Value Buy - Kernex Microsystems

· Kernex Microsystems is engaged into manufacturing of Networked Anti-Collision Devices (ACD) for Indian Railways and had installed over 2,500 kms. in Indian Railways since 04 – 05.

· These ACDs are supplied by the company to Railways, through Konkan Railways, under its exclusive Technology and Production Tie-up.

· Railways Board, after review of ACD Pilot Project in North Frontier Railways, set by the company, declared it to be completed, commissioned and proved to be successful. According to Railway Safety Plan, ACD Systems will be deployed in the entire Indian Railway Network by 2013 and survey over 10,000 kms is in progress.

· Railway Minister Lalu Prasad Yadav has cleared deploying thee ACDs under Railway Safety Plan, in its 08 – 09 budget. This was pending for quite a long time, which finally saw light of the day.

· The total outlay by Railways on these ACDs, till 2013 – 14 is estimated to be about Rs.3,500 crores, taking cost escalation and design changes into consideration and for about 56,000 kms., covering all routes of Indian Railways. So, annual flow of orders to the company, could be about Rs.400 crores.

· For FY 07, total income of the company was at Rs.29.68 crores, of which Rs.6.90 crores came via bank interest and provisions written back. Due to this, EPS for the year, was at Rs.5.61. The income of Rs.21.80 crores from its core business is purely of maintenance of ACDs supplied earlier by the company, which is about 15% annually, of cost of equipment.

· Even in first nine months of FY 08, total operational income of about Rs.15 crores is purely from AMC of ACDs supplied by the company to Railways, earlier. Even this activity would give an EPS of about Rs.5 to the company.

· The present paid-up equity of the company is at Rs.12.50 crores, which got raised due to 1 bonus share, issued on every 10 shares held, by the company. Of this, promoters holding is 58% while 42% is held by the public.

· The EBITDA margin of the company on these ACDs are over 40% and costs about 35% to 40% against similar devices, if imported. Also, any supply of ACDs gives an assured AMC of 15%, every year, to the company, on equipments supplied. ACDs supplied by the company in 05 – 06 is enabling the company to earn an AMC revenue of Rs.20 crores, annually, by which EPS of about Rs.5 is being earned.

· Once this supply will start to Railways, the performance of the company, would come in new orbit with EBITDA in excess of Rs.50 crores, depending upon the quantum of order flow from Railways. Even bottomline could be close to Rs.25 crores, giving an EPS of Rs.20 as the company has least interest and depreciation burden.

· The company is also aiming to capture the major segments of medium to light density Rail routes in developing countries, as the ACD system is efficiently suited and cost effective. The company is hopeful of securing ACD orders from countries like Egypt, South Africa, Brazil, Argentina, Venezuela, Indonesia, Cambodia and Vietnam.

· Even continuous upgradation keep happening in ACDs as R&D is the main focus of the company. This would keep demand of improved version products in place, which shall assure continuous and assured business to the company.

· The company also makes Advanced Railway Signal Systems, for which major trust has been given by Railways in its recent budget. This could be another area of growth for the company.

· The company is also developing “Multi Section Digital Axle Counter” in collaboration with Altpro, Zerob, Croatia and Indian Railways has requirement of about Rs.600 crores, in the next five year for this product.

· The company also makes Auto Driving Devices for Metro Railway, which would be developed once Indian Market for the same is developed.

· The company is a debt free company and Rs.99 crores, raised by the company from IPO is still available with the company.

· With expectation of these Railway orders, working of the company would improve sharply from FY 09. Since the sector enjoys a very high PE multiple, share had potential to cross Rs.500 mark in the next 10 – 12 months. Long term prospects are extremely bright.


· Share at Rs.220 is a safe bet which can give a return of 100% in the next 12 months and a consistent return of 40% to 50%, annualized, over the next 2 – 3 years.

Trading Tips 25-Feb-08

1. HTMT Ltd.. BUY BUY

WORST IS OVER...............101% !!
20+20% Freeeeze on card !!
BUY & Hold for 2-3 Days or upto Budget Session.
-Stoploss for Investment :Rs.76-70
Stock will zooooom to kiss 98-104 level in hrs only.
Watch price level of Rs.120+ in day or two.

2. Jai Corp.. BUY BUY

Nonstop rally upto Rs.989 level !!
(Today......Above 947 ,Buy 10-100-500-1000 shares & Forget)
*Watch level of 1115-1150 very sooon !!
----Expect atleast 1-2-3-4 upperfreeeeeeeeze !!!!

3. JP Assoc

Any Rise..........Just exit on Rallies.........!!!
(Already started 1-2-3.....on downside )
Break below 241...last hope @ 234.
Yes ,It will break this level too...and will slide to kiss 211-204 level.
(Watch price level of Rs.150.......very shortly )

4. Lanco Infratech

Freeeeeeeefall on card !!On Rallies Sell-Sell !!
Future Traders.......Don't hold long position.
Stock will crash to kiss 380 & there after expect lower freeeze in single session.............!!!!

Technical trades for 25 Feb-08

BUY APTECH

Just want to eat Rs.5-10 profit ?

Then pls Don't trade in this stock..........This is a sleeping beauty will spurt by Rs.75-100 in hrs only.

(Catch it....before your Blue channels Analyst...starts BLA-BLA )

228.....will kiss 252-261-264

Whole India will say ........A for Aptech & A for Apple !!

Outlook for Week starting 25-Feb

Panic and Bloodbath in Heavy Weight and Sensex stocks.


1. Reliance Industries Ltd.

Below 2501......No Long positon
Stock will slide to kiss 2456 -2452 level & there after expect freefall upto 2430-2406 level.

2. Reliance Capital Ltd

Break below 1979 with volumes.......will take stock to 1849-1806 level in hrs only.

