Vinay Cements - Rs.29.00

Incorporated in 1986, Vinay Cements Ltd. (VCL) is the flagship company of the BK Bowri group, which is a leading cement manufacturer in North East India. In fact, it is among the top three players in the region since inception. Its brand name ‘Vinay’ is the largest local cement brand with a market-share of 8% in the region. Importantly, VCL has its own captive mines for cement grade limestones. Since, the company has an installed capacity of only 2,40,000 TPA, it enjoys the status of mini-cement plant with exemption from payment of excise duty. Interestingly, the north eastern market doesn’t have many cement plants and most of the demand is met by importing cement from other nearby states like U.P., MP, Bihar or Orissa.

VCL’s manufacturing facility is the first Fuller Technology based plant incorporating state-of-the-art process control systems for manufacturing both Ordinary Portland Cement (OPC) and Pozzolana Portland Cement (PPC). In FY06, it produced little more than 1 lakh tonnes against an installed capacity of 2.40 lakh tonnes translating into capacity utlization of less than 50%. This means that it has the potential to double its sales without any major capital expenditure. Secondly, the company along with others has promoted a new company called Calcom Cement India Ltd to set up a greenfield cement project of 1.5 million TPA at Chachar in Assam at an investment of about Rs.414 cr. And VCL being a promoter company holds around 59 lakh equity shares of Calcom at an investment of Rs.6 cr. and has also provided corporate guarantee to some extent. This project in itself will be a state-of-the-art cement plant and the biggest cement plant in the North-East and is expected to commence operation by mid-2007.

Due to higher price realisation and better capacity utilisation, VCL is performing extremely well and has reported stunning numbers for H1FY07. However, the major part of the PAT is contributed by other income which it earns as incentives, royalties etc. Notably, the company has paid off all its loans and is currently a 100% debt-free company although it has cash-credit facility with UTI Bank. With huge reserves of Rs.23 cr., the book value of its share stands at Rs.33. For FY07, it is estimated to report a turnover of Rs.55 cr. with net profit of Rs.5.50 cr. leading to an EPS of Rs.6 on its equity of Rs.10 cr. Its long-term prospects are very encouraging along with the hidden value in Calcom Cement. However the other income aspect, huge debtor outstanding of Rs.16 cr. and contingent liability to the tune of Rs.25 cr. is a cause of concern. Investors can buy it at dips with a price target of Rs.45-50 in 12-15 months

Choksi Laboratories Ltd - Rs 19.00

Incorporated in 1993, Choksi Laboratories Ltd. (CLL) is a group of research laboratories offering analysis, calibration, pollution control, research and consultancy services to a broad spectrum of industries. In short, it’s a commercial testing and analysis laboratory. It was the first to start water and soil analysis in central India and also the first to start instrument calibration services for organizations that were seeking ISO certification. In fact, it was the only one to commission and run ONGC’s Effluent Treatment Plant at Amod oil rig probably the largest in India. Today, CLL boasts of serving over one thousand customers, both regional and international and analyzing over 1000 different products. Of late, the company has entered clinical trial research in a big way.

CLL’s labs/branches are located at Chandigadh, Indore, Vadodara, Delhi, Ahmedabad & Vapi and are equipped with ultra modern, sophisticated and very hi-tech equipments imported from various parts of the world. Recently, it commenced a 40-bed clinical research facility at Vapi for carrying out bio-availability and bio-equivalence studies. Notably, CLL is certified by BIS, FDA, Gujarat and Madhya Pradesh PCBs, Department of Health (MP), AGMARK - GOI and several other regulatory bodies. It has also been accredited to NABL, which is internationally recognized through ILAC and is based on ISO/ IEC guidelines. The company has facilities to analyze food & agricultural products, cement & building materials, chemicals, drugs, metals, oil, soil, PVC pipes & paints etc for its client or as a regulatory requirement. It also helps different industries in their research processes. Its Environment Consultancy Division helps companies keep the environment clean and free from pollution. Apart from calibrating services for individual instruments, CLL provides a comprehensive Annual Calibration Contract (ACC) that covers maintenance of calibration due-date charts and on-site/ laboratory schedules etc. Moreover, it offers consultancy services for solid waste management, sewage treatment plants, hotel and hospital waste management, hazardous waste management etc.

Fundamentally, it hasn’t shown great performance yet but the potential is huge and the future looks very promising. For FY06, its sales improved by 15% to Rs.7.60 cr. and net profit dropped by 10% to Rs.0.81 cr. on the back of higher interest cost and depreciation. For the first six months ending 30th Sept.’06, total revenue grew by nearly 20% to Rs.4.70 cr. but profit increased by only 10% to Rs.0.65 cr. However, the company enjoys an operating profit margin (OPM) of over 35% and net profit margin (NPM) of more than 10% and at the current market cap of Rs.10 cr., it can turn out to be a multi-bagger if held for 2-3 years. For FY07, it is expected to report a total revenue of around Rs.10 cr. with PAT of Rs.1.30 cr. This translates into EPS of Rs.3 on its equity of Rs.4.85 cr. At CMP of Rs.18, the scrip is discounts its FY07 earnings by merely 6 times, which is very cheap for such a niche player. With a 52-week high/low as Rs.45/Rs.13, the downside to this stock is minimal whereas on the upside, the scrip can easily double in 15-18 months. Strong buying recommended for long-term investors only.

