STOCK WATCH

Indsil Electrosmelts (Code No: 522165) (Rs.60.45) was beaten down since there was a marginal decline in its topline in Q4FY05. But still, the company reported a good bottomline and its operating margins remain healthy above 30%. For the nine months ending 31st March 2005, its net sales increased 20% to Rs.59 cr. and NP stood at Rs.10cr. compared to Rs.0.60 cr. last year. For FY05, it may report an EPS of Rs.14. A strong buy.

Sah Petroleum (Code No: 532543) (Rs.25.80), which came out with public issue at Rs.35, is quoting almost at its all time low. It produces specialty industrial lubricants, rubber processing oils and automotive lubes under the 'Ipol' brand name. Due to the rise in crude oil prices its margins are under pressure. Still, the company is expected to end FY05 with an EPS of Rs.3.5. It is also planning to double its existing capacity to 80,000 kilolitres by April 2006 and may close FY06 with an EPS of Rs.5. The share has the potential to cross Rs.40 in next 12~15 months.

In construction and infrastructure, MSK Project (Code No: 532553) (Rs.65.35) is looking good and is still available reasonably cheap. For FY05, its total revenue grew by marginal 7% to Rs.78 cr. but its NP jumped 65% to Rs.5 cr. posting an EPS of Rs.4. Currently, the company has a healthy order-in-hand position of more than Rs.230 cr. and is expected to post an EPS of Rs.7~8 for FY06. Share price can hit a century in the next 12~15 months.

Over the last few months, MTNL (Code No: 500108) (Rs.115.50) has beaten the big pvt cellular operators in garnering new subscribers both in Delhi and in Mumbai. And things are changing at a much faster pace in MTNL as it is aggressively marketing its products and turning more professional. It has huge reserves of Rs.10,000 cr. and a Gross Block of Rs.13,500 cr. on its current equity of Rs.630 cr. But its market cap is still at Rs.7500 cr. With such a huge infrastructure, strong financials and the management becoming serious, MTNL can grow faster than the industry average. Merger or no merger, MTNL looks good and can be accumulated, as the downfall is limited from current levels.

Lahoti Overseas (Code No: 531842) (Rs.49.50) a leading player in the export of cotton yarn is trading reasonably cheap and can be bought at the current levels. The company is planning to foray into weaving to manufacture and export fabrics as well. It’s a good dividend paying company. For FY05, it may report an EPS of Rs.9 that can rise to Rs.12 in FY06. Its share price can rise 50% in 12 months

Tata Sponge (Code No: 513010) (Rs.177.45) has once again come out with impressive numbers for March’05 quarter. Its sales grew by 40% to Rs.65 cr. and NP was up 60% to Rs.16 cr. For FY05, it reported an EPS of Rs.40 and declared 70% dividend. The company is expanding its installed capacity from 2,40,000 TPA to 3,90,000 TPA and may report an EPS of Rs.45 for FY06. Its downside is very limited from hereon where as on the upside, it can easily cross Rs.250 marks.

Simbhaoli Sugar Mills - Rs.81.00

Simbhaoli Sugar Mills Ltd (SSML) was incorporated as a Private Limited Company in 1936 and became a Public Limited Company in 1989. It is one of the oldest and largest integrated sugar manufacturers in North India and produces alcohol and ethanol downstream. Last year, it converted its entire manufacturing capacity at Simbhaoli Sugar Division into a sugar refinery. It basically produces refined sugar and various specialized sugars like pharma grade sugar, confectionery sugar, coffee sugar, sugar cubes, table sugar etc. It has also entered into the branded market under the brand name `TRUST' and has its own 1 kg and 5 kg packs. SSML is the preferred vendor to institutional customers like Coca Cola, Jayco, Pepsi and sweetmeat makers such as Haldiram, Nathu, Bikanerwala etc as it supplies low sulphur content sugar which is perceived to be of superior quality and commands a premium.

SSML operates two mills in Uttar Pradesh at Simbhaoli and Chilwara with a crushing capacity of 7500 TCD and 3800 TCD respectively employing over 1300 people. SSML also has a distillery capacity of 75 KLPD and ethanol production capacity of 30 KLPD. At the Simbhaoli unit, SSML produces refined sugar through the DRPIE process, which is a unique feature in the sugar industry as opposed to the conventional double sulphitation process. The company is now expanding the crushing capacity of its Simbhaoli unit to 9,500 TCD, so that in addition to the 7500 tonnes of refined sugar, 2000 tonnes of raw sugar is produced every day. This will enable the unit to run its refinery for 240 days in a year processing in-house and imported raw sugar for an extended period of 100 days. SSML is also expanding the Chilwaria plant capacity to 6,000 TCD and increasing co-generation of 8 MW/hour to 17 MW/hour and establishing raw sugar processing facility for the off-season. It is also increasing the distillery capacity to 90 KL/day from 75 KL/day. The entire cost of expansion is Rs.50 cr., which will be funded through a rights issue. With this expansion, its total installed capacity will stand increased to 15,500 TCD from the current 11,300 TCD. But with its innovative `model' of extending the running period by using surplus stored baggase to process raw sugar in the off-season, SSML will double its production capacity from the existing 1.8 lakh tonnes to about 3.4 lakh tonnes of sugar, which includes processing of one lakh tonnes of imported raw sugar. Besides, this will also help in the sale of additional power from its co-generation unit to the State grid.

