Biggest Contribution of Aam Admi Party and Kejriwal

In midst of all the hoolah on AAP’s startling debut, emergence of new political force and giant killer personas, I believe there is a bigger message and contribution of AAP that needs to be highlighted.

I have been observing political scene for past 15 years or so, perhaps with almost the same sincerity with which rest of India watches.

Now, with exception of die-hard politicians, during all this time none of the lay man I knew ever wanted to have any association with politics. Some even took pride in giving a miss to ‘inking the finger’ ritual on voting day as they don’t want to be party to misery of this country.  Politics had become a dirty word, a refuge for goons, corrupts, incompetents, nepotists, fanatics and good for nothing people.

For the first time in my life I saw participation of common man, of people I knew personally, into the political sphere. There was Rajee, a pulished author, who not only contributed generously to AAP campaign but was also proud of the fact and prompted us to do the same. There was Ankit Jain, an entrepreneur running trekking busiess in Himachal, who travelled a long distance to promote AAP in Calcutta. There was Saurabh, a financial analyst, who was trying to persuade voters in Delhi to cast their vote on D-day. There were my juniors from my college who participated in Lokpal rallies.

Some of my Delhi acquintances had opened their homes for AAP volunteers. Some of my contacts from Gujarat and UP went all they way to Delhi to campaign for AAP. Some, who stayed at home, but were calling their relatives/contacts urging them to vote for AAP.

Now to be sure this had happened before, perhaps many a times before. One I recall is Ram Mandin Andolan. But then, the issues were not only emotive, sectarian and divisive but masses who participated comprised of semi literates, unemployed youth and disgruntled elements of society.

This time it was truly different. The people I am talking about boast of post graduate degrees, decent paying jobs, financial secured chaps whose all talk on politics was limited to Lalu Jokes. But all this changed after arrival of Anna and the sustenance of the movement by Arvind Kejriwal

Whether he will be successful in changing the politics of the country or not, only time will tell. But he has surely shown that just blaming politicians for everything won’t work, one has to participate in the system and make an effort to change it.

He has been totally successful is removing the stigma of untouchability from political sphere. One doesn’t losing his halo while talking on politics, an erstwhile dirty word. Not only that perhaps he has even added a WOW factor to it.

And that my friends has been his biggest contribution.

-Written by Ashish Tripathi. All views and opinion are of author alone and does not necessarily represent Anavaran’s viewpoint.

Kalpataru Power Transmission Limited

I have been looking at potential companies to invest in the capital goods segment and like the Transmission & Distribution (T&D) segment as this industry is already under-invested compared to govt. spending in the power generation space and so should show momentum even if the rest of the power sector takes time to recover.

In this space there are 3 key players, Kalpataru Power Transmission Limited, KEC International and Jyoti Structures. Here we are looking at Kalpataru Power Transmission Limited (Kalpataru). Lets look at why I like the stock….

Kalpataru Power Transmission Limited
BSE Scrip code:522287
Industry: Heavy Electrical Equipment
Marketcap: Rs14.27bn

Company Overview: Kalpataru is a leading EPC contractor in the Transmission & Distribution industry. The company also operates in oil & gas, railways, infrastructure development, civil contracting, agri-logistics and warehousing business. Its key subsidiaries are JMC Projects India Ltd. (JMC) which is into civil and structural works for Factories and Buildings, roads and bridges, power plants, water pipelines, rail and metro infrastructure projects and Shree Shubham Logistics Ltd is into warehousing and agri-logistics. Kalpataru’s consolidated order book is of Rs120bn and standalone order book of Rs67bn as of 1H 2014. The company has a global footprint in 37 countries and its international business contributes 60% of the total order book of the company.

The company reported 35% y-o-y growth in standalone revenues to Rs.9.6bn in 2Q 14 while operating profit grew 42% y-o-y to Rs.7.4bn and operating margins expanded 40bps to 7.7%. The company’s standalone operating margins were at 8.6% levels in 1Q 14 but moderated in 2Q 14 owing to execution of the lower margin Infrastructure orders.

Investment Overview:

Focus on international markets pays off, leads to strong order book: The company’s strategy of expanding its international business to offset the weakness and uncertainty in domestic market has paid off. 55% of revenues clocked in 2Q 14 and 57% of the standalone order backlog of Rs67bn is from international business. Its standalone order book as of 1H 2014 is 2 times its FY 2013 standalone revenues giving good revenue visibility over the near term. The management expects to increase international contribution to 70% of the T&D business over the next 1-2 years. Furthermore, international orders tend to have price variation clause and tighter working capital management which also benefit company’s performance.

