Reliance Industries Ltd (Q4 FY07) - Result Update

Reliance Industries Ltd (RIL) Q4 FY07 results were marginally below our expectations primarily because of below estimated performance of the petrochemical segment. However, the refining segment continues to surprise us with US$13/bbl GRMs as compared to US$6.8/bbl Singapore GRMs. Oil and Gas production from the PMT field s have increased post implementation of EPOD and NRPOD plans. KG-D6 block is all set to commence production from the second half of 2008. Retail venture has commenced operations during the last fiscal in an astounding manner with RIL investing over Rs40bn. Our sum of parts analysis yields a target price of Rs1,642 an upside of 2.9% on a completed diluted equity. However, upsides cannot be ruled out from earlier commencement of production of gas from KG D-6 and further clarity on retail business. We recommend a HOLD.


Click below for the detailed Result Update:

www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2742007/reliance_0307.pdf


Warm Regards,

Prayesh Jain
India Infoline Ltd.

Godrej Consumer Product Ltd - FY07

CMP: Rs139
Rating: Not rated

Godrej Consumer Product Ltd (GCPL) recorded 36.2% yoy growth in net sales at Rs9.5bn during FY07, driven by 21% yoy growth in toilet soaps at Rs4.8bn and 28.7% yoy grwoth in hair color segment at Rs2.1bn (standalone Rs1.8bn). Toiletries sales increased sharply to Rs2.1bn from Rs818mn in FY06. Operating margins dipped by 130bps to 18.9% due to sharp increase in raw mater ial cost, higher overheads and faster growth in low margin soap segment. EBIT margins in both the soaps and personal care division remained under pressure during the year. Margins in the soaps segment (contributing 51.2% to revenues and 28.8% to profitability) were down by 110bps to 11.3%. While, personal care segment (contributing 48.8% to revenues and 71.2% to profitability) recorded a sharp dip in margins by 780bps to 29.4%. Adjusted net profit after extraordinary items (profit from Snuggy sale - Rs50.7mn, tax adjustments in respect of previous years - Rs48mn) rose by 18.7% yoy to Rs1.4bn translating into an EPS of Rs6.4.

Click below for the detailed Result Update:

http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2742007/godrejcp_0307.pdf


Warm Regards,


Vanmala Nagwekar
India Infoline Ltd.

Zensar Technologies (Q4 FY07) - “Splendid quarter and strong FY08 guidance”

Zensar delivered strong results for the quarter with revenues and earnings growing far above expectations at 15.8% and 30.1% respectively. Even after excluding inorganic impact of Thought Digital, the organic revenue growth stood strong at ~10.8% qoq despite Rupee appreciation. Operating margin improved significantly by 170 bps led by sharp improvements in profitability of EAS and BPO segments. Higher other income offset the impact of sequentially higher tax payout there enabling 30.1% profit growth. Management has guided for a strong FY08 with revenues and earnings in excess of Rs8.5bn and Rs850mn respectively.

Company’s guidance for FY08 appears achievable given the fact that full year Thought Digital integration would add close to US$27mn (similar to CY06 revenues) at least in the year thereby leaving a yoy growth requirement of 24% for organic revenues aga inst 40% achieved in FY07. Further, profitability turnaround in ITS segment or even break-even here would act as a big margin lever enabling in sustaining operating margin on yoy basis. Management’s earnings guidance translates into an EPS of Rs35.5 and reflects attractive P/E valuation of 8.5x on FY08 basis.

Click below for the detailed Result Update:

http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2542007/zensartech_0307.pdf


Warm Regards,

Rajiv Mehta
India Infoline Ltd

Monetary policy review and expectations 2007-08

RBI’s monetary policy review was in line with expectation, with status quo being maintained on the major policy rates. We take comfort from RBI’s diluted stance on credit growth moderation to 24-25% from its earlier 20%. In line money supply and deposit growth have been estimated higher than previous year to facilitate growth. Slower moderation in credit growth should avoid any sharp monetary tightening in the near future. Lowering of risk weights from 75% to 50% on home loans up to Rs2mn (temporary for one year), is a positive measure as it will re duce pressure on capital adequacy and in turn upward pressure on lending rates. We expect RBI to maintain a close vigil on the impact of its previous policy actions, which should see tight monetary condition persist. The Central Bank also announced a host of measures taking gradual steps towards capital account convertibility.
Click below for the detailed Monetary policy review :
http://www.indiainfoline.com/news/innernews.asp?storyId=32895&lmn=1&cat=26
Warm Regards,
Ashutosh NarkarIndia Infoline Ltd.

