in .18.Cover Story 16 Dalal Street Investment Journal Nov 5 . 2012 www.DSIJ.

DSIJ. 130240 141900 % Change 29. and are indeed glad that we have been instrumental in helping investors seize the opportunity at the correct Nov 5 . our portfolio of stocks recommended as ‘Muhurat Buys’ last year has provided astonishing returns of 29 per cent as against the 11 per cent rise of the Sensex (See Box: Performance of Diwali 2011 Muhurat Buys). Things have not changed overnight and the improvement has been gradual. we have created a model portBalmer Lawrie Qty : 220 folio for our investors and CMP Reco Price expect another round of 18/10/2011 17/10/2012 encouraging performance for 592 645 Value Value next Diwali.18. and the performance of our recommended portfolio for Diwali 2011 Muhurat Ajanta Pharma buys attests to this. the highest returns by a fund stand at 22. which has always been at the core of wealth creation for our readers. Ajanta Pharma.20 www.00 Qty : 1487 CMP Reco Price 18/10/2011 17/10/2012 Value Value 130038 101116 % Change Chambal Fertilisers TVS Srichakra Qty : 361 Reco Price 18/10/2011 CMP 17/10/2012 87 68 Value Value 140068 108661 % Change 388 301 -22. A quick flashback of the situation during the same period last year would bring back images of a worried market reeling under various pressures. While this was happening on the domestic front. Our Qty : 934 portfolio recommendaCMP Reco Price tion consisting of seven 18/10/2011 17/10/2012 161 411 stocks has provided Value Value an astounding apprecia149907 383874 % Change tion of 29 per cent since 156. 2012) Portfolio Gain (%) 9. But as they say. always try to maximise investors’ wealth. were among the first to recognise the changing pattern of the market. This time too. But the way the markets have been rallying ever since the government stepped up the ante on the reforms front. From an impending slowdown in economic growth to a paralysed government devoid of strength to carry out any meaningful reforms. Surely our readers would agree that beating the best minds in the industry by such a margin is no mean achievement. the global scenario was not too different. In fact.40 Dalal Street Investment Journal 17 . Castrol Qty : 678 Reco Price 18/10/2011 CMP 17/10/2012 W The best part is that the returns provided by our portfolio are in terms of capital appreciation and we have not considered the dividends received by investors. Just to put our performance in perspective. days change. and we do this by discovering value very early. Even Castrol and City Union Bank have provided returns of more than 30 per cent each. the returns would have been higher still. This clearly indicates our standard of research. Needless to say. and from rising inflation to higher interest rates. it is always good to review one’s own performance as it allows you to gauge yourself and also set higher benchmarks for future performances.10 last Diwali as against a meagre 11 per cent by the Sensex. The Sensex has moved up significantly. our returns have been so strong that we have managed to beat all equity diversified mutual fund schemes (excluding City Union Bank sector funds) during the Qty : 3037 Reco Price 18/10/2011 CMP 17/10/2012 Value Value 160008 209502 % Change 236 309 Value Value 129984 170072 % Change 43 56 Bajaj Auto Qty : 99 Reco Price 18/10/2011 CMP 17/10/2012 30. a major part of this happening over the past four odd months ever since the government kicked off the reforms process.80 1609 Value Value 159291 177705 % Change 1795 11. We. The year since the last Diwali has Performance Of Diwali 2011 Muhurat Buys e.86 per cent. One of the stocks. the outperformance is quite significant.33 11. Here too. There are many factors that helped the Sensex move into a new orbit. gloomy and worrisome to one full of cheer and optimism. at DSIJ. worries on the US and the Euro zone front were even more pressing.T he auspicious festival of lights. nothing seemed to be right for the Indian market then. and they did.21 Sensex Gain (%) (CMP as on OCT 26. Let’s take a look at what has happened in Samavat 2068 and what to expect from Samavat 2069. The sentiment has switched from one that was largely dull.60 period under consideration. prosperity and opulence is just around the corner. at Dalal Street Investment Journal.90 30. 2012 -22. celebrations already seem to have begun out there. If the dividends are also considered. We have done it again. rising by almost 11 per cent since last Diwali. For starters. While we have provided 29 per cent returns. has provided returns of as much as 156 per cent.

