Suzlon Lacks Clarity

Disappointing H1 FY10 results
Suzlon’s consolidated 1H FY10 revenue was INR89bn, down 11% y-y. Suzlon Wind only delivered 406MW of wind turbines in 1H FY10. Suzlon consequently lowered FY10 shipment guidance to 1,900-2,100MW from 2,400-2,600MW.

Over the past few months, some positive policy developments have taken place in Suzlon’s key markets: US, India, China and Australia. While we do not expect these to translate into real business momentum in the near term, we are more positive about our current assumption of a 32% y-y shipment growth (2,500MW) in FY11.

Suzlon’s net debt to equity ratio reached 160% by September 2009. Suzlon continues to work towards de-leveraging the balance sheet and reducing absolute debt levels through the planned sale of Hansen, refinancing its current debt and fund infusion from promoters. Based on our downward earnings revision, we believe Suzlon runs a risk of not meeting its debt covenants, but management noted that the penalty may only result in slight increase in interest rates.

We expect share price weakness due to poor 1H FY10 results, reduced guidance and risks on order intake. However, we are positive about Suzlon’s long-term potential given our bullish view on the wind power industry.

Investors may avoid this scrip till the management comes out with a clear picture. However, the traders can still look for the technicals to make gain from short term price movements.

Lakshmi Energy: Result Highlights

Sales are lower primarily due to lower offtake in the agri business. The sales in the agri business fell by 39% YoY while the energy business witnessed strong sales with an increase of Rs. 31.6Cr YoY.


Operating income fell by 2% YoY during the quarter mainly benefiting from lower material costs, which fell by 57% YoY. Operating income was also boosted by lower other expenditure which fell by 40% YoY.


In spite of lower sales and operating income, net profit for the company increased by 19% YoY. The jump came on the back of lower depreciation costs and lower tax expense for the year. Depreciation costs were lower by 49% YoY while tax expenses fell by 23% YoY.


While on a year to year basis, the top-line performance has been bad mainly due to the lower offtake, improvement is seen on a sequential basis. Further, the power segment continues to aid the margin growth.

We suggest holding this stock for another one year for better return.

Elecon Engg. – Q2FY10 Update

Elecon’s revenues grew by 1.1% YoY during 2QFY10. The company was able to manage this growth largely due to a strong growth in its material handling equipment (MHE) business (which recorded a 16% YoY growth during the year). On the other hand, its transmission equipment (TE) business saw a fall of almost 18% YoY. As such, the MHE business increased its share in the company’s total revenue to nearly 64% from 56% last year, while the TE business contributed to the balance 36% (44% in 2QFY09).


Elecon’s operating margins contracted by 1.2% YoY during 2QFY10. The reason behind this was higher raw martial costs (both as percentage of sales). On the other hand, employee costs and other expenditure saw a fall as a percentage of sales during the quarter.

Net profits (33% YoY decline) saw a substantial fall due to a to three factors, namely, the fall in operating margins, higher interest costs, and much higher depreciation expenses.

At the current price of Rs 81, the stock is trading at a multiple of 15.4 times its trailing twelve months earnings, this restricts major upward movement short term.

Cairn India – Buy on Dips

How it performed past quarter:

Cairn India’s (CIL) top line at Rs. 2,29.8 Cr, was down 28.2% Y-o-Y (on lower crude prices and production) and up 12.1% Q-o-Q (on higher crude prices) in Q2FY10.

The company’s net hydrocarbon production (includes Rajasthan production, revenues on which were not booked), at 18,638 boepd, increased 8.9% Y-o-Y and 17.1% Q-o-Q.

Crude realisation of USD 69.1/bbl was up 14.8% Q-o-Q, down 40.6% Y-o-Y, and gas realisation was lower at USD 3.9/mmscf.

Higher total expenses (production and employee) resulted in an EBITDA of Rs. 1,33.3Cr. (down 41.5% Y-o-Y and up 0.9% Q-o-Q).

CIL’s results benefited from several exceptional items like foreign exchange fluctuation gain of Rs. 66.18 Cr. (included in other income), reversal of deferred tax liability of Rs. 264.79 Cr.(considering field like as stipulated in PSC against useful economic life), and gain of Rs.163.71 Cr. on reversal of provision in the ONGC carry case (group has won its appeal in Malaysian Court). Hence, CIL’s PAT, at Rs. 469.5 Cr, increased 60.1% Y-o-Y and was almost 10x Q-o-Q.

