Which of the Birla Groups in India is most valuable? – Part 4

Sundaramurthy Vadivelu

Disclosure Please click the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

In this last part of article series let us discuss about the Aditya Birla group. The group manages the following companies in India.

• Grasim Industries (Viscose staple fibre, grey cement, white cement, sponge iron, chemicals and textiles)

• Hindalco Industries (Alumnium and copper)

• Aditya Birla Nuvo (Carbon black, chemicals, fertilizers, textiles, garments and viscose filament yarn)

• UltraTech Cement

• PSI Data Systems

• Aditya Birla Minacs Worldwide

• Essel Mining & Industries

• Shree Digvijay Cement

• Idea Cellular

• Aditya Birla Insulators

• Aditya Birla Retail

• Bihar Caustic and Chemicals

In addition, the group has presence in other countries too. It manages 6 companies in Thailand, 4 in Philippines, 5 in Indonesia, 3 in China, 2 each in Egypt and Canada, one each in Australia and Laos.

The group has a market capitalization of USD 31.5 billion and a combined workforce of 100,000 in 25 countries. It was adjudged "The Best Employer in India and among the top 20 in Asia" by the Hewitt-Economic Times and Wall Street Journal Study 2007.

Summary:

Scrip/NSE Ticker	BSE Group	Scrip Code	Price 16-Nov
Grasim Industries (GRASIM)	A	500300	3837.00
Hindalco Industries (HINDALCO)	A	500440	203.75
Aditya Birla Nuvo (ABIRLANUVO)	A	500303	1562.00
UltraTech Cement (ULTRACEMCO)	B1	532538	1004.00
Idea Cellular (IDEA)	A	532822	127.00
Bihar Caustic & Chemicals (BCCL)	B1	500057	81.25

The following table shows the key financial ratios:

Scrip	P/E	P/BV	Gain since 01-Jan
GRASIM	20.19	5.65	38.14
HINDALCO	9.29	1.90	17.97
ABIRLANUVO	74.44	4.66	26.80
ULTRACEMCO	15.55	7.09	(5.52)
IDEA 1	75.45	29.81	69.33
BCCL	5.93	1.29	85.45

¹ Idea Cellular was listed on March 9, 2007 and the gain has been computed based on IPO price of Rs.75.

Grasim:

During July 2007, an “ascending triangle breakout” (bullish continuation pattern) occurred in the medium term chart of Grasim. The technical target of 3948 was achieved when the stock hit a high of 4051 a couple of weeks ago. As such, there are no reversal signs yet. Hence it can be concluded that the bull run should continue. The next target for the stock works out to 4602. However, the declining volumes during the uptrend is a concern.

Hindalco:

The stock had fallen by about 52% between May 2006 and May 2007 as can be seen above. The resistance at 192.70 could not be broken during the uptrend that started in May. However, it has now successfully closed above it for two weeks in a row. The stock has already touched a high of 240 which is 100% retracement from the low of 120. It is likely to test the previous high at 251.30 when the uptrend continues. National Aluminium Company (NALCO) has gained 88.47% this year compared to Hindalco’s 17.97%.

Aditya Birla Nuvo:

We had already discussed about this stock in my previous article, “Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 1”.

I had mentioned that the stock is bullish for the medium term. It is on a corrective decline now and it should find support at around 1400 levels. The support trendline is intact and we need to wait for a confirmation for a trend reversal. The next target for the stock works out to 2000.

UltraTech Cement:

This stock has so far not yet closed above its resistance at 1250 in medium term chart. However, the support trendline has not been broken. There are no reversal signs yet. In the absence of such confirmations, it may be concluded that the bullish trend will continue. The projected technical target for the current upmove is 1324.

Idea Cellular:

Like UltraTech, this stock is also bullish and it is on a decline. Suport exists at around 117. Once again, let us wait for a technical confirmation for a trend reversal.

Bihar Caustic & Chemicals:

This stock too, is bullish. It broke the previous resistance at 65.50 three weeks ago with good volumes. We can see a bullish “triple bottom” formation. This is a highly bullish sign and the stock is expected to reach a target of 121.50 in the medium term.

Conclusion:

All the six stocks belonging to Aditya Birla group are bullish in the medium term charts.

Grand Finale: The India Street verdict

Parameter	MP Birla	GP – CK Birla
Stocks	4	2
Bullish stocks	1	2
Price appreciation above 20% since January 1	1	2
Growth stocks (High P/E)	1	1

Parameter	KK Birla	Aditya Birla
Stocks	6	6
Bullish stocks	4	6
Price appreciation above 20% since January 1	4	4
Growth stocks (High P/E)	1	2

The GP – CK Birla group is the smallest as far as number of listed companies are concerned. Only one stock from MP Birla group is bullish. KK Birla and Aditya Birla groups have six listed stocks each and technically, all the Aditya Birla group stocks are bullish compared to 4 of KK Birla group; two of its companies (Aditya Birla Nuvo and Idea Cellular) are ‘growth’ stocks compared to Texmaco of KK Birla group.

Kumar Mangalam Birla

Therefore, we can conclude that the Aditya Birla group companies are more valuable in Indian stock market.

