Narmada Chematur - Rs.39.00

(Code No: 524650) Narmada Chematur Petrochemicals Ltd. (NCPL) is an Indo-Swedish Joint Venture Company of Gujarat Narmada Vally Fertilizers Company Limited (GNFC), Chematur Engineering AB of Sweden and IBI Chematur, Mumbai. This company was basically formed to put up India's largest Single Stream Aniline Plant and India's first plant to manufacture Toluene-Di-Isocyanate (TDI). Today, besides Aniline and Toluene Di-Isocyanate, NCPL also manufactures Nitrobenzene, Liquid Nitrogen, Meta Tolune Diamine (MTD) and Ortho Toluene Diamine(OTD). In fact, NCPL is the only TDI manufacturer in the whole of South, East and Middle Asia and hence enjoys a near monopoly status in Asia. Lloyds Register Quality Assurance (LRQA) accredits the company with ISO 9001: 2000, ISO 14001: 1996 & OHSAS 18001: 1999 certifications.

NCPL’s aniline plant went on stream in early 1995 and is the country’s only plant based on Liquid Phase Hydrogenation, a technology imported from Du Pont, USA. Currently, NCPL has an installed capacity to manufacture 25,000 TPA of Aniline, which is basically used in textile dyes and pigments, pharmaceuticals, rubber chemicals etc. Its TDI plant started production in 1998 and has an installed capacity of 10,000 TPA. TDI is used as the basic raw material to make Flexi Polyurethane foam, which in turn is used for automobiles seats, mattresses, lining and padding, packaging, industrial gaskets etc. Besides, the company can produce 27,000 TPA of nitrobenzene which is used in the manufacture of pesticides, dyes and intermediaries etc.

Due to better management, availability of raw material, strong demand and higher price realisation for all its products, NCPL is witnessing the best of times. It reported record high profits for FY05. To take advantage of this uptrend, NCPL is working towards increasing the capacity of its Aniline Plant to 40,000 TPA and the TDI Plant to 20,000 TPA on top priority. For FY05, its Sales increased by 50% to Rs.382 cr. whereas its NP almost tripled to Rs.31 cr. leading to an EPS of Rs.5 on its current equity of Rs.61 cr. For FY06, it can report NP of Rs.45 cr., which means an EPS of Rs.8. Though the scrip is in T2T segment investors are advised to accumulate this stock at declines with a price target of Rs.60 for 50% appreciation in the next 12 months.

STOCK WATCH

Deccan Cement (Code No: 502137) (Rs.67.65) is a small cement company based in South India. It is expected to come out with good numbers on 24th June and may declare 25% dividend. For the first 3 quarters, it has already reported 50% higher profit of Rs.6 cr. inspite of huge tax provision of Rs.2 cr. For the full year, it may report an EPS of Rs.12. Besides it has huge reserves of around Rs.55 cr. on its small equity of Rs.7 cr. leading to a book value of above Rs.90. Recently, it has caught the attention of few HNIs and the share price is expected to run beyond Rs.100. A strong buy.

Investors who fancy turnaround scrips can take a look at Gujarat Carbon Industries (Code No: 506457) (Rs.21.01). Though it has seen a fast run up from Rs.2 to Rs.20 but it still looks good. Since the last 2 quarters, it’s reporting fantastic numbers and has shown a sharp turnaround. The company is into manufacturing of Methyl Ethyl Ketone and Secondary Butyl Alcohol. For FY05, its sales doubled to Rs.23 cr. and NP stood at Rs.4.20 cr. compared to loss of Rs.1.90 cr. last year. It reported an EPS of Rs.3.25 on its current equity of Rs.12.40 cr. For FY06, it can report an EPS of Rs.7 and hence becomes a good bet for the long term.

Gradually action is building up in National Oxygen (Code No: 507813) (Rs.69) as 30th June comes closer. Huge buying may take place in anticipation of fantastic numbers and a good dividend of 35%. The company may report an EPS of Rs.13~14 for FY05 and is currently trading cheap at 5 PE. Since the liquidity is very poor for Bombay Oxygen, this company becomes the best choice in this sector. Its share price has the potential to rise 50% in the next 3 months.