Outlook

Crude production at the Mangala field commenced on August 20, 2009, In line with its guidance during the 2006 IPO.. Train 1 was commissioned and production has begun. First cargo of crude was delivered to MRPL on October 9, 2009. Train 2 (50 kbpd capacity) completion will be delayed from end CY09 to early CY10 and train 3 (50 kbpd capacity) by H1CY10. With this, Mangala plateau production of 125,000 bpd is targeted by H1CY10. GoI has agreed for CIL to be able to sell to private refiners. Further, management also indicated little impediment to exports. Aishwarya FDP has yet to be approved. CIL estimates the implied price realisation is ~10-15% discount to brent (based on six month ending Sept 2009 average prices).

In addition to the ramp-up of Rajasthan production, the company has 25 discoveries, development of which could positively impact production.

One may look at buying this scrip on dips and hold on as long as you can, for maximising your profit.

By and large the movement will be decided by the oil prices, which is unlikely to come down any time soon.

Fortis Healthcare – Healthy Days Waiting

Fortis Healthcare Limited declared its Q2 results. The company’s Q2 net profit was up at Rs 12.97 crore versus Rs 4.3 crore. Its revenues were up at Rs 187.5 crore versus Rs 154.7 crore.


H1F10 revenue increased to Rs. 370.36 Cr. from Rs. 291.53Cr and net profit up to Rs. 20.52Cr as against Rs. 10.99 Cr.

Quarterly EPS stands at Rs. 0.57 as against Rs. 0.17 during Q2FY09.

Outlook

The company is in growth stage. 2 months ago, Fortis Healthcare sealed the biggest deal in the Indian healthcare industry when it acquired 10 hospitals from Wockhardt for Rs 910 crore helping it emerge as a pan-India player. The acquisition adds 1902 beds to its existing 3142 beds and expands its geographical presence to Mumbai, Bangalore and Kolkata.

Sensing the huge growth potential in the Indian healthcare industry, the company has been keen to scale up rapidly and acquisitions has been its preferred route for growth. After the controversial takeover of the Escorts group’s healthcare business in 2005, it snapped up Chennai-based Malar Hospital and Delhi-based, The Cradle, in 2007. With these acquisitions, the company seems well on its way to achieve its target of having around 40 hospitals, or approximately 6,000 beds, by 2012.

The company’s greenfield hospitals in Shalimar Bagh, Delhi and Gurgaon project are on track to be operational by end FY10 & FY11 respectively.

The management is very vibrant, and is capable of making the company to a largest hospital network in India. However, the negative about them is the way they get off from Ranbaxy, which is still alive in the minds of investors.

One, with long term view of 2 -3 years, can buy this stock and grow your money with the company.

Sintex Industries: Q2F10 Result Review

Sintex Industries came out with a result, which was below market expectation. Let us go through the figures once again.


Revenue

Total revenue fell by 2.5% on quarterly basis and on half yearly basis H1 revenue fell by 5.8%, YoY. According to the company, the revenue fall was mainly due to reduction in prices for their products, line with reduced commodity prices.

Segment wise, textile division dragged down overall revenue, declined 14.1% for the quarter and 11.4% for the half year. This was largely attributable to the falling polymer prices and most of which had been passed on the customer.

Other hit was on operating income, which was down 70.6% during last quarter. A slag in the BT shelters segment and the US subsidiary facing execution hiccups in the wind energy segment saw the other income dropping significantly 78%.

From the companies recently acquired subsidiaries, Zeppelin Mobile performed the best (sales increased 136.2%) and Wausaukee Composites (sales decreased 33.6%) performed the worst.

Operating Profit Margin

Operating profit margin down 1.8% during Q1F10, stands at 18.2%, backed by better profit margins from Prefabs (24%) and monolithic (26%) segments. Again, textiles was on blip side owing to under utilization of recent capacity additions, OPM felled to just 4%.

Net Profit

Q2 net profit dropped to Rs. 58.26Cr. from 83.78Cr, i.e. 31.7%, on YoY basis. H1 net profit down by 16%.

Earning Per Share

Q2 EPS stands at Rs. 4.2 down 31.7% from Rs. 6.2 during Q2 previous year. On half yearly wise, EPS down to Rs. 8.7 from Rs.10.4, a fall of 16%.

