money navigator december 2015

8/20/2019 Money Navigator December 2015

1/20

Wa k e U p C a l l Fr e sh A p pr o a c h

N DA G ove rnme nt

Bihar

Defeat

IntoleranceMoody’sWarning

Political

Stance

mm o d o c a c t e A

1st December-2015 to 31st December-2015 www.jhaveritrade.co

F o r P r i v a t e C i r c u l a t i o n O n l y

Wake Up call andFresh ApproachPg. 1-2

BIHAR

DEFEAT

INTOLERANCEMOODY’S

WARNING

POLIT ICAL

STANCE

Webelieve that Bihar defeat has taken BJP lead NDAaback and this could prove tobe a wake-up call for coming elections aswas NDA’s political stance in Loksabha and Rajyasabha. Although, they have replied back their critics through various reformwithin days of election outcome and have shown their might to fight back. We believe that government has taken fresh approaandstarted to accommodate views of opposition on various reforms, specially on GST, with several opposition parties coming oinopen support.

Chemical & SugarSector UpdatePg. 3-7

WelspuSyntex LPg. 9-12


2/20

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3/20

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From The MD’s Desk

The earning season isoverand the muchdebated Bihar election isout ofway.

Despite of Bihar fiasco, key reforms are being rolled out by the central government. Wehave seen the power sector reforms

in the form of “UDAY”.Wehave also seen theproposedbankruptcy lawwhichmaygoa longway in addressing theproblems

of banking sector. TheGovernment hasaccepted themodificationsproposedin theRealityActby theoppositionparty.

The Government has also seriously attempted to address the concerns of opposition for the proposed GST Act. Without

disturbing the soul of the Act, government has successfully accepted the changes proposed by the states and now all the

statesareonboardandready toacceptandrollout GST.

Surprisinlgy, some FIIs have arranged a meeting with Mr. Rahul Gandhi to convince himabout theurgency andseriousness

to implement GST to boost the economy. FII have sold equities worth ̀ 6,500 Cr. in the month of November indicating their

dissatisfaction for slow reforms, spoiled political atmosphere and muted corporate earnings. FIIs are also adjusting their

equity exposure in the view of weak earning performance and likely rate hike by Fed on December 15th.. Some big bang

reforms in theparliamentsession andexecutiveactions in Cabinet coupled with moderate rate hikeby Fedwill prompt them

tohalt the sellingspree in the Indianmarket.

The international atmosphere is also causing threat to the equity market world over. Any remarkable escalation in the war

like situation will heat the global sentiment and the risk assets in the form of emerging market equity. Any rise in Dollex from

the sentimental level of100 and fall inoil pricesbelow USD 40will affectthe sentiment in the equitymarket.

Technically, Nifty has support zone of 7690-7700 and below it the market may test the recent lowof 7540. The sustainability

of 7850 level may take the market to higher levels. We believe that it is a stock pickers’ market and one should remain

selectivewith mediumto longtermview.

Kamlesh Jhaveri ( MD )

Jhaveri Securities Ltd.

Leave aside Bihar election and watch the reforms and international trend


4/20


I s s u e T h e m e

BIHAR

D EFEAT

INTOLERANCEMOOD Y’S

WA RNI NG

POL I TI CAL

STANCE

Wake Up call and Fresh Approach

1

Bihar election outcome : An opportunity for NDA on both the fronts

The Grand Alliance of JD(U), RJD and Congress routed (defeat) the BJP-led NDA in Bihar and scored two-thirdsmajority in the state election giving Chief Minister Nitish Kumar a third term in Bihar. RJD emerged the leader in theBihar election with 80 seats while JD(U) had 71. Both the parties had contested 101 seats each. Congress won 27

seats out of 41. The BJP-led NDA bagged 58 seats. We believe that the state elections are mostly a depended on localissues and local leader while national issues and central leadership could have little impact on them.

TheBiharelection results give theNDAanopportunity to make strategies for theupcomingstateelections and also embarkon longertermcorrectivemeasures.

However, Bihar election outcome is a clear negative and can slow down the NDA's attempt to strengthen its position in theRajyaSabha.

Initially, it was expected that the Bharatiya Janata Party’s fiasco in the Bihar assembly election may set back thegovernment’s economic reforms agenda. However, NDA government eased foreign direct investment (FDI) norms across15 sectors, including defence, civil aviation and broadcasting to attract overseas funds and boost economic growth whichgivesstrongsignal that theGovernment hasfirm intensions foreconomicgrowthin spite of Bihardefeat.

The government has introduced 7th pay commission. Historically, more funds in the hands of government employeesfollowingpayhikes hasboosted spending on clothing, footwear, consumer durables, vehicles andother products.The SixthPay Commission played a key role in cushioning (Saving) the economy from the Lehman shock as the first payout took

place in October 2008.

However, high lending rates and low capacity utilization are unlikely to change in a hurry. Given this, the expected boost toconsumption demand, as a result of implementation of the Seventh Central Pay Commission is welcome step. Both thesestepshave long term impacton theeconomy.

Some consumption indicatorshave reveled thesign of improvingsuch as :Oil : 17%growth YoYin India’soildemandin October 2015 afterSeptember's15%and3 monthmovingaverage

growth 14%YoY wasthehighest since 2004.

