packaging unit to make it easier for interested companies and private equity firms to bid. Buyers could more likely be keen if the packaging division is broken up and offered for sale as smaller entities, the advisor is reported to have indicated. While sales of USD 5 billion or Rs 200 billion, is too big for any single company to acquire on its own. The packaging unit is the only section that has been immediately identified to be sold, while its bauxite, alumina, primary metal and engineered products divisions will all be absorbed into Rio Tinto.
Essel Propack (EPL) september, announced an acquisition of Minneapolis (US), based company Medical Engineering & Design (MED), a supplier of specialized disposable Medical Devices. EPL has acquired 74% equity of MED in an all cash deal through its US subsidiary – Tacpro. The rest will continued to be held by the existing promoter employees. MED has a diversified customer base with the provision of high quality medical device manufacturing services and reliable, on-time delivery of manufactured products. MED is supplier of custom products to the global medical device industry and delivers proven and effective solutions to catheter, extrusion and braid reinforced tubing needs of customers. The company is vertically integrated with its own in site extrusion, wire braiding, reflowing and assembly resulting in significant cost competitiveness and lead time savings to its customer.
Valuation—
Company is on expansion drive, it is looking for more acquisitions in international markets. At current market price, stock is trading at attractive valuation of 14.87 P/E multiple of its FY2010 estimated earnings par share. We recommend investors to “BUY” “Essel Propack Ltd” with medium to long-term investment prospective.

Tata Elxsi Ltd – Short Term Investments

admin — Wed, 30 Sep 2009 03:00:36 +0000

Tata Elxsi Ltd (Rs 175)

(BSE Code – 500408 NSE Code – TATA ELXSI)

(P/E – 9, Dividend Yield – 4%, Market Cap – Rs545 cr)

Tata Elxsi Ltd (TEL) is a technology company with a distinct focus on design. It delivers outsourced product design and R&D services and solutions to customers worldwide through four core practices: product design services, engineering design services, system integration services, and visual computing labs. The company has a team of more than 2,000 engineers and designers. Tata Elxsi broadly operates under two divisions – software development services (85% of revenues) and systems integration. The software development division comprises of two high growth areas – product design services catering to clients in consumer electronics, multimedia, wireless communication and automotive electronics. The visual computing division develops graphics and special effects and creates animation films.

Tata Elxsi’s product design services offerings address a wide variety of specialized technologies ranging from automotive systems, very large-scale integration (VLSI) design, embedded systems, networking, digital signal processing, multimedia and storage systems. Tata Elxsi’s engineering design services business holds a strong potential for sizeable growth in the coming years, with incremental technology spending in the industry like automotive styling, consumer products and packaging design of FMCG goods. The visual computing lab division of Tata Elxsi is focused on providing world-class, quality animation (2D & 3D), special effects, and gaming services to customers worldwide. This division has already done some great projects in the domestic market including movies like Bunty aur Babli, Jodha Akbar, Salaam Namaste, Rang De Basanti. The company has also done some big projects in Hollywood such as XXX2 and Into the Blue.

In the Telecom segment, TEL works with telecom network manufacturers and phone companies in the wireline, wireless as well as wireless-broadband space. Tata Elxsi develops applications and software components that are built into telecom infrastructure. The company develops solutions value-added services such as MMS and Mobile TV to be integrated to mobile phones. Wimax is another focus area for the company and has deal wins in the US in this segment. All these factors represent strong opportunities for Tata Elxsi, which it is well placed to tap, thanks to its existing working relationships in the design engineering space such as Tensilica, ARM, Altera and Xilinx

TEL has reported a top-line CAGR of more than 16% since past nine years. PAT has grown at a CAGR of nearly 31% since FY2000. The company was able to maintain its top-line in the fledging market in FY2009 and also delivered a 10% growth in bottom-line over FY08 PAT. For the year ended March 2009, Tata Elxsi reported 4% growth in the net sales at Rs 418.6 cr. and operating profit grew 6% at Rs 81.41 cr. The PAT was up10.5% at Rs 58.1 cr.. On a equity of 31.14 cr (Promoters’ stake- 44%) the EPS stood at Rs 18.65 and the dividend declared was 70%. For the Q1 ended June 2009, TEL posted net profit of Rs 7.21 cr (up 1.4%) on net sales of Rs 90.47 cr.(down 6.5%) cr.. Due to cyclical nature of TEL’s business, Q1 is the weakest and the company can be expected to post moderate growth in top line and bottom line for FY10. At the current price of Rs 175, the stock trades at a PE of 10.3 times FY09 earnings (Rs 16.9) and at 8.7 times FY10 earnings (Rs 20). At CMP of Rs 175, the TEL stock is available at a dividend yield of 4%.

