CRUDE THE JOURNEY FROM 147 to 106 .
For so many years have been focussed on tracking equities and considering technicals do work sharply on them but in the last few months due to the effect of crude , gold , global cues setting up the sentiment have been tracking crude and giving my views.
Although i may not understand the fundamentals behind movement of crude prices ( are there any ;) ) but what i have observed is the technical analysis we have been using on equity have been evenly accurate on Crude too.
Some of the big moves , tops , bottoms we picked up on crude which also was a base for some of our stock and index recommendations on indian equities.
Top suggested at 146 . Saw a top around 145.8 . Rising wedge pattern !!!
Again top was suggested around 149 we saw a high of 147 odd.
Within days of our view of a highly bearish pattern being made on crude and its about time it falls and below 134-136 could lead to big collapse , crude hit 120 non stop.
Later we saw a pullback and then break of the weekly lows to test our 112-110 tgt.
Again pullback to 122 ( zone was said as resistance ) and then almost achieving our tgt of 105 .
All the charts are in order of the views !!! Final chart has recent levels mentioned.
Good recap showing how useful technical analysis can be !!
For so many years have been focussed on tracking equities and considering technicals do work sharply on them but in the last few months due to the effect of crude , gold , global cues setting up the sentiment have been tracking crude and giving my views.
Although i may not understand the fundamentals behind movement of crude prices ( are there any ;) ) but what i have observed is the technical analysis we have been using on equity have been evenly accurate on Crude too.
Some of the big moves , tops , bottoms we picked up on crude which also was a base for some of our stock and index recommendations on indian equities.
Top suggested at 146 . Saw a top around 145.8 . Rising wedge pattern !!!
Again top was suggested around 149 we saw a high of 147 odd.
Within days of our view of a highly bearish pattern being made on crude and its about time it falls and below 134-136 could lead to big collapse , crude hit 120 non stop.
Later we saw a pullback and then break of the weekly lows to test our 112-110 tgt.
Again pullback to 122 ( zone was said as resistance ) and then almost achieving our tgt of 105 .
All the charts are in order of the views !!! Final chart has recent levels mentioned.
Good recap showing how useful technical analysis can be !!
STOCK UPDATE
Tata Motors
Cluster: Apple Green
Recommendation: Hold
Price target: Rs545
Current market price: Rs430
Terms of rights issues announced
Key points
*
Tata Motors has announced its sales numbers for August 2008 and the same continue to be weak. The total sales of the company declined by 3% to 43,576 units in the month from 45,132 units in August 2007.
*
The sales of medium and heavy commercial vehicles (M&HCVs) declined by 12.7% to 10,143 units whereas those of passenger vehicles dropped by 6% to 15,573 units in the month.
*
In August, the new Indica Vista was launched which should help revive the passenger vehicle sales of the company.
*
The future of Singur plant remains dark with the agitation over land still continuing and the work being closed for the fifth day.
*
The company has announced the terms of the rights issues that are expected to lead to a 33% dilution in the company’s equity. The dilution is in line with our expectations. Considering the ratio and the current market price, the company would be able to raise Rs4,143 crore from the issues.
*
However, due to weakness in the sales numbers and very little chance of any revival in the immediate term, we maintain our cautious view on the company. At the current levels, the stock trades at 7.1x its FY2010E consolidated earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.4x. We maintain our Hold recommendation on the stock with a price target of Rs545.
Satyam Computer Services
Cluster: Apple Green
Recommendation: Buy
Price target: Rs521
Current market price: Rs433
Annual report review
Key points
*
Satyam’s hedge position increased to US$1,133 million in FY2008 from US$452.6 million in FY2007. At the end of Q1FY2009, its hedge position has reduced to US$675 million, which is lowest among its peers. As the rupee depreciated around 7% in Q1FY2009, Satyam reported lower foreign exchange (forex) losses in Q1FY2009 compared to its peers.
*
The subsidiaries contributed 4.7% to the top line in FY2008, while their contribution to the bottom line was negative. The management expects that Satyam BPO will break even in FY2009 as against a loss of Rs20 crore in FY2008.
*
Satyam’s balance sheet also remained strong in FY2008. The company had cash and cash equivalent of Rs4,502.4 crore in FY2008. Moreover, the operating cash flow remained healthy during the year, inspite of a marginal increase in the DSO days. We believe, the strong cash position would enable the company to go ahead with the acquisitions that it has announced recently.