Plastics : strongpick up in plastics demand in India support Napthaconsumption and 54%rise inbitumen YoYmeans

road construction isdoing well.

Auto : 13%/21% rise in 2-wheelers / 4–wheelers sales volumein October.

Power : 11/%9% rise in powerconsumption in Sept./Oct. from prior sub-5%levels.

Retail : Thesecome on theback of general retailstrength reportedbycompanies

Reformist agenda of NDA becomes morestrengthen after Bihar verdict

First sign of recovery– Micro consumption related indicator have started to offtake

Pondicherry

Kerala

Assam

30

140

126

Early 2016

Early 2016

Early 2016

West Bengal

Tamil Nadu

Uttar Pradesh

294

235

403

Mid -2016

Early 2016

2017

State Total Seats Election Due State Total Seats Election Due

Source: Indian Express


5/20


BIHAR

D EFEAT

INTOLERANCEMOOD Y’S

WARNI NG

POL I TI CAL

STANC E

2

Wake Up call and Fresh Approach

Cement : Aftera weak year, October hasdone well.

However, it should take a couple of quarters for the micro growth to catch up with the macros and incorporate results asexports have done very badly, Credit offtake from the banking system has been poor and there is unutilized capacity inthe industry.

Surprise :1 The aggregate Sensex headline profit growth for Q2FY16 came in at 5.3% on a consolidated basis (vs.expectation of 2% ). However, this surprise was entirely driven by a few large one-offs (mainly in Tata Steel and inBharti).

Surprise : 2 Aggregate EBITDAmargins for Sensex companies showed a 70bp expansion on a y-o-y basis. Howeverthis was below expectation of 150bps and was completely led by Oil. Ex-energy EBITDAmargin declined by 100bp, ledbyPharma(300bp) & Metals (180bp).

Surprise : 3 Among Sensex cos, Banks (HDFC Bank, ICICI Bank, SBI), IT (TCS, Infy) lead the growth. On the otherhand, Oil& Gas(GAIL, ONGC),Pharma (Sun Pharma, Lupin)& Industrials (BHEL,L&T)drag down growth.

However, the risks to FY17 earnings estimates have increased post Q2FY16 results on the sluggish weak top line andcontinuedweakdomestic& globalmacroeconomicconditions.

Market is eagerly waiting to conclude two important events in December. First, any positive news from the parliament aswinter session of parliament has started and this session will be more interesting as the government indicated that itiswilling to tweak the constitutional amendment bill to roll out GST to accommodate the views of the opposition. This is thefirst time when govt. hasshownreadiness tohouse viewsof opposition.Moreover, Moody’s hasalso warnedthat a failure to

implement reforms could hamper investment in India on weak global growth. Second, FIIs are also adjusting their equityexposure on likely rate hike by Fed. We expect market to remain range bound in near term and will take cues from wintersession and upcoming Fed rate meeting. Technically, Nifty has major support zone of 7690-7700. Any rise above 7850 willmaytake marketto gohigher levels.

Weak Q2 but had many inherent surprises

Conclusion

Capacity Utilization level for various industr ies (%)

FY10 FY14 FY16E Comments for Current year

92

76

84

79

78

Industry

Steel

Two Wheelers

Passenger Vehicles

Commercial Vehicles

Cement

Touched at all time low

Currently all time low




80

76

73

62

70

Improved YoY

No Improvement YoY

Improved YoY

Improved YoY

No Improvement YoY

Q2 FY16 (YoY Change) (%)

Industry

Source : BSE 500 ; Exclud ing Banks , Financials and MRPL

Net Sales

Total Expenditure

-5.91%

-8.18%

Operating Profit Margin

Net Profit

+202bps

+5.30%

Source: BofAML

Source : Capital Line


6/20


S e c t o r U p d a t e

Indian Chemical Industry“Specialty Chemical”

Among the most diversified industrial sectors, chemicals cover more than 80,000 commercial products and account for 15%of the country’s industrial output. The Indian chemical industry was worth US$ 144 billion in 2014, commanding a 3.3%share in the global chemical market, and isexpected tobe worth US$ 173 billionby 2018, implying a growth rate of 8.0%perannum Basic chemicals and their related products accounts for nearly 2.1% of the GDP, 9.5% of total exports and 8.9% of total imports.

Bas ic Chemicals : Chemicals such as organic and inorganic chemicals, bulk petrochemicals, other chemicalintermediates, plastic resins, synthetic rubber, man-made fibers, dyesandpigments,printing inksarebasicchemicals.

Agro- Chemicals : India is the third largest producer of agrochemicals globally. The market size at US$ 4.2 billion in 2014 isexpected to reach US$ 6.4 billion by 2016. The Indian agrochemicals market is segregated into various segments such asInsecticides andHerbicides

Specialty Chemicals : Specialty chemicals, also known as performance chemicals, are low-volume but high-valuecompounds. Thesechemicalsarederived from basic chemicalsandaresold on thebasisof their functions.

