Sunday, January 22, 2012

TOP 20 IDEAS FOR 2012 TO 2015


WE R HEREBY GIVING 20 TOP IDEAS FOR 2012 TO 2015, WE  RECOMMEND  TO  INVEST 
EQUAL AMOUNT IN ALL THE SCRIPS i.e. IF U WANT TO  INVEST  RS.5 LACS THEN DIVIDE 
RS.25000 EQUALLY AND SELL ONLY WHEN U GET AS LEAST 50% RETURN IN TWO YEARS 
AND 100% RETURN BY 2015

1. Asian Paints (Present price: 2700)
Asian Paints is the market leader in the domestic paint industry, accounting for around +50% overall
market share and +60% share in the decorative market. The company has clocked 20% higher than
industry growth in volume terms over the last five years.
Asian Paints has a strong brand, enhanced dealer network with 27000 outlets and focus on premium
emulsion segment. The company has clocked a net profit of Rs.472.4 crore on net sales of Rs.4511
crore during H1FY12, translating into an EPS of Rs.49.25.
The companys products have a strong replacement demand which should help it sail through tough
times. With improving demographics, increasing brand awareness, we expect Asian Paints to emerge
as a key beneficiary.
 2. Dabur India (Present price: 96)
The brandname, Dabur has become synonymous w. The company with its wide range of products is
emerging as a key player in the Indian FMCG market. With the acquisition of Fem Care Pharma and
Balsara's Hygiene and Home products businesses, the company is strategically placed to reap the
benefits.
At present, the company is rejigging its distribution structure and increasing the number of outlets
and doubling the rural reach by penetrating sparsely populated areas, the complete benefits of the
same should be visible from FY13E onwards. Dabur India should clock an EPS of Rs.3.6 and Rs.4.3
by FY12E and FY13E respectively.
 3. Dr. Reddy’s Laboratories (Present price: Rs.1650)
The company registered strong Q2FY12 results on the back of significant improvement in the
topline. We expect this trend to continue going forward also. We expect significant improvement in
earnings by FY13E since Russia and CIS which contribute 15% to the turnover, are expected to grow
by ~20% on the back of significant volume growth in 20 key brands.
 4. Gas Authority of India (GAIL) (Present price: Rs.370)
Post ~30% correction from its 52-week high levels, GAIL (India) Limiteds share has emerged as a
significant value-buy at the present levels. The company is the leader in the gas transmission and
trading and continues to maintain this position going forward also. With the demand for natural gas
from the end-user industry rising, demand for transportation of the same is expected to remain
robust going forward.
During H1FY12, the company registered a PAT of Rs.2079.1 crore on net sales of Rs.18566.4 crore,
translating into an EPS of Rs.16.4.
5. HDFC Bank (Present price: Rs.485)
The Bank has grown its net profit consistently at a CAGR of +30% over the last several years. More
commendable is the fact that this growth has been achieved along with consistent improvement in
asset quality. The Banks loan book is equally divided between the retail and the corporate
segments. In the corporate segment, HDFC Bank finances mostly working capital loans in case of
corporates.
The Bank has a strong liability franchisee with CASA ratio quoting at 47% of the total deposits. A
high CASA ratio leading to effectively lower cost of funds has helped the Bank clock the highest NIMs
( next only to Kotak Bank) in the banking space.
During H1FY12, the Bank has registered an Interest Income of Rs.12695.7 crore, an increase of
37.6% y-o-y. The net profit for the corresponding period stood at Rs.2284.3 crore, an increase of
32.5% y-o-y.
 6. Idea Cellular Limited (Present price: Rs.84)
We feel that inspite of a number of policy overhangs, telecom stocks have a significant potential for
appreciation going forward. We believe that tariff hikes have seen their bottom levels, which would
lead to improvement in revenues as well as margins. Since Bharti is grappled with foreign debt in its
books to fund the African acquisition, MTM loss on this debt would lower its PAT, Idea Cellular
should emerge as a key beneficiary in the sector.
