Tinplate Company of India - Rs.60.00

Incorporated in 1920, Tinplate Co. of India Ltd (TCIL), an associate company of Tata Steel, is engaged in the manufacture and marketing of tinplate to provide cost-effective metal packaging solutions for processed products. Today, this 80 years old company is the country’s largest indigenous producer of tinplate with a market share of over 35 per cent. Apart from cold rolled products in coil form, TCIL basically manufactures electrolytic tinplates/tin free steel for can fabrication to pack edible oils, processed foods, dairy products, beverages, pesticides, paints and for manufacturing battery components. It also exports to select customers in some markets in the Far East, South East Asia, West Asia, Europe and neighbouring countries like Nepal, Sri Lanka which constitutes around 25% of its total turnover. TCIL is an ISO 9001:2000 and ISO1400: 1996 certified company.

TCIL’s plant is located at Jamshedpur having two units: a combination line of electrolytic tinplate (ETP)/tin-free steel (TFS) and a cold-rolling mill (CRM). It also has a two-stand (double cold rolling) DCR mill backed by state-of-the-art technology obtained from SMS of Germany and UEC of USA for the manufacture of DR tinplates. The company has recently made technical tie ups with French major Arcelor and Japan giant, Nippon Steel, as consultants for process and technology improvements. For cost-competitiveness, TCIL has adopted the double reduction route for manufacturing lighter and thinner tinplate. Currently, its capacity of ETP (electrolytic tinning plant) stands at 1,50,000 TPA. To cater to the increasing demand TCIL is setting up a greenfield project with state-of-the-art tinning line in Jamshedpur at an investment of Rs.100 cr. Besides, it is already implementing a phase-wise expansion programme of its existing unit and intends to take its total capacity to around 4,00,000 TPA in the next few years.

Incidentally, the company has wiped out all its accumulated losses in FY05 and its book value now stands positive at Rs.12 per share. Although its Sales reported a degrowth of 12% to Rs.253 cr. its NP increased 43% to Rs.30.50 cr. due to better operating efficiency and lower interest cost. TCIL is regularly restructuring to replace its high cost debt by low interest loans, which will result in further reduction of interest cost. With the company’s thrust on innovative products and increasing exports it can post Net Sales of Rs.325 cr. and NP of Rs.40 cr. leading to an EPS of Rs.14 for FY06. Investors are advised to accumulate this scrip only at sharp declines with an expectation of 50% appreciation in 12~15 months.

Delton Cables - Rs.49.00

Established in the year 1948, Delton Cables Ltd. (DCL) is one of the largest manufacturers of telecom and instrumentation data control cables in India. It offers total telecom solution products - from conventional telecom cables to Microwave Accessories. DCL manufactures almost all available varieties of cable from telecommunications cable to railway signalling cables, power cables, data transmission cables, house wiring cables, coaxial cables, instrumentation cables etc. Interestingly, DCL was the first private sector company to venture into Jelly Filled Cables and was the first to develop Axle Counter Cable, which ensured safety in train movements and Auto Cables, Coil Cords, Coaxial Cables and many other speciality cables for the first time in India.

Delton has modern integrated manufacturing facilities at Faridabad (Haryana), Dharuhera (Haryana) and New Delhi. It also has in-house PVC compounding, which ensures the highest quality PVC sheathing and insulation. Besides, it has a high tech wire drawing facilities and a separate unit totally devoted to Jelly Filled cables along with a wide assortment of extruders, bunchers, lying up and armouring machines. Its is also well-equipped with R&D facilities meeting the most stringent national and international standards for quality control and product development. Today, DCL is a prime supplier to the Power, Telecommunications, Railways, Steel and Mining sectors in India and has also firmly established itself in the International market. It has a huge clientele supplying its products to all biggies like Reliance, Bharti, NTPC, Tata Power, Siemens, EIL, MTNL, BHEL, BEL, BPCL, RCF, HAL etc. Moreover to increase its international presence, it has entered marketing tie-ups with various foreign firms in USA, Australia, Swedes, Australia etc.

