STOCK WATCH

Jhunjhunwala Vanaspati (Code No: 519248) (Rs.43) is the single-largest Vanaspati ghee manufacturing unit in India. It’s an ISO 9001:2000 certified company following a policy of perpetual technological upgradation. The company’s brand ‘Jhoola’ is the market leader in UP and other neighbouring markets. For Dec’05 qtr. it reported fabulous numbers with sales up by 41% at Rs.170 cr. when NP jumped by 155% to Rs.3.60 cr. due to huge ‘other income’ of Rs.2.20 cr. For the current nine month period it reported an EPS of Rs.11.50 which may rise to Rs.14 for full year 2005-06. After more than 10 yrs, company has returned to the dividend list and declared 10% for FY05. Though rising cheap imports is a concern but considering its huge market share, the scrip appears to be a good bet.

The Textile industry seems pretty confident that excise duty on man-made fibre will be reduced at least to 12% if not 8% in the coming budget. This will have a positive impact on synthetic yarn producers like Sarla Polyester (Code No: 526885) (Rs.128). For Dec.’05 qtr. its Sales increased by 20% to Rs.22 cr. and NP grew by 18% to Rs.3.05 cr. For the full year FY06, it is expected to report an EPS of Rs.18 and may declare Rs.3 as dividend. Domestic institutional investors are also bullish on the company. The scrip has corrected 25% from its recent high of Rs.172 and has the potential to hit Rs.200 in 12 months or so.

Kilburn Chemicals (Code No: 524699) (Rs.58) is the only manufacturer of Titanium Dioxide in India apart from SAIL. Due to increased demand from the user industry and higher anti-dumping duty, the company is witnessing the best of times. It is exploring the possibility of setting up new businesses in the area of Information Technology and also putting up windmills for generation of electricity at a lower cost. For Dec.’05 qtr, sales were up by 7% at Rs.17.40 cr. but its NP shot up by 40% to Rs.2.20 cr. i.e. qtrly. EPS of Rs.2.90. For the full year FY06, it will post an EPS of around Rs.9 and may declare Rs.2 as dividend. Long term prospects are even better. In short, a very good medium to long- term bet with a decent dividend yield.

Diamines & Chemicals (Code No: 500120) (Rs.54) is a leading producer of ethylenediamine, polamines etc and the only domestic supplier of piperazine to the pharma and other industries. For Dec.’05 qtr., it reported stunning numbers with Sales registering 150% growth at Rs.6.20 cr. and NP increased by 65% to Rs.1.80 cr. in spite of no other income compared to Rs.2.38 cr. last year. This works out to a qtrly. EPS of Rs.2.80 on its current equity of Rs.6.50 cr. For the full year FY06, it is estimated to post an EPS of Rs.8~9. The company has already declared an interim dividend of Rs.1.50 and may declare another Rs.1.50 as final dividend later. The scrip is trading extremely cheap and has the potential to double in 12~15 months. A solid bet in the petrochemical sector.

Construction sector is in full boom and the govt. is seriously working as well as spending on building world class infrastructure to compete globally. In such a scenario, the future prospects of Triveni Glass (Code No: 502281) (Rs.68) looks very promising as it is among the few to make pyrolytic reflective glass which is used in construction and building exteriors. Besides, it is one of the largest (20% market share) and wholly Indian owned entity to manufacture international quality float glass. For Dec.’05 qtr. it came out with fabulous nos. Sales were up 50% to Rs.50 cr. and NP stood at Rs.3 cr. compared to Rs.8 cr. loss last year. It’s a strong turnaround candidate due to restructuring and other initiatives and can report Rs.12 cr. NP for the full year. A screaming buy in such a growing sector.

Karur KCP Packaging - Rs.66.00

Beginning as supplier of jute bags to cement companies, Karur KCP Packaging Ltd. (KKPL) has today become a one-stop shop for the packing requirements of any industrial sector. Since its inception in 1961, the group has grown into multi-dimensional and multi-product group manufacturing paper, paper bags, polypropylene bags and flexible intermediate bulk containers (FIBC). In fact, KKPL is the only company in India manufacturing extensible sack kraft paper (ESKP) that is used for making multiwall sacks. Currently, 75% of its revenue is contributed by the paper and paper bags division and the rest by PP bags and FIBC.

