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June 29, 2014

elara on orient cement

In the past few weeks, prices of cement in South India have increased sharply. If prices were to remain high, then South-based firms would see a sharp improvement in earnings. Orient Cement (ORCMNT IN), which is the lowest cost producer in the southern region, is likely to regain its margin leadership in Q2FY15 when it would benefit from the full quarter impact of the recent price hike. Given that the existing plant (which has an inherited cost advantage due to proximity to raw materials sources and the market) is likely to generate a ROCE of 12% even at a replacement cost of INR 6,000/tonne, its valuation should command 1x replacement cost. As AP has sustained high cement prices for the past six months to 2 years, we conclude that these prices could sustain at the current levels for some more time.
Orient is also expanding capacity from 5 mn tonnes to 8 mn tonnes by Q1FY16. The new 3-million-tonne plant is coming upin the oversupply Gulbarga cluster and is likely to have a higher landed cost of fly ash and fuel. To address investor concerns regarding low profitability, we assume the plant will be unable to generate sufficient returns above its WAAC for the next five years. Hence, we assign 1x replacement cost of INR 6,000/tonne over the next five years where this plant’s ROCE would be equal to its WACC and discount the same value of WACC at 12% for the next five years. Based on these assumptions, valuation of new capacity would be at INR 3,405/tonne.
Weighted average targets multiple works out to be at INR 4,937/tonne. The stock is currently trading at an EV/ tonne of INR 3,560/tonne on FY16 capacity
Watch the Diet
After valuing the company at a target multiple of INR 4,937/tonne, fair price under the blue sky scenario would be INR 147, implying upside potential of 58% from the current levels.

June 27, 2014

Nirmal bang on Steel Authority of India-

  Steel Authority of India- Institution Desk Management Meet Update- Likely Improvement Priced-in; Retain Sell: We had a meeting with the management of SAIL recently in order to get an update on its current activities. The company will enjoy the benefit of lower coking coal prices, which will be slightly offset by a minor drop in steel prices. SAIL is hopeful of improvement in demand driven by investment revival, which will help it to sell incremental volume arising out of expansion. The management indicated that there were certain non-recurring expenses in FY14, which led EBITDA to fall to a 10-year low of Rs3,457/tn. The management expects the performance to improve on the back of higher volume and lower coking coal as well as overheads costs. We have not revised our estimates at this point of time, as we have already factored in adequate improvement from FY14 onwards. SAIL currently trades at 12.1x/10.8x FY15E/ FY16E EV/EBITDA, respectively, higher than its past 12 years’ average of 6.3x. We have retained Sell rating with a TP of Rs72, which is 22% below the CMP.



   Attended Analyst Meet of Vaibhav Global. Q1 result will be impacted on account of lower volume and higher carriage cost of channel. volume  is lower on account of company has outsourced Call center during the quarter and transition impacted volume and company inventory level at studio level reduced sharply in Q4. Both the things has corrected and Q2 will show normal growth. Higher carriage cost is for increasing the channel reach which is more of an Investment. We feel lower volume in Q1 will be made up in next 3 qtr and maintain of EPS expectation of Rs.45 for FY15 and Rs.58 for FY16. We recommend to Hold the stock and Buy on decline with Target price of Rs.925.

From NB desk

I personally would avoid the stock

have no holding although the stock has given multifold returns


Sub : Revision in Criteria for Shifting Scrips to/from Trade for Trade Segment

The scrips in Trade for Trade segment are made available for trading under BE or BT series.
The settlement of scrips available in this segment is done on a trade for trade basis and no
netting off is allowed. Currently, the surveillance action whereby scrips are transferred for
trading and settlement on a trade-to-trade basis is reviewed at periodic intervals viz
fortnightly and quarterly. These criteria for shifting scrips to/from Trade for Trade segment
are decided jointly by the stock exchanges in consultation with SEBI and reviewed
With a view to rationalize the criteria of shifting of scrips to/from Trade for Trade Segment
and to bring it in line with the current market dynamics, SEBI and Stock Exchanges after
deliberation and discussions have decided to revise the criteria and periodicity for trade for
trade review. Henceforth ,the process of identifying the scrips for moving to/from Trade to
Trade will be done on a monthly basis (along with the price band review process, which too
shall be done on a Monthly basis instead of Bi-monthly basis), based on the following

 Kindly refer to the circular.

I guess the exchange is going in for high pe stocks.It should also go and hound stocks having negative pe which doesnt find any mention in the notice.

Anyways time will tell whether the circular is progressive or regressive.You be the judge

read the circular here


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