J Street Volume 264

Index Market View 1 Company Update 2 Around the Economy 3 Knowledge Corner 3 Mutual Fund 4 Commodity Corner 5 Forex Corner 6 Report Card 7 Editor & Contributor Margi Shah Special Contributors Ashesh Trivedi Aditya Nahar For suggestions, feedback and queries [email protected]

Market View: Further up move depends on second quarter results

Last Week, we have discussed about the rate cut and The RBI Governor cut the rate aggressively by 50 bps and kept the mind open for further rate cuts depending on the data. The market responded positively and touched the important psychological level of 27000 and 8200. Some positive comments from Finance Minister and Prime Minister also helped and the comments by some of the banks’ chiefs regarding the NPA recovery and cautious optimism have also created positive sentiment for the banking sector. Now the focus is shifted to the corporate result of second quarter. The impact of low commodity prices and crude oil will be felt in the result of this quarter and the market is eagerly waiting for the same. Majority of FIIs are also cautiously optimistic about India and consider India as the preferred choice amongst emerging countries. The corporate result and the Bihar election outcome will decide the future course of the market. Technically any rise and close above 8225 / 8250 range will take the market to 200 days SMA which is at 8390. On down side the support levels are placed at 8100 and 7950. Kamal Jhaveri MD- Jhaveri Securities

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Vol.: 26412th October,2015

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Company Basics

BSE Code 503806

NSE Symbol SRF

EQUITY (` in Cr.) 57.42

MKT.CAP (` in Cr.) 6582.92

Financial Basics FV (`) 10.00 EPS (`) 52.74 P/E (x) 21.74 P/BV (x) 2.90 BETA 1.3170 RONW (%) 10.52

Share Holding Pattern Holder's Name % Holding Foreign 16.04 Institutions 12.59 Promoters 52.38 Non Prom. 0.00 Public & Others 15.17 Government 3.82

Company overview SRF Limited is multi-product, multi-business organization and industrial intermediate segment. The company was incorporated in 1970. The business divisions of the company include Technical Textile Business, Chemical Business, Packaging Films Business and Engineering Plastics Business. The company has 12 production plant across the globe. Out of 12 nine in India and the remaining in Dubai, South Africa, Thailand. It is market leader in majority of its product. SRF has strong presence in international market with exporting around 75 countries. Investment Rational SRF is one of the leading and sole domestic supplier of HFC –134 a and growth in passenger vehicles spur sales

This elements contributed 23% of SRF’s fluorochemicals revenues. The market-size of HFC-134a in India is 8.0KTPA, which is expected to rise with the rise of automobile and refrigerator sales. We estimate HFC-134a’s consumption to clock 10.1% CAGR till FY20 as sales of passenger vehicles pick up from FY17 (HFC-134a gas is used as refrigerants in cars). With a capacity of 17.5KTPA, SRF is the sole domestic producer of R-134a and its market share increased to 41% in FY15. Imports have broadly remained flat at ~4,700 MT during the past 5 years.

Specialty Chemical is on strong footing

SRF is on a strong footing in Specialty Chemicals, as it is knowledge driven and has high entry barriers. We expect the business to grow at a CAGR of 28% over FY15-17 to `1005.40 Cr. Given that it is a niche business, we believe it will continue to enjoy PBIT margin of 35%.

Packaging Business has a good strength The total demand for films in India is 360,000 MT/year and is growing at 10%. Capacity utilization swings between 73% and 86%. Currently, the industry is operating at peak utilization of ~86%. With higher capacity utilization, film manufacturers have begun enjoying higher margins.

Valuation : SRF Ltd. is currently trading at 15.74x FY16E EPS of Rs.72.80 and 12.51x FY17E EPS ofRs. 91.60, valued the stock at 15xFY17E (three year average) with the target price of Rs. 1374.

Company Update : SRF Ltd.


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Weekly Market Recap :

• On macro economic front, the outcome of a monthly survey from Market Economics on Tuesday, 6 October 2015 showed that the growth in India's services sector activity eased last month. The Nikkei India Business Activity index dropped to 51.3 in September 2015 from 51.8 in August 2015. The slowdown in growth in the services sector comes close on the heels of another data showing slowdown in growth momentum in the manufacturing sector in September 2015.

• Vedanta in its financial update said that in light of the current market conditions, the company is focused on optimizing operational expenditure and capital expenditure, increasing free cash flow and reducing net debt.

