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Small & Beautiful Dt. 06.03.2008

Roto Pumps (55.00) is a reputed manufacturer of progressive cavity pumps and twin screw pumps which have very wide application in agriculture, domestic and industrial sector. Besides India, it has warehouse cum marketing office in Australia and U.K. and also good network of distributors spread across the globe. On the back of strong industrial growth and robust demand for its product, company has undertaken an expansion cum modernization plan at its manufacturing facilities. It recorded 20% growth in sales to Rs 28 cr and 40% rise in net profit to Rs 2 cr for nine months ending Dec’07. Accordingly it may register a topline of Rs 40 cr and bottom-line of Rs 3 cr for fiscal year 2008. This translates into EPS of Rs 10 on a tiny equity of Rs 3.09 cr. Moreover for FY09, company has the potential to post an EPS of more than Rs 12. At the current enterprise value of Rs 23 cr, scrip is trading fairly cheap.

Blue Bird (40.00) is one of the leading manufacturers of paper based notebook products and office stationery products like executive notepads, diaries, arch-lever files, registers, filler papers and folders. Although notebook forms the core business with more than 80% revenue, company has also ventured into publishing academic textbooks and self study books for children apart from general publications in subjects such as ayurveda and biographies. It also offers commercial printing under which it designs and prints annual reports, brochures, catalogues, calendars, greeting cards, magazines, text books, publications etc. In order to cater the central and south India market efficiently, company has recently put up two new plants at Indore and Bangalore apart from having its main plant in Pune. It is also expanding its distribution network and has ambitious growth plans for publication division. For FY08 it is expected to register sales of Rs 485 cr and PAT of Rs 28 cr i.e. EPS of Rs 8 on equity of Rs 35 cr.

Asian Granito (55.00) is one of the largest producers of vitrified tiles in India under the brand name “Asian Tiles” offering a wide range including glazed, unglazed, rustic, matte, homogenous and non-homogeneous body, water jet cutting and tailor made designs as per clients requirement. In July 2007, company raised around Rs 68 cr thru IPO @ Rs 97 per share for setting up a wall tile unit and expanding its vetrified tile capacity. Accordingly, it has recently expanded its vitrified tile capacity to 16,000 sq mtr from 14,000 sq mtr tiles per day. Importantly, company has even started the trial run in Jan’08 at its new wall tile plant having a capacity of 9300 sq mtr per day. On the other hand its wholly owned subsidiary Asian Tile Ltd is into the business of manufacturing ceramic floor tiles with a capacity of 7,000 sq mt per day. Financially, it is expected to clock a turnover of Rs 200 cr and net profit of Rs 26 cr i.e. EPS of Rs 12 for FY08. For FY09 it is estimated to post 15 Rs EPS. Considering its brand value and future prospects, it is available fairly cheap at an EV of Rs 175 cr.

PBA Infrastructure (74.00) is engaged in execution of civil engineering projects and specializes in construction of highways, dams, runways and heavy RCC structures, bridges and other infrastructure projects of various govt bodies. It is executing projects from Kashmir to Kanyakumari and has taken up new works like toll collection and quarrying to augment its income. For the first three quarters its revenue increased by 45% to Rs 270 cr and NP increased by only 20% to 11.50 cr. Notably, company has been regularly bagging new orders and its current order book position is around 700 cr. Fundamentally, company is having a huge debt of 170 cr due to which its interest cost is very high. However, to fund its working capital requirement and reduce the high cost debt, company has finalized to make pref allotment of 30 lac warrants to promoter and promoter group. Meanwhile it is estimated to clock a turnover of Rs 375 cr and PAT of Rs 13.50 cr for FY08. This translates into EPS of Rs 10 on current equity of Rs 13.50 cr. Although share price can fall further, still its good to start accumulating from current levels.

Paramount Cables Infratech Ltd - 33.00 Rs

Incorporated in 1978, Paramount Cables Infratech Ltd (PCIL) erstwhile Paramount Communication Ltd, is the only Indian cable company to offer comprehensive range of specialized cables & wires needed by all sectors of the economy viz. power and electricity, thermal and nuclear power plants, space research, railways, telecom, IT, oil and gas, petrochemicals, steel, electronics & various other industries. Based on the product type, company has classified its business operation into three categories.

A. Power Cables: PCIL manufactures the entire range of cables for power sector including high tension & low tension power cables, Aerial bunch cables, control cables, instrumentation cables & thermocouple cables. Company derives nearly 55% revenue from this segment and is well positioned to take maximum advantage of the boom in the power sector because of its long-standing and prestigious track record with major players in the industry including NTPC, BHEL, Areva, L&T, various Electricity Boards, Power Grid, Reliance Energy, ECC, ABB. Alstom, Siemens amongst many others

B. Railway Cables: Ironically, Paramount is the single largest supplier of underground quad axle counter cables and underground signaling cables to the Indian Railways. It even supplies specialized instrumentation cable for underground and elevated Metro projects. Notably, more than 30% of total revenue comes from Railway alone.

C. Telecom Cables : With 15% revenue share, this segment offers a single point source for a wide range of high quality telecommunication cables which covers optical fibre cables, jelly filled cables, aerial telecom cables, buried service wires, installation cables, co-axial cables, computer cables etc.PCIL has two state-of-the-art manufacturing facilities at Dharuhera, Haryana and Khushkhera, Rajasthan. These plants are equipped with unique swing facility which enables it to shift from one type of cable manufacturing to other type depending upon the demand, thereby de-risking the business and increasing the capacity utilization. Last fiscal, company commissioned 1,500 km HT power cable capacity at its Dharuhera plant and increased the LT power cable capacity to 25,000 km. This year it has set up additional capacity of 30,000 km of LT and 2,000 km of HT power cables at the Khushkhera plant thereby taking the present installed capacity to 55,000 km of LT and 3500 km of HT power cables. On the back of robust demand company is further augmenting its capacity of LT by 35,000 km and HT by 2500 km. For this it has already commenced land development and civil construction on 25 acres of land just opposite to its existing plant. Post completion of this expansion which is expected to complete within this calendar year, PCIL will boast of having a capacity of 90,000 km for LT and 6,000 km for HT.More importantly, in Sept 2007, PCIL acquired UK based AEI Cables which is one of the oldest and internationally most reputed brands in the world, with numerous customer approvals and technological strengths. With a turnover of more than Rs 500 cr AEI claims a market share of 10-15% in UK and currently operates at 60-70% capacity level at its plant in Birtley, North East of England. Interestingly, this Rs 105 cr acquisition was substantially funded thru borrowings against the AEI Cables assets with PCIL actually infusing only Rs 25 cr. However AEI has made loss at PAT level for the first half of FY08, which PCIL is planning to turnaround by end of current fiscal.In order to fund its expansion plans, PCIL had raised more than Rs 65 cr in April 2006 thru GDR route @ Rs 40 per share. Subsequently in Nov 2006, it raised another Rs 120 cr thru FCCB, to be converted @ Rs 53 per share. Now it is planning to make preferential allotment of 91 lac warrants to promoters and promoter group which is expected to be made around Rs 35. To conclude, with huge investment in power sector, railway expansion plan and rapid growth in telecom sector, the cable industry in general and PCIL in particular is on exponential growth. Fundamentally, company reported stellar performance for FY07. However for FY08 it is estimated to report sales of Rs 450 cr and profit of Rs 35 cr on standalone basis. This works out to an EPS of more than Rs 3 on diluted equity (post conversion of all FCCB @ Rs 53) of Rs 21.50 cr with face value as Rs 2/-. On consolidated basis, the key trigger will be the turnaround of AEI cables. Once this UK subsidiary start reporting reasonable net profit, the share price of PCIL will shoot up substantially. Hence investors are recommended to keep accumulating the scrip at declines for a price target of Rs 50 (i.e. 50% return) in 12~15 months.

Greaves Cotton Ltd (GCL)

Established in 1859, Greaves Cotton Ltd (GCL) - part of B M Thapar group and well known as Greaves Ltd is one of India’s leading and well-diversified engineering companies. It manufactures a wide range of industrial products to meet the requirement of core sectors in India and abroad. GCL’s core competencies are production of diesel/petrol engines, gensets, agro equipment and construction equipment. Besides, it is also engaged in marketing high technology systems for marine, aviation and electronic applications. The business operations of the company are divided into four business groups strategically structured to ensure maximum focus on each business area and yet retain a unique synergy in the operations.

I. Engines - Power Generation Group (15%): This business group manufactures diesel engine (10 - 1000 HP) primarily for generating sets in the 15-550 KVA range, in both air-cooled and water-cooled versions and enjoys 15% market share in the domestic market. These engines also finds applications in barges, pilot launches, compressors, construction equipment, cranes, forklifts and various defense applications. Notably, GCL even manufactures dual fuel engines / gensets (30 KVA to 400 KVA) and gas engines / gensets (25 KVA to 300 KVA) operating on natural gas, bio-gas and producer gas.

II. Engines - Agro Equipment Group (10%): Under this group GCL manufactures light-weight, fuel-efficient, 2/4-stroke engines in 1 - 4HP range which are either marketed as complete pumpsets for the agricultural sector or as bare engines for multiple applications like water pumps, sprayers, construction equipments, allied agricultural machineries and more. With its plant in Chennai, this division boasts of making different types of petrol/kerosene run portable engines, sprayer engines, power tillers, portable gensets etc.

III. Engines – Automotive Group (55%): Engines including CNG/LPG variants manufactured by this division are for automotive, marine and industrial applications, with majority revenues accruing from the light-weight diesel engines used in 3-wheelers. Incidentally, GCL has been the sole supplier to Piaggio for more than a decade. To tap the emerging 4-wheeler SCV segment, company has indigenously developed the new generation twin cylinder engine with a suitable gearbox which has huge potential in coming years.

