Saturday, October 20, 2007

Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 1

In this 3 part article series let us analyze ten stocks which have “family names”. The stocks are so chosen that these belong to either ‘A’ group or ‘B1’ group of the Bombay Stock Exchange (BSE); the stocks are from a variety of sectors.




Scrip Code

Price 19-Oct

Aditya Birla Nuvo (Textiles)




Bajaj Hindusthan (Sugar)




Dalmia Cement (Cement)




Jindal Saw (Pipes)




Kirloskar Oil Engines (Engg. Equipments)




Aditya Birla Nuvo Limited:

This company was formerly known as Indian Rayon and Industries Limited. It has diversified business segments in viscose filament yarn, carbon black, branded garments, fertilizers, textiles etc. The company is India’s second largest producer of viscose filament yarn, largest branded apparel manufacturer and the largest linen fabric manufacturer. It has 31.78% stake in Idea Cellular Limited, a leading mobile phone service provider in India.

The company had declared a net profit of Rs.281 crores for the financial year 2006 – 07 at an EPS of 32.

There are no reversal signs in the the monthly/weekly charts of the stock as yet. In the last five years, it has appreciated by more than 16 times.

In the daily chart shown above, the stock had broken the short term support at 1319 on August 17. The resistance at 1625, though breached on October 3 with good volumes, will only be an exit opportunity for the bulls; A bearish engulfing pattern has been formed near the resistance levels on October 12. The short term traders may exit this stock.

Aditya Birla Nuvo, Century Textiles and S.Kumars Nationwide have gained 35%, 29% and 43% this year so far. In contrast, Bombay Dyeing and Raymond have lost 15% and 20% respectively since January 1, 2007.

The medium term and long term investors may remain invested in the stock; Considering the current market situation, partial profit booking may be considered by them.

Bajaj Hindusthan Limited:

Bajaj Hindusthan is India’s leading sugar and ethanol manufacturing company. It has 9 plants in operation and one more is being built, all in the state of Uttar Pradesh in northern India. Once the tenth plant is commissioned, the company will have a combined crushing capacity of 100,000 tonnes per day. It produces 220 million litres of ethanol as well.

However, the company’s earnings have terribly fallen in the last five quarters; for the first quarter 2006 – 07, it declared a net profit of Rs.63.88 crores; For the corresponding period in 2007 – 08, it has declared a net loss of Rs.60.47 crores.

Bajaj Hindusthan hit a high of 569.90 during April 2006. It has been bearish in long term charts; It is currently on its second wave in medium charts. 115 is the most important support level for the stock, below which one can expect more downfall for the medium term.

It is mildly bullish though, in daily charts. Currently it is in the fifth wave and a close above 198.50 with good volumes will push the stock further up.

Sugar sector has indeed been thrashed in the last one and half years. Since January 1, 2007 Andhra Sugar has lost 28%, Dwarkesh has shed 40% and KCP Sugar Industries has fallen by 32%. However, Sree Renuka Sugars has gained 66% this year so far.

Definitely, this sector will take some time to stabilize. One may consider investment in the stock after confirming the medium term trend.

Dalmia Cement (Bharat) Limited:

Dalmia Cements has been in existence since last 70 years. It has two plants, one at Dalmiapuram near Tiruchirapalli in Tamil Nadu and other at Mishrikh near Lucknow in Uttar Pradesh. The combined capacity is about 3.5 million tonnes per year.

Superoof, the Dalmia cement for housing, has better acid, alkali and chloride resistance compared to ordinary cement. Physical properties such as compactness, shrinkage on drying are also better compared to the usual cement. Other housing cement varieties include super foundation cement, vajram and coastal cement. For infrastructures like airstrips, oil wells and railway sleepers the company produces special grade cements. The company’s net profits stood at Rs.229 crores for 2006 – 07 at an EPS of 54.

Technically, the stock is bullish in short, medium and long term charts. However, the increase in prices have been accompanied by declining volumes, indicating that the trend is becoming weak and it also forewarns a possible trend reversal.

In the weekly chart shown above, the stock has broken its resistance at 460 this week. However, at successive peaks, the volumes have gone down. Though there is no reversal signs yet in daily charts, the long term investors may book partial profits, since trend has become weaker.

India Cements, Dalmia Cements and Madras Cements have gained 14%, 22% and 19% respectively while Birla Corporation, Kakatiya Cement and JK Cement have lost 8%, 21% and 4% respectively this year.

Jindal Saw Limited:

There are 3 major Jindal groups in India. These are:

  • O.P.Jindal group, which owns Jindal Stainless, Jindal Saw, Jindal Steel and Power and JSW Steel
  • D.P.Jindal group, which controls Maharashtra Seamless and Jindal Drilling and Industries
  • S.S.Jindal group, which manages Jindal Polyfilms and Jindal Photo

Their family hierarchy is shown below.

Jindal Saw Limited (formerly known as Saw Pipes Limited) is managed by the eldest son of O.P.Jindal, Prithvi Raj Jindal.

Jindal Saw manufactures submerged arc welded (SAW) pipes which are used for transportation of fluids in oil and energy sector. It has diversified further into manufacturing large diameter submerged arc pipes and spiral pipes and bends for the energy transportation sector; carbon, alloy and stainless steel seamless pipes and tubes are used for industrial applications and ductile iron pipes for water and sewage transportation.

The company has 9 plants are 4 locations: two at Mundra in Gujarat, one at Nashik in Maharashtra and one at Kosi Kalan in Uttar Pradesh. The company reported a net profit of Rs.82 crores for the first quarter 2007 – 08 at an EPS of 16.5.

The monthly chart of Jindal Saw is shown below. The stock appears to have completed the fifth wave; the long term investors may exit the stock at every rise.

It can be seen that the wave 5 of the current uptrend has not been accompanied by reasonably good volumes. The stock has also tested the support levels, though we have to wait for a monthly close below 513 to confirm.

In both daily and weekly term charts, the stock has started forming lower highs and lower lows, indicating bearishness. The stock is not recommended for the short and medium term investors.

Jindal Saw has gained 47% since January 1 this year while other steel pipe manufacturers like PSL and Welspun Gujarat have gained 92% and 211% respectively. This way, the stock may be considered an underperformer.

Kirloskar Oil Engines Limited:

We discussed about this stock in my previous article, “Buy These India Stocks and Hold for 6 Months”.

Kirloskar Group is worth nearly USD 600 million and this Pune based engineering company manufactures equipment, machinery and high precision engineering products for the transportation sector, including ship building, railways, roads and cargo. It also has a major presence in auto components, process industries, rubber and plastics, textiles and also consumer goods industries. Kirloskar Oil Engines’ product range includes diesel engines, irrigation pumpsets, diesel generating sets, engine bearings, engine valves and grey iron castings.

The company’s net profit for the year 2006 – 07 was Rs.178.41 crores at an EPS of 16.07.

We mentioned in the previous article that the stock had made a near cup and handle breakout. It can be seen that the support level (previous resistance) at 305 holds well for the stock. Though a “three inside down” candlestick pattern has been formed this week, its reliability is low. As long as the stock stays above 305 levels on a weekly close basis and no major reversal signals are formed, investors can remain long on the stock for the targets of 421 and 457.

While Kirloskar Oil Engines has gained 26% since January 1 this year, other notable engine manufacturers like Swaraj Engines (19%) and Cummins India (40%) have done reasonably well too.