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Retail Investors can AVOID Info Edge India IPO
Monday, October 30, 2006

As promised, I looked into the finer details of draft RHP of Info Edge India Limited. I feel it's very risky to apply and hence recommending all small investors to avoid. You can read the details about this in our IPO section.

Published by DalalStreet Business @ 11:34 AM  



Tech Mahindra - Company Analysis and Review
Saturday, October 28, 2006

Tech Mahindra Limited is promoted by the Keshub and Anand Mahindra Group. Their IPO was reasonably priced and was heavily oversubscribed.

I have been optimistic about the prospects of this company mainly because of the promoters background on Dalal Street and ethical business practices. (Anand Mahindra refused to make any forward looking statements for the company after announcing the Q2-07 results).

Here is a brief research and analysis of their performance.

Tech Mahindra's QoQ growth in Income and PAT(in Rs crores) since Q2-2006 are as follows.
Q2-2006. Income 257.64 (+4.89%) and PAT 37.4(+10.9%)
Q3-2006. Income 340 (+32.2%) and PAT 75 (+100%)
Q4-2006. Income 421.2 (+23.8%) and PAT 89 (+18.7%)
Q1-2007. Income 587 (+39.5%) and PAT 106 (+19%) 100 ? Not Sure.
Q2-2007. Income 647 (+10%) and PAT 141 (+33%)

Their has been a phenomenal growth in terms of Income and PAT for the past 6 quarters. Why is this necessary ? Read my Satyam Computers Case Study. Fund Managers like to chase stocks which report consistent growth in PAT. Tech Mahindra gets A+ for all other parameters except its Income concentration from British Telecom, another promoter. This issue is also mitigated since their is no slowdown expected in the European Telecom Market.

Earnings Front:
Now lets have a look at Tech Mahindra's YoY growth in Income and PAT

FY2005 Income 954.19 (+24%) and PAT 102 (+51.3% )
FY2006 Income 1276.6(+33%) and PAT 235 (+129%)
For the Half year ending, sept-30-2006, it's income was 1204.4 and PAT of 241.4.

DalalStreet.Biz to mitigate risks models on 3 fronts, Conservative, Moderate and Optimistic for short term predictions (6 Months to 12 Months).

Conservative Estimates:
Half Yearly Income and earnings 1204.4 and 241.4. Assume it grows at 10% QoQ for the next 2 quarters which will bring it's PAT for the whole Year to 241 + 155 + 170 = 566 crores.
FY2007 EPS Estimated = 48.83 after dilution say Rs45. Discounting its FY07 earnings @ 20 times, Price Target for the stock will be Rs900.

Moderate Estimates:
Half Yearly Income and earnings 1204.4 and 241.4. Assume it grows at 15% QoQ for the next 2 quarters which will bring it's PAT for the whole Year to 241 + 162 + 186 = 589 crores
FY2007 EPS Estimated = 50.81 after dilution say Rs48. Discounting its FY07 earnings @ 22.5 times, Price Target for the stock will be Rs1080

Optimistic Estimates:
Half Yearly Income and earnings 1204.4 and 241.4. Assume it grows at 15% QoQ for the next 2 quarters which will bring it's PAT for the whole Year to 241 + 169 + 203 = 613 crores
FY2007 EPS Estimated = 52.89 after dilution say Rs50. Discounting its FY07 earnings @ 25 times, Price Target for the stock will be Rs1250.

Take either of the estimation model and you will see its PAT grow 100% YoY. Fund Managers would also like to know the revenue mix of different verticals and different geographies before they initiate a coverage. In any case we are upbeat on Tech Mahindra and we also believe it will be a $1 Billion company by FY2009 and not a year later FY2010 as projected by its management during IPO.

Update: Many on the MoneyControl board think I have been very conservative in my expectations of the stock price. Maybe, I will always be so and anything over it is a bonus ;-)

Published by DalalStreet Business @ 12:33 AM  



Info Edge India Limited - IPO Review
Friday, October 27, 2006

Naukri.Com holding and promoter company Info Edge India Limited's IPO will open for subscription on Oct-30th and closes on Nov-2nd. Here is an analysis of the same. First, I am very disappointed by the way the company management has arranged the financial figures of EPS, RONW, etc without tabulating on page 10 of the application form.

IPO of 5,323,851 equity shares of Rs10 each through 100% book building process. The price band has been fixed at Rs290 to Rs320 per equity share. This translates the issue size to be in the range of Rs154.39 crores and Rs170.36 crores.

Retail Investors have 30% of the issue reserved for them. Non-Institutional investors have 10% of the issue reserved for them.

Background on Info Edge India Limited:
The company derives major part of its revenues from recruitment classifieds and related services. 92.73% for the past year. rest of the revenue is contributed by Jeevansathi (Matrimonial Site) and 99Acres (Real Estate Site). Naukri.Com is the leader in online recruitment in India. Jeevansathi made it to the top-3 in online matrimony in India. 99Acres is relatively young trying to establish itself.

