ORG Infomatics Ltd - 100.00 Rs

Incorporated in 1976 & promoted by Amabalal Sarabhai group ORG Informatics Ltd (ORG), was among the several small sized IT hardware and software service companies that were struggling to survive in the post dotcom era and was saddled with accumulated losses. But its fortunes changed dramatically in 2003, with the acquisition of the management control by Global Asia Partners (GAP) led by Ajoy Khanderia. Today, ORG is the niche player in converged IT and telecom space with expertise in various telecom technology domains such as CDMA, GSM, IPTV, DTH, Wi-Max & IP based solution. Company has broadly segmented its business model into three divisions namely system integration, managed services and software solution. Under first two divisions, it provides complete integrated solution in the field of billing & operation support system, NGN/VOIP, SatComm, Wimax, CDMA, IPTV, CRM, Vehicle Tracking system etc. Under third division it offers tailor made as well as pre-packaged applications based on multiples channels like web, phone, mobile etc.

ORG is the pioneer in providing remote sensing turnkey VSAT solutions for enterprise and corporates including banks, financial institutes, manufacturing units, educational institutes etc Initially it started VSAT support with 95 sites which has now spread to more than 5000 VSAT sites across the country. Its solutions include complete supply, installations and maintenance of VSAT equipments, alongwith satellite bandwidth solution. It is also one of the few in the world to deploy GSM networks on VSAT. ORG is registered member at the international Wi-max forum. Its client base includes Airtel, Hutch, Spice Telecom, MTNL and BSNL. Globally, it has presence in 21 countries with clients like Roshan Telecom (Afghanistan), Telebartha (Bangladesh), Mobiletel (Srilanka), Spice Nepal, Saudi Telecom, Maxis (Malayasia), Reuters, Citibank and Mobifusion. Offlate, company has expanded its operations to Tanzania, Nigeria and is also considering DTH (Direct To Home) business in Europe. Few months ago, it has successfully completed the pilot phase of MTNL IPTV commercial rollout and the supply phase of 425 cr MTNL convergent billing project.

Importantly, ORG has a wholly owned subsidiary called ORG Telecom which is also growing at a scorching pace. Earlier in December 2006, ORG raised around 45 cr through a GDR route @ Rs 155 per share to acquire 100% stake in two companies namely - DGIT Solutions (Singapore) and Unified Technologies (Bangalore). Besides, ORG DTH, ORG Singapore, ORG FZE (UAE) & ORG Inc (USA) are few of its other subsidiaries. In early 2007, company also acquired 18% equity stake in Six Dee Telecom Solutions. Meanwhile, last month ORG got a good breakthrough as it signed an agreement to acquire the satellite based business of Belgacom Group, Belgium which is the country national operator. Post acquisition, ORG will be able to provide various satellite-based services including broadcasting across Europe, the Middle East and Africa. To fund this, company intends to raise around 120 cr thru FCCB or private placement route in near future.

Financially company is doing exceptionally well as its topline as well as bottomline, both increased by 100% to 307 cr and 17 cr respectively on a consolidated basis for FY07. Hence it reported a consolidated EPS of 10 Rs on equity of 17 cr. For the first quarter also ORG reported encouraging nos with an OPM of more than 9.50%. Accordingly it may end FY08 with total revenue of 375 cr and PAT of 20 cr excluding the recent takeover of Belgium business. This translates into EPS of 12 Rs on current equity of 17 cr. However, going forward its equity is expected to get diluted by 50% to the extent of 25 cr but at the same time Belgium business will give a fillip to its topline as well as bottomline. Despite being in such a high growth sector and having strong fundamentals, the scrip is trading at its 52 week low. Investors are strongly recommended to buy at current levels as share price can easily appreciate 50% in a year’s time.

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At the time when Sensex is hitting all time high above 16K, Bihar Caustic (58.00) is one the safest bet with negligible downward risk. Belonging to Aditya Birla group, it is among the leading manufacturers of caustic soda, chlorine and hydrochloric acid. After increasing its caustic soda capacity by 50% last year, company is now further expanding it from 225 to 265 TPD by addition of electrolysers as well by debottlenecking. Besides, it is putting up a stable bleaching powder plant at an estimated cost of Rs.7.50 cr to be operational by mid 2008. But most importantly, company has recently set up an aluminium chloride project and the commercial production has just begun. It expects to produce and sell about 12000 MT of aluminium chloride in FY08 which will give a good fillip to its topline. On the margin side, company is consistently reporting an OPM of around 45% and NPM of more than 20% which is excellent as per any standards. For FY08 it is estimated to clock a turnover of 185 cr and profit of 40 cr which leads to an EPS of 17 Rs on equity of 23.40 cr. Considering reserves of 125 cr & gross block of 305 cr it’s a value buy at current market cap of merely 135 cr. Although debt of 112 cr is bit on higher side still scrip is bound to cross 100 mark sooner or later.

