Tyre Sector
16/09/2014 Sector Updates
The tyre industry is poised to grow in double digits over the next two years. Recovery in the OEM segment (contributing about 30% of the demand) due to positive consumer sentiment, and better replacement sales due to improved economic scenario and fleet utilization levels are likely to boost demand. Further the radialisation levels in the commercial vehicle space are likely to double and reach 50% levels over the next four years. We initiate coverage on JK Tyre with a Buy recommendation and target price of Rs461 (based on 6x FY2016 EPS). We have an Accumulate rating on Apollo Tyres with a target price of Rs240 (based on 10x FY2016 earnings).
   Stock Holding Disclosure list as on September 15, 2014
16/09/2014 Disclosure
The list includes the stock position of Angel Broking and its Affiliates and/or its Analysts as on September 15, 2014. The stock holding position is pertaining to companies under the coverage of Analysts employed by Angel Broking and its Affiliates.
   Relaxo Footwears Ltd
15/09/2014 Result Updates
Relaxo Footwears (Relaxo), predominantly a low value mass-product (Hawaii) company, has over the years gained a respectable market share in the mid-market segment by successfully establishing specialized high-value products like Flite and Sparx. At the current market price, the stock is trading at a PE of 22.7x FY2016E EPS of Rs20.4. With improving product mix leading to higher realizations and margins coupled with increasing brand value, we are valuing the company at a higher multiple of 25x FY2016E earnings and recommend an Accumulate rating on the stock with a target price of Rs510.
   Sterling Tools Ltd
12/09/2014 Initiating Coverage
Going ahead, we expect STL to report net sales CAGR of ~14% over FY2014-16 to ~`394cr owing to recovery in automobile sales volumes in both domestic as well as export markets. This will lead to recurring business opportunities for auto ancillary companies like STL. Going ahead, the company would improve its volume growth in the fasteners segment driven by healthy volume growth from OEMs customers like Honda Motorcycle & Scooters India, Maruti Suzuki India, Tata Motors, Ashok Leyland, Daimler, Fiat, Hero Motocorp, Mahindra & Mahindra, Volvo, Eicher, TAFE and General Motors. On the profitability front, we forecast STL to report a net profit CAGR of ~20% over FY2014-16 to ~Rs23cr owing to healthy sales and better operating margins due to better product mix and cost effective management strategy. At the current market price of Rs332, the stock trades at a PE of 12.1x and 10.0x its FY2015E and FY2016E EPS of Rs27.4 and Rs33.1, respectively. We initiate coverage on the stock with a Buy recommendation and target price of Rs397, based on 12x FY2016E EPS, indicating an upside of ~20% from the current levels.
   Automobile Sector
04/09/2014 Sector Updates
Strong momentum continues in passenger space; CVs subdued: The passenger vehicle (PV) segment and two wheelers (2Ws) maintained their strong growth momentum, reporting a double digit volume growth during August 2014. An improvement in the economic scenario and positive consumer sentiments post elections boosted volumes during the month. Commercial vehicles (CVs) on the other hand continued to remain under pressure, reporting a double-digit decline. We expect CVs to remain flattish in FY2015. Improvement in CV volumes usually comes with a lag to the improvement in the economy; we expect a full-fledged recovery in the segment only in FY2016.
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