Su-Raj Diamond and Jewellery - Rs.61.00

Incpororated in 1985, Su-Raj Diamonds and Jewellery Limited (SDJL) is the flagship company of the Su-Raj Group founded in the early Sixties. It went public in 1986 and was the first diamond company to do so. SDJL’s core business includes manufacture and export of gold, silver & platinum jewellery studded with diamonds, colour stones and semi-precious stones as well as plain jewellery. In fact, it is one of the country’s largest manufacturer and exporter of polished diamonds and also a leading player in the international fine gold jewellery market.

SDJL has nine state-of-the-art manufacturing facilities across the country equipped with machining, facilities and processors that ensure quality merchandise and timely delivery. Its new plants at Bangalore, Kolkatta and Goa boast of the most modern facilities like latest casting machines, CAD/CAM design tools, laser engraving and welding, RPT machine for model making etc. Its team of nearly 100 passionate professionals churns out more than 700 new designs every month making its jewellery comparable with the best standards prevailing in Europe and USA. Besides, all its products are ‘Hallmarked’ guaranteeing its purity. SDJL is a ‘star trading house’ with a global footprint and a marketing network spanning New York , Antwerp , Bangkok , Hong Kong, UAE and Los Angeles. Presently, the company is focusing more on markets like the oil rich middle. Visualising the huge domestic potential, SDJL is also positioning itself in the domestic retail segment through its subsidiary and associate companies. Su-Raj Diamond Dealers Ltd. and Forever Precious Jewellery and Diamonds Ltd. Forever Precious is a major player in the B2B jewellery market in India. For the overseas market, its acquisition of Koradiam N.V. in Antwerp in Belgium is being used as its jewellery retail face. The company is also setting up jewellery manufacturing units in special economic zones (SEZs) in Kochi and Kolkata.

Since the early Nineties, Jewellery has averaged a growth of over 30%, making India the fastest growing Jewellery exporter in the world. In an industry where market reputation is the key asset, the company has carved a niche for itself with its professional set-up and transparent operations. It has an unmatched dividend paying record and has even paid as high as 40% dividend. For FY06, company is expected to clock a turnover of Rs.1175 cr. and NP of Rs.36 cr. which translates into EPS of Rs.9. For FY07, it can report Rs.11~12 EPS. Apart from this, it has huge reserves of more than Rs.450 cr. i.e. a book value of around Rs.125. With the Gems and Jewellery sector buzzing along with the listing of Gitanjali Gems, investors can accumulate this scrip with a price target of Rs.100 in 12~15 months.

STOCK WATCH

Most mid cap pharma scrips are beaten down badly as marketmen were expecting cut in excise duty in the Budget but were disappointed. Ironically, Aarti Drugs (Code No: 524348) (Rs.91) hit a new low of Rs.84 from its 52W high of Rs.180. This is a golden opportunity for long-term investors looking to enter the pharma sector. Aarti Drugs has a strong presence in anti-diarrhoea, anti-inflammatory therapeutic groups with products such as Tinidazole, Metronidazole, Nimesulide, Rofecoxib and is the largest producer of Benzene based basic and intermediate chemicals in India. Recently, it has established a US FDA compliant facility at Tarapur and is in the process of submitting its 1st DMF to US FDA. For FY06, it may report a topline of Rs.250 cr. and a bottomline of Rs.13 cr. i.e. EPS of Rs.11 on its current equity of Rs.11.71 cr. With its plant expected to get US FDA approval by FY07, the company is estimated to make much better profits in FY07 and FY08. A screaming buy at CMP

Lot of retail investors sold in panic, when the share price of Sanjivani Parenteral (Code No: 531569) (Rs.48) crashed. But long-term investors need not worry with this short term price fluctuation and huge volatility. The company is faring satisfactorily as per industry standards and has reported a healthy topline of nearly Rs.12 cr. for the Dec.’05 qtr. It even raised capital by making preferential allotment of Rs.11.45 lakh shares @ Rs.60 to outsiders. Recently, the company announced that it is going to launch Anti-Cancer products, which have a market size of Rs.500 cr. For this, it has tied-up with a European multinational company. For FY06 and FY07, company is expected to report an EPS of Rs.10 and Rs.12 respectively. Aggressive investors should accumulate it at every decline.