Due to the huge expansion undertaken by telecom players and the government’s thrust on the power sector, DCL is witnessing good times. But due to the increase in copper prices, it is yet to see the best of times. For FY05, its turnover grew by nearly 80% to Rs.68 cr. and NP stood at Rs.1 cr. against a net loss of Rs.1 cr. in FY04. Notably, its OPM improved to 6% from 2% last year. Considering the future growth prospects for the cable industry, DCL can end FY06 with net sales of Rs.90 cr. and NP of Rs.3.5 cr. leading to an EPS of Rs.12 on its tiny equity of Rs.2.88 cr. Investors are recommended to buy this scrip with a price target of Rs.75 in 12 months.

STOCK WATCH

Last fiscal, Kilburn Eng (Code No: 522101) (Rs.53.60), a Williamsom Magor group company sold off its Baroda property to retire a part of its debt, and has brought down the total debt to Rs.24 cr. from Rs.87 cr. It is expected to wipe out its accumulated losses in the next 2 years. Besides to improve its working capital requirement, the company is coming out with 1:1 right issue at Rs.25 i.e. 50% discount to its CMP. Due to the strong uptrend in the industrial cycle, the company is doing very well and has good orders in hand position. For the year ending Sept’ 05, it is expected to post an EPS of Rs.12 on its current equity of Rs.6.75 cr. Share price has the potential to double in 12 months. A great buy.

Sathavahana Ispat (Code No: 526093) (Rs.33) has completed its expansion/modernization programme and commercial production has already begun. With this, it has nearly doubled its production capacity of pig iron to 2,10,000 TPA. Moreover the work for its Rs.170 cr. greenfeild project of 3,00,000 TPA of metallurgical coke with co-generation of power of 30MW is going on as per schedule. For FY06, it is expected to report a topline of Rs.280 cr. and bottomline of Rs.28~30 cr., which means an EPS of Rs.11~12. With a dividend yield of 5%, it is a strong buy with minimal downward risk from the current levels.

Of late, renewed interest is emerging in the Shipping sector in anticipation of a rise in freight rates. GE Shipping (Code No: 500620) (Rs.154.40), being the largest player in the private sector is all set to rise sharply in coming days. Currently, the company’s fleet size stands at 75 vessels – 44 ships aggregating 3 million DWT and 31 offshore units. Apart from its new building, it has ordered 12 vessels - 5 MR Product Tankers and 7 Offshore Supply Vessels. For FY05, it had reported an EPS of Rs.42 and declared Rs.9 dividend. For FY06, it can report an EPS of around Rs.35 and Rs.7/8 as dividend. Share price is expected to hit Rs.250 in 6~9 months. A very good long term bet with a good dividend yield as well.

After bottoming out at Rs.130, India Glycols (Code No: 500201) (Rs.157) has once again begun its upmove and is expected to hit the double century soon. With crude oil hovering around $ 60 a barrel and predicted to move up higher, MEG prices be bound to shoot up in future. Secondly, the duty on molasses has been reduced a few months back. Considering these factors and the company’s recent expansion, India Glycols could register Net Sales of Rs.725 cr. and NP of Rs.100 cr. in FY06. With an expected EPS of Rs.35, the share price can easily cross Rs.300 in the next 15 months. A very good buy.

Due to a strong uptrend in the industrial cycle, the demand for industrial gases has also increased substantially. Strong demand has led to higher prices, which in turn means better margins for manufacturers. Bhuruka Gas (Code No: 509728) (Rs.44.10), which produces a variety of gases like Oxygen, Nitrogen, Hydrogen, Argon etc and under takes turnkey projects for high - pressure gas pipelines of Cu/SS/Carbon Steel with cylinder handling etc is available quite cheap compared to its peers. Post restructuring, its equity stands at Rs.2.18 cr. With the face value of Rs.2.50 per share. For FY06 it is expected to report a top-line of Rs.60 cr. and NP of Rs.9 cr. leading to an EPS of Rs.10. Its share price can double in 12 months.

Gulshan Polyols (Code No: 532457) (Rs.19.25) is engaged in manufacturing Sorbitol, which is mainly used in cosmetics, pharma, food products, paper, dentrifice etc. Recently, it completed its backward integration to produce its basic raw material i.e. starch. Due to the strong demand from the user industry, the company is expected to perform much better in coming years. For FY06, it is estimated to post Sales of Rs.60 cr. and NP of Rs.3 cr., which means an EPS of around Rs.5. On its current equity of Rs.3 cr. and FV of Rs.5 per share. It is a dividend paying company and the share price can rise 50% in 6~9 months.

