MAYUR UNIQUOTERS LTD : DIWALI 2014 MUHURAT PICK !!!

Scrip Code: 522249 / MAYURUNIQ

CMP:  Rs. 418.80; Buy at current levels and at every dipps. Medium to Long Term Target: Rs. 600 and can go to Rs. 800 in two years time; STOP LOSS – Rs. 385.30; Market Cap: Rs. 1,813.39 Cr; 52 Week High/Low: Rs. 485.00 / Rs. 125.00. Total Shares: 4,33,05,600 shares; Promoters : 3,06,61,904 shares –70.80 %; Total Public holding : 1,26,43,696 shares – 29.19 %; Book Value: Rs. 27.36; Face Value: Rs. 5.00; EPS: Rs. 13.92; Dividend: 95.00 %; P/E: 30.56 times; Ind. P/E: 30.08; EV/EBITDA: 18.40.

Total Debt: Rs. 21.00 Cr; Enterprise Value: Rs. 1,828.84 Cr.

MAYUR UNIQUOTERS LIMITED: Mayur Uniquoters Limited was founded in 1992 and is based in Jaipur, India. Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. It also exports its products to the Middle East, Cyprus, the United Kingdom, Russia, Sri Lanka, Nepal, the United Arab Emirates, Mexico, Italy, and the United States. The company had declared splits in face value of its shares from Rs. 10 to Rs. 5 in July 2013 and gave bonus of 1:1 in June 2012 and again 1:1 bonus in February 2014. Mayur Uniquoters Ltd has an installed capacity of 400,000 Linear Meters per month & it has a full range of machinery to full-fill Printing, Embossing, Lacquering, Sue ding and laminating needs. The company possesses fully equipped Physical, Chemical and Product Development Laboratories capable of testing nearly all the properties of Artificial Leather for different segments and applications. Company also manufactures and exports PVC Vinyl also referred to as Artificial Leather or Synthetic Leather; they are also termed as PVC Leather Cloth, PU/PVC Leather Cloth. The company has its own inline testing lab, physical testing lab, raw material testing lab, Colour testing lab and product development lab. Company carters to major automobile brands in India to name the few are BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. Mayur Uniquoters Ltd is locally compared with Superhouse Ltd, Lawreshwar Polymers Ltd, Super Tannery ltd, Super House Ltd, Crew BOS products Ltd, Mideast India Ltd, Mirza International Ltd, Fenoplast ltd, Zenith Exports Ltd, Mayur Leather Products Ltd, Relaxo Footware ltd globally compared with Daiichi Kasei Company Ltd of Japan, Chanco International Group Ltd of Hong Kong.

Investment Rationale:

