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Monday, December 31, 2012

NEW YEAR 2013 !!!



I Thank you all for being a regular reader at BHAVIK SHAH's BLOG.
I Thank you all for your unconditional support towards me,
Your such priceless support inspires me to work better towards the best interest of my investor friends.
For me, its been a pleasure helping you all reach your goals in some or other manner, also its been a pleasure discussing stocks and sharing views on topics of stocks or economy & 
I will be my best going forward to bring new stock ideas, my views and surely we will share the same healthy relation that we shared last year.  
Lastly, I look forward to serving you all again in 2013, I wish you all peace, happiness, and abundant good health in the new year



Best Regards,


Sunday, December 23, 2012


Scrip Code: 500477 ASHOKLEY
CMP:  Rs. 27.10; Buy at Rs.26.50 - 27.00 levels.
Short term Target: Rs. 30.00; 6 month Target – Rs. 55; 
STOP LOSS – Rs. 24.95; Market Cap: Rs. 7,210.43 Cr; 52 Week High/Low: Rs. 33.50 / Rs. 18.75
Total Shares: 266,06,76,634 shares; Promoters : 102,72,37,424 shares –38.61 %; Total Public holding : 163,34,39,210 shares – 61.39 %; Book Value: Rs. 10.89; Face Value: Rs. 1.00; EPS: Rs. 2.01; Div: 100 % ; P/E: 13.46 times; Ind. P/E: 40.50; EV/EBITDA: 8.22.
Total Debt: 2,395.53 Cr; Enterprise Value: Rs. 9,605.96 Cr.

ASHOK LEYLAND LTD: The Company was founded in 1948 and is based in Chennai, India. Ashok Leyland limited is a subsidiary of Hinduja Automotive Ltd. It was named after the founder Raghunandan Saran’s son Ashok, the company was renamed ‘ASHOK LEYLAND’ with equity participation from Leyland Motors Ltd in 1955. Ashok Leyland ltd engages in the manufacture and sale of commercial vehicles and related components in India and internationally. India’s first inland made double decker was launched by Ashok Leyland in 1967. The Company's products include Buses – double decker and vestibule buses, CNG buses, Trucks – including multi axle trucks & tractor trailers, diesel engines, defense and special vehicles for Indian army. From 18 seater to 82 seater double-decker buses, from 7.5 ton to 49 ton in haulage vehicles, from numerous special application vehicles to diesel engines for industrial, marine and genset applications, Ashok Leyland offers a range of products. In the year 2006 Ashok Leyland acquired AVIA the Czech Republic based truck manufacturer. In 2007 the company formed a JV with Nissan Motor Company, Japan for the manufacture and marketing of light commercial vehicles, same year Ashok Leyland signed another JV with Continental AG, Germany – for the development of automotive Infotronics. In 2010, the Company acquired 26% stake in Optare plc. a bus manufacturer in the United Kingdom. Ashok Leyland Ltd is compared to: Bajaj Auto Limited, Motherson Sumi Systems Limited in India and Xiamen King Long Motor Company Limited globally.