we will not be surprised to see the Sensex touching new highs till next Diwali. the India growth story will surely gather steam once again. which was almost dormant in the first half of 2012. What followed was a slew of reforms including the allowing of FDI in multi-brand retail. We are of the opinion that the seeds of prosperity have been sown. The impact of this was clearly visible. Like every year. The Indian market too was not untouched by all this mayhem. which very quickly got reflected in the rise of the Sensex beyond the psychological mark of 19000. The portfolio we built last year beat the Sensex with significant margins. `1 Crore Portfolio 1 2 3 4 5 6 7 Asian Paints Quantity 463 Amount(`) 1798292 CMP `3884 Weightage 18 Axis Bank Quantity 1518 Amount(`) 1798830 CMP `1185 Weightage 18 Bajaj Corp Quantity 8602 Amount(`) 1599972 CMP `186 Weightage 16 Cera Sanitaryware Quantity 3234 Amount(`) 1199814 CMP `371 Weightage 12 Persistent Systems Quantity 2547 Amount(`) 1199637 CMP `471 Weightage 12 Shree Cement Quantity 336 Amount(`) 1396080 CMP `4155 Weightage 14 Talwalkars Better Value Fitness Quantity 5076 Amount(`) 999972 CMP `197 Weightage 10 Cash (`) Sensex (CMP as on OCT 30. with leading global indices witnessing a decline or remaining largely subdued. In fact. We wish all our readers a happy and prosperous Diwali! www. the Euro Zone sovereign debt concerns only added to the woes. There is no better time than Diwali to plan your financial goals and more so in the context of the equity market.Cover Story been a real roller coaster ride for the Indian markets. The very important one was an economic slowdown. So. only deteriorated. it wasn’t really so. introduction of the Land Acquisition Bill. As easy as this may sound. Expect better times ahead. many counters were rejected by our team to come up with these jewels. we do not see the Indian `7403 18431 growth story getting derailed. To make it easier for our readers and investors. though earlier. There were many factors that impacted the markets negatively. which until then was moving in a very tight range. Things started improving as the government. The only good thing that happened was that FIIs continued to repose their faith in the Indian growth story and were net buyers to the tune of USD 18 billion on a Year-to-date basis. The reappointment of P Chidambaram as the Finance Minister was the starting point of this. What added to the difficulties in India was a complete policy paralysis which brought the India growth story to a virtual standstill. we have primarily selected strong businesses that are available at lower and fair valuations. As for the stock selection approach. While the US market never conclusively got out of the 2008 meltdown. enhancing the FDI limits in pension and insurance funds. with the government doing its bit. All this was welcomed by the markets. All seems to be going well now and naturally. The capex cycle is reviving and quarterly results have also begun to improve. No wonder. but also impacted margins of Indian companies. and going ahead. Matters worsened further as the rupee depreciated significantly (touching an all-time low) against the dollar. days have changed and so has the course of the market. After long discussions and deliberations. the equity indices witnessed a range-bound movement with an acute southward bias. the introduction and impending implementation of GAAR did threaten to put brakes on this too. which begins a fresh year from 18 Dalal Street Investment Journal Nov 5 . which marks the commencement of the new trading year. finally got its act together. A higher inflation not only resulted in higher interest rates. investors would be waiting to chart out their future course of action based on what can expected going forward. one would be able to reap the benefits of the same.DSIJ. Further. we are again recommending a portfolio consisting of seven stocks to be bought on Muhurat day.18. If reforms are announced as well as executed in a proper manner. 2012 . We guess this seems to be already happening. it is now the turn of Corporate India to show its willingness to keep its engines in full throttle. the financial performance of India Inc. not just on the domestic front but also globally. 2012) As we said earlier. unless and until something really terrible happens. we have created a model portfolio which we expect to generate strong returns till next Diwali. the Companies Bill and the Banking Bill which are now awaiting Parliamentary approval which will see them turn into Acts of law. and we are confident that our recommendations for the ensuing year too would do the same. As expected.

What level do you expect the Sensex to touch for 2013? We expect the Sensex to trade around 22100 on the conservative side. I maintain a positive stance on this company as the stock is trading at around 30 per cent discount to its five-year trading PE multiple.18. What are the scrips that you recommend for Muhurat trading? » Dishman PharmaceutiAMBAREESH cals & Chemicals: This is a major BALIGA player in the CRAMS business. » GSK Consumer Products: This company is a leader in malted food drinks with around 70 per cent market share. with an average execution period of 30 months. A focus on health and nutrition by the Indian consumer is to be the key growth driver for the company’s products. An established brand with a national footprint. Its attractive CASA franchise. » Crompton Greaves: Considering the attractive valuations. On the aggressive side. » United Phosphorus: In the mid-cap space. AJAY JAISWAL 20 Dalal Street Investment Journal Nov 5 . This has resulted in a turnaround in fortunes for Dishman as evident in the last two quarters. It has made in mark in the Tier II cities. where aspiration levels and fitness awareness are on the rise due to the media’s reach as well as higher disposable incomes. multiple sources of sustainable fee income. » IL&FS Transportation Networks: The company is all set to ride the benefits emanating from the robust momentum in NHAI’s road project awards.DSIJ. What are the three sectors that you recommend for Muhurat trading? The three sectors that will ANDREW HOLLAND » CEO – Investment Advisory be in the limelight till next Diwali are: Ambit Capital • Banking • Real Estate • Infrastructure » I am expecting the interest rates to start falling and the economy to start picking up. which will act as a trigger for these three sectors. which provides high revenue visibility over the next two years.2. These will be confidence boosters. strong growth outlook and A-list management make the company a favourable pick. Market Analyst which has favourable prospects going ahead as the outsourcing from India has been increasing. it is growing at a feverish pace with a mix of owned and franchisee outlets.6x FY2014E ABV Angel Broking (around 60 per cent discount to HDFC Bank). The malted food segment remains under-penetrated. IThe valuation is inexpensive in relation with its projected FY14EPS of . What are the three scrips that you recommend for Muhurat trading? President Investment » Cera Sanitaryware: The Strategies & HOR company plans to increase the caMicrosec Capital pacity of its sanitary unit from 2 million to 2. » Talwalkars Better Value Fitness: This is lifestyle story which should get a similar valuation like the consumption stocks. it may trade around 24000. What are the three scrips that you recommend for Muhurat trading? DINESH THAKKAR » Axis Bank: This company CMD is trading at 1. What level do you expect the Sensex to touch for 2013? The target for the Sensex in 2013 is 22500-23000. as they serve upwardly mobile consumers whose spending habits are not as elastic as those at the lower end.7 million pieces per year and that of its faucet plant from 2500 to 5000 pieces per day over the next two years. 2012 www. What level do you expect the Nifty to touch for 2013? I expect the Nifty to touch the 6400 levels.Cover Story Brokers Speak What level do you expect the Sensex to touch for 2013? The Sensex is likely to see an upside from the current levels with a target of 20300. The pessimism surrounding the company’s profitability has clearly been factored into the stock price. UPL figures among the top five generic agrichemical players in the world. given the PE multiple derating. The company has a robust order book of Rs 12000 crore. The company is favourably placed amongst its competitors to leverage the upcoming opportunities in the global generics space.

