Diwali 2012: Five stocks that can make you rich! :rediff

A look at a few good stocks in Indian markets whose dividend yield is as good as or even higher than interest rate received by your bank savings account.

Dividend is your share of the annual or quarterly profits that a company has declared over a period of time. Dividends are regular payments made by companies to their shareholders and are considered tax-free in the hand of shareholders in India. When you purchase stocks for investment and are shareholder of a given company, the company can either pay part of their annual profits to you in the form of regular dividends, or the profits can be reinvested in the company's business. Typically, it is seen that companies willing to share their profits with their shareholders do well over a period of time, as their stock gets good visibility among investors and is traded at good premium over other stocks.

For retail investors, studies have shown that holding good dividend paying company in your portfolio is a good strategy. Gains made by yearly or quarterly dividends slowly accumulate to a sizeable amount over the years. Investors can treat dividends as a source of income, or can even reinvest the dividend received to buy more shares in the given business. Hence investors can improve their ownership in the business and benefit significantly over a period of time.

For investors who want to benefit from dividend payments, there are a few dates you need to be aware of regarding dividends declarations.

Rakesh Jhunjhunwala on Investing in markets

Mahindra Finance ‐ Momentum sustaining; vals reasonable 􀂄 :: Prabhudas Lilladher,

Mahindra Finance ‐ Momentum sustaining; vals reasonable
􀂄 Growth going strong; FY14 could be another strong year: MMFS has been
reporting better-than-expected growth of ~35% YoY driven by all segments excl.
tractors as Mahindra continues to add new OEMs and aid in their rural sales
financing. We believe Congress despite tight fiscal situation will continue rural
spending next year as it will be the pre-election year and thus, volumes are
expected to remain strong in FY14 as well.
􀂄 Fixed rate book ‐ Margins to inch up: MMFS's margins have been inching down
as funding costs increased over last 4-6 quarters as MMFS did not pass on the
entire cost hike to consumers. With wholesale rates easing and a completely
fixed rate book, we believe margins for MMFS will bounce back over the next 3-
4 quarters.
􀂄 Operating leverage improving: MMFS's cost-to-assets have come off as opex
growth remains lower than B/S growth as against their earlier long-term
guidance of 3.5% stable cost/assets, MMFS is currently at ~3.2-3.3% cost/assets
and management has now guided for 3.0% stable cost/assets guidance,
indicating that operating leverage has aided in lowering opex/assets.
􀂄 Asset quality stable; CRISIL feedback suggests limited stress on securitized
pools: Credit costs have held up at relatively lower levels and management
guidance continues to remain sanguine but there is limited primary data to
corroborate management guidance. However, our feedback from CRISIL
(securitization team) suggests that asset quality performance of MMFS's tractor
pools have been satisfactory and there is no unusual build up in overdue
buckets.
􀂄 ROEs relatively high even after assuming a dilution: Sensitivity to Rs8bn
dilution indicates a post dilution ROE of ~20% which remains best in class and
valuations on diluted book at 1.9x FY14 book is undemanding in our view.

Yes Bank – Delivering on re‐rating catalysts 􀂄 :: Prabhudas Lilladher,

Yes Bank – Delivering on re‐rating catalysts
􀂄 NIM outlook positive: Yes Bank's margins have inched up in Q2FY13 to 2.8%
(10bps QoQ) after stagnating at ~2.7% for the last 5-6 quarters. Being largely
wholesale funded, Yes Bank has started to gain from easing rates (CD rates
down 70-80bps and AAA yields down 50bps in last 3mnts) and we believe
margins to continue to gain over the next 2-3 quarters. Loan book will reprice
early as ~90% of Yes Bank's book is either floating in nature or with maturity of
<12 6-7="6-7" a="a" book="book" built="built" however="however" investment="investment" is="is" large="large" last="last" months.="months." months="months" over="over" p="p">largely fixed in nature and will prevent asset yields.
􀂄 Underlying liability and fee income momentum strong: (1) Yes Bank's
momentum on SA accretion has remained the strongest of banks which
increased SA rates - Higher SA rate offer has led to significant increase in ticket
size (2x since SA de-reg). Though interest rate sensitivity will remain high for
Yes's SA franchise, the management has guided to keeping SA rates relatively
high in the medium term. (2) Fee income momentum also continues to remain
strong despite moderating B/S growth and is driven by all round performance
rather than deal related corporate fees/treasury.
􀂄 Asset quality comfortable despite some exposure to stress accounts: Q2
highlights Yes Bank's superior credit underwriting as this bank was the only bank
to recover some loans from Deccan due to superior collateral structures. Credit
costs have remained at just ~30bps despite Yes providing Rs0.6bn for their
Deccan exposure. Yes has exposure to some stressed accounts like Suzlon
(Rs2bn) but we believe higher credit costs assumptions factor these stress.
􀂄 Valuations reasonable; ROEs high even on diluted basis: Yes generates ~22-
23% ROEs which is among the highest in the industry and valuations on a PE
basis is extremely reasonable for a bank with negligible thermal power
exposure. An impending dilution will be ~15% book accretive leading to
favorable valuations of 1.88 on FY14 book without denting ROEs <18-19 p="p">