Investment Rationale:
Ashok Leyland management expects M&HCV industry volumes to revive in H2 mostly back ended but still decline 5 – 10 % in FY13. Ashok Lay land with the launch of new products believes to achieve market share of 26 % in FY13. While Ashok Lay land was able to maintain its leadership in South, it was able to increase its market share in West to 25% from 22% earlier, East to 14% from 10% earlier and Central to 24% from 20% earlier. The company’s Export environment remains challenging as both Sri Lanka and Bangladesh which accounted for 70% of export volumes have seen demand contraction and targets 10,000 unit exports in FY13. Ashok Lay land’s new launch LCV Dost has very well received good response and the current order book stands at 2 months and management expects volumes of around 36,000 to 50,000 units in FY13/FY14 & expects that 70% of volumes sales to be from outside Tamil Nadu in H1FY13. Other segments have seen strong growth in Q2/H1 – like spare part sales were up to 27% in H1, Engines were up at 25% in H1 and defense continues to see steady growth as well. Company targets to have spare part revenues of Rs 1,000 Cr in FY13. Ashok lay Land has increased its customer touch points to 425 by Sep end with relatively more additions in North and West regions. Company’s input costs have remained largely flattish in H1 and is expected to have a marginal reduction in selected pockets like steel and tyres due to Subdued demand environment pushing up discounts to Rs 80,000 per vehicle in Q2 against 50,000 – 60,000 earlier. This has effectively neutralized all price hikes taken from the beginning of the year. The production from Pantnagar plant stood at 7,607 units in Q2 and should comfortably reach 40,000 units in FY13. This should benefit margins as the plant enjoys excise savings of Rs 60,000 per vehicle – the company plans to further increase this benefit to Rs. 65,000 led by higher localisation and increased sourcing. Due to High warranty charges (AMC) margins in H1 were impacted, company has suspended all its AMC contracts currently and this is under review. The company’s working capital has decreased by Rs. 700 Cr to Rs. 1700 Cr QoQ and maintains its target of lowering this to Rs. 1,000 Cr by FY13 end. Ashok Layland has incurred a capex of Rs. 350 Cr in H1 and targets capex of Rs. 650 Cr in FY13. Most of this is to be utilized for optimization of facilities, engines and on Pantnagar plant for next-gen cab. It also plans to spend another Rs. 150 Cr on product development expense. The company has new products in pipeline which is very healthy and which includes 10X2 5 axle 37 ton truck, entire MAV series with Neptune engine, 5 new models in ICV and the Jan-bus. Ashok Lay land targets to increase its investments to Rs. 7oo Cr primarily due to a Rs. 350 Cr investment in Hinduja Foundries. John Deere is expected to come out with a backhoe loader variant and a new wheel loader. Company’s debt levels are expected to increase by Rs. 700 Cr by FY13 to take care of the capex and investment plans. Management also plans to restructure investment companies and come out with the consolidated financials for FY13

Outlook and Valuation:
Ashok Leyland reported growth of 5.8 % YoY in its top-line at Rs. 329 Cr. Volume for the quarter grew by 26.1% YoY which is 10.5% decline excl. LCV sales, whereas average realisation de-grew by 16.1% YoY, mainly hinting towards higher discounting on account of slowdown in demand and higher contribution of LCV ‘Dost’. Spare parts sale grew by 27% YoY to Rs. 260 Cr coupled with richer product mix in the export market restricted the decline in average realisation / vehicle. Other expenses increased by 29.7% YoY on account of increase in the marketing and brand building expenses as well as higher power expenses. However, on a QoQ basis, other expenses declined by 70bps on account of Rs. 12 Cr saving in power cost and Rs. 15 Cr in reduction in ad spends. At the same time, due to one-time incentives and benefits to employees in Q1FY13, Q2FY13 employee expenses declined by 90 bps QoQ. As a result, EBITDA margins improved by 160 bps QoQ to 9.8%. EBITDA declined by 2.7% YoY to Rs. 320 Cr higher than our estimate of Rs. 270 Cr. On account of higher working capital requirement, interest cost grew by 57.4 % YoY to Rs. 100 Cr, thereby, leading to a 19.2 % YoY de-growth in PBT. On account of lower tax rate at 8.5 % due to higher production at Pantnagar and R&D spend, PAT (adj. for forex) decline was restricted to 15.3% YoY at Rs.130 Cr. Ashok Leyland an ideal buy at current price as well as at declines with a stop loss placing at Rs. 24.95 for a target of Rs. 30.00. The stock trades at 11.88x/9.54x P/E on FY12/13 estimates with the target price of Rs. 30/ share. Uncertainty with respect to demand for Ashok Leyland (due to regional disparity) continues to be a concern on the volume front. However, price hikes and lower Raw Material cost can provide cushion against the drop in earnings due to lower volumes.

SALES (Rs. Crs)12,842.0013,476.7014,836.4017,156.20
NET PROFIT (Rs. Crs) 566.00530.50606.90754.40
EPS (Rs.)2.121.992.282.84
PE (x)12.1012.9011.309.10
P/BV (x)1.601.501.401.40
EV/EBITDA (x)7.807.907.106.30
ROE (%)13.9012.2013.0015.30
ROCE (%)

I would buy ASHOK LEYLAND with a price target of Rs. 30.00 for the 6 month target. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 24.95 on your every purchase.



