Below is the mail that we sent to the paid clients on Monday.
| hide details Nov 8 (2 days ago) | ||||||||||||||||||||||||
Hi All,
The markets are likely to continue the upward march in the coming week given the positive breakout on the daily charts. The Nifty has immediate support at 6,300, which should be seen a key level for the markets to trade higher and cross all time high.
The BSE benchmark index, the Sensex, began the week on a positive note. The index gathered momentum on positive vibes from the Reserve Bank of India (RBI) and the US Fed. RBI, in its second quarterly review, raised rates by 25 basis points. More importantly, it signaled a pause to the rate hike cycle in its December review. The US Fed also announced fresh impetus - worth bond purchases up to $600 billion - in a bid to revive the US economy.
The Sensex rallied to a high of 21,109, and finally settled at a record high of 21,005, up 973 points (nearly five per cent) this week. The index is just 200 points away from its record high of 21,207 touched on January 10, 2008. Getting there could be a mere formality given the strong momentum. Going by the current trend, the Nifty may easily target 6,400 next week as long as the 6,300 support holds. In case of a dip, the index may seek support around 6,215 and 6,155. In fact, it seems like the base has now moved to the 6,180-6,200 level.
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Regards
VenkiStockCalls.
The markets are likely to continue the upward march in the coming week given the positive breakout on the daily charts. The Nifty has immediate support at 6,300, which should be seen a key level for the markets to trade higher and cross all time high.
The BSE benchmark index, the Sensex, began the week on a positive note. The index gathered momentum on positive vibes from the Reserve Bank of India (RBI) and the US Fed. RBI, in its second quarterly review, raised rates by 25 basis points. More importantly, it signaled a pause to the rate hike cycle in its December review. The US Fed also announced fresh impetus - worth bond purchases up to $600 billion - in a bid to revive the US economy.
The Sensex rallied to a high of 21,109, and finally settled at a record high of 21,005, up 973 points (nearly five per cent) this week. The index is just 200 points away from its record high of 21,207 touched on January 10, 2008. Getting there could be a mere formality given the strong momentum. Going by the current trend, the Nifty may easily target 6,400 next week as long as the 6,300 support holds. In case of a dip, the index may seek support around 6,215 and 6,155. In fact, it seems like the base has now moved to the 6,180-6,200 level.
Out of USD 600 billion in quantitative easing to provide a boost to the US economy, a sizeable part of this quantitative easing will flow into emerging markets as part of hedge fund and foreign institutional investor (FII) investments. Therefore, emerging markets are expected to remain strong over the medium term.
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PICK OF THE WEEK: Sathavahana Ispat (BSE Code: 526093): Buy is recommended around Rs. 54/55.
Company Description:
Incorporated in 1989, SIL manufactures pig iron through the mini blast furnace route
SIL operates in the iron and steel industry, which is considered as core sector.
Earlier, it had replaced Tata-Korf technology with China-Shougang technology for
pig iron making. It uses the Anshan technology sourced from P.R. China for
metallurgical coke making. Production from the mini blast furnace is of a high quality
and can be assured to contain a minimum iron content of 93.5% and 4% carbon
content. With the production of metallurgical coke, SIL is integrated backward for
the key input material. Metallurgical coke is the key input material for Iron making.
Investment Rationale:
SIL’s pig iron manufacturing capacity is 2.10 lakh tpa and metallurgical coke 3 lakh
tpa. It commenced its 30MW co-generation of power at its site in the Bellary district
of Karnataka from July 2008. It has already signed PPA with PTC at Rs 3.25 per unit for five years. The surplus metallurgical coke production from this facility is being sold in the nearby market. SIL is enhancing coke capacity to 4.5 lakh tpa.
During FY08, SIL had issued 15.4% stake (49 lakh shares) to Stemcor Holdings, a
strategic investor at a price of Rs 60 per share. Stemcor is a $6 billion leading
consultancy firm, which provides marketing, finance and logistic services to steel
industry. SIL also converted 6.25 lakh shares and 15.70 lakh warrants issued to
promoters at Rs 60 per share. The funds raised were utilised to meet the aforesaid
coke capacity expansion and 10 MW power plant & 10 MW coal fired cfbc boiler at Kudithini Plant.
Recently, Sathavahana Ispat has started trial production of Metcoke plant with a capacity of 1.50 lac tonnes. Commercial production should commence shortly. This take metcoke capacity to 4.50 lac tones Sathavahana Ispat is implementing 10 MW Power plant & 10 MW Coal fired CFBC Boiler summing to 20MW Power plant which is likely to be commissioned by Nov 2010.
Also there are news that UK Based steel trading major stemcor is interested to buy 20% stake in sathavahana Ispat. UK based steel trading major Stemcor, which owns minority stakes in various Indian steel companies, is planning to increase its stake in Sathavahana Ispat.
“Stemcor, which currently owns 14.7% equity in Sathavahana, is likely to buy at least 20% stake in the Indian company, as any move to increase its holding to over 15% would automatically trigger a 20% open offer under SEBI's takeover norms. SEBI's takeover norms are triggered if a company's shareholding in another company touches 15%.”
“Stemcor, which currently owns 14.7% equity in Sathavahana, is likely to buy at least 20% stake in the Indian company, as any move to increase its holding to over 15% would automatically trigger a 20% open offer under SEBI's takeover norms. SEBI's takeover norms are triggered if a company's shareholding in another company touches 15%.”
If this happens then the share price will sky racket in no time.
Mr Mathew Stock MD of Stemcor India told that “We are talking to the promoters of Sathavahana and are looking at all options. It's too early for me to comment as we haven't finalised any option as yet.”
Soon Sathavahana Ispat may announce its foray in new business segment Ductile Iron Pipe with a capex of 50 crores.
Mr Mathew Stock MD of Stemcor India told that “We are talking to the promoters of Sathavahana and are looking at all options. It's too early for me to comment as we haven't finalised any option as yet.”
Soon Sathavahana Ispat may announce its foray in new business segment Ductile Iron Pipe with a capex of 50 crores.
Financials:
Sathvahana Ispat has posted higher net for Q1 of current fiscal. As per unaudited results, the company has earned net profit of Rs. 11.63 crore on a turnover of Rs. 105.96 crore for three months ended 30.6.2010 against net profit of Rs. 5.61 crore on a turnover of Rs. 132.60 crore for corresponding previous period. For entire 09-10, the company posted net profit of Rs.25.45 crore on a turnover of Rs. 394.37 crore.
Shareholding Pattern: The promoters hold 36.20% while the general public holds 63.80%. The DIIs hold 1.32%. Moreover 6.59% of the shares of the company are locked and not traded in market.
Valuations: Sathavahana Ispat appears an attractive buy considering, Scrip is trading at 4.15xFY11EEps , Scrip is available at 0.90xFY10 Book Value, Market cap is just 187 Crores.
Also If the stake increase by Stemcor is announced or agreed by Sathavahana Ispat management, then the scrip price will shoot up like anything.
Book value of Rs. 60 plus makes it a safe bet, for a short term target of Rs. 78, and for 6 to 9 months period it can reach Rs.100+
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Regards
VenkiStockCalls.
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