Nifty :: Three River Evening Doji with Spinning top candle.. Volume slightly increases in red doji.. Technically bearish sign.. Watch important support 5110/4994/4970/4924.. Resistance for up move at 5080/5104/5128/5138…
About The Company
Bharat Forge Limited. The Group's principal activities are to manufacture and sell closed and open die forgings, machined components and aggregates. The Group operates in two segments namely Steel Forging and General Engineering. The products of the Group include front axle assembly and components, general engineering equipment, hydraulic and mechanical presses, bandsaw machines for cutting metallic rounds, couplings and material handling equipment. The Group caters to the medium and heavy commercial vehicle segments. The manufacturing plants are located at Pune, Satara and Jalgaon districts of Maharashtra.
About The Financials
If Q1 had been disappointing, Q2 does not disappoint, that’s the only solace. But YoY, when we look at the numbers, clearly the company has some more miles to go before we can say that it has reached the victory post.
Fall in raw material prices and reduction in employees costs and manufacturing expenses shored up the margins of the company. Its forex losses have also come down to Rs.2.97 crore v/s Rs.87.51 crore in Q2FY09. Consequently, OPM was at 24.66% as against 11.91% in Q2FY09 and NPM rose to 6.27% v/s 1.67% (YoY).
This was because the company managed to bring down costs – operating costs were at 77% of the net sales compared to 90% in Q2FY09. What really helped was that raw material prices dropped 42%, employee cost was down 7% (clearly some downsizing happened) and manufacturing expenses were down 39%. This also explains why when net sales was down 37% on a YoY, net profit galloped with an over 227% jump.
What is really helping the company is Bharat itself. Sales in India alone were at around Rs.280 crore and exports have declined. Europe and US markets were down on account of the various schemes announced by their govts there, be it duty on scrappage surcharge or cash back clunker scheme.
The company has entered into deals with Alsthom and Areva and both these are expected to start adding on to the revenues from 2012. The company hopes to shift from its dependence on auto sector to non-auto sector. The aim of the company is to get the share of non auto revenue at 40% by FY12 and by FY15, non auto business would be the bread winner and is expected to be 75% of the revenue. It also plans to invest Rs 50,000 crore in the power sector and has a targeted generation capacity of up to 10,000 MW, over the next 10 years.
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Tgt 419 422 429
This is very interesting. In last one week - I have seen three reports written around the same time - from various influential research houses on Reliance; and their views: all over the place. So, the big question: whom should you listen?
Simple - Listen to all but follow only what stock price indicates…
Fundamental Price Targets all over the place
- Goldman Sachs is very bullish on the stock. It has put a 12 month target price of 2620 on the stock [great news for Nifty]. The reason for bullishness - refining cycle is expected to pick up in next 1 year; D-6 gas ramp-up seems to be on track; and company has lots of cash on its book which it can use to pursue inorganic growth.
- BoA Merrill Lynch is bearish on the stock; and thinks that company’s Exploration business is extremely overvalued. I am not going to go into the detailed reasoning why the research house thinks its overvalued…but that’s their opinion. The price target is 1758. Today, stock closed around 2100 - that means stock need to go down 16% from current levels
- Morgan Stanley seems to have played it safe and has come out with price target of 2460. MS seems to be bullish on the stock on strong 21% CAGR earnings growth over next 2 years; and it’s ability to generate higher profit [GRMs] from upturn in refining cycle. The E&P business can also throw up +ve surprises.
This is the tricky part. The stock chart continues to give mixed messages. The stock has been under performing since last six months for reasons well known to everyone. But in last rally from 4550 to 5050 on Nifty - the Reliance stock has actually outperformed Nifty. Reliance stock has been up 16% against 11% upmove by Nifty.
Source: ChartAlert [www.chartalert.com]
The stock is still all over the place and does not have clear trend to make any conclusive view. As you can see in the chart above, the stock is trading above 50 dma of 2090; and if bullish momentum sustains - Reliance has potential to go to 2400.
Risks
It’s quite interesting that market is unanimous on risk assessment. The first one being the court case with RNRL. It has huge bearing as it impacts the E&P realization. The second one being disappointment in exploration i.e. not finding enough commercially viable reserves; and third one - Global downturn (double dip recession) and it’s impact on refining and petchem margins.
Reliance is the stock that moves the market; and hence one should keep an eye on what stock does. It seems to be a good buy around 200 dma i.e. 1850 and seems to be sell around 2200-2400; till fresh trend emerges. As always, please note the above stock is not a trading recommendation.
Stocks of the same sector move together and interestingly leave similar footprints on the charts. Let me share one example with you.
Example: Oil marketing companies - HPCL and BPCL
HPCL stock Daily Chart
HPCL has been a strong stock in 2009. As you can see in the chart, stock had a gap-up opening above 50 dma post election results and follow through spectacular rally to 390
The stock then pulled back to 50 dma multiple times - rallied and moved from 290 all the way to 420. But in early October, the stock broke down below 50 dma because of strength in crude oil prices.
Source: ChartAlert [www.chartalert.com]
Trading Rule: When a stock breaks 50 dma - then stock can slip to next moving average i.e. 200 dma.
It seems the above trading rule is playing out on the stock. From the time, the stock has broken 50 dma, it has not been able to exhibit strength. It seems stock is now on its way down to 200 dma of 320.
BPCL stock daily chart
BPCL also followed a similar chart pattern, though it has been little stronger stock than HPCL.
The stock had a huge gap-up opening above 50 dma (sounds similar) and follow through rally post election results. There was buying at every dip to 50 dma before stock broke below 50 dma in early October. Now, stock has lost strength and technically it can slip to 200 dma i.e. 452
Source: ChartAlert [www.chartalert.com]
Conclusion
- Stocks of the same sector move together and hence follow a similar pattern.
- Technically, when a stock breaks one major moving average, then next moving average becomes the target.
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Bombay Dyeing - Low Volume Correction Indicates Lack of Institutional Selling Pressure
- Bombay Dyeing trades on moderate volume and closes just above its 50-day moving average which is currently running around 394.0
- Stock enjoys strong support coming from its 50-day moving average as well as its uptrend line connecting the low of March and July 2009
Bombay Dyeing Daily Chart - Tuesday November 17, 2009
Bombay Dyeing technical analysis was previously posted on:
- Thursday, May 21, 2009: Bombay Dyeing Soars 60% in Four Trading Days
- Monday, May 18, 2009: Bombay Dyeing - Perfect breakout from a solid base pattern
52 Week Low: 110.0 (March 09, 2009)
Buy IOB with stop loss below 113.20. If you are lucky, and does not hit the stoploss, book where ever you like as shown in the chart.
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