Brief Financials about Info Edge India Limited:
Income in crores.
FY2004 - Income=9.076 EPS=1.12
FY2005 - Income=19.472 EPS=0.15
FY2006 - Income=84.057 ESP=6.08

Post-Issue Share Holding and Financials:
Number of Eq. Shares = 2,72,95,256 of Rs10 each
If Promoters don't sell their shares upon listing then, they will hold 54.6%

The company reported a net profit of Rs5.219 crores for Q1-2006. If the figures are annualised, then the company is expected to report a Net Profit of Rs20.87 crores and an EPS of Rs7.64.
At EPS of 7.64, the issue price of Rs290 or Rs320 translates into a forward P/E Multiple of 37.95 or 41.88.

I have requested for some more details from the company and will write my recommendation whether to APPLY or AVOID the issue after I receive a reply from the company.

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Published by DalalStreet Business @ 12:31 AM  



The Top 5 gift Ideas in India this Holiday Season
Saturday, October 21, 2006

It's Holiday season all around the world beginning in India. Everyone of us are in quest to find the best gift and I found these reviews very interesting and thought I'll share with you as well.
Wishing you all a very Happy Diwali and a prosperous New Year. Happy Muharat Trading on Monday Saturday evening.

Published by DalalStreet Business @ 3:32 AM  



UBS puts a BUY recommendation on Unitech
Friday, October 20, 2006

UBS has initiated coverage on Unitech Limited with a BUY2 rating. UBS analysts are little bit over-optimistic about the land bank saga without realizing the shady deals of the operators in Unitech counter.

UBS report is expecting income of Rs 2,703, Rs 6,382 and Rs 11,309(in crores) and EPS of Rs8.43, Rs 22.95 and Rs43.00 for the financial years 2007, 2008 and 2009. 100% YoY growth for the next 2 years. Sounds bit over optimistic projections.

UBS has set a price target of Rs444 with a Buy 2 rating. You can read the report and make your investment decision[PDF] yourself.

Published by DalalStreet Business @ 8:09 PM  



Prabhudas Lilladhar puts a BUY recommendation on ITC
Thursday, October 19, 2006

Mumbai's leading Broking firm, Prabhudas Lilladhar has put a BUY recommendation on the company's stock at Rs194.

Their team met ITC company officials before writing the research report. Key highlights of the report are as follows. Increase in tobacco prices not a key concern for ITC. In non-cigarette's FMCG, Foods, LifeStyle Retailing and Stationery to be key growth drivers. Agri trading business is expected to show a robust performance. Capacity additions in Paperboard.

ITC is expected to report an EPS of Rs7.1 and Rs8.3 for FY2007 and FY2008. Prabhudas research says @ Rs194 it is quoting at 26.2X FY07Eand 22.4X FY08E which is wrong. However, if you calculate on the expected EPS, it is actually quoting at 27.32XFY07 and 23.37XFY07. The entire report on ITC can be accessed here. [PDF]

DalalStreet.Biz Recommendation: I maybe wrong but for me the stock looks expensive at Rs194 levels and wouldn't buy at this level.

Published by DalalStreet Business @ 12:43 PM  



HCL Tech to grow 30-40 in the next 8-12 quarters
Wednesday, October 18, 2006

The management of HCL Technologies Limited is positive on the prospects of their company. You might have observed, HCL Tech lagged behind its peers in earnings during 2003 through 2005, mainly because of the vertical nice they were into. In the past 2 years they have expanded into every possible domain from Application Development to IT Infrastructure Management(Another big outsourcing opportunity, where HCL Tech is the leader).

HCL Technologies enjoyed poor PE discounting because of the fact their quarterly earnings were not consistent. The restructuring in the past two years has streamlined their earnings and you can expect HCL Tech to report QoQ growth rates just like Infosys or TCS. The stock is likely to be re-rated if it consistently grows over 8-10% QoQ and I expect an EPS of Rs33 for the FY ending June 2007. At current discounting of 20X, the one year price target is Rs660 for the stock. However, on re-rating, I would expect the stock to quote around Rs750, 25% upside from current levels.

Disclosure: I hold HCL Tech in my folio.

Published by DalalStreet Business @ 8:42 AM  



Technical Analysis and Recommendations
Monday, October 16, 2006

I hope the weekend was nice with Diwali Shopping. Here is the technical analysis for Monday's trading and ET's stock recommendations in the Investor Guide.

Stop Losses are a Must. Happy Trading.

Published by DalalStreet Business @ 9:48 AM  



Indian Stock Markets Close at Record Highs
Saturday, October 14, 2006

The benchmark of Indian Stock Market, 30 Shares BSE Sensitive Index closed at 12,736.42 a record high in the Indian history.

Just 5 months ago when the markets had crashed, many people said that India was headed towards a bear market and only, DalalStreet.Biz ruled out and we started BUYING at those attractive levels. Keep invested. You will see many more record levels. Valuations do justify earnings in most stocks(not all) and India is the last big emerging market the world will see. FIIs have pumped in $3 Billion since the June crash. One FII will sell while other will BUY, and according to me their will be more buyers than sellers and hence India may look overvalued at certain time, but stay invested.

