Shakti Met-Dor Ltd - 210.00 Rs

Incorporated in 1988, Shakti Met-Dor Ltd (SMDL) has established itself as India’s leading manufacturer of Performance Steel Doors. It offers a total door set solution, which includes design manufacturing, supply and installation of steel door sets. It primarily caters to infrastructure industry, information technology, power, textile, hotel, ITES, BPO, pharma, food processing and healthcare sector. Company’s product line includes complete range of general doors, scientific doors, fire doors, pure stainless steel doors, commercial doors and other special application doors that have been developed in consultation with leading architects, consultants and specifiers. By offering effective use of vision panels, hardware, ironmongery and unlimited range of paint finishes, SMDL products are far superior to other doors using traditional materials. Its special stainless steel doors are designed to meet harsh environmental exposure to chemicals, water, steam, laboratories, bottling plants, food processing plants, hospital surgery rooms and all humid environments. On the other hand their scientific door surpasses the most stringent requirements associated with industries like pharmaceuticals, hospitals and at the same time being aesthetic also. This is proven by the fact that Shakti doors are installed in the plants/offices of corporate biggies like Pfizer, Cadilla, Shanta Bio, Dr. Reddy’s, Cipla, GE Shipping, Nuclear Power Corp, HSBC, Citibank, DLF group, British High commission, Oberoi Hotels, Holiday inn, Bank of America etc. Incidentally, it has also been exporting Shakti Doors to other countries in the Middle East, Sri Lanka, Madagascar, Kenya Cyprus etc.

SMDL’s manufacturing plant is located at Gagillapuram, Andhra Pradesh. The company began operations with technical assistance from Martin Roberts of UK, however, since 1999, it has charted its own independent course. Today it possesses the technical expertise, innovative design capability and manufacturing facilities to fully satisfy every customer requirement. To maintain its leadership, company is regularly expanding its manufacturing capacity. After doubling the capacity to 40,000 units in FY06, company further augmented its installed capacity by 50% to 60,000 units in FY07. Notably, this ISO 9001: 2000 certified company is stream lining its operations by implementing ERP from SAP business software. Last fiscal it also commissioned the R&D centre and facilities training centre. On the export front, company is looking at South Asia, among other regions, as a possible growth area for its product and is actively exploring it. For future, SMDL is examining the feasibility of introducing new products to cater to the building industry which are wood substitutes and would also compliment the current products. Moreover, after getting expertise in various projects, company now provides consultancy for recommending suitable ironmongery and accessories to others.

The government’s special emphasis on infrastructure and the increase in FDI investments expected in this area as well as other industry segments, would result in a large market for company's products. Secondly, the aggressive growth plans of the pharma, healthcare and Information Technology industries will also help company in maintaining its growth over the next few years. Considering its half yearly nos, it is expected to clock sales of 80 cr and PAT of 13.50 cr for FY08 which works out to an EPS of 49 Rs on a very tiny equity of 2.75 cr. Ironically, company hasn’t raised or diluted the capital since its public issue in 1994. At the CMP of 210 Rs, scrip is trading at P/E ratio of merely 4x times. With 52 week H/L as Rs 305/160 and expected book value of Rs 125, scrip can move up to Rs 290 (i.e. 40% return) in a years time. However in long term, investor can expected much better returns.

Crew BOS Products Ltd - 78.00

Incorporated in 1988, Crew BOS Products Ltd (CBPL) designs and manufactures leather and leather-based fashion accessories and footwear. So its primarily engaged in exporting lifestyle fashion accessories & home decoration products made from fabrics, leather, metal, wood etc. Over the years, company has successfully transformed itself from being just a bags and belt manufacturer to a multi-product company. Today, its niche product profile can be broadly segmented into four divisions: fashion bags and wallets division, belts and footwear division, home goods division and the recently started - watch strap division. The fashion bag and wallet division is the largest, contributing more than 40% of revenue followed by belts and straps which accounts for 25%. The fashion footwear division, which started in 2003-04 is growing at a scorching pace and presently adds 20% to the top line. The balance comes from export of finished leather and from home good division. CBPL is constantly looking to broad base its product portfolio in order to keep itself abreast with the latest changes in fashion trends around the world. Recently, it has also entered into production of close shoe footwear. To summarize, company’s business model is based on catering to the outsourcing requirements of the leading international brands in U.S. and Europe.

