Gladiator Stocks: Series 6.0 Tide Water Oil (TIDWAT) (CMP )

Transcription

1 Gladiator Stocks Time frame: 6 months Key Technical Data Recommended Price Price Target Stoploss Week High Week Low days EMA days EMA Week EMA *Recommendation given on i-click to gain on November 27, 2014 at 11:43 Stock price movement vs. BSE Oil & Gas 17,300 15,300 13,300 11,300 9,300 7,300 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Tide Water Aug-14 Sep-14 Oct-14 Price performance over last five years 104% 24% -56% 66% -29% 38% -4% Nov-14 11,800 11,300 10,800 10,300 9,800 9,300 8,800 8,300 BSE Oil&gas 130% YTD Year 2014 November 28, 2014 Gladiator Stocks: Series 6.0 Tide Water Oil (TIDWAT) (CMP ) Technical View Strategy: Buy Tide Water Oil in the range of for a target price of with a stop loss below on a closing basis The share price of Tide Water Oil embarked upon a strong uptrend after breaking out past its 2010 peak of in June The stock witnessed a rapid advance, thereafter, and continues to stride northward in a rising peaks and troughs fashion. The sharp decline in Brent crude oil prices, which has plummeted to four year low of $75.50/barrel, has lent further support to the stock, which is the direct beneficiary of lower crude prices. Key technical observations The strong breakout above 2010 highs (10116) after a four year consolidation below the same signalled a major trend reversal and lifted the stock into a higher orbit. Since June 2014 lows, the rallies are getting bigger and faster while secondary corrections have been shallow and time consuming affairs. Such price/time behaviour clearly highlights the positive price structure After a strong rally from June 2014 low of 8846 to in September 2014, the stock entered a consolidation mode and traded in a narrow range over the last two months. The stock maintained a rising trajectory even during this consolidation phase, which highlights constant buying support at elevated levels The medium term 50 day moving exponential average also remains in a rising trajectory and has lent support to prices during intermediate corrective declines. The 50 day EMA is currently placed at and is expected to act as a solid base for the stock from a short-term perspective The price action in Thursday s session has seen the stock recoup previous five session s shallow decline in just a single trading session highlighting resumption of the strong upward momentum. We believe the stock has witnessed a healthy time wise correction as it has spent almost 10 weeks in consolidation mode albeit within rising trajectory against 15 week rally during June to September 2014 Among oscillators, the 14-period RSI has generated a positive crossover above its nine period average after sailing above its bull market support reading of 50 levels during the entire consolidation phase highlighting the underlying strength in the trend Conclusion: We expect the stock to continue its uptrend and head towards in the medium term. The price equality of current up move from September 2014 low of with the June to September up move, which measured (5993 points) projects upsides towards over the medium term ICICI Securities Ltd. Retail Equity Research

2 Exhibit 1: Tide Water Oil Daily Bar Chart Faster retracement of last five session corrective decline in just single trading session signalled resumption of upward momentum. We expect the stock to head towards levels being the price equality of current up move from Sept low with the June-Sept rally which measured 5993 points Equality with June-Sept Analyst Dharmesh Shah [email protected] day EMA Dipesh Dagha [email protected] Pabitro Mukherjee [email protected] 9337 Rising price, rising volumes indicate larger participation in the direction of primary trend highlighting a healthy uptrend RSI generated a positive crossover after sailing above its bull market reading of 50 during last 2 month consolidation Source: Bloomberg, ICICIdirect.com Research ICICI Securities Ltd. Retail Equity Research Page 2