Mayur Uniquoters Ltd is the largest manufacturer of artificial leather and PVC Vinyl in India and was established by Mr. Poddar in 1994. Mayur Uniquoters is a market leader with installed capacity of 2.5 million linear meters per month. The company is operating at 100 % capacity utilisation, and has planned to expand its capacity further to 3.05 million linear meters per month by 2015. Company’s nearest competitor is just 50 % of the company’s current capacity. The company derives more than 50 % of its revenues through organised footwear industry and some of its prestigious clients include all top names such as Bata, Action, Liberty, Relaxo, etc. and the Automobile industry contributes 35 % of revenue and some of its prestigious clients include all top names such as BMW, General Motors, Daimler, Maruti Suzuki, Tata Motors, Honda, Ford, Hyundai, Nissan, LML. This list further indicates the consistent superior quality provided by Mayur Uniquoters. On the export front, the company has managed to get entry into Ford Motors and Chrysler. In addition, orders from clients like GM, Mercedes and BMW are also in the pipeline. Due to inherent negatives of natural leather such as being derived from animal sources, tanneries causing pollution and most importantly due to its high cost, Synthetic Leather has become a better economical alternate to natural leather and Mayur Uniquoters sees an increasing trend of replacing natural leather with synthetic leather in various industries. As per the management of Mayur Uniquoters Ltd, the addressable market size is in the range of Rs. 4,000- Rs. 5,000 crores. The Indian textile industry is one of the major sectors of Indian economy largely contributing towards the growth of the country’s industrial sector. The textile sector contributes 14 % to industrial production, 4 % to National GDP, and 10.63 % to country’s export earnings. Textile sector in India provides direct employment to over 35 million people and holds the second position after the agriculture sector in providing employment. Growing at a rapid pace, the Indian Market is being flocked by foreign investors exploring investment purposes and with an increasing trend in the demand for textile products in the country, a number of new companies and joint ventures are being set up in the country to capture new opportunities in the market The most significant change in the Indian textile industry has been the advent of man-made fibres (MMF). The country has successfully placed its innovative range of Man Made Fibres textiles in almost all the countries across the globe. Lower realisations and margins in the domestic market have prompted Mayur Uniquoters to shift focus towards exports and replacement markets. Mayur Uniquoters has successfully acquired clientele in the global Auto OEM markets such as Ford (USA) and Chrysler (USA). The company is expecting to supply to other global OEM players such as BMW, Mercedes and GM. In future, the company can insulate itself from any recessionary trends in the auto industry by targeting the replacement market. Supplying to the dealers of the aftermarket segment of USA is also under consideration. Indian synthetic leather manufacturers supply mainly to the Footwear industry and to the Automotive OEMs. The market size of synthetic leather industry in India is estimated to be Rs. 4500 crores. The unorganised sector accounts for 50 % of this market, whereas the remaining 50 % is serviced by the organised sector which comprises 10-15 players including 5-6 big players. These organized players include Jasch Industries, Fenoplast, Manish Vinyl, V.K. Polycoats, HR Polycoats and Polynova Industries, among others. Synthetic leather is also used to make accessories such as bags, home furnishings etc. Synthetic leather has found acceptance in the western markets which have been traditionally natural leather markets. As cost efficiency gains importance in the global auto markets, synthetic leather, which is 4-5 times cheaper than natural leather, has become a preferred choice for Auto OEMs. Apart from the cost differential, synthetic leather has found favour over natural leather due to a variety of reasons such as reduced pollution, animal cruelty concerns etc usually associated with leather tanning. The market size of India's synthetic leather industry is expected to double in the next five years to Rs. 9,000 crore on account of improved technology, improved product quality, increasing consumption and purchasing power.

Outlook and Valuation: 

Mayur Uniquoters Limited manufactures and sells coated textile fabrics in India. The company’s products include artificial leather, synthetic leather, and PVC vinyl. Its products are used in footwear, furnishings, automotive OEM, automotive replacement, and automotive exports markets. The company sells products directly to OEMs, as well as to other manufacturers and wholesalers. The company is in the process of installing a 5th coating line, which will be dedicated mainly to the exports market. This will take the coating line production from 1.85 mn linear meters per month to 2.5 mn linear meters per month. In addition, the company is planning to increase this capacity to 3.1 mn linear meters per month going forward. The capacity addition will lead to increase in volume and the export focus will lead to margin expansion. In addition, the company is doing backward integration in manufacturing synthetic knitted fabric, a key raw material post chemicals with investment of Rs. 25 crores. This will lead to quality control and reduce rejection which will also help in margin expansion. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry – by Warren Buffett) expanding moats which is a very strong sign of a future Multi-bagger stock. Footwear segment contributes 54 % to Mayur Uniquoters Ltd’s total revenues on the back of big clientele. The company’s clientele include Bata, Paragon, Liberty, Action, VKC group and Relaxo. The current market size of Indian footwear industry is estimated at Rs. 30,000 Cr to Rs. 35,000 Cr. The industry witnessed a CAGR of 18 % over FY08-12, which in turn led to growth in Mayur Uniquoters Ltd’s footwear segment. India’s average per capita footwear consumption is at 2.5 footwear pair’s p.a, which is much lower than the average per capita consumption of 5.0 pair’s in the developed countries. Thus, there is scope for improvement, which in turn offers big opportunity for players such as Mayur Uniquoters Ltd to cater to this growing market. The Auto OEM segment is the second largest segment for Mayur Uniquoters Ltd. This segment contributes 35 % to the company’s total revenues. Mayur Uniquoters Ltd caters to both domestic as well as global OEMs and replacement markets. OEM exports realisations can be as high as US$ 7 to $ 9 per metre (Rs. 427 to Rs. 550 per metre) over domestic OEM realisation of Rs. 120-135 per metre. The realisation from sale to Global OEMs with Indian presence stands at Rs. 200 per metre. Synthetic leather is produced by a process known as calendaring where PVC sheet and two distinct layers of knitted fabrics are fused together. Mayur commands 7 % to 8 % market share in Indian PVC market and has steadily increased its exposure to big Auto OEM players. Mayur Uniquoters has already received approvals and featured in the supplier list of Auto OEMs such as Ford India, GM India & Mahindra SUV500 etc. It is also part of the approval list of suppliers to Ford Worldwide along with Chrysler (USA). Mayur intends to expand its presence in the global market as a key synthetic leather supplier. Mayur Uniquoters Ltd has achieved backward integration linkage by investing Rs. 25 crores in a unit producing knitted fabrics. This could bring down the raw material costs by 5-10 % and in turn improve margins. By controlling the quality of raw material, the company would also target a lower rejection rate, thus improving quality. Also, this backward integration would significantly reduce the product development cycle from 2-3 months to 3-4 weeks. The company has consistently improved its realisation per meter from Rs. 188 per meter in FY11 to Rs. 225 per meter in FY13. The growth in high margin exports business and the backward integration in manufacturing knitted fabric will lead to further improvement in margins. The comapny has been reporting strong return ratios for the last 4 years with ROE in excess of 40 %. Due to strong cost control and better working capital management, the debt equity ratio is negligible. There has also been consistency in dividend payout. On Financial side, Mayur Uniquoters Ltd.’s has consistently grown over the last decade. Its Sales are expected to grow at a CAGR of 23 % over FY13-FY16E. The company has revenue growth of 24 % CAGR over FY11-FY13.  It is expected that Mayur Uniquoters to continue recording such a strong revenue growth going ahead with its renewed focus on the Auto OEM segment and its emphasis on an exports led revenue growth. EBITDA is expected to record a growth of 17 % CAGR over FY13-16E. Company’s PAT grew at a CAGR of 31 % over FY11 to FY13 and is expected to grow at a healthy rate. Mayur Uniquoters offers a superior ROCE and ROE. It has reported an average of 61 % of RoCE since FY11 and will continue to generate healthy ROE, making it an attractive business to look at. Going forward, it is expected that the quality of ROE to remain in excess of 30 % with stable operating margins and minimal addition in leverage. Company will witness strong operating cash flows with no incremental capex; the Debt to Equity ratio is expected to be reduced further and company’s Operating cash flows are expected to remain strong on the back of robust sales and efficient working capital management. At the current market price of Rs. 418.80, the stock P/E ratio is at 13.29 x FY15E and 11.16 x FY16E respectively. Company can post Earning per share (EPS) of Rs. 31.50 for FY15E and Rs. 37.50. One can buy this stock with a target price of Rs. 600.00 for Medium to Long term investment. 

