MCX – 800 pound Gorilla of Commodities; Invest

February 21, 2012March 16, 2012Leave a comment

Update on Feb 28th – Stunning demand, low allotment, bullish signs

Update: MCX got subscribed 54 times (4.5 till 2nd day), with QIB 49 times (3.68); HNI 150 (1.9) and Retail 24 (6.9). Allotment price has been fixed at 1032.

From a target of 663 crores, the process has generated 36,000 crores !!
I have to admit to readers that the response to the IPO was beyond my expectations. Particularly in HNI category, where everyone seems to have jumped in on the last day. This is bad news – as share allocation will vary from 10% to 0, giving very small absolute gains to investors.
Bullish sign: This late surge reminds me of the frothy periods in 2007 and 2010 when many IPOs were heavily oversubscribed. MCX shares is definitely going to take off on listing. This IPO will be remembered for signalling the start of the 2012 revival of Indian markets.

Update on Feb 24th

Today is the last day to apply for this IPO.
Update: MCX got subscribed 4.5 times till yesterday evening, with QIB 3.68 times; HNI 1.9 times and Retail 6.9 times.
My prediction that this offering will be oversubscribed seems to be true :-)
Strategy: Based on this data from yesterday, there are better chances of getting more shares in the HNI category than Retail. (Risk: this situation can reverse today)
The subscription limit for Retail is 2 lakhs; and >2L is category HNI.
I do not think there are any other issues/ challenges with applying under HNI. While applying, ensure you tick this category in the form. Before you proceed, do check if your Trading account supports HNI.
For Retail, to maximize subscription, bid for 192 shares at cut off (likely 1032) for a total application cost of Rs 1,98,144.
For HNI, work backwards from the total amount you wish to invest, over 2L, and calculate your number of shares applied for.
With high oversubscription, allotment expectations need to be lowered also :-(
Good luck !!

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Report Date: 21st Feb ’12

Offering: Price Range Rs 860 to Rs 1032/-, available from Feb 22-24
Opinion: Very attractive offering, is likely to be oversubscribed, apply at upper end of range

Multi Commodity Exchange of India – MCX – Description and Profile

The MCX is an electronic commodity futures exchange, currently the largest Commodities Trading (CT) platform in India, with an 82% market share. MCX offers more than 40 commodities across segments such as bullion, ferrous /non-ferrous metals, energy, and a number of agri-commodities, for CT on its platform.
The Exchange is the world’s largest exchange in Silver, the second largest in Gold, Copper and Natural Gas and the third largest in Crude Oil futures
MCX has over 2,100 registered members operating over 247,000 terminals across India. MCX is the fifth largest CT exchange globally.
Other Indian exchanges are National Commodities & Derivatives Exchange (NCDEX), National Multi Commodity Exchange (NMCE), Indian Commodity Exchange (ICEX) and ACE Derivatives & Commodities Exchange.

Promoter – Financial Technologies – Snapshot

Financial Technologies – FT – is a software/ exchanges/ ecosystem company promoted by Jignesh Shah. It is listed (Financial Technologies), and Market Cap is 4200 crores.
FT has started, promoted and spun off MCX, and is the largest shareholder. It also supports, maintains and develops the current software based platforms. About FT:

Fig1 – Price 5 year view of MCX (click to enlarge)

The FT stock has been very volatile, rising to over 3000 compared to today’s 910, due to the excessive excitement around MCX, as well as the general market euphoria in FY 2007.
FT stock also fell in Dec 2011 to a low of 518, before recovering. Revenues have been inconsistent also. But current price reflects a P/E of 53 times.

Fig2 – Financials snapshot of FT (click to enlarge)

The PE is high because FT has been a very innovative company, to have created the MCX platform, and taken leadership position in a very knowledge intensive, and high potential industry of CT.
FT has also taken its capabilities to new markets, to set up a network of 10 exchanges and 5 ecosystem ventures, connecting growing economies of Africa, Middle-East, India and SouthEastAsia.

MCX – Financials

Fig3 – Financials snapshot of MCX (click to enlarge)

A quick view of figures 2 & 3 reveals a transfer of business from Promoter FT to spin-off MCX. This is positive for the new entity.

IPO Offering Outline:

The MCX IPO is of 64.27 lakh equity shares (dilution of 12.6% post issue) for subscription during February 22-24, 2012. The exchange could raise Rs 663 crore at the upper end of the price band. (Mkt Cap 5100 crores)
IPO shares sale is by shareholders like FT, State Bank of India, GLG Financials Fund, Alexandra Mauritius, Corporation Bank, ICICI Lombard Gen. Insurance Co and Bank of Baroda.
There is no fresh issue of equity, so MCX will not get any money through this IPO.
CRISIL has assigned a grade 5/5 to the IPO, indicating strong fundamentals.
By current projections, IPO pricing PE ratio is 15 to 18 times of FY12 earnings.

Why does MCX need to do an IPO?

FT, the promoter, holds 31% in MCX, and has to dilute its stake to 26% in MCX to conform to guidelines prescribed by the commodity markets regulator, Forward Markets Commission. FMC is part of Ministry of Consumer Affairs, Government of India.
Other shareholders mentioned above are early investors looking for an exit route.

Was there any legal issue/ court case around MCX or FT?

FT/MCX have faced a series of litigations from SEBI, FMC, etc on aspects like corporate structure, Promoter holding and Trading permits. However these are mostly resolved. They were also necessary as a Commodities Trading platform in India is a critical infrastructure that can affect (and of course improve :-)) lives of crores of farmers/ agro based workers, commodity consumers, etc.
Other litigation pertain to transaction level issues, which are inevitable as trading and discipline are introduced into new sectors, new commodities and new producers and consumers.

Investors should look at the MCX IPO because:

MCX is available to investors at a PE of 15-18 compared to FT PE of 53. This is a massive discount. It is reasonable to expect the high PE of FT to rub off on MCX.
This is among the largest IPO offers in the last year. There has been an improvement in investment climate & sentiment in India from Dec’11. The IPO is testing this new investment climate.
It is believed that Retail as well as Institutional investors are waiting in the sidelines for good investment and entry opportunities.
MCX is a pioneer in a new industry, provides a critical infrastructure and is a good independent business opportunity. It has an innovative, fast growing platform that not just dominates India but also is in global top 3 in several commodity categories.
MCX has good management with global ambitions; firm is cash positive, profitable and growing fast. As a standalone entity it is attractive.

