Category Archives: Stock

Will ITC go to 150 -175

Times are uncertain . But there are some facts that cannot be ignored.

P/ BV = 6.80

P/E = 31.00

The most important – LIC the saviour has a 16 % stake as of June 18 , and it needs to make money and also generate some, if it continues to be the saviour of last resort .

At 291 , this stake would be valued at approximately 56,000 crore.

And it would need to monetise a part of it . The prospect of LIC selling , is the biggest overhang .

Playing Andhra Bank : Range 35 to 86 : #andhrabank #publicsectorbanks

Andhra Bank has a Current P/BV of 0.39 and is one of the few PSU banks which has maintained a positive P&L consistently .

#AndhraBank #publicsectorbanks

 

The lowest P/BV seen has been around 0.28 , basis which the lower end of the range shifts towards 37.40 . The Higher range shifts towards 0.40 to 0.65 times P/BV which portends to a price range between 53.42 to 86.81 .

For passive investors a capital allocation of 40% at current price and then averaging towards as close 37.40 with a view to sell into the higher range ina a few months seems a prudent strategy  for a greater than 12% return per annum.

Leveraged aggressive  investors who are comfortable with running draw downs and options , a strategy could be at the right price levels to build positions in out of the money puts while going long the futures   with an objective to rollover positions to exit at a higher end of the price range over the coming months ;while controlling the leverage ratio .In case of a drastic quick fall the options should provide a bit of cushion.

The underlying will be volatile and is very prone to large fast moves since the free float  market cap is only around  1290 crores. Fundamentally the stock is better placed than peers most of whom are at multiples of greater than 0.45 times book value. The below table compares a few peers .

  Andhra Bank Central Bank of India Dena Bank Oriental Bank of Commerce
         
CMP 52.65  95.00 30.80 127.30
Book Value/ Share 133.56  71.07 64.97 351.85
Price/BV 0.39  1.34 .47 0.36
M Cap ( crs) 3,590  18,070 2,428 4,407
Free) Float M cap ( crs) 1,290  2,530 850 1,807
Shareholding Pattern( Jun 17)%   
Govt 69.77  81.38 70.04 58.38
Institutions 16.24  14.39 19.76 24.92
Others 13.99  4.23 10.20 16.70
 
FY17 operating Profit  4,388 3,089 1,390 4,170
FY 17 PAT 174  -2,439 -132 -1082
NIM FY 17 3.07%  2.51% 2.00% 2.42%
Total assets 1,44,232  1,53,008 77,538 1,66,438
Total NPAS 17,670 (12.25%)  27,251
(17.81%)
12,619
(16.27%)
22,859
(13.73%)
PCR FY 17 51.03%  58.43%  50.56% 53.61%
 
 Jun 17 Operating profit 1,369  451  288 1008
 Jun 17 PAT 40  -577  -132 -486
 NIM Jun 17 3.12%  1.95% 2.44% 2.19%
Total Assets Jun 17 1,45,801  1,72,198  74,807 1,64,577
Total NPAs Jun 17 13,509
(13.33%)
 31,398
(18.23%)
 12,994
(17.37%)
24,409
(14.83%)
PCR Jun 17  51.73%  54.48%  51.72% 54.68%
 
CET 1 Jun 17 7.45%  6.17%  9.19%( maybe inc addtnl) 7.24%
Additional Tier 1 Jun 17 1.44%     1.29%
Tier II Jun 17 3.09%  3.74%  2.46% 2.72%
Total CRAR Jun 17 11.98%  9.91%  11.65% 11.25%
 
Branches ( Jun 17 ) 2,908 4,716  1,874 2,376
ATM/BNA/CR 3,928  5,267  1,538 2,607

Disclaimer : This is not investment advice but a generic article for reading purposes. Readers are strongly encouraged to verify facts and seek opinions of registered financial advisors. At any point of time FFSPL may or may not have positions in asset classes/ specific assets , being or not being contents of this publication/presentation/article.

 

 

 

SUN PHARMA KEEP ACCUMULATING

SUN PHARMA : CMP : 475 , Price Target 1 : around 640 , Price target 2 :around 740.Possible downside to  a 365 to 400 range however cannot be ruled out.

Sun Pharma  at the current market price (CMP)  of 475 has a cash P/E at 16.37 and P/BV at 3.11 . Looking at the strong downward momentum and ” stay – away ” , “avoidable”  view on the pharma sector , the stock may be hammered down towards 365 to 400 levels , however alternately the valuations are BECOMING attractive and so are the technicals.

