A New Beginning :2016 Value pick 4

Sometime underrated stock outperforms and our fourth value picks is highly underrated.

Let’s start with our low price high value pick:

Suzlon Energy:

CMP: 21.65(8^th Jan).

From a position of strength, Suzlon has gone through multiple crises over the past five years including debt default. However, it has since taken corrective steps to substantially repair its balance sheet by selling off its German offshore wind arm, Senvion for 1 billion euros and issuing fresh equity worth Rs 1800 crore to Dilip Shanghvi & Associates—a promoter for Sun Pharma. Suzlon can now focus all its energies on new order wins and execution in the domestic market, and is well placed to win back 50 percent market share. Government’s ambitious wind energy target of 60GW by 2022 should help to drive demand for wind equipment

Moreover, Suzlon Group chairman Tulsi Tanti said on Thursday(7th Jan) that the group is looking to enter the solar energy sector in the current financial year . Its evolutionary S97"HT DFIG 2.1MW Wind Turbine with an All"Steel Hybrid Tower has achieved 35% PLF over the last 12 months. The evolutionary product has received encouraging response from customers across segments and reflects in the ~350 MW of orders received. Tulsi Tanti, Chairman, Suzlon Group, said, “The S97- HT DFIG 2.1MW with All Steel Hybrid Tower is a game changer and is the result of our continued focus on investing in next generation technologies. Suzlon endeavors to lower the cost of energy and provide clean and affordable energy for all.”

Suzlon demonstrates buoyant growth in Q2FY16; delivers 227MW with 18% normalised EBITDA margin.

• Sales volume is 64% up Y-o-Y.
• 18% EBITDA margin is highest in last 5 years.
• Order book continues to remain strong with INR 6812 crores.
• Gross debt reduces by 963 crores.

Above all clean energy is next big sector for next 5 years and Suzlon and Inox Wind are the two big players in this sector. For one year prospective Suzlon can move to 35-45 easily.We Suggest to buy this stock for 3 to 5 year horizon to see multi-fold return. 

 Be Smart. Invest Smartly

A New Beginning :2016 Value pick 3

We have already given two value pick for 2016. Please check previous post for that.

Now let’s start with another value pick:

Larsen and Toubro:

CMP: 1239(6^th Jan 16)

     L&T is the biggest player in Construction and heavy engineering. Stock has touched 52-week low which makes it more attractive for investor. In current state L&T is well placed for an earnings recovery and improving RoE on the back of:

•   Management’s decision to change the company’s focus to asset light businesses and unlocking value from its subsidiaries/JVs over the past two years and going forward (real-estate, Dhamra & Kattupalli ports, L&T Finance, L&T Infotech). 
•   A pick-up in execution in long-gestation projects to drive 20% revenue CAGR over FY16-18F in the core E&C business, in our view. Unlike orders in the power equipment sector, we think L&T’s order backlog is only ‘slow-moving’ or even ‘slow to start’ rather than ‘non-moving’ as in the case of BHEL
• Margin recovery as several long-gestation orders reach margin recognition thresholds coupled with tailwinds from the decline in commodity prices.
• With bulk of the problems now behind the company, we expect earnings pick up from FY17F and estimate 35% EPS CAGR for L&T over FY16F-18F.(Source:http://www.financialexpress.com/article/markets/indian-markets/buy-rating-on-larsen-toubro-better-days-lie-ahead-for-lt/184330/)

        L&T is exposed to several levers across business/geographic segments and has emerged as the E&C partner of choice in India, which provides a robust foundation to capitalize on the next leg of the investment cycle. Manufacturing businesses (like Shipyard, Power BTG, Forgings, etc) also present interesting possibilities in the longer term. Many of these businesses are difficult to replicate and LT is strongly positioned as a dominant player.

According to the company, its unexecuted order book stood at an all-time high of INR232,649 crore and represents a 28 per cent growth over the order book at the end of the previous year.

For L&T near-term outlook is weak; but long-term growth story remains intact. One can enter at this level and stay invested for 3-5 years to get good return.

Be Smart. Invest Smartly

A New Beginning :2016 Value pick 2

 In our previous post we have given our first value pick Britannia

 (http://kevaljethi2363.blogspot.in/2016/01/a-new-begining-2016-value-pick-1.html)

Now let’s start with our second value pick:

Ashok Leyland:

 CMP: 88.75 (1th Jan 2015).

    Ashok Leyland’s market capitalization surged 74% in last year to Rs.25,471 CR as of 30 December, reflecting its improved operating performance. Stock raise form 51 level to 88 in last year. Management’s focused approach is paying off in a) market share gains, b) rising ASPs, c) controlled cost, d) working capital reduction, e) significant control on capex and f) debt reduction. Strong volume recovery, coupled with weak commodity prices, would drive significant margin expansion and EPS growth going growth.

  

The sales of medium and heavy commercial vehicles jumped 35.33 percent to 9,758 units in December 2015 as against 7,210 in the same month a year ago, the company said in a recent statement. Ashok Leyland is well poised to reap the benefits of the anticipated sustained uptrend in the domestic CV industry over the next two to three years.  