Risks:

FT should stay at arms length away from MCX and allow this firm to develop independently.
Government controlled sector. There are periodic bans on commodity exports. The Indian Govt should allow CT exchanges and market to grow.
Competition can intensify as some other firms have the backing of government, NSE, BSE, PSUs, etc.
My opinion is that Commodities trading should be restricted to Producers, Consumers, Institutions and professional / specialist investors. Retail investors without specialized knowledge may burn their fingers, and give the CT business bad publicity.

Opinion, Outlook and Recommendation

MCX is part of a new agri /commodities revolution in India, where trading can ‘disintermediate’ the commodities supply chain, reduce price inflation, enable better price realization for producers and reduce costs (and risks) in the system. That is if markets develop as expected :-).
MCX is the dominant leader in this emerging business. It has a good management with global ambitions.
The only reason for these discounts to be available to IPO investors is because MCX is testing troubled waters, as market sentiments have been poor in the past and some IPOs have even been cancelled recently. Also public resentment is high as IPOs from 2010/11 are running at discounts to IPO pricing.
This is a very attractive investment opportunity. I expect this IPO to be a big success and get heavily oversubscribed. Also there should be a good appreciation of the share on listing.
Conservative investors should watch subscriptions on 22-23 Feb and take a decision by 24^th.
And check back on this website www.jainmatrix.com for updates :-)
More on the 800 pound gorilla ;-)

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Bajaj Finance, Auto-matic Growth

February 16, 2012March 18, 20143 Comments

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This report was updated on 23rd Jan 2014, find the new report on Link.

Date: 31st Jan 2012
CMP: Rs 723 Mid Cap with Market Cap Rs 2534 crores
Advice: Invest Target: 1750 by 03/13 and 2700 by 03/14

Bajaj Finance is an NBFC on a growth path. It is a leader in auto and consumer durables loans, but customers are spread across Retail 60% and SME/ Corporate 40%. Key strengths are all India reach; strong ‘Bajaj’ brand and rapid entry into new growth segments. Revenue, NII, Net Profit and EPS have grown at 28-41% CAGR over 7 years, and performance did not slow in 2011. Gains can accelerate in a falling interest rate scenario. Invest in this potential multi bagger.

JainMatrix Investments published this report to Subscribers (31/01) and all readers (1/03)

Bajaj Finance – Description and Profile

Bajaj Finance (BF) is a NBFC promoted by Bajaj Auto over 23 years ago. Post a 2008 restructuring, Sanjiv Bajaj is handling the financial services business of Bajaj Auto group, including Bajaj Finance.
BF was set up as a captive financier of Bajaj Auto’s 2 & 3 wheelers. It has now expanded to related areas such as loans for Consumer Durables, Against Property, Small Business, Construction Equipment, Against Securities, Personal Loans, and Insurance Services, see Fig 1.

Fig 1 – Bajaj Finance – Business Segments (click to enlarge)

About 60% of its business is consumer oriented – B2C, while rest is B2B, with a SME focus. The largest Segments are Consumer durable and 2/3 wheelers. BF is diversified across customer segments and geographies; this de-risks operations and inspires a confidence in continued growth.
BF has a network of 4000 distribution partners/ dealers and 225 points of presence. It has 5 million customers across the country.
In 2011, BF added 603 permanent employees, taking total employees to 1657. This is a sign of business confidence and investments in expected growth.
Funds sourcing – CRISIL has rated it at FAAA/Stable for FDs, indicating a high safety with regard to timely payment of interest and principal.
The company has just launched a new loan product specially designed for SMEs, called “flexisaver”. This could be an excellent offering for this segment.
BF has a capital adequacy ratio at 17.5%. This is good. Even so, to fund rapid growth, BF is expected to raise Rs 750 crores in 2013 through a QIP or Private equity route.
Management intends to raise its equity holding to 75% from the current levels. This indicates high ownership, which is good. See Fig2.

Fig 2 – Bajaj Finance – Shareholding Pattern (click)

Another positive is the stake holding from Mutual Funds, FIIs and DIIs.

Industry Note

There are a large number of NBFCs in India (>10,000). These are relatively unregulated companies, unlike Banks that are governed by RBI. In this fragmented market, there is tremendous opportunity to offer Loans and Financial services in a fast growing economy of India, to Individuals (Retail), SME and Corporates.
RBI has projected a 16% growth in loans for Banks; NBFCs should have higher industry growth rates.
Current projections – of fall of interest rate cycle, and lower inflation, is positive for this sector. See article on this Trend.

Unique strengths:

Strong ‘Bajaj’ brand; BF also shares in the growth of Bajaj Auto through the Auto loans service. Also a leader in Consumer Electronics/ durables loans with presence in showrooms of top Retail chains.
With Sanjiv Bajaj at the helm, there is clarity in management succession. He is also a talented and ambitious finance professional and promoter.
A strong distribution network, spread nationally with presence across customer segments, industries and geographies. The BF strategy is to diversify loans with a 30% segment cap. This will provide a de-risked business model.
The group financial services ambitions and new initiatives are going to be routed through BF.

Stock Evaluation, Performance and Returns

Listed long back, BF has shown excellent performance over the last 5-7 years, as seen in the charts.
The Net Profit, Net Interest Income and NII plus Other Income have grown at 28-38% CAGR over 7 years. Growth has really accelerated since 2008. See Fig3.

Fig 3 – Chart with Quarterly Net Income, Profit

Revenues rose over a 7 year period at 41% CAGR; and EPS at 28% CAGR, see Fig 4.
The share has appreciated by 22% CAGR over 7 years. However, post the 2009 fall, the appreciation has been very steep at 112% CAGR.

Fig 4 – Chart with Quarterly Income, EPS

In 3 years, Share Price & dividends have appreciated (Fig 5); P/BV is not too high

Fig 5 – Chart with Price, Dividends, P/BV

Price and PE chart shows that PE is currently at all time lows even though the Price has risen to 700+ levels. It seems the full effect of the Earnings improvement is not yet reflected in the Price, see Fig 6.

Fig 6 – Price and PE Chart

ROCE is 12% and ROE is 19.7%, these are good ratios.
The EPS growth has accelerated since 2008, (Fig 7). This is an excellent chart of the firm’s growth.
Its asset under management stood at Rs 11,919 crore as in Dec’11; as against Rs 6,868 crore a year back (up 74% YoY). The overall credit growth of the company is significant at a time when the entire industry is experiencing a slower credit off-take.

Fig 7 – Price and EPS Chart

Of late, BF has improved asset quality. Its net non-performing asset (NPA) ratio stood at 0.25% in FY12 Q3 as against 0.33% in Q2. Current net NPA is the lowest for the company in the last five years.
PEG is at 0.29 – indicates undervalued status

Peer Benchmarking and Financial Estimates till FY14

BF in this comparison shows better growth characteristics. See Exhibit 8.

