STOCK WATCH

Kamanwala Housing Construction Ltd (96.00) is engaged in real estate development of both residential as well as commercial property. It concentrates mainly in Mumbai city and is carrying out various residential projects at Andheri-E, Malad-W, Santacruz-W, Charni Road-E etc. Under commercial segment, it is developing ‘Pinnacle Corporate Park’ admeasuring 75,000 sq ft at Bandra Kurla complex apart from 1,00,000 sq ft residential cum commercial project at Versova, Andheri-W. On the back of booming real estate industry it made a strong turnaround for FY07 with sales of 83 cr (against 11 cr) and NP of 13 cr (against 0.50 cr). Moreover, it has also purchased two acre plot in Hyderabad and is developing another 35 acre land in joint venture with Prajay Syndicate. To fund its working capital requirement, it made pref allotment of 15.84 lakh equity shares and 19.95 lakh warrants @ 98 Rs per share in Dec 2006. Meanwhile, company has reported encouraging nos for the June qtr as well and is expected to end FY08 with topline of approx 125 cr and bottomline of 16 cr. This works out to an EPS of 25 Rs on fully diluted equity of 6.50 cr. Although its profit margin seems too high and company has a debt of more than 50 cr, still it has the potential to give 50% returns in a year’s time. Buy at sharp dips.

Ironically, Flat Products (312.00) is the only company in India having capabilities for designing, fabrication and installation of cold rolling mills, galvanizing lines and corrugating machines. It provides twenty different solutions to ferrous and non-ferrous metal processing industry with its unique strength, state-of-the-art equipment building, process technology and project management capabilities. Due to sharp rise in raw material cost and no escalation clause, its profit margin fell substantially in FY05 and FY06. But now the company is back on track and with steel & metal producers expanding aggressively worldwide including India, its order book is bulging constantly. For the June’07 quarter its sales jumped up 70% to 105 cr whereas NP shot up to 4.90 cr against 0.75 cr last year. Importantly, company has reported healthy OPM of 8~9% for the last two quarters. Hence, assuming it to clock 8% operating margin for FY08 it may report sales of 600 cr and PAT of 25 cr. This translates into EPS of 50 Rs on small equity of 4.94 cr. Secondly having a book value of around 170 Rs, scrip is ripe for bonus as well.

Pricol Ltd (27.00) is the largest manufacturer of dashboard instruments in India with nearly 80% market share. Infact it is a global supplier of automotive systems and component offering more than 60 products with over 2,000 variants. Inspite of having five manufacturing facilities across India, company has recently set up a greenfield plant in Pantnagar, Uttarakhand and is further putting up one more facility over there which is expected to commence operation shortly. For better customer service it has opened representative offices in USA and Germany and may also open in Italy soon. Moreover under a joint venture with Nava Khodro, it is setting up an assembly unit in Iran to be operational by end of this fiscal. For FY08, it is expected to clock a turnover of 650 cr and PAT of 35 cr i.e. EPS of approx 4 Rs on equity of 9 cr having face value as 1 Rs per share. Although its debt equity ratio is quite high but at the same time its gross block stands at whopping 395 cr. Due to some labour unrest at its Coimbatore factories, the share price has been beaten down to 52week low. Long term investors should take this opportunity and start accumulating at dips for a price target of 35 Rs in 12 months.

Shree Hari Chemicals (35.00) made a strong turnaround in FY07 with its operating margin shooting up to 15% against 6% in FY06 on back of higher price realization and better operating efficiency. It is one of the reputed manufactures and exporters of dyes and intermediaries and produces reactive, acid as well as direct dyes and a wide range of dye intermediaries like H-acid, Gama acid, Peri acid, vinyl suplhone etc. For the latest June’07 quarter its sales jumped up 40% to 16 cr and NP increased to 1.00 cr in comparison to 0.20 cr last year. On a very conservative basis also it is expected to clock a turnover of 75 cr and NP of 3.75 cr i.e. EPS of more than 8 Rs on equity of 4.50 cr. Importantly, company has decided to declare a maiden dividend for FY07 and is also planning to raise capital thru preferential allotment which may lead to re-rating of the scrip. At the current market cap of 16 cr, scrip is trading reasonably cheap and can give handsome return in medium term.

