STOCK WATCH

Its heartening to see that despite some disputes going on between Man Industries (48.00) & GAIL, the former has recently bagged Rs 200 cr from the latter. Few months ago Man Industries took GAIL to the court due to cancellation of one of the already confirmed orders. However, with this and another Rs 550 cr order from Middle East and Africa, company’s total order book position as on today stands at Rs 2500 cr. It is one of India's largest producers and exporter of large diameter Longitudinal submerged arc welded (LSAW) pipes and Helically submerged arc welded (HSAW) pipes. Infact it is the only company in India to manufacture 18 mtr long HSAW pipe. Of late, company has started a new production line for HSAW pipes with a name plate capacity of 200,000 MTPA thereby equalizing the total production capacity to 500,000 MTPA each for LSAW as well as HSAW. To become a global player, company is setting up a HSAW pipe manufacturing plant with an capacity of 300,000 MTPA in USA under a capex of Rs 400~450 cr. Although company was expected to report better margins due to softening of raw material cost but it didn’t and instead reported sharp decline in net profit to Rs 3 cr on sales of Rs 322 cr. Couple of months ago company made a preferential allotment of 25 lac warrants to promoter group to be converted @ Rs 35 per share. Despite poor Q1FY10 nos, company is expected to report sales of more than Rs 2000 cr and profit of Rs ~50 cr leading to an EPS of Rs 9 on expanded equity of Rs 27.85 cr hacing face value as Rs 2 per share. Keep accumulating at declines.

Diamond Power Infrastructure Ltd (180.00) is a leading manufacturer of transmission & distribution conductors, power & control cables & speciality cables. After the acquisition of Western Transformers in March’07 and Apex Electricals in July’07, company has also ventured into transformer production with installed capacity of 7500 MVA for power transformer and 5000 MVA for distribution transformer. For the June’09 quarter it reported marginally 5% decline in topline as well as bottomline to Rs 170 cr and Rs 14 cr. Couple of month ago it bagged a large power infrastructure project entailing electrification of north Cachar, Demaji and Kamrup districts of Assam to the tune of Rs 140 cr, thereby taking its total order book position to Rs 1150 cr. During June 2009 it also commissioned its horizontal lead extrusion facility of 66 kV, 132kV, & 220kV cables as partII of its cable expansion project at Vadodara. With this company is now among the select club of EHV cable manufacturers in the range of 11kV to 220kV. Company is further in the midst of expanding its low tension cables capacity from 8800 km to 30,000 km and is adding an EHV cable capacity of 2800 km for voltage upto 500kV maing it one of the largest power cable manufacturers in India. It is also investing 60 cr in setting up a facility for manufacture of Transmission tower with 48000 TPA capacity. All its project are expected to complete by Mar’10. Recently, L&T Infrastructure Finance Company Ltd has also agreed to extend a credit of Rs 50 cr to part finance the expansion project. For FY10 it may register sales of Rs 875 cr and PAT of Rs 75 cr i.e. EPS of Rs 36 on current equity.

JMC Projects (155.00) part of Kalpataru group, is among the top seven players for building and factory construction in India & has also been recognized as India’s one of the fastest growing company. It has successfully ventured into fields of turnkey execution involving civil, mechanical, electrical, HVAC, fire fighting, architectural and landscaping works. Lately, it has started focusing on infrastructure and power projects and is aggressively bidding for contracts to construct bridges & flyovers, roads & highways, railways stations, marine work, water supply & irrigation projects and construction of power plant. Despite significant slowdown in construction industry, company boast of having order book position of Rs 2200 cr (i.e. 1.7x times its FY09 turnover) of which nearly 50% consists of industrial construction/buildings segment, 30% of infrastructure related and 12% of power projects. It is also executing major fast track projects in Delhi for the Commonwealth Games 2010. For future it intends to take up railways, airports and water management projects on an EPC basis which will further add to its execution capabilities. For FY09 company clocked 45% growth in topline to Rs 1309 cr and 20% rise in PAT to Rs 37 cr posting an EPS of Rs 19 on equity of Rs 18 cr. Meanwhile for the recent Q1FY10, its revenue declined by marginally to Rs 292 cr but net profit remained flat at Rs 6.50 cr. Recently company has decided to come out with right issue of Rs 40 cr in the ratio of 1:5 @ Rs 110/- per share and is trading ex-right currently. For FY10 company is expected to clock a turnover of Rs 1500 cr and NP of Rs 42 cr i.e. EPS of Rs 19 on diluted equity of Rs 21.75 cr. Good for long term appreciation.