HDFC Bank (Q4 FY07): Consistency maintained -

Dear Sir/Madam,

Sustained high CASA and lower pressure on resources helped improve margins to 4.5% in Q4 FY07. HDFC Bank reduced its exposure to bulk deposits as liquidity remained comfortable with advances reporting a 2.2% drop qoq. Operating cost continued to remain high as Bank opened 101 new branches during the quarter. Higher general provisions kept provisioning requirement high though profit growth maintained its 30% consistency. We maintain our positive outlook on the Bank’s operational performance, though valuations at 4.3 x FY08E book offer no upside from a 12 month perspective. We maintain our SELL rating on the stock with a price target of Rs953.

Click below for the detailed Investment Update:
http://www.indiainfoline.com/content/rep/Investment_Ideas/2007/4/2542007/hdfcbank_0307.pdf

Warm Regards,

Ashutosh Narkar
India Infoline Ltd

Wipro Ltd (Q4 FY07) - "Strong performance"

Dear Sir/Madam,

Wipro delivered strong performance in the quarter led by good growth across all segments. Revenues grew by 8.8% with BPO services and Wipro Infotech segment growing faster. Operating margin decline was lower than anticipated at 40 bps qoq with significant improvement in profitability of BPO, acquisitions and Wipro Infotech. Aided by higher other income and tax write back of ~Rs700mn, net profit grew higher at 11.8%. Company has guided for a muted 2.9% qoq revenue growth in Global IT segment for Q1 FY08.

Outlook

We are revising downwards our FY08 EPS estimate by 2% to Rs24.9. However, we still maintain ‘BUY’ rating on the company as our one-year target price of Rs721 (based on 29x FY08E EPS) implies about 25% appreciation from current levels.

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2342007/wipro_0307.pdf

Warm Regards,

Rajiv Mehta
India Infoline Ltd

India Cements (ICL) - Q4FY07

Dear Sir/Madam,

CMP – Rs170

Rating – SELL

Target – Rs177

Q4FY07 Financial Highlights

  • Net Sales increases by 36.2% to Rs5.8bn
  • Operating profit increases by 149.5% to Rs1.9bn
  • Operating margin increases by 1500 bps to 33.1%
  • Realization per ton increases by 32% to Rs2798
  • Cost per ton increases by 7.7% to Rs1872
  • PAT stood at Rs1.4bn for Q4FY07 compared to Rs241mn for Q4FY06

Valuation

We expect ICL to post earnings per share of Rs18.5 and Rs17.7 respectively for FY08 and FY09 without including Visakha Cement figures. At consolidated level including Visaka Cement EPS comes to Rs18.6 and Rs17.5 for FY08 and FY09 respectively. With restriction in pricing power and inflation still continuing at high levels we expect the realization increase to be flat going forward for ICL. There are indications of demand slowing down for housing due to higher interest rates which may reduce demand growth for cement. As the price appreciation possibility is looking limited we maintain our SELL rating on the company.

Warm Regards,

J Radhakrishnan

Garware Offshore Services Ltd Q1 CY07

Garware Offshore Services Ltd (GOSL) delivered robust Q1 CY07 results on back of its acquisition of a platform support vessel in th e month of November 2006. GOSL reported 63% yoy growth in sales to Rs193mn. Higher margins for the PSV segment helped margins expand by 6 percentage points. However, higher interest outgo and depreciation charge restricted PAT growth to 42.3% to Rs54mn.

Outlook

GOSL is expecting to have a fleet size off 11 vessels from current level of 6 vessels. The delivery schedule of which is as follows:

Table: Delivery schedule

Delivery date

Vessel

May-07

PSV

Mar-08

PSV

Jun-08

AHTSV

Jul-08

AHTSV

Dec-08

PSV

Source: Company

We believe that the tightness in the market will help GOSL to get higher charter rates for the vessels than in the past translating into realization growth. Higher contribution from PSV will enable the company to earn better margins than in the past. With GOSL, already receiving technical qualification for tenders of both ONGC (28 ships) and Shipping Corporation of India (10 ships), there can be significant rise in other income .

