Pitti Lamination - Rs.76.50

Pitti Laminations Ltd, a Hyderabad based company, specialises in standard and special purpose laminations for application in industrial and electrical equipments including Motors, Alternators, Power & Wind Generators, Pumps, Medical Diagnostic Equipment and Aeronautics. It manufactures Electrical Stampings, Press Tools, Stator Motor Core Assemblies, Segmental Core Assemblies, Die Cast Rotors and Electrical Laminations, which are used in all types of motors, alternators, DC machines and railway lighting alternators. It has a very strong clientele and biggies from the power sector including Ador Welding, Alstom, ABB, Best & Crompton, Bharat Bijlee, Crompton Greaves, Kirloskar Electric, BHEL, KSB Pumps, Siemens, Otis Elevator, Toyo Denki Power Systems and Welco Technologies of USA etc. It also supplies electrical laminations and press tools to US markets for use in special purpose motors having a wide and varied applications in weaving, diagnostic medical equipment and in aerospace industries.

Its manufacturing plant is located at Nandigaon Village in Mahaboobnagar District in AP with current capacity of 6000 MT. Due to an industrial uptrend, its plants are working at more than 100% capacity utilization. Recently in April 2005, it started commercial production at its new plant with a capacity of 4,000 MT, which will cater mostly to the export market. With this, the company’s total installed capacity goes up to 10,000 MT. Currently, Pitti Laminations is riding the boom with a healthy order book position and is continuously receiving new export enquires. To cater to this increasing demand, the company is planning to expand further by another 10,000 MT by February 2006. It is also contemplating modernizing some of the equipment at its existing plant.

Incidentally, the company has been de-registered by BIFR in Nov 2004 and is no longer a sick company since its networth has turned positive. In fact, it has already declared and interim dividend of 10% for FY05, which proves the vastly improved financial position of the company. It is expected to come out with encouraging numbers for March’05 quarter and may close FY05 with Net Sales of Rs.45 cr. and NP of Rs.6.25 cr. posting an EPS of Rs.10. For FY06, it can post Sales of Rs.60 cr. with NP of Rs.8.50 cr. reporting an EPS of Rs.14 on its current equity of Rs. 6.20 cr. Investors are advised to buy at declines for a price target of Rs.120 in 12 months.

STOCK WATCH

Jindal Steel & Power (Code: 532286) (Rs1042.20) has completed its Phase 2 expansion way ahead in March 2005 thereby taking its sponge iron capacity to 1.37 million tonnes, power plant capacity to 265 MW and steel melting capacity to 1.15 million tonnes. Moreover, it has recently been included in the F&O list, which will increase its liquidity in the cash segment too. Although most metal scrips, including biggies like TISCO and SAIL, were hammered down recently, this scrip didn’t correct much. It will continue to report record high numbers in coming quarters.

Uttam Galva (Code: 513216)(Rs58.00) has recently commissioned its latest reversible cold rolling mill with an installed capacity of 2,50,000 MTA, which will enable the company to manufacture import-substitute-grade finished cold rolled sheets to cater to the exacting standards of the automobile and white goods industry. Its 31st March’05 numbers were pretty decent but the company disappointed by skipping dividend. It closed FY05 with an EPS of Rs. 12 and is expected to post EPS of Rs.16 for FY06. Share price has the potential to hit Rs.100 mark. Accumulate at sharp dips.

Jindal Stainless Steel (Code: 532508) (Rs102.70) has signed a MOU with Steelway s.r.l. Italy Ltd to establish a world-class service centre near Gurgaon, Haryana, to promote the usage of stainless steel and to serve its existing customers better and thereby expand its market share. Besides, it has continued to report fantastic number for the Q4FY05 quarter as well and ended FY05 with an EPS of Rs.24. A good long term bet from the stainless steel sector.

Indoco Remedies (Code: 532612) (Rs285.00) which touched a high of Rs.440 is quoting near its all time low. It’s a leading pharma company manufacturing a wide range of products in various therapeutic segments such as anti- diabetics, antihypertensives, antispasmodics, anticold preparations, Stomatologicals, cough syrups, antifungals, NSAIDs, anti-infectives, antibiotics, anti-tuberculars, antimalarials, etc. for the domestic as well as export
markets. Last month, it commenced commercial production at its new US FDA approved tablet manufacturing facility at Verna in Goa, which has a manufacturing capacity of 65 million tablets per month. Recently, it also tied up with New Jersey based Strategic Resources USA, LLC, which will market Indoco’s products in the US market. The scrip is quoting at single digit PE and can be accumulated for long term.