IV. Infrastructure Equipment Group (20%): GCL manufactures a wide range of products in both the road making & concreting equipment segments such as vibratory soil compactors, heavy/light tandem rollers, transit mixers, concrete pumps, batching plants. Secondly, company markets the entire range of CIFA and BOMAG tunneling equipments, which include shotcrete pumps, spritz system, tunnel forms, sprizzo, moulds, tampers, plate compactors, pneumatic tyre rollers, recyclers & refuge compactors amongst many other machines. It also deals in tunnel boring machine, roadheader, backhoes, stage loaders, lump breakers, conveyors, roof bolters, locomotives for mining, tunnelling and surface transport of famous international brands like Dosco, Clayton, WAM, SIM etcPresently, GCL has six manufacturing plants spread across Aurangabad & Pune in Maharashtra and Chennai, Ranipet & Gummidipoondi in Tamilnadu. In view of anticipated higher demand, company has last year set up an additional manufacturing facility for concrete mixers at its existing location in Gummidipoondi. Moreover, few weeks back it inaugurated its technology centre and a new diesel engine plant at Chinchwad, Pune equipped with the state-of-the-art facilities to manufacture new generation water-cooled multi cylinder medium HP diesel engines for one-ton four wheelers, gensets and industrial applications. As a part of company’s long term strategy to position itself in the global market, GCL last year acquired, Bukh Farymann Diesel GmbH (renamed as Greaves Farymann Diesel GmbH) which is engaged in the manufacture and marketing of single cylinder diesel engines and parts for Rs 25 cr.On the flip side, Piaggio – the largest client representing nearly 30% of GCL’s total revenue is planning to set up its own engine production facility, which is expected to be operational in 2010. However, the likely impact on this is expected to be more than offset by a combination of various initiatives being taken by the GCL, such as diversifying the application range of engines, focusing on global business opportunities by leveraging of 'Farymann' brand, introduction of newly developed twin cylinder engines and tying up new OEMs for SCV application. Moreover on the contrary, couple of weeks back Piaggio Group's Indian subsidiary signed a 8 year agreement with the company for purchase of mono-cylinder diesel engines for application on the three-wheeled vehicles manufactured by them. This implies that GCL will continue to be a single source supplier of such mono-cylinder diesel engines to Piaggio.On the other hand, its strong service and distribution network has helped GCL counter competition from China. To maintain its future growth company is putting special thrust on greater penetration in rural sector and targeting overseas markets for pump sets. In short, with ambitious plans to capitalize on the opportunities across the industrial, automotive and infrastructure sectors, GCL is set to boost its brand equity in the market. Although it ended FY07 on quite a robust note but for FY08 ending June 2008 it is estimated to clock a turnover of Rs 1400 cr and PAT of Rs 115 cr. This translates into EPS of Rs 24 on current equity of Rs 48.80 cr. At a fair discounting by 16x~18x times, scrip has the potential to touch Rs 380 ~ 430 within 12~15 months. Hence investors are advised to accumulate at sharp declines.

STOCK WATCH 29.03.2008

Lok Housing & construction (210.00) is having a land bank of whopping 1222 acres across Mumbai, Pune and Bangalore with development potential of 62.5 million sq ft. Most of the land has been acquired long back at very low cost and are located at Ambernath(80 acres), Kalyan(92 acres), Vasai(136 acre), Turbhe(180 acre), Pune(425 acres), Bangalore(240 acres) and balance 69 acre spread across Andheri, Malad, Khar, Thane & Virar in Mumbai. With the recent merger of Lok Shelter, company is now involved into lucrative business of urban rehabilitation and reconstruction projects as well. Hence, it has already submitted a proposal to the state government to rehabilitate tenants of about 300 unsafe cessed buildings in Mumbai and simultaneously develop 6 million sq ft in the heart of the city in association with MHADA. At the same time it has several residential townships under construction at Mulund, AMbernath, Khar, Virar, Thane, Kalyan, Marol etc. Importantly, it has finalized to make pref allotment of 50 lac warrants @ Rs 354 to promoters. Keep accumulating at declines.
Yuken India (190.00) is one of the reputed manufacturers of power saving hydraulic pumps & valves which are very popular in heavy engineering industry as effective means of automation and hence find extensive use in various key sectors like machine tools, material handling equipment, construction machinery, drill rigs, automobiles, defence, steel, power & cement plants, plastic machinery etc. Besides it also manufactures complete hydraulic power units as per customer specifications, cylinders, parison controllers, actuators, accumulators and power packs. Due to phenomenal demand, company has recently doubled its hydraulic casting products capacity to 2400 TPA and is further augmenting it to 6000 TPA within next 2~3 years. Besides it made a tie up with Hydrocontrols SPA Italy to produce and market state-of-the-art mobile control valves especially for agriculture, construction, earth moving and lifting machineries. For FY08 it is estimated to clock a turnover of Rs 100 cr and PAT of Rs 5.50 cr which translates into EPS of Rs Rs 18 on very tiny equity of Rs 3 cr. For FY09, EPS is estimated to shoot up to around Rs 25. It’s a screaming buy as scrip as corrected 50% from its recent high of Rs 400.
3i Infotech (125.00) is the fourth largest Indian software products company offering a comprehensive range of software products & solutions primarily for banking, insurance, capital markets, mutual funds, telecom, manufacturing, retail & distribution industries. It provides complete end-to-end outsourcing solutions to various industries mainly in the domestic market and specializes in non-voice based BPO services. It is also recognized as one of the major national players in the e- Governance consultancy space in India. Importantly, company derives revenues from products and services in a 1:1 ratio which differentiates it from other IT companies. In order to beat the competition and grow at a rapid pace, company is betting high on inorganic route and has adopted an acquisition-led strategy to acquire new capabilities and foray into new geographies in the BFSI space. With net dollar inflow of less than 10%, company is hardly affected by the rupee appreciation. On the back of excellent performance till now and considering the strong order book position, it is expected to report total revenue of Rs 1200 cr and net profit of Rs 175 cr on consolidated basis. This works out to an EPS of Rs 10 on fully diluted equity of Rs 175 cr. A good contrarian bet.
Aurobindo Pharma (310.00) is among India’s top five pharmaceutical companies with operation in over 100 countries and marketing over 180 APIs and 250 formulations. Infact it is one of the largest players in Semi Synthetic Penicillin and Cephalosporin space and is backward integrated into manufacturing key raw material P-Gen. Presently company derives nearly 70% of the revenue from the sale of APIs and intermediates while about 30% comes from formulations. Interestingly, it is one of the largest DMF filer with the US FDA from India with 114 DMFs filed to date. Besides it has filed 100 ANDAs in US and 40 ANDAs in Europe, out of which 62 approvals (both final and tentative) have been received from US and only 7 approvals from Europe. In order to increase its foot hold in Europe, company earlier acquired Pharmacin in Netherlands with a portfolio of 203 market authorizations; and Milpharm in UK having 100 market authorizations. For future, company is planning to invest around Rs 200 cr in SEZ at Jedcherla near Hyderabad, and Rs 160 cr in Pharma city near Visakhapatnam. To fund its growth plan APL has raised nearly Rs 900 cr thru FCCB route to be converted into equity shares @ Rs 1014 and Rs 879 in tranches. On a standalone basis it is expected to register a topline and bottomline of Rs 2200 cr and Rs 280 cr for FY08 i.e. EPS of Rs 52 on current equity of 26.90 cr and Rs 40 on estimated diluted equity of Rs 35 cr (assuming FCCB conversion @ Rs 550). A good bet in pharma space.

Small & Beautiful 27.03.2008

Avantel Softtech (67.00) designs and manufacturers repeaters, filters, splitters, tappers, combiners, couplers & amplifiers to enhance the capacity and coverage of wireless communication networks for use in GSM, CDMA and 3G networks. Interestingly, it has developed customized solutions for INSAT based mobile satellite services with advance microwave, digital wireless communication and signal processing products for defence and commercial market. Hence it offers mobile satellite services for messaging, tracking and all locations based services with appropriate network security. Using this same technology it provides specialized products like Ship borne terminal, handheld terminal, S-band receiver, UHF transmitter, burst demodulator etc which are one of its kind. It has also signed a Transfer of Technology (TOT) agreement with ISRO for supply of hubs and satellite interactive terminals for EduSat networks. Thru its govt recognized R&D division, company has developed a number of products for defence sector by ensuring compliance of stringent defence standards. Being Q4 the best quarter for company traditionally, it may end FY08 with sales of Rs 35 cr and profit of Rs 5 cr i.e. EPS of Rs 10 on equity of Rs 5.15 cr.

La Opala (31.00) is among the very few well-established domestic crockery brand in the country with a range of 100 products including dinner sets, tea sets, coffee sets, soup bowls & spoons, mugs, plates, casseroles, flower vases and other table wares. Infact, it is the market leader with 50% market share in opal ware and 20% market share for crystal ware. It is having good distribution network with approx 50 distributors & 9300 dealers. Apart from having pan India presence company is also exporting to 30 countries across the globe including US, UK, Spain, Belgium, France, Germany, Japan, Dubai etc. In order to meet the growing demand and increase its market share company has recently set up a new fuel efficient unit of opal ware at tax free zone of Uttrankhand with a capacity of 4,000 MTPA at a cost of Rs. 35 cr. Hence company has more than doubled its opal ware capacity to 7500 MT from 3500 earlier. However, although company has started trial production in Sept 2007, but due to synchronization problem, this new plant is yet to operate its full fledge production. Hence FY08 will not be a great year but for FY09 it is estimated to clock sales of 75 cr and PAT of Rs 7.50 cr i.e. EPS of Rs 7 on current equity of 10.60 cr. A risk free bet.

