Money Times 5th Nov
Money Times 5th Nov
Money Times 5th Nov
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T
VOL. XXVI No.1
Markets nervous!
S
Pages.22 Rs.18
25 going on 26!
By Sanjay R. Bhatia
Dear Reader,
Correction continued on the bourses on
the back of weak global cues. The Nifty
This issue marks the beginning of the 26th year of our journey and the
breached the psychologically important
only investment weekly to have survived on the national scene.
8500 mark during last week. The
But far from being tired, we are full of hope and energy as we plan some
markets failed to offer any resilience as
new offerings this year. And like all our products, they will live up to our
buying support remained elusive.
credo of Timely, Topical & Trusted because you, dear reader, are the
FIIs remained net sellers in the cash
centre of our focus.
segment but were seen hedging as net
buyers in the derivatives segment. DIIs
Looking forward to your continued patronage.
continued to support the markets at
lower levels and remained net buyers
Yours Truly,
during the week. The breadth of the
R. N. Gupta
market remained weak amidst high
volumes, which is a negative sign for the
Editor & Publisher
markets.
Crude oil prices remained weak and slipped below the $48 mark on the back of high inventory data. The US Federal
Reserve maintained a status quo on interest rates. On the domestic front, the GST council has agreed on the following
rate structure - 0%, 5%, 12%, 18% and 28%. The earnings season continued to disappoint.
Technically, the prevailing negative technical
conditions weighed on the market sentiment
leading to selling pressure. The Stochastic,
MACD, RSI and KST are all placed below their
respective averages on the daily and weekly
charts. Further, the Nifty is below its 50-day
SMA and 100-day SMA, which is a negative for
the market. These negative technical
conditions could lead to intermediate bouts of
selling pressure.
The prevailing positive technical conditions,
however, still hold good. The Stochastic is
placed in the oversold zone. The RSI is placed
around the oversold zone on the daily chart.
The Nifty is placed above its 200-day SMA. The
Niftys (50-100 day SMA, 50-200 day SMA and
A Time Communications Publication
100-200 day SMA) Golden Cross breakout continues to hold valid, which augurs well for the market. These positive
technical conditions could lead to buying support at lower levels.
The -DI line is placed above the ADX line and the +DI line is placed above the 38 level on the daily chart indicating that
sellers are gaining strength. The ADX line has moved above the 19 level. The market sentiment remains nervous due to
weak global cues and the US presidential elections. Fresh positive triggers are needed for the markets to bottom out.
The Nifty has failed to close above 8500, which is a negative sign. If it continues to sustain below it, then the markets
could fall further to test 8337. On the upside, if the Nifty moves above 8500, then it could test the 8621 level. 8337
remains a crucial support level. Stock-specific action is likely to be witnessed due to the earnings season.
In the meanwhile, the markets could take cues from the US presidential election results, news flow on earnings,
geopolitical events, RupeeDollar exchange rate, global markets, progress of GST implementation and crude oil prices.
Technically on the upside, the BSE Sensex faces resistance at the 27650, 28100, 28290, 28578, 29100 and 30025 levels
and seeks support at the 27131 and 26730 levels. The resistance levels for the Nifty are placed at 8500, 8621, 8727,
8848, 8968, 9047 and 9120 while its support levels are placed at 8337, 8285 and 8088.
BAZAR.COM
The Muhurat fever has cooled down as the Sensex and the Nifty turned red from the green on the auspicious day. Weak
global cues, the narrow margin race between Hillary Clinton and Donald Trump, the Tata tussle, Pakistan firing, Chinas
indifference etc all weigh heavily on the benchmarks.
The resilience, if any, in the coming
days may come from the growth
Believe it or not!
story of India, which remains intact.
Compucom Software recommended at Rs.11.88 on 17 October
Robust rainfall, superb kharif
2016 recorded a new 52-week high at Rs.22.02 last week
harvest, higher minimum support
appreciating 85% in just 3 weeks!
price for cereals and staples, GST,
Century Enka recommended at Rs.261.6 on 3 October 2016
higher advance tax collection etc.
recorded a new 52-week high at Rs.362.75 last week
are the positives that play up to
appreciating 39% in just 1 month!
control the negative elements.
The government, too, has clarified that it stands at a distance for now as this is an internal matter of a business house. It
may join the scrutiny if issues of non-governance or poor corporate governance are raised and shareholders interests
are jeopardized.
The market cap of Tata companies has been eroding every passing day and so is the groups goodwill. The 170-year old
business house is raising doubts even in the hardcore Parsi investor community.
Trumps Cleanton: The swings in Clintons and Trumps favour are being monitored every day. The last minute email
row has raised a storm for Clinton and Trump is pressing advantage. Markets the world over have turned jittery over
Trumps victory (going by his pre-poll statements) and the approach he may adopt if elected. He may have made some
weird statements but at the end, if elected, he may fine tune every word and thought. After all, Trump is a sharp
businessman and holds USAs interest uppermost. His mentality and traits may click well with those of our Prime
Minister and they may tango to mutual advantage than feared.
