Monthly Market Report Sept 2015: Fill & Download for Free

Since the start of the year Indian stock market has corrected by almost 6% till date. People were waiting for some big ticket reforms which did not materialize due to a standstill in the Parliament. Subdued FII flows have hampered capital raising efforts of corporates leading to tepid earnings growth in H1FY2016. However, we believe India is poised to be one of the fastest growing economies in the world with our GDP growing by 7.3% - 7.5% in FY16, as per IMF’s forecast. The government is working on removing various bottlenecks for ease of doing business and the performance of various sectors especially power, roads, shipping and mining and industries are set to improve. Implementation of GST could be another game changer for the Indian economy. Though the benchmark indices may get decent returns we believe a bottoms-up approach is better to make extraordinary returns.After following this Bottom-Up approach and careful evaluation of the existing opportunities in the current market, we bring to you 5 stocks this New Year, which we feel are a mix of long-term wealth creation and Multi-Baggers ideas.Redington IndiaAbout :Redington (India) Ltd. has evolved into an integrated supply chain solutions provider from a single product distributor. As of 2015, it is the second largest distributor of IT and non-IT products in India. Redington is an end to end Supply Chain Solutions Provider in the Information Technology and Digital Life Style Products space with some of its major clients being some of the leading companies of the world such as HP, HCL, Dell, Apple, Microsoft, Oracle, Samsung, Wipro, etc. It Operates in 24 countries and has a huge distribution network through 33,000 channel partners and facilitated by Automated Distribution Centers.Investment Rationale :Redington’s strength in capturing emerging business opportunities across Social, Mobile, Analytics and Cloud (SMAC) is what makes it a strong candidate for high revenue growth potential. Coupled with the ability to provide a wide range of services – distribution, logistics and after sales services, continues to be the unique selling point to the customers. Its UAE subsidiary was recently appointed by Apple to distribute iPhones which are a key addition since the company expects a significant increase in its offerings to customers in the smartphone category. Despite the move to online for purchase of mobiles, Redington due to its ability in the offline segment has been able to deliver strong numbers.Risk :In case, there is a very large move to buy all products online that can lead lower volumes for Redington.Why invest now :With the increased growth of smartphones, one expect significant traction in company’s revenue going forward. Despite good ROIC, the stock is available at a cheap valuation of 13 PE which makes it a suitable candidate for investment.JK Tyre & IndustriesAbout :JK Tyre & Industries (JKT) is the third largest tyre manufacturer in the country with an overall market share of ~16%. The company operates four plants in India, with a current installed capacity of 13.7mn tyres annually. While 75% of JKT's tonnage volume is contributed by the commercial vehicle segment, the passenger car segment accounts for ~15% of the volumesInvestment Rationale :Natural rubber prices have declined to ~Rs. 101.5/kg levels from the highs of ~Rs. 250/kg in 2011. It accounts for ~40% of total raw material costs, which coupled with crude oil prices being at 8 years low, will help keep the gross and operating margins high. Given an economic revival, capacity utilization for most players on the radial side is expected to remain high. With demand in Radial tyres expected to increase and the stock having corrected by 27% in the last one year despite a favorable performance and earning high margins, the stock seems a good bet for long-termRisk :The Company reported a loss of production of 700 tonnes at Tamil Nadu plant due to heavy floods in that region, however, it reported no loss to plant and machinery. The debt equity of the company is significantly higher than its peersWhy invest now :Given the low rubber prices, the raw material cost of JK tyre is expected to be low for the next few quarters, till oversupply comes down. The recent improvement in auto sales no is also a clear indication of further improvement in volumes in the quarters ahead. This New Year one should accumulate the stock and hold for at least 2-3 years to expect good returnsTata Motors-DVRAbout :Tata Motors DVR is a share with differential rights. It is traded in a similar way to how Tata Motors share is traded which own British automobile giants Jaguar and Land Rover. Tata Motors also has a major presence in Truck and Bus segment in IndiaInvestment Rationale :Tata Motor DVR trades at 26% discount to main shares, whereas globally DVR shares trade at a very small discount to the main share. Also, the stock is trading in single digit PE of 5.8, in comparison to 20 for the automobile industry. The growth prospect of its commercial vehicle segment, especially M&HCV where it is the market leader with 58% share, seems bright and is