BSEL Infrastructure - Rs.45.00

BSEL Infrastructure Realty Ltd. (BIRL) incorporated in 1995 as Bell South Enterprises Ltd. and subsequently renamed as BSEL Information System in 1998 changed its name to the present ‘BIRL’ in August’03 it. The company’s primary activity is infrastructure development as it has completely moved out of the software development/ programming business.Its first project i.e. BSEL Tech Park with saleable area of around 3,00,000 sq. ft. has been completed and is a huge success with 80% of the area already sold. Its other project, Hilton Centre consists of 22,000 sq. ft. of aesthetically designed; fully furnished office at prime location in CBD Belapur was also sold out. Besides, out of the 80,000 sq. ft. area acquired by the company from CIDCO in the International Infotech Park at Vashi, 60,000 sq. ft. has already been leased to.

The major revenue driver for BIRL will be its ongoing and future projects. In Gujarat, the company is setting up service apartments, a prime budget hotel, a food court with recreational facilities having a saleable area of 6,00,000 sq. ft., which is likely to be completed by June’07. It is also constructing a 3,50,000 sq. ft. shopping mall by the name ‘Beauty Palace’ in Nagpur of which around 70,000 sq. ft. will belong to the company. Its wholly-owned subsidiary is also developing residential, commercial, retail properties, townships etc in Dubai and has already acquired 1,00,000 sq. ft. area at Business Bay & Internet City in Jumeira. BIRL has also acquired 30-acre land at Bokhar near Panvel and Navi Mumbai SEZ where it plans to develop a mega city township. It has also participated in the tender for the allotment of a five storied BMC building at Tardeo for running a municipal retail market admeasuring around 40,000 sq. ft. apart from other luxury and lifestyle projects.

To fund its projects, the company raised above Rs.90 cr. a few months back through the GDR route and which got converted into Rs.2.27 cr. shares at around Rs.41. For FY06, its total revenue jumped by 135% to Rs.46 cr. whereas its net profit increased by 120% to Rs.22 cr. registering an EPS of around Rs.4 on its equity of Rs.59.30 cr. It reported stunning numbers for the June’06 quarter as well. Assuming the same track record, could end FY07 with a top-line of Rs.85 cr. and bottom-line of Rs.35 cr. i.e. an EPS of Rs.6. Considering the strong growth story, the ambitious projects on hand and its solid land bank, the share could touch Rs.75 (100% return) in 15-18 months. The company, however, is planning to raise further capital by way of FCCB, which will dilute its equity going forward and may change the fundamentals accordingly.

STOCK WATCH

In the sugar sector, Indian Sucrose Ltd. (Code: 500319) (Rs.31.70), a small sugar company, seems a pure value buy at current levels. It has already expanded its crushing capacity from 3500 to 5000 TCD and can easily expand to 6000 TCD in the near future. Besides, it has acquired a sugar unit in Dhuri, Punjab, having a capacity of 2500 TCD, which can be merged with it later on. For the first qtr. of June’06, its sales spurted by 60% to Rs.35 cr. and net profit increased by 45% to Rs.3.90 cr. reporting an EPS of Rs.2.50 for the quarter. Although marketmen are lukewarm on the sugar sector, it cannot be written off and may bounce back with better sugar prices. As such, Indian Sucrose may end FY07 with sales of Rs.150 cr. and net profit of Rs.14 cr. i.e. EPS of Rs.9 on its equity of Rs.15.40 cr. With the company foraying into retail segment aggressively and having a distillery unit which produces four well known brands of rum, the scrip is trading fairly cheap and can be bought for handsome gains for the long-term.

Despite great expectations, Jupiter Bioscience Ltd. (Code: 524826) (Rs.115), has been a gross underperformer. However, we remain bullish as it is the only peptide company in Asia with technology to manufacture peptides from the basic stage and is among the ten-peptide companies in the world. Recently, it has acquired a manufacturing facility from M/s. Aurobindo Pharma Ltd., in Medak District of Andhra Pradesh as a part of its expansion programme for commercialisation of Speciality APIs, Chiral Intermediates and key Organic Intermediates and Bulk Peptide raw materials. Moreover, it is planning to set up a manufacturing base in USA for catering to the regulated markets. For the June’06 quarter, its sales and net profit increased by 10% to 18 cr. and Rs.4.50 cr. respectively which may shoot up to Rs.100 cr. and Rs.23 cr. for FY07. At a P/E of less than 5, it’s a screaming buy.

