NEWSLETTER

The last couple of weeks might have been relaxation time for the market-men and same was the case with specific stocks who did show some strength but started relaxing in the festive mood.

Saw initial momentum which fizzled out. This implies increase in the no of trailing stoploss hits. So all in all lots of potential but no outcome :)

Lets c a few charts and what happened. This also makes one sit up and note why Stoplosses are so important in trading to save money as well as your brains :) !!

The comments in red are afterthoughts !

Still the scenario remains the same. Breakouts or Breakdowns are not seeing follow up confirmations making it difficult to trade. So continue to be on the lighter side of the trade or be ready to take small choppy trades in the range.

MY CHART

Nifty :: Exactly close above strong support 4968/4958.. Breakout of 4968 in intraday once again momentum turns week and give minimum next target of Nifty at 4931/4909.. Technically 4900 works as strong support from last one month, below 4900 next strong support zone 4866 to 4839.. Now be careful in shorting at lower level if Nifty open gap down.. Short term indicator now enter in oversold region and any time corrective intraday bounce beck possible from strong support level.. Our strategy for 27th Oct. watch 4960, below 4960 sell at high (S.L 5016) buy in deep (S.L 4909/4904).. If Nifty break 4900 watch next support zone 4866 to 4839, and buy Nifty for short term corrective swing up move .. Resistance for up move 5012/5016/5054/5077/5115.. Supports at 4960/4931/ 4909/4866/4857/4839…

 

 

About The Company

Prakash Industries manufactures sponge iron, steel billets, wire rod and rigid PVC pipes. It is also into generation of power.

About The Results

The company has posted results for second quarter ended 30th September 2009 posted a 20% drop in net sales but managed to show a 40% rise in net profit.Two things worked in favour – sales were down as realisations had gone down despite the rise in volumes. Steel volumes rose by more than 18% in the current quarter and it also saw higher volumes in sponge iron and power And prices of raw material fell and this helped improve the profit margins. Its OPM for Q2FY10 was up at 23.98% as against 15.75% in Q2FY09 and NPM was at 17.96% v/s 10.19% on a YoY.

The company is already in the process of doubling its steel making capacities in the entire chain of integrated steel operations. In addition, one of the existing mills is being modernized to expand its product mix to enable it to manufacture TMT bars as well, which is expected to be completed this year. All these expansion plans are expected to increase the present volumes by more than 50% in the ensuing year.

The company is taking steps to get the iron ore mines in Chattisgarh as well as in Orissa operational in second half of FY10. In addition, Madanpur coal block allotted to the company in JV with other companies is expected to be operational by end of the current financial year. This shall cater to the increased coal requirement of the steel and power operations of the company.

The company had on 12 October 2009 raised $50 million through foreign currency convertible bonds (FCCBs) for funding expansion plan. The FCCBs, to be listed on the Singapore stock exchange has a maturity of 5 years and 1 day are convertible at an initial conversion price of Rs 170 per share. The money raised from the FCCB is to be used to fund its 625 power capex.

The company is expanding its power generation capacity from 100 megawatt to 725 megawatt. The project is being set up at Champa in Chhatisgarh, near the company's existing facility and it plans to market surplus power generation through power exchanges. It will commission its first phase of 250 megawatt (MW) by next year and to complete the entire 625 MW in three years.

As against the debt of Rs 250 crore which the company had at the end of FY09, its current debt stands at Rs.175 crore. It plans to retire major part of this within the next 12 months and hopes to become a debt free company by FY11.

About The Stock
My personal opinion on this stock with regard to its’ price performance in short to long term on basis of Fundamental analysis , Technical analysis and exclusive multi bagger reliable news sources are exclusively reserved for the registered member with detailing of the same. Only registered member have right to email me mentioning the name and date of registration to ask for the same.
Disclosure : I do not feel any need of giving any disclosure over here , my personal portfolio are always shared with the members.



The market did open flat to negative with seen selling pressure again from higher side and ended with negative closing and also below 4995 which is its good immediate support.Market as expected again seen profit booking and exit from longs near 5034 and finally a round of selling seen in the last trading hours with nifty closed below 5000.We expected selling from higher levels and it was mentioned so many times that market may if not hold the 5020 then we might see fresh selling pressure till 4945-25.Upper side it will face hurdles now at 5020-5045,while good support now comes near 4951 and breach and sustain below this mark nifty will slide to kiss 4880-4845 in the downside.Any rise will not sustain as long as we are holding below 5052,and for very immediate time nifty will face hurdles near 4995-5025 range.







NIFTY (4997.05)
Resistance : 5015 / 5065 / 5090
Support : 4945 / 4915 / 4860


SENSEX (16810.81)
Resistance : 16885 / 17030 / 17100
Support : 16715 / 16650 / 16560


NIFTY FUT (5007.9)
Resistance : 5020 / 5070 / 5115
Support : 4940 / 4920 / 4875






MKT COMMENTS
NIFTY FUT OI (both series) up with increasing volumes indicating forming of short positions in next series.
We expect NIFTY FUT to trade volatile. Bounce expected from lower levels.