Something is cooking between the promoters of Winsome Textile (Code No: 514470) (Rs.28). Its entire stake of 25 % in Winsome Yarns was sold for around Rs.6.5 cr. i.e. @ Rs.10 per share. At one time, this stake was worth more than Rs.20 cr., which means this deal, was done at the cost of Winsome Textile shareholders. Despite this, with a cash flow of Rs.6.50 and NP of Rs.3.50 cr., the company is available at a market cap of only Rs.17 cr. With an expected EPS of Rs.6, cash EPS of Rs.14 and book value of around Rs.50, its share price is bound to hit the Rs.50 mark in medium term. Keep accumulating at declines.

In spite of the Sensex rising from 5000 to above 10000 level, one scrip that has not rallied much is MTNL (Code No: 500108) (Rs.162), for obvious reasons. But a lot of positive things are taking place within the company and it appears a value buy in the current overheated market. First of all, it’s a debt-free company with cash in hand of more than Rs.2500 cr. (i.e. equivalent to Rs.40 per share). Recently, it won a case and is expected to get Rs.1233 cr. tax refund from IT dept. Its Gross Block is Rs.14,000 cr. and Net Block is 6500 cr. Besides, it has a huge reserve of more than Rs.10,000 cr. which translates into book value of more than Rs.175. In spite of such strong fundamentals, MTNL is available at a market cap of less than 10,000 cr. For FY06, it is expected to report total revenue of Rs.5250 cr. and NP of Rs.650 cr. (excl. extraordinary items) which means EPS of Rs.10. Scrip may shoot up to Rs.180 in the short-term and will then gradually cross the Rs.200 mark. A good short to medium term bet.

With the metal sector coming back in action one can buy Mahindra Ugine (Code No: 504823) (Rs.126) for short term gains. Belonging to the Mahindra & Mahindra Group, it is one of the better manufacturers of alloy steel in the country. It also has a stampings division to manufacture pressed sheet metal components and assemblies. Considering the buoyant market and the encouraging trends, it is planning to expand its installed capacity to 2,40,000 tonnes at an estimated cost of Rs.95 cr. Last year, it successfully developed two new grades of steel for railway application and for crankshaft application. Moreover, shareholders have already approved to merge ‘Console Estate & Investments Ltd’, ‘Valueline Hotels & Resorts Ltd’ and ‘Pranay Sheetmetal Stampings Ltd’ with the company, which will have a positive impact on its market sentiment going forward.

Ramsarup Industries - Rs.80

Incorporated in 1973, Ramsarup Industries Ltd (RIL) is the flagship company of the Kolkata based Ramsarup Group and manufactures and exports steel wires, galvanized wires, TMT bars and rods which are primarily used in the power, housing and infrastructure sector. Today, RIL is one of the largest black and galvanized steel wire producers and among the very few manufacturers in India to provide the whole range of TMT products under the Thermax technology. It is selling the TMT bars under the brand name of ‘Ramsarup TMT Bars’ and enjoys wide acceptability in the market both for its quality and competitive price. RIL has an enviable customer base that caters to almost all sectors. In the Power sector, which generates 40% of its revenues, the main customers are Power Grid Corporation, KEC, L&T, Tata Projects, Tata Power. In the housing and construction sector its main customers are L&T, Gammon India, Nuclear Power projects, Reliance Industries, PWD, WIPRO and NTPC Projects etc. Further, its customers also include the railways, roads and bridges projects, water management and defence. RIL has the following three manufacturing units:

Ramsarup Industrial Corporation
Situated at Kalyani, West Bengal it was originally established in 1966 as a partnership concern and was subsequently taken over by RIL to become its unit. Presently, it has an installed capacity to produce 1,13,000 MTA of steel wire and 60,000 MTA of galvanized wire. In future, it plans to produce low relaxation PC wire and electroplated wire of size 26swg to 32swg.