Competent Automobiles (Code No: 531041) (Rs.43) is recommended for investors who trust the Maruti growth story. The company is a leading dealer for Maruti cars. It has 5 big showrooms and 3 workshops in Delhi. It has one showroom in Himachal Pradesh also and is planning to open one workshop soon. This Rs.500 cr. company has small equity of Rs.6 cr. and reserves of more than Rs.25 cr. leading to a book value of Rs.55 for its share. Though the company works on a narrow margin, it is a dividend paying company and the promoters hold 69% of the stake. For FY05, it reported an EPS of Rs.6, which can rise to 7.5 for FY06. Scrip can rise 50% in 12 months.

GNFC (Code No: 500670) (Rs.87.65) once again came out with wonderful figures for FY05 though dividend payout was a bit lower than expected. For FY05, its total revenue increased 26% to Rs.1822 cr. where its bottomline doubled to Rs.224 cr. due to better operating efficiency and lower interest cost. This works out to an EPS of Rs.15 on its current equity of Rs.146.50 cr. Though there are concerns over the recent gas price hike, this scrip can still be accumulated at declines as it can give 25~30% return in a year if the monsoons are good.

In auto ancillary sector, Amara Raja Batteries (Code No: 500008) (Rs.126.60) is still available reasonably cheap. It is gradually increasing its market share and achieved a recent breakthrough on being selected as an exclusive supplier for the Maruti Swift. The company manufactures batteries for cars, tractors, LCV, HCV, three wheelers, home inverter etc. They have an ongoing agreement as original equipment supplier with Maruti, Tata Motors, M&M, Ashok Leyland and is exclusive supplier to Daimer Chrysler, Ford and Swaraj Mazda. In future, the company is expected to witness exponential growth and can report an EPS of Rs.15 for FY06. Scrip can cross Rs.200 easily in the next 12 months. Keep accumulating at sharp declines.

Shri Lakshmi Cotsyn - Rs.60.50

Incorporated in 1988 as Galaxy Indo Fab Ltd. and later renamed as Shrivatsa International ltd (SIL) is a leading manufacturer & processor of a wide range of fabrics like 100% cotton, polyester and blended fabrics. It is now expanding to manufacture embroidered fabrics, fusible interlining, defence & military related textiles and textile articles. Recently, the management has again changed the name of the company to Shri Lakshmi Cotsyn. Within a decade of its establishment SIL has tripled it manufacturing capacity from 6 million metres per day to 18 million metres per day. With the removal of the quota regime in USA, SIL with interests in weaving, dyeing, printing, embroidery, fusing, quiliting etc is set to gain in coming quarters. Given below is a brief description about its each unit.

Fabrics: SIL manufactures suiting & shirtings, dress materials, canvas, ripstop, twill/drill, gabardine, industrial and synthetic fabrics etc in 100% cotton and blended fabrics like PC & PV. Apart from supplying fabrics to various garment manufacturers to produce trousers, shirts and uniforms, SIL even exports directly to various countries.

Dyeing & Printing: The company has a most modern and sophisticated Processing & Dyeing unit specialising in Vat & Disperse dyes, producing 100% cotton, blended fabrics like PC & PV and other similar fabrics. It also has a Coating Plant to coat Polyurethane on fabrics and make them waterproof or water repellant. For printing, SIL has 12 colour Rotary Printing machines, which can even print camouflage fabric, dual shade fabric and any other type of printing as per specifications. Besides, it is equipped with a full-fledged computerized laboratory for testing the colour, shade and strength of fabrics.

Embroidery: This division is equipped with a Multi Needle Embroidery machine, from Switzerland which can embroider fabric upto 14 to 21 yards at one time. These high quality Embroidered Fabrics and Laces are marketed under the brand name of ‘Alisha Embroidery’.