Roto Pumps Ltd - 55.00 Rs

Roto Pumps Ltd (RPL) was established in 1968 for manufacture of progressive cavity pumps with indigenous technology, for the first time in India, as an import substitute. Since then it has emerged as a reputed manufacturer primarily for progressive cavity pumps and twin screw pumps. It offers a comprehensive range of pumps as per application, apart from horizontal internal bearing, horizontal external bearing, vertical bearing pumps etc. Company markets its products under brand name ‘RotoFLOW’ and ‘RotoPOSI’ which are very well accepted in the market. These pumps have very wide application and are used by across the industry including oil & gas, sugar, paper, steel, fertilizer, agriculture, good, chemicals, mining, ceramic, waste water treatment, pharma etc. Importantly, RPL also manufactures pump’s spare parts and other accessories like pressure switches, gauges, relief valves, strainers, dry running protection device etc. It also offers paid annual maintenance contracts including spare parts for its own pumps as well as pumps of other makes.

RPL has two manufacturing facilities – one unit at Noida and the second one at Noida Special Economic Zone (NSEZ). Being an integrated player, most of the critical components of the pump are manufactured in house leading to lower cost of production and best quality. Infact, company has a rich heritage in manufacturing technology with sophisticated machine tools and testing facilities. It has a good distribution network across the country with offices in Noida, Vadodara, Kolkata, Bangalore, Chennai, Pune, Mumbai etc. Besides India, it has warehouse cum marketing office in Australia and U.K. Due to higher realization, company is putting special thrust on export with its products being exported to USA, Canada, Brazil, Spain, Germany, Egypt, South Africa, Japan, Taiwan, UAE etc. RPL is strengthening its supply chain system and has increased stock levels at UK and Australia warehouses to enable them service the market more effectively and also penetrating in other existing markets. Meanwhile, company is developing other markets in China, Middle East, Far East Asia, Africa and have been able to establish contacts with potential partners. In future, RPL has plans to introduce Triple Screw pumps and Lobe pumps to enhance its product line.

On the back of strong industrial growth, it registered 40% jump in sales to 34 cr whereas PAT shot up 125% to 2 cr for FY07. So it reported an EPS of nearly 7 Rs on a small equity of 3.10 cr. It declared 15% dividend for FY07 against 10% last year and the scrip is still trading cum dividend giving a yield of approx 3% at CMP. For the June’07 quarter, sales grew by 35% to 7.90 cr but NP increased by 70% to 0.44 cr due to better operating margin. Accordingly for the current year it may clock a turnover of 45 cr and profit of 3 cr i.e. EPS of 10 Rs on current equity. With 52 week H/L as 71/30 Rs and promoter holding of 70%, this engineering company is trading reasonably cheap at a market cap of merely 17 cr. Investors are advised to buy at current levels as share price has the potential to appreciate 50% in 12~15 months.

Ansal Buildwell Ltd - 78.00 Rs

Incorporated in 1983, Ansal Buildwell Ltd (ABL) - flagship company of the high profile Ansal Group, is a well known player in the field of real estate development and construction. It has presence across the real estate sector and has expertise in developing shopping complex, malls, residential township, row houses, sky scrappers, corporate offices etc. In short it caters to both - residential as well as commercial sector. Notably, the group has a major contribution in converting the Connaught place, Delhi into an enviable commercial business district. Although company has majority projects in Gurgaon, still it can boast of developing landmarks like Sushant Lok I, II and III in south of Delhi, Ansal KRSNA-I & II, Ansal FORTE at Bangalore, Ansal's Riverdale at Kochi and Ansal's Green Valley at Dehradun and Prakash Enclave at Moradabad.

Shalimar Residency, Executive Residency, Silver Crest, Eden Villa, Oriental Homes, Royale Casa, Sushant Floors and Flexi Homes are few of its popular residential creations. In order to cater the elite class, company has recently designed and constructed prestigious projects namely 'Florence Homes', 'Florence Super', 'Florence Grand', 'Florence Manor' & 'Florence Elite' in Gurgaon. All these schemes are complete and possession is being offered to the respective clients. Among the ongoing and new projects, ABL is developing Florence Marvel & Florence Villa in Gurgaon and a huge residential township called “Ansal City” in Amritsar, Punjab. It has also acquired around 35 acres of land at Kochi for development of plots, villas and town houses, again under the project name “Ansal City”. On the commercial front company has completely handed over the corporate park namely Sushant Tower and Navkriti Arcade. It is now constructing a huge shopping mall called ‘BOOM PLAZA’ in Guragaon only. In the wake of the booming real estate industry, ABL has acquired land in Amritsar, Jaipur, Panipat, Faridabad and Jhansi. Infact in Faridabad company is venturing into multi-storeyed group housing societies.