So lets wait for the near-term panic on Trumps arrival and enter the two most laggard segments pharma and I.T. by
buying the leaders. An US president cant be impractical. Business first, development first, progress first is the key to any
leaders popularity and Trumps trump card or Hillarys Cleanton cannot be anything but that.
TRADING ON TECHNICALS
DRV
27877
Weekly Trend
Down
WRV
27541
Monthly Trend
Up
MRV
26280
BAJAJ HOLDING
CAIRN INDIA
FORBES & COMPANY
INDUSIND BANK
MULTI COMMODITY EXCH
Last
Close
Level
1
Level
2
Center
Point
Level
3
Level
4
Relative
Strength
Weekly
Reversal
Value
Up
Trend
Date
2190.00
236.85
2396.00
1219.00
1334.85
Weak
below
2150.0
224.9
2115.0
1187.0
1248.0
Demand
point
2152.0
225.6
2168.0
1192.3
1257.2
Demand
point
2188.0
236.2
2343.0
1213.7
1325.6
Supply
point
2226.0
247.4
2571.0
1240.3
1403.3
Supply
point
2300.0
269.2
2974.0
1288.3
1549.3
69.8
66.2
64.5
61.1
60.4
2152.8
229.8
2065.8
1214.8
1314.5
23-09-16
30-09-16
21-10-16
04-11-16
04-11-16
Last
Close
MINDTREE
SUN PHARMACEUTICAL I
WIPRO
IDEA CELLULER
JUSTDIAL
424.95
653.00
452.45
72.05
393.75
Level
1
Level
2
Center
Point
Level
3
Level
4
Demand
point
Demand
point
Supply
point
Supply
point
Strong
above
391.8
515.7
420.1
64.2
339.2
415.8
617.7
442.3
70.0
379.2
430.6
684.3
454.4
73.7
404.6
439.8
719.7
464.6
75.8
419.2
445.4
751.0
466.5
77.4
430.0
Relative
Strength
Weekly
Reversal
Value
Down
Trend
Date
25.95
27.33
27.68
28.02
31.45
460.15
722.50
471.96
75.75
427.08
21-10-16
28-10-16
28-10-16
28-10-16
28-10-16
*Note: Up and Down Trend are based of set of moving averages as reference point to define a trend.
Close below averages is defined as down trend. Close above averages is defined as up trend. Volatility
(Up/Down) within Down Trend can happen/ Volatility (Up/Down) within Up Trend can happen. Relative
Strength (RS) is statistical indicator. Weekly Reversal is the value of the average.
EXIT LIST
Note: SA-Strong Above, DP-Demand Point, SP- Supply Point, SA- Strong Above
Last
Close
Supply
Point
Supply
Point
Supply
Point
Strong Above
MARICO
262.80
267.94
270.05
272.16
279.00
232.1
37.81
PIDILITE INDUSTRIES
695.00
697.10
703.00
708.90
728.00
597.1
40.95
SUNDARAM CLAYTON
2863.00
3083.20
3164.50
3245.80
3509.00
1705.2
44.74
PIRAMAL ENTERPRISES
1611.00
1673.42
1699.50
1725.58
1810.00
1231.4
45.14
2414.00
2460.95
2487.50
2514.05
2600.00
2011.0
46
762.00
780.01
786.50
792.99
814.00
670.0
46.01
ATUL
2173.00
2220.67
2242.50
2264.33
2335.00
1850.7
46.48
HAVELL'S INDIA
385.45
393.27
397.10
400.93
413.35
328.3
47.12
799.00
801.46
805.00
808.54
820.00
741.5
47.28
FINOLEX INDUSTRIES
442.75
445.70
449.00
452.30
463.00
389.7
47.33
S.R.F.
1704.00
1726.11
1749.00
1771.89
1846.00
1338.1
47.65
GRUH FINANCE
317.90
323.06
325.55
328.04
336.10
280.9
47.81
GRASIM INDUSTRIES
900.00
921.53
932.50
943.47
979.00
735.5
47.93
Scrip
Demand Monthly
Point
RS
VARDHMAN TEXTILES
1095.00
1112.92
1120.00
1127.08
1150.00
992.9
48.63
YES BANK
1196.40
1212.83
1224.70
1236.57
1275.00
1011.6
49.02
CHENNAI PETROL.CORP.