Speciality Chemicals are a group of high value, low volume chemicals formulated for developing/enhancing properties ofspecific products. The customized product requires special technologies, process expertise and understanding of clientneeds, and so the industry typically commands limited competition, yielding higher gross margins and returns than otherchemical sub-segments.

The Global Specialty Chemicals market is growing at a fast pace. According to TechNavio Analysis, the Global Specialty

Chemicals market is expected to grow at a CAGR of 5.16% during the period 2013-2018 and reach US $760.9 billion by2018 (fromUS$619.0billionin 2014).

The key demand drivers for Speciality chemicals are per capita income growth, rising urbanization and infrastructurespending. The per capita chemical consumption for India in most categories of Speciality chemicals (paints, dyes,polymers,home andpersonalcare etc.) is only about 15-20%of theglobalaverage, thus, there isa significant opportunity

forgrowth.

Chemicals can be broadly divided into the following sub-groups

Speciality chemical offers good growth opportunity

Proxy to play consumption as well as infrastructuretheme

3

Outlook: Positive

800

800

400

200

0

5.60%

5.40%

5.20%

5.00%

4.80%

4.60%

4.40%

4.20%2014 2015 2016E 2017E 2018E

5.37%

5.34%

5.35%

4.92%

4.61%619 649

684 720760

Growth RateRevenue (US $ Billion )

Global Speciality Chemicals Market

Source: Company, JSL Research


7/20


The robust demand for Speciality chemicals would be driven by strong growth in end-user industries itself. While the ones

linked to infrastructureareexpected togrow at >15%, theothercategories areexpected togrow at 10-15%

With improving cost competitiveness (with respect to China), favorable IPR framework and strong domestic demand

outlook, India is emerging as a preferred manufacturing destination for Speciality chemicals. China is losing out its edge

over India in chemical manufacturing dueto :

(1) Steep cost inflation (labour costs) (2) Stricter compliance of environmental regulations being enforced in China, while in

India the same had been already in place since past few years; and Chemical exports from India have grown at 22% CAGR

over 2010-14, significantly outpacingtheglobaldemandgrowth (3-4%)and thetrendhascontinuedthrough in 2015 aswell.

To boost domestic production, the government has launched the Draft National Chemical Policy (NCP), which aims to

increase chemical sector’s share in country’s GDP. The policy is expected to help India’s chemicals sector grow and

becomemore competitive as well as place a framework forpromotingsafetyandsecurity of chemical facilities.These steps

are 1) Focus on dependency on imports. 2) NCP aims to make available 20% of the domestic petrochemicals as feedstock

for downstreamchemicalcompanies.

Exports to propel further growth

National Chemical Policy aims to increase theshare of chemical output in India’s GDP

Preferred Stocks

Key end user industries and their expected growth rates

Segment 2012 Size ( US $ Billi on )Expected VolumeGrowth CAGR (%) Segment 2012 Size ( US $ Billion )

Expected VolumeGrowth CAGR (%)

Paint

Construction

Paper Chemicals

Textile

4

0.7

0.5

0.9

15.00

25.00

22.00

11.00

Rubber Chemicals

Industrial Cleaners

Water Chemical

Plastic Additives

0.2

0.2

0.7

1

13.00

19.00

7.00

12.00

Indian Chemical Industry“Specialty Chemical”

4

in 2020E in 2020E

Source: Company

Source: Company, JSL Research

(Note: All figures are of FY15 excluding CAGR figures & CAGR figures are of last three years)

EBITDA (%) APATM (%)CAGR NetSales 3Yrs Debt /Equity

(x) ROCE (%) RONW (%)Company

Name

20.23

13.16

15.73

16.67

23.36

17.49

19.64

13.41

22.91

21.59

22.73

14.91

1.19

0.17

0.56

1.41

16.71

24.87

28.89

11.56

20.54

20.42

26.3

15.88

1.33

2.84

2.03

0.78

15.2

9.93

15.62

18.49

6.2

5.67

8.33

8.46

339.49

36.72

32.13

52.85

(%)

CAGROperatingProfit 3 Yrs

(%)

CAGRNet Profit

3yrs (%)

Total AssetTurnover Ratio

(x)

Cash Flowfrom Operation

( ` in Cr. )

Aarti Inds.

Plastiblends (I)

Adi Finechem

Omkar Spl.Chem.


8/20



Indian Sugar Sector

5

Sugar - Current global perspective

Indian Sugar industry - Current perspective

Govt gives incentives to Indian sugar sector

The world sugar industry is facing some challenging times with selling prices hardly meeting production costs. In 2014-2015, the key sugar producers such as Australia, India, the EU, Central America and Thailand will exceed the production

records of 2012-13, a peak in the world surplus. During 2014-15, global production is `169.40 Mn. MT while global

consumption is `167.10Mn.MT

Currently, The sugar prices have shot up across the world due to the crop failures overseas. Globally, EU is facing its worst

sugar production in more than four decades, pushingdomestic prices higher and spurring a wave of imports by the region’s

refiners. Global tracking agencies have forecast sugar supply to be deficient in 2015-16. The International Sugar

Organization has forecast a deficit of 2.5 million tonnes and the US Department ofAgriculture reckons the shortage will be

3.8 million tones. Moreover, over the long term, a decline in global sugar consumption patterns driven by lifestyle changes

and government health regulationsalsoadd to thepricestress.