Being an ISO 9001:2000 certified company, CBPL has six state-of-the-art manufacturing units including a world-class leather finishing unit located at Manesar (Haryana) equipped with hi-end Italian machineries and Italian leather processing technology. It also has a tannery at Jalandhar (Punjab) and is also fast developing an exclusive footwear manufacturing unit at the Mahindra SEZ in Chennai (Tamil Nadu). Notably, it has setup an outsourcing and marketing office in Hong Kong (China), marketing office in Milano (Italy) and a resourcing office in Cairo (Egypt). Company has to its credit the unique distinction of producing cost-effective, international-grade, Italian quality leather which has been very well appreciated in the foreign market. Its product range represents the international pulse of fashion as it supplies to some of the world’s best and most renowned international brands and retail chains such as Accessorize, Monsoon, Fossil, Marks & Spencer, Esprit, Next, GAP, Old Navy, Zara, Banana Republic, Tesco, H&M, Chico’s, Fat Face, Debenhams, J Jill, AEO, Armani to name just a few. To compliment this it has a highly scalable business model and there is tremendous scope for ramping up every individual client account. As CBPL derives 100% revenue thru export, it has formed a subsidiary called Crew Style Works to penetrate Indian market under its own brand name to encash the ongoing domestic retail boom. Company has already formulated strategic marketing plans and is all set to launch two brands ‘TEMPESTA’ and ‘CREW REPUBLICA’ initially by early 2008. It also intends to initiate a multi brand concept i.e. different brands for youth, executives, women, etc.

Being very optimistic on the footwear segment, CBPL has entered into a 51: 49 JV with Leather Crafts - a respected Chennai-based leather exporting house servicing the renowned American brand ‘Hush Puppies’, to manufacture and export all kinds of footwear and footwear components. Accordingly company has purchased 6 acres of land at Mahindra World City SEZ at Chennai where it is setting up a new plant to produce 10,000 pairs of full shoes per day. Part production from this new facility is likely to begin by December 2007 and to be fully operational by December 2008. At the same time, it is also looking to enhance its Manesar shoe unit capacity to 5,000 pairs of full shoes per day form 1800 pairs currently. Moreover for future growth company has acquired 30 acres of land at Neemrana in Rajasthan for the expansion of its capacities for fashion accessories and for the development of state-of-the-art manufacturing plant for closed shoe footwear.

To fund its expansion plan, CBPL is looking to raise 100 cr thru equity route in near future. Besides it has already allotted 12.50 lakh warrants, convertible into equity shares @ 178 Rs on preferential basis to the promoters / private business investors. Because of the continuous rupee appreciation, company’s share price has tumbled down sharply to hit new lows of 77 Rs from 290 Rs in Feb’07. Although rupee appreciation will hit company’s bottomline to some extent but importantly, neither the companys product nor its clients are price sensitive. However company is expected to register lower profit for FY08 since it is consolidating and expanding its operation. But from FY09 it will on a strong growth trajectory and won’t be looking back. It is estimated to clock a turnover of little less than 200 cr and PAT of around 19 cr. Still this translates into EPS of 14 Rs on diluted equity of 14 cr. That means scrip is currently trading at a P/E ratio of less than 6x times making it a screaming buy. Investors are strongly recommended to buy at current levels with a price target of 120 Rs (50% return) in a year’s time.

