STOCK WATCH
Last week, Rama Papers (Code No.: 500357) (Rs.38.05) came out with very encouraging numbers for the March 2006 quarter. Its sales grew by 15% to Rs.20 cr. whereas net profit jumped 170% to Rs.1.90 cr. posting a quarterly EPS of Rs.2.50. For full FY06, it recorded sales of Rs.77 cr. and net profit of Rs.5.50 cr. despite making huge tax provision of Rs.3 cr. Due to buoyancy in the paper industry, the company is going in for capacity expansion and also setting up a 6 MW captive power plant. It has already got a loan from Bank of Baroda and its balancing equipment project is expected to be completed by this month end which will increase its production capacity to 44000 TPA from 39500 TPA. Besides, its power project is estimated to be commissioned by November 2006, which will result in considerable savings in power cost. For FY07, it may clock a turnover of Rs.100 cr. with net profit of Rs.8 cr. i.e. EPS of Rs.11 on its equity of Rs.7.60 cr. The major reason for the scrip trading so cheap and commanding a market cap of only Rs.30 cr. is because it is in Z category. But soon it will be transferred to its original group as the company has completed all the formalities. Just go and buy this scrip.
Maintaining its consistent double digit growth rate, Jupiter Bio Science (Code No.: 524826) (Rs.148.65) has once again come out with satisfactory numbers for March 2006 quarter. Its top-line increased by 14% to Rs.23 cr. and net profit grew by 15% to Rs.6 cr. whereas for the full FY06, it reported sales of Rs.78 cr. and net profit of Rs.20.50 cr. against Rs.71 cr. and Rs.14 cr. in the previous year. The EPS for FY06 works out to Rs.23 on its equity of Rs.8.90 cr. The company is a niche player enjoying a NPM of 26% and is perhaps the only peptide company in Asia with technology to manufacture peptides from the basic stage. To fund its expansion, the promoters are infusing fresh money, which establishes their confidence & commitment to its growth story. The EGM has already approved the to make preferential allotment of 27.50 lakh shares to the promoters at the rate to be calculated as per SEBI guidelines. Besides, it is also planning to raise Rs.90 cr. through FCCB/ADR/GDR route which will lead to its re-rating and substantially increase its market capitalization. Though it has not performed for quite long on the bourses its still one of the most undervalued scrip in this sector.
In line with our expectation, International Combustion (Code No.: 505737) (Rs.406.50) has come out with terrific set of numbers for March 2006 quarter. Sales were up 50% to Rs.21 cr. and net profit increased by 120% to Rs.1.85 cr. thereby registering an EPS of Rs.8 for the quarter. Full FY06 figures are even better as its top-line grew by 46% to Rs.67 cr. but its PAT spurted by 160% to Rs.5.70 cr. Notably, the current tax provision (excluding deferred tax) for FY06 is whopping Rs.3.34 cr. This means that the company has paid nearly 40% tax on PBT of Rs.9 cr. It is expected to declare 50-60% dividend compared to 25% last year. All its divisions are doing exceptionally well and have a healthy order book position. For FY07, it is estimated to report sales of Rs.90 cr. and net profit of Rs.8 cr., which translates into EPS of Rs.35 on its tiny equity of Rs.2.27 cr. At a reasonable discounting of 18x for the Engineering/ Capital Goods sector, the scrip has the potential to cross Rs.600 in the medium term. Company may even declare bonus/ stock split later in this calendar year.
Due to huge saving in interest cost on account of debt restructuring, Sujana Universal (Code No.: 517224) (Rs.28.05) has turned around smartly. To fund its working capital requirement and other plans, the company had raised around Rs.70 cr. Through a GDR issue and is now raising another Rs.16 cr. by preferential allotment of 46 lakh shares at Rs. 35. Because of better cash flows and the growing economy, the company is working more efficiently and effectively. Its casting, bearings and light engineering component divisions are faring exceedingly well on the back of strong demand. For March 2006 quarter its sales were flat at Rs.222 cr. but net profit quadrupled to Rs.9.11 cr. For the full FY06, it may report top-line of Rs. 875 cr. and net profit of Rs.30 cr., which means EPS of Rs.6 on fully diluted equity of Rs.48 cr. With a recent high of Rs.46 and a market cap of only Rs.120 cr., the scrip can easily rise 50% in 9-12 months.
