ARE MARKETS FOR FEW !!!

Hi friends,

I got some alerting data on Markets - which are on data dated 2010 - there were 31 lakhs registered customers/investors on NSE from which only 2 lakhs (6 %) of these had done 90 % of the total volume on NSE. Looking minutely at this data we get that - 50 % of the exchange turnover was done by only 450 customers, 60 % of the exchange turnover was done by only 1500 customers, 70 % of the exchange turnover was done by only 8700 customers, and 80 % of the exchange turnover was done by only 41,000 customers.

Let’s have a look at DERIVATIVES - which is shocking that only 3.77 % dominates nearly 90 % of total F&O Turnover. There were 5.5 lakhs customers who do DERIVATIVES trading from which only 3.77 % controls nearly 90 % of the total derivatives turnover. THIS IS DISGUSTING !!!

After knowing that only a few runs the cash & F&O segment more shocking is that only a few scrips are concentrated for the trading, there were only 10 scrips which contributed 24 % of the Cash segment volume, whereas only 10 scrips contributed 38 % of total derivatives turnover.

WE SAY THAT OUR MARKETS HAVE MATURED ..IS THIS THE MATURITY ....ARE WE RUNNING MARKETS FOR FEW PEOPLE ...????
ARE THE NEWS FLOWS OR REPORTS TO FOOL INNOCENT INVESTOR WHO PUTS HIS HARD-EARNED MONEY...WHO'S GOING TO LOOK INTO THIS... I AM SURE THAT EXCHANGES & THE MARKET REGULATOR MUST BE HAVING FAR MORE DEEP DATA THAN THIS....AND THAT's THE REASON BUY FUNDAMENTALLY STRONG COMPANIES..WHICH DEFINITELY GIVES YOU GREAT RETURNS IN THE LONG RUN !!!
WE NEED TO BE ALERT.....

READ HERE TO KNOW MORE ON LONG TERM INVESTING - Click 

ULTRATECH CEMENT LTD: SHOULD BE INVESTORS CHOICE !!!

Scrip Code: 532538 / ULTRACEMCO

CMP:  Rs. 1368.70; Buy at current levels.
Medium to Long term Target: Rs. 1,566; STOP LOSS – Rs. 1260.00; Market Cap: Rs. 37,508.08 Cr; 52 Week High/Low: Rs. 1544.70 / Rs. 914.00

Total Shares: 27,40,65,301 shares; Promoters : 17,36,05,057 shares –63.35 %; Total Public holding : 10,04,60,244 shares – 36.65 %; Book Value: Rs. 478.25; Face Value: Rs. 10.00; EPS: Rs. 89.25; Div: 60 % ; P/E: 20.10 times; Ind. P/E: 15.33; EV/EBITDA: 14.96.

Total Debt: 4,144.60 Cr; Enterprise Value: Rs. 41,652.68 Cr.

ULTRATECH CEMENT LIMITED: ULTRACEMCO was incorporated in 2000 and is based in Mumbai, India. It was formerly known as Ultra Tech Cemco Limited and changed its name to ULTRATECH CEMENT Ltd on October 2004. It’s a subsidiary of Grasim Industries Ltd from Aditya Birla Group. The Company is engaged in the business of cement and cement related products. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. The Company also manufactures ready mix concrete (RMC). UltraTech Cement is an exporter of cement clinker. The Company has an annual capacity of 23.1 million tons. The Company has 11 integrated plants, one white cement plant, one clinkerisation plant in the United Arab Emirates, 15 grinding units - 11 in India, two in the United Arab Emirates, one in Bahrain and Bangladesh each and five terminals - four in India and one in Sri Lanka. In the 2011, its wholly owned subsidiary, UltraTech Cement Middle East Investments Limited (UCMEIL) acquired ETA Star Cement together with its operations in the United Arab Emirates, Bahrain and Bangladesh and acquired management control. On July 1, 2010, Samruddhi Cement Limited (Samruddhi) amalgamated with the Company.  The Company's subsidiaries include Dakshin Cement Limited, UltraTech Cement Lanka (Pvt.) Ltd. and UltraTech Cement Middle East Investments Limited. The company is compared to Ambuja Cements Ltd, ACC Limited and Rain Commodities Limited domestically.