Ironically, most of the transformer manufacturers reported dismissal performance for the June’09 quarter and Voltamp Transformer (850.00) is no exception. It posted 50% fall in sales to Rs 104 cr whereas PAT declined by 35% to Rs 15 cr ofr the quarter. On the back of lower realization its operating margin also shrank to 15% against 20% last fiscal. However it is a leading manufacturer of customized transformers for industrial, building and power applications. It has special expertise in production of dry type vacuum resin impregnated (upto 3 MVA/11 kV class) and cast resin transformers (upto 7.5 MVA/33 kV class) apart from manufacturing regular oil filled power & distribution transformers, induction furnace transformers & unitized substations. Infact, company is the market leader in dry type transformers with around 40% market share. Unlike other transformer makers, VTL's focus is on the non-SEB industrial and engineering segment, which has enabled the company to restrict its debtors day to less than 2 months and thus better working capital management. Currently company is in the midst of putting up a Greenfield plan with an installed capacity of 4000 MVA thereby taking the total transformer manufacturing capacity to 13000 MVA. The plant is expected to go on stream soon. Although the margins may comparatively remain low but due to higher volumes in H2FY10 it is clock a turnover of estimated to end FY10 with topline of Rs 650 cr and bottomline of Rs 100 cr leading to an EPS of Rs 100 on equity of Rs 10.10 cr. But at sharp declines.

Oil Country Tubular - Rs 70.00

Incorporated in 1985, Oil Country Tubular Limited (OCTL) is among the world’s leading manufacturers & processor of oil country tubular goods specially required by oil drilling and exploration industry. Its expertise lies in production of wide product range of product such as drill pipe, heavy weight drill pipe, drill collars, production tubing, casing, tool joints, couplings, pup joints, nipples, subs, and cross overs. It also deals in oil field accessories such as rotary subs, lift plugs and lift subs, stabilizer sleeves, welded blade stabilizers & integral stabilizers and cast steel lifting bails. But broadly, company has segmented its product range into Drill pipes, production tubing & Casing pipes.

· Drill pipe, a seamless pipe is the principal tool, other than the rig, required for drilling of an oil or gas. OCTL is among the handful companies in India, manufacturing coated as well as uncoated drill pipes up to five and half inches.

· Casing pipes are the steel pipes, placed in an oil or gas well as drilling progresses to prevent the wall of the hole from caving in during drilling, to prevent seepage of fluids and to provide a means of extracting oil & gas. OCTL has the capabilities to produce casing pipes up to 20 inches outer diameter.

· Production tubing is also a tubular pipe but held inside the casing pipe to provide a continuous bore from the production zone to the wellhead in case the oil has stopped flowing naturally.

Presently, drill pipes constitute ~50% of total sales followed by 35% from casing pipes and 10% from production tubings. The rest 5% of revenue comes from services as OCTL also offers following facilities to its clientele:

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  Reconditioning of Drill Pipe


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  Re-threading of Drill Pipe


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  Internal Plastic Coating of Drill Pipe and Tubing


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  Make and Break of Tool Joints


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  Tool Joint Hardbanding


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  Tubing and Casing


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  Field Inspection of Tubulars.