IRB Infrastructure Is The Story Over ? :: Philip Capital

IRB Infrastructure reported +14% YoY growth in topline (Rs8.45bn) and +18%
YoY growth in Operating Profit (Rs3.8bn), in‐line with our and consensus
estimates. The numbers however, were better than our and street expectation at
the PAT level (Rs1.21bn, +10% YoY), mainly due to lower than expected interest
expense (FX losses being capitalized and refinancing of debt for Bharuch‐Surat
project). While the EPC division reported robust execution (+18% YoY), traffic
growth at all major projects remained muted. Overall, there were no major
surprises, and the results were along expected lines.

Worst is behind for Sun TV Network:: Centrum

Worst is behind
Sun TV Network posted 4%YoY decline in revenues on the back of de-growth in
analog subscription revenues and the movies business. However, ad revenue
growth was at 4% and management expects this to turn double digit going
forward. Digitisation in Chennai will help the company grow its DTH and analog
subscription revenues at a faster pace. We have lowered our estimates marginally
but maintain BUY rating on the stock.
Q2FY13 marginally below expectations: Revenues de-grew by 4% YoY to
Rs4333mn on the back of 28% de-growth in analog subscription revenues and no
revenues form movies business. Operating profit was down 10% YoY to Rs3290mn
as margins contracted by 506bps. Profitability was down by 15.8%YoY to
Rs1517mn, 12% below expectations.
Worst is behind for advertising: Advertisement revenues grew by mere 4%YoY
during the quarter on following the economic slowdown. Management believes
that sectors such as FMCG, mobile handsets, consumer durables continue to do
well while BFSI remains a laggard. It remains optimistic of double digit ad growth
for coming quarters and is confident that the worst was behind as more than 55-
60% of the revenues of the company come from the FMCG sector, which has
increased spending. We have modeled 8.5% growth for FY13 and 15% for FY14E.
Subscription revenues to grow: On a sequential basis analog subscription
revenues grew by 13% but declined by 28% YoY. Post digitization in Chennai and
from Phase-II in key cities we expect a healthy growth rate. Also, the company
plans to become a pay channel in the city of Chennai which could further spurt
revenues. On the back of Phase-I in digitisation, management expects DTH
revenues to grow at a healthy rate as MSO has not been able to meet the demand
for STBs. Hence the DTH offtake has increased by 3x from 350 connections/day to
more than 1000/day. This will help the company increase DTH revenues as the
ARPU form this is Rs38 currently. International subscription revenues grew by
44%YoY on the back of currency gain and increase in reach and deeper
penetration.

Golden period of stock market still ahead of us: Rakesh Jhunjhunwala in ET

In an interview with Nargis Fakhri on ET Now, Big Bull Rahesh Jhunjhunwala shares his views on market and his success story as an investor. Excerpts:

Nargis Fakhri: I will start with asking you how did you become the most successful investor?

Rakesh Jhunjhunwala: God's grace and elders' blessings.

Nargis Fakhri: So I heard that you started off with a small amount of money and then you created such a massive amount. Do you really think that was God's grace or do you think that you studied a lot?

Rakesh Jhunjhunwala: It could not have come without hard work and ambition; I would say the ability to face failure and doing things in a rational manner and always using the right means for the ends. I believe I may not get my hands where I should never change my means and finally God's grace and elders' blessings.