Thursday, December 13, 2012


Scrip Code: 532555 NTPC
CMP:  Rs. 153.20; Buy at every dips.
Short term Target: Rs. 175; Medium to Long Term target Rs. 214.00; 
STOP LOSS – Rs. 131.00; Market Cap: Rs. 1,26,320.51 Cr; 52 Week High/Low: Rs. 190.75 / Rs. 137.00
Total Shares: 824,54,64,400 shares; Promoters: 696,73,61,180 shares – 84.50 %; Total Public holding: 127,81,03,220 shares – 15.50 %; Book Value: Rs. 88.89; Face Value: Rs. 10.00; EPS: Rs. 12.57; Div: 40 %; P/E: 12.18 times; Ind. P/E: 14.41; EV/EBITDA: 10.78
Total Debt: Rs. 47,338.33 Cr; Enterprise Value: Rs. 1,73,658.84 Cr.

NTPC INDIA LTD: The Company was founded in 1975 and is based in New Delhi, India. NTPC Limited engages in the generation, distribution, and sale of bulk power to state power utilities in India. It generates power from coal, gas, hydro, and liquid fuel sources. The company also undertakes consultancy and turnkey project contracts that comprise engineering, project management, construction management, and operation and maintenance of power plants. In addition, it engages in the oil and gas exploration, and coal mining activities. The Company’s other business includes providing consultancy, project management and supervision, oil and gas exploration, and coal mining. As of march 31, 2012, the Company was engaged in executing two projects: Lata Tapovan hydro electric project (171 mega-watts (MW)), located in Chamoli District of Uttarakhand and Rammam Hydro Electric Project, Stage III (120 MW) located in Darjeeling District of West Bengal and West Sikkim District of Sikkim. As of March 31, 2012, the Company had installed capacity in India was 199877.03 mega-watts. During the fiscal year ended March 31, 2012, the Company added 2,820 mega-watts of installed capacity. As of March 31, 2012, the Company had five subsidiaries: NTPC Electric Supply Company Limited, NTPC Vidyut Vyapar Nigam Limited, NTPC Hydro Limited, Kanti Bijlee Utpadan Nigam Limited and Bhartiya Rail Bijlee Company Limited.

Investment Rationale:
NTPC plans to spend Rs. 20,995 crore towards capex whereas the same as of H1FY13 stands at Rs. 8,081 crore. NTPC’s Q2FY13 capex is pegged at Rs. 4,103 crore. As of H1FY13, the total installed capacity of NTPC group was 39,174 MW out of which 4,364 MW capacities is attributed to J.V.’s & subsidiary companies. The commercial capacity of NTPC group stood at 37,236 MW. As of H1FY13, NTPC has commissioned 2,160 MW of capacity whereas 2,820 MW of capacity has been commercialised. During H1FY13, NTPC commissioned 2,160 MW which comprises of one unit of 660 MW at Sipat and one unit of 500 MW each at Rihand, Mauda and Vindhyachal. During this period 2,820 megawatt has been declared on commercial operation, two units of 660 megawatt at Sipat and one unit of 500 megawatt each at Farakka, Simhadri and Jhajjar. The Gross generation of NTPC for Q2FY13 stood at 52.72 BU’s as against 50.88 BU’s, implying a rise of 3.62 % YoY. But on a sequential basis, generation was down by 10 % due to planned shutdown across majority of the operational capacity. The regulated asset base of the NTPC stands at Rs. 30,075 crore as of Q2FY13 as against an asset base of Rs. 29,295 crore in Q1FY13. The imported coal blending was at 4 % in Q2FY13 whereas for H1FY13 the same stood at 6.2 % (10.6% in H1FY12). NTPC received 32 MT of coal in Q2FY13 vs. 25.1 in Q2FY12 (increase of 24% YoY). The materialisation rate in Q2FY13 stood at 103 % vs. 88 % in Q2FY12. On the imported coal front, NTPC imported 1.5 MT, a decline of 45 % YoY. PLF for coal based stations for Q2FY13 stood at 74.9% (vs. 78.4% in Q2FY12) whereas PLF for gas based power for Q2FY13 was 57.7% (vs. 60.8% in Q2FY12). NTPC’s Total capex committed towards development of captive mines till Q2FY13 stood at Rs. 959 crore. The company expects commissioning of Pakhri Barwadih in CY13 and expects the peak production to be at 15 MT’s by FY17. The Average cost of borrowing stood at 7.31 %. The Debt/Equity ratio stood at 0.68 x as of Q2FY13. The generation loss on account of fuel supply was 5.05 BU’s in Q2FY13 as compared to 1.95 BU’s in Q2FY12. While NTPC has received the in principle approval for re-allocation of the coal blocks, the final communication in this regard is awaited. The management is confident of receiving the same and has continued with its development work and capital expenditure in these blocks. The management has indicated that the production from its Pakhri - Barwadih coal block is likely to start in 2013. The management has indicated that the company continues to realise its dues (including servicing of bonds under the one-time settlement scheme) from the state utilities. Debtor days remained stable at 35 days in Q2FY13 as against 32 days in Q1FY13.