Outlook

The management expects a topline growth of 10% and PAT growth of 15% for FY10. However, It is alarming the management’s cautious tone on the BT shelter segment and its overseas subsidiaries performance.

Going ahead, we expect the companies prime focus would be on the building materials segment, anticipating better order inflows from national development programs line JNNURM, Bharat Nirman etc. With govt. push for mass housing and better infrastructure would be the key for the companies domestic business.

We expect, with the smooth order inflow expected from the government in the mass housing segment and a strong order book position (now at Rs. 1400 Cr) would enable the company to sustain its growth momentum. Moreover, revival in the overseas subsidiaries’ performances would add sheen to its business going forward.

We maintain our buy recommendation, for a holding of 12 – 16 months.

Punj Lloyd – Why is it falling?

Punj Lloyd crashed to over 15% today, as it had reported a disappointing Q2 result on Saturday and today the investors got first chance to react.

Result Hightlights

• Net profit fell 63.3% at 51.5Cr. as against 144.1 Cr. on YoY basis
• Operating Profit decreased by 20% YoY due to higher raw material prices.
• Sales fell 1.7% at 2,876.4Cr. as against 2,926.1 on YoY basis
• Sales of its infrasture segment fell by nearly 37% YoY, while its pipeline division grew over 100%

Their overseas subsidiary, Simon Carves UK remains a menace. Simon Carves incurred a loss of Rs. 104Cr. as a result of it’s Bio-Ehanol project in UK’s cost overruns due to delays in completion of project and poor productivity of subcontractors.

Positive side is that the company has order backlog of over Rs. 268 Billion.

Buy – Aditya Birla Chemicals India Ltd

Aditya Birla Chemicals India Ltd (ABCIL) is one of the leading Chlor Alkali company in India, where Hindalco Industries holds 56% of equity. ABCIL was formerly known as Bihar Caustic & Chemical Ltd, is a part of Birla Chemicals.

Products

Its product range includes caustic soda lye with a capacity of 92,750 tpa, liquid chlorine (6,500 tpa), hydrochloric acid (43,750 tpa), sodium hypochlorite (1,800 tpa), compressed hydrogen gas (17,42,400 Nm3/A), aluminium chloride (12,000 tpa) and stable bleaching powder (17,500 tpa). The plant is located at Garhwa Road, Palamau district, Jharkhand.

The plant uses the most-modern, energy-efficient and environment friendly membrane cell technology. With the implementation of membrane cell technology, caustic soda capacity has increased from 160 to 265 tpd. The company also has a state-of-the-art 30 mw captive power plant for uninterrupted power supply.

Some of its major customer’s include: Hindalco, GAIL, SAIL, NTPC, TISCO, Hindustan Uniliver, IOCL, IFFCO, BALCO, JK Paper, Usha Martin etc.

Financials/Performance

During the Financial Year 2008-2009 the Companies‘ gross turnover was up by 14.03 % at Rs. 230.91 crores as compared to Rs. 202.50 crores and net sales were Rs. 204.07 crores as compared to Rs. 174.27 crores in the previous year. Profit before tax stood at Rs. 55.60 crores as against previous year’sprofit of Rs. 58.45 crores.

The company holds cash reserve of 168Cr.

Gross Turnover: 230.91Cr. (FY09)

PAT: 46.08Cr. (FY09)

EPS: 20.78 (TTM)

BV: 102.34 (FY09)

PE:4.45

FV:10

Industry PE: 9.72

Div Yield: 1.62

Current Ratio: 2.13

During past five years, the company doubled its sales and EPS grown over 4 times. Over past five years, the company giving its shareholders an average dividend of 12%.

 

Outlook

 

The Company expects to expand its size of operations with better performance in the coming years by progressive improvement in capacity utilization of the plant. Moreover the Company has plan for further capacity expansion by 250 TPD Caustic Plant and 30 MW Power Plant along with value added Chlorine based down stream products.

 

Risk & Concerns

 

a) Under utilization of installed capacity.

b) Increase in the cost of basic raw material i.e. Salt and Coal.

c) Import threat of Caustic Soda.

d) Frequent bandhs (strikes) and extremist activities affecting movement of goods and Productivity (their plant is naxal infested Jharkhand).