KEI Industries (80.00), the second largest power cable company in India is engaged in manufacturing of high and low tension cables (HT and LT), control and instrumentation cables, house wires and stainless steel wires. In near future it plans to manufacture Extra High Tension cables which will serve the modern power transmission segment. It is also contemplating to move up the value chain from manufacturing and supplying cables to executing EPC contracts and manufacturing and supplying transformers. Last week company started commercial production at its new 100% EOU unit in Alwar-Rajasthan for manufacturing of HT and LT power cables. Hence it has increased its capacity by 10,000 Kms thereby taking the total cable manufacturing capacity to 50,000 kms per annum. Company has already registered excellent performance for the first three quarters and may clock a turnover of Rs 900 cr and PAT of Rs 52~55 cr for FY08. This translates into EPS of Rs 7 on fully diluted equity (post conversion of all FCCB) of around Rs 15.75 cr. But considering company’s recent expansion and future growth plans it is estimated to report an EPS of more than Rs 10 for FY09. Scrip can appreciate 50% in 12~15 months.

Shanthi Gears (70.00) is engaged in the manufacture of gears, gearboxes, geared motors and gear assemblies both standard and custom-made. Its product portfolio includes a range of worm gear boxes, helical & bevel gear box, geared motor, custom built gear box, mill gear box, open gearing, CNC machine tools and products for the textile industry. It also manufactures high precision gears for marine and aviation industries. It has recorded 25% growth in sales to Rs 176 cr and 30% rise in net profit to Rs 32 cr for nine months ending Dec 2007. Notably, company makes gearboxes of 250 KV for windmills and is looking for technical collaboration to manufacture higher capacity gears for windmills. On the back of strong industrial and economic growth company is sitting on a strong order book of more than Rs 100 cr currently. For FY08 it can clock a turnover of Rs 250 cr and profit of Rs 45 cr which leads to an EPS of Rs 5.25 on fully diluted equity of Rs 8.60 cr with a face value of Rs 1/- per share. Moreover for FY09 it has the potential to register an EPS of Rs 6.50 which means scrip is trading fairly cheap at P/E ratio of 10x times. Besides, company is having around 18 acres of surplus land in prime location of Coimbatore which can fetch handsome value once sold.

Spanco Telesystems and Solutions Ltd.

Established in 1995 by Mr. Kapil Puri and Mr. Rajesh Chhabria primarily to manufacture and supply of EPABX, Spanco Telesystems and Solutions Ltd (STSL) is today one of the leading telecom systems integration and IT services company in India. From providing telecom integration services to MNC’s, PSU’s and Defense sector, STSL has evolved to extend its expertise into the dynamic space of Business Process Outsourcing (BPO) and Radio-frequency identification (RFID). In short company is operating in following four business segments:

I. Turnkey Solutions STSL’s core competency lies in offering telecom systems integration which includes implementation of multi-location, multi-services converged networks for carrying diverse multimedia traffic (voice, data & video) based on latest technologies like ATM, MPLS, Frame Relay, TCP/IP etc. In other words company undertakes the turnkey responsibility of supplying the requisite products and services under the PDIM (Plan Design Implement-Manage) model, thereby taking care of the networking and networking infrastructure requirements of the customer. It also offer network engineering services and acts as an ideal intermediary between Network Equipment Providers and Operators for the roll out of GSM/CDMA infrastructure across the length and breadth of the country. Notably, STSL has alliances with leading global companies like Alcatel, Nortel, Key Mile, Apropos, DMC Stratex Networks which help in bidding for large Indian contracts.

II. Business Process Outsourcing (BPO) After hiving off its domestic BPO activities ‘Sparsh’ to Intelenet, SSTL currently manages ‘Respondez’ state-of-the-art international call centre in Mumbai serving clients in the US and UK. It offers BPO solutions in the entertainment, retail, telecom, healthcare, banking and financial services sectors and also provides technical support to gaming companies. Importantly, SSTL along with 50:50 joint venture with Spice group bagged a 10-year contract to set up, operate and maintain Interactive Voice Response System (IVRS) and Regional Call Centres (RCC) for the Indian Railways. In alliance with BSNL as the telecom service provider company obtained the license to operate the various passenger & tourism information services on behalf of Indian Railways. Accordingly, the Integrated Train Enquiry System (ITES) in north, east, west and south zones is serviced by SSTL only

III. IT Services SSTL offers specialized IT solutions for an extensive range of embedded systems comprising device drivers, OS porting on newly designed chips and mobile programming. Besides offering e-governance, ERP product etc SSTL is among the early few to provide mobile application solutions like bill payments thru mobile etc. Infact company is looking to get patent for its M-Money product thru which one can make payment or literally transfer money thru his cellphone. Moreover it is one of the pioneering companies in India in the field of GPS/GIS which is actually a satellite-based locating and navigating utility that determines a user's precise latitude, longitude and altitude by tracking signals from satellites.

IV. Radio-frequency identification (RFID) In 2006, SSTL ventured into RFID space by acquiring 51% stake in Skandsoft Technologies - a pioneering software solutions company which is dedicated to revolutionize the upcoming world of automated business processes through technologies like Radio Frequency Identification (RFID) & Automatic Identification and Data Capture systems (AIDC). This company has a patented platform (middleware), SETU™, which allows organizations to make the optimal usage of RFID technology.On the infrastructure front, apart from 8 regional offices in India, SSTL has over 60 service and support facilities across the country. Internationally, it is present in the US, UK, Singapore and UAE. Besides, company has formed a joint venture “Spanco-GKS” with Golden Key Solutions of Oman to replicate its Indian business in the gulf region as well. It also has some technical tie-up with Great Wheel Corporation, Singapore. Further company is looking to acquire RFID service entity having presence in international market. Under BPO segment, company is once again focusing largely on domestic market and intends to become one of the largest domestic BPOs with about 25,000 employees and 15,000 seats in the next 2~3 years. Recently, SSTL has decided to transfer all its BPO related businesses including Respondez (international BPO), domestic call center operations and the IRCTC project (a 50:50 JV with spice telecom group) into a separate subsidiary. This step may be a precursor to unlock value by hiving-off or de-merging its BPO business into separate listed company in future. Financially company is doing quite well and considering its strong order book position it may end FY08 with sales of Rs 625 cr and profit of Rs around Rs 48 cr on a standalone basis. This translates into EPS of Rs 23 on current equity of Rs 20.65 cr whereas on diluted equity of Rs 23.50 cr (post conversion of 28.50 lac warrants) EPS works out Rs 20. Therefore investors are strongly recommended to buy at current levels with a price target of Rs 280 (i.e. 40% returns) in a years time.

Selan Exploration Technology Ltd.

Incorporated in 1985, Selan Exploration Technology Limited (SETL) is one of the very few private sector listed companies, engaged in oil exploration and production. Infact it was amongst the first private sector companies to have obtained rights to develop oilfields way back in 1992 when government of India opened up the oil sector for private initiative in exploration and production of hydrocarbons. Earlier it use to undertake seismic data acquisition work for ONGC. Hence, the promoters/management have extensive experience and domain knowledge in the field of petroleum exploration, development and production as well as in the field of geophysical data acquisition, processing and Interpretation. So based on their expertise, company entered into the business of developing proven oil fields and was awarded three oil fields in 1993. Subsequently in 1997, SETL received Letters of Intent for two additional fields out of which one was gas field. Since then company is basically involved in onshore drilling for exploration of oil and gas.Presently, SETL boasts of owning four oil fields Bakrol, Indrora, Lohar, Ognaj and one gas field Karjisan; all in and around Ahmedabad, Gujarat. Incidentally, all the blocks have a well laid out infrastructure with easy accessibility and are in close proximity to the Government's crude gathering station as well as are in close proximity to a large industrial town. However, company has been producing crude from three oilfields only as the mining lease for Ognaj oilfield is still awaited from the government of Gujarat. But its Bakrol field alone is stated to have oil/gas reserves of around 45 million barrel which is huge by any standard. Against this, due to limitiation of funds and conservative management SETL produced only 100,000 barrels of crude in FY07 and is expected to do 140,000 in current fiscal which may move up to 2,00,000 barrels in FY09. With assured offtake of the entire oil and gas production from these blocks by the government, as per the terms of the production sharing contract there is zero marketing risk for the company. To take the advantage of high crude prices, SETL has been aggressively drilling new wells and is busy analyzing the well logging data to further identify prospective drilling locations which would be taken up for drilling in foreseeable future. Fortunately, these new wells are yielding good production levels.With international crude oil prices hovering around 100$ per barrel and expected to remain high, the future earning of the company looks very encouraging. Secondly, company is constantly following up with government of Gujarat for mining lease of Ognaj Oilfield. And once the lease is obtained, company will initiate the development activities in the block. Meanwhile this debt free company is expected to clock a turnover of Rs 35 cr and Net profit of Rs 15 cr for FY08. This leads to an EPS of more than Rs 10 on equity of 14.40 cr. However for FY09 it is estimated to post an EPS of Rs 15. To conclude, considering company’s proven huge oil reserve and encouraging future prospects, scrip is trading fairly cheap at a current market cap of merely Rs 225 cr. Investors are advised to accumulate at declines as scrip can appreciate 50% in 15 months.