likely to pick-up at a reasonable pace going forward. Jaguar & Land Rover which are globally well-known and mature brands saw a growth of 9.5% in FY2015, contributes to 83% of the overall revenue. With 2 new models of passenger cars being launched every year till 2020, the revival and growth prospect of the company looks goodRisk :There is a bit of uncertainty about the future growth in China for Jaguar and Land Rover. Evoque sales have not been as per expectation in China leading to negative sentiment on the stock. The company’s Jamshedpur plants which manufacture trucks was also impacted by Chennai floods given that its auto-ancillary suppliers were based out of that region. Total sale of passenger and commercial vehicle declined by 7% YoY in the month of November 2015Why invest now :The stock price of Tata Motor DVR has corrected 27% from its 52 week high due to weak Chinese outlook. Tata motor's exposure to China is 29% of its total Revenue of FY15. Even if we assume there is no growth from China, the stock has corrected more than necessary. Tata Motor continued to show strong YoY growth in M&HCV segment with 21% growth in the month of November. Also, it recently launched a new model which has received good feedback and is expected to be launched in the first half of CY2016UFO MoviezAbout :UFO Moviez India Ltd. is India’s largest digital cinema distribution network and in-cinema advertising platform in terms of a number of screens. UFO operates India’s largest satellite-based, digital cinema distribution network using its UFO-M4 platform, as well as India’s largest D-Cinema network. The company has so far enabled the release of 9,800 films in 22 languages on its UFO M4-Platform and has conducted over 19.8 million shows since June 2005 till Q1FY16 and this number is increasing.Investment Rationale :As of 30th Sept 2015, the consolidated business of the company spans across 6,636 screens worldwide. It has an in-cinema advertising platform with long-term advertising rights to 3,690 screens, with an aggregate seating capacity of approximately 1.79 million viewers. The company indicated that it is set to generate higher revenues due to high CapEx incurred earlier and expects lower incremental capital expenditure over the coming years. Caravan Talkies is its van based entertainment platform for areas where there is no access to cinemas and the company is expecting to earn high-margin ad revenues from this novelty offering. The company saw an 18% YoY growth in revenue in Q2FY16 and 19% YoY growth in Net Profits for the same period. Its ad revenues are expected to grow at ~30% per annum over the next 3 years which is supported by the fact that in H1FY16 the company’s ad revenues has already grown by 38%.Risk :The stock price has come down by 23% and it had listed on the exchange at a 4% discount to its issue price which had not gone down well with the investors. The company needs to constantly update its technology or make innovations survive against other big players since its digitization of movie screen has reached its saturation.Why invest now :The stock price has corrected significantly by 23% from its 52 week high of Rs. 643 and is currently nearing 52 week low. We believe there is a likelihood of significant pick up in earnings due to better sweating of assets leading to expansion in PE of the stock.GIPCLAbout :GIPCL was incorporated in 1985 and is majorly (~58%) owned by various state-owned companies of Gujarat. It is engaged in the business of Electrical Power Generation. The company currently has 815MW generation capacity, with 500MW lignite-based capacity operational at Surat and the remaining 2 power plants with combined 310MW gas-based capacity operational at Vadodara. The company also has a 5MW SLPP solar power plant in its portfolio.Investment Rationale :The Company has 815MW of gas + lignite capacity with gas for both plants being sourced from GAIL. One of the plants is under MOU with compensation of fixed charge and returns & bonus being given above a particular plant load factor (PLF) level. The other plant gives under 13% ROE for a particular PLF. The lignite plants at Surat are located at a proximity to the captive mines. The company also plans to add wind capacity of up to 50 MW by FY17. Wind energy business is currently in focus with a lot of government initiatives being taken for clean energy. The company has substantially reduced its debt in the last 5 years to ~Rs. 379 crore as on 30th Sept 2015 and plans to be debt free by March. The prices of raw material have also decreased which could lead to improvement in EBITDA.Risk :Given the increase in players in the wind energy business, the company would need to ensure that there are no delays in setting up the turbine. Also, the company has delivered poor revenue growth in the last 5 years where it was impacted due to various issues such as flooding of mines, plant shut down and generator problems.Why invest now :The Company’s generator transformer unit at SLPP which was under forced outage has been repaired and will be operational soon, leading to an increase in revenue. Also the stock trades at a discount to book value.

