MOrning Calls

	Two Attractive Mid Cap Stocks Sanjay Chhabria Sanjay Chhabria Jan 19, 2009 Manaksia Ltd (Rs 108) (Rs 2 Paid Up) (BSE Code – 532932, NSE Code - MANAKSIA) (P/E - 6.5, FY’09 Net Sales - Rs1,485 cr, Market Cap - Rs750 cr) Manaksia Limited (formerly Hindusthan Seals Ltd., incorporated in 1984) is a multi-division and multi-location conglomerate. It possesses 15 manufacturing plants in India and three abroad; two in Nigeria and one in Ghana. Manaksia specialises in the manufacture of packaging products (crowns, closures and metal containers), metal products and fast moving consumer goods, among others. The company's metal packaging products include crowns, roll-on pilfer-proof closures, expanded polyethylene liners as well as push-open and other metal containers. In the fast moving consumer goods segment, the company is a dependable mosquito repellents outsourcing destination for the Mortein (owned by Reckitt Benckiser (India) Limited) and Maxo (owned by Jyothy Laboratories) brands. The company has now diversified into the production of aluminium rolled products, secondary specification aluminium alloys and galvanised steel. The company’s wholly owned subsidiary in Nigeria, MINL Limited, was set up in 1996 and is the market leader in ROPP caps and crown corks in Nigeria. It has also set up facilities for the manufacture of galvanised steel, metal colour coated sheets and coils and secondary specification aluminium alloys. The company also has subsidiary companies in Ghana (Dynatech Industries Ghana Limited) and Dubai (Euroasian Ventures FZE). Manaksia manufactures value-added metal products and metal packaging products. The Kolkata-headquartered Manaksia Group is India’s largest secondary producer of value-added aluminium rolled products with 15 manufacturing facilities in the country and three abroad. The business of the Manaksia can be categorised into metal products, packaging products, mosquito coils, and engineering and other goods. For funding its expansion plans and general corporate purposes, the company had come with an IPO of Rs 248 cr., comprising fresh issue of 155 lakh shares at Rs 160 per share(Rs 2 paid up) in December 2007. Manaksia has vertically integrated across a number of products, resulting in reduction in manufacturing cost. Its metal-management skills and innovations in manufacturing and product enhancement have enabled it to manufacture advanced metal packaging products and retain and add customers like Hindusthan Coca Cola Beverages (Coke), Reckitt Benckiser, Dabur India, Jyothy Laboratories, Eveready Industries and McDowell Group and other major beer and liquor manufacturers. The aluminium division has attracted reputed alloy ingot users like TVS Motor, Orient Fans and Toyota Tsusho Corporation as customers. The company does the bulk of its business in Nigeria, which offers two main advantages. One, it gets aluminium scraps at a cheaper rate compared to international prices since the export of aluminium scrap is banned by the Nigerian government. Second, it gets cash incentives on export of the finished products. Since the company has been getting this benefit for more than a decade, it expects this trend to continue for the next few years too. In the fiscal 2008-09, Manaksia’s consolidated net sales stood at Rs 1,485.06 cr., up from Rs 1,147.37 cr. in 2007-08. The consolidated profit after tax in 2007-08 was Rs 106.3 cr. (Rs 128.19 cr.). This translated into an EPS of Rs 15.3 on Rs 2 paid up share(Equity-13.9 cr. Promoters’stake- 58.1%) and P/E multiple of 5.3 at its current price of 82. A 110% dividend (Rs 2.2 on equity shares of the face value of Rs 2 each) was declared for 2008-09. For the half year ended Sept. 2009, Manaksia has posted net profit of Rs 56.62 cr. on net sales of Rs 596 cr. on consolidated basis. The EPS for half year stands at Rs 8.14 Going forward, the company plans to focus on its metal business, which mainly consists of steel and aluminium-rolled products. Manaksia claims to be the largest player in secondary aluminium rolling in India. This gives the company economies of scale and helps it to reduce raw material costs, thereby resulting in better operating margins. The company has strong technical know-how in producing value-added metal products and expects to leverage this to generate higher profits. Some of the company’s metal products are also supplied to auto majors like Maruti Suzuki and Toyota. The management expects the metal business will grow at decent rates in coming years on a conservative basis. At current levels, the stock trades at 7 times its FY2009 earnings(Rs 15.3) and 6.5 times its estimated FY 2010 earnings(Rs 16-17). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-45% over the next 6-8 months. Repro India Ltd (Rs 113) (BSE Code- 532687 NSE Code- REPRO) (P/E- 7, Promoters’ stake-68.78%, Market Cap - Rs117 cr) Repro India Limited is one of the few integrated print solution provider and a manufacturer and exporter of books in the highly fragmented printing industry. Its solutions include content management, configuration to content delivery and the entire supply chain for publishers. The Indian Printing industry has managed to grow at a CAGR of 14% over the last 25 years. to touch Rs 1100 cr.. That is almost twice the GDP growth rate. Repro has successfully evolved from a printing press to an end-to-end print solutions provider. The company provides value-added printing and prints related solutions to major publishing houses, corporates and software companies. The clients of the company include publishing houses such as Alligator Books, Macmillan, Orient Longman, Oxford University Press ; software companies Microsoft , Oracle, IBM; and Indian corporates including Tata Steel, Infosys, Wipro etc. RIL had come with an IPO in November 2005 at Rs 165 per share and raised Rs 43.2 cr.. RIL’s equity stands at 10.47 cr. out of which promoters hold 68.78% while the public holding is 15.19%. Through content process outsourcing, Repro offers content, creativity and designing. It provides desktop publishing, ideation, content creation, designing, illustration and copywriting. Content Process outsourcing is another large opportunity for India and holds great potential as we have a low cost talent pool, design and creative capabilities and knowledge of English language. Countries like USA and the UK, which are considered among the largest markets for printing industry, are increasingly looking at outsourcing to low cost countries such as India. Repro offers print solutions for educational and children’s books for the publishing industry and annual reports and other corporate print solutions for corporates. Digital printing is utilised for IT industry and print on demand (POD). It also services the insurance industry through POD. Repro is also into contractual publishing—magazine printing and others like replication of CDs and stock management activities For the half year ended Sept. 2009, Repro posted Adjusted net profit of Rs 8.8 cr.(down 23%) on net sales of Rs 103.5 cr. (down 4%). EBIDTA fell 12% to Rs 16.8 cr. and net profit fell 45% to Rs 5.13 cr.. The major reason for fall in sales was that the impact of the global meltdown which led to delay in execution of large no. of export orders on account of Repro waiting for the client to tie up for the money or open the LC’s.. The situation has changed now and the growth prospects look optimistic in the coming quarters. Repro has an order book position of about Rs 130 cr.(of which Rs 35 cr. is domestic and rest is exports) to be executed in the next six months. Repro had posted a healthy 57% growth in topline to Rs. 241 cr, for FY09 while net profit grew just 6.5% at Rs 16.55 cr..(up 6.5%) due to forex losses of 16.5 cr.. On a equity of 10.47 cr., the EPS stood at Rs 15.75 and the dividend declared was 25%. Almost 35% of the company’s turnover comes from exports. Its exports business holds significant revenue upsides as it shifts focus from straight printing to content process outsourcing(CPO). As the company would be focusing on CPO for its foreign clients it expects margins to grow in future. The expansion at Surat SEZ and Vashi units will also bring benefits this year. As the company scales up its business and sets up infrastructure to support its expansion in the exports market, it expects higher realizations in the years to come. The Repro stock appears attractive as it is valued at about 7.5 times expected FY10E(Rs 15) and at 5.6 times FY11E earnings(Rs 20). On account of increasing contribution from higher margin businesses and attractive valuations, the stock holds good potential for appreciation in the medium-long term. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-45% over the next 6-8 months. valueinv@sify.com 9893200307 Sanjay Chhabria is an equity analyst and investment consultant based at Raipur (Chhattisgarh). At the time of writing this, he doesn’t have any position in the stocks mentioned above. He is bringing a weekly Investment newsletter "Market-View" since April 2001 to help small (retail) investors take an informed investment decision. He invites Readers to send him email to get free 1 week trial offer of "Market –View". He also appears on CNBC TV 18(Mid cap radar). He welcomes comments, feedback & investor queries at valueinv@sify.com. Under no circumstances does the information in this report represent a recommendation to buy or sell stocks. This report has been prepared solely for information purposes and does not constitute a solicitation to any person to buy or sell a security. While the information contained therein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Readers using the information contained herein are solely responsible for their actions and are advised to satisfy themselves before making any investments.
	MTNL: Cash is king Rathin Shah
	IDFC: Buy at CMP Rs158 KRChoksey
	Technical calls: EID Parry, Financial Technologies, Canara Bank HDFC Sec

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Heard on the street

Satyam Computer down over 5% on L&T exit buzz Satyam Computer shares were among the biggest losers on Tuesday, shedding over 5% to close at Rs 110.35. Buzz is that L&T, one of the largest shareholders, is likely to exit its position in Satyam in the next few days. According to market buzz, Dubai-headquartered Legatum Group is among FIIs interested in picking up a slice of L&T’s 4.9% stake in the company. Jubilant IPO door seen shut for many retail clients Jubilant Foodworks’ IPO will close on Wednesday, but for many of a broker’s clients in Mumbai suburbs, the issue is as good as closed on Tuesday. The broker, which is also a mutual fund distributor, has told clients that he won’t not accept applications for this IPO in any of his branches on Wednesday. The reason cited is the logistical difficulties to carry the forms to the head office on the last day before 3 pm. Such reasoning is surprising, as many retail investors usually apply on the last day of an IPO. Stock trading over mobile may soon be a reality Sebi is said to be examining a proposal to introduce equity trading over mobile. Market buzz is that the regulator is considering certain security protocol issues connected to mobile trading and once those are resolved will kick start the facility. When introduced, mobile trading is expected to boost online trading as currently mobile penetration is a lot deeper than personal computers. Bulls lap up ICICI on hopes of strong Q3 numbers SHARES of ICICI Bank have been inching up in the past three trading sessions, defying the sluggish trend in frontline shares in general. On Tuesday, the stock held ground in a falling market, closing flat at Rs 863.40. One of the theories doing the rounds is that traders are loading up on the stock in anticipation that the third quarter numbers due on Thursday will be better than market expectations. But equity analysts feel that looks unlikely at the moment. The other talk is that some of the foreign broking firms are taking a more positive view on the stock of late and have been enthusiastically recommending it to their clients. It is not known if the recommendations have actually translated into buy orders. Contributed by Santosh Nair,Deeptha Rajkumar & Nishanth Vasudevan.

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