3 Stock Data Particular Amount Market Capitalisation ( Crore) 1,526.0 Totak Debt ( Crore) 9.0 Cash ( Crore) 64.5 EV ( Crore) 1, week H/L 17689/ 6820 Equity Capital ( Crore) 1.0 Face Value ( ) 10.0 MF Holding (%) 0.1 FII Holding (%) - Stock return (%) 1M 3M 6M 12M Tide Water Castrol Gulf Oil Lubricants NA NA Exhibit 1: Key metrics FY11 FY12 FY13 FY14 P/E (x) EV/EBITDA (x) P / BV (x) RONW (%) ROCE (%) Exhibit 2: Financial highlights Crore FY11 FY12 FY13 FY14 Net Sales ,007 EBITDA Net Profit EPS ( ) Source: Company, ICICIdirect.com Research Fundamental view Tide Water Oil Company India is a part of the multi divisional Andrew Yule group. Tide Water Oil has been one of the leading players in the Indian lubricant industry since The company has an extensive distribution network with 50 distributors and over 650 dealers servicing over 50,000 retail outlets. This network is fed by five plants and 55 depots located strategically across the country. The company operates in two major segments: automotive and industrial. It has tie-ups for the manufacture of genuine oils with a number of renowned OEMs in the automotive and industrial equipment segment including Hero MotoCorp, Honda Motor Cycle, L&T Komatsu Ltd, etc. The company also has a technical collaboration JX Nippon Oil & Energy Corporation, the No.1 petroleum conglomerate in Japan. Superior quality lubricants under the brand name Eneos are manufactured and marketed in India by Tide Water Oil. It manufactures and markets Veedol brand of lubricants Over the last few years, the lubricant industry s volume growth has contracted due to improvement in motor vehicle technology leading to lower consumption of lubricant oil and longer refill cycle. The industry reported negative volume growth at ~1% CAGR over FY10-13 whereas Tide Water Oil reported a volume growth at ~2.3% CAGR. However, going forward, the lubricant industry is expected to report an improvement in volume growth owing to an improvement in the Indian economic scenario with growth of automobile sales and an improvement in industrial sector leading to higher lubricant oil consumption. Over the last 12 years, Tide Water Oil has shown a continuous improvement in market share increasing from 2.9% in FY03 to 4.7% in FY13 owing to its strong brands (Veedol, Prima, Turbo, etc.), wide distribution network and good quality of products. The company s strong brands and wide distribution network (mainly in the Bazaar segment) would aid it to grow its business substantially. The company expanded its global footprint with the acquisition of Veedol International (100% subsidiary) in FY12 from Castrol and Lubricants UK, wholly-owned subsidiaries of BP Plc. This acquisition brought with it global rights to a wide portfolio of registered trademarks for the master brand, Veedol, as well as associated product sub-brands and iconic logos Tide Water Oil s revenues have increased from in FY10 to in FY14 at a CAGR of 9% while profits have increased from 57.8 in FY10 to 68.3 in FY14. The return ratios of the company have remained strong with RoCE at 21.5% and RoE at 17.6% in FY14. We expect the decline in crude oil prices and growth in volumes to help the company improve its margin profile and thereby profitability, going forward ICICI Securities Ltd. Retail Equity Research Page 3

4 Time frame: 6 months Key Technical Data Recommended Price Price Target Stoploss Week High Week Low days EMA days EMA Week EMA Recommendation given on i-click to gain on 27 th November 2014 at 12:45 Stock price movement vs. BSE Small cap Index Mar-14 Apr-14 May-14 Jun-14 International Travel Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 BSE Small cap Price performance over last five years 115% 35% 45% 103% 34% 12% 11% 73% Y TD Year ,000 10,000 9,000 8,000 7,000 6,000 International Travel House (INTTRA) (CMP ) Technical view Strategy: Buy International Travel House in the range of for a target price of with a stop loss below on a closing basis Key technical observations The share price of International Travel House remains in a strong uptrend and continues to form rising peaks and troughs on all time frames. The stock hit an all-time high of 310 in August 2014 and, thereafter, entered a secondary corrective phase. In Thursday s trade, the stock has given a falling channel breakout consisting of the entire price correction, thus indicating the end of the corrective phase and signalling resumption of the primary uptrend, thereby offering a fresh entry opportunity to ride the next up move in the stock Earlier, in late May, the stock gave a breakout from the rounding pattern, which elevated the stock price to a higher trajectory setting up the bullish momentum from a medium-term perspective. The stock since breaking out of the rounding pattern has consolidated its gains maintaining positive bias The most recent correction in the stock from its August 2014 high ( 310) retraced its preceding up move from 219 to 310 by 78.6%. More importantly, the key retracement also coincided with the rising 34-week moving average. The share price formed a decent basing pattern at key support juncture and now seen resolving higher suggesting positive trend Time wise, the stock consumed 12 weeks in the corrective phase while retracing just 78.6% of the preceding seven week s rally. Larger time consolidation and limited price correction is the primary indicator of a healthy corrective action and highlights the underlying strength in the trend. Strong volume surge in the price rally signifies larger participation in the direction of the primary trend while the price correction has seen relatively low volume Among oscillators, the 14-week RSI is seen holding above 50 levels and has recently given a bullish crossover above its nine period s average thus validating positive momentum from a medium-term perspective Conclusion: Based on the various technical observations listed above, we believe the stock is set for its next up leg and is likely to head towards 385 in the short-term. The 161.8% extensions of the previous up move from 219 to 310 as measured from the recent trough of 238 projects upsides towards 385, thus offering a favourable riskreward set-up to ride the bull trend ICICI Securities Ltd. Retail Equity Research Page 4