2012 Dalal Street Investment Journal 21 . Its CASA deposits have been rising. there is huge value waiting to be unlocked in the bank’s insurance and mutual fund ventures. » ITC: The performance of the company has been fabulous. What level do you expect the Sensex to touch for 2013? The one-year target of the Sensex is around 20100-21500 What are the three scrips that you recommend for Muhurat trading? » ICICI Bank: The bank HEMANG JANI has entered an expansionary mode Sr.5x FY13. which makes for a fairly healthy balance sheet. which is about 4. What are the three scrips that you recommend for Muhurat trading? » ICICI Bank: The private DR VK VIJAYAKUMAR banking sector is doing well even Investment Strategist in a slowdown.PCG & Q2 numbers. With the tourist season approaching. With its niche expertise in film distribution and co-production. EMIL is well poised to gain from the rising discretionary spending on film entertainment. The cash on BEL’s books as on March 31. The paper business has also posted decent growth. » Eros International Media: With its proven track record.05 per cent. » Cairn India: It owns 10 oil and gas blocks. it is well poised to capitalise on the upswing in the Indian film industry. which include producing. which is about 20 per cent of its current market cap and nearly equal to its capex guidance for the next two years. Its loan book is very Channel Sales healthy. and is poised to sustain this growth trend. It has many product launches in US and Japan in the pipeline. The order book continues to remain strong at `25000 crore. The NIMs are good Wealth Advisors and the NPAs are Nov 5 . What level do you expect the Sensex to touch for 2013? The Sensex has the potential to touch the 20000 level.18. » YES Bank: This company is one of the best picks in the private banking space. a de-risked business model and aggressive ramp-up plans. The bank has been making quiet inroads and increasing its retail presence across the nation.DSIJ. ED & CEO The dividend yield is at five per Centrum Broking cent and the valuations are reasonable at 3.4 billion. with low exposure to the Fullerton Securities & infra players. www. 2012 was `6773 crore. » Reliance Capital: This company posted over 57 per cent YoY profit growth in FY2012. contributes to a significant proportion of the company’s total production. It has net cash of USD 2. development and exploration assets. we expect Reliance Capital to be an outperformer going ahead. Advisory . which will give a big fillip to the bottomline going forward.[ SPECIAL REPORT ] What level do you expect the Sensex to touch for 2013? We expect the Sensex to touch an all-time high in 2013. » Lupin: This company has excellent credentials. What are the three scrips that you recommend for Muhurat trading? » GIC Housing Finance: VIJAY CHOPRA The company has posted fantastic Head. Within the priGeojit BNP Paribas vate sector banking space. Vice President once again and it offers substanAdvisory Desk tial value unlocking opportunities Sharekhan with the expected listing of its subsidiaries like ICICI Securities and ICICI Prudential Life Insurance. and the orders delayed in FY2012 will get executed in FY2013. which is about 62 per cent of its current market cap. the NIMs have also steadily grown and the NPAs are at 0. Considering the potential for value unlocking from its businesses and the prospect of consistent growth in India’s financial sector. ICICI Financial Services Bank’s performance has been very good on all parameters.2x its FY2012 revenue and provides strong revenue visibility for more than two years. It is gradually gaining ground in the FMCG space as well apart from its leadership in the cigarette space. It has reported eight consecutive quarters of margin expansion when the industry itself was going through difficult times. The Rajasthan block. its hotel business should also pick up. What level do you expect the Sensex to touch for 2013? The Sensex levels will be between 20600-25100. What are the three scrips that you recommend for Muhurat trading? » Andhra Sugars: The busiSANDEEP NAYAK ness cycle for the company is up. » Bharat Electronics: The worst is over for the company. » HCL Tech: The company has been putting in a stellar performance in recent times. Moreover.