Market Eye Week ahead : • Among the key macro economic data, the government is scheduled to release the consumer price index (CPI) data for the month of

September 2015 on Monday, 12 October 2015. The all-India general CPI inflation was nearly flat 3.66% in August 2015 comparedwith 3.69% (revised) reading in July 2015.

• The government will also release the industrial production data for August 2015 on Monday, 12 October 2015. Industrial production rose at 4.22% in July 2015 compared with growth of 4.36% in June 2015.

• Inflation data based on the wholesale price index (WPI) for September 2015 will be declared on Wednesday, 14 October 2015. TheWPI inflation dipped further into sub-zero level to (-) 4.95% in August 2015 compared with (-) 4.05% in July 2015.

KEY EVENTS/FACTORS TO WATCH 1. Mon: Infosys earnings, CPI data for the month of September, IIP data for the month of September 2. Tue: DCB Bank, TCS earnings 3. Wed: HUL, TTK prestige, Network 18, TV18 broadcast, Zee Entertainment earnings, WPI data for the month of August 4. Thu: CCL products, Mindtree, LIC housing finance, Sintex Industries earnings 5. Fri : NIIT technologies, RS Software, Reliance Industries earnings 6. Sat : TCI industries, Unichem laboratories earnings

Securities-Based Lending

• The practice of making loans using securities as collateral. Securities-based lending (SBL) provides ready access to capital that can

be used for almost any purpose such as buying real estate, purchasing personal property like jewelry or a sports car, or investing in a business. The only restrictions are other securities-based transactions like buying shares or repaying a margin loan.

• Also known as "securities-based borrowing" or "non purpose lending," • SBL is separate and distinct from "securities lending." Securities-based lending became increasingly popular with U.S. broker-dealers

and banks from 2011 onwards as an additional revenue stream, facilitated by the steady rise in equities and record-low interest rates.

Around The World


Knowledge Corner :

Mutual Fund Corner

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Source : - www.valueresearchonline.com

Fund Name Scheme Name Axis Focused 25 Fund

AMC Axis Asset Management Company Ltd

Type Multi Cap

Category Open-ended and Equity

Launch Date June 2012

Fund Manager Sudhanshu Asthana

Net Assets (` In crore ) Rs. 304.8 crore as on Aug 31, 2015

Top 10 Sector Break-Ups Fund (%)

Financial 28.94

Services 17.09

Technology 11.24

Automobile 10.91

Diversified 9.79

Engineering 8.48

Healthcare 5.99

Textiles 3.96

Metals 2.38

Composition (%) Equity 98.78

Debt 0.07

Cash 1.15

Risk Analysis Volatility Measures Standard Deviation 13.73 Sharpe Ratio 0.69 Beta - R-Squared - Alpha -

Vol.: 20418th August, 2014


History 2012 2013 2014 2015 NAV (Rs) 11.51 12.18 16.90 17.39

Total Return (%) - 5.82 38.75 2.90

+/‐CNX Nifty - - - -

+/‐ CNX MNC - -0.94 7.36 6.91

Rank (Fund/Category) - 34/74 87/119 71/187

52 Week High (Rs) - 12.24 17.15 18.82

52 Week Low (Rs) - 10.27 11.49 16.56

Net Assets (Rs.Cr) 147.41 116.94 180.29 -

Expense Ratio (%) 2.36 3.13 3.16 -

Fund Style

Investment Style Growth Blend Value

Large

Medium

Small

Capitalization

Commodity Corner

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Vol.: 20418th August, 2014Vol.: 264