India is the second largest producer of sugar in the world, producing around 28 million tons of white plantation sugar per

annum. Called the ‘growth engine’ of the rural economy, the sugar industry is ranked as the second largest agro processing

industry in thecountry.

There has been a steady increase in the Central Governments’ Fair & Remunerative Price (FRP) stipulation for sugarcane

over the years without any corresponding increase in sale price of sugar. The FRP was raised from ` 1700 per tonne in

SugarYear(SY) 2012-13, to` 2,100 in SY2013-14 andfurther to` 2,200 forSY 2014-2015.

The Central Government has given a number of incentives to sugar sector so far to facilitate payment of Cane dues to the

farmers.These incentives areexpected to improve theliquidityposition of theindustry. Thesesteps /measuresinclude:-

Hike in Import duty : Increased the duty on import of sugar from 25% to 40% and abolished the Duty Free import

authorization Scheme (DFIA).

Soft loan Scheme : Schemefor extending softloan to the sugar millsequivalent to the stock valueof 25 lackM.T. @`24000perM.T. to facilitatepayment of Cane dues of thefarmers forthe currentsugarseason2014-15.

Export incentives : The Government has extended the scheme for current sugar season 2014-15 and provided incentive

@ `4000/- per Metric Tons of raw sugar produced and exported up to 30.09.2015 subject to quantitative ceiling of 14.0 Lac

MetricTons.

Financial assistance : Envisaging interest freeloansworth ` 6600 Cr. by bank asadditional workingcapital tosugarmills

World Sugar Production ( In Million MT)

Key Players Brazil CS India EU 27 China Thailand Russia USA Mexico Australia Others

2014-15 32.10 28.10 17.50 10.40 11.30 4.45 7.40 6.00 4.25 48.00

Outlook: Negative

Source: Company


9/20

ICRA expects a declinein thedomestic sugar Production during FY 16

Lower production leads to better realization for domestic sugar manufacturer but turnaround

unlikely

Cyclical factors lead to improvement in realization but key fundamental issues are not touched

Key Financials of somesugar companies

Domesticallyalso, dueto scanty rains, theproduction in thedomestic market is nothigh. Indiansugar producershave hugegodown stocks so prices are likely to surge. According to ICRA Research, India's sugar output is estimated to decline by4.62 percent to 26.8 million tonnes in the 2015-16 marketing year. Due to increase in fair and remunerative price (FRP) of cane and absence of linkage of cane rates to sugar and by-product realizations in the State Advisory Price (SAP) adhering

states, the profitability and debt coverage of sugar mills would continue to be under stress in the near term resulting incontinueddependence ongovernment support toclear cane arrears to farmers.

International sugar prices have gained 30 per cent after a gap of some years, as global output is likely to decline. Brazilian

cane production remains affected by drought conditions and increased ethanol usage is likely to further reduce caneavailability for sugar production. Sugar output in China at 9.3 million tonnes (mt) is likely to be 11 per cent lower than lastyear’s, while the European Union’s production is also down 20 per cent. For India, though it might continue to see surplusstocks, production is expected to decline compared to last year, owing to lower rainfall in Karnataka and Maharashtra. Thelikely fall in output, coupledwith compulsory exports of four mt,might result in a significant decline in closing stocksto7.6mt

thisyearfrom10.1mt in2014-15,says ICRA.

Duetocyclical factors,sugarpriceshave gained.Linking input costs (canepricing) tooutputprices(sugarrealization)will bekeyto improvingindustry profitability. Thekeyfactors that have not touched are:

While all these cyclical factors lead to improvement in realizations, fundamental reforms such as linking procurementprices of cane with sugar prices will play a crucial role for sugar industry. According to experts, sugarcane procurement

prices are not in synchronies with the sugar prices in the country till there is not much improvement in the balance sheet of companies.

Major reform for the industry that is required for sustained profitability is de-control and linkage of end sugar pricing tocane prices paid to farmers. In the absence of this, market signals are not reflected to farmers and, hence, productionconsistently remains high irrespective of demand.


Indian Sugar Sector

6

45000

45000

35000

30000

25000

20000

15000

10000

5000

2011 2012 2013 2014 2015

32608

46%

22%

39862

37783

-5%

42163

12%

-8%

38757

50%

40%

30%

20%

10%

0%

-10%

-20%

Net Sales ( IN Cr. ) YoY Growth (%)


10/20



7

Indian Sugar Sector

5500

4500

3500

2500

1500

500

10%12%

-18%

-38%

-43%

20%

10%

0%

-10%

-20%

-30%

-40%

-50%

4968 5580

4604

2835

1627

2011 2012 2013 2014 2015

Operating Profit ( in Cr. ) YoY Growth (%) YoY Growth (%)

2000

1000

0

-1000

-2000

-3000

-4000

2011 2012 2013 2014 2015

1200%

1000%

800%

600%

400%

200%

0%

-200%

-400%

8%

-156%-66%-14%

1089%1281

436 -245-2916 -3158

Net Profit ( in Cr. )

6100

5100

4100

3100

2100

1100

100

Monthly Quarterly Half-yearly Yearly

Stock Return (%)Company

Bannari Amm.Sug.