At OCTL, the complete manufacturing & processing activity is concentrated in a single unique integrated plant located at Narketpally, Nalgonda and with corporate headquarters in Hyderabad, India. It boast of having an installed capacity of 10,000 TPA for drill pipes, 50,000 TPA for casing pipes and 15,000 TPA for production tubings. However against this total installed capacity of 75,000 tonne, OTCL produced only 25,000 tonne for FY09 leading to one third capacity utilization. Categorically, 75% utilization for drill pipes, 30% for casing pipes and 15% utilization for production tubings. The facilities at the plant include upsetting, heat treatment, non-destructive testing, metallurgical laboratory, gaging and calibration laboratory, tool joint and coupling threading, casing and tubing threading, friction welding of drill pipe, hydrostatic testing and internal plastic coating of tubulars. Importantly, OCTL is licensed by American Petroleum Institute (API) as processor/threader of casing & tubing, processor of drill pipe and manufacturer of rotary drill stem elements according to API specification. In addition to the manufacture of API Products, company is also a licensee for the manufacture of high performance premium connections which are basically threaded connections with a gas tight seal and the ability to handle high torque, tension and pressure. Being ISO/TS 29001 certified, company’s products are well accepted in the international market and it has been regularly exporting to Russia, Middle East, Far East and European countries. Infact it derives 50% of its revenue from exports. Domestically ONGC and OIL are its two biggest customers apart from other central and state govt companies. For future growth, company has planned to doubled its drill pipe manufacturing capacity to 20,000 TPA but it seems the planned has been dropped. Now OTCL is contemplating to triple its casing pipe capacity to 1,50,000 TPA in the current fiscal itself.

Being a manufacturer of oil country tubular products, OCTL’s fortune is mainly dependent on oil & exploration activities. With crude oil price shooting up at almost US$ 150, the oil exploration activities were at its peak in 2007. But post the economic meltdown & global recession in 2008, crude price as well as exploration activity has come down significantly. Thus the order book which stood at Rs 250 cr in March 2007 now stands at Rs 150 cr in March 2009. However the situation has improved to some extent in the recent past and the long term prospects of the industry looks promising. More importantly, OCTL made a smart turnaround in FY08 as its operating margin improved drastically and it also wiped out all its earlier losses. What more, in FY09 it has even made itself debt free and is now generating strong cash flows. For FY09 it recorded 25% rise in sales to Rs 420 cr but PAT zoomed up 125% to Rs 65 cr due to lower interest cost. This translates into EPS of Rs 15 on equity of Rs 44.29 cr. After a gap of more than 20 years, OTCL has returned back to dividend paying list by declaring 15% dividend for FY09. Despite challenging times, company has reported good nos for June’09 quarter as its revenue grew by 17% to Rs 72 cr and profit increased by 25% to Rs 14 cr due to lower tax provisioning. Considering all the factors, OTCL is estimated to clock a turnover of Rs 375 cr and net profit of Rs 60 i.e. EPS of Rs 14 for FY10. Further it has the potential to post an EPS of Rs 18 for FY11. Long investors are advised to buy at current levels and add on declines for a price target of Rs 110 in 12~15 months.

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Interesting Jindal Polyfilms (300.00), has recently approved a second buy back for an aggregate amount not exceeding Rs 73 cr at a maximum price of Rs 400/- per share from the open market. In the first buy back which it closed in April 2009, company bought back an aggregate of 32,34,492 equity share at an average market price of Rs 270.17 per share absorbing a total amount of Rs 87.38 cr. So it seems that company may actually buy back further shares which will restrict the major correction in the scrip. Incidentally company didn’t take the benefit of recent amendment in AS11 and provided huge forex loss to the tune of Rs 61 cr in P&L a/c for FY09. Despite that it recorded a PAT of Rs 124 cr on sales of Rs 1417 i.e. EPS of Rs 47 on standalone basis. Company is a leading player in flexible packaging, basically makes polyester films (BOPET), polypropylene films (BOPP), metallised films and coated films with in house ability to produce polyester chips (93800 TPA) for captive consumption. It is the only company in India to offer PVDC coated BOPP and Pet films having a capacity of 4500 TPA to manufacture PVDC, Acrylic and LTS coated films. Remarkably, company has been constantly expanding over the years and has further lined up aggressive expansions till 2011. For the latest June’09 quarter, company has posted good set of nos as it provided Rs 25 cr as forex gain leading to a net profit of Rs 85 cr on sales of Rs 381 cr. Even excluding the forex gain company has recorded an EPS of Rs 24 on current equity of Rs 24.90 cr which is quite encouraging. Purely on the operational front company can register sales of Rs 1500 cr and profit of Rs 160 cr i.e. EPS of Rs 64 for FY10. Keep accumulating at sharp declines.

