Hind Industries - Rs.36.00

Established in 1973, Hind Industries Ltd. (HIL) was promoted by Gulab Rai Kohli and Sardul Singh Uberoi and was taken over by Sirajuddin Qureshi in 1988. Since then, HIL has grown by leaps and bound to emerge as a leading manufacture and exporter of fresh, chilled and frozen sheep, buffalo and goat meat and meat products. Under the brand names ‘Eatcco’ and ‘Sibaco’. Ironically, HIL has a subsidiary Hind Agro Industries, which is 4 times its size and has a turnover of more than Rs.350 cr. HIL exports its products to more than 45 countries including Bahrain, Egypt, Indonesia, Iran, Jordan, Kuwait, Lebanon, Malaysia, Mauritus, Oman, Phillipines, Qatar, Saudi Arabia, Thailand, UAE, Yemen, East and West African countries and CIS countries.

Along with its subsidiary, HIL has one of the most modern abattoir-cum-meat processing plant of Asia at Aligarh in UP which is approved by the Agricultural and Processed Food Products Export Development Authority (APEDA). It is the only group with unique facilities to slaughter animals, which have been bred and reared as per the strict guidelines set by O.I.E., Paris. Besides the ‘halal’ process is strictly carried out by Islamic Shariat procedures and is supervised by a representative of the Jamiat-Ulema-I-Hind, who issues a certificate to that effect. Although HIL has an installed capacity of 25,000 TPA, it is operating at around 50% capacity utilization. This means it has the potential to double its turnover without any further investment. As only a few major players exist in the meat export industry, the company faces very little competition and India with its rich livestock wealth offers major scope for development for the meat export industry.

For future growth, the company is setting up an integrated animal husbandry, rearing and meat processing project in West Bengal at an investment of around Rs.106 cr. for which the government has already allotted 500 acres of land. In the first year of operations HIL estimates to breed and rear 5,000 Murrah buffaloes and 10,000 female black Bengal goats and the meat produced will be sold in domestic and export markets. For FY06, it posted an EPS of Rs.4.50 and is expected to declare dividend in the coming week. For the June’06 quarter, its sales shot up by 85% to Rs.36 cr. whereas profit zoomed 450% to Rs.1 cr., recording an EPS of Rs.1.20 for the quarter. For FY07, it may clock a turnover of Rs.100 cr. with a net profit of Rs.5.50 cr. i.e. EPS of Rs.6 on its equity of Rs.8.64 cr. As the share price has run up sharply in the recent past, investors are advised to buy it at sharp declines with a price target of Rs.60 in 12-15 months. However, equity dilution is a cause of concern in the near future.

Fulford (India) Ltd. - Rs.586.00

Fulford India Ltd (FIL) was originally incorporated as C.E. Fulford India Pvt. Ltd. in 1948 and began with the manufacturing and marketing of pharmaceutical consumer products like ‘PEPS’ cough tablets and ‘Zambuk’ herbal ointment. In 1968, Schering-Corporation, USA, took over the company by acquiring 100% stake from C. E. Fulford Limited, UK and subsequently set up a plant in Andheri, Mumbai, for manufacture of pharmaceutical products. Notably, Schering-Plough Corporation, USA, is a leading research-based company, engaged primarily in the discovery, development, manufacturing and marketing of pharmaceutical and health care products worldwide.

Today, FIL markets innovative and science based products in therapeutic areas like Oncology, Virology, Cardiovascular, Dermatology, Suncare, Anti Infective and Anti Histamines. Most of these products are original research products of its parent company. Few of its well-known brands are Netromycin, Garamycin, Elocon, Dipsalic, Dipgenta, Diplene, Lotriderm, Dipform, Emolene, Tinaderm-M, Clingard, Shade, Polaramine, Celestone, Top Nitro, Integrilin, Temodal, Remicade, Zadine etc. Presently, FIL derives close to 50% of its revenues from dermatology products, 30% from Oncology products, 8% from cardiovascular products and the balance from Anti-Infectives. Being a marketing company, majority of its work force of 480 people constitutes the marketing field force that generates prescription sales. Importantly, FIL has successfully reduced the number of drugs under price control to less than 40% and is launching new products for Gastroenterology, Collitis, Hair care and Hepatatis-B.

To maintain its growth, the company is taking various initiatives that include restructuring, introducing new products, enhancing the field force and effectiveness and productivity. For the six months ending 30th June’06, its top-line grew marginally to Rs.71 cr. but its net profit declined by around 15% to Rs.6.20 cr. Still, for the full year CY06, it is expected to report sales of Rs.150 cr. and net profit of Rs.16 cr., which means an EPS of Rs.50 on its tiny equity of Rs.3.20 cr. Thus a company backed by Schering-Plough Corporation of USA, which holds 40% stake in FIL, is available at P/E ratio of 12 makes it a fairly cheap investment compared to its peers. With huge reserve of over Rs.35 cr. makes it a strong bonus candidate too. Investors are advised to buy only on sharp declines with a price target of Rs.900 (50% appreciation) in 18-24 months.

