Gupta Synthetics - Rs.178.00

Synthetic Ltd (GSL) was promoted by the renowned Gupta Group of Companies which has wide and varied experience of over two decades in the manufacture of polyester yarn apart from Texturising, Twisting, Sizing, Dyeing of Yarns and processing of Fabrics. The group is known in textile circles for their business acumen and techno savvy attitude, which has helped them in charting consistent growth even under unfavourable conditions. Currently, GSL is one of the leading yarn manufacturer engaged in production of partially oriented yarn (POY), fully drawn yarn (FDY), drawn texturised and drawn twisted yarns.

Its world class manufacturing facilities are located at Silvassa and Surat. It has all hi-tech imported machineries like Barmag A G machinery for POY spinning imported from Germany and Teijin Seiki for FDY Spinning from Japan etc. Ironically, the company has installed complete IBM infrastructure and is running international class ERP package of SAP and has also connected its manufacturing plants and corporate office by leased lines to get real time information and updates. Due to continuous expansion and modernization, GSL’s current capacity stands at 46,500 TPA for POY, 2500 TPA for FDY, 2200 TPA for drawn texturised yarn and 550 TPA for drawn twisted yarn. To cater to the rising demand, GSL is increasing the production capacity of FDY by 15,000 TPA by installing additional imported FDY Lines at a capital outlay of Rs.25 cr. This expansion is estimated to be completed by April 2006. The company is also exploring possibilities to take up a backward integration project by installing a Continuous Polymerisation plant (CP) to reduce its dependency upon foreign suppliers. Besides, it also plans to increase its production capacity of POY and Polyester Texturised Yarn (PTY). Interestingly, the management is also keen to diversify its activities from polyester products to include nylon based products also.

Recently, the company announced its Dec.’05 qtr. numbers which are very encouraging. It registered a growth of 63% in sales at Rs.80 cr. whereas its NP jumped 260% to Rs.3.20 cr. It is planning to rise around Rs.25 cr. Through a preferential allotment to fund its future expansion plans. With its long experience in the Textile Industry and equipped with all infrastructural facilities, GSL is estimated to clock a turnover of Rs.285 cr. and NP of Rs.9 cr. after all tax provisions for FY06. This works out to an EPS of Rs.56 on its current equity of Rs.1.58 cr. with a diluted EPS of Rs.30. For FY07, it may post an EPS of Rs.40 as the full impact of the expansion will be felt in FY07 only. The 52 week high of the scrip is Rs.207 and the scrip has the potential to touch Rs.240 in the medium term and Rs.320 in 15-18 months.

STOCK WATCH

When most pharma companies are reporting disappointing numbers, Jupiter Bioscience (Code No: 524826) (Rs.137) has declared pretty encouraging results. Its total revenue grew by 15% to Rs.20 cr. and NP also increased by 15% to Rs.5.70 cr. For the full year, it may report a topline of Rs.78 cr. and NP of Rs.16 cr. i.e. an EPS of Rs.18 on its current equity of Rs.8.86 cr. Besides, the company may GDR/FCCB issue to raise funds for expansion in the near future which will push the scrip to new highs. The company has already allotted to the promoters 27,50,000 warrants that can be converted into equity shares price to be determined later. Moreover, the company has increased its authorized share capital to Rs.20 cr. from the existing Rs.12 cr. which means that the management is planning to take some aggressive steps. All these developments will lead to a re-rating of the company and its market capitalization is poised to shoot up in future.

Austin Eng (Code No: 522005) (Rs.80) is a leading manufacturer and exporter of quality auto components like ball bearings and roller bearings. It manufactures all types of bearings that include Ball Bearings, Cylindrical Roller Bearings, Needle Roller Bearings, Tapered Roller Bearings, Spherical Roller Bearings and Flexible Roller Bearings. Due to strong demand from the user industry, the company is doing exceptionally well. For the Dec’05 qtr., its Sales rose by 53% to Rs.15 cr. whereas its NP tripled to Rs.1.10 cr. For the full year it may register net sales of Rs.55 cr. and NP of Rs.3.50 which leads to an EPS of Rs.11 on its current equity of Rs.3.28 cr. It may, therefore, return to the dividend list and may declare 18~20% dividend for FY06. A solid buy for long term investors.