SSML is planning to come up with a rights issue in the ratio of 1:1 at around Rs.60~65 per share. Moreover, SSML has already provided for cane price arrears upto 2003~04 and is also going in for a corporate debt restructuring which will reduce its interest burden and make the balance sheet much stronger. The sugar industry has witnessed a dynamic change from a surplus to near deficit situation due to which sugar prices are estimated to remain firm. In short, all conditions are favourable to SSML and we expect it to report a total turnover of Rs.475 cr. and earn NP of around Rs.38 cr. This works out to an EPS of Rs.17 on its expanded equity of Rs.22 cr. Investors are advised to buy this scrip at sharp declines with a price target of Rs.120 in 12~15 months.

Ashirwad Steel - Rs.36.00

Ashirwad Steels & Industries Limited (ASIL) was incorporated in 1986 as Ashirwad Mercantiles Ltd. but subsequently the name was changed to Ashirwad Steels & Industries Ltd. in 1993. Today, this Rs.75 cr. company is engaged in the production of sponge iron. Besides this, the company also has a LPG storage facility. Since the last 15~18 months demand for steel has increased substantially in the domestic as well as international markets. Hence the demand for sponge iron, the basic raw material, has also spurted leading to sharp price hikes as well. ASIL is having the best of times as it enjoys double benefit-one of expansion and the other of higher price realization although the rising input costs are now becoming a concern for the company.

ASIL is headquatered in Calcutta and its manufactuing plants are located in Jamshedpur in Jharkhand and Nalgonda in Andhra Pradesh. Earlier, it had only one plant of 36,000 MTA in Jamshedpur but within a short span it tripled capacity by setting another plant in Nalgonda with 30,000 MTA in the first phase in October 2003 and another 30,000 MTA in the second phase in August 2004. Currently, it has a total installed capacity of 96,000 MTA. In FY04, it produced around 45,000 MTA of sponge iron which is expected to cross 80,000 MT in FY05 and 96,000 with optimum production in FY06.

Its LPG Bottling Plant at Uluberia, Howrah, is given under lease to M/s SHV Energy North East Ltd and is generating lease rent as other income.With the government’s thrust on infrastructure and the overall industrial uptrend, demand for steel and thereby for sponge iron is expected to remain robust in FY06 as well. But at the same time, little cool off in sponge iron prices cant be ruled out. Although ASIL’s December quarter was not that great but still it’s expected to end FY05 with impressive figures. For FY05, ASIL is expected to report Net Sales of Rs.75 cr. and NP of Rs.6 cr. leading to an EPS of Rs.15. As on March 2005, its book value may stand increased to Rs.33 from Rs.23 last year. The company may declare 5~10% dividend but chances are bleak. Investors are advised to buy after its March numbers are declared and only if the company maintains the operating profit margin. Its share price has the potential to touch Rs.60 in 12~15 months. ASIL has already demated its shares with CSDL and NSDL. Considering its small equity capital and improved performance, its low P/E coupled with the bright prospects of the sponge iron industry; the shares of ASIL can be bought for long-term gain.

STOCK WATCH

Surana Telecom (Code No: 517530)(Rs.29) has posted excellent numbers for FY05. Its Net sales jumped 300% to Rs.115 cr. and NP increased by 400% to Rs.12.50 cr. posting quarterly EPS of Rs.5.5 and declared 20% dividend. Besides, the management is planning to restructure the company by de-merging its infrastructure business into a new company and let Surana Telecom concentrate on the telecom business. Its also plans to raise some capital through preferential issue, which may dilute equity. But inspite of that, it can report an EPS of Rs.12 for FY06 considering its strong order book position. Its share price has the potential to cross Rs.50 soon.

Sanjivani Parenteral (Code No: 531569)(Rs.56) one of the fastest growing companies in the contract manufacturing of pharmaceuticals, has reported mind boggling numbers for FY05. Its top line increased by 350% to Rs.21 cr. and NP was Rs.1.22 cr. against Rs.0.01 cr. last year. It recorded the highest ever sales this quarter and the growth in topline shows how aggressive the company is. The company has bagged good orders from the Kerala Government. It also plans to raise Rs.2 cr. for expansion through preferential allotment to promoters. For FY06, it can report an EPS of Rs.12 and the share price can easily cross Rs.100 mark in 2005 itself.

