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Khandwala Securities Limited 1 | P a g e
TWENTY PICKS
Date : 03.06.2014
RESEARCH REPORT
ON
TWENTY STOCKS
SPECIALLY
CREATED FOR
KSL’s esteemed CLIENTS
Khandwala Securities Limited 2 | P a g e
TABLE OF CONTENTS
1. AXIS BANK LIMITED
2. ICICI BANK
3. HDFC BANK
4. STATE BANK OF INDIA (SBIN)
5. HDFC LIMITED
6. INFOSYS LIMITED
7. WIPRO LIMITED
8. TATA CONSULTANCY SERVICES LTD
9. DR REDDYS LABORATORIES LIMITED
10. CIPLA LTD
11. LUPIN LIMITED
12. LARSEN AND TOUBRO LIMITED
13. BHARAT HEAVY ELECTRICALS LIMITED
14. HERO MOTOCORP
15. MAHINDRA & MAHINDRA LTD
16. ONGC
17. RELIANCE IND
18. TATA STEEL
19. HINDUSTAN UNILEVER LTD
20. ASIAN PAINTS LIMITED
Khandwala Securities Limited 3 | P a g e
SNAPSHOT:
SCRIP CMP (Rs.)
STRATEGY TARGET STOP LOSS TIME FRAME
Axis Bank 1836.15 Buy in the range of 1550 - 1650 2200 – 2430 - 2820 1410 on closing basis 4 – 8 months
ICICI Bank 1418 Buy in the range of 1418 - 1280 1810 – 1990 - 2230 1160 on closing basis 4 – 7 months
HDFC Bank 793 Buy 50% positions at CMP and remaining between 735 - 750
925 – 1035 - 1113 899 on closing basis 9 – 12 months
State Bank of India
2542 Buy in the range of 2542 - 2410 3115 - 3450 2360 on closing basis 3 – 5 months
HDFC 876 Buy at CMP and dips to 810 1020 – 1090 - 1235 780 on closing basis 4 – 6 months
Infosys 2939 Buy in the range of 2940 - 2860 3330 – 3460 2760 on closing basis 2 – 3 months
Wipro 506 Buy in the range of 506 - 480 553 – 568 - 580 464 on closing basis 2 – 3 months
TCS 2141 Buy above 2200 2370 – 2460 - 2520 Below 2000 on closing basis
2 – 3 months
Dr Reddys 2358 Buy at CMP and on dips to 2260 2790 – 2935 - 3180 2220 on closing basis 3 – 6 months
Cipla 384 Buy in the range of 380 - 365 405 – 415 - 428 363 on closing basis 2 – 3 months
Lupin 935 Buy in the range og 900 - 890 1010 - 1080 810 on closing basis 2 – 3 months
LT 1548 Accumulate on dips towards 1330 2170 – 2390 - 2670 1180 on closing basis 6 – 8 months
BHEL 242 Buy 50% positions at CMP and remaining between 210 - 200
345 – 401 - 430 175 on closing basis 6 – 9 months
Hero Motocorp 2345 Buy in the range of 2345 - 2190 2715 – 2980 - 3125 2090 on closing basis 5 – 7 months
M&M 1235 Buy in the range of 1200 - 1180 1380 - 1420 Below 1060 on closing basis
2 – 3 months
ONGC 378 Buy 50% positions at CMP 378 and remaining between 315 - 335
435 – 485 - 567 280 on closing basis 9 – 12 months
Reliance 1065 Buy 50% positions at CMP and remaining between 1020 - 1035
1240 – 1411 - 1583 975 on closing basis 9 – 12 months
Tata Steel 475 Buy in the range of 475 – 425 625 – 740 - 915 365 on closing basis 6 – 8 months
Hindustan Unilever
603 Buy in the range of 590 - 575 680 - 720 Below 530 on closing basis
3 – 4 months
Asian Paints 509 Buy in the range of 475 – 490 545 – 563 - 595 458 on closing basis 2 – 4 months
Khandwala Securities Limited 4 | P a g e
SECTOR COMPARISON - PSU BANKS
SECTOR COMPARISON -PRIVATE BANKS
35%
55%
75%
95%
115%
135%
155%
May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14
HDFC BANK
ICICI BANK
KOTAK BANK
BANK NIFTY
Khandwala Securities Limited 5 | P a g e
SCRIP AXIS BANK LIMITED
BLOOMBERG SYMBOL AXSB:IN
REUTER SYMBOL AXBK.NS
CMP (Rs) 1836.15
MARKET CAP (Rs in Cr) 86,471.86
STRATEGY BUY IN RANGE OF 1550 - 1650
TARGET 2200 - 2430 – 2820
STOP LOSS 1410 ON CLOSING BASIS
TIME FRAME 4 - 8 MONTHS
FUNDAMENTAL VIEW :
Axis Bank Limited operates within the Commercial banks sector. In addition to historical fundamental analyses, the
complete report available to purchase compares Axis Bank Limited with three other companies in this sector in
India: Union Bank of India (2014 sales of 325.34 billion Indian Rupees [US$5.52 billion] ),Bank of India (424.44 billion
Indian Rupees [US$7.20 billion] ), and Bank of Baroda (460.18 billion Indian Rupees [US$7.80 billion] ).
Sales Analysis. During the year ended March of 2014, sales at Axis Bank Limited were 385.02 billion Indian Rupees
(US$6.53 billion). This is an increase of 14.0% versus 2013, when the company's sales were 337.71 billion Indian Rupees.
This was the fifth consecutive year of sales increases at Axis Bank Limited (and since 2009, sales have increased a total
of 180%).
AXIS BANK is expected to be a major gainer from the new Government policies going forward. Based on this one would
look at the PE multiple going up from the current 14.37x to 16.40x. This counter is a high beta stock which looks good to
be bought for targets of 2200 and more.
Khandwala Securities Limited 6 | P a g e
TECHNICAL VIEW :
On February 18, 2014, we had issued buy a positional call on AXIS BANK at 1115.25 and price moved perfectly as per our
expectations and hit further more than our mentioned targets. Stock has rallied by more than 70% in last 15 weeks after
our recommendation. We have witnessed shrill momentum in the stock after the momentum indicator RSI has given
‘Inverted Head and Shoulder’ pattern breakout in weekly chart in early 1st week of March 2014. Stock has given multi-
year breakout at 1600 levels and has moved to fresh territory. The strident rally might have bushed at current levels as
the stock has reached to the long term rising trendline resistance. We are also observing exhaustion in volumes, which
indicates disinterest of traders in the stock and a sharp correction can come any time along with volumes.
On Momentum Indicator front, Relative Strength Index (RSI) is moving in oversold zone and has stretched to the stiff
resistance of 80 levels in weekly chart indicates a correction on chart. On monthly chart, RSI has given double bottom
pattern breakout, which is a bullish sign for the stock.
After analyzing stock chart in different time horizon viz daily, weekly, monthly and quarterly, trend of the stock if strong
but a correction can’t be ruled out and that correction can be a good buying opportunity for long term. Thus, we advise
to go long in Axis Bank on dips towards 1550 - 1650 levels for the upside target of 2200 - 2430 – 2820 with the stoploss
placed below 1410 on closing basis.
Khandwala Securities Limited 7 | P a g e
FUNDAMENTAL VIEW :
ICICI Bank Limited operates in the Commercial banks sector. In addition to historical fundamental analyses, the
complete report available to purchase compares ICICI Bank Limited with three other companies in this sector in
India: Bank of India (2014 sales of 424.44 billion Indian Rupees [US$7.20 billion] , Bank of Baroda(460.18 billion Indian
Rupees [US$7.80 billion] ), and Punjab National Bank Ltd (496.68 billion Indian Rupees [US$8.42 billion] ).
Sales Analysis. ICICI Bank Limited reported sales of 494.79 billion Indian Rupees (US$8.39 billion) for the fiscal year
ending March of 2014. This represents a sharp decrease of 33.4% versus 2013, when the company's sales were 742.85
billion Indian Rupees.
ICICI Bank has an EPS of 84.95 and is currently trading at 1464 which is 17.23x multiple on its EPS. Going forward we
expect to move upward on the bourses and touch 21.30x multiples and more. Overall, a very good stock to have in the
basket.
SCRIP ICICI BANK
BLOOMBERG SYMBOL ICICIBC:IN
REUTER SYMBOL ICBK.NS
CMP (Rs) 1418
MARKET CAP (Rs in Cr) 163927.06
STRATEGY BUY IN THE RANGE OF 1418 - 1280
TARGET 1810/1990/2230
STOP LOSS 1160 ON CLOSING BASIS
TIME FRAME 4-7 Months
Khandwala Securities Limited 8 | P a g e
TECHNICAL VIEW :
On the monthly charts the stock prices has witnessed a breakout from its six years multi supply zone and have
successful closed above 1280 – 1300 levels, confirming the continuation of uptrend. Additionally with reference to the
past two years chart, price action have completed an ‘ASCENDING TRIANGLE’ breakout confirming the above view.