Conclusion

The company passed the tested time very fairly. During the time of the global meltdowns and slowdowns of past two years, while many other large players were struggling to hold their feet, ABCIL could not only withstand, but it could improve both sales and earnings. Naturally, one should expect a better performance once demand and consumption is resumed. Most of its clientele are well known top companies from various sectors. The improvement in sales of these companies will also make more demand for raw materials, which ABCIL supplies.

At current price, we believe, the share is undervalued. It is now selling at around 4.5 times of its TTM EPS of 20.78, as against industry PE of 9.72.

The company will release its Q2FY10 results on 26 October, we expect some good figures.

We expect at least 50% upward movement for this scrip in short to medium term.

Pros & Cons of Rising Rupee

US Dollar has been falling ever since the news came out that the oil producing countries had a discussion to end dollar dominated oil trade. There may be many other reasons why US dollar has dropped. In other terms, the other currencies have been gaining. Indian Rupee has gained over 10% against US Dollar since last March.

Here we discuss the Pros & Cons of rising rupee:

CONS:

• Exporters will be hurt. The reason is they get less rupees for the dollar they earn through export. Suppose an exporter earns $100,000 in foreign exchange. At an exchange rate of Rs. 51/US$, this is worth of 51 lakhs while at the rate of 47, it is worth of 47 lakhs only.

At the same time, it makes their products more expensive in overseas market and erode their international competitiveness.

The strengthening of rupee ha an adverse impact on various companies/sectors, which derivses a substantial portion of their revenue from the USA markets. Software BPOs are for example.

Sectors to affect: Textiles, IT, BPO,

• NRIs will be badly affected.  They will have to pay more currencies of their respective country to get same amount that they sent last month.

• A cheaper imported item will affect our domestic industries. It is good on the other hand, as Indian companies will have to concentrate more on efficiency and quality.

• Affect FDI or FII: Every time a foreign bank or company to invest in India, they will need to buy rupees. The foreign investors (FIIs or FDIs) will have to pay more for rupees to invest in India. That means less return in dollar terms for them therefore, less attractive. At the same time it will turn positive if dollar gains against rupee. For example during this fall, FIIs have gained 10% return in dollar terms since Mar 09, as they will have to pay less amount of rupees to get their dollar back.

PROS

• Importer’s rejoice; exactly opposite to the exporters. A stronger rupee means their import bill will fall in rupee terms. Biggest beneficiaries in this case will be oil marketing companies.


• Your foreign trip will cost you less, as you will have to pay fewer rupees to buy dollars to spend abroad.


• Beneficial to students who are studying abroad.


• Appreciating rupee helps in easing the pressure, related to foreign debts servicing (interest payments on debt raised in foreign currency), both Indian govt. and companies.

A stronger currency is always good for a nation for long term perspective. Short term glitches can be maintained with proper planning.


How many of us know that when India got independence in 1947, 1 Rupee was equal to 1.2 US Dollar!!

Sintex Industries - Your way to profit

Sintex is Nokia of water storage tank business in India. Even if you don’t have one at your home, you can see ‘Sintex’ on every corner of the country.

Sintex industries is a prominent player in textiles and plastic business in India. Over the years it has built a strong brand recognition. It was a textiles company in 1931 and later diversified into plastic business in 1974, with manufacturing of water tanks. Since then company has diversified into various plastic products like prefabs, custom moulding and into construction. Recent years, they acquired many companies to scale up custom molding and prefab segment, within and outside India. Currently, Sintex manufacture their products from 15 plants in India and 20 plants outside India.

Sintex operates in three business segments:

Textiles (structured fabrics)

Plastic (water tanks, custom moldings, prefabricates structures etc.)

Construction (Monolithic Construction)

TEXTILES

Sintex is probably the only Indian textile company which relies heavily on product development. In the textiles business, it primarily manufactures industrial fabrics and fabric for premium retail garmenting. However, it does not have direct marketing presence, rather it is a supplier of international and domestic design houses. They work with some of leading European brands like Lacoste, GAP, Ann Taylor and Marks & Spencer. Also, the company has strong marketing and design tie up with Europe’s leading fashion and design company, Canclini Tessile. Sintex annually adds about 36,000 designs to its fabric collection. The company has now begun marketing of coated fabrics, which are used in sports wear, travel, and military products.

Concerns:

*Since their textiles business is export oriented, the global downturn may affect the sales.

*Fluctuation in USD is also a concern

*Growth in textiles will be relatively lower and that largely led by deepening relationship with global design and fashion marketing companies.