253.10
265.78
270.45
275.12
290.25
186.6
49.35
GABRIEL INDIA
117.60
121.04
122.60
124.16
129.20
94.6
49.4
660.00
675.15
683.80
692.45
720.45
528.6
49.43
J K CEMENT
857.15
895.44
909.10
922.76
967.00
663.8
49.48
317.35
326.67
330.95
335.23
349.10
254.1
50.06
MAHARASHTRA SCOOTERS
1813.00
1862.96
1885.50
1908.04
1981.00
1481.0
50.23
DISHMAN PHARMACEUTIC
226.75
235.12
239.85
244.58
259.90
154.9
50.52
IIFL HOLDINGS
303.65
306.46
310.00
313.54
325.00
246.5
50.62
353.75
368.11
373.70
379.29
397.40
273.3
50.79
230.80
245.19
249.90
254.61
269.85
165.4
51.47
466.65
471.43
476.50
481.57
498.00
385.4
51.51
ULTRATECH CEMENT
3851.85
3888.91
3908.65
3928.39
3992.30
3554.3
52.67
UFLEX
282.35
295.49
300.27
305.06
320.55
214.4
53.4
VIP INDUSTRIES
132.35
136.61
139.15
141.69
149.90
93.6
53.61
JSW STEEL
1589.00
1612.08
1626.00
1639.92
1685.00
1376.1
53.75
MUTHOOT FINANCE
343.80
349.33
353.23
357.12
369.75
283.2
57.82
BUY LIST
Note: SA-Strong Above, DP-Demand Point, SP- Supply Point, SA- Strong Above
Scrip
Weak below
Supply Point
Monthly RS
PUNTER PICKS
Note: Positional trade and exit at stop loss or target whichever is earlier. Not an intra-day trade. A delivery based trade for a
possible time frame of 1-7 trading days. Exit at first target or above.
Note: SA-Strong Above, DP-Demand Point, SP- Supply Point, SA- Strong Above, RS- Strength
Scrip
RRML
BSE Code
Last
Close
Demand Point
Trigger
Weak
below
Supply point
Supply
point
RSStrength
539837
88.85
85.50
89.50
80.50
95.1
104.1
58.03
*Note: Up and Down Trend are based of set of moving averages as reference point to define a trend.
Close below averages is defined as down trend. Close above averages is defined as up trend. Volatility
(Up/Down) within Down Trend can happen/ Volatility (Up/Down) within Up Trend can happen.
! Note: Momentum breakout trend of stocks value(volume*close) between 10-80 lakhs.
TOWER TALK
The normal monsoon, the recent rate cut and the likelihood of retail inflation dipping to 4.5%, aided by
manufacturing PMI touching a 22-month high will definitely boost the market sentiment. Hence the current
volatility need not worry us.
Visaka Industries, manufacturer of fibre cement sheets, is expected to grow at 35% CAGR over the next few years.
The stock may appreciate about 30% in the medium-term.
NBCC (India) Ltd will incur a capex of about Rs.5000 crore to redevelop 10 railway stations, which is just part of its
redevelopment plans to convert 100 stations into world-class terminals. Buy for excellent returns.
Hyderabad-based Aurobindo Pharma has shown interest in acquiring Portuguese drug maker, Generis
Farmaceutica, for about $200 mn, which will boost its revenue. A smart buy.
Grasim Industries has posted fantastic Q2 results with 50% higher PAT since all its segments have performed well.
A good buy.
Tech Mahindra will remain in the spotlight after declaring decent numbers.
A Time Communications Publication
BEST BET
as its new CEO, who has immense experience in consumer market and has previously worked with Niligris and Reliance
Private Equity. The Company is now strongly focused on ramping up branded sales.
We believe that the Companys limited presence in the non-South market presents a humungous growth opportunity as
the branded kitchen segment is expected to post a strong double digit growth over the next three years led by a
confluence of factors like the Seventh Pay Commission, good monsoons etc.
Over the past three years, BGAL has expanded its portfolio from mere 6 products in FY11 to 20+ now. Currently, the
Butterfly brand is available through multi-brand outlets/retail touch points through 400 distributors reaching 18,000
retail touch points. It has also increased the number of stock keeping units (SKU) from 250 in 2011 to around 554
currently and it aims to expand further.
Going forward along with expanding its retail footprint, BGAL plans to aggressively explore other distribution channels
like online, modern retail and canteen stores department (CSD), which are expected to boost revenue. The management
expects the Company to achieve a turnover of Rs.1000 crore by FY20 (CAGR 17% over FY16-20).
Currently, BGALs utilisation stands at 50%. Over the next three years, the management expects the Companys branded
sales and earnings to reach Rs.1000 crore and Rs.50 crore respectively, led by improvement in gross and operating
margins. Thus, improving the margin profile will positively benefit the RoCE from the current level of 11.2% to 20% by
FY20.
Valuations: The BGAL share trades at 0.8x FY16 branded sales
Valuations:
whereas other players in this category trade at 3-4x FY16
FY13
FY14
FY15
FY16
sales. Going forward, sharpening focus on branded sales is Year to March
Diluted
EPS
(Rs.)
18.7
12.5
1.6
6.9
envisaged to enhance the Companys margin and return ratios.