1 per RAHUL ARORA cent will improve profitability in CEO . textiles. up 15. the Sensex could come closer to its previous major highs and trade in the range of 1950020500. The company’s debt of 3000 crore is equal to its paper division’s valuations. What level do you expect the Sensex to touch for 2013? In 2013. Mumbai.9 per cent YoY to `172132 crore. leaving room for an upside given the improving client metrics. jewellery and eye wear. Better dividend yield and attractive valuation are other factors in favour of the counter. What are the three scrips that you recommend for Muhurat trading? Sr. » Sun Pharmaceutical Industries: This stock has been a consistent performer and is on a strong long-term uptrend. » Bombay Dyeing: The company has completed its first phase of construction at Dadar. and more orders are flowing in.1 per cent YoY basis.Institutional FY14.Cover Story Brokers Speak What level do you expect the Sensex to touch for 2013? We believe that the Sensex will reach the 22000 level and surpass its all-time high level of 21108 in 2013.2x FY14E EPS. while a focus on hiring freshers has led to a strong margin performance. It is also planning to enhance its supply to the power sector to 90 per cent of its targeted production of 531 MT in the next three years compared to about 70 per cent now.18. and it is expected to gain in the festive season as consumer demand for such products .DSIJ. Technically too. the bank posted an NII of `2326. » MindTree: This scrip currently trades at 8. The company’s order book stood at 378 crore as on 31st March. The volume growth would Equities support falling PET film realisaNirmal Bang Equities tions. What are the three scrips that you recommend for Muhurat trading? NAGJI K RITA Chairman & MD » Reliance Industries: This Inventure Growth stock is attractive for the long and Securities term. 2012. Loan growth was up 22. all the other businesses are almost free of cost. What level do you expect the Sensex to touch for 2013? In 2013. impressive margin performance and a 24. The cement valuations alone on the basis of EV/tonne work out to `550 per share. » Mukand Engineering: This stock belongs to the Rahul Bajaj group. I see the Sensex touching the 24000 level. Its EPC order book of `100 billion will drive robust growth going forward. ft. RAKESH GOEL What level do you expect the Sensex to touch for 2013? Our target for the Sensex is 17200. It has come out of its trading range and is poised for decent appreciation. The company enjoys an EBITDA margin of 20 per cent on an average. and hence. » Coal India: The company is all set to increase its production by another 180 million tonnes during the 12th Five Year Plan. » IRB Infra: We believe that the company offers a good blend of growth and sustainable cash flow. What are the three scrips that you recommend for Muhurat trading? » Century Textiles: Century KISHOR P. and the gains on realisation on sale of flats will start accruing in a big way in 2013. 22 Dalal Street Investment Journal Nov 5 . What are the three scrips that you recommend for Muhurat trading? » JBF Industries: A likely fall in forex losses by 75.9 crore.Vice President » Axis Bank: The scrip has Bonanza Portfolio posted a Net Profit growth of 22. It is the biggest beneficiary of traction in the roads segment. In Q2FY13. 2012 www. which clearly shows buying interest in the stock. The total land bank available with the company is around 1 crore sq. Improving client metrics drive confidence on the revenue front.9 per cent YoY basis. with a continued decline in the retail segment.4 per cent EPS CAGR over FY12-14E. » JP Associates: The stock is good for long-term investment. This could mean that this stock be a dark horse on number games. Estimated time to execute these orders could be two-three years. » Titan Industries: The company is diversified into watches. paper and real CNI Research estate. OSTWAL Textiles has four business verticals CMD – cement. It is able to hold strong even when the overall markets are under selling pressure. the chart is showing strength.

the company has been growing healthier in terms I of its product mix.84 per cent. its ability to pass on costs to customers. The geographies that the company operates in have been facing a highly unstable environment.Cover Story Asian Paints BSE Code: 500820 Face Value: `10 Current and planned capex ensure growth and a positive long-term outlook FINANCIAL HIGHLIGHTS (TTM) Market Cap (`/Crore) 37376. which were prompted by a drastic increase in prices of Titanium Dioxide that accounts for 20-25 per cent of its raw material costs. Moreover. prompted by higher costs the stock has yielded a return of 51. This segment is likely to be pressured in the near term. which contributes to 6.92 Sales (`/Crore) Net profit (`/Crore) EPS (`) Dividend Yield (%) PE (x) EBITDA Margins (%) Equity (`/Crore) TTM . APL has been softening the impact of this by enhancing capacity and improving operational efficiency. We also expect raw material prices to remain high and add to the margin pressures. Add this stock to your portfolio for superior returns going forward.03 34.22 10290. This validates a robust upside potential in terms of demand. Bangladesh and 24 Dalal Street Investment Journal Nov 5 . APL has been adding capacities to match the growing demand across geographies. Going forward. decorative paints. However. This ability to pass on costs to its customers in an area that contributes to a large chunk of the company’s revenues has been the key driver of APL’s outperformance. APL’s operations are broadly categorised into three units.75 1. a pricing pressure has been affecting the industrial paints division. APL’s strong performance during tough times. With volumes doubling nearly every five years. and this segment has been witnessing a growth in terms of both. Moreover. International business accounts for more than 18 per cent of APL’s revenues. However. These are exactly the traits found in Asian Paints (APL).DSIJ. even in this situation. Decorative paints contribute to more than 75 per cent of APL’s consolidated revenues. this has been challenging in the case of OEMs (Original Equipment Manufacturers). www. a healthier product mix. On the other hand. As compared to this.87 per cent of APL’s revenues. Higher growth seen in emulsions and exteriors has been reducing its dependence on enamels and distempers and helping it successfully establish itself in the premium segment.18.65 per cent return.89 1081. 2012 . massive capacity additions and a positive long-term outlook give the company a good chance to continue performing well regardless of the environment. Though the company has been passing on higher costs to its customers to a certain extent in the Refinish business. ONE YEAR PRICE MOVEMENT However.52 13. volume and revenues. Rising raw material prices have been exerting a downward pressure on the company’s margins. This growth has come despite frequent price hikes. Rohtak. APL’s export revenues grew by a healthy 16.56 per cent from the beginning of this fiscal. we expect short term uncertainty in certain geographies that the company is present in.48 112. industrial paints and international business. Sriperumbudur. the Sensex has yielded a 20.02 95. the slowdown in the automobile industry has been further affecting volumes. but the long-term growth prospects seem promising. Among these are planned and recently executed capacity additions at Khandala.Trailing Twelve Months CMP: `3884 Ability to pass on increasing costs to customers in major operational segments A very resilient stock n a volatile market. In a highly uncertain global environment and despite difficult operating conditions. a stock that outperforms the benchmark in an uptrend and declines relatively lower than the benchmark in a downtrend makes a comfortable investment.

