RUPA & COMPANY LTD : A MATTER OF COMFORT !!!

Scrip Code: 533552 /RUPA

CMP:  Rs. 152.20; Buy at 145-150 levels.
6 month Target – Rs. 250; STOP LOSS – Rs. 133.40; Market Cap: Rs. 1,210.37 cr; 52 Week High/Low: Rs. 300.00 / Rs. 137.00

Total Shares: 7,95,25,560 shares; Promoters : 5,95,86,390 shares –74.93 %; Total Public holding : 1,99,39,170 shares – 25.07 %; Book Value: Rs. 21.68; Face Value: Rs. 1.00; EPS: Rs. 11.73; Div: 65.00 % ; P/E: 13.21 times; Ind. P/E: 9.17; EV/EBITDA: 2.32

Total Debt: Rs. 122.28 cr; Enterprise Value: Rs. 1332.65 cr.

RUPA AND COMPANY LTD: Rupa was incorporated in 1985 by the Agarwala brothers. In 1995, they took over the business of Binod Hosiery, a partnership firm incorporated in 1979. They have emerged, over the years, as the largest hosiery manufacturer in India. The company produces and markets knitted garments such as innerwear, casuals wear and also footwear. The company launched Thermocot, the first branded winter wear in India. The company is also pioneered in printing of the brand name in front of the vest. This made the logo as a design element which made the product to be flaunted. RUPA is one of the earliest brands which introduced celebrity endorsement. This created huge impact and recall value. The Company has a comprehensive portfolio of product offerings in the knitted innerwear, casual wear and thermal wear segment for men, women and kids. The Company manages more than 2000 stock keeping units (SKUs), each of them for a particular brand, segment colour and size. The Company has two wholly owned subsidiaries- (1) Euro Fashion Inners International Private Limited which sells premium men’s innerwear products under the brand “EURO” and (2) Imoogi Fashions Private Limited which has recently launched apparel for kids under the brand “IMOOGI” Rupa is the number one knitwear manufacturer in India in terms of revenues, in the year ended FY11 revenues was Rs. 650 crore and is the largest knitted innerwear Company. Rupa sells more than 1.20 cr pieces of inner wear every month. Rupa’s competitive advantage lies in its owned Brands which have grown over the years, a product line range named $ across all categories have a great reputation of “Great Quality at Great Price points” and a fact that it accepts the Buyer’s specification. Due to decades-long experience in successfully launching, nurturing and managing several winning brands in a pre-dominantly unorganized industry, RUPA & Co is acclaimed by the Limca Book of Records as the largest hosiery and innerwear manufacturing and marketing company in India, for a record period of six years. Also RUPA is the first Indian company to launch bacteria-resistant briefs under its exclusive brand Euro.

Investment Rationale: From September 09, 2011, the equity shares of RUPA & Company Ltd (Scrip code: 533552) were listed only at BSE at Rs. 202.00 and is traded in the list of 'T' Group Securities (So no Intra day square off allowed). It made its all time high of Rs. 300 on BSE. RUPA & Co is also listed from 1996 onwards on Jaipur stock exchange (Scrip code: 811) and Calcutta Stock exchange (Scrip code: 028161). The company announced that it plans to launch its brands across countries in South-Asia and Africa. The company would be launching its renowned products in Bangladesh and Sri Lanka, where it would offer licenses to local partners for production and marketing. After implementing the expansion plans for its plants in West Bengal and Tripura & its plans to enter in different geographies, it is expected that RUPA expects to have CAGR of 20 % on top line; PAT of up to 36 % . Rupa has well established brands name like “Rupa, Rupa- Frontline, Macroman M’Series, Air, Macroman, Euro, Bumchums and Thermocot”. These brands promoted by the company enjoy great visibility in the market and are all owned by the Company. Lovable Lingerie has not created brands but have acquired “Lovable” & “Daisy dee” from the third party. Rupa Industries has created all its Brands and owned all the brands in the company. The average advertisement spend during the last five years has been around 8 % of its sales. During FY 2010-11, Rupa & Co. Ltd had spent Rs. 52.1 cr on advertisement. This amount was incurred towards brand building and promoting the various brands of the Company. Since the Company is continuously spending on Advertising for promotion and building brands, there lies a significant brand value in the company, yet to be unlocked. To enhance effectiveness, its laboratory monitors shop-floor developments to protect established quality standards. Over the years, this commitment to cutting-edge technology has been reinforced through the following investments: Spectraflash SF450 (a high-performance spectrophotometer) with colour matching software from DATACOLOR of USA, this makes it possible for the Company to dispatch a lab-tested colour sample within 24 hours of receipt from the client.

