Jupiter Bioscience Ltd - Rs126.00

Jupiter Bioscience Limited (JBL) was promoted as a Private Limited Company in 1985 by a visionary scientist, the Late K. S. Sharma who expired last year, and was converted into a Public Limited Company in 1992. Initially, it was into manufacturing of bulk drugs & chemicals but is today among the few companies in the world with its core competence in peptide chemistry, organic chemistry, chiral chemistry and biotechnology. In fact, JBL was the first company in Asia to introduce and commercialise molecules based on peptide chemistry. The company has no competitors in Asia and faces competition only from European and American companies. Its customers include major global players like Dupont, PPG (USA), Bachem and Sigma Aldrich and leading trading houses like Siber Hegner, Schwieizer Hall (Switzerland) etc. apart from marketing agents like Eurolabs and other Institutions and universities. It also supplies products to MNCs like Pfizer, Eli Lilly, Abbot Laboratories and the Monsanto Group.

JBL has two manufacturing facilities - one at Bidar in Karnataka and the other at Cheriyal in Medak District in Andhra Pradesh which is a 100% EOU. It has three specialised product lines viz. Peptide reagents and protected amino acids, Drug intermediates & Speciality Chemicals as well as fine chemicals. New generation medicines, diagnostics and vaccines are based on Peptide Chemistry with major focus on different branches of Medicine like Neurology, Cardiology, Immunology, Oncology (Cancer related), HIV /AIDS, Autoimmune diseases etc. JBL has successfully launched peptide precursors, the essential raw material for these generic peptide drugs.. With various drugs expected to go off patent, Jupiter Bio can grow by leaps and bound in the years to come.

The company has also formed a wholly owned subsidiary, Sven Genetech Ltd. for R & D with a state-of-the-art research lab in line with International GLP standards and equipped with modern instrumentation. It is looking towards moving up the value chain to commercialise and introduce generic peptide drugs such as Oxytocin, Vasopressin, Desmopressin, Leuprolide, Lisinopril and Calcitonin in the domestic and international markets. It has already launched various finished formulations in the domestic market. It is very strong not only in basic R&D but also in Process Development, which is the current global trend for every corporate and Research entity in the Pharmaceutical and Biotech fields.

To increase it global presence, JBL is agressively participating in exhibitions, fairs and trade shows all over the world. It has even promoted Jupiter Bioscience Inc. in USA to enhance its presence in peptides and peptide based drugs business in the global market and to set up manufacturing facilities for peptide based bulk actives. Recently, it entered into a general cooperation agreement with a Clariant Pharmaceutical Fine Chemicals of Germany to leverage the strengths of both companies in view of the interest shown by the global pharmaceutical industry for peptide based products

Fundamentally, the company is strong with higher operating margins compared to its peers and has huge reserves of more than Rs85 cr. on its small equity of Rs9 cr. Moreover it has invested Rs.25.06 cr. in its subsidiary Sven Genetech Ltd. Its debt equity ratio is also low at 0.53. For the nine months ended 31 Dec. 2004, its net sales grew by 9% to Rs50 cr. and NP by 10% to Rs13 cr. For full year FY05, it is expected to post Sales of Rs70 cr. and NP of Rs18 cr. i.e. EPS of Rs20. In FY06, its sales can cross Rs100 cr. and EPS may touch Rs.28. Its consolidated numbers will be much better. Considering the huge growth potential and the current valuation this scrip, JBL can be a multi-bagger in the long run. It is a screaming buy at CMP and investors should not be surprised if it touches Rs500 if held for 2~3 years.

Rajratan Global Wires - Rs109.00

Belonging to the Chordia Family of Indore, Rajratan Global Wires was originally promoted in technical and equity collaboration with Gustav Wolf of Sweden in 1991 and was known as Rajratan Gustav Wolf Ltd. Later in 2003, the Indian promoters bought out the Swedish stake and changed the company’s name to Rajratan Global Wires Ltd. Today, it is the second largest tyre bead wire & pre-stressed concrete wire manufacturing company in India. Tyre bead wire is a carbon bronze-coated wire used in tyres. Its main function is to hold the tyre on the rim and to resist the action of the inflated pressure, which constantly tries to force it off the rim. In India, there are only 3 manufacturers of tyre bead wires of which Rajaratan enjoys around 30% market share and aims to increase it to become the market leader. It supplies to almost all tyre manufactures like MRF, Ceat, JK, Goodyear, Apollo, Falcon, TVS etc. in India and to Bridgestone, Dunlop, HWA Fong, Kerman Tyres etc. internationally. Rajratan is the first wire manufacturing company in the country to achieve ISO/TS 16949:2002 certification from TUV Rheinlend, Germany

Its plant is located at Pithampur, 30 kms from Indore, with an installed capacity of 20,000 MTA of Tyre Bead Wire and 10,000 MTA of P.C. wire. Due to boom in the auto sector, the demand for tyres is very high both from OEM manufacturers and the replacement market, which leads to higher demand for tyre bead wire. Moreover, given the expansion plans of most of tyre companies domestically and internationally, the demand for tyre bead wire will be even more in the future. The company has already received approvals for supplies from major global manufacturers such as Bridgestone, Goodyear and Michelin. To meet this increasing demand, the company has capex plans of Rs40 cr. to increase manufacturing capacity to 30,000 MTA by the end of 2005. With all these initiatives, the company intends to enhance its export share to 50% in the next 3 yrs. from the current 6%.

