Choice Scrip Buy Recommendation – IPCA Laboratories
IPCA Laboratories: From Strength To Strength
HERE IS WHY
- The company has seen consistently good financial performance and dividend payment.
- Its new USFDA-approved facility at Indore and additions to its product pipeline are expected to drive revenues.
- High growth is expected in the antimalarials segment.
Established in 1949, Mumbai-based IPCA Laboratories is one of the oldest companies in the Indian pharmaceuticals sector. It is a fully integrated pharma company with a presence in formulations and active pharma ingredients (APIs). The scrip is already up by 60 per cent this year, and even on conservative valuations, it can get an investor another 25 per cent returns from here on. Besides, the company has also been extremely consistent in dividend payments.
Due to its focus on the promising products and high growth markets, IPCA has seen a 10-year CAGR of 19 per cent in revenues and 18 per cent in net profits. The EBITDA margins have also improved from 19 per cent in 2002-03 to 22.5 per cent in FY12. Going ahead, we expect sales growth and margin expansion to continue, led by exports. This makes it a good buy in the current uncertain macro-economic environment.
|
Best of Last One Year |
|||
|---|---|---|---|
| Company Name | Reco. | CMP (Rs) | Gain % |
| Ajanta Pharma |
171.00 |
407.75 |
138.45 |
| FAG Bearings India |
1261.00 |
1619.00 |
28.39 |
| Torrent Pharmaceutical |
559.00 |
708.00 |
26.65 |
| Dabur India |
104.00 |
128.00 |
23.08 |
| Asian Paints |
2985.00 |
3669.00 |
22.91 |
| Colgate Palmolive |
1014.00 |
1218.00 |
20.12 |
| HDFC |
621.00 |
722.00 |
16.26 |
| ING Vysya Bank |
325.00 |
374.50 |
15.23 |
The revenues of IPCA Laboratories are majorly driven by formulations, which constitute almost 76 per cent of its topline. The remaining 24 per cent come from its APIs business. Exports are a major contributor, making for 61 per cent of the total revenues. Over the years, the contribution of exports has increased consistently. Domestic revenues are also growing by a rate of over 15 per cent, and by FY12, the contribution from the same stood at 39 per cent.
On the exports front, Europe, Africa and America are key markets for IPCA, adding 41 per cent of the company’s revenues. In Africa, it is a dominating player in the antimalarials market, while in the US, it is growing on the generics boom. In Europe, it has started increasing formulations exports in other untapped countries from FY12 onwards, due to which revenues will grow in future.
The World Health Organisation (WHO) has approved its anti-malarial formulation, which has helped IPCA to increase its African revenues by 84 per cent in FY12. The company also has another set of products in the same category which has been approved by WHO and which it expects to launch in India in the second half of the current fiscal. This will provide a further upward thrust to its revenues. India and Africa are the biggest markets for antimalarials, where IPCA has already been successful with its formulations. The new products will garner more revenues for the company in these markets.
We also expect a rise in US revenues as its capacity constraints have been addressed after the USFDA approved its Indore SEZ facility. According to the management, the Indore SEZ facility can add about USD 80-100 million (Rs 440-550 crore) per year when used at its optimum level. Currently, it has 25 ANDAs filed with 12 approvals. It is moving a total of five ANDAs from its Silvassa facility to the Indore SEZ facility, and hence, we expect higher revenues and margin expansion as well. It is also targeting the addition of eight to 10 products in the USFDA-approved products pipeline, which will lead to sustainable revenues.