Outlook and Valuation:

According to CRISIL Research’s estimates, the Indian inner-wear market was worth about Rs. 13,000-14,000 cr in terms of value in 2010. It is estimated to have recorded a CAGR of 12.7 % over the past 4 years (2006 to 2010) in value terms. CRISIL Research expects the Indian innerwear industry (value terms) to post a 15.9 % CAGR over the next 5 years (2010 to 2015).  In volume terms, the domestic innerwear industry grew by 6 % over the past 4 years (2006 to 2010) and is expected to grow by 9.8 % over the next 5 years (2010 to 2015). Of the total innerwear segment, men’s innerwear is estimated to be around 42 % of market share. The men’s organised segment would be around 65 % of the overall men’s innerwear market & rest with small local manufacturers. The organised segment is estimated to have a growth of CAGR of 16 %-18 % over the past five years, while the unorganised segment  will have growth of CAGR of 12 % during the same period. Increasing per capita income and higher level of quality consciousness has resulted in higher growth in the branded innerwear segment. The growth of per capita disposable income is at 6.8 % over the period FY06-10 & is expected to continue at similar rates over the next five years thereby driving growth to the innerwear sector. The demand among-st the consumers is shifting from the basic necessities to lifestyle products; mans are now preferring more on innerwear brands which offers style, color, pattern and comfort as compared to the previous times when it was sold as a commodity with limited colors and patterns.  An estimated 34 cr people (30 % of the total population) lived in Urban India by 2008. By FY2025 the number of Indians living in cities is expected to grow to 64 cr. Increase in urbanization would drive the demand for the branded innerwear of new styles and fashions to match new lifestyles. The median age of the Indian population stands at 25.1 years as compared to the world's median age of 28.1 years. The huge size of the working population with higher purchasing power implies a very large market for branded and lifestyle products. The Kids wear apparel market is expected to grow from Rs. 22,500 crs in 2009 to Rs. 33,100 crs by 2014, at a CAGR of around 8 %. Branded Kids wear still has few established players who have created a niche market for themselves and holds a large opportunity which is clearly untapped. 

Indian Knitwear Industry has been commanding a relatively higher P/E Ratio when compared to other sectors. Page Industries (Jockey Brand) is the most established listed player in the knitwear Industry. The stock discount it’s FY12E EPS by 34.6x and its FY13E EPS by 26.5x . Lovable, a newly listed player, discount it’s FY12E EPS by 43.8x and its FY13E EPS by 36.7x. RUPA could command a P/E multiple of 25x based on its FY13E EPS of Rs. 7.70 to arrive at a value of Rs. 192 per share. At the Target price of Rs. 192.00, the P/BV for FY13 comes around 6.0 based on the Book Value of Rs. 32 per share. As per Bloomberg Consensus, the P/BV of Page Industries and Lovable for FY13E comes around 11.95 and 5.5 respectively based on the Book value of Rs. 216.80 and Rs. 111.90 per share respectively.

WHATS THE BUZZzzzzz.....

There is the buzz in the market that RUPA will soon get itself listed on NSE which needs minimum paid up capital of Rs. 10 cr for listing. It’s already listed on BSE which needs Rs. 3 cr as min. paid up capital, this listing is done as per the alliance between BSE & CSE.

KEY FINANCIALS	FY11	FY12E	FY13E	FY14E
SALES (Rs. Crs)	650.00	750.80	878.40	1,036.50
NET PROFIT (Rs. Crs)	33.70	44.20	61.70	76.20
EPS (Rs.)	4.20	5.60	7.70	9.60
BVPS	21.00	26.00	32.00	41.00
ROCE (%)	22.00	24.00	27.00	26.00
RONW (%)	21.10	22.60	26.90	28.30

I would buy RUPA & COMPANY LTD with a price target of Rs. 175 for the short term and Rs. 250 for the 6 month target. As this scrip in "T" group I will keep a strict stop loss of 8 % or Rs. 133.40 on every purchase. ONLY HIGH RISK TAKERS SHOULD BUY THIS SCRIP

APOLLO HOSPITALS : Touching Lives !!!

Scrip Code: 508869 / APOLLOHOSP

CMP:  Rs. 522.15; Buy at Rs.518-520 levels.

Short term Target: Rs. 560, 6 month Target – Rs. 850; STOP LOSS – Rs. 478.00; Market Cap: Rs. 6,859.86 cr; 52 Week High/Low: Rs. 599.70 / Rs. 408.00

Total Shares: 13,13,77,376 shares; Promoters : 4,14,51,438 shares –31.55 %; Total Public holding : 8,99,25,938 shares – 68.44 %; Book Value: Rs. 129.93; Face Value: Rs. 5.00; EPS: Rs. 14.74; Div: 75 % ; P/E: 35.42 times; Ind. P/E: 35.68; EV/EBITDA: 18.97

Total Debt: Rs. 1575.60 cr; Enterprise Value: Rs. 16,070.34 cr.

