Bongaigaon Refineries Rs.89.30

Bongaigaon Refinery & Petrochemicals Limited (BRPL) was incorporated in 1974 as Government of India Undertaking. In 2001, it became a subsidiary of Indian Oil after the disinvestment by the Govt. of India. With an investment of about Rs.890 cr. in Refineries & Petrochemicals plants, BRPL has the unique distinction of being the first indigenous grass root Refinery in the country integrated with a Petrochemical complex at one location. Being in the north eastern region, BRPL enjoys special excise duty concession of 50 per cent from the government Petroleum products from the Refinery includes conventional fuels like LPG, petrol, MS, Naphtha, ATF, SKO, HSD, LDO, LVFO, LSHS, etc. Apart form petro products it also produces petrochemical like ylene, Dimethyl Terephthalate (DMT), Orthoxylene, Paraxylene, Ceenine and Polyester Staple Fibre (PSF).

BRPL has two crude distillation units (CDU) in Bongaigaon in Assam with a total crude processing capacity of 2,35,000 MTPA. The major products of this unit are Reduced Crude Oil, LPG, Straight run Naptha, Reformer feed naptha, Raw kerosene & Diesel oil. Reduced Crude oil is then converted into Fuel Gas, LPG, Naptha, gas oils, Fuel oil and Raw petroleum coke under its two delayed coke unit (DCU) each having capacity of 5,00,000 MTPA. Its Coke calcination unit is designed to convert 75,000 MTPA of Raw petroleum coke available from DCU into 52,500 MTPA Calcined petroleum coke. It also has a Kerosene treating unit with a capacity of 2,37,500 MTPA which can process raw kerosene from CDU to produce Superior kerosene oil and Aviation turbine fuel. Moreover its Xylenes plant can produce 29,000 MTPA of Para-ylene,6,000 MTPA of Ortho-ylene and 10,000 MTPA of Ceenine. BRPL also has a Dimethyl Terephthalate plant which can produce 45,000 MTPA of DMT. Recently, the company has suspended its production of DMT and PSF units due to lower market demand and unremunerative sales realisation.

Currently, BRPL is processing crude available from the oil fields of ONGC and OIL located in the North-East India Ravva crude oil from the Krishna-Godavari basin off the coast of Andhra Pradesh. Its working almost at 100 per cent capacity utilisation and gross refining margin is at record high of USD 9.30. For future growth, the company is implementing modernisation and other efficiency improvement schemes under a capex plan of Rs800~1000 cr. to become a vibrant petroleum company of national prominence. Though some analysts expect it to be merged with IOC, chances of it areess as BRPL will then lose the 50 per cent excise benefit concession.

Fundamentally, it is a strong and investor-friendly company having paid a healthy dividend of 77 per cent for FY04. For the quarter ending Dec 2004 it posted impressive numbers. Sales grew by 60 per cent to Rs1174 cr. and NP increased by 40 per cent to Rs134 cr. Its March’05 quarter numbers will be much better compared to March 2004 since the company has already made higher provision for under recovery of CST. With the continuation of strong refining margins, a healthy balance-sheet and the guiding hand of the parent Indian Oil, we expect it to end FY05 with Sales of Rs4300 cr. and NP of Rs550 cr. This works out to an EPS of Rs28 on its current equity of Rs199.82 cr. Hence the scrip is trading very cheap at 3 PE in spite of a good dividend yield. Investors are advised to buy at the current market price and hold it patiently for 12 months to see a price target of Rs150.

Videocon International Ltd. Rs.67.15

Incorporated in 1985, Videocon International Ltd (VIL), the flagship company of the Videocon Group, is India's largest manufacturer of Consumer Electronics & home appliances. It manufactures, markets & exports a wide variety of televisions, audio systems, VCD/DVD players, air conditioners and other electronic components. VIL can boast of having a product for every segment of society from economy to value added hi-tech products. Fired by a passion for innovation, VIL has kept pace with the changing face of technology constantly upgrading its manufacturing facilities to incorporate advanced technology and high standards of quality into its product range, right across the spectrum.

Videocon’s USP lies in introducing innovative products and having state-of-the-art ultra modern manufacturing plants spread across all over India and also in Russia, Bahrain & Italy. At its modern plant at Chitegaon and Aurangabad, the company has undertaken complete backward integration to manufacture all critical and important components of its products, such as Electronic Tuners, FBTs, ATDMs and Deflection Yokes thereby reducing costs, ensuring quality control and becoming vertically integrated. Its subsidiary Videocon Narmada Glass has the distinction of having set up India's first plant with 1.7 million units capacity for the manufacture of Glass Shells for Color Television Picture Tubes, in technical collaboration with Techneglas Inc., USA world leader in Glass Shell Technology. It also enjoys the credit of bringing international brands like Toshiba, Sansui, Akai & recently Hyundai to India. The company has also set up 25 branches across the globe to give a fillip to its international operations. Recently, it acquired Thomson's colour picture tube plant located in Anagni, Italy which has capacity to produce 3 million units per annum. With all this consolidation, the Videocon group is looking at reaching international sales of $1 billion in three years.