In the June 2012 quarter, IPCA’s revenues grew by 20 per cent to Rs 637 crore. However, its net profit was down by 30 per cent to Rs 43 crore due to forex loss of Rs 59 crore. Its EBITDA margins have expanded by 456 basis points showing a robust performance. We expect further expansion of EBITDA margins with higher sales growth in FY13. On the valuations front, the scrip is trading at a PE of 15x its FY13 expected EPS of Rs 28. We advise our readers to buy the scrip with a target price of Rs 525.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*- Dalal Street Choice Scrip Buy Calls – IPCA Laboratories
- Buy Recommendation – IPCA Laboratories
- Buy Ipca Labs
- Buy Recommendation – CIPLA
- Dalal Street Choice Scrip Buy Calls – Precot Meridian
- Buy Call – IPCA Laboratories
- Dalal Street Choice Scrip Buy Calls – Bharat Bijlee
- Suprajit Engineering – Dalal Street Choice Scrip
- Buy Recommendation – Divi’s Laboratories
- Dalal Street Choice Scrip Buy Calls – Panacea Biotec
Low Priced Scrip Buy Recommendation – Dena Bank
Dena Bank – Promising Returns
Here is Why:
- Its asset quality is improving even in an uncertain environment.
- It is witnessing good business growth (deposits and advances) and has given a confident guidance with regard to maintaining its NIM.
- The stock is available at a fair valuation of 0.65x, and had an attractive dividend yield of around 3.5 per cent for FY12.
Asset quality is a very sensitive issue when it comes to public sector banks. However, in the case of Dena Bank, the situation seems to be slightly different. Even in uncertain times, the bank has seen an improvement in its asset quality, which set it apart from the other affected public sector banking companies. This, coupled with good business growth and the fact that the stock is available at lower valuations, makes Dena Bank a good buy at the current levels.
| Best of Last One Year | |||
|---|---|---|---|
| Name of Company | Reco. | CMP(Rs) | Gain% |
| Granules India | 102.30 | 198.60 | 94.13 |
| Omkar Specialty Chem. | 58.50 | 78.50 | 34.19 |
| PTC India | 45.00 | 56.25 | 25.00 |
| Power Grid Corp. of India | 96.00 | 123.90 | 29.06 |
| HeidelbergCement India | 36.30 | 42.50 | 17.08 |
| Dena Bank | 80.50 | 88.30 | 9.69 |
| IDBI Bank | 81.00 | 87.50 | 8.02 |
| GIC Housing Finance | 84.00 | 84.50 | 0.60 |
Dena Bank is currently witnessing handsome business growth. This is evident from the fact that as on June 30, 2012, its total deposits increased by 26 per cent to Rs 79736 crore and the advances increased by 39 per cent to Rs 59641 crore on a YoY basis. The robust growth in advances was due to high lending that resulted in growth of around 70 and 31 per cent in the agriculture and MSME segments respectively.
The asset quality of the bank strengthened as the gross and net NPAs of the bank contracted. Its gross NPAs decreased by six basis points to 1.8 per cent, while the net NPAs decreased by seven basis points to 1.01 per cent YoY. Even on a sequential quarter basis, the net NPAs remained stable, which is commendable. Further, the provision coverage ratio (PCR) stood at 75.62 per cent, which should be considered as decent enough.
The bank did face some sought of pressure on the margin front. On a sequential basis, the Net Interest Margin (NIM) of the bank decreased by 15 basis points to 3.06 per cent. However, this improved by 16 basis points on a YoY basis. The management has further guided they would maintain the NIM above three per cent. As of 30th June, 2012, the Capital Adequacy Ratio (CAR) stood at 12.35 per cent, with the Tier 1 CAR at 8.33 per cent. According to the management, the bank has no plans of raising capital to meet the Basel III norms as of now, as there is plenty of time before the deadline kicks in.
The bank opened 16 new branches in the June 2012 quarter, taking its total network to 1358 branches and 545 ATMs. The management plans to open 100 new branches during FY13. According to Nupur Mitra, Chairperson and Managing Director of the bank, the management is focussing on core banking activity, which will help the bank to grow further. In terms of guidance, Mitra expects an 18 per cent growth in deposits and a 20 per cent growth in terms of advances in FY13, which is above the RBI’s projection of 15 and 17 per cent respectively.
| SHAREHOLDING PATTERN AS ON 30/06/2012 | |
|---|---|
| Indian Promoters | 55.24 |
| Banks Fin. Inst. and Insurance | 10.3 |
| FII’s | 13.28 |
| Private Corporate Bodies | 4.51 |
| General Public | 15.19 |
| Others | 1.48 |
| GRAND TOTAL | 100 |
In the June 2012 quarter, the bank’s Net Interest Income (NII) increased by 37 per cent to Rs 446 crore and it posted a robust net profit growth of 42 per cent to Rs 238 crore on a YoY basis. As on June 30, 2012, the ratio stood at 39.26 per cent as against 46.10 per cent during the same period last year, which shows that the bank is operating in an efficient manner.