APOLLO HOSPITALS ENTERPRISE LTD:  The Company was formed on 5^th December 1979, at Chennai, India, Promoted by Dr. Prathap C. Reddy (executive chairman), it belongs to the Apollo Hospitals group that pioneered the concept of corporate healthcare delivery in India. Apollo Hospitals Enterprise has over 54 hospitals of which 14 are client hospitals managed by professionals deputed from Apollo. The company has a network of 922 pharmacy outlets & approximately 8,717 beds capacity. The company’s services include cardiology, cardiothoracic surgery, orthopedics, joint replacement surgery, complex neurosurgery with critical care units. It also offers a range of diagnostic modalities, including CT scanner, X-ray, diagnostic cardiology, endoscopy systems, lab services, and blood bank. Its subsidiaries include Unique Home Health Care, AB Medical Centers and Apollo Hospitals International. Lanka Hospitals is an associated company with a 350-bed capacity in Sri Lanka. In 2006, the company acquired 51% of Imperial Cancer Hospital and Research Center & Samudra Healthcare Enterprise. It entered into a JV with British American Investment (Mauritius) for setting up a multi-specialty hospital (MSH) in Mauritius and launched India’s first exclusive healthcare center for women in Chennai. It is to get into medical tourism with Taj Hotels Resorts and Palaces and will set up Tele-medicine centers in about 300 villages in Kutch. Apollo Hospitals has seven Joint Commission International (JCI) accredited hospitals within the Group located in Chennai, Hyderabad, Delhi, Kolkata, Bangalore, Ludhiana and Dhaka. Unique Home Health Care Limited (UHHCL) is a wholly owned subsidiary of the Company which provides medical and pharmaceutical services including doctor's consultation, physiotherapy services directly at patients places and also offers paramedical service in hospitals to critically ill patients. As of March 31, 2011, Apollo Hospitals had 12 subsidiary companies.

Investment Rationale: 

Apollo Hospital operates with 54 hospitals with total bed capacity of 8,717 beds as on Mar 31, 2011. Apollo Hospitals Group is the only healthcare provider to be featured in the top 10 business super brands of 2011. The Indian healthcare market is one of the prominent contributors to the country’s gross domestic product (GDP) having attracted large number of players- domestic as well as international – during the past few years. Highly qualified doctors and scientists, state-of-the-art technology and low costs have helped India become an attractive global destination for medical tourism, clinical studies, and research and development (R&D) programs. This sector offers massive growth potential and a chance to capitalise on its expansion, especially as the country sees a rise in the incidence of lifestyle-related diseases. A growing elderly population paired with a rise in income levels also emphasise the need for better medical facilities in the country. The market size of health sector is about US$ 5,000 Cr-a-year & is growing rapidly and is now the second-largest service- sector employer in the country, providing jobs to about 45 lakhs people directly or indirectly. According to Fitch ratings agency, the Indian healthcare sectors will double its size to US$ 10,000 Cr by 2015 and by 2020 - the Indian healthcare industry is estimated to be worth US$ 27,560 Cr. Currently, only 8.00 % of India’s GDP is spent on healthcare. India needs to spend at least US$ 80 billion more in the next five years to meet targets. Apollo Hospitals Enterprise Ltd and University College London (UCL) have signed a memorandum of understanding (MoU) to collaborate their efforts in training and clinical research. The strategic partnership would aim to promote and conduct educational and research initiatives in health sciences. As per the data released by the Department of Industrial Policy and Promotion (DIPP), the drugs and pharmaceuticals sector has attracted 12 foreign direct investments (FDI) worth US$ 2.4 billion between April 2000 and April 2011, while hospitals and diagnostic centre have received FDI worth US$ 1.03 billion in the same period. The Indian medical tourism industry is presently at a nascent stage, but has an enormous potential for future growth and development on the back of low cost range of treatments provided by the country. According to a global report India’s share in the global medical tourism industry will reach around 3 % by the end of 2013. The report states that medical tourism is expected to generate revenue around US$ 3 billion by 2013, growing at a CAGR of around 26 % during 2011–2013. The number of medical tourists is anticipated to grow at a CAGR of over 19 % during the forecast period to reach 1.3 million by 2013. And so Apollo Hospitals is to get into medical tourism with Taj Hotels Resorts and Palaces to capture this space and carries ability to do so.