5 Exhibit 2: International Travel House Weekly Bar Chart 161.8% 385 The share price have given a breakout above the falling channel indicating the end of the corrective phase and signalling resumption of the primary uptrend, thereby offering a fresh entry opportunity. Stock price is expected to rally towards 385 in the near term 310 Long term rounding pattern breakout signals resumption of primary uptrend in the stock 78.6% weeks EMA While corrective phases witness low volume activity, rallies have been on the back of far greater participation highlighting bull market phenomenon Weekly RSI is seen holding above 50 levels and has recently given a bullish crossover above its nine periods average thus supporting positive bias Source: Bloomberg, ICICIdirect.com Research ICICI Securities Ltd. Retail Equity Research Page 5

6 Stock Data Particular Amount Market Capitalization 237 Crore Total Debt 0 Cash 46 Crore EV 191 Crore 52 week H/L ( ) 310 / 142 Equity capital 8 Crore Face value 10 FII Holding (%) 0.0 DII Holding (%) 0.0 Stock return (%) Return (%) 1M 3M 6M 12M Int. Travel House Thomas Cook India Cox & Kings India (2.3) (0.6) Exhibit 3: Key metrics (x) FY10 FY11 FY12 FY13 FY14 P/E EV / EBITDA P/BV RoNW (%) RoCE (%) Exhibit 4: Financial highlights ( Crore) FY10 FY11 FY12 FY13 FY14 Net Sales EBITDA Net Profit EPS ( ) Source: Company, ICICIdirect.com Research Fundamental View International Travel House (ITH), an associate of ITC Ltd (61.7% stake), established in 1981, is an integrated travel and tourism service provider accredited with ISO 9001 certification. It offers the entire bouquet of travel services, including business travel, car rentals, leisure holidays and conferences & exhibition management services. ITH has a nationwide network through 10 IATA travel offices, 14 car rental offices and 19 travel counters. The company services business travel needs of Indian and multinational business houses with implants in 160 companies including NDTV, Infosys, HCL, Citibank, Samsung, Max Hospitals, Ficci, Essel group among others. The company has a major presence in the car rental business with transportation contributing a healthy 75.6% of the total topline as of FY14. The company has its own transport fleet of ~900 cars and has over 700 trained travel professionals. The topline and bottomline has grown at a CAGR of 12% and 13%, respectively, in FY The company also commands healthy return ratios with RoCE and RoE of 18% and 14%, respectively, in FY14. The dividend payout for ITH is steady at ~20% The company is promoted by ITC Ltd and is involved in the business of travel services. The company clocked a topline and bottomline of 172 crore and 18 crore, respectively in FY14. On a consistent basis, the company clocks EBITDA margins of ~20%. On the balance sheet front, the company is debt-free with net cash position of ~ 46 crore as of FY14 (~20% of the current market cap). Its domestic competitors though backed by foreign promoter groups are currently trading at 37.3x TTM P/E (Thomas cook trading at 64.2x TTM P/E while Cox & Kings trading at 10.4x TTM P/E). The company, however, is trading at 13.1x FY14 P/E, which is a steep discount to its domestic peers (~65% discount). We feel that this discount is unwarranted given the healthy financials, strong promoter group and robust economic outlook. However, since the company is a major car rental player, it is expected to trade at a certain discount to its industry peers The company realises healthy business ( 82 crore; 48% of topline) form its parent group i.e. ITC Ltd. and will also be a key beneficiary of increase in occupancy at ITC s hotels across the country. With a new government at the Centre and its thrust on healthy growth of the domestic tourism industry, the company is poised for an exciting journey ahead. Key government announcements, which should ultimately benefit the company include visa on arrival policy & electronic visa approval provision. On the risk front, the company is facing some competition from new start-ups offering car rental services in the cities in which the company operates. These start-ups are vying for a share of the market on the basis of an asset-light business model and heavy use of back-end technology and analytics. However, ITH is working towards building on its web strategy. It is evaluating web based operating platforms for its forex, conferences and delegate management business, as also for revamping its website and making itself ready for meeting the challenges of e-commerce ICICI Securities Ltd. Retail Equity Research Page 6

