Growth to turn around in six month: Ahluwalia

India's economic growth is expected to turn around in about six months, said Montek Singh Ahluwalia, deputy chairman of the Planning Commission. "We can bring GDP back to 9% by the end of 12th Plan," he told reporters at a banking conference on Monday.

India's finance minister P Chidambaram called on Saturday for the country's central bank to take "calibrated risks" to support the struggling economy as a reciprocal measure to the government's fiscal efforts, and said the country's growth has bottomed out. Ahluwalia sees current account gap close to 3% of the GDP over the next five years. He says the current account gap is high as imports remain strong.

However, he expects gold imports to fall to "normal levels". He sees India April-September GDP at 5.5% and October-March growth at 6%. "The economic deceleration has been arrested," said Ahluwalia. 

India's industrial output rose modestly in August, but not enough to end a long slump in Asia's third-largest economy, while inflation slowed, improving the case for a cut in interest rates that both businessmen and politicians have been pleading for.

Ahluwalia says the major supply constraint for growth is infrastructure bottlenecks. He believes India can support 8.2 percent growth if it can finance current account deficit at 3 percent of the GDP. 

India's current account deficit fell to USD 16.55 billion in the June quarter, down from an all-time high of USD 21.76 billion in the March quarter, and also below the USD 17.54 billion deficit posted in the June quarter last year.

Increasing RoCE: a best senario

We always look to Return on Assets and Return on Equity to gauge company’s financial performance. Return on Capital Employed (RoCE) is a measure of how gainfully a company is able to deploy or use its capital. A company which can generate higher profits from a lower capital base will always be better off compared to a firm which needs higher capital to generate the same level of profit. Investors always prefer stocks which have low risk-reward ratio similarly a company with higher RoCE will be preferred over a company with a lower RoCE. This fact can see in most leading FMCG companies which have consistently outperformed the market.

It has been seen that the expansion of RoCE generally leads to the expansion of price-to-earnings ratio (P/E). Thus, an investor benefits on two counts. One is through increase in earnings and second is by expansion of P/E. On the other hand an investor would avoid stocks to which have falling RoCE. Though RoCE gives best measure of company’s profitability, one should not consider only RoCE for stock selection criteria because many other factors affect company’s profitability.

Rising RoCE lead down by two possibilities; one is the company is reducing its capital base by higher payout with same level of profits and second is the company’s profit is increasing super normally with same level of capital. Both of the scenarios will result in to increase in RoCE.

In reverse case the companies’ price which has falling RoCE has crashed significantly. I have also attached list of companies which has falling RoCE. Most of the company’s price fell significantly during last three years.

Here we have applied the same parameters, i.e. increasing RoCE since last 3 years, on BSE 500. There are total 41 companies which have rising RoCE. Out of 41 we have selected top 15 companies which reported highest RoCE expansion. We have also calculated the return if we would have invested in these stocks before 3 years.

Top 15 Companies

imageanchor="1" style="margin-left: 1em; margin-right: 1em;">

Cera Sanitaryware Q2 net up 44%

Cera Sanitaryware Ltd, bathroom solutions provider and India’s third largest player in sanitaryware products, on Wednesday said it has posted a 44 per cent increase in net profit and 52 per cent increase in top line in the second quarter of 2012-13 ended September 30, as compared to the corresponding period in the last financial year.

While the net income from operations was Rs 111.38 crore (Rs 73.28 crore), net profit stood at Rs 11.02 crore (Rs 7.65 crore), Vikram Somany, Chairman and Managing Director, said here. The increase in business was due to increased demand.

 

With a CAGR of 25 per cent over the last five years, the company is expecting to increase its turnover from Rs 319 crore in 2011-12 to nearly Rs 500 crore this fiscal, he said.

 

On Wednesday, the company’s share price at the BSE closed 0.01 per cent up at Rs 363.85.

Cera Sanitaryware has also embarked upon a three-year rolling plan to invest Rs 150 crore to expand its current capacity at the Kadi (Mehsana, Gujarat) plant for sanitaryware products from the existing two million pieces to 2.7 million pieces by January 2013, scalable up to three million pieces.

 

The company is targeting first-year sales of Rs 20 crore in the tiles business and Rs 60 crore next year with the recent launch of high-definition digital wall tiles with matching floor tiles, besides digital polished glazed vitrified tiles, said Somany. Cera Sanitaryware will be using natural gas as fuel in the manufacturing process.

 

Focusing on domestic demand, the company is currently producing 55 per cent of its products at its Kadi plant and outsourcing 45 per cent to other parties, including those from China and Oman. The tiles production will also remain outsourced.

Pharma pricing policy: What changes are likely to be made?

The Cabinet is also likely to approve the Pharma pricing policy, despite drug experts alleging that there are major loopholes in the pricing of drugs. This reform is expected to make pricing more consumer friendly, but perhaps not in the long run.

