Monday, December 19, 2011 Mehta Equities take on Orchid Chem, TCS, Opto Circuits Source: IRIS (19-DEC-11) Mehta Equities take on Orchid Chem, TCS, Opto Circuits Source: IRIS (19-DEC-11)

In an interview with, Prashanth Tapse, AVP Research, Mehta Equities gave views on three stocks which were buzzing on Monday, Dec. 19. The same is as follows:

Orchid Chemicals: Orchid Chemicals has been on a downtrend charts since July 2011 on the back of its concerns on FCCB redemption which is due on Feb 2012. To overcome with the above transaction company has now raised USD 100 million debt through external commercial borrowing (ECB) which going forward it will be used to repay the bonds for USD 117 million in February 2012. The differential gap between the total FCCB amount and the ECB raised will be easily met through internal accruals. These ECB terms are better than the interest that is there on FCCB bonds which we are going to repay. The bonds that are currently outstanding are having 7.25% to YTM on a five-year bond, and the rates and tenure both are better than 7.25% and the tenure is longer than five years.

Overall the fundamental scenario stands out to be neutral, while technically charts are reflecting a negative trend with a strong support seen at Rs 106/100 in the near term. Hence we recommend a ``Sell`` call.

Shares of the company declined Rs 13.85, or 10.24%, to trade at Rs 121.40. The total volume of shares traded was 3,607,101 at the BSE (2.27 p.m).

Tata Consultancy Services: Tata Consultancy Services (TCS), India`s biggest exporter of software services by sales reported its plans to make an initial six billion rupees (USD 113 million) investment to set up a new software development center in Nagpur, Maharashtra state. The center will be built in two phases and will house 16,000 employees. We believe that the above plans are to tap the potential demand for outsourcing services going forward in Asian markets. India being the leading outsourcing hub hence TCS takes prior step. Currently TCS has outsourcing services exposure to places like U.S. and Europe- grapple with slow growth, high unemployment and a debt crisis.

Technically TCS has given negative breakout near 1,175 level, and trend continues towards 1105. If breaks one can see 1,045 on short term basis.

Shares of the company declined Rs 6.85, or 0.6%, to trade at Rs 1,136.65. The total volume of shares traded was 99,493 at the BSE (2.28 p.m).

Opto Circuits: Opto Circuits a leading global medtech conglomerate is more active on the counter after long halt. As per over understanding Debtor days are moving on the higher side which is currently 128 days which is above industry standards with Nihon Koden (108 days), Medtronics (89 days) and Boston Scientific (66 days). On overall basis it has export more than 90% of the total sales Rs 15.85 billion (2011). With exposure seen in countries like USA, Europe, South-East Asia, Latin America and the Middle East we see some pressure is building on its future profitability.

Technically 165-170 would be the level for long term accumulation.

Shares of the company declined Rs 8, or 4.1%, to trade at Rs 187.05. The total volume of shares traded was 47,609 at the BSE (2.28 p.m).

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