BF is also superior due to multiple customer segments – a de-risked business model.
Three-year projections of BF financials indicate a robust ramp up of revenues and profits, Exhibit 9.

Risks:

Interest rates unpredictability. This will affect our growth projections for BF.
Hyper competition. An excessive ramp up/new entrants of NBFCs & Banks can affect BF performance
Promoter driven consolidation. Bajaj group has financial firms like Bajaj Allianz (Insurance), Bajaj Financial Solutions (Wealth mgt) and Bajaj Finserv (Holding Co). Consolidation will change the outlook.
Unpredictable events like a European sovereign default, some new media issue/ bad publicity or any governmental charge sheet, etc. can occur that can mar equity performance for short periods.
Past performance is no indication of future results

Opinion, Outlook and Recommendation

Indian market is underserved for loans and financial services. Quick calculations show BF has 5-7% market share among listed Indian NBFCs (non Bank). While small, this indicates a big market for BF to grow.
In the last three years, BF has embarked on a business trajectory that, if sustained, can make it a top 3 NBFC in 4-6 years. In essence it may move from mid-cap to large-cap, and shareholders could be holding on to a ten bagger.
Invest now and systematically for long-term out-performance.

The projection/ targets for Bajaj Finance are

March 2013 – 1750 – 140% appreciation
March 2014 – 2700 – 270% appreciation

Disclaimer:

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These reports and documents are prepared by JainMatrix Investments Ltd. They are not to be copied, reused or made available to others without prior permission of JainMatrix Investments. Any questions should be directed to the director of JainMatrix Investments at punit.jain@jainmatrix.com . Also see: https://jainmatrix.wordpress.com/disclaimer/

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Petronet LNG – entering a new Orbit

December 22, 2011August 4, 2012Leave a comment

This report has been updated in June 2012 – see Petronet LNG – A Solid Gas Company

Date: 19 December, 2011
CMP: Rs 157, Large Cap with Market Cap Rs 11,883 crores
Advice: Invest, Target: Mar 2013 – 250 and Mar`14 – 301

Petronet LNG is doubling capacities in the next two years. It provides a clean fuel, Liquefied Natural Gas to an energy starved country. Being a PSU JV, business risks are lower. The operational performance and capacity addition projects in the last few years have been excellent. It is a gem of a stock that will continue to give equity investors safe and high returns for the next few years.

Petronet LNG – Description and Profile

Petronet LNG imports, processes and sells LNG in India, and is a JV of GAIL, ONGC, Indian Oil & BPCL.
Turnover in 2011 was Rs 13,197 crores with PAT at 620 crores. PLNG owns and operates a LNG terminal at Dahej, Gujarat that imports 10 mmtpa (Million Metric Tonne Per Annum) of LNG.
LNG is sourced through long term contracts (with 7.5 mmtpa from RasGas-Qatar, 1.44 mmtpa from Exxon Mobil-Australia and 2.5 mmtpa from Gazprom) and also spot cargoes (sourcing 0.6MT in ’12 from Gaz De France) that boost volumes and utilize capacity. These contracts indicate stable supplies.
Imported LNG is regassified and supplied to customers in pipelines – generally operated by GAIL and GSPL. The customer base includes power plants, household and commercial piped gas, fertilizer plants, Industrial boiler fuel, etc. Most sales are through GAIL, IOCL & BPCL
Operational performance was excellent, with the FY11 LNG volumes at 11 mmtpa, a 110% capacity utilization at Dahej.
The global prices of LNG have been rising. It depends on location, and today varies from 4$/mmbtu in USA to 15$/mmbtu in Japan. However, PLNG is protected from these prices, as it ensures back to back buying arrangements with customers. It earns a Rupee denominated marketing margin.

The current projects include:

PLNG is 26% promoter of a JV with Adani Enterprises, called Adani Petronet (Dahej) Port Pvt Ltd. This is a bulk Solid Cargo Port of capacity 12 mmtpa that has started operations this year at Dahej.
Construction has started of an additional LNG jetty at Dahej which will take the terminal capacity from 10 to 15 mmtpa by Sept ’13.
Construction of a new LNG terminal at Kochi, Kerala of 5 mmtpa, which will start by Sept 2012.
Started LNG Supply in Cryogenic road Vehicles – for supply to isolated customers without pipelines
Direct Marketing of LNG in coastal & industrial areas, will develop the market /boost demand

Future Plans

Plan for forward integration into a power plant of 1200 MW capacity at Dahej using LNG fuel.
A plan for building a LNG Terminal on the east coast of India. Location to be decided.
Once the Kochi terminal is ready, PLNG may also invest in a power plant here, using LNG fuel.
By FY16, total capacity could increase to 25 mmtpa, which is 2.5 times current capacity.

Industry Note:

Gas is a cleaner fuel than Coal and Oil. It burns completely. Usage of Gas is better environmentally than other fuels.
Gas consumption in India is low compared to global patterns. PLNG is a pioneer that is creating the infrastructure that will improve gas usage and meet demand.

Fig 1 – Energy consumption – World and India – Click to expand

Today India is energy hungry, and raw fuel deficit, with supply issues:

Coal – while there are enough Coal reserves, Coal India has not been able to meet production targets. Their constraints are environmental clearances, logistic challenges, recent heavy rains in mining areas and labor issues. Other mine owners in India are also not producing enough; so many customers need to import coal. Also Coal is a dirty fuel.
India is a crude oil importer and 70% of demand comes from this route. Oil prices are high.
Nuclear energy has suffered a setback in India due to the Japan disaster. New plant construction is a political hot potato. Hydro and Renewables have a high cost of capacity setup.

Indian gas demand is expected to reach 381 mscmd by 2015, compared with a current supply trajectory of 202.9 mscmd. There is definitely a huge demand for gas.
Domestic supply of Natural gas from Reliance (Krishna Godavari), ONGC and Oil India wells has not scaled up and will not be able to meet above demand.
Other LNG terminals are Hazira (Shell owned, 3.5 mmtpa) and Dabhol (GAIL/NTPC, ready by 2012).
GAIL also procures LNG in long term contracts, and used the available terminal capacity (including PLNG) to import this.

Stock evaluation, performance and returns

PLNG had its IPO in March 2004 priced at Rs 15. It was oversubscribed 4.2 times.
The maiden dividend of Rs 1.3 on FV Rs 10 was paid in 2007. Thereafter dividend has shown a steady to increasing trend (See Figure 2)
At CMP of Rs 157 today, the stock has shown a 42% annualized return over the last 8 years!
Revenues have grown steadily at 37% CAGR, (Fig 3), along with EBITDA – 35% and Profits 29%.