Apart from real estate, ABL also carries out hi-tech engineering projects and has successfully being associated with Baner hydel project, Sardar Sarover Narmada main canal project, Jammu Udhampur rail link project, Bangladesh road project etc. Currently it is engaged in Thoubal spillway project-Manipur, NEIGRIHMS Project-Shillong, Palam Drain Project-Delhi & C-DOT main R&D building project-Delhi. Incidentally, company has diversified into hospitality also and has completed the work of group housing club namely 'Harmony Club'. Due to encouraging response for the membership, it has started another hospitality project 'Club Florence'. ABL has further expanded its area of operation by giving consultancy in sales & marketing of real estate to various new property owners. Moreover in joint venture with Chaudhari group of Nepal it has developed three projects in Nepal namely Kathmandu Residency, Mount View Residency Phase-I & Phase –II which are completely sold out and handed over.

Financially, ABL recorded a marginal growth of 5% in total revenue to 120 cr but its PAT quadrupled to 7.25 cr for FY07 against 1.70 cr last year. Hence it reported an EPS of 10 Rs and declared 18% dividend. For the latest June qtr, its topline grew by 30% to 28 cr whereas NP jumped up 70% to 1.80 cr. Hence for FY08 it may report revenue of 150 cr and profit of 10 cr which leads to an EPS of 14 Rs on small equity of 7.40 cr. Even at a modest discounting by 8x times, share price can shoot up to 120 Rs (50% appreciation) in 9 - 12 months.

STOCK WATCH

Seshasayee Paper (162.00) is engaged in manufacturing of printing/writing papers, packing/wrapping papers and speciality papers. For the June qtr its sales grew marginally to 108 cr but net profit shot up 80% to 11.50 cr registering an EPS of 10 Rs for the qtr. Importantly, it recorded a healthy OPM of 18% for the second consecutive quarter. To enhance its environmental performance, company is replacing its 30 yr old wood pulp mill of 230 TPD capacity with a comparatively newer but second hand pulp mill from USA which has advanced technological features, like RDH Pulping, Oxygen De-lignification, ECF Bleaching etc apart from having higher capacity of 350 TPD. The equipment has already reached the company’s site and is expected to become operational from Dec’07. Besides, company is taking various initiatives to better its operational efficiency and ensure cheaper and regular raw material supply. For FY08 it is expected to clock a turnover of 500 cr and NP of 40 cr which works out to an EPS of 36 Rs on equity of 11.25 cr. Although company debt has increased substantially to 244 cr still it’s a good long term bet.

Thirumalai Chemicals (162.00) is the leading manufacturer of phthalic anhydride (PAN), maleic anhydride (MAN), fumaric acid, pthalate esters, food acids etc. Till now company was working at very less capacity utilization but because of increasing demand from the pigment as well as resin sector its capacity utilization improved to 75% for FY07 and is further estimated to improve substantially in FY08. For the June qtr its topline increased by 25% to 180 cr but due to higher interest cost and tax provisioning, NP grew by 15% to 11.40 cr posting an EPS of 11 Rs for the quarter. In future company has some capital expenditure plans to increase it PAN manufacturing capacity by 40% to around 150,000 tonnes. Importantly, the PAN prices are trading higher and are expected to remain high due to strong demand. Hence company may end FY08 with sales of 675 cr and PAT of 33 cr. This leads to an EPS of 32 Rs on equity of 10.25 cr. Share price has the potential to cross 200 mark in medium term.

XL Telecom & Energy Ltd (131.00) is among the very few companies, manufacturing CDMA handsets, fixed wireless phone, SPMS, solar photovoltaic system and ethanol in India. Incidentally, all these are high growth sectors and have immense potential. As company’s financial year ending is in month of June, it is yet to come with its last qtr nos. Hence it is estimated to clock a turnover of 525 cr and profit of 20 cr i.e. EPS of nearly 14 Rs on equity of 14.50 cr. Ironically, company has a huge 300 cr capex plan for its solar photovoltaic business under which it intends to expand the capacity of solar photovoltaic module making plant from the existing capacity 25 MW to 65 MW and setup a new solar photovoltaic cell manufacturing plant with a capacity of 120 MW per annum. Hence it is planning to raise 160 cr thru FCCB route and make pref allotment of around 52 lac warrants to promoters and others. Company is bound to get re-rated in future and the share price may shoot up like Bartronics. Buy and hold patiently.