Interlining & quilting: SIL manufactures woven interlining Fusible Interlining, Microdot Fusible Interlining, Powder Dot Coated Fabric, LDPE Coated Fabric, HDPE Coated Fabric, EVA Coated Fabric and sells under the brand name ‘Star Track’. Besides interlining, SIL produces readymade collars and belt rolls in different shapes and sizes. SIL can also boast of its Quilted products manufactured by a state of art fully computerised multi needle quilting machine imported from Switzerland and South Korea, which can quilt up to 130 inches wide fabric material with a padding of upto 40mm. All the quilted products, starting from Quilted mattress covers, Poly filled Quilts, Baby Quilts, Patch Work Quilts, Bath mats, Sleeping bags, Pillow covers, Cushion covers and Quilted jackets are marketed under the brand name of ‘Dream Flower’.

Defence & Technical Textiles: SIL is a reliable and established name in the Indian Defence Organisation and other Government purchases. It supplies to all Ordinance factories (Clothing) in India like the Ordinance Equipment Factory, Kanpur, Ordinance Clothing Factory, Shahajanpur,Avadi & Hazartpur etc. It supplies Polyurethane/Protective Coating fabric, Camouflage Fabric, Military Clothing, Army Clothing, Water Repellent Fabric, Fire Retardant Fabric, Body Armour, Nylon PU Coated Fabric, etc. for the Indian Military and Para Military forces, Railways and other organizations. SIL specializes in manufacturing bulletproof jacket with advanced technology using aramid fabric and uhmpe sheets to produce hard armour plate, which meets the requirement of NIJ, threat level 3.

To cash on the quota free boom and for its future growth, SIL is coming up with a wew project at Mallwan, Fatehpur (UP) to manufacture 20 million metres of Denim Fabric per annum, 12 million mtrs Wide-width Fabric per annum, 6 million mtrs Bottomweight Fabric per annum, 3000 MT Terry Towel fabric per annum, Yarn Processing 1200 MT per annum and 5 MW Co-generation Power Plant. This expansion will be funded through a right issue or private placement of equity for an amount not exceeding Rs.60 per share. Earlier, it dropped the idea to issue bonus shares and is now planning a stock split to Rs.1 from Rs.10 face value. Financially as well as fundamentally, SIL is very strong and may end FY05 (30 June) with Sales of Rs.290 cr. and NP of Rs.10 cr. leading to an EPS of Rs.10 on its current equity of Rs.10 cr. The scrip is currently discounted at a PE of just 6. Investors are recommended to buy with a price target of Rs.100 in 15 months.

Hazoor Media - Rs.11.25 (Rs.4 paid-up)

Incorporated in Hazoor Media 1992, Hazoor Media & Power Ltd (HMPL) originally known as Hazoor Hotels & Properties Ltd was a subsidiary of Sunbeam Infotech Ltd. Later in 2002-03 as per the scheme of arrangement, it acquired the Property & Hotels Division of its parent company and became an independent asset rich company. Today, it is heading to become a global player in the media sector and a national player in the power sector.

HPML has successfully embarked in the production of media content in diversified software categories viz. entertainment, film and film based programmes, sitcoms, news and current affairs, game shows catering to the demands of media companies in the international market. It has state-of-the-art equipments in its warehouse and provides them on hire to film and TV serial producers. The company has now drawn a strategy to provide trained and qualified manpower services along with the equipment to its clients. HMPL also provides infrastructure services like shooting locations, floors, studios, post production processing facilities, filming equipments and qualified trained manpower to all major media companies and channels including Star Network, Zee Network, Sahara Television, Sab TV and a host of religious and spiritual channels like Sanskar, Sadhana, Aastha. Importantly, it has a large tract of land admeasuring 1,22,000 sq. mtrs. worth over Rs.28 cr. in market value near Sahara lake city at Lonavala near Mumbai, which is utilized as a shooting location. The management is currently identifying a location in Columbia for setting up its marketing office in USA to maximize its business as a media content provider. Apart from this, the company also wants its ‘Hazoor Media School’ to become a leading centre for media education with state-of-the-art technology and infrastructure to focus on quality education. On the power front, HMPL is setting up 10 MW co-generation power project for generation and distribution of grid quality power from biomass resources using steam turbine technology in the state of Maharashtra. Moreover, HPML has entered into a joint venture project with Omkar Petrochemicals Limited to jointly set up a project with an installed capacity of 30000 litre per day to manufacture Ethanol – an Energy Fuel. In future, it may takeover Omkar Petrochem and merges it with itself.