12th October,2015

FUNDAMENTAL:Bullion rallied last week whereby Silver gained more than +6.50% while Gold gained nearly +2% on safe haven appeal after Federal Reserve meeting minutes lifted confidence that the central bank may not hike interest rates and after the dollar weakened against other currencies. Prices of the yellow metal were supported on safe haven appeal after minutes from the Fed's Sep 16-17 meeting highlighted that the policy maker are concerned about the slowing global economy, led by China, and stronger dollar. On Friday, gold jumped $11.60, or 1.01%, after minutes from the Fed’s September policy meeting showed that most policymakers were concerned that recent global economic and financial developments may have in-creased the downside risks to the U.S. economy. "Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the Com-mittee decided that it was prudent to wait for additional information," the Fed said in the minutes. In the policy meet last month, the central bank had surprised investors by refraining from hiking interest rates citing recent turbulence in financial markets and in economies abroad. "Many acknowledged that recent global economic and financial developments may have increased the downside risks to economic activity somewhat," Fed minutes added. The Fed officials have delayed hiking benchmark interest-rate from near zero, but they are still expected to act before year's end. From the physical market Indian gold is still trading with a discount of nearly -7$, ahead of majority of hindu consumers consider festival of Navratri, Dussehra and Diwali as an auspicious occasion for purchase of gold. In the quarter ended September this year, gold imports jumped to a three-quarter high of an estimated 262.2 tonnes, owing to lower prices and higher import of dore gold, or unrefined gold, by refineries. In the quarter ended December last year, imports stood at 292 tonnes, while the previous high was in the June 2013 quarter. In the September quarter this year, demand was high, as prices started fal-ling since July-end, before being quoted at $1,072 an ounce at a global level and Rs 25,000/10g in Mumbai. RECOMMENDATION : BUY GOLD @ 26300 SL 25950 TGT 26800-27100. BUY GOLD @ 26300 SL 25950 TGT 26800-27100. FUNDAMENTAL: Last week base metals recovered from the week's low to settled high as metals had found early support after minutes of the Federal Reserve's latest meeting led investors to further pare bets that the central bank will hike interest rates this year, keeping funding cheap for metals users and investors. Whereby Zinc rose more by +7.68% to settled at 119.15 after commodities group Glencore said it would cut its zinc output by a third, sparking a short-covering rally across the board. Zinc's jump, its biggest one-day gain in at least a decade, followed Glencore's announcement that it will cut 500,000 tonnes of annual zinc production, equivalent to around 4 percent of global supply, in its latest response to weak commodities prices. Zinc mine supply had already been set to shrink given the closure of MMG's huge Century mine in Australia and Lisheen in Ireland this year. The cut is certainly significant and swings the zinc market into a deficit for 2016, which we estimate will now be around 300,000 tonnes, a reversal of the 180,000 tonne surplus we were forecasting earlier. London Metal Exchange three-month zinc shot up to an intraday peak of $1,875 a tonne, a gain of 12.5 per-cent. That was its highest price since Aug. 11 and its biggest single-day gain, which goes back to mid- 2005. It closed up 10.1 percent at $1,835. West-ern Mining Group put its 100,000-tpy zinc smelting project into production in Qinghai’s Xining September 30. Copper settled up 2.90% at 347.75 as fears of broader supply cuts by Glencore PLC triggered a buying spree in industrial metals. Demand boost came as Chinese smelters piled up stocks to sell later, leading to a drawn down at exchanges. The London Metal Exchange’s inventories fell for the 9th day to the lowest since March, reversing a trend earlier this year that warehouse stocks swelled on faltering demand. The International Copper Study Group (ICSG) has revised the copper fore-cast for 2016. It now anticipates the metal market to turn into deficit during the next year. Also Nickel settled up 2.75% at 683.50 as all commodities headed for the biggest weekly advance since 2012 as PIMCo. said the worst of the collapse is probably over, helping mining companies surge and Glencore Plc double from its record low set last month. RECOMMENDATION : BUY COPPER @ 342 SL 335 TGT 350-364. BUY ZINC @ 117 SL 114 TGT 121-125. BUY NICKEL @ 670 SL 640 TGT 700-735. BUY ALUMINIUM @ 101 SL 99 TGT 104.50-108. BUY LEAD @ 112 SL 109 TGT 115-118.50. FUNDAMENTAL: In energy complex Crude oil lead the rally with a gain near to +7.88% to closed at 3205 on MCX while on Nymex WTI Crude oil rose above $50 a barrel a level it hasn’t closed above since July, as OPEC officials predicted that global crude markets will recover. While Natural gas rallied and managed to recovered from the earlier fall to settled with a marginal gain of 0.74% at 163.10 after data showed that U.S. natural gas supplies rose less-than-expected last week. Meanwhile Kuwait's oil minister said economic growth and the removal of high-cost producers would help tighten global fuel balances. Kuwait Oil Minister Ali al-Omair told Reuters the Organization of the Petroleum Exporting Countries would stick to its output policy, which has focused on building market share at the expense of higher cost non-OPEC producers. "There are indications that a lot of high-cost oil production is starting to get out of the market and this will help improve prices," Omair said. The comments followed data from oil services company Baker Hughes Inc that showed the number of U.S. rigs drilling for oil fell for a consecutive sixth week. Since hitting an all-time high of 1,609 a year ago, the number of U.S. rigs operating has fallen by an average of 20 a week as higher cost drillers curb costs due to low prices. "The current rig count is pointing to U.S. production declining sequentially between 2Q15 and 4Q15 by 255,000 barrels per day," Goldman Sachs said in response to the data. On the other hand Natural gas recovered from the week's low after data showed that U.S. natural gas supplies rose less-than-expected last week. In its weekly re-port the EIA said natural gas storage in the week ending October 2 rose by 95 billion cubic feet, compared to expectations for an increase of 98 bcf. Total U.S. natural gas storage stood at 3,633 bcf the EIA said. Stocks were 443 bcf higher than last year at this time and 155 bcf above the fiveyear average of 3,478 bcf for this time of year. EIA data shows that power plants account for approximately 32% of gas demand in the U.S. Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use. . RECOMMENDATION : BUY CRUDEOIL @ 3160 SL 2980 TGT 3350-3500.BUY NAT.GAS @ 160 SL 156 TGT 166-170.