KEY FINANCIALS	FY13	FY14	FY15E	FY16E
SALES (₹ Crs)	381.00	487.00	600.00	709.00
NET PROFIT (₹ Cr)	44.00	54.00	68.00	81.00
EPS (₹)	20.10	25.00	31.50	37.50
PE (x)	48.20	19.40	15.40	12.90
P/BV (x)	8.90	6.60	5.00	3.80
EV/EBITDA (x)	15.40	12.20	9.40	7.70
ROE (%)	42.70	39.10	36.80	33.30
ROCE (%)	55.60	48.20	45.80	42.70

I would buy MAYUR UNIQUOTERS LTD for Medium to Long term for target of Rs. 600.00 and stock can see Rs. 800 and for the shorter term the target would be Rs. 500.00. 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 ₹ 385.30 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

FINANCIAL TECHNOLOGY:UNLOCKING VALUES !!!

Scrip Code: 526881 / FINANTECH

CMP:  Rs. 929.95; Buy at every dips.
Medium to Long term Target: Rs. 1130.40; STOP LOSS – Rs. 855.55; Market Cap: Rs. 4,285.07 Cr; 52 Week High/Low: Rs. 1221.90 / Rs. 551.55

Total Shares: 4,60,78,537 shares; Promoters : 2,10,42,582 shares –45.67 %; Total Public holding : 2,50,35,955 shares – 54.33 %; Book Value: Rs. 532.75; Face Value: Rs. 2.00; EPS: Rs. 112.37; Div: 400 % ; P/E: 8.27 times; Ind. P/E: 21.00; EV/EBITDA: 5.75.

Total Debt: 562.72 Cr; Enterprise Value: Rs. 4,191.79 Cr.