Significant domestic opportunity: The T & D industry’s fortune is linked to the power industry. India is a power deficit country and government plans to add significant power capacity to address this problem. Compared to the power sector, The T&D sector is even more under-invested. Transmission segment investment target is of Rs.1.8Tn and Rs.2.3Tn for 12th and 13th 5year plan. Power Grid (PGCIl) which is a major client for the T&D companies has a planned investment of bout Rs.1Tn for the 12th 5year plan of which is nearly half of the total industry spending for the transmission segment. Furthermore, Kalpataru is a leading player in the Transmision & Distribution EPC business with an established execution record and as such stands to benefit.

Consolidation in domestic industry to support order wins and margins: In the past the T&D space witnessed significant competition from Chinese players which negatively impacted order wins and margins for domestic players. However, Power grid has become has become increasingly tightened the qualifying norms for bidding for its businesses which has led to many companies been disqualified from the bidding process. This has led to a consolidation in the industry and bodes well for Kalpataru.

Margins have potentially bottomed-out: Consolidation in the domestic T& D industry and comparatively better margins in international T & D projects bores well for the company’s margins. Furthermore, the company has executed 95% of its low margin order backlog for JMC and hence should start seeing improvement in margins even on a consolidated level post 3Q 14. Hence, I believe that margins for the company have bottomed out.

Better working capital and debt management: The company’s consolidated cash conversion cycle and debt/equity at 52 days and approx. 0.3 (based on FY 2013) is lower than KEC’s cash conversion cycle of 74 days and debt/equity of 1.5.

Financials & valuation:
I expect the company’s standalone revenues to grow at a CAGR of 13.5% from FY 2013-FY 2015 while standalone operating margin is expected to expand steadily from 9.7% in FY 2013 to 10% in FY 2014 and 10.5% in FY 2015. Consecutively, net profit is also expected to increase at a CAGR of 19.6% from FY 2013-FY 2015.

Valuing the company at 8x FY 2015, the standalone value of the company comes to Rs101. Furthermore, the value of the JMC business is arrived at Rs 10 per share. This leads to a valuation of Rs111 per share for the company on a SOTP basis. The company has run up significantly since I started analyzing it (went up from Rs78 to Rs 93 in just the last 4 trading days) but still provides significant upside potential from CMP of Rs93.

The target price excludes company’s investment in shubham and other investments which could provide further upside. Additionally, stock is trading at a discount to its historical multiples due to relatively weaker performance and could be a potential re-rating target once it starts delivering. It is also at a discount to KEC (trading at a P/B of 0.6 compared to KEC’s P/BV of 1.6). Hence, I am positive on the kalpataru stock.

Source: Posted by Shazia Naik at http://multibaggerinvestments.blogspot.in/. Reproduced with Author’s permission. All copyright for the above post rests with the author.

Sample Portfolio Performance – Outperformance of 14.3% compared to Sensex in 2 months!!

In this post we are re-visiting my last post titled ‘Decoding the Indian markets – Bull or Bear?’ dated 23 September 2013 to see if the expectations expressed then have turned out to be correct. If you re-call, in my last post, I had voiced my views that the markets are likely to remain volatile in the near term. I also expected investments in ‘Defensives’, particularly ‘Export-oriented’, and ‘Monsoon Plays’ as prospective investment themes to do well in the near term and outperform the broader markets.So lets see how things have unfolded…..The markets have seen a lot of volatility in the last 2 -3 months on the back of volatile FII investments.  The Sensex rose from  19,900 (18,619 on 30 August 2013) on 23 September 2013 to peak at 21,239 on 03 November 2013 before correcting to 20,217 levels by 22 November 2013. Disregarding the interim highs and lows for the market and our sample set, let us just look at how a sample portfolio of the above mentioned investment ideas has performed  visavis the Sensex from:

(a) 30 August 2013 to 22 Nov 2013 and
(b) from the date of my post (23 Sept 2013) till 22 Nov 2013.

