Moneylife STOCK LETTER

PantherSmall-cap/low price stock

Monday, 27 October 2014Volume 1, Issue 27

MARKET WATCH

The S&P BSE Sensex closed the week that ended on 23rd October at 26,851 (up 743 points or 2.84%),

while the NSE’s CNX Nifty ended at 8,015 (up 235 points or 3.02%). Last week, we had mentioned that Nifty might try to rally. This week, the Indian stock market opened with a gap on the back of positive data from the US and the winning of Bharatiya Janata Party (BJP) in Haryana and Maharashtra assembly polls helped build up the positive sentiments. On Monday, Nifty closed at 7,879 (up

100 points or 1.28%). On Tuesday as anticipated, the

index closed in the green after making a recovery from the day’s low. Nifty closed at 7,928 (up 48 points or 0.61%) making it the third consecutive day of gain.

According to Moody’s Investors Service the Indian government’s decision to remove price controls on diesel and to raise natural gas prices, signals fiscal discipline and is a “credit positive” step, although the overall impact could be limited.

The government, on Monday, announced that it would auction 74 coal-mining licenses to private companies in the next three to four months. The government will allocate government companies licenses without an auction. This move is likely to help power, cement and steel sectors.

Market on Wednesday moved higher in line with the positive trend of US indices on Tuesday and positive closing of most of the Asian indices. Nifty closed at 7,996 (up 68 points or 0.86%).

The market was open for a special trading session on Thursday to mark the start of Samvat 2071. Nifty closed at 8,015 (up 19 points or 0.23%).

Friday market was closed on account of on account of public holiday. Stock: Although R S Software sales for the September 2014 quarter fell by 5% over the year ago period while its operating profit for the relevant quarter rose by 14%. The board of the company has approved the payment of another interim dividend of 15% for FY14-15. The stock rose 3%. The board of directors of AVT Natural decided on the closure of AVT Natural Pte., Ltd., Singapore, a wholly owned subsidiary, due to changed international market conditions, while on the other hand AVT Tea Services Ltd, its wholly owned subsidiary in the United Kingdom has set up a subsidiary company in the US, under the name AVT Tea Services North America, LLC to cater to the American market. Weak result pulled the stock lower by 14%. Changes: There are no changes this week.

Indices Change

BSE Sensex 3%

Nifty 3%

Disclaimer: Although information has been obtained from and is based upon sources we believe to be reliable, we do not guarantee its accuracy and the information may be incomplete or condensed. All opinions and estimates constitute our judgment as of the date of the report and are subject to change without notice. This report is for informational purposes only and none of the stock information, data and company information presented herein constitutes a legally binding recommendation or a solicitation of any offer to buy or sell any securities. Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalised recommendation to you. Individual stocks presented may not be suitable for you. Moneylife is a research and information company and not investment advisor. Please consult an advisor about the appropriateness of your investment decisions.

Nifty, Sensex will struggle to make fresh highs

The Nifty rose 3% this week. Both FIIs and DIIs were net buyers this week bringing in Rs1,067.64 crore and Rs289.26crore respectively.

The current four-quarter trailing Nifty EPS as per NSE is Rs387. On this basis, the current Nifty PE works out to 20.70. Unless earnings improve, the market is getting overvalued.

Market Valuation

Money Flows

FII Net Inflow

22 Aug-14 23 Oct-1422 Sep-14

(Rs crore)

440

1,700

1,070

-820

-1,450

-190

PENifty

5,890

8,150

7,020

3,630

4,760

2,500

Jan-08 May-11 Oct-14

DII Net Inflow

(Rs crore)

490

1,350

920

-370

-800

60

22 Aug-14 23 Oct-1422 Sep-14

Grossly Overvalued

Overvalued

Fairly valued

22x

20x

17x

15xGrossly Undervalued

Undervalued

Moneylife STOCK LETTER

PantherSmall-cap/low price stock

Monday, 27 October 2014Volume 1, Issue 27

Company Business Comments

AVT Natural Products Industrial Intermediates Conservative management based in Kerala with decades of experience in the field

Adi Finechem Chemicals A small chemical manufacturer with low debt

Ador Fontech Industrial Intermediates Beaten down stock with great growth prospects if industrial growth picks up

Atul Auto Auto Focused presence in a growth segment, as 3-wheeler sales continues to boom

Avanti Feeds Farm & Farm Inputs Excellent growth over the next two years.

Goodyear India Auto Components Well-known tyre company, offering steady dividends

MPS Education Extremely strong growth and price rise in the last two quarters. But valuation still reasonable

Munjal Auto Inds Auto Components Business has been sluggish for two years which is why the stock is available at a low price

Munjal Showa Auto Components Business has been sluggish for two years which is why the stock is available at a low price

Orient Refractories Industrial Intermediates MNC with great prospect, low valuation and high return on capital

RS Software (India) Software & IT Services Small software stock with high return and low valuation.