Click below for the detailed Result Update:

http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2442007/garwareoffshore_0307.pdf


Warm Regards,

Prayesh Jain
India Infoline Ltd

Bank of India (Q4 FY07): Keep flying high

Our central investment theme of high core profit growth and asset quality improvement is playing out well in Bank of India, which was amply evident in Q4 FY07 results. While results have been far above our expectation, core profit growth was in line with expectation. Net NPAs have halved from the March 06 levels to 0.74%. We have revised our profit growth expectation for FY08 by 2.4 %, though maintained flat for FY09. We maintain our BUY rating on the stock with a price target of Rs244.

Warm Regards,

Ashutosh Narkar
India Infoline Ltd.

CEAT – Q4FY07

Q4FY07 Financial Highlights

  • Net Sales increases by 16.2% to Rs5.6bn
  • Operating profit increases by 76.2% to Rs439mn
  • Operating margin increases by 265 bps to 7.8%
  • PAT stood at Rs234mn for Q4FY07 compared to Rs49mn for Q4FY06

Valuations

We have revised upwards our FY08 and FY09 estimates to give effect for easing in natural rubber prices. Our revised EPS estimates for FY08 and FY09 are Rs10.4 and Rs13.0 respectively. The investment portfolio with haricut of 70% stands at Rs28 per share. We value CEAT at 10x of its FY09 estimated EPS and adding Rs28 for investment portfolio our revised target price comes to Rs158. Maintain BUY.

Click below for the detailed Result Update:

http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2442007/ceat_0307.pdf


Warm Regards,

J Radhakrishnan
India Infoline Ltd

Petronet LNG Ltd (Q4 FY07) - Investment Update

Dear Sir/Madam,

Petronet LNG Ltd (PLL) announced its Q4 FY07 results, which were below expectations on the revenue front as the volumes from Ras Gas were down by more than 10% qoq to 60.2 TBTUs. The dip was compensated by 4 spot cargos, which provided incremental volumes of 13.1 TBTUs. Operating margins during the quarter slipped by 250bps yoy as spot cargos command lower operating margins in terms of percentage (in absolute terms OPM on spot cargos are higher than regular busines s as they include some element of marketing margins). 121.2% yoy jump in other income translated into a 60.3% yoy growth in PAT to Rs1,060mn. Going ahead, PLL has tied up for 36 spot cargos which it would regasify to supply fuel to the Dabhol power project. With Dahej expansion to 10mn tons slated to commence operations in Q4 FY09, PLL is all set to tap the opportunity provided by the strained demand-supply scenario for natural gas in the country. We believe that PLL will clock a CAGR of 14.1% in topline and 14.3% in PAT during FY07-FY09. We recommend a BUY on the stock with a one year target of Rs54, up 17.4% from current levels. The target price was arrived at by assigning a P/E multiple of 10x to FY09 EPS estimate of Rs5.4.

Click below for the detailed Investment Update:
http://www.indiainfoline.com/content/rep/Investment_Ideas/2007/4/1842007/Petronet_0307.pdf

Warm Regards,

Prayesh Jain
India Infoline Ltd

Infotech Enterprises (Q4 FY07): "Weak operational performance "

Infotech Enterprises delivered a poor operational performance in the quarter, contrary to our expectations. The revenues and net profit before IASI share grew sequentially by 5.7% and 3.7% respectively with operating margin declining by sharp 220 bps qoq to 20.4%. Operating profit growth was negative 4.5% qoq which was pushed up by higher other income and lower tax provision. The high IASI profit share (entire of whic h was exceptional) v/s a negative contribution last quarter led to phenomenal 32.6% qoq growth in adjusted net profit. For the full year FY08, company’s performance stood robust with revenue growth of 49.7% and adjusted profit growth of 66.3%. Management is confident of maintaining the growth momentum with stable operating margin in FY08.