Satnam Overseas (Code No.: 512559) (Rs.94.60) is the undisputed leader in branded Basmati rice with more than 35% market share with reputed brands like Kohinoor, Trophy, Charminar, Rose, Darbar, Shehanshah and Falcon. It is aggressively expanding its presence in the lucrative ready-to-eat foods (RTE) segment and is constantly augmenting its product portfolio. Recently, it has set up a frozen food processing facility at Haryana and has already received orders from Singapore, Mauritius, UK and South Africa. It also has plans to enter into the business of fresh fruits and fruit based snacks and desserts. For FY06, its total revenue grew by 7% to Rs.541 cr. but its net profit increased by 40% to Rs.21.50 cr. due to higher operating margin. This works out to an EPS of Rs.11 on its current equity of Rs.19.60 cr. Considering its future plans and management quality, the scrip is trading relatively cheap than its peers and has the potential to appreciate 25-30% in a years time. A solid bet in the agro based food processing sector. The risk–reward ratio is in favour of bulls.
Maintaining its consistent double digit growth rate, Jupiter Bio Science (Code No.: 524826) (Rs.148.65) has once again come out with satisfactory numbers for March 2006 quarter. Its top-line increased by 14% to Rs.23 cr. and net profit grew by 15% to Rs.6 cr. whereas for the full FY06, it reported sales of Rs.78 cr. and net profit of Rs.20.50 cr. against Rs.71 cr. and Rs.14 cr. in the previous year. The EPS for FY06 works out to Rs.23 on its equity of Rs.8.90 cr. The company is a niche player enjoying a NPM of 26% and is perhaps the only peptide company in Asia with technology to manufacture peptides from the basic stage. To fund its expansion, the promoters are infusing fresh money, which establishes their confidence & commitment to its growth story. The EGM has already approved the to make preferential allotment of 27.50 lakh shares to the promoters at the rate to be calculated as per SEBI guidelines. Besides, it is also planning to raise Rs.90 cr. through FCCB/ADR/GDR route which will lead to its re-rating and substantially increase its market capitalization. Though it has not performed for quite long on the bourses its still one of the most undervalued scrip in this sector.
In line with our expectation, International Combustion (Code No.: 505737) (Rs.406.50) has come out with terrific set of numbers for March 2006 quarter. Sales were up 50% to Rs.21 cr. and net profit increased by 120% to Rs.1.85 cr. thereby registering an EPS of Rs.8 for the quarter. Full FY06 figures are even better as its top-line grew by 46% to Rs.67 cr. but its PAT spurted by 160% to Rs.5.70 cr. Notably, the current tax provision (excluding deferred tax) for FY06 is whopping Rs.3.34 cr. This means that the company has paid nearly 40% tax on PBT of Rs.9 cr. It is expected to declare 50-60% dividend compared to 25% last year. All its divisions are doing exceptionally well and have a healthy order book position. For FY07, it is estimated to report sales of Rs.90 cr. and net profit of Rs.8 cr., which translates into EPS of Rs.35 on its tiny equity of Rs.2.27 cr. At a reasonable discounting of 18x for the Engineering/ Capital Goods sector, the scrip has the potential to cross Rs.600 in the medium term. Company may even declare bonus/ stock split later in this calendar year.
Due to huge saving in interest cost on account of debt restructuring, Sujana Universal (Code No.: 517224) (Rs.28.05) has turned around smartly. To fund its working capital requirement and other plans, the company had raised around Rs.70 cr. Through a GDR issue and is now raising another Rs.16 cr. by preferential allotment of 46 lakh shares at Rs. 35. Because of better cash flows and the growing economy, the company is working more efficiently and effectively. Its casting, bearings and light engineering component divisions are faring exceedingly well on the back of strong demand. For March 2006 quarter its sales were flat at Rs.222 cr. but net profit quadrupled to Rs.9.11 cr. For the full FY06, it may report top-line of Rs. 875 cr. and net profit of Rs.30 cr., which means EPS of Rs.6 on fully diluted equity of Rs.48 cr. With a recent high of Rs.46 and a market cap of only Rs.120 cr., the scrip can easily rise 50% in 9-12 months.
Satnam Overseas (Code No.: 512559) (Rs.94.60) is the undisputed leader in branded Basmati rice with more than 35% market share with reputed brands like Kohinoor, Trophy, Charminar, Rose, Darbar, Shehanshah and Falcon. It is aggressively expanding its presence in the lucrative ready-to-eat foods (RTE) segment and is constantly augmenting its product portfolio. Recently, it has set up a frozen food processing facility at Haryana and has already received orders from Singapore, Mauritius, UK and South Africa. It also has plans to enter into the business of fresh fruits and fruit based snacks and desserts. For FY06, its total revenue grew by 7% to Rs.541 cr. but its net profit increased by 40% to Rs.21.50 cr. due to higher operating margin. This works out to an EPS of Rs.11 on its current equity of Rs.19.60 cr. Considering its future plans and management quality, the scrip is trading relatively cheap than its peers and has the potential to appreciate 25-30% in a years time. A solid bet in the agro based food processing sector. The risk–reward ratio is in favour of bulls.
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