Electrotherm India - Rs.99.00

(Code No: 526608) In 1986, Electrotherm India Ltd (EIL) was promoted by technocrat Mukesh Bhandari to manufacture crucial induction furnaces for the Steel Industry. Since then, it has become a trusted name in the foundry and steel industry providing unmatched technological leadership. EIL caters to Ferrous & Non-Ferrous foundries and the metal melting industry by manufacturing Medium Frequency Induction Melting Furnaces, Metal Refining Converter, Induction Ladle Refining Furnace, Induction Heating/Hardening Equipments, Submerged Arc Furnace and a host of allied products. It has the distinction of manufacturing 3 tonnes to 20 tonnes Medium Frequency Induction Melting Furnaces for the first time in the country. The company is renowned for providing sophisticated technologies and offers customised metallurgical turnkey solutions irrespective of its nature, size and geographical boundaries. Apart from being a leading player in domestic market only next to ABB, EIL has exported its products to Ethiopia, Ghana, Greece, Kenya, Mauritius, Myanmar, Sri Lanka, South Africa, Tanzania, Zimbabwe, Middle East and East African countries. As of today, EIL has over 800 installations.

EIL's full-fledged state-of-the-art manufacturing and testing facilities are spread over an expansive area of 70,000 sq.mtrs at Palodia on the outskirts of Ahmedabad. It has a well equipped machine / assembly shop fitted with the latest CNC machines and a host of special purpose machines for better precision in machining and overall quality of its products. Besides, the company can boast of having the largest group of Metallurgical Engineers compared to any Metallurgical equipment manufacturer in India. Its R&D department’s pursuit for newer and better solutions has led to the development of sophisticated, rugged, efficient, cost-effective and user friendly equipment for the metallurgical industry for which EIL was conferred 21 prestigious national awards. For better service, the company has a widespread Sales & Service network with more than 30 offices in India alongwith offices at Australia, Bangladesh, Brazil, Russia etc.

The rising demand of steel worldwide has led to capacity expansion by all the major steel producers, which augurs very well for EIL and has eventually led to a strong order book position. Apart from this, to cash on the steel boom, EIL has recently set up a cast iron manufacturing facility in the Kutch District of Gujarat with an installed capacity of 70,000 TPA. This unit started commercial production a couple of months back only and will add substantially to the company’s topline and bottomline in coming quarters. In the near future, the company intends to set up a cast iron pipe manufacturing facility and by mid 2006 plans to set up a sponge iron plant.

For the nine months ending 31st Dec 2004, its Net Sales tripled to Rs.103.50 cr. and NP zoomed to Rs.7 cr. compared to 0.32 cr. last year. For the full year FY05, it can report NP of Rs.10 cr., which works out to an EPS of Rs.21 on its current equity of Rs.4.80 cr. For future growth and to meet its huge expansion plans, it may raise money by issuing equity shares and through debt, which will give returns over a period of time. Hence, long-term investors are recommended to buy this scrip with expectation of 100% return in 18~24 months.

Narmada Chematur - Rs.39.00

(Code No: 524650) Narmada Chematur Petrochemicals Ltd. (NCPL) is an Indo-Swedish Joint Venture Company of Gujarat Narmada Vally Fertilizers Company Limited (GNFC), Chematur Engineering AB of Sweden and IBI Chematur, Mumbai. This company was basically formed to put up India's largest Single Stream Aniline Plant and India's first plant to manufacture Toluene-Di-Isocyanate (TDI). Today, besides Aniline and Toluene Di-Isocyanate, NCPL also manufactures Nitrobenzene, Liquid Nitrogen, Meta Tolune Diamine (MTD) and Ortho Toluene Diamine(OTD). In fact, NCPL is the only TDI manufacturer in the whole of South, East and Middle Asia and hence enjoys a near monopoly status in Asia. Lloyds Register Quality Assurance (LRQA) accredits the company with ISO 9001: 2000, ISO 14001: 1996 & OHSAS 18001: 1999 certifications.