Pre-Budget Info 2008

Have A Close Eye :
29-02-2008 is the Final Show of the Movie..i.e. Central Government's Budget.....
World's biggest democracy India's budget is going to be announced on 29th Feb.'08 from the bags of Shri P.Chidambaram, finance Minister. Common people of India, Media, Industrialists of India & abroad, FII's,Inst.Investors, Mutual Funds, HNIs, all are looking towards eyes of Shri P.Chidambaram. Whole World's Big Financial Heads are keenly waiting for 29-02-2008,cause
U.S. and Euoripean Economies are struggling against fear of economy and industrial slowdown, Where as Emerging Markets like India, China,Brazil, Russia are doing good since last 4-5 Years.
Lawyer from Chennai, Shri P.Chidambaram had given the budget for the financial year 1997-98 & since last 3-4 years. All were super-duper budgets for all common people, Industrialists, Economy,Development & also for the Stock-Market. This year also, people from all over India & abroad hoping for repetition of history. Even I also believe that Central budget would be as
good as P.Chidambaram's & Dr. Manmohansingh's image .Simultaneously he has to take care of Inflation,Sub-prime effect to Indian Economy, Rising Crude Oil Prices, Slowing Economic as well as Industrial growth,Further push to Agriculture growth so as to achieve agri sectors targets,Volatality of Foreign Markets & its effect on indian economy,market, Tax-payer's Expactations,Liquidity Flow Control,Interest Rates and Keep GDP Growth above 8.5 or 9 in coming years...etc. This time finance minister will get the full support of Prime minister who
himself was a finance minister & was the promoter of the Economic Reforms.Lalooprasad's Rail Budget is going to favourable.It seems that, this Central Budget is also people,Investor,Industry & Market Friendly. But he has to take care of Left parties, Tax plannings,Inflation,Economic
Reforms,PSU Disinvestments,Employment,Fresh investments,support to Indian industries for development & growth in India & abroad. Many Sectors are Waiting for good announcement. Many sectors are struggling against severe competition, so that sectors really needs to boost up and some good relief in taxation. Last few figures of Economic data, Industrial Data was poor but
Tax Collection data is coming out with mind blowing figures... roughly42% up…Record Break tax collection which fullfills Finance Minister's last year budgetary expactations. 29-02-08's budget will be well balanced,likely to focus more on Employment,Rural Development,Agriculture growth,Infrastructure Growth. Coming Budget can be called as " Comman-Man Budget "....
In coming budget following Industries likely to gain on good nnouncement from the FM. Keep a close eye on stocks belonging to these sectors.Undoubtlythis year budget is likely to focus more on common People,Farmers cause of Elelctions are nearby in India & Shri P.Chidambaram has to take care of Smt. Sonia Gandhi's view for forthcoming political events. Here are the few hot scripts sector wise. If these sectors related news is positive then these companies will be in limelight & may be create firework in coming days.

*Sector : Co.'s Will Be benefited if Good
Announcement :*
Oil and Gas :
HPCL,BPCL,IOC,ONGC, Cairn,Gail, Essar Oil
Infrastructure :
IVRCL, Nagarjuna Construction, DLF, Jai Corp,
Telecom :
MTNL, R Com, Bharti Tele, IDEA,Spice Tele, GTL Infra
Aviation :
Jet Air, Air Deccan, Spice Jet
Media & Entertainment :
Cinemax, Zee, NDTV,Dish Tv, Zee news.
Banking :
SBI, ICICI, HDFC, Union Bank, BOI, Dena, Vijaya, Indusind Bank, Fedral
Bank
Agriculture :
KS Oil, Ruchi Soya, Zuari Agro, Excel Crop, Usher Agro, Nutraplus
Products
Pharma :
Surya Pharma, Sandu Pharma, Glenmark,Ranbaxy, Nutraplus Products,
Wanbury
Biotech :
Jupitor Bio, Sharon Bio, Biocon, Mediaman
IT :
TCS, Zensar, Prithvi, Infosys, Tutis Tech, Aftek Info, D-link, Tech
Mahindra, Fin.Techno
FMCG :
Colgate, ITC, Hind.Lever, Nestle
Oil Exploration :
Hind.oil, Selan Exploration
Fertilizers :
RCF, GSFC, GNFC,Nagr.Fert, Godavari, Chambal
Tyres :
TVS Shrichakra, CEAT, MRF, Apollo
Gems & Jewellery :
Rajesh Export, Vaibhav Gems
Finance :
Continental Credit, TFL, Ind.Lease
Mining & Minerals :
Hind.Copper, RNRL, Kachch Mineral, Sesa Goa, Hind.Zinc,GMDC,VBC Ferro
Alloys.
Metals :
Tisco, Jindal Stainless, Kaamdhenu,Ferro Alloy, Hindalco
Retails & Textile :
Arvind, Life Style Fashion, Timex, Santogen Export, Super Spinning,
Suryajyoti
Shipping :
Mundra Port, SCI, GE Shipping, SEAM
Const. Material :
Hyderabad Industries
Chemicals,Paints :
Asahi Songwan, Vikram Thermo
Hotels & Tourism :
Hotel Leela, Indian Hotel, EIH Associated, ITH
Insurance & Housing Finance :
LIC Housing, HDFC, ICICI, GIC, Ind. Lease
Sugar :
Renuka, Riga Sugar, Bajaj Hind.,Uttam Sugar
Cement :
OCL, ACC, India Cement, Birla Corp
Engineering :
Rolta, Hind-Door, Batliboi
Food( Agri Base) :
Britannia, Nestle,GTC,ITC, Nutraplus,ADF Food
Logistics :
Aegis Log., Gati, GDL
Irrigation :
Rungta Irrigation, Jain Irrigation
Elect.Goods :
Salzer Electr.
E-Governance & IT Education :
Prithvi Info,NIIT, Aptech, NIIT Tech
Auto :
Maruti,Telco, Punjab Trac, M&M, VST Tillers
Pumps :
KSB Pump,Roto Pump
Paper :
BILT, AP Paper, Sirpur Paper
Medical Services :
Indraprasth Mediacal, Apollo Hospital, Span Diag.
Leather:
BATA, Mayur Leather, Liberty Shoes
Pesticides :
Excel Crop, Zuari Agro, Bayer Crop
Plastics :
Nilkamal,
Printing & Stationery:
Navneet Publications
Food Processing:
Usher Agro, Agro Dutch Ind., Ravalgaon Sugar, Quality Dairy, Satnam
Overseas, Dawat.
Also Keep Eye on Jayaswal Neco, Hitachi Home, Rohit Ferro, Asian Oil
Field,
Assam Co., Sathwahna Ispat,Pyramid Retail, Ankur Drug, Oswal Chem,
Crest
Animation, Mphasis, DCB, Kabra Extrusion, India Glycol, VIP Ind,Viceroy
Hotels, Max Ind, Voltas, Amar Raja, Garware Off, Sunil Hi-tech, GTL,
BRFL,
Jyoti, Tata Sponge, Shilp gravures, Avental Soft, Gujarat Gas from
respective sectors.
May u all get profits in all scripts u have or u r going to trade.

Hotel Leela Venture

Hem Research is bullish on Hotel Leela Venture and has recommended buy rating on the stock with a target price of Rs 85 in its February 19, 2008 report. “The Hotel Leela entry into Hyderabad and Pune would give fillip to its revenues due to an increase in the growingIT and ITeS industries in these cities. Both the cities in recent past seen huge surge in demand due to the growing number of business travelers thereby increasing the occupancy rates of the rooms. The Hotel Leela with upcoming hotels in Gurgaon, Udaipur, Chennai, Delhi, Pune and Hyderabad will have 2,750 rooms over the next three years from the current 1,086 rooms. Of the six proposed projects, the Gurgaon hotel is expected to be operational first followed by projects in Udaipur, Chennai, Delhi, Hyderabad and Pune. These facilities once becoming operational will generate huge turnover for the Hotel Leela and thereby add to its top line and bottom line."
"The Hotel Leela has emerged as one of the major players in the premium segment, though it is present in western and southern India only but it has identified this lacuna and embarked on an expansion spree to set up a pan-India pres-ence to capitalise on the increasing demand in the country. The stock at the current market price of Rs 52 will trade 11.30 times to its earnings and 2.38 times to its book value and is having lots of upside potential in the medium to long-term. Therefore, we are initiating ‘BUY’ signal on the stock with the target price of Rs 85, which is approximately 63% up from the current market price of Rs 52,"says Hem Research report.

STOCK WATCH 20.03.2008

Ansal housing (205.00) has been the pioneer to introduce the concept of large integrated residential townships in the country and also the first to enter Tier - II & III cities like Ghaziabad, Noida, Allahabad, Lucknow, Ludhiana, Agra, Bhopal, Haridwar etc. Till now company has constructed massive 67.6 million square feet of commercial and residential project across India. Further, it has lined up gigantic 56.10 million sq. ft of development (80% in the residential segment) spread over 22 cities in the next five years. Recently, it has launched residential townships branded as “Ansal Town” across several cities. It will also be developing an I.T. Park in Bangalore apart from venturing into construction of budget hotels and serviced apartments. Currently, company has a rich land bank of 2500 acres with about 50% under its own name while the rest under firm collaborators agreement. Notably, the total value of the projects with the company and under joint ventures is massive 6000 crores. Few weeks back company has made a pref allotment of 17 lac warrants to promoters @ 208 Rs and 29.50 lac warrants @ Rs 225 to others. For FY08 on a standalone basis it may register a topline of Rs 260 cr and bottomline of Rs 58 cr i.e. EPS of Rs 35 on current equity of Rs 16.70 cr. A good bet on real estate story.

