Thread: Weekly Wrap indiainfoline investment ideas june

SELL
Puravankara Projects Ltd CMP Rs170
Investment ideas
SELL
Jet Airways (India) Ltd CMP Rs488
1
Margin under pressure
Jet Airways Ltd reported 13.4% decline in operating margins in Q4
FY08. The fall was primarily on the back of escalating crude oil prices.
With crude oil crossing the US$140 mark and prices expected to be
at higher levels for some time, margins would continue to remain
under pressure. Further, the company has embarked on an
aggressive capex plan of US$2bn over the next five years. The
investment is expected to be funded by a debt equity mix of 85:15.
This would further worsen the debt equity ratio, which currently
stands at 2.6x. Moreover, with interest rates on a sustained rise,
additional leverage may put pressure on the profitability in mediumterm.
Domestic and International operations showing signs of
slowdown in growth
In order to offset higher fuel costs, airlines have hiked fuel surcharge
over the past few months. This has led to higher fares translating
into lower growth in traffic. As crude oil prices continue to surge,
airline operators are expected to announce fresh round of fare hikes.
With airport developers introducing development charges in some
major cities, cost to the consumer will only increase, leading to further
softening of demand. Jet Airways which recently commenced
international operations is expected to witness higher initial costs.
Multiple headwinds to earnings
Rising fuel prices and slowdown in traffic has resulted in profit erosion
for major aviation companies like Jet Airways. We expect Jet Airways
to continue making losses for next 6 to 7 quarters on expectations
of high crude prices and further rupee depreciation. However, with
international operations maturing post FY09E, we could see Jet
Airways return to profitability post Q3 FY10. We recommend a sell
with a medium-term price target of Rs420.
Sector news flow will continue to be negative
An impending increase in interest rate following the recent repo
rate hike by RBI further dampens the demand outlook and financial
condition for the real estate sector. With funding (both equity and
debt) becoming significantly dearer for the developers over the past
two quarters, they will have to drop prices meaningfully to stimulate
sales and thereby improve the cash flows. The news flow is likely to
worsen over 2H CY08 dominated by project delays and further price
corrections.
Concentrated pipeline puts Puravankara at relative risk
The intensifying residential slowdown is relatively riskier for
Puravankara as more than 90% of company’s current project pipeline
is in the residential segment, with 50% in Bangalore. Absorption in
Bangalore continues to be weak and the company had recently
offered a limited-period promotional scheme on its Highlands project
to push sales.
Margins continue to be under pressure
The company’s margins have been under pressure over the last
two quarters on the back of the sharp rise in input costs. With
concentration in Bangalore, company has not been able to pass on
cost increases to its customers. The ongoing price correction and
cost inflation is likely to further depress operating margin and
increasing interest cost would pressurize the net margin.
Guidance and earnings estimates at risk; SELL
We believe that company’s aggressive guidance towards new
launches of 15mn sqft in FY09 is at risk in the current scenario of
declining demand, decreasing prices and diminishing funding options
with increasing cost. We recommend SELL on Purvankara with a
target price of Rs149, which represents 45% discount to NAV and
12% downside from current levels.
Share price chart
Source: Company, India Infoline Research
Shareholding pattern Share price chart
Source: Company, India Infoline Research
Mar-08 (%)
Promoters 90.0
FIIs & institutions 9.1
Non promoter 0.2
Others 0.7
Shareholding pattern
Mar-08 (%)
Promoters 80.0
FIIs & institutions 16.5
Non promoter 0.9
Others 2.7
Financials Financials
March (Rs cr) FY08 FY09E FY10E
Revenue 10,245 14,164 16,120
yoy Growth (%) - 38.3 13.8
Operating profit 246 480 1820
OPM (%) 2.4 3.4 11.3
PAT (505) (640) 288
yoy Growth (%) - - -
EPS (58.5) (73.5) 33.2
PE - - 14.7
Source: Company, India Infoline Research Source: Company, India Infoline Research
March (Rs cr) FY08 FY09E FY10E
Revenues 566 837 1,100
yoy growth (%) 35.7 48.0 31.3
Operating Profit 213 305 382
OPM (%) 37.7 36.4 34.7
PAT 240 276 302
yoy growth (%) 84.0 14.9 9.4
EPS (Rs) 11.2 12.9 14.1
P/E (x) 15.1 13.1 12.0
June 30, 2008
Weekly Wrap
India Infoline Weekly Wrap
Indian market fell sharply after RBI hiked both the repo rate and FII & MF activity
CRR by half a percentage points each. Uncertainty from the political
front over the nuclear deal issue, weakness in the global markets
and record high crude oil prices were the other dampeners.
