STOCK WATCH

Although Accurate Transformers (125.00) is unable to fully capitalize the boom in power sector and is registering normal growth still it’s a value buy at current levels. For the recent March quarter it posted 10% rise in sales as well as NP to Rs 95 cr and Rs 3.40 cr respectively. Accordingly for entire FY08, sales improved by 15% to Rs 197 cr and PAT grew by 25% to Rs 7.90 cr. Incidentally, this translates into an healthy EPS of Rs 27 on a very tiny equity of Rs 2.97 cr. Due to shortage of funds for working capital company is running at very low capacity utilization. Earlier it tried to raise the capital by making preferential allotment of around 31 lac warrants @ 56 Rs to promoters. But it seems company didn’t get SEBI approval to some technical issue. Coimpany has huge manufacturing facilities spread across Ghaziabad, Sikandrabad, Greater Noida, Dehradun & Haridwar with an installed capacity to manufacture nearly 8000 MVA of transformers. At a very modest discounting by 6x~7x times share price can move up Rs 175 in 6~9 months.

On year on year basis, March’08 quarter nos of Tera Software (54.00) looks very disappointing as revenue declined by nearly 50% to Rs 16 cr and PAT fell by 40% to Rs 3 cr. But if we see quarter on quarter basis it reported highest sales among all the four quarters of FY08. So it implies that company may have completed some big e-governance project in last March ’07 quarter. Still for the entire FY08 company has posted marginal growth in revenue to Rs 59 cr and 15% increase in PAT to Rs 12.25 cr after making highest tax provisioning of 38%. It reported an EPS of Rs 11 on equity of Rs 12.50 cr and is expected to declare 25% dividend for the fiscal. Of late, company has been selected as empanelled vendor for rollout of IT services in govt sector through National Informatics Centre Services Inc. for a period of one year which can be extended for another one year. Looking at its strong order book position it may end FY09 with sales of Rs 75 cr and profit of Rs 16 cr i.e. EPS of Rs 13. Secondly, as per reliable source company is looking to dispose off its 20 acre surplus land in Hyderabad which is worth Rs 40 cr. Once the deal is finalized, share price will shoot up vertically.

Amar Remedies (31.00) is one of the well known manufacturer of ayurvedic, herbal and cosmetic dental care, personal care, skin care, beauty care & health care products like tooth paste, toothpowder, shampoo, creams, lotions, shaving gel, balm & pain relieving ointment. Besides, it has successfully developed 24 different ayurvedic and herbal medicines and has also obtained the FDA approval for the manufacture and sale of these medicines, which include medicines for hypertension, diabetes, and heart ailments. Recently it came out with excellent set of nos for Dec qtr as sales jumped up 70% to Rs 73 cr and PAT increased by 40% to Rs 5.60 cr. Unfortunately company is yet to start commercial production at its newly set up Dehradun facility as it is awaiting the clearance certificate from pollution control authorities. On the back of aggressive capex it has tripled its gross block from Rs 35 cr to almost Rs 100 cr now. For FY08 ending June 2008, it is expected to register sales of Rs 300 cr and PAT of Rs 20 cr i.e. EPS of Rs 8 on equity of Rs 26.20 cr. A safe bet in current market sentiments.

Mazda Ltd (80.00) is among the few engineering companies in the world, manufacturing very specialized, high technology and critical equipments for various industries like power, refineries, fertilizers, chemicals, nuclear, sugar, paper, food, pharma etc. Broadly its product profile is segmented into Vacuum system, Valve division, Air pollution control equipment, Crystallizers and Evaporators. It came out with satisfactory nos for the March qtr and ended FY08 on quite a buoyant note. For the full year its sales improved by 15% to Rs 60.50 whereas its profit increased by 30% to Rs 6.60 cr. Hence it registered a very healthy EPS of Rs 15.50 on a small equity of Rs 4.26 cr. Importantly, company has a technical collaboration with world renowned Croll-Reynolds Inc. USA, who holds 12% stake in the company. To cater the increasing demand, it is setting up a third unit with an investment of approximately 5 to 6 crores. Despite having promising future, this hi-tech engineering company is available very cheap at an enterprise value of around Rs 40 cr. It’s a screaming buy.