Dalmia Bharat

Sakthi Sugars

Dhampur Sugar

KCP Sugar &Inds.Triven.Engg.Ind.

EID Parry

Bajaj Hindustan

Balrampur Chini

Sh.Renuka Sugar

12.39

13.55

26.19

15.13

25.8121.00

7.35

-2.68

20.30

25.84

75.34

191.08

109.59

124.75

72.0177.47

39.64

61.36

92.09

104.67

17.81

224.61

141.71

117.92

31.94105.87

22.00

27.48

76.97

31.74

-11.75

168.40

71.43

43.37

11.5046.49

-13.78

-7.67

26.47

-12.87

Note : Returns calcu lated from 26/11/2015 to monthly, quarterly, half yearly and yearly. We have taken top 10 companies and theirfinancial parameters according to market capitalization.

Source: Capital Line

10

8

6

4

2

0

-2

-4

-6

FY 11 FY 12 FY 13 FY 14 FY 15

-3.76

1.53

0.30

4.29

6.50

5.207.79

7.72

7.478.85

ROCE (%) RONW (%)

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.002011 2012 2013 2014 2015

1.63

2.02

2.39

3.56

4.69Debt Equity Ratio (x)


11/20

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9

Welspun Syntex Ltd.


“Buy” CMP : ` 140 TGT : ` 223Company Basics

BSE ID

NSE Symbol

Group

EQUITY (` in Cr.)

MKT.CAP(` in Cr.)

508933

WELSYNTEX

B

39.24

434.39

Financial Basics

FV ( )

EPS ( ) (TTM)

P/E (x) (TTM)

P/BV (x) (TTM)

BETA

RONW (%)

`

`

10.00

11.37

9.74

2.97

1.3904

30.61

Investment Rationale

Share Holding Pattern

Holder's Name

Foreign

Institutions

Promoters

Govt. Holding

Public & Others

Non PromoterCorp. Hold.

% Holding

0.661.10

70.10

0.00

23.16

5.00

ROI : 59%

Valuations

Currently, WELSYNTEX is trading at`140. We recommend “Buy” withtarget price of `223, valuing stock13xFY18E EPS of `17.18.The stockcurrently trades at 10.06x of FY16Eand 8.38xof FY17E and 7x of FY18E.

Investment Horizon : 12 to 15 Months

Company Overview

Product portfolio

Indian Textile Industry

Flow chart of Yarn Manufacturing

Welspun Syntex is a flagship company of the Welspun Group. Welspun group is one of

the leading and largest growing business conglomerates in India. Welspun Syntex

Limited was established in 1983 and is the flagship company under the Welspun

umbrella. Since its inception WSL. has grown manifold and is amongst the largest

manufacturers and exporters of Polyester Texturised Filament Yarn, Nylon Filament

Yarn from India. With plants located at Silvassa andPalghar (Thane), India WSL. is well

equipped tomeet thedomestic as well as international demand. It hasmarketingoffices

located at Surat andMumbai in India that facilitatebigbusiness ventures.

WSL produces special kind of yarn that suits best to the industry that includes : Partially

Oriented, Fully drawn, Mono Filament, Draw Textured, Air textured and Nylon and

others.

The textile industry holds significant presence in Indian economy. The size of the

industry is currently estimated to be over $120 billion. It contributes around 14% in

industrial production, 4% of the country’s GDP and 12% of the country’s merchandise

exports.

Polyester Viscose

Natural Material

Natural Material

Cotton

Yarn

Spinning of Fiber into Yarn

Weaving / Knit ting o f Yarninto Fabric & Conversion of

Fabric

WSL is Producing man made

polyster yarn that uses in

Readymade garments , Home

textiles & has other uses.

C o m p a n y A n a l y s i s


13/20

Welspun Syntex Ltd.

www.jhaveritrade.com10

India hasovertakenItaly, Germany andBangladesh to emergeas theworld’s second largest textile exporter. Indian textile

industrycan bedivided intoseveral segments, someofwhich can be:Cotton : Second largest cottoncellulosic fibersproducingcountry in theworld.

Silk: India is thelargest producerof silkand contributes.

Man-Madefibres : Thefourthlargest in synthetic fibres/ yarnsglobally.

Jute: India is thelargest producerandsecondlargest exporterof jute goods.

Indian textile industry uses all kind of fibres / yarn but it continues to be predominantly cotton based. The consumption of

cotton fibres v/s other fibres / yarn in India is 62 : 38, while the global consumptionof fibres / yarn is 40 : 60 in favor of non-

cotton fibres /yarn. However, India’s consumption of manmade fibre / yarn is increasing very fast and expected to reach

the world level in near future. The man-made fibres/ yarns industry, particularly the polyester segment, has achieved

significant growth during the last two decades. The sharp increase in production of polyester fibre and yarn has made

India to emerge as the 5th largest producer of man-made fibre/filament yarn in the world. Installed capacity of Polyester

filment yarn has marginally increased from 2058 Mn. kg during the year 2009-10 to 2118 Mn. Kg in 2014-15 (up to

December2014).