On the back of discouraging numbers for the June’06 quarter, the share price of Hyderabad Industries Ltd. (Code: 509675) (Rs.311) has tumbled down sharply giving good opportunity for long term investors to get in. For FY06, its top-line grew by 10% to Rs.450 cr. whereas its net profit quadrupled to Rs.38 cr. reporting an EPS of Rs.53. This is in spite the fact that its Jasidih plant was shut down for 3 months due to a strike. Although its profit margin is under pressure due to stiff competition it will still report better numbers in absolute terms for FY07 as it has recently started the commercial production of asbestos cement sheets and accessories at its new unit located at eastern Uttar Pradesh. Moreover, it is implementing a Rs.100 cr. expansion programme by setting up of two fibre cement sheet units and one autoclaved aerated concrete blocks manufacturing facility. For FY07, it may a clock a turnover of Rs.500 cr. with net profit of Rs.40 cr. i.e. EPS of Rs.56 on its tiny equity of Rs.7.50 cr. Having a book value of around Rs.180, the scrip is ripe for a bonus and may also announce a stock split this fiscal.

In a short span of time, Electrotherm India Ltd. (Code: 526608) (Rs.243), a leading manufacturer of crucial induction melting furnace has grown and diversified aggressively to include steel and automotive business as well. Today, it also manufactures Sponge Iron, TMT Bars, Billets and Ductile Iron Pipes. But the biggest growth driver is its automotive division ‘Indus Elec-trans’ which manufacture electric vehicles and has already launched eco friendly bikes under the brand name ‘YOBykes’. These bikes run on rechargeable battery and don’t need petrol or licence or registration to drive. The company has a capacity to manufacture up to 1.2 lakh bikes per year and is planning to increase it to over 5 lakh bikes. For the June’06 quarter, its sales jumped 65% to Rs.91 cr. and net profit grew 50% to Rs.5.80 cr. The company is raising around Rs.100 cr. through preferential allotment route, which may dilute the equity to the extent of Rs.8.75 cr. For the full year FY07, it is estimated to record a turnover of Rs.425 cr. with net profit of Rs.28 cr. (excluding deferred tax), which works out to an EPS of Rs.32 on its diluted equity. A good bet for the medium to long-term.

Pricol Ltd - Rs.37.00

Establised in 1972, Pricol Ltd. (Pricol), formerly known as Premier Instruments and Controls Ltd., is a reputed manufacturer and supplier of automotive instruments enjoying more than 50% share in the domestic market. In fact, it is the undisputed leader in the dashboard industry with current capacity of more than one crore units. Apart from dashboards, it also manufactures speedometers, cables, switches, sensors, control valve assemblies, oil pumps, windshield washer motor kits, heater ventilation, air condition control units, disc brakes and other precision machined components. Pricol, this produces 14 products catering to the two-wheeler segment, 16 products for cars and MUVs segment, 7 products for trucks segment and 16 products for the tractors and other vehicles segment. The two-wheeler segment contributes about 48% of its revenue followed by cars and MUVs at 34%. Its clientele includes all the leading auto players such as Ashok Leyland, Eicher, Bajaj Auto, GM, Hero Honda, LML, Maruti, M&M, Tata Motors, Toyota, TVS, Yamaha etc.

Pricol has five huge plants spread across India with three plants near Coimbatore, one at Pune and one at Gurgaon. Importantly, Japanese auto component giant, Denso Corporation, is the joint venture partner and has invested 12.5% in the equity capital of the company. Pricol also exports about 12% of its turnover to USA, Canada, Mexico, South America, Europe, Turkey, Egypt, Middle East, Asia, Australia, New Zealand, etc. To cash in on the growing demand in the automobile sector, Pricol is expanding its capacity by setting up a plant in Indonesia and Uttaranchal. The Uttaranchal plant, which may be ready by January’07 will manufacture 10 lakh sets of speedometers, oil pumps, fuel sensors and gear systems for Bajaj Auto in the two-wheeler category and around one-lakh sets of instruments and field sensors for Tata Motors and Mahindra and Mahindra in the cars and MUV segment. The Indonesian plant is expected to start production by December’06 and will produce around 8,50,000 sets out of which around 2,50,000 sets will be supplied to TVS Motors and Bajaj Auto. Pricol also plans to set up a unit in Iran to supply instrument clusters.