Small & Beautiful (Guj)

Click here to download Gujarati version

In the last few months, price of newsprint have shot up nearly 40% and is being sold at more than Rs 35000 per tonne. This augurs well for Rama Paper (25.00) as it derives nearly 60% revenue from newsprint segment. Its 6 MW co-generation captive power plant is fully operational now. Further company has undertaken expansion project of putting MG Machine to manufacture Tissue / Poster Paper thru a capex of Rs 24 cr. In the last two years, promoter have infused more than Rs 15 cr of their own money by taking preferential allotment of 45 lac equity shares @ 35 Rs per share. However, despite 500 basis point improvement in operating margin, company reported flat numbers for FY08 due to substantial increase in interest & depreciation cost. Its sales and PBT remained flat at Rs 84.50 cr and Rs 8 cr respectively. But, on the back of lower tax provisioning its PAT was up 90% to Rs 7 cr posting an EPS of Rs 7 for FY08. It is expected to declare 10% dividend which means a good yield at CMP. But at sharp declines.

Pondy Oxides (23.00) is one of the India's leading metallic oxides and plastic additives producers. It is basically engaged in manufacturing of Zinc oxide, Lead sub Oxide, Litharge Red lead and solid and liquid stabilizers of PVC. Infatc it boasts of number one position in the industry with a market share of about 30% in Plastic Additives division. Recently company declared robust nos for the March quarter. Sales jumped up 30% to Rs 41 cr whereas net profit increased by 60% to Rs 1.30 cr. Accordingly it ended FY08 with sales of Rs 170 cr and PAT of Rs 4.50 cr registering an EPS of Rs 4.50 on equity of Rs 10 cr. To concentrate on its core business it has decided to dispose of its battery unit in Tamilnadu. Last year company got itelf backward integrated by setting up manufacturing unit for Lead smelter thereby minimizing the cost of input to the optimum level. For FY09 it may clock a turnover of Rs 200 cr and profit of Rs 6 cr i.e. EPS of Rs 6 on current equity. Its trading fairly cheap at an EV of around 40 cr.

Belonging to IFB Group, IFB Agro (65.00) is engaged in the production of Extra Neutral Alcohol (Rectified Spirit), IMFL and Marine Products. It boasts of having very successful and leading brands like Volga Vodka, Gold Cup Brandy, Blue Lagoon Gin & IFB Select Whisky under the IMFL segment. Company is also a pioneer in 50* UP category with bestselling brands like Baluba Rum, 3 Cheers Whisky & Russki Vodka. On the other hand its marine division, last year, launched its first ready to fry product "PRAWN POPS" and has plan to introduce more such products in the ready to cook and ready to eat segment. Infact its marine division is poised to become an integrated business and serve all the inputs from the farm to the final consumer. Although it reported poor nos for Dec qtr still for the first nine months sales increased by 15% to Rs 156 cr and NP stood at Rs 6.40 cr. Hence it may end FY08 with topline and bottomline of Rs 200 cr and Rs 10 cr respectively i.e. EPS of Rs 13 on equity of Rs 7.70 cr. Buy at sharp declines.

Notably, Ind Swift Lab (51.00) has already received the USFDA approval in Sept 2007 for its API manufacturing facility at Derabassi Punjab for Clarithromycin. Presently, exports constitute around 45% of sales with company having presence in 45-50 countries across globe. For future growth the company has a robust product pipeline of 25 products which includes few blockbuster drugs as well. It has successfully filed over 72 DMFs with the US, Canadian, UK and European Drug Authorities. Hence company has been aggressively expanding its capacity and has quadrupled its Gross Block to nearly 400 cr from 100 cr two years back. Accordingly it may end FY08 with sales of Rs 450 cr and PAT of Rs 25 cr i.e. EPS of Rs 11 on current equity of Rs 22.80 cr. To fund its growth plan, company made a pref allotment of 28 lac warrants @ Rs 70 in March 2007 and recently allotted another 25 lac warrants @ 70 to promoter group. With a book value of whopping Rs 93 and expected CEPS of 18~20 Rs, scrip is trading extremely cheap at a P/E ratio of less than 5x times. It has the potential to double in 12~15 months.

