Investment idea - Ashok Leyland

Target price: Rs 76
Current market price: Rs 55
Upside: 40%

Theme
The commercial vehicle (CV) segment took a hit for a couple of months to absorb pre-buying due to new emission norms, effective October 1, 2010. The domestic truck segment picked up momentum since December 2010 on strong economic growth. Further, increased production at Ashok Leyland`s Uttarakhand facility is expected to boost margins.

Drivers
1) Management targets 95k units during FY11 while we estimate volume of 89k units. We expect the company to surpass our estimates by 4-5%. In FY12, we expect the company to record volume growth of 10% to 97k units with an upward bias.

2) Due to fiscal benefits available at the Pantnagar unit, we expect Ashok Leyland to realize significant savings per vehicle produced at the facility. Production is expected to ramp up to 15k units in Q4FY11 as against the YTD number of 5K units. We estimate margin expansion of 100bps in FY12 due to increased contribution from this facility.

 3) Ashok Leyland entered into a JV with Nissan, to participate in the high growth LCV segment. The JV is likely to commence production by H2 CY11. However, in our earning estimates, we have not considered any volumes for this JV during FY12. Commissioning of this JV would boost our earning estimate for FY12

Estimates versus consensus
Our earnings estimates for FY11 and FY12 are Rs 4.3 and Rs 5.5 respectively. Our FY12 earnings estimate are 5.7% lower than consensus estimate of Rs 5.8. We have a `Buy` recommendation on the stock with a target price of Rs 76, which discounts FY12E earnings by 14x.

Challenges to target price
1) Increase in prices of raw materials such as steel and rubber affecting profitability;

2) Increase in excise duty hampering industry growth; and

3) Significant rise in interest rates increasing cost of ownership.

Disclaimer

The information, analysis and estimates contained herein are based sources believed to be reliable. We  accept no  liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for the completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This information  is for circulation only

Investment idea - Edelweiss capitals

Edelweiss Capital

Business now under pressure, but valuation attractive

Rating: Accumulate Target Price Rs49

Major shareholders

Promoters 38.01% Foreign 13.51% Domestic Inst. 3.59% Public & Other 44.89%

Overview: Leading diversified financial services organization

Key businesses now: Investment Banking, Brokerage - Institutional

and Retail, Asset Management, Financing and Treasury

2575 employees and 360 offices pan-India after Anagram acquisition

 Result: Overall profitability remains under pressure.

Gross revenues grew by 16.7% QoQ, while PAT declined by 5.7% QoQ.

 Net revenue grew by a modest 3.6% QoQ.

 Commission income: Given the weak cash market volumes

Overall broking revenues for the company remained flat at about Rs810m

for the quarter. Overall Fee & Commission income declined by 5.8% QoQ.

 Financing spreads decline as interest costs rise: The steady state loan book

remained nearly flat QoQ at Rs30.3bn. However due to higher yields

(16.4% in Q3) and episodic financing opportunities, interest income

grew by 33.2% QoQ. Due to the tight liquidity conditions in the systems,

 EDEL’s borrowing costs increased (9.4% in Q3) which resulted in

interest cost shooting up by 44.1% QoQ.

Treasury income improves: With higher short-term interest rates in

the system, treasury yields also improved during the quarter.

Outlook better over longer-term: The core Broking business

remains under pressure due to weak cash volumes in the market.

Financing business was impacted due to higher borrowing costs

and lower spreads. Despite short-term pressure, valuations are

attractive from long-term perspective.

Disclaimer

The information, analysis and estimates contained herein are based sources believed to be reliable. We  accept no  liability whatsoever direct or indirect that may arise from the use of information herein and shall not be responsible for the completeness and accuracy. It is not an offer to sell or a solicitation to buy securities. This information  is for circulation only

Possitive Affirmations

Amazing results will start to happen if you keep repeating these affirmations for a few days, with honesty, trust, and belief.

1.      I'm inspired and I love what I do..

2.      I make things happen and I make a difference.

3.      I am consistent and persistent in achieving my stretch goals..

4.      Everything I do turns into success.

5.      I don't accept anything but the best.

6.      I turn every experience into an opportunity.

7.      I take action when something is important to me.

8.      I choose to look at something in a new way or do something different whenever I feel stuck.

9.      My willingness to serve others moves me into unlimited achievement.

10.   I am deeply fulfilled by all that I do.

Investment Strategies- When the markets hits, it hits hard...

What intrigues me most about TV Business channels is the way the TV Analysts and Anchors portray the market movements – like happy investors their face radiates like a thousand volt bulb, when the Sensex and Nifty keeps rising and the tone of their voice mimics the rise of the indices – higher the indices, higher the tone but the same person fumbles when markets go downhill as if somebody is squeezing the vocal chords of the Analyst /Anchors.

In fact, when the markets fall they should smile like a Star and tell investors – hey guys, the rising and falling of the markets is in nobody’s hands, but what you can buy and what you can sell is very much in your control. In other words, the TV Analysts should convince investors to patiently wait and watch the erratic movements of the markets instead of doing something foolish like buying / selling stocks when the markets are crashing. Selling stocks for whatever reason when markets are down is sheer foolishness but buying stocks during depressed market scenarios can prove to be a very rewarding experience and very few people like to indulge in such simplicities – so do wait patiently for the market to go down further and then rush like a brave soldier onward and forward to hug the bear with all your love and affection by buying stocks that you were dying to buy but could not afford to when the markets were at greater heights

The problem with most investors is that they start getting ready for a party which is not going to happen – for instance I know quite a few guys who bought Reliance Capital when it was close to its peak of Rs.881/-per share thinking that the share price will double in a years time and they don’t want to miss the party! But see what happened – the Market cap of Reliance Capital has come crashing down from a 52 week peak around Rs.21,686 crores to Rs. 12198 crores, that’s a mind boggling erosion of investors wealth of around Rs.9488 crores.

I fail to understand why people believe that they will miss the party and therefore they go shopping for stocks when the bourses are heated – what party are they talking about, what grandiose enjoyment they are talking about. Had they taken my suggestion before buying at such high price, guess these folks would save their hard earned money. In fact, these guys would be better off had they joined a political party where they can at least live like a Raja!

Nifty ends above 5400;A Raja arrest spooks sentiments

Why should investors look at this event with a bearish overtone – if Raja goes behind bars will Corporate India or the Governance of the country suffer by any stretch of imagination or will the Market Capitalization of companies come crashing down? No way. So, all this does not make sense. But then, as investors you need to use commonsense and take advantage of falling prices. In this matter, investors must learn something very valuable from Mr. Buffet. Warren Buffet’s value investing strategy works like a patient eagle, it can wait for suitable prey for hours together. And when the time comes, he does no delay in catching the prey. Warren Buffet can wait for one value stock for year and years. So, you need to wait for prices to crash further and then go for the prey, your target stock.

• Don’t touch any stock when the market is red hot.

• Buy stocks only selectively when “blood is running in the streets” which in very simple terms means buy when everyone is selling and sell when everyone is buying.

And in the markets, there will always be contradictions- without contradictions and opposing views there won’t be a market in the first place – some say “all is well” and some say “nothing is well” and now you decide whether you are well. If you are well, then be alert to what’s happening in the markets because this will help you to buy some very good scrips at beaten down prices .if you sense that the price of the stock you want to buy, is still in a downward trend, wait and allow it to slide gracefully. And when it falls, pick up the wounded stock not with cunningness but with humility and then watch the magic happen.