Bharati Shipyard (150.00), second largest private shipyards in India is engaged in design and construction of bulkers, cargo/container ships, tankers, dredgers, passenger vessels, chemical carriers etc. It has special expertise in construction of offshore support vessel required for oil exploration industry and is the first Indian player to bag an order of an oil rig. However, the shipyard sector is going thru a bad phase as very few shipping companies are placing major fresh order for ships due to world economy slowdown. However company is having sufficient order position (of more than Rs 3000 cr) for next two years and by then the situation is expected to improve. Secondly the crude oil prices have also recovered smartly which will lead to continuation of increased E&P activities. But because of the ongoing slump in business, company has slowed down its Greenfield expansion and other capex plan. For FY09, its topline increased by 45% to Rs 934 cr but bottomline grew by 20% to Rs 125 cr due to significant increase in employee and interest cost posting an EPS of Rs 45. In May 2009 company acquired 15% stake in Great offshore and since then it has been constantly in news as it is competing against ABG shipyard to acquire Great offshore. As of now it holds nearly 20% stake in Great offshore against 8% held by ABG shipyard. Ironically ABG has made a counter open offer @ Rs 520 per share to acquire 1.26 cr shares of Great Offshore against companys open offer of Rs 405 per share. So even if company sells the 72 lac shares to ABG it will make a cool gain of Rs 155 cr on its investment.

Indag Rubber (50.00) has reported satisfactory result for the June’09 quarter. Sales as well as NP improved by 20% to Rs 23 cr & 2.30 cr respectively. Thus it posted an EPS of Rs 4.50 for the quarter. For the entire FY09 its sales marginally grew to Rs 76 cr but net profit declined by 10% to Rs 7.60 cr posting an EPS of Rs 15 on equity of Rs 5.25 cr. It declared 20% dividend for FY09. Company is one of the reputed players in tyre retreading business and has been benefitted to the drastic fall in prices of raw material like poly butadiene rubber, natural rubber, carbon black and rubber chemicals. Due to high prices of tyres, retreading of tyres has become all the more necessary as tyres retreaded with quality material give about the same mileage as new tyres and that to at a much lower cost per mile. On the other hand the concept of retreading is bound to grow in coming years being environmentally friendly. However the performance of the company will be vulnerable to commodity prices and hence scrip wont command very high premium. Buy only at sharp declines

By capitalizing all the forex gain/loss as per AS-11 amendments, JK paper (29.00) has reported decent set of nos for the June’09 quarter. Sales remained flat at Rs 261 cr and net profit stood at Rs 20 cr posting an EPS of Rs 2.50 for the quarter. Surprisingly it reported an impressive OPM of 23% due lower raw material cost. It will be interesting to see if company can maintain this margin going forward. For FY09 it had clocked a turnover of Rs 1077 cr and PAT of Rs 38 cr leading to an EPS of almost Rs 5 on equity of Rs 78 cr. With more than dozen of popular brands, company is India’s largest producer of branded papers and commands 40% market share in branded cut size papers. It is engaged in production of writing & printing paper and has recently ventured into high-end coated packaging boards. It operates two integrated plants in India with an total installed capacity of 180,000 TPA. Of late it has setup Rs 300 cr state-of-the art multi layer packaging board plant with an installed capacity of 60,000 TPA, thereby taking the total installed capacity to 240,000 TPA. But the most interesting aspect of the company is the high dividend payout ratio. Company has announced a dividend of 17.50% (against 15% last year) which translates into payout ratio of more than 35%. At CMP the dividend yield works out to more than 6%. However the record date has gone and scrip is trading ex-dividend now. So buy during corrections.