Fig 2 – Petronet LNG stock performance – Click to expand

Fig 3 – Quarterly revenues have grown steadily

Cash flow and EPS are showing a robust growth rate – see Fig 4. A dip in 2010 was temporary, with a substantial recovery in 2011.
With the excellent capacity utilization in 2011, PLNG has partially repaid debt and D/E ratio is 1.0

Fig 4 – Cash Flow and EPS have grown substantially

Price and PE chart shows that PE has fallen recently close to the 5 year mean of 14 times. (Fig 5). PE today is 13.3 and has fallen 43% from 23 levels. During this fall, the price has only fallen 14% from the recent peak of 183 in Aug 2011. The rest of the fall comes from EPS growth, see fig 6.

Fig 5 – Price and PE Graph

Fig 6 – Price and EPS Graph

Price and EPS quarterly graph shows that EPS growth has accelerated in recent quarters. This elevated EPS will stabilize in 2012, and any further gains will come from interest cost reductions. Volume growth will happen in 2013 with additional capacity coming on stream in Kochi and Dahej.
ROCE is between 15 – 25%
PEG is at 0.46 – indicates safety and undervalued status

Financial Projections, with FY14 estimates

Exhibit 7: Financial Projections – (Click to expand)

Risks:

A global recession, perhaps involving a European country debt default, will depress the equity market overall, and PLNG also. But this even if it happens, will be a temporary condition.
There has been a recent spurt in spot LNG price. This was largely due to the March 11 Japan earthquake and nuclear disaster; Japan has started idling their nuclear plants, and turned to LNG in a big way. In India, LNG demand is high, but may drop if prices exceed 18$/ mmbtu. However, spot prices in USA are at <4 $/mmbtu, so this is unlikely. US has low prices as they have started producing LNG from non conventional sources.
Pipeline infrastructure from Dahej to customers is a constraint. However this is being aggressively addressed by GAIL and GSPL. Similarly pipelines to demand centers around Kochi have to be set up to evacuate gas. This being addressed by Kerala Government and GAIL
Currently, LNG charges regasification tariffs are not under the purview of the regulator. Any policy decision to regulate the tariff may affect the valuation of the stock.

Opinion, Outlook and Recommendation

PLNG has an excellent track record of investing in LNG assets and utilizing/ operating them well.
In the last 8 years, all performance metrics of revenues, profits and EPS have improved to a new orbit every time capacity was added. Imminent capacity addition will replay this characteristic.
Demand is huge in India, and as of now, all LNG import for the next 6 months are booked by customers.
My opinion is that Petronet will continue down the path of solid stock performance and dividends over the next decade .
Invest now and systematically for long term outperformance
The projection/ targets for PLNG are
- March 13 target is 250 (a 60% appreciation from current levels)
- March 14 is 301 (a 92% appreciation)
The projections are based on PE expectations of 18 times.

:-)

This report is an update on a Feb 2011 report I had shared, available on Link

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BGR Energy Systems – Time to Re-energize

December 3, 2011August 3, 20122 Comments

Date: December 2, 2011
CMP: Rs 269; Small Cap – Market Cap 1952 crores
Advice: Invest at lower levels. Target – Rs 800 in 24 months.

BGR Energy is a leader in the Power Plant EPC space. However the industry headwinds have pulled down the business performance. BGR shares have fallen sharply to current under priced levels, and may stay around these level for 2 quarters. Thereafter the stock is expected to rise and recover lost ground.

Warning – Extreme volatility – this stock is not for the faint hearted.

BGR Energy – Description and Profile

‘Water water everywhere, but not a drop to drink’. For BGR, the line needs to be – electricity shortages everywhere, but no orders for generation :-)
BGR Energy is primarily a Power Sector focused Engineering- Procurement- Construction (EPC) company. It builds Power plants for Utility companies and commissions and hands over the plant. It is Chennai based, with 2010-11 revenues of 4747 crores; market cap 1894 crores and 2200 employees.
Power Plant work can be in a Turnkey EPC mode, responsible for entire plant, or BoP (Balance of Plant) other than the BTG (Boiler Turbine Generator), or only BTG.
BGR has domain capabilities in power, and the ability to plan, design, procure/ build, execute and commission projects. Thus experienced personnel are the main resource of this firm.
Shareholding pattern is: Promoters – Individual and Corporate: 81.1%, DII 5.1%; Bodies Corporate 1.9%; Individuals – retail plus others 11.9%. Thus Promoters hold significant stake – a good sign.
By nature, the firm is paid in terms of milestones achieved in the project execution, so revenues tend to be lumpy. Also the Orders booked for this firm as a proportion of current revenues indicates the safety and visibility of the current business.

Strategies executed by BGR

BGR has extended its offerings to other verticals like Oil & Gas, Electrical projects (substations), environmental engineering projects and air fin coolers.
In recent years, it has diversified into manufacture of BTG as well as key technology components with partners/ JVs, thus capturing a larger share of the Turnkey project budget. This also gives it an edge in terms of cost and timely execution of projects. It has set up a number of collaborations, subsidiaries and JVs to assemble the Plants and machinery:

With Hitachi, it has Turbine and Boiler JVs. These two firms are setting up manufacturing facilities in Tamil Nadu, near Chennai
Group companies with GEA Energietechnik of Germany give access to Cooling systems technologies and specialized tube cleaning systems
Other group companies – Progen Systems – focuses on Design and manufacture capability for Process equipments. Also Cuddalore Powergen Corp Ltd is setting up a Power Plant.

It can be seen that BGR is over time going to straddle the entire Power Generation lifecycle, from BoP to EPC to BTG/ key components manufacture, to the Plant Operator (Generation) and the Utility play.

Industry Note:

Classification of Indian Industry players

Power Industry is at a high level divided into Generation, Transmission and Distribution. The Public sector dominates the industry, owning 70-80% of current assets. However the government is opening up to the Private sector. In future, 50% of investments are expected to be from Private investments
The key players in the Power Plant EPC market are NTPC, BHEL, L&T, and AIA Engineering. But it is a crowded market. The competition also includes Reliance Infra and Tatas.
Sub-segments are BoP and BTG manufacturers. Chinese manufacturers of BTG have a price advantage in India compared to locals. This anomaly should soon be corrected by the government.
The government has just come out with an order compelling open access, in line with the Electricity Act, 2003. This will allow all consumers of >1 MW freedom to choose the supplier, and only inform their current distributor. This will be a game changer for the Power industry if correctly implemented.

Stock valuation, performance and returns

BGR Energy had its IPO in Dec 2007. In a blockbuster offering, it was oversubscribed 119 times. Hoping to generate 438 crores, they attracted 52,000 crores.
However, from its IPO price of 480, it has now fallen to 269 a fall of 14% per year. See Fig 1.