FY 17 FY 16 FY 15 FY 14 FY 13
Consolidated Net profit (crs) 6964 4715 4539 3141 2983
BV PER SHARE 152 130.47 123.49 89.44 59.08
Price Low 571 704 570 405 277
Price High 841 1200 1075 651 424
Price low to BV 3.76 5.40 4.62 4.53 4.69
Price High to BV 5.53 9.20 8.71 7.28 7.18
EPS 29.03 19.6 21.92 15.17 14.43
Price Low to EPS 19.67 35.92 26.00 26.70 19.20
Price High to EPS 28.97 61.22 49.04 42.91 29.38

Assuming 50% drop in Consolidated Net Profit 3482 3482 3482
Shares O/s as of March 17 239.93 239.93 239.93
EPS 14.51 14.51 14.51
Assumed Valuation P/E      
15 217.69 217.69 217.69
16 232.20 232.20 232.20
17 246.71 246.71 246.71
18 261.23 261.23 261.23
19 275.74 275.74 275.74
Assuming 40% drop in Consolidated Net Profit 4178.4 4178.4 4178.4
Shares O/s as of March 17 239.93 239.93 239.93
EPS 17.42 17.42 17.42
Assumed Valuation P/E      
15 261.23 261.23 261.23
16 278.64 278.64 278.64
17 296.06 296.06 296.06
18 313.47 313.47 313.47
19 330.89 330.89 330.89
Assuming 30% drop in Consolidated Net Profit 4874.8 4874.8 4874.8
Shares O/s as of March 17 239.93 239.93 239.93
EPS 20.32 20.32 20.32
Assumed Valuation P/E      
15 304.76 304.76 304.76
16 325.08 325.08 325.08
17 345.40 345.40 345.40
18 365.72 365.72 365.72
19 386.03 386.03 386.03

Assuming the profit falls by 30% and a P/E of 18 is applied the price should be around 365 and a P/BV of 2.40 which is a very attractive level. That also assumes that going forward the profits stay flat, assuming the P/E multiple still remains at 18 for a rudimentary valuation.

Below is the monthly chart with key points

Monthly Chart Sun Pharma

 

Why I Like Andhra Bank : watch the clip

Andhra Bank

Why I Like #AndhraBank : watch the clip

Andhra bank has a current market price (CMP)  of  50.85 and a book value of  152.48. It has declared Gross NPAs of 16,262 crs  and provisioned 8,198 crores as of Sep 16. If we assume an operating profit of 4000 crores plus for FY 16-17 and no substantial increases in Gross NPAs , the bank is generating profit enough to get it out of the blues.

A re rate on Price/ BV to even 0.50 would get the price to 76.00 . Seems like a good stock to accumulate at current and lower levels with targets of at least P/BV of 0.50 and above.

Please watch the Clip.

NMDC : CMP 95, target 120 to 125 , time frame within 3 months , Stop Loss 80.00

After the successful call on Vedanta, (on 12th April 16), I initiate the call on NMDC.

NMDC is India’s largest iron ore producer, producing around 30 m MT of Iron Ore per annum. Approximately 95% of iron Ore produced is sold domestically. The book value per share as per the 2014-15 annual report is Rs 81.54 and the current market price (CMP) is Rs 95.00. The total dividend declared for FY 2014-15 was Rs 8.55 /share which provides a yield of around 9.00% before taxes at the CMP.

The stock price is correlated  to international prices of Iron Ore, though the quality of produce is on an average is inferior to 62 Fe Iron Ore fines.

Iron Ore prices have been broadly volatile between a 38 to 64 Dollar/ MT and are expected to remain volatile. With a new boss at Rio Tinto, the focus seems to be shifting from outright maintenance of market share to a more balanced perspective between profits, dividend and market share. Rio Tinto is up around 18% since June 16, NMDC by around 7% since June 16.

iron ore price vs nmdc

A breakout from the 38/64 channel could propel international Iron Ore prices into a new range between 80 to 90 dollars/MT. When the Iron Ore prices averaged around 56 dollars / MT, the NMDC price hovered at around 102.

There is an inverted head and shoulder formation in process on the NMDC chart which portends a breakout from the 85 to 106 range . Its early days , but the international commodity price scenario has changed from a grossly bearish one to that of stability . Prices , however do not remain stable, they eventually break out.

nmdc

Apart from the weekly trend line support, the 38.2 % Fibonacci retracement for the move from 190 to 78 , targets a 122 number.

Looking at the overall structure , would call a target between 120 to 125 within the next 3 months , going long at current market prices and adding to longs with a stop loss of 80.00 .