For Monsoon Plays we have considered 2 Wheeler and Tractor stocks* and for Defensives/Export-oriented we have considered BSE-IT and BSE -Healthcare Indices.
We have included returns from 30 August 2013 to show how resilient our Selected Portfolio has been versus the highly volatile the stock market (highlighted by pink box).
As can be seen from the table, if someone had invested Rs. 10,000 in the Sensex on the date of the post, that amount today would be Rs. 9,977 (-0.2% returns) whereas the same amount if invested in the sample portfolio would have yielded Rs. 11,407 (14.1% returns). An outperformance of 14.3% over the same period!  Moral of the story, stay invested but in the right place!!
Till we meet again…. Happy and safe investing!
Please note that the tactical ideas such as ‘Monsoon Plays’ will change with change in strategy and stock performance & hence we may not continue to be positive on them now. 
 

 * 2-Wheeler and Tractor stocks were mentioned as ‘Monsoon Plays’ in the comment section of the same post on my blog. 

Source: Posted by Shazia Naik at http://multibaggerinvestments.blogspot.in/. Reproduced with Author permission. All copyright for the above post rests with the author.

Decoding the Indian markets – Bull or Bear?

Indian markets have shown a lot of volatility in recent times. The market rallied 15 percent (about 2,650 points) in 15 trading days between 28 August 2013 and 19 September 2013 on account of the fading threat of US military attack on Syria, steps announced by the new RBI chief Mr. Raghuram Rajan to address depreciation of the Rupee and liquidity constraints and also the dovish stance by Fed which postponed the anticipated QE taper and thus resulted in an increase in FII investment into Emerging Markets (EMs) like India. FIIs made Net Equity investments of Rs.11,138crs in September (till 19th September 2013) as compared to a net outflow of Rs. 6200crs in August 2013.

However, markets lost nearly 400 points on 20 September 2013 on Mr. Rajan’s decision to hike repo rates by 25bps and the blood-bath continues. So where exactly is the market headed and what are the factors to watch out for?
Well to address this let us rewind a bit and look at the concerns the markets were facing pre- the rally – CAD issues, depreciating rupee, economic slowdown, inflation worries, debt burden for corporates, policy paralysis and low visibility on core- policies owing to the looming elections. The Rupee regained some of its lost luster from the historic lows of 68.80 per dollar reached on 28 August 2013, benefiting from Mr. Rajan’s measures (including enhanced limits for exporters to re-book cancelled forward exchange contracts and a swap window to swap foreign currency deposits,etc) and renewed interest in EMs owing to Fed postponing the taper. However, India’s other macro-economic concerns remain, the impact of which will play out in the upcoming corporate results session which is expected to be disastrous.
In view of all these factors, I believe that while the Fed taper postponement might lend support to Indian markets as capital gets reallocated to EMs, markets are still likely to remain highly volatile in the next few months owing to risks related to the impending taper, weak fundamentals, impending elections and lack of visibility on implementation of pro-growth policies.  Moreover, in addition to RBI policies, even Government support in the form of policy implementation will be a key factor for the up-turn of India’s economic and investment cycle.
I believe, the markets are likely to move in an uptrend post elections since the new government, whichever be it, will be under a lot of pressure to deliver. It is likely that we will see the resurgence of the new investment cycle once we start seeing policy implementations aimed at structural changes in the country. However, until all these macro-factors play out, the markets are more likely to be a Trader’s market rather than an Investor’s. Also, there is a high possibility of markets correcting further if the Fed tapering occurs before we see any structural changes in the Indian economic/policy scenario. Till either of these happen, the market may continue to be a ‘Defensives’ and ‘Export oriented’ market in the near term as has been the case during historically weak periods and periods of a stronger dollar respectively. Additionally, there might be some interest in stocks which are ‘Monsoon plays’ in the near term owing to a good monsoon session. However, I believe that the core India-centric ‘Cyclicals’ will start gaining traction only after visible improvements in the economic and policy space.
Source: Posted by Shazia Naik at http://multibaggerinvestments.blogspot.in/. Reproduced with Author permission. All copyright for the above post rests with the author.

Diwali Stock Picks

On behalf of entire team @ Anavaran, We wish you a Happy Diwali and a prosperous New Year.

May this festival of light bring peace and prosperity to you, your family and our investments.

Continuing with our past tradition, we today reveal a list of stocks that we believe are poised to yield decent return over long term (12-24 months) investment horizon.