*In textiles, being a high value business, the focus is more on relationship with the vendors who require customized solutions. Thus, sustaining the current relationships and nurturing new relationships would be crucial.

*Since this is a high-end value-driven business, its potential to grow on volumes would be limited.

PLASTIC

The Indian plastic industry is valued at US$ 4 bn (0.4%) compared to the global plastics industry of US$ 1 trillion. The domestic per capita consumption still lags behind at 4 kg, as against the world average of nearly 20 kg. This provides huge opportunity for sustainable growth for plastic products manufacturers in the country.

Sintex is a leader in the manufacturing and sales of plastic products in India. Sintex’s plastic division has been the star performer for the company over the past 4-5 years. Presently plastic segment is the largest revenue contributor to the company. From just water tank business, it has diversified into prefabs and custom moldings.

Tanks:

Water is a scarce commodity in India, and storing them for future usage is inevitable and important.

Sintex is the leader in the plastic overhead tanks. The company started this operation in 1975 and at present has 1,200 agents, 650 dealers, 18 offices, 22 depots and close to 10,000 retailers. The wide distribution network is Sintex’s greatest strength as it is a deterrent to competition. Companies plastic division has been star performer over past 4-5 years. It holds over 60% of market share of water storage tank business in India.

Since this is a matured business, the growth rate for Sintex tank is low. The margins are also very low due to competition from a lot of unorganized players. However, this business allows Sintex to retain its distribution strength and the brand value through which it can push a lot of other plastic-related products.

Custom molding:

This is another fastest growing segment of Sintex. Custom moulded products are made from glass-fiber-reinforced polymers that yield characteristics such as higher strength, corrosion resistance and lower weight compared to conventional materials such as steel. Custom molding substitutes metal components used in auto, wind power, aerospace, defense etc.

The custom molding is likely to emerge as a stable and secure long term growth business for the company. It has made 5 acquisitions recent years to address diverse industries such as aerospace, wind power, aeronautics, defense etc. They manufacture the products for major clients like GE, Cummins, Coca Cola and Pepsi. Its key product in custom molding business includes electrical enclosures, meter boxes, auto components, FRP Tanks, etc.

Auto Accessories: Sintex acquired the auto accessories business of Bright Brothers in FY08. Bright Brothers specializes in injection moulded components, such as bumpers, cockpit system, door panels and radiator fans etc. Its client list includes Maruti, Tata Motors, M&M, Hyundai, Honda etc.

Prefabricated Structures:

Prefabricated structures are the building structure manufactured in the plant and assembled at site. The key facet of prefabs business are manufacturing, assembling and execution. Prefab is a very big business in Western countries, which represents 8-10% of total construction industry, but that is not the case in developing countries like ours, mainly due to lack of awareness. Prefabs are maintenance free, takes 60% less time, and upto 15% cheaper. Sintex is the largest player in the domestic prefabrication market.

Sintex prefabs, which are available in various types and designs, find diverse uses, ranging from temporary to permanent structures. They are ideal for erecting schools, kiosks, huts, tent substitutes, hospitals, police stations, offices, telephone exchanges, post offices and even community halls. Govt is planning for large number of schools, hospitals etc. The market potential is huge.

Concerns:

*Prefab structures, being a service intensive business, could face execution risks.

*Also, relationships with state/centre governments are crucial as these products are generally sold to them.

*Any government regulation curtailing the use of plastics could be detrimental for Sintex.

MONOLITHIC CONSTRUCTION

Monolithic construction involves creating a lightweight plastic-based formwork and then casting walls and slabs together by pouring fluid cement concrete into the formwork. It requires nominal quantity of metallic reinforcement bars that helps in significantly reducing construction costs and time and requires minimal maintenance. Monolithic is a substitute to conventional method of construction, promises immense growth potential to the company. It is cost effective and less time consuming. While prefabs are used to construct only single storey structures, monolithic construction can create structures up to five to six floors.

Low income housing present opportunity for monolithic construction to the tune of Rs. 4L Cr. Currently sintex is the only player in Indian market in this segment.

Sintex entered the monolithic business in the beginning of FY08 and was soon flooded with orders from various state government organizations.