2012. its overall Capital Adequacy Ratio (CAR) stood at 13. Axis Bank is the fourth largest bank in India by market capitalisation. 2012. Its Net Profit stood at `4242 crore. On a halfONE YEAR PRICE MOVEMENT yearly basis. having registered a five-year CAGR of around 45 per cent.71 per cent respectively. This indicates a very high interest of this vital constituent in the scrip.92 0. The bank continues to face marginal headwinds on the asset quality front.33 per cent respectively on a sequential quarter basis.50 3. the banking space is one which would be among the greatest beneficiaries. the Tier I CAR stood at 9. its Net Interest Margin (NIM) improved by nine basis points to 3.74 414. The Net Profit of the bank grew despite higher Nov 5 . of the total loan book.1 and 0.53 ith the governm e n t getting aggressive on the reforms front.22 and 35. FIIs have increased their stake to 32. the bank has seen a good growth. as on 30th September. around 10 per cent is to power generation and distribution companies. total deposits with the bank stood at `220104 crore while its total advances stood at `169759 crore. One should buy the scrip keeping in mind a long term horizon to garner better returns. It has seen a robust business growth in the past. Going ahead. which is higher by 172 basis points on a YoY basis and within that. its Gross and Net NPAs increased by four and two basis points to 1. Its branch network stands at 1741 domestic branches and extension counters and 10297 ATMs. we have selected Axis Bank as a Muhurat buy. We have always maintained that private players have an edge over PSBs. which is commendable.46 per cent on a sequential basis.46 13.DSIJ. the economy is soon expected to get back on the growth track. its Net Interest Income (NII) increased 21 per cent to ` 4507 crore while Net Profit grew by 22 per cent to ` 2277 crore on a YoY basis. the stock is currently available at a 12-month trailing PE of 11x and a Price to Book Value of 2x.27 per cent that they held in the June quarter of 2012.92 per cent. almost stable asset quality and its availability at fair valuations all make it a good bet for investors. registering a five-year CAGR of 30. Improvement in margins. Further.Axis Bank BSE Code: 532215 Robust and sustainable business (advances and deposits) growth KEY FINANCIAL INDICATOR Face Value: `10 CMP: `1185 Good bottomline growth and the stock is available at a fair valuation Improving margins and stable asset quality Market Cap (`/Crore) Return on Assets (%) Net Interest Margin (%) Capital Adequacy Ratio (%) Net NPA (%) TTM EPS (`) Book Value (`) Equity (`/Crore) As on 30th September 2012 50590. good business growth. 2012. As on 30th September. As the economy improves. which was up 32 per cent at `768 crore on a YoY basis. Even in an uncertain environment. which is very commendable.18.78 per cent during the September quarter against 27. we believe that the management is quite capable of sustaining the current growth rates. www. 2012 Dalal Street Investment Journal 25 . its CASA ratio stood at around 42 per cent. Further as on 31st March. For the September quarter of 2012. Its current position too is looking to be very good. W Further. Further. As at the end of FY12. However. and therefore.92 per cent.33 112. On the valuation front.57 608.33 1. we believe the bank would not face any major issues on its asset quality front as it is maintaining a higher Provision Coverage Ratio (PCR) of around 80 per cent. which is slightly on the higher side and could be risky.

BCL’s performance for the September quarter was good. it has reported strong financials driven by a volume growth. part of the reputed Bajaj Group. For FY2012.20 19. with Bajaj Almond Drops having a share of 54 per cent of this FINANCIAL HIGHLIGHTS (TTM) Face Value: `1 CMP: `186 Immense opportunities from rural areas from where it draws 38 per cent of its total revenues Robust business growth. the stock is available at a trailing PE multiple of around 19x.75 t is very necessary to have a defensive bet in one’s portfolio. which is expected to be completed by mid-2015.60 533. around 38 per cent of its total sales come from the rural area. The company has a broad network of 2. is the third largest player in the overall hair oil market and a market leader in light hair oil segment.82 per cent. we at DSIJ. The decline in raw material costs coupled with a price hike effected in the past helped the company in expanding its EBITDA by 308 basis points to 28. with a share of around 54 per cent and is also a major contributor to its topline. With a higher disposable incomes. The raw mate- I rial-tosales ratio declined by 383 basis points to 42. we believe. BCL declared a dividend of `4 per share. which could provide decent returns even during uncertain times.00 26. Brahmi Amla. the company would set up a plant there. On the valuation front. resulting in a dividend yield of around 2. We believe concrete steps in the same direction could be a positive trigger for the company as well as for the stock. 2012 www.34 14.95 9. Amla Shikakai. Currently. 26 Dalal Street Investment Journal Nov 5 . Going ahead.78 138. The company is also looking to grow through the inorganic route in the FMCG sector and in the hair oil market through mergers and acquisitions.2 per cent. have selected Bajaj Corp (BCL) from the FMCG space. which we believe is not only a defensive bet but also a good investment bet for the growth potential that it has. We believe. majorly volume driven. the company aims to achieve a market share of 65 per cent for ADHO by ONE YEAR PRICE MOVEMENT FY2016. It will also be constructing its corporate headquarters at Worli. where its topline increased by 27 per cent to `136 crore (with volume growth of 18. It is planning to buy some land in Gujarat which would result in an outlay of a p p rox i m a t e ly `28 crore. Mumbai. The company has different products like Bajaj Kailash Parbat Cooling Oil. there is an immense growth opportunity in this market. Market Cap (`/Crore) Sales (`/Crore) Net profit (`/Crore) EPS (`) Dividend Yield (%) PE (x) EBITDA Margins (%) Equity (`/Crore) TTM .in . good rural presence and most importantly. Jasmine Hair Oil and an oral care product named Kala Dant Manjan in its portfolio. According to the management.Trailing Twelve Months 2737. which would help in its operations. Its availability at a fair valuation is factor which too goes in its favour.Cover Story Bajaj Corp BSE Code: 533229 Market leader in the light hair oil segment.87 per cent after prices of its key raw material declined considerably. Its key product Bajaj Almond Drops Hair Oil (ADHO) is a market leader. Therefore. Its advertisement-to-sales ratio increased by 132 basis points to `13. The company has a strong market share. Bajaj Corp.7 per cent) while the bottomline grew by 34 per cent to `38 crore on a YoY basis. with the implementation of the GST.76 per cent.43 million retail outlets serviced by 6456 direct distributors and 14118 wholesalers.DSIJ. availability of its products in smaller pack sizes and the potential that the untapped rural market has.63 2.18. one could invest in the scrip with a long-term view as it is available at fair valuation and is poised to grow going ahead.