Production has been reduced from 1434.88 Mn. during the year 2009-10 to 1213.06 Kg. during the year 2013-14 and 873

Mn. kg during 2014-15. Installed capacity of Nylon filament yarn is at the same level at 32 Mn. kg since 2009-10 to 23.98

Mn.kgduring theyear 2013.14.

WSLhas uniquepositioning in theBCFsegment with POLYCYCLE. Polycycle is a 100% recycled Polyesteryarn extruded

(derived) from used PET bottles (plastic bottles) using patented process called ReNew. This polyester has same feature

and better quality like normal Vargin polyester. Vargin polyester is derived crude feed stock like PTA and MEG. So

fluctuation incrudeoilpricesareless concern.

BCF has unique product application like Wall to wall carpets, rugs and tiles and bath mates and is available in the higher

range of 1200-2600 diner. WSL also cater to global customers with specially kind of BCF like in Heat Set, intermingled

fancyandair twisted high performanceyarn.

The company has two state of the art manufacturingplants in Silvasa (UT) and Palghar. Silvassa plant is perfectly located

between the twomost importantTextilesStatesof India, Gujarat andMaharashtra.This location is situated near seaports

of JNPT and Mumbai and it becomes possible to deliver the finished products and receive the imported raw materials to

and from the ports. This location helps Welspun to deliver finished products to its customers in India and overseas.

Palghar also plant enjoys the advantages of ideal geographical location to efficiently handle all the logistics to facilitate

promptshipments to theIndianand overseascustomers.

Investment RationalLower consumption ratio provides enough growth opportunity for non cotton yarn

Polycycle- a uniquekind of Yarn with uniqueadvantages

Strategically located plant in Union Territory and Maharashtra


14/20

11

Welspun Syntex Ltd.


C o m p a n y A n a l y s i s

Focus on high margin accretiveproducts

Stable crudeoil prices helps to maintain operating margin

Financial AnalysisEBITDAgrew CAGR 26% from FY11 to FY15

Healthy return ratios

WSL has unique product portfolio that fulfills the requirement of Industry. WSL is highly concentrating on the specialty and

high quality yarns that have multipleuselikePolycle. Initially, WSLwas focusingon thedyed anddope– dyed yarn.

Man made yarn mainly consumes crude oil based derivatives as Raw material (chips constitutes ~50-60% where as other

textures consumes ~40% -45% of total RM cost ). RM cost as % of sales fell from 68.41 to 60.95 YoY, one of the lowest inlast five year, largely because of fall in key components like purified terephthalic acid (PTA) and mono-ethylene glycol

(MEG)whichhave touched multi-year lows on account of lowercrudeprices.

Consistent focus on higher margin products, development of new products and production of BCF coupled with cost

optimization drives EBITDA growth. WSL’s EBITDA grew from ` 34.22 Cr. in FY11 to ` 86.87 Cr. FY15, CAGR growth of

26%. EBITDA growth largely maintain on higher sales growth of Textured yarn as WSL is strengthening its position in

international marketandstepping upproduction of high Nylongrey anddyed yarn.

Year ( ` in Cr. ) FY 12 FY 13 FY 14 FY 15FY 11

WSL is consistently maintaining higher double digit return

ratios. We believe that higher top line growth in FY16E /FY17E, higher capacity utilization in existing product

capacity (doubling capacity of BCF, increase capacity of

dyeing vessel, install Nylon mother yarn line) and

concentration on products yielding high margins will drive

better ROCEand RONW.

35

30

25

20

15

10

5

0

FY 11 FY 12 FY 13 FY 14 FY 15

21.67

14.62

8.54

15.74 18.18

13.53

12.29

13.74

19.63

30.61ROCE (%) RONW (%)

Source: Capital Line

Year ( ` in Cr. ) FY 12 FY 13 FY 14 FY 15

84.34

595.73

115.54

694.32

121.39

819.06

126.77

752.43

Source: Company

Partially Oriented Yarn (POY)

Texturised Yarn

EBITDA

EBITDA YoY Growth (%)

EBITDA Margin (%)

34.22

26%

6.91%

41.51

21%

6.92%

49.48

19%

6.51%

63.03

27%

7.16%

86.87

38%

10.57%


15/20

Financial Performance

Welspun Syntex Ltd.

www.jhaveritrade.com12

FY 12

1.32

0.58

0.8

2.05

10.72

19.87

3.531.67

6.41

15.74

8.54

18

19

FY 13

1.68

0.83

0.87

2.41

12.01

23.85

3.231.86

5.98

13.53

18.18

15

12

FY 14

1.84

0.96

0.89

2.33

12.59

22.09

2.991.84

6.59

13.74

12.29

17

12

Debt-Equity Ratio (x)

Long Term Debt-Equity Ratio (x)

Current Ratio (x)

Fixed Assets Ratio (x)

Inventory Ratio (x)

Debtors Ratio (x)

Total Asset Turnover Ratio (x)Interest Cover Ratio (x)

PBIDTM (%)

ROCE (%)

RONW (%)

Debtors Velocity (Days)

Creditors Velocity (Days)