Fig 1 – Investment and Returns

As compared to share price, we can see that in the last 4 years, sales have grown at an average of 57% CAGR. See Fig 2 – Quarterly Sales and Profits.
Both EBITDA (53%) and Net Profits (69%) are growing rapidly.

Fig 2 – Quarterly Sales and Profits

We can see from EPS and Cash Flow – Fig 3, the unevenness of the business model of BGR. Cash flow is unpredictable and lumpy.
EPS however is growing fast at 57% CAGR. Again this is a good data, but from a low base.

Fig 3 – EPS and Cash Flow

Fig 4 – Gross Debt

Debt is the big issue with BGR. It has increased significantly in the recent past. Gross Debt also stems from two sources – Net working capital and Debtors.
Working capital increased from 103 days (end FY11) to 206 days (end 2QFY12). This could be due to execution delays across the ongoing projects.
Debtors went up from 243 days (end FY11) to 341 days (end 2QFY12). This was due to a sharp rise in Retention Money, which was 1300 crores (end 2QFY12). Of this 900 crores is due to projects under execution and 400 crores against completed projects v/s 1100 crores (end FY11).
Retention Money is generally Bank deposits/guarantees for performance on projects. The completed project Debtors is certainly payment issues faced from some customers, possibly State Electricity Boards that are themselves in financial stress.
BGR expects debt to fall from 2300 crore (see Fig 4) to 2000 crores by the end of FY12 as the retention money is realized. And Debt equity is expected to increase from 1.4 (FY11) to 2.0 (FY12 Estd).
An important ratio for BGR analysis is the Orders booked to Revenues ratio (BTB). This has shown a cyclical nature, and by indications, is on an upswing now.

Fig 5 – Orders Booked and Billings

Financial Projections, with FY14 estimates

The financials and PE of BGR has been projected for the next 3 years. See Exhibit 6.

Exhibit 6 – Key Financials and Projections

The current PE of BGR Energy is 6.7, below the industry average of 9.9. The average PE in the last 4 years has been 17.5. Certainly today BGR is at the lower end of the pricing range.
The Price and PE chart Fig 7 – shows that the successful IPO gave big valuations, but this fell rapidly in the 2008-09 global financial crisis. The view of the EPS chart – Fig 8 shows that EPS continued its rise thereafter, and the share price smartly recovered, only to fall again in this current situation. Certainly the fall in share price is very steep compared to EPS, so the share is today underpriced.

Fig 7 – Price and PE trends

The EPS of BGR is on a growth path, and is expected to stay in the defined Trend line range.

Fig 8 – Price and EPS trend

Risks:

Industry: 3-4 years ago the Electricity sector was the darling of Entrepreneurs and Investors. The yawning gap between demand and supply gave a demand assurance. Investors believed that they will be able to sell power at Merchant rates, and planned for large generation addition. Government too encouraged this with the Electricity Act, 2003 that threw open the sector to Private investors.

Today systemic flaws are appearing in the sector. There is financial stress among Utilities, particularly State Electricity Boards that are facing Tariff inflexibility and Collection issues.
Power Plants in India are facing an issue with fuel linkages and a shortage of Coal/ Natural Gas. This has affected the investment climate in this sector. The projects under execution by BGR may also be affected, and execution/commissioning may be delayed. See Notes on Petronet LNG and Bharat Forge.
Project execution delays due to government clearances like environmental, land acquisition, etc.

Interest rates increases in the Indian economy are certainly impacting the balance Sheet of BGR
BGR: BGR is certainly facing a shortfall in Order Bookings due to this environment. However, as seen in Fig 5 this is reversing, and we expect recovery in the next 6-12 months.
Vertical focus Risk, as revenues are essentially from the Power Gen. vertical. However, this is being addressed by BGR extending its EPC, manufacturing and technology strengths to other verticals.
BGR share has fallen by 67% from 843 in Sept 2010 to today’s 270. This is massive value destruction. It is partly because BGR has also been in the news for all the wrong reasons in the last 12 months:

In Nov10, BGR was in the news for a Finance bribery scam. The company clarified that it has no dealings with LICHF and Money Matters, and cooperated with the authorities.
In Oct 2011, BGR received a notice from the Central Excise Department, for tax evasion of Rs 107 crore. The company is confident that it has not evaded taxes, and will clear these charges.

Opinion, Outlook and Recommendation

India has a surging growth in electricity demand, and there is a 9-13% power deficit today. This will widen in the next few years.
As a leading EPC company, BGR’s fortunes are closely linked to the improvements in the regulatory environment and overall industrial climate of the Indian power sector. In a stable environment, BGR should perform excellently based on current skill sets and manufacturing and execution capacities.
The core undeniable strengths of BGR will take around 2 quarters to emerge in the form of business metrics like Orders booked, billings, profitability and EPS, as the government addresses industry systemic issues. BGR also needs to repair the Balance Sheet and manage the debt levels. A good sign is that Merchant power rates are now on the upswing in India.
FY2011 was an excellent year, and BGR will not be able to show any significant improvements in FY12. However the demand gap will catch up, and FY13 will be a good year for BGR.
BGR is a High Risk, High Gain stock. Share may even fall from current levels. Investors with a risk appetite and a 2-3 year time horizon can accumulate BGR at 220-270 levels over next 6 months.
The 24-month projection (Sept 2013), for BGR is Rs 800, a 310% appreciation from CMP.

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Bharti Airtel – Take the call

November 12, 2011October 16, 2014Leave a comment

Date: November12, 2011
CMP: Rs 396; Large Cap
Advice: Safe long term investment
Target: 18 month – 800

There is an update on this report called Bharti Airtel – This is a year of consolidation (Aug 2012) available for readers.

Bharti Airtel is a large telecom player. The market leading India business is seeing high competition, but going forward the profitability will stabilize and improve. The next growth engines are Indian 3G and the 16 country African acquisition. Invest for the long term in this Indian – going – MNC Blue Chip.

Bharti Airtel – Description and Profile

Bharti Airtel is the market leader in the Indian telecom sector. Incorporated as recently as 1995, it is a global telecom operator ranked #5 today in terms of customers.
Standalone turnover is Rs 38,000 crores (FY’11), and the Market Cap at Rs 1,50,000 crores ranks it #7 in India. Consolidated revenues in Q2FY12 was Rs 17,200 crore (annualized Rs 61,000 crore)
Other than India, Operations are spread over 18+ countries including Bangladesh, Sri Lanka and the African continent. Airtel has an aggregate of 237 million customers as of September 2011.