The board of directors recommended a 30 per cent dividend (Rs 3 per share) for FY12, which translates into a dividend yield of around 3.5 per cent. On the valuations front, the stock is available at a price to book value of around 0.65x, which should be considered a fair valuation. We believe that Dena Bank presents a good buying opportunity to garner better returns over a long-term horizon.
| LAST FIVE QUARTERS (Rs / Cr) | |||||
|---|---|---|---|---|---|
| Jun ‘ 12 | Mar ‘ 12 | Dec ‘ 11 | Sep ‘ 11 | Jun ‘ 11 | |
| Sales | 2,137.20 | 1,955.89 | 1,676.24 | 1,633.82 | 1,528.18 |
| Other income | 141.65 | 210.47 | 133.97 | 113.37 | 124.35 |
| Employee Expenses | 172.17 | 213.1 | 170.84 | 162.63 | 168.11 |
| Total interest | 1,524.96 | 1,357.52 | 1,135.04 | 1,118.93 | 1,081.63 |
| Provisions Made | 103.41 | 291.11 | 124.33 | 81.33 | 65.49 |
| Net profit / loss | 238.63 | 254.79 | 186.68 | 193.58 | 168.09 |
| Equity capital | 350.06 | 350.06 | 333.39 | 333.39 | 333.39 |
- Dalal Street Low Price Scrip – United Bank of India
- Buy Recommendation – Yes Bank
- Dalal Street Low Price Script – Vijaya Bank
- Buy Recommendation – IDBI Bank
- Buy Recommendation – Punjab National Bank
- Buy Recommendation – J&K Bank
- Investment Opportunity – Bank of Baroda
- Dalal Street Low Priced Scrip – IFCI
- Premier Explosives – Dalal Street Low Priced Scrip Buy Recommendation
- Dena Bank – 10% Upside in 3 months
Hot Chips Buy Calls – CESC
CESC
BSE Code: 500084 | Volume: 11789 | CMP: Rs 302
With a focus in three segments, viz. power, retail and property, CESC, a flagship company of the R P – Sanjiv Goenka group, is well poised to witness gains in the medium term. The company has 1225 MW of generation capacity and provides electricity distribution services in the Kolkata circle. Unlike other power utilities, CESC is protected from the deteriorating financial health of SEBs to some extent, since it buys power from them to meet the increasing demand for its distribution business.
The West Bengal Electricity Regulatory Commission (WBERC) had recently issued a tariff order allowing an increase of Rs 0.69/unit, which is to be recovered over the next four years. The tariff increase will reduce concerns on CESC’s Kolkata distribution business. FDI in retail would also be a key catalyst for the stock. Furthermore, its stable RoE in the regulatory business and its foray into merchant power post expansion along with its coal linkages for expansion till 2015 will improve the cash flow. One can look at the scrip from a medium-term perspective.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*Hot Chips Buy Calls – McLeod Russel India
MCLEOD RUSSEL INDIA
BSE CODE: 532654 | Volume: 8811 | CMP: Rs 322
With a production capacity of more than 100 million kg, Mcleod Russel India is well poised to capitalise on the growing demand for Indian black tea in the global markets. The company is the world’s largest tea producer, with a total area of 38758 hectares under tea cultivation. The rising demand-supply gap of tea due to a production shortfall in the key tea exporting countries has created a favourable scenario for the domestic tea producers. It is expected that the average realisations of the company are likely to witness a growth of Rs 12-15 per kg.
