Food inflation has gone down and it's negative at the moment. As per
Govt. notification Qualified Foreign Institution (QFI) are allowed to
invest in India. It is taking quick decision and at any moment it may
cut down the interest rate and also solve the liquidity issue. US and
Europe problem has been over discounted in Indian market and American
job data has also shown an improvement. India's growth story is good
along with the consumption. Hence, in this panic BUY 20% - 30% Y-o-Y
growing & Dividend paying fundamentally strong companies. Following is
the BEST PICK from Smart Profit Financial Consultancy:-
BUY NATIONAL HYDRO POWER CORPORATION (533098)
CMP:21
Target: 40 in 6 months
National Hydro Power Corporation, an entity of Government of India, is
country's largest hydro power producer.
NHPC is currently having an installed capacity of more than 5,300 MW
with 14 operational power stations and has a cash surplus of over Rs.
4,000 crore.
National Hydroelectric Power Corporation (NHPC) has reported a net
profit of Rs 966 crore in the second quarter of FY12, a growth of 40%
as compared to Rs 690 crore in the corresponding quarter of last
fiscal.
The state-run major is engaged in the construction of 10 projects at
various locations in the country, going to have an additional capacity
of 4,502 MW. It is planning to develop two hydro projects in Myanmar.
It plans to increase the capacity to over 10,000 MW by end of 2012.
The coal price has raised, which will forced to increase in power
price by 20%. This will further boost the profit margin of NHPC to a
large extent.
Spanning on Government's increasing emphasis on hydro power and NHPC's
strong hold, we recommend a BUY on NHPC at CMP of Rs 21, with a target
of Rs.40 in 6 months.
BUY TATA COMMUNICATION (500483)
CMP: 221
Target: 250 in 4 months
Tata Communications Limited along with its global subsidiaries (Tata
Communications) is a leading global provider of the new world of
communications. The Tata Global Network encompasses one of the most
advanced and largest submarine cable networks, a Tier-1 IP network,
connectivity to more than 200 countries across 400 PoPs and more than
10 lac square feet data center space. Tata Communications serves its
customers from its offices in 80 cities in 40 countries worldwide.
The number one global international wholesale voice operator and
number one provider of International Long Distance, Enterprise Data
and Internet Services in India (famously known as TATA PHOTON+), the
company was named "Best Wholesale Carrier" at the World Communications
Awards and was named the "Best Pan-Asian Wholesale Provider"
Tata Communications and Essar Telecom Kenya (yuMobile), a unit of
Essar Group, announced the signing of a mutually beneficial strategic
sourcing agreement, Tata Communications will benefit from the
increasing demand for high quality voice services in Africa generated
by a rapid rise in the number of mobile subscribers on the continent
Tata Communications Ltd. is a part of the $6740 Crore Tata Companies;
it is listed on the Bombay Stock Exchange and the National Stock
Exchange of India and its ADRs are listed on the New York Stock
Exchange (NYSE: TCL).
Tata communication has made conscious efforts to diversify from its
core wholesale voice business and tap the higher margin managed
services and cloud business.
We believe the stock is a good opportunity point as long term drivers
are intact as addressable market opportunity leaves tremendous scope
for expansion stock may go up by 40%.
We recommend 'BUY' on the stock at CMP Rs.221 with a target price of
Rs. 250 in 4 months
BUY RURAL ELECTRIFICATION CORPORATION LIMITED (REC) (532955)
CMP: 169
Target: 300
REC, under Ministry of Power, was incorporated on July 25, 1969 under
the Companies Act 1956. REC a listed Public Sector Enterprise
Government of India with a net worth of Rs. 12,784 Crore as on
31.03.11.
REC provides loan assistance to SEBs/State Power Utilities for
investments in rural electrification schemes through its Corporate
Office located at New Delhi and 17 field units (Project Offices),
which are located in most of the States.
The company has been rated among the top 500 Global Financial Services
brands for 2010 by UK-based plc Brand Finance. REC is also among the
Forbes Global 2000 companies for 2010.
With a strong sanctions pipeline (INR1.6 trillion), loan growth is
likely to be healthy at 22% CAGR over FY11-13. Loan book grew 24% Y-o-
Y and 5% Q-o-Q to INR858 billion.
We have a 'BUY' rating on the stock at CMP of Rs.169 due to REC's
robust long-term business outlook and valuations considering
compounded earnings growth of 25% and average return on equity (RoE)
of 22% over 2011-12.
BUY FIRSTSOURCE SOLUTION (532809)
CMP: 9
Target: 25
Formerly known as ICICI OneSource, incorporated in 2001, Firstsource
Solutions Limited provides a range of business process outsourcing
services.
