Triveni Glass - Rs.94.00

Incorporated in 1971, Triveni Glass Ltd (TGL) was promoted by S.N. Agarwal who was associated with the first sheet glass plant in the country set up at Bahji (U.P.) four decades ago. Today, TGL is among the largest glass manufacturers with 20% market share in float / sheet glass. In fact, it is the only wholly-Indian enterprise to manufacture international quality float glass. It offers the widest range of glass products in sheet glass, laminated safety glass, toughened glass, float glass, figured glass, tinted glass, reflective glass etc. It has many firsts to its credit like making the first laminated glass, tempered glass, mirror glass and bullet proof glass in India. TGL is also the second largest manufacturer of Neutral Borosilicate Glass Tubes.

TGL’s huge manufacturing facility is spread over 50 acres at Allahabad and over 40 acres at Rajamundry and Meerut consisting of total 8 hi-tech plants. It has some of the best quality processes in India like using the latest laser technology for non-contact measurement, which ensures consistently high quality products for the special requirements of the glass industry. TGL also has one of the largest nationwide distribution networks in the industry that includes 16 sales offices and more than 200 wholesalers. Although it concentrates more on the domestic market, its products are exported to Italy, Greece, Egypt, U.A.E., Iraq, South Africa, Mauritius, Australia, Indonesia, Malaysia etc. TGL is among the few to make pyrolytic reflective glass which is used in construction and building exteriors to keep out the heat, glare, UV rays and sound as well as keep down the air-conditioning costs and sold as ‘Triflect’. Moreover its sister company, Hindustan Safety Glass Works Ltd. has been OE supplier to most automobile manufacturers from Hindustan Motors to Maruti Udyog Ltd and to Defence, Railways, State Road Transport organisation etc.

Now the biggest trigger for the scrip is its debt restructuring. TGL has already repaid the full loan amount to UTI and only the IDBI debt is outstanding for which it has entered into one-time settlement (OTS) scheme with IDBI's Stressed Assets Stabilization Fund. After a waiver of around Rs.98.50 cr. only Rs.67 cr. after Rs.10 cr. payment in FY05 remains outstanding, which will be paid in installments till 2009. It is also considering issuing 40 lakh equity shares to IDBI against part of the interest due. In short, it’s a strong turnaround story available in a fast growing sector linked to automobiles and the construction industry. For FY06, it may report net sales of Rs.190 cr. and NP of Rs.12 i.e. EPS of Rs.14 on its equity of Rs.8.63 cr. For FY07, it can clock a turnover of Rs.240 cr. and NP of Rs.14 cr. (excluding extraordinary items), which means EPS of Rs.17 and diluted EPS of Rs.12. As its 52 week high is Rs.128, the scrip has the potential to give 30~35% returns in the short to medium term. Aggressive investors are recommended to buy it at declines with a price target of Rs.140 in 9~12 month.

STOCK WATCH

GIPCL (Code No: 517300) (Rs.70) which recently completed its IPO at Rs.68 came out with impressive numbers for Dec’05 qtr. Its topline was marginally down to Rs.195 cr. but its NP increased by 28% to Rs.30 cr. in spite of lower other income. For the full year FY06, it can report a NP of Rs.125 cr. i.e. an EPS of Rs.8 on its expanded equity of Rs.151.25 cr. The company is in the process of doubling its capacity at Surat Lignite Power plant (SLPP) to 500 MW from 250 MW and is also working on setting up two 1000 MW project in South Gujarat besides diversifying into power distribution in the State as part of its expansion plans. Leading mutual funds have evinced interest in this company and will gradually increase their stake going forward. A good long term bet in the power sector with a minimal downfall from current levels.

Ramsarup Industries (Code No: 532690) (Rs.80) is a leading manufacturer of TMT bars and steel wires which are mainly supplied to the power sector. For Dec.’05 qtr. its sales grew by 18% to Rs.247 cr. whereas its NP jumped 72% to Rs.8.20 cr. due to better operating efficiency and declared an interim dividend of 10%. For the full year FY06, it may report a NP of Rs.30 cr., which works out to an EPS of Rs.17 on its equity of Rs.17.50 cr. The company is expanding its product portfolio by setting up a structural mill with an installed capacity of 1,35,000 TPA at Shyamnagar in West Bengal at a cost of around Rs.70 cr. Besides it is planning to enter the power transmission and distribution business in the near future. Scrip has the potential to rise 50% in 9~12 months.