On Tuesday,Opening Is Flat To Down,
Buy NIFTY Above 5005,Sl Below 4985,Tgt 5025/5040/5060/5095
Sell NIFTY Below 4980,Sl Below 5000,Tgt 4960/4945/4925/4890





Sell




SESAGOA, Sl 325,Tgt 300/280
LNT Below 1555,Sl 1575


TATASTEEL Below 530,Sl 535,Tgt 525/520/515+
SBIN (2306), Sl Above 2325,Tgt 2285/75/65+

This company caught my attention when it was quoting at around 100 levels. The stock has rose steadily from its lows of 38 to around 180 levels. J Kumar is a Mumbai based construction company engaged mostly in civil engineering and infrastructure development projects. The company was established in 1999 and got listed just a year back. J Kumar has exposure to segments like engineering, irrigation, civil and commercial construction segments It is also present in the high margin piling business.

This company is different from many of its peer in more than one way and should out perform them in the future.

Lower debt levels and interest expense - The one reason i don't really like most of the infra companies is that they are bogged down by the debt levels they carry and the huge interest expenses, which adversely affects the net margins. The companies are not really at fault and its the nature of the business in which they are that warrants for higher debt levels. They execute projects worth billions of rupees over a prolonged period of time and most of these projects have higher debt levels when compared to equity.

For ex in FY 09, companies of similar size like Pratibha industries paid 31 crore in interest expense compared with a net profit of 44 crore, JMC projects paid 29 crore on interest expense compared to 36 crore in net earnings, Unity infra paid 43 crore in interest expense compared to 70 crore in net earnings, Gayatri projects paid 39 crore in interest expense compared to 32 crore in net earnings. This is not the case with these mid size companies alone. It is the case with even the larger companies and the interest expenses are only rising over the years. Add to it, the expected surge in interest rates, these companies are going to find it difficult.

J Kumar infra doled out just 7 crore compared to around 32 crore in net earnings. Even better, the company reported interest expense of only 1.8 crore against a net earning of around 19 crore in the latest quarter. Now J Kumar is very comfortably placed when compared to most of its peers to undertake and execute projects in the years to come by stretching its debt level without much difficulty. This can fuel growth for the next 2 to 3 years.

Higher Margins - The operating and the net margins of the company stand at around 15% and 9% respectively. It reported an astounding 14% net margins in the September quarter results that it announced today on back of a sharp decline in the construction and other cost. If you check out other infra companies of similar profile, the margins are 4 to 5% lesser compared to J Kumar. The above explained lesser interest expense is definitely one of the factors.

Other than that, the company owns most of the construction equipments that it needs to execute its projects, while the other companies hire them which adds to their operating expense. Procurement of equipments was one main reason for the company getting listed.

There is also this piling business, in which the company has presence and owns the piling equipments. Though it constitutes for only a smaller portion of the revenues - around 3 or 4%, the margins here are higher at more than 20%.

Order book - The company's order book as on Aug 31 2009 stands at around 1400 crore which is more than 3.5 times the FY 09 revenues. These orders should be executed over a period of 20 to 24 months and this provides very good earnings visibility for the company, at least for the next 2 years.

There are some negatives as well. The company has not executed or received any major projects out of Maharashtra. More than 80% of the order book is composed of transportation engineering segment where the margins are lesser and there is cut throat competition.

In spite of some of the negatives listed above, this company is poised for strong growth in earnings in years to come and will out perform most of its peers. 

 

FOR DATE 27-10-2009
SCRIP = RADICO KHAITAN LIMITED (BSE),
SCRIP CODE = RADICO,
PREVIOUS CLOSE = 124.5,
STOP LOSS = 120,
TARGET = 150.
FOR INTRADAY MOVEMENT OF THE STOCKFILTER PLEASE Click Here!
(OR CLICK THE LINK ABOVE LIVE SENSEX WATCH.)

CHART AS ON 26-10-2009

WITH A CONSIDERABLE RISE IN VOLUMES, THE STOCK HAS GIVEN A FRESH BREAKOUT IN THE LAST TRADING SESSION. THE STOCK WAS RANGE BOUND SINCE SEPTEMBER AND IS IN A GOOD UP TREND FROM JUNE.
THE STOCHASTICS AND MACD SHOW A POSITIVE CROSSOVER AND THE CANDLESTICK PATTERN IS ALSO BULLISH.
TECHNICAL ANALYSIS AND PORTFOLIO MANAGEMENT SUGGESTS THIS COUNTER GOOD FOR A SHORT TO MEDIUM TERM RANGE.