KKPL’s hi-tech plant for paper and paper bag division is located at Pondichery whereas its reputed manufacturing facility for PP bags and FIBC is at Mayanur near Karur. Its paper bag division produces eco friendly paper bag using imported ‘bottomer’ machines from Japan having an installed capacity of 9 million bags per month. The paper unit manufactures special paper called ESKP thru CLUPAC, which is a patented US technology and has a production capacity of 70 TPD. Catering mainly to cement companies, its PP bag division produces 5 million bags per month. Also, its latest plant for FIBC manufactures world-class Jumbo bags of 500 kg to 2500 kg capacity with the entire production earmarked for exports to USA and EU countries. Last year, KKPL diversified into the non-cement sector namely Carbon Black, Tea, Fertilizers, Grains, Spices, Chemicals and Dyes etc. Due to this increasing demand, the company is planning to increase its Paper production capacity from 65 TPD to 80 TPD. Similarly, the FIBC bags capacity will be increased from 300 TPM to 400 TPM.

From jute to polypropylene then paper and now FIBC, KKPL is continuously growing its product range and expanding capacity. For Dec.’05 qtr., its sales increased by 15% to Rs.56.50 cr. whereas profit after tax spurted by 125% to Rs.2.30 cr. Company is estimated to end FY06 with sales of Rs.220 cr. and NP of Rs.8 cr. i.e. EPS of Rs.8 on an equity of Rs.10 cr. Incidentally, company has a total debt of around Rs.115 cr. on which it pays an interest of Rs.19 cr. @ whopping 16% p.a. To fund its expansion and reduce its debt substantially, KKPL is coming out with FCCB to raise around Rs.70 cr. which may dilute equity to the extent of 100% going forward. Hence only aggressive investors are advised to buy as the scrip can give 50% returns in a bullish market in 6~9 months.

Austin Engineering - Rs.82.00

Austin Engineering Company Ltd. (AEC) was incorporated as private limited company in 1978 and was subsequently converted into public limited company in 1985. Founded by 5 technocrats, AEC today manufactures the widest range of ball and roller bearings in a single manufacturing unit in India. AEC manufactures all types of bearings, which include Ball Bearings, Cylindrical Roller Bearings, Needle Roller Bearings, Tapered Roller Bearings, Spherical Roller Bearings and Flexible Roller Bearings etc. It makes more than 2500 different types of bearings in sizes ranging from 10mm inner diameter to 1000 mm outer diameter. . Its products are mainly consumed by the auto and engineering industry apart from steel plants, textile machinery manufacturers, power plants, defence industry, railways and the replacement market. The company has a strong, reputed clientele including Tata Motors, SAIL, Premier Automobiles, Punjab Tractors and Defence. It also exports to developed countries like USA, UK, Germany, Italy etc.

AEC’s has two manufacturing plants spread across 3,50,000 sq ft at Patla in Gujarat with an installed capacity of 3 million bearings. Due to rapid development and flexible manufacturing system, batch size is not a constraint and is its strong point to meet its customers' needs. It has an in-house R&D staffed by well-qualified engineers, a metallurgical lab using the finest gauges to critically follow the material behaviour after every process. The company continuously undertakes comprehensive modernization and technology upgradation as its product is well accepted by OEMs as an import substitute. AEC is planning to launch a number of new and high value added products, which will further strengthen its competitive edge in future. It has also established subsidiaries in Italy and USA to increase its exports.

