Bharti at 52-week low: Time to buy?

The telecom industry continues to weather rough storms. In the throes of an intense pricing war in a bid to woo subscribers — especially by the newer entrants — apart from concerns relating to irregularities in the Department of Telecom’s (DoT) allocation of 2G spectrum and a harrowing delay in the 3G auction, the sector’s cup of woes seems to be running over.

Industry leader Bharti Airtel is especially facing a tough time. The bellwether, which a few months ago called off an attempt to strike a merger deal with South Africa’s telecom giant MTN, faces the threat of competition biting away at its subscriber base with lucrative pricing and the prospect of declining average revenues per user (ARPUs) — the industry benchmark used to measure a telco’s financial health.

In a recent interview with CNBC-TV18, industry veteran Rajeev Chandrasekar, former chairman of BPL Mobile and now a Rajya Sabha MP, said the telecom sector was on the verge of a fundamental shift in dynamics. “We are going from a model where there were two or three well capitalised strong players in this market — the Bhartis and the Vodafones — to a market where now we will have most likely six-seven players, all very well capitalised and strongly positioned to take high market shares in the incremental market,” he said, adding that newer players like Tate DoCoMo and Reliance Communication would do to Bharti and Vodafone what these leaders did to BSNL 10 years ago. “The best days for incumbents like Bharti, Vodafone, BSNL and Idea are behind them.”

Stock at 52-week low

Bharti Airtel, announced its second quarter FY10 results on Friday, which were quite disappointing. The company’s net profit declined 7.8% to Rs 2,321 crore as against Rs 2,517 crore on a quarter-on-quarter (QoQ) basis. Soon after, the Bharti Airtel stock hit a 52-week low at Rs 290 on the exchanges. The stock was, two months ago, quoting a price of Rs 450.

Is Bharti now so beaten-down that investors can buy at it current levels or is it wiser to stay away from it at even these levels, given the outlook of the telecom sector?

Stock close to bottom

“For Bharti, we are closer to the end now in terms of price damage,” says Sanjay Chawla of Anand Rathi Securities. “However, it is the time correction that is likely to be extended and that may well last for another three-six months.”

Chawla adds that market is eyeing two-three developments closely: the impact of tariff cuts on its margins and evidence of the pricing war bottoming out.

“Also, with the Unitech-Telenor launch, Docomo making rapid inroads and number probability to launch soon, the effect of that remains to be seen,” he says. “We don’t see that the time correction is going to end until Q1 results are out.”
He, however, added that stock was close to bottoming out and may stay at current levels for some to come.

“The earnings numbers that we saw are disappointing particularly the fact that the average revenue per user (ARPU) has declined 8% — even when the entire tariff cut was implemented much later,” says Hemang Jani, Senior Vice President, Sharekhan, adding that there was a feeling that the stock may under-perform for the next six months given the competition.

“However, the way I look at Bharti, it’s a company that makes a net profit of Rs 8,500 crore, available at about 11-12 PE and I don’t think we are going to see this kind of a scenario playing out for too long. From an investment perspective at 11 times forward PE, Bharti definitely looks attractive.”

Watch out for ARPUs ahead

Shubham Majumder of Macquarie Securities feels that even as the stock looked attractive for long-term investors at current levels, one needs to watch out for a few developments. “Brokerages’ estimate for Bharti’s earnings per share (EPS) could be scaled down further if its embraces per second billing and number portability, which could affect its post-paid user segment where profitability remains high,” he says.

“Also, we could see pressure on the text and data side of the business because as of now, all of this tariff action is limited to the prepaid, which essentially is the Rs 100-200 ARPU bracket,” Maajumder says. “When you see action move to the Rs 400-500-800 ARPU customer — that is when you really need to start to worry for players like Bharti and Vodafone because they cater to a majority of the high ARPU and a high value market.”

Source: Moneycontrol

Reliance Infratel files draft prospectus for IPO

Anil Ambani group firm Reliance Communications on Thursday said its telecom tower subsidiary Reliance Infratel has filed the draft prospectus for its initial public offer with market regulator SEBI.