The increase in the realisations will help the margins to improve by around 130-135 basis points ahead in the year. With expectations of a strong cumulative operating cash inflow, it is expected to improve the dividend payout or build a war chest for potential inorganic initiatives in the future. One can look at the scrip from a medium-term perspective.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*Dalal Street Choice Scrip – Mahindra & Mahindra
HERE IS WHY
- M&M has been maintaining high growth rates even in times of an economic slowdown.
- The company’s presence in tractors and utility vehicles has been dominant and unshakeable for quite some time now.
- M&M has been increasing its presence in Commercial Vehicles and two-wheelers, making it a less risky investment and providing strong scope for widespread growth.
The auto sector has been slowing down since the beginning of FY11. However, there have been some exceptions, the most striking among them being Mahindra & Mahindra (M&M). The company has carved a niche for itself in the auto sector through its consistently good performance.
|
BEST OF LAST ONE YEAR |
|||
|---|---|---|---|
| Company Name | Reco. | CMP (Rs) | Gain % |
| Ajanta Pharma |
171 |
406 |
137.43 |
| FAG Bearings India |
1261 |
1615 |
28.07 |
| Asian Paints |
2985 |
3693 |
23.72 |
| Torrent Pharmaceutical |
559 |
686 |
22.72 |
| ING Vysya Bank |
325 |
393 |
20.92 |
| CESC |
263 |
317 |
20.53 |
| HDFC |
621 |
733 |
18.04 |
| Colgate Palmolive (I) |
1014 |
1174 |
15.78 |
M&M’s business is divided into two divisions, the Farm Equipment Sector (FES) and Automotive. Business in the FES segment has been pressured for the past few months, but the company’s automotive segment has been outperforming to compensate for it. M&M is a market leader in tractors, with a market share of over 40 per cent. Factors like high interest rates, rising fuel prices, a delayed monsoon, labour shortage as well as weak industrial and agricultural output have led to a slower demand for tractors since November 2011. The YoY monthly domestic sales volume for tractors has reported a median growth of -4.71 per cent. Though the monsoon revived, the demand did not see much of a change. We expect it to pick up once the macroeconomic situation improves.
In CY2012, the Utility Vehicle segment, in which the company had a market share of 55.1 per cent at the end of FY12, has seen a YoY sales growth of over 30 per cent in most of the months. The company has fully utilised the opportunity offered by the fast growing UV segment, with its existing product range and the success of the XUV500. The company also performed well in the four-wheeler pickups and LCV segments. On the Passenger Cars front, the recent launches of the New Look Verito and the Mini-Xylo are expected to boost its presence in this segment.
Apart from the core business of M&M, its complex network of 117 subsidiaries can be scaled up to add value in the coming years. This business structure has a simultaneous risk of increased investments in unrelated businesses keeping the return ratios lower. With increasing products and volumes, the company’s subsidiary, Mahindra Vehicle Manufacturers, which was launched with a capacity of 300000 units, will see a ramp up in production, thus boosting revenues.
|
Share Holding Pattern as on 31/06/2012 |
|
|---|---|
| Promoters |
25.5 |
| Institutional Investors |
47.5 |
| Other Investors |
18.8 |
| General Public |
8.3 |
| GRAND TOTAL |
100 |
The company’s presence in the M&HCV segment through Mahindra Navistar Automotive has been strengthening, and it has a range of products to be able to compete well. On the two-wheelers front too, it has laid out elaborate plans for new launches to capture the growing motorcycles and scooters market. M&M’s performance has been mirrored in the financial results of the company. Over the past five years, its revenues have grown steadily in the range of 14 per cent to 41.55 per cent YoY. Over the past five quarters itself, the company’s revenues have increased by 39.12 per cent. For Q1FY13, on account of higher efficiency, the OPM and the NPM stood at 11.84 per cent and 7.75 per cent respectively, which is way higher than the margins seen by its competitors.