3. Reliance Power Ltd

Stock will show power above 428.50

(If crosses with volumes.....and closes above then expect nonstop rally upto Rs.453-460 )
-Other wise........Go short & enjoy another round of panic

4. Jet Airways

Our Ultimate target :Rs.641 (Yes ,641 )

Yes.......Panic on card in this stock.

Have a eye on Rs.753 level.Once breaks this level with volumes it will nonstop slide to kiss 726-721 level in minutes only.

5. Canara Bank

RED ......HOT SELL !!

Watch.........it had broken H&S neckline with volumes.
101%..........Below 284 ,NO BUYING POSTION !!
Nonstop slide upto Rs.245 level.

6. CESC Ltd

Have a eye on 505-499

Break with volumes......below 499 will crash to kiss 479-473 in minutes...........only !!
(Some very Intelligent persons had sold this stock...God knows ...Why ??? )

7. Unitech Ltd

Below.......368 ,No Long positon ...........small request.

Stock will slide to kiss 355 & there after expect freeeefall upto Rs.333-------------326 level !!!

WISDOM QUOTE : When we begin to understand we grow polite, happy, ingenuous.

Pick of the Week - 24-Jan-08

STOCK OF WEEK: Prithvi Info

BUY BUY BUY Prithvi Info

Equity: 18.08 Cr(BSE: 532675 | NSE: PRITHVI | ISIN: INE700C01013)

BSE: 274.20 1.25 (0.46%)
NSE: 269.50 -0.40 (-0.15%)

BUY : PRITHVI INFO @ 274: 275 TGT 292: 294


Prithvi was incorporated under the name Prithvi Information Solutions Private Limited on July 24, 1998 with the Registrar of Companies, Hyderabad, as a private limited company. In 2000, Prithvi was converted to a public limited company. The registration number assigned to Prithvi is 01-29831 of 1998-99. The Registrar of Companies, Hyderabad, issued a fresh certificate of incorporation on April 27, 2000. Prithvi Information Solutions Ltd is a provider of Technology and Process Outsourcing services that strategically harness the power of Information Technology to help clients maximize their business value. Since its inception in 1998, Prithvi has grown consistently and has served over 85 client relationships in US and India. Prithvi is one of the fastest growing companies in its field and has achieved a compounded annual growth rate of 84.16% since its inception.


The Company is a global provider of customized IT solutions and software services to clients and having the bulk of its operations in USA. It was promoted in 1998 by Ms V. Madhavi (based in Pittsburgh) and Mr. V. Satish Kumar (based in India). The company provides software solutions across a host of technologies and platforms. They have software solutions design / development centres and marketing offices in Pittsburgh U.S.A., Springfield VA, Lewis Center Oh, Sugar Land TX, San Ramon CA, Durham, Singapore and Offshore Delivery Centres in Hyderabad and Bangalore, India. Prithvi started its business in 1998 with outsourcing contracts for offshore software development and has, over the years, evolved into a solution provider with a number of services that meet most of its client�s outsourcing needs. Prithvi provides clients with smart solutions that enable them to derive strategic benefits, apart from operational and tactical advantages from deployment of technology. It was this guiding principle that made Prithvi tailor all its processes to understand and solve business problems faced by the client rather than the technological issues, and perform a rootcause analysis before suggesting a solution.


Prithvi�s solutions are characterized by innovation, and in order to convince Engagement Patrons and Decision Influencers in client organizations to implement forward-looking solutions, Prithvi has had to demonstrate exceptional flexibility in designing client work contracts to de-risk the engagement from the client�s point of view. This philosophy of sharing risks and rewards has helped Prithvi forge strong client relationships. The Company�s strong domain skills and customer-centric approach, has resulted in several strategic client relationships. The Company has invested in building a strong sales team and has a core team of 20 sales personnel covering the offices in USA. Several of the Company�s senior executives are based in client geographies and are focused on developing client relationships at senior levels. Sales and NP for year ended 06 � 07 were 1054.27 Cr & 100.96 Cr. Sales and NP for latest Quarter 291.73 Cr & 28.4 Cr. On YOY basis NP has increased by 25 % & based on quarter latest its increased by 22 %

Pick of the Week-17 Feb-08

STOCK OF WEEK: L&T (BEST BUY IN PANIC)

BUY BUY BUY LASREN & TOUBRO

Equity: 58.43 Cr,(BSE: 500510 | NSE: LT | ISIN: INE018A01030)

BSE: 3,536.95 29.80 (0.85%)
NSE: 3,538.15 36.80 (1.05%)

L&T was hitting a high of 4600 before the sharp correction, and is now available at around 3300
3400 levels. That is around 30% from its highs. Recently there was a study done by BCG (Boston consulting). They studied more than 3,000 companies from 14 developing countries to pick the the top global contenders. They primarily focused on corporations with annual sales of at least $1 billion, with 10 percent of their revenue coming from outside their home countries.L&T was one topping their lists.

Larsen & Toubro strength is to build infrastructure which is in short supply in India relative to demand. It's a very good engineering company with low-cost production. It is expanding its construction business overseas, primarily in the Middle East. Its global operations currently account for 25 percent of sales. This will bring a good increase in its margins. Order book growth of 25% and 30% plus growth in towline over next few years is possible. Larsen & Toubro
(L&T) will set up a `mini L&T' in the Middle East, in a bid to enhance its operations in the region

The company plans to increase the overseas share to 25-30% in the coming years and expecting $2-billion revenues from the region by 2010.

It has many subsidaries.
1. L&T InfoTech IPO is likely in H2 2008.
2. L&T Infra Development will go for IPO by 2009-10

L&T should be giving you good upside over the next 12-24 months time. One can keep a price target of around 5000 to 5200 in 8 to 10 months time.