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Monthly Archives: January 2012

Hidden Gem: Atul Ltd

Investment rationale of Atul Ltd: Some jottings

Factors that attract towards Atul: 
  • 1200 acre land bank on Mumbai-Ahmedabad highway,
  • 100 cr investment in Wyeth,
  • 60 years operational history and proven track record,
  • Trustworthy promoters with sale 50% holding. promoter
  • Integrated operations with captive power plant, infrastructure and water resources.
  • On MCap of 450Cr the company is generating sales of 1500Cr and net profit of 90Cr
  • Continued and rising dividend since 2001.

Concerns:

  • Debt of over 300Cr is worrisome. But most of it is working capital loan.
  • Rising raw material prices. Weakening dollar will further take a toll on cost front.
  • Weak market sentiments.

Outlook: Despite concerns over short term the stock could return decent return over coming 2-3 years.


Sunset time for SUN TV

Sun TV (CMP-Rs291)

 Our key concerns for the company are:

  • Close links between DMK and SUN TV’s management is bound to make attract hurdles by ruling AIADMK government in Tamil Nadu.
  • Revitalization of government owned Arasu cable will impact Sun Direct, Sun TV’s DTH unit.
  • We foresee contraction in company’s market share as pan-India channels ncrease their efforts to penetrate in Tamil Nadu.
  • We also expect the company’s promoters, the Maran family,  to pledge SUN TV shares to bridge funding gap in Spicejet whoses losses have mounted throughout 2010.
  • These factors are likely to pressurize the company’s profitability over the coming years.
  • Ongoing investigation of 2G scam and accusation of Marans involvement in Aircel-Maxis deal could further dampen investor sentiments.
  • Given concerns of the company, valuation multiples like P/Sales of 5x, P/Book Value of 5x and P/E of 15x looks lofty for the company. At current market price of  Rs291/- we view Sun TV as overvalued and hold a bearish stance on the company rating it a SELL.

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