Category: Daily Analysis

The Roads Sector – Is it a Revival?

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Thought for the Day:

Roads a very important sector for modern India. But India’s road sector had been stagnating since 2012, hit by both an economic slowdown and private sector disinterest. The famed PPP model had yielded poor results. A number of projects were delayed or in financial distress.

Cut to 2015, and the story may have changed. Of about 77 road projects that were languishing with the roads ministry, 34 have been shut down and rebid; 18 have been revived using govt. money, and the remaining 25 are under revival discussions. A number of decisions were taken:

  1. The govt. will award 10,000 kms of roads for construction this year by Mar 2016. That’s a far cry from 2013 when the central government could only award 1,300 kms.
  2. The govt. has also gone back to the basics and instead of a complex Public Private Partner-ship (PPP) model, has reverted to the simpler EPC model. Here the construction of the road is executed by the private firm, but funded by the govt.
  3. The govt is infusing Rs 4,000 crore to complete projects stalled due to lack of funds. In Feb this year, the govt. had decided to invest Rs 80,000 cr. in the road sector in the annual budget.
  4. The govt. will allow private developers to exit projects two years after tolling starts. After exiting, they can also apply for 80 public private partnership (PPP) projects.
Roads (JainMatrix Investments)

Roads (JainMatrix Investments)

These decisions are expected to rapidly stimulate this sector. Road transport and highways minister Nitin Gadkari is upbeat about the “transformation” of India’s road network. The NHAI too is undergoing reforms, for faster approvals and project revivals.

Watch out for shares of infrastructure companies into the roads and construction space like KNR Constructions, RPP Infra, Sadbhav Engineering, IRB Infrastructure, Ashoka Buildcon, Jaypee Infra, IL&FS Transportation, GMR Infra, Lanco Infra, IVRCL, Ashoka Buildcon, etc. which are likely to benefit due to these new initiatives.

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The Slide of Oil – Positive for the Economy

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Thought for the Day:

India has been an oil importing country for many years, and imports over 70% of the crude requirement. The ray of sunshine this year has been the fall in oil crude prices globally.

Oil prices (oil-price.net), jainmatrix investments

Oil prices (oil-price.net)

This 60% fall in import costs (see Fig above) will translate into over $70 billion ( Rs 4,55,000 crore) of forex savings this year.

  • These savings are spread across consumers (lower prices at the pump), businesses (lower fuel, raw material and transportation costs) and government (lower deficits, higher tax incomes through raised rates).
  • Domestic inflation too has fallen.
  • A fall in crude oil prices is particularly beneficial for sectors that use crude and crude derivatives as a raw material. Stocks of sectors such as paint, tyre, FMCG, airlines and lubricants will remain in focus.

There is of course a flip side to this fall. The Indian Oil and Gas industry suffers some disruptions. Within the industry, the Exploration and Production (E&P) firms are badly hurt as their production revenues were pegged to global crude prices. Some taxes and commissions for retailers based on percentage of price have fallen. 

Embed from Getty Images

But overall India gains tremendously from crude fall. These low crude prices may also continue as the outlook for crude oil prices still looks subdued. The OPEC cartel looks weak. Crude oil production is high. And big growth in renewable and green power sources like solar and wind industries may replace oil demand over time.

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PSUs are HOT investments

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The government sector and PSUs were, till recently, not very good investments. The reasons were many. There was an uncertainty about their future.

Now things have changed:

  • The new Central government (well not new, now about 18 months in power) has undertaken a number of structural reforms that will slowly but surely improve the economy.
  • Government departments, lead by motivated ministers, are gathering speed in terms of clearer objectives, faster decisions and accountability. Coordination issues among ministries are being sorted out.
  • There are plans emerging for PSUs disinvestment, which will accelerate this process.
  • The slogan is ‘less government, more governance’. They appear to be executing on this.

In the light of this, JainMatrix Investments has prepared a report on a mid sized PSU. Based on our research, the PSU firm has a projected 80% gain in 2 years.

This is however premium content, so we invite you to subscribe to our Investment service to receive this and other such reports.

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Apple Inc. and the Happiest Moment

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  • Apple Inc., USA
  • Feb 12, 2015 
  • CMP: $125
  • Global #1 Cap – Mkt Cap $ 727 billion 

Dear Investor, Almost 2 years ago, I wrote an investment note on Apple Inc. Here it is.

There’s nothing wrong with Apple Inc.

The key message was that Apple is innovative, cash rich, will reward shareholders, and even after Steve Jobs, it will do well.

Today, we have just seen the Q4/2014 results from Apple, and its been a record quarter.

See Article.

The launches of iPhone 6 and 6 plus were very successful. Apple Pay and Apple Watch are the new products that have good potential. And every analyst who tracks Apple is now positive about the stock and rates it a BUY.

So lets see. In about 2 years, the share has appreciated from $63.7 (my call was at $446, and then there was a 7 for 1 stock split) to $124.9, a gain of 96%. And now every analyst calls it a Buy?

It is at such moments that an equity analyst feels the happiest. The day when after a very good appreciation in a recommended stock, it gets rediscovered and rated highly by the community.

Cheers to such moments.

The most profitable moment is still to come.

Regards,

Punit Jain. Founder, JainMatrix Investments

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Disclaimer: 

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com Punit Jain does not have any shareholding in Apple Inc., and JM and its promoters/ employees have no financial interest in Apple Inc., and no known material conflict of interest as on date of publication of this report. He does own an old iPad2.