BULLION

BASE METALS

ENERGY

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Commodity Corner

USD/INR

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Forex Corner

EUR/INR

GBP/INR

JPY/INR

Market Eye Week ahead :

• The rupee regained its gaining streak and appreciated to a near two month high against the US dollar, as the Federal Reserve's meeting minutes indicated the central bank was in no hurry to raise interest rates because of global slowdown concerns. There will be some inflows during the week as the day as the limit increase for FII investors into central government and state government bonds which is effective from today.

Level S2 S1 CP R1 R2 High Low Close

USD/INR 64.66 64.40 65.18 65.44 65.96 65.69 64.91 64.93


JPY/INR 53.65 53.33 54.19 54.51 55.05 54.73 53.87 53.97


GBP/INR 99.14 98.65 99.73 100.22 100.81 100.33 99.25 99.62

Level S2 S1 CP R1 R2 High Low Close EUR/INR 73.34 72.87 73.67 74.14 74.47 74.00 73.20 73.81

Market Recap :


• Rupee opened at Rs 64.76 against the dollar and registered an intra-day high and low of 64.69 and 64.81 so far during the day.

• In the spot currency market, the domestic unit was last seen at 64.77. Rupee had bounced back by 32 paise to 64.74 against the US dollar in Friday's trade on fresh selling of the American currency by banks and exporters on the back of recovery in the equity market.

• The U.S. dollar index, which measures the greenback's strength against a trade-weighted bas-ket of six major currencies, was quoted down 0.01% to 94.92.

• In the week ahead, investors will be looking to Wednesday's U.S. data on retail sales and Thursday's data on consumer prices for fresh indications on the strength of consumer spending

• Q2 September 2015 corporate earnings, Macroeconomic data, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs), first phase Bihar elections ,the movement of rupee against the dollar and crude oil price movement will also dictate trend on the market next week.

• Traders long in index and index related stocks need to take profits as the Nifty hits the gap of 8091-8225 range. Nifty has strong resistance at 8180-8330 which is also the gap on weekly charts. The gap got covered as it tested almost level of 8250. Fall and close below 8130 can create momentum on sell side for a target of 8000 which will also act as strong support on downside. Further rally can happen on rise and close above 8250..

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J Street Recommendations Report Card

Top Fundamental Stocks

Stocks Rec. Date CMP on Rec. CMP Target Absolute Return @

CMP Status

Sun Pharma 03/07/2015 831 892 1041 7% Buy

Infinite Computer Sol. 20/07/2015 190 186 255 -2% Buy

Nitin Spinners Ltd. 06/07/2015 79 59 94 -25% Buy

Bank of Baroda 01/06/2015 163 177 217 8% Buy

Ambika Cotton Mills 18/05/2015 880 863 1149 -2% Buy Sadbhav Engineering Ltd.

04/05/2015 298 300 430 1% Buy

CARE Ltd. 20/04/2015 1666 1257 2250 -25% Buy

Setco Automotive Ltd. 30/03/2015 242 230 304 -5% Buy

Omkar speciality 16/03/2015 152 193 251 27% Buy

DHFL 16/02/2015 252 227 368 -10% Buy

TV Today Network 27/01/2015 222 268 337 21% Buy

M&M 12/1/2015 1238 1276 1452 3% Buy

Havells India 27/10/2014 274 260 346 -5% Buy

All Cargo Logistics 05/08/2014 260 312 342 20% Buy

PTC India Fin. Ser. 07/07/2014 39 47 45 19% Buy

Adani Port 05/07/2014 280 320 347 14% Hold

Ahluwalia contracts 24/08/2015 235 267 368 14% Buy

L & T 05/07/2014 1750 1549 1866 -11% Buy

SRF Ltd. 21/09/2015 1140 1231 1374 8% Buy

It's not important whether you are right or wrong, It’s about how much money you make when you're right and how much you lose when you're wrong.”



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J Street Volume 264