Businesses are classified as B2C and B2B

B2C operations include Mobile, Telemedia (broadband, IPTV and fixed line), and Digital TV (DTH)
B2B operations are Enterprise services (end to end telecom services) and Passive Infrastructure Services (Telecom towers)
Africa for Airtel is essentially a market for mobile services and Passive Infrastructure Services (Telecom towers)

Fig 1 – The revenue proportions from business segments (click graphic to enlarge)

Strategic Partner – Singapore Telecom is a key Partner and investor in Bharti Airtel.
Equipment and Technology Partners – excellence from specialists

For network and telecom equipment, the partners are Ericsson, Nokia Siemens Networks (NSN), Huawei, Alcatel Lucent, ECI, Tejas Networks and Cisco
IBM is the partner for all business and enterprise IT systems, across geographies
The Call Center expertise is from partners like IBM Daksh, Mphasis, Firstsource, Aegis, Tech Mahindra Teleperformance, and HGSL

Shareholding pattern is: Promoters 45.5%, Foreign Strategic Partner 22.8%; FIIs 17.1%; DII 8.7%; Bodies Corporate 4.1 %; Individuals – retail and Other 1.8%

Industry Snapshot

The total number of Indian subscribers of telecom services– wireless & wire line – is 88.6 crores. The tele-density is 73.97% (on 30/06/11), an increase of 4.69% over the previous quarter
Gross Revenue during the quarter was 46,891 crores, an increase of 3.03% over the previous quarter
The policy environment for Telecom is driven by TRAI, DoT and the Ministry of Communication & IT
There are 15 players in the telecom operator space, including PSUs. Here is a comparison of the larger players

Company	Subscribers millions	ARPU Rs/ month	MoU minutes	ARPM Rs/minute	Market Share %	3G licenses won	3G Bid Rs Billion
Bharti Airtel	172.51	192	454	0.42	19.91	13 circles	122.95
RCom	144.51	105.8	240	0.44	16.77	13 circles	85.85
Idea	95.11	165.2	413	0.40	11.12	11 circles	57.68
Industry	885.99	93.44	329		100	7 private firms have won 71 circles among them	506

Above telecom data is from April and June 2011 quarters, from TRAI and public reports

Key challenges for Bharti Airtel and strategies being followed:

Focus on network improvements, customer support and new service launches, so Airtel is seen as a stable, technically superior and quality service provider

2. The draft National Telecom Policy 2011 attempts to ease conditions for M&A in the telecom sector, promote the ‘One Nation-One License’, and possibly infrastructure status for the industry

These policies are seen as boosts for the sector, particularly the larger players like Airtel
It will hasten the end of the intense competition phase and, through alliances and M&A, lower the number of players to 6-8. This can permit profitable telecom operations for most players.

3. Airtel won a number of 3G licenses in important circles, but at a high price

3G is the next big thing for Indian telecom players. Driven by a growth in smartphone sales, enabled by the telecom operators, a whole new ecosystem of content, services and functionality is being set up. This includes internet browsing, entertainment services, application stores, video calling, enterprise services, m-Heath, m-Education, m-Commerce, e-governance, etc. These will drive usage, 3G penetration, subscriptions and ARPU, and help monetize the 3G license assets.

4. Regulatory uncertainties on issues like Excess spectrum charge, license renewal fees, formation of 3G roaming alliances

By working with the industry bodies such as COAI, Bharti Airtel is defending its position on these issues. Many of these new conditions impose additional costs on the Telecom operators, which are unplanned for.

5. Airtel acquired the African telecom assets of Zain in 2010, for USD $9 billion in cash.

This purchase is of a high growth franchise. As per Airtel estimates, Africa will eventually overtake India and China as a telecom market – as population of Africa will peak at 1.8 – 2.0 billion. By leveraging the balance sheet and sound financial engineering, Airtel was able to service this loan for only $200m per year in 2010.

6. Mobile Number Portability was perceived as a threat for Airtel. However, the first year of experience of this consumer facility shows that it has not materially reduced market shares.

Stock valuation, performance and returns

CMP is 395. In the last 7 years, the market price has appreciated at 21% per annum CAGR. It is below the all time high of 565 in Oct 2007. See Fig 3.
However, prices are on an uptrend in the last year or so. PE at 21.5 is still well below the 7 year range of 27.5

EPS growth in the last 7 years has been 35% CAGR. Even so, we can see the trends – EPS had a rapid expansion from 2005 to 2009, but has fallen off in the last 2 years.

The Good News? Expectations now are that the period of falling consumer prices in telecom are over. The hyper competition phase has played out, and EPS will stabilize and start their climb once again for Airtel.

Fig 4 – Price and EPS Trends

Sales have grown steadily at 23.4% over the past 7 years. Net profits have also appreciated at 21.3%. We can see however, that profits which were rising rapidly till 2009, have tapered down recently. This is due to industry hyper competition.

Fig 5 – Sales and Profits Trends (click to enlarge)

Telecom is a very resource intensive business. Airtel has managed this well, and has grown the Cash generated from operations at 28% CAGR over the last 7 years. EPS growth has been higher at 35%.

Fig 6 – Cash Flow and EPS Trends

RoCE is at 16% – healthy statistic; RoNW is 17.6%; Price/Book is 3.42
Debt / Equity is 0.7 for the consolidated entity. This is a comfortable level for a telecom player.
PEG is at 0.61 – indicates it is underpriced, and a good investment opportunity, especially given it’s Blue Chip status

Risks:

Poor regulatory conditions in India. The telecom sector continues to be buffeted by ad-hoc ism in policy matters, and overlapping jurisdictions of TRAI, DoT and the Ministry. The revenue short government may exert additional pressure to raise receipts, sacrificing industry growth.
The current policy directive is to allow M&As and reduce competition intensity in the sector. If this is not implemented, or even reversed in some way, the hyper competition environment may continue to haunt this sector, affecting profitability and margins.
The interest rate has risen in India. This increases debt servicing costs. Expectations are that rates have peaked in India, and should fall going forward.
Revenue and capital leakage into unrelated diversifications of Bharti group like Retail, Insurance, foods, etc. However this risk is fading as Bharti Airtel corporate governance standards are high, and investments are being made independently by the holding company, Bharti Enterprises.

Opinion, Outlook and Recommendation

Airtel essentially has two large businesses, India (mature asset) and Africa (growth).

In India, the major investments have been made; the revenues are large and growing, and the high competition is expected to ease up. Over the next few quarters, all metrics will point up – Cash flow, operating margins and net profits, in addition to revenues which has held up well.
In Africa, we will see Airtel slowly establish itself, move from #3, 4 or 5 in the market to #1 or 2. In country after country, it is engaging with the government, trade and consumers, to roll out its ‘minutes factory’, ‘network infrastructure sharing’ and ‘partner with the best vendors’ approach. The 2013 target for Airtel Africa is $5 billion of revenues.