FY 15

1.57

0.84

0.89

1.92

12.45

23

2.632.79

9.73

19.63

30.61

16

14

Key Ratios

FY 12

23.65

68.66

201.18

116.17

321

32.12

133.75

101.65

302.83

647.51

611.55

2

617.85

561.31

18.51

41.51

24.17

28.9

11.56

11.5711.35

FY 13

39.24

107.54

311.13

196.97

364.56

78.9

172.79

93.9

405.03

826.88

776.12

2.5

773.66

697.62

28.15

49.48

30.83

34.67

16.02

16.0216.33

FY 14

39.24

112.96

328.51

209.67

457.57

73.84

186.24

112.4

440.9

957.29

896.38

3.14

896.84

800

27.7

63.04

39.14

43.93

20.03

19.6919.85

Equity Paid Up

Networth

Capital Employed

Total Debt

Gross Block (Excl. Reval. Res.)

Net Working Capital ( Incl. Def. Tax)

Current Assets ( Incl. Def. Tax)

Current Liabilities and Provisions ( Incl. Def. Tax)

Total Assets/Liabilities (excl Reval & W.off)

Gross Sales

Net Sales

Other Income

Value Of Output

Cost of Production

Selling Cost

PBIDT

PBDT

PBIT

PBT

PAT after Minority Interest & P/L Asso.Co. Adjusted PAT

FY 15

39.24

146.37

350.85

197.78

471.45

72.4

159.73

87.32

438.17

892.7

834.86

3.1

825.9

709.52

24.95

86.87

62.95

66.67

42.75

42.7542.69

Key Financials (` in Cr.)


16/20

13

Monthly Technical Picks


M

o n t h l y T e c h n i c a l P i c k s

13

ASHOK LEYLAND INDIAN OIL

TCS

We have detected an Ascending Continuation trianglechart pattern formed on Ashok Leyland. It is a bullishsignal with good volume. The increasingly higher highsand constant highs within this pattern tells us thatbuyersaremore aggressive than sellers, confirmedbyabreakout through a resistance level and positivedirectional moving index crossover to signal acontinuationof theprioruptrend.

The share price of Indian Oil Corporation has recentlyregistered a breakout above the triangular patternformed precisely at the 61.8% retracement of theprevious up move from Rs 324 to Rs 465, as can beseen in the adjacent weekly chart. It signals resumptionof upward momentum and offers a fresh entryopportunity to ride the next up move in the stock. Thebase of triangular pattern is placed above the 200 DaysEMA , which has acted as a strong support during theentire recentrally.

BUY BTWN 414-422 TARGET 470 - 475 SL 390BUY BTWN 94-97 TARGET 112-114 SL 87

Wehave detected breakof crucial 200EMAon Monthlycharts of BHEL. The price continues to descend lower from last four months. The negative crossover of Directional moving index on monthly charts suggestsmuch lower prices in coming weeks. These are allbearish signals which suggests stock to sell on everyrise asstock is in continousdowntrend.

Wehave detected break of crucial 100SMAAT Rs2428and break of Supertrendline at Rs 2395 on Weeklycharts of TCS. The negative crossover of Directionalmoving index on weekly charts suggests much lower prices in coming weeks. The price continues to descendlower from last three weeks which suggests sellingpressure. These are all bearish signals which suggestsstock to sell on every rise as stock is in positionaldowntrend.

SELL BTWN 174-178 TARGET 140-135 SL 200 SELL BTWN 2335-2375 TARGET 2220-2180 SL 2440

BHEL


17/20


What is Mutual Fund Retirement Plans

Benefits of Mutual Fund Retirement Plans

Mutual Fund Pension Plans in India

Retirement or Pension plans offered by Mutual Funds do not get as much of mention compared to the other retirementplanning solutions, e.g. PPF, life insurancepension plans etc. These schemes areessentially hybridmutual fund schemes,

i.e. they have both fixed income and equityallocations in theirportfolios. Investors can invest either in lumpsum amounts or

through systematic investment plans. Investments in Mutual Fund pension plans, in most cases, qualify for Section 80C

benefits under Income Tax Act. Post retirement the investors can withdraw their corpus on a lump sum basis or through

systematic withdrawal plan at a chosen frequency (e.g. monthly, quarterly etc.) for their regular income needs during

retirement.Thebalance unitspost withdrawals ineithercase remaininvested andcontinue togrow in value.

With higherallocation toequities,some mutual funds retirement plans cangeneratesuperior returns in thelong run

compared tootherproducts likePPF, life insuranceplansetc.

Some Mutual fund retirement solutionsoffers higher flexibility in termsof assetallocationoptions.

Charges of mutual fund pension plans aremuch lowercompared to insuranceproducts.

Looking at the assetsunder management of the different mutual fund retirement plans, it seems that they are not as popular

compared to the other retirement planning solutions like PPF, life insurance plans etc. On the other hand, over the last 3

years or so, these funds have given 11 – 15% returns, which are much higher than what the more popular retirement

planning solutionsgeneratedover thesame time period.