With reference to the momentum oscillators like RSI and MFI which is trading in its overbought zone, it suggest some
sideways consolidation for the next 2 – 3 weeks at around the breakout levels and any price momentum followed by
volumes above this consolidation will led to a further upside momentum by 10 to 15% .Hence we recommend a buy in
ICICIBANK at CMP 1418 and on dips to 1280 for the targets of 1810/1990/2230 with SL of 1140 on closing basis.
Khandwala Securities Limited 9 | P a g e
SCRIP HDFC BANK
BLOOMBERG SYMBOL HDFCB:IN
REUTER SYMBOL HDBK.NS
CMP (Rs) 793 (15.30 Hours IST, 09/05/2014)
MARKET CAP (Rs in Cr) 190987.90
STRATEGY BUY 50% POSITIONS AT CMP 793 AND REMAINING BETWEEN 735-750
TARGET 925/1035/1113
STOP LOSS 899 ON CLOSING BASIS
TIME FRAME 9 to 12 MONTHS
FUNDAMENTAL VIEW :
The 20% underperformance of HDFC Bank vs the Bankex over the last 3 months can be primarily attributed to technical
factors in our view. With the overhang from the MSCI rebalancing now behind us,
we expect HDFC Bank stock to return to trading on fundamentals, which we think remain as strong as ever. We factor in
the impact of a potential capital raise of Rs100bn (@CMP Rs794) into our estimates, leading to a c.14% upgrade to our
FY15E BVPS estimate.
On a post money basis, HDFC Bank trades at 3.3x FY15E P/ABV, which is close to its historical average multiple. We
expect consensus BVPS upgrades as the details of the capital raising are finalized. With steady state RoE of nearly 20%
and short-term earnings growth of more than c.26% we believe the fair multiple for HDFC Bank is 4.0x (unchanged)
based on our Two Stage Gordon Growth model. We reiterate our BUY rating on HDFC Bank and maintain it as our top
pick in the banking space. The change to our FV (to Rs975 from Rs850) is driven by the c.14% upgrade to our FY15E
BVPS due to capital raising assumptions.
HDFC Bank has underperformed the Bankex by c20% over the last 3 months after MSCI announced a reduction in HDFC
Bank’s weighting from 5.4% to 1.9% (execution on 30th May’14). With the overhang due to the MSCI rebalancing now
behind us, we expect fundamentals, which we think remain as strong as ever, to take precedence for HDFC Bank.
Capital raising could be 15% BVPS accretive On 19th May 2014, HDFC Bank informed that it had decided to seek
shareholder approval to raise equity capital of nearly Rs100bn. Assuming the capital raise happens at the current price
of Rs794, we estimate that it would lead to equity dilution of nearly c5.4%. However, given that the price is 4.4x trailing
BVPS, this capital issue will lead to BVPS accretion of nearly c.20%. The post-money FY14A Basel III Tier 1 Capital ratio
will increase from 11.8% to 14.7%.
HDFCBANK is expected to be a major gainer from the new Government policies going forward. Based on this one would
look at the PE multiple going up from the current 23.20x to 26.20x. However this counter is a good high beta stock
which looks good to be bought for targets of 925 and more.
Khandwala Securities Limited 10 | P a g e
TECHNICAL VIEW :
HDFC Bank is in uptrend and its trading near all-time high levels. Short term trend, Medium term trend and Long term
trend are bullish and thus this stock is buy on every dips. HDFC Bank is defensive stock and thus this stock becomes right
pick in high volatile market where one might get opportunity to buy at lower levels. 750 is the minor support for this
stock and 710 is the strong support levels and one can buy this stock at current levels and on dips till 735-750 levels
with stop loss of 699 on closing basis.
Khandwala Securities Limited 11 | P a g e
SCRIP STATE BANK OF INDIA (SBIN)
BLOOMBERG SYMBOL xc SBIN:IN
REUTER SYMBOL SBI.NS
CMP (Rs) 2542
MARKET CAP (Rs in Cr) 1,89,771.41
STRATEGY BUY IN RANGE OF 2542 - 2410
TARGET 3115/3450
STOP LOSS 2360(CLOSING BASIS)
TIME FRAME 3 TO 5 Months
FUNDAMENTAL VIEW :
Expects advances growth at 15-16% and NIM to be maintained steady in FY2015
State Bank of India conducted an analyst meet on 23 May 2014 to discuss the financial performance for the quarter
ended March 2014and prospects of the bank. Arundhati Bhattacharya, Chairman of the bank addressed the meet:
Highlights:
Bank has made many qualitative changes in the banks functioning. The focus areas for the bank were risk management,
NPA control, productivity improvement and cost control.
On risk management front, bank has been providing special training to all the credit committees sanctioning loans. Early
review of all sanctions is conducted to check that the quality is not compromised.
On NPA control front, the committees formed to monitor the accounts showing stress conducted about 1099 meetings
in Q4FY2014, while status of about 4600 accounts was reviewed.
Bank has formed special committees to look at the restructuring of Special Mentioned Accounts (SMA).
Bank has mapped about 69000 villages to branches to have better control on NPAs in the agriculture segment.
On productivity improvement front, bank plans to roll out performance dashboard and incentives by July 2014. Bank
has also made compulsory e learning for all staff.
On cost control front, bank expects the impact of measures takes so far to pay dividends in FY2015, while also expects
the impact of qualitative changes made in the bank to be visible soon.
Bank proposes to contain the growth in overheads (other operating expenses) at 10% in FY2015 compared to about
22% in FY2014. Bank has fully provided for revised pension assumptions and wage revision in FY2014.
Bank continues to maintain the healthy market share, despite being cautious on the lending front.
Bank has maintained the NIM steady in FY2014, while consistently improving yield on advances on qi basis.
With the capital market opportunities opening up leading to corporate credit demand deleveraging and working capital
cycle shortening, bank expects the asset quality stress to ease.
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Bank has the restructuring pipeline of Rs 3700 core for Q1FY2014.
Bank sold assets amounting to Rs 3590 crore to Asset Reconstruction Companies (ARC) in Q4FY2014, of which about Rs
1700 crore recorded in the recovery and balance Rs 1890 as write off.
Bank expects the advances growth of 15-16% in FY2015, while hopes growth can be higher with the higher
improvement in the economic growth.
Bank expects to maintain the NIMs steady in FY2015.
As per the bank, the capital base of the bank is sufficient for the advances growth of 15% in FY2015.
SBI reported an EPS of 156.76 and a Book Value of 1503 for the Fiscal 2013-14. Based on this the current price is
quoting at a 16.86x multiple. Going forward, SBI look a good buy for targets of 3115 and more based on an Earnings
Multiple of 19.87x.
VALUATION
EPS (Rs)*
37.30
P/E Ratio (x)
13.30
Market Cap (Rs m)
481,720.16
P/BV (x)
1.41
Khandwala Securities Limited 13 | P a g e
TECHINCAL VIEW :
As seen in the chart the stock prices of SBIN for last 3 years were finding strong resistance at 2500 levels but last week
the prices gave a close above the levels and have confirmed a bullish reversal pattern known as ‘ROUNDING SAUCER’.
The breakout was supported with huge volumes and positive placement of momentum oscillators. The prices after a
strong up move after the breakout have corrected back to the breakout levels and the levels which was acting as a
strong resistance is now acting as a strong support.
Since the prices had a strong bull run in last two months, the momentum oscillators like RSI and MFI have moved in
overbought zone and in weekly charts we are witnessing bearish candle stick pattern known as ‘DARK CLOUD COVER
‘which indicates profit booking at higher levels. Although the current short term price movement indicates correction,
the overall long term scenario remains bullish and hence the current correction in prices should be taken as an
opportunity for buying on dips. Going forward looking at the price pattern formation we recommend to enter the stock
at CMP 2540 and on dips to 2410 for targets of 3115/3450 with stop loss of 2290 on closing basis.
Khandwala Securities Limited 14 | P a g e
SCRIP HDFC LIMITED
BLOOMBERG SYMBOL HDFC:IN
REUTER SYMBOL HDFC.NS
CMP (Rs) 876.60
MARKET CAP (Rs in Cr) 1,90,988
STRATEGY BUY AT CMP AND ON DIPS TO 810
TARGET 1020 - 1090 - 1235
STOP LOSS 780 ON CLOSING BASIS
TIME FRAME 4 - 6 MONTHS
FUNDAMENTAL VIEW :
Housing Development Finance Corporation (HDFC)'s consolidated net profit rose 19.7% to Rs 7947.82 crore on 13.41%
growth in total income to Rs 40814.56 crore in the year ended 31 March 2014 (FY 2014) over the year ended 31 March
2013 (FY 2013).
HDFC's board of directors at its meeting held today, 6 May 2014, recommended dividend of Rs 14 per share for FY 2014.
Housing finance major HDFC has a wide network of offices spread across the country. It also has offices in Dubai,
London and Singapore and service associates in the Middle East region, to provide housing loans and property advisory
services to Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs).
HDFC is expected to be a major gainer from the expected economic growth and increase in employment going forward.
Based on this one would look at the PE multiple going up from the current 25.91x to 29.30x. This counter is a perennial
favorite in the Housing Finance sector and looks good to be bought for targets of 1020 and more.