Investment Rationale:

ULTRA TECH CEMENTS limited is in the process of setting up 4.8 MT plant at Raipur, Chhattisgarh and 4.4 MT plant at Malkhed, Karnataka along with a captive power plant of 75 MW and waste heat recovery plant of 45 MW. These new capacities are likely to get operational by Q1FY14. This will increase company's capacity by nearly 9.2 MT, taking it to a total capacity of 59 MT. Revenue growth of the company during Q4FY12 was boosted by improvement in cement prices as well as volume growth on a sequential basis. Costs remained high during the quarter but higher cement prices led to margin improvement on sequential and yearly basis. Revenues improved by 19 % for Q4FY12 and 37.5 % for the full year FY12 led by improvement in cement realizations and cement dispatches over last year. Operating margin for Q4FY12 and FY12 also witnessed an improvement due to higher prices. Margins stood at 23.7 % and 22 % for Q4FY12 and FY12 respectively as compared to 22.7 % seen during Q4FY11 and 19.2 % for full year FY11. Net profit performance was boosted by healthy revenue growth; lower than expected interest outgo and higher other income. UltraTech (UTCEM) delivered 40 % YoY and QoQ PAT growth to Rs. 860 Cr. EBITDA per MT stood at Rs. 1,018. White cement, wall care putty and RMC revenues, cement realizations for the company stood at Rs. 4,624 per tonne during Q4FY12 and Rs. 4,460 per tonne during FY12 as against Rs. 4,330 per tonne and Rs. 3,746 per tonne during Q4FY11 and FY11 respectively. Combined grey cement and clinker sales volume stood at 11.54MT during Q4FY12 as against 10.37 MT during Q4FY11.  Export cement volumes stood at 0.18MT approx. $55 per tonne and clinker export volumes stood at approximately 0.27MT approx. $45 per tonne. The full year volumes stood at 40.73 MT as against 35.26MT in FY11, registering an improvement of 15.5 % over last year. Volumes are expected to further improve to 44MT for FY13 due to improvement in demand going forward. Domestic cement volumes are expected to be nearly 44 MT for FY13 for the company. White cement volumes are also likely to remain robust going forward and thus revenues of Rs. 20,700 Cr for FY13 is expected also it is expected that the industry cement demand to grow to 8 % and 10 % respectively during FY13 - FY14 vs. 4.5 % and 6.5 % during FY11 - FY12 period led by continued retail demand as well as by pre - general election (in 2014) led infrastructure demand from the end of FY13E. However, industry’s utilization is expected to remain under 80 % until FY14E. It is expected that the pending CCI’s investigation report to remain an overhang on the stock in near term.  

Outlook and Valuation:

Cement sales in India grew by 4.5 % and 6.5 % YoY during FY11 - FY12 period and expected the same to improve to by 8 % and 10 % respectively during FY13 - FY14 vs. 4.5 % and 6.5 % during FY11 - FY12 period led by continued retail demand as well as by pre - general election (in 2014) led infrastructure demand from the end of FY13E. However, industry’s utilization is expected to remain under 80 % until FY14E. Demand in the southern region has buoyed over the last five months- which in turn has helped Ultra Tech Cement’s volume and realisation growth. However, with more than 60 MT of new capacities expected to get commissioned during FY12 - 14E period; it is believed that the industry utilisation to hover below 80 % until FY14E. Cement manufacturers have shown maturity in passing on the incremental cost pressure through supply discipline which is expected to continue over the next few quarters until demand recovers. An estimate EBITDA per MT of Rs. 898 and Rs. 944 during FY13 - 14E is expected. The on-going cement cartelization inquiry by Competition Commission of India (CCI) against about 40 cement companies including Ultra Tech Cements is expected to be completed by this month and CCI is expected to come out with its findings during April – May 2012 and if found guilty of cartelization, cement companies could be fined up to 50 % of their FY12E profits which for Ultra Tech Cements could be around Rs. 1200 to 1300 Crs which would be around 6.5 % to 7 % of its total sales. Ultra Tech Cements is expected to deliver strong EBITDA per MT performance similar to that posted during the current quarter & thereafter the seasonal weakness (monsoon driven weak demand and cement prices) would weigh on the stock performance for the subsequent two quarters. While, it is seen that profitability of Ultra Tech Cements to improve going forward, the current valuation multiples already discounts the same. The clarity on the CCI investigation report should be a major trigger for the stock. In line with the multiples ascribed to its peers ACC and Ambuja Cements, Ultra Tech Cements valuation comes at 9.5 x its FY13 – FY14E EBITDA thereby implying a target price of Rs. 1,566 per share. This price implies a replacement cost of US$ 165 per MT. EBITDA/tonne of Rs. 991 for FY13 translating into EBITDA margins of 22.5 % for FY13 is expected. At current price of Rs. 1368.70, the stock is trading at 15.95 x P/E and 8 x EV/EBITDA on FY13 estimates and one should ACCUMULATE the stock and should use declines in the stock to buy with a long term view with the key risk of the out come from CCI imposing fine on cement companies on alleged cartelization. One can buy Ultra Tech Cement Limited with a target price of Rs. 1,566.00 for Medium to Long term investment.

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	13,316.30	18,313.20	20,077.50	22,693.70
NET PROFIT (Rs. Crs)	1,406.00	2,446.80	2,350.30	2,489.30
EPS (Rs.)	51.30	89.30	85.80	90.80
PE (x)	28.60	16.40	17.10	16.10
P/BV (x)	3.80	3.10	2.70	2.30
EV/EBITDA (x)	14.80	9.40	9.40	8.50
ROE (%)	19.90	20.80	16.90	15.50
ROCE (%)	13.70	14.90	12.60	11.80

I would buy UltraTech Cements LTD with a price target of Rs. 1,566 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. 1259.20 on every purchase.

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

MARCH IIP -3.50 % v/s 4.10 % :IS THIS WE CALL THE GROWTH ????

IIP DATA COMES AS A SHOCK !!!

MARCH 2012 Index of Industrial Production (IIP) which is declared by Ministry of Statistics & Programme Implementation came at SHOCKING -3.50 % which is complied by Central Statistic Office. The index is a composite indicator that measures the short term changes in the volumes of the industrial production.

Three sectors that constitute the index are Mining, Manufacturing and Electricity. The monthly growth rates of these three sectors for the month are for Mining (-)1.3%, Manufacturing (-)4.40% and for Electricity 2.70 %, the ministry added that as per “use – Based “ classification there has been negative growth in capital goods (-21.3%) and intermediate goods (-2.1 %) and positive growth has been achieved in basic goods (1.1%), consumer durables (0.2%) and consumer non-durables (1.0%).

The contraction was driven by particularly poor performance of the manufacturing sector, in line with weak exports that month. It is believed that April saw a turnaround, but until this is confirmed, sentiment will be weak. The data increases the odds of another rate cut, is negative for the INR, and should push INR OIS rates and bond yields down. IIP, will change the RBI (Reserve Bank of India) policy stance. RBI will not cut rates till July, but may have to start after that. Expect another 50-75 basis points rate cut in this year

BACKGROUND

• India's economy probably expanded 6.9 % in the 2011 - 12 fiscal year that ended in March, its slowest pace in three years.
• The RBI, which cut interest rates in April for the first time in three years, has forecast growth at 7.3 % in 2012 - 13.
• Expansion in manufacturing sector picked up pace in April, supported by bulging order books, but slower output growth and increasing price pressures dampened sentiment, a business survey showed.
• Growth in the services sector accelerated a touch in April thanks to a rise in new business, and optimism hit its highest level since June 2011, a survey showed last week.
• Headline inflation slowed marginally to 6.89 % in March helped by a softening in prices of manufactured goods, even as food inflation shot up. Analysts expect April inflation at 6.70 %.
• The Reserve Bank of India slashed its main lending rate - the Repo rate - by a sharper-than-expected 50 basis points in April to help revive growth.