UTI Retirement Benefit Plan was the first fund to be launched in this space in 1994, followed by Franklin India Pension Plan

in 1997. After a gap of 15 years, Tata Mutual Fund came out with a retirement savings fund in November 2011. Earlier this

year Reliance MutualFund launched theReliance Retirement Fund.

The funds from UTI and Franklin Templeton have around 40% of their assets allocated to equity, while the balance is

invested in fixed income securities. The equity portions of both these schemes investment portfolios are concentrated in

large-cap stocks in the equity portion, whereas the fixed income has more of corporate bonds and long term government

securities.The Tatascheme offers threeoptions:

Progressive plan in which theminimum equity investment is85%

Moderateplan in which theequity investment isaround75%

Conservativeplansofferequityexposure ranging from 0-65%

The scheme automatically switches from one plan to another depending on the investor's age. At age of 45, investments

under theprogressiveplan automatically switchto themoderateoptionwhile at theageof 60 investments in themoderate

Are Mutual Fund Retirement Plans suitable for you?

14


18/20


M u t u a l F u n d

Are Mutual Fund Retirement Plans suitable for you?

plan areswitched to theconservativeplan.

The chart below shows the 3, 5 and 10 year trailing annualized returns of the three comparable plans, UTI, Franklin

TempletonandTata(Conservative plan).NAVsasonNovember9, 2015.

Annualized returns of UTI, Franklin Templeton and Tata (Conservative plan) are shown. The returns of Reliance Retirement

Fundare not shown because it has not completed a yearyet.

Investment in Mutual Fund Retirement Plans is subject to tax deduction under Section 80C of Income Tax Act for most

mutual funds retirement plans. However, the maturity proceeds of retirement plans are not entirely tax free. Non equity

oriented mutual funds, i.e. the mutual funds where equity allocations are less than 65% are subject to debt fund taxation.Long term capital gains for non equity mutual funds are taxed at 20% after allowing for indexation benefits. Indexation

benefitsallowyou toadjust the acquisition price ofunits by the ratio ofcostof inflation index in the yearof redemptionand the

year of purchase.

As a consequence, while the long term capital gain for income tax purposes is not tax free, it is lower and hence the tax

obligation is also lower compared to many other fixed income investments, e.g. fixed deposits etc. You should note that, for

debt funds the minimum holdingperiod for longtermcapital gainsto applyfordebt funds is36months.

In summary, while on an absolute basis the returns of these pension plans is not as attractive as equity funds or evenbalanced funds, their performance is much better than a lot of other retirement solutions available in the market. Higher

equity market returns over the long term make these products an effective inflation hedge for retirement. The UTI

Retirement Benefit Pension Fund and Templeton India Pension Plan are suitable for investors with conservative risk

profiles, while Tata and Reliance Mutual Fund offers variety of options for investors with different risk profiles. You can also

create your own retirement planning portfolio by investing in diversified equity and income funds through Systematic

InvestmentPlans.

Tax treatment of Mutual Fund Retirement Plans

Summary

15

10 years

5 years

3 years

0 % 2 % 4 % 6 % 8 % 10 % 12 % 14 % 16 %

Tata Retirement Savings Fund - Conservative Templeton India Pension Plan UTI Retirement Benefit Plan


19/20

Member: NSE / BSE / NSDL / MCX / NC

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SCLAIMER : Tradingand Investmentdecisiontakenon yourconsultation aresolelyat thediscretionof thetraders/investors.We arenot liable forany loss, which occur asa result ofour recommendations. Thisdocum

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PPI y/yFrench Final Non-Farm Payrolls q/qGerman Trade BalanceWholesale Inventories m/mCrude Oil Inventories10-y Bond Auction

Unemployment ClaimsImport Prices m/mNatural Gas Storage30-y Bond Auction

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Core CPI m/mEmpire State Manufacturing IndexNAHB Housing Market Index

Final CPI y/yFinal Core CPI y/yTrade BalanceBuilding PermitsHousing StartsCapacity Utilization RateIndustrial Production m/mCrude Oil Inventories

FOMC Statement

Federal Funds RateFOMC Press ConferenceGerman Ifo Business ClimateECB Economic BulletinPhilly Fed Manufacturing IndexUnemployment ClaimsCurrent Account

CB Leading Index m/m

Italian Prelim CPI m/mGerman Buba Monthly ReportConsumer Confidence

French Flash Services PMIGerman Flash Manufacturing PMIGerman Flash Services PMIFlash Manufacturing PMIFlash Services PMIFinal GDP q/q

Final GDP Price Index q/qExisting Home SalesRichmond Manufacturing Index

Italian Retail Sales m/mCore Durable Goods Orders m/mCore PCE Price Index m/mDurable Goods Orders m/mPersonal Spending m/mPersonal Income m/mNew Home SalesCrude Oil Inventories

Revised UoM Consumer SentimentRevised UoM Inflation ExpectationsNatural Gas Storage

French Consumer Spending m/mItalian Monthly Unemployment RateGoods Trade Balance

S&P/CS Composite-20 HPI y/yCB Consumer Confidence

Spanish Flash CPI y/yM3 Money Supply y/yPrivate Loans y/yChicago PMIPending Home Sales m/mCrude Oil Inventories

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money navigator december 2015

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