Sundaramurthy Vadivelu

Suggested Reading

Which of the Birla Groups is Most Valuable? Which of the Birla Groups in India is most valuable? – Part 2 Which of the Birla Groups in India is most valuable? – Part 3

Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 3 of 3

Sundaramurthy Vadivelu

Disclosure Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

Now, it’s time to analyze the “Family Named” stocks based on:

• Performance in the last five years

• Valuations (Price/Earnings and Price/Book value ratios)

• Current technical status

Ranking based on stock performance:

Scrip	5 year return	Scrip	1 year return
KIRLOSOIL	3,011.65	ABIRLANUVO	85.04
BAJAJHIND	2,804.17	JINDALSAW	59.08
ABIRLANUVO	1,774.42	SRIADIKARI	41.54
DALMIACEM	1,755.15	RPGCABLES	37.93
M&M	1,625.08	KIRLOSOIL	32.36
JINDALSAW	814.07	DALMIACEM	14.53
TATATEA	400.19	TATATEA	6.86
RPGCABLES	344.44	M&M	5.78
PATNI	NA	PATNI	(0.62)
SRIADIKARI	(26.75)	BAJAJHIND	(47.39)

It can be seen Aditya Birla Nuvo and Kirloskar Oil Engines find a place in the top 5 based on stock performance.

Ranking based on valuations:

The following table sorts out the stocks based on P/E and P/BV ratios.

Scrip	P/E	Scrip	P/BV
ABIRLANUVO	77.17	M&M	4.92
TATATEA	24.33	ABIRLANUVO	4.81
RPGCABLES	21.67	KIRLOSOIL	4.02
KIRLOSOIL	20.62	DALMIACEM	3.19
M&M	18.61	TATATEA	3.10
PATNI	15.73	JINDALSAW	3.01
SRIADIKARI	13.95	PATNI	2.77
BAJAJHIND	12.87	BAJAJHIND	1.80
JINDALSAW	10.57	SRIADIKARI	0.87
DALMIACEM	8.28	RPGCABLES	(8.26)

In my previous article, “Top value stocks in Indian markets” we discussed the relationship between P/E ratio and P/BV ratio. These two parameters can help an investor to identify “growth” and “value” stocks in the market. Growth stocks usually have high P/E and P/BV ratios, which means that these stocks are relatively high-priced in comparison with the companies’ net asset values. In contrast, value stocks have relatively low P/E and P/BV ratios. Most growth investors are willing to pay a fairly high price for a stock whose earnings they expect to go up higher. Value investors (Rakesh Jhunjhunwala for example) view cheapness as a major factor. They focus on stocks that are relatively cheaper.

Aditya Birla Nuvo and Kirloskar Oil Engines can be classified as “growth” stocks whereas Patni Computer Services and Jindal Saw can be classified as “value” stocks.

Ranking based on current technical scenario:

The following tables shows the summary of the technical status of stocks for short term, medium term and long term. It is to be remembered here that these can change when confirmed reversal signals appear on charts.

Since Sri Adhikari Brothers Television Networks will be suspended for consolidation of face value, it is excluded from our analysis. Its status need to be ascertained after relisting.

Scrip	Short term	Medium term	Long term
ABIRLANUVO	Bearish	Bullish	Bullish
BAJAJHIND	Bullish	Sideways	Bearish
DALMIACEM	Bullish	Bullish	Bullish
JINDALSAW	Bearish	Bearish	Bullish
KIRLOSOIL	Bullish	Bullish	Bullish
M&M	Bearish	Bearish	Bearish
PATNI	Bearish	Bearish	Bearish
RPGCABLES	Bearish	Bearish	Bearish
SRIADIKARI	-	-	-
TATATEA	Bearish	Bearish	Bearish

It can be seen that Aditya Birla Nuvo and Kirloskar Oil Engines are bullish for both medium term and long term.

Conclusion:

Kumar Mangalam Birla

Atul C Kirloskar

Based on the above analysis, we can conclude that Aditya Birla Nuvo and Kirloskar Oil Engines are the winners in this contest.

Sundaramurthy Vadivelu

Suggested Reading

Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 1 Which of India’s Top 10 “Family Named” Stocks is Most Valuable? – Part 2 of 3

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

Sundaramurthy Vadivelu

Disclosure Please click on the above link to view the disclosure document before reading this article. The contents may not be reproduced in any form without obtaining prior permission from the publisher. Please send your feedback

In part 1 of this 3 part article series, let us analyze ten stocks which have “family names” to determine the best performing Indian family stock. Like we have done with cricket team values, we endeavor here to find the best performing Indian family named stock and determine which family is most valuable. We also seek to determine which family stock will have the greatest potential in terms of appreciation.

OK LET THE COMPETITION BEGIN!

The first 5 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. The 2nd set of 5 family stocks will be published in Part 2, with the 3rd part of the series giving a ranking and summary of the stocks.

Summary:

Company	Group	Scrip Code	Price 19-Oct
Aditya Birla Nuvo (Textiles)	A	500303	1612.00
Bajaj Hindusthan (Sugar)	B1	500032	174.25
Dalmia Cement (Cement)	B1	500097	504.60
Jindal Saw (Pipes)	A	500378	568.55
Kirloskar Oil Engines (Engg. Equipments)	B1	500243	352.55

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.

http://groups.google.com/group/theindiastreet/web/ABIRLANUVO_D_191007.jpg

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.

http://groups.google.com/group/theindiastreet/web/BAJAJHIND_D_191007.jpg

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.

http://groups.google.com/group/theindiastreet/web/DALMIACEM_W_191007.jpg

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.

http://groups.google.com/group/theindiastreet/web/JINDAL_FAMILY_TREE.jpg

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.

http://groups.google.com/group/theindiastreet/web/JINDALSAW_M_191007.jpg

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.

http://groups.google.com/group/theindiastreet/web/KIRLOSOIL_W_191007.jpg

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.

Click here for Part 2 of this series

Sundaramurthy Vadivelu

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