Derivatives expiry contributed further towards the volatility. Nifty
rollover to the next series stood at 70% with huge build up of short
positions. Finally, the BSE Sensex closed at 13,802 down by 5.3%
and NSE Nifty lost 4.8% to close at 4,137.
Market review
Weakness was seen in major global markets with Dow Jones slipping
to a 21-month low on the back of record high crude oil prices.
Sentiment was further dampened after a Goldman Sachs' report
painted a dismal picture for the financial sector. Asian market also
weakened led by a fall in Nikkei Index after Japan's inflation rose to
the highest in a decade.
Combination of repo rate and CRR hike kept the interest rate
sensitive stocks under pressure. Concerns over the demand for
metals on account of rising interest rates led to a sharp fall in metal
stocks while profit booking was seen in IT and pharma stocks. Fears
that rising oil prices would increase subsidy burden for the industry
has led to selling in stocks of oil marketing companies.
Company Name B/S Qty (‘000)
UTI Software Rohinton Screwvala S 750
Info Edge Kapil Kapoor S 52
Geodesic Info Prashant Mulekar B 16
Educomp Sol Sangeeta Gulati B 3
Ambuja Cement PB Kulkarni S 27
Insider trades
Date Institution Scrip name B/S Qty (lacs) Price
23-Jun Reliance MF Monnet Ispat B 7.5 540
24-Jun CLSA Karuturi Global B 26 21
24-Jun Fidelity Pantaloon (R) B 10 459
25-Jun Morgan Stanley Gwalior Chem B 1.3 92
26-Jun Merrill Lynch Hind Oil Exp S 7.4 131
Bulk deals
BSE Sensex BSE 200
CMP % CMP %
Company (Rs) Chg Company (Rs) Chg
Tata Power Co 1,060 (15.3) HCC 84 (22.7)
Hindalco Inds 139 (13.5) Triveni Engg 70 (22.4)
L&T 2,266 (11.6) NALCO 334 (22.3)
ICICI Bank 652 (11.0) IndusInd Bank 55 (19.5)
Grasim 1,944 (10.6) IFCI 41 (18.4)
BSE Sensex & BSE 200 Five Top Losers
BSE Sensex BSE 200
CMP % CMP %
Company (Rs) Chg Company (Rs) Chg
RIL 2,183 4.0 GHCL 71 10.5
Dr Reddy's Labs 657 0.3 i-flex 1,378 9.9
TCS 866 0.2 Financial Tech 1,649 2.7
- - - CESC 409 2.2
- - - P&G 780 1.7
BSE Sensex & BSE 200 Five Top Gainers
(Rs in cr)
FII MF
Date Net Investment Net Investment
19-Jun (353) (100)
20-Jun (953) 216
23-Jun (621) 37
24-Jun 274 211
25-Jun (104) 325
Total 2008 (26,157) 8,980
2
India Infoline Weekly Wrap
Technical ideas
SELL
Divis’s Labs CMP Rs1,340
SELL
Essar Oil CMP Rs199
Star TV may sell 26% stake in Bajaj Telefilms
Welspun Gujarat is likely to bag an order worth Rs2,000cr from
North America
Buzz on the street
Technically strong
The stock has corrected from a high of Rs1,930 in January 2008 to
a low of Rs1,100 in March 2008. Since then, it rallied to a high of
Rs1,635 early June 2008. However, it has corrected back to the
vicinity of the Rs1,300 levels.
The price movement from June 2007 till date has taken the shape
of a rising Head & Shoulders pattern with the neckline placed at the
Rs1,270 levels. This is a bearish price pattern with negative
implications for the future price movements.
The weekly RSI has generated a fresh crossover sell signal
suggesting further weakness in the trend. The weekly MACD has
also generated a fresh sell signal, indicating a pickup of momentum
in the downtrend.
Traders should look to sell at current levels and on rallies to a
resistance of Rs1,390-1,420 levels. Traders should keep in mind an
initial target of Rs1,200 followed by Rs1,150 and Rs1,100 levels. A
stop loss of Rs1,461 is recommended on all short positions.
The stock corrected from a high of Rs360 to a low of Rs105 in
January 2008. Since then, it staged a smart pullback rally to a high
of Rs281.45 levels in May 2008. The stock held its 200 DMA levels
for the past six months, even though prices swung wildly.
The daily RSI as well as the MACD are in a sell mode suggesting
weakness in the trend as well as momentum. The 8-Day ADX is
also in sell mode which suggests a fast decline on the cards. Fridays
decline saw the stock closing below its 200 DMA placed at the Rs201
levels. This close below the 200 DMA is likely to trigger an immediate
correction to the Rs180 and/or Rs170 levels.