 7. IndusInd Bank (Present price: Rs.280)
With the new management under the leadership of Mr. Romesh Sobti in place, IndusInd Banks net
profit has registered an almost eight-fold jump to Rs.577 crore in FY11 from Rs.75 crore in FY08.
The Bank has clocked higher than industry growth and almost doubled the Balance Sheet size and
the income earned during this period. The CASA ratio has also doubled during FY08-11 from 14% to
28%. The management has targetted for CASA deposits for FY14 stands at 34%.
Over the next two years, the management has guided for almost doubling of the branch network
compared to the present figure of 350. The major growth in the loan book should come from the
consumer finance segment and the enhanced branch network should provide a significant
opportunity to cross- sell, leading to higher growth in fee income compared to the loan book
growth.
 8. Infosys (Present price: Rs.2590)
Unlike in 2008, the IT sector has shown a significant resilience this time and Infosys should be a key
beneficiary of the same. The depreciating rupee also augurs well for IT companies and Infosys has
the highest proportion of unhedged receivables amongst the top IT players. The management has
guided that it may not abe able to achieve the top-end of the guidance, however, we feel that this
negative element is already being factored in the present price.
9. ITC Limited (Present price: Rs.200)
Cigarettes contributed 64% and 80% to the FMCG revenues and gross total revenues during H1FY12.
The contribution of the cigarette segment to the consolidated EBIT stood at 80% during the same
period. Cigarette sales are least impacted by factors which impact the markets in general, whether
interest rates or high commodity prices. The company has been able to not only sustain volume
growth inspite of hike in duties on cigarette but also maintained margins very well.
ITC is the second largest hotel-chain operator and the largest paperboard and packaging companies
in the country. The company has scaled up rapidly in the FMCG space, which not only requires
establishment of new manufacturing operations but efficient and widespread distribution channels.
 10. Sun Pharma (Present price: Rs.525)
Sun Pharma holds 4.4% market share in the highly- competitive domestic pharma market, per latest
AIOCD report. The company is now ranked no.1 based on share of prescription classes of specialists.
Sun Pharma has 388 ANDA filings till date with 150 ANDAs pending for approval. This is the highest
number of filings by an Indian pharmaceutical company. The company has reported excellent
financial numbers with net sales and PAT registering a CAGR of 28% and 27% respectively. The
company has clocked a 30% growth in topline during H1FY12. We expect the same trend to
continue for the balance portion of the year also.
MIDCAP IDEAS
 11. Arshiya International(Present price: Rs.135)
Arshiya International has pioneered the unique concept of setting up Free Trade Warehousing
Zones(FTWZ) in the country with first FTWZ already set up at Panvel. The companys other FTWZs
are expected to come up at Khurja in the north, Nagpur in Central India and Chennai in South India
which would be eventually linked through the rail route. With its own FTWZs, distriparks and rail
network, Arshiya should be able to provide an end-to-end logistics connectivity to all its clients.
 12. Delta Corp (Present price: Rs.72)
With 3 out of 6 off-shore licenses in the state of Goa, Delta Corp is the largest and the only listed
casino operator in the country. The gaming positions in the company are expected to increase from
the present figure of 690 to +3000 over the next 9 to 12 months on the back of addition of a new
vessel, Horseshoe, to the existing fleet and commencement of operations of “Thunderbird Resorts”
in Daman. The company has got the best parcel of land in Sri Lanka and would be setting up a five-
star hotel and a casino.
In addition, the company also operates real estate business in Kenya through a 40: 60 JV with a
subsidiary of Reliance Industries Limited. Delta Corp would build around 1.2 million square feet of
real estate space in Kenya.