Y-o-Y Growth (%)
(6.9)
(31.5) (87.4) 338.2
Technical Outlook: The Butterfly Gandhimathi Appliances Ltd
12.9
18.8
149.1
34
stock looks good on the daily chart for medium-term Diluted P/E (x)
Price/BV
(x)
2.1
1.9
1.9
1.8
investment. It has made a higher high and higher low pattern
EV/Sales
(x)
0.6
0.8
1.1
0.7
with a strong uptrend on the price while forming a saucer
6.7
10.7
15
10.3
pattern on the weekly chart and testing the neck line at Rs.210. EV/EBITDA (x)
The stock trades above all moving averages like the 200 DMA.
Start accumulating at this level of Rs.234.60 and on dips to Rs.205 for medium-to-long term investment and a possible
price target of Rs.300+ in the next 12 months.
GURU SPEAK
Despite being full of festivities, the stock market last week behaved with a negative bias contrary to everyones
expectations especially those who were hoping that the markets will achieve fancy targets by Diwali 2016. Speculators,
market experts and analysts were all disappointed with the market behaviour last week as it did not render any comfort
at all.
Although Samvat 2073 started on a positive note in the one hour special Muhurat trading
session, on Sunday, 30 October 2016, it fell short of expectation while closing in the negative in
the last few minutes of trading. Both the BSE Sensex and the CNX Nifty closed marginally lower.
The trend signalled a definite weakness as the Sensex slipped 11 points at 27930 followed by the
CNX Nifty which lost 12 points at 8625.70.
Post Diwali on Tuesday, 1 November 2016, too, trading was not encouraging as the Sensex lost
54 points at 27876.61 while the Nifty loss a fraction of 0.55 points to close at 8626. This
weakness in the market was attributed to weak global cues principally the US Federal interest
rate hike expected at the 2-day meet on Wednesday, 2 November 2016. However, the growth
By G. S. Roongta
prospects of the US economy are not so encouraging forcing the authorities to defer the interest
rate hike once again for the fourth time.
Big bull, Rakesh Jhunjhunwala, too, did not project any fancy target this time during his interview on Muhurat trading in
an exclusive interview with Economic Times. He was more than happy to distribute his wealth rather than multiply and
derive greater satisfaction proving to be right without using any wrong methods. But this was not bought by market
observers who believe that no one can build such huge wealth by playing straight forward and during his long career in
A Time Communications Publication
last fiscal. What else is needed to boost the market further? Such a correction of over 1500 points without any reason is
surely confusing and utterly baseless.
However, worries of US presidential elections and the US Federal rate hike next month or next year is natural and has
been discounted in the current market prices. According to me, it is purely a technical correction or profit-booking
before making a fresh commitment to make the market healthier and stronger to sustain higher levels going forward.
This is the best opportunity for investors in general and for people who have enough liquidity in hand.
Stocks recommended last week:
1) Ganesha Ecosphere rose from Rs.220 to Rs.229.75
2) Andhra Sugars rose from Rs.235 to Rs.262.50
3) Century Textiles & Industries made a new all-time high of Rs.1037.25 from Rs.909
Mid-Cap Twins: The stocks recommended staged recovery despite the market losing momentum throughout the week.
Both the stocks have immense potential and their values are likely to shoot up when the market regains its strength. It is
still not late to take a position in these stocks for decent gains.
Conclusion: The market is in a short-term downtrend and is likely to bounce back suddenly. Investors must keep
patience.
STOCK SCAN
10
share of polypropylene fibre (PPF) in non-woven industries in USA and Europe is higher than that of polyester while the
consumption of virgin polyester/reprocessed polyester fibre is more than PPF in India. Non-wovens are rapidly growing
in the following sectors Automobile; Hygiene products; Civil Engineering geotextiles; Filtration; Medical textiles;
Consumer products.
PP non-woven fabric is a preferred choice today owing to its superior quality over other nonwoven fabrics mainly for
manufacturing hygiene products. PP (fibre and polymer) is the primary raw material used for manufacturing non-woven
fabric. Increasing birth rate (mainly in Asia Pacific) has boosted the demand for consumer disposable products such as
baby diapers.
PP non-woven fabrics have gained market penetration for durable applications in geotextile, automotive and
construction industries mainly in countries like China and India. In addition, the growing ageing population mainly in
USA, Western Europe and Japan has spurred the demand for adult incontinence products, which is expected to boost the
demand for PP non-woven fabrics over the next couple of years. However, volatility in raw material prices coupled with
stringent regulations related to growing environmental concerns imposed on producers is expected to remain a key
challenge for the industry.
PP is one of the primary petrochemicals used for a variety of applications across numerous end-user industries and is
obtained via crude oil. The industry has now shifted its focus towards developing bio-based PP, which is expected to
serve as a major opportunity for market participants over the next six years.
The use of geotextiles in major infrastructure projects calls for policy guidelines, regulations and standardization, which
makes the use of PP fibre mandatory in applications where sturdy and tough fabrics are needed for particular
applications in railways, roads, etc.
PPSF manufactured by ZFL is suitable for use in non-woven carded needle felt fabrics. Currently, the Company sells 7075% of its PPF production to the non-woven sector while the rest is sold to conventional textile producers.