Khandwala Securities Limited 15 | P a g e
TECHNICAL VIEW :
Since past few months, HDFC LTD has been losing its charm among traders as percentage growth in earnings are not
that good as it was, and also due to steadiness in stock price. But the heavy weight continues to be a top pick for fund
managers and institutions because to stability in stock price and regular dividend earnings. Stock price of HDFC LTD is
moving in strong uptrend and taking support of rising trendline in weekly chart. Price has kissed the mentioned
trendline 5 times in last 14 years and bounced back sharply. At current juncture, price is moving just above the same
trendline and a sharp rally may resume anytime in upcoming trading sessions. At the same time, a fall cannot be ruled
out in case of weekly closing below the trendline. Stock price is moving in sideways direction from last eighteen months
in weekly chart. In this sideways move, price is moving around an horizontal trendline, which is place at 865 levels.
Counter has also retested the downward slopping breakout trendline in weekly chart and bounced back sharply.
On Oscillator front, Momentum indicator RSI is moving towards south and has halted the journey at the falling
trendline, indicates reversal on cards. As both the prices and indicator RSI is trading precisely at trendline support, we
can witness a sharp rally any time after reversals.
This is a ‘make or break’ level for the counter, hence ‘Risk-Reward’ is highly favourable for Bulls. Thus, we advise to go
long in the counter at current market price of 876.60 and on dips to 810 for the target price of 1020 - 1090 - 1235.
Stoploss for the trade should be placed below 780 on closing basis.
Khandwala Securities Limited 16 | P a g e
SECTOR CAMPARISON - IT
Khandwala Securities Limited 17 | P a g e
FUNDAMENTAL VIEW:
According to media report (Economic Times), former SAP board member Mr. Vishal Sikka is all but certain to be chosen
as the new CEO of Infosys. The appointment of Sikka, 47, who resigned from the German business software maker early
last month, is likely to be announced within the next few weeks.
Sikka – Among front runners with backing of few board members as well: According to older media reports, Sikka has
met Infosys' board members on several occasions in recent past and been part of various events at the company. He
had also made a presentation before the Infosys board at the company's annual strategy meeting in Mysore in January.
Sikka's candidature is believed to have the backing of Mr. KV Kamath and Mr. NRN, the chairman of the company's
nominations committee.
A strong signal to the market: Infosys, if appoints Sikka as CEO, will be sending a strong signal to the market about their
aspiration to be a global technology major and not just an Outsourcing vendor. However, if that happens, there are
possibilities of few more exits in the company. We believe the evolution of recent technological trends definitely
mandate Indian IT Outsourcing vendors to take a lead in innovation. But, the transition is going to be a bumpy ride for
Infosys.
Valuation and Recommendation – BUY: Infosys is trading at 12.8x FY16E earnings estimate (a valuation nearing multi-
year low). We see limited downside and retain our “BUY” rating for a PE of 14.5x FY16E earnings estimate.
SCRIP INFOSYS LIMITED
BLOOMBERG SYMBOL INFO:IN
REUTER SYMBOL INFY.NS
CMP (Rs) 2939.40
MARKET CAP (Rs in Cr) 1,68,911
STRATEGY BUY IN THE RANGE OF 2940 - 2860
TARGET 3330 - 3460
STOP LOSS 2760 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
Khandwala Securities Limited 18 | P a g e
TECHNICAL VIEW:
Well, what can be said about this stock? Infosys has been in news since last few quarters when Mr. Murthy joined the
company once again. From that time the company has been facing few headwinds in terms of their business and
management issues. Due to this the stock collapsed straight away to 2900 right from the highs of 3797 in a matter of
just three months. Saying that we feel that it is remiss to avoid that the company and the stock prices has the potential
to bounce back and the prices are also showing some exhaustion while going done. Starting with the smaller time frame
i.e. the Daily chart depicts that the prices have been drifting but the momentum oscillator ‘RSI’ has recently confirmed
the three points positive divergence which indicates hopes of strong buying at lower levels. Even the other oscillators
too are highly oversold.
If we observe the weekly chart, we can conclude that as shown in the chart the stock is now exactly resting at its
previous ‘Multiple Resistance’ breakout level of 2921. The mentioned level coincides with the value of ’89 – Week EMA’,
which most of the time tends to be a reversal zone. Along with that the ‘Stochastic’ oscillator on the weekly chart is
turning upwards after declining below 10. On the monthly chart we are observing that at this point in time the stock is
trading between 50% and 61.8% Fibonacci retracement level of the entire rise from 2121 to 3797 as shown in the chart.
The band of these retracement levels falls between 2959 – 2761 which generally acts as a strong support zones. Thus,
with respect to the above mentioned evidences we expect some smart buying happening in the stock in the midterm.
Khandwala Securities Limited 19 | P a g e
Hence we advise aggressive institutions and traders to go long in the counter in the range of 2940 – 2860 for an upside
target of 3330 – 3460. The stop loss for the trade should be placed below 2760 on closing basis.
Khandwala Securities Limited 20 | P a g e
FUNDAMENTAL VIEW:
Wipro’s Q4FY14 numbers were above expected estimates. However, the Q1 FY15 USD revenue growth guidance given
by the company was disappointing & below their as well as the street expectations. Margin expansion during the
quarter was a positive surprise, led by higher utilization rates and productivity improvements. Weak USD revenue
growth guidance of ‐0.3‐2% q-o-q given for Q1FY15 was due to seasonality in India business and spending cuts in retail
vertical. While the deal closures were strong, the management expects the ramp up to get delayed and happen only
after Q2FY15.
Valuation and Recommendation: At CMP of Rs 494, the stock is trading at 14xFY14E EPS, which is at a discount of
~30.94% to TCS & ~12.90% to Infosys. The discount to TCS is justified considering its relatively lower margins and lower
success in driving incremental growth. The company has done reasonable well over the past 2‐3 quarters. In this
quarter, its USD revenue growth was better than Infosys & TCS. However, the concern on the revenue growth visibility
(based on weak Q1FY15 guidance) could lead to near term underperformance in the stock price. In order to improve its
valuations Wipro should display strong performance both on revenue & profit front and impress the street in the
coming quarters.
For better returns & margin of safety, one can consider buying the stock on dips to Rs486‐504 (13.75‐14.25xFY15E EPS)
for a price target Rs 553 over the next quarter.
SCRIP WIPRO LIMITED
BLOOMBERG SYMBOL WPRO:IN
REUTER SYMBOL WIPR.NS
CMP (Rs) 506.20
MARKET CAP (Rs in Cr) 1,24,591
STRATEGY BUY IN THE RANGE OF 506 – 480
TARGET 553 – 568 - 580
STOP LOSS 464 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
Khandwala Securities Limited 21 | P a g e
TECHNICAL VIEW:
Since past few months the IT stocks have been continuously on the seller’s radar due to substantial strength in INR over
US Dollar. At the same time, the Indian IT giants have been going through some crisis in terms of their performance
since past couple of quarters. As Wipro Ltd too falls under the same umbrella, the stock prices of the company faced
similar kind of setback in the recent times. After registering a ’52 – Week High’ of 611 on Feb 2014 the prices corrected
sharply and is now trading near 500 mark. During the process, now the daily charts have turned highly oversold and
they are showing signs of reversal in the offing. At the same time, the stocks has bounced after registering a low of 475
which is very near to its prominent swing low of 464 on the weekly chart. In addition, on the daily chart if we accurately
observe the prices, we are witnessing an emergence of a beautiful harmonic pattern, named as ‘Bullish Bat Pattern’.
Here, as shown in the chart the stock has initially made the high of 611 (Point A), then the prices corrected till 50%
retracement level of the impulse rally ‘XA’ (464 - 611), which is placed at 530 levels (Point B). After this the price again
bounced back and hit 595 levels, which was again 78.6% retracement level of the fall “AB” (611 - 530). Then an extreme
fall has been observed in the stock, which is halted at 88.6% retracement level of the first impulse (464 – 611) and
Khandwala Securities Limited 22 | P a g e
161.8% retracement level of the second impulse wave (B – C) (530 – 595). Thus the stock has fulfilled all the criteria of
‘Bullish BAT Pattern’ and started bouncing back. As all other indicators and oscillators are moving resiliently in favour of
buy side on the counter along with the harmonic pattern, we advise aggressive traders and institutions to go long in the
stock at current market price of 506 and on dips to 480 for the upside targets of 553 / 568 / 580. Stop loss for the trade
should be placed below 464 on closing basis.
Khandwala Securities Limited 23 | P a g e
FUNDAMENTAL VIEW:
Q4FY14 numbers of TCS displayed mixed picture on a sequential basis. Revenue growth was below their estimates,
impacted by seasonality, weakness in India business and subdued growth in Americas. Decline in the EBIT margins
was led by continued re-investments in business and dip in realizations. However, strong growth witnessed in
Continental Europe was encouraging.
KSL maintains its price target of Rs 2370 (21.7xFY15E EPS). Hence existing investors are advised to hold the stock. For
better returns & margin of safety against market corrections, fresh buying should be made on dips to Rs2015-2065
(18.6-19.1xFY15E EPS) for their price target of 2370 over the next quarter.