Small investors, kindly take the Mutual Fund and SIP route to make money as it is currently tax free. Have a great weekend!

Published by DalalStreet Business @ 8:47 PM  



Investment Advise and Update - Amtek Auto and Bharat Forge
Wednesday, October 11, 2006

In early August DalalStreet.Biz had put a BUY recommendation on Amtek Auto Limited when the price was around Rs290. We still maintain the same BUY rating on the stock at around Rs320 and continue to be bullish about the prospects of the company in long term.

DalalStreet.Biz analysts are also bullish on the long term prospects of Bharat Forge Company Limited. Bharat Forge is setting up a large manufacturing facility in SEZ. It has been aggressively expanding in export markets. BUY 25% of your capacity around Rs350 and we will inform you of further developments.

We are also studying the prospects of HT Media and we will keep you posted as soon as our research on the stock is done.

Thanks and Happy Investing.

Published by DalalStreet Business @ 1:14 AM  



India Inc Q2 - Logistics, Retail, IT and Telecom likely winners
Monday, October 09, 2006

Logistics, Retail, Telecom and IT are likely to be the star performers in India Inc for Q2. In a research report published by ILFS,[PDF] Logistics is expected to report a rise in YoY sales of 232% followed by Retail expected to report 70.2% rise in YoY sales. IT is expected to report growth of 39% and Telecom 36%.

ILFS favorite picks sectorwise are as follows.
Logistics:
Gateway Distriparks and Allcargo Global

Retail:
Pantaloon Retail (India) Limited and Shoppers Stop.

IT:
Infosys Technologies Limited, TCS, Wipro (My favorites are Satyam and HCL Technologies)


Check out the entire report here.[PDF]

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Published by DalalStreet Business @ 12:15 PM  



Indian IT Q2 Expectations.
Friday, October 06, 2006

The Indian IT industry is expected to announce a rock solid quarter for Q2. Infosys results are expected on 11-OCT-2006. IT companies are expected to grow 8.8% QoQ and analysts at JP Morgan have set some high expectations from Infosys, 11% QoQ.

CLSA has outperform on Infosys and Wipro and underperform on the rest(Satyam, TCS, HCL Technologies). Read CLSA report here. [PDF] I personally believe Satyam and HCL-Technologies are undervalued compared to their peers. Both the companies should decisively cross $1 Billion in sales this financial year, critical figure required to bid for large IT contracts. Satyam and HCL-Tech hopefully will get re-rated very soon. Accumulate on every decline.

Disclosure: I am a small investor and hold both Satyam and HCL-Technologies.

Published by DalalStreet Business @ 6:28 PM  



Update - SEZs in China and India

Should India follow the Chinese Business Model for SEZs ? Here is an excellent comparison of how SEZs in China have transformed the Chinese economy. The SEZs location, proximity to Hong Kong and Taiwan was itself a blessing in disguise.

Published by DalalStreet Business @ 4:21 PM  



Stock Tipping a Mini-Scandal on MoneyControl.Com
Wednesday, October 04, 2006

Not too long ago, I had questioned the behavior of S P Tulsian and the TV channel pampering and beaming his sick advise, CNBC-TV 18.

SEBI has unearthed a Mini-Scandal involving Mathew Easow's stock tipping on MoneyControl(CNBC TV18 group company).

Modus Operandi of Matthew Easow:
Matthew Easow would buy stocks a week to 10 days in advance and then come out on CNBC's MoneyControl and give a BUY recommendation and when you small investors would BUY, he would SELL. In case of Kalpana Industries Ltd, Matthew had accumulated the stock from 02-09-2006 and then gave a BUY recommendation on the tainted MoneyControl on 13-09-2006 and on the very same day he sold 13,500 shares even before the target price he mentioned was achieved. Other stocks in this mini scandal are, Albert David , Alhcon Parent and CESC Limited.

SEBI investigated the entire issue and fined rs20 Lakhs on Matthew Easow. Read the entire findings of SEBI here. I have lost respect for CNBC TV 18 and it's group company MoneyControl for focusing shady brokers and researchers like Matthew.

Small investors, kindly stick to good and fundamental investing values. AVOID StockTips.

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Published by DalalStreet Business @ 10:20 AM  



Morgan Stanley Star Analyst Resigns
Monday, October 02, 2006

Morgan Stanley Star Analyst, Andy Xie has resigned. Recall he is the same guy who came on CNBC TV-18 in June-06 and created panic amongst Indian investors by telling that the Indian Stock Market was headed towards a bear phase. I had strongly opposed his reactions then because he was very immature to have made such an ir-responsible statement.

Subsequently the Indian markets bounced back and Morgan Stanley Revised India's GDP upwards on Sept-2. And exactly a month after this, he resigned. Maybe Andy Xie didn't want to face the embarrassment from his peers during peer review which come up at the end of every quarter in MNC firms. Did Andy deserve to be a STAR at all ? You know better :-) Good Luck for your future Andy!!!

Published by DalalStreet Business @ 11:36 AM