It offers business process management services to the banking,
financial services and insurance (BFSI); telecommunications and media;
and healthcare industries. Firstsource has a "rightshore" delivery
model with operations in India, U.S., UK and Philippines.
INVESTMENT VIEW:-
Firstsource Recognized with Top Honors at the International Quality
and Productivity Council (IQPC) Conference.
Leadership position in the healthcare industry.
About 40% of the revenue comes from its healthcare vertical catering
mainly to US markets.
The Company works with more than 1000 clients. 7 of the top 10 clients
have grown during the quarter.
The current Employee Strength is 29,664 and further increasing its
strength by 3000.
Depreciation in Rupee from 44 to 52 will increase the profitability of
the company.
The company is expected to sell out one of its subsidiary company
worth Rs 1600cr.
The company has repurchased zero coupon convertible bonds worth `99.7
crore ($19.1 million). The buyback will bring down its outstanding
foreign currency convertible bonds from the current `993 crore ($191
million) to `894 crore ($172 million).Quarter by Quarter it will
repurchase the remaining FCCB bonds and its liability will be zero by
2012.
With P/E of 22 and considering the strong performance both on
revenues and profitability it will be a cash rich company within a
year. Hence, we recommend a strong BUY on FSL at CMP Rs.9 with a
target price of Rs.25 within 9 months.
BUY AREVA T&D (522275)
CMP: 180
Target: 300
India Ltd, the Indian subsidiary of AREVA France SA, engages in the
design and manufacture of equipment, systems, and services for
transmission and distribution of electricity in India.
Eight new factories were built at three locations: Vadodora in
Gujarat, Hosur and Padappai in Tamilnadu.
The comply of Areva T&D India's business at global level by the
Consortium of Alstom-Schneider continues to fortify on the stock.
Although the signs of recovery are emerging Areva T&D India wins
contract for 765 kV Extra High Voltage Substation from Rajasthan Raja
Vidyut Prasaran Nigam Ltd (RRVPNL) worth close to 4000 MINR, the stock
is currently trading at lower valuations that contradict the
fundamental.
On 4th Oct, 2011, Government has enforce 14% Import duty on Power
Generation & Distribution Equipment which will directly benefit to
Areva T&D
Building on the strong operating performance with relatively low
interest and depreciation cost as proportion to sales and lower tax
incidence, we expect company to register CAGR of 13.5% respectively.
We expect the stock perform dominant in earning at CMP Rs. 180 with a
target price of Rs. 300.
BUY HOTEL LEELA (500193)
CMP: 33
Target: 60
India's fifth-biggest luxury hotel chain founded in 1957. Leela Group
is engaged in the business of ready-made garments and luxury hotels
and resorts.
Hotel Leela venture, plans to raise funds through divest as much as
14.95% stake through a fresh issue of shares to unnamed investor(s)
and besides monetize its land bank by selling non-core assets
including a major portion of a commercial office space next to its
hotel in Chennai. It expects to generate about Rs 950 crore from such
sale of land and joint development, which would be used for reducing
its debt. The other decision to sell a stake will bring around Rs 270
crore ($60 million) additionally as cash into the firm, according to
estimates based on current market price. The strategic or financial
investor will pick just a tad less than 15% stake that would trigger
an open offer.
India is one of the fastest growing tourist markets in the world
inherently rooted concept of hospitality in form of "Ätithi Devo
bhava" . At present, this Company operates six hotels at the locations
viz. Mumbai, Bangalore, Goa, Kovalam, Udaipur and Gurgaon comprising
1523 guest rooms and 90 serviced apartments.
Hotel Leela venture has signed a pact with Travancore Enterprises to
transfer its hotel property in Kerala to a special purpose vehicle
(SPV), which would be overtaken by the latter for Rs 500 crore.
Hotel Leela adding 260 rooms in Delhi and 332 rooms in Chennai
properties.
With an ever increasing demand in tourism business synergizing with
growth plans of Leela, we recommend a BUY at current level of Rs.33
with target of Rs.60.
BUY TATA TELESERVICES (532371)
CMP: 14
Target: 30
Tata Teleservices Limited spearheads the Tata Group's presence in the
telecom sector. The Tata Group includes over 90 companies, over
395,000 employees worldwide and more than 3.5 million shareholders.
It launched mobile operations in January 2005 under the brand name
Tata Indicom and today enjoys a pan-India presence through existing
operations in all of India's 22 telecom Circles.
Tata Teleservices Limited also has a significant presence in the GSM
space, through its joint venture with NTT DOCOMO of Japan, and offers
differentiated products and services under the Tata DOCOMO brand name.
Today, Tata Teleservices Ltd, along with Tata Teleservices
(Maharashtra) Ltd, serves over 85 million customers in more than
450,000 towns and villages across the country.
The Company maintained a strong focus on wireless broadband services,
and its VAS and data revenues accounted for 33.3 % of total wireless
revenues in Q2 of FY 11-12.