SCRIP TATA CONSULTANCY SERVICES LTD
BLOOMBERG SYMBOL TCS:IN
REUTER SYMBOL TCS.NS
CMP (Rs) 2141.35
MARKET CAP (Rs in Cr) 4,19,990
STRATEGY BUY ABOVE 2200
TARGET 2370 – 2460 - 2520
STOP LOSS BELOW 2000 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
Khandwala Securities Limited 24 | P a g e
TECHNICAL VIEW:
TCS – One of the most endearing counter for the investors as it is backed by strong fundamentals. The stock has been
outperforming all its peers in the past while going towards north. Recently the stock once again out class the other IT
counters as they suffered heavy losses but on the other hand the prices of TCS consolidated in a broad range. Although
the stock drifted towards 2000 mark after registering all- time high of 2380, it managed to bounce back twice from
those levels. Now at this juncture the stock is trading in a broad range of 2250 – 2000 as shown in the chart. On the
weekly chart, we are observing a double bottom formation at 2000 mark which will be very difficult to be breached in
the coming months.
Khandwala Securities Limited 25 | P a g e
On the contrary similar kind of multiple obstacles can be seen on the upside. The stock has been facing selling pressure
every time it reached near 2200 mark. Observing the placement of momentum oscillators and moving averages on the
lower and higher degree charts, it can be construed that the stock is in consolidation mode and only a breakout or a
breakdown from the broad range of 2200 – 2000 will now dictate the further trend. Meanwhile, we expect the IT pack
to bottom out in the near term. In this scenario, as history suggests TCS could be the top pick among the investors to go
long. Hence we advise conservative investors and institutions to go long in the counter once it sustains above 2200
mark for an upside target of 2370 / 2460 / 2520. The stop loss of the mentioned trade should be placed below 2000
mark.
Khandwala Securities Limited 26 | P a g e
SECTOR CAMPARISON - PHARMA
Khandwala Securities Limited 27 | P a g e
SCRIP DR REDDYS LABORATORIES LIMITED
BLOOMBERG SYMBOL DRRD:IN
REUTER SYMBOL REDY.NS
CMP (Rs) 2358
MARKET CAP (Rs in Cr) 41,626.70
STRATEGY BUY AT CMP AND ON DIPS TO 2260
TARGET 2790 - 2935 - 3180
STOP LOSS 2220 ON CLOSING BASIS
TIME FRAME 3 - 6 Months
FUNDAMENTAL VIEW :
Dr Reddy's Laboratories' consolidated net profit declined 15.6% to Rs 481.60 crore on 0.1% growth in total income to Rs
3508.37 crore in Q4 March 2014 over Q4 March 2013. The fall in net profit was partly due to base effect. The company
had received one-time settlement income of Rs 120 crore from Nordian Inc. (formerly MDS Inc.) in Q4 March 2013. The
company announced Q4 result during trading hours on Tuesday, 13 May 2014, when the stock settled 3.99% lower at Rs
2,610.70 on BSE.
Dr Reddy's Laboratories' consolidated net profit rose 28.2% to Rs 2151.20 crore on 12.5% growth in total income to Rs
13376.03 crore in the year ended 31 March 2014 (FY 2014) over the year ended 31 March 2013 (FY 2013).
Gross profit margin fell to 51.4% in FY 2014 from 52.1% in FY 2013. However, gross profit margin rose to 57.2% in Q4
March 2014 from 50.4% in Q4 March 2013.
Research & Development (R&D) expenses rose 62% to Rs 1240 crore in FY 2014 over FY 2013. Selling, general &
administrative (SG&A) expenses rose 13% to Rs 3880 crore in FY 2014 over FY 2013.
Earnings before interest, taxation, depreciation and amortization (EBITDA) rose 19% to Rs 3320 crore in FY 2014 over FY
2013.
The company launched 54 new generic products, filed 51 new product registrations and 61 DMFs globally in FY 2014, Dr
Reddy's Laboratories said. The company launched 13 new generic products, filed 22 new product registrations and 29
DMFs globally in Q4 March 2014.
Dr Reddy's Laboratories during market hours on Tuesday, 13 May 2014 said that board of directors of the company has
decided to have separate roles of the Chairman of the company and Managing Director and CEO.
The company has appointed Satish Reddy as Chairman of the Board. He previously held the position of Vice-Chairman,
Managing Director and COO. GV Prasad will continue as the CEO and provide leadership to the company in an executive
role. He has also been appointed as the Co-Chairman and Managing Director.
The company also announced that Abhijit Mukherjee, President, Global Generics, has been appointed as Chief
Operating Officer (COO). He will be responsible for both the global generics and pharmaceutical services and active
ingredients (PSAI) businesses.
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Dr Reddy's Laboratories said that Board of Directors of the company at its meeting held on Tuesday, 13 May 2014,
recommended a final dividend of Rs 18 per share for the financial year ended 31 March 2014.
Dr Reddy's Laboratories is an integrated global pharmaceutical company. Through its three businesses - Pharmaceutical
Services and Active Ingredients, Global Generics and Proprietary Products - Dr. Reddy's offers a portfolio of products
and services including active pharmaceutical ingredients (APIs), custom pharmaceutical services, generics, biosimilars
and differentiated formulations.
For the year ended March 31, 2014, on the consolidated basis, the company has posted a rise of 9.42% in its net profit
after taxes & Minority interest at Rs 1218.81 crore as compared to Rs 1113.88 crore for the same period in the previous
year. Total income of company has increased by 16.25% at Rs 12849.03 crore for year under review as compared to Rs
11053.09 crore in the previous fiscal.
Dr Reddy’s margins could be under pressure from the expected gain in the local currency going forward. Based on this
one would look at the PE multiple going up from the current 20.79x to 24.60x. While this may be offset by the increase
in local sales, the exports will be under the radar for some time to come. Post the issues of Ranbaxy in the USA this
counter has a positive bias and looks good to be bought for targets of 2790 and more.
TECHNICAL VIEW :
On April 02, 2014, we had issued buy call on DR REDDYS LAB at 2600 and price moved perfectly as per our expectations
and hit our mentioned target of 2750. After reaching our target the stock made an immediate high of 2781.75 on April
30, 2014. Soon after that we witnessed that the stock started correcting gradually. During this process, the stock price
has fallen by more than 18% in three weeks. The downtrend has bushed as stock is making inside candles in daily chart
near strong support of ‘89 EMA’ (Exponential Moving Average) in weekly chart, and price has started the rallying.
Khandwala Securities Limited 29 | P a g e
On Momentum Indicator front, Relative Strength Index (RSI) has bounced back sharply from oversold zone and silently
started moving towards north, indicating limited downside in the stock. And on monthly chart, RSI is moving at strong
support zone of 57 - 59, affirming bullish impulse to resume soon.
If we fastidiously observe the prices in daily chart, we are witnessing emergence of a beautiful harmonic pattern in daily
chart, named as ‘Bullish Butterfly Pattern’. Before going into deep, let us discuss what bullish butterfly pattern is? And
how it works?
Butterfly Pattern is different from the M-type and W-type alignments in the other patterns but the same Harmonic
Trading principles apply. The Butterfly Pattern is an extension harmonic pattern (that is - the D point exceeds the X
point) and is used to trade highs and lows at key reversal points. It represents a temporary extreme structure that seeks
to capitalize on the extended nature of the Extreme Harmonic Impulse Wave. It demands immediate change in price
action character immediately following pattern completion. This is as effective as other harmonic patterns, where
extreme harmonic impulse wave utilized depends upon location of couple of Fibonacci retracement levels.
Now coming back to daily chart of DrReddys, ‘Bullish Butterfly Pattern’ is clearly visible. Here, Stock price has initially
made the high of 2939.40 (Point A), then price corrects till 78.60% retracement level of the impulse rally ‘XA’ (2391.15 –
2939.40), which is placed at 2520 levels (Point B). After that price again bounced back and hit 2781.75 levels, which is
again 61.80% retracement level of the fall “AB” (2939.40 – 2520.05). Then an extreme fall has been observed in the
stock, which is halted at 127% retracement level of the first impulse (2391.15 – 2939.40) and 200% retracement level of
the second impulse wave (2520.05 – 2781.75), which also coincides with 127% extension level of point “AB” from point
“C”. Thus it fulfilled all the criteria of ‘Bullish Butterfly Pattern’ and started bouncing back.
As all other indicators and oscillators are moving resiliently in favour of buy side on the counter along with the harmonic
pattern, we are again advising to go long in the stock at current market price of 2358 and on dips to 2260 for the upside
targets of 2790 - 2935 - 3180. Stoploss for the trade should be placed below 2220 on closing basis.
Khandwala Securities Limited 30 | P a g e
FUNDAMENTAL VIEW:
Cipla’s 4QFY14 results were below estimates. Revenue grew 28% YoY to INR25.2b (miss of 3%), EBITDA was flat YoY at
INR4.1b (miss of 16%) and reported PAT declined 3% to INR2.6b (miss of 9%).
- Revenue growth was primarily led by export formulations on account of CiplaMedpro consolidation, excluding which
we expect sales growth to be in lower double-digits. Domestic formulation showed recovery and grew 15% YoY (in line),
while growth in export APIs was above estimates.