Outlook


Though the actual EPS for FY07 was higher than forecasted (Rs17.9), we revise our FY08 EPS estimate marginally downward by 1.2% to Rs23 mainly to factor the expected substantially lower IASI profit share yoy. We maintain our Market Performer stance on the company with a one-year target price of Rs391 based on 17x FY08E EPS. Despite lower potential share price upside, we remain positive on the company for its exhibition of consistent strong revenue growth and margin improvement over past 8-10 quarters and strong visibility, unlike any o ther mid-cap company. Further, our estimates have upside risk from inorganic growth on which the company is very keen.

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/2042007/infotecent_0307.pdf



Warm Regards,


Rajiv Mehta
India Infoline Ltd

Tyre Industry: Smooth drive

Dear Sir/Madam,

Tyre sales to grow irrespective of short term fluctuations in automobile sales

Automobile sales is the growth driver for tyre industry. But the short term fluctuations in the automobile sales do not affect tyre sales on year on year basis. This is due to strong replacement market (RM) sales for key Commercial Vehicles (CV) segment. CV segment constitutes nearly 70% of tyre sales on value terms even though in number terms it constitutes only 25%. RM and export sales contribute more than 80% to CV segment. Thus, one of the major segments is not affected nearly by 56% in value terms due to short term fluctuation in automobile sales. We find the tyres produced to vehicles regi stered (a multiplier to show the demand for tyres in the country) growing for CV from 2.99 in 2001 to 3.17 in 2006 despite fluctuations in CV sales. In case of Passenger Vehicles (PV), the same has gone up from 1.13 to 1.25 in this period. RM and export sales contribute more than 60% to PV tyre sales.

Robust growth in last two years for automobile industry to have positive effect on tyre industry

We expect high growth in automobile sales in the past two years to increase demand for tyres in the comin g years and improve RM sales. Indian automobile industry has been clocking high growth in the past few years, thanks to high economic growth and improved disposable income. Automobile sales and exports, except tractors, from the country have grown at 15% in FY06 and at 16.3% for April-January 2007 period. Tractor sales for April-December 2006 period rose by 25.6%.

Series of price hikes reflect reduction in unhealthy competition

From April 2006, tyre producers have hiked the prices to the tune of 15-20%. Tyre companies could increase the prices of tyres by 2-4% only in FY05 and FY06. This was despite continuous increase in key raw materials like Rubber, Carbon Black and NTCF. Stiff competition in the sector to increase market share, even at the cost of reduction in margins, has eroded margins. Producers have passed on the increase in raw material prices and margins are also improving from April 2006. The reason for change in the trend is due to lack of capacity. The present capacities are running at above 90% utilization. Apart from this, the players in the industry are planning to invest in capacity expansion to meet the demand, which would require large outlay of funds and high competition would affect the capex plans.

Margin and PAT expansion on cards

With increase in tyre prices and softening of raw material prices, the margins of tyre producers are improving. Given the low operating margin of 5-8% at which the tyre producers were operating in the past 2-3 years, margin growth of 100 to 200 basis points itself multiplies the profit at net level for these players, which is very low at 0.5-2% at present. We believe, the margins in the industry are still not reasonable. We expect unhealthy competition to come down further among the players to suppo rt capex, which can be a surprise element.

Rubber price expected to remain subdued

Global Natural Rubber (NR) demand growth was subdued in 2006. This was caused by steep rise in prices and resultant shifting to Synthetic Rubber (SR). We expect the volatility in NR price to reduce going forward as this leads to increased shift towards SR. We have considered average rubber price of Rs94 for FY08 and FY09 in our estimates. Domestic stock position for rubber is comfortable, which is expected to keep rubber in the estimated price band.

Crude-based raw material prices also expected to stabilize

SR, Carbon Black and Nylon Tyre Cord Fabric (NTCF) are crude-based products and have strong correlation to crude oil prices. Crude-based raw materials constitute around 30% of operating expenses. In the past 6 months crude oil price has stabilized around $60 per barrel, barring the recent spike. We expect this to bring stability in crude-based raw materials.