Ramsarup Bars and Rods
Situated at Shyamnagar, West Bengal RIL acquired the steel division of Nicco Corporation Ltd., a sick unit, in August 2002 and started operating it under the name and style of Ramsarup Bars & Rods. The unit is engaged in manufacturing Steel Bars, Wire Rods, Steel Wires (both Black and Galvanized) and TMT Bars. Last fiscal; it expanded the facilities to produce higher sizes in 20 mm to 40 mm diameter TMT (Thermo Mechanically Treated) Bars using the Thermax Cooling technology of Henningsdorfer Stahl Engineering Gmbh Germany. After the expansion, the unit’s capacities have increased to 87,000 MTPA of TMT Bars & Rods and 24,000 MTPA of Steel Wires and 12,000 MTPA of galvanized wires. Considering its extensive clientele, who also require structurals, RIL is setting up a structural mill with an installed capacity of 1,35,000 MTPA to produce medium structurals like angles, channels and beams at a cost of around Rs.70 cr. which are mainly used in the construction sector.

Ramsarup Vidyut
Set up very recently at Dhule, Maharashtra, it has embarked into the production of power by setting up windmill to generate 3.75MW of power annually. The company has entered into a long term power purchase agreement with the Maharashtra State Electricity Board business (MSEB) and is considering downstream integration into the electricity transmission and distribution business as the company is already producing steel wires that are required for power transmission and distribution.

Being one of the beneficiaries of the boom in infrastructure spending, the future prospects of RIL appear promising. For FY06, RIL is expected to clock a turnover of Rs.950 cr. and NP Rs.30 cr. which leads to an EPS of Rs.17 on its current equity of Rs.17.50 cr. For FY07, it can report an EPS of even Rs.25. Though it belongs to the metal sector, it deserves much higher discounting being a power / infrastructure ancillary company. As its IPO was priced at Rs.60, the downfall from hereon is very minimal. Investors are strongly recommended to buy at the current level with a price target of Rs.120 (50% returns) in 9~12 months.

Kovai Medical Centre - Rs.59.00

Incorporated in 1985 and promoted by Dr. N.G. Palaniswamy, Kovai Medical Centre and Hospital Ltd (KMCHL) is a Rs.50 cr., multi-disciplinary, super-speciality corporate hospital located on the Avanashi Road in the Coimbatore-Chennai highway. It is rated one of the best medical centres in the world equipped with the most modern equipments like CT scanner, Angiography equipment with DSA, Operating Microscope, Mammography, C-arm, Color Doppler etc. Super-speciality procedures like Coronary Bypass surgeries, Coronary Angioplasty, Stent Implantation, Laproscopic & Vascular Surgeries, Hip & Knee replacements, Kidney transplants and complex Neuro surgeries are regularly done at the hospital. KMCHL is recognized as one of the best Trauma care centres in the country and has a 24 hours Emergency Department with ambulance services, CT scan, a well-equipped operation theatre with C-arm, Monitoring equipment, 30 bed sophisticated Intensive care unit with well-organized physiotherapy and occupational therapy departments for rehabilitation.

Apart from the main hospital, it has two other full-fledged satellite medical centres - one in Coimbatore itself with 10 beds and the other at Erode with 50 beds. There are over 30 medical departments and 11 operation theatres at the hospital. Nearly 500 outpatients & inpatients are treated everyday with 25 major and minor surgeries performed daily. In order to cater to the increased patient in flow, KCMHL is expanding rapidly and its West Wing project at the main centre has been successfully completed. With this, its total bed capacity has increased substantially. A Neonatal ICU has also been established at the Erode facility. Last fiscal, the hospital added new medical equipments to the tune of Rs.1.2 cr., like the latest ADC Digitiser, Pulsar 3 Chip Camera, Neuro Microdrill, Pacemaker, Therapeutic Drug Analyser etc. to its armoury of medical equipments in order to deliver healthcare on international standards. It has plans to procure 64 slice cardiac CT, state-of-the-art monitoring equipment, Linear accelerator and a Gamma camera in the near future. KCMHL can boast of conducting around 413 Open Heart Surgeries last year with incredible success rate of 99%. Its Cardiology is widely acclaimed and continues to attract large number of patients from the neighbouring states.

Besides, medical tourism is growing phenomenally from a mere 5000 patients 5 years ago to 1,00,000 today and still rising. Being in the promising healthcare sector, KCMHL is estimated to end FY06 with total revenue of Rs.50 cr. and NP of Rs.6 cr. This may rise to Rs.70 cr. and Rs.7.50 cr. respectively for FY07. This works out to an EPS of Rs.5 and Rs.7 on its current equity of Rs.10.94 cr. As it is trading fairly cheap compared to its peer, the share price has the potential to appreciate 60% in 12~15 months.

