WALCHANDNAGAR INDUSTRIES LTD; BEST ENTRY PRICE

                                   CMP 68                                                BSE 15814

TECHNICALS:

• The long term Price Charts clearly indicate that the Stock has troughed out at 57 levels intraday on 23/12/2011. The bounce back from 57 was swift and it closed at 64 levels on the same day.
• The Charts are pucca positive at the moment with the Stock having closed above its 30 SMA (67) on large volumes. On the upside, the next levels to watch out for are 73 and in case taken out on a closing basis, then 95.

FUNDAMENTALS:

• The Company is one of the oldest diversified high-tech Heavy Engineering Project Execution entities with  strong Engineering and Project Management capabilities. It boasts of sophisticated and modern Manufacturing infrastructure to undertake both Projects as well as supply of machinery and equipment in the fields of Nuclear Power , Aerospace, Defence, Steam Generation plants, Independent Power Projects etc.  It is also engaged in the manufacture of Gray Iron and Ductile Iron ( S.G.Iron) castings for specialised applications in the infrastructure Sectors, in particular the Nuclear Power Sector. The reason why I have given this longish fundamental intro is to emphasise that the Company is a good proxy for specialised and pre-qualified needs of Sectors such as Nuclear Energy, Space Applications etc.
• One is a little wary of talking about Corporate financial Performance for the Infra Sector knowing the macro hurricane headwinds that the Sector has faced over the last two odd years. However, the Company's core operating financial performance has been none too bad in the last year (September to September FY) and has been mainly blighted by high Interest costs (what else?!!!) and a biggish mtm forex loss. But, the core operating numbers for the three segments of Heavy Engineering, Foundry and Machine Shop and Precision Instruments have been pretty good given the extenuating circumstances.
• The perceived turning of the Rate Cycle gives one the confidence of better performance in the coming Quarters.
• At CMP 68 the Stock is trading at 20x FY 11 (ie September 2010 to September 2011 being the FY for this Company) which optically looks expensive but let us qualify this by saying that FY11 was perhaps one of the relatively troughish years that the Company will see. Hereon things are likely to get better.
• It will be reasonable to expect an improved performance in the upcoming Q1 FY12 results of the Company with further fillip as the year progresses and the Rate Cycle eases out.
• In order to take full early mover advantage, I am of the opinion that long term Investors can safely buy in at CMP 68, ride the possible volatility and hold long term for better than expected gains.

-WALCHAND Q4 FY11 and FY 11 RESULTS  SEE HERE

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