The recent bottom of the Airtel share was Rs 255 in June 2010. The share has been moving up thereafter and has appreciated 55% to today’s 396. The stock will continue its upward march, as it continues to deliver on stated corporate goals.
At current levels, Airtel share is above 20, 50 and 200 DMA levels. See Fig 7. This indicates the share is likely to continue to move up.

Fig 7 – Airtel stock is above 20, 50 and 200 DMAs

I recommended the Airtel stock in my report in December 2010. See Link.
I reiterate my recommendation to Buy. My 18 month target for this stock is 800.

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Mundra Port: Infra play at good valuations

September 4, 2011February 19, 20143 Comments

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There is an update to this report. Read this latest Sept 2012 update called ‘Adani Port – The Great Australian Adventure’. Click this LINK

Introduction

Mundra Port and SEZ (MPSEZ) is a Gujarat based infrastructure and exports play. Promoted by Adani Group, it includes the following businesses –
India’s largest private port, with volumes having recently crossed 50 MT (FY11) and 15.08 MT in Q1 FY12
An SEZ area adjacent to the port, which is being developed on an area exceeding 100 sq km
The port has got ranked 5^th in India among all ports, major, public and private. The port deals in a number of container and bulk products.

Fig 1 – Mundra Port – Cargo details

Fig 1 – Business Segments in Q1 2011. MPSEZ handles a broad range of products. A broad-based customer group means lower business risks.

Connectivity and logistical facilities extend the Port, berthing and storage to Roads, Rail connection, Air strip and Pipelines based evacuation
Port has also recently added specialized car exporting facility
The SEZ facility enjoys a series of Indirect and Direct Tax benefits designed to encourage industrialization by the Gujarat Government
Power supply will be by a plant being set up by Adani group, that will meet all the SEZ needs
The SEZ area is organized into Industrial clusters that include – Engineering, Auto & Auto Ancillaries, Textile & Apparel, Chemicals & Pharma, Plastic Processing, Stone & Minerals, Food & Agro, Global Trading Hub, Timber & Furniture and Metals and minerals

Current Business Outlook

The port has rapidly increased business throughput over the last 5 years, venturing into new categories of goods, and working closely with manufacturers and exporters to improve infrastructure
Capacity building is ongoing including ICDs under development

Fig 2 – Mundra Port – Quarterly Sales and Net Profits

Fig 2 – Mundra has shown steady revenue and profit growth.

Sales have grown by 32% over the last 5 years
Profits have grown an astonishing 128% CAGR over this period
Major competition to MPSEZ is from Kandla, JNPT and Pipavav on the Western shores. Mundra is able to provide port access to North India based industry. Additionally

Kandla and JNPT have not invested sufficiently in infrastructure due to government constraints.
Pipavav is at an early stage of development. Also it is in South Gujarat and logistically more remote.

Mundra Port in Gujarat Map

Additional Developments include:

MPSEZ is also developing Dahej Port and Mormugao Port in terms of terminal creation or port operator.
Acquisition of Australia Queensland based Abbot Point Coal Terminal (APCT). The coal terminal, has capacity of 50 MT a year, will facilitate the transport of coal from Australian mines to India.

Overview of Share IPO and Stock performance

The IPO in Nov 2007 was amazingly successful. It was oversubscribed 115 times, and eventually provided huge listing gains. However it was aggressively priced.
Business performance over the last 4 years has justified investor confidence in this stock

Fig 3 – Mundra Port Valuations and stock performance

Fig 3 – IPO investors have received a 12% CAGR return over the four years since listing

Debt-equity is 0.94 as of Mar’11 (down from 1.7 at IPO time). This is good, for an infra company.
Healthy return Ratios. Return on Capital employed – ROCE is 15.4%; Return on Equity – ROE is 23.4%
PEG is in the range of 0.84, indicating indicates safety and undervalued status

Fig 4 – Mundra Port – EPS and Cash Flow

For an infrastructure company, cash is critical. MPSEZ comes out excellent on this count as it has improved Cash flow from operations and EPS (Adjusted for stock split) rapidly in recent years

Fig 5 – Mundra Port – Price and PE chart

Fig 5 – PE has fallen to attractive levels, and combined with robust business performance gives us a very good entry point for long term investments

Fig 6 – Mundra Port – Price and EPS chart

The chart – Fig 6 plots the adjusted market price against the EPS over a 4-year period.
EPS shows us a steady quarterly increase indicating stable business improvement

Projections and Investment Advice

EPS may slow a little to 40-50% growth range over the next 3 years as competition intensifies and an interest rate driven domestic slowdown takes shape.
Even this is very high. Also, MPSEZ is well placed to capture market share from the increase in Indian exports (oil, containers, manufactured goods and minerals) as well as imports (Coal, oil, commodities).
SEZ revenues are lumpy, driven by sale of land to industries. However the infrastructure provided and industrialization will drive this business.
The recent fall in prices has not affected MPSEZ, and it is expected to ride out this slowdown
As long as it stays over 150, MPSEZ share price is in positive territory. Invest

Risks

Adani group is a complex group of interconnected firms with cross holdings in group companies like Adani Power, the holding company Adani Group, Adani Enterprises Ltd. and MPSEZ.
Recent shareholding reports for MPSEZ indicate the Promoter group has 77%, Institutional is 15% and Public Retail has 7%. Thus unless the Promoters sell more holding soon, it is possible that the promoters may try to buy-back from others and de-list this firm.
Intensifying competition. It is possible that Indian government may finally able to grow capacities at Kandla and JNPT (they have both been running close to 100%), overcoming the current lethargy.
Pipavav Port is owned by A.P. Moller-Maersk Group, is one of the largest container terminal operators in the world. Over the next few years, APM Terminals will transfer a lot of India business from other ports to Pipavav, and also build good infrastructure here.
Recent rumours against Adani Group were that it has powerful political linkages, and interests in illegal mining in Karnataka/ Andhra Pradesh. These rumors affected investor sentiment in Adani Industries. This could also affect MPSEZ in the future. However MPSEZ is a different business, and the possibilities of this are remote.

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A Titan for the long term

June 18, 2011June 25, 2014Leave a comment

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There is an update of this report dated Nov2012, Titan – The Jewel in the Crown

Titan Industries is a power brand and the largest specialty retail chain in India. It is translating the success in watches into new categories by adding one every 5-7 years, and now also straddles jewellery, eye wear and precision components. Titan is at a very early stage of revenue and profit growth. Invest.

