KCP Sugar - Rs.208.00

KCP Sugar Ltd is a Chennai based well focused, fully integrated sugar manufacturer with a total crushing capacity of 11,500 TCD at its two plants located at Vuyyuru and Lakshmipuram. The unit at Vuyuru has a capacity of 7500 TCD and the second unit at Lakshmipuram has a capacity of 4000 TCD. It also has the capacity to produce 60,000 tonnes of molasses, 25,000 litres per day of industrial alcohol and 12,000 tonnes of bio fertilisers. Though in the South, KCP sells around 85 to 90 per cent of its sugar in the eastern region where the price realisation is much higher. Hence the company has the best of times as sugar prices are ruling high due to shortage in sugarcane production all over India and are expected to rule high in future too due to the demand supply scenario.

The South has additional advantages as Andhra Pradesh does not have administered price (SAP) for sugarcane. Hence KCP pays only as per central advised price (statutory minimum price) for sugarcane which is lower than what UP based manufacturers pay as per their SAP. Secondly, the company is cashing on its huge carryover stock, which will boost its topline as well as bottomline. Moreover, due to decent rainfall in the south this year, it will have enough sugarcane for crushing in 2005.Infact the management expects the production to rise marginally. To further capitalise on the emerging opportunities, the company is installing a 50 kilolitre per day distillery cum ethanol plant at Vuyyuru, which is likely to be commissioned shortly. The Company has also initiated steps to set up a co-generation unit at Lakshmipuram, which will enable it to sell about 2 to 3 MW of power to State grid in 2005. The company is also actively considering setting up 20 MW co-generation powerplant at the Vuyyuru unit as well. For FY05 it is expected to post an EPS of Rs. 30.

STOCK WATCH

Aftek Infosys (Code No: 530707) (Rs.124.25) has announced 1:2 bonus and will go ex-bonus by last week of January 2005. The company is reportedly doing well and will post an EPS of more than Rs.12 for FY05. FIIs are also quite active in this counter and the share price is tipped to trade at Rs.110 ex-bonus. Aggressive investors can buy cum bonus and stay invested for 2 months to reap handsome returns.

Man Industries (Code No: 513269) (Rs.85.65) is expecting to bag huge orders in 2005. The scrip has not rallied in this bull run and is still available quite cheap. Patient investors are advised to accumalate at the current level as the company could post an EPS of Rs.18 in FY05. At though rising steel prices is a concern still this is the best bet among its peer group.

Being in T2T Lincoln Pharma (Code No: 531633) (Rs.34.15)is lying quite low inspite of strong fundamentals and dynamic future prospects. The company has given more thrust on Research & Development in formulation and is getting its NAMSAFE patented. The scrip has the potential to cross Rs.50 easily and may shoot up the way Ankur Pharma did.

Of late Steel scrips has witnessed a smart rally barring Jindal Stainless Steel (Code No. 532508) (Rs.90.10). The company has massive expansion plans and is increasing its steel melting capacity from 5,00,000 to 6,00,000 TPA, Steckel Mill form 4,00,000 to 5,00,000 TPA and Cold Roll capacity will be increased to 2,50,000 from 90,000 TPA. It has also lined up an ambitious greenfield project at Duburi in Orissa. For FY05, the company is expected to post diluted EPS of Rs.16 and the share price could cross Rs.120 soon.

Alphageo (Code No: 526397) (Rs.59.35) is a pioneer seismic contractor engaged in the business of seismic data acquisition, processing and interpretation. It also undertakes seismic surveys and offers a range of services for oil exploration & drilling like evaluation, reservoir services and production services. Surprisingly, its share price has not rallied in this bull run and is still trading reasonably cheap at Rs.58 This company can be a pure multibagger if held patiently for 2~3 year. For FY05, it is expected to register an EPS of Rs.11 and for FY06 it can even post Rs.20 Grab it at every dip.

In the tech sector in such a high market, Rolta India (Code No: 500366) (Rs.80.60) is trading quite cheap with a limited downward risk. Fundamentally, its very strong with book value of Rs.80 and expected EPS of Rs.14 for FY05. It declared 30 per cent in FY04 which means a good dividend yield as well at the current market price. Long term investors are recommended to buy it for Rs.120 in 1 year.

Aarvee Denim - Rs.66.50

Established in 1988, Aarvee Denims & Exports (Aarvee) is among the leading and oldest denim manufacturers in India and manufactures over 70~80 varieties of denim fabric with different textures and style. At present, it exports to Panama, Honduras, Guatemala, Chile, Turkey, Venezuela, Mexico, Morocco, France, US and Bangladesh. It also manufactures and exports jeans and jackets for men and women to Africa, America and South America and also has a brand called ‘ADEN’. With the removal of the quota regime, the company is concentrating on garment exports to tap new markets in America, Europe and other Asian countries.

The company has a spinning unit near Bavla and a weaving & processing unit at Narol, both in Gujarat. It has enhanced production capacity regularly and can spin over 17,000 MTA and weave 19.90 million metres of denim. It outsources another 10 million metres of weaving outside on a contract basis making it the second largest denim fabric producer after Arvind Mills. To match the increasing demand post quota, it is adding another 14 million metres in weaving and 3100 MTA in spinning at a cost of about Rs40 cr., which will be operational by end September 2005. In addition, it is commissioning a new project of Bed Linen with an initial capacity of 1.2 million metres per month for the European and American markets.