- EBITDA margin was down 460bp YoY to 16.1% (v/s est. 18.9%). Management attributed this to (1) higher contribution
from low-margin ARV business and (2) increasing R&D as well as staff costs. There was a forex gain of INR400m in other
income.
- FY15E guidance: Management expects sales growth in mid-teens coupled with EBIDTA margins similar to FY14 levels.
Domestic formulation is expected to outpace the industry growth led by new launches, while growth from new launches
in major export markets will be back-ended. Pressure on EBITDA margin will ease only after 1HFY15 as new launches in
US and Europe begin contributing meaningfully. Capex will be at INR5b and R&D expenses are expected to be in the
range of 6-7%.
Outlook and Valuation:
Post 4QFY14 results, a downgrade on EPS estimates for FY15E/16E by 5.75%/4.25% are in place to reflect (a) pressure
on margins due to the ongoing investments in R&D, building front-end in emerging markets and (b) our new currency
assumptions of INR/USD as 55/57 for FY15/FY16. The next few quarters for Cipla may well continue to be an investment
phase, the benefits of which are likely to come through only in FY16E. We estimate core EPS of INR19.1/23.3 for
FY15E/16E, which is 5%/3% below Bloomberg consensus estimate. The stock trades at 19.5x FY15E and 16.0x FY16E
earnings. KSL maintains Neutral rating with a revised target price of INR405 (17.35x FY16E EPS).
SCRIP CIPLA LTD
BLOOMBERG SYMBOL CIPLA:IN
REUTER SYMBOL CIPL.NS
CMP (Rs) 384.55
MARKET CAP (Rs in Cr) 30,844.22
STRATEGY BUY IN THE RANGE OF 380 – 365
TARGET 405 – 415 – 428
STOP LOSS 363 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
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TECHNICAL VIEW :
With the recent upside in the index gaining nearly 25-28 % and the individual stock performing more then 50 -60 % over
the couple of months, CIPLA has been one of the front line pharma counter which has been underperforming and has
lost nearly 20 % from its high of 450 levels.
With recent price action stock is back to its multi support zone in weekly chart around 360 – 350 mark and most of the
averages and oscillators being placed in the oversold zone suggesting a cap on the immediate downside. Understanding
the price behavior over the couple of months technically stock is likely to form a “Doji“formation on Weekly chart (A
first sign of reversal) along with the 89 EMA closing as an inside body candle, with a shorter and daily formation stock is
likely to witness a near term bounce till its falling Trend line (See chart) and likely to have a medium term breakout of its
overall (7-8) months congestion zone.
We recommend traders to initiate longs in the range of 380 – 365 for an immediate price action till 405 then for a
medium term target of 415 – 430 in couple of months with a strict stop loss of 363 levels.
Khandwala Securities Limited 32 | P a g e
FUNDAMENTAL VIEW
LUPIN LIMITED
Lupin’s Q4FY14 sales of Rs30.5bn were in line with their expectation, while adjusted EBITDA margin of 26.5% was
300bps ahead of their expectation. Lupin’s sales benefitted from changes in product mix in favour of US generics.
Shortfall in growth in domestic formulations (2% y-o-y growth) was substituted with 30% y-o-y growth in emerging
markets (EMs) and 20% y-o-y growth in API. Together, US generics and EMs have increased contribution of formulation
to 81% in Q4FY14 from 78% in Q4FY13. This has partially helped in higher EBITDA margin.
- New products help in US generic growth: Launches of Niaspan in Mar’14 and Cymbalta and Zymaxid in Nov‐Dec’13
have helped in 18% y-o-y growth to USD241m sales in US generics in Q4FY14. Limited competition in Niacin, sole
generic in Zymaxid and lower price erosion in Cymbalta have led to higher contribution from new products. However,
sales of branded products in US, with 10% contribution to US sales, were disappointing. Loss of patent in Antara,
expiration of contracts in Aero chambers and short duration of winter (led to normal flu season) in US led to dismal
sales of branded portfolio.
- Valuation: Maintain ‘Accumulate’, increased TP to Rs 1010-1080: While management guided for 25‐26% EBITDA
margin in FY15, they believe, the major contributor to 26.5% EBITDA was 300bps q-o-q reduction in net RM expenses in
Q4FY14. Employee expenses increased 3% despite reduction in headcount by 35 reps to current sales force of 125,
implying absorption of retrenchment cost in Q4FY14. They expect decrease in employee expenses Q1FY15E onwards.
Sales growth is guided at 15‐20%, while Capex is expected to be USD100m (Rs5bn) and tax rate at 33% in FY15E. This
leads to an increased sales projection by 2% and 4% and EPS by 14% and 12% in FY15E and FY16E, respectively. This has
resulted in an increase in the expected price to Rs1010-1080.
SCRIP LUPIN LIMITED
BLOOMBERG SYMBOL LPC:IN
REUTER SYMBOL LUPN.NS
CMP (Rs) 935.95
MARKET CAP (Rs in Cr) 41,981.30
STRATEGY BUY IN THE RANGE OF 900 – 890
TARGET 1010 – 1080
STOP LOSS 810 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
Khandwala Securities Limited 33 | P a g e
TECHNICAL VIEW :
On the monthly chart LUPIN has gained 80 % from its low of 563 levels, and has been outperformer in the pharma
space. With respect to the monthly charts stock is witnessing some distribution at higher level (which can be named as
profit booking) and suggest sideways to negative move in smaller time frame (2-3 weeks).
As per daily and weekly chart any decline in prices action around 900 – 890 levels should be viewed as a healthy buying
zone, as the long term charts stands to be positive and can scale much higher. The placement of 3&8 moving average
along with RSI oscillators witnessing a positive crossover from its oversold zone suggest the limited downside. Whereas
the MACD histogram the trend following indicator has managed to close with first positive bar in the daily chart
suggesting strength.
Traders are advised to initiate a longs in declines in the range of 900 – 890 levels with as strict stop loss place below 810
levels for a price target of 1010 – 1080 levels respectively.
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SECTOR COMPARISON – CAPITAL GOODS
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SCRIP LARSEN AND TOUBRO LIMITED
BLOOMBERG SYMBOL LT:IN
REUTER SYMBOL LART.NS
CMP (Rs) 1548.90
MARKET CAP (Rs in Cr) 1,43,646.38
STRATEGY ACCUMULATE ON DIPS TOWARDS 1330
TARGET 2170 - 2390 – 2670
STOP LOSS 1180 ON CLOSING BASIS
TIME FRAME 6 - 8 MONTHS
FUNDAMENTAL VIEW :
The strong growth in bottom-line can be explained by strong operating performance and higher extraordinary income.
Consequent to completion of demerger of hydro carbon business to wholly owned subsidiary effective from 1 April
2013 in pursuant to approval of said demerger scheme by Bombay High Court vide its order dated 20 December 2013,
the numbers of corresponding previous quarter/nine month and FY 2013 figures were restated and the growth figures
are in comparison to restated P&L figures
The growth in L&T's top line during Q4 March 2014 was due to progress in various jobs under execution. The
international revenue rose 25% to Rs 2966 crore in Q4 March 2014 over Q4 March 2013. International revenue
constituted 15% of total revenue in Q4 March 2014.
L&T's order intake during the quarter was steady at Rs 26737 crore. International order inflow during the quarter at Rs
11389 crore constituted 43% of the total order inflow for the quarter.
International revenue rose 22% to Rs 9129 crore in FY 2014 over FY 2013. It constituted 16% of the total revenue in FY
2014.
The company successfully secured fresh orders worth Rs 94108 crore in FY 2014, registering a significant growth 15%
YoY, on a large base despite a sluggish economic environment during 2013-14. The international order inflow during the
year at Rs 30752 crore grew more than 3 times on a YoY basis, constituting 33% of the total order inflow. Major orders
during the year were procured by the infrastructure segment, L&T said in a statement.
The order book at Rs 162952 crore as at 31 March 2014, grew 13% on YoY basis. International order book constituted
21% of the total order book, L&T said in a statement.
With regard to future business outlook, L&T said it has weathered the challenging times of the past few years due to its
inherent capabilities and strong balance sheet. Being well positioned to tap the emerging opportunities in its core
businesses, the company looks forward to a period of renewed investment momentum and sustainable growth. Given
Khandwala Securities Limited 36 | P a g e
its large order book, the company is optimistic to maintain its growth momentum in the medium term, as domestic and
global economic environment improves, L&T said in a statement.
We strongly believe that L&T stands a very good chance of winning orders in its core sectors of strength and
simultaneously narrow losses in new businesses. Lastly, the fund raising in L&T IDPL would obviate the need for infusion
of funds from the parent as well as reduce losses attributable to L&T, thereby improving its RoE. Hence we upgrade our
recommendation to Buy. LT is expected to be a major gainer from the new Government policies going forward. Based
on this one would look at the PE multiple going up from the current 27x to 35.30x. This counter is a high beta stock
which has just broken it’s all time high and looks good to be bought for targets of 2170 and more.
TECHNICAL VIEW :
Stock price of LARSEN AND TOUBRO LTD (L&T) was moving in strong uptrend from August 2002 to November 2007.