Financial Highlights:Equity and Reserves: The reserves of the Company Financial Highlights:
(Rs.in crore)
are 8 times its equity capital of Rs.4.42 crore.
Particulars
FY12
FY13
FY14
FY15
FY16
Sales and Profit: The Companys sales have Sales
51.79
55.98
57.47
69.21
66.80
consistently grown 10-15% with operating profit Total Expenditure
45.28
48.51
50.96
59.26
52.64
margins varying from 8-13% and net profit margins PBIDT
6.52
7.51
6.52
9.95
14.16
between 5-9% over the last 10 years. For FY16, the
Interest
0.16
0.20
0.24
0.27
0.27
Company posted a net profit of Rs.8.49 crore as
Depreciation
0.94
1.06
1.11
0.81
0.72
against Rs.5.91 crore in FY15. Its profits have
PBT
5.42
6.21
5.16
8.87
13.17
consistently risen year after year.
Tax
1.88
1.76
1.77
2.96
4.68
ZFL is a debt-free company with a lean balance sheet.
PAT
3.54
4.45
3.39
5.91
8.49
Overall, it has performed well over the last five years
EPS
(Rs.)
8
10.06
7.67
13.36
19.20
in terms of growth, profitability, return ratios and
2
2
1.5
2.5
3
cash flows from operations. It registered sales and Dividend (Rs.)
profit CAGR of 14.51% and 13.89% respectively during the last 5 years with RoE of 15.57%.
Book Value: The Companys share book value has risen to Rs.91.16 in FY16 from Rs.75.58 in FY15.
Dividend: ZFL is an investor-friendly company. It has regularly paid dividends since 13 years. For FY16, it paid a
dividend of Rs.3/share. The Company has maintained a healthy dividend payout of 19.27% of its profits.
Market Price: The ZFL stock is undervalued and ideally its stock price should be more than double the current level.
The Companys valuations look attractive with high margin of safety thereby offering a good investment opportunity for
long-term investors.
Conclusion: The general outlook for the industry is good. With ZFLs sharp focus on
Shareholding:
improving quality, developing new grades of fibre for critical as well as new
Particulars
%
applications, which cannot be replaced by polyester or other man-made fibre, the
Promoters
50.27
management is confident to see a rise in the demand for its products going forward.
General
Public
41.78
The Company continues to meet international quality standards and product
7.33
specifications. With an established production base of almost 25 years, the Company Others
NBFC
&
Mutual
Funds
0.62
is in the position to handle production and supply of quality products smoothly at
lower costs.
A Time Communications Publication
11
On the basis of the above coupled with attractive valuations of the Company at the current level and its debt-free status
with surplus cash reserves, we have a Buy on this stock for long-term price targets of Rs.500, 1000 and above.
SMART PICKS
STOCK WATCH
12
During the quarter, GILs net profit grew 26% Y-o-Y to Rs.408 mn from Rs.323 mn led by margin improvement and rise
in other income. Its depreciation was up 28% Y-o-Y to Rs.185 mn from Rs.144 mn on the back of the Gagillapur PFI
facility which went on-stream. Tax rate declined to 30.4% from 31% of PBT due to high R&D spend.
We expect the Company to report sustainable growth, driven by moving up the value chain and higher revenues from
regulated markets. We expect it to deliver superior performance due to the change in product mix, additional capacities,
margin improvement and new product launches. Further, the recent agreement with US Pharma to acquire 12.5% stake
would boost its bottom-line.
Technical Outlook: The Granules India Ltd stock looks very good on the daily chart for medium-term investment. It has
formed a likely double bottom pattern on the daily chart and short-term bottoming out can be seen with huge volumes.
Start accumulating at this level of Rs.111.75 and on dips to Rs.95 for medium-to-long-term investment and a possible
price target of Rs.175+ in the next 6 months.
*****
ITC Ltd
13
MARKET REVIEW
By Devendra A Singh
Market
participants
are
closely
watching the US presidential elections
What TF+ subscribers say:
and its impact on global financial
Think Investment Think TECHNO FUNDA PLUS
markets. The BSE Sensex corrected
sharply by 656.06 points to close at
Techno Funda Plus is a superior version of the Techno Funda column that
27274.15 and the CNX Nifty closed at
has recorded near 90% success since launch.
8433.75 tumbling 191.95 points for the
Every week, Techno Funda Plus identifies three fundamentally sound
week ending Friday, 4 November 2016.
and
technically strong stocks that can yield handsome returns against
On the macro-economic front, data by
their peers for short-to-medium-term investment. Most of our
Markit Economics showed Indias
recommendations
have fetched excellent returns to our subscribers.
