Stock idea:-(September 14,2012)
Story:SpiceJet is a low-cost airline headquartered in Chennai.It began service in May 2005 and as on date, it is India's third largest airline in terms of market share ahead of Air India, Kingfisher Airlines and GoAir.SpiceJet operates more than 284 daily flights to 34 Indian cities and 3 international destinations.Along with passenger services, SpiceJet also offers cargo services on the same flight. The service is available on flights connecting Ahmedabad, Agartala, Bagdogra, Bangalore, Chennai, Coimbatore, Delhi, Goa, Guwahati, Hyderabad, Jaipur, Kochi, Kolkata, Madurai, Mumbai, Pune and Visakhapatnam. Between 2 to 3.5 tons of cargo is ferried on each flight ensuring maximum utilization of the aircraft.The Cabinet Committee on Economic Affairs on Friday relaxed norms for foreign direct investment in the aviation sector, allowing international airlines to invest in domestic peers.This will open up a wide range of opportunities for both Indian carriers and foreign carriers who wish to participate in the strong growth potential for Civil Aviation in the Country.Allowing 49 percent stake to foreign airlines to invest in civil aviation will bring in much needed capital into the Airlines industry thereby enabling healthy re-capitalization of airline companies, promoting vital connectivity and bringing benefits to all stakeholders including banks.The move is most positive for SpiceJet as its debt levels are low(hardly 500crs).The company is already in talks with foreign players.With an eye on the increasing demand, SpiceJet has lined up significant expansion plans, the major focus of which is towards Tier-II and Tier-III cities where air traffic is expected to grow faster than bigger cities in the country.SpiceJet is presently having a fleet of 34 Boeing aircraft and 7 Bombardier aircraft.It further plans to add 3 Boeing and 4 Bombardier aircraft by the end of the present fiscal.Next year the company plans to further strengthen its capacity by adding 5 more Boeing aircraft and couple of Bombardiers. By the end of FY2014, the total tally would be 41 Boeings and 15 Bombardiers, as per the current expansion plans.The company has started this financial year on a sparkling note.SpiceJet made a turnaround into profits, after five consecutive quarters of losses.SpiceJet reported net profit to Rs 56.15 crore in the quarter ended June 2012 as against net loss of Rs 71.96 crore during the previous quarter ended June 2011. Sales rose 51.14% to Rs 1406.74 crore in the quarter ended June 2012 as against Rs 930.76 crore during the previous quarter ended June 2011.Number of passengers carried rose by 26%, while average revenue per passenger rose by 24%. Seat factor is up by 1.4% to reach 80.3%.While all these metrics are comforting to the airline industry, SpiceJet also exhibited better competitiveness by increasing its market share by 1.5% to reach 18.6% during Q1.The company's fuel import has just recently started which shall further boost its numbers in the coming quarters.I expect the company’s revenues to post a growth of 27 odd percent CAGR to Rs6,510cr over FY201214.The industry is witnessing a structural change, where airline companies have increased their ticket prices and competition has reduced a lot after the kingfisher debacle.Load factors have also been improving for all airlines post Kingfisher’s capacity reduction.SpiceJet should report 80-82%+ load factor in coming quarters with consistent bettering numbers.SpiceJet with changing times recently witnessed a large buy of 25 lakh shares at 31rs per share by Rare Enterprises, the investment company of celebrity investor, Rakesh Jhunjhunwala.Spicejet is also backed by other Large institutional investors which includes the likes of Reliance Capital Trustee Company, Ewart Investments, Sundaram Mutual Fund, SBI Magnum, & College Retirement Equities Fund.To me the worst is over for the counter and investors betting on it now got hardly anything to loose.Another comforting factor which provides a lot of confidence stems from the fact that, "at a time when Kingfisher has not paid salary for months and Air India is also struggling on that front,SpiceJet has recently given its employees hike of between 5% and 10%".Going by the 1st quarter trend it should conservatively report an EPS of at least 5rs which gives a forward PE multiple of just 7.In an industry which is reeling under severe losses with some peers about to shut down ,spicejet's performance is something really to boast of.A multiple of 9 odd gives you your target price.
Stock idea:- (July 7,2012)
Scripscan:Omkar Speciality Chemicals Ltd
Story:Omkar Speciality Chemicals is involved in the production of speciality chemicals and pharma intermediates. Omkar manufactures a range of organic, inorganic and organo inorganic intermediates. The inorganic intermediates include Molybdenum derivatives, Selenium derivatives, Iodine derivatives, Cobalt derivatives, Bismuth & Tungsten derivatives and the organic intermediates include Tartaric acid derivatives and other intermediates. Omkar Specialty is a unique play on pharmaceutical intermediates & speciality chemicals that find application in healthcare, glass, poultry feed, water treatment and agrochemicals among others.It derives major chunk of its revenue from domestic operation, with Cipla, Ranbaxy, Glenmark, Biocon and Dr Reddy’s being its most vital customers in pharmaceuticals segment.Its other prominent customers in chemicals segment are Clariant-UK, Asahi India Glass.The company has been able to uphold strong relation with its client by supplying products of highest quality.It is thus well positioned to take a leap into the domestic territory as a force to reckon with in the derivatives of iodine, molybdenum,selenium, cobalt and tartaric acid, which are primarily pharmaceutical intermediates. With such strong customer base, the reputation and stature of being a specialty chemicals supplier has grown over the years, which will assist in deriving more cream level clientele.As can be seen,Omkar is doing all the required things to catapult itself in the top global league.The company has added new 1,000 tonne of capacity.It also recently acquired a company in Ratnagiri with an installed capacity of 2,800 tonne per annum. This capacity will begin commercial operations from this month itself and is expected to generate Rs 50 crore of turnover in the coming fiscal.Its badlapur unit going forward should also witness fresh capacity addition to the tune of 1,800 tonne.Its product portfolio comprise of more than 80 products and with the ongoing capacity expansion,I expect net profits to grow at a CAGR of more than 60% over the next two years.The company is also venturing into the manufacturing of APIs with application in high growth end therapeutic markets like HIV &oncology. It is indigenously developing new chemical processes of manufacturing these products with an endeavour to make them cost effectual and environmental friendly.Venturing into API would ensure future growth for the company.Further the company will captively consume its pharmaceutical intermediates for manufacturing its developed API products. It will be a significant growth driver for the company as currently it is providing only intermediates and moving into API will provide higher value addition.The company is in a growth stage and has been clocking a compounded annual growth rate of over 35% in the last five years.Once the new capacities gets operational it would be prudent to expect this company being a 450-500 crs company in 2014-15 with margins of 11-12% at the net level.Management is competent and seems committed to make lot of wealth for the stakeholders.Pravin Herlekar,the Chairman and Managing Director of the company who has vast experience in the field is a Bachelor of technology in Chemical Engineering from the Indian Institute of Technology,Bombay, and is a post graduate in management studies from the Mumbai University.At present prices it quotes at less than 6 times its expected EPS of 13rs for fy13.The company appears to have a robust business model with growing revenues and margins.Assigning a moderate PE of 10 times helps me in arriving to a figure of 130rs which is 75% higher than the present market price.Go for it members.
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