STOCK WATCH

Laffans Petro (Code No: 524522) (Rs.24) is engaged in manufacturing ethylene oxide derivatives such as Ethoxylates, Glycol Ethers, Acetates, Triethonal-amine, and Brake fluids. Due to higher demand and better price realisation on its products, Laffans Petrochemicals has improved its operating efficiency and is expected to perform much better in coming quarters. For FY05 ending Sept 2005, it may report an EPS of more than Rs.5 and the share price can appreciate by 50% in the next 12 months. A good medium term bet. Due to the uptrend in the Steel sector and strong demand for their products the refractory industry is enjoying the best of times. Raasi Refractories (Code No: 502271) (Rs.29) is a Hyderabad based small player that has posted a good turnaround. It also manufactures high temperature shuttle kiln, heavy-duty top and bottom pressing hydraulic presses, PLC controlled heavy-duty mechanical presses, high intensity mixing equipment and latest lab equipment such as Hot MOR testing machine and photometer. For the nine months ending 31st Dec’ 04, its topline tripled to Rs.16 cr. and it reported a NP of Rs.1.30 cr. against a Net loss of 1.20 cr. in the corresponding previous period. It is expected to report an EPS of Rs.5 for FY05, which may shoot upto Rs.7 for FY06.

The cool off in metal prices will have a positive impact on Ashok Leyland (Code No: 500477) (Rs.24) to a certain extent. It reported an excellent performance for the March 2005 quarter with Sales jumping 30% to Rs.1460 cr. and NP zooming 65% to Rs.143 cr. including Rs.33 cr. as other income. It posted an EPS of Rs.2.30 for FY05 and may report Rs.2.60 for FY06. The outlook for the commercial vehicle segment is very robust and may continue to grow in double digits. The share price has the potential to hit Rs.35 in 12~15 months

Since the last few weeks, companies engaged in agro and food products are attracting market attention with rising sharply on the bourses. At this stage, one can take some exposure in Jhunjhunwala Vanaspati (Code No: 519248) (Rs.26.50) and keep accumulating it at declines. It reported pretty decent numbers for the March 2005 quarter and ended FY05 with an EPS of Rs.8.5. In the current small cap bull run, this scrip can cross Rs.50.

In the Chemicals sector, National Peroxide (Code No: 500298) (Rs.4479.85) this Bombay Dyeing Group Company was very popular one time. It is engaged in manufacturing of Hydrogen Peroxide is trading reasonably cheap. It has a very small equity of Rs.2.30 cr. and very low floating stock since its face value is Rs.100 and the promoters hold 65%. Due to increased production and higher price realization, it reported fabulous numbers for FY05.Sales increased 30% to Rs.75 cr. and NP doubled to Rs.14.30 cr. reporting an EPS of Rs.620. For FY06 it can post an EPS of Rs.720

Lot of positive developments is taking place in Tinplate Company (Code No: 504966) (Rs.55.65). The company is already implementing a phase-wise expansion programme of its existing unit which will take its tinplate making capacity to around 4,00,000 TPA in the next few years. It is also planning to set up a greenfield project with state-of-the-art tinning line in Jamshedpur at an investment of Rs.100 cr. The company has also started offering cost effective packaging solutions to the end-user industry. Besides, it is putting more thrust on exports and intends to become a dominant player in South East and West Asian markets. For the March 2005 quarter it reported stunning numbers posting a quarterly EPS of Rs.5. For FY06, it can report an EPS of Rs.14. A strong long term buys.

Syncom Formulations - Rs.95.00

Incorporated in 1988, Syncom Formulations (India) Ltd (SFL) is promoted by Kedarmal Bankda, Ajay Kumar Bankda and Vijay Kumar Bankda. The company is mainly engaged in pharmaceutical formulations. Its state-of- the-art manufacturing facilities located at Pithampur in Dhar district of Madhya Pradesh and Palghar in Thane near Mumbai. It’s an ISO 9001:2000 certified company. Keeping in view the shifting consumer preferences for the use of herbal products, the company has initiated steps to aggressively manufacture and market of herbal products. Some of the products already marketed are Edicare, Attom Megacaps, Ecziguard, Yes Antacid salt etc. For future growth, the company is putting more thrust on exports and has successfully established its footprint in more than 15 countries of Africa, Latin America, C.I.S. and Asia. To expand its market reach, SFL is in the process of appointing a distributors in Kenya, Tanzania, Philippines, Russia, Ukraine, Moldova and the Domino Republic.