Despite most of the fertilizer scrips buzzing on the bourses; Liberty Phosphate (19.00) is trading at a steep discount from its 52W high of 55 Rs. It is the largest manufacture of Single Super Phosphate commanding more than 14% market share. Presently, it has four manufacturing units having an total installed capacity of 4,63,000 MTPA of SSP fertilizer. Against this, its production stood at only 2,80,000 tonne for FY07 i.e. capacity utilization of merely 60%. On the back of good monsoon and govt’s special thrust on agriculture, demand for single super phosphate is expected to increase considerably in the current year. Accordingly company is estimated to produce and sell around 3,50,000 tonne this fiscal representing 25% rise in volume terms compare to FY07. In order to fund its higher working capital requirement and improve the operating efficiency, company raised 5 cr thru preferential allotment of nearly 20 lac equity shares @ 25 Rs per share. Further, it issued 8% redeemable preference shares for another 5 cr. Hence company is now on a strong footing and may end FY08 with sales of 175 cr and PAT of 3 cr. This works out to an EPS of 5 Rs on diluted equity of 6.13 cr. Having a book value of 25 Rs and P/E ratio of less than 4x times, scrip has the potential to appreciate 50% in a year’s time.

Due to some non compliance, trading in equity shares of the Micro Forge (32.00) was suspended. But from 3rd May 2007, it has been revocated with the base price as 23.00 Rs. Since then it made a high of 52/- Rs in early June and has now settled down to 30/- Rs. It is engaged in manufacturing of forging and machined components for automobile industry with an installed capacity of 14,000 MTPA. Apart from making flanges, it also forges alloy steel, stainless steel, carbon steel etc in partially or fully machined like connecting rods, crankshafts, camshafts, crown wheels, bull gears and various other auto part ranging from 0.5kg to 40 kg single piece weight. Company made a strong turnaround for FY07 as sales jumped up 40% to 79 cr but PAT increased multifold to 3.10 against 0.30 cr on back of improved operating efficiency. For the June qtr its sales and NP stood at 17 cr and 0.7 cr respectively posting an EPS of 1.25 Rs for the qtr. Although it may not register phenomenal growth from hereon, still a topline of 85 cr and bottomline of 3.50 is estimated for FY08. This translates into EPS of 6 Rs on equity of 5.60 cr. At a market cap of less than 20 cr it’s a value buy and share price can once again test 50 levels in medium term.

Belonging to well known RUCHI group, National Steel (30.00) is engaged into manufacturing of galvanized corrugated & plain steel sheets as well as coils under the brand name “APPU”. It also has a cold rolling mill and a modern state-of-the-art colour coating line which produces sophisticated and unlimited range of coloured steel with high corrosion resistance. To cater to the increasing demand, company has been constantly expanding, and currently has a capacity of 2,10,000 tonnes of galvanized steel, 2,40,000 tonne of cold roll steel and 80,000 tonne of colour coated line. In near future, company intends to diversify further to manufacture galvalume and other products like aluminium, zinc, alloy coating etc. For this it has an capex plan of 75 cr for FY08 under which it will add new capacity to produce 1,50,000 tonne of galvalume and also increase the pre-painted galvanized steel capacity by 20000 tonne. On a conservative basis it is expected to end FY08 with sales of 2200 cr and PAT of 22 cr i.e. EPS of approx 7 Rs on equity of 32.60 cr. Notably company has been making highest tax provisioning of around 34%. With a book value of 58 Rs and replacement cost of more than 500 cr, company is available fairly cheap at an enterprise value of around 300 cr.

Veejay Lakshmi Engineering Works Ltd - 97.00 Rs

Incorporated in 1947, Veejay Lakshmi Engineering Works Limited (VLEWL) manufactures textile machinery namely twisters and winders, which are used in the textile spinning mills for post spinning operations. Infact, company is the largest manufacturer of Two-for-one Twister (TFO) in India with more than 4500 installations worldwide and also the only manufacturer of Automatic Cone Winders (ACW) in India. Interestingly, company also has a high pressure die casting division under which it produces dies, moulds and other precision components from 40 Tons to 400 Tons capacity for the textile and engineering industry. Apart from the engineering division, it is also actively engaged in manufacturing of 100% cotton yarn through its wholly owned subsidiary called ‘Veejay Lakshmi Textiles’ which has a capacity of around 15936 spindles.