Going forward we expect the company to maintain quarterly addition of
0.5 million subscriber in FY12, which signifies an addition of 20
million subscribers in a year.
We expect the upgrade to 3G to boost average revenue per user, premium
services may take time to pick up in a price sensitive market such as
India. The overall performance of the company looks encouraging. At
CMP of Rs 14. We have a BUY rating on the stock with the target price
of Rs 30.
BUY POWER GRID CORPORATION OF INDIA (532898)
CMP: 100
Target: 150 in 9 months
Power Grid Corporation of India, the Central Transmission Utility
(CTU) of the country under the Ministry of Power.
Central Transmission Utility - Navaratna PSU - Asset of Rs. 50352 Crs
as on March 31, 2011. World's Leading Power Transmission Utility -
82,354 Ckt.Km line-135 Substations . Technology Leader in EHVAC & HVDC
Transmission.
Carries 51% of Generated Power Across Country.
• 93,050 MVA Transformation Capacity
• 22400 MW (Approx) Interregional Capacity
Telecom NLD with 20733 Km Optical Fiber Network & Internet Service
Provider
Capital expenditure for FY12 is expected to be around Rs 16700 crore.
For the 12th plan, company's capital expenditure is expected to be
around Rs 100,000-120,000 crore in which about 52,000 km of
transmission lines, 70 sub-stations and transmission capacity of
1,36,000 MVA are to be added. The management has guided for
capitalization of Rs 10,000 crore in FY12. Higher capitalization
should aid top line growth. Company has more than 50% of the market
share of the transmission sector and this is expected to increase.
Due to Power Grid's robust long-term business outlook, valuations and
on a strong fundamental basis, we have a 'BUY' rating on the stock at
CMP of Rs 100 with target price of Rs.150 in 9 months.
BUY NEYVELI LIGNITE CORPORATION LIMITED (513683)
CMP: 84
Target: 150 in 9 months
NLC is a government-owned lignite mining Indian company, which is
wholly owned by the Union Government (49%) and administered via coal
ministry. It is recently announced as "Navratna" by Government of
India in April 2011. NLC Neyveli spreads over an area of around 54
square km, comprising Neyveli Township and temporary colonies around
32 blocks. The company runs the biggest open-pit lignite mines in
India and mines around 2.4 Crore tonnes of lignite annually for fuel,
with an installed capacity of 2490 MW of electricity per annum.
NLC now elaborated its project to Rajasthan also in mining as well as
thermal stations, 3 big mines also supplies a huge amount of sweet
water to Chennai. The Tamil Nadu electricity board has a JV with the
Neyveli Lignite Corporation Ltd (NLC) for two projects – A 1000-MW
coal-based project at Tuticorin in southy Tamil Nadu at the cost of Rs.
4000 crore and the Jayamkondam lignite power project at a cost of Rs.
5000 crore for 1000 – MW power plant. The company has also planned to
develop clean coal technologies like extraction of coal bed methane
(CBM) and Underground coal gasification for which several steps have
been taken. The coal priced has raised, due to which Central Govt. has
forced SEB to increase Electricity Power tariff by 20%, which will
directly benefit NLC for ownership of their mines.
Neyveli Lignite is an open-cast mechanized lignite mine. The Company
has 50 % joint venture with Tamil Nadu Electricity Board and its
announced its plans to invest about Rs.36,900 crore on power
generation and mining capacity augmentation by 2017. The plan also
includes development of power projects using other fuel feed. The
company is also planning to invest Rs.40,200 crore to build power
plants in Tamil Nadu, Rajasthan and Uttar Pradesh.
Strong expansion & diversification plans to explore coal-based, wind
and solar power generation projects will add on strength to the
cashbook.
We recommend 'BUY' on the stock at CMP Rs. 84 with a target price of
Rs. 150 in 9 months
DISCLAIMER:- Smart Profit has taken due care and caution in
compilation of data for its reports. The market view and investment
tips expressed on Smart Profit are in no way a guarantee either
express or implied. However, Smart Profit does not guarantee the
accuracy, adequacy or completeness of any information and is not
responsible for any errors or omissions or for the results obtained
from the use of such information. CEO, Directors and staff may have a
position in the recommended stock.
FOR FUTHER DETAILS CONTACT:-
SUMAN JAIN
(CEO)
+919820041126
Email: sumanjain@smartprofit.in
DIPAK MANGELA
(Research Analyst)
+919820260291
Email: dipak.mangela@smartprofit.in
MANSINGH RAI
(Sr. Executive)
+919320907684
Email: mansingh.rai@smartprofit.in
SHAILESH GOWDA
(Sr. Executive)
+919967394114
Email: shailesh.gowda@smartprofit.in
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