Interestingly, SFL has more than 250 products to offer in ethical, generics, OTC and the herbal range. It is planning to increase its product offering upto 500 products within the next 2/3 years and has earmarked significant resources for product registration process in various overseas markets. Additionally, it has a basket of 20 well-tested and proven herbal products and has high level plans for marketing. SFL is planning an aggressive entry into branded herbal market of South Africa and Europe for which it has already appointed a distributor in South Africa and negotiations are on with an international player to market its herbal range in Europe. It plans to capture a significant market share in these markets through joint promotional activities. SFL has also entered into long-term sales contracts with its distributors in Vietnam, Cambodia, Philippines, and Nigeria.

Besides, the company is negotiating with a Latin American company for contract manufacturing of its brands at its WH0-GMP certified facility. It is also planning to offer comprehensive contract manufacturing services including pilot plant, technical services, quality control and regulatory services for both domestic as well as foreign companies. To take advantage of the burgeoning contract manufacturing, SFL plans to make substantial investment in a new export oriented unit in a special economic zone (SEZ) at Pithampur near Indore. Apart from its contract manufacturing focus, the company has prepared a blueprint to tap the virgin markets of West Africa by increased focus on licensing arrangements with various international players.

To fund all this expansion and growth plans, the promoters are infusing fresh capital regularly as and when required. Earlier in March’05, they made preferential issue of 2.65 lakh shares to themselves at Rs.90 and are now planning to issue 2.78 lakh shares at Rs.84. For FY05, its net sales increased by 21% to Rs.53.50 cr. whereas NP zoomed 135% to Rs.7.10 cr. leading to an EPS of Rs.13. For FY06, we expect it to report Net Sales of Rs.65 cr. and NP of Rs.10 cr., which means an EPS of Rs.18. Investors are recommended to buy this scrip at dips with a price target of Rs.150 in 8~12 months. Long -term investors can even expect a price of Rs.250 in 24 months.

Sanjivani Parenteral - Rs.64.00

Incorporated in 1994, Sanjivani Parenteral Ltd. (SPL) is jointly promoted by a team of pharma professionals. The company’s chairman, Mr. Anami H. Khemka, is associated with the Pharmaceutical Industry for more than 10 years with specialisation in marketing & exports and has good commercial relations with first line pharmaceutical companies. Basically, SPL is a contract manufacturing company specialising in injectibles for the institutional and hospital segments and its key clientele include Ranbaxy, Zydus Cadila, Alkem, Macleods, IPCA Labo, Intas, Glenmark, Medley and Shreya Life Sciences among others. It operates in the antibiotic injectible space (anti-inflammatory, microbial, emetic, allergic and spasmodic) with products like Ceftrimax, Ivimax, Piptaz, Cefepime and C-Bactum.

