Gladiator Stocks
November 28, 2014
Gladiator Stocks: Series 6.0 Tide Water Oil (TIDWAT)
Time frame: 6 months Key Technical Data Recommended Price
16450-15800
Price Target
19450.00
Stoploss
14800.00
52 Week High
16992.00
52 Week Low
6851.10
50 days EMA
14887.00
200 days EMA
11610.00
52 Week EMA
11286.00 *Recommendation given on i-click to gain on November 27, 2014 at 11:43
Stock price movement vs. BSE Oil & Gas 11,800
17,300
11,300
15,300
10,800 10,300
13,300
9,800
11,300
9,300
9,300
8,800
Tide Water
Nov-14
Oct-14
Sep-14
Jul-14
Aug-14
Jun-14
Apr-14
May-14
8,300 Mar-14
7,300
BSE Oil&gas
Price performance over last five years 130% 104%
66%
24%
38% -29%
-4%
-56% 2010
2011
2012 Year
2013
YTD 2014
(CMP- | 16450.00)
Technical View Strategy: Buy Tide Water Oil in the range of | 16459.00–15800.00 for a target price of | 19450.00 with a stop loss below | 14800.00 on a closing basis The share price of Tide Water Oil embarked upon a strong uptrend after breaking out past its 2010 peak of | 10116 in June 2014. 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 ¾ 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 ¾ After a strong rally from June 2014 low of | 8846 to | 15330 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 ¾ 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 | 14910 and is expected to act as a solid base for the stock from a short-term perspective ¾ 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 ¾ 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 | 19500 in the medium term. The price equality of current up move from September 2014 low of |13542 with the June to September up move, which measured (5993 points) projects upsides towards | 19500 over the medium term
ICICI Securities Ltd. | Retail Equity Research
Exhibit 1: Tide Water Oil – Daily Bar Chart
Equality with June-Sept rise @ 19500
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 19500 levels being the price equality of current up move from Sept low with the June-Sept rally which measured 5993 points 15330
13542 Analyst
50-day EMA
Dharmesh Shah
[email protected] Dipesh Dagha
[email protected]
9337
Pabitro Mukherjee
[email protected]
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
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Stock Data Particular Market Capitalisation (| Crore) Totak Debt (| Crore) Cash (| Crore) EV (| Crore) 52 week H/L Equity Capital (| Crore) Face Value (|) MF Holding (%) FII Holding (%)
Amount 1,526.0 9.0 64.5 1,470.4 17689/ 6820 1.0 10.0 0.1 -
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 1928. 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 | 751.6 in FY10 to | 1156.5 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
Stock return (%) 1M 7.0 10.8 17.1
Tide Water Castrol Gulf Oil Lubricants
3M 34.1 36.1 43.1
6M 64.1 59.0 NA
12M 126.7 63.3 NA
Exhibit 1: Key metrics P/E (x) EV/EBITDA (x) P / BV (x) RONW (%) ROCE (%)
FY11 17.6 10.4 3.9
FY12 19.1 11.0 3.3
FY13 18.0 9.9 3.0
FY14 16.5 9.9 2.7
24.4 33.4
19.2 24.8
18.6 24.8
17.6 21.5
FY12 801 86 59 695.1
FY13 954 93 63 740.4
FY14 1,007 92 68 804.0
Exhibit 2: Financial highlights | Crore Net Sales EBITDA Net Profit EPS (|)
FY11 760 97 64 754.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd. | Retail Equity Research
Page 3
International Travel House (INTTRA)
Time frame: 6 months Key Technical Data Recommended Price
290-280
Price Target
380.00
Stoploss
238.00
52 Week High
310.00
52 Week Low
142.00
50 days EMA
260.00
200 days EMA
227.00
52 Week EMA
223.00
Recommendation given on i-click to gain on 27th November 2014 at 12:45
Stock price movement vs. BSE Small cap Index 11,000
290
10,000 9,000
240
8,000
190
7,000
International Travel
Nov-14
Oct-14
Sep-14
Jul-14
Aug-14
Jun-14
May-14
Apr-14
6,000 Mar-14
140
BSE Small cap
Price performance over last five years
115%
103%
(CMP- | 290.00)