NCPL’s aniline plant went on stream in early 1995 and is the country’s only plant based on Liquid Phase Hydrogenation, a technology imported from Du Pont, USA. Currently, NCPL has an installed capacity to manufacture 25,000 TPA of Aniline, which is basically used in textile dyes and pigments, pharmaceuticals, rubber chemicals etc. Its TDI plant started production in 1998 and has an installed capacity of 10,000 TPA. TDI is used as the basic raw material to make Flexi Polyurethane foam, which in turn is used for automobiles seats, mattresses, lining and padding, packaging, industrial gaskets etc. Besides, the company can produce 27,000 TPA of nitrobenzene which is used in the manufacture of pesticides, dyes and intermediaries etc.

Due to better management, availability of raw material, strong demand and higher price realisation for all its products, NCPL is witnessing the best of times. It reported record high profits for FY05. To take advantage of this uptrend, NCPL is working towards increasing the capacity of its Aniline Plant to 40,000 TPA and the TDI Plant to 20,000 TPA on top priority. For FY05, its Sales increased by 50% to Rs.382 cr. whereas its NP almost tripled to Rs.31 cr. leading to an EPS of Rs.5 on its current equity of Rs.61 cr. For FY06, it can report NP of Rs.45 cr., which means an EPS of Rs.8. Though the scrip is in T2T segment investors are advised to accumulate this stock at declines with a price target of Rs.60 for 50% appreciation in the next 12 months.

STOCK WATCH

Deccan Cement (Code No: 502137) (Rs.67.65) is a small cement company based in South India. It is expected to come out with good numbers on 24th June and may declare 25% dividend. For the first 3 quarters, it has already reported 50% higher profit of Rs.6 cr. inspite of huge tax provision of Rs.2 cr. For the full year, it may report an EPS of Rs.12. Besides it has huge reserves of around Rs.55 cr. on its small equity of Rs.7 cr. leading to a book value of above Rs.90. Recently, it has caught the attention of few HNIs and the share price is expected to run beyond Rs.100. A strong buy.

Investors who fancy turnaround scrips can take a look at Gujarat Carbon Industries (Code No: 506457) (Rs.21.01). Though it has seen a fast run up from Rs.2 to Rs.20 but it still looks good. Since the last 2 quarters, it’s reporting fantastic numbers and has shown a sharp turnaround. The company is into manufacturing of Methyl Ethyl Ketone and Secondary Butyl Alcohol. For FY05, its sales doubled to Rs.23 cr. and NP stood at Rs.4.20 cr. compared to loss of Rs.1.90 cr. last year. It reported an EPS of Rs.3.25 on its current equity of Rs.12.40 cr. For FY06, it can report an EPS of Rs.7 and hence becomes a good bet for the long term.

Gradually action is building up in National Oxygen (Code No: 507813) (Rs.69) as 30th June comes closer. Huge buying may take place in anticipation of fantastic numbers and a good dividend of 35%. The company may report an EPS of Rs.13~14 for FY05 and is currently trading cheap at 5 PE. Since the liquidity is very poor for Bombay Oxygen, this company becomes the best choice in this sector. Its share price has the potential to rise 50% in the next 3 months.

Competent Automobiles (Code No: 531041) (Rs.43) is recommended for investors who trust the Maruti growth story. The company is a leading dealer for Maruti cars. It has 5 big showrooms and 3 workshops in Delhi. It has one showroom in Himachal Pradesh also and is planning to open one workshop soon. This Rs.500 cr. company has small equity of Rs.6 cr. and reserves of more than Rs.25 cr. leading to a book value of Rs.55 for its share. Though the company works on a narrow margin, it is a dividend paying company and the promoters hold 69% of the stake. For FY05, it reported an EPS of Rs.6, which can rise to 7.5 for FY06. Scrip can rise 50% in 12 months.

GNFC (Code No: 500670) (Rs.87.65) once again came out with wonderful figures for FY05 though dividend payout was a bit lower than expected. For FY05, its total revenue increased 26% to Rs.1822 cr. where its bottomline doubled to Rs.224 cr. due to better operating efficiency and lower interest cost. This works out to an EPS of Rs.15 on its current equity of Rs.146.50 cr. Though there are concerns over the recent gas price hike, this scrip can still be accumulated at declines as it can give 25~30% return in a year if the monsoons are good.

