Created: Wednesday, 27 August 2014 13:39
Paint manufacturing shares are posting in growing revenues which is citing commencement of bull run in the sectoral industry following the hiking stocks of paint companies' on BSE. Stocks of top paint manufacturers including Asian Paints, Kansai Nerolac, and Berger Paints are performing over the highest expectations of market analyst starting last month and will probably continue the trend in the coming time.
Kansai Nerolac premiered first in the market as the shares of the decorative paint industry set a new life time high in July. Asian Paints and Berger Paints followed the league as their stocks marked fresh heights on the stock exchanges as early investors chipped in to buy equities for medium to long-term gains.
Painting industries growth is standing on pillars of strong demand and recovery in sectoral growth. The companies backed up with high demand destined to grow as their key pillar, demand of paints is generally higher during the festive season, on the way to Indian markets.
The industry advocates a profitable investment as falling of crude oil prices is another profit jumping news. Crude oil produces titanium oxide which is a key ingredient in production cycle of plastic paints.
In the first quarter of FY 2014-15, the three major companies in painting producing sector reported higher revenues pushed up by growth in volumes of sales. Industrial recovery followed country's economic growth where companies worked up to regain exploding market share.
Kansai Nerolac headed the industrial sector as it captured 45 percent of total revenues. Berger paints and Asian paints shared 20 percent each of the total profits flourished in the segment. Nerolac is leading Indian markets and standing among the top three positions in the world decorative and painting industry.
Berger is walking on the strategic motive to capture premium paying audience by creating higher brand equity value in the market over the previous year. The company bought out the market share under influence of small dealers unable to touch Asian Paints brand loyalty customers.
Asian paints is gaining on its strong position in the market which is consistently paying off its bills. The company nurtures on its key strength of strong pricing power due to consumer loyalty and trust.
It's expansion plan in the vertical of providing home accessories like modular kitchens and faucets did not produce estimated results according to some opposing analyst lower than optimistic analyst who are supporting the group.
Overall, the company is making a small investment compared to its large variant of working capital of 3.5 percent. Therefore, the company is still joyous on its return from painting vertical.
Economists are looking at the sector with blue eyes hoping to see further growth in the market of decorative paint companies who are launching new products. Key strength backing up the market growth enlisted is availability of premium products, regular demand of product and consumers high purchasing power.
Asian Paints is trading over 32 times FY-16 predicted profits, Berger Paints over at 27 times, and Kansai Nerolac up at 24 times, against their previous averages at 30 times, 20 times and 25 times, respectively. All paint companies are gaining after they prospects of growth improved in the market.
Created: Tuesday, 26 August 2014 18:04
Power sector stock dragged down Nifty and Sensex by 0.5 percent each though metal stocks pillared the pressure and kept Nifty 2 points above 7900-level and Sensex at 26,442.81.
Major power generating companies shares like Tata Power, Reliance Power and Adani Power lost out in the trade on Tuesday. Tata Power shed 3 percent, Reliance Power lost 4 percent and Adani topped the losing rate with 6 percent downfall.
The losing struck Adani and Tata after Supreme Court launched a stay order to stop compensatory tariff benefits to the companies under Appellate Tribunal's argument.
Two of the power majors gained approval from Central Electricity Regulatory Commission to gain favorable tariff charges in their Gujarat plant set up in Mundra Power Plant in February end.
Government of India (GOI) signed an approval allowing the companies to extend the charges of power supply over the existing rates set by State power distribution utilities. The additional charges over the normal rate of power supply meant to compensate the companies as profits are now on hold.
Companies are paying for high costing coal, imported to India to produce power. Tata and Adani requested GOI for collecting compensation over the prices to repay their expenses. Appellate Tribunal received a challenging report from the state distribution authorities which opposed the action.
Supreme Court decided to put a hold on the order and asked Appellate Tribunal’s court to take a decision at the earliest possible remark.
The unattributed stoppage in the hike of prices brought down the cited growth in companies' profit and earnings per share.
Tata Powers biggest project Mundra ultra-mega power plant having an installed capacity of 4,000 MW accounts for more than half of its total power producing capacity is affecting its entire power sector vertical. The plant commissioned in FY 2012-13 is struggling to keep up as the cost of imports of coal, its major source from Indonesia rose invariably after the country changed export laws in 2011.
Before supreme court's declaration imposing a stop on its previous dealing allowing power companies to collect compensatory amount, Tata Power planned to collect Rs 690 crore for recovering losses in Mundra plant in the previous fiscal. Company did not account for the amount in the planning until they received the final put orders. Therefore, Tata Mundra project recorded accumulated net loss of Rs 260 crore in the year ending 31 March 2013.
In Adani Power, Mundra plant is holding 4,620 MW capacity, which faced similar problems of recovering over primary costs. The company recorded aggregate loss of Rs 291 crore in the same time period. In case of Adani, the company recorded the loss after considering the compensatory amount offered of Rs 1,013 crore including an accumulated amount of Rs 830 crore for losses recorded at the end of last fiscal.
If supreme court decides to cancel the move then Adani will have to move down its profits, i.e. report a higher net loss further losing market shares.