VLEWL has four manufacturing facilities, all located in Coimbatore, Tamilnadu. It has also invested in wind mills and has presently installed around nine wind mills having capacity of more than 4000 KW. The power generated from these are used/adjusted for the power consumed from the state grid by itself and its subsidiary. Last year, VLEWL came out of the joint venture arrangement with Savio, but retained the right to continue to produce the automatic cone winders with the know-how given by the Savio. However it cannot use the trade/brand names Savio and Espero, hence is now selling its winders under its own brand name ‘EXCELLO’. Importantly, company is handling all manufacturing, marketing, installation, after sales service and supply of all spare parts relating to automatic cone winder through its own separate sales and distribution network company called Veejay Sales and Services Ltd. This associate company also undertakes annual maintenance contracts for the maintenance of automatic cone winders. Interestingly, VLEWL has even established a full fledged printed circuit board (PCB) reconditioning lab facility to offer PCB reconditioning and repair facilities to all customers with minimal time for service.

On the back of the strong industrial growth and better future prospects, VLEWL has strengthen its aluminum die casting division by installing second hand machines imported from Switzerland. The subsidiary company i.e. Veejay Lakshmi Textiles has also planned for investments in a garment unit and expansion of the spinning capacity. Moreover, most of the spinning mills in India are modernizing and expanding their capacities and there are also new mills being set up. Hence, the demand for company’s main products viz. twisters and winders is expected to go up considerably in future. Accordingly, company has also taken steps to give thrust to its marketing activities by conducting road shows and seminars in different parts of the country and the response is encouraging. Considering all the factors, company is estimated to report sales of 100 cr and PAT of 9 cr for FY08 on a standalone basis. This means an EPS of 18 Rs on small equity of 5 cr. Consolidated nos will be much better. However the rising competition from import of new and second hand textile machines is a cause of concern for company. Still, with a gross block of 75 cr, reserves of 57 cr (i.e. BV of 123 Rs), investment of 21 cr (in subsidiary) this debt free company is a pure value buy at current market cap of 50 cr. Only long term investors are advised to buy for a price target of 175/- Rs (75% appreciation) in 15~18 months.

Micro Forge (India) Ltd - 31.00 Rs

Belonging to New Tech group, Micro Forge (India) Ltd was originally incorporated as private ltd company in 1989 and was subsequently converted to public ltd in 1993. It is primarily engaged in manufacturing of forging and machined components for automobile industry. Its product profile can be broadly segmented into flanges & automobile parts. It produces a wide range of forged & machined flanges made from carbon steel material confirming to ASTM, DIN, JIS, GOST, etc. It also forges alloy steel, stainless steel, carbon steel etc in partially or fully machined like connecting rods, crankshafts, camshafts, crown wheels, bull gears and various other auto part ranging from 0.5kg to 40 kg single piece weight. MFL is well known for its ability to develop & manufacture customized automotive spare on the basis of buyers technical drawings.

MFL’s manufacturing facility is spread over 6 acres of land with built-up are of 6773 sq. mtrs at Rajkot-Gondal National highway conveniently accessible by four track road from Rajkot city in Gujarat. The plant is equipped with the most modern forge shop and machining facilities alongwith latest testing equipments; all under one roof. Presently company has an installed capacity of 14,000 MTPA. Besides catering to domestic OEM’s, its products are also exported to U.S.A. and various other European countries. Infact, company has been conferred with export house status from the ministry of commerce. Its stringent quality control measure and full proof system got it accredited with ISO-9001 certification and registration of CRN of its product with 'MICRO' brand name. The domestic automobile industry is growing rapidly and outsourcing of auto components by the MNC’s is expected to see a substantial jump in coming years due to cost and various other factors. This all augurs well for the company.

Earlier, due to some non compliance, trading in equity shares of the company was suspended. It was only from 3rd May 2007, it was revocated with the base price as 23.00 Rs. Since then it shot up substantially to make a high of 52/- Rs in early June and has now settled down to 30/- Rs. Financially company has made a strong turnaround in FY07. Sales grew by 40% to 79 cr but PAT increased by 10x times to 3.10 against 0.30 cr in FY06. Importantly, its OPM improved substantially to 8% as compared to 3% in last fiscal. Meanwhile for the June qtr also its registered 8.50% of operating margin. Accordingly for FY08, it may clock a turnover of 85 cr and profit of 3.50 cr i.e. EPS of 6 Rs on equity of 5.60 cr. Although company margins are quite low compare to its peers, but it has the potential to improve it going forward. At the same time higher steel price is cause of concern. Despite all odds, scrip is trading reasonably cheap at current market cap of 17 cr and can once again test its high in medium term.