Technical view Strategy: Buy International Travel House in the range of | 290.00–280.00 for a target price of | 380.00 with a stop loss below | 238.00 on a closing basis Key technical observations ¾ 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 ¾ 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 ¾ 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 ¾ 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 ¾ 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
73% 35%
‐34%
12%
2011
2012 2013 Y ear
‐11%
‐45% 2010
Y TD 2014
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
Exhibit 2: International Travel House – Weekly Bar Chart
161.8% extensions @ 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% retracement @ 238 219 34 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
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Fundamental View
Stock Data Particular Market Capitalization Total Debt Cash EV 52 week H/L (|) Equity capital Face value FII Holding (%) DII Holding (%)
Amount | 237 Crore |0 | 46 Crore | 191 Crore 310 / 142 | 8 Crore | 10 0.0 0.0
•
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 FY10-14. 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
Stock return (%) Return (%) Int. Travel House Thomas Cook India Cox & Kings India
1M 5.9 12.2 (2.3)
3M 4.4 19.0 (0.6)
6M 22.3 87.6 72.0
12M 84.2 118.4 197.8
FY11 8.9 3.8 1.7 20.4 30.1
FY12 7.5 3.2 1.4 19.9 29.0
FY13 6.8 2.4 1.1 16.2 24.2
FY14 7.0 3.0 1.0 14.5 21.4
FY12 165.3 39.9 19.1 23.2
FY13 164.3 38.9 17.9 21.7
FY14 171.7 37.6 18.1 21.9
Exhibit 3: Key metrics (x) P/E EV / EBITDA P/BV RoNW (%) RoCE (%)
FY10 9.7 4.2 1.5 15.9 23.4
Exhibit 4: Financial highlights (| Crore) Net Sales EBITDA Net Profit EPS (|)
FY10 108.2 37.2 11.3 13.6
FY11 146.1 35.8 16.7 20.3
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd. | Retail Equity Research
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Strategy Follow up Date
Scrip
Product
9-Jun 19-Sep 9-Jun 9-Jun 9-Jun 9-Jun 8-Sep 9-Jun 9-Jun 9-Jun 10-Oct 10-Oct 16-Sep 19-Sep 16-Sep 8-Sep 9-Jun 9-Jun 9-Jun
Essel Propack Heidelberg Cement Cummins KSB Pumps BEL Ingersoll EPC Industries SKF Aban Federal Bank Infosys Simplex Infra KPR Mill UltraTech Cement Repro Phoenix lamp SBI India Cements EIH Hotels
Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash Cash
ICICI Securities Ltd. | Retail Equity Research
Strategy
RP
Target
SL
Gain/Loss %
Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy
95.00 78.50 635.00 500.00 1835.00 665.00 196.00 980.00 720.00 117.00 3770.00 255.00 305.00 2630.00 290.00 144.00 2710.00 112.00 94.00
155.00 98.00 860.00 790.00 2350.00 995.00 255.00 1425.00 1050.00 165.00 4490.00 310.00 375.00 3100.00 355.00 180.00 3515.00 160.00 150.00
64.00 69.00 545.00 390.00 1490.00 528.00 167.00 780.00 575.00 97.00 3490.00 224.00 267.00 2435.00 261.00 125.00 2350.00 87.00 74.00
31.00 30.00 29.00 27.00 25.00 25.00 20.00 20.00 19.00 17.00 14.00 11.00 10.00 -7.00 -10.00
Comment
Book 50% profit at 124 Target achieved Book profit at 820 Book 50% profit at 635 Book profit at 2290 Book 50% profit at 830 Book profit at 235 Book 50% profit at 1180 Book profit at 853 Book 50% profit at 136.50 Book 50% profit at 4300 Book profit at 283 Book profit at 336.5 Stoploss triggered Stoploss triggered Open Open Open Open
Page 7
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
Recommended product wise trading portfolio allocation
Products
Allocations Product wise Max allocation allocation in 1 stock
Return Objective Number of Calls
Frontline Stocks
Mid-cap stocks
Duration
Daily Calls
8%
2-3%
3-4 Stocks
0.50-1%
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%
-
-
-
-
-
100%
ICICI Securities Ltd. | Retail Equity Research
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Pankaj Pandey
Head – Research
[email protected]
ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC Andheri (East) Mumbai – 400 093
[email protected]
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
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