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Aug 18, 2008, 07.15 PM IST | Source: CNBC-TV18

Stocks to Watch: SBI, Rolta, Axis Bank

The Sensex closed at 15,212.13, down 291.79 points or 1.88%. Nifty ended with a loss of 68.15 points or 1.47% at 4552.25. Rahul Mohindar of viratechindia.com is positive on SBI and Axis Bank stocks. He is also positive on tech stocks like MphasiS and Rolta.

Rahul Mohinder , viratechindia.com
Markets retreated and ended sharply lower on the back of profit booking, disappointing IIP numbers, and negative European and Asian cues. Sell off was seen in rate sensitives, i nfrastructure , technology , metal and pharma stocks. Midcap and smallcap stocks were also under selling pressure. Nifty Fifty slipped below 4600 mark.

The Sensex closed at 15,212.13, down 291.79 points or 1.88% after hitting an intraday high of 15,579.78 and low of 15,124.91. Nifty ended with a loss of 68.15 points or 1.47% at 4552.25. It has touched a high/low of 4649.85 and 4525.75, respectively.

Deven Choksey of  KR Choksey Securities is positive on JMC Projects (India).

of viratechindia.com is positive on SBI and Axis Bank stocks. He is also positive on tech stocks like MphasiS and  Rolta .

 

Heres how Rahul Mohinder views the stocks on board: 

 

On SBI and Axis Bank :

 

I think I am also very convinced technically banking is a sector to stay and even if you are looking at this from a slightly longer perspective. I think both on short-term as well as long-term counts one should stay in the sector. We particularly like Axis Bank closer to these Rs 700 levels I think its an opportunity finally I see the stock moving to even Rs 840-850 levels. So even if you look at State Bank of India (SBI) or ICICI Bank, I still think there is some momentum, which is going to possibly develop here the volume cues are very interesting here. So keeping all this in mind, I think it would rate as one of the better sectors to be in now.

 

On Maruti :

 

 dont really see too much happening in auto sector, unless Maruti really seems to breakout. I think leaving aside Maruti I dont think anyone could really perform. So these levels, I still see some subdued action if not weakness here but nothing exceptionally bearish that I would go out and short right away here.

 

On MphasiS  and Rolta :

 

I think midcap technology may show some movement. So I would look at stocks like Mphasis, Rolta. I think sectorally that is the trend I would see. I think if I had to choose this one sector it is going to be that across the board you may see several stocks, which I think are available at very good long-term support points to name a few if we look some of them in the power sector, if we look at some of them in the energy sector. So I would look at these sectors and then take a bottom down approach, so for now I would focus on midcap technology and that is why I see some action coming in.   

 

Sanjay Chhabria , Equity Analyst is positive in midcap picks like International Travel House , TTK Prestige and Cords Cable Industries .

 

Here's how Sanjay Chhabria views the stocks on board:

 

On International Travel House :

 

It is an ITC group company, which is Indias leading travel and tourism company offering a full bouquet of travel solutions like car rentals, business travels, inbound and out bound leisure trips, event management etc. The company serves as a one stop shop for tourists whether corporate or leisure and has strong presence in the corporate travel segment and car rentals, with clients such as Infosys, Citi Bank, Siemens apart from the ITC Group. Looking at the boom time being witnessed by the travel and tourism industry, higher disposable incomes have resulted in more Indians going for holidays in India and abroad. These augurs well for the company and a window of opportunity lies for the company.

 

Regarding the steady financials of the company, for FY08, the company posted a net profit of Rs 10.5 crore on the net sales of Rs 79 crore. On a small equity of Rs 8 crore, the EPS stood as 13.3 and the dividend declared was 30%. So at the current price of Rs 100, the dividend deals is also at around 3% and given the strong parentage of ITC and the good times being witnessed by the travel industry, the stock holds a good potential for in an upside in the medium term; I have a price target of Rs 175 and the current levels of market cap is very low of around Rs 80 crore.

 

On TTK Prestige :

The company is a pioneer and leader in pressure cookers in India. It retails under the brand Prestige. The company has evolved from a mere pressure cooker company to a total kitchens solution provider. It has transformed its distribution model by adding exclusive retail outlets known as Prestige Smart Kitchens. This transformation is paying rich dividend for the company as reflected by FY08 results. Net profit came in at Rs 17.73 crore while net sales stood at Rs 326 crore on an equity of Rs 11 crore. The company's EPS stood at Rs 15.71 per share. It also declared a dividend of 35%. At current valuations, the stock trades just around 7.5 times FY08 earnings and 6.3 times FY09 earnings. Given the strong brand equity of the Prestige brand, aggressive retail foray, and product diversification, the valuations appear very attractive. The other upside is the value unlocking of its real estate holdings in Bangalore. I have a price target of about Rs 180 on this stock.