Outlook and Valuation:

A growing economy, lifestyle related health issues, improving healthcare insurance penetration, government initiatives and increasing disposable income are the key drivers that will create a robust future for this industry. The industry has witnessed the establishment of world class pharmaceutical manufacturing and emergence of a vibrant biotechnology industry. Medical tourism too has been rising in recent years. To conclude, the Indian healthcare sector is on a fast growth track and Indian health care & medical sectors are on prime focus of the world investment regime. At the current market price of Rs. 522.15, the stock is trading at 29.82 x FY12E and 25.52 x FY13E respectively. Earnings per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs. 17.51 and Rs. 20.45 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19 % - 20 % over the period of time. Price to Book Value of the stock is expected to be at 3.43 x and 3.02 x respectively for FY12E and FY13E. It is expected that the company will keep its growth story intact in the coming quarters also. I would ‘BUY’ APOLLO HOSPITALS with a target price of Rs. 560.00 for short term and for the Long term investment it will be Rs. 850.00. 

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	18,257.80	23,319.60	27,517.13	31,644.70
NET PROFIT (Rs. Crs)	1,519.70	1,817.20	2,183.53	2,550.66
EPS (Rs.)	24.60	14.57	17.51	20.45
PE (x)	21.46	36.24	30.16	25.82
P/BV (x)	2.12	3.87	3.43	3.02
EV/EBITDA (x)	10.38	16.53	14.24	12.43
ROCE (%)	9.86	10.67	11.36	11.72
RONW (%)	16.51	19.17	20.06	20.61

I would buy APOLLO HOSPITALS with a price target of Rs. 560 for the short term for long term Rs. 850.00. 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. 478.00 on every purchase.

HINDALCO INDUSTRIES : An industry leader in Aluminium and Copper !!

Scrip Code: 500440 / HINDALCO

CMP:  Rs. 142.90; Buy at Rs.135- 138 levels. 6 month Target – Rs. 200; STOP LOSS – Rs. 124.50; Market Cap: Rs. 27,357.05 cr; 52 Week High/Low: Rs. 252.85 / Rs. 128.20; Total Shares: 191,44,19,297 shares; Promoters : 61,37,97,188 shares –32.06 %; Total Public holding : 130,06,22,109 shares – 67.93 %; Book Value: Rs. 155.12; Face Value: Rs. 1.00; EPS: Rs. 11.73; Div: 150 % ; P/E: 12.20 times; Ind. P/E: 14.89; EV/EBITDA: 10.50

Total Debt: Rs. 6359.70 cr; Enterprise Value: Rs. 33,770.35 cr.

HINDALCO INDUSTRIES: The Company was formed in 1958, and based in India. Hindalco Industries Limited engages in the production & sale of aluminium and copper in India and internationally. The company operates in two segments: Aluminium & Copper. The Aluminium segment engages in the production of alumina, aluminium metal, and aluminium metal products, such as aluminium ingots, billets, wire rods, flat rolled products, foils, and extrusions. The company's aluminium units across India encompass various operations, from bauxite mining, alumina refining, aluminium smelting to downstream rolling, extrusions, foils, alloy wheels, and recycling. The Copper segment engages in the smelting of copper and the production of continuous cast copper rods, copper cathodes, sulphuric acid, dap and complexes, gold, and silver. The integrated facility at Renukoot is for an alumina refinery and an aluminum smelter, along with facilities for the production of semi-fabricated products, such as rods, flat rolled products and extrusions. The others segment engages in the production of caustic soda and provides cellular services. The company has a joint venture agreement with Mahanadi Coalfields Limited (MCL, a subsidiary company of Coal India Limited) and Neyveli Lignite Corporation Limited (NLCL) and has formed MNH Shakti Limited for mining of coal. In addition, the company along with its partners, Dubai and Hydromine, is developing an alumina project through a joint venture company, Hydromine Global Minerals GMBH Limited. The Company's subsidiaries include Novelis Belgique SA, Novelis Benelux NV, Albrasilis-Aluminio do Brasil Industria e Comercia Ltda, Novelis do Brasil Ltda, Novelis Cast House Technology Ltd., Novelis Foil France SAS, Novelis PAE SAS, Novelis Deutschland GmbH, Novelis Aluminum Holding Company, Novelis Italia SpA and Novelis (India) Infotech Ltd.