Post debt restructuring, Sujana Universal Industries (Code No: 517224) (Rs.23) has been announcing excellent numbers due to huge saving in interest cost. As per the scheme, the company is subjected to repay Rs.75 cr. of loan and Rs.41 cr. of deferred interest in instalments starting from Oct 2007. Its outstanding loan is estimated to fall sharply to Rs.31.50 cr. and the interest on term loans has also been negotiated and brought down to 8% with retrospective effect. Besides, the company has raised around Rs.70 cr. through its GDR issue and is planning to raise more money by issuing another 40 lakh shares. It also has casting and light engineering component divisions which are faring exceedingly well. In short, future prospects look promising with healthy cash flows and the company is expected to end FY06 with sales of Rs.900 cr. and NP of Rs.28 cr. i.e. EPS of Rs.7 on its current equity of Rs.41.40 cr. and diluted EPS of Rs.6. The scrip is trading at 60% discount its book value and has a market cap of merely Rs.100 cr. A good bet for 50% returns in a year.

The ongoing boom in housing construction sector is definitely benefiting the ceramic tiles sector. Inspite of stiff competition from cheap imported tiles from China, Orient Ceramics (Code No: 530365) (Rs.92.50) came out with very impressive numbers for Dec’05 qtr. Sales jumped 36% to Rs.35 cr. and NP spurted by 43% to Rs.2.80 cr. thereby reporting a quarterly EPS of Rs.6. It’s a dividend paying company with promoters stake at 72% Aggressive investors can buy it for short term gains but it is not recommended for long term as the profit margin of this industry will be under pressure. A pure short term bet for momentum play.

Suryalata Spinning (Code No: 514138) (Rs.80) has completed its expansion cum modernization programme at Kalwakurthy at a cost of Rs.8.6 cr. and the expansion scheme at Ramtek unit at a cost of Rs.11 cr. to add 7200 spindles. Now its total spinning capacity stands enhanced to about 65,000 spindles. For Dec’05 qtr., its sales grew by 15% to Rs.45 cr. whereas its NP shot up 300% to Rs.2.20 cr. For the first nine months, it has already reported NP of Rs.7 cr. and is expected to end the full year with Rs.8 cr. after deducting deferred tax etc. This works out to an EPS of Rs.15 on its current equity of Rs.5.45 cr. For future growth, it has capex plans of Rs.126 cr. which includes addition of 45,000 splindles and setting up of weaving and processing unit with a capacity of 50,000 mtrs a day. It may allot some preferential shares to institutional investors at high premium, which may trigger its share price in future.

Diamines & Chemicals - Rs.61.00

Incorporated in 1976, Diamines & Chemicals Ltd (DACL) is a leading producer of ethylenediamine and polamines such as diethylenetriamine, triethlenetetramine and other polyethylene polyamines. Its products are used mainly in the manufacture of pesticides & fungicides, textiles, auxiliaries, paints and adhesives, drug intermediates, paper, petroleum additives, rubber chemicals and plastics. DACL also started the manufacture Piperazine anhydrous and piperazine 65% and has become the only domestic supplier of piperazine to the pharma and other industries. It offers a range of packaging starting from 40 kg customized packing to bulk packing in ISO containers.

DACL’s manufacturing facility is situated in the Petrochemicals Complex area in Vadodra. Its huge 40,248 sq. mtr plant has in house govt. recognized R&D and fully- equipped Quality Assurance Lab. The company is also ISO 9001:2000 certified for manufacture and sale of Amine based Industrial Chemicals by internationally reputed M/s. BVQI. The Company has set up an integrated on-line information system in all major operating areas including all major offices, warehouses and stores. Last fiscal, DACL also set up a Windmill at Surajbari in Gandhidham for captive consumption, which shall help in bringing down the cost of electricity. Lately, DACL has focused its product mix on Piperazine as it is the main product used by pharmaceuticals, agrochemicals, lubricants, fuel additives etc apart from offering better profit margins. Besides it has also embarked on marketing a new product range after a detailed market survey.

The company has come out with very strong numbers for its Dec’05 qtr. Sales increased by 150% to Rs.6.15 cr. and NP spurted 64% to Rs.1.80 cr. thereby reporting an EPS of Rs.2.70 for the quarter. Considering the company’s strategy, it is estimated that DACL may end FY06 with sales of Rs.22 cr. and NP of Rs.5.50 cr. This works out to a full year EPS of Rs.8.50 on its current equity of Rs.6.50 cr. For FY07, it can report an EPS more than Rs.10. Interestingly, in spite of having negative reserves, DACL is been giving handsome dividends to shareholders and has recently declared 15% interim dividend for FY06. It may declare another 15% as final dividend later. The scrip is trading cum dividend and gives a handsome dividend yield of nearly 5% even in such a high market. Investors are recommended to buy it at current price with a price target of Rs.80 in 6~9 months.

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.