Monnet Ispat(Code No:513446) (Rs.154) once again came out with stunning results. Its sales grew by 60% to Rs.235 cr. and NP zoomed 370% to Rs.36 cr. posting an EPS of Rs.39 for FY05. Although its operating margins are bit down but in absolute terms it will keep increasing due to expansion. For FY06, the company is expected to report an EPS of Rs.45. These impressive numbers are not factored in the share price and it’s a good chance for investors to accumulate it with a price target of Rs.200 in the coming 6 months.

In the textile sector, Gupta Synthetics (Code No: 514116) (Rs.67) still looks good inspite of the sharp run up in its share price. Its March’05 quarter was excellent with sales increasing by 250% to Rs.36 cr. and NP stood at Rs.1.25 cr. compared to Rs.0.13 cr. last year. This Surat based company is engaged in texturising, twisting, dyeing of yarn and weaving of fabrics and is having good times after the removal of quota. For FY05, it posted an EPS of Rs.19 and for FY06 it may post an EPS of Rs.25. Accumulate at dips.

Steelcast Ltd (Code No: 513517) (Rs.70), an ISO 9001:2000 unit, is a four decade old company based in Gujarat and engaged in manufacturing high integrity Carbon, Low Alloy and Manganese Steel Castings with Shell and Sand Foundries. It has been catering to a host of Original Equipment Manufacturing (OEM) Industry sectors like Earth Moving, Mining, Mineral Processing & Crushing, Steel Plants, Cement, Electro-Locomotive, Oil Field Equipment (OFE), Power, Aerobridge, Shipping and Values & Pumps. For FY05, it reported net sales of Rs.52 cr. and NP of Rs.3 cr. leading to an EPS of Rs.9 on its current equity of Rs.3.60 cr. For FY06, it can report a EPS of Rs.11 and the share price has the potential to touch Rs.100 in 12-15 months.

Aggressive investors and speculators can take a look at Netvision Web Technology (Code No: 532010) (Rs.16.75) a small IT company based in Gujarat for a short term play. The scrip is ruling almost at its 52 week low and is expected to declare a dividend on 9th May. It has good order book position and has recently launched wireless Internet Technology from which it expects to a generate revenue of Rs.50 cr. For FY05, it reported an EPS of Rs.8.Its share price can touch Rs.20 if the market sentiment improves.

MUSCO Ltd - Rs.103.50

Incoporated in 1962, Mahindra Ugine Steel Co. Ltd. (MUSCO) belonging to the Mahindra & Mahindra Group is one of the well-known manufacturers of alloy steel in the country. It has around 100 customers, mainly manufacturers of forgings & bearings and engineering firms. The company's product profile consists of alloys, tool and die steel, engineering alloys, plastic mould steel, ball bearing steel, aircraft quality steel, offshore oil field steel, ferritic/ austenitic/martensitic/duplex/precipitation hardening stainless steel, case carburising steel, boron steel and automotive valve steel. The company also has a stampings division to manufacture pressed sheet metal components and assemblies. It is the only steel company to have achieved ISO 9002 accreditation for all its operations. MUSCO has an impressive list of clients including BHEL, Siemens, NTPC, SKF Bearings, Cummins, Ingersoll Rand, Bharat Forge, M&M, Fairfield Inc. (USA), Comprador Inoxidable (USA), PT Perkasa (Indonesia), S.I.Studs (UAE), Precision Forgings (Saudi Arabia) and Indian Railways to name a few.

Its steel plant has a capacity of 1,10,000 TPA and a workforce of more than 800 employees is located at Khopoli on the Mumbai-Pune highway about 100 kms from Mumbai. The stampings division is at Kanhe, Tal. Maval, Dist. Pune, has a capacity of 18,000 MTA. Due to the uptrend in the user industry, MUSCO is witnessing strong demand for its products, and has chalked out Rs.100 cr. expansion plan to enhance its installed capacity to 2,40,000 TPA by 2008 in a phased manner. It has already spent Rs.30 cr. in FY05 and plans to take the capacity to 1,50,000 TPA by end of fiscal FY06. MUSCO is also concentrating to export directly, which will improve margins further and some European and American buyers have shown interest in sourcing alloy steel from the company.

Fundamentally as well as financially MUSCO has become much stronger with better cash flows and better operating efficiency. It even declared 30% dividend for FY05. For the full year ending 31st March 2005 it posted very impressive number. Its topline grew by almost 50% to Rs.522 cr. whereas bottomline shot up to Rs.48 cr. compared to Rs.6 cr. last year. Its OPM improved substantially to 16% from 7.5% last year. Which means it reported an EPS of Rs.15.50 on equity of Rs.30.93 cr. Considering the expansion and slightly better margins in FY06, MUSCO to report NP of Rs.70 cr. on total sales of Rs.675 cr. registering an EPS of Rs.23 on the current equity. Investors are strongly advised to buy this scrip for 50% return in 12 months.