FINANCIAL TECHNOLOGIES (INDIA) LIMITED: Financial Technologies was incorporated in 1988 and is based in Mumbai, India. The company was earlier known as e-Xchange on the Net, in Aug 2001 the company changed its name to Financial Technologies India Ltd. Financial Technologies (India) Limited provides technology solution, intellectual property and domain expertise for digital transaction and financial markets across all asset classes including equities, commodities, currencies and bonds. It has set up 8 exchange ventures and 6 ecosystems venture – MCX, MCX-SX, IEX, DGCX (DUBAI), GBOT Mauritius, IBS FOREX, NSEL and SNX are all exchange ventures, while NBHC, Ticker Plant, Infovending, Atom technologies, Riskrat Consulting, FT Knowledge Management Company (FTME) are ecosystem ventures. It provides exchange, brokerage, messaging, consulting, and connectivity solutions. The company’s exchange and trading technology platform creates electronic, organized, and regulated financial markets for the asset classes and investor classes. The company offers comprehensive end-to-end solutions for the securities industry vertical encompassing the entire trade lifecycle of pre-trade, trade and post trade processing. In Brokerage Solutions its main product is ODIN. During March 2012, the company’s exchange technology (ET) division deployed energy solution Power Automated Risk & Matching System (PowerARMS) to enable trading risk management and clearing & settlement for Day Ahead Market at the Indian Energy Exchange. Financial Technology India Ltd is compared with Bursa Malaysia Berhad of Malaysia & Daiichi Commodities Company Limited of Japan.  

Investment Rationale:

Financial Technologies (India) Limited (FINANTECH) is the flagship company of the Financial Technologies Group co-promoted by Jignesh Shah an electronic & telecommunications engineer from Kandivali a small suburb of Mumbai who was the man behind the creation of Dubai Gold and Commodities Exchange and Singapore Mercantile Exchange, he started his career with BSE in its Rs. 100 Cr ambitious project to built BOLT. FINANTECH set out by introducing India's first derivatives trading platform, with the launch of ODIN in 1995, which enjoys 80% market share. It powers the Group's exchanges with its technology, and has demonstrated ample expertise in creating robust solutions for exchanges across asset classes and geographies. FINANTECH is one of the leading software and technology providers to institutional investors and their related counterparts. Its technology vertical is sub-divided into four solution suites: (1) Exchange Solutions, (2) Brokerage Solutions, (3) Messaging Solutions, and (4) Consulting Solutions. FINANTECH has graduated from technology to Exchanges to Ecosystem, it ventured into a Regulated business and obtained license by multiple regulators and has become a Market leader across ventures. FINANTECH further integrated by setting up its own exchange - Multi Commodity Exchange (MCX) a state-of-the-art electronic commodity futures exchange, offering futures trading in 47 commodities. FINANTECH further promoted MCX-SX India's third full-fledged Equity stock exchange which was recently launched by the present finance minister Mr.P. Chidambaram on 9^th Feb 2013. Like BSE and NSE, it has now from 11^th February 2013 started offering trading in equities, equity derivatives and other asset classes. Currently, MCX-SX index is named SX-40 comprising 40 diversified stocks & offers trading in equity cash & futures contracts & in bonds etc. MCX -SX has 1,116 companies listed on it as compared to 1,662 on the NSE & 5,195 on BSE, with around 700 member out of which 405 members have received approvals from SEBI rest to follow soon. Its international exchange ventures - Singapore Mercantile Exchange (SMX), Global Board of Trade (GBOT) and Bahrain Financial Exchange (BFX) - are relatively new and still in investment mode, growing on a low base in their respective regions. Its newest exchange venture, Bourse Africa, is all set to commence operations. It will be Africa's first commodities spot and multi-asset derivatives exchange, equipped with a central counter party (CCP) clearing house and depository platform. FINANTECH four ecosystem ventures, which together addresses upstream and downstream opportunities in the financial market which are - National Bulk Handling Corporation (NBHC); Atom; TickerPlant; Financial Technologies Knowledge Management Company (FTKMC) a leading provider of solutions and services in the realm of financial sector knowledge. It offers numerous products and services in the areas of executive education, financial literacy, financial certification, research, consultancy and advisory.

Outlook and Valuation:

FINANTECH is a unique play on end-to-end presence in the ecosystem of stock exchanges and provides technology solutions for the financial markets. With the start of MCX –SX the 132 years of legacy of BSE - Asia's oldest stock exchange with 1,405 brokers & the out performance of NSE which was started in 1992 is being challenged. NSE being a relatively new entity by then was more receptive to innovation. NSE quickly realized the importance of IT and innovative products to meet the growing sophistication of the financial markets. NSE raced ahead to rule market share charts. Due to technology expertise of FINANTECH which gives the company a strong economic moat. An Economic Moat protects a company's profits from being attacked by a combination of multiple business forces. Exchanges globally have been enjoying the status of winner takes all businesses, with minimal competition. Financial Technologies forward integration ranges from trading platform to exchanges to complementary ecosystem ventures facilitate a distinctive value proposition to its customers, these cannot be easily replicated in the market and hence FINANTECH enjoys a healthy competitive advantage and sustainable profitability and which provides it Economic Moat to the company. Technology is the key requirement for an exchange hence FINANTECH is the technology supplier for all its exchanges, except Dubai Gold Commodity Exchange. Exchanges are largely a network business. The network effect lends sustainability to the business model and acts as an entry barrier. The first mover clearly holds the edge in such a scenario. The SOTP valuation of FINANTECH's comes at Rs. 1,413.12 per share and applying a holding company discount of 20% to the entities wherein FINANTECH is holding a majority stake and /or will go ahead and unlock value through sale of stake in the future comes the target price for FINANTECH at Rs.1,130.40, which implies 21.55% upside to the valuation. There are some potential triggers in the near term that could drive the valuations of the stock higher which are the Passage of FCRA bill - which allows trading of new products like options, indices on MCX, driving volumes and valuation for MCX, and consequently, FINANTECH, the Stake sale in IEX (from 33% to 26%) - which would help value unlocking in the same and the Volumes performance at MCX-SX post launch on February 9th, the valuation of which will get embedded in FINANTECH's price. At the Cmp of Rs. 929.95 the stock trades at 20.26 x P/E on estimated EPS of Rs. 45.90 for FY13E and 19.74 x the P/E on estimated EPS of Rs. 47.10 for FY14E. One can buy FINANTECH with at target price of Rs. 1130 for medium to long term .

SOTP Valuation :-

Business Subsidiary FY13E	Value Per Share (in Rs.)
FINANTECH Standalone	543.00
MCX	341.12
MCX-SX	245.00
IEX	91.00
NSEL	106.00
SMX	61.00
OTHER INVESTMENTS	26.00
TOTAL	1413.12
Disc. to Holding co.(ex. FTECH stand.%)	20.00 %
TOTAL	1130.40

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (Rs. Crs)	425.50	390.90	482.50	533.40
NET PROFIT (Rs. Crs)	490.90	211.50	216.80	250.30
EPS (Rs.)	106.50	45.90	47.10	54.30
PE (x)	10.10	23.50	22.90	19.80
P/BV (x)	2.00	1.90	1.80	1.70
EV/EBITDA (x)	20.20	22.30	15.50	13.40
ROE (%)	21.70	8.30	8.00	8.60
ROCE (%)	6.00	5.30	5.40	7.30

I would buy FINANCIAL TECHNOLOGIES LTD with a price target of Rs. 1130.40 for Medium to Long term. 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. 855.55 on every purchase. 

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RETURN ON CAPITAL

ADANI PORT & SEZ : GRAB GREAT BUSINESS AT GREAT PRICE !!!

Scrip Code: 532921 / ADANIPORTS

CMP:  Rs. 131.70; Buy at current levels.

Medium term Target: Rs.145 ; Long term Target: Rs. 165; STOP LOSS – Rs. 121.16; Market Cap: Rs. 26,384.70 Cr; 52 Week High/Low: Rs. 157.75 / Rs. 105.65

Total Shares: 200,33,94,100 shares; Promoters : 155,25,38,715 shares –77.50 %; Total Public holding : 45,08,55,385 shares – 22.50 %; Book Value: Rs. 26.05; Face Value: Rs. 2.00; EPS: Rs. 7.47; Div: 50.00 % ; P/E: 17.63 times; Ind. P/E: 20.97; EV/EBITDA: 16.93.

Total Debt: Rs. 5,137.69 Cr; Enterprise Value: Rs. 31,522.39 Cr.

Adani Port and Special Economic Zone LTD: The Company was incorporated in 1998 and is based in Ahmedabad, Gujarat- India. It was earlier known as Gujarat Adani Port Limited and later named as Mundra Port and Special Economic Zone Ltd. In January 2012 the company was renamed as Adani Port and Special Economic Zone Ltd. Adani Port and Special Economic Zone Ltd is a subsidiary of Adani Enterprises Limited from September 2010. The company engages in the development, operations and maintenance of multi product special economic zone and related infrastructure in India. The company through its Mundra port located in Gulf of Kutch, India provides cargo handling & other value-added port related services. It operates port infrastructure facilities of bulk cargo at Dahej, Gujarat, handles bulk, liquid and containerized cargo, single point mooring, storage, and transportation of cargo by road, rail and pipeline. APSEZL is near completion of setting up coal cargo terminals at Murmugao Port, Goa. The company is also developing a non- LNG multi-user, multi-cargo port facilities at Hazira under the sub-concession route The company also operates container trains on specific railways routes; and provides multi-model cargo storage and logistics services through the development of inland container depots at various locations. It operates a fleet of approximately 2517 vessels. In addition, APSEZL provides non scheduled (passenger) services through its aircrafts. Adani Port and SEZ ltd is compared with Essar Port & Gujarat Pipavav Port locally & Globally with Meiko Trans Co. Ltd  & Azuma Shipping co. ltd of Japan; Rizhao Port Co. ltd; Shenzhen Chiwan Wharf Holdings Ltd.