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Numeric Power (450.00) is India’s No 1 manufacturer of uninterrupted power supply (UPS) systems, stabilizers and power conditioners. It also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. For the June qtr its sales increased by 30% to 76 cr but the NP shot up 75% to 8.90 cr on back of higher other income thereby posting an highest ever EPS of 18 Rs for the quarter. Last year, company entered into a joint venture with the French UPS major SOCOMEC SA to distribute, market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. Ironically, around 75% of the ATMs in the country are fitted with UPS supplied by the company. With India's significant power deficits and the ubiquitous outages and voltage fluctuations; company’s products still have significant market potential in the country. For FY08 it may report sales of 325 cr and profit of 24 cr i.e. EPS of 48 Rs on equity of 5.05 cr. Buy at declines

Apart from being one of the lowest cost manufacturer, TNPL (101.00) is also having the world’s largest bagasse based paper mill with a capacity of 2,30,000 TPA. It is also the largest exporter of wood free paper from India. To cater the increasing paper demand and become a global player, company has implemented Phase-I of Mill Development Plan envisaging increase in captive pulp production capacity from 170,000 TPA to 260,000 TPA with element chlorine free (ECF) bleaching at a capital outlay of Rs 565 Crore. This will also increase the paper production capacity by 15,000 tonnes to 245,000 TPA and is expected to become operational from Oct 2007. It has further plans to take it to 4,00,000 TPA by Sept 2009. As power is one of the major cost components, company has made the mill self-sufficient by having in-house captive power generation capacity of 61.12 MW and another 35.50 MW thru wind farm. Moreover it has plans to establish a mini cement plant with a capacity of 400 tpd and is also contemplating to construct an IT Park measuring an office area of 4 lakhs sq. ft. on its surplus land. With an expected turnover of 1000 cr and NP of 110 cr i.e. EPS of 16 Rs, company is a value buy at current market cap of 700 cr.

Sukhjit Starch (150.00) is mainly engaged in manufacturing edible and non edible maize starch, dextrine, liquid glucose and dextrose monohydrate. Besides, it also produces sorbitol, maize oil, maize gluten, maize husk, high maltose syrup, oxidized/pregelatinized starch etc. It has an impressive clientele including corporates like Britannia, Dabur, Colgate, HLL, Heinz, Ballarpur, Berger paints, JCT, Mahavir Spinning, Wockhard etc. It is the only multi-locational group in India as of now with a combined installed capacity of 1,50,000 tons corn grind per annum. Couple of months back only company has started commercial production at its new unit in HP which has enhanced the capacity by nearly 25% and is dedicated for high margin starch and derivative products especially for pharmaceutical industry taking shape in Baddi, Himachal Pradesh. It reported satisfactory nos for the June quarter and accordingly may clock a turnover of 210 cr and PAT of 25 cr for FY08. This works out to an EPS of 34 Rs on current equity of 7.40 cr. Scrip has the potential to cross 200 mark in medium term

SEAMEC Ltd (218.00) operates multi-purpose support vessels (MSV) for diving and provides underwater/subsea engineering and construction, maintenance, inspection of under-water structures, rescue-operations and fire-fighting and other support services for offshore oil/gas installations located in India or abroad. Hence it is a pure play of charter hiring of MSVs, which are more specialized vessels than Offshore Supply Vessels (OSV) as they are equipped with Dynamic Positioning (DP) system and can go underwater for repair & maintenances of underwater pipelines. Ironically, there are only 6 MSV in India, out of which four belongs to SEAMEC and the rest two are with ONGC. However, as two of the company’s MSV are under dry dock its FY07 performance will be lack luster. But after that, it is estimated to report bumper results also due deployment of its fourth vessel. Hence, for financial year ending Dec 2008, it is expected to register a topline of 250 cr and bottomline of 80 cr which means an EPS Rs.24 on its equity of 33.90 cr. Being a subsidiary of Technip S.A of France, the largest oilfield engineering, construction and service group in Europe and being a debt free company it deserve much better valuation. Accumulate at declines.