Our Top Picks

Apollo Tyres - BUY CMP Rs279

Apollo Tyres (ATL), the leading CV tyre player in India is expanding capacity at a rapid pace both organically and inorganically. With automobile sector booming and international automobile majors setting shops in India, we expect ATL to be a major beneficiary. We expect ATL’s topline and bottom line to grow by 14.3% and 26.2% respectively between FY06 to FY09. We expect EPS to grow by 15.2% from FY06 to FY09. We find the recent fall in ATL’s share price a good opportunity to enter. Initiating coverage with BUY and a target price of Rs397.

CEAT - BUY CMP Rs117

CEAT, a diversified tyre major, is ramping up its production facilities to benefit from the uptrend in automobile industry. It has planned to modernize its existing facilities and double its OTR capacity, which will boost volumes in FY08 and FY09. We estimate top line and bottom line to grow by 12.1% and 454.5% respectively from FY06-FY09. The proposed sale of part of land at its Bhandup facility is expected to boost its capex plans of putting up T&B radial tyres in the next two years. Investment portfolio to the tune of Rs95 per share is expected to act as a cushion for the company. Initiating coverage with BUY and a target price of Rs135.

JK Industries - BUY CMP Rs115

JK Industries (JKIL), a pioneer in the T&B radial tyres with nearly 70% market share, is expected to benefit from the high growth in this segment. JKIL has hived off its investment portfolio into a separate company. We expect re-rating to the stock as JKIL will become a focused tyre play. With softening in natural rubber prices from the recent peak and buoyancy in automobile sector we expect JKIL to perform better going forward. We expect JK IL’s topline and bottom line to grow by 13.5% and 55.9% respectively between FY06 to FY08 (September ended). We expect EPS to grow by 80.0% from FY06 to FY08. We value JKIL based on 10x of its FY08 earnings of Rs13.5. Initiating coverage with BUY and a target price of Rs135.

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Investment_Ideas/2007/4/2042007/Tyre Industry.pdf


Warm Regards,

J Radhakrishnan
India Infoline Ltd.

TCS (Q4 FY07) Result Snapshot - "Below expected lines"

TCS posted modest results for Q4 FY07 with revenu es and earnings growing 5.9% and 6.6% respectively. The operational performance was far below expectations with decline in operating margin by 50 bps qoq. If not for the higher other income from forex cover and stake sale in JV company, PBT would have grown by just 3.9% qoq. Management has indicated continuation of revenue growth momentum and stable OPM for FY08.

Outlook

We are revising our FY08 EPS forecast marginally downwards by 0.9% to Rs53.7 mainly to factor underachievement of our expectations in Q4 FY07. We maintain BUY rating wi th a one-year target price of Rs1,558 representing 24.3% upside from current levels.

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/1842007/tcs_0307.pdf

Warm Regards,

Rajiv Mehta
India Infoline Ltd.

Petronet LNG Ltd (Q4 FY07) - Investment Update

Dear Sir/Madam,

Petronet LNG Ltd (PLL) announced its Q4 FY07 results, which were below expectations on the revenue front as the volumes from Ras Gas were down by more than 10% qoq to 60.2 TBTUs. The dip was compensated by 4 spot cargos, which provided incremental volumes of 13.1 TBTUs. Operating margins during the quarter slipped by 250bps yoy as spot cargos command lower operating margins in terms of percentage (in absolute terms OPM on spot cargos are higher than regular busines s as they include some element of marketing margins). 121.2% yoy jump in other income translated into a 60.3% yoy growth in PAT to Rs1,060mn. Going ahead, PLL has tied up for 36 spot cargos which it would regasify to supply fuel to the Dabhol power project. With Dahej expansion to 10mn tons slated to commence operations in Q4 FY09, PLL is all set to tap the opportunity provided by the strained demand-supply scenario for natural gas in the country. We believe that PLL will clock a CAGR of 14.1% in topline and 14.3% in PAT during FY07-FY09. We recommend a BUY on the stock with a one year target of Rs54, up 17.4% from current levels. The target price was arrived at by assigning a P/E multiple of 10x to FY09 EPS estimate of Rs5.4.