After having largely refrained from taking high risk for past two years, we now believe risk-reward ratio to be titled in favor of risk takers.

Thus, this year’s Diwali Stock Picks contain couple of picks whose risk is assessed to be high.

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To access detailed reports on these companies and to access more such multibagger stock picks throughout the year, please consider subscribing to our stock recommendation services. Annual plan begins from Rs930/-.

In case of any queries, please feel free to call us at 022 322 56579

Earning Analysis: Punjab and Sind Bank

Analysis on Punjab and Sind Bank’s 1Q 13 earnings performance:
  • The company’s top-line (interest income) was broadly in-line with estimate with decent  annual growth of 17% to Rs1,758Cr in 1Q 13.
  • On the expense side, the company’s performance was ‘rather not satisfactory’ as the company’s interest costs increased slightly more than its income (+20.8%YoY to Rs1,389Cr). We were in for  a positive surprise on the operating side as the company cost saving efforts led to slide in operating expenses ( down 9.1% QoQ to Rs278 Cr)
  • As anticipated earlier, rising loan defaults continue to dent PSB’s earning performance. While rise in non-performance assets was rather moderate from 1.65% in 1Q 12 to 1.73% in 1Q 13 which lead to high provisioning for bad debt (+25.4% YoY to Rs86Cr).
  • Much disappointing was the rise in effective tax rate from 35% in 1Q 11 to 73.8% in 1Q 12. Thus companies tax provisions nearly doubled (+93% YoY) to Rs68 Cr. If not this one-off event of excessive taxation, the companies net earnings in 1Q 13 would have been at similar levels to corresponding quarter in previous year.
  • Adjusting for exceptionally high taxation, which is set to normalize in coming quarters, we expect the company to generate EPS to be in double digits in FY2012-13. Long term earning potential of the bank remains in excess of Rs20 per share. Given strong company fundamentals we believe its unwarannted for government owned banking entity to be trading at 60% discount to its book value. We expect the stock yield high return over the long run and view the recent downtrend as attractive levels to accumulate the stock. 
To access more such multibagger stock picks, please consider registering to our stock recommendation services.

 

Sterlite Industries: Jottings on proposed restructuring of Vedanta Group Assets

The mega merger of Vedanta Group Assets will burden Sterlite Limited with capital intensive and trouble-some aluminum operations thus denting its fundamental strengths.
  • Compared to calculated cost saving of Rs1,000Cr from resulting synergies, the merged entity will be laden with net debt nearly Rs37,000 Cr leading to additional interest burden of Rs3,000 Cr. Thus the proposed mega merger is likely to result in additional cash outflow of Rs2,000Cr.
  • We view the proposed restructuing as an exercise by the promoter group to club its wholly owned non-lucrative aluminum business (MALCO, Vedanta Aluminum) with its lucrative listed operations of Zinc and Iron Ore where there is substantial minority interest. A similar attempt in 2009 was thwarted by institutional investors due to corporate governance issues.
  • Also, we foresee operational compatibility issues in management of the proposed mineral resource giant.
  • As a standalone entity we hold a positive outlook on Sterlite Industries at current price levels (Rs115). However, we view the proposed restructuring to be an exercise of value destruction for its shareholders. Hence we rate the company an Avoid.
To access target price of Sterlite Industries and our other multibagger stocks and to get your queries resoled by our analyst, please consider registering for our investment research services.

 

 


Bad Market News, Good Stock Price!!!


Anavaran.png
Glimpses from the past

In March 2003, a leading business magazine carried a cover story titled  “CAN THE SENSEX TOUCH 4000 in 2003?”.  Now, that shouldn’t have been a question of so importance so as to reach the front cover, especially when markets had already crossed that mark 10 year back in 1992. Surprisingly, of all the experts surveyed for the masterpiece, no one dared to predict a humble 4K mark for the beloved Sensex. 3,800 was their most bullish projection.

 

 

For the record, the article turned out to be good luck charm for the market and Sensex registered a whooping gain of 89% in rather short period of 9 months. With the benefit of hindsight, it can be said that is was not just that year but a beginning of 5 year bull rally that culminated in January 2008 with Sensex breaching 21,000. Moral of the story, none of the market pundits, at least those in public arena, were able to predict the coming bull run in stock market.  So, could be the case this time as well. Afterall, the Sensex had first time breached current levels of 17,000, 5 years back.