Honda Siel Power (230.00) is engaged in manufacturing and marketing of portable generator sets, portable engines, internal combustion engines, pumping sets, water pumps, lawnmowers, spare parts and other related products in India. Being a 67% subsidiary of Honda Motor Co. Japan, company is the undisputed leader in the field of portable generators with its “HONDA” brand commanding more than 70% market share. Infact company boasts of launching India’s first LPG run gensets which is doing extremely well along with its super silent series. However, going forward the major growth for the company is expected to come from its engine and water pump sets division on back of strong industrial growth & increased mechanization in the agriculture/floriculture/horticulture sectors. To consolidate the manufacturing operations company is shifting its Rudrapur (Uttaranchal) plant to its factory at Greater Noida in Uttar Pradesh. Hence for the short term, company is incurring substantial costs along with production loss. But this restructuring will prove benefitial in longer term. So accordingly it may end FY08 with sales of Rs 240 cr and PAT of Rs 20 cr i.e. EPS of Rs 20 on equity of Rs 10 cr. Accumulate only at sharp declines only as scrip may drift down to sub 200 levels.

Belonging to high profile RPG group, Phillips Carbon (200.00) is the pioneer and largest manufacturer of carbon black in the country. Infact it is the undisputed leader with a capacity of 270,000 MTPA, which is almost 47% of the total installed capacity of carbon black in India It has also established a strong goodwill in the global market with more than 25% revenue coming from exports to over 15 countries including China, Japan, Indonesia, Iran, Sri Lanka, Vietnam, Turkey, Philippines, Australia, New Zealand and East African countries. To cash on the buoyant economic condition, company has chalked out massive Rs 350 cr expansion plan to be completed by Dec 2008, post which it will have carbon black capacity of 395,000 MTPA and power generation capacity of 74.50 MW. Importantly, to protect its profit margin company has re-negotiated the pricing formula with the customers, so as to built-in escalation clause. Accordingly it is estimated to clock a turnover of Rs 1050 cr and profit of Rs 85 cr i.e. EPS of Rs 30 on a conservative basis. For FY09 it has the potential to post an EPS of Rs 40. Accumulate at declines.

Blue Bird (48.00) is one of the leading manufacturers of paper based notebook products and office stationery products like executive notepads, diaries, arch-lever files, perforated pads, registers, filler papers and folders. Although notebook forms the core business with more than 80% revenue, company has also ventured into publishing academic textbooks and self study books for children apart from general publications in subjects such as ayurveda and biographies. It also offers commercial printing under which it designs and prints annual reports, brochures, catalogues, offer documents, coffee table books, calendars, greeting cards, magazines, text books, publications etc. In order to cater the central and south India market efficiently, company has recently put up two new plants at Indore and Bangalore apart from having its main plant in Pune. It is also expanding its distribution network and has ambitious growth plans for publication division. Sarcastically, company is having very high interest cost else it’s trading extremely cheap at an EV / EBIDTA of hardly 4x times. For the current fiscal it is expected to report total revenue of Rs 485 cr and NP of Rs 28 cr i.e. EPS of Rs 8 on equity of 35 Rs. Considering its IPO at Rs 105 in Nov 2006 and 52 week H/L as Rs 94 / 44, it’s a screaming buy at current market cap of merely Rs 170 cr.

International Combustion India Ltd.

International Combustion India Ltd.

BSE Code : 505737 NSE code : Not listed
Market Cap : Rs 110 cr Industry : Engineering
TTM EPS : Rs 46 P/E Ratio : 10.2x
Pmt Stake : 53 % Dividend : 50 %
52W H/L : Rs 914/235 Book Value : Rs 153
Established in 1936, International Combustion India Ltd (ICIL) is recognized to be a leading manufacturer of sophisticated plant and machinery for core sector industries such as mining, steel, cement, petrochemical, construction, sugar, power, textile, paper, rubber, pharma, chemicals etc. From a modest beginning as a trading house, ICIL today boasts of manufacturing specialized range of engineering products under technical collaboration and license agreement from various global leaders. According to its product profile, company has broadly
segmented its revenue model into following two divisions:-
I. Heavy Engineering Division :
This is the main division as nearly 80% of total revenue comes from it whereas it contributes more than 95% of earnings. This division has been further divided into following three categories:-
a. Vibrating equipments: ICIL manufactures and markets a wide range of mechanical and electro-magnetic vibrating screens, feeders, sizers, & onveyors which can handle all types of bulk solids, whether large lumps or very fine grains, wet or dry, or whether abrasive such as scrap, flux and sinter.
As accessories it also makes exciters, DC brake unit & monitoring system for vibrating machines.
b. Bulk Material Handling: Under this category, ICIL deals in spiralling belt elevators, scooping belt conveyers, girdle pocket elevators, apron feeder, mining haulages etc. as an intelligent solutions to suit even difficult to handle materials.
c. Grinding, Classfication and Drying system: ICIL offers complete grinding mill systems designed to pulverise and classify various kinds of material, including non-metallic minerals, fertilisers, chemicals and many other manufactured products. Importantly, it markets ‘Raymond" American brand roller mill, pulverisers, grinding mills, mechanical air separators and flash drying system, which can reduce many products by 95~98% or refine them below 10 microns

II. Gear Motors & Gear Box Division
Under license from Danfoss Bauer, Germany, ICIL offers a comprehensive range of geared motors, gear boxes and electric motors manufactured on specially designed inter-linked CNC production lines. It also exports these products to neighboring markets including Iran and Sri Lanka. Besides company has also been chosen as the outsourcing partner by Danfoss Bauer and has even started exporting cast iron machine parts to them.
Currently, ICIL is having three fully equipped manufacturing facilities spread across Calcutta, Nagpur and Aurangabad. To have a cutting edge technology for manufacturing premium quality equipment, ICIL has made several tie-ups with international majors like Danfoss Bauer(Germany), Mogensen(Germany), IMS Engineering(South Africa), Alstom Power(USA), Gummi Kuper (Germany) and Tredomen Eng (UK) for each product group. Offlate, it has also entered into a license agreement with Ecutec(Spain) to manufacture microfine classifiers. Ironically, all the players in user industries are ramping up their capacities translates into a huge opportunity for company's products. To meet the increasing demand, an expansion programme has been initiated by the company for augmenting the manufacturing capacity of the gear box/geared motor division. It is also upgrading the manufacturing capacity of the Heavy Engineering Division. On the back of its wide product range and high engineering skill, ICIL is contemplating to enter the lucrative turnkey project segment in foreseeable future.
Fundamentally, ICIL is on a strong footing with expected reserves of around Rs 45 cr i.e. book value of nearly Rs 200 by end of this fiscal. Besides being a debt free company it has an impressive ROCE of 40% and ROE of 25%. Financially, ICIL has recorded 20% growth in sales to Rs 66 cr and 50% increase in PAT to 8.25 cr for nine months ending Dec’07. Accordingly for this fiscal it is expected to clock a turnover of Rs 95 cr and profit of Rs 11.50 i.e. EPS of Rs 48 on a tiny equity of Rs 2.40 cr. Hence with expected CEPS of more than Rs 60, and EV/EBIDTA of less than 6x, company is available fairly cheap at current market of merely Rs 110 cr. For FY09, company has the potential to register an EPS of around Rs 60. So investors are strongly recommended to buy at current levels as at a reasonable discounting by 14x times against FY09 earning, scrip can touch Rs 850 (i.e. 80% appreciation) in 12~15 months. Moreover scrip is a strong bonus candidate as well.

Small & Beautiful 20.02.2008

GM Breweries (88.00) is the single largest manufacturer of country liquor in the state of Maharashtra and enjoys virtual monopoly in the districts of Mumbai, Navi Mumbai and Thane. This is proved from the fact that Maharashtra govt is getting one fifth of the total excise duty on country liquor from GM Breweries alone. For the latest Dec qtr, company’s sales improved by only 10% to Rs 49 cr but NP shot up 85% to Rs 4.40 cr on back of lower raw material cost and better operating efficiency. It recorded a healthy OPM of 14% against 10% last year. With the installation of additional bottling lines last fiscal, company now has the capacity to process 8.26 crores bulk litres of country liquor per annum. Hence it is expected to end FY08 with sales of Rs 190 cr and NP of Rs 15.50 cr i.e. EPS of Rs 17 on equity of Rs 9.40 cr. Having a gross block of Rs 68 cr, low debt equity ratio, strong cash flow, decent margins etc, company is available extremely cheap at an Enterprise Value of less than Rs 100 cr. With 68% holding, promoters are investor friendly and have an uninterrupted record of dividend payment from the day of listing. Company definitely deserves much better discounting and at a modest PE multiple of 12x times, scrip has the potential to cross Rs 200 mark in medium term.

Bhagyanagar India (51.00) the flagship company of Surana Group is touted as an emerging real estate story by the marketmen. Including its subsidiaries, company boasts of having around 175 acre of land bank valued at more than Rs 600 cr presently. It includes 25 acres of prime land in Gachibowli area Hyderabad, 50 acres in SEZ, Chennai, 25 acres near new Hyderabad airport etc. To take the maximum benefit of the ongoing boom in real estate, company has aggressively forayed into real estate development and construction industry through its various subsidiaries and is, focusing mainly on housing and construction of IT Parks, SEZ etc. Recently, it has formed a SPV along with IL&FS Infrastructure for undertaking, various infrastructure and entertainment projects such as theme parks, special economic zone, industrial parks etc on a large scale basis. On the other hand, it has successfully commissioned the wind power project with an installed capacity of 9 MW in Karnataka last fiscal. At the same time its traditional copper & telecom products business is doing okay. Notably, couple of weeks back company has formed a joint venture with group company for setting up of solar photo voltaic cell and module project and has even been allotted 25 acres of land in the Fab City, Hyderabad. Although promoters don’t enjoy a good reputation in the market, still it’s a good trading bet.