Nargis Fakhri: Do you have an obsession with money?

Rakesh Jhunjhunwala: I do not think so because I am essentially a middle class person and I have far less wealth than people think, but far more than I need. I have a very simple wife. Only the hunt is more interesting than the kill.

Margin improves Pfizer results Q2FY13: :: Centrum

Margin improves
Pfizer results for Q2FY13 were in line with our expectations. The company
reported 7%YoY decline in revenues, 500bps improvement in EBIDTA margin
and 19%YoY growth in net profit despite lower growth of pharma business.
The sales growth of pharma segment was flat due to slower growth of four
key brands namely: Corex, Becosules, Gelusil and Dolonex. The introduction
of new products in the domestic market is likely to drive growth. We have
revised the rating from Neutral to Buy and maintained the target price at
Rs1,325 (based on 17x FY14E EPS of Rs77.9) with an upside of 16.9%.
Slow domestic growth: Pfizer reported 7%YoY decline in total revenues from
Rs2.90bn to Rs2.69bn due to slower growth of the pharma business and
divestment of AHC business to its 100% subsidiary. The pharma business (89%
of revenues) was flat at Rs2.40bn. AHC revenues were ‘nil’ against Rs326mn.
The services business grew by 60%YoY from Rs177mn to Rs283mn.
Good margin improvement: Pfizer’s EBIDTA margin improved by 500bps
YoY from 17.9% to 22.9% due to overall decline in expenses. Material cost
declined by 140bps from 34.7% to 33.3% of revenues due to the change in
product mix with the absence of AHC products. Personnel cost declined by
50bps YoY from 17.4% to 16.9% due to lower incentives to field staff and
credit of Rs40mn from the retirement scheme. Other expenses declined by
320bps from 30.0% to 26.8% due to lower ad spend and lower new product
launches.

Rakesh Jhunjhunwala's stock picking mantra

Results affected by manufacturing constraints Glaxo SK Pharma’s (GSK) ::: Centrum

Results affected by manufacturing constraints
Glaxo SK Pharma’s (GSK) results for Q3CY12 were below our expectations.
The company reported 10%YoY growth in revenues, 70bps improvement in
EBIDTA margin and 12%YoY growth in net profit. The growth was driven by
vaccines and specialties segments. However, capacity constraints at its
Nashik facility and one of the suppliers of sterile products affected the results.
GSK is a debt-free company with cash/share of Rs201. We expect the growth
momentum to be maintained from new products introduction. We have
lowered our CY12 and CY13 estimates by 5% and 3% respectively. We have a
Buy rating for the scrip with a revised target price of Rs2,393 (based on 24x
CY13E EPS of Rs99.7).
Moderate growth in core business: GSK reported 10%YoY growth in
revenues from Rs6.15bn to Rs6.76bn. The pharma business grew by 11.0%
during the quarter. The company’s vaccines and specialties segments had
good growth. New products introduction is likely to drive future growth.
Margin improved: GSK’s EBIDTA margin improved by 70bps YoY from 29.8%
to 30.5% due to the reduction in other expenses. The company’s material cost
increased by 260bps from 39.5% to 42.1% of revenues due to the rise in
imported raw material cost with the depreciating rupee. GSK’s personnel cost
increased by 30bps from 10.8% to 11.1%. Other expenses declined by 370bps
from 20.0% to 16.3% of revenues due to rationalization measures

Tata Steel Earnings marred by forex losses and initial start‐up costs:: Prabhudas Lilladher

Tata Steel reported Q2FY13 earnings below our expectation on account of higher
than expected costs in domestic operations and weakness in European operations.
We believe that current earnings in domestic operations don’t reflect the normalised
earnings given the high cost in expanded capacity due to instabilisation of facilities,
elevated forex losses and absence of scale benefits. We maintain our ‘Accumulate’
rating, underpinned by strong domestic operations and comfort on valuations.