Back to the future

Feels  good to see 5% upside in broader markets since upward revision in our market outlook from neutral to cautiously bullish. We continue to maintain our bullish stance on the market, but are becoming increasingly cautious with every point rise in broader market.

Series of bad news continued to flow in since upward revision in our market outlook of which petrol price hike, depreciating rupee and weak IIP numbers occupied maximum public attention. Market eyes are now glued to RBI’s decisions on interest rate on 18 June 2012. Given continued slowdown in industrial growth 25 bps cut in interest rate is almost certain and even 50 bps cut lies within the realm of reality. 

Rate cut, rating cut

Mr Market’s excitement on probable rate cut by RBI is being subdued by S&P’s cautionary on potential rating cut on Indian debt below investment grade.  Rating agencies have been behind the curve for the past decade with subprime crisis in US and sovereign debt related problems of PIIGS group standing epitome to their prowess. S&P’s caution note only reiterated those issues, policy paralysis and rising fiscal deficit, that were already known for quite long. Hence, we don’t foresee much impact of proposed rating cut signals on long term fundamentals.

Because of positive impact of RBI credit policy on interest rate sensitive sectors, falling crude oil prices and more because of the low prices that the stock are trading in current markets, we maintain our cautious but bullish stance on the Indian stock markets.

Grab these stocks before someone else

Please find below some of the stock that  we like with investment horizon of more than 12 months:

  • Allahabad Bank
  • BHEL
  • Can Fin Homes
  • Ganesha Ecosphere
  • GIC Housing
  • IFB Industries
  • Mahindra Satyam
  • Punjab and Sind Bank
  • Sintex

For detailed access on these companies and more such multibagger stock picks, please consider registering for our stock recommendation services.

 


Sanghvi Movers: High growth company @ low stock price

Sanghvi Movers (CMP-Rs104)

Sanghvi Movers is a crane hiring company servicing infrastructure and mining companies. The company owns over 400 hydraulic truck mounted cranes with lifting capacity of 200 to 800 tons. The company has expanded its fleet which has largely been funded by debt which has increased from Rs275Cr in 2007 to Rs640Cr in 2011. 

Sanghvi’s sales increased during the same period  from Rs179Cr to Rs361Cr in  and is poised to cross Rs400Cr in just concluded  fiscal year (FY12).  Net income increased from Rs47Cr in 2007 to Rs86Cr in 2011. We estimate the company to register net profit of Rs100Cr in 2012. 

Based on FY12 earnings, the company is trading at PE of 4.5x. Given strong business fundamentals and high growth potential, we expect he company’s valuation multiple to be re-rated upwards over the coming years. This coupled with growth in earnings will boost company’s valuation over the coming years. 
At CMP of Rs104, we expect growth in company’s stock price to exceed hurdle return rate of 18%. Dividend yield of 3% further sweetens the deal. Hence we rate the company a BUY for long term investors. (Investment Horizon:2-3 years)

However, the company high debt and capital requirements to fund its expansion coupled with week market sentiments will keep the stock price pressurized over the near-to-medium term. Hence fresh position in the company should be taken only with long term investment horizon.
To access target price of Sanghvi Motors and our other multibagger stocks and to get your queries resoled by our analyst, please consider registering for our investment research services.



Multibagger Stock Picks: Must Hold Stocks for your portfolio

 

 

Fall in stock markets over the past few weeks has created some attractive investment opportunities. 

Taking advantage of this, we have identified several multibagger stocks that could double over the coming 2-3 years

And as subscriber to our newsletter, we want you to be among the select few to have access to these multi-bagger stocks at 20% discount on our Safal plan. The annual subscription is available at Rs1,560/- instead of usual price of Rs1,920/-


So @ Rs4.5 per day, one gets:

 

  • Immediate access to 3 of  our latest stock picks.
  • Access to over 20-25 long term stock picks over the coming year
  • Access to our medium term investment calls
  • Besides, reports issued from our side, get up to 30 of your stock queries resolved by our analysts.
  • Online support during market hours.
  • Portfolio Review: Subscribers of our Safal Plan can get their existing portfolio reviewed by our analysts.
  • 30 day trial period with 100% money back guarantee.

 

Good things don’t wait forever. Offer ends of 11 June 2012. To register for services click here.

Have any queries? Write in to us at support@anavaran.com or you can also contact us at 022 322 56579.

 


 

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