STOCK WATCH

After the removal of quota in 2005, Kallam Spinning Mills Ltd. (Code:530201) (Rs.21.75) is aggressively expanding capacity to cash in on the increased demand. In FY06, it augmented its spinning capacity by 50% to 33648 from 22608 spindles. It is again increasing 30% capacity by adding another 11040 spindles at investment of Rs.22.50 cr., taking the total to 44688 spindles. For the June’06 quarter, its turnover as well as PBT grew by 30% to Rs.9.90 cr. and Rs.1.40 respectively. For FY06, it declared 10% dividend and the scrip is trading cum dividend offering an yield of 5% at CMP. The company has its own hydel power plants, which generate power for captive consumption reducing its power cost considerably. For FY07, it is estimated to clock a turnover of Rs.45 cr. and net profit of Rs.4.25 cr. i.e. EPS of Rs.6 on its current equity of Rs.6.85 cr. At the current market cap of Rs.14 cr., it’s a steal!

Although Indian Toners & Developers Ltd. (Code:523586) (Rs.26) is facing stiff competition from local importers and its margin is under pressure in absolute terms it is performing better on the back of higher volumes and development of new products including toners for the new generation digital machines and laser printers. For June’06 quarter, sales recorded a handsome gain of 40% at Rs.9.20 cr. whereas net profit increased by 25% to Rs.0.82 cr. For future growth the company is betting high on exports, and has set up a wholly-owned subsidiary in USA and a representative office in Singapore. Further, it is planning to put up offices in China & Europe to capture new markets. It has also started selling printer components through its existing network to increase its top-line. For FY07, it may register a top-line of Rs.40 cr. and PAT of Rs.4 cr., which leads to an EPS of Rs.5 on its current equity of Rs.8 cr. Having a book value of Rs.31 and 52-week as Rs.41, the scrip has the potential to give 25-30% return in a year’s time.

As Gujarat Reclaim & Rubber Products Ltd. (Code:509152) (Rs.242.40) is traded only in physical form, only genuine long-term investors are recommended to buy this scrip. Due to the sharp increase in the price of natural and synthetic rubbers, the demand for reclaim rubber has increased considerably. And to cater to the rising demand, the company is putting up a third plant at Panoli in Gujarat with a capacity of 10,000 MTA. Post expansion, its production capacity will stand enhanced to 40,000 MTA making it among the top three producers of reclaim rubber in the world. For FY06, its sales increased by 30% to Rs.59 cr. and net profit jumped 40% to Rs.5.80 cr. reporting an EPS of Rs.44 on its very tiny equity of Rs.1.33 cr. It declared Rs.10 as dividend leading to a yield of around 5%. It also announced very encouraging numbers for the June’06 quarter as well. For FY07, it may post an EPS of Rs.50. Share price will shoot up sharply once it goes for demat trading or declares liberal bonus as it has huge reserves of around Rs.15 cr.

Ahlcon Parenterals (I) Ltd. (Code:524448) (Rs.50) manufactures life-saving Intravenous Fluids and medical disposals employing highly sophisticated production process imported from Switzerland. Its product range includes Dextrose, Saline, Electrolytes, Amino Acids, Fat Emulsion, Blood Substitutes, Small Volume Injectables, Eye Drops etc. It as also setting up a state-of-the-art testing facility and formulation development lab equipped with the best infrastructure. It ended FY06 on a buoyant note with 25% higher sales at Rs.45 cr. while the net profit tripled to Rs.6.70 cr. recording an EPS of Rs.9 on its equity of Rs.7.20 cr. For June’06 quarter, its sales and PAT grew by nearly 15% to Rs.12 cr. and Rs.1.72 respectively. With an expected EPS of Rs.10 for FY07, this niche company is trading fairly cheap at a P/E ratio of less than 5 times.

Power sector is the flavour of the season and is expected to remain so for the next 5 years as massive investments are lined up in coming years. GIPCL (Code:517300) (Rs.62.60) is also in the process of doubling its capacity at Surat Lignite Power Plant (SLPP) to 500 MW from 250 MW and is working on setting up two 1000 MW projects in South Gujarat, besides diversifying into power distribution in the state as part of its expansion plans. For June’06 quarter, its sales increased marginally to Rs.192 cr. but the net profit jumped 65% to Rs.70 cr. due to lower tax provisioning and higher extra ordinary income. For the Full year FY07, it is estimated to clock a turnover of Rs.825 cr. with net profit of Rs.150 cr. leading to an EPS of Rs.10 on its equity of Rs.151 cr. The scrip can easily hit a new high above Rs.100 in 9-12 months.