TIL Ltd - Rs 235.00

Established in 1944, TIL Ltd (erstwhile Tractors India Ltd) is one of the oldest and country’s leading providers of a wide range of technology intensive equipment for infrastructure development that represent some of the finest in global technology. It provides a complete gamut of support solutions ranging from equipment recommendation to total maintenance and repair contracts. Apart from manufacturing and marketing hi-tech equipments, TIL’s forte also lies in after sales service including equipment commissioning, inspection, overhauling and rehabilitation, training support, 365 days service and tailor made service contracts. It also offers field repair service and fleet maintenance management even if the equipments are deployed in the remotest location. And most importantly, TIL boasts of having a strong network of parts warehouses across various regions to minimize delivery lead time. Infact, its total stock of spare parts exceeds 2 lac line items which ensures that all the critical items are available off the self to its customers. Headquartered in Kolkata, company has four regional offices (Kolkata, Delhi, Mumbai and Chennai) and a network of 50 branches. Besides it has overseas office is in Phuntsholing (Bhutan) and subsidiaries in Nepal, Myanmar and Singapore. Its manufacturing locations are based in Kolkata (cranes, reach stackers and lorry loaders) and Ghaziabad (generator sets). To have cutting edge technology, TIL has several long term technical and strategic alliances with leading Equipment manufacturers in the world - Caterpillar Inc, Grove Worldwide USA, Manitowoc Crane Group - USA, Paceco Corp-USA [a part of Mitsui Engineering and Shipbuilding-Japan], FAMAK - SA, Poland. For effective management, TIL operates through following three strategic business groups

Material Handling Solutions (20%): This division designs, manufactures, markets and supports a comprehensive range of lifting and material handling equipment. Notably, it has many “first in India” to its credit – the first mobile yard crane, first truck mounted crane, the first rough terrain crane, the first 100 tonne crane to name a few. The broad product portfolio includes all types of Mobile Cranes, Lorry Loaders, Reach Stackers, Electric Level Luffing cranes, Rubber Tyre Gantry cranes, Lattice Boom Crawler cranes etc. The division caters to a wide array of infrastructure sectors such as Port, Aviation, Railways, Construction, Mining, Oil & Petrochemicals, Steel plants, Cement, Power and Defence through its product range. Presently, TIL is the undisputed leader commanding more than 60% market share in India and is infact the only manufacturer of higher capacity mobile cranes (40 tones and above) in India.

Construction and Mining Solutions (60%): This is basically the dealership division, as TIL represents “Caterpillar’ products across North and East India as well as Bhutan, Nepal and Myanmar. It markets, imports and services a comprehensive, range of equipment manufactured by Caterpillar- the world leader in construction and mining equipment. Remarkably, TIL partnered with ‘Caterpillar' in 1944 and since last 6 decades the bonding has only become stronger. The products offerings include Wheel Loaders, Backhoe Loaders, Excavators, Off Highway Trucks, Motor Graders, Track-Type Tractors, Compactors, Paving products, Wheel Dozers and Underground Mining equipment. Being a very reputed brand, the equipments are extensively used by the companies in mining & quarrying industry like coal, iron ore, metal and limestone. Its also popular in construction sector like building, Roads, Ports, Power (thermal and hydro), Airport, Urban and Rural infrastructure.

Power Systems Solutions (20%): For continuous and quality power and for critical standby applications, TIL offers a complete portfolio of diesel and natural gas generator sets powered by Caterpillar engines. The core focus products are diesel generators from 200 kVA to 3500 kVA and gas generators from 1000 kVA to 3500 kVA. It even markets only the engines for industrial, oil & gas, marine as well other applications. It also deals in engine and generator sets used for the Petroleum sector. Thus as a single source for complete power solutions, TIL provides application engineering, feasibility studies, supply chain management, onsite installation services, and uninterrupted product uptime thru on-site support & maintenance.

Apart from above three segments, TIL has of late started to focus on the global concept of providing equipment on Rent. In India, the rental business is gaining importance rapidly as it eliminates capital investments, risk of equipment idling, the need for cumbersome maintenance, as well as inventory management for the end users. To cash on this growing opportunity, company has already set up six rental stores in Sahibabad, Bhubaneswar, Asansol, Lucknow, Udaipur and Chandigarh. These rental stores offer new and relatively new rental equipment and reliable used equipment. To improve coverage and be close to the medium & smaller size companies, rental was also promoted from outlets in Dhanbad, Jamshedpur, Kolkata and Ranchi. Due to special thrust, company rented out more than 150 units for the first time in FY09 and is planning to grow this business at CAGR of 50% for next 5 years.

