Market really had great week. Though global and political issues made market realize their presence but index managed to make it out of worries. Of course, the US fed provided a helping hand to recover and it helped, though once reacted badly on lack of support from fed. On political front India also had some relief and stability. Congress said that it would put Indo-US nuke deal on hold for now and that was some face saving formula. Market had a great bounce back in spite of F&O settlement week. Sensex and Nifty both gained by 6.5%. Probably this was back by short covering. However it is paired off 1.5% for August. August market was extremely volatile.
Political overview: The news flow from the political front may appear encouraging. At least polls have been averted for now. This is what we mentioned in our previous note that the crucial time will be in two months from now. Volatility may continue?really the time will tell us!
Sensex zoomed 6.5% (894 Points) for the week. With Tisco among the biggest gainer up by18%, followed by Hindalco, MNM and RIL gaining 10% each. Losers for week were Cipla and Guj Ambuja down by over 1% each. topnew.gif (1104 bytes)
Auto Majors at their best; Eveready ready for more?..Zodiac super jump..
Auto stocks did rally this week. Bajaj Auto is set to launch its new fuel-efficient 125 cc bike that offers 109 km a litre. Named as? Exceed? and is slated to be launched in mid -September. The company is also launching a new-generation engine ahead of the rollout of bikes to educate people about the advantages of new technology that combines the features of fuel efficiency and performance. With Bajaj upgrading the platform from 100 cc to 125 cc with the new bike, the sales of 100 cc would further decrease which would impact Hero Honda. Hero Honda is the market leader in the 100 cc segment. Bajaj wants to make the bike to exceed the youth power. We expect trading upsides over the medium term. The Festival demand is what all 2 wheeler players are banking on and we too. Lower interest rates will be the trigger the markets will be looking for. MNM was also rallied ahead of its Sales numbers for the month of August is what we assume. Auto Majors will be coming out with their monthly sales number next which we expect to be good one.
McNally Bharat, it was surprising to note that the Rs 90 cr Mazgaon dock order was already an old one existing in the Rs 1100 cr order book indicated with the recent results. It?s just that the order copy was received. However, the negative which emerged was that the Rs 1000 cr orders may take their time to be announced given that the uncertainty in political environment has delayed their letters to be sent. May be, in the face of elections, the company may not be ready to accept for now given the uncertainty. There is no surety that a new government and new Minister may want to review the same. However this is our guess. All in all, this company is less expensive than many other engineering firms on an FY09 expectation.
Textile stocks performed mixed for the week. Star performer was Zodiac Clothing for the week. The branded business has continued to grow and has recorded a growth of nearly 24% by virtue of growth in every segment of the Indian business. In the export business the sales grew with a satisfactory increase in contribution due to the company reshuffling its portfolio of customers, eliminating those customers with low contribution. Profitability and growth has been sustained, despite a major challenge posed by the sudden and sharp appreciation of the rupee. With the festive season in India approaching, we look forward to sustained demand for the branded business which will grow the profitability overall. Zodiac ralied 17% for the day..
Esab India is another stock which has good prospects going ahead. The company had an open offer revised upward: 58.01 lakh shares (37.7%) from 30.78 lakh shares (20%) Price increased to Rs 505 from Rs 406 (CMP: Rs 490.85). We seem to be running into luck. We like this welding electrode business which will benefit from lower metal prices. The company has recently added new capacity and has also seen greater outsourcing to meet the demand in India. Charter PLC is the parent owning ESAB. It also has a group business called Howden which is into Gas Turbines. Howden has been looking to get into India as indicated in Howdens annual report and that could be through Esab though given the less than 50% holding gives reason to believe that its more likely to be a trading activity initially. The welding demand is more dependent on Ship building, Pipes Engineering, and Construction. Ship Building and Pipelines is where there is strong visibility for the next couple of years where the order books are full. Valuations at 17X FY 08 at Rs 490 the stock is certainly not cheap but the downsides are limited. With Charter probably owning over 51% post this offer. We believe that product introductions could accelerate. However for now the stock is likely to remain in the current range.
Eveready sold of the Mumbai land and our guess was on target. They sold the Mumbai land for Rs 115 cr that comes to Rs 14 per share. The company intends to raise money for business. Do they find the current prices attractive ?.. With Zinc at around $ 3000 per tonne, profitability certainly will be better.. and promoters have a 40% stake in the company. May be a good time to increase stake. There is also the issue of the FCCB issued 2 years ago with conversion at Rs 95. If the stock does not cross 95, that would mean cash outflow. More comment on that once we speak to the management.