Due to stiff competition in the domestic market, the company is concentrating on garnering overseas business. It is also in the process of opening marketing and sales offices in Europe and USA. For FY06, inspite of a rise in the top-line by 7% to Rs.482 cr., its net profit declined by 20% to Rs.33 cr. However for June’06 quarter it reported a decent set of numbers with sales registering 20% rise to Rs.133 cr. and profit improved by 30% to Rs.9.60 cr. Hence for FY07, it may post a turnover of Rs.525 cr. with net profit of Rs.40 cr. on its equity of Rs.9 cr., which will translate into an EPS of Rs.4.50 against the Re.1 face value of its share. Although the share price may not see a phenomenal rise in future, still 50% appreciation i.e. a price target of Rs.50 can be expected in 12-15 months.

ABC Bearings - Rs.124.00

Promoted by M.I. Patel Group, ABC Bearings Ltd. (ABL) was established in 1960 by setting up a plant in Lonavala in collaboration with Steyr Diamler Puch of Austria. Today, ABL is the market leader in tapered bearings with its main area of focus on roller bearings for commercial vehicles and tractors. The company’s revenues are predominantly from domestic sales with 75-80% of it coming from OEM supplies and the rest through aftermarkets. Its client list includes most of the auto and tractor players such as Tata Motors, Mahindra & Mahindra, Escorts, Eicher, Ashok Leyland, Punjab Tractors etc. In the international market its products are exported to USA, Canada, Dubai, Peru, Italy, Singapore, Indonesia, Bangladesh, Sri Lanka etc.

Earlier, the company had two plants one in Gujarat and other in Maharashta. But since October’05, it stopped manufacturing activities in Lonavala, Maharashtra and shifted the machineries to its Bharuch plant. This has led to savings in labour cost and other incidental expenses besides concentration of manufacturing at one place. Presently, it has an installed capacity of 6.4 million bearings per annum. ABL also has a long-term licensing and technical assistance agreement with NSK to upgrade its manufacturing process and improve the quality of its products. To expand its presence in industrial bearings and increase exports, ABL is undergoing expansion to double its capacity to 12 million bearings by 2010. Moreover, to reduce its dependence on the original equipment segment, the company has recently shifted its attention towards the lucrative replacement market. Importantly, the company has a wholly owned subsidiary by the name MIPCO Seamless Rings Ltd. engaged in the production of ring manufacturing & forgings for captive consumption by ABL.

For FY06, its sales increased by 20% to Rs.152 cr. but net profit jumped 40% to Rs.15.70 cr. registering an EPS of Rs.14 on its equity of Rs.11.55 cr. It gave Rs.4 as dividend compared to Rs.3 last year. Although in FY06, profit margin was impacted to some extent by rising metal prices this has cooled off now as evident from its first quarter numbers. For the June’06 quarter, turnover grew by 30% to Rs.48 cr. but PAT increased by 55% to Rs.5.40 cr. Notably, its OPM improved to 21% compared to 14% last year. Company is also one of the best tax payer shelling out nearly 35-40% of PBT as tax. For the full year, it is estimated to report a top-line of Rs.185 cr. and profit of Rs.18 cr. i.e. an EPS of Rs.16. Hence investors are advised to buy only at declines with a price target of Rs.200 (60% appreciation) in 12-15 months.