Traders can sell at current levels and on rallies to Rs205-208 levels
for target of Rs180 and/or Rs170 levels. A stop loss of Rs213.50 is
recommended on all short positions.
Sanwaria Agro may sell 10% stake to PE players
ICICI Ventures, a subsidiary of ICICI Bank, may list US$1.5bn realty
fund on the London Stock Exchange
10 days Total 10 days
Moving Traded Average
Company CMP Average Qty Traded Qty
(Rs) (Rs) (Lacs) (Lacs)
GHCL 71 68 97.0 82.8
i-flex 1,378 1,318 2.1 1.9
Financial Tech 1,649 1,620 0.7 0.6
P&G 780 776 3.2 0.2
- - - - -
Technically weak
10 days Total 10 days
Moving Traded Average
Company CMP Average Qty Traded Qty
(Rs) (Rs) (Lacs) (Lacs)
Cipla 211 214 4.7 1.8
RIL 2,183 2,198 1.6 0.7
JSW Steel 981 987 0.1 0.1
Mah Seamless 290 302 13.5 40.6
HPCL 186 194 16.1 40.3
3
India Infoline Weekly Wrap
4
Mutual funds round-up
Fund this week: UTI Opportunities Fund
NFO update Dividend update
India Infoline picks
India Infoline Ltd, 15th Floor, P.J.Tower, Dalal Street, Mumbai -01. Tel 91-22-67491700.
The information in this newsletter is generally provided from the press reports, electronic media, research, websites and other media. The information also includes information from interviews conducted,
analysis, views expressed by our research team. Investors should not rely solely on the information contained in this publication and must make their own investment decisions based on their specific
investment objectives and financial position and using such independent advisors as they believe necessary. The materials and information provided by this newsletter are not, and should not be construed
as an advice to buy or sell any of the securities named in this newsletter. India Infoline may or may not hold positions in any of the securities named in this newsletter as a part of its business. Past performance
is not necessarily an indication of future performance. India Infoline does not assure for accuracy or correctness of information or reports in the newsletter.
Fund Name Close Type Class
Templeton FHF - Sr-VIII -Plan F 2-Jul CE Debt- FMP
Canara Robeco FMP Sr 2 3-Jul CE Debt- FMP
ING Latin America Equity Fund 10-Jul OE Hybrid
Equity - Diversified Assets NAV Absolute return (%) as on June 26, 2008
(Rs Cr) (Rs) 1wk 1mth 3mth 6mth 1yr 2yr 3yr 5yr
HSBC Equity Fund (G) 1,214 83.3 (1.7) (9.8) (6.6) (26.3) 10.5 60.0 123.6 534.0
Kotak 30 (G) 706 78.6 (1.5) (10.1) (9.3) (29.7) 6.2 51.7 135.5 458.5
SBI Magnum Comma Fund (G) 637 19.4 (2.7) (10.0) (5.7) (33.8) 12.7 61.1 94.1 --
Sundaram Select Focus - RP (G) 864 71.9 (0.9) (8.3) (6.4) (32.5) 13.1 60.3 150.2 461.3
UTI Opportunities Fund (G) 488 16.0 (2.5) (9.3) (8.3) (31.9) 4.6 33.4 -- --
Asset allocation (%)
Equity 88.1
Debt 3.2
Cash/Call 8.7
Top 10 holdings (%)
Tata Steel 5.0
Reliance Inds. 4.6
Axis Bank 4.4
Reliance Comm 4.1
Infosys Tech. 4.0
Sterlite Inds. 3.8
L&T 3.7
Ranbaxy Lab. 3.3
Satyam Computer 3.2
HDFC Bank 3.2
Fund snapshot
Fund manger Harsha Upadhyaya
NAV - June 26, 08 Rs16
NAV 52 high/low Rs25/15
AUM -May 30, 08 Rs488
Type Open-ended
Class Equity-diversified
Options Growth & dividend
Min investment Rs5,000
Entry load 2.25%<Rs5crs
Exit load 1.00%<6mths
Registrar UTI Tech
Benchmark BSE100
No. of stocks 42
Expense ratio 2.2%
Commodity, debt and currency graphs
Mutual Fund Dividend % Record date Class
UTI Opportunities Fund 18.0 1-Jul Equity - Div
Templeton FHF Sr II- P(B) 100.0 1-Jul Debt- FMP
Optimix Dbt Multi Manager 0.7 2-Jul Debt- FOF