Stock price has moved abruptly from 26 to 1563 in the said period. The mega Bull Run in the stocks has halted in late
2007 and stock price has started moving in sideways direction in monthly chart. In the ongoing consolidation phase of
last six years, stock has made ‘lower high - higher low’ pattern has resulted into formation of ‘Symmetrical Triangle
Pattern’ in monthly chart. Recently, stock price has given multi-year breakout and made new life time high. In May
2014, stock successfully closed above the breakout level of the mentioned pattern, which indicates the huge upside
potential in the counter. Momentum Oscillator RSI has also closed above the resistance of 70 levels in monthly chart,
indicative of continuation in rally with healthy momentum. RSI is also moving well above the bullish range of 60 in both
daily as well as weekly chart, suggesting strong momentum to continue for upcoming weeks.
After meticulously observing the price patterns and indicators, we are expecting a new leg of impulse to resume soon.
Thus, we advise to go long in the counter on every dips towards 1330 levels for the upside target of 2170 - 2390 – 2670
with the stoploss placed below 1180 on closing basis.
Khandwala Securities Limited 37 | P a g e
SCRIP BHARAT HEAVY ELECTRICALS LIMITED
BLOOMBERG SYMBOL BHEL:IN
REUTER SYMBOL BHEL.NS
CMP (Rs) 242 (14th MARCH 2014).
MARKET CAP (Rs in Cr) 59268.63
STRATEGY BUY 50% POSITIONS AT CMP 240 AND REMAINING BETWEEN 210-200
TARGET 345/401/430
STOP LOSS 175 ON CLOSING BASIS
TIME FRAME 6 to 9 MONTHS
FUNDAMENTAL VIEW :
Bharat Heavy Electricals, the PSU power equipment major continued its weak performance with its net profit for the quarter ended March 2014 register sharp fall of 43% to Rs 1844.60 crore. Sharp fall in bottom-line is largely on account of lower sales (down 22% to Rs 15031.50 crore) and 600 bps crash on operating profit margin which together resulted in 41% decline in operating profit to Rs 2733.40 crore. Hurt further by lower other income, higher depreciation and marginally higher tax incidence the net profit was eventually lower by 43%. The financials for the quarter ended Dec 2013 includes the financial results of HPVP unit (erstwhile BHPV) consequent to merger of the same wef Aug 30, 2013. The impact at top line and PBT on account of this merger for the quarter ended March 2014 is incremental revenue of Rs 49.8 crore and at PBT level it was a profit of Rs 21.2 crore.
Sales (net of excise and service tax) but excluding other operating income for the quarter was lower by 22% to Rs 14754.90 crore. But the value of production (net of excise) for the same period was lower by 24% to Rs 13562.70 crore. Client side issues hold back the burnout of orders as per schedule leading to lower revenue.
Downside in revenue is from both power as well as industry segment. While the segment revenue of power was lower by 21% (to Rs 12210.8 crore or 79% of total sales) but that of industry were lower by 26% (to Rs 3220.8 crore or 21% of sales). Lower sales of power sector are largely on account of client side issues where the project execution slowed due to non-availability of all clearance to proceed, or non-payment for bills raised etc. On industry front the delay in order finalization and eventual placement of order due to normal bureaucratic delays in case of Railway orders and due to economic downturn in case of industries.
Operating profit contracted by sharp 600 bps to 18.2% as all cost heads seen an increase. While the material cost (as % to sales net of stocks) was higher by 110 bps to 54.1%. However the staff cost was higher by 170 bps (to 9.5%) and other expenses by 300 bps (to 16.7%). Sharp jump in staff cost is largely due to increase in manpower strength due to merger of BHPC and consequential realignment of their salary and compensations in line with that of BHEL. Thus hit by lower sales and sharp fall in OPM, the operating profit was lower by 41% to Rs 2733.40 crore.
The EBIT suffered with lower segment profit of both power systems and industry. The segment profit of Power was lower by 43% to Rs 2335.4 crore hurt by lower sales as well as 700 bps contraction in segment margin to 19.1%. Similarly the segment profit of industry was down by 33% (to Rs 626.8 crore) on the back of lower sales and sharp contraction in segment margin (down 210 bps to 19.5%).
Khandwala Securities Limited 38 | P a g e
Other income was lower by 1% to Rs 288.90 crore with interest income on customer advance drop with lower order bookings. The interest cost was higher by 18% (to Rs 47.90 crore) and depreciation was lower by 6% (to Rs 271.90 crore). Thus the de-growth at PBT was 42% to Rs 2696.50 crore.
EO Expenses was higher at Rs 6 crore compared to Rs 0.40 crore in the corresponding previous period. Thus the PBT (after EO) was lower by 42% to Rs 2696.50 crore.
Provision for taxation was down by 37% (to Rs 883.20 crore) in absolute terms and the tax incidence for the quarter was marginally higher at 32.7% compared to 30.2% in the corresponding previous period. Thus the PAT was lower by 44% to Rs 1813.30 crore.
PPA for the quarter was an income of Rs 31.30 crore (up 91%) and thus the de-growth at net profit moderated a bit to 43% (to Rs 1844.60 crore).
Yearly performance
Standalone sales were lower by 19% to Rs 39108.80 crore. But lower sales together with 780 bps contraction in OPM, resulted in 52% fall in operating profit to Rs 4519.80 crore. The operating profit was impacted by under recovery of capacity, higher doubt full debt provision and impact of BHPV. Eventually the net profit was lower by 48% to Rs 3460.80 crore. But for higher other income (up 44% to Rs 1616 crore) the fall in net profit would have been much higher. Consolidated sales were lower by 19% to Rs 39569.40 crore. But lower sales together with 780 bps contraction in operating margin led to 52% fall in operating profit to Rs 4579.50 crore. After accounting for higher other income, higher interest, higher depreciation and taxation and higher EO exp, the PAT was lower by 48% to Rs 3471 crore. The PPA income was lower by 49% to Rs 31.30 crore. The minority interest was share of loss amounting Rs 0.50 crore (up 67%). Thus the net profit (after MI) was lower by 48% to Rs 3502.80 crore. Other developments To pay a final dividend of Rs 1.52 per share of Rs 2 face value in addition to the interim dividend of Rs 1.31 per share (of Rs 2 face value) paid during FY14. BHEL is expected to be a major gainer from the new Government policies going forward. Based on this and discounting its dismal show in Q4 2014, one would look at the PE multiple going up from the current 14.16x to 24.35x. However this counter is a good defensive stock which looks good to be bought on dips to 200.
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TECHNICAL VIEW :
This stock is in uptrend and it was up by more than 34% on monthly closing basis. At current level, Risk to reward ratio
is on higher side but one can use any correction in this stock as a buying opportunity. This stock was under performing
Nifty from 2010 to 2013 i.e. Nifty is trading at all time high but its way below from all time high levels. So we are
expecting this stock to outperform Nifty and will take maximum advantage of this bullishness in this market. This
stock is having minor support at 235 levels and strong support at 210-200 range. 290 is the immediate target and
above that 346/401/430 levels to watch out for.
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SECTOR COMPARISON - AUTO
Khandwala Securities Limited 41 | P a g e
FUNDAMENTAL VIEW :
Hero MotoCorp posted net profit of Rs. 5544.30 million for the Quarter ended March 31, 2014
Hero MotoCorp, on Sunday reported an 8% increase in May sales at 6,02,481 units. The two-wheeler company had sold
5,57,890 units in the same month last year, Hero MotoCorp said in a statement. Hero MotoCorp posted net profit
of Rs. 5544.30 million for the Quarter ended March 31, 2014 whereas the same was at Rs. 5742.30 Mn for the Quarter
ended March 31, 2013. Total Income was at Rs. 66359.40 Mn for the Quarter ended March 31, 2014 whereas the same
was at Rs. 62502.60 Mn for the Quarter ended March 31, 2013.
HEROMOTO reported an EPS of 105.60 for the year ending on 31st March 2014. Based on this the current price is trading
at a multiple of 22.50x. Going forward HEROMOTO is expected to touch a PE of 26x and the price target based on that
would be upwards of 2715.
SCRIP HEROMOTOCORP
BLOOMBERG SYMBOL HMCL:IN
REUTER SYMBOL HROM.NS
CMP (Rs) 2345.85
MARKET CAP (Rs in Cr) 46801.76
STRATEGY BUY IN THE RANGE OF 2345 - 2190
TARGET 2715/2980/3125
STOP LOSS 2090 ON CLOSING BASIS
TIME FRAME 5 - 7 Months
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TECHNICAL VIEW :
After consolidating in a range of 2230 and 1420 for last 4 years the stock has finally ripped off on the upside and has
confirmed a bullish pattern known as ‘RECTANGLE CHANNEL’. Since pattern formation is a dynamic process and hence
within this long term ‘RECTANGLE CHANNEL’ we are also witnessing an ‘INVERSE HEAD N SHOULDER’ in a shorter time
frame as shown in the chart. Currently the prices are trading near the breakout levels and technically it can be
presumed that till the time the stock sustains above the breakout levels chances of a sharp rally from the current levels
cannot be ruled out. Looking on all the above price patterns and positive placement of momentum oscillators like RSI
and MACD we recommend a buy on HEROMOTOCO at CMP 2345 and on dips to 2190 for targets of 2715/2980/3125
with SL of 2090 on closing basis.