7 Strategy Follow up Date Scrip Product Strategy RP Target SL Gain/Loss % Comment 9-Jun Essel Propack Cash Buy Book 50% profit at Sep Heidelberg Cement Cash Buy Target achieved 9-Jun Cummins Cash Buy Book profit at Jun KSB Pumps Cash Buy Book 50% profit at Jun BEL Cash Buy Book profit at Jun Ingersoll Cash Buy Book 50% profit at Sep EPC Industries Cash Buy Book profit at Jun SKF Cash Buy Book 50% profit at Jun Aban Cash Buy Book profit at Jun Federal Bank Cash Buy Book 50% profit at Oct Infosys Cash Buy Book 50% profit at Oct Simplex Infra Cash Buy Book profit at Sep KPR Mill Cash Buy Book profit at Sep UltraTech Cement Cash Buy Stoploss triggered 16-Sep Repro Cash Buy Stoploss triggered 8-Sep Phoenix lamp Cash Buy Open 9-Jun SBI Cash Buy Open 9-Jun India Cements Cash Buy Open 9-Jun EIH Hotels Cash Buy Open ICICI Securities Ltd. Retail Equity Research Page 7

8 NOTES: It is recommended to enter in a staggered manner within the prescribed range provided in the report Once the recommendation is executed, it is advisable to keep strict stop loss as provided in the report on closing basis The recommendations are valid for three to six months and in case we intend to carry forward the position, it will be communicated through separate mail. Trading Portfolio allocation It is recommended to spread out the trading corpus in a proportionate manner between the various technical research products Please avoid allocating the entire trading corpus to a single stock or a single product segment Within each product segment it is advisable to allocate equal amount to each recommendation For example: The Daily Calls product carries 3 to 4 intraday recommendations. It is advisable to allocate equal amount to each recommendation ICICI Securities Ltd. Retail Equity Research Page 8

9 Recommended product wise trading portfolio allocation Products Product wise allocation Allocations Max allocation in 1 stock Number of Calls Frontline Stocks Return Objective Mid-cap stocks Duration Daily Calls 8% 2-3% 3-4 Stocks % 2-3% Intraday Short term Delivery 6% 3-5% 7-10 p.m 4-5% 7-10% Opportunity based Weekly Calls 8% 3-5% 1-2 Stocks 5-7% 7-10% 1 Week Weekly Technical 8% 3-5% 1-2 Stocks 5-7% 7-10% 1 Week Monthly Call 15% 5% 2-3 Stocks 7-10% 10-15% 1 Month Monthly Technical 15% 2-4% 5-8 Stocks 7-10% 10-15% 1 Month Techno Funda 15% 5-10% 1-2 Stocks 10% and above 15% and above 6 Months Technical Breakout 15% 5-10% 1-2 Stocks 10% and above 15% and above 3-6 Months Cash in Hand 10% % ICICI Securities Ltd. Retail Equity Research Page 9

10 Pankaj Pandey Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai Disclaimer The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of ICICI Securities Ltd (I-Sec). The author may be holding a small number of shares/position in the above-referred companies as on date of release of this report. I-Sec may be holding a small number of shares/position in the above-referred companies as on date of release of this report. This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This report may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate the investment risks. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Actual results may differ materially from those set forth in projections. I-Sec may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject I-Sec and affiliates to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. ICICI Securities Ltd. Retail Equity Research Page 10