Visu International - Rs.13.00

Started in 1983, Visu International Ltd. (VIL) erstwhile known as Visu Consultants was promoted by Mr. C. C. Reddy, an NRI from USA who is currently the Chairman of the company. From a humble beginning, he has succeeded in the uphill task of dispelling all the myths usually associated with 'study abroad' and have brought the concept of overseas education to the doorstep of every student by making it affordable and devoid of cumbersome procedures. Hence, VIL has been a pioneer in global education and consultancy business apart from being a household name for providing unparalleled coaching and training in pre-requisite tests such as TOEFL, GRE, SAT, GMAT & IELTS. Its core activity lies in assisting students to make the right choice with regard to higher education overseas. It has more than 73 offices all over the world and has placed more than 75,000 students in universities abroad. Its reach extends to five continents and universities in most countries like the USA, UK, Canada, Ireland, Singapore, Malaysia, Nepal, Kenya, Tanzania, Uganda, France and Spain. VIL is also into software development and services, merchant export-import & trading and also offers E-Learning through satellite enabled virtual class rooms.

In brief, VIL offers comprehensive counselling with regard to country of study, programme, tuition fees, location, pre-requisite tests and admission requirements according to the candidate's profile. Besides, it also explains about education systems in different countries, importance of the documentation, Visa procedures, financial requirements, scholarship chances, programme curriculum, living conditions, career options in the country etc. Coaching India, the training division of VIL with 40 centres across India successfully trains 30,000 students per annum for pre-requisites tests with very scientific standards. The company has a banking desk, which assists students in securing educational loans for pursuing their studies abroad. The students can enroll themselves for a step-by-step Visa mock interview to boost their confidence in facing the consulate officer and presenting themselves in an accurate mode. Travel assistance, foreign exchange assistance, student Insurance plans etc are the post visa services provided by the company. Meanwhile, VIL is on the anvil of launching ‘Visu Testing Service’, which is computer generated automation software that enables a student to test his/her strengths and weaknesses in a given area at any given point of time. Moreover, it is setting up a international boarding school from 5th to 12th grade in Hyderabad aimed at preparing students on par with world standards with state-of-the-art campuses, modern amenities equipped with latest technologies and inculcate contemporary skill sets, imbibe self confidence with wide international exposure. 30 acres land for the project has already been already acquired on the Mumbai - Hyderabad highway. Besides, a subsidiary is being set up in Dubai to improve the scale of software operations in foreign countries. VIL is also on the look out for acquiring a foreign company/firm to increase competency and economies of scale.

To fund its Hyderabad school project and its other growth plans, VIL raised around Rs.15 cr. through the GDR route last year to be converted into Rs.2.175 cr. equity at Rs.6.90 per share. Earlier in 2005, it raised capital by allotting 35 lakh equity shares. Thus its current equity stands at Rs.35.33 cr. compared to Rs.10.08 cr. in March 2005. Further, it has allotted 40 lakh warrants and has taken the approval to raise Rs.110 cr. more by allotting not more than Rs.5 cr. equity shares. That means a massive equity dilution can take place in future. However for FY07, VIL is expected to report total revenue of Rs.95 cr. with PAT of Rs.12.50 cr. This translates into EPS of Rs.3.50 on its current equity of Rs.35.33 cr. For FY08, its revenue can rise up to Rs.125 cr. and profit maybe Rs.16.50 cr. On its diluted equity of Rs.39.33 cr., the FY08 EPS works out to more than Rs.4. Hence at the current market price, the VIL scrip is available at around 3 times FY08E earnings. Although it’s a dividend paying company, there are promoter concerns as they hold only 3% stake. Moreover, the management hasn’t clarified at what rate they had made preferential allotment and also the GDR conversion price is very low. But since the share is trading near its 52-week low of Rs.12, investors can expect 30-50% appreciation in a year’s time.

Vadilal Industries - Rs.36.00

Incorporated in 1982, Vadilal Industries Ltd. (VIL) is the flagship company of the Vadilal Group engaged in the business of Ice-creams and Food Processing. Starting as a one man show with hand cranked machines and a small retails outlet, VIL is today the leader in the Indian ice-cream market with 25% market share. It has the largest range with 80 flavours and a product matrix of over 200 SKUs comprising of cones, cups, candies, family and party bricks and bulk packs. Its processed foods division processes and markets a wide variety of fruits, vegetables and ready-to-eat Indian foods.