Click here to download Gujarati version

Smart Investments (Guj)

Parmaount Communications Ltd

• Click here to download Gujarati version
• Click here to download English version

Cosmo Films Ltd

• Click here to download Gujarati version
• Click here to download English version

Ansal Housing & Construction Ltd - Rs 150.00

Incorporated in 1983, Ansal Housing & Construction Ltd (AHCL) – part of the high profile Ansal group is one of the reputed real estate developers with a predominant presence in North India. AHCL has been the pioneer to introduce the concept of large integrated residential townships in the country. Moreover, it has been the first to enter Tier - II & III cities like Ghaziabad, Noida, Allahabad, Lucknow, Ludhiana, Agra, Bhopal, Haridwar etc. Till now company has constructed massive 67.6 million square feet of commercial and residential project across India. Despite residential segment being the biggest contributor, AHCL is now seeing increased activity in commercial division since it has aggressively forayed into shopping malls and retail space. Under the collaboration of Radisson worldwide, company is setting up chain of restaurants across India with “The Great Kebabs Factory” and “Superstars” already operational in Noida. It also owns and manages club houses under the ‘Chancellor’ brand name in Ansal Townships. As a part of diversification, company has also forayed in automobile business thru a joint venture with Itochu Corporation of Japan. And on the back of excellent prospects, it is now setting up state-of-the-art sales cum service centre facility of Honda Cars at Ghaziabad.

Ironically, out of the total development done by the company till today, more than 95% have been carried out in the Tier II or Tier III cities which stands out as the USP of the company. Few of popular townships developed by the company are Aashiana - Lucknow(477 acres), Golf Link I & II - Greater Noida(140 acres), Tronica city - Ghaziabad(87 acres), Bachittar Enclave - Ludhiana(34 acre) etc. In the commercial space, Imperial Tower, Majestic Tower, Classique Tower, Vikas Deep etc in Delhi and Ansal Plaza - Ghaziabad(5,45,000 sq ft), Fortune Arcade - NCR(91,35,000 sq ft), Mega Arcade - Noida(750,00 sq ft) are some of its landmark creations.

On the back of boom in housing sector and strong demand for commercial property, AHCL is aggressively expanding and has launched residential townships branded as “Ansal Town” across seven cities namely Agra, Indore, Jammu, Rewari, Karnal. Meerut and Ghaziabad which are spread over 1400 acres with an investment of Rs 2000 cr. In all, company has lined up gigantic 56.10 million sq. ft of development (80% in the residential segment) spread over 22 cities in the next five years. Interestingly, it has construction plans in much smaller towns like Kurukshetra, Narnaul, Yamuna Nagar, Rewri & Panchkula in Haryana, Ajmer & Alwer in Rajasthan, Muzzaffer Nagar & Jhansi in UP, Parwanoo & Poanta Sahib in HP. At the same it also has ongoing projects in Mumbai metro whereby it is building two towers under the name “Whispering Meadows” and “Ansal Heights” at Mulund and Worli respectively. It is also constructing three high premium towers with super luxurious facilities under its "Ansals Tanushree" project at Ghaziabad (UP). Company also intends to develop Holiday Homes in Shahpur - Thane spread over 150 acre.

Currently, AHCL has a rich land bank of 2500 acres with about 50% under its own name while the rest under firm collaborators agreement. And more importantly the acquisition cost of these lands is reasonably low, for which company has been able to register better profit margin compare to its peers. Financially, its topline increased by 60% to 199 cr and PAT more than doubled to 42.75 cr for FY07, posting an EPS of 25 Rs on equity of 16.80 cr. Incidentally, AHCL follows the percentage of completion method of accounting and hence the revenue is recognized in proportion to the actual cost incurred. It reported encouraging result for the first three quarters and is expected to end FY08 with revenue of Rs 260 cr and net profit of Rs 55 cr i.e. EPS of Rs 31 on current equity of Rs 17.50 cr. To fund its various projects, AHCL has recently allotted 17 lac warrants to promoter group @ Rs 208 per warrant & 29.50 lac warrants to others @ Rs 225 per warrant. Post all conversion its diluted equity is estimated to be around Rs 21.50 cr. Considering its massive land bank, huge order book position and 52 week H/L as 405/190 Rs, AHCL is trading fairly cheap at an current enterprise value of merely Rs 500 cr. Investors are strongly recommended to buy at current levels as scrip can easily appreciate 50% in a year’s time.