Here are the key things to watch out for:

• Cabinet to consider bringing 348 essential drugs under price control
• 348 drugs part of the National List of Essential Medicines
• Total sales in excess of Rs 25,000 cr per year
• Constitute 60% of the total sales
• Cabinet to consider using weighted avg prices of drugs
• Weighted avg prices for drugs with mkt share of 1%

ALLCARGO LOGISTICS

Expansion to Play a Vital Role

COMPANY PROFILE

Allcargo Logistics, an Avashya Group company, is among the leading logistics companies in India. The company offers specialized logistics services across Multimodal Transport Operations, Container Freight Station (CFS) Operations and Project & Engineering Solutions as an integral part of its logistics services.

The company currently operates out of 140 own offices in 65 countries and gets supported by an even larger network of franchisee offices across the world. Allcargo Logistics is among India's largest publicly owned logistics companies.

Allcargo Logistics is worldwide leading player in LCL business. Last year the company acquired two Hong Kong based companies engaged in Non Vessel Owning Common Carrier (NVOCC) business in China and other parts of the eastern region.

Today, Allcargo is among the largest operators in the country with world-class CFS facilities in Jawaharlal Nehru Port Trust (JNPT), Chennai, Mundra and Indore. Allcargo cater to the hinterland of North India through its Inland Container Depots (ICD) at Kheda, Pithampur in Madhya Pradesh and at Dadri, Greater Noida in NCR.

ALLCARGO’S CFS/ICD CAPACITY

Particular	JNPT CFS	JNPT – II CFS	Chennai CFS	Mundra CFS	Kheda ICD	Dadri ICD	Total
Nearest port/rail siding	18 km	18 km	7 km	7 km	3 km	0.3km	12km*
Annual capacity (teu)	144000	200000	145000	48000	40000	75000	652000
Land area (acre)	28	23	24	16	11	10	112
Warehouse area (m2)	11400	22800	14257	12210	3100	5160	68927
*: Weighted average

INVESTMENT  RATIONAL 

• Allcargo is world leader in LCL forwarding. It also has a great network spanning world over for NVOCC. Going forward, the company is expanding in segments like ship owning which will help the company’s Multimodal Transport Operations. We observe that the company has maintained top line growth of 25% since last four years and we expect it will maintain same growth in coming years led by  the ramp up in the project division and the commissioning of the additional 100,000 TEUs CFS capacity near JNPT.
• Expanding CFS capacity at JNPT to boost growth: With the 2nd CFS near JNPT getting commissioned in 2QFY13, AGLL’s Mumbai CFS capacity will rise to 2.44 lk TEUs. This would boost company’s share at JNPT upwards from the current 7%
• Project order book provides revenue visibility : The Engineering solution segment possesses order book of Rs, 300 cr. which provides revenue visibility for the next three to five quarters.
• Currently the company is trading  at 7x of its earning multiple at Rs. 130. We expect the company to report EPS growth of 30% during FY13 and FY14  to Rs. 26 and Rs. 33. We recommend Buy on Allcargo at CMP with price target of Rs. 165 for the time horizon of 12-15 months.

 

Price Information
Latest Price (Rs)	135
1 Year Price Var%	-2.76	Key Ratio
52 Week High (Rs)	156	Latest EPS (Rs)	17.48
52 Week Low (Rs)	109	TTM PE (x)	7.74
Beta	0.48	Price/BV(x)	1.13
Face Value (Rs)	2	Dividend Yield%	1.15
Industry PE	13.38	MCap/TTM Sales(x)	0.51
Market Cap(Rs Cr.)	1725	Book Value (Rs)	119.8

 

Financial Highlights (Consolidated)				(Rs. in Crore)
Description	201203	201012	200912	200812	200712
Equity Paid Up	26	26	25	22	20
Reserve	1463	1154	954	558	448
Total Debt	768	378	204	344	126
Gross Block	2153	1382	924	708	558
Net Sales	4271	2863	2061	2314	1613
PBIDT	574	298	247	230	147
PAT	298	176	141	122	86
Dividend %	75	150	50	25	50
Adj. EPS(Rs)	21.86	12.71	10.41	9.63	7.56
Adj. Book Value (Rs)	114	90	78	52	46
Quarter on Quarter (Consolidated)				(Rs. in Crore)
Particulars	201206		201203		YoY %
Net Sales	975		854		14.18
Total Expenditure	862		752		14.66
PBIDT (Excl OI)	113		103		10.69
PAT	59		69		-14.54
PBIDTM% (Excl OI)	11.64		12		-3
PBIDTM%	12.12		13.14		-7.76
PATM%	6.06		8.09		-25.09
Adj. EPS(Rs)	4.26		5.09		-16.31

Peer Group Comparison (Consolidated)								(Rs. in Crore)
Company Name	Year End	Net Sales	PBIDT	PAT	EPS(Rs)	PBIDTM%	PATM%	ROCE%	ROE%
Allcargo Logistics	201203	4271	574	298	21.86	13.43	6.97	22.7	22.34
Arshiya Internatl.	201203	1057	279	121	20.53	26.41	11.42	10.06	15.47
Gateway Distriparks	201203	821	264	136	12.19	32.16	16.51	16.07	18.92