Investment Rationale: In next 4 years company expects Aluminium capacity to increase by three folds.  A Part of the phase 1 at Hirakund has been completed in which the capacity will increase to 161 ktpa. Further, in phase 2 capacities will be increased to 213 ktpa. Capacities at Utkal Alumina & Aditya Aluminium are expected to come on line by 2 half of CY2012 & early by 2013 respectively. It is expected that production & sales volume will show significant growth over FY2011 – 2014. Most of these new capacities will be backed by captive bauxite & coal mines & hence, Hindalco will have a lower cost compared to non – integrated players. NOVELIS will also to expand its capacity by 20 % by FY2014. Novelis capacity at Pinda operations in Brazil is being increased by 220ktpa by 2012 and rest will be through debottlenecking (a 3-4 % increase in capacity every year), Novelis plans to invest up to US$400 million in expansion of its South Korean aluminum rolling & recycling plant by 1mtpa. Given its stable conversion business a steady EBITDA of US$1 billion/annum from Novelis is expected. The Pinda (Brazil) expansion is on process and is expected to complete by December 2012. This will increase the flat rolled product capacity to 600 KTPA. The expansion in South Korea and North America is expected to complete by mid 2013.  The Forest Advisory Committee has rejected the forest diversion proposal for the Mahan Coal block during the quarter. The issue has been recommended to the Group of Ministers (GoM) which has been constituted for giving forest clearance. The issue will be discussed in the next meeting of GoM. The first metal from the Mahan smelter is expected to come on by the end of DEC 2011.  The forest stage II clearance for the Aditya Aluminium has been received; hence the production is expected to start by early 2013. The majority land has been acquired for the Aditya Refinery & is expected to be operational by 2014. The land acquisition has started for the Jharkhand Aluminium.  The timely completion of the projects will be the key focus for Hindalco as the new capacities coming on stream will drive the additional growth in revenue and profitability from FY13E. However, the projects have infrastructure and administrative challenges which can lead to delay in commencement of the new projects.

Outlook and Valuation:

HINDALCO posted a 16.5 % net revenue of Rs. 6031 cr in Q1 FY12 vs. Rs. 5178 cr YoY and EBITDA was up 4.2 % to Rs. 867 cr vs. Rs. 832 cr. PAT was up by 20.5 % YoY to Rs.644 cr; other income at Rs. 178 cr. Novelis posted increase in net revenue to $3,113 million in Q1 FY12 vs. $2,533 million YoY and $2,960 million QoQ due to higher LME prices. Adjusted EBITDA was up 16.3% YoY to $306 million in Q1 FY12 from $263 million in Q1 FY11 (up 9.3% QoQ). Total shipments of the aluminium rolled products were up 3% YoY to 767 KT in Q1 FY12 vs 746 KT in Q1 FY11. Demand from the auto and beverage can segments have remained strong. The total beverage can volume increased 9% YoY (2% QoQ) and accounted for 60% of the total rolled product volumes. However the non-can segment declined 5% YoY and 4% QoQ. In the electronics segment the company is facing intense competition in the foil business from the unorganised players. The segment is not performing well due to weakness majorly in Asia in the flat panel TV segments. Novelis has a capex of $67 million against the full year guidance of $550-600 million. Hindalco is well placed to benefit from its aluminium expansion plans (capacity increasing by nearly 3 folds in the next 4 years); low production cost at its new capacities and steady capacity expansion at Novelis. Due to delay in its Utkal & Aditya projects there could be lows in production and sales volume estimates for FY12 and FY13. Higher other income was due to treasury operation, return of capital from Novelis and dividend from Aditya Birla Minerals.
HINDALCO to hold its AGM on 23rd September 2011; Book closure for dividend of Rs. 1.50/sh or 150 % from 16th September 2011 to 23rd September 2011. The valuation of HINDALCO stock on SOTP (sum‐of‐the‐parts) basis, with the standalone business comes at Rs. 196 / share for FY13E. In my view HINDALCO could report EPS in FY12E & FY13E of Rs. 12.90 / sh and Rs. 18.70 / sh, respectively. I would buy HINDALCO IND LTD for the long term with a price target of Rs. 200 with the strict stop loss of Rs. 124.50  

Business Subsidiary FY13E	Enterprise Value (in Rs.Cr)
HINDALCO (Standalone)	34,935
NOVELIS	23,946
TOTAL EV	58,882
Less : Net Debt (FY13)	23,523
Value of Investments@25% discount	2,224
Value per Share	196.00

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	60,708	72,078	75,368	83,023
NET PROFIT (Rs. Crs)	4,352	2,879	2,461	3,572
EPS (Rs.)	22.70	15.00	12.90	18.70
PE (x)	6.80	10.30	12.00	8.30
P/BV (x)	1.40	1.00	1.00	0.90
EV/EBITDA (x)	4.70	6.20	7.70	6.60
ROCE (%)	20.90	10.80	15.50	15.00
RONW (%)	14.00	9.90	10.00	10.00

I would buy HINDALCO INDUSTRIES with a price target of Rs. 200 for the 6 month. 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. 124.50 on your purchase.