SPL’s manufacturing facility is WHO GMP certified and is located at Taloja in Maharashtra and can manufacture high grade antibiotics and life saving injectibles used in various pre and post operative infections. SPL is one of the fastest growing companies in contract manufacturing and has a healthy order book. Recently, it bagged a huge order of approx Rs.32 cr. from Kerala Government for supplying sterile cephalosporins for a period of 2 yrs. Earlier, it had received Rs.7 cr. order to supply cephalosporin injectables to the CIS market for a period of 18 months. It has already filed two DMFs (drug master files) in the CIS countries and expects to register 12 more products there. Besides for the first time, Sanjivani has launched its own drugs, Cobaz (Mecobalamine Injection) and Trenaxa (Tranexamic Acid) in the domestic market a few months back through its marketing partner, V.H.Bhagat Pharma, and has fetched a good response from the market. With this initial success, the company is planning to launch a third product Meropenam, a CNS Drug used for brain fever. SPL also intends to introduce Aprotimin injectibles used in heart ailments and the anti-amoebic Ornidazole injectibles. Moreover, SPL has received a contract manufacturing order from a mid-sized Indian pharma company for a novel drug which is a big breakthrough for the company. The Tamil Nadu (TN) Govt. team has inspected its facility and the company may announce some fresh orders soon. On the export front, the company is now trying to supply its products to other markets like Vietnam and Malaysia. There is also a possibility of a merger of Sanjivani Paranterals with its sister concern, Sanjivani Pharmaceuticals, which will give access to an additional basket of Anti-HIV drugs.
With every passing quarter, the company has become stronger and bigger. The board has decided to make a preferential allotment to promoters to raise Rs.2 cr. for setting up an UK MHRA approved facility. The company is in a process of transferring its debt from a co-operative bank to a nationalised bank, to reduce the cost of borrowing from the present level of 13% to about 10%. For FY05, it posted stunning numbers. Sales jumped 135% to Rs.31 cr. and NP stood at Rs.2.80 cr. compared to 0.16 cr. last year. Considering the company’s aggressive growth plan for FY06, we expect it to report Net Sales of Rs.60 cr. and NP of Rs.6 cr. leading to an EPS of Rs.12 on its current equity and approx Rs.10 on the diluted equity. Investors are strongly recommended to buy with a price target of Rs.100 in 12 months

The company has filed its dossier for registration in the Russian market for Cepreomycin, which falls under the anti-T B category. The major player in the market is ELI-Lilly of USA. The market size as on today (December 16, 2004) is 15 million US$. Sanjivani Paranteral Ltd has informed that the Board of Directors at its meeting on April 20, 2005 has decided to issue a Convertible Warrants to the promoters and their relatives aggregate to Rs.2 cr. subject to increase in the Authorised Capital of the Company. Further, the company has informed that the Board has also decided to call a General Meeting for this purpose.
The Company has further informed that it has bagged order for the supply of 3 million units of Cephalosporin to CIS Market which is to be executed within 18 months, and the approximate value of the order is USD 1.50 million.

STOCK WATCH

Punjab Alkalies (Code No: 506852) (Rs.60), This little talked about company from the Caustic Soda sector seems good from the long-term perspective and can be accumulated at sharp declines only. It is the only major player in the northern region and due to the uptrend in caustic soda prices it has shown a sharp turnaround. Since the last 2 quarters, it has improved its OPM substantially and reported an EPS of Rs.10 for FY05. For FY06, it is expect to post an EPS of Rs.12~14. Its share price can rise 50% in 15 months.

Paper prices are ruling firm on strong demand and manufacturers are hiking product prices regularly as their input cost is increasing and paper stocks are buzzing on the bourses. But Star Paper (Code No: 516022)(Rs.67.70) has still not appreciated with respect to its fundamentals and future prospects. Institutional investors have not taken any stake because of the management’s reputation. But sooner or later, they will take interest and get into this company. For FY05 & FY06, Star Paper is expected to post and EPS of Rs.13 & 16 respectively. A very good buy

Most marketmen believe that freight rates have peaked out and shipping companies will witness de-growth in the coming quarters. In this scenario, one can look at a small company called Garware Shipping (Code No: 501848) (Rs.28.40), which operates only in Indian coastal waters serving the high seas oil industry and is least affected by the downfall in international freight rates. Its 52-week high/low is Rs.33/20. It reported an EPS of Rs.8 for year ending 31st December 04. It has a healthy OPM of around 50% and its BV stands at Rs.48. It has already declared an interim of 5% and is expected to declare final dividend on 20th May. It recently sold one vessel for USD1.95 million for which it will show extraordinary income as well in the current fiscal. A good long term bet.

Elder Pharma (Code No: 532322) (Rs.180.35) is trading in a narrow range for quite some time. But since the pharma index has bottomed out and is ready for a sharp upmove the stock could move into a new zone. Elder Pharma has ambitious plans to launch various lifestyle drugs for which its has tied with more than 25 multinationals and has formed a separate division ‘EL Life’. For FY06, the company is expected to report an EPS of Rs.20 and the share price may shoot up to Rs.250 once it catches the market fancy. Buy and hold patiently as there is hardly any downward risk.