Affordable and quality housing is a key challenge faced by the Indian government. With private builders concentrating on middle and high income groups, the lower income group and poor people are deprived of proper housing facilities. This offers a huge opportunity for Sintex, as its formwork system offers speedy construction of high quality houses at affordable prices. The company already constructed low cost houses for Ahmadabad Urban Development Authority, and they are negotiating with many north Indian cities for similar projects. The current order book for the monolithic construction stands at over Rs. 1800Cr., which is to be executed within 2 years time.

Concern: Since the clients are mainly Govenements (state/centre) delay in getting site clearance or clear title for the land could delay the sales cycle. This would also result in lower margin, as the company would keep on incurring labor cost.

OVERALL CONCERNS

*One of its recent acquisition, Geiger Technik, Sintex has paid around Euro 7 m for a 10% stake so far. Geiger has recently filed for bankruptcy Sintex likely to lose the entire amount that it has invested so far.

*Successful integration of overseas acquisitions and its ability to improve operational efficiency.

FINANCIALS

Sintex maintained a strong growth record over the past few years. It generated average revenues of around US$ 350m over the past three years. Topline and bottomline have grown at average annual rates of 54% and 52% respectively during the past 3 financial years. During the last financial year the sales almost reached at US$700.

Companies average operating margin over past 5 years is 17.5%

SHARE HOLDING PATTERN

Promoters – 30.15% (up from 30.06)

FIIs – 32.38% (down from 34.9%) *

Public – 7.84% (down 8.09)

Private Corporate Bodies - 10.73% (up from 7.82%)

Banks, Fin. Inst., Insurance – 0.08% (up from 0.01%)

*High FII holding is considered as negative after last crash, as FIIs were the main sellers due to global economic crisis. Their action is become unpredictable.

SHARE MOVEMENT

weeks high/low: 70.20/270.60

Average Volume: 2,80,000

HOW IS IT VALUED

Face Value: Rs. 2

Last Closing Price: 252.15

No. of Shares: 136.5m

EPS (FY09): 23.80

PE: 10.59

OPM: 20.15%

GPM: 20.43%

NPM: 13.48%

INTRINSIC VALUE

By evaluating the current business prospects of the company, many of them are at nascent stage in India, the company has potential to grow in big way. Sintex has the advantages of first entrants in many areas. Strong growth drivers are likely to ensure rapid revenue growth in coming years. However, there was dip in sales Q to Q basis in last quarters, mainly due to reduction in prices. We expect a net profit ~Rs.350Cr. (an EPS of ~Rs.25.5/share) for FY10, and the company has the value to pay at least 15 times of FY10 earning (current Sensex PE is 21).

In that perspective, we expect the price of the stock has the potential to reach to Rs. 380 in 1 year time, which is 50% more over current price.

In the meantime, you may watch the last quarter result, which is due to come tomorrow (Oct 12), to decide the entry price. They might subtract Euro 7m as against Geiger bankruptcy this quarter. Any dip in numbers can take the stock 10-15% down, which you may consider as an opportunity to enter.

One may buy the stock with 12 – 18 month perspective. A position even beyond FY12 is advisable for further gains.

We welcome your opinion too, do write us…….

Note:  Sintex Ind's Q2 result is out. Net Profit is down to 46.9Cr. as against 68.24 YoY. Click here to read the management clarificaiton

Dolefully, Dollar

US Dollar has value everywhere except in US. It has became the obligation of other countries to keep the dollar afloat, as they hold USD as their main reserve of foreign currencies.

Who holds most of that? It is China. They were making toxic toys to tanks and selling all around the world in exchange of this paper, in currency or in bond.

And what was US doing? Simply printing. Printing as much as they wanted to spend. US Fed was printing more and more and giving cheap money to its citizen. They were, in tern, swiping their plastic cards to purchase these toxic toys. Fed was encouraging its citizen to spend more, beyond their means, even beyond their future earnings.

Result: fiscal deficit, in trillions of dollors!!

Now US and China are feared equally, each others action. US worries what if China start selling their bonds in the market? Dollar will go to drain.

China fears what will happen if US economy will not recover. What if fiscal deficit increases further. If you keep printing more money, as theory says, more money follow few goods turns to hyper inflation results devaluing bonds they are holding.

Not only China, but India, Russia, Brazil, GCC countries are holding huge reserves in USD or holding their bonds, but not that much as China holds.

Now think who has to worry more?

China is leveraging their foreign kitty by buying more assets overseas, from Austrilia to Antartica.  Buying more gold, buying mines, oil, whatever they can buy.  That is they are spreading this paper currency all over the world.