MAHINDRA & MAHINDRA LTD : Showing Signs of strong growth !!

Scrip Code: 500520 / M&M

CMP:  Rs. 765.10; Buy  Rs. 730
Short term Target: Rs. 780, 6 month Target – Rs. 814; STOP LOSS – Rs. 670.00; Market Cap: Rs. 46,975.21 Cr; 52 Week High/Low: Rs. 826.70 / Rs. 585.00

Total Shares: 61,39,74,839 shares; Promoters : 15,26,37,105 shares –24.86 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 167.64; Face Value: Rs. 5.00; EPS: Rs. 44.05; Div: 230 % ; P/E: 17.39 times; Ind. P/E: 15.40; EV/EBITDA: 11.91.

Total Debt: Rs. 2552.90 cr; Enterprise Value: Rs. 50,619.76 cr.

MAHINDRA & MAHINDRA LTD: The Company was formed in 1945 as Mahindra & Mahindra and renamed as Mahindra & Mahindra Ltd in 1948, based in India. Mahindra & Mahindra Limited operates in the Motor vehicles and car bodies sector. The Company operates in nine segments: automotive segment comprises of sales of automobiles, spare parts and related services; farm equipment segment comprises of sales of tractors, spare parts and related services; information technology (IT) services comprises of services rendered for IT and telecom; financial services comprise of services relating to financing, leasing and hire purchase of automobiles and tractors; steel trading and processing comprises of trading and processing of steel; infrastructure comprise of operating of commercial complexes, project management and development; hospitality segment comprises of sale of timeshare; Systech segment comprises of automotive components and other related products and services, and its others segment comprise of logistics, after-market, two wheelers and investment. In November 2009, BAE Systems entered into a joint venture agreement with Mahindra & Mahindra Limited to create a land systems focused joint venture Defense Company, based in India. During the fiscal year ended March 31, 2011, the Company acquired a 70 % stake in Ssangyong Motor Company Limited - a manufacturer of sports utility vehicles in Korea. The company has a distribution network of over 130 dealers in Korea and exports to over 90 countries through 1,200 dealers. With the support of M&M, SMC is working on a revitalization plan with strong focus on cost reduction along with new product development and market expansion.

Investment Rationale: M&M gained market share by launching new models which drove volume & revenue growth in automotive sector, company’s market share in Utility Vehicles (UVs) rose by 4.50 % to 56.2 % and in tractors by 2.30 % to 43 %. Its domestic tractor numbers grew 14 % in Q1 to 1,33,103 units. New product launches in the pickup segment has helped M&M maintain its demand momentum. In the UV segment, the company expects to launch a new SUV by December 2011 end. SsangYong Motor Company a part of US$ 12.5 billion Mahindra Group unveiled the concept of crossover vehicle, which is targeted for the global market. The car will make its debut at the 64^th Frankfurt International Motor Show to be held in Germany this month. This SUV will be first launched in India & South Africa while several others countries around the world will be targeted later. M&M’s global SUV project codenamed W201 was christened as the XUV500. Consumer research for the Mahindra XUV500 was carried out in various western markets, South Africa & India, with testing of the product done across Europe, Australia & South Africa among others. The SUV will be manufactured at M&M’s plant in Chakan near Pune in Maharashtra. Mahindra is likely to price the SUV in Rs. 12 – Rs. 20 lakhs range. Demand for small commercial vehicles (SCV’s), the fastest growing commercial vehicles (CV) segment, remains strong and M&M has been successful in grabbing 20 % market share in the segment in less than 2 years of launch. M&M is working on turning around its recent acquisition of Ssangyong, Korea. In CY11, M&M targets revenue of US$3 billion from Ssangyong against US$ 2 billion in CY10. Two SUV’s from Ssangyong Motor’s portfolio (Rexton and Korando) would be assembled at M&M Chakan facility. Through its JV with Navistar, M&M continues to expand its sales network for commercial vehicles. M&M’s Tractors segment is expected to sustain its demand driven by higher rural penetration, good monsoons, onset of festival season & increasing usage in haulage applications. Current demand scenario is similar to what was witnessed in Punjab during the green revolution. The difference is it is visible in larger parts of the country & hence, a sharp jump in growth numbers. M&M’s low segment product (15HP) Yuvraj is gaining popularity among farmers. Company is selectively opening up in new markets with the latest addition being Maharashtra & Karnataka  

Outlook and Valuation:

Finance availability rather than interest rates, is the key parameter affecting demand. Not witnessing any constraints with finance availability M&M’s in-house financing arm - M&M Finance usually finances 35 % - 40 % of total vehicles sold. The company is prepared to handle any shift in demand for diesel/petrol vehicles with introduction of duty/price hike on diesel vehicles. MM expects share of Chakan in overall production to go up to 25 % in FY12. Currently, this plant produces Maximo, Genio and Navistar trucks. Management stated that all new products including W-201 and SMC products will come out from Chakan plant. Xylo and Scorpio are produced at Nashik plant, while Bolero is produced at both Nashik and Zaheerabad plants. The company is looking at new Auto plant in Chennai and new Tractor plant in Zaheerabad, as it operates at near full capacities at its existing units. Maharashtra government has withdrawn set-off of sales tax on sales outside the state from mid-March 2011. While it does not reduce the benefit, which is fixed as a % of total Capex, the benefit would now be realized over a much longer period. Impact of withdrawn of set-off of sales tax have contracted EBITDA margin by 0.6 % – 0.8 % in Q1 FY12. Management expects 25 % of auto sector volumes, as well as all new launches would be produced from Chakan plant. Due to higher volumes and revenues from Chakan plant, impact of withdrawn of set-off of sales tax would be higher in coming quarters. Capex could be some were about Rs 7,000 Cr over the next three years. M&M’s DEBT EQUITY RATIO AS ON JUNE 2011 stood at 0.22 X. In the automotive sector, M&M is expected to register a volume growth of around 17 % in FY12 and 13 % in FY13; in tractor sector at around 12 % in FY12 & 13 % in FY13 respectively. It is estimated that growth in M&M automotive sector would be lead by continued dominance of UV portfolio, launch of new SUVs and higher sales of Verito passenger car (earlier known Logan). Tractor sector to continue with its market share with expansion in capacity for Yuvraj tractor from 1,000 to 1,500 per month and normal monsoon this year. Any additional increase in excise duty on diesel vehicles would impact M&M as its UV portfolio is entirely diesel based (at around 97-98%). The valuation of M&M stock on SOTP (sum‐of‐the‐parts) basis, with the standalone business comes at Rs. 602 / share and subsidiary investments at Rs. 212 / share FY13E.  In my view M&M could report EPS in FY11 & FY12E of Rs. 43.70 / sh and Rs. 51.40 / sh, respectively. I would buy M & M LTD for the long term with a price target of Rs. 95o and for the SHORT TERM PLAYERS it would be Rs.814.00 

Business Subsidiary FY13E	Value Per Share (in Rs.)
M&M Financial Services	65.00
Mahindra Forgings	10.00
Mahindra Holidays & Resorts Ltd	34.00
Mahindra Lifespace Developers	13.00
Mahindra Ugine Steel Co	1.00
Tech Mahindra	65.00
Ssangyong Motor Company	24.00
Other Investment (at BV)	1.00
Total Subsidiaries	212.00
TOTAL	814.00

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	18,529.60	23,295.00	29,349.10	34,210.80
NET PROFIT (Rs. Crs)	2,018.10	2,519.80	3,019.70	3,492.40
EPS (Rs.)	36.30	43.70	51.40	59.50
PE (x)	18.40	15.30	13.00	11.20
P/BV (x)	4.70	3.70	3.20	2.60
EV/EBITDA (x)	13.60	12.50	10.20	8.70
ROCE (%)	30.90	27.80	26.50	25.50
RONW (%)	24.30	23.10	24.30	24.40

I would buy MAHINDRA & MAHINDRA LTD with a price target of Rs. 780 for the short term and Rs. 814 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. 670.00 on your purchase.

VISAKA INDUSTRIES LTD: A strong rural play with strong fundamentals !!!!

Scrip Code: 509055 / VISAKAIND

CMP:  Rs. 87.15; Buy at current levels.
Short term Target: Rs. 100, 6 month Target – Rs. 150; STOP LOSS – Rs. 78.00; Market Cap: Rs. 138.40 cr; 52 Week High/Low: Rs. 173.70 / Rs. 82.55

Total Shares: 1,58,80,952 shares; Promoters : 59,87,530 shares –37.70 %; Total Public holding : 98,93,422 shares – 62.30 %; Book Value: Rs. 164.54; Face Value: Rs. 10.00; EPS: Rs. 25.24; Div: 50 % ; P/E: 3.45 times; Ind. P/E: 5.73; EV/EBITDA: 3.37.

Total Debt: Rs. 188.85 cr; Enterprise Value: Rs. 323.74 cr.