Manufacturing Purchasing Managers
Index (PMI) surge to a 22-month peak
Of the 111 stocks recommended between 11 January 2016 and 19
to 54.4 in October 2016 from 52.1 in
September 2016 (37 weeks), we booked profit in 75 stocks, 13 triggered
September 2016.
the stop loss while 23 are still open. Of these 23 stocks, 15 are trading in
The latest reading was indicative of a
the green while 8 are trading marginally in the red.
robust improvement in manufacturing
business conditions that was in line
If you want to earn like this, subscribe to TECHNO FUNDA PLUS today.
with the long-run series average,
For more details, contact Money Times on 022-22616970/22654805 or
Markit Economics said.
moneytimes.support@gmail.com.
The growth in the Index of Eight Core
Industries stood at 5% in September
Subscription Rate: 1 month: Rs.2500; 3 months: Rs.6000; 6 months:
2016, stronger than the 3.2% growth
Rs.11000; 1 year: Rs.18000.
seen in August 2016. The Eight Core
Industries comprise nearly 38% of the weight of items included in the Index of Industrial Production (IIP).
A recently released report states that India Inc is optimistic about its business prospects with a majority of firms saying
that the current economic conditions are moderate to substantially better compared to the last six months even as cost
and availability of credit remain a concern.
The Overall Business Confidence Index (OBCI) rose to a six quarter high in the Business Confidence Survey conducted by
FICCI indicating that demand is gaining traction. The index value stood at 67.3. Good monsoons and award of the
Seventh Pay Commission will provide a further fillip to demand. Results pertaining to operational parameters indicated
mixed signs.
India is on the recovery course and there are indications of improved economic activity. The government's focus on
reforms has been laudable. The recent consensus on the passage of GST Bill is commendable and industry is looking
forward to it being rolled out in April 2017. This will be a game changer for the Indian industry and economy, the report
said.
High interest cost is a major concern for the industry. It remains critical that the cost of capital is made competitive to
propel investments. The RBI cut the repo rate by 150 bps since January last year.
The government had also announced a cut in the small saving rates earlier this year. It remains critical that banks take
cognizance of the situation and transmit these cuts by lowering the lending rates, a survey noted.
The Eurozone economy should continue to improve slowly. ECB President Mario Draghi said, Inflation will be creeping
up in the coming months. But the risks are to the downside means performance is more likely to be worse than better.
Mr. Draghi also said that it was mainly economic events outside the Eurozone that would affect the economy.
The economic recovery in the Euro area is expected to be dampened by subdued foreign demand, he added as the
ECBs decision to leave the monetary policy unchanged.
On the US front, US elections are scheduled to be held on Tuesday, 8 November 2016 GMT and for IST it will be live on
Wednesday, 9 November 2016. Also, the US Federal on 2 November 2016 signalled that the time for another interest
A Time Communications Publication
14
rate hike is approaching and it doesnt need more evidence before moving. The Fed said that inflation has been moving
up toward its 2% target since the beginning of the year.
The Indian stock market remained open for a Muhurat trading session on Sunday, 30 October 2016 on account of Diwali
from 18:30 to 19:30 IST.
The Indian financial markets were closed on Monday, 31 October 2016, on account of Diwali.
Key index fell on Tuesday, 1 November 2016, on profit-booking. The Sensex ended 53.60 points (-0.19%) lower to close
at 27876.61.
Key index tumbled on Wednesday, 2 November 2016, on consolidated selling of equities on global worries. The Sensex
corrected 349.39 points (-1.25%) to close at 27527.22.
Key index fell on Thursday, 3 November 2016, on extended selling of equities. The Sensex tanked 96.94 points (-0.35%)
to settle at 27430.28.
Key index settled down on Friday, 4 November 2016, ahead of the US election outcome. The Sensex was down 156.13
points (-0.57%) to close at 27274.15.
For future events, national and global macro-economic figures will surely dictate global markets movements and
influence investor sentiment in the near future.
The government is scheduled to release figures based on wholesale price index (WPI) and the combined consumer price
indices (CPI) for urban and rural India for October 2016 by mid-November 2016.
On the global front, the Caixin China manufacturing PMI data and the Caixin China services PMI data for October 2016 is
scheduled to be released in the coming weeks of November 2016.
By Subramanian Mahadevan
STOCK BUZZ
15
CFL has three manufacturing facilities in India and one each in Korea and USA which cater to clients in 100+ countries
with major presence in USA, Europe, Japan and India. It derives 50% of its revenue from exports (value-added high
margin speciality films account for 70%).
CFL posted slightly disappointing Q2FY17 results with a marginal increase in PAT on 7% lower sales. Although global
demand for BOPP is expected to be in high single digit for the rest of the financial year, any price hike in raw material
Polypropylene, a derivative of crude oil may prove to be a dampener as the Companys raw material cost is 64% of its
sales. FY18 numbers will fully reflect the sales and earnings of the Companys 60,000 TPA plant likely to be
commissioned soon. Book profits and re-enter at lower levels.