Click below for the detailed Investment Update:
http://www.indiainfoline.com/content/rep/Investment_Ideas/2007/4/1842007/Petronet_0307.pdf

Warm Regards,

Prayesh Jain
India Infoline Ltd

Infosys Technologies Q4 FY07 Result Snapshot - "More disappointment than cheer"

After an ordinary Q3 FY07, Infosys delivers a below ordinary performance in Q4 FY07 missing its revenue guidance for the quarter, believe it or not. As if this was not enough, the operating margin declined qoq by 100 bps mainly impacted by the Rupee appreciation. If not for the exceptional reversal in tax provisions amounting Rs1250mn, the net profit would have grown just 3.7% qoq. The sequential EPS growth was further depressed by exercise of majority of outstanding options at the start of the quarter. Company has guided for a muted Q1 FY08 (in line with traditional pattern) and below expected FY08 revenue and EPS growth.

Outlook

In the light of poor Q4 FY07 result and below expected FY08 guidance, we are revising our FY08 EPS estimate downwards by 4% from Rs87.1 to Rs83.6. However, we maintain BUY on the company as our 1-year target price of Rs2,509 (based on 30x FY08E EPS) indicates 19.5% upside from present levels. The stock returns remain attractive even post the EPS downgrade due to significant price fall in the last 3 months (~12%) especially since the Budget (~9%).

Click below for the detailed Result Update:
http://www.indiainfoline.com/content/rep/Result_Analysis/2007/4/1642007/infosystch_0307.pdf

Warm Regards,

Rajiv Mehta
India Infoline Ltd.

Copper Commodity Report: Chinese demand to sizzle copper

Dear Sir/Madam,

ü Demand drivers in China only getting stronger, demand in CY2007 to rise by 10.8-13.5% to 3.9-4.1mn tons

ü Current inventory levels at 3.5 days of cover, not enough cushion to drop in supply

ü Demand from Europe to surprise on the positive side

ü US demand for copper to continue further

ü Market back to backwardation on increased demand

Outlook:

We expect copper prices to remain strong in the near term as inventories are low and consumers are looking for opportunities to buy. A combination of the above factors will support t he rise in copper prices. The world demand is expected to rise by 6.4% in CY2007 to 18.11mn tons while the supply is expected to rise by 8% to 18.9mn tons in CY2007. The majority of the rise in the copper supply is expected to come in the last quarter of CY2007 and not before that. Thus, the gap between the demand and supply in the first half of the year is expected to keep prices in the range of US$7000-7500 in the first three quarters of CY2007.

Recommendation: BUY

The bearish phase in copper witnessed in Q4CY2006 was a buying opportunity for the market players. Copper prices are expected to remain firm on account of increased capital flows moving into commodity market and demand is expected to outpace supply. Although an increase in global copper stocks is possible in CY2007, holdings will remain relatively low. While growth in refined copper production is expected to be faster than that of refined copper consumption, majority of the new projects are expected to come online in the last quarter of CY2007 or beyond. We expect the current rise in the seasonal demand from China to push prices towards the US$8000 and then towards US$8500 levels in CY2007.

Technical recommendation:

The long term trend of copper is positive and the fall witnessed in the last quarter of CY2006 and January 2007 from the high of Rs398 was only corrective in nature. We expect the rally in copper prices will continue further and may see a new high in the next couple of months. MCX COPPER (April) is expected to rise to Rs360 and if this level is broken, prices are expected to rise further to Rs380.

Click below for the detailed commodity report on Copper:
http://www.indiainfoline.com/content/rep/Special_Reports/2007/4/1242007/Commodity%20Report%20-%20Copper.pdf

Warm Regards,

Tarang Bhanushali
India Infoline Commodities Pvt. Ltd.

IT Sector Preview (Q4 FY07): "Not weak as expected"

Dear Sir/Madam,

We expect decent results from sector companies in Q4 FY07 with revenues and profits of our estimated universe growing 7.4% and 6.3% on qoq basis. Infosys FY08 guidance would be the key thing to watch out for, as usual. The excitement and anxiety levels surrounding it are higher this time with Rupee at its 8-ye ar high and concerns over US economic slowdown. We feel that Infosys FY08 guidance will neither please (as for FY07 guidance) nor disappoint (as for FY06 guidance) in extreme with its growth range being in line with current market expectations. Market seems to have already factored a lower growth guidance yoy from the company.