Going forward, TEL is looking to enter the defence market where it sees significant growth opportunity. The defence market is the least affected by the downturn and there are large budgetary allocation and spends. TEL has already been engaging with overseas defence companies in areas such as security, surveillance and communications. The security-related deals include functions such as image capturing using radar or satellite and processing them to gain intelligence. In the communication space, projects include setting-up WiMax networks for secure communications. Research firm Frost & Sullivan estimates the Indian defence market to touch $36 billion by 2013. Strong presence in the product design and engineering segment, emerging opportunities in developing full-length animation films, which Tata Elxsi appears well placed to tap, and an expanding presence in lucrative markets may drive growth for the company. The skill-intensive nature of its business sets its apart from other software companies and deserves better valuation. In another important development, at the Board Meeting held on September 07, 2009, Mr. S. Ramadorai was appointed as Chairman of the Company. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months

Tata Elxsi Ltd (Rs 175) (BSE Code – 500408 NSE Code – TATA ELXSI)

(P/E – 9, Dividend Yield – 4%, Market Cap – Rs545 cr)

Tata Elxsi Ltd (TEL) is a technology company with a distinct focus on design. It delivers outsourced product design and R&D services and solutions to customers worldwide through four core practices: product design services, engineering design services, system integration services, and visual computing labs. The company has a team of more than 2,000 engineers and designers. Tata Elxsi broadly operates under two divisions – software development services (85% of revenues) and systems integration. The software development division comprises of two high growth areas – product design services catering to clients in consumer electronics, multimedia, wireless communication and automotive electronics. The visual computing division develops graphics and special effects and creates animation films.

Tata Elxsi’s product design services offerings address a wide variety of specialized technologies ranging from automotive systems, very large-scale integration (VLSI) design, embedded systems, networking, digital signal processing, multimedia and storage systems. Tata Elxsi’s engineering design services business holds a strong potential for sizeable growth in the coming years, with incremental technology spending in the industry like automotive styling, consumer products and packaging design of FMCG goods. The visual computing lab division of Tata Elxsi is focused on providing world-class, quality animation (2D & 3D), special effects, and gaming services to customers worldwide. This division has already done some great projects in the domestic market including movies like Bunty aur Babli, Jodha Akbar, Salaam Namaste, Rang De Basanti. The company has also done some big projects in Hollywood such as XXX2 and Into the Blue.

In the Telecom segment, TEL works with telecom network manufacturers and phone companies in the wireline, wireless as well as wireless-broadband space. Tata Elxsi develops applications and software components that are built into telecom infrastructure. The company develops solutions value-added services such as MMS and Mobile TV to be integrated to mobile phones. Wimax is another focus area for the company and has deal wins in the US in this segment. All these factors represent strong opportunities for Tata Elxsi, which it is well placed to tap, thanks to its existing working relationships in the design engineering space such as Tensilica, ARM, Altera and Xilinx

TEL has reported a top-line CAGR of more than 16% since past nine years. PAT has grown at a CAGR of nearly 31% since FY2000. The company was able to maintain its top-line in the fledging market in FY2009 and also delivered a 10% growth in bottom-line over FY08 PAT. For the year ended March 2009, Tata Elxsi reported 4% growth in the net sales at Rs 418.6 cr. and operating profit grew 6% at Rs 81.41 cr. The PAT was up10.5% at Rs 58.1 cr.. On a equity of 31.14 cr (Promoters’ stake- 44%) the EPS stood at Rs 18.65 and the dividend declared was 70%. For the Q1 ended June 2009, TEL posted net profit of Rs 7.21 cr (up 1.4%) on net sales of Rs 90.47 cr.(down 6.5%) cr.. Due to cyclical nature of TEL’s business, Q1 is the weakest and the company can be expected to post moderate growth in top line and bottom line for FY10. At the current price of Rs 175, the stock trades at a PE of 10.3 times FY09 earnings (Rs 16.9) and at 8.7 times FY10 earnings (Rs 20). At CMP of Rs 175, the TEL stock is available at a dividend yield of 4%.