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PBA Infrastructure (82.00) 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 Sept qtr its revenue grew by 45% to 79 cr whereas NP increased by 20% to 4.20 cr. Half yearly figures are much more encouraging. Notably, company has been regularly bagging new orders and its current order book position is around 650 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, it is looking to raise capital thru equity route in near future. Meanwhile it is estimated to clock a turnover of 375 cr and PAT of 17 cr for FY08. This translates into EPS of 13 Rs on current equity of 13.50 cr. Hence scrip is trading at a P/E ratio of approx 6x times. Considering the 52 week H/L as Rs 157/72, this is one of the safest & cheapest bet in the high growth infrastructure sector.

Datamatics Technologies (35.00) is a premier provider of business process outsourcing (BPO) and knowledge processing outsourcing (KPO) solutions with specialization in accounting, claims, payroll, tax services, legal matters, content management, abstracting & indexing, document & workflow management, data warehousing, and business intelligence solutions. It delivers reliable services to a host of international clients, including six of the top 25 Fortune 500 companies and having its consulting services practice certified at CMM Level 5 by the Software Engineering Institute. Due to sharp rupee appreciation coupled with rising salary levels, it reported pathetic nos for the last two quarters. Hence its share price crashed from a high of Rs 86 in Feb’07 to Rs 35 now leading to the current market cap of 140 cr. Ironically, company is holding liquid cash to the tune of 105 cr out of which nearly 100 cr is invested in mutual funds which will be generating more than 10 cr of other income. Being a debt free, company is actually available for 10 Rs per share. Moreover company has finalized to merge Datamatic Ltd - a group company with itself which apart from making its balance sheet stronger, will also de-risk its business model as well. To conclude it’s a screaming buy with negligible downward risk.

Shilp Gravures (55.00) is undisputed leader in electro-mechanical engraving, with a substantial market share of around 40% for flexible packaging industry in India. In simple terms it manufactures electronically gravure/engraved cylinders which are eventually used for rotogravure printing. It has a 300-strong client list which includes India's most reputed names like HLL, Britannia, Amul, Nestle, Cadburys, Tata Tea, Pepsi Foods, Haldiram, P&G, Reliance, ITC, Colgate, Mcdowells etc thereby having a pan India presence. It reported fantastic set of nos for the Sept qtr. Sales improved by 50% to Rs 9.15 cr and profit jumped up 60% to Rs 2 cr. It was also successful in improving its OPM by 200 basis point to 46% against 44% last fiscal. Importantly, its half yearly profit stands at 3.50 cr which is 20% higher than the entire FY07 net profit of 2.90 cr. Hence accordingly it may end FY08 with sales of 38 cr and NP of 6.50 cr which leads to an EPS of 11 Rs on equity of 6.15 cr. just buy and relax as the share price can easily appreciate by 50% in 9-12 months.

Presently, IT sector is totally out of flavor with most of the scrips hitting new lows. And Helios & Matheson (100.00) is no exception with its share price tumbling down to 100 Rs from the high of 190 Rs in June’07. However, on a consolidated basis it announced decent set of nos for the Sept qtr. Total revenue grew by 35% to Rs 110 cr but PAT remained flat at Rs 15 cr. More importantly, company was able to maintain its profit margin due to proactive hedging strategy, offshore leverage, better pricing and cost management. It has also expanded its facilities in Mahindra world city, a multi product special economic zone and international tech park, Chennai, in addition to competency centres in califorma, newyork and newjersey. Notably, its subsidiary “The A Consulting Team Inc” now renamed as “Helios & Matheson North America” has completed ten successful years of listing in the NASDAQ. Financially, against its market cap of 275 cr, company is holding cash equivalent worth of Rs 80 cr and its consolidated gross block stands at 220 cr. Out of the total debt of Rs 150 cr, Rs 115 cr is towards FCCB which will be converted into equity share @ Rs 130 and hence actual debt is only Rs 35 cr. To conclude, it may end FY08 with topline of Rs 450 cr and NP of Rs 55 cr on consolidated basis i.e. EPS of Rs 19 on fully diluted equity of approx Rs 29 cr. A good bet in mid cap IT space.