STOCK WATCH

The share price of Balaji Amines Ltd. (Code: 530999) (Rs.214.50) has crashed severely over the last few days on the back of sanctions imposed by USA on the company. This gives a golden opportunity for long-term investors to buy as the company hardly exports to USA and this sanction will not have any monetary effect on the company. It is a leading producer of specialty chemicals viz. Aliphatic Amines and its derivatives at its plant in Osmanabad District in Maharashtra. For the first quarter ending 30th June’06, its sales increased by 55% to Rs.46 cr. whereas net profit jumped 60% to Rs.4.85 cr. For the full year FY07, it may report sales of Rs.175 cr. with a net profit of Rs.13 cr. i.e. an EPS of Rs.40 on its tiny equity of Rs.3.25 cr. with a 52-week high of Rs.510, it’s a good bet at current levels.

The last fiscal was not good for KIC Metaliks Ltd. (Code: 513693) (Rs.39.50) due to high raw material costs for iron ore and mettalurgical coke and lower price realization for pig iron. But things have improved this fiscal as raw material prices have cooled off from their highs. It already has a 1,44,000 TPA captive coke oven plant and is now setting up a Hot Blast Stove, which will be operational by 31st October’06. For the June’06 quarter its sales improved by 125% to Rs.38 cr. whereas net profit increased by 50% to Rs.2 cr. A few months back, it allotted about 6 lakh shares at Rs.80 on preferential basis. To fund the expansion, promoters are planning to bring in more money by making preferential allotment to themselves. For FY07, it is estimated to clock a turnover of Rs.150 cr. and net profit of Rs.7, which means an EPS of Rs.14 on its current equity of Rs.4.30 cr.

Gujarat Apollo Equipments Ltd. (Code: 522217) (Rs.135.20) is India's No.1 manufacturer of Asphalt based road construction & maintenance equipment and produces the entire range of equipments for building roads like Asphalt plants, soil stabilization plants, indirect heating equipment, paver finisher, bitumen sprayer, rollers, kerb paver and road maintenance equipments like milling machines and recycling machines. For the current first quarter, its sales doubled to Rs.34 cr. and PAT spurted by 130% to Rs.3.20 cr. In spite of being in such a high growth trajectory, the company is available at single digit P/E ratio. Recently, it concluded its 1:2 right issue offer at Rs.100 per share and the share is trading at just 15% premium to that. For FY07, it can register total revenue of Rs.135 cr. and net profit of Rs.13.50 cr. i.e. an EPS of Rs.13 on its expanded equity of Rs.10.50 cr. A risk-free buy which can give 50% return in 12-15 months.

To cater to the increasing demand, Mangalam Cement Ltd. (Code: 502157) (Rs.161.75) is investing around Rs.75 cr. to enhance its cement capacity to 1.6 MT from 1.1 MT and clinker capacity to 8,25,000 lakh tonnes from 6,00,000 lakh tonnes. It is also setting up a captive thermal power plant of 17.5MW capacity, which is expected to be commissioned by June’07. For the June’06 quarter, sales increased by 35% to Rs.113cr. but its net profit zoomed 380% to Rs.19 cr. Interestingly, the company’s OPM has improved substantially to 27% compared to 11% last year due to better operating efficiency and reduction in other expenses. For the full year ending September’06, it may report sales of Rs.400 cr. and profit of Rs.60 cr. i.e. EPS of Rs.21 on its current equity of Rs.28.20 cr. Although most cement scrips are richly discounted, this scrip is trading a market cap to sales ratio of almost 1 and is available at 35% discount from its recent high of Rs.230.

In the paper and newsprint sector, Rama Paper Mills Ltd. (Code: 500357) (Rs.27.50) is trading extremely cheap and at mouth watering levels. It is a reputed producer of newprint/ writing and printing paper with an installed capacity of around 40,000 TPA. For the June’06 quarter, its top-line grew by 20% to Rs.21 cr. whereas its bottom-line registered a gain of 10% to Rs.1.90 cr. The company is implementing a massive expansion for which the promoters have infused their own money to the tune of Rs.9 cr. by making preferential allotment of 25 lakh shares at Rs.35 to themselves. The promoter holding as on June’06 stands at 52%, which imparts confidence to shareholders over the management’s commitment. Its book value has also grown to Rs.26. For FY07, it may report sales of Rs.100 cr. with net profit of Rs.7 cr., which translates into an EPS of Rs.9 on its diluted equity of Rs.7.60 cr. A screaming buy.