Fundamentally, HMPL is quite strong and at the current price seems reasonably cheap. For the six months ended 28 Feb 2005, it has reported a net profit of Rs.2.4 cr. on net income of Rs.8.9 cr. Its equity capital is Rs.3.5 cr. and with reserves of Rs.13 cr., the book value of the share works out to around Rs.20 on the face value of Rs.4 per share. The company has a healthy operating margin of around 35%. Considering the company’s aggressive plans it is expected to post an EPS of Rs.6 for FY05. To fund its future growth plans, HPML may go for equity dilution but investors can still buy at the current market price (CMP) as the scrip has the potential to double in 12~15 months. A strong buy.

STOCK WATCH

Genus Overseas (Code No: 530343) (Rs.83.10) is a leading manufacturer of electronic energy meters. It has a healthy order book position of more than Rs.90 cr. Besides, it has diversified its revenue stream by entering into other electronic products and solutions such as inverters/UPS, set-top box, tariff meters and energy audit. It may report an EPs of around Rs.11~12 for FY06. A strong buy at dips.

Recently Kilburn Engg (Code No: 522101) (Rs.59.90) decided to come out with a right issue in the ratio of 1:1 at Rs.25. Considering its market price of above Rs.60, it is a mini bonus! The fund will be utilized to meet the working capital requirements and the company is expected to do much better in future. It can post an EPS of Rs.6 in FY06 and Rs.10 for FY07 on its expanded equity. Grab it.

Purely on fundamentals, investors can accumulate Videocon Appliances (Code No: 500945) (Rs.26.65) for the medium term. It is into consumer durables and the white goods segment but have a healthy OPM of 16%. It posted good numbers for the quarter ending 31 March 2005. NP has zoomed by 50% to Rs.7.5 cr. compared to Rs.5 cr. last year although sales increased marginally by 4% to Rs.263 cr. For FY05 ending 30 Sept 2005, it can post an EPS of Rs.8. With a BV of Rs.74, its share price can rise by 50% in the coming bull run.

Bimetal Bearings Ltd (Code No: 505681) (Rs.291.90) belongs to the Chennai based Amalgamation group of companies and is a leading producer of thin wall bearings or engine bearings sold under the brand name-BIMITE. It has in-house fully integrated manufacturing facilities - from alloy powder and bimetallic strips to bearing shells, bushes and thrust washers. For FY05, it can report an EPS of Rs.27 which can shoot up to Rs.30~32 level for FY06. With a book value of more than Rs.250, a bonus issue can also be expected in the near future.

Few months back, Sujana Universal Industries (Code No: 517224) (Rs.23.15) commissioned facilities for the manufacture of telecom and transmission towers. Besides, it also deals in all types of bearings, light engineering components, automobile components, castings and domestic appliances. It may also come out with a ADR/GDR issue to fund its expansion plan. Recently, Schneider Electric has selected the company for development of precision engineering components. For FY05 ending 30 June 05, it may report an EPS of Rs.4, which may cross Rs.6 in FY06 on its current equity of Rs.20 cr.

In the steel sector, Stelco Strips Ltd (Code No: 513530) (Rs.26.20) looks good on further correction. It is engaged in the manufactures of Cold Rolled Steel Strips of mild steel and medium to high carbon steel. Due to strong demand and higher realization for its products its bottomline doubled to Rs.3.50 cr. while its topline increased 60% to Rs.128 cr. for FY05. It posted and EPS of Rs.5, which can rise to Rs.7 for FY06. The scrip may see a sharp rally if the metal sector revives on the bourses. Aggressive investors can take some exposure.