VISAKA INDUSTRIES LTD: was incorporated in 1981 in Secunderabad, India. Visaka Industries Limited manufactures and sells corrugated cement fiber sheets in India and internationally. It operates in two segments, Building Products and Textile Synthetic Yarn. The Building Products segment produces asbestos sheets, accessories, and non asbestos flat sheets that are used as roofing materials and interiors. Its accessories include close fitting adjustable ridges, apron piece, north light ridges, barge boards, north light curve, serrated adjustable ridges, roof lights, and ridge finials. This segment also offers V Boards and V Panels, which are used for false ceiling, wall partitions, wall paneling, door panels, mezzanine flooring, back liners, structural glazing back lining, prefabricated buildings, and roofing, as well as for fixed furniture, such as computer tables, black boards, dressing tables, shoe racks, A.C. duct covers, photo frames, and office tables. The Textile Synthetic Yarn segment manufactures yarns out of the blends of polyester, viscose, and other materials to produce various fabrics, including shirting, suiting, fashion fabrics, upholstery, and embroidery laces. This segment also exports its products to Italy, Belgium, the United Kingdom, the United States, Spain, Germany, Australia, Mexico, and Turkey. Visaka Industries markets its products through dealers for the retail market, and directly for projects and government departments.

Investment Rationale:

Visaka industries limited is the second largest manufacturer of fiber cement sheets in India with an estimated market share of more than 15 % by sales. VIL’s high-tech Fiber Cement plant is fully automated factory with the latest sophisticated technology.  The Cement Asbestos segment produces asbestos sheets and accessories used primarily for as roofing material. Visaka industries is a rural sector player which holds tremendous potential for its asbestos division as whenever economic conditions of the rural populations improves, their spending in durable products like asbestos cement sheets is likely to be increased. VIL is growing at a CAGR of 29% for past five years, highest in the industry. Company is making continuous efforts to increase production capacity through new and existing plants. Company’s new product in Reinforced Building Product is accepted in the market as it is preferred over wood/gypsum based products. Company has commenced the commercial production of V-Panel unit from January 01, 2010. V-Panel is a revolutionary building product, which is being manufactured with technical collaboration from M/s Dantotech of Australia. Company has its asbestos cement sheets unit at pune. Visaka industries commenced the commercial production in Reinforced Building Boards division on 1st May 2008. This unit is situated in Miryalguda Taluq, Nalgonda District, in the state of Andhra Pradesh. The product from this unit is branded as “V-Board”. The company exports its products to the countries likes of Srilanka, Bangladesh, and Middle East. VIL has through a special purpose vehicle Visaka Thermal Power Ltd ventured into Coal- based power of 1050 MW at an estimated cost of Rs. 5000 crores in Orissa. The project implementation is spread over a period of 9 years in 3 stages of 350 MW each. Also VIL has Synthetic yarn business, engaged in the manufacturing of yarn using state-of-the-art Twin Air Jet Spinning technology from Murata, Japan, with 28 MTS machines equivalent to 60,000 spindles Visaka has earned recognition as the largest Unit in the world with MTS installation. As of now company produces 10000 MT of yarn per year and exports around 4000 tons across the world.

Outlook and Valuation:

Real estate and construction and infrastructure dominate the growth for Cement product industry. With the initiatives made by the government in various infrastructure projects, road networks and housing facilities the cement product industry especially the asbestos cement manufacturers cheer on the importance given to rural infrastructure in the union budget especially on the thrust given on rural housing by the government through Indira Awaas Yojana and increased allocation to rural housing is a positive sign. Fiber cement sheets are gaining popularity because of their strong physical properties as compared other roofing materials. Asbestos cement industry is growing at 10- 12%, at this growth VIL can significantly be able to service its debts. In my view VIL could report EPS in FY11 FY12E of Rs. 28.30/sh and Rs. 22.70/sh, respectively. I would buy VISAKA INDUSTRIES LTD which is currently available at a discount to its Book Value of Rs. 164.54; I would buy VIL for the long term with a price target of Rs. 15o and for the SHORT TERM PLAYERS it would be Rs.100.00 

KEY FINANCIALS	FY10	FY11	FY12E	FY13E
SALES (Rs. Crs)	600.90	653.40	712.90	823.60
NET PROFIT (Rs. Crs)	60.00	45.10	36.10	46.90
EPS (Rs.)	37.70	28.30	22.70	29.50
PE (x)	3.50	3.70	4.60	3.50
P/BV (x)	0.90	0.60	0.60	0.50
EV/EBITDA (x)	2.60	3.50	3.00	2.40
ROCE (%)	28.30	18.10	13.10	15.30
RONW (%)	26.50	16.90	15.50	18.00

I would buy VISAKA INDUSTRIES LTD with a price target of Rs. 100 for the short term and Rs. 150 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. 78.00 on your purchase.