To maintain its growth momentum, TIL is in the midst of constructing a 5-star state-of-the-art component rebuild centre at Asansol-West Bengal, as per the Caterpillar standards. Simultaneously, it is also putting up a Greenfield plant for manufacturing cranes and other new products. Of the required 200 acres of land, the company has already acquired 100 acres of land at Kharagpur, West Bengal. The total capex is estimated to be Rs ~200 cr and may begin operation in FY11. Meantime, to enhance its product range and increase its customer base TIL has entered into strategic tie up with NACCO-USA for marketing its Hyster range of Big Forklift trucks, Container Handlers & Reach Stackers. Besides its has also entered into technical collaboration with Astec Inc – USA for manufacturing Double Barrel Hot Mix Asphalt plant, used in the road making industry and for crushing and screening plants for mining and construction industry. This new indigenization process under the technology transfer and licensing agreement from Astec will enhance TIL’s cost competitiveness and ensure faster delivery and better value proposition.

During FY09, the infrastructure industry in particular, was impacted because of the freeze on fresh capital infusion into projects of a large size, given the contracted liquidity situation across the globe. Ironically, the Indian construction equipment industry at US$ 2.3 billion, is a fraction of the global market, whose size is over US$ 75 billion. However, it has been growing at a frenetic pace of 30%, in sharp contrast to the world average of 5 per cent. Today, India is one among the top ten markets for construction equipment and is one of the key international markets. The Government of India's focus on infrastructure development is the single biggest driver for the construction, mining and material handling equipment industry. With government planning to invest Rs. 2,002,000 cr in physical infrastructure (railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) as per Eleventh Five-Year Plan, the future prospect of the company looks robust.

Financially TIL is doing well although it didn’t recorded spectacular growth as it did in FY08 due to obvious reasons. For FY09 on a consolidated basis it recorded marginal decline in sales to Rs 1037 cr and 7% rise in PAT to Rs 45 cr leading to an EPS of Rs 44 on equity of Rs 10 cr. However for Q1FY10 it reported flat bottomline of Rs 5.80 cr despite 10% fall in topline to Rs 163 cr on a standalone basis. But considering all the factors like revival in construction sector & fall in metal prices, TIL is expected to clock a consolidated turnover of Rs 1200 cr and NP of Rs 48 cr i.e. EPS of 48 on current equity. Recently, the 30 lac convertible warrants (@ Rs 326) which were issued in Dec’07 to promoter group & ENAM to fund the expansion got lapsed due to poor market sentiment. But it doesnt make much difference as company can easily raise debt and complete the project. Its debt equity ratio stands low at 0.50x. At current Enterprise Value of Rs 300 cr, TIL is trading grossly cheap at PE ratio of less than 5x times, EV/EBITDA of less than 3x times & Price/book value of almost 1x times. Investors are strongly recommended to buy at current levels for 50% gain within 12~15 months.

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For the latest June’09 quarter TIL Ltd (250.00) reported flat bottomline of Rs 5.80 cr despite 10% fall in topline to Rs 163 cr on a standalone basis. Company is engaged in three business segment namely construction and mining solutions, material handling solutions & power systems solutions. It has long term technical and strategic alliances with leading equipment manufacturers in the world- Caterpillar Inc, Manitowoc crane Group, USA Famak S.A, Poland and Paceco Corp, USA. Pioneering the manufacture of mobile cranes in India, company deals in hundreds of specialized construction equipment like excavators, loaders, pavers, rollers, concrete mixers, batch plants, forklifts, conveyors, tower cranes, crushing plants, dumpers, demolition equipments etc. To cater the global clients effectively it has set up subsidiaries in Singapore, Myanmar & Nepal etc which are doing well. For FY09 on a consolidated basis company has recorded sales of Rs 1037 cr and PAT of Rs 44 cr leading to an EPS of Rs 44 on equity of Rs10 cr. With government planning to invest Rs. 2,002,000 cr in physical infrastructure (railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) as per Eleventh Five-Year Plan, the future prospect of the company looks robust. Thus company is even setting up a Greenfield plant in West Bengal under a capex of Rs 175 cr which may get ready by late 2010. Meanwhile the 30 lac convertible warrants (@ Rs 326) which were issued in Dec’07 to fund this expansion got lapsed due to poor market sentiment. But it doesnt make much difference as company can easily raise debt and complete the project. For FY10, on a consolidated basis it is expected to clock a turnover of Rs 1200 cr and PAT of Rs 48 cr i.e. EPS of Rs 48 on current equity. A solid bet