VIL derives almost half of its profit from its glass shell business due to which it enjoys the highest operating margin of 16 per cent compared to its peers. Fundamentally, its a very strong company with a book value above Rs180 due to huge reserves and posted an EPS of Rs25 for the year ending Sept 2004. Its first quarter ending 31 December 2004 is also quite impressive with net sales growing 18 per cent to Rs1165 cr. and the NP increased 26 per cent to Rs55 cr. leading to a quarterly EPS of Rs7.75 on current equity of Rs71.10 cr. FIIs and MFs are also active in this scrip with 4 per cent and 2.65 per cent stakes respectively. With the rural demand picking up coupled with the increased spending by urbanites and the huge potential in the export market, we expect VIL to clock a turnover of Rs4250 cr. and NP of Rs200 cr. for FY05 which would mean an EPS of Rs28. Thus the scrip is trading extremely cheap (below 3 PE of FY05 EPS) and investors are advised to buy with a price target of Rs110 in 12 months time. At the same time, investors should remain cautious as the promoters don’t enjoy a good reputation in the capital market and some analysts even doubt the group’s financial numbers as the dividend payout ratio is very poor.

STOCK WATCH

Lot of rumours are buzzing the market about consolidation in the banking sector and Banking personalities opine that mergers and acquisitions are inevitable in the current situation. Hence South Indian Bank given its strong fundamentals and wide regional presence is being targeted by several big private and foreign banks. It’s safe and good bet in the banking sector.

Purely on fundamentals National Oxygen, a very small company manufacturing oxygen, nitrogen gas etc looks fairly cheap and can rise sharply if the market remains bullish. For the December quarter it reported excellent set of numbers. Its Net Sales was up 60 per cent to Rs.3.85 cr. and NP zoomed 360 per cent to Rs.1.25 cr. posting a quarterly EPS of Rs.4 on equity of Rs.3.10 cr. Its OPM also improved substantially to 39 from 14 per cent last year. For FY05, it is likely to post an EPS of Rs.12 and the scrip can cross Rs.60 in medium to long term.

Haldyn Glass Gujarat Ltd is one of the major players in the Clear Glass Container manufacturing segment and has a diverse and reputed clientele including Glaxo, Cipla, McDowells, Shaw Wallace, Camlin etc. Its December’04 quarter was quite good as Sales grew by 17 per cent to Rs.13 cr. and NP jumped 80 per cent to Rs.1.10 cr. For the full year, it can post an EPS of Rs.7 and the share price can cross Rs.50 mark if the market sentiment remains bullish

Era Construction, a lesser known and relatively smaller company in infrastructure construction sector is reportedly faring well. Thanks to the growing economy and its bulging order book. For FY05, it may report an EPS of Rs.9 which may shoot up to Rs.14 in FY06. Accumulate it at every dip to get handsome returns in the long term.

Jupiter Biosciences is among the very few companies in the world specializing in peptide chemistry, organic chemistry, chiral chemistry and biotechnology. Recently it has entered into a general cooperation agreement with a Clariant Pharmaceutical Fine Chemicals of Germany. For the full year, it is expected to report an EPS of around Rs.20. The management is very media shy but the share price can rally sharply in future like Ind. Swift Ltd. Investors are advised to hold it patiently. There is hardly any downward risk even if the market corrects.

DCM Shriram Industries has one of the most modern sugar factories at Daurala in U.P. with 8000 TCD capacity and the country’s largest alcohol plant with a capacity of 45,000 kilo litres of bulk alcohol. For December quarter its total sales was up 24 per cent and NP increased by 30 per cent to Rs.6.30 cr. posting a quarterly EPS of around Rs.5 on its current equity of Rs.13.70 cr. Sugar prices are expected to rise further in future, which will lead the company to report an EPS of Rs.18 for FY05. A strong buy for a target of Rs.150 in the next 15 months.

Textiles scrips have seen a smart rally and an analyst feels that most of the scrips are fairly valued against their FY06 earning. But Eastern Silk being in T2T segment is still trading reasonably cheap and can be accumulated for long term gains. The company has good growth plans for the future and is expected to close this financial year with an EPS of Rs.38 .The scrip has the potential to rise 50 per cent from the current level in a year’s time.

KIC Metalics- Rs.77.50

KIC Metaliks Ltd, promoted in 1986 by Mr Ravi Kajaria, was formerly known as Kajaria Iron Castings Ltd. The company manufactures of Pig iron, castings and slag cement. Due to the boom in steel, auto & construction sectors, its product is witnessing good demand and higher price realisation. It manufactures pig iron of both steel and foundry grade and its castings have a good international market and are mainly exported to various European countries, US and Australia. About 15-20 per cent of the pig iron produced is used captively for making its own castings and the rest is supplied to other foundries and steel companies.

The company’s manufacturing plant is located at Durgapur in West Bengal and currently produces 1,20,000 TPA of pig iron through technology obtained from Korf of Brazil. To get the maximum benefit out of a growing economy, the company is going in for forward integration and is in the process of setting up steel billet manufacturing plant with a capacity of 1,50,000 TPA which is expected to be operational by Sept. 2005. This plant will consume 75,000 tonnes of captive pig iron production. Hence the company is expanding the pig iron production capacity from to 1,50,000 TPA. To feed all its plants it is setting up a captive power plant of 4MW by using the waste gas generated from the blast furnace, which will reduce its power cost substantially. Due to the shortage and rising prices of metallurgical coke, KIC is putting up coke oven battery plant to produce 2,00,000 TPA of metallurgical coke which will meet 100 per cent of its coke requirement. Nearly 30 per cent of the capacity is in place and this coke plant is expected to commence production shortly. In short, the company has an aggressive Rs.100 cr. expansion plan to become an integrated steel manufacturer.

Recently the company came out with splendid Dec.’04 numbers. Its net sales jumped 170 per cent to Rs.68.20 cr. and NP increased by 150 per cent to Rs.2.50 cr. posting an quarterly EPS of Rs.6.70. In future, its profit margin is expected to improve due to cheaper raw material on account of backward integration. Considering the company’s growth plan and the rising demand for steel in the domestic as well as international markets. KIC Metalics could close FY05 with a topline of Rs.180 cr. and Net Profit of around Rs.7 cr. On its current small equity of Rs.3.70 cr. EPS works out Rs.19 and CEPS of Rs.28. Thus its trading at a low PE of 4 with a potential to appreciate by 50 per cent in next 6 months. Its FY05 and FY06 will be much better due to the impact of expansion. But at the same time the management may dilute its equity to fund the Rs.100 cr. expansion.

Metalman Indsutries - Rs. 33.00

Metalamam Industries Ltd (MIL) was incorporated in 1971 as private limited company to manufacture high frequency induction welded tubes and other specialised pipes. In 1986 it was converted into a public limited company and in 1996 it changed its name from Metalman Pipe Manufacturing Company Limited. Today, it is an ISO 9001:2000 manufacturer & exporter of CR Steel Sheets/Coils, CR Galvanised plain steel Sheets/Coils and Corrugated steel sheets. It also manufactures black and galvanised steel pipes, precision tubes and hollow sections and exports its products all over the world including China, USA, Japan France, Germany, UK, Europe, Brazil, South Africa, Philippines, Mauritius etc.

MIL can boast of one of the most ultra modern and hitech manufacturing plant spread across Pithampur, Dhar Dist and Sukliya Industrial Area, Indore. Its total current capacity is 2,75,000 TPA but due to raw material concerns, the company is working only at 40 per cent capacity utilisation. Recently, the company started to manufacture Mild Steel Plain HR Plates and Chequered plates. It also added a Mini Spangle and Tension leveling equipment to its Continuous Galvanizing Line, which will help in product applications such as colour coating. A few weeks ago, MIL completed backward integration by which its sister company, Soni Ispat Ltd., has set up a plant to manufacture 2,00,000 TPA of ingots needed as a raw material for HR products. MIL has also acquired on a long lease arrangement Bhanu Iron, which is adjacent to its plant and has the capacity to produce 6,00,000 TPA of HR steel. Hence, MIL now has fully integrated operations from ignots to HR to CR to galvanized sheets under its control. Going forward, MIL’s capacity utilisation is expected to improve from the current 40 per cent, now that raw material concerns have been addressed. This, in turn, will boost its topline and bottomline in coming quarters.

For the six months ending 30 Sept. 2004, it posted very impressive numbers with Net Sales rising 50 per cent to Rs134 cr. and NP increased in line by 55 per cent to Rs5.35 cr. recording a half yearly EPS of Rs 4.5. Its second half is expected to be much better given the new developments and initiatives taken by the management. The company also has huge reserves of around Rs50 cr. on its current equity of Rs11.72 cr. taking its book value to around Rs 45. With higher production and improvement in profit margin, the company can report Net Sales of Rs290 cr. and earn NP of Rs12.50 cr. resulting in an EPS of Rs11 in FY05. Currently, the share is trading very cheap and investors are strongly advised to buy . Although the promoters stake is only 28 per cent and the scrip is in ‘Z’ category, still it has the potential to double in year’s time and turn into a multibagger in the long run.