STOCK WATCH
Paper scrips are once again buzzing and Rama Paper Mills (Code: 500357) (Rs.25.75) is the best bet in this sector. Working at 100% capacity utilization, the company recently added some balancing equipment to increase capacity by 10% to 44500 TPA. Besides, it is installing a 6 MW power plant for captive consumption, which will reduce power cost by Rs.800 per tonne of paper produced. It is setting up an additional line of paper manufacturing to produce tissue paper and post paper of 18380 TPA capacity and is also undertaking expansion and modernization to enhance the capacities of its existing three units. On completion of all the projects, its total production capacity will stand augmented to 79500 TPA. To fund this, the company is planning to raise money through debt and equity and may come out with right issue or preferential allotment in the near future. This will lead to a re-rating of the scrip. At its current market cap of Rs.20 cr., it’s available for a song!
As the Sensex heads for the 12,000 mark, buying has begun in the metal sector. In the last few days good buying was seen in Sujana Universal Industries Ltd. (Code: 517224) (Rs.20.20) counter, which indicates that smart accumulation is taking place. From a 52-week high of Rs.45, the scrip was mercilessly battered down to a 52-week low of Rs.13.50 in June’06. It has now recovered partially to around Rs.20 but is still at 55% from its high. Sujana Universal is mainly in domestic appliances, bearings and castings. It also envisages the introduction of value-added products like pump assemblies, clutch release bearings and automobile spindles. For the full year ending 30th June’06, its sales increased by 12% to Rs.891 cr. whereas the net profit jumped 90% to Rs.58 cr. on the back of strong other income of Rs.40 cr. Because of better cash flows and the growing Indian economy, it may end FY07 with sales of Rs.1000 cr. and net profit of Rs.25 cr. posting an EPS of Rs.5 on its equity of Rs.48.20 cr. Scrip can easily appreciate by 50% in a 12-15 months.
ITL Industries (Code: 522183) (Rs.25.60) is the pioneer in high speed sawing technology offering 60 different models of bandsaw machines ranging from 100 mm to 1500 mm cutting capacity with manual, semi-automatic, automatic and fourth generation CNC machines. It is also engaged in the trading of hydraulic power packs and hydraulic presses. Apart from making Industrial Blades, Power Hackshaw Machines, Special Purpose Machines, Hydro Testers, lubricants and other supporting equipments, it also manufactures Tube and Pipe Mills, Section Mills, Straightening Machines, Draw Benches, Automatic Cut-offs, Accumulators etc. Although sales were marginally up Rs.3.11 cr. for the June’06 quarter, the net profit increased by 16% to Rs.0.22 cr. For the full year FY07, it may post a turnover of Rs.25 cr. and net profit of Rs.1.60 cr. i.e. EPS of Rs.5 on its small equity of Rs.3.23 cr. Interestingly, the company has announced the book closure dates for dividend but is yet to declare dividend. It may announce Rs.1.25 or Rs.1.50 per share as dividend, which means an yield of more than 4% at CMP. It’s a screaming buy as the share price can touch Rs.40 in a year’s time.
Uttam Galva Steels (Code: 513216) (Rs.32.30) is one steel company whose profit margin is almost consistent irrespective of the huge volatility in steel prices. For the June’06 quarter, its sales as well as net profit registered marginal increase of 4% to Rs.550 cr. and Rs.22.50 cr. respectively. For future growth, the company is undergoing a Rs.350 cr. expansion, by which it will add a new galvanising line of 3,50,000 TPA capacity taking its total capacity to 7,00,000 TPA. It is also doubling the production of cold rolled steel from existing 5,00,000 TPA to 10,00,000 TPA. It is also investing about Rs.100 cr. to expand capacities in its service centre for steel processing and distribution from 5000 tonnes a month. Hence for FY07, on a conservative basis, the company is estimated to register a top-line of Rs.2500 cr. and PAT of more than Rs.85 cr., which translates into an EPS of Rs.8 on its fully diluted equity of Rs.110 cr. At a reasonable P/E of Rs.6, the scrip is bound to touch Rs.48 in a year’s time. A good bet.
Belonging to the well-known Ador group, Ador Fontech’s (Code: 530431) (Rs.87.05) product portfolio consists of low heat input welding alloys, solid and flux-cored wires, welding and cutting equipment, fume extraction products, in-situ machining systems, thermal spray products, wear plates, cladded pipes and hands-on rebuilding and reclamation services. Its core business is 'Life enhancement of vital machinery components' which is done through implementation of value-added reclamation, fusion, surfacing and coating solutions. Its customer base spans across all industries including steel, mining, power, railways, construction, sugar, cement, fertilizers, shipping, oil drilling and various other engineering industries. For the first June’06 quarter sales and profit increased marginally to Rs.13.50 cr. and Rs.0.30 cr. respectively. Hence for the full year FY07, it may report total revenue of Rs.80 cr. and net profit of Rs.5 cr. i.e. EPS of Rs.14 on its tiny equity of Rs.3.50 cr. Being a liberal dividend distributor, the company commands a better valuation and the share price can cross Rs.120 in 6-9 months.