Prominent processed items are fruit pulps and juices, frozen fruits and vegetables, fruit based ready-to-serve beverages, canned fruits and vegetables and ready to serve foods like samosas, parathas, pav bhaji, dal makhani, Punjabi chhole etc. Currently, 75% of its revenue comes from the ice-cream division while the rest 25% comes from processed food.

Presently, VIL has two ice cream plants and one food processing plant. Its ice-cream facilities are located at Bareilly-UP and Gandhinagar-Gujarat having an installed capacity of 60000 and 85000 litres per day respectively. Its food processing unit in Valsad-Gujarat is equipped with fruit pulping, canning, storage and Individually Quick Freezing (IQF) facilities and has an installed capacity to process 2 tonnes of fruits/vegetable per hour. This unit enjoys ‘Export House’ status and the products are exported to USA, UK, Japan, Europe, South-East Asia, Middle East etc. VIL has also initiated discussions with various supermarkets in Australia (Woolworth), France (Auchan), UK (Tesco, Safeway), USA (Krogers, Walmart), where it intends to make its frozen products available in the near future. It has the largest cold chain network in India backed by a strong distribution network of 22 C&F Agents, 450 distributors, over 40,000 retail dealers and a large fleet of refrigerated vehicles. The company has already opened around 25 exclusive ice cream parlours by the name ‘Happinezz Parlours’ and intends to open more going forward. And to capture the eastern India market it is setting up a new ice-cream manufacturing plant in Kolkata with a capacity of 35,000 litres per day. Moreover, to increase its market share it is also expanding the capacity of its UP plant from 60,000 litres to 90,000 litres a day and is also enhancing the capacity of its processed and frozen food plant at Valsad. It is in the process of introducing a few new products such as ready meals, Nann/Kulcha, Microwavable Samosas, ready-to-serve foods in resort packs and other South Indian frozen products. The capex for all this expansion and development is Rs.40 cr., which will be funded through a mix of debt and internal accruals.

In its recent policies, government of India has recognized the importance of processed food sector and decided to boost this industry through various policy measures. The sector has also been accorded priority sector status for lending by banks, which will result in increased credit flow to this industry segment. Incidentally, around 3% stake is held by the legendary Mr. Rakesh Jhunjhunwala as a long-term investment. For FY07, VIL is expected to register total sales of around Rs.125 cr. with net profit of Rs.4.50 cr. This works out to an EPS of Rs.6 on its equity of Rs.7.20 cr. and the company is expected declare 10% dividend for FY07. Due to the expansion effect, its FY08 revenue may bloat to Rs.150 cr. and PAT may be around Rs.6 cr. i.e. EPS of Rs.8. The scrip, therefore, is trading at a P/E multiple of merely 4 of FY08E earning. Investors are recommended to buy at current levels for 50% gain in 9-12 months.

STOCK WATCH

ICSA (India) Ltd. (Code: 531524) (Rs.1060) is in the business of constructing & setting up of power transmission lines and substations. It also provides embedded technology for the power sector to identify Transmission & Distribution (T&D) losses and monitor power consumption using the GSM Network. It has successfully deployed its power sector products like Substation Controllers, Distribution Transformer Controllers, and Automatic Meter Reading Systems etc. Apart from the power sector, its Remote Monitoring applications are utilized by other sectors including oil, gas, mining, irrigation, transport and water utilities etc. For FY07, it may report sales of Rs.330 cr. with net profit of Rs.65 cr., which can shoot upto Rs.500 cr. and Rs.100 cr. respectively for FY08. On its current equity of Rs.6.60 cr. the FY07 EPS works out to around Rs.100. Recently, the company raised around Rs.100 cr. through the FCCB route and has also issued 7.5 lakh warrants at Rs.1135 to promoters and Goldman Sachs. Hence on its diluted equity of around Rs.8.50 cr. its FY08 EPS works out to Rs.118. However, the company is planning to raise another Rs.100 cr. through ADR/GDR or any other route to fund its future growth plans.