Then comes the news.  Gulf states were in secret talks with Russia, China, Japan and France to replace the US dollar with a basket of currencies in trading oil. Main reason countries holding USD was due to this reason.  No more explanation needed why dollar start crashing.  Even though these countries denied this report, not only there was no recovery but it crashed further, questioning the confidence on USD. 

It is not new that Chinese are pursuing other countries to use some Yuan in exchange of goods/services, and many Chinese friendly countries expressed their readiness, and anti-American countries (like Iran, Venezuela) jumped with joy to accept Yuan.

But, in India's perspective, a stable dollar is more desirable than Yuan.

Is there an alternative for USD? Not till now as liquid as dollar.  Above all, US is a stable, democratic, free society. Physically more powerful country.  There is no alternative to that yet.

Hope US will take confidence of all the countries, to revive dollar, at least for short term.

.

Expect Green Today

Yesterday's strong recovery was a indication that bulls has no plan to let up. Steamed by strong global cues, despite DIIs & FIIs net sold, it managed to turn around and bounce.

Bull will likely to stage the show today as well. Domestically there is nothing negative.

Global markets trade in positive territory.

A recovery is expected in telecom that was beaten down by the investors for their price war, that has reached at its bottom. Watch the following stocks today:

+Yesterday, RIL submitted affidavit in SC. Also RIL board is meeting today for reviewing audited result and recommending dividend.
+JSW Steel said Q2 crude steel production up 54% at 15.39 lakh tonnes
+KS Oils buys 53,000 acres land in Indonesia to develop palm oil plantations
-Pyramid Saimira denies reports RBD Group buys 40% stake in company and production arm

The weakening dollar continues to strengthen prices of commodities. Gold has hit an all-time high of USD 1045 per ounce, gaining over 2%. The yellow metal surpassed its 2008 high of USD 1034 dollar per ounce in intra-day trade on Wednesday night.
Gold prices have gained 18% this year in dollar terms.

Rupee gained yesterday by 63 paise against weakening dollar.

.....more views to follow

Markets Tomorrow

Market is likely to be traded green tomorrow.

Reverse action is likely to be seen in telecom, which has beaten today. Global cues are positive.Global markets are trading positive, Dow & S&P up 1.37%.

Lakshmi Energy & Foods

Rice is an important food for the population across the glob. The demand growth is outpaced supply growth on account of changing income & consumption growth. Asian countries account 92% of world’s total rice production. Unusual variations in climate have badly affected corps in many producing countries.

Look at India. It was drought that affected the agri pdoduction a couple of months ago, now it is flash flood. Rice production in Andhra Pradesh, one of the main rice producing state, will also hit badly by the unexpected flood. India is the second largest producer of rice, accounts 1/4th of global output.

Lakshmi Energy & Foods, a Punjab based company, is one of the largest non-basmati rice producer in India, may benefit from the current situation. It is uniquely positioned in two of the fastest growing sectors: Food and Power. It was bumper paddy production in Punjab last year, and there was situation of storage problem in godowns. Deferred offtake had a hit on Lakshmi Energy’s revenue during last FY. At the current situation, the piled up stocks will likely get a better realization for the producers like Lakshmi (remember govt. already increased the minimum support price). The non-basmati rice segment is relatively a much more stable business as the rice is sold to the government at a fixed price minimum support price.
They produce another scarce item in India – electricity- out from husks. Current capcity is 30MW, however the company has plan to increase the same to 105MW in next couple of years time.

Some other valued added products are:
Refined oil
Cattle feeds
Chakki atta

Risks
There are delays in setting up new padding processing capacities
Adverse weather conditions, such as drought or flood
Any change in govt. policy, as the price is constituted based on MSPs fixed by the govt.

Company
Largest producer of non-basmati rice
One of largest food grain processing company in the world
Better utilization of by-products, thereby by adding better realization

Shareholding pattern
Promoters: 45%
FII: 25% (down from 37)
Public holding 11.50% (up from 6%)

Overview
52weeks high-low: 283-63
Book Value: 74.33
Face Value: 2
EPS (TTM): 21.6
PE (Price at 130): 6.01



Conclusion:
At current price this stock looks cheap. Going forward, with their planned expansion, especially power capacity additions, the stock has potential to double in a one year period. Recommended to accumulate 120-110 range.