Top performing sectors in 2015 – An Interview

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Excerpts from my recent interview with IndiaNotes: 

Punit Jain, JainMatrix Investments

Punit Jain

Q: What is your view on the Indian equity markets? Is the correction due or we could see a continuation in the bull run? Please provide your long term perspective on the markets?

Punit Jain: In December we expect a mild correction where the market takes a breather. The Sensex move from 20,300 on 7th Feb 2014 to 28,800 on 28th Nov has been a 42% gain over 9 months almost without a break. All big gains are interspersed with small corrections (and the converse). Plus there is a year end (book your gains) angle for FIIs. But the market will revive in Jan 2015. The long term perspective is a 15-20% annual gain in markets over the next 3 years. This adds up to a 43,000 Sensex by Dec 2017. 

Q: Top 5 stocks you would place your bets on in 2015? Why? Which sectors do you think would be the top performers in 2015? 

Punit Jain: I cannot be stock specific in my commentary, but the sector leadership and the theme for our portfolios is IT Services, Auto and Auto Ancilliary, Banks, NBFCs, Housing and rural/ semi urban consumption. All the top bets would be from these identified sectors. 

Q: What is your take on Kotak Mahindra and ING Vysya Bank merger? Could we see more mergers in the banking sector?         

Punit Jain: Kotak Mahindra Bank was at one stroke able to almost double its branch strength and grow its retail presence. It is thus set to be a much bigger and stronger Bank. All the larger private banks are looking at aggressive growth, both organic and inorganic. There may certainly be more such mergers in the future. It is just a matter of a bank asset being available on the market at the right valuations.

Embed from Getty Images

Q: With global crude oil prices plummeting, is it the right time to invest in Oil companies?

Punit Jain: Its a mixed bag for the Oil & Gas sector.

  • The oil marketing companies will see falling prices at the pump, and subsidies have been withdrawn for many of the petro products. This will help them strengthen financially and their valuations should improve. (Positive)
  • The E&P Oil firms will suffer as the oil produced was benchmarked against international crude prices. Their revenues will be hit. (Negative).
  • The oil refiners will enjoy good margins and the oil prices do not affect them, they pass on any oil price changes. However the demand is falling abroad, so exports volumes may be affected. Domestic demand will be good. (Neutral to Positive).

Q: What is your take on SEBI norms for independent research analysts?  

Punit Jain: Its a very good initiative by SEBI. Speakers on national TV or newspapers will have to be careful about their words and ensure they comply with the norms. I think we will see the emergence of a better quality of research reports and communication. Its better for Investors.

This interview has been published simultaneously on IndiaNotes, at LINK.

Balkrishna Industries – Nov 2014

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Dear Investor,

I’m quite proud of my Sept 2013 report on Balkrishna Industries. (link) We found this interesting Small Cap stock early. The share price was Rs 238. It had all the ingredients we look for in our investment research.

Small cap. Undervalued. Unknown. In the right sector. Good management.

We made this report public on this very website.

On 12 Nov 2014, this share touched Rs 855.

And we were staring at a 259% gain in a mere 14 months.

 

As usual, Mr Market threw in a googly.

On 13 Nov, Balkrishna came out with its Q2FY15 results. Next day, the share plunged by 16%. One day later it dropped further. A total of 29% wiped out in 2 days.

Investors are nervous about this firm. Perhaps even panicking. Naturally. Who likes to lose 30% of one’s investment in 3 days? So should one exit quickly? Or buy more of Balkrishna? Or just do nothing?

Subscribers of JainMatrix Investments aren’t worried. They’ve just got our follow up report on Balkrishna Industries. They know what to do.

 

JainMatrix Investments is today one of India’s best Equity advisory Investment Services in terms of quality of research, track record and reasonable costs.

JainMatrix Investments is the essential service for the Indian equity investor. 

 

Subscribe now to navigate the profitable but tricky Indian equity markets.

But hurry. There are just a few more subscriptions available. Join this select group of informed investors. 

 

This is an opportunity for you.

Punit Jain

Founder, JainMatrix Investments

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JainMatrix Investments – September Updates

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Investment Notes

12th Sept 2014

Dear Investor,

The investment climate has certainly improved this quarter. At JainMatrix Investments, we can feel the changes, and our reports reflect this excitement:
  1. The IPO season has started; see our update on Snowman Logistics, An Update – Snowman in the Summer Sun?
  2. We have just created a research report on an exciting Mid Cap Consumer products firm. However this is subscriber restricted.
  3. We finally share our blockbuster report on Motherson Sumi Systems. If you had followed our advice on this, you would have gained 102% in 7 month. Here it is Motherson Sumi – Global Auto Ancillary Growth – LINK
  4. Do you play cards? Why is it that great investors are also good card player? See my thoughts
  5. Some excitement from the PM’s speech on I’day overflowed into the Mid Cap review – LINK
  6. We launched an Investor Rewards fortnight, with 7 quality reports, previously restricted to Subscribers – LINK
  7. We updated our Track Record on Aug 8th, to find our portfolios are doing very well, against their objectives –Report
  8. We shared our thoughts on The Real Estate Industry – LINK
  9. Everyone spends a lot of energy on a BUY decision, but when should you Sell your equity portfolio? See Article
Here’s hoping you learn a little bit, enjoy some more and profit a lot !!
Happy investing
Punit Jain

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Disclosures and Disclaimer

  • This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation.
  • JM has been publishing equity research reports since Nov 2012.
  • This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.
  • The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same.
  • Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein.
  • Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor.
  • Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com