Monday, March 4, 2013

Why NHPC tanked 25%?

NHPC stock fell as much as 25.8% on Monday before recovering marginally. This followed a 10.5% decline on Friday and prompted the management to issue a clarification. “As far as the fundamentals of the company, there is no change which affects the major price movement,” the company said in a stock exchange filing. “In our opinion, there is no issue in the Finance Bill, which has any adverse effect on (the) hydro sector.”
Dealers said the fall in the stock was due to some margin calls being triggered, which had a domino effect. While the budget may not have had an impact, the company’s fundamentals remain weak, though that doesn’t warrant such a steep decline in its stock price.
After listing at Rs.36 a share in 2009, NHPC exceeded that price only once—on 6 January 2010. The main problem dogging the company has been a delay in executing projects. It added no capacity at all in FY10, just 120 megawatts (MW) in FY11 and none at all in FY12. If one went by the projections given in its red herring prospectus, NHPC should have added 3,941MW of capacity by now.
So far this fiscal year, the company has added 275MW of capacity. An investor presentation on its website said it expects to add another 417MW of capacity in this fiscal year and another 680 MW in the next.
However, after that, expect another lull in commissioning for 18 months before capacity additions start in FY17. NHPC has so far spent Rs.19,000 crore on these projects which are at varying levels of completion.Emkay Global Financial Services Ltd said in a report that, “20% book (is) invested in projects that are stuck or facing problems.” In other words, it will take a long time for these projects to be added to NHPC’s gross block and start earning.
The recent capacity additions have also meant that NHPC has reported a rise in generation. But then it has also been facing other problems. Capital costs for the company have increased and the tariff for new projects such as Chutak in Jammu and Kashmir is estimated at Rs.8 per unit, far higher than the average electricity rates around the country.
NHPC is also seeing receivables piling up, another threat to earnings. According to Emkay, total receivables at the end of December 2012 stand at Rs.1,999 crore, about one-third of its FY12 sales. Of this, receivables which are more than 60 days old constitute Rs.1,258 crore.
While these limit the upside for the stock, note that NHPC now trades at 0.77 times estimated book value for FY14, much below the consensus 1.1 times call by brokerages.
So I would like to Given fresh buy call on NHPC at this fair valuation.But kindly note that this stock is not suitable for short term traders.Only longterm investors with 2 year holding period can accumulate stock
                   I express my sincere thanks to Livemint website for this article

Adding Tata Global Beverages and Cairn India in Trading Portfolio

After a 300 points correction in Nifty last month there are lots of buying opportunity in the market as of now.But the important question is the stock selection. Obviously stock selection is very difficult task in this current market scenario.So I am adding low beta and fundamentally strong stocks at this point of time.I also request my clients and followers to add only quality fundamentally strong stock and least debt companies only in portfolio.Dont buy stocks who have large debt and whose promoters stakes are pledged.

Now I would like to add two fundamentally strong companies namely Tata Global Beverages and Cairn India in my trading portfolio. Cairn India is Indias second largest refining company after Reliance industry.Recently Vedanta group bought acquired Cairn India.Now Cairn India is trading at Rs.290.Its 52 week low is at 285.So I am buying 35 shares at 290(35*290=10150) levels for a target of 330.

Secondly I would like to buy Tata Global at Rs.130 levels for a target of 160 plus.I am buying 80 shares of TGBL for Rs.10400 in trading portfolio.

Kindly note that I choosen these stocks so that I can hold these companies for another six month minimum
My cash reserve in trading portfolio is reduced from Rs.82034 to Rs.61484 after buying this two stocks