Ramsarup Industries (133.00) has been continuously enhancing its production capacity for steel wire as well as TMT bars and has completed the expansion project at its existing plants viz Kalyani and Shyamnagar. It recorded 15% growth in sales to 355 cr and 25% rise in PAT to 12.50 cr for the latest June’07 quarter. To cash on the ongoing boom, company has a massive expansion plans whereby it is putting up a greenfield plant in Durgapur for manufacture of Low Relaxation Prestressed Concrete (LRPC) strand wire along with special grade steel wires. Phase-I of this new plant is near completion and expected to commence operation by Sept 2007. Moreover its Infrastructure division is engaged in laying of power transmission lines and has also got a contract of Indo-Bangladesh border fencing. Company has plans to raise around 200 cr via FCCB/GDR route in future. For FY08, it may report a total revenue of 1750 cr and PAT of around 48-50 cr. This works out to an EPS of 28 Rs on current equity of 17.50 cr. At a modest discounting by 7x times, share price can touch 200 Rs in 9-12 months. However it may not get very rich valuation being a commodity company and earning lower profit margin.

Orient Paper & Industries - 430.00 Rs

Incorporated in 1936, Orient Paper & Industries Ltd (OPIL), flagship company of the renowned CK Birla Group is a diversified company having interest in papers, cement and electric fans.

CEMENT DIVISION:-
OPIL’s main cement plant is located at Devapur, Andhra Pradesh, and a split grinding unit in Jalgaon, Maharashtra, leveraging the proximity to limestone, coal and fly ash sources on the one hand and fast-growing markets of Maharashtra, Andhra Pradesh and Gujarat on the other. With total installed capacity of 2.40 million tonne, it manufactures and markets portland pozzolana cement under the brand 'BIRLA A1 and ordinary portland cement under the brand name of 'ORIENT GOLD'. Ironically, cement contributes 55% to total revenue but 90% of the company’s profit comes from this division only. Hence to take advantage of the market growth and success of its brands and distribution network, it is implementing aggressive expansion plan to double the cement capacity from 2.4 million to 5 million TPA. It is also setting up a 50 MW captive power plant at Devapur to achieve further economy in the cost of energy consumed. These projects are scheduled to be completed before end of the financial year 2008-09 with 1 million TPA additional capacity becoming operational before March 2008. Moreover the cement division has already received 96310 units of CERs for activities undertaken up to 31st March, 2006 and will be entitled to further CERs each year until 2012 based upon its performance under the CDM project.

PAPER DIVISION:-
OPIL manufactures a wide range of writing and printing paper specially photocopying and office paper category apart from having dominant market shares in tissue paper segment. Its paper mill is located at Amlai in M.P having an installed capacity of 95,000 TPA. To provide sustainability in raw material availability, the company has been undertaking farm-forestry programmes across 18 proximate districts of Madhya Pradesh and Chhattisgarh. It is also expected to cover over 160 hectares during the planting season of 2007 under captive plantation. For this division also company is enhancing its pulping capacity along with setting up of additional tissue paper capacity of 20000 tonnes to be operational during 2008-2009. The paper division contributes around 25% of total sales. Incidentally, its second plant in Orissa at Brajrajnagar is non operational since 1999 and company is looking to dispose it off. As per unconfirmed news, the plant size is 880 acres and is expected to fetch more than 150 cr.

ELECTRICAL APPLIANCES:-
OPIL is India’s largest manufacturer of electric fans in terms of in-house manufacturing capacity with its two plants at Kolkata and Faridabad having an installed capacity of 30 lakhs fans per year. It offers entire product chain including fans, portable fans and exhaust fans - across price points, colours and designs with its ‘ORIENT PSPO’ brand as one of the most visible and respected names. Last fiscal, it launched 7 new products including a new children's segment fan under the name ‘Fantoosh’. Having global presence across 20 nations such as USA, Egypt, South Africa, Saudi Arabia etc, company enjoys the status of being the largest fans exporter with a brand share of 44.5% of total exports from India. Although 20% revenue comes from this division, but it hardly contributes to bottomline due to cut throat competition and low margin. Still, company is adding balancing facilities to increase the fan manufacturing capacities to 35 lakhs fans per year.

To fund its expansion plan company is raising around 160 cr via right issue in the ratio of 3:10 @ 360 per share. Scrip has already become ex-right with equity getting diluted by 30% to 19.30 cr. For FY07 it recorded 30% growth in topline to 1102 cr but its net profit multiplied 6x times to 131 cr on back of higher cement price realization and better operating efficiency. Hence it reported an EPS of 88 Rs and gave 10 Rs dividend. Importantly, company has brought down its total debt to 325 cr against 435 cr last year. For the latest June’07 qtr its sales grew by 13% to 293 cr but PAT shot up by 75% to 44.50 cr registering an EPS of 30 Rs on equity of 14.84 cr. With cement price expected to remain robust for couple of years and considering company’s expansion plan it may end FY08 with sales of 1250 cr and PAT of 165 cr i.e. EPS of 86 Rs on expanded equity of 19.29 cr. Investors are recommended to accumulate at dips with a price target of 575 Rs (35% appreciation) in 9~12 months.