STOCK WATCH

Belonging to Patodia Group, PBM Polytex (Code No: 514087) (Rs.32) is a leading producer of top of the line 100% combed cotton yarn using blends of Egyptian giza cotton etc. In FY05, it suffered a severe setback because of a five months illegal strike by the workers at its Borgaon unit. But in FY06, things are working fine and the company is back on track with Sales at Rs.83 cr. and NP at Rs.3.05 cr. for the nine months ending 31st Dec 2005. Hence for FY06, it can post an EPS of Rs.6. Having a book value of Rs.50, Cash EPS of Rs.12, 52 week high of Rs.45 and market cap of merely Rs.25 cr., this regular dividend paying company is trading reasonably cheap. Besides, the management has decided to dispose off its texturising and twisting unit at Silvassa which may trigger its share price.

From the Budget speech one can easily make out that the FM cares for farmers and as always the government’s focus is on agriculture. Increasing the farm credit limit to Rs.1,75,000 cr. and directing NABARD to give short term loans to farmers @ 7% with an upper limit of Rs.3,00,000, is all good news for Dhanuka Pesticides (Code No: 507717) (Rs.108) which has already corrected sharply from its recent high of Rs.163. For FY06, it is expected to clock sales of Rs.55 cr. and NP Rs.4 cr., which translate into EPS of Rs.20. Due to its tiny equity of Rs.1.98 cr., EPS for FY07 can shoot upto Rs.30 as well. With a dividend yield of 4% and a market cap of merely Rs.20 cr., the scrip has the potential to rise sharply in future. One of the best bets related to the agriculture sector.

Due to debt restructuring and one-time settlement with all institutions/banks, Cubex Tubings (48.00) turned around sharply in the last fiscal. Since then, it is on a high growth trajectory. It manufactures copper, copper alloy products and enamelled copper wires used by the core sector and other critical industries like power generation, shipbuilding, railways, telecommunications, defence and automobiles. Recently, it made a preferential allotment of 9,25,000 equity shares and 15,75,000 share warrants @ Rs.48 for expansion and modernisation to increase its production capacity from 2800 TPA to 5000 TPA. For FY06 ending June 2006, it is estimated to report sales of Rs.60 cr. and NP of Rs.5.50 cr. i.e. EPS of Rs.7 on its diluted equity of 7.70 cr. Only aggressive investors should take exposure as there is risk of further equity dilution upto Rs.10 cr. through the FCCB/ADR/GDR route.

Mayur Uniquoters Ltd. (Code No: 522249) (Rs.35) is engaged in the manufacture and export of PU/PVC made Synthetic leather. Being a highly capital intensive, technology intensive industry, there is hardly any quality manufacturer of PU in India. Last fiscal; the company installed a new coating line with a production capacity of 3.6 million metres per annum (MMPA) which has increased its overall production capacity by 60%. Recently, it has diversified into the growing home furnishing business and is developing a lot of products for the upper end market in upholstery and furnishing products. The company is also making rigorous efforts to develop the market for its leather products in the countries like South Africa, Dubai, Shri Lanka, Malaysia, West Africa, etc. For FY06, it is estimated to report an EPS of Rs.5 which may rise to Rs.6~7 in FY07.

Ahlcon Parenterals Ltd. (Code No: 524448) (Rs.66) manufactures life saving Intravenous Fluids and medical disposables by employing a highly sophisticated production process imported from Switzerland. Its product range includes Dextrose, Saline, Electrolytes, Amino Acids, Fat Emulsion, Blood Substitutes, Small Volume Injectables, Eye Drops etc. It is also diversifying to add more value added ophthalmic products and expand its existing Infusions and Anti- microbial solutions. Moreover, the company has already initiated the process of setting up a state-of-the-art Testing Facility and Formulation Development Lab equipped with the best infrastructure. For FY06, it is estimated to register total revenue of Rs.45 cr. with NP Rs.7 cr. which can lead to an EPS of Rs.10 on its current equity of 7.20 cr. It may even declare 25~30% dividend for FY06, which works to a dividend yield of 4%. With a net profit margin (NPM) of around 15%, this scrip deserves much better discounting.