Penny Stocks investment should normally be avoided however, the following stocks can be bought by you.Redington IndiaAbout :Redington (India) Ltd. has evolved into an integrated supply chain solutions provider from a single product distributor. As of 2015, it is the second largest distributor of IT and non-IT products in India. Redington is an end to end Supply Chain Solutions Provider in the Information Technology and Digital Life Style Products space with some of its major clients being some of the leading companies of the world such as HP, HCL, Dell, Apple, Microsoft, Oracle, Samsung, Wipro, etc. It Operates in 24 countries and has a huge distribution network through 33,000 channel partners and facilitated by Automated Distribution Centers.Investment Rationale :Redington’s strength in capturing emerging business opportunities across Social, Mobile, Analytics and Cloud (SMAC) is what makes it a strong candidate for high revenue growth potential. Coupled with the ability to provide a wide range of services – distribution, logistics and after sales services, continues to be the unique selling point to the customers. Its UAE subsidiary was recently appointed by Apple to distribute iPhones which are a key addition since the company expects a significant increase in its offerings to customers in the smartphone category. Despite the move to online for purchase of mobiles, Redington due to its ability in the offline segment has been able to deliver strong numbers.Risk :In case, there is a very large move to buy all products online that can lead lower volumes for Redington.Why invest now :With the increased growth of smartphones, one expect significant traction in company’s revenue going forward. Despite good ROIC, the stock is available at a cheap valuation of 13 PE which makes it a suitable candidate for investment.JK Tyre & IndustriesAbout :JK Tyre & Industries (JKT) is the third largest tyre manufacturer in the country with an overall market share of ~16%. The company operates four plants in India, with a current installed capacity of 13.7mn tyres annually. While 75% of JKT's tonnage volume is contributed by the commercial vehicle segment, the passenger car segment accounts for ~15% of the volumesInvestment Rationale :Natural rubber prices have declined to ~Rs. 101.5/kg levels from the highs of ~Rs. 250/kg in 2011. It accounts for ~40% of total raw material costs, which coupled with crude oil prices being at 8 years low, will help keep the gross and operating margins high. Given an economic revival, capacity utilization for most players on the radial side is expected to remain high. With demand in Radial tyres expected to increase and the stock having corrected by 27% in the last one year despite a favorable performance and earning high margins, the stock seems a good bet for long-termRisk :The Company reported a loss of production of 700 tonnes at Tamil Nadu plant due to heavy floods in that region, however, it reported no loss to plant and machinery. The debt equity of the company is significantly higher than its peersWhy invest now :Given the low rubber prices, the raw material cost of JK tyre is expected to be low for the next few quarters, till oversupply comes down. The recent improvement in auto sales no is also a clear indication of further improvement in volumes in the quarters ahead. This New Year one should accumulate the stock and hold for at least 2-3 years to expect good returnsTata Motors-DVRAbout :Tata Motors DVR is a share with differential rights. It is traded in a similar way to how Tata Motors share is traded which own British automobile giants Jaguar and Land Rover. Tata Motors also has a major presence in Truck and Bus segment in IndiaInvestment Rationale :Tata Motor DVR trades at 26% discount to main shares, whereas globally DVR shares trade at a very small discount to the main share. Also, the stock is trading in single digit PE of 5.8, in comparison to 20 for the automobile industry. The growth prospect of its commercial vehicle segment, especially M&HCV where it is the market leader with 58% share, seems bright and is likely to pick-up at a reasonable pace going forward. Jaguar & Land Rover which are globally well-known and mature brands saw a growth of 9.5% in FY2015, contributes to 83% of the overall revenue. With 2 new models of passenger cars being launched every year till 2020, the revival and growth prospect of the company looks goodRisk :There is a bit of uncertainty about the future growth in China for Jaguar and Land Rover. Evoque sales have not been as per expectation in China leading to negative sentiment on the stock. The company’s Jamshedpur plants which manufacture trucks was also impacted by Chennai floods given that its auto-ancillary suppliers were based out of that region. Total sale of passenger and commercial vehicle declined by 7% YoY in the month of November 2015Why invest now :The stock price of Tata Motor DVR has corrected 27% from its 52 week high due to weak Chinese outlook. Tata motor's exposure to China is 29% of its total Revenue of FY15. Even if we assume there is no growth from China, the stock has corrected more than necessary. Tata Motor continued to show strong YoY growth in M&HCV segment with 21% growth in the month of November. Also, it recently launched a new model which has received good feedback and is expected to be launched in the first half of CY2016UFO MoviezAbout :UFO Moviez India Ltd. is India’s largest digital cinema distribution network and in-cinema advertising platform in terms of a number of screens. UFO operates India’s largest satellite-based, digital cinema distribution network using its UFO-M4 platform, as well as