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Unichem Laboratories: Attractive valuation with a strong Balance Sheet – BUY CMP Rs172, Target Rs215

Unichem laboratory (ULL), an integrated pharmaceutical company has a strong footprint in domestic formulation market. Domestic operations contribute around 75% to total revenues. In the recent past, the company failed to keep pace with the competitors in the domestic market but now, after the completion of restructuring activity and improving operating parameters, the company is all set to post improvement in the margins and return ratio. We believe the rough phase for ULL is set to be over soon; the turnaround of overseas operations along with ramp up in domestic business and cost pressure rationalizing with incremental revenue will help ULL post robust growth.

 

Unichem’s four brands feature among the Top 300 Indian pharmaceutical brands and out of which two brands are in the Top 100 (Losar H- Rs790mn- 90th Rank and Losar- Rs680mn -100th Rank). Top 10 Brands contribute nearly 50% of the company’s domestic revenues. Domestic business will drive long term growth on leveraging on brands. Additionally, Company is also gradually entering developed markets to leverage upon its R&D and manufacturing capabilities. Unichem has presence in Europe through its 100% subsidiary Niche Generics having 33 products in the portfolio. It has direct sales operation in UK and Ireland and is exploring other territories like Australia, SA and Canada. We expect this venture to add meaningful contribution to EPS by FY14. In the US, the company has filed 29 ANDAs till date and has 15 approvals of which 9 have been launched. We expect 2-3 filings every quarter. CRAMs business would also prove to be an interesting opportunity for ULL.

We expect revenues to register 15% CAGR over FY13-15 and margins to expand to 15%. The company is a zero-debt company with a cumulative positive cash flow. The company is looking for acquisitions in therapy area to fill the gap in product offerings. We believe ULL’s valuation is attractive at 8.7x FY15E EPS. . We estimate the fair value of Unichem at Rs 210 and recommend BUY.

Source : IIFL Ltd 

 Note : Unichem Laboratories is a Shariah Compliant stock with zero debt and hence those investors who are following shariah guidelines can also invest in this stock. Its Ethical to invest in this particular stock as of today 4th July, 2013. We will update if this stock is removed from the list of Shariah Compliant Companies in future.

Tata Global Beverages Ltd – BUY CMP Rs129, Target Rs149, Upside 15.4%

Tata Global Beverages Ltd – BUY
CMP Rs129, Target Rs149, Upside 15.4%

• Correction in Kenyan tea prices augurs well for TGBL
• Rupee depreciation of ~6% yoy to drive revenues
• New business initiatives to further drive growth
• Recent price correction provides a good entry point; BUY

Amara Raja Batteries - A play on strong auto replacement demand

Amara Raja Batteries Ltd (ARBL) is one of the best plays on the ensuing surge in replacement demand for automotive batteries in the domestic market. During FY09-12, passenger car sales in the domestic market registered a CAGR of 18.2% and 2-wheeler sales witnessed a CAGR of 21.8%. With replacement cycle for batteries in a passenger car of 30-36 months and that of a switch-start 2-wheeler of 24-30 months, substantial jump in replacement demand can be seen in the near future. As compared to past, 2-wheeler battery replacement market is likely to increase in size. This can be mainly attributed to the rising proportion of switch-start 2-wheelers in the domestic sales. 

  

Steady increase in automotive market share

ARBL has gained a strong foothold in the replacement market for the automotive with a steady increase in market share in the segment. Even with the OEMs, the company has been able to get into its fold most incumbent players and is in discussions to enter into tie-ups with new entrants. 

Industrial segment to add to momentum

The industrial segment is mainly driven by demand for UPS led by investments in IT industry and towers in the telecom segments. Battery demand in the UPS segment, which has witnessed a 15% growth, is expected to continue given that investments in computerization by India Inc has been on a rise. While pace of new addition of new telecom towers has slowed down, replacement of batteries in the existing towers is due which will keep demand growth from the segment robust.

 

Strong revenue and profit growth, attractive valuations

ARBL, to capture these growth opportunities is expanding capacities in all segments by nearly 50% by H2 FY15. The company has been performing better than Exide in the past few quarters on all counts. This has triggered a re-rating in the stock. We expect the performance to continue on both revenue and profitability fronts with estimates of a revenue  and PAT CAGR of 22% and 26% respectively between FY12-15E.

Courtesy and Source : IIFL Ltd.  

Note : Amara Raja Batteries Ltd is a Shariah Compliant stock and hence those investors who are following shariah guidelines can also invest in this stock. Its Ethical to invest in this particular stock as of today 9th April, 2013. We will update if this stock is removed from the list of Shariah Compliant Companies.

Amara Raja Batteries Ltd: Charged up - BUY CMP Rs267, Target Rs340, Upside 27.3%

Amara Raja Batteries Ltd (ARBL) is one of the best plays on the ensuing surge in replacement demand for automotive batteries in the domestic market. During FY09-12, passenger car sales in the domestic market registered a CAGR of 18.2% and 2-wheeler sales witnessed a CAGR of 21.8%. With replacement cycle for batteries in a passenger car of 30-36 months and that of a switch-start 2-wheeler of 24-30 months, substantial jump in replacement demand can be seen in the near future.

As compared to past, 2-wheeler battery replacement market is likely to increase in size. This can be mainly attributed to the rising proportion of switch-start 2-wheelers in the domestic sales. In a kick-start 2-wheeler, replacement of batteries was not essential as it was not used to start the vehicle. However, batteries are a key for ignition of switch-start 2-wheelers.

ARBL has gained a strong foothold in the replacement market for the automotive with a steady increase in market share in the segment. Even with the OEMs, the company has been able to get into its fold most incumbent players and is in discussions to enter into tie-ups with new entrants.