PRESS RELASE
EXPERT EYE
16
media platforms. Of this, over 700+ titles are perpetual rights (wholly-owned) and the remaining 2,200+ titles are
aggregate rights (partially owned). This spans new and old Hindi films and titles in various regional languages like
Marathi, Gujarati, Punjabi, Bengali etc as well as non-film content. SEL is one of the largest independent content
aggregators in Bollywood and CGI animated films like Bal Ganesh. Maaza Navra Tuzi Baiko was its first film in the
regional category, which was the highest grossing movie in Marathi Cinema in 2006.
Identifying movies that have the longest shelf life for television and other media content, SEL pioneered the movie
library syndication business by acquiring movie titles from producers and distributing it to broadcasters and other
media platforms. The Company has grown multifold over the years by developing excellent relationships with producers
and the broadcasting networks and thereby emerged as the largest organized player in a historically fragmented
industry. It also has ancillary revenue streams like New Media and Home Video movie distribution, which contribute the
remaining 5-10% of the revenue.
SEL has extended its relationship with The Orchard (an international distributor of digital content) for distributing and
marketing its music catalogue on iTunes in the Middle East and North Africa (MENA) region. Earlier, it had also entered
into a strategic alliance with Orchard to distribute its music content in Latin America, North America, Europe and Asia
Pacific. The deal allows Orchard to exploit SELs music catalogue of 100+ international digital platforms like iTunes,
Spotify, Rhapsody, eMusic, Virgin FR, Amazon Digital Services Inc, Xbox Music, radio, MediaNet, etc. The vast repertoire
of music includes film and non-film across multiple genre like folk, pop, sufi, qawwalis, kids music and regional music.
This means that Indians living abroad can also enjoy audio songs in their own language as a variety of regional music in
22+ languages including Punjabi, Marathi, Bhojpuri, Gujarati and Bengali among others, that are available on these
platforms. In July 2015, the Company partnered with Sharukh Khans Red Chillies Entertainment to distribute Shahrukh
Khans films on the television platform.
Traditional Media includes Broadcast Syndication, Home Entertainment and Others Broadcast Syndication. SEL has a
diverse content library of over 2,900 titles, which it syndicates to various broadcasting channels. This vertical
contributes over 50% of the Companys revenue. It has distributed over 1,000 films for telecast on TV networks.
Considering its vast and diverse library, most broadcasting channels would have syndicated content from the Company
at some time or the other.
Theatrical, Television and Overseas release generate 90-95% of the revenue in the first cycle of launch, where SEL is not
typically present. It participates in the second and subsequent cycles of film monetization. These subsequent cycles of
film monetization have been growing due to various factors like rising advertisement spends, digitization etc. There is a
lower risk in these cycles due to visibility of performance of movie during the first cycle of launch based on which SEL
decides on the cost of the content after it is confident of achieving the desired return on investment at the portfolio level.
It then distributes this content over different platforms like Broadcasting channels, New Media platforms like
YouTube.com and others. Its content on YouTube gets around 45-60 million views a month or around 1.5 to 2 million
hits per day. SEL earns revenue share from the advertisements shown on its channel on YouTube by way of Banner Ads,
Pre-roll ads and Mid-roll ads etc.
For FY16, the Companys net profit jumped 33% to Rs.55.4 crore on 16% higher sales of Rs.375 crore fetching an EPS of
Rs.20.4 and a dividend of 15% was paid. During Q2FY17, its net profit jumped 36% to Rs.15.2 crore from Rs.11.2 crore
in Q2FY16 on 21% higher sales of Rs.113.6 crore fetching an EPS of Rs.5.6. During H1FY16, its net profit climbed 28% to
Rs.29.2 crore on 22% higher sales of Rs.209.4 crore fetching an EPS of Rs.10.8.
With an equity capital of Rs.27.2 crore and reserves of Rs.344.8 crore, its share book value works out to Rs.137. The
promoters hold 65.8% of the equity capital, FIIs hold 13.5%, DIs hold 2% and PCBs hold 5.8%, which leaves 12.9% stake
with the investing public.
Coming to the futures prospects of the New Media industry, internet penetration is expected to grow faster than
television penetration to reach 496 million users by 2017 at 23.3% CAGR. Digital advertisement spends have reached 67% of the total Media and Entertainment industry. Advertising revenues are expected to grow at 32% CAGR till 2017.
Indian digital ad spend is likely to zoom from Rs.2200 crore in 2012 to Rs.8700 crore in 2017 at 32% CAGR as against
Chinas 24%, Brazils 19%, USAs 10% and UKs 9%.
The Indian Television industry is expected to grow from Rs.42,000 crore in 2013 to Rs.84,600 crore in 2018 at a CAGR of
about 15%. Subscription revenue is expected to increase from Rs.28,200 crore in 2013 to Rs.59,300 crore in 2018 at a
CAGR of 16%. Advertising revenue is expected to grow at a CAGR of about 13% from Rs.13800 crore in 2013 to reach
Rs.25300 crore.