Sarcastically, the share price of Rama Paper (23.00) which hit a high of Rs 59 in 2005 has been beaten down mercilessly to unbelievable levels, inspite of improvement in fundamentals. Off late, company has increased its paper production capacity to 44000 TPA and is further enhancing it to nearly 60000 TPA in near future. It is putting up an additional line of paper manufacturing machine to produce tissue and poster paper with annual capacity of 16320 TPA under a capex of 24 cr. But most importantly, company has set up 6 MW co-generation power plant for captive consumption which has already commenced operation leading to substantial saving in power and fuel cost. Last fiscal company raised around 16 cr thru equity route by making pref allotment to promoters and others @ 35 Rs. As on today promoters are holding 41% stake. For FY08 it is estimated to clock a turnover of Rs 80 cr and profit of Rs 6 cr on back of higher operating margin. This can shoot up to Rs 100 cr of sales and Rs 8.50 of NP for FY09. With means an EPS of Rs 6 and Rs 9 for FY08 and FY09 respectively on fully diluted equity of 9.70 cr. Buying strongly recommended as share price can shoot up to 35 Rs in short term.

Rohit Ferro Tech Ltd (80.00) is a leading producer of high carbon ferro chrome apart from manufacturing ferro manganese and silico manganese through submerged arc furnace route. During last fiscal only, company has set up a greenfield plant in Jajpur-Orissa thereby taking its total capacity to 165,000 MT from 55,000 MT earlier. Further it has set up fifth furnace with 15000 MT capacity in Bishnupur, which is expected to become operational shortly. To become an integrated player company has applied for mining lease to the state government of Orissa for chrome ore as well as manganese ore. Presently it is sourcing manganese ore from Australia besides local sourcing. On the other hand, due to higher production, better margins, and the better availability of raw-materials company is stressing more on production of ferro manganese in place of high carbon Ferro Chrome For future, it has chalked out a plan to setup a 110 MW captive power plant to being down its power cost. In order to fund this, it recently made a pref allotment of 80 lac convertible warrants @ 43 Rs per share to promoters as well as strategic investors like Kampani Finance, Foster Capital etc. On the back of stunning Q3 nos it may end FY08 with sales of more than Rs 500 cr and PAT of Rs 50 cr i.e. EPS of Rs 14 on current equity of 34.50 cr. Moreover company has the potential to post an EPS of Rs 20 on fully diluted equity of Rs 42.50 cr for FY09. Keep accumulating at declines

Yuken India Ltd (YIL)

Yuken India Ltd (YIL) was set up in 1976 in technical and financial collaboration with Yuken Kogya Co Ltd – Japan mainly for the manufacture of oil hydraulic equipment. Since then it emerged as the leading and reputed manufacturer of power saving hydraulic pumps & valves. Its product range consist of all types of hydraulic pumps like vane pumps, piston pumps, gear pumps, pal pumps etc. Under valves, it boasts of manufacturing various types of hydraulic valves for industrial and mobile applications including pressure control valves, modular valves, flow control valves, logic valves, electro proportional valves, servo valves, direction control valves & mobile control vavles. Besides it also manufactures complete hydraulic power units as per customer specifications, cylinders, parison controllers, actuators, accumulators and power packs. Moreover it also supplies related accessories such as cartridge kits, pipe flanges, air bleed valves, act pressure switch, sub plates, MMC manifolds, modular bolt kits, pump mounting brackets, coolers etc. Hydraulic devices are very popular in heavy engineering industry as effective means of automation, hence company’s product find extensive use in various key sectors like machine tools, material handling equipment, construction machinery, drill rigs, automobiles, defence, steel, power & cement plants, plastic machinery etc.
YIL’s operates thru its main foundry plant at Bangalore and four subsidiary companies spread across Bangalore, Hyderabad & Chennai. Its subsidiary Yuflow Engineering manufactures hydraulic cylinders for industrial use, Sriplas Engineering act as an ancillary unit for machined components, Coretec Engineering manufacture iron cores for solenoid valves and Prism Hydraulics to manufacture solenoid coils. Earlier in 1991, company formed a joint venture to manufacture radial piston motors in collaboration with Sai of Italy, the largest manufacturers of radial piston motors in the world. Presently, in order to fulfill the rising demand YIL is implementing a gradual expansion plan to increase its capacity multifold. Accordingly, it has recently doubled its hydraulic casting products capacity to 2400 TPA and is further augmenting it to 6000 TPA within next 2~3 years by installing additional hi-tech machineries in the existing foundry unit. Recently it made a tie up with Hydrocontrols SPA Italy to produce and market state-of-the-art mobile control valves especially for agriculture, construction, earth moving and lifting machineries. Importantly, YIL has forayed into Chinese steel industry by successfully commissioning hydraulic system for a cold rolling mill line in China for M/s Changshu Everbright. In short, apart from catering to domestic market YIL is looking to increase its foothold in international market as well.
Interestingly, YIL runs a 'Hydraulic School' at different levels for its customers to provides hands-on experience and has already trained more than 6,000 engineers from a large number of organizations, both from India and abroad. Financially, company is doing well and has reported a 20% rise in sales to Rs 39 cr and 70% jump in bottomline to Rs 3.90 cr for nine months ending Dec’07. Considering company’s expansion plan and strong demand for its product, it is estimated to report a topline of Rs 100 cr and bottomline of Rs 5.50 cr for FY08. This translates into EPS of Rs 18 on very tiny equity of Rs 3 cr. For FY09, EPS is estimated to shoot up to around Rs 25. Thus investors are strongly recommended to buy as at a reasonable discounting by 12x times, scrip can easily touch Rs 300 in 9~12 months.

Avantel Softech Ltd - 65.00 Rs

Incorporated in 1990, Avantel Softech Ltd (ASL) is a technology driven, ISO 9001 - 2000 accredited company which offers telecom products and software solutions. It has over the past few years developed expertise in telecom hardware, relevant embedded software and network management systems. In order to provide better solutions in communications and computing, ASL has made strategic alliance with renowned entities like Space Applications Centre, ISRO, L 3 Communications - Narda, USA and Vedang Radio Technology. Thru its govt recognized R&D division, ASL has developed a number of products for defence sector by ensuring compliance of stringent defence standards. Infact, it was the first Indian company to supply HDSL (High speed Digital Subscriber Line) and DSL equipments. Hence company primarily caters to the telecom and defence sector organizations. Broadly, its business model can be divided into following two segments:
A. TELECOM
ASL is actively involved in design and development of products based on high power broadband Wireless, Satellite communication and broadband access technologies. The design, development and integration of wireless and access products are carried out using its own proprietary software tools. Besides, company has a test and measuring facility for design, development and manufacture of wireless products (up to 20 GHz) and various access products supported by compilers and evaluation modules to test and integrate the software and hardware. This segment can be further subdivided into following two divisions:-
Wireless : ASL designs and manufacturers repeaters, filters, splitters, tappers, combiners, couplers & amplifiers to enhance the capacity and coverage of wireless communication networks for use in GSM, CDMA and 3G networks. In short it offers products for indoor and outdoor environment to improve signal quality, coverage and capacity
Satelite Communication: Ironically, ASL’s design and engineering team has developed a range of subsystem for satellite earth stations in collaboration with ISRO. It has developed customized solutions for INSAT based mobile satellite services with advance microwave, digital wireless communication and signal processing products for military and commercial market. Hence it offers mobile satellite services for messaging, tracking and all locations based services with appropriate network security. Using this same technology it provides specialized products like Ship borne terminal, handheld terminal, S-band receiver, UHF transmitter, burst demodulator etc which are one of its kind.
B. SOFTWARE
ASL provides services in the areas of ERP, web enabling of business processes as well as maintenance / enhancement of legacy systems, network management systems, remote monitoring & management, automation of test equipments and corporate portals. Its ERP software produc called “FunWork” covers all core and extended business critical functions of the enterprise such as marketing and sales, finance and accounts, manufacturing operations, customer support, personnel and administration. It also has expertise in electronic design services for product development, re-engineering, PCB design etc. Uner multimedia, ASL offers complete in-house creative and production capabilities-from concept development and script writing to programming, assembly, and testing.
Prsently, ASL is having development centers at Hyderabad, India and Boston, USA. Its client base comprises of telecom service providers like Airtel, BSNL, Ericsson, Vodafone, Idea, L3Communications, Nokia and Siemens and many other government organizations like BEL, Defence Labs, ECIL, Indian Army, Indian Navy, ISRO Centres etc. Notably, ASL could successfully develop transmitters and receivers to offer mobile satellite services for applications in Indian defence as well as other sectors. Secondly, its products for EW and COMINT applications have been well received by defence PSU'S such as BEL and ECIL. Company is also developing network manager to offer wide range of VSAT services with cost effective indigenous technology. It has also signed a Transfer of Technology (TOT) agreement with ISRO for supply of hubs and satellite interactive terminals for EduSat networks. Moreover it is developing various products for GPS based vehicle tracking system. To increase its presence company is in talks with some international players involved in the system integration business for strategic tie-ups and alliance. In future it plans to address requirements of railways, coast guards, fishing trawlers and transport vehicles. To conclude, company has huge potential for future growth. For nine months ending Dec 2007, its sales jumped up 135% to Rs 19 cr whereas Pat zoomed up to Rs 3.40 cr against 0.60 cr last fiscal. Historically, Q4 is the best quarter for the company and hence it may end FY08 with sales of Rs 35 cr and profit of Rs 5 cr. This works out to an EPS of Rs 10 on equity of Rs 5.15 cr. At a current EV of less than Rs 35 cr it’s a good bet and can give 50% return is a year’s time.