Shrachi Infrastructure (Code No: 511591) (Rs.50) offers a wide range of financial products and services from financing passenger cars and light commercial vehicles to heavy commercial vehicles and construction equipment. For rapid growth, the company is concentrating on infrastructure funding operation since it has a huge potential. For the full year FY06, it may report a bottomline of Rs.9.50 cr. leading to an EPS of Rs.11 on its current equity of Rs.8.50 cr. Recently, it allotted 19 lakh warrants to promoters @ Rs.53 per share and intends to raise further capital to fund its expansion plans while there is a risk of equity dilution going forward, its results are expected on 31st Jan. and we may see some firework in the short term.

Bombay Oxygen (Code No: 509470) (Rs.4933) is engaged in business of industrial gas and produces various types of gases like gaseous and liquid oxygen, liquid nitrogen, liquid argon etc. For Dec’05 qtr. sales were up 19% at Rs.12 cr. but its NP zoomed 53% to Rs.3.20 cr. For full year FY06, it may report Sales of more than Rs.50 cr. and NP of around Rs.12.00 cr. This works to an EPS of whopping Rs.800 on its tiny equity of Rs.1.50 cr. and share having a face value of Rs.100. Its book value as on 31st March’05 is Rs.1700 which may shoot up to Rs.2400 by 31st March 06. This means that the management may anytime announce a stock split and liberal bonus which will take the stock to dizzy height. Its 52-week high is Rs.6826 i.e. 30% lower than its recent high. Since promoters hold 59% of the stake the scrip is bound to hit continuous circuit filters in the near future. Catch it if you can.

Though most cement scrips are busy hitting new highs, Mangalam Cement (Code No: 502157) (Rs.91) is still bit far from its recent high of Rs.101 and trading reasonably cheap due to constant selling by financial institutions like IDBI. It began its new fiscal with excellent numbers. For Dec’05 qtr. Sales spurted 42% to Rs.86 cr. and NP stood at Rs.7.20 cr. compared to 0.61 cr. Its Operating Margin also improved to 14% against 10% last year. For FY06, it is estimated to earn a profit of Rs.25 cr. i.e. an EPS of Rs.9 on its current equity of Rs.28.20 cr. For FY07, it can report an EPS of Rs.12. Ironically; in the last 2 qtrs. IDBI sold a whopping 10% of its equity in the open market and has brought down its stake to 4%. Not much selling pressure is expected now and the scrip is poised to hit a new high soon.

In spite of being considered defensive sector, pharma has been ignored and that too when markets are trading so high. Ind Swift Labs (Code No: 532305) (Rs.158) announced decent numbers last week. Its turnover has increased by 23% to Rs.82 cr. whereas its profit increased 21% to Rs.9.10 cr. In its effort to tap the regulated markets, the company has filed 6 DMFs in USA and targets to file 4~5 DMFs every year. It has also filed 13 patents for non-infringing process for its APIs in USA & India and has put to commercial launch, 4 new APIs during the quarter. Besides, lot of other positive development and massive expansion is on which lead to a sharp re-rating of the company going forward. Although promoters stake is 26%, FIIs hold 30% and MFs hold nearly 4% stake. For FY06, company is expected to report topline of Rs.330 cr. and bottomline of Rs.37 cr. i.e. EPS of Rs.18 on its equity of Rs.20.90 cr. Even at a reasonable PE of 12x, the scrip is bound to cross Rs.220 in the short to medium term.

Mukand Ltd - Rs.84.00

Established in 1937, Mukand Ltd (ML) is one of the largest manufacturers of specialty Carbon/Alloy steel and Stainless Steel. Its Stainless Steel Division caters to the demand from fasteners, industrial components, surgical instruments, weaving wires, industrial springs, heat resistant chains, wire mesh, cutlery, kitchen utensils, etc. Alloy Steel is used in transmission parts, engine components, steering components, high tensile fasteners, fuel injection pumps, bearings and springs. The Specialty Alloy Steel made by the company is mainly supplied to auto ancillary and engineering industry. It supplies to almost all the players in the auto sector like Tata Motors, M&M, Maruti, Bajaj Auto, Hero Honda, Sundaram Fasteners, Lakshmi Precision Screws, SKF India, Hi-Tech Gears, Sona Koyo, MICO, Rane (Madras), etc in the auto component sector. Although it derives major revenue from the Steel Division, it also operates in other two segment namely Machinery Building & Road Construction. In the heavy machinery segment the company builds EOT cranes, gantry cranes, bulk material handling system, process equipment for steel, cement, aluminium, copper and power plants. Mukand is among the largest suppliers of high capacity EOT cranes in India boasting of an impressive client list comprising NTPC, NHPC, ISRO, DRDO, SAIL, BHEL, NALCO, Tata Group, Jindal Group, L&T, Hindalco, Vedanta Group, Essar Group, etc. For road development, the company has entered into a tie-up with one of the largest highway construction companies in Russia-Centrodorstroy. Recently, it completed 168km two-lane highway construction project which is a part of a cumulative 600 km four lane highway project being undertaken at NH-2 in UP worth Rs.700 cr.