Honda Siel Power Products Ltd. (Code: 522064) (Rs.172) is engaged in manufacturing and marketing of portable generator sets, portable engines, internal combustion engines, pumping sets, water pumps, lawnmowers, spare parts and other related products in India. Being a 67% subsidiary of Honda Motor Co. Japan, the company is the undisputed leader in the field of portable generators with more than 70% market share. For FY07, it is expected to report net sales of Rs.225 cr. with net profit of Rs.15.50 cr. i.e. an EPS of Rs.15 on its equity of Rs.10 cr. Notably due to various indigenisation plans, the company has reduced its import cost from 35% to 20% as a percentage of material cost earlier. Its profit margin has accordingly considerably and is expected to rise further for FY08. It may clock a turnover of Rs.260 cr. and PAT of Rs.20 cr. i.e. EPS of Rs.20 for FY08. A safe bet.

Manugraph India Ltd. (Code: 505324) (Rs.172) is the largest manufacturer of web offset and sheet-fed offset presses. With a whopping 70% market share, its presses are present in almost all-major publication houses, in India. Besides, it has worldwide presence from Latin America to Europe and from the Middle East to China. Recently, it has acquired Dauphin Graphic Machines Inc., a leading manufacturer of web offset printing machines based in Pennsylvania, USA for $19.20 mn. With this acquisition, it will become the world largest single width press manufacturing company. It is expected to end FY07 with sales of Rs.375 cr. with net profit of Rs.50-52 cr. i.e. EPS of Rs.17 on its equity of Rs.6 cr. having FV of Rs.2 per share. However, due to the recent acquisition its consolidated numbers will double and it can register a consolidated turnover of Rs.750 cr. for FY08. There is also good interest from institutional investors as FIs hold around 8% whereas domestic MFs hold 4% as on December 2006 and HDFC MF and Reliance MF have also bought good quantity from open market in the range of Rs.185-200 in the last two months. A solid bet for the long-term.

TIL Ltd. (Code: 505196) (Rs.191) is India's leading provider of technology intensive, application specific heavy engineering equipment for use in core infrastructure sectors. Its business is primarily dividend into three segments namely material handling (25%), construction equipment (50%) and power system (25%). Its product profile consist of Mobile Cranes, Forklift Trucks, Hydraulic Excavators, skid steer loaders, off highways trucks & Dumpers, Industrial generator sets, diesel engines and various other material handling and earth moving equipments. On a standalone basis, it may end FY07 with sales of Rs.550 cr. and profit of Rs.17 cr., which will result in an EPS of Rs.17 on its current equity of Rs.9.70 cr. To meet the increasing demand, the company is planning to increase its capacity for material handling equipment like mobile cranes etc. Accordingly for FY08, it can clock a turnover of Rs.625 cr. with net profit of Rs.21 cr. i.e. EPS of Rs.22. On a consolidated basis, it works out to an EPS of Rs.25-26. At a reasonable discounting by 12 times, the share price can touch Rs.300 in 9-12 months. A good bet in the engineering sector.

Frontier Springs - Rs.16.00

Incorporated in 1981 and promoted by Mr. K. L. Bhatia, Frontier Springs Ltd. (FSL) belongs to the small Kanpur based Frontier group which has over 30 years of experience in the business of automobile & railway suspension parts like U-bolt, center bolt, coil springs, leaf springs, centre pivots, side assemblies, cast steel brake beams, buffer components, buffer assemblies, coupler components metal bonded etc. Out of these products Suspension springs, Leaf springs and Coil springs are made by FSL. The range of application of these springs varies from rail rolling stock to passenger cars. It also makes heavy and light hot coil springs for earth moving equipments, boiler plants etc. Apart from the Railways being a major customer, its clientele includes Ford, Opel, Daimler, BMW, Mercedes, Tata Motors, Texmaco, Kalyani Brakes, Central Ordinance Depot, Sunflag Industries, Usha Martin etc. Moreover its products are also exported to the UK, USA, Holland, Australia, Netherland and South East Asian countries. In short, it has a very good quality and design reputation both in India and abroad.