and hence. Gujarat.5x and a forward FY13 PE of 10. The company also intends to add more products. Cera’s revenues have shown a very high growth despite all the gloom surrounding the sector that it services. It intends to continue with this strategy. its current sanitaryware manufacturing capacity (other than faucets) stands at two million pieces per annum (MPA). Besides.59 Sales (`/Crore) 37. the company doubled its advertising expenses. which means there is a high probability of improvement in its fundamentals going forward. stocks of sanitaryware companies have been performing well on the bourses. Located in Kada. shower panels. On the financial front.81 PE (x) 12. we expect growth to continue in the future as well. bathroom cubicles. In FY10. mirrors. bath fittings etc. which should happen by the second half of this fiscal and yield even better results. it also enjoys pricing power – the company had earlier said that it will increase the prices of some of its products. which will address its future capacity constraints. Its faucetware manufacturing capacity stands at 2500 pieces per day. EBITDA margins have also remained intact at 19-20 per cent. The company has been consistently ramping up its capacities from FY07.7 MPA.48 EBITDA Margins (%) 16. its growth has been nearly 50 per cent. which is showing up in its topline. An increased awareness of sanitation and rising disposable incomes have been major demand drivers for this sector. it has been witnessing an over 30 per cent growth in topline over the last two years. Even for the first two quarters of the current fiscal. The company in fact has aggressively added new capacities which will fuel its growth in future. For some products.17 Market Cap (`/Crore) 384.Trailing Twelve Months espite a weak sentiment prevailing in the realty sector. which translated into a growth of over 30 per cent ONE YEAR PRICE MOVEMENT each in FY11 and FY12. Cera Sanitaryware is a manufacturer of faucets. it is dependent upon contract manufacturing and outsourcing. Its healthy relationship with architects and interior D designers acts as a major trigger for its sales. We expect it to generate a return of over 30 per cent in one year. It is also expanding its sanitaryware production capacity to 2. indicating that Cera will achieve its revenue target `500 crore in FY13.64 EPS (`) Dividend Yield (%) 0. 28 Dalal Street Investment Journal Nov 5 . Cera Sanitaryware is among the few listed companies in this sector that we are bullish on.33 Equity (`/Crore) TTM . The capacity of Cera’s faucetware manufacturing plant can go up to 10000 pieces per day.51 Net profit (`/Crore) 29. Cera’s margins in the latest quarter have seen an expansion of 58 basis points Y-oY. indicating that the company is enjoying profitability at that level. The company’s strong brand value has been a major contributor to its success.DSIJ. Cera Style Studios and Cera Style Galleries are initiatives which have added a shine to its marketing capabilities. kitchen sinks. which has helped it to accelerate its growth rates from 20 per cent in FY10 to about 50 per cent in FY13. 2012 www. It has been adding new products.56 6. bath tubs. as they generate an interest about its products.Cover Story Cera Sanitaryware BSE Code: 532443 A high brand recall entails that it does well even in difficult economic conditions FINANCIAL HIGHLIGHTS (TTM) Face Value: `5 Capacity expansion has been in line with expected demand growth CMP: `371 It has been a consistently dividend paying company 468. the scrip is priced at a TTM PE of 12. On the valuation front. The sanitaryware market is favouring organised players as the small players are taking hit on their margins.18.

The strategy of focussing on emerging areas in a manner that optimises sales has been working well for Persistent and will continue ONE YEAR PRICE MOVEMENT to show results in the coming quarters. infrastructure and systems.00 Market Cap (`/Crore) 1035.42 crore and the bottomline at `86. For H1FY13. These are areas which serve the industry verticals of banking and finance. However.20 40. 18. the management has expressed its intention of actively pursuing acquisitions. In terms of financials.DSIJ. Salesforce. It also plans to incur capital expenditure to the extent of `60-70 crore with regard to this.29x.Trailing Twelve Months T companies today are having a tough time dealing with slowing demand and rapidly changing technological trends. Technology Consulting and IP-based business models. The company has in place a 4x4x4 (read as four by four by four) strategy that focusses on growth areas including mobility. making it an inexpensive buy promisingly poised for better returns. and has been successful in capturing the opportunity offered by these emerging areas. Persistent plans to increase its focus on this area.00 Equity (`/Crore) TTM . With the current strategy in place. mobile. Shares of Persistent are currently trading at a PE of 11. Persistent has managed to maintain its momentum and a growth trajectory based on its sell-with initiative that partners with IBM. Apart from bolstering the company’s presence in this area. its topline stood at `644. it plans to start acquiring talent in H1FY13 with utilisation rates going up. analytics & business intelligence and cloud computing. we expect this trend to continue.28 PE (x) 11. The trend is clearly moving from vanilla application development and maintenance to more complex deals based on execution and multiple Nov 5 . life sciences and telecom using the business model and solutions that concentrate on OPD (Offshore Product Development). Though revenue growth from this area has been volatile and is expected to remain so. among others.32 Sales (`/Crore) 155.Persistent Systems BSE Code: 533179 Concentration on emerging verticals with high growth potential positioning itself better than its peers FINANCIAL HIGHLIGHTS (TTM) Face Value: `10 Strategic alliances and acquisitions leading to inorganic growth CMP: `471 Consistent financials and inexpensive valuations 1880. the company has been actively making acquisitions and mobilising resources towards generation of IPs to capture on this high margin business. collaboration. However. www. Persistent Systems has been focussing on these for quite some time now. and is expecting it to contribute a larger chunk of the total revenues going forward. we expect some pressure on account of acquisitions which have led to higher employee expenses.57 Net profit (`/Crore) 42. this acquisition will start adding to its revenues from October onwards. Considering a well-positioned strategy as well as its presence in highgrowth areas and strategic alliances and acquisitions. While the company was slow on hiring in H1FY13. IT Companies are displaying dynamism by changing their strategy towards new disruptive technologies of social.29 EBITDA Margins (%) 24. In Q2FY13. Of the three acquisitions made by the company in FY13. I Mo re ov e and Oracle. Sell-With Business.23 crore. analytics and cloud computing. on the margin front.5 per cent sequentially.01 EPS (`) Dividend Yield (%) 1. 2012 Dalal Street Investment Journal 29 . the company is all set to embark on a steep growth trajectory.9 per cent of the company’s revenues came from the IP-led business that grew by 48. the latest includes Doyenz’s rCloud that provides backup and disaster recovery for physical and virtual servers under the cloud for SMBs. Persistent has been showing consistent growth in its topline.18.