To fund its capex, the company has approved an issue of about 6, 00,000 shares to Ashok Dalmia at Rs102 on a preferential basis. For the nine months ending 31 Dec. 2004, its Net Sales increased by 40% to Rs63 cr. and NP jumped 80% to Rs4.80 cr. recording an EPS of Rs13. Considering its order book position and the thrust on exports, Rajratan can post Sales of Rs90 cr. and NP of Rs6.80 cr., which works out to an EPS of Rs16. For FY06. It may post an EPS of more than Rs.20 on its diluted equity. Investors are advised to buy at current levels with a price target of Rs180 in 15 months.

STOCK WATCH

Mumbai based Orient Information Technology Ltd is one of the leading IT solutions & service provider in customer application development, application management, package implementation and other professional services. It is a SEI-CMM Level 4 and ISO 9001: 2000 certified company with presence in North America, Europe, Middle East and the Asia-Pacific region. For FY05, it is expected to post and EPS of Rs5 and with a book value of Rs60 it is trading reasonably cheap.

India Card Clothing manufactures a wide range of wires, tops and flexible card clothing to process every type of fibre. It also manufactures card accessories such as web catcher, Accura, Sharprite and Metallic Mounting Unit. It enjoys 45% market share in the domestic market and is now concentrating to increase its global presence. With the removal of quota, most yarn companies are going in for major expansion, which is very good for the company. With an expected EPS of Rs24, this scrip can be accumulated at CMP for long-term handsome gains.

Ador Welding, a debt-free company is the leader in the welding consumables and equipment industry catering to industries like steel, power, oil & gas, auto and infrastructure. It is focusing on the export market with value-added products to shore up revenues. With an expected EPS of more than Rs10, it can declare 35~40% dividend which gives a handsome dividend yield at CMP. Scrip has potential to rise 50% from the current level in the next 12 months. Accumulate at every dip.

Vijaya Bank is one of the most well managed banks with Net NPA below 1%. It is targeting 1000 branches by FY06 and is also planning to enter into the lucrative business of insurance. It is also increasing its presence in the northern and western regions and may takeover some small bank in future. For FY06, it can report an EPS of more than Rs 13. A safe long term bet from the banking sector.

Ind Swift Ltd has recently announced its plans for a stock split, which is almost as good as a bonus. The company is doing extremely well and has great potential to grow in future. For FY05, it is expected to post an EPS of around Rs34 excluding extraordinary items, which can rise to above Rs40 in FY06. A strong buy.

Bimetal Bearings belonging to the Chennai based Amalgamation Group of companies is a leading producer of thin wall bearings or engine bearings. Hyundai, Tata Motors, Maruti, Leyland, Escorts, TAFE, M&M, Cummins etc. are some of its reputed customers. It is a debt-free company with huge reserve of around Rs90 cr. on its small equity of Rs3.80 cr. leading to a book value of more than Rs250. For FY05, it may report an EPS of Rs28, which can increase to Rs35~38 in FY06. A good long term bet from the auto ancillary sector.

Natco Pharma - Rs.140.00

Incorporated in 1981, Natco Pharma was promoted by Mr. V.C.Nannapaneni as a private limited company to manufacture and market pharmaceutical producs. Today it has emerged as a complete pharmaceutical company with all critical facets necessary for effective value delivery viz., research & development, active pharma ingredient (API), finished dosage production, regulatory submission, marketing & sales. It manufactures a comprehensive range of branded and generic dosage forms, bulk actives and intermediates for both Indian as well as international markets. Its products come in various forms such as timed release capsules, tablets, inhalers, dry syrups, dispersible syrups and suspensions, ointments, gels, injectables, infusions, sterile preparations and large and small volume parenterals. NATCO’s branded products and generic versions of antibiotics, anti-malarial, amoebicides, analgesics, anti-pyretic, peripheral vasodilators, anti-anginal, anti-hypertensives, anti-asthmatic, tranquilizers, anti-depressants, oncologicals, anti-emetics, anti-anemic, nutritional supplements, biotechnology based drug forms and health products of natural origins, which are well accepted in the market.