20 ideas for 2012
13. Goodyear India (Present price: Rs.295)
Goodyear has one of the strongest Balance Sheets in the tyre sector. The net cash and cash
equivalent of the company stood at Rs.217.9 crore, translating into a cash per share of Rs.94.4. This
figure is equivalent to more than 30% of the present price of the company. The company has posted
a PAT of Rs.44.3 crore on net sales of Rs.1118.8 crore during 9MCY11. We expect the operating
profit margins to improve going forward on the back of fall in the price of its key raw material,
natural rubber.
The parent company had come up with a delisting offer in April 2010 which eventually did not go
through.
 14. MRF (Present price: Rs.7100)
The company has got an excellent Balance Sheet with reserves to equity ratio quoting almost 400
times. The company has posted a net profit of Rs.338.7 crore on net sales of Rs.9743.9 crore during
FY10(September year-ending company).
On a small equity of Rs.4.24 crore, the EPS stood at Rs.798.8. At the present price, the stock is
available at 8.3x its TTM earnings. We expect the company to post an improvement in margins going
forward on the back of weakening rubber prices.
 15. Navneet Publications (Present price: Rs.56)
The company is one of the pioneers in education field and has a strong foothold in the states of
Maharashtra and Gujarat. The company has almost doubled its revenues and PAT over the five year
period FY06-11. Navneet has a debt-free Balance sheet and recently the company has entered the
Andhra Pradesh education sector by acquiring a stake in K-12 which manages schools under the
brandname – Gowtham.
 16. NIIT Technologies (Present price: Rs.210)
NIIT Technologies has a strong order book and the companys valuations are compelling at the
present levels considering a turnover of Rs.1400 crore and a PAT of Rs.182 crore, translating into an
EPS of Rs.30.9 in FY11. During H1FY12, the company has clocked a turnover of Rs.700 crore and a
PAT of Rs.87 crore. The net cash and cash equivalent in the companys book as on September 30,
2011 stood at Rs.25 per share (~14% of the present price).
The company has a decent dividend yield of approximately ~4.5%. NIIT Technologies has had an
excellent dividend payment track record. The dividend ratio for FY11 stood at 75% and payout ratio
stood in excess of 25% over the last five years. We expect this payout policy to continue in future
also.
17. Pfizer (Present price: Rs.1180)
This MNC pharma company has a debt-free, cash-rich Balance Sheet with net cash and cash
equivalent totaling to Rs.294 per share. This is equivalent to ~27% of the present price. The
company has clocked a PAT of Rs.88.2 crore on net sales of Rs.513.7 crore during H1FY12. This
translates into an EPS of Rs.65 for FY13. At the present price, the stock is available at 12x 1-year
forward earnings(after knocking off the cash). The stock has corrected by one-third from its 52-
week high levels.
 18. Polyplex Corporation (Present price: Rs.170)
There is significant value in Polyplex Limited after the correction in the stock price over the last
one and a half year. The company has a clean Balance Sheet and is funding the expansion plans in
Thailand, USA through internal accruals only. During H1FY12, the company has posted a net profit
of Rs.124.6 crore on net sales of Rs.1251.9 crore, translating into an EPS of Rs.38.9.
 19. Vivimed Laboratories (Present price: Rs.292)
Vivimed Laboratories has registered phenomenal growth in performance over the last few years.
The net sales of the company stood at Rs.416 crore in FY11 from Rs.276 crore in FY09. The net
profit during the same period has grown from Rs.19 crore to Rs.48.8 crore.
The company has acquired Spain-based Uquifa and has joined the big league of pharma companies
to clock a turnover in excess of Rs.1000 crore in FY13 ( compared to Rs.650 crore in FY12). The
company would be able to maintain the PAT margins equivalent to ~10%, a figure which it had been
maintaining in the past also, leading to a two-fold growth in PAT compared to FY10 figure of
Rs.31.01 crore.
20. VST Industries (Present price: Rs.1230)
VST Industries has reported the best sales and PAT figure for FY11 in its history inspite of an
increase in duties on cigarette imposed during the Union Budget 2010. The company has been
clocking a dividend pay-out ratio in excess of 80% over the last three years and we expect the same
trend to continue going forward also. During H1FY12, the company has registered a PAT growth of
61%. We expect the company to end FY12 with an EPS of atleast Rs.78 and a dividend of Rs.60 per
share. This translates into a dividend yield of ~5.5%. VST Industries has a debt-free, cash-rich
Balance Sheet to the tune of Rs.134 per share as on September 30, 2011.


No comments:

Post a Comment