 

Disclosure:

I personally do not hold any of the stocks discussed, but have recommended them to our clients.

 

Deven Choksey of  KR Choksey Securities is positive on JMC Projects (India).

 

Heres how Deven Choksey views JMC Projects stock:

 

Its a company with a better business model and they are moving into a good space with BOT (Build, Operate and Transfer) related projects in the road sector as well as into the power transmission sector. The company is available at a very attractive valuation of 7-8 forward PE; 40-50% growth coming in, around two year of an order book visibility is there. So this company looks pretty okay from the investment point of view if one wants to take a view for more than one year horizon because this market its largely going to favour the largecaps. I think the midcaps are going to be wait and watch, and get reward at some point of time in future. So in such situation one will have to stay invested for longer period of time but the business model and the earnings of the companies are suggesting that one can buy this company at current market price.          

 

Dipen Sheth of Wealth Management Advisory Services is bullish on Tanla Solutions, Castrol, and HBL Powe.

 

Here's how Dipen Sheth views the stocks on board:

 

On Tanla Solutions :

Tanla Solution is a unique kind of company. Along with OnMobile, it is in the space of creating, hosting, and providing mobile value-added service applications for network providers and marrying them to content and services providers. This is a very interesting business, where revenues and profits may not pan out in a linear way. We see tremendous growth going forward. They are market leaders in UK and Ireland, where they have picked up the nuts and bolts of the business. They are now expanding in India and US, which holds a lot of promise. I am yet to see clear tractions in these two markets.

 

The company is in a take-off stage right now. Q1 numbers were very good. There was a 79% jump in revenues at Rs 169 crore, very profitable 48% EBITDA margin, and PAT up 70% at Rs 56 crore. Even if you annualize this number to about Rs 200-250 crore, the post tax profit range at a market capitalization of around Rs 2,100 crore looks interesting.

 

On Castrol :

Castrol is a market leader in lubricants in India. It is actually an FMCG company. About 70-80% of its net profit is disseminated as dividend every year. Over the last two years, the company has been posting an improvement in margins. That tells me about its pricing power in the face of rising base oil prices. The company has done very well in the June quarter. They have maintained 15% topline growth. This has been accompanied by margin expansions of more than 180 basis points.

 

The company is getting into a stage where it can command its pricing, and generate more cash. I don't know what they are going to do with this cash, because they still continue to distribute a lot of this as dividend. The interim dividend is up from 4.5% to 6% this year. I expect at least Rs 17-18 as dividend, which is an about 6% dividend yield. In this choppy market, this is a high quality company having brand value, earning better margins, and growing reasonably well if not very fast. It offers a very high margin of safety. Our target price of Rs 400-450 is very comfortable here.

 

On HBL Power :

I wish I could find peers for this business. There is Exide, Amara Raja, and a whole lot of other unlisted players in the space. HBL also manufactures lead acid batteries which contributes about 70-80% of its revenues. HBL is a technology leader. One have got to realize that this company, which is run by technocrats, produces batteries which are used in specialist applications starting from railways to the defence industry. Now, big growth is happening in telecom. More than two-third of their batteries are now sold to the telecom sector. The telecom sector is now growing in rural areas, where performance issues relating to these batteries are going to be much more stringent, as they need to operate in much harsher conditions. Here deep discharge kind of batteries is required,

 

The technocrats who run this company have invested aggressively in increasing capacity with very little dilution over the last two years. There was just one rights issue where it diluted about 10%. They have tripled revenues in the last three years and have quadrupled profits.

 

This stock inline with the rest of the market crashed apparently for no reason. The Q1 numbers were mind-boggling. Revenues are up 127% and profits are up more than five times. Some of that was actually attributable to the fact that they logged in on some contracts where they priced lead at a higher cost. Profits for the June quarter stands at Rs 33 crore. Even if Rs 5-6 crore is attributable to price movement in lead, I would say this company is capable to doing Rs 100-120 crore post tax profit this year. At Rs 700 crore of market capitalization, this a technology leader, world-renowned specialist manufacturer, and the only manufacturer of batteries used by aircrafts in India, which is available at a great discount.

 

Disclosures:

Our clients and us might be holding this stocks in our PMS or advisory portfolio.

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SBI Axis Bank Maruti Suzuki
MphasiS Rolta Intl Travel
TTK Prestige Cords Cable Ind JMC Projects
Tanla Solutions Castrol HBL Power

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