FSL’s manufacturing facility is located at Rania in Kanpur, UP, with an installed capacity of 10,800 MTPA. In order to obtain better space utilization, more fatigue life and weight reduction, different types of springs are manufactured at its plant. Variable load rates as well as fixed load rate coil springs are manufactured by high quality chrome vanadium and chrome silicon steel rods which are duly crack detected and epoxy powder coated. Incidentally, the group companies Frontier Alloy Steels and Frontier Metaprod help FSL get regular supply of raw materials thus giving it the much needed cost-efficiency advantage. Recently, it set up a new assembly line for the manufacture of heavy and light-coiled springs by importing the plant from Cogan Constructions, USA. The commercial production has already started and is expected to contribute an additional Rs.12 cr. of revenue per year, which is quite substantial for FSL. The company plans to further expand its Leaf Spring capacity as it is expecting some big order from a large UK based trailer manufacturer. Moreover, it has decided to diversify into the business of Air Suspension Spring, which has been indigenously developed. FSL has already engaged the services of M/s KPS Consultants and Impex Private Ltd., New Delhi primarily to explore the lucrative Technical Know-how and collaboration with some countries in Europe and China for manufacture of Air Springs.

FSL is thus well poised to encash the exponential boom in the Locomotive & Automotive Ancillary industry. The recent expansion and future capex will give a substantial fillip to its topline and bottomline in coming quarters. For the nine months ending 31st December 2006, its sales increased by whopping 60% to Rs.17 cr. whereas net profit jumped 140% to Rs.0.95 cr. with the massive expansion and modernization plans approved in the recent railway budget, FSL is expected to get some big orders in the near future. For FY07, it may report net sales of Rs.25 cr. with net profit of Rs.1.40 cr., which can shoot up to Rs.35 cr. and Rs.2.25 cr. for FY08. This works out to an EPS of Rs.4 and Rs.6 respectively. Investors are strongly recommended to buy the FSL scrip at current levels as its share price can easily double in 12-15 months.

Goodyear India - Rs.140.00

Established in 1922, Goodyear India Ltd (GIL) was originally incorporated as Goodyear Tire and Rubber Company (India) but was subsequently renamed as GIL in 1961 when it became a public limited company. This 85-year-old FERA company has a technical-cum-financial collaboration with Goodyear Tire and Rubber Company, USA which is also the holding company with 74% equity stake. Notably, the American parent is among the top three players in the world with presence in six continents and operating from 80 facilities in 28 countries. Here in India, GIL has emerged as a leading manufacturer of automotive tyres with 15% market share. In fact, it is the largest supplier of tractor tyres in the country and was the first to roll out tubeless radial tyres on Indian roads.

GIL has two manufacturing facilities: one in Aurangabad, which makes passenger car tyres and other facility in Haryana where tractor and other tyres are made. Except for two-wheelers, the company has presence in all major segments like passenger cars, heavy and light commercial vehicles, tractors & farm equipments etc. It supplies to most of the auto companies including Maruti, Tata Motors, M&M, Ford, GM, Hyundai, Ashok Leyland, Swaraj Mazda, TAFE, PTL, Eicher, Escorts, etc. It also commands a major market share in the Off The Road (OTR) segment by being the major supplier to Coal India Limited, Escorts, L&T, Tata Steel and other steel plants of the country. Importantly, it has strong presence not only in the OEM segment but also in the replacement market. Besides, its tyres are being exported to Australia, Dubai, Hongkong, Phillipines, Nepal, Bangladesh, Srilanka, Bhutan and Pakistan. Due to improved market conditions, GIL is finally implementing its Rs.80 cr. expansion plan to increase the production capacity at its Aurangabad facility from 4500 tyres per day to 10,000 tyres in the next two years. On the retail front, it has introduced international & multi-brand format 'Shop-in-shop' outlets, which not only sells tyres but also car accessories. GIL plans to open 300 such outlets by 2008 at an investment of Rs.50 cr.

The biggest turnaround for the tyre industry was the fall in the price of rubber, as it constitutes around 40% of the total raw material cost. Although, historically rubber prices are still trading high but in the last one year they have cooled off a bit. The RSS-4 Kottayam rubber price is currently trading around Rs.8700 per quintal compared to Rs.11500 in May 2006. Hence for the September 2006 quarter, GIL’s topline grew by 40% to Rs.212 cr. but NP zoomed by 10 times to Rs.15 cr. compared to Rs.1.50 cr. last year. It reported a healthy OPM of 10% after a long time. For the full year ending 31st December 2006, it may report net sales of Rs.800 cr. and NP of Rs.50 cr. i.e. an EPS of Rs.22 on its equity of Rs.23 cr. Hence at its current market cap of around Rs.325 cr., this MNC associate is trading at P/E ratio of than 7. However, as the performance of the tyre industry largely depends on the rubber prices, it’s very difficult to predict the future profit of the company. If the price of the rubber falls in future, