Stock Reports - 29.12.09

10 fastest growing cos


10 worst performing cos

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	Aditya Birla Chemicals: A Value Buy Rathin Shah
	Solvay Pharma: Buy at CMP Rs1760 Abhishek Jain
	Technical calls: Buy Aban Offshore & Ashok Leyland HDFC Sec Nifty spot: No significant upside above 5200 level Angel Broking Technical calls: Buy Akruti City, Escorts, Hindustan Zinc HDFC Sec Uptrend intact as Nifty makes new highs HDFC Sec

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Two Attractive Mid Cap Stocks

Sanjay Chhabria
Dec 24, 2009

Gruh Finance Ltd (Rs 205)
(BSE Code - 511288, NSE Code - GRUH)
(P/E - 12, Equity - Rs34.65 cr, HDFC’s stake - 61.5%, Market Cap - Rs710 cr)

Gruh Finance (GFL) was set up in 1986 by HDFC to replicate its ‘home financing’ business model in semi urban and rural areas. Presently, the parent’s ownership stands at 61.85% and it has three representatives in the board of Gruh Finance (out of the total board’s strength of eight). Gruh has maintained the standards of services, quality of assets and management of cost of funds comparable to its parent. HDFC is the largest shareholder in the company with a stake of 61.49%. Gruh Finance has been a major player in the non-metro markets of Gujarat and Maharashtra where semi-urban and rural areas are witnessing growing prosperity. With the exception of a few PSU and co-operative banks, none of the aggressive private sector entities cater to the latent demand in these regions. Gruh has entered this relatively under-banked market with a unique marketing strategy. GFL is primarily engaged in the business of providing long-term finance to individuals for construction, purchase, extension, repair and renovation of homes. Gruh has launched innovative products and flexible repayment options to suit consumers in various segments. Besides home loans, Gruh offers loans for purchase of non-residential properties like office premises and shops. One of the major strength of the company is its strong and visionary Parent & management. HDFC, the major stakeholder is the pioneer in the housing finance and strong credibility as well as investor confidence.

Gruh Finance presently operates out of 65 offices and majority of these offices are in locations where HDFC does not have a presence. Going forward, Gruh would like to be in places that would not be on the radar of large housing finance companies. The company’s strategy has been to establish its presence at the district headquarters and then gradually penetrate adjoining areas, after garnering adequate knowledge about the local markets. This model of expanding into contiguous geographies helps in minimizing risks associated with venturing into uncharted territories. Gruh has maintained quality of service comparable to its parent although it operates in different geographies. Hence, in distant future, if the parent decides to merge the operations of Gruh with itself, it would not be very difficult.

GFL’s financials are in sound shape. The capital adequacy ratio(CAR) of about 16% allows the company considerable flexibility in managing both business growth and dividend disbursals. The proportion of bad loans at less than 2% is also impressive. The profitability of the operations has improved considerably in recent years, with spreads rising above 2%. The asset quality is comparable to HDFC. The housing finance sector continues to be one of the fastest growing sector in the finance sector. As growth prospects are bright in the home loan business, there is a strong likelihood of GRUH Finance sustaining its healthy profitability levels.

For the half year ended Sept. 2009, GFL has posted a net profit of Rs 20.64 cr.(up 29%) on total income of 150 cr.(up 20%). For the year ended March 31, 2009 GFL had posted a net profit of Rs 50.28 cr.(up 19%) cr. on total income of Rs 295 cr.(up 46%). On a equity of 34.65 cr. the EPS stood at Rs 14.53 and the dividend declared was 48%. The Gross NPAs of the GFL stood at Rs 19.68 cr. (0.94% of the Loan Assets). The NPAs are fully provided for and as a result the Net NPAs of the Company are Nil. Going forward, the company plans to target interior areas of Maharashtra and expand its presence into the adjoining states of Rajasthan, Karnataka and Madhya Pradesh. The foray to new geographies should enable the company to maintain an average disbursement growth between 18-20%.

The stock trades at 11.7x FY10E earnings (Rs 17.5) and at 9.7 x FY11E earnings (Rs 21). Gruh Finance offers long-term investors an excellent exposure to rapid semi-urban and rural socio-economic development in India in the next few years in the area of home loans and personal finance. Its strong pedigree and balance sheet attributes, high quality of loan book, low rate of delinquencies and superior to peer group RoEs makes it a premium play inspite of its rather small size. Gruh Finance is like HDFC being available in small caps. 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.

Autoline Industries Ltd (Rs 119)
(BSE Code – 532797, NSE Code- AUTOIND)
(P/E - 9, Market Cap - Rs145 cr, Equity - Rs12.2 cr)

Autoline Industries (AIL) supplies complex sheet metal assemblies and sub-assemblies to Tata Motors, Bajaj Auto, Kinetic Engineering, Mahindra & Mahindra, Walker Exhaust and Fiat India. Tata Motors, which buys components for passenger cars and commercial vehicles, is Autoline's largest customer. AIL, which has five facilities in Pune, is a design engineering and manufacturing solutions provider focused on sheet metal assemblies and formed tubular products. AIL had come with an IPO in January 2007 at Rs 225 per share. Funds raised through the IPO have been used to upgrade and expand Autoline's Chakan facility in Pune; set up another manufacturing facility at the same location; relocate and consolidate a couple of smaller units; establish a corporate office; fund acquisitions, and provide long-term working-capital resources. The equity capital of the company is Rs 12.22 cr. of which promoters’ hold 26.62%, FII/Mutual funds hold 1.82%, corporate bodies hold 16.65% and the public holds 54.91%

The Indian automobile ancillary sector is transforming itself from a low -volume, highly fragmented one into a competitive industry, and backed by competitive strengths, technology and transition up the value chain. Despite a relatively small share of Asia in the global pie, India is now amongst one of the most preferred destinations and has come to occupy the image of an exporting hub for most of the major global OEM players. Almost all the big auto manufacturers of the world are either already or are in the process of outsourcing from India. AIL has realized the potential of component manufacture business. It owns in-house design engineering, rapid prototyping and mass manufacturing capabilities. AIL had an in-house CAD/CAE/CAM facility and decided to scale up the capabilities of this facility by acquiring a design engineering software company (a majority stake 51%) in Autoline Dimensions Software Pvt. Ltd. (Formerly known as Dimensions Engineering Software Services Pvt. Ltd.), which has expertise in design engineering services. Further it plans to expand capacities by setting up another plant at Chakan (Unit –II). AIL has taken efforts to shift from low margin products to high margin products. Autoline Dimension would be one of the future growth driver providing a boost to AIL’s revenue.

For FY09, AIL has reported net profit of Rs 4.68 cr. on net sales of Rs 350 cr. on consolidated basis.. On a equity of 12.2 cr., the EPS stood at Rs 3.84 and the dividend declared was 10%. From a turnover of Rs 51 cr. in FY-2004, Autoline's revenues scaled up to Rs 350 cr. in FY09. For the half year ended September 2009, the figures are net sales of Rs 198.23 cr. and net profit of Rs 6.67 cr. (up 68%) on consolidated basis. The EPS for first half stands at Rs 5.5. On Oct. 28, 2009, Autoline Industries USA, a wholly owned subsidiary of Autoline Industries announced that it has received orders to manufacture brake and clutch pedal assemblies from 2 US automakers. The new business will bolster the sales of US unit by US$ 40 Million over the next 4 year period

AIL, should be able to post a top-line of around Rs.400 cr., and PAT of Rs. 16-17 cr., giving an EPS of Rs.13-14 for FY10. The share is presently trading at Rs. 119, which discounts FY10E earnings by 8.8 times. In view of the improved results and good medium term prospects, 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.

Latest Developments- Autoline Industries has drawn up a Rs 255 cr. brownfield expansion. This will be funded through internal accruals and term loans. The expansion will add another 1,000 employees to its 2,000-strong workforce. It will involve an additional 40 acres to the existing 100 and is expected to be over by 2011. The company has sought mega status (which translates into concessions in stamp duty and electricity tariff) for the project from the Maharashtra Government. Approval could be granted by January. The project is also eligible for industry promotion subsidy. The expansion plan involves ramping up the production line, creating a tool room and adding prototyping/designing facilities at three sites in Pune district. Autoline wants to become a complete designing, engineering and manufacturing entity for mechanical assembly systems in automobiles. The idea is to make components based on designs provided by carmakers. At present, the company has orders for designing and manufacturing pedal assemblies for Volkswagen whose facility is also at Chakan. It supplies the same part to Tata Motors for its Indica and Ace models.

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.

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ICICI Bank

Hindustan Zinc

India Economy

Ranbaxy Labs

Weekly Review - Dec 29 2009

Weekly Newsletter - Dec 29 2009

Src: Valuenotes, Economictimes, DP Blog and etc.

Technicals and Stock Reports

Positive closing for 2009

he market bounced with a strong volume expansion to establish a new 52-week high on X-mas Eve. The Nifty closed at 5,178.4 points for a week-on-week gain of 3.82 per cent. The Sensex closed at 17,360 points for exactly the same gains. The Defty was up 4.15 per cent as the rupee rose.

Volumes expanded and breadth improved dramatically in the last two sessions. At the end of the week, every major market segment had established gains. The Bank Nifty outran the pivotal indices and the BSE 500 was up by 3.4 per cent. Both FIIs and domestic institutions were net buyers. Operator buying was also in evidence.

Outlook: The market could test 5,300 on the upside, going into the December settlement. On the downside, reactions will find support at 4,950-5,050. Volatility is likely to be up. There could be a couple of action-packed sessions since next week is also truncated. Most signals are positive.

Rationale: The market penetrated key resistance at 5,180, hitting a new high of 5,198. Although this could not be sustained, it confirms all three trends – short-term, intermediate and long, - are up. Breadth and volume expansion on the breakout are positives. There is a target of around 5,300. However, there may be a narrowing in trading with a focus on the larger F&O stocks.

Counter-view: It is possible that this week saw a lot of short-covering and exits. In that case, settlement week could see net losses and lower volumes than normal. However, there is solid support at 5,050-5,075 and again, between 4,950 and 5,050. Since all three trends are in bullish phase, a big correction is unlikely.

Bulls & Bears: The week ended with net gains across most indices and industry sectors. The Bank Nifty outperformed after several weeks. Other financials and the realty segment also saw net gains. Though this up move in interest-sensitive stocks looks like a technical correction, it could continue. Axis Bank, Bank of Baroda, Yes Bank, IDFC and HDIL may outperform.

The auto industry received a lot of bullish investment calls. Tata Motors has looked strong for weeks but in the past two or three sessions, we also saw money coming into Bajaj Auto, Hero Honda and Mahindra. While IT and pharma also delivered net gains, there was a pattern of profit booking towards the end of the week. The rupee hardening also suggests that IT may ease down or at least, underperform next week. However, big guns like TCS and Educomp still look bullish.

Pharma-healthcare saw Dr Reddy’s, Fortis and Glenmark delivering good returns last week, but money seems to be moving out of here into more aggressively traded counters. Apart from these, a host of movers attracted attention for stock specific reasons. These included Great Offshore, Nilkamal, Maytas Infra, Nagarjuna Construction, etc.

MICRO TECHNICALS

TCS
Current Price: Rs 749 Target Price: Rs 765

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Since March 2009, TCS has risen along a 45 degree trendline (split-adjusted prices) and this pattern holds at a new high. Keep a stop at Rs 740 and go long. A long-term target cannot be calculated. But, if the trendline is maintained, TCS should hit Rs 765 by settlement (December 31).

NTPC
Current Price: Rs 229.95 Target Price: Rs 250

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The stock has made a breakout on strong volumes and is testing resistance at the current levels. If it can close above Rs 232, it could have a target of around Rs 250. Keep a stop at Rs 225 and go long. Add to the position above Rs 232.

HCC
Current Price: Rs 151 Target Price: Rs 157

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HCC has hit a new 2009 high on strong volumes. The chart pattern suggests a target in the range of Rs 157-160. Keep a stop at Rs 145 and go long. Start booking profits above Rs 157. If you wish to hold a position beyond Rs 160, reset the stop loss to Rs 155.

GUJARAT NRE COKE
Current Price: Rs 78 Target Price: Rs 90

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The stock has jumped on a strong volume expansion. It has resistance between current levels and Rs 80. If it closes above Rs 80, it will have a target of around Rs 90. Keep a stop at Rs 74 and go long. Increase the position above Rs 80 and reset the stop to Rs 79.

STERLITE INDUSTRIES
Current Price: Rs 860.45 Target Price: Rs 895

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The stock has finished a reaction and is consolidating. There is serious resistance at current levels but if it crosses Rs 870, it will test Rs 900. Keep a stop loss at Rs 850 and go long. Add to the position above Rs 870 and reset the stop to Rs 865. Book profits beyond Rs 895

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Expect moderate returns in 28-DEC-09 After the astonishing performance in 2009, which has helped Indian stock markets emerge among the best performing markets globally with year-to-date returns of almost 80 per cent, the year 2010 could prove to be a disappointment.

Smart Portfolios shine in holiday week 28-DEC-09 The Smart Portfolios registered healthy gains last week in line with a pull back in the broader markets.

Markets at a glance 28-DEC-09 The markets began on a weak note with the BSE Sensex closing at its six-week low on Monday.

The probability myth 28-DEC-09 Do you know how many times you use “Probably” in a day?

Bullish sentiment with rising volatility 28-DEC-09 The market made a breakout that propelled it to new highs.

Positive closing for 2009 28-DEC-09 The market bounced with a strong volume expansion to establish a new 52-week high on X-mas Eve.

What analysts expect in 2010 28-DEC-09 After a stellar performance in 2009, the Indian stock market is set to move higher in 2010 believe most research houses and brokerages.

'Commodities are pricey at this point in time' 28-DEC-09 After last year’s sharp run up in commodity prices, Jim Rogers, the legendary commodities investor, is not bullish on most of the commodities at this point in time.

'Focus on few stocks' 28-DEC-09 Given the near 80 per cent returns the BSE Sensex has delivered since the beginning of 2009, it is quite likely that the current year’s performance would turn out to be the third best in almost three decades.

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Analysts picks: Infosys, Hindustan Zinc, Tata Steel, Jet Airways, Adani Enterprises

Derivatives Diary: Nifty appears to be following DJIA again

Experts debate on how mkts will pan out in 2010

Src: Economictimes, Business-Standard and etc