Stock Watch

After few disappointing quarters Torrent Cables Ltd. (Code: 504096) (Rs.184) seems to be back on track if the last two quarters results are any indication. For the March 2007 quarter, it registered 30% higher sales at Rs.63 cr. whereas net profit increased by 45% to Rs.7.70 cr. i.e. EPS of Rs.10 for the quarter. The company managed to maintain a decent OPM of 19%. For the full year FY07, its sales and profit stood at Rs.190 cr. and Rs.19.50 cr. Respectively leading to an EPS of Rs.26 on its current equity of Rs.7.50 cr. Belonging to the reputed Torrent Group and operating in the high growth sector of power cables, it can end FY08 with topline of Rs.250 cr. with a bottomline of Rs.27 cr. i.e. EPS of Rs.36. Hence at CMP of Rs.180, the scrip discounts its FY08 earnings by just 5 times. It’s a value buy and investors can buy with a price target of Rs.250 for the medium-term.

JK Lakshmi Cement Ltd. (Code: 500380) (Rs.123) has once again reported fantastic numbers for the March 2007 quarter. Sales increased by 50% to an all time high of Rs.263 cr. whereas net profit zoomed by 160% to Rs.61 cr. on the back of better margins, lower depreciation and negative tax provision. For the entire FY07, sales were up 45% to Rs.844 cr. and PAT more than trebled to Rs.178 cr. i.e. a whopping EPS of whopping Rs.31 on its current equity of Rs.57 cr. Notably, the company has commissioned one of the captive thermal power plants of 18 MW, while the other 18 MW plant will start by June 2007 end where after the company will become almost self-sufficient for its power requirements. Also a, couple of months back it completed the capacity expansion and operational efficiency improvement plan thereby taking its total cement production capacity to 3.4 million tonnes. Going forward, cement prices are expected to soften but considering its expansion impact and saving in power costs, it can report sales of Rs.1000 cr. and PAT of Rs.160 cr. on a conservative basis for FY08. This translates into an EPS of Rs.26 on its fully diluted equity of Rs.61.20 cr. Scrip may see a smart rally in the near future.

Simplex Castings Ltd. (Code: 513472) (Rs.61) is part of the Simplex group of industries and manufactures heavy castings in grey cast iron, alloy cast iron, stainless steel and steel. These products are used primarily in steel plants, power plants, mining, cement plants, defence and the railways. For the March’ 07 quarter, its sales jumped up 35% to Rs.40 cr. and net profit more than doubled to Rs.2.20 cr. registering a quarterly EPS of Rs.3.70. For the full year FY07, its sales improved by 25% to Rs.134 cr. but PAT doubled to Rs.5.70 cr. i.e. an EPS of Rs.9.50 on its equity of Rs.6 cr. Incidentally, the company has shown the receipt from contract work to the tune of Rs.2.50 cr. as ‘other income’ for FY07. However for FY08, it may clock a turnover of more than Rs.150 cr. with profit of Rs.6.50 cr., which means an EPS of Rs.11. Buy at declines.

Although the current market cap of Garnet Construction Ltd. (Code: 526727) (Rs.69) is hardly Rs.60 cr. the company is betting huge on construction and real estate space with its Rs.1200 cr. ‘Magic Hills’ project at Khopoli near Panvel. Presently, the company has 400 acres of land under which it is developing the entire township project including apartments, row houses, independent bungalows, malls, IT centre and also educational facilities. It has also entered into an exclusive global marketing alliance with the Sternon Group (Dubai-based real estate developers, builders and promoters) to market this residential and commercial project to prospective buyers around the world. The project is expected to be commissioned by October 2007 for which the company is planning to raise around Rs.250 cr. through FCCB or QIP route. For FY07, it recorded sales of Rs.35 cr. and after tax provisions of Rs.3.35 cr., the net profit stood at Rs.6.65 cr. However, it’s a pure long-term buy and investors should buy on sharp declines only.

For a very long time Bihar Caustic & Chemicals Ltd. (Code: 500057) (Rs.54), an Aditya Birla group company, is trading in a very narrow range of Rs.50-60 despite of strong fundamentals. Last year, the company increased capacity by 50% to 75,000 MT and shifted to the energy efficient membrane cell technology. It has been reporting decent set of numbers for quite some time and ended FY07 with 30% higher sales and net profit at Rs.143 cr. and Rs.34 cr. respectively. This translates into an EPS of Rs.14.50 on its equity of Rs.23.40 cr. It declared 15% dividend, which gives a yield of around 3% at CMP. With the divestment plan of Gujarat Alkalies hotting up, scrips from this sector may come into action in the near future. Moreover, for FY08 it can report sales of Rs.160 cr. and PAT of Rs.36.50 cr. i.e. EPS of Rs.16 on its current equity. In spite of huge debt of more than Rs.100 cr., the scrip has the potential to give an average return of 25-30% in a year’s time.