Once again Jupiter Bioscience (48.00) has reported satisfactory performance for the June’09 quarter. Sales improved by 15% to Rs 33 cr but PAT remained flat at Rs 7 cr posting an EPS of Rs 4.50 for the single quarter. Even for FY09, company had clocked 10% rise in sales to Rs 143 cr and 20% increase in profit to Rs 32 cr thereby posting an EPS of Rs 20 on a standalone basis. Although the consolidated nos are not available but it estimated to be marginally better. Company is operating in a very niche segment and is among the few companies in the world to have competency in synthesis of peptides. The technology focus of the company has enabled it to develop more than 400 products in its catalogue and establish a leadership position in the peptide business internationally. It is poised to become a global peptide solutions group having a broad canvas of peptide chemistry products, peptide reagents, coupling reagents, protective agents and supplier of key ingredients used in peptide based pharmaceuticals. However few experts have concerns over the non performance of its subsidiaries despite considerable capital being employed into them. Despite this investors can accumulate the scrip at current levels. The days its subsidiaries start performing scrip will see a vertical rise.

After witnessing the worst time of its history, things are gradually improving for Phillips Carbon Black (100.00). Due to economic meltdown and slump in auto sector, demand for carbon black also nose-dived during late 2008 which forced the company to cut down the production. Moreover the carbon black prices also fell due to dumping & inventory clearance by international players. Incidentally, company’s capacity utilization for FY09 stood at merely 79% (against 93% in FY08). However in the last few months the price as well as demand has improved to some extent. Also anti-dumping investigation against import of carbon black from Thailand, Australia, China, Russia, etc. is in progress and it is expected to be concluded in due course during FY10. In the meantime company reported encouraging performance for the June’09 quarter. After reporting significant operating loss in the preceding two quarters it recorded an operating profit of Rs 32 cr (OPM of 11%) for this quarter. Interestingly it reported only 10% fall in sales and PAT to Rs 291 cr & Rs 20.50 cr respectively against corresponding quarter last year. In order to generate extra revenue from sale of power, company has put up a huge 30 MW power generation plant which commenced commercial operation from April, 2009. For future growth company is looking to expand its installed capacity by whopping 140,000 tonne thru Greenfield as well Brownfield expansion along with adding another 32 MW of captive power generation facility. In short, post all expansion by end of 2010, its carbon black production capacity will stand augmented to 410,000 MTPA and power generation capacity to 80.50 MW. Worth a punt.

Ironically, the net profit of Balaji Amines (85.00) remained same at Rs 5 cr despite 25% fall in topline to Rs 59 cr. It recorded a healthy OPM of 17% against 12% in the corresponding quarter last year. For FY09 its sales as well as net profit were up 15% to Rs 252 cr & 15 cr respectively. Company is among the few handful manufacturers across the world producing methylamines, ethylamines and their derivatives, as amine manufacturing technology is a closely guarded process. Ironically company is using indigenously developed technology i.e. without any technical foreign collaboration. It also produces specialty chemicals which are import substitutes like Morpholine,hydroxylamine, N-Methyl Pyrrolidone etc and few natural products (herbal extracts) such as solanesol, calcium sennosoid, coleus forskohlii, camptothesin etc. Infact couple of weeks ago it commissioned Gamma Butyro Lactone (GBL) plant with a capacity of 18 MT / day which is first of its kind in India and is a 100% import substitute. However being in a petrochemical industry with crude based feed stock, company’s performance is affected to some extent by the volatility in crude oil prices. For FY10 it is expected to register sales of Rs 250 cr and PAT of Rs 15~16 cr i.e. EPS of Rs 25 on equity of Rs 6.50 cr. Only long term investors can accumulate at declines.