to r ’s Focus

Inves -Madhukar Das

Issue 7, Vol 1

Finolex Cables -Jan 30, 2011

Markets under heavy selling pressure as FIIs again start selling causing a 4% drop in bench- Other Picks
mark indices in last 3 days and bringing them down a to 5 month low. Selling in large cap has
effected a sell off in mid and smallcap space causing the stock prices to spiral down 2-14%.
Fundamentally Speaking BUY :
Finolex cables is India’s largest and leading manufacturer of electrical and telecommunication
cables and is the flagship company of Finolex group. The company is rated as a SuperBrand. HCL Infosystems
With Government and corporate spending on infrastructure and power projects in the country, CMP—`103
sales for electrical and telecommunication cables is bound to rise and Finolex being the largest
player in this space is most likely to benefit from it. They have ramped up production in their Target—`110
Roorkie plant and further increased its capacity by 50% with proximity to north Indian market Stop Loss—`99
this plant will be able to cater to the growing demand by infrastructure projects in that region.
The company also produces a range of electrical items such as electrical switches, CFLs etc.
The company is going in for a JV with a Japanese company to produce high tension cables of Sell :
upto five hundred kilowatts. The JV is expected to be operational in next 3-6 months.
Essar Oil
The ratios look very attractive for the company. Gross margin and net profit margin are about
two times the industry average. RoE is 9% whereas industry weighted average is 4%. P/B ratio CMP—`125.30
is 1.16 which is very low for industry leader in a segment. Price to sales is 0.46 which means Target—`113
revenue per share is more than twice the price of each share. P/E ratio is 7.1 whereas weighted
average for industry is 21. Sales have been growing over past 3 years with a CAGR of 16.1%. Stop Loss—`128
Current enterprise value per share is `66.7. The current market cap for the company is `750
crores. The company has got investments in equities and cash of close to `500 crore. Therefore
the investments and cash comprise of 66% of the market cap which makes the company funda- Mastek
mentally sound and very lucrative investment at current levels. CMP—`168
Target—`160
Technically Speaking Stop Loss—`172

Special points of interest:

The candlestick chart suggests
it has found support at the 40
bar (short term) support level.
Any improvement in broad
market dynamics will propel
this stock up from the current
levels.
The stochastic oscillator sug-
gests that the scrip has been in
the oversold region and bears
will soon wane out.
Commodity channel index chart
shows sudden fall in scrip on
weekly charts owing to heavy
sell off by FIIs and domestic
institutions in the broader mar-
ket and recovery will effected
by fundamentally sound scrips
when the bears fade out.
Since we are looking at a
trading horizon of 15-30
days, we shall give more
weightage to technical
analysis and price trend of
the stock.
We shall also study the
fundamental aspects of a
company to avoid getting
into loss making trade
positions in case of move-
ment of market in direc-
tion opposite to that of my
prediction.

MACD charts signals a rever-
sal in short term trend.
Recommendation : BUY
More at:
CMP : `48.85 http://investorsfocus.blogspot.com
Williams %R on weekly chart
suggests that the scrip has Target Price : `54
been under selling pressure but Stop loss : `46
is showing signs of recovery.