India’s largest D-Cinema network. The company has so far enabled the release of 9,800 films in 22 languages on its UFO M4-Platform and has conducted over 19.8 million shows since June 2005 till Q1FY16 and this number is increasing.Investment Rationale :As of 30th Sept 2015, the consolidated business of the company spans across 6,636 screens worldwide. It has an in-cinema advertising platform with long-term advertising rights to 3,690 screens, with an aggregate seating capacity of approximately 1.79 million viewers. The company indicated that it is set to generate higher revenues due to high CapEx incurred earlier and expects lower incremental capital expenditure over the coming years. Caravan Talkies is its van based entertainment platform for areas where there is no access to cinemas and the company is expecting to earn high-margin ad revenues from this novelty offering. The company saw an 18% YoY growth in revenue in Q2FY16 and 19% YoY growth in Net Profits for the same period. Its ad revenues are expected to grow at ~30% per annum over the next 3 years which is supported by the fact that in H1FY16 the company’s ad revenues has already grown by 38%.Risk :The stock price has come down by 23% and it had listed on the exchange at a 4% discount to its issue price which had not gone down well with the investors. The company needs to constantly update its technology or make innovations survive against other big players since its digitization of movie screen has reached its saturation.Why invest now :The stock price has corrected significantly by 23% from its 52 week high of Rs. 643 and is currently nearing 52 week low. We believe there is a likelihood of significant pick up in earnings due to better sweating of assets leading to expansion in PE of the stock.GIPCLAbout :GIPCL was incorporated in 1985 and is majorly (~58%) owned by various state-owned companies of Gujarat. It is engaged in the business of Electrical Power Generation. The company currently has 815MW generation capacity, with 500MW lignite-based capacity operational at Surat and the remaining 2 power plants with combined 310MW gas-based capacity operational at Vadodara. The company also has a 5MW SLPP solar power plant in its portfolio.Investment Rationale :The Company has 815MW of gas + lignite capacity with gas for both plants being sourced from GAIL. One of the plants is under MOU with compensation of fixed charge and returns & bonus being given above a particular plant load factor (PLF) level. The other plant gives under 13% ROE for a particular PLF. The lignite plants at Surat are located at a proximity to the captive mines. The company also plans to add wind capacity of up to 50 MW by FY17. Wind energy business is currently in focus with a lot of government initiatives being taken for clean energy. The company has substantially reduced its debt in the last 5 years to ~Rs. 379 crore as on 30th Sept 2015 and plans to be debt free by March. The prices of raw material have also decreased which could lead to improvement in EBITDA.Risk :Given the increase in players in the wind energy business, the company would need to ensure that there are no delays in setting up the turbine. Also, the company has delivered poor revenue growth in the last 5 years where it was impacted due to various issues such as flooding of mines, plant shut down and generator problems.Why invest now :The Company’s generator transformer unit at SLPP which was under forced outage has been repaired and will be operational soon, leading to an increase in revenue. Also the stock trades at a discount to book value.

As late as in May 2015, Amtek Auto acquired a german company thru itssingapore based subsdiary. The shares were quoting around 180 or so. But the charts of the company's stockprices gave me a hint in March/April 2015itself, that something is not going well. It was a death cross on the charts.It was on 17th august 15, that the second quarter results came as a rudeshocker to the markets, reporting substantial loss and the stock tanked by 10 percent. This was the time, the investors started to panic and get out ofthe counter. On that day, Rupee closed at a new two year low of 65.30 or so.On sept 7th, on the stock exchange announcement that Amtek Auto wasbeing removed from derivatives segment from 30th October, stock tanked byabout 40%On Aug 7th, CARE downgraded Amtek Auto debentures, on the reason thatcompany is not forthcoming with the required information. The debt equity stood at 15 times, debt in the order of about 8000 cr. Their group cos alsohad huge debts on their books, for instance Castex technologies had debt of 6000 cr.The company was also widely accused of rigging the share price of AmtekAuto, to escape from repayment of FCCBs . The company had certain obligations towards FCCBs. This had actually infuriated the foreigninstitutional investors.Their group cos also didn't perform well for the second quarter. The company had a spate of acquisitions and had amassed a debt of over 18000cr for the group as a whole. The interest cover was really going down after the second quarter performance. The company's bondhooders are looking to move coirt in UK for the price rigging in the shares with regard to FCCB conversion. The bond holders had also approached SEBI and the stock exchanges with the complaint of share rigging.This is the whole story. The company's shares have been heavily shorted using derivatives route and is in heavy oversold region. BUY above 35, if you have a lion's heart to see some gain. Wait for the share to gather some strength. This is purely for short term.Disclaimer: I dont hold any shares in the company nor proposing to buy in the future.