STOCK WATCH

Although Mazda Ltd (60.00) is not expected to record spectacular growth in coming year, still it’s a value buy at current levels. For FY09 it reported 35% rise in sales to Rs 80 cr and 40% increase in PAT to Rs 9.25 cr thereby posting an EPS of Rs 22 for FY09. Company is among the few engineering companies in the world, manufacturing very specialized, high technology and critical equipments for various industries like power, refineries, fertilizers, chemicals, nuclear, sugar, paper, food, pharma etc. Broadly its product profile is segmented into vacuum system, valve division, air pollution control equipment, crystallizers and evaporators. Notably, it has a technical collaboration with world renowned Croll-Reynolds Inc. USA, who holds 12% stake in the company. Besides engineering, it also has a Biotechnology division dealing in carbohydrates, rare sugars and miscellaneous bio-chemicals. Lately, it has diversified into business of manufacturing and exporting soft drink drink concentrates, essence, jams etc in a small scale. However for Q1FY10 it recorded 15% fall in sales and profit to Rs 15 cr and 1.70 cr respectively. Accordingly it may end FY10 with sales of Rs 80 cr and profit of Rs 8.75 cr i.e. EPS of Rs 20 on tiny equity of 4.26 cr. Fundamentally, company is on a strong footing with very low debt equity ratio and good reserves. At an Enterprise value of Rs 30 cr scrip and at a P/E multiple of 3x times, scrip is trading fairly cheap. Considering the market sentiment, one can even buy for good short term gains as well.

Accurate Transformers (80.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity power Transformers of 160 MVA in near future. It has expertise to carry out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. As per management company is working at very low capacity utilization due to high working capital requirement and shortage of funds. On a gross block of Rs 11 cr company claims of having 5 manufacturing plants with an installed transformer production capacity of 8000 MVA, of which 3000 MVA in Dehradun and Haridwar are relatively new and enjoy income tax and excise exemptions. For FY09 its sales improved by 10% to Rs 195 cr whereas net profit remained flat at Rs 7 cr thus posting an EPS of Rs 24 on a very tiny equity of Rs 3 cr. For Q1FY10 also it posted 10% improvement in sales as well NP to Rs 27 cr and 1.10 cr respectively. Sarcastically, company seems to have borrowed the funds at high interest rate resulting into substantial interest cost which eats up more than 50% of operating profit. Accordingly it may clock a turnover of Rs 210 and NP of Rs 8.50 for FY10 i.e. EPs of Rs 29 on current equity. Buy for short term gains.

Continuously for the last three quarters, SEAMEC (180.00) has been reporting terrific performance. For Q2FY09 i.e. June’09 quarter its revenue shot up 65% to Rs 100 cr whereas net profit increased 8 fold to Rs 60 cr from Rs 7.50 cr in the corresponding period last year. For H1FY09 company has already clocked an EPS of Rs 36 till now. Despite such powerful performance, marketmen are skeptical of its future profit margin, as to at what rate company will hire out its vessels. But considering the current trend and improvement in demand for such vessels, it seems that company will be able to clock some long term deals at healthy charter rates. As of now, company’s all four vessels are deployed and none of its vessel is expected to go for dry dock in the current fiscal. Even for next fiscal, chances of dry dock of any vessel are quite negligible. Fundamentally, its not only a debt free MNC but also a cash rich company having potential to generate Rs 60 ~ 70 cr cash thru core business operation. Although H2FY09 may not be as good as H1FY09 still it may clock a turnover of Rs 350 cr and PAT of Rs 170 cr for FY09 ending Dec’09. This translates into EPS of Rs 50 on equity of Rs 33.90 cr. Investors can accumulate this scrip at sharp declines for a price target of Rs 280 within 15 months

Cosmo Films (100.00) is one of the dominant players in the Bi-axially Oriented Polypropylene Films (BOPP) market in India with a 23% market share and also one of the lowest cost producers of BOPP films in the world. It currently boast of having an installed capacity of 56000 MTPA of BOPP films, 21000 MTPA of thermal lamination films & 3000 MTPA of metallized films. Importantly, company is the only Indian player to manufacture thermal laminated films which is a high margin business. Despite demand supply mismatch, company is working at 100% capacity and is further expanding its BOPP capacity to 136000 MTPA & metalized films to 10500 in phases. It has even started a coating film with a capacity of 12000 MTPA last year. Recently company acquired GBC, a USA based company for Rs 80 cr. This company provides thermal lamination films and equipment in Europe, North America, Japan and the Pacific region and has sales of nearly Rs 500 cr. Post this acquisition, Cosmo Films has emerged as the global leader in thermal lamination segment. However considering its not so encouraging performance for Q1FY10 and fall in BOPP prices, it may end FY10 with sales of Rs 650 cr and profit of Rs 35 cr i.e. EPS of Rs 18 on current equity of Rs 19.40 cr. Meanwhile, the promoter group didn’t opt to convert the 31 lac convertible warrants which were allotted to them @ Rs 107 in Feb’08.

Gremach Infra Equipment & Projects Ltd - Rs 35.00

Incorporated in 1991, Gremach Infrastructure Equipment & Projects Ltd’s (GIEPL) main activity is to provide rental of construction/earthmoving machineries to medium & large construction companies who are engaged in the business of infrastructure developments like constructing of roads, airports, dams, power projects, mining activities, housing & civil construction and other related activities. GIEPL’s business is flourishing rapidly as it makes business sense for the construction companies to take these high cost construction equipments on a rental basis instead of blocking their capital in procuring equipments which may not be used for executing other projects. The other advantage of taking the equipment on rental basis is the availability of quality equipments without the hassle of their maintenance. Thirdly, with rapid technological developments, the cost of replacement of these equipments is also very huge and hence the developers now prefer to take equipments on rent rather to own them. Over the year, GIEPL has pursued a strategy of diversifying the selection of machinery/equipment according to different business segments in the infrastructure sector. In addition to renting its owned equipments, company also hires equipments owned by other parties and rent it out to its own clients. Infact, GIEPL has been deriving majority of revenue from renting of equipment which are exclusively owned by third parties. This is possible due to the fact that, company has established a very strong network so as to have a geographical reach as well as a diversified industrial and project segment.