STOCK WATCH 16.02.2008

Hind Rectifiers (140.00) is one of the leading manufacturers of locomotive transformers, rectifiers, inverters, and power electronics like diodes and thyristors (types of semiconductor devices) etc which are basically used in converting the current from AC to DC and vice versa. Incidentally, it derives more than 50% of its revenues from railways and 20% from power industry. For Dec qtr, sales improved by 15% to Rs 23 cr and NP grew by 10% to Rs 2.80 cr. Offlate, company has set up two new units in tax free zone of Uttranchal, but in order to get the Cenvat paid on raw material it is still operating from its old plant in Mumbai and Nagpur. However the new orders booked by the company will be manufactured at Uttranchal plant only. Moreover, recently company has signed a technical collaboration agreement with M/s. Infineon Technologies AG, Germany for manufacturing of IGBT based primeSTACK which will complement its existing products. It may end FY08 with sales of Rs 95 cr and PAT of around Rs 11 cr i.e. EPS of Rs 15 on a very tiny equity of Rs 1.50 cr having a face value of Rs 2/- per share. Importantly, company is estimated to report an EPS of more than Rs 20 for FY09 and at a modest discounting by 12x times share price can double in 12~15 months.

Shanti Gears (65.00) is engaged in the manufacture of gears, gearboxes, geared motors and gear assemblies both standard and custom-made. Its product portfolio includes a range of worm gear boxes, helical & bevel gear box, geared motor, custom built gear box, mill gear box, ppen gearing, CNC machine tools and products for the textile industry. It also manufactures high precision gears for marine and aviation industries. It has recorded 25% growth in sales to Rs 176 cr and 30% rise in net profit to Rs 32 cr for nine months ending Dec 2007. Notably, company makes gearboxes of 250 KV for windmills and is looking for technical collaboration to manufacture higher capacity gears for windmills. On the back of strong industrial and economic growth company is sitting on a strong order book of more than Rs 100 cr currently. For FY08 it can clock a turnover of Rs 250 cr and profit of Rs 45 cr which leads to an EPS of Rs 5.25 on fully diluted equity of Rs 8.60 cr with a face value of Rs 1/- per share. Moreover for FY09 it has the potential to register an EPS of Rs 6.50 which means scrip is trading fairly cheap at P/E ratio of 10x times. Besides, compay is having around 18 acres of surplus land in prime location of Coimbatore which can fetch handsome value once sold.

Hitachi Home & Life Solutions (127.00), a 68% subsidiry of Hitachi-Japan is amongst the top airconditioning companies in India with an installed capacity of 250,000 units per year. It maufactures high technological home and commercial air conditioners like window AC, split AC, concealed splits, ductables, chillers and specific telecom cooling solutions. Its plant at Kadi, Gujarat is among the seven Hitachi room air conditioner facilities worldwide. Couple of years back company also introduced 3-Door refrigerators and big capacity washing machines which are basically imported from Hitachi factory in Thailand. Its topline grew by 45% to Rs 83 cr but PAT shot up 240% to Rs 5.40 cr for the latest Dec’07 qtr. Importantly, due to strong brand equity company has managed to retain the high quality position as well as price realisation in spite of stiff competition. Accordingly it is expected to report total revenue of Rs 425 cr and PAT of around Rs 37 cr for FY08. This works out to an EPS of Rs 16 on equity Rs 23 cr. Accumulate at every decline.

L.G.Balakrishnan & Bros (22.00) is enaged into auto transmission & metal forming business thereby manufacturing products like chains for both automotive and industrial segment, sprockets, tensioners and belts on one hand and fine blanking, forging (cold, hot and warm), machined components, wire drawing on the other hand. In order to cater to the requirements of major OEMs customers, last year company has put up a new manufacturing plant in tax free zone of Pantnagar, Uttarakhand. Notably, company meets 100% of transmission requirements of Bajaj Auto and TVS, and nearly 80% of Hero Honda's. For the nine months ending Dec’07 it registered 12% growth in sales to Rs 394 cr but profit grew marginally to Rs 10.80 cr. Offlate, it has also set up a Greenfield forging plant near its existing plant at Annur. Interestingly, it is demerging its forging division into LGB Forge Ltd and will be allotting one share of it for every one share held in the company. For entire FY08 it may clock a turnover of Rs 525 and NP of Rs13.50 cr i.e. EPS of Rs 1.70 on equity of Rs 7.85 cr having face value of Rs 1/- per share. However, the continuos pressure for price reduction by OEMs and severe competition in the after market coupled with volatile input cost are causes of conern. But only at sharp declines.

Small & Beautiful 15.02.2008

Shringar Cinemas (61.00) is an integrated film exhibition and distribution company operating chain of multiplexes under the brand name -'FAME'. It is also in food and beverage business thru one of its wholly owned subsidiary. It has major presence in Mumbai apart from Bangalore, Ahmedabad, Surat, Nasik, Pune Kolkatta & Aurangabad. It currently operates 14 properties with 48 screens. For the nine months ending Dec’07 its revenue increased by 60% to Rs 60 cr whereas NP shot up 70% to Rs 12.80 cr. Because of rising disposable income, increasing mall culture and various tax benefits from govt, the future growth potential for the company is quite huge. It has plans to scale up its multiplexes to 150 screens with pan India presence. For partial funding, last year it raised around Rs 90 cr thru FCCB route to be converted @ Rs 90 & 107 per share. Ironically scrip is still available near its IPO price of Rs 53 per share in April 2005. On a standalone basis for FY08 it may register a topline of Rs 85 cr and bottomline of Rs 17 cr i.e. EPS of Rs 5 on diluted equity of Rs 33.85 cr. Meanwhile company is contemplating to get in to film production as well. Share price can easily appreciate 50% within a year.

Gujarat Alkalies (160.00) is the single largest producer of caustic soda in India, with a production capacity of 358,760 TPA. Besides it also produces various other chemicals like sodium chloride, liquid chlorine, hydrochloric acid, chloroform, methyl chloride, hydrogen peroxide, sodium cyanide, aluminium chloride, phosphoric acid etc. Ironically, company’s plants are working at more than 100% capacity utilization against industry average of 70%. In order to reduce the power cost, company has undertaken a windmill project of 24 MW expected to go on stream in coming few weeks. It is further setting up additional windmills for a capacity of 40 MW. On the other hand, company has already finalized monetization of CERs generated from three of its CDM projects and has infact become the first PSU in the country, to get the approval of the host country from MOEF for its CDM Project. To maintain its future growth it is exploring the possibilities of putting up additional projects like expansion of caustic soda by 500 TPD, expansion of hydrogen peroxide by 75 TPD (100% basis) and another captive power plant with a capacity of 90 MW at a capex of Rs 1,100 crore. For FY08 it may clock a turnover of Rs 1150 cr and PAT of Rs 250 cr on a conservative basis. This translates into EPS of Rs 34 on equity of 73.40 cr. Keep accumulating at declines.
Patels Airtemp (70.00) is involved in the design and manufacture of industrial process plant equipments like pressure vessels, heat exchangers, air cooling & air heating equipment, dehumidification plants, air conditioning and refrigeration equipment and coils etc. Hence company’s products that find use in key sectors like oil and gas, refineries, power, fertilisers, chemicals, cement and textiles. It is also into HVAC business, which currently contributes about 15% to the total revenues. Its clientele include Ingersoll Rand, BHEL, Reliance group, NTPC, Indo Gulf, ONGC, Nirma, Nuclear Power Corporation etc. On the back of strong industrial and economic growth, company is sitting on a healthy order book position of Rs 45 crore. On the export front, company is expecting to get more orders from Germany and Singapore. It is negotiating for a waste management project in Singapore and is hopeful to get the same soon. For FY08 it is estimated to report sales of Rs 50 cr and PAT of Rs 5 cr i.e. EPS of Rs 10 on equity of Rs 5 cr. Share price can easily double in 12~15 months. Buy at every declines.

Rajendra Mechanical Industries (135.00), part of the Mumbai based REMI group, is a pioneer in manufacturing of stainless steel welded and seamless pipes & tubes. These pipes and tubes are used extensively in critical process industries such as refineries, petrochemicals, paper and pulp, fertilizers, pharmaceuticals, nuclear plants, etc. IOCL, IPCL, GNFC, IFFCO, Madras refineries, Mangalore refineries, Ranbaxy Laboratories are few among its reputed clientele. It has also developed specialized stainless steel tubing especially for critical power industry. To cash on increasing demand, company has been constantly expanding its production capacity which now stands at 7500 MTPA from 4500 MTPA in 2005. Notably, company has also ventured into power generation thru wind mill and has total installed capacity of 2.25 MW. For the Dec qtr, sales jumped up 55% to Rs 43 cr whereas NP zoomed up 290% to Rs 2.60 cr. Accordingly it can report a NP of Rs 10.00 cr (incl. extra ordinary income of Rs 1.50 cr on sale of property) on sales of Rs 185 cr for FY08 which leads to an EPS of Rs 21 on equity of Rs 4.80 cr. Besides it has the potential to earn an EPS of 25 Rs for FY09 from business operations only.

Five Golden Rules For Traders

Date: 14.02.2008 1. Invest in the direction of the Trend! The fastest and most risk free way to make money in the markets is to identify a change of trend in the market as early as possible, take your position, ride the trend and close your position shortly after the trend reverses.Any market professional will tell you that it is impossible to buy at the lows and sell at the highs (or sell at the highs and buy at the lows) consistently, but with the Fortunate Group's Research and Analysis, it is very possible to catch 60 to 80% of much intermediate term and long term market movements.

2. Cut Losses Quickly.In order to keep investing, you must preserve your capital. It is therefore important to keep the individual losses small in relation to the overall size of your investment.Fortunate Group will ensure that you will never loose more than 1.0% of your investing capital in any single trade. This means that even if you make five incorrect investment decisions, you will still have 95% of your capital to continue investing.Alternatively the Fortunate Group's trailing stop loss mechanism helps you to capture 70% to 90% of most trends. Our "Trailing Stop Loss" tracks the trend direction, liquidity, volatility and momentum and automatically adjusts itself to stay with profitable trends as long as possible to make your profits even larger.