Khandwala Securities Limited 43 | P a g e
FUNDAMENTAL VIEW:
Mahindra & Mahindra’s (M&M’s) Q4FY14 operating performance was in line with estimates. The combined entity’s
(M&M + MVML) EBITDA margin was flat YoY to 14.0% (Excl. Mahindra Truck & Bus Ltd.). MTBL reported an EBITDA loss
of Rs3.4bn for FY14 which was consolidated in Q4. Hence, the reported EBITDA margin of M&M+MVML was lower at
10.2%. Management indicated new launches in the compact UV segment in CY15 based on two new platforms. On
tractors, they were cautiously optimistic and guided for an 8.0-10.0% growth. A 12.0% CAGR in Automotive segment
volumes and 8.0% CAGR in tractor volumes over FY14-FY16E period seems to be in place. We stand by the ‘Accumulate’
rating on the stock with a SOTP based Price of Rs1,200 as we roll over to Mar’16E.
- M&M+MVML EBITDA margin flat YoY at 14.0%:
Revenue grew by 2.3% YoY to Rs102.1bn, whereas EBITDA margin declined by 370bps YoY to 10.4% (mainly on account
of full year impact of MTBL financials in Q4FY14). As a result, EBITDA for the combined entity declined by 26.1% YoY to
Rs10.6bn. However, due to tax credit on account of accumulated losses at MTBL, PAT grew by 4.9% YoY to Rs9.1bn
(Plea: Rs9.2bn). Excl. MTBL, EBITDA was flat at Rs14.0bn, with EBITDA margins maintained at last years’ level of 14.0%.
Adj. for MTBL, PAT came in at Rs9.2bn (indicating no impact on bottom‐line on account of tax credit).
SCRIP MAHINDRA & MAHINDRA LTD
BLOOMBERG SYMBOL MM:IN
REUTER SYMBOL MAHM.NS
CMP (Rs) 1235.50
MARKET CAP (Rs in Cr) 75,785.56
STRATEGY BUY IN RANGE 1200 - 1180
TARGET 1380 – 1420
STOP LOSS BELOW 1060 ON CLOSING BASIS
TIME FRAME 2 - 3 Months
Khandwala Securities Limited 44 | P a g e
TECHNICAL VIEW:
One of the outperformed in the four wheeler space and marking a percentage gain of more than 72 % in 7-8 months,
stock is trading to its all time high and suggest its long term trend positive.
Whereas on the monthly chart, it is more likely we can witness one more bull candle as compared to its previous month
15% gain, before we see any reversal additionally the RSI has also witnessed a break out from its over bough zone and
approaching further upside suggesting strength, as the stock is trading near to its all time high any divergence or
negative cross over in smaller degree charts can be negated or can also be trapped by the bears.
Going further any aggressive traders can initiate longs in the range 1200 – 1180 with a stop loss placed below, 1060 for
an upside view around 1380 – 1420 levels.
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SECTOR COMPARISON –OIL & GAS
Khandwala Securities Limited 46 | P a g e
SCRIP ONGC
BLOOMBERG SYMBOL ONGC:IN
REUTER SYMBOL ONGC.NS
CMP (Rs) 378 (31th MAY 2014).
MARKET CAP (Rs in Cr) 323611.41
STRATEGY BUY 50% POSITIONS AT CMP 378 AND REMAINING BETWEEN 315-335
TARGET 435/485/567
STOP LOSS 280 ON CLOSING BASIS
TIME FRAME 9 to 12 MONTHS
FUNDAMENTAL VIEW:
Oil & Natural Gas Corporation Limited operates in the Crude petroleum and natural gas sector. In addition to historical
fundamental analyses, the complete report available to purchase compares Oil & Natural Gas Corporation Limited with
three other crude oil and natural gas companies in Asia: Inpex Corporation of Japan (2013 sales of 1.22 trillion Japanese
Yen [US$11.95 billion] of which 43% was MidEast&Africa), PTT Exploration & Production Public Company Limited of
Thailand (224.97 billion Thai Bahts [US$6.88 billion] ), and CNOOC Limited which is based in Hong Kong (361.05 billion
Hong Kong Dollars [US$46.56 billion] of which 87% was E&P).
Oil & Natural Gas Corporation Ltd has posted a net profit of Rs. 48890.00 million for the quarter ended March 31, 2014
as compared to Rs. 33887.10 million for the quarter ended March 31, 2013.
Total Income has decreased from Rs. 230753.10 million for the quarter ended March 31, 2013 to Rs. 226849.20 million
for the quarter ended March 31, 2014.
The Company has posted a net profit of Rs. 220948.10 million for the year ended March 31, 2014 as compared
to Rs. 209257.00 million for the year ended March 31, 2013.
Total Income has increased from Rs. 884521.50 million for the year ended March 31, 2013 to Rs. 906021.60 million for
the year ended March 31, 2014.
ONGC has an EPS of 25.82 and is currently trading at 397 which is 15.37x multiple on its EPS. Going forward we expect it
to move upward on the bourses and touch 16.85x multiples and more. Overall, a very good stock to have in the oil and
gas segment.
Khandwala Securities Limited 47 | P a g e
TECHNICAL VIEW:
As we can see on monthly chart, it was consolidating between 240 to 340 levels from last 7 years and now it gives
breakout on monthly basis. From last 7 years especially last 5 years, it was consolidating at higher levels after 1700
times gain i.e. from 20 levels to 340 levels in just 7 years from 2000 to 2007. Currently it is giving 5 years consolidation
levels on monthly closing basis. This stock is Buy on dips and not sell on rise. On every Dip, one should buy at support
levels and we are expecting this stock to outperform Nifty on long run.
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SCRIP RELIANCE IND
BLOOMBERG SYMBOL RIL:IN
REUTER SYMBOL RELI.NS
CMP (Rs) 1065 (15.30 Hours IST, 31/05/2014)
MARKET CAP (Rs in Cr) 344284.41
STRATEGY BUY 50% POSITIONS AT CMP 1065 AND REMAINING BETWEEN 1020-1035
TARGET 1240/1411/1583
STOP LOSS 975 ON CLOSING BASIS
TIME FRAME 9 to 12 MONTHS
FUNDAMENTAL VIEW:
Reliance Industries Limited operates in the Petroleum refining sector. In addition to historical fundamental analyses, the
complete report available to purchase compares Reliance Industries Limited with three other companies in this sector in
India: Bharat Petroleum Corporation Limited (2014 sales of 2.64 trillion Indian Rupees [US$44.84 billion] ), Hindustan
Petroleum Corporation Limited (2.34 trillion Indian Rupees [US$39.71 billion] ), and Essar Oil Ltd (986.02 billion Indian
Rupees [US$16.72 billion] ).
Sales Analysis. Reliance Industries Limited reported sales of 4.34 trillion Indian Rupees (US$73.68 billion) for the fiscal
year ending March of 2014. This represents an increase of 9.7% versus 2013, when the company's sales were 3.96
trillion Indian Rupees. Sales at Reliance Industries Limited have increased during each of the previous five years (and
since 2009, sales have increased a total of 188%). Sales of Others saw an increase that was more than double the
company's growth rate: sales were up 28.4% in 2014, from 142.65 billion Indian Rupees to 183.15 billion Indian Rupees.
Reliance Industries Limited also saw significant increases in sales in Petrochemicals (up 16.2% to 1.02 trillion Indian
Rupees) . Not all segments of Reliance Industries Limited experienced an increase in sales in 2014: sales of Refining fell
14.5% to 3.16 trillion Indian Rupees. Reliance Industries Limited also experienced decreases in sales in Oil and Gas
(down 1.1% to 108.88 billion Indian Rupees) .
RELIANCE has an EPS of 68.02 and is currently trading at 1082 which is 15.95x multiple on its EPS. Going forward we
expect it to move upward on the bourses and touch 18.23x multiples and more. Overall, a very good stock to have in
the oil and gas segment. Has been consolidating for three years and expected to move up smartly.
Khandwala Securities Limited 49 | P a g e
TECHNICAL VIEW:
As we can see on monthly chart, it was consolidating between 700 to 920 levels from last 4 years and now it gives
breakout on monthly basis. From last 7 years especially last 5 years, it was stabilizing at higher levels. It gives breakout
on ascending triangle on monthly chart which shows strength in this stock. Thus we are expecting exponential upside
movement in this stock towards all time high levels. This stock is having resistance at 1130-1150 levels and then it can
move towards 1240/1411/1583 levels. This stock is having small support at 980levels and major supports at 964/920
levels going ahead.