The company’s strategic partnerships, its unwavering presence in key segments and its expansion into other segments are what give us the conviction to have a positive outlook on M&M. We believe that the company will start growing in profitability at a faster rate with the revival of the tractor industry and once its subsidiaries start yielding returns. In terms of valuations, the scrip is currently trading at a PE of 15.06x, which is far cheaper than Maruti Suzuki and Tata Motors, which are valued at 22.53x and 61.43x respectively. Thus, we recommend that investors buy the stock at the current levels to garner gains over time.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*- Dalal Street Choice Scrip – M&M Financial Services – Strong Growth Prospects
- Dalal Street Low Priced Scrip Buy Call – Samkrg Pistons & Rings
- Free Dalal Street Recommendation Choice Scrip – ZF Steering Gears (India)
- Suprajit Engineering – Dalal Street Choice Scrip
- Dalal Street Choice Scrip – Strides Arcolab
- Dalal Street Choice Scrip Buy Calls – Wim Plast
- Dalal Street Choice Scrip Buy Call – Nestle India
- Dalal Street Choice Scrip Buy Calls – IPCA Laboratories
- Dalal Street Choice Scrip Buy Calls – Greaves Cotton
- Dalal Street Choice Scrip Buy Calls – SRF
Dalal Street Low Priced Scrip – Syndicate Bank
Here is Why
- Syndicate Bank has seen an improvement in its Net NPAs at a time when the most of the players in the banking space are facing concerns on the asset quality front.
- In the June 2012 quarter, the Net Profit of the company grew at a healthy rate of 28 per cent despite higher provisions (increased by 57 per cent).
- It has an attractive dividend yield and is available at a fair valuation.
In the banking space, when a majority of players saw their asset quality worsening on a sequential basis, there were very few that saw an improvement in the same. Syndicate Bank is one such bank whose asset quality has improved. In addition to this, the bank has seen decent business growth and is available at an attractive valuation, which also makes it a good grab. We believe that Syndicate Bank is a good bet as it is insulated from the current volatile environment and investors can park a portion of their funds in the same.
|
BEST OF LAST ONE YEAR |
|||
|---|---|---|---|
| Name of Company | Reco. | CMP(Rs) | Gain% |
| Granules India |
102.3 |
147 |
43.7 |
| Omkar Specialty Chem. |
58.5 |
80 |
36.75 |
| PTC India |
45 |
58 |
28.89 |
| Power Grid Corp. of India |
96 |
119 |
23.96 |
| Heidelberg Cement |
36.3 |
43 |
18.46 |
| Dena Bank |
80.5 |
90.5 |
12.42 |
| IDBI Bank |
81 |
87.5 |
8.02 |
| GIC Housing Finance |
84 |
84.5 |
0.6 |
In the June 2012 quarter, the bank has seen improvement in its asset quality. Its Gross NPAs decreased by 15 basis points to 2.38 per cent, while the Net NPA decreased by three basis points to 0.93 per cent on a sequential basis. On a YoY basis, the Gross NPAs were down by one basis point while the Net NPAs remained stable at the same level. Further, the Provision Coverage Ratio (PCR) improved by 228 basis points to 80.71 per cent YoY, which should also be considered a good level. A higher PCR usually indicates that the probability of the asset quality being worsened is lower. We believe that the improvement in the bank’s asset quality in this quarter was one of the most important factors in its favour, as the industry has witnessed exactly the opposite situation.
The Net Interest Income (NII) of the bank increased by 18.83 per cent to Rs 1319 crore, while the Net Profit saw a robust growth of 28 per cent to Rs 440 crore on a YoY basis. The robust growth in the bottomline was despite the higher provisions, which increased by 57 per cent to Rs 513 crore. Further, the Cost to Income ratio also decreased by 113 basis points to 45.9 per cent YoY. A lower Cost to Income ratio indicates that the bank is operating efficiently.