Titan Industries – Description and Profile

Titan Industries is a Tata group company selling watches, jewellery, eye wear and precision components. Titan has built excellent brands that drive sales in these consumer categories.
They have also set up specialty retail chains to display these products and improve the customer experience. This chain is the largest specialty retail chain in India.
Started in 1984 with a joint venture between the Tatas and the Tamil Nadu Industrial Development Corporation for watches, it expanded in 1995 into jewellery and in 2007 into eye wear.
Today the turnover is 6050 crores, PAT 430 cr and sales has grown 35% CAGR over the last 6 years.
Here is a graphic of Titan’s products, distribution, brands and future growth drivers

Fig 1 – A snapshot of Titan’s products, brands, distribution and future growth (click to enlarge)

The demand for Titan products depends on consumer disposable incomes, and straddle the mid to high end segments

In watches, the owned brands are Fastrack, Xylys, Titan and Sonata. High end licensed watch brands include Tommy Hilfiger, fcuk and Hugo Boss.

In eye wear, the three in-house brands are Titan, Eye+ and Dash, while the international and luxury brands include Gucci, D&G, Armani, BOSS, Esprit, Daniel Swarowski and Mont Blanc

There has been a steady growth in consumer demand except for 2008-09. Recovery is complete, and this trend is expected to continue and even accelerate.
Watch parts which were sourced from China, are now being transitioned to production in house in India. This is due to increase in prices from Chinese parts. Even though Titan’s investments requirements and cost of production increase, this gives Titan greater control over the supply chain and quality control.
Titan operates 85–90% of its stores through the franchisee model – this allows flexibility in scale and lower cost expansion

Stock evaluation, performance and returns

The Price and Dividend history of Titan is detailed below:

Price and Dividend History

Fig 2 – Price and Annual dividend history

(Dividend in Rs/share, FV Rs 1) Click to enlarge graphic

Fig 3 – Quarterly revenues and Profits have grown steadily over the last 8 years

EPS and Cash Flow

Fig 4 – Cash Flow and EPS are up substantially

Sales are growing at 35% CAGR over the last 6 years.
Over the same period, EPS (on a steady equity base) has grown 57%. This is remarkable profitability.
However, cash from operating activities is up only 19.8% – this is because Titan is investing in building the retail chain as well as in the manufacturing facilities.
Putting these together, Titan appears to be in a virtuous cycle of investment – growth – profits that (barring any India/ global slowdown) – is a multi year business acceleration.

Price and PE

Fig 5 – Price and PE Graph

Price and EPS

Fig 6 – Price and EPS Graph

Even with the rapid appreciation of Titan’s share price in the last 2 years, the PE is around 46. This is historically in the medium/ average range for Titan over the last 7-8 years. Investors seem to have always expected more from Titan :-)
EPS has increased steadily, barring the 2008-09 period where overall the economy had slowed. Post this period, the earnings have rebounded and caught up with the previous growth path
ROCE has been at an amazing 42-48% in the last 2 years.
PEG is at 0.81 – indicates safety and still undervalued status
Very low debt equity ratio, and good cash position indicates strength in the balance sheet.
The company has recently approved a share split to 1 Re face value (from 10Rs), and a bonus issue of 1 for 1 held. This will reduce market price by 1/20 and boost retail participation (and shareholder returns in the short run).

Risks:

Titan is seen as a proxy for gold. In recent times, Titan has been enjoying appreciation on the inventory due to gold appreciating. A fall in price of gold can be a risk to the gold inventory and the jewellery demand at Titan.
Competition in India is intensifying with a host of jewellery and eye wear brands challenging Titan.
Precision components is a commodity type business, needing volumes, compared to watches, jewellery and eye-care, which are branding, manufacturing and retailing oriented. This business may never reach profitability levels compared to the other three.
So what next after eye care? In the next 2-4 years Titan needs to enter into a new business that falls in it’s sweet spot of takeover of unorganized sector – precision manufacturing – consumer retail where it’s strong brand can be deployed successfully. If it does not, business in India can taper off in the next 7-10 years.

Opinion, Outlook and Recommendation

In India the ‘demographic dividend’ and GDP growth have pulled the per capita income to over Rs 54,000. Experts expect consumption to accelerate now, as consumers have more discretionary spending power, (and spend less of total income on food). Titan’s watch, jewellery and eye care categories will ride this consumption wave.
In Jewellery and eye care, Titan is addressing a relatively unorganized sector, and by leveraging it’s national brand and distribution network, building credibility and loyal consumers. This is a sustainable model, and Titan enjoys a first mover advantage.
Exports too are a big driver of future growth, as the Indian success story is replicated in 26+ countries. In these business categories, margins can be much higher in developed countries, so there is high potential here.
Precision components manufacture, while being a lower margin business, has a very large global potential. Anecdotal evidence from Titan’s procurement for watch parts suggests that Indian parts are gaining in competitiveness compared to Chinese equivalents.
Titan has built capabilities in branding, design and manufacturing that are strong core competencies.
In the last 2 years, share price has appreciated 4 times. For new investors, it may appear to be a case of, closing the stable door after the horse has bolted :-). However, this stock is expected to continue to perform strongly for several years to come.
Invest now and systematically for long term outperformance

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Update on Feb 28th – Stunning demand, low allotment, bullish signs

Update on Feb 24th

Report Date: 21st Feb ’12

Multi Commodity Exchange of India – MCX – Description and Profile

Promoter – Financial Technologies – Snapshot

MCX – Financials

IPO Offering Outline:

Why does MCX need to do an IPO?

Was there any legal issue/ court case around MCX or FT?

Investors should look at the MCX IPO because:

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

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This report was updated on 23rd Jan 2014, find the new report on Link.

Bajaj Finance – Description and Profile

Industry Note

Unique strengths:

Stock Evaluation, Performance and Returns

Peer Benchmarking and Financial Estimates till FY14

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

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Petronet LNG – Description and Profile

The current projects include:

Industry Note:

Stock evaluation, performance and returns

Financial Projections, with FY14 estimates

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

BGR Energy – Description and Profile

Industry Note:

Stock valuation, performance and returns

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

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There is an update on this report called Bharti Airtel – This is a year of consolidation (Aug 2012) available for readers.

Bharti Airtel – Description and Profile

Industry Snapshot

Stock valuation, performance and returns

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

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Introduction

Current Business Outlook

Overview of Share IPO and Stock performance

Projections and Investment Advice

Risks

Disclaimer:

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There is an update of this report dated Nov2012, Titan – The Jewel in the Crown

Titan Industries – Description and Profile

Stock evaluation, performance and returns

Risks:

Opinion, Outlook and Recommendation

Disclaimer:

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