Kewal Kiran Clothing:: Margins at Comfort, Maintain “BUY” :: Karvy

Margins at Comfort, Maintain “BUY”
Kewal Kiran Clothing’s (KKCL) sales, EBITDA and net income declined by
9%, 3% and 4% YoY respectively on delayed festive season
The Company’s top‐line declined 9% YoY to Rs. 916.9 mn during Q2FY13,
while sequential growth was 61.3%. This slippage is due to delayed festive
season YoY, which adversely impacted volume by 11.7%. We expect strong
festive season in H2FY13 to cover up the revenue slippage. EBITDA margin
for the quarter expanded by 164 bps YoY at 27.7% however EBITDA declined
by 3.3% YoY to Rs. 254.4 mn during Q2FY13, due to revenue de‐growth. The
Company’s realization per garment went up by 6.3% to Rs. 791 for Q2FY13.
Net income of the Company declined 3.9% YoY to Rs. 176.5 mn while
sequential growth was much higher at 143%. Net Income Margin improved
by 103 bps YoY to 19.2%.

Special with Rakesh Jhunjhunwala.

Gearing up for Phase-III ENIL :: Centrum

Gearing up for Phase-III
ENIL posted Q2FY13 results marginally below expectations on the back of
10% YoY growth on ad revenues with 2% YoY decline in pricing while
volume rose by 17.5%. Operating profit grew by mere 3.1% on the back of
margins declining by 199bps YoY due to higher marketing cost while PAT
was up by 14% due to high other income as the company has Rs2.6bn of
cash. We maintain our BUY rating on the stock.
Q2FY13 marginally below expectations: The company posted 11.5%
YoY growth in topline to Rs771mn (4.2% above our expectations) on the
back of 10% YoY ad revenue growth. Operating profit was at Rs189mn (up
mere 3.1% YoY) on the back of 199bps drop in margins while PAT was up
by 14%YoY to Rs103mn due to higher other income.
Strong ad growth in challenging environment: ENIL posted 10% YoY
growth in advertising revenue on the back of 17.5% volumes growth while
pricing was down by 2%YoY. Utilisation for legacy 10 stations was at 90%
while for the remaining stations it was best ever 76%. Blended rate was also
best ever at 72%. Sectors such as durables, real estate and auto have
bounced back adding to volume growth. The share of radio advertising in
the revenue was at 73% while the remaining was on the back of 360 degree
approach which the company took up to garner higher revenue from
clients in the form of activation & BTL activities. The management believes
that the advertisement environment has seen an up-tick in the current
festive season and the growth rates could be better going forward.

Financial Services Still remains a story of contrasting halves; Like Yes/MMFS:: Prabhudas Lilladher

Q2FY13 performance continued to remain a story of contrasting halves with
private banks/NBFCs surprising and PSUs disappointing, especially on asset
quality. Despite undemanding valuations and easing rate cycle, we prefer
ICICI/Axis as beta plays as PSU bank managements continue to sound cautious on
asset quality. Yes Bank and MMFS are our top picks among mid‐caps and we also
like old generation private banks despite the run‐up (J&K/ING/Federal).

‘Track the real-time NAV’:: Business Line

If there is sharp rise or fall in the market, the same will be immediately reflected in the traded price of the ETF.

Leading Indian fund houses are today taking to passive products such as Exchange Traded Funds. We spoke to the people who pioneered ETFs in India to understand how they work in the imperfect Indian market.

Excerpts from an interview with Sanjiv Shah, Co-CEO, Goldman Sachs Asset Management (India):