Click below for the detailed IT Sector Preview:
http://www .indiainfoline.com/content/sector/Quarterly_Previews/2007/4/942007/IT%20Sector%20Preview%20Q4%20FY07.pdf

Warm Regards,

Rajiv Mehta
India Infoline Ltd.

Garware Offshore Services Ltd

Garware Offshore Services Ltd (GOSL) has received a Letter of Award of Contract from ONGC for its Platform Support Vessel (PSV) "M.V. Kamet", which is due to be delivered in the month of May 2007. The tenure of the contract is of 5 years and as per the company the contract would fetch it revenue of Rs250mn per annum. The charter rate works out to be close to US$16,500 per annum, which is slightly ahead of our expectations of US$15,500/day. The increase, however, translates into only Rs0.1 increased in our EPS estimates for CY07. Two more PSVs are likely to be delivered in the months of March 2008 and December 2008. If the company is able to put these vessels on similar day rates, the upside in earnings could be as much as Rs0.3 in CY08 EPS.
MANY THANKS TO
Prayesh Jain
India Infoline Ltd

Beauty of a `provoked' bull By Pradeep Chandrasekaran

Thanks to : http://RacyCases.blogspot.com

Beep, Beep Beep, went the mobile. Chotu wearily picked it up. Monday mornings meant more trading advice from his retinue of trading well-wishers, which included his broker, professional advisors, friends and his driver. But this was no trading message. All that the message said was "Provoked". It was from his former trading buddy Motu. He had grown fatter during the bull market. And why not? Unlike Chotu, his account had been growing. Though he hated to admit it, Chotu knew that the reason why they had drifted apart was the fact that the path of growth taken by their accounts was diametrically opposite.

Chotu was not fond of riddles and puzzles that taxed his overworked brain. Irritated but intrigued that there could be a hidden "insider tip", he called Motu.

"What is this about being provoked?" "Aare yaar, don't you read the papers?" came the reply.

"Provoked is being hailed as Aishwariya's best film. And have you forgotten that she is getting married in a few days? And that is not the only reason why I have been provoked to celebrate," he continued. "In two weeks, the Indian Bull will complete its fourth birthday. Come over and share my joy."

This was rubbing salt into the wounds. Like all traders he felt the loss of pain, but even more painful was the realisation that others were succeeding where he failed. Resigned to the fact that he could not avoid meeting Motu, he agreed to meet him for lunch at his house.

Motu was waiting in his trading room when Chotu reached his house. Ash was keeping an eye on the room from vantage spots on the walls. As his eyes stopped feasting on the eye-catching photos, Chotu noticed that the rest of the free space on the walls was occupied by huge chart papers with graphs on them.

"What are they?" he asked, revealing his ignorance.

Motu's reply was prompt. "Nothing but a graphical representation of the market. You see, I study these charts to tell me what I should do in the market at any given point of time. I do my own analysis and that is what has helped me succeed."

It was then that Chotu realised that there was no television in Motu's trading room. "But don't you need a business channel to update you on the latest developments?" Chotu demanded.

"Most of the so-called latest developments and news are already known and factored into the price. Further, if the news is really going to have an impact, then you cannot come to a conclusion about its impact in five minutes. This is something which most of the traders don't realise."

Chotu was still not convinced. "What about the view of the fund managers and analysts? Are they not important?" "Sure", Motu replied, "but not to you or to me. They are important for the fund or company they represent. What you need to realise is that their outlook, timeframes and objectives are completely different from ours. In fact, they do not tell us what those are, nor do they come and tell us when those factors change. That is one of the main reasons why no one ever succeeds by listening to an otherwise successful fund manager or analyst."

"All right then, tell me what you think of the market now. Let me see whether you are better than them," challenged Chotu.

"I am not here to convince anyone about my views or opinions on the market. My trading record speaks for itself. To use a cricketing term, I let my bat do the talking." Motu's reply was like that of a man who has been there. "I can, however, show you some simple rules which you can apply in your trading," he offered.

Chotu was feeling smaller than usual this morning. But he knew that he needed help in getting on track with his trading. "All right, show me what I should do to succeed."