The industrial segment is mainly driven by demand for UPS led by investments in IT industry and towers in the telecom segments. Battery demand in the UPS segment, which has witnessed a 15% growth, is expected to continue given that investments in computerization by India Inc has been on a rise. While pace of new addition of new telecom towers has slowed down, replacement of batteries in the existing towers is due which will keep demand growth from the segment robust.

ARBL, to capture these growth opportunities is expanding capacities in all segments by nearly 50% by H2 FY15. The company has been performing better than Exide in the past few quarters on all counts. This has triggered a re-rating in the stock. We expect the performance to continue on both revenue and profitability fronts with estimates of a revenue and PAT CAGR of 22% and 26% respectively between FY12-15E. We initiate coverage with a BUY recommendation and a 9-month price target of Rs340.

Source : IIFL Ltd.  

Note : Amara Raja Batteries Ltd is a Shariah Compliant stock and hence those investors who are following shariah guidelines can also invest in this stock. Its Ethical to invest in this particular stock as of today 25th March, 2013. We will update if this stock is removed from the list of Shariah Compliant Companies.

India Oil & Gas - "10 stocks, 10 factors"

Indian oil & gas sector has seen an eventful FY13 with hoards of announcements by companies and plenty of changes accorded by the government. While some companies have gained out of these, there are few who have borne the pain as well. External factors such as crude price movements, exchange rate fluctuations, sanctions on Iran, Euro Zone debt crisis and many more have played their part in increasing the volatility.

In this report, we pick 10 factors that we feel will have the maximum impact on the sector's performance in the medium term. We provide an outlook on each of these variables and give an insight into their impact on the respective companies. Based on our findings, we have also furnished our investment view on 10 companies.

Our top picks include Cairn India (best proxy on crude prices, cheap valuations), Oil India (strong production growth, play on reforms, huge cash balance), ONGC (relative under valuation to global peers, play on reforms), BPCL (huge upstream value, less sensitive to vagaries of subsidy sharing), Petronet LNG (rising domestic gas demand, expectations of weak LNG prices) and GSPL (long term growth in gas supplies, attractive valuations). We have assigned Market Performer rating to Reliance Industries (core business of refining & petrochemicals still under pressure, KG-D6 volumes continue to fall), GAIL (risk to earnings from regulations, fall in petrochemical profitability if gas prices are raised), HPCL (high risk to earnings from subsidy sharing mechanism, high leverage) and IOC (limited upside potential).

The 10 factors

1. Volatility in crude prices
2. Depreciating rupee
3. Muted outlook for gross refining margins
4. Sustained strong demand for petroleum products in domestic market
5. Diesel, kerosene and LPG prices still under government control
6. Subsidy sharing pattern remained volatile
7. Gas supply concerns raised in the medium term
8. Rising demand-supply gap in the domestic gas market
9. Controlled gas prices
10. Uncertainty over regulations

The 10 stocks (Market Prices as on 14th March, 2013)

Company	Rating	CMP (Rs)	Target (Rs)	Upside (%)
Cairn India	BUY	298	360	20.8
Reliance Industries	MP	848	930	9.7
Oil India	BUY	547	638	16.6
ONGC	BUY	325	365	12.5
BPCL	BUY	397	460	15.8
HPCL	MP	305	330	8.1
IOC	MP	311	340	9.5
GAIL	MP	346	365	5.6
GSPL	BUY	66	80	21.4
Petronet LNG	BUY	148	187	26.7

Source: India Infoline Research

Note : Out of above 10 oil stocks only Reliance, ONGC and GAIL are Shariah Compliant stocks and hence  those investors who are following shariah guidelines can invest in only these three stocks. Its Ethical to invest in these stocks as of today 19th March, 2013. We will update if these stocks are removed from the list of Shariah Compliant Companies.

I am away from stock market, what to do?

Its been so long I posted my last article on How much one can earn through share market? These days I am spending my beautiful time in the Kingdom of Saudi Arabia and that is the reason I was away from Indian Stock Market. But you will ask me have I left investing in stock market, NO I have not. But these days I am not able to track stock market changes to a bit extent. Since investment in stock market is about patience and long term investment. That is why I am relaxed and not much worried about my money which floating in stock market. See my previous article on Long Term Investment.

We believe in giving quality investment tips which should be fundamentally strong. Flooding stock tips on daily basis just for the sake of it is not good. And that is the reason you will not find stock tips on a daily basis on our blog like others do. Always remember investing in fundamentally good companies will fetch you positive returns in future.
Learn 10 steps to Profitable Trading in Stock Market for US Investors
You must have come to know which I had said in my last post that its not certain as to how much money you can earn or you will always make profit. It all depends upon your patience and long term commitment in stock market. Take the examples of my previous stock recommendations on Rallis India and Va Tech Wabag, both of the stocks are trading down these days. Rallis India is hit very badly. But fundamentally both the companies are strong. Rallis India posted a 16% sales increase however the profit was impacted by a negative currency effect. These triggers are global and not domestic. The company is doing good and in the long term you can expect good returns out of it.

Keep one FUNDA in your mind which is you have to be patient and your approach should be long term. We are sure there is no one who can beat you except GOD in stock market if you follow this approach. So stay tuned and keep visiting our blog for more investment tips and ideas.

We invite our readers if they want to write a post on investment tips which they have. You can send your writing at our email address stockbouncers@gmail.com or at imransayed.a@gmail.com and we will review and publish your ideas on our blog. The subject of the email should be " Request for My Post on Your Blog".

Please share any investment ideas you have with us in comments so that other readers will get benefited. Thanks for reading good luck.