12 April 2013

Equities-- Sustainability missing… Anand Rathi Equities


Sustainability missing .

·        NIFTY (5495), Nifty after making fancy high of 6111(27 Month high) on 29th January2013 has corrected till 5487 almost 10% from recent high. Nifty has closed below 200DMA 5645 while 200 Weekly M.A 5329 would form next support.

·        SENSEX (18226) has corrected till 18206 and strength is lacking and till Gap-down(19383-19378) is not crossed Month of April & May 2013 could see some pressure on overall market as we ahead towards result season and Budget session of parliament restarting 22nd April.


Pick Of the month - NATCO PHARMA

·        Revenue distribution - Domestic formulations 40%, API's 28%, exports formulation 13% and others 19%.
·         Recent Supreme Court ruling on Glivec case is favourable for Natco as Natco's sales from this product is ~`250m annually.
·        Strong growth continues in API business and export formulation. Change in revenue mix (a higher proportion from high margin API business) is also contributing to the bottom line as well.
·         API business growth is seen due to increased supply of niche category APIs to domestic & export markets and export formulation is led by recently-announced Lansoprazole approval (a prescription product).
·         Successful monetization of para IV opportunities (Lansorazole OTC, Revlimid, Tamiflu, Copaxone etc) would provide substantial performance.
·         This will further be reflected in improved ROCE to 16.6% by FY15  and drop in DE to 0.2 x in the same period.
·         The stock trades at valuations of 15x FY14e and 12.7x FY15e earnings.

Picks of the Last month
Reco Price
High after Reco
% returns
Last month Pick



Rallis India (March 2013)
126
130.5
3.57
Cummins India (Feb 2013)
502
518.5
3.29
LIC Housing (Jan 2013)
289
290.45
0.50
Sun Pharmaceuticals Inds (Dec)
715
887
24.06
ING Vysysa Bank (Nov)
471
607
28.87
BASF (Oct)
665
781
17.44
Tata coffee (Sep)
993
1673.9
68.57
Bayer Cropscience (Aug)
922
1341
45.44
This month Pick


Natco Pharma (April 2013)
444






Thanks & Regards

--