the company has more than quadrupled its capacity in the past five years to reach the current 13. This.00 0.00 216. which looks attractive as compared to other players.Trailing Twelve Months 14596.67 34. It has good capacity expansion plans in place and its financial performance in last one year has been pretty strong. the scrip is trading at a PE of 19x. Further. 2012 www. Not only that. But surprisingly. Shree Cements is the largest cement manufacturer and power producer in North India that derives 80 per cent of the revenue from cement and 20 per cent from power.84 fter reporting a subdued performance for a long time. The company has a strong balance sheet with its debt-to-equity ratio at 0. if we look at the company on its EV/Tonne .5 million tonnes ONE YEAR PRICE MOVEMENT per annum (MTPA). the stock is still available at a decent valuation Demand for cement is on the upswing Higher capacity utilisation and improving realisations Market Cap (`/Crore) Sales (`/Crore) Net profit (`/Crore) EPS (`) Dividend Yield (%) PE (x) EBITDA Margins (%) Equity (`/Crore) TTM . which resulted in a 21 per cent A increase in the sales volume to 3 million tonnes. The capacity utlisation during the quarter stood to 90 per cent against that of 70 per cent in the corresponding period last year. This is reflected in the outperformance of the stocks of cement companies on the bourses. This spectacular performance was on account of the increase in capacity utilisation and a jump in the realisations. improving price realisations and a strict production discipline have helped cement companies post a strong year-on-year quarterly growth in revenues and profitability over the last one year. which looks attractive at a TTM EPS of `216. the topline of the company jumped by 54.6 per cent on a YoY basis to `1323 crore while the bottomline grew significantly by 492 per cent to `228 crore.00 753. The September quarter was expected to be a bit subdued due to the monsoon. which is expected to be completed by June 2014 respectively.17 0. the government’s thrust on higher infrastructure development will be a major growth driver for the company in the coming years. it is available at `1041/tonne. despite a run-up on the bourses.DSIJ. 30 Dalal Street Investment Journal Nov 5 . it has doubled its power producing capacity from 260 MW to 560 MW in a span of just two years. coupled with a jump of 16 per cent in the cement realisation to `3950 per tonne resulted in a better than expected performance during the quarter. The company continues to perform well and its performance in FY13 has taken off well from where it had ended FY12. 2012. Among cement companies that we track closely. In view of the above factors. All this.00 28. to meet the rising demand for cement. A revival in demand. coupled with a positive outlook for the cement sector.00 5516. Shree Cements is one which we would like to recommend as a Muhurat buy. The company is a market leader in the northern region and has the lowest cost operating efficiency. we recommend. the company has planned to increase its cement grinding capacity to 15. most cement companies have recovered strongly over the last one year. On the valuation front. makes this scrip an attractive buying opportunity.5 MTPA. We believe it will not face any financing issues for any future expansion plans that it may have. Moreover. buy this scrip from a one year perspective.17.18.35x as on 31st March.Cover Story Shree Cements BSE Code: 500387 Face Value: `10 FINANCIAL HIGHLIGHTS (TTM) CMP: `4155 Despite a run-up on the bourses. Since beginning commercial production in 1985. Also.