During H1FY05, while its sales increased by 63 per cent to Rs114 cr., NP spurted by 71 per cent to Rs9 cr. thanks to its expanded capacity. Given its thrust on exports and debt restructuring, it can register Net Sales of Rs240 cr. and NP of Rs20 cr. recording a likely EPS of Rs11 on an equity of Rs18 cr. As the impact of the new expansion will be visible only in FY06, it’s best to hold it for the longer term for maximum returns. At CMP, it is trading at 6 PE against FY05 forward earning. Investors are advised to accumulate at dips and sharp corrections for 50 per cent appreciation in the coming 12 months.

Orissa Sponge - Rs.55.50

Incorporated in April'79, Orissa Sponge Iron Ltd (OSIL) was promoted in the joint sector by the Industrial Promotion & Investment Corporation of Orissa and Torsteel Research Foundation and its associates. It manufactures sponge iron through the direct reduction route by using non-coking coal as a reducing agent. Sponge Iron is the basic raw material used for steel making and steel manufacturers of late are trying to replace iron ore with sponge iron to reduce their dependency on imported coking coal, which is very good for sponge iron manufacturers like OSIL. The company also has a project consultancy division which provides technical consultancy and project engineering services to sponge iron plants. Lloyds Metals & Engineers, Usha Martin Industries etc. have already adopted the OSIL technology whereas other leading steel producers like the Bokaro Steel Plant of SAIL has shown a keen interest to adopt it.

OSIL has a current installed capacity of 1,00,000 TPA of Sponge Iron and 1,00,000 TPA of Steel billets. It has installed a 10 MW power plant utilizing the waste heat from the sponge iron plant. It is upgrading technologies to allow 100 per cent sponge melting as well as permit the use of iron ore fines generated during mining for sponge iron making. The company intends to install an additional kiln with a capacity of 1,50,000 TPA of Sponge Iron and also to set up a Steel Billet Plant at Bamra in District Sambalpur in Orissa with an installed capacity of 3,00,000 TPA. The company is also setting up a 9 MW power plant using waste heat of the kiln, which will not only make it almost self sufficient in the power requirement of the Steel Billet Plant but also reduce its power cost. The Central Government has also approved the grant of iron ore mining lease to OSIL.

OSIL has reported impressive numbers for the six months ending Sept 2004 with Net Sales up by 30 per cent at Rs64 cr. while NP jumped 124 per cent to Rs5.60 cr. posting an half yearly EPS of around Rs5. Its OPM also improved 550 basis points to 26 per cent compared to last year. Taking into effect the expansion and higher price realization, it could clock a turnover of Rs150 cr. and NP of Rs13 cr. for FY05 This works out to an expected EPS of Rs11 on its current equity of Rs11.90 cr. and it may declare 20~25 per cent dividend, which makes it a good dividend yield at the current price. In the current market sentiment, this scrip can easily give 50 per cent return in 6 months and can double in a year’s time.

STOCK WATCH

In the paper sector, Tamilnadu Newsprint Ltd. (Code No.531426) (Rs.64.50) (TNPL) is the best bet for the long term. It has ambitious expansion plans to increase its copier paper production to 3500 tonnes a month from 2500 tonnes. Its in-house pulp production is set to increase from 500 TPD to 800 TPD and its annual production of paper will increase to 2,45,000 MT from 2,30,000 MT. The higher production coupled with better price realizations will lead to higher profitability, which will drive its share price beyond the century mark in the next 12 months

Navabharat Ferro Alloys (Code No.513023) (Rs.345.95) seems to bottomed out and is ready for a sharp rally. The company has good expansion plans and is the best bet in the current market situation. For FY05, it will sure to register an EPS of more than Rs100 and the scrip can anytime to shoot to Rs500.

Most of the chlor alkali scrips like Gujarat Alkalies, DCW etc. have shot up due to the hike in caustic soda prices. Bihar Caustic (Code No.500057) (Rs.54.60) with an installed capacity to produce 51048 TPA of Caustic Soda, 39600 TPA of Liquid Chlorine and 29040 TPA of Hydrochloric Acid has still not performed as per market expectation and can rally sharply in coming days. For FY05, it is expect to post an EPS Rs11. A strong buy.

In spite of strong fundamentals and all positive news coming in, the India Glycol (Code No.500201) (Rs.133.95) share has not rallied at all and is trading in a very narrow range. But a sharp break out is expected shortly. Be patient and accumulate it at every sharp dip. It is bound to cross the Rs200 mark.

Of late, shipping scrips have reacted negatively on news of the fall in freight rates. This gives a good opportunity of buy SCI (Code No.523598) (Rs.175.65). Its future prospects still remain very promising and the company has many triggers going forward. Its share price has the potential to cross Rs250 in the next 12 months

Karnataka Bank (Code No.590002) (Rs.203.30) still seems cheap at Rs200 considering 2:1 rights offer is priced at Rs20 per share. Post rights, the bank is expected to post an EPS of more than Rs12 on the expanded equity. At CMP, the acquisition cost works out to Rs80. This means it is still trading at 6 PE whereas other private banks have run up a lot recently.