"Reliance Infratel has filed its draft red herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI)," RCom said in a filing to the Bombay Stock Exchange.

Reliance Infratel, a passive telecom infrastructure provider, is planning an IPO for divesting 15.60 crore equity shares of Rs 10 each for cash at a premium to be decided through a 100 per cent book building process.

The net issue would constitute 10 per cent of the post-issue paid-up equity capital of the company, the statement said.

Source: EconomicTimes

Avoid stocks that ran up 20-50% in last few weeks: JM Fin

Gautam Shah, Technical Analyst, JM Financial Services said, the markets may see 5-7% correction in the near-term as the technical indicators were showing that the markets were overbought. He said he would avoid stocks that ran up 20-50% in the last few weeks. He advised to book part profits now. However, he quickly added that the markets would see 20-25% upside after the short-term pullback. The Sensex trading base was at 16000 levels, he said. His medium-term target for the Sensex was at 18300 and for the Nifty was at 5550.

He didn’t see too much upside in autos and technology stocks. However, he was positive on oil, power, banking, capital goods and realty stocks.

Source: Moneycontrol

Alembic (Rs 50.2): Buy

We recommend a buy in the stock of Alembic from a short-term perspective. It is apparent from the charts that the stock has been on an intermediate-term uptrend since October 2008 low of Rs 24.7, which is a multi-year low. In early July, the stock found twin support at Rs 35, from the intermediate-term up trendline as well as key support level. Subsequently, the counter resumed its uptrend and has been on a medium-term uptrend too. On August 27, the stock broke through a significant resistance at Rs 45 by surging 8 per cent accompanied with high volume. Besides, it gained 7 per cent with high volume on September 23. The stock is trading well above its 21- and 50-day moving averages. The daily relative strength index (RSI) has entered the bullish zone and weekly RSI is featuring in this zone. The weekly moving average convergence and divergence indicator is steadily rising in the positive territory. We are bullish on the stock from a short-term horizon. We anticipate it to move up until it hits our price target of Rs 56. Traders with a short-term perspective can buy the stock while maintaining a stop-loss at Rs 47.5.

Source: thehindubusinessline

Buy JP Associates at Rs 197-200: Gujral

Buy Jaiprakash Associates at Rs 197-200, says Technical Analyst, Ashwani Gujral.

Gujral told CNBC-TV18, "JP Associates is weakened; it had a breakout above Rs 257 but the management used it. Now if one wants to buy it, around Rs 197-200 is a strong support, there people could try and get into it."

Source: Moneycontrol

Buy Alembic, says Ashwani Gujral

Buy Alembic with a stoploss of about Rs 46, says Technical Analyst, Ashwani Gujral.

Gujral told CNBC-TV18, "Midcap pharmaceutical particularly smaller ones like Aarti Drugs, Alembic did well yesterday. So there is some sort of momentum there. Alembic you could buy with a stoploss of about Rs 46 and the target here could be Rs 54 and then Rs 57. The idea here is that if the global markets are getting into some kind of a dip, we could have probably another 100 points towards that 4,800 kind of level but that will not happen in a very sharp kind of move. You will have jagged up and down kind of days and finally we will probably end the pullback around 4,800. So the idea has to be that if you are getting a gap down, don’t go and sell into it, try to buy and play for some sort of a pullback.”

Source: Moneycontrol

Buy Paper Products, says Gujral

Buy Paper Products with a stoploss of about Rs 58, says Technical Analyst, Ashwani Gujral. It has target of Rs 71.

Gujral told CNBC-TV18, "Some of the paper stocks did quite well and this one also moved higher. One could buy with a stoploss of about Rs 58; target here is about Rs 71. Most of my calls are buy calls because as long as the market stays above 4,800 to about 4,825 it’s above every major moving average and it’s holding the trend line which started from 2,200. So the trend remains intact and on dips one should expect to buy.”

Source: Moneycontrol