BPCL- Government compensation for H1 leads to profitability in Q2:: Centrum

Government compensation for H1 leads to
profitability in Q2
Government compensation of Rs300bn for the under-recoveries incurred
during H1FY13 led to profitability of all OMCs including BPCL. The
company bettered its Q2 operational performance with US$6.4/bbl in
GRMs and higher throughput of 5.94mmt. Bina refinery throughput was
lower at 1.0mmt due to operational issues but GRMs remained healthy at
US$7.7/bbl. With the revision in petrol prices during Q2, the company has
stopped incurring any losses on petrol. Although, BPCL reported PAT of
Rs50.3bn in Q2, under-recoveries’ absorption of Rs61.3bn during H1 led
to a loss Rs38.0bn for H1FY13. We like BPCL due to its E&P success and
hence maintain our ‘Buy’ rating on the stock.
Lower market sales yet rupee depreciation leads to higher revenues:
BPCL’s revenues jumped by 34.5% YoY at Rs568.9bn backed by 10.4%
increase in market sales at 7.8mmt and higher product prices due to
rupee depreciation. Throughput also inched up 6.5% YoY and 0.5% QoQ
at 5.9mmt.
Forex and inventory gains further support profitability: BPCL’s
operational performance was better with average GRMs of US$6.4/bbl in
Q2 and US$4.6/bbl in H1. The company had inventory gains of Rs4.4bn
while favourable exchange rate led to Rs11.7bn in forex gains. Upstream
companies offered Rs36.2bn in discounts to BPCL while government
compensation for H1FY13 was at Rs72.4bn which led to BPCL posting PAT
of Rs50.3bn. However, due to absorption of Rs61.3bn in under-recoveries
during H1, the company incurred a loss of Rs38.0bn during H1FY13. The
company holds a debt of Rs256.0bn of which over 80% is foreign currency
debt. BPCL also holds oil bonds of Rs64.8bn.

United Spirits:: Big re-rating on the cards; maintain BUY, TP Rs 2,100 :: Religare research

Big re-rating on the cards; maintain BUY, TP Rs 2,100
Diageo PLC has acquired a controlling stake (27.4%) in UNSP for Rs 1,440/sh, which is a significant positive for minority shareholders. UNSP is likely to receive a cash infusion of Rs 33bn, which would improve its capital structure as well as margin profile in the medium to long term through premiumisation and operational efficiencies. We upgrade FY14/FY15 earnings by ~50% each and maintain BUY with a revised Septeber’13 TP of Rs 2,100 (30x Sep’14 EPS, 54% upside) from Rs 750 earlier.

Tough times continue, maintain sell Tata Steel :: Centrum

Tough times continue, maintain sell
Tata Steel reported consolidated PAT loss of ~Rs3.6bn as performance across operations
worsened on account of severe realisations drop amidst demand crunch. Consolidated
EBITDA dropped ~32% QoQ and stood at Rs23bn (margin of 6.8%, down by 330 bps QoQ) as
domestic operations witnessed sharp fall of 5.8% in sequential realisations and continued to
see higher operational costs resulting in standalone EBITDA margin of 27.9%, the lowest in
the past 14 qtrs. We expect the sequential fall in realizations to continue albeit at a lower clip
and expect overall profitability to remain under pressure going forward. We revise our
estimates lower further and remain well below consensus with our continued negative stance
on the European operations, lower margin profile in domestic operations on reduced
backward integration post expansion and high interest costs on account of the large debt
pile. We maintain sell with a revised lower target price of Rs330.
Standalone results worsen due to sustained higher costs: Domestic sales volume stood at
~1.7MT and realizations dropped by 5.8% QoQ on account of pressure on domestic demand,
high imports and falling global steel prices. Costs remained high on power & fuel, freight and
other expenses which led to lowest EBITDA/tonne of ~Rs14500 in standalone business since
Q3FY10.
Margin pressure across operations: Cons. EBITDA stood at ~Rs23bn (down by ~32% QoQ
and 16% YoY) with a margin of 6.8% (well below our expectation of 9.1%). Margin pressure
was witnessed across operations with domestic operations having a margin of 27.9%
(EBITDA/tonne of ~US$263), European operations reported negative EBITDA/tonne of ~US$2
and South-East Asian operations had a margin of 0.6% (EBITDA/tonne of ~US$5/tonne). This
was mainly due to the sharp fall in realizations and we see realizations in Europe and domestic
markets remaining under pressure in H2FY13 on account of slow industrial activity and
lacklustre demand, lower raw material prices and import pressure from China & CIS markets.

Volumes strong but e-auction realizations dip and fuel costs escalate Coal India’s (CIL) :: Centrum

Volumes strong but e-auction realizations dip and fuel costs escalate
Coal India’s (CIL) operational performance was below our estimates with EBITDA at
~Rs28.6bn (our est. of Rs34.5bn) on account of sharp fall in e-auction realizations (down
by ~11% QoQ and premium over raw FSA coal ) and higher fuel costs (up by ~9% QoQ).
CIL continues to see improvement in sales volumes (up by 7% in H1FY13) with better
railway rake availability (170 rakes/day in H1FY13, up by 10.4% YoY) and strong
domestic demand. CIL announced changes to the new FSAs (80% qty trigger) with
domestic/import supply split of 65%/15% and penalties below 65% domestic supply
ranging from 5%-40% and imported coal to be supplied at cost plus basis. We see
robust volume growth ahead but revise our realizations and EBITDA assumptions lower
to account for lower e-auction prices and higher fuel costs. Recommend accumulate
with a target price of Rs384.
Volumes remain firm but realizations dip on account of lower premium on eauction
volumes: CIL’s blended realizations stood at Rs1432/tonne, up by 2% YoY but
lower by ~2% QoQ. FSA raw coal realizations remained firm at Rs1287/tonne but eauction
coal realizations fell to Rs2282/tonne (lower by ~11% QoQ and down for second
successive quarter on account of cheaper import option for buyers). Overall volumes
went up by 8.5% YoY to ~102 MT and e-auction volumes stood at 11.7 MT (11.5% share).
EBITDA margin lower due to higher wage & fuel costs: EBITDA stood at Rs28.6bn
with margin of 19.6% (Centrum est. 23.2%) as wage cost went up by 6.6% QoQ to
Rs65.4bn and power & fuel costs also increased by ~9% QoQ due to diesel price hike.
We expect wage cost for FY13E at Rs256bn.

2Q beats but challenges persist; Maintain Neutral Ashok Leyland :: Centrum

2Q beats but challenges persist; Maintain Neutral
Ashok Leyland’s (ALL) 2QFY13 operating results were ahead of our estimates
with EBITDA margins at 10.1% compared to our estimate of 7.8% largely
driven by better than expected realization growth. ASP for the quarter grew
1.3% despite higher contribution from low realization Dost (we believe this
was largely on account of strong export realizations). Based on our
calculations, we believe that domestic realizations have dropped 1.4% during
the quarter. While, we are upgrading our earnings estimates by 9% and 14%
for FY13E and FY14E respectively driven by better performance in 2Q, we
continue to believe that current discounts and negligible rise in fleet
operators’ pricing power suggest weak demand environment for M&HCV
goods segment. We expect the recovery to be gradual for the M&HCV goods
segment over 2HFY13-FY14E and await meaningful signs of recovery in the
investment cycle before re-rating the stock. As a result, we maintain our
Neutral rating on the stock with a revised target price of Rs26.8 in line with
the earnings upgrade.

Tata Motors::JLR momentum to remain strong – BUY ::religare research,

JLR momentum to remain strong – BUY
We state a BUY on TTMT with a TP of Rs 320 (upside 13%). JLR’s volume growth momentum is likely to continue in the next two years propped by new launches and growing strength in the China market (dealership to rise to 130 by year end from 100 currently), in our view. Also, the domestic CV market is close to its bottom – we see a revival in the next two years as rate cycle turns and favourable base effect comes into play. We expect revenue/PAT CAGR to be 15%/18% in FY13E-FY15E. Accumulate on dips.

Rakesh Jhunjhunwala in conversation with Nargis Fakhri - Part 2

Rakesh Jhunjhunwala in conversation with Nargis Fakhri - Part 1

Build a balanced portfolio:: Business Line

If you invest Rs 14,000 a month for 20 years, you would be able to accumulate Rs 2 crore, if the returns are 15 per cent per annum.Go for investments in equity (including mutual funds), debt, gold and real-estate.

I am 25 and have been investing in mutual funds for the last two years through monthly SIPs. My current allocation of Mutual Fund SIP investments is follows:

ICICI Prudential Focused Bluechip Equity - Rs 2,500; HDFC Top 200 - Rs 1,500; UTI Opportunities - Rs 1,500; IDFC Premier Equity Plan A - Rs 2,000; SBI Magnum Emerging Businesses - Rs 2,000; UTI MNC - Rs 1,500; BSL Dynamic Bond – Rs 1,000; Reliance Gold Savings - Rs 1,000; HDFC Balanced – Rs 1,000

I have also been investing a small chunk of my savings in Equities. I wish to retire at 45.

Please suggest how to go about with allocations so as to generate decent and steady returns, given the 20 year time-frame I have set for myself.

Prateek

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Markets closed today!

Enjoy some rest and start trading from tomorrow!!