Therefore. while it continues to grow on the owned gym front at a steady pace.12 Face Value: `10 Operates in owned. This was also backed by a robust renewal rate of 76 per cent.00 116. NuForm and Zumba will drive revenues and margin growth for the company in the coming years. It offers a unique play on the fitness market. the company had launched the HIFI model in Nov 5 . On the financial front. spas. this fitness chain has been doing exceptionally well. aerobics etc. As for the latest quarter that ended in September 2012.75 by 19x. which add directly to the EBITDA resulting in higher margins. With a strong brand recall.DSIJ. has become the largest dance fitness program and does not require much upfront investment. Of the total 130 centres.6 0.75 0. Under these models.00 46. The company has set up 130 health clubs in 69 cities under the brand name of Talwalkars and HIFI (Healthy India Fit India). offering a wide range of services including www. fresh new initiatives and a rising health consciousness are factors which will take this company places.18.40 24. At its CMP of `197. with a strong brand recall FINANCIAL HIGHLIGHTS (TTM) Market Cap (`/Crore) Sales (`/Crore) Net profit (`/Crore) EPS (`) Dividend Yield (%) PE (x) EBITDA Margins (%) Equity (`/Crore) TTM . article? Send your feedback to comment@dsij. its topline and bottomline registered a robust CAGR of 36 per cent and 68 per cent over the last two years on the back of a strong addition in the ONE YEAR PRICE MOVEMENT number of centres from 60 to 128 in two years’ time.65 23. As part of its expansion strategy and in order to increase its presence in Tier III and IV cities. We believe HIFI. The valuation looks attractive. the company has launched other fresh initiatives like ‘NuForm Studios’ (a weight loss programme) and ‘Zumba’ (aerobics). TBVF posted a strong set of results with net sales growing at 20 per cent on a YoY basis to `46 crore on the back of a price hike of 6-8 per cent that it had put into effect. we recommend (Wish to comment on this a ‘buy’ on the scrip. 17 are franchise-based (HIFI) and 23 are operated as JVs or subsidiaries. TBVF is among the largest fitness chains in India. the company charges upfront royalty fees of six per cent.Talwalkars Better Value Fitness BSE Code: 533200 It is among the largest fitness chains in India. The EBITDA margin improved by 438 basis points on the back of some really strict cost control measures. 2012 Dalal Street Investment Journal 31 . the royalty income that it earned and the new offerings. the stock discounts its TTM EPS of `9. the HIFI and the subsidiary-based models involve either no or lower capex helping the company break even faster and yield a higher ROI. ‘Zumba’ first introduced in 2001. Also. In addition to HIFI gyms. Offered at the existing gym base at a premium price. 90 are owned. and the scope of opportunity is immense considering the low share of the organised market. It is steadi- I ly increasing investments in Zumba and this along with the weight loss program ‘REDUCE’ (NuForm) will help the company increase its same store sales growth by leveraging its current assets and existing customer base. The bottomline was up by 47 per cent to `12 crore on the back of significant margin expansion. a franchisee-based model to reach out to the Tier III and IV cities. thanks to which it enjoys a total market share of 10 per cent in the organised fitness market. franchise-based and JV models CMP: `197 Constant innovations that are expected to drive revenues and margin growth f fitness is the question. Its sturdy performance. Talwalkars Better Value Fitness (TBVF) is the answer that will come to your mind. This model enables the company to expand its presence at a faster pace to smaller cities.Trailing Twelve Months 466.52 9. which eventually helped the company post a 47 per cent YoY increase in profitability.

In August 2012. DS Last Seven Days’ Volume Table (No. which will improve the pricing power for producers catering to these Nov 5 . eastern and western regions of the country.21. the company has opened four new operating divisions. establishing its presence in the high yield eastern market.Oct 8 .Oct 22 . which in turn would support higher dispatches and realisations. C&K roped in a PE fund to invest USD 138 million to acquire a minority stake in Prometheon Holdings UK. 2012 ith a strong presence in the northern. One can look at the scrip from the medium-term perspective. adventure.00 164.18. The company trades at a significant discount to its south-based peers in terms of EV/tonne (The analyst does not hold any shares in these companies. JK LAKSHMI CEMENT T Last Seven Days’ Volume Table (No. which owns a stake in HBR. 2012 Issue No 23 . short hotel breaks and camping.00 439.00 Peak After Reco* 214. These divisions are likely to provide better growth opportunities for the company going forward.DSIJ. as fundamentals may or may not back the recommendations he Indian operations of Cox & Kings (C&K) are expected to post 21 per cent revenue CAGR driven by rising disposable incomes and a growing share of the organised travel segment. The investment proceeds would largely be used to retire debt raised by Prometheon for the acquisition of HBR. Therefore.10 2. of Shares) Days Volume 19-Oct-12 22-Oct-12 23-Oct-12 25-Oct-12 26-Oct-12 29-Oct-12 30-Oct-12 182260 168700 29298 133438 33738 40109 29758 BSE CODE: 500380 Volume: 37042 CMP: `122 SCRIP’S MOVEMENT W HOT CHIPS OF LAST ONE MONTH Reco.Hot Chips COX & KINGS BSE CODE: 533144 VOLUME: 29758 CMP: `137 SCRIP’S MOVEMENT The scrips in this column have been recommended with a short-term investment horizon in mind and carry high risk.50 744. investors are advised to take into account their risk appetite before investing. It is nearly doubling its capacity to 10 mtpa by FY15. of Shares) Days Volume 8-Oct-12 9-Oct-12 10-Oct-12 11-Oct-12 12-Oct-12 15-Oct-12 16-Oct-12 7229 3038 1885 44814 38910 6779 9619 *Highest price after our recommendations (Closing price as of Oct 30. 2012) www.7 mtpa expansion plans in Durg (Chattisgarh). One can look at the scrip from a mediumterm perspective. Higher demand coupled with a tight demand supply scenario is likely to translate into better utilisations.39 10. The improvement in the demand outlook of real estate and the commencement of new infrastructure projects is likely to benefit companies like JKLC.50 Likely Gain (%) 1.30 Issue No 22 . education. viz. 2012 Dalal Street Investment Journal 81 . the stock is likely to witness better movement going forward as far as its price is concerned. which have leading positions in UK and other major European markets.Nov 4. With the onset of the festive/holiday season. 211.42 13. Wish to comment on this article? Send your feedback to comment@dsij. which includes 2. With the acquisition of Holidaybreak (HBR). JK Lakshmi Cement (JKLC) is likely to benefit from improved demand in its key markets.00 145.00 449.00 675. Price (`) Pidilite Industries Tata Global Beverages Karur Vysya Bank Godrej Consumer Prod.