As the Sensex heads for the 12,000 mark, buying has begun in the metal sector. In the last few days good buying was seen in Sujana Universal Industries Ltd. (Code: 517224) (Rs.20.20) counter, which indicates that smart accumulation is taking place. From a 52-week high of Rs.45, the scrip was mercilessly battered down to a 52-week low of Rs.13.50 in June’06. It has now recovered partially to around Rs.20 but is still at 55% from its high. Sujana Universal is mainly in domestic appliances, bearings and castings. It also envisages the introduction of value-added products like pump assemblies, clutch release bearings and automobile spindles. For the full year ending 30th June’06, its sales increased by 12% to Rs.891 cr. whereas the net profit jumped 90% to Rs.58 cr. on the back of strong other income of Rs.40 cr. Because of better cash flows and the growing Indian economy, it may end FY07 with sales of Rs.1000 cr. and net profit of Rs.25 cr. posting an EPS of Rs.5 on its equity of Rs.48.20 cr. Scrip can easily appreciate by 50% in a 12-15 months.
ITL Industries (Code: 522183) (Rs.25.60) is the pioneer in high speed sawing technology offering 60 different models of bandsaw machines ranging from 100 mm to 1500 mm cutting capacity with manual, semi-automatic, automatic and fourth generation CNC machines. It is also engaged in the trading of hydraulic power packs and hydraulic presses. Apart from making Industrial Blades, Power Hackshaw Machines, Special Purpose Machines, Hydro Testers, lubricants and other supporting equipments, it also manufactures Tube and Pipe Mills, Section Mills, Straightening Machines, Draw Benches, Automatic Cut-offs, Accumulators etc. Although sales were marginally up Rs.3.11 cr. for the June’06 quarter, the net profit increased by 16% to Rs.0.22 cr. For the full year FY07, it may post a turnover of Rs.25 cr. and net profit of Rs.1.60 cr. i.e. EPS of Rs.5 on its small equity of Rs.3.23 cr. Interestingly, the company has announced the book closure dates for dividend but is yet to declare dividend. It may announce Rs.1.25 or Rs.1.50 per share as dividend, which means an yield of more than 4% at CMP. It’s a screaming buy as the share price can touch Rs.40 in a year’s time.
Uttam Galva Steels (Code: 513216) (Rs.32.30) is one steel company whose profit margin is almost consistent irrespective of the huge volatility in steel prices. For the June’06 quarter, its sales as well as net profit registered marginal increase of 4% to Rs.550 cr. and Rs.22.50 cr. respectively. For future growth, the company is undergoing a Rs.350 cr. expansion, by which it will add a new galvanising line of 3,50,000 TPA capacity taking its total capacity to 7,00,000 TPA. It is also doubling the production of cold rolled steel from existing 5,00,000 TPA to 10,00,000 TPA. It is also investing about Rs.100 cr. to expand capacities in its service centre for steel processing and distribution from 5000 tonnes a month. Hence for FY07, on a conservative basis, the company is estimated to register a top-line of Rs.2500 cr. and PAT of more than Rs.85 cr., which translates into an EPS of Rs.8 on its fully diluted equity of Rs.110 cr. At a reasonable P/E of Rs.6, the scrip is bound to touch Rs.48 in a year’s time. A good bet.
Belonging to the well-known Ador group, Ador Fontech’s (Code: 530431) (Rs.87.05) product portfolio consists of low heat input welding alloys, solid and flux-cored wires, welding and cutting equipment, fume extraction products, in-situ machining systems, thermal spray products, wear plates, cladded pipes and hands-on rebuilding and reclamation services. Its core business is 'Life enhancement of vital machinery components' which is done through implementation of value-added reclamation, fusion, surfacing and coating solutions. Its customer base spans across all industries including steel, mining, power, railways, construction, sugar, cement, fertilizers, shipping, oil drilling and various other engineering industries. For the first June’06 quarter sales and profit increased marginally to Rs.13.50 cr. and Rs.0.30 cr. respectively. Hence for the full year FY07, it may report total revenue of Rs.80 cr. and net profit of Rs.5 cr. i.e. EPS of Rs.14 on its tiny equity of Rs.3.50 cr. Being a liberal dividend distributor, the company commands a better valuation and the share price can cross Rs.120 in 6-9 months.
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