Friday, December 17, 2010

Hanung Toys & Textiles - Short Term & Long Term Targets

 Hanung Toys & Textiles (BSE: 532770, NSE: HANUNG) had found firm support at Rs. 170 levels during the last correction. For long-term investors in Hanung, this should be of some comfort, as it did not go down all the way back to its 52-Week Low levels of Rs. 108/106. 

But many short-term investors would now be in serious loss at this counter, which was showing great promise until the broad correction hit the markets. Non-index shares like Hanung, that doesn't fall into even any of the broader indices like BSE 500 or NSE CNX 500 were especially hit. 

After such a free fall, and slight recovery, many new investors might consider Hanung a good bet, and many older investors in this counter might average by buying more to cut losses. This can present an upside for this stock, going forward, on a short to medium-term basis. In a continuous positive environment for small caps / mid caps, Hanung may easily take out the immediate resistance of Rs. 232.  The price-earning valuations are also attractive for achieving this target, hovering around just 5. 

However, short-term trading wise, the scrip might slip a bit, especially on a bad day for small cap / mid cap indices. On a serious downturn in the markets, the key level to watch would be Rs. 170, below which the Hanung scrip can go very weak.

In any case, it will be very difficult for Hanung to scale back quickly to its 52-Week High levels of Rs. 414, as most of these companies would now be very wary whether any so-called operators are jacking up their prices, thus inviting regulator scrutiny. 

But Rs. 300-310 levels seems possible in the medium to long-term, as Hanung Toys has comfortably traded in the past at those twice-the-book-value levels. 

On the fundamental side, the postponement of the QIP will be attractive as it will postpone the equity dilution. Also, though the proposed share buyback was cancelled, and it was taken as a negative, Hanung's intention behind that - to conserve funds for expansion - seems sound, as the QIP won't happen now. 

Future events to watch at Hanung would be the third-quarter results - whether it continues the good performance of the past quarters, and the annual results to ascertain book-value growth.

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