Virinchi Technology - Rs.37.00

Incorporated in 1990, Virinchi Technology Ltd. (VTL), erstwhile Virinchi Consultants Ltd., is an e-Business solutions provider for large enterprises and government establishments in the areas of e-procurement, private exchanges, supply chains and finance. It is the global leader in providing IT solutions to the retail micro lending industry in North America. VTL is ISO 9001:2000 certified for its production, delivery and quality processes and is currently being assessed for CMM Level 5 certification. The company has four strategic business units: B2B e-commerce, enterprise wide resource planning solutions, networking and services. Its B2B understanding is backed by domain expertise in an array of industry verticals like Chemicals, Pharmaceuticals, Cement, Electronics, Telecom, Food & Agriculture, Oil & Gas, Automobiles and Infrastructure.

Presently, VTL has two development centers in Secunderabad - one in Vikrampuri and the other in Marredapally spread across 25000 sq ft and employing around 250 engineers. It has several wholly-owned enterprise-wide software products providing solutions to over 10 industry domains with more than 55 clients located across 12 countries. It has offices in India, Malaysia, United States, Italy, Germany, Switzerland, Middle East & Hong Kong. Its clientele include biggies like McKinsey & Company, Venture 2002, the Birla Group, Saudi Telecom, Saudi Electricity co, Globoworks, Bank Lonmbard, Perintis, Advance America etc. Few of its software products such as Enterprise Enabler 3.0, CaseTrail, Financial & Accounts Management for Enterprises (FAME), TrackPORT, MarketSmart, Secure, Hospitality Management System (HMS) have been huge successes and are witnessing good demand in the global markets. Last year, VTL acquired K-Soft System Inc., a US based company providing enterprise business solutions with vast experience & expertise in packaged product implementation for a total consideration of around Rs.12 cr. Besides, the company also intends to grow organically and is planning to expand its Hyderabad facility to accommodate 1000 techies. Interestingly, in September’05 VTL forayed into mobile applications covering gaming, enterprise solutions and also partnered Mobitas to develop applications for the construction industry.

To conclude, VTL’s vast domain expertise across industries coupled with its product development and implementation experience, in onsite-offshore model and pure offshore model to global clientele act as the USP for the company. For FY06, its top-line grew by 40% to Rs.26 cr. and its bottom-line gained by 45% to Rs.8.55 cr. registering an EPS of Rs.6 on its equity of Rs.13.91 cr. It reported quite encouraging numbers for the June’06 quarter as well and is estimated to post revenue of Rs.32-35 cr. with net profit of Rs.10 cr. for FY07. This translates into an EPS of Rs.7 on its diluted equity of Rs.15.15 cr. having a 52-week high/ low as Rs.77/ Rs.24, it’s a safe bet at the current level and can give 50% return in 9-12 months.

BSEL Infrastructure - Rs.45.00

BSEL Infrastructure Realty Ltd. (BIRL) incorporated in 1995 as Bell South Enterprises Ltd. and subsequently renamed as BSEL Information System in 1998 changed its name to the present ‘BIRL’ in August’03 it. The company’s primary activity is infrastructure development as it has completely moved out of the software development/ programming business.Its first project i.e. BSEL Tech Park with saleable area of around 3,00,000 sq. ft. has been completed and is a huge success with 80% of the area already sold. Its other project, Hilton Centre consists of 22,000 sq. ft. of aesthetically designed; fully furnished office at prime location in CBD Belapur was also sold out. Besides, out of the 80,000 sq. ft. area acquired by the company from CIDCO in the International Infotech Park at Vashi, 60,000 sq. ft. has already been leased to.

The major revenue driver for BIRL will be its ongoing and future projects. In Gujarat, the company is setting up service apartments, a prime budget hotel, a food court with recreational facilities having a saleable area of 6,00,000 sq. ft., which is likely to be completed by June’07. It is also constructing a 3,50,000 sq. ft. shopping mall by the name ‘Beauty Palace’ in Nagpur of which around 70,000 sq. ft. will belong to the company. Its wholly-owned subsidiary is also developing residential, commercial, retail properties, townships etc in Dubai and has already acquired 1,00,000 sq. ft. area at Business Bay & Internet City in Jumeira. BIRL has also acquired 30-acre land at Bokhar near Panvel and Navi Mumbai SEZ where it plans to develop a mega city township. It has also participated in the tender for the allotment of a five storied BMC building at Tardeo for running a municipal retail market admeasuring around 40,000 sq. ft. apart from other luxury and lifestyle projects.

To fund its projects, the company raised above Rs.90 cr. a few months back through the GDR route and which got converted into Rs.2.27 cr. shares at around Rs.41. For FY06, its total revenue jumped by 135% to Rs.46 cr. whereas its net profit increased by 120% to Rs.22 cr. registering an EPS of around Rs.4 on its equity of Rs.59.30 cr. It reported stunning numbers for the June’06 quarter as well. Assuming the same track record, could end FY07 with a top-line of Rs.85 cr. and bottom-line of Rs.35 cr. i.e. an EPS of Rs.6. Considering the strong growth story, the ambitious projects on hand and its solid land bank, the share could touch Rs.75 (100% return) in 15-18 months. The company, however, is planning to raise further capital by way of FCCB, which will dilute its equity going forward and may change the fundamentals accordingly.