Eldeco Housing - Rs.113.00

Incorporated in 1985, Eldeco Housing & Industries Ltd (EHIL) is the flagship company of the Eldeco Group, which is a leading name in township development, group housing, commercial complexes, contract work and enjoys leadership position in Lucknow, Kanpur, Agra, Ghaziabad and Greater Noida. EHIL is also involved civil construction and housing. Since last 20 years, the company has completed more than 50 prestigious projects in Lucknow, Kanpur, Agra and Ghaziabad. Due to the easy availability of housing and property loans, real estate & construction activities have started booming in ‘B’ class towns. This means that the best is yet to come for EHIL.

EHIL has expertise in constructing all sorts of residential projects and can boast of successfully completing various projects including low-rise apartments, multi storeyed buildings, independent row houses to big townships. Last year, it completed and handed over the first phase of its prestigious township ‘Udyan’ in Lucknow and is currently working on another prestigious project ‘Suraksha Enclave’, which is nearing completion. Besides this, EHIL has finalised five new projects with a turnover of more than Rs.100 cr. With these projects, the value of the company’s total projects in hand goes over Rs.450 cr. keeping it booked for the next 5 years.

Fundamentally as well as financially, the company is quite sound and is backed by Eldeco’s strong brand image, which commands a healthy premium in the market place. For FY05, its turnover grew by 25% to Rs.41 cr. but the NP jumped 240% to Rs.5.50 cr. leading to an EPS of Rs.28 on its tiny equity of Rs.1.97 cr. For FY06, it may clock a turnover of Rs.60 cr. and NP of Rs.6.50 cr., which means an EPS of Rs.33. With such an impressive growth rate, its share price shot up smartly from its 52w low of Rs.18 to the recent high of Rs.143, before stabilising at Rs.115. Since the promoters hold 60% stake, the floating stock is only 7~8 lakh shares, which makes it a very volatile scrip. Long-term investors are advised to buy at current levels with a price target of Rs.250 in 12 months.

Sambandam Spinning - Rs.126.00

Established in early seventies, Sambandam Spinning Mills Ltd (SSML) is engaged in the manufacture and sale of cotton yarn. It produces finer and high-count cotton yarns, which are used in making garments and madeups meant for export. Normally, such yarn trades at a premium with higher profit margin compared to the normal coarse cotton yarn. Although the company has been exporting directly/indirectly to Italy, Japan, Spain etc but is currently concentrating on the domestic market due to the higher demand and better price realization. With the removal of quota and cotton prices remaining stable, the future prospects of SSML appear very promising.

SSML has two spinning mills in Salem and one mill in Coimbatore with a total installed spinning capacity of around 55,000 spindles. Since it is an old mill, there is constant technological upgradation by replacing the older spindles. Also, it plans expand its capacity to 1,00,000 spindles by increasing capacity by 20% each year over the next 5 years. In addition, it has finalized outsourcing contracts with 3rd party spinning units to produce yarn on an exclusive basis. To ensure quality and cater to the increasing demand, SSML has set up an in-house R&D centre with state-of-the-art machines for all sorts of testing to produce a better product. Besides a windmill, it has also set up 10 wind energy converters at Tirunelveli district, which has led to a substantial reduction in its power cost. For future growth, the company has planned forward integration and intends to get into the production of knitted garment.

Ironically since the last 10 years, the company has not diluted its equity but preferred to avail of loans under the governments TUF scheme at subsidised interest rate for modernisation and expansion. Though the interest rate is low at 5 ~ 6%, SSML’s debt today stands at a huge Rs.61 cr. against its equity of Rs.4.30 cr. and sales of Rs.90 cr. Still, the company is fundamentally strong and has good dividend payout track record. For FY05 its sales increased by 7% to Rs.90 cr. whereas its NP jumped 65% to Rs.5.50 cr. inspite of higher tax provision of Rs.4.90 cr. and declared Rs.5 dividend (50%). Since the real effect of the quota-free regime will be visible in the current year, SSML can report a topline of Rs.110 cr. and NP of Rs.10 cr. leading to an EPS of Rs.23~24. Investors are advised to accumulate this scrip at declines with a price target of Rs.200 i.e.60% appreciation in 15 months time.