Outlook and Valuation: 
As usual NTPC reported better Q2FY13 revenues of Rs. 16,351 crore and PAT of Rs. 3,142 crore which are higher than estimates owing to many one offs relating to accounting. Adjusted PAT came in at Rs. 2,047 crore. Other income was higher than estimates on account interest income on deposits and higher dividends from J.V.s & Subsidiaries. Capacity additions during Q2FY13 was nil due to planned shutdown. The Gross electricity generation growth was at 3.6 % YoY. There was a 10 % QoQ decline of 52.72 billion units (BU’s) mainly due to planned shutdown of capacity. As a result there was contraction of 350 bps and 310 bps QoQ in Coal plant and gas plant PLF’s, respectively in Q2FY13. However, as per management, PLF’s have started showing up tick from October 2012. NTPC has commercialised capacity to the tune of 2,820 MW in H1FY13. Realisation per unit for Q2FY13 stood at Rs. 3.05/Kwhr. NTPC’s capacity addition in 12th Plan is front loaded. The company expects to commission as much as 50 % of 12th plan target over FY13- FY14E. It is believed that the NTPC is on track to achieve the same as it has commissioned 15 % of the target in H1FY13. If the capacity additions plans pan out accordingly, then the rate of capitalisation would surprise everyone on the upside. However, NTPC is expected to commission 3,670 MW in FY13E (88% of the planned target in FY13E). The contribution of CWIP as % of Networth is expected to gradually decline to 49 % and 46% in FY13E and FY14E respectively, implying higher capitalisation intensity in the balance sheet. Given the rate of capacity additions in H1FY13, it is believed that NTPC will be able increase the rate of gross block addition from existing CWIP. Adding to this NTPC is one of safest utility to take shelter under (Regulated Model/Lesser fuel risk/Underleveraged balance sheet) when power sector is facing challenging times. At the value of 1.8x to its FY14E book value, markets will wait to see the run rate of capacity addition before re-rating the NTPC. Capacity addition in the Twelfth Five Year Plan is lower at 51,000 MW as against the earlier company estimates of 75000 MW, the focus on commercialization (thereby turning CWIP to gross fix assets) can lead to re-rating , going forward. The key Risks could be-delay in capacity addition in H1FY13-FY14 and Overhang due to disinvestment by Government of India to the tune of 9.5 %. At the CMP of Rs. 153.20, the stock is trading a P/E of 10.17 x FY13E and 8.67 x FY14E respectively. Earnings per share (EPS) of company for FY13E and FY14E are seen at Rs. 15.06 and Rs. 17.67 respectively, in my view the Fair Value of NTPC comes at Rs. 214. One can buy NTPC with a target price of Rs. 214.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 175.00

SALES (Rs. Crs)57,407.0064,830.0067,459.0073,207.00
NET PROFIT (Rs. Crs) 9,103.009,223.0010,166.0011,474.00
EPS (Rs.)11.0011.2012.3013.90
PE (x)15.0015.1013.7012.20
P/BV (x)2.101.901.701.60
EV/EBITDA (x)11.4010.2011.6011.40
ROE (%)13.4012.6012.8013.10
ROCE (%)11.0011.5011.0010.80

I would buy NTPC with a price target of Rs. 214.00 for the 6 month target and for short term it would be Rs. 175.00. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 141.00 on your every purchase.



Thursday, December 6, 2012

Credit Analysis and Research Ltd IPO : A MUST SUBSCRIBE !!!

Price Band: Rs. 700 - Rs. 750.
Retail Discount : NA .
Face Value: Rs.10.
Minimum Lot Size: 20 Shares.
Issue opens on: 07th December 2012, Friday.
Issue closes on: 11th December 2012, Tuesday.
Listing Date on: by 21st December 2012.
Total No. of Shares offered: 71,99,700  shares or 25.22 %
Employee Reservation: NA.
Net Public Offer: 6,61,15,000 shares.
QIB Book: 35,99,850 shares or 50 % of issue.
Non – Institutional Bidders: 10,79,955 shares or 15 % of issue.
Retail Book: 25,19,895 shares or 35 % of issue.
Equity Shares outstanding prior Issue: 2,85,52,812 shares.
Equity Shares outstanding post Issue: 2,85,52,812 shares.
Total Size of the Issue: Rs. 503.97 Crs - Rs. 539.97 Cr.
IPO GRADING: Exempted for Grading by SEBI.