Due to the huge demand from user industries and the strong industrial growth, AEC is witnessing the best of times. For Dec.’05 qtr. its Sales rose by 53% to Rs.15 cr. and NP almost tripled to Rs.1.10 cr. reporting a quarterly. EPS of Rs.3.35 on its current equity of Rs.3.28 cr. For full FY06, company is estimated to clock sales of Rs.55 cr. and NP Rs.3.50 cr. For FY07, sales may further rise to Rs.65 cr. with NP Rs.4.50 cr. This means an EPS of Rs.11 and Rs.14 for FY06 and FY07 respectively. The company is also expected to return to the dividend list from this fiscal itself. With reserves of nearly Rs.15 cr. i.e. book value of Rs.55 and a market cap of only Rs.26 cr., the scrip is trading reasonably cheap in the fast growing engineering sector. Investors are strongly recommended to buy it at CMP for 100% appreciation with a price target of Rs.150 in 15~18 months.

STOCK WATCH

With the boom in the auto sector on the back of strong industrial growth, the casting industry is reportedly doing very well. Gujarat Intrux Ltd. (Code No: 517372) (Rs.29.30), which is engaged in manufacture of Stainless Steel, Alloy Steel and Non-Alloy Steel castings has come out with good numbers for the Dec’05 qtr. Sales grew by 18% to Rs.4.90 cr. but its NP increased by nearly 50% to Rs.0.61 cr. For full year FY06, it may report NP of Rs.2.10 cr. i.e. an EPS of Rs.6 on its small equity of Rs.3.44 cr. Last year, the company had enhanced its capacity from 100 to 150 MT per month and with ferro alloy (its main raw material) prices expected to remain low, the company is unlikely to face any margin pressure in future. A good bet in the small-cap segment.

Fertilizer scrips are tipped to rise sharply in the near future in anticipation of some favourable announcement in the forthcoming Budget. Liberty Phosphate (Code No: 530273) (Rs.39), one of the low cost manufacturers of single super phosphate (SSP) with 12% market share is the cheapest bet in this sector. For the Dec’05 qtr., its total revenue increased by 21% to Rs.24.50 cr. whereas its NP spurted 87% to Rs.1.12 cr. due to lower tax provisioning. For the full year, it is expected to clock a turnover of Rs.80 cr. and NP of Rs.3.20 cr. This works out to an EPS of Rs.8 on its current equity of Rs.4.13 cr. Its share price can shoot up 30~40% in 6 months or so.

After hitting continuous upper circuits and making an all time high of Rs.305, Eldeco Housing (Code No: 523329) (Rs.237) has corrected sharply to Rs.225 on profit-booking. This North-based housing construction company has under taken several new mega projects worth Rs.250 cr. in Lucknow. Eldeco is fully booked for the next 3 years and its real estate development is going on in full swing. For Dec 05, its total revenue was up 18% to Rs.8.50 cr. whereas its NP has more than trebled to Rs.1.03 cr. For FY06, company is expected to post an EPS of around Rs.25~30 on very tiny equity of Rs.1.97 cr. For FY07, it is estimated to post bumper profit on completion of various projects. Scrip has the potential to test Rs.350 level in a bull market. Hold on to your position.

In spite of high crude oil prices, Laffans Petro (Code No: 524522) (Rs.31) reported pretty decent numbers. For the Dec.’05 qtr. its topline increased by 11% to Rs.38 cr. and its NP grew by 13% to Rs.1.26 cr. For FY06 ending on 30th Sept.’06, the company may report a topline of more than Rs.150 cr. and bottomline of Rs.4.50 cr. leading to an EPS of Rs.6 on its current equity of Rs.8 cr. when its book value is estimated to touch Rs.42. With a market cap of just Rs.25 cr., its share price is sure to rise 50% in 9~12 months. But in spite of being a profit making company, it’s yet to declare a maiden dividend.

When all auto ancillaries are richly discounted even against their expected FY07 earning, Subros (Code No: 517168) (Rs.177) is trading reasonably cheap with low sales to market-cap ratio. Professionally, it’s one of the well-managed companies with a uninterupted dividend track record since 13 yrs. For Dec.’05 qtr., though its Sales were marginally down to Rs.133 cr. its NP increased by nearly 50% to Rs.6.50 cr. due to better operating efficiency. Its OPM improved to 12% from 9% last year. Last fiscal, the company expanded its capacity to 5,00,000 AC units per annum and is now doubling the capacity to 10,00,000 units by setting up plants at Manesar & Pune. Although it is currently supplying to MUL and Tata Motors only, M&M, GM, Ford, ALL, Volkswagen and Renault may start buying from Subros. With an expected EPS of Rs.17 and Rs.20 for FY06 and FY07 respectively, its share price is sure to cross Rs.250 in the medium to long term. A solid buy.