Mahindra Ugine (Code: 504823) (Rs108.05) has again came out with splendid numbers. For the March’05 quarter its sales increase by 31% to 153 cr. but NP zoomed 175% to 15 cr. It ended FY05 with EPS of Rs.16 and may report more than Rs.20 EPS for FY06. It has also returned to the dividend list by declaring 30% dividend for FY05. Although mid-cap steel stocks look expensive compared to the current share price levels of TISCO & SAIL, they still have the potential to give 25~30% return in a year or so.

Shreyas Shipping (Code: 520151) (Rs.64.50), a leader in the container feeder segment, reported excellent numbers for March’05 with a total revenue of Rs.31.30 cr., up 63% and NP at Rs.12.70 cr. compared to a loss of Rs.0.53 cr. last year. For the full year it reported an EPS of Rs.13. excluding extraordinary income. It declared a total 20% dividend for FY05. In addition to the coastal trans shipment feeder services, it has been concentrating on developing the coastal shipping trade by promoting a 100% subsidiary to promote and expand its domestic service. For FY06, it can report an EPS of Rs.16~18. This scrip can be accumulated only at declines for a target of Rs.100 in 12 months time.

Nagarjuna Agrichem Ltd - Rs.114.00

(Code No: 524709) Established in 1994, Nagarjuna Agrichem Ltd (NACL) belongs to the reputed Nagarjuna Group of Hyderabad. Producing technical grade Monocrotophos since inception, NACL has grown substantially and manufactures a comprehensive range of pesticide technicals, formulations and custom manufactured fine chemicals of international quality standards and specifications. Today, the company has an impressive range of over 40 formulations of Insecticides, Fungicides & Herbicides to supplement its crop protection and speciality agronutrients business. NACL is among the few companies in India exporting technical grade pesticides and formulations to as many as 15 countries including Argentina, Australia, Greece, Italy, Japan, Oman, Portugal, Saudi Arabia, South Africa, Spain, etc. It has one of the largest dealer networks spread across India with sales and marketing offices in addition to extensive warehousing and Logistics infrastructure to handle operations in 19 States. In fact, it is the largest seller of High Performance Speciality Fertilizers in India, which are sourced through an exclusive tie-up with HAIFA Chemicals, Israel.

NACL operates one of the most modern and comprehensive Technical Agrochemical manufacturing plants situated in Srikakulam district of Andhra Pradesh. This unit is among the few to have integrated multi-line facilities capable of producing a variety of pesticide formulations such as liquids, wettable powders and granules simultaneously in a single location. This unit has the formulation technology to produce dry flowables and water based emulsions. The R&D / Process Development Department of NACL is the second largest of any Indian Agrochemical Company in terms of size and scope of operation. Currently research is being carried out to develop Bio-pesticides and Fermentation metabolites. Interestingly NACL also does Toll manufacturing of Agrochemicals and Intermediates for MNCs and Indian Pesticide majors who wish to outsource a part of their product requirements. In addition to the above, it also custom synthesises several Fine Chemicals for reputed customers.

Given the higher GDP growth, the government’s thrust on agriculture and better monsoons will lead to increased usage of crop protection products and increase in sales for NACL. For the nine months ending 31 Dec. 2004, its net sales was up 40% to Rs.227 cr. and profit after tax has more than doubled to Rs.22 cr. Due to its improved performance the company is expected to declare 15% final dividend taking the total to 30% dividend compared to 12% in FY04. For FY05, it may report a turnover of Rs.280 cr. and NP of Rs.26 cr. leading to an EPS of Rs.18. For FY06, it can report an EPS of Rs.22 in anticipation of better monsoons and higher export realization. Investors can accumulate this scrip at declines with a price target of Rs.180 over the next 15~18 months.

DCM Shriram Industries - Rs.78.00

DCM Shriram Industries Ltd. (DSIL) was formed in 1990 on the restructuring of the erstwhile DCM Ltd. It is the flagship company of the DCM Shriram Industrial Group based predominantly in North India with a portfolio of products comprising Sugar, Alcohol, organic and inorganic chemicals, drug intermediates, Rayon Tyrecord & Shipping Containers. Incidentally, all their divisions are performing well due to the growing economy and their future seems even brighter.

DSIL’s sugar, chemical & alcohol plants are located in Daurala, UP, whereas its industrial Rayon and Nylon plant is situated at Kota, Rajasthan. It has a most modern sugar factory with 8000 TCD capacity and is the largest manufacturer of high purity. Double Refined Sugar in the country besides producing sugar cubes, sugar sachets, packaged premium sugar etc. DSIL’s distillery unit is amongst the largest in the country with a capacity of 45,000 KL of bulk alcohol and a million cases of potable liqour and country liquor. Its Anhydrous Alcohol plant of 9000 KL, which produces and supplies ethanol to oil companies for mixing with petrol is based on the latest state of the art Membrane Technology and is the first plant of its kind in India established by a Japnese MNC. DSIL’s industrial fibre plant is also one of the biggest manufacturers of Rayon Tyre Cord, Nylon Tyre Cord and Nylon Fabrics with capacity of 14,800 MT.