Going forward, TEL is looking to enter the defence market where it sees significant growth opportunity. The defence market is the least affected by the downturn and there are large budgetary allocation and spends. TEL has already been engaging with overseas defence companies in areas such as security, surveillance and communications. The security-related deals include functions such as image capturing using radar or satellite and processing them to gain intelligence. In the communication space, projects include setting-up WiMax networks for secure communications. Research firm Frost & Sullivan estimates the Indian defence market to touch $36 billion by 2013. Strong presence in the product design and engineering segment, emerging opportunities in developing full-length animation films, which Tata Elxsi appears well placed to tap, and an expanding presence in lucrative markets may drive growth for the company. The skill-intensive nature of its business sets its apart from other software companies and deserves better valuation. In another important development, at the Board Meeting held on September 07, 2009, Mr. S. Ramadorai was appointed as Chairman of the Company. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months

International Travel House Ltd – Short Term Investments

admin — Wed, 30 Sep 2009 02:56:25 +0000

International Travel House Ltd (Rs 110)

(BSE Code – 500213)

(P/E – 10, ITC Group Stake – 61.69%, Market Cap – Rs88 cr)

International Travel House (ITH) is an associate Company of ITC – one of India’s largest business conglomerate. ITH is India’s premiere travel and tourism company offering full bouquet of travel solutions and services like air tickets, business travel, car rentals, conferences, exhibitions, forex, event management, inbound and outbound leisure trips. ITH commenced operations in 1981 and its expertise has been built up over 28 years and is now one of India’s largest travel management company with presence in 13 cities. ITH is one of India’s largest branded Car Rental companies with 13 Car Rental Offices in the major Indian cities and a fleet of 900 cars. ITH is one-stop-shop for tourists, whether corporate or leisure and its corporate clients include many of the largest and most discerning corporates such as Infosys, Samsung, Sun micro, Citibank, Bharti Airtel, Siemens etc. apart from the ITC group. Over the years, ITH has grown to be one of the largest Complete Travel Management companies in India.

Tourist arrivals into India have grown at an average of 18.7% p.a. in the last three years. The boom times witnessed by the India travel and tourism industry in the past and the higher disposable incomes have resulted in more Indians going for holidays in Indian and abroad. To sustain growth of 18-20% p.a. in foreign and domestic tourist traffic achieved recently, an improvement in overall infrastructure facilities, specific connectivity to important tourist sites and an increase in investment in the hospitality sector are needed. All this augurs well for ITH and a window of opportunity lies for ITH, which runs a huge fleet of 900 cars, has access to the Welcomgroup of Hotels, is a authorized currency changer and provider of global scale Hotel and Airline bookings.

For the Q1 ended June 2009, ITH has posted a net profit of Rs 1.67 cr.(down 35.5%) on net sales of Rs 17.69 cr.(down 14.7%). The poor results can be attributed to general economic slowdown which led to decline in corporate and leisure travel. For the year ended March 2009, ITH had posted a net profit of Rs 8.19 cr (down 22%) on net sales of Rs 79 cr (flat). On a equity of 7.99 cr (Promoters’ stake – 61.69%) the EPS is Rs 10.25 and the dividend declared is 30%.. At CMP of Rs 110 the ITH stock trades at 10.7 times FY09 earnings and at 9.1 times FY10E earnings (Rs 12). Given its parentage, the future of ITH appears promising. Moreover the current slowdown in the travel and tourism sector offers investors an attractive opportunity to accumulate the ITH stock at current low levels and more on declines. Also, as the company is poised to launch its online portal soon to boost its retail travel market share, the stock should fetch better and higher valuations. With the current improving sentiment for Hotel and Tourism stocks, the ITH stock is bound to do well in the medium term. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 35%-40% over the next 6-8 months.

International Travel House Ltd (Rs 110) (BSE Code – 500213)

(P/E – 10, ITC Group Stake – 61.69%, Market Cap – Rs88 cr)