Is Essar Oil Worth Buying in Current Market?

Essar Oil is one company that has made investors both rich and poor in the past. Relatively, it has almost always been a speculative play because the refinery initially never existed and once it was commissioned, the stock touched even 300 in 2008 without any fundamental reason. Things have changed now. The company is fundamentally much stronger but the script price range is somewhere between 50 to 55.

First of all, let us see the positives.

Essar oil has increased its capacity to 18MMTPPA and will further increase it to 20+ MMTPA by Sep2012. The complexity index has increased from 6-7 to 11.8, one of the best in the world and only second to RIL refinery in India. This gives Essar Oil refinery the capability to process much heavier crude oils which are way cheaper than high quality crude and hence will help to improve margins tremendously.This will increase GRM by upto $5 a barrel and that is something astounding!!

Add to this the fact the gas reserve (CBM block) that Essar Oil possesses that people simply  miss. It is the largest acreage in India and pilot production has already started. It wont be long before Essar Oil profits immensely from Gas sales.
Also, not only is Essar Oil a refining company, it is also an Exploration company and owns stakes in Oil Wells throughout the world and that is increasing steadily.

The Negatives:

The biggest negative is debt (above 22K crores) which is one of the primary reasons why the script is reeling under pressure. Add to this the income tax (almost 6K crores + Interest) that Essar Oil has to pay to Gujarat government. This becomes a very harsh play on the future cash flows of Essar Oil.

Positives vs. Negatives:

The company is a solid 42+K crore company and is bound to double its revenues by FY 13 end, thanks to gas production and doubling of capacity. The margins are going to increase significantly.
However, the cash flows are going to get used up in paying Debt and Tax to Gujarat government as well.
The promoters are very rich and company will come across any difficulties.

With almost all negatives accounted for in current script price, we feel Essar Oil is now a fundamental play and investors can invest in the stock. The results are definitely going to improve in near future and the way political scenario is shaping up between government and RIL, there is a huge possibility that Essar Oil may be a beneficiary.

We suggest to buy at these levels:

1) 25% of Intended quantity : 50-54
2) 25% of Intended quantity : 47 - 50
3) 50% of intended quantiy : 42-45

All said and done, if you are a long term investor and believe in fundamental story of Essar Oil, you can invest  in stock below 60 and you will be positively surprised within next one year. The stock has the potential to double within one year.

Cheers!
Invvest2Richness

Guaranteed as Ever - Another BUY Recommendation in this Topsy Turvy Indian Stock Market!

Hi Friends

We hope you have benefited immensely from our previous recommendations. In fact, we have been right more than 90% of the times and this has been a result of real hard work on our analysis of current and global market situations and businesses including the financial and political scenarios.
You can check the Buy levels recommended by us and scripts performance thereafter.

The newest script that has been on our radar for quite a while now has been PFS or PTC India Financial Services or PFS.
The company is a private public joint venture with PTC India as its parent company and GoldMan Sachs and Macquarie invested heavily in the venture. The company is putting all the right steps forward in making its future secure including funding from international markets at low interest rates and issuing of Infrastructure Bonds driving the costs lower for PFS. Also, the unique model to invest in equity markets to help power companies is paying rich dividends.

Hence, we suggest to buy PFS at the following levels:

1) 15.50 - 16 : 25% of intended investment.
2) 15 - 15.50 : 25% of intended investment
3) 14.50 to 15 : 50% of intended investment.

This investment will pay rich dividends in long term but even in short term, it can give good profits once the results are announced.

Cheers!
Invest2Richness.

Hot Recommendations - Market at 18289!! Buy or Sell?

Dear friends

In the interest of all investors, we are back with the richness guaranteed blog!
Now that market has risen at an amazing pace, if you feel that you have been left behind, that is not the case. This is just a suckers rally and the fundamentals have been worsening each passing day. Especially for Indian markets, oil at $120+ and Sensex at 18K plus does not make sense!! One has to go down fast and we know with Iran episode happening, it is not going to be oil.
Hence, we suggest people to sell most of the stocks at current values except 10 to 20% investment in HPCL and ONGC. However, in the same series, we are also recommending the following stocks as medium term buy and explaining the buys.

1) Shipping Corporation of India (SCI) - Baltic dry index has crashed and there is nothing worse for shipping industry. So, this is the right time for long term investors to keep a watch on shipping stocks.
We suggest to buy SCI at the following levels:
10% - CMP
20% - Rs. 62
30% - Rs. 58
40% - Rs. 51

There is a huge probability that the stock may not move below 60 but keep your eagle eyes on this one! An yes, do check the dividends which can cross 8% easily for you.

2) Essar Shipping - This is our hottest buy of the season.
Ruias are very intelligent people who know how to create wealth for themselves and for other few who understand their gameplans!.
We all know that erstwhile ESPLL (Essar Shipping,Ports and Logistics Limited) was listed as Essar ports Limited(EPL) in 2011 and a new company Essar Shipping Limited (ESL) was listed. Now, investors never got a chance to look at the businesses this company was controlling but the latest Q3 2012 results reaffirm what we always thought.
Essar ports is good and has been steadily growing. However, if you take a look at 2011 and earlier results of ESPLL, the subsidiaries or companies that generated maximum profits for ESPLL are listed under Essar Shipping and not Essar Ports. No wonder, the book value of ESL shown on moneycontrol is 250+!!
Also, every 3 shares of ESPLL were divided into 2 shares of EPL and 1 of ESL. Hence, out of around 600 million shares , 400 million shares are of EPL and only 200 million of ESL which makes float of ESL very low and hence EPS higher.
The gameplan was simple. List ESPLL as EPL but move the major business lines to ESL (Shipping/Charter, Logistics, Oilfield Services), reduce the number of shares and increase value tremendously. Hence, if Essar ports (EPL) trades at 70, ESL should actually trade at a premium to that, around 100!!
Now, we would suggest readers to catch ESL before it is too late (however watch out for 2G case hearing on 22nd feb and if script falls, catch more!). Buy at following levels:

1) 25% - Right Now!!
2) 25% - After Feb 22 after case hearing. Buy on dips if result is not in favor of Essar promoters else buy on rise as well.
3) 50% - Anywhere between 25 to 30! Just buy on dips.

If the script refuses to come down, catch the uptrend at following levels - 37+, 43+, 52+...after this there is no looking back!!

Cheers!
Invest2Richness