Remarkably, GIEPL is among the handful of large player in the organized sector, which is presently being dominated by small unorganized players. But as the project location are diverse and the equipment requirement at various sites may vary, only bigger companies with strong financial muscle like GIEL can fulfill the requirement. Secondly, company has an edge over its peers as it has huge asset bank of heavy equipments ranging from compacters, rollers, concrete mixers, dozers, forklifts, loaders to excavators, PTR, dumpers, electronic sensor pavers, kerb laying machine, tunneling boomer, concrete batching and mixing plant. Moreover it also has a vast pool of skilled labour that include mechanical engineers, civil engineers, mechanical experts, technicians, and operators etc. who operate and maintain the equipment. Because of all these factors, GIEPL boats of having a very strong clientele base that includes all the major infrastructure players in the country such as L&T, Punj Lloyd, Shapoorji Pallonji, Gammon India, HCC, Gannon Dunkerley etc. Incidentally, company adopts direct marketing approach and has set-up a separate Tender department to procure contracts from public sector undertaking as well as from private clients. As of now, company has a centralized maintenance department & workshop in Kalamboli, Navi Mumbai spread over an area of 450 sq. mtrs each.

As a part of its diversification plan, GIEPL has taken 75% controlling stake in 11 Coal mine licenses in Mozambique having an aggregate 13,520 hectares (appx. 13.52 cr sq. mts) of land in prime region of Moatize, Africa. With the global shortage and crisis of hard coking coal, the future prospect of this business looks terrific. Infact in Oct’08 only company stuck coal in the range of 1~3 mtrs depth making it a full open cast mines. Moreover company expects the coal reserve to the tune of 200 million tonne in these mines which is huge. On the other hand witnessing a sharp jump in E&P activities earlier, company even entered into the business of renting of oil & gas drilling rigs. Accordingly it has signed the MOU for 40 on-shore rigs with China's biggest oil & gas rig manufacturer “BOMBO”. Simultaneously, company has also ventured into setting up of SEZ and has received formal approval for 100 hectares Metal SEZ at Kolhapur & another at Dhule in Maharashtra. Although in short term above diversification looks a drain on company’s cash flow, but in long term it may emerge as a sustainable and profitable business.

Meanwhile due to global liquidity crunch and a significant slowdown in domestic construction activity, GIEPL’s performance also took a hit. Its topline as well bottomline declined sharply in the last few quarters. However, of late the infrastructure development & construction activity has started picking up and the industry is expected to be back on growth track soon. To conclude, with govt’s special emphasis on creating physical infrastructure and massive investment being planned in coming years, company’s core business of renting equipment will do well. This concept is growing rapidly and gaining wide acceptance as the penetration level in India is quite low at 2%, compared to UK at 80% and North America at 35%. In order increase its equipment bank & fund other growth plans, GIEPL had raised almost Rs 200 cr in Feb 2008 thru FCCB route to be converted into equity @ Rs 376 per share. Subsequently conversion price has been reset to Rs 282 per share. Surprisingly in June 2009 when the scrip was trading at Rs 30 odd levels, more than 16% of the FCCB holders amounting to US$ 0.82 cr opted for conversion to equity shares @ Rs 282 per share. What made them do so, only they can reply. This is despite the fact that GIEPL has recently taken the approval for FCCB back in March’09. At the same time taking the benefit of crash in the share price, promoters went ahead and made an allotment of whopping 4.90 cr warrants in June’09 to themselves to be converted into equity at merely Rs 31 per share. And infact within the same month they opted to convert 1.8 cr warrants diluting the equity capital to Rs 34.40 cr currently. With this new preferential allotment of 4.90 cr warrants they will smartly let their old allotment of 1 cr warrants lapse which was to be converted @ Rs 123 per share. Despite Rs 55 cr fresh capital infusion, company is looking to raise more money thru other avenues like selling of old machinery, surplus land, ESOP, fresh debts etc to funds its other projects, capital expenditure and working capital requirement. Notably, its outstanding FCCB to the tune of Rs 165 will be due for redemption only in 2013.

Fundamentally, GIEPL reported 15% rise in revenue to Rs 295 cr but 30% fall in PAT to Rs 26 cr for FY09. Even for Q1FY10 it recorded 30% fall in topline to Rs 71 cr and 60% drop in bottomline to Rs 4.50 cr. However it is expected to clock bumper growth in coming years on the back of substantial capital expenditure and starting of commercial operation by its other divisions. Company has also highly leveraged itself with the debt equity ratio of more than 2.5x times. For FY10, it may clock a turnover of Rs ~375 cr and NP of Rs 25 cr leading to an EPS of more than Rs 7 at current equity of Rs 34.40 cr. Although no further FCCB conversion is expected, but the warrant conversion will lead to further 90% equity dilution to Rs 65 cr. So the fully diluted FY10 EPS works out to Rs 4. Considering the company’s growth plan and aggressive attitude, investors are advised to keep a close track on the share price and accumulate it between Rs 30~35 levels for handsome gain in long term.

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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.