Recently Agro Dutch Industries (Code No: 519281) (Rs.49.90) has attracted market attention and started to move up. The company is planning to raise capital for an ambitious expansion plan. It is fully integrated from composting to can making and canning. Moreover, it specialises in growing mushrooms round the year, which gives it an edge over its competitors. For FY05, the company is expected to post an EPS of Rs.10 and if the company declares some dividend, its share price can easily rise 50% from the current level. A very good bet for short to medium term

In the sugar sector, KCP Sugar & Industries looks very promising and is available at reasonable discounting. The company's Rs.15-cr. co-generation power plant is expected to go on stream in October 2005. Recently, it doubled its daily production capacity to 50 kilo litres (kl) each for rectified spirit, ethanol and extra neutral alcohol. Besides, it also manufactures and markets bio-compost and bio-fertilizers. For FY06, it is expected to report record sales and NP registering an EPS of more than Rs.35. Its share price can rise 50% in coming 12 months.

Ind Swift Ltd - Rs.61.00

Ind-Swift Ltd (ISL) started up its activity in development, manufacturing and marketing of prescription and non-prescription pharmaceuticals in 1984. Since then, it has emerged as a research driven, forward looking pharmaceutical company with world-class expertise in finished dosage form medicines. ISL is one of the fastest growing Pharma companies and ranked among the most promising pharmaceutical groups in India by both IMS and ORG-Marg. It’s into manufacturing of broad range of solid, liquid, semi-liquid forms, capsules, tablets, dry/liquid injectables (small & large volume), eye/ear drops, oral solutions, creams/gels etc. ISL is gradually becoming a leading player in select therapeutic categories like Gynaecology, Cardiology, Diabetology and Paediatrics. ISL also manufactures a wide range of products under anti-allergic, anti-fungal, anti ulcer, antibiotic, antispamodic, mineral & vitamins, antihypertensive, speciality herbals etc.

The company’s manufacturing procedures are laid down as per US FDA/WHO GMP guidelines & complies with ISO certification. It has an unique R&D centre having facilities for bio-equivalence studies, clinical trials for Ist, IInd and IIIrd phase and toxicological studies. The R&D team is presently working on a number of products at various stages of development in the high growth areas of cardiology, diabetology, neurology, anti-asthmatic, anti-cancer and anti-alcoholic segments, which are planned for launch in the current year. Recently, the company has successfully launched a wonder molecule for the first time in Asia named `Nitazoxanide' under the brand name `Netazox' for the treatment of diarrhoea. The company has been granted two process patents by the Indian Patent Office. ISL has launched a new marketing division under the name 'Resurgence' for Anesthesiology, Oncology and Surgery Segment. Last year, the company received its first US patent for the NDDS of a macrolide antibiotic `Clarie-SR' a formulation completely developed in-house. The company has also filed another patent for NDDS formulations based on an anti-histamine drug. ISL is also in line to offer a very synergistic opportunity for partnership with MNCs for contract research & manufacturing world-class products that involve substantially reduced R&D costs as compared to their current expenditure. ISL’s future business model envisages achieving leadership in the niche value-added specialized domestic pharmaceuticals market and building a strong de-risked international business around its core strengths by leveraging its manufacturing capability of NCEs, CRO for Global markets, APIs and Formulations with Distinctive sales & marketing infrastructure, and R&D through alliances and In-Licenses and Acquisitions.

Fundamentally as well as financially, the company is very strong and holds around 45 lakh shares of Ind Swift Labs. On its very small equity of Rs.7.30 cr., the company has around Rs.90 cr. in reserves and Rs.90 cr. in investments as per current market valuations. For FY05, its Net Sales increased by 16% to Rs.247 cr. and NP jumped 120% to Rs.28 cr. (including extraordinary income) reporting an EPS of Rs.8 on face value of Rs.2 per share. Going forward, we expect the company’s margins to improve and it can post a NP of Rs.33 cr. on total sales of Rs.300 cr. This works out to an EPS of Rs.9 on its current equity. Investors are advised to buy at current levels with a price target of Rs.100 in 15~18 months.