The Home Entertainment business has helped SEL emerge as a nationwide well-known and accepted brand. Its products
are available across 2,000+ retail stores (Planet M, Music World, Crossword, Landmark, Reliance Retail, etc.) in 75+
towns and cities in India.
A Time Communications Publication
17
18
The Central governments initiative of mandatory blending of 5% ethanol is expected to rise to 10%, which will boost
profit margins since realisation on ethanol is better than other distillery products. DBSILs regional diversification has
led to higher power realisations and increased share of downstream products contributing to higher profitability
margins.
India is the second largest sugar producing country in the world after Brazil with 16% market share. International sugar
prices have recovered from a low of 10.7 US cents/pound in August 2015 to 20 cents/pound in August 2016 due to
sugar deficit world-over as Brazil is likely to record a reduction in sugar production.
India offers the lowest retail sugar prices in comparison to other key sugar consuming countries. It also has the lowest
per capita consumption of sugar as compared to the world average. A dry El Nino has reduced agricultural yield and
sugar recoveries in Thailand, which is estimated to produce 10.3 MMT in FY16 in the best case scenario a shortage of
over 6,00,000 tonnes. This trend is likely to continue in FY17.
Indias sugar production is estimated at about 25.2 MMT in sugar season (SS) 2015-16, a 10.95% drop from 28.30 MMT
in SS2014-15. At the same time, sugar export is expected to remain about 2 MMT higher than import in SS2015-16. This
would result into depletion in closing stock of sugar from about 9 MMT at the end of SS2014-15 to about 7.2 MMT at the
end of SS2015-16. The decline in sugar production in India is attributed primarily to drought in states of Maharashtra
(largest sugar-producing state in India) and Karnataka (third largest). There is huge fall in these two states a decline
of 20% in Maharashtra from 10.52 MMT to 8.4 MMT; and a decline of 18% in Karnataka from 4.99 MMT to 4.10 MMT.
Blending targets under EBP (Ethanol Blending Programme) is scaled up from 5% to 10%. In January 2015, remunerative
prices for Ethanol supplied under EBP were fixed in the range of Rs.48.5-49.5 per litre, a substantial increase over
previous years. For SS15-16, the government had also waived-off excise duty on ethanol supplied for blending in order
to further incentivise the mills.
Sugar consumption in India has a growth potential due to the rise in per capita income in the country. The Maharashtra
government has waived the 3% tax on cane purchase for mills that exported 12% of their sugar output in between
October 2015 and September 2016.
Sugar prices are expected to remain stable providing reasonably good margins to mill owners. Moreover, the
government has introduced measures such as imposition of stock holding limits by traders, imposition of 20% export
duty and withdrawal of excise duty exemption on ethanol supplied for blending in order to maintain sugar availability in
the domestic market.
Based on the current going, DBSIL is all set to post an EPS of Rs.25 in FY17. At the CMP of Rs.112.90, the DBSIL share
trades at a forward P/E of just 4.5x. A reasonable P/E of 6.8x will take its share price to Rs.170 in the medium-term
fetching 50% returns. Its 52-week high/low is Rs.168.40/55.50.
By Nayan Patel
TECHNO FUNDA
REVIEW
19
price:book value ratio stands at just 1.56x, which is quite attractive. The promoters hold 38.76% of the equity capital,
which leaves 61.24% stake with the investing public.
For Q2FY17, the Companys PAT zoomed 134% to Financial Performance:
(Rs. in crore)
Rs.1.45 crore on higher sales of Rs.44.18 crore fetching
Particulars Q2FY17 Q2FY16 H1FY17 H1FY16 FY16
an EPS of Rs.1.25. During H1FY17, its PAT zoomed 172%
44.18
47.77
100.24 97.03
200.68
to Rs.4.7 crore from Rs.1.73 crore in H1FY16 on higher Sales
PBT
2.22
0.96
7.22
2.61
8.38
sales of Rs.100.24 crore fetching an EPS of Rs.4.07. For
Tax
0.78
0.34
2.52
0.89
2.9
FY16, the Company paid a dividend of 20%. It is a regular
PAT
1.45
0.62
4.7
1.73
5.48
dividend-paying company.
EPS
(Rs.)
1.25
0.54
4.07
1.5
4.74
Currently, the ABC Bearings stock trades at a P/E of just
23.8x and looks quite attractive for investment as the prospects of the auto ancillary sector also appear bright. Investors
can buy this stock with a stop loss of Rs.145. On the upper side, it could zoom to Rs.205-210 in the medium-term and
further to Rs.250+ in the long-term.
*****
20
Disclaimer: Investment recommendations made in Money Times are for information purposes only and derived from sources that are deemed to
be reliable but their accuracy and completeness are not guaranteed. Money Times or the analyst/writer does not accept any liability for the use of
this column for the buying or selling of securities. Readers of this column who buy or sell securities based on the information in this column are
solely responsible for their actions. The author, his company or his acquaintances may/may not have positions in the above mentioned scrip.
21
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