KEY FINANCIALS (Consolidated)31 Mar 200931 Mar 201031 Mar 201130 Sept 2012
6 month
Total Income (Rs. Crs)103.15153.79176.62104.00
Net Profit (Rs. Crs) 54.6787.0491.0549.76
Net Profit Margin (%)53.0056.5951.5547.84
EPS (Rs.)19.1530.4931.8917.43

CREDIT ANALYSIS AND RESEARCH LIMITED : Credit Analysis & Research Ltd (CARE) was incorporated in 1993. CARE is the second largest full service credit rating company among six players in India. They offer rating and grading services across a diverse range of instrument and industries including IPO grading and grading of various types of enterprises, including shipyards, maritime training institutes, construction companies and rating of real estate projects among others. They also provide general and customized industry research reports. It is also has international presence in Maldives, Nepal, Mauritius, Hong Kong, Eucador, Mexico & has non-binding MOU with credit rating agencies in Brazil, South Africa, Malaysia & Portugal. CARE is professionally managed has no identifiable promoter & its existing share holders include domestic banks and financial institutions such as IDBI Bank, Canara Bank, SBI and IL&FS etc. Company's list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub- sovereign entities, Small and Medium Enterprises ("SMES") and micro-finance institutions. They are also leading credit rating agency in India for IPO grading having graded the largest number of IPOs since the introduction of IPO grading in India. CARE ratings has completed over 19,069 rating assignments as of September 2012 since its inception in April 1993. It has a rating relationships with 4,644 clients as o 30th September 2012.

CARE, being a credit rating company in India, is exempted by SEBI from obtaining IPO grading for its Initial Public Offer. None of the rating companies including CRISIL, FITCH or ICRA graded CARE IPO.

The company has fixed the price band at Rs. 700-750 per share. Based on FY12 annual EPS of Rs. 40.55, CARE will be trading at P/E range of 17.27 x to 18.5 x. This is at a significant discount to peers like ICRA & CRISIL which are trading at 27 x and 35 x respectively. For FY12 the consolidated revenues from operation stood at Rs. 190 Cr with Net Profit of Rs. 116 Cr resulting in Net Margin of 61.05 % with EPS of Rs. 40.55 CARE has consistently maintained high PAT margin of 53 % with strong ROE of 34 %. It is a debt free company. 85 % of its revenue comes from ratings business. At the IPO price the P/E is in range of 17.27 x to 18.5 x & P/B is in the range of 5.3 x to 5.6 x. Net worth o the company as on 3oth September 2012 is Rs. 427 Cr with Book Value of Rs.  149/share. Company has cash equivalents of Rs. 260 Cr. CARE is expected to post FY13 profit of around Rs. 100 Cr which can lead to EPS of close to Rs. 35. 

Retail Investors can subscribe up to maximum of Rs. 2,00,000 per application. CARE has strong financial position and is high cash-generating business and which is available at very reasonable valuations.

The object of the offer is to carry out sale of 71,99,700 Equity share by selling shareholders & to achieve the benefits of listing the Equity Shares on the Stock Exchanges. The Promoters will dilute 25.22 % of their holding in the company through the stake sale. The company CARE will not receive any proceeds from the offer and all proceeds will go to selling shareholders.

Out of the Offer of a total of 71,99,700 equity shares -  24,54,400 equity shares are being offered by IDBI Bank; 21,71,200 equity shares are being offered by Canara Bank. 9,14,500 equity shares are being offered by SBI; 8,55,500 equity shares are being offered by IL&FS; 5,84,100 equity shares being offered by Federal Bank. 58,605 equity shares being offered by IL&FS Trust held on behalf of Milestone Fund. 1,395 equity shares being offered by Milestone Trusteeship held on behalf of Milestone Army Trust; 60,000 equity shares being offered by ING Vysya; 1,00,000 equity shares being offered by TATA Investment. 