In auto ancillary sector, Amara Raja Batteries (Code No: 500008) (Rs.126.60) is still available reasonably cheap. It is gradually increasing its market share and achieved a recent breakthrough on being selected as an exclusive supplier for the Maruti Swift. The company manufactures batteries for cars, tractors, LCV, HCV, three wheelers, home inverter etc. They have an ongoing agreement as original equipment supplier with Maruti, Tata Motors, M&M, Ashok Leyland and is exclusive supplier to Daimer Chrysler, Ford and Swaraj Mazda. In future, the company is expected to witness exponential growth and can report an EPS of Rs.15 for FY06. Scrip can cross Rs.200 easily in the next 12 months. Keep accumulating at sharp declines.

Shri Lakshmi Cotsyn - Rs.60.50

Incorporated in 1988 as Galaxy Indo Fab Ltd. and later renamed as Shrivatsa International ltd (SIL) is a leading manufacturer & processor of a wide range of fabrics like 100% cotton, polyester and blended fabrics. It is now expanding to manufacture embroidered fabrics, fusible interlining, defence & military related textiles and textile articles. Recently, the management has again changed the name of the company to Shri Lakshmi Cotsyn. Within a decade of its establishment SIL has tripled it manufacturing capacity from 6 million metres per day to 18 million metres per day. With the removal of the quota regime in USA, SIL with interests in weaving, dyeing, printing, embroidery, fusing, quiliting etc is set to gain in coming quarters. Given below is a brief description about its each unit.

Fabrics: SIL manufactures suiting & shirtings, dress materials, canvas, ripstop, twill/drill, gabardine, industrial and synthetic fabrics etc in 100% cotton and blended fabrics like PC & PV. Apart from supplying fabrics to various garment manufacturers to produce trousers, shirts and uniforms, SIL even exports directly to various countries.

Dyeing & Printing: The company has a most modern and sophisticated Processing & Dyeing unit specialising in Vat & Disperse dyes, producing 100% cotton, blended fabrics like PC & PV and other similar fabrics. It also has a Coating Plant to coat Polyurethane on fabrics and make them waterproof or water repellant. For printing, SIL has 12 colour Rotary Printing machines, which can even print camouflage fabric, dual shade fabric and any other type of printing as per specifications. Besides, it is equipped with a full-fledged computerized laboratory for testing the colour, shade and strength of fabrics.

Embroidery: This division is equipped with a Multi Needle Embroidery machine, from Switzerland which can embroider fabric upto 14 to 21 yards at one time. These high quality Embroidered Fabrics and Laces are marketed under the brand name of ‘Alisha Embroidery’.

Interlining & quilting: SIL manufactures woven interlining Fusible Interlining, Microdot Fusible Interlining, Powder Dot Coated Fabric, LDPE Coated Fabric, HDPE Coated Fabric, EVA Coated Fabric and sells under the brand name ‘Star Track’. Besides interlining, SIL produces readymade collars and belt rolls in different shapes and sizes. SIL can also boast of its Quilted products manufactured by a state of art fully computerised multi needle quilting machine imported from Switzerland and South Korea, which can quilt up to 130 inches wide fabric material with a padding of upto 40mm. All the quilted products, starting from Quilted mattress covers, Poly filled Quilts, Baby Quilts, Patch Work Quilts, Bath mats, Sleeping bags, Pillow covers, Cushion covers and Quilted jackets are marketed under the brand name of ‘Dream Flower’.