Mukand’s manufacturing facility is spread across Kalwe in Maharashtra and Hospet in Karnataka (this facility is shared with Kalyani Steels Ltd. having 42% share) The Kalwe plant manufactures stainless steel and has a capacity of 150,000 MTA. The value added facilities at Kalwe enables the company to manufacture highly customized specialty steel and stainless steel products like wire rods, bars, rounds, bright bars and wires. Its machinery building plant is also located adjacent to its steel plant. Whereas its Hospet plant manufactures more than 400 varieties of alloy steel products in the form of bars, wires, wire rods and bright bars. Mukand also has leased an iron ore mine for captive consumption. The company is in the process of bidding for a third mine and extending the lease of the present mines. To cash in on the boom, the company is expanding its Hospet capacity from 1,60,000 to 2,90,000 MTA in phases by FY08. It also has plans to enhance its finishing facilities, rolling facilities and fabrication/assembling facility at Kalwe. The total capex envisaged over the next two years is around Rs.250 cr. for specialty steel and Rs.30 cr. for heavy machinery division, which would be met from internally generated funds.

Mukand is undergoing a major financial restructuring to improve its balance sheet and bring down its to Rs.980 cr. end by FY06 and to Rs.790 cr. by FY07 (i.e. 1:1 debt/equity ratio). It is also replacing high cost debt with low cost debt and intends to bring down the average cost of debt to below 8%. As the interest cost is almost 6 ¬ 7% of its revenue, debt restructuring will boost the bottomline in FY07 coupled with stable operating margins. For FY06, Mukand is estimated to report turnover of Rs.1650 cr. and NP of Rs.78 cr. i.e. EPs of Rs.11 on its current equity of Rs.73.13 cr. For FY07, NP may shoot up to Rs.130 cr. i.e. EPS of Rs.18 due to saving in interest cost and the booming economy. So, only long-term investors are recommended to buy this scrip at CMP with a price target of Rs.150 (50% return) in 15 months.

Canfin Homes - Rs.52.00

Canara bank promoted Can Fin Homes Ltd. (CFHL) in 1987 in association with reputed financial bodies like HDFC and UTI. It is the first and the biggest bank sponsored housing finance company (HFC) in the country and is one of the leading players in the housing finance sector. It is also one among the four HFCs selected by NHB in its first phase of securitization programme and enjoys 5 Star rating from NHB for the purpose of refinance. The business operations of the company are being carried out through its 40 branches and 4 representative Offices in major cities/towns and 30 Out-reach Centres.

In order to expand its business activities, CFHL has recently diversified by launching three non-housing products viz., premises loan for practicing professionals to set up their offices etc. under the brand name 'VENTURE', mortgage loan scheme under the brand name 'NETWORTH' and loan against rent receivables with the brand name 'N-CASH', which are expected to make a significant contribution in increasing the volume of business. Besides, it is also organizing and participating in various property exhibitions and fairs and has entered into special tie-up arrangements with corporates and others and extended special festival offers as a part of different promotional measures to reach the consumers from different segments of the economy. It has also tied-up with Aviva Life Insurance Company (I) Pvt. Ltd., a leading Life Insurance Company in the private sector to provide free insurance to its client along with housing finance. Adopting the direct selling agency (DSA) model, CFHL is strengthening its marketing efforts and has appointed 12 DSAs to tap the Bangalore and Mumbai markets.