Recently Ashok Leyland has received orders worth $82 million (approx Rs 521 crore) from Senegal Also $200 million (around Rs 1,331 crore) from the West African country Cote D'Ivoire for the supply 3,600 trucks and buses which was largest contract for this country with any firm in India and also represents the largest such contract till date for the company. "The vehicles include trucks and buses, will be delivered over the next 12 months," the company said.

With healthy order book and good management Ashok Leyland is well placed to outperformed in 2016. Passage of GST bill will be added advantage for company. We can see the stock crossing 140 level in next 12 months.

 Be Smart. Invest Smartly

A New Beginning :2016 Value pick 1

 Hi All ,

A very Happy New Year to all our readers.

New year started and there is lots of hope comes with it in market as well. 2015 is pretty flat year for sensex but some stocks have outperformed and market is full of stock which will outperform coming time.  So we started new series of value picks for 2016.

So let’s start with our first pick:

Britannia Industries Ltd.
CMP: 2991 ( 1 Jan 2016).
On 1 Jan 2015 :  1825

Last year Britannia has given more than 60% return and we believe it will continue to outperform this year as well. 

Few facts that make it clear winner

•   Company is virtually debt free. 
•    Company has good consistent profit growth of 28.38% over 5 years
•   Company has a good return on equity track record: 3 Years ROE 46.22%
•   Sound management like Varun Berry, the former chief executive officer of PepsiCo Foods India
•   Flagship products like Good Day, Tiger, Marie Gold, 50 50 and Milk Bikis etc.

All factors are in favor of Britannia. Hoping GST bill will pass this year which will give new boots to company profit margin.  With all this we suggest our first 2016 pick with year target 4000+. Don’t miss this gem. 

And remember nothing will change in 2016 until you do. Start investing today.

Be Smart. Invest Smartly

Life Insurance: Your first investment towards your family.

      Believe or not but life is uncertain and one must have Life Insurance because you leave not your family. In today’s world no relative will support your family for life time but your Life Insurance does.   Imagine a 35 year old young only earning man left forever with 2 kids and wife and parents behind. Did he earn enough for his kid’s future? Indeed money cannot fill your absence but still it helps your family to survive.

 
One old saying about insurance is that “Buy Insurance when you don’t need it because when you need it you will not get it easily” So buy it as early as possible.

Now question comes which Insurance policly you will buy?

There are mainly two categories of Life Insurance :

A.Term Insurance: Which provide only death benefit , no return on maturity

B.All other: Which provide Death benefit and return on maturity

Now when it comes to buy Insurance most people prefer Money back or endowment plans as they want return from their money. Though insurance is primarily a risk mitigation tool, many people use insurance for the purpose of long term investment. These people buy endowment and money back plans sold by insurance companies. Why it is that insurance is used for investments? There are two reasons for this- 1) Insurance agents mis-sell insurance as they want to get maximum commission and 2) People buying insurance feel it is a good return option along with insurance cover. However, most of traditional insurance products don’t provide returns even close to other traditional investment products like PPF, Bank deposits etc.

How do you know what is the return offered by the insurance product that you have purchased? If you ask a person who has purchased an insurance product about the returns, he will not be able to give answer to this question. So how do you calculate returns offered by the insurance policy? Let me take an example. Suppose you have purchased the following endowment plan:

1. Policy Term 20 years
2.  Premium Payment annual
3.  Premium amount 25000 per year (Assumed)
4.  Sum Assured 5 lakhs
5.  Maturity value (Sum Assured plus Bonus)
6.  Bonus: 3.5 lakhs (Assumed)

 If we calculate premium of 20 years it stand 8.25 lakh while return you get will be 8.5 lakhs. So your return stands around 5.26%. In case of death you will get Sum Assured and Bonus (if any). Does it worth??

 Now take example of Term insurance Plan:

1. Policy Term 30-35 years
2. Annual premium: 6000
3. Sum assured: 50 lakhs.

If we calculate total Premium for 30 year that it will be 1.8 lakhs. By paying 1.8 lakhs over 30 years you secured the future of your family.

People argue that there is no return on term plan where money back policy provides them 6-8% return.

 Let now take another Example to overrule this myth:

Person A: Buys Money back plan with premium 25000 and sum assured of 10 lakhs. He will get assured money back with 7% return on maturity of 20 years.  So after 20 year he will get around 5 lakhs of Sum assured and around 5.9lakhs of interest on it. Sounds good. Wait but what about tax?? Yes mostly this money back police show pre-tax return. One has to pay tax on interest amount. Assuming 10% tax on interest so final interest amount will be around 5.4 lakhs.

Person B: Buys Term Insurance with premium of 5000 and sum assured of 50lakhs on death for 30years. So as compare to Person A person B pay 20thousand less yearly. Now Person B opt PPF account and placed 20thousand yearly in it. So now Person B is paying 1.5lakhs over 30 years with no return. Now what he get from PPF over 20years lets see:

Annually ROI of PPF is around 8.7% which is also compounding so after 20 years   he will get 10.75lakhs which is tax fee also.

Other than PPF, there are many good Mutual Funds which has past record of 10-15% returns annually.

Simply we can say Term Insurance is only insurance that one should opt if you want return there are many other products available with great returns

In conclusion we can say one must not mix Investment and Insurance. Both are different and essential product. One must have both in pocket.



 Be Smart. Invest Smartly