Khandwala Securities Limited 50 | P a g e
SECTOR COMPARISON –METALS
Khandwala Securities Limited 51 | P a g e
SCRIP TATA STEEL
BLOOMBERG SYMBOL TATA:IN
REUTER SYMBOL TISC.NS
CMP (Rs) 475
MARKET CAP (Rs in Cr) 46,132.73
STRATEGY BUY IN RANGE OF 475 – 425
TARGET 625/740/915
STOP LOSS 365(CLOSING BASIS)
TIME FRAME 6 TO 8 Months
FUNDAMENTAL VIEW:
Tata Steel Limited operates in the Blast furnaces and steel mills sector. In addition to historical fundamental analyses,
the complete report available to purchase compares Tata Steel Limited with three other steel companies in Asia: JSW
Steel Limited (2014 sales of 512.20 billion Indian Rupees [US$8.69 billion] ), Kobe Steel, Ltd. of Japan (1.82 trillion
Japanese Yen [US$17.92 billion] ), and JFE Holdings Incorporated which is also based in Japan (3.67 trillion Japanese Yen
[US$36.01 billion] ).
Sales Analysis. Tata Steel Limited reported sales of 1.49 trillion Indian Rupees (US$25.20 billion) for the fiscal year
ending March of 2014. This represents an increase of 10.3% versus 2013, when the company's sales were 1.35 trillion
Indian Rupees. This was the fourth straight year of sales growth at Tata Steel Limited. The sales level in 2014 was fairly
close to the level five years ago: in 2009, Tata Steel Limited had sales of 1.47 trillion Indian Rupees.
Based on the market price of 492 the PE based on an EPS of 37.30 works out to 13.30x.
Khandwala Securities Limited 52 | P a g e
TECHNICAL VIEW:
On the weekly charts, the stock prices of TATASTEEL have given a bullish ‘INVERTED HEAD N SHOULDER’ breakout at
around 450 levels. The pattern breakout was supported with huge volumes. At around same levels of ‘INVERTED HEAD
N SHOULDER’ breakout we are witnessing another major breakout at 450 levels where prices have closed above the
sloping trend line which was acting as a strong supply zone since last 5 years. As seen in the chart the prices have
registered ‘HIGHER TOP HIGHER BOTTOM’ price cycle in short as well as in long term time frame which indicates
strength in the bulls. Going further if prices sustains above the 440 levels then we are expecting a strong upward
movement in the stock prices for the next levels of 600. Hence we recommend a buy in TATASTEEL at CMP 475 and on
dips to 425 for targets of 625/740/915 with the SL of 365 on closing basis.
Khandwala Securities Limited 53 | P a g e
SECTOR COMPARISON –FMCG
Khandwala Securities Limited 54 | P a g e
FUNDAMENTAL VIEW:
HUL’s Q4FY14 revenue & PAT growth were more or less in line with their estimates, however, the company
disappointed marginally at the operating level. Volume growth of 3% y-o-y was subdued, reflecting slowdown in the
FMCG market. However, price hikes supported the overall revenue growth. The revenue growth of Soaps & Detergents
(near to double digits) was slightly better than the y-o-y growth reported in the previous two quarters.
In a scenario of slowdown in consumer spending, the company has limited scope for price hikes, if the input cost
inflation persists. Hence improvement in volume growth is essential. KSL feels HUL would be able to meet their
projections for FY15, which are conservative. A target price of 680 based on a PE of 38x seems achievable.
SCRIP HINDUSTAN UNILEVER LTD
BLOOMBERG SYMBOL HUVR:IN
REUTER SYMBOL HLL.NS
CMP (Rs) 603.35
MARKET CAP (Rs in Cr) 1,29,991.96
STRATEGY BUY IN RANGE 590 – 575
TARGET 680 - 720
STOP LOSS BELOW 530 ON CLOSING BASIS
TIME FRAME 3 - 4 Months
Khandwala Securities Limited 55 | P a g e
TECHNICAL VIEW:
On the weekly chart stock has gain of 7.45% in its previous week and has formed a bullish stick sandwich pattern near to
its support levels of 550 marks, the positive cross over in Stochastic and RSI oscillators from its oversold zone suggest
the strength at current levels.
With respect to the weekly chart an strong consolidation near to its previous break out levels around 550 and a bullish
stick sandwich pattern followed by above average volumes, suggest that bulls are in driving seat, where as in the near
term prices action and oscillators suggest that we are likely to witness a consolidation break out and likely to retest its
previous high 714 levels.
Traders are advised to initiate longs in the range of 590 – 575 levels with a strict stop loss placed below 530 levels for an
upside till 680 and 720 respectively.
Khandwala Securities Limited 56 | P a g e
SCRIP ASIAN PAINTS LIMITED
BLOOMBERG SYMBOL APNT:IN
REUTER SYMBOL ASPN.NS
CMP (Rs) 509.45
MARKET CAP (Rs in Cr) 48,866.33
STRATEGY BUY IN RANGE OF 475 - 490
TARGET 545 – 563 - 595
STOP LOSS 458 ON CLOSING BASIS
TIME FRAME 2 - 4 MONTHS
FUNDAMENTAL VIEW :
The company has reported 10.30% fall in its net profit after tax of Rs 239.56 crore for the quarter ended March 31, 2014
as compared to Rs 267.07 crore for the same quarter in the previous year. However, total income of the company
increased by 21.53% at Rs 2763.07 crore for quarter under review as compared to Rs 2273.55 crore for the quarter
ended March 31, 2013.
On consolidated basis, the company has reported 14.46% rise in its net profit after taxes & Minority interest at Rs
287.42 crore for the quarter ended March 31, 2014 as compared to Rs 251.11 crore for the same quarter in the previous
year. Total income of the company has increased by 21.47% at Rs 3338.19 crore for quarter under review as compared
to Rs 2748.20 crore for the quarter ended March 31, 2013.
For the year ended March 31, 2014, the company has posted a fall of 10.18% in its net profit after taxes at Rs 1050.00
crore as compared to 1169.06 Rscrore for the same period in the previous year. However, total income of company
improved by 16.58% at Rs 10592.44 crore for year under review as compared to Rs 9086.19 crore for the period ended
March 31, 2013.
For the year ended March 31, 2014, on the consolidated basis, the company has posted a rise of 9.42% in its net profit
after taxes & Minority interest at Rs 1218.81 crore as compared to Rs 1113.88 crore for the same period in the previous
year. Total income of company has increased by 16.25% at Rs 12849.03 crore for year under review as compared to Rs
11053.09 crore in the previous fiscal.
Based on the profitability of Q4 2013-14 we see a growth in the PE from the 41.54x to 44.70. A favorite stock of
Institutions, it is expected to retain its leader status in the paints segment.
Khandwala Securities Limited 57 | P a g e
TECHNICAL VIEW :
ASIAN PAINTS LTD – one the most favorite stock of institution due to its past record. Stock has given consistent return
over the years. Stock price is moving in strong uptrend from last 14 years in weekly chart. From last four years stock is
moving in ‘Rising Channel’ in weekly chart. On daily chart, Stock is moving in short term down trend.
If we meticulously observe the prices in daily chart, we are witnessing emergence of a beautiful harmonic pattern in
daily chart, named as ‘Bullish Butterfly Pattern’. Here we are projecting the completion of ‘Bullish Butterfly Pattern’ in
daily chart, the completion of this pattern will be around 478 and 478 levels. Here after the rally from 503 to 563.90
(XA), stock price has corrected and made the low of 515.70 (point B), which is 78.60% retracement level of the fall (503
– 563.90) and then price again rallied for couple of days and has retraced till 70.70% of the fall (AB) at 549.85 (Point C)
and has started falling. At current juncture, price is heading towards south and can halt near the potential reversal zone
of 478 – 487 (Point D), which is 141% reciprocal of ‘XA’ (503 – 563.90) which also coincides with 200% reciprocal of ‘BC’
(515.70 – 549.85). Any reversal from 478-487 range will result into completion of ‘Bullish Butterfly’ pattern in daily
chart.
On Oscillator front, Momentum indicator RSI is moving at the buying support level of 40, indicates a new impulse to
resume on any reversal in indicator. We advise to go long in the Asian Paints in range of 475 to 490 for the target price
of 545 – 563 - 595. Stoploss for the trade should be placed below 458 on closing basis.
Khandwala Securities Limited 58 | P a g e
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Khandwala Securities Limited and its affiliates are a full-service, integrated investment banking, investment management and brokerage group. We along with our affiliates are leading underwriter of securities and participants in virtually all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals provide important input into our investment banking and other business selection processes. Investors should assume that Khandwala Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our research professionals are paid in part based on the profitability of Khandwala Securities Limited, which include earnings from investment banking and other business. Khandwala Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally, Khandwala Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general information of clients of Khandwala Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Khandwala Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment.
Certain transactions -including those involving futures, options, and other derivatives as well as non-investment-grade securities - give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavour to update on a reasonable basis the information discussed in this material, but regulatory, compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have “long” or “short” positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. For the purpose of calculating whether Khandwala Securities Limited and its affiliates holds beneficially owns or controls, including the right to vote for directors, 1% of more of the equity shares of the subject issuer of a research report. Khandwala Securities Limited and its affiliates may, to the extent permissible under applicable laws, have acted on or used this research to the extent that it relates to issuers, prior to or immediately following its publication. Foreign currency denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies affectively assume currency risk. In addition options involve risks and are not suitable for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.
This report has been prepared by Khandwala Securities Limited (KSL). KSL has reviewed the report and, in so far as it includes
current or historical information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.