Sun Pharma Adv Research Pharma Could be a jackpot thanks to the commitment of the management of Sun Pharma

Suven Life Sciences Pharma Lumpy earnings growth but is stabilising. High return on capital

Hexaware Technologies Software & IT Services Mid-cap IT stock with a good OP growth of 22% and RONW of 40%

MT Educare Education Conducts coaching classes for school and college as well as entrance exams. Strong RoCe and reasonable valuation.

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PantherSmall-cap/low price stockMonday, 27 October 2014 Volume 1, Issue 27

MoneylifeSTOCK LETTER

How to Use the Stockletter1. At any point, we intend to maintain a maximum portfolio of 30 shares in our Panther stockletter. If we go beyond, we will explain why 2. Our suggestion is to invest an equal amount in each stock listed. 3. A new subscriber may take a position in any of the two kinds of recommendations a. When a completely new stock is added b. Any existing stock which we recommend to enter at current price 4. For instance, in case if you have Rs500,000 to invest, and we have listed 25 stocks, you would put Rs20,000 in each. If we have

recommended 10 stocks as per 3a and 3b above, you may invest Rs20,000 in each of the 10 stocks and wait for further recommendations. If it is a rare stock that exists in Antelope and/ Lion, you would spread your Rs20,000 investment equally across each such stock

5. As for exits, please follow the recommendations which would be mentioned in the column Comment in the previous page

Happy investing!

Financial* Valuation** Return# Entered

Av. Sales Av. OP MC/Sales MC/OP RoE Date Price Current

PricePerformance

since entry date

Older stocks that can be bought now

1. AVT Natural Products 69.34 17.25 2.97 17.53 25% 25 Apr 14 27 39 49%

2. Adi Finechem 38.96 8.38 2.40 11.76 45% 25 Apr 14 114 300 164%

3. Ador Fontech 34.34 4.86 1.39 10.83 16% 25 Apr 14 68 103 51%

4. Atul Auto 106.01 10.99 2.09 21.79 37% 25 Apr 14 192 379 97%

5. Avanti Feeds 321.94 30.10 0.73 8.78 47% 25 Apr 14 622 1,545 148%

6. Goodyear India 410.95 38.90 0.87 8.40 25% 25 Apr 14 420 651 55%

7. MPS 46.70 15.54 5.68 17.40 59% 25 Apr 14 383 611 60%

8. Munjal Auto Inds 209.72 16.58 0.61 7.41 26% 25 Apr 14 54 113 109%

9. Munjal Showa 406.97 27.38 0.42 5.73 19% 25 Apr 14 90 184 103%

10. Orient Refractories 102.36 19.82 2.60 14.14 39% 25 Apr 14 61 94 54%

11. RS Software (India) 90.09 20.95 2.37 9.02 37% 25 Apr 14 221 670 203%

12. Sun Pharma Advanced 40.58 4.80 32.00 — 8% 25 Apr 14 152 194 28%

13. Suven Life Sciences 130.37 54.12 3.98 10.48 56% 25 Apr 14 84 193 129%

14. MT Educare 46.07 10.05 2.94 18.12 23% 01-Oct-14 149 140 -6%

Older stocks to avoid now ( does not mean exit; Hold not Sell)

1. Hexaware Technologies 255.88 96.36 5.90 17.32 38% 27-Jun-14 157 187 19%

* 5 quarter average (Rs crore) ** Based on latest quarter (annualised), MC- Market Cap #Return on Equity (based on net profit of previous 4 quarters)

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How to Use the Stockletter 1. These stockletters, as a source of information, are for those who understand the rewards and risks of investing in stocks for the long run and use the list for doing their own research with their own time and resources. 2. Equal distribution of your surplus across all stocks is preferable. For this, you can use the tool - https://advisor.moneylife.in/panther-sip.html 3. Changes in the stockletter list will be mentioned in the table as and when they arise. Happy investing!

Operating Profit - profit generated in the normal course of business (for companies other than bank and NBFCs); arrived at after deducting operating expenses (excluding depreciation and interest) from sales. For Banks and NBFCs, operating profit is arrived at after deducting operating expenses (excluding depreciation) from total income and net revenue respectively.Valuation - ratio of market capitalisation to sales or operating profit. Low ratio is better.Market capitalisation - recently traded price multiplied by number of shares outstanding.RoE is return on equity which is net profit divided by networth.Shortlisted price is the price at which we had added the stock to our stockletter. Current price is the price as on the last trading date of the week.Performance is the return between the entered at price and current price.