Chooses not to undertake big contracts that carry a bigger risk.
Thermax plans to grow slowly but steadily in the booming power industry of India, making money without risking its shareholders, said MD and CEO M S Unnikrishnan in an interview.
Thermax, a leading maker of small capacity boilers for power plants, gets 65 per cent of its revenues from boilers and engineering, procurement and construction orders.
Yet, Unnikrishnan said the company would not go overboard with it, and resist taking EPC orders that are sized more than half its annual turnover.
“Typically, power units take 4-5 years to be commissioned. So, if you put all that you have to execute a big contract, it can boost your order book, but will carry a long-term risk,” Unnikrishnan said.
Thermax currently has an order backlog of Rs 2,700 crore, which comprises boilers, water treatment equipment, air pollution control equipment and speciality chemicals.
Capital expenditure
“Our conservative approach has won the confidence of our shareholders. At the worst of times, our two-rupee face-value shares have traded at about Rs 600,” he said.
Thermax recorded sales of Rs 2,330 crore in 2006-07. He said it is expected to grow 40 per cent this year, while the company will “maintain profitability”. The company’s net profit for 2006-07 was Rs 194 crore.
Thermax made a capital spending of Rs 425 crore during the current financial year, but is likely to incur much lower capital expenditure in 2008-09, he said.
“We will add to our boiler and heater capacity and also enhance our other businesses,” he said, without elaborating.
Thermax shares closed at Rs 525.15 on Wednesday last week, a loss of over 13 per cent over its previous weekend close.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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