STOCK WATCH

Simmonds Marshall Ltd. (Code: 507998) (Rs.45.85) is the market leader in Nyloc nuts and manufactures wide range of world class nuts like flange, cage, weld, cap, castle, couplings, u-nuts, wheel nuts etc. It also has a cold forged automotive components division, which is capable of cold forging small and shallow components for automobile manufacturers and their ancillaries. For H1FY07, while sales grew by 20% to Rs.11 cr., net profit jumped 40% to Rs.1.10 cr. registering half-yearly EPS of more than Rs.5. It may declare 15% dividend for FY07, which gives an yield of more than 3% at CMP. Due to the robust demand for its products, the company is constantly adding and modernising its plant & machinery to enhance its production capacity. On a conservative basis, it is expected to end FY07 with sales of Rs.22 cr. and PAT of Rs.1.80 cr. This works out to an EPS of Rs.9 on a tiny equity of Rs.2.10 cr. Buy immediately as the scrip has the potential to appreciate by 50% in a year’s time

Madhav Marbles & Granites Ltd. (Code:515093) (Rs.132.75) is India’s third largest manufacturer and exporter of granite tiles and slabs. Almost all its entire production is exported to countries like U.S.A., Germany, Holland, U.K, Italy, Spain, Japan, Australia and South Africa. It derives around 55% revenue from the Granite Slabs 30% from granite tiles, 10% from marbles and the rest 5% comes from power and other activities. For H1FY07, its sales and revenue grew by 30% to Rs.48 cr. and Rs.11.50 cr. respectively. However, to cash in on the construction boom, the company has diversified into the realty business comprising Urban Infrastructure, Township, Housing and construction development projects. To fund these plans it, may come out with FCCB/GDR issue in the near future. For FY07, it is estimated to clock a turnover of Rs.100 cr. with PAT of Rs.19 cr. i.e. EPS of Rs.21 on its current equity of Rs.8.95 cr. Buy at declines.

Cubex Tubings Ltd. (Code:526027) (Rs.63.15) is engaged in manufacturing copper and copper alloy tubes, rods, strips, profiles and wires which are used by the core sector and other critical industries such as thermal & nuclear power plants, refinery & petrochemicals, telecommunications, electrical & electronics, defence, condensers & heat exchangers, railways, automobiles etc. Recently, it bagged around Rs.10 cr. order from Siemens for seamless condenser tubes. Its sales & net profit increased by 50% & 60% to Rs.46 cr. and Rs.4.50 cr. respectively for the H1FY07. Earlier this year, the company got permission to import low cost waste and scrap that will reduce the cost of its production. Also as copper prices are in a downward trend since the last few months, it bodes well for the Cubex. For FY07, it may report a topline of Rs.90 cr. with net profit of Rs.9 cr. which will result in an EPS of Rs.12 on its fully diluted equity of Rs.7.70 cr. Buying is strongly recommended as the scrip can give 50% return in 9-12 months.

Kulkarni Power Tools Ltd. (Code:505299) (Rs.112.35) is a leader in the design, engineering, manufacturing and marketing of power tools like drills, grinders, hammers, cutters, polishers etc. used in construction and other industrial activities. Notably, it has developed strong customer alliances with some of the largest retailers and important brand names in the world. It also owns the ‘Powermaster’ brand of professional tools well-known in Asia and Africa. For H1FY07, while its sales improved by 12% to Rs.20.50 cr., net profit spurted by 65% to Rs.1.40 cr. in spite of huge deferred tax provision. For FY07, it is estimated to register sales of Rs.42 cr. with profit of Rs.3 cr. This translates into an EPS of Rs.18 on its very tiny equity of Rs.1.70 cr. Accumulate at sharp declines with a price target of Rs.200 in 15 months or so.

Bhagiradha Chemicals & Industries Ltd. (Code:531719) (Rs.136) is one of India’s largest manufacturers of Chlorpyriphos, the best-selling insecticide used on a wide variety of crops such as cotton, chilli, rice, sorghun, soyabean, sugarcane, groundnut, vegetables, ornamental flowers and plantation crops like citrus, mango, grapevine etc. apart from use in the preservation of wood & timber. For H1FY07, it reported 35% higher sales of Rs.48 cr. with 80% higher net profit of Rs.6.20 cr. over the corresponding previous period. Earlier this year, it entered into an exclusive contract manufacturing agreement with Dow Agro Sciences, Europe, for supply of 200 to 250 tonnes of Fluroxypyr or Methyl Ester Intermediate for 4 years from 2006. Hence for the full year FY07, it may report sales of Rs.100 cr. with net profit of Rs.12.75 cr. recording an EPS of Rs.25 on its low equity of Rs.5.05 cr. At a reasonable discounting of 8 times, the share can cross Rs.200.