Ashiana Housing & Finance - Rs.78.00

Incorporated in 1986 and promoted by B P Gupta, O.P. Gupta and R K Modi, Ashiana Housing and Finance (I) Ltd (AHFL) belongs to the Ashiana Group with diversified interests in food processing, engineering, edible oil and leather garment exports. AHFL is in housing development for the last two decades and has established its reputation as a real estate developer that provides quality of construction, safety of investment and integrity of commitment. Starting from Patna, the company has extended its residential as well as commercial activities to Jamshedpur (Jharkhand), Bhiwadi (Rajasthan), Ghaziabad (UP), Gurgaon, Greater Noida and the National Capital Region(NCR) around Delhi. AHFL can boast of developing 40 lakh sq. ft. of construction and buildings. Some of the reputed residential complexes are Ashiana Villa, Ashiana Garden, Gulmohar Park, Ashiana Bageecha, Ashiana Greens etc in Bhiwadi.

Changing demographics, low interest rate regime, rising disposable incomes and fiscal incentives have all created a huge demand for housing.. The real estate boom has gradually percolated from the big metros to tier II cities and AHFL is taking full advantage of this boom with its various projects under construction or nearing completion. Its Project Ashiana Rangoli is nearly completed and the hand over of possession has already started. The construction of the company's dream project 'Ashiana Utsav' comprising 640 units has already started and running as per schedule. Market response of the project is very encouraging as this project is planned to cater to the needs of senior persons of the society. Its Jamshedpur project ‘Ashiana Residency Greens’ comprising 149 units is nearing completion and the hand over possession of the flats has started. Due to the flourishing demand for housing in the Neemrana region (Rajasthan), AHFL has opened booking of 60 flats in its residential project ‘Ashiana Green Hill’. It also has a couple of projects under construction in Indirapuram, Ghaziabad by the name ‘Ashiana Upvan’ and ‘Ashiana Greens’. In Greater Noida, its project ‘Ashiana Orchid’ is completely sold out. Interestingly, AHFL is constructing an ultra modern hitech recreational club called ‘Ashiana Gymkhana’ in Bhiwadi with multi cuisine restaurants, banquet hall, conference room, lawn tennis, billiards, basketball ground etc.

The growth trajectory of the real estate sector could move up sharply in coming months due to the gradual opening up of the sector to FDI. Demand for real estate is on an upward swing and this is reflected in the higher prices despite the increase in supply. For its future projects, AHFL has acquired 27 acres of land in Bhiwadi and another 23 acres for a new residential complex called ‘Ashiana Angan’. Some more residential projects in Bhiwadi are in the pipeline. It has also acquired 9 acres of land for setting up a new township named as ‘Ashiana Woodland’ at Jamshedpur in Jharkhand. The company is also planning to enter another rapidly growing city viz. Pune. Surprisingly, the company is nearly debt-free and has an investment of Rs.19 cr. as on 31 March 2005. More importantly, it paid a dividend of 10% in spite of reporting a net loss for FY05, which shows it is a cash rich company. For the nine months ending 30 Sept 2005, its total revenue quadrupled to Rs.24 cr. and NP stood at Rs.2.98 cr. against Rs.0.13 cr. last year. For FY06, it may earn Rs.4 cr. profit on a topline of Rs.35 cr. which may shoot up to Rs.6 cr. on sales of Rs.50 cr. by FY07. This works out to an EPS of Rs.7 and Rs.11 respectively on its tiny equity of Rs.5.35 cr. With a 52W high at Rs.134 and current market of Rs.45 cr., the scrip is trading reasonably cheap and can give 100% return in 12~15 months. Investors are strongly recommended to buy at current levels and hold it for 2~3 years to earn handsome returns.