The Equity Shares being offered by the Selling Shareholders under the Offer have been held by such Selling Shareholders for a period of more than one year prior to filing of the Draft Red Herring Prospectus with SEBI. CARE has mandated six bankers for managing the IPO, with Karvy Computershare Private Limited as its registrar & DSP Merrill Lynch Ltd as lead banker, other bankers managing the share sale are Edelweiss Capital Limited, ICICI Securities Limited, IDBI Capital Market Services Limited, Kotak Mahindra Capital Company Limited, SBI Capital Markets Limited. 

According to me one should look for subscribing for CARE IPO, having 85 % o its revenue coming from rating business which earns better margins is thus being offered to public at very attractive valuation. CARE will be third listed company after CRISIL & ICRA - the rating agencies India Ratings (formerly Fitch), Brickworks & SME rating are unlisted. CARE can have Market Cap of around Rs. 2,141.46 Cr with cash of Rs. 260 Cr which brings its Enterprise Value of around Rs. 1,881.46 Cr at an Upper band of Rs. 750. 

Thus, with attractive pricing & strong fundamentals with good institutional holdings the Long term investors should look into subscribing the IPO for good opportunity. Short term investor can subscribe for listing gains.



Monday, December 3, 2012

COX & KINGS (INDIA) LTD : Accumulate at every Dips !!!

Scrip Code: 533144 COX&KINGS
CMP:  Rs. 137.20; Buy at current levels.
Short term Target - Rs. 150; Medium to Long term Target – Rs. 170; 
STOP LOSS – Rs. 126.25; Market Cap: Rs. 1,873.16 Cr; 52 Week High/Low: Rs. 207.30 / Rs. 119.05
Total Shares: 13,65,27,890 shares; Promoters : 8,03,46,760 shares – 58.85 %; Total Public holding : 5,61,81,130 shares – 41.15 %; Book Value: Rs. 80.67; Face Value: Rs. 5.00; EPS: Rs. 4.40; Div: 20.00 % ; P/E: 31.12 times; Ind. P/E: 21.50; EV/EBITDA: 16.84.
Total Debt: 1,158.26 Cr; Enterprise Value: Rs. 3,031.42 Cr.

COX & KINGS INDIA LTD:  Cox & Kings Ltd was incorporated in 1758 and is based in Mumbai, India. The company was formerly known as Cox and Kings (India) Limited and changed its name to Cox & Kings Limited in July 2010. The company was listed on the bourses in December, 2009 and raised Rs. 600 crore through an IPO at a price of Rs. 330/share of face value Rs. 10 (17 x FY10 EPS), in June 2011 the company announced split of shares from Face value of Rs. 10.00 to Rs. 5.00. Cox & Kings Limited operates as a travel and tours company primarily in India, Europe, Australia, the United States, Dubai, Japan, and Singapore. The company offers destination management services; outbound tourism services; leisure and business travel services; education travel services; hotel bookings; car, coach, railway bookings; visas, passport, medical insurance assistance services; camping holidays services; and meetings, conferences, and events services, as well as NRI, trade fairs, and foreign exchange services. The company has presence in over 19 countries with 13 branch offices, 177 agents and 150 franchises. It also offers various leisure holiday packages primarily under the Cox & King, Explore, Edge, Superbreak, CKDMS, Tempo, BenTours, online Bookit, and Djoser brand names; education travel services principally under the PGL, NST, Meininger, EST, and Travelplus brand names; and camping holidays primarily under the Eurocamp, Keycamp, Ecamp, Eurocamp Independent, and Own a Holiday Home brand names. 