Technically Speaking: Sensex closed above 15200 levels. Next Immediate target is at 15650. On the lower side 15170 and 15040 are the key supports. Volumes traded were good at over 5000 cr for the day.
Political overview: The news flow from the political front may appear encouraging. At least polls have been averted for now. This is what we mentioned in our previous note that the crucial time will be in two months from now. Volatility may continue?really the time will tell us!
Sensex zoomed 6.5% (894 Points) for the week. With Tisco among the biggest gainer up by18%, followed by Hindalco, MNM and RIL gaining 10% each. Losers for week were Cipla and Guj Ambuja down by over 1% each. topnew.gif (1104 bytes)
Auto Majors at their best; Eveready ready for more?..Zodiac super jump..
Auto stocks did rally this week. Bajaj Auto is set to launch its new fuel-efficient 125 cc bike that offers 109 km a litre. Named as? Exceed? and is slated to be launched in mid -September. The company is also launching a new-generation engine ahead of the rollout of bikes to educate people about the advantages of new technology that combines the features of fuel efficiency and performance. With Bajaj upgrading the platform from 100 cc to 125 cc with the new bike, the sales of 100 cc would further decrease which would impact Hero Honda. Hero Honda is the market leader in the 100 cc segment. Bajaj wants to make the bike to exceed the youth power. We expect trading upsides over the medium term. The Festival demand is what all 2 wheeler players are banking on and we too. Lower interest rates will be the trigger the markets will be looking for. MNM was also rallied ahead of its Sales numbers for the month of August is what we assume. Auto Majors will be coming out with their monthly sales number next which we expect to be good one.
McNally Bharat, it was surprising to note that the Rs 90 cr Mazgaon dock order was already an old one existing in the Rs 1100 cr order book indicated with the recent results. It?s just that the order copy was received. However, the negative which emerged was that the Rs 1000 cr orders may take their time to be announced given that the uncertainty in political environment has delayed their letters to be sent. May be, in the face of elections, the company may not be ready to accept for now given the uncertainty. There is no surety that a new government and new Minister may want to review the same. However this is our guess. All in all, this company is less expensive than many other engineering firms on an FY09 expectation.
Textile stocks performed mixed for the week. Star performer was Zodiac Clothing for the week. The branded business has continued to grow and has recorded a growth of nearly 24% by virtue of growth in every segment of the Indian business. In the export business the sales grew with a satisfactory increase in contribution due to the company reshuffling its portfolio of customers, eliminating those customers with low contribution. Profitability and growth has been sustained, despite a major challenge posed by the sudden and sharp appreciation of the rupee. With the festive season in India approaching, we look forward to sustained demand for the branded business which will grow the profitability overall. Zodiac ralied 17% for the day..
Esab India is another stock which has good prospects going ahead. The company had an open offer revised upward: 58.01 lakh shares (37.7%) from 30.78 lakh shares (20%) Price increased to Rs 505 from Rs 406 (CMP: Rs 490.85). We seem to be running into luck. We like this welding electrode business which will benefit from lower metal prices. The company has recently added new capacity and has also seen greater outsourcing to meet the demand in India. Charter PLC is the parent owning ESAB. It also has a group business called Howden which is into Gas Turbines. Howden has been looking to get into India as indicated in Howdens annual report and that could be through Esab though given the less than 50% holding gives reason to believe that its more likely to be a trading activity initially. The welding demand is more dependent on Ship building, Pipes Engineering, and Construction. Ship Building and Pipelines is where there is strong visibility for the next couple of years where the order books are full. Valuations at 17X FY 08 at Rs 490 the stock is certainly not cheap but the downsides are limited. With Charter probably owning over 51% post this offer. We believe that product introductions could accelerate. However for now the stock is likely to remain in the current range.
Eveready sold of the Mumbai land and our guess was on target. They sold the Mumbai land for Rs 115 cr that comes to Rs 14 per share. The company intends to raise money for business. Do they find the current prices attractive ?.. With Zinc at around $ 3000 per tonne, profitability certainly will be better.. and promoters have a 40% stake in the company. May be a good time to increase stake. There is also the issue of the FCCB issued 2 years ago with conversion at Rs 95. If the stock does not cross 95, that would mean cash outflow. More comment on that once we speak to the management.
Technically Speaking: Sensex closed above 15200 levels. Next Immediate target is at 15650. On the lower side 15170 and 15040 are the key supports. Volumes traded were good at over 5000 cr for the day.
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