Investment Rationale:

Adani Port is the largest private Port in Indian with No.2 position in container cargo. Adani Port’s market share in all India cargo i.e. Mundra + Pipavav + Major Ports has moved up from 14.4 % in H1FY12 to 17 % in H1FY13. Due to weak macro’s it faced a slowdown in container cargo growth to 16 % YoY v/s 25 % in the last quarter. Adani ports during the quarter commenced the trial runs at Hazira Port & CT-III (ahead of its schedule in Q2FY13) taking the overall operational portfolio across 4 ports. Abbot point recorded cargo volumes of 3.67MT, Dahej recorded cargo volumes of 1.2 mn tons & Hazira (trial runs) recorded cargo volumes at 0.11 MT in Q2FY13. Adani Ports has handled 47.88 MT at all the ports under their management during H1FY13 recording a growth of 24 % year on year. Dahej port has handled 3MT in H1FY13 with a positive APAT generation in H1FY13. CT-3 has also commenced operations in Aug-12 which has raised the container handling capacity of CT-3 from 2.5mteu to 4.3mteu. Hazira port has also commenced trial runs during the quarter, commercialization is expected from FY14E. APSEZ delivered solid Q2 performance by reporting standalone EBITDA at Rs. 485 Cr up at robust 28% year on year, led by high volumes in cargos. It’s EBIDTA margins stood at 69.5 % marginally up by 5.10 % year on year. The company posted revenues at Rs. 698 Cr up by 18.7 % year on year led by volume beat, as cargo volumes at 20.4MMT grew at a healthy rate of 15 % year on year. The Dry bulk segment (9.9 mt) grew at robust 41 % year on year, while the container cargo (6.2 mt) grew by 16 % year on year. APSEZ posted blended realization of Rs. 342/tone. Its’ APAT came at Rs 370 Cr up by 35.9 % year on year with significantly higher other income at Rs. 97.3 Cr which includes Rs 50 Cr of SEZ income. On Consolidate basis - Its revenue came at Rs. 1020 Cr up by 19 % year on year led by outperformance by Mundra port. Adani ports in Q2FY13 handled overall cargo of 25.7mn which included 3.67mt at Abbot Point and 1.5mt at Dahej port. EBITDA came in at Rs. 64o Cr up by 24.5 % year on year with a sharp decline in EBITDA margins at 62.6 %. APAT came in at Rs. 275 Cr down by 4 % year on year led by higher other income of Rs. 75.1 Cr. Overall implied EBITDA of other subsidiaries stood at Rs. 120 Cr down by 27 % quarter on quarter. ADSEZ reported a strong increase in standalone net debt by Rs. 1850 Cr from Mar 31, 2012 levels to Rs. 6450 Cr at H1FY13, Simultaneously the money deployed in short-term Loans & Advances has raised sharply by Rs. 1050 Cr to Rs. 1220 Cr raising questions on wasteful deployment of resources. We await clarifications on the nature of advances.

Outlook and Valuation:

ADANI PORT is among the largest beneficiaries of an increasing demand-supply mismatch in India’s port capacity. APSEZ’s competitive advantages and attractive location plus connectivity provides a strong visibility of traffic for APSEZ. It should be noted that 90 % of APSEZ’s estimated traffic comprises of coal, crude oil, and container. Of this, coal and crude oil are not likely to see any impact from global macro concerns, while container traffic should continue to benefit from the shortage of capacity on India’s west coast. Based on the SOTP valuation method the value APSEZ comes at Rs. 165 per share, implying an upside of 25.28 % from current levels. The value of Mundra Port (core operating asset of APSEZ) comes at Rs. 119 per share, constituting 72 % of total value of APSEZ. Mundra Port, given its strategic positioning & diversified mix of cargo & is expected to deliver strong volume growth. The company having delivered a strong track record of maintaining superior realization & margin has emerged as the preferred port due to superior infrastructure which facilitates faster transit of cargo, thereby reducing the overall cost of handling for logistic companies and end users. Amongst other projects, Dahej and Abbot Point (Australia) are already operational and gaining further traction. Despite been in a capital intensive business, the debt situation for ADSEZ is at very comfortable level. The stable cash flows from assured cargo and minimum working capital investment would be very important for the company to make more capex in the future for growth. At the current market price of Rs. 131.70, the stock is trading at a PE of 29.26 x FY13E and 18.41 x FY14E respectively. The company can post Earnings per share (EPS) of Rs. 4.50 in FY13E and Rs. 7.30 in FY14E. The SOTP (sum‐of‐the‐parts) valuation of Adani Port & Sez comes at Rs. 165. One can buy APSEZ with medium term target of Rs.145 & a Long term target price of Rs. 165.00.

SOTP Valuation :-

Business Subsidiary	Value Per Share (in Rs.)
Mundra Port	119.00
Value of SEZ	16.00
Adani Petronet Dahej Pvt Ltd	5.80
Mormugao Port	2.00
Abbot Point Coal Terminal	12.00
Hazira Port	4.00
Vizag Port	2.00
Adani Logistics Ltd	5.00
TOTAL	165.80

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	2,000.01	3,270.80	4,026.80	5,231.30
NET PROFIT (Rs. Crs)	943.50	1,094.80	913.20	1,464.50
EPS (Rs.)	4.70	5.40	4.50	7.30
PE (x)	26.10	22.50	27.00	16.80
P/BV (x)	5.90	5.10	4.50	3.70
EV/EBITDA (x)	21.10	20.00	16.60	12.90
ROE (%)	24.70	24.30	17.60	24.10
ROCE (%)	14.70	10.60	7.90	9.20

I would buy ADANI PORTS & SEZ with a price target of Rs. 145 for medium term & Rs. 165 for long term. 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. 121.16 on your every purchase. 

*As the author of this blog I disclose that I do hold ADANI PORT AND SEZ LTD in my investment portfolio.

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RETURN ON CAPITAL

SANGHVI MOVERS LTD: A Hidden Gem, Accumulate at every Dip !!!

Scrip Code: 530073 / SANGHVIMOV

CMP:  Rs. 104.70; Buy at current levels. Short term Target: Rs. 110, 6 month Target – Rs. 150; STOP LOSS – Rs. 90; Market Cap: Rs. 453.22 Cr; 52 Week High/Low: Rs. 135. / Rs. 83.50

Total Shares: 4,32,88,000 shares; Promoters : 1,96,74,951 shares –45.45 %; Total Public holding : 2,36,13,049 shares – 54.55 %; Book Value: Rs. 124.94; Face Value: Rs. 2.00; EPS: Rs. 23.51; Div: 150 % ; P/E: 4.45 times; Ind. P/E: 9.19; EV/EBITDA: 4.07.

Total Debt: Rs. 639.25 Cr; Enterprise Value: Rs. 1085.45 Cr.

SANGHVI MOVERS LTD: The Company was founded in 1985 and is based in Pune, India. Sanghvi Movers Limited operates as a crane services company, Equipment rental & leasing sector in India and other parts of Asia. It provides heavy lift, plant erection, and maintenance services for various large scale projects. The company also offers over dimensional, heavy, and bulk cargo transportation services. It operates a fleet of 398 medium to large size hydraulic truck mounted telescopic and lattice boom cranes, and crawler cranes with lifting capacity ranging from 20 MT to 800 MT; and 132 hydraulic multi axle modular trailers. In addition, the company also engages in the generation of power from windmills. It primarily serves power, cement, steel, refinery, metros, windmill, and metal sectors. The Company operates in two business segments: Operations of Cranes and Power Generation. It earns regular revenue from the business of power generation from windmills commissioned in Jaisalmer, Rajasthan and Chitradurga, Karnataka. The Company's clients include Suzlon, Aditya Birla Group, TOYO, BHEL, Reliance, Vedanta Group, Siemens, Tata Steel, and Enron power, Samsung, Gujarat Ambuja and TISCO.