Investment Rationale:
Cox & Kings (C&K) is one of the leading and oldest players in the travel & tourism industry that caters to the overall travel needs of Indian and International travelers. C&K has a presence in more than 19 countries besides India through subsidiaries and JVs. This places the company in a unique position among all regional players to offer multiple travel choices and value for products. C&K further plans to expand its network of franchise outlets to 250 by FY13 in India mainly in Tier II and Tier III cities to gain market share. The company provides training, site development, advertisement and marketing support with minimal investment. Higher number of franchises provides C&K an edge over competitors to gain market share and brand recognition. In addition, this also gives it better bargaining power to make bulk bookings, which finally helps company to provide a competitive package to customers, thus attracting more traffic in the long run. Captive destination management services assures C&K of savings in cost in terms of commission and capture the maximum pie of expenditure accrued by customers, right from transportation to sightseeing. The wide network of overseas branches gives the company access to important geographies and markets that help it to gain a strong footing in the offline travel industry. Its global presence also helps to mitigate the seasonality impact faced by the domestic travel and tourism industry. India’s tourism is counter cyclical to the rest of the world as the outbound season is in the first half of the financial year (April-September) whereas the profitability in the second half is taken care of by the overseas subsidiaries and India outbound operations. COX & KINGS had made series of acquisition which is a key route to become leader in tourism Industry. It has done seven acquisitions in the past six years (including HBR), which made C&K an integrated player globally with quality products and services & brings huge business volume on the book on a consolidated basis. This, in turn, increases C&K’s bargaining power with vendors due to its large customer base and global presence. The overseas acquisition created value for the company with healthy growth in revenues (CAGR of 51 % during FY07-11) and operating margins (i.e. at 40 %) during the same period. Recently the company increased stake in its student accommodation brand Meininger Hotels. C&K earlier held 50 % stake & has now increased it by 24 % taking the total holding in Meininger to 74 % at a cost of Rs. 190 Cr, the company will eventually acquire the balance 26 % stake, which is also expected to cost the company around Rs. 190 Cr. 

YearCompanyCountryAmountType of Offerings
Mar 2006Clearmine LtdUKRs. 15.60 CrDestinations management services & inbound Services in Europe.
Sep 2007Cox & KingsUKRs. 39.00 CrOutbound services to upmarket leisure client: Wealthy retirees, Key destination: India, Latin America etc.
Sep 2007Cox & KingsJapanRs. 2.00 CrTravel wholesaler of products & services to other tour operators.
Nov 2008Tempo Holidays Pty LtdAustralia$ 27.00 millionOutbound European & UAE countries.
Apr 2009East India Travel Company LtdUSA$22.00 millionPremium outbound travel package in US.
Jan 2010MyPlanet, BenTours InternationalAustraliaNASpecialised Outbound tour operator.
Sep 2011Holidaybreak PlcUKRs. 2,300 CrEducation tour operator.

Outlook and Valuation:
Tourism is an important sector of the economy and contributes significantly in the country’s GDP as well as foreign exchange earnings (19 % YOY to Rs. 77,580 Cr). The tourism industry in India is vibrant and is fast becoming a global destination. This is clearly evident from the rise in inbound and outbound tourists by 8.1 % and 12.6 %, respectively between 2005 and 2010. According to World Travel and Tour Council (WTTC), currently the travel and tourism industries directly contributes to about 2 % to India’s GDP which are backed by growth of 8 % CAGR in FTAs and 14 % CAGR in domestic tourism in India over the last five years. Considering the high growth potential, WTTC estimates the size of the Indian tours & travel industry to register growth at a CAGR of 10 % from US$42 billion to US$111 billion by the end of 2020. 

Cox and Kings India net sales have grown to Rs. 500 crore in FY11. Profits have grown to Rs. 129 crore at the end of FY11. The company has maintained its operating profit margin at an average of 40 % for the past five years. The company is focusing on trimming down debt through cash generated from business and minority stake sale in its wholly-owned subsidiary Prometheon Holdings (UK) Ltd, which is believed, would further improve its profitability, going forward. However, continued slowdown in the business of international division and seasonality remains a concern. At the current market price of Rs. 137.20, the stock is trading at a PE of 6.92 x FY13E and 6.26 x FY14E respectively. The company can post Earning per share (EPS) of Rs. 19.80 for FY13E and Rs. 21.90 for FY14E. It is expected that with the company’s surplus scenario is likely to continue for the next three years & will keep its growth story intact for the coming quarters also. One can ‘BUY’ in COX & KINGS (INDIA) LTD with a target price of Rs. 170.00 for Medium to Long term investment.

SALES (Rs. Crs)496.70837.901,961.002,093.30
NET PROFIT (Rs. Crs) 129.1041.60270.50298.90
EPS (Rs.)9.503.0019.8021.90
PE (x)14.7045.607.006.30
P/BV (x)1.601.601.301.10
EV/EBITDA (x)7.7027.205.305.00
ROE (%)10.703.5018.5017.00
ROCE (%)10.302.4012.2012.90

I would buy COX & KINGS (INDIA) LTD with a Short term price target of Rs. 150 & for the 6 month target of Rs. 170. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 126.25 on your every purchase.



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