Click here to download Report (PDF)

Tamilnadu Newsprint & Paper Ltd - Rs 102.00

Incorporated in 1979, Tamilnadu Newsprint & Paper Ltd (TNPL) was promoted by the Government of Tamil Nadu who still hold around 35% stake in the company. Inspite of being a public sector company, TNPL pioneered the concept of producing paper from Bagasse, namely sugarcane waste thereby using as little wood as possible. Today apart from being one of the lowest cost manufacturer, company boast of having the world’s largest bagasse based paper mill with a capacity of 2,45,000 TPA. It is also the largest exporter of wood free paper from India. TNPL basically manufactures printing and writing paper comprising cream wove, copier and mapiltho paper for business stationery, classical writing, computer stationery and other commercial and quality printing. It offers a range of high-quality surface sized maplitho paper to suit any kind of printing - sheet-fed or web-offset. It is the undisputed market leader for computer stationery in domestic market. It also derives nearly 2% revenue from newsprint. Presently company’s product is exported to over 20 countries across Asia-Pacific, Australia, Middle East, the Mediterranean and the African subcontinent.

TNPL is acknowledged as the world leader in technology for the manufacture of paper from bagasse and has the most modern paper mill in the country with unique bagasse procurement, storing, preserving, handling, processing and pulping system. It continues to enjoy its relatively lower reliance on wood because of its vision to make paper primarily from Bagasse - a sugarcane waste product, which is abundant and cheap, as compared to wood which is scarce and expensive. Ironically, due to this technology it actually avoids the chopping down of trees in about 30000 acres of forest land every year. However it maintains a relationship of 65:35 for bagasse and wood pulp in production to ensure high quality of the paper. To cater the increasing paper demand and become a global player, TNPL had implemented Phase-I of Mill Development Plan which is almost completed. The evaporator, recovery boiler, lime kiln and few other plants were commissioned during September 2007 and the 20 MW turbo generator during October 2007. Accordingly company has increased its captive pulp production capacity from 170,000 TPA to 260,000 TPA with element chlorine free (ECF) bleaching and also a rise in the paper production capacity by 15,000 tonnes to 245,000 TPA. In order to further de-risk the exposure to volatile wood pulp prices, TNPL intends to increase the pulpwood plantation by another 12000 acre from 19349 acres presently, through farm forestry and captive plantation schemes. Importantly, TNPL is self-sufficient in power with in-house captive power generation capacity of 86.12 MW and another 35.50 MW thru wind farm. Infact it has been supplying surplus power to State grid.

Considering the robust outlook for paper industry and to maintain its future growth, TNPL is now contemplating to further hike its paper production capacities from 245,000 to 400,000 TPA by March 2010. Besides, company has entered into the carbon trading by having got its Bio-methanation plant registered as CDM project with UNFCCC and is expected to get 37000 CER as carbon credit till 2013. Moreover it is setting up a mini cement plant with a capacity of 400 tpd for producing high grade cement using the lime sludge and fly ash – the waste material generated in the process of manufacture of paper. TNPL is also contemplating to construct an IT Park measuring an office area of 4 lakhs sq. ft. on its surplus land in suburb of Chennai

Financially as well as fundamentally company is on a strong footing, but however has a huge debt of more than 550 crore. For FY08, company is expected to clock a turnover of Rs 930 cr and Net Profit of Rs 115 cr which translates into EPS of Rs 17 on equity of Rs 69.40 cr. On the back of increased pulp capacity, rise in paper manufacturing capacity and an increase in power generation capacity coupled with robust paper prices, TNPL has the potential post an EPS of Rs 20 for FY09. Considering company’s eco friendly technology, Cash EPS of Rs 30, dividend yield of 4% and massive reserve of more than 500 cr scrip is available relatively cheaper at an Enterprise value of Rs 1300 cr. Hence investors can buy with a price target of Rs 175 in 15 months.

Click here to download Report (PDF)