The bank faced some issues when it came to the margins front. Its Net Interest Margin (NIM) increased by three basis point to 3.19 per cent on a YoY basis, but declined by 24 basis points on a sequential basis. We believe that going ahead, the bank would maintain stable margins, which will further help it to post good growth.
| SHARE HOLDING PATTERN AS ON 12/07/2012 | |
|---|---|
| Promoters |
66.17 |
| Banks Fin. Inst. and Insurance |
17.42 |
| FIIs |
3.7 |
| General Public |
10.25 |
| Others |
2.46 |
| GRAND TOTAL |
100 |
As on 30th June, 2012, its Capital Adequacy Ratio (CAR) stood at 11.72 per cent, with the Tier 1 CAR at 8.63 per cent. As on 30th June 2012, the global business of the bank grew by 17.67 per cent to Rs 286447 crore, with a decent growth in terms of deposits as well as advances. Even in this uncertain time, its global deposits increased by 18.35 per cent to Rs 157276 core, while the advances grew by 16.85 per cent to Rs 129171 crore. The bank currently has a network of around 2707 branches in 32 states and two union territories and one overseas branch in London. The management has ambitious plans to cross the 3000 branch network landmark by the end of FY2013.
Syndicate Bank’s Board of Directors recommended a dividend of Rs 3.80 per share. This translates into a current dividend yield of almost four per cent, which is commendable. On the valuations front, the bank is currently available at a trailing Price to Earnings multiple of 4x and a Price to Book Value of around 0.61x, which should be considered fair. We believe that one could invest in the scrip to garner better returns.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*- Dalal Street Low Priced Scrip – Bank of Maharashtra – Prospects Appear Bright
- Dalal Street Low Price Scrip – United Bank of India
- Dalal Street Low Priced Scrip Buy Call – UCO Bank
- Dalal Street Hot Chips Buy Calls – 2nd – 20th May
- Dalal Street Low Price Script – Vijaya Bank
- Dalal Street Low Price Scrip Buy Calls – Development Credit bank (DCB)
- Dalal Street Low Priced Scrip – IFCI
- Premier Explosives – Dalal Street Low Priced Scrip Buy Recommendation
- Dalal Street Recommendation – Buy Hot Chips – Power Finance Corporation
- Dalal Street Low Priced Scrip – JBM Auto
Dalal Street Hot Chips Buy Calls – City Union Bank
CITY UNION BANK
BSE Code: 532210 | Volume: 23271 | CMP: Rs 50
The Q1FY13 results of City Union Bank were slightly better than street expectations. Net Interest Income showed a healthy increase of 15 per cent on a YoY basis for Q1FY13 while PAT grew 26 per cent on a YoY basis. Strong growth in the fee income and significantly lower provisions translated into the banks increased bottom line for the June quarter. Advances grew 33 per cent while Deposits increased 25 per cent on a YoY basis for Q1FY13.
The bank continues to maintain a healthy provision coverage ratio, which is much higher than the required norm. Total slippages during the quarter amounted to Rs 45 crore, however, since a high proportion of loans (around 97 per cent) are secured, the bank should be able to manage its asset quality concerns. One can look at the scrip from a medium term perspective The scrips in this column have been recommended with a short-term investment horizon in mind and carry high risk. Therefore, investors are advised to take into account their risk appetite before investing, as fundamentals may or may not back the recommendations.
*To get the password for buy calls, please subscribe to this blog. You will receive the password in next email to you*- Dalal Street Hot Chips Buy Tips – 1st August Issue
- Dalal Street Hot Chips Buy Calls – 2nd – 20th May
- Indian Stock Market Hot Chips Buy Calls – UltraTech Cement
- Dalal Street Recommendation – Buy Hot Chips – Yes Bank
- Dalal Street Low Price Scrip – United Bank of India
- Dalal Street Hot Chips Buy Calls – Jubilant Life Sciences
- Dalal Street Hot Chips Buy Calls – Axis Bank
- Dalal Street Low Priced Scrip – Bank of Maharashtra – Prospects Appear Bright
- Dalal Street Low Priced Scrip Buy Call – UCO Bank
- Dalal Street Recommendation – Buy Hot Chips – Power Finance Corporation