In addition to research and manufacture of pharmaceuticals, it is also one of the largest contract manufacturers of bulk actives and intermediates for leading Indian and multinational companies like Ranbaxy, Dr. Reddys, Wyeth, Parke Davis, Sun Pharma, Smithkline Beecham, Novartis etc. It is also into contract research for process research and custom synthesis and also conducts clinical trials. To attain a significant position in the oncology segment, NATCO regularly introduces high value niche drugs for treatment of ovary cancer, prostrate cancer, multiple myelomia, leukemia, lung cancer etc., which have become leaders in their respective field. It has another 25~30 products of similar calibre in the pipeline, which will be introduced in FY06. Its 4 manufacturing plants are world class with ultra modern equipments and complying with international standards including USFDA, UKMFA etc. With focus on molecular modeling for New Chemical Entities, Phyto Chemistry, Plant Chemistry, New Drug Delivery Technologies, NATCO's Research Centre is in the forefront of the company's strategy to emerge as a research driven organization. Recently, the company was granted European patent for its invention of soft gel capsules with an innovative drug delivery system. More such developments are likely in future.

Last year, the company successfully raised funds to the extent of USD13.50 million through a fully convertible bond (FCCB) issue for meeting the capital expenditure and expenses connected with the filing of Drug Master Files (DMFs) and Abbreviated New Drug Applications (ANDAs). For the nine months ending 31 Dec. 2004, its net sales grew by 25% to Rs123 cr. and NP increased by 30% to Rs16.5 cr. With several drugs going off patent in coming years and the company’s thrust to become a global player, it may end this fiscal with sales of Rs170 cr. and NP of Rs23 cr., which may increase to Rs240 cr. and Rs35 cr. respectively for FY06. This works out to a forward EPS of Rs10 for FY05 and Rs15 for FY06 on its current equity of Rs23.40 cr. Investors are advised to buy at CMP with a long term perspective expecting 50% appreciation in the coming 12 months. Its share price can even double after 2 years.

Panama Petrochem - Rs.56.00

Panama Petrochem Ltd (PPL) was incorporated in the year 1982 as a private limited company by the Rayani family, which has over three decades trading experience in petrochemicals. PPL manufactures and exports a a wide variety of petroleum based speciality products. They include ink & resin oil, mineral oil, transformer oil, petroleum jellies, liquid paraffin, white oil, turbine oil, loom oil, wax, grease etc. The company sells its product under the name of 'Panama' and exports its products to USA, UK ,UAE, SaudiArabia, Australlia, SriLanka, Egypt, Tanzania, Syria, Italy, Turkey, Nigeria & some other African Countries. It is also the sole distributor of lubricants for foodstuff, paper, textile, and automotive industries manufactured by Lubcon of Germany.

PPL’s plants are located at Ankleshwar, Mumbai and Daman. The Daman unit manufactures Antistatic Coning Oils, Petroleum jelly (Cable Filled Compounds) & Specialty Lubricants and Oils with a capacity of 36,000 MT and went operational in Dec 2003. Its total installed capacity stands at 51,000 MTA. The company has received ISO 9001:2000 certification for its manufacturing processes. It manufactures the products as per International Environmental & Safety Norms and its Petroleum and White Mineral Oils are as per BP/USP FDA norms for specific users. It has developed a good export market by participating in international trade shows and is expected to bag some orders from various malls in USA for supply of its indigenously developed non-smoky and environment friendly lamp oil, which is in demand in USA.
Apart from the petrochemical industry, PPL also caters to the Printing Ink, Agarbatti, Perfumery, Rubber, Pharmaceutical, Cosmetics, Texturizing, Engineering, Machinery Manufacturing and Chemical sectors. Its products are also used by various Power Generation utilities and Atomic Research Centres. Such a large & diversified end user base and exports help it de-risk its overall business model. But rising crude oil prices is still a big concern for it as it is a key raw material.

PPL is planning to issue 5, 00,000 shares on a preferential basis to promoters at Rs58 per share, which is at a marginal premium to the current market price (CMP). As on 31st Dec. 2004, the promoters were holding 32% stake, which will increase to 40% post allotment. It’s a investor friendly company with a dividend payout ratio of more than 30%. For FY05, it could declare 25% dividend which works out to around 5% dividend yield. For the nine months ended 31 Dec. 2004, its topline grew by 35% to Rs52 cr. but the bottomline tripled to Rs2.45 cr. For FY05, it may post sales of Rs75 cr. with and NP of Rs3.40 cr. leading to an EPS of Rs9 on its current equity of Rs3.76 cr. For FY06, it could report an EPS of Rs11~12 depending on crude oil prices. Investors should buy this share only at sharp declines or a major correction with a price target of Rs75 in next 12~15 months.