Importantly, CFHL has followed prudent provisioning policy to maintain low NPA levels which currently stand at commendable 1.6%. Moreover, its capital adequacy ratio as on March’05 was 18.92% against the minimum stipulated requirement of 12%. For FY05, it reported flat numbers with a topline growth at Rs.127 cr. and bottomline of Rs.21 cr. posting an EPS of Rs.10 and dividend of Rs.2.50. Due to the tax concessions provided to HFCs and to individual borrowers on the interest paid on such loans and on the repayment of the principal amount, more and more individuals are seeking to acquire a home on loan from HFC. Consequently, the demand for housing loans is increasing. For FY06, CFHL is expected to report total revenue of Rs.140 cr. and NP of Rs.23 cr. i.e. an EPS of Rs.11 on its current equity of Rs.20.50 cr. Surprisingly in such an overheated market, this scrip is still available with a dividend yield of 5% and that too at phenomenal discount of 35% to it book value of Rs.75 Long term investors are recommend to buy it at the CMP with a price target of Rs.80 (50% appreciation) in 12~15 months.

STOCK WATCH

Indian Sucrose (Code No: 500319) (Rs.56) which recently acquired a Punjab based sugar company having a capacity of 2500 TCD, came out with satisfactory numbers for the Dec’05 qtr. Its Sales grew by 60% to Rs.27 cr. but PBT remaining flat at Rs.4.32 cr. Due to higher tax provision its NP was 14% lower at Rs.3.60 cr. which works out to an EPS of Rs.2.30 for the qtr. For FY06, it may report an EPS of Rs.7~8 EPS but for FY07 it can report bumper profits as it will get the dual benefit of capacity expansion as well as higher sugar prices. It can even report an EPS of Rs.15 for FY07. Moreover from this season it has expanded its crushing capacity from 3500 to 5000 TCD. Scrip has the potential to double in 15 months.

Long-term investors can take this opportunity to accumulate Tinplate (Code No: 504966) (Rs.82) as it has corrected sharply post its Dec.’05 qtr. numbers. Though there was some pressure on margin in this qtr., still it reported higher profit in absolute terms due to increase in sales volume. Its sales and NP have both increased by whopping 80% to Rs.108 cr. and Rs.8.30 cr. respectively. This works out to a quarterly EPS of Rs.3 on its current equity of Rs.28.91 cr. For the full year, it is expected to report an EPS of Rs.14 and with the company undergoing a massive expansion, it’s a good long-term bet.

Winsome Textiles (Code No: 514470) (Rs.28) is one of the cheapest textile scrips available on the bourses. It has once again reported excellent numbers for the Dec.’05 qtr. Its Sales grew by 26% to Rs.36 cr. and NP stood at Rs.0.95 cr. against a net loss of Rs.0.33 cr. last year. With lower cotton prices and higher demand for yarn, the future looks very promising for the company and it can report a topline of Rs.135 cr. and bottomline of Rs.3.50 cr. for FY06. This works out to an EPS of Rs.6 on its tiny equity of Rs.5.90 cr. Its book value is Rs.46 and the current market cap is only Rs.15 cr. The only negative factor is high debt as it debt equity ratio is almost 2.80. Still it’s a 2~3 bagger in the long run.

Shasun Chemicals (Code No: 524552) (Rs.97) is one of the world’s largest producer of Ibuprofen with exports to more than 150 countries. It is setting up a commercial facility for creation of significant biotechnology capabilities & capacities especially in the area of protein processing solutions and has already set up a pilot scale fermentation unit. It’s also transforming itself into a CRAMS centric business model. For the Dec.’05 qtr., its total revenue grew by 30% to Rs.99 cr. whereas NP jumped 43% to Rs.12.90 cr. i.e. EPS of nearly Rs.3 for the qtr. Several other positive developments will make the company attract much better valuation in future. Recently, it has also acquired the custom synthesis business of the Rhodia group of France. Scrip has the potential to appreciate 50% in 12 months and may even double in 18 months. Institutional Investors are also quite active in the counter.

GM Breweries (Code No: 507488) (Rs.67), which is the largest manufacturer of country liquor in Maharashtra has announced its Dec.’05 qtr. numbers. Interestingly, with every passing qtr. the company is improving its operating profit margin. Its Sales tripled to Rs.41 cr., while the NP zoomed to Rs.3.04 cr. against Rs.18 lakh last year. Maintaining the same growth for FY06, it may clock a turnover of Rs.150 cr. and NP of Rs.8 cr., which will lead to an EPS of Rs.9 on its current equity of Rs.9.36 cr. In spite of being a Rs.150 cr. company, its current market cap is merely Rs.60 cr. which leaves ample scope for appreciation in future. The scrip is bound to cross Rs.100 sooner or later.