Recently, the company has approved the merger its subsidiary, Daurala Organics Ltd with itself under a swap ratio of 1:10. i.e. 1 share of DSIL against 10 shares of Daurala Organics. This is very good for DSIL as this subsidiary is a downstream diversification project of Daurala Sugar to manufacture high technology, high-value drug intermediates. Besides, the management is taking various initiatives to restructure its high debt and bring down the interest cost, which will boost its bottomline substantially. With its sugar, alcohol and industrial fibre segment growing rapidly, we expect it to end FY05 with Net Sales of Rs.530 cr. and NP of Rs.27 cr. posting an EPS of Rs.20 on its current equity of 13.73 cr. Post merger figures for FY05 may be Rs.630 cr. of Net Sales and Rs.30 cr. of Net Profit, which will lead to an EPS of Rs.19 on the merged equity of Rs.16 cr. Since it is quoting at a PE of just 4, which is reasonably cheap, the share price can easily appreciate 50% in 12 months time. Investors are strongly advised to buy at current levels with a target of Rs.120 in 12~15 months.

STOCK WATCH

Venus Remedies Ltd (Code: 526953) Rs81.65: is a Chandigarh based pharmaceutical company engaged in manufacture of Super Specialty formulations in Oncology & Cephalosporin segments. Within 4 months, it has filed 4 patent applications to the Indian patent office and another 10 are in the pipeline. The company is very aggressive in launching innovative, new generation, high-end, specialty products in the anti-cancers and Cephalosporin segments. It has successfully launched 10 new formulations in these segments during 2004-05 and is planning nearly a dozen launches during this fiscal. It has ambitious growth plans for which it is setting up an USFDA accredited manufacturing facility at Baddi. It appears to be a multibagger in the long run.

Recently, the second plant of Pitti Lamination (Code: 513519) Rs71.85 has gone on stream with commercial production taking the total capacity to 10,000 MTA. With a healthy order book position and expectation of large export orders the company is planning to further enhance the capacity by another 10,000 MTA. For FY06 it can report an EPS of Rs15. A strong buy for the medium to long term.

Kilburn Engineering (Code: 522101) Rs.48.25 operates in areas of process design, engineering, manufacture installation and commissioning of turnkey plants and systems catering to industries such as petrochemicals, chemical fertilisers, refineries, oil and gas and food processing. It came out with very impressive numbers for 31 March 2005 quarter. Its revenue grew by 21% to Rs14.50 cr. and reported a NP of Rs2.07 cr. against a loss of Rs8.30 cr. last year. For FY05 ending 30 Sept. 2005, it can report an EPS of Rs12. It is expected to clear its accumulated loss in 2 years time. Moreover, it’s planning to relocate its factory in Bhandup and sell the land.. Its share price can easily double in 15 months.

Those who believe in the Steel story should buy KIC Metaliks (Code: 513693) Rs75.05. It has set up 1,44,000 TPA captive coke oven plant, which commenced production last month. Secondly, it’s also setting up a hot stove and a 4 MW captive power plant. With these developments, its input cost will come down substantially. It now plans to put 1,50,000 TPA steel billet plant and 1,00,00 TPA sponge iron plant besides increasing its pig iron capacity to 1,50,000 tonnes. To fund this expansion, the company is obtaining term loans and may raise capital from the capital market, which will dilute its equity. But still it is expected to post an EPS of Rs.11 and Rs.18 for FY05 & FY06 respectively. Buy at every decline.

Bihar Caustic (Code: 500057) Rs.53.65 enjoys the highest operating margins among it peers -even better than Gujarat Alkalies and Chemfab Alkali. Recently, it came out of the T2T segment on the BSE and is expected to declare 20% dividend along with its March numbers on 26th April 2005. Whether it provides for any extraordinary expense this quarter is to be watched carefully. Otherwise, it is expected to post an EPS of Rs11 for FY05. Grab it fast as the scrip may shoot up sharply once the numbers are out!

Sathavana Ispat Ltd (Code: 526093) Rs.42.90 has increased its pig iron capacity from 1,20,000 to 2,10,000 tonnes in Dec.’04 only and has set up 8.4 MW co-generation power plant, which will impact its March numbers to a certain extent. Secondly, its coke oven facility of 1,50,000 TPA is working at full capacity. Moreover, the company has already arranged for the term loan for its greenfield project for the manufacture of 3,00,000 MTPA of Metallurgical Coke with co-generation of power of 30MW. With an expected EPS of Rs11 and an ambitious growth plan without any equity dilution, its share price can double in 12 months. Buy and hold it with patience.