Investment Rationale: Sanghvi Movers Ltd is the 3rd largest crane services company in India, and ranked 7^th largest in the world by Cranes International in June 2011 issue. Sanghvi Movers Ltd is undertaking an implementation of the turnkey projects, which includes providing of the well maintained equipment's,experts technical services and skilled manpower. The company carters to 75 % of the traditional Power sector crane requirement and 65 % of the Windmill sector’s crane requirement. The company has Crawler and truck mounted cranes and also has Hydraulic Multi Axle Modular Trailer. The company claims to have 98 % guaranteed machine availability with a timely deployment. The company has its owned state of the art Sanghvi Training Academy which provides high skills crane training programmes and produces highly skilled crane operators. Sanghvi Movers has 12 depots across the country to ensure timely deployment of cranes. The Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry despite having the second largest network of roads at 3.83 million km, the fourth largest rail network of 63000 km, 128 airports, 12 major ports, 1 trans-shipment port and 187 non major ports. Indian Logistics sector grew by 8 to 10 percent annually over the last decade. There are several factors which have favorably impacted the growth of the logistics industry, like the country’s tax regime, growth across major industry segments such as automobile, pharmaceutical, fast moving consumer goods (FMCG) and the emergence of organized retail. Exim trade volume of India is growing consistently from last decade hence India is set to increase its share in global trade from less than 1 % now to about 1.6 % in 2012. India’s level of containerization is less than 25 % as against global average of 60 % - 70 %. An average time taken to clear import and export cargo at ports is about 19 days in India as against 3-4 days in Singapore. The trend towards containerization picked up in India in the last decade. Container traffic has seen a growth of 12 % CAGR in India from 2.5 million TEU in 2000-01 to 7.5 million TEU in 2010-11, seeing this and due to competitive advantage Sanghvi Movers is best fitted to tap in the growing trend of containerization. 

Outlook and Valuation:

Sanghvi Movers nearly has a monopolistic position in the high tonnage crane rental market in India. The Company is a great proxy to play the improving Indian infrastructure industry. The company is led by C.Sanghvi and his professional team, company has been able to maintain its competitive advantages in this sector. Company has its Economic Moat (A competitive advantage that one company has over the other companies in the same industry - by Warren Buffett). Especially in businesses, logistics is responsible for all the movement that takes place within the organization whether it is inbound logistics of incoming, raw materials or movement within the company or the physical distribution of finished goods and logistics encompasses all of these. A typical logistics framework mainly consists of physical supply, internal operations and physical distribution of goods and services. To put it more simple manner, the material supply logistics starts from the base level of “generation of the demand”, through the “process of purchase” and “supply of material from the vendor” right through to “final acceptance” and “payments to the supplier” and “issue to the indenter” and has to be considered as a “one whole activity” with each stage having an impact on price/cost of material supply. Logistics is, in itself, a system; it is a network of related activities with the purpose of managing the orderly flow of material and personnel within the logistics channel and as said before the Indian logistics industry accounts for a mere 2 % ($100 billion) of the $5000 billion global logistics industry and the trade volume of India is growing consistently from last decade & hence India is all set to increase its share in global trade from less than 1 % now to about 1.6 % in 2012, and Sanghvi Movers is well equipped for that. The company will also be benefited from the boost by the Prime minster of India on infrastructure development plans – Sanghvi Movers is a silent play to the infrastructure sector. During the quarter ended, the Net profit of the company increased to Rs.24.66 Crs and registering a growth of 13.53 %. Net Sales and PAT of the company are expected to grow at a CAGR of 16 % by 2014E. At the current market price of Rs.104.70, the stock is trading at PE of about 3.92 x FY13E and 3.54 x FY14E respectively. Company can post Earnings per share (EPS) of about Rs. 26.69 for FY13E and Rs. 29.54 for FY14E respectively. On the basis of EV/EBITDA, the stock trades at 1.17 x for FY13E and 1.05 x for FY14E respectively. It is expected that the company will keep its growth story intact in the coming quarters with the help of its competitive advantage. One can ‘BUY’ SANGHVI MOVERS at every given opportunity with a target of Rs.117.00 for Medium to Long term investment.

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	361.25	450.47	509.03	565.03
NET PROFIT (Rs. Crs)	86.31	101.77	115.52	127.90
EPS (Rs.)	19.94	23.51	26.69	29.54
PE (x)	5.12	4.34	3.83	3.46
P/BV (x)	0.80	0.70	0.59	0.51
EV/EBITDA (x)	1.65	1.31	1.17	1.05
ROE (%)	15.53	16.22	15.55	14.69
ROCE (%)	30.20	34.53	34.84	34.55

I would buy Sanghvi Movies Ltd with a price target of Rs. 117 for Medium to Long term. 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. 90.00 on every purchases.

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