3. Let Profits Grow…Fortunate Group stays with profitable trends as long as possible because the trend is likely to continue and make your profits even larger.Fortunate Group's Research and Analysis includes what is called a trailing stop. This is a method of moving an exit point along some distance behind your trade.The "Stop Loss" mentioned in " Fortunate Group's Research and Analysis " will let profits run while still guarding against the possibility that prices will turn around and take away much of your accumulated profits before the trend actually reverses. It is called a "trailing stop loss". This "Stop Loss" level is always some distance behind your trade. As long as the trend keeps moving in your favor, you stay in the trade. If the market reverses direction by the amount of the "Stop Loss', you exit the trade at that point.Thus the " Fortunate Group's Research and Analysis " "Stop Loss" will always protect your profits by insuring that you keep 80% to 90% of the accumulated profit.

4. Diversify.Fortunate Group's Research and Analysis includes diversification for spreading risk and or increasing the odds of good fortune.Spreading your risk between different securities across different sectors reduces your odds of losing your entire capital on a single stock or industry sector.Diversifying across different sectors is important because when the economy is digging itself out of recession, certain sectors whose profits are particularly enhanced by falling interest rates put in their best price performance. Then as the economy moves into the terminal recovery phase, the outperforming issues start to decline, but the market averages are buoyed by previous underperforming issues, which thrive in this kind of environment.

5. Manage Risk.Fortunate Group provides Risk Management Strategy covers the most important element of managing risk by keeping your losses as small 1% of your trading capital.Our Risk management Strategy ensures that you as an investor can continue to invest in the markets even after a couple of incorrect decisions. In fact if you follow our "risk management strategy" along with the Fortunate Group's Research and Analysis you can continue investing in the markets for as long as you live. You will never ever have to worry about losing your entire trading capital.

Amar Remedies Ltd (ARL)

Date: 13.02.2008 Established in 1984, Amar Remedies Ltd (ARL) was originally promoted by Mr. P. Shah as "Swami Aushadhalaya Private Limited” to develop ayurvedic medicines. In the year 1988, it made its first breakthrough in oral care products with the development of an ayurvedic toothpowder. Two years later it developed and launched an effective ayurvedic vegetarian toothpaste (i.e. gelatine-free formula), which is the only toothpaste of its kind. Subsequently, it research and developed several different ayurvedic medicines and even got it approved from FDA. In 2001, ARL developed and commercially launched two healthcare products namely AMAR Get-Up - a pain relieving ointment and AMAR Balm for cold, headache & body ache. Since then ARL has established itself as one of the well known manufacturer of ayurvedic, herbal and cosmetic dental care, personal care, skin care, beauty care & health care products like tooth paste, toothpowder, shampoo, creams, lotions, shaving gel, balm & pain relieving ointment. Infact, it boasts of making twenty different variants of toothpaste under 12 brands for sale to intermediate traders for export and nine variants of toothpaste under 3 brands for the domestic market. But importantly till now, ARL has successfully developed 24 different ayurvedic and herbal medicines and have also obtained the FDA approval for the manufacture and sale of these medicines, which include medicines for hypertension, diabetes, and heart ailments.
ARL has two manufacturing facilities located at Surat & Daman. The Surat plant basically manufactures ayurvedic and herbal medicines whereas the sophisticated Daman plant manufactures tooth paste and other FMCG products. Last fiscal, company expanded the installed capacity of oral care and health care from 12400 MT and 595 MT to 13400 MT and 645 MT respectively at its Daman plant. As a part of its expansion plan, company has recently set up a new state of the art manufacturing plant spread over 1 Lac sq. feet of constructed area at Dehradun in Ultaranchal. It has installed ultra modern machinery, to manufacture FMCG & ayurvedic products. It has also set up a complete integrated R&D and quality control department to ensure enhancement of quality of existing products & development of new products. But it is unable to commence commercial production due to delay in obtaining permission from pollution control authorities. However it will get the clearance certificate sooner than later and the plant is expected to start in next couple of months. Once fully operational it will give a good fillip to company’s topline as well as bottomline. Notably, ARL has appointed 13 super-stockists for domestic sales who in turn have more than 700 sub-stockists spread in western, northern, and eastern regions of India. Besides, it has recently selected 2 super-stockists who in turn have 130 sub-stockists in the southern region and are yet to contribute to turnover. Meanwhile, after capturing a major share of the Indian domestic market, ARL has started tapping the international potential of FMCG markets. It is currently exporting to over various countries across the globe from Europe through Middle East & from Asia to Far East countries. Accordingly it is contemplating to form a wholly owned subsidiary at Ras-AL-Khaimah-Free Trade Zone, UAE.
To protect the intellectual property, ARL has offlate applied for trade mark registration for 9 toothpaste brands. And it intends to apply for process patent of all 24 ayurvedic medicines after commencement of their commercial production. For future growth, ARL’s focus is to change the perception of consumers towards ayurveda from an age-old science to a remedy for various new age ailments and diseases by changing the delivery system of the medicine. It also propose to start a unique concept of consultation over toll free phone lines for ayurvedic treatment thru sales and service offices in select cities of India. Financially, for FY08 ending June 2008company is expected to register sales of Rs 300 cr and PAT of Rs 20 cr i.e. EPS of Rs 8 on equity of Rs 26.20 cr. And for FY09, it has the potential to post an EPs of 10~11 Rs. Considering its all time H/L of Rs 102/26 and commencement on Dehradun plant in near future, this is one of the cheapest scrip trading at a P/E multiple of hardly 3x times against FY09 earnings. Investors are strongly recommended to buy at current levels as it can easily appreciate 50% in 9~12 months

Simplex Castings Ltd (SCL)

Date: 13.02.2008 Incorporated in 1980, Simplex Castings Ltd (SCL) belongs to well diversified Simplex group of Industries which has interests in Simplex Forging (in forging business), Simplex Engineering (Blast Furnace, Coke Oven projects etc), Signum Fire Pvt ltd (in preparing fire proof doors made of steel and timbers) etc. However, SCL is engaged in manufacturing of heavy engineering castings in various grades for industries like steel, rail, mining, cement, power and other engineering sectors. It produces various castings such as grey cast iron castings, S.G iron castings, stainless steel castings, steel castings, ingots, valve castings etc. It can make castings from 350 kg to 32000 kgs weight in single piece. It specializes in developing different casting for steel plants and also valve / cone castings for supplying the same to valve and pump manufacturers. Incidentally, company has been supplying casnub bogies, coco bogies & bolsters assemblies (used in railway wagons) to Indian railways for a long time. Apart from Indian Railways, all major steel companies including Tata Steel, Jindals, Sail, Essar, Bhushan etc are its clients. Besides, company also derives 15~20% of revenue by exporting its products to countries like Spain, France, Belgium, Egypt, Korea etc
SCL has two manufacturing plants, one in Bhillai and other in Raipur, both are present in iron ore rich state of Chattisgarh. The main raw material for company is steel, scrap, iron ore & sponge iron which are all available near to its location. Notably, it manufactures all types of castings at its plants, which have installed capacity of 15000 tons each. However the actual production depends upon the product mix and the size of the orders. Ironically, SCL can operate its plant at even 125 times of its installed capacity. To derisk its business model company is moving up the value chain and is venturing in to the machined castings. For that, it has imported machineries from Spain worth Rs 8 crore. This will improve the margins going forward and will also lead to addition of new clients which seek the machined components. Interestingly, due to volatility in input cost and to safe guard its profit margin, management has worked out a backward strategy of raw material pricing while coating a tender. This has of course restricted volume growth, but has given the company the margin of safety on execution of the orders. Meanwhile, it has bagged a prestigious order worth Rs 12 cr from Indian railways for supply of coco bogies and expects to get more such order in future. Currently it has a very healthy order book position of Rs 120 cr which includes export orders worth Rs 30 cr from its valued clients like Indu steel-France, Arcellor-Spain, Ingersoll Rand-Italy, Sandwik Asia-Pune, Al-Nasar-Egypt, Hyundai Corporation-Korea.
On the other hand, as it already manufactures valve casting, in near future it intends to forward integrate into valve manufacturing business, which is a very high margin business. Especially for this it has planned a capex of Rs 60~70 cr to be funded from debt and internal accruals. It also plans to venture into project execution and turnkey business of steel plants. So far it’s into manufacturing of huge castings, which are used to build and lay blast furnaces, coke oven plants, slag plots etc. But now it has started laying down and construction of such plants. It has already entered into collaboration with BHEL and one Chinese company and has even executed one such contract of Rs 2.5 crore of Bhillai Engineering Company and is undergoing another such contract with it. Simultaneously, it has bid for Indian Iron and Steel Company’s four such contracts, which is of Rs 80 crore each in size.
Fundamentally as well as financially company is doing quite well. For the nine months ending Dec’07, it recorded 10% growth in sales to Rs 106 cr but NP increased by 55% to Rs 5.40 cr due to better profit margin. Considering the massive expansions planned by all steel companies and increased spending by Indian Railways on infrastructure development coupled with strong economic growth and company’s diversification/integration plan, the future prospect of SCL looks very encouraging. For FY08 it is estimated to clock a turnover of Rs 145~150 cr and PAT of Rs 8 cr i.e. EPS of Rs 13 Rs on equity of Rs 6 cr. For FY09 SCL can post an EPS of Rs 16~17. Hence, investors are recommended to buy at current levels as at a reasonable discounting by 8x times against FY09 earnings scrip has the potential to touch Rs 130 (70% appreciation) in 12~15 months time.