"The first rule is never to buck the trend. If you look at the chart, you can see that market's long-term trend is up, which means that as a long-term investor you could continue to stay invested."

"But how do I know what the trend is?" asked Chotu, sounding interested.

"Well, there are a number of ways you could do that. You could look at Swing Charts or construct trend-lines from significant bottoms or tops. In fact, the reason why I said the long-term trend is up is because when I construct a long-term trend-line from the May 2004 low, the market has continued to stay above it."

"What else do you learn from this chart?" asked Chotu.

"This bull run can be broken down into three phases. The first phase is from May 2003 to January 2004. The second phase started in May 2004 after the defeat of the NDA Government and culminated in May 2006. The third phase commenced in June 2006 and completed its run in February 2007. So what you need to understand is that the market does not go up or down in a straight line. The main trend is always interrupted by movements against it which are called corrections."

"What else can you teach me?" Chotu asked eagerly.

"Trading involves not only good analytical skills but also those of money and risk management. I do not mean to open a sensitive wound, but you would never listen when I kept telling you not to start off with a big account. Zero to hero is a long journey, but hero to zero takes very little time. One of the reasons for your downfall was because you wanted to impress your broker and your trading friends that you were a `big trader'. Remember that for making big money in the market, you do not need big money but a lot of skill — in knowing when to trade, how much to trade and when to lock in your profits."

"Look at Abhishek. He is a chip off the old block. He did not wait for his father to ask him `Kya Aishwariya ko lock karoon'? Smart traders are like that — they take their profits and run."

Chotu's next question, however, elicited no response from the seasoned Motu. "So, can we say that the Indian cricket team's long-term trend is up and that this is only a correction?"


Developing a Trading Plan By Louise Bedford

Money is made as a by-product of following a sound trading plan, and adhering to the principles of money management. If you end up losing a significant proportion of your trading capital due to greed and ignorance, you can no longer trade, and you are out of the game.

What to Include

Your plan must cover some basic issues such as your trading goals and objectives, which accounting structure from which to trade, and how you will handle your positions when you go on holidays. A trading plan must also cover 3 essential areas:

* Entry
* Exit
* Position Sizing

Entry

Decide whether to use fundamental or technical analysis methods to trigger your entry into a position. There is no room for gut-feel in the markets when you are starting out. Over time, you may develop an inkling that a trade will work out well, but this will take many years of successful trading. When experienced traders talk about a ‘gut-feel’, it often means that they have internalised many of the indicators that imply an enduring trend, after years of honing their skills. Trading is about making money. It is not about feeling right. Stop trusting your gut feelings. Traders can only afford to trust their trading plans.

Develop a scientific process for analysing signals, and do not let your emotions dictate your trading habits. You need to define your signal in words so that another trader unfamiliar with your technique can duplicate your strategy. If it’s not duplicatable, it’s not a system.

Exit

Before you place your order, you must decide on where you will exit. I advocate that you use a stop loss to capture your profits and avoid large losses. There are four main ways to set a stop loss:

  • Pattern based stop loss traders will exit trades if the share breaks downwards through a trend-line or a significant line of support.
  • Technical indicators can be used as a stop. A dead cross of two moving averages may trigger an exit.
  • Percent drawdown or retracement methods suggest that if the instrument drops in value by a set percentage eg. 7%, then an exit should be made.
  • Volatility based stops rely on significant changes in volatility past a pre-defined level in order to trigger an exit.

To exit a position in the sharemarket, you can choose to implement one of these types of stops or even a hybrid of any of these methods. Derivatives can use all of these types of stops and more. If you are unfamiliar with any of these techniques, it is essential that you research them to find out the most appropriate stop for your own requirements.

Position Sizing

The key to managing risk is to position size correctly. Buy fewer shares and allow the price action room to move if conditions have become lumpy. Seek risk by buying more shares when in profit, or if conditions are more stable. There are many ways to correctly gauge your position size according to sound risk and money management principles. Whichever method you follow, make it explicit by writing it in your trading plan.


Louise Bedford (www.tradingsecrets.com.au) is a full-time private trader and author of The Secret of Writing Options, The Secret of Candlestick Charting and Trading Secrets. Her new book Charting Secrets has just been released.

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