*
Satyam’s economic value added (EVA) increased by 19.9% to Rs871.17 crore. However, the EVA spread (spread between return on capital employed [RoCE] and weighted average cost of capital [WACC]) fell by 110 basis points largely due to a 137-basis-point decline in the earnings before interest and tax (EBIT) margin.
*
In terms of return ratios, both the RoCE and the return on net worth (RoNW) declined to 27.9% and 23.3% respectively largely due to a drop in the EBIT margin.
*
Satyam remains our top pick in the sector because of its improved operating metrics. We expect the company’s top line and bottom line to grow at a compounded annual growth rate (CAGR) of 25.4% and 23.4% respectively during the period FY2008-FY2010. At the current market price, the stock is trading at attractive valuation of 13.5x FY2009 earnings estimate and 11.6x FY2010 earnings estimate. We maintain our Buy recommendation on the stock with price target of Rs521.
Tata Motors
Cluster: Apple Green
Recommendation: Hold
Price target: Rs545
Current market price: Rs430
Terms of rights issues announced
Key points
*
Tata Motors has announced its sales numbers for August 2008 and the same continue to be weak. The total sales of the company declined by 3% to 43,576 units in the month from 45,132 units in August 2007.
*
The sales of medium and heavy commercial vehicles (M&HCVs) declined by 12.7% to 10,143 units whereas those of passenger vehicles dropped by 6% to 15,573 units in the month.
*
In August, the new Indica Vista was launched which should help revive the passenger vehicle sales of the company.
*
The future of Singur plant remains dark with the agitation over land still continuing and the work being closed for the fifth day.
*
The company has announced the terms of the rights issues that are expected to lead to a 33% dilution in the company’s equity. The dilution is in line with our expectations. Considering the ratio and the current market price, the company would be able to raise Rs4,143 crore from the issues.
*
However, due to weakness in the sales numbers and very little chance of any revival in the immediate term, we maintain our cautious view on the company. At the current levels, the stock trades at 7.1x its FY2010E consolidated earnings and is available at an enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 3.4x. We maintain our Hold recommendation on the stock with a price target of Rs545.
Satyam Computer Services
Cluster: Apple Green
Recommendation: Buy
Price target: Rs521
Current market price: Rs433
Annual report review
Key points
*
Satyam’s hedge position increased to US$1,133 million in FY2008 from US$452.6 million in FY2007. At the end of Q1FY2009, its hedge position has reduced to US$675 million, which is lowest among its peers. As the rupee depreciated around 7% in Q1FY2009, Satyam reported lower foreign exchange (forex) losses in Q1FY2009 compared to its peers.
*
The subsidiaries contributed 4.7% to the top line in FY2008, while their contribution to the bottom line was negative. The management expects that Satyam BPO will break even in FY2009 as against a loss of Rs20 crore in FY2008.
*
Satyam’s balance sheet also remained strong in FY2008. The company had cash and cash equivalent of Rs4,502.4 crore in FY2008. Moreover, the operating cash flow remained healthy during the year, inspite of a marginal increase in the DSO days. We believe, the strong cash position would enable the company to go ahead with the acquisitions that it has announced recently.
*
Satyam’s economic value added (EVA) increased by 19.9% to Rs871.17 crore. However, the EVA spread (spread between return on capital employed [RoCE] and weighted average cost of capital [WACC]) fell by 110 basis points largely due to a 137-basis-point decline in the earnings before interest and tax (EBIT) margin.
*
In terms of return ratios, both the RoCE and the return on net worth (RoNW) declined to 27.9% and 23.3% respectively largely due to a drop in the EBIT margin.
*
Satyam remains our top pick in the sector because of its improved operating metrics. We expect the company’s top line and bottom line to grow at a compounded annual growth rate (CAGR) of 25.4% and 23.4% respectively during the period FY2008-FY2010. At the current market price, the stock is trading at attractive valuation of 13.5x FY2009 earnings estimate and 11.6x FY2010 earnings estimate. We maintain our Buy recommendation on the stock with price target of Rs521.
Buy Srei infra - Target 120 - Within 2 Months
Buy Ranbaxy - Target 520 - Within 1 Month
Buy Ranbaxy - Target 520 - Within 1 Month
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