Defence & Technical Textiles: SIL is a reliable and established name in the Indian Defence Organisation and other Government purchases. It supplies to all Ordinance factories (Clothing) in India like the Ordinance Equipment Factory, Kanpur, Ordinance Clothing Factory, Shahajanpur,Avadi & Hazartpur etc. It supplies Polyurethane/Protective Coating fabric, Camouflage Fabric, Military Clothing, Army Clothing, Water Repellent Fabric, Fire Retardant Fabric, Body Armour, Nylon PU Coated Fabric, etc. for the Indian Military and Para Military forces, Railways and other organizations. SIL specializes in manufacturing bulletproof jacket with advanced technology using aramid fabric and uhmpe sheets to produce hard armour plate, which meets the requirement of NIJ, threat level 3.

To cash on the quota free boom and for its future growth, SIL is coming up with a wew project at Mallwan, Fatehpur (UP) to manufacture 20 million metres of Denim Fabric per annum, 12 million mtrs Wide-width Fabric per annum, 6 million mtrs Bottomweight Fabric per annum, 3000 MT Terry Towel fabric per annum, Yarn Processing 1200 MT per annum and 5 MW Co-generation Power Plant. This expansion will be funded through a right issue or private placement of equity for an amount not exceeding Rs.60 per share. Earlier, it dropped the idea to issue bonus shares and is now planning a stock split to Rs.1 from Rs.10 face value. Financially as well as fundamentally, SIL is very strong and may end FY05 (30 June) with Sales of Rs.290 cr. and NP of Rs.10 cr. leading to an EPS of Rs.10 on its current equity of Rs.10 cr. The scrip is currently discounted at a PE of just 6. Investors are recommended to buy with a price target of Rs.100 in 15 months.

Hazoor Media - Rs.11.25 (Rs.4 paid-up)

Incorporated in Hazoor Media 1992, Hazoor Media & Power Ltd (HMPL) originally known as Hazoor Hotels & Properties Ltd was a subsidiary of Sunbeam Infotech Ltd. Later in 2002-03 as per the scheme of arrangement, it acquired the Property & Hotels Division of its parent company and became an independent asset rich company. Today, it is heading to become a global player in the media sector and a national player in the power sector.

HPML has successfully embarked in the production of media content in diversified software categories viz. entertainment, film and film based programmes, sitcoms, news and current affairs, game shows catering to the demands of media companies in the international market. It has state-of-the-art equipments in its warehouse and provides them on hire to film and TV serial producers. The company has now drawn a strategy to provide trained and qualified manpower services along with the equipment to its clients. HMPL also provides infrastructure services like shooting locations, floors, studios, post production processing facilities, filming equipments and qualified trained manpower to all major media companies and channels including Star Network, Zee Network, Sahara Television, Sab TV and a host of religious and spiritual channels like Sanskar, Sadhana, Aastha. Importantly, it has a large tract of land admeasuring 1,22,000 sq. mtrs. worth over Rs.28 cr. in market value near Sahara lake city at Lonavala near Mumbai, which is utilized as a shooting location. The management is currently identifying a location in Columbia for setting up its marketing office in USA to maximize its business as a media content provider. Apart from this, the company also wants its ‘Hazoor Media School’ to become a leading centre for media education with state-of-the-art technology and infrastructure to focus on quality education. On the power front, HMPL is setting up 10 MW co-generation power project for generation and distribution of grid quality power from biomass resources using steam turbine technology in the state of Maharashtra. Moreover, HPML has entered into a joint venture project with Omkar Petrochemicals Limited to jointly set up a project with an installed capacity of 30000 litre per day to manufacture Ethanol – an Energy Fuel. In future, it may takeover Omkar Petrochem and merges it with itself.

Fundamentally, HMPL is quite strong and at the current price seems reasonably cheap. For the six months ended 28 Feb 2005, it has reported a net profit of Rs.2.4 cr. on net income of Rs.8.9 cr. Its equity capital is Rs.3.5 cr. and with reserves of Rs.13 cr., the book value of the share works out to around Rs.20 on the face value of Rs.4 per share. The company has a healthy operating margin of around 35%. Considering the company’s aggressive plans it is expected to post an EPS of Rs.6 for FY05. To fund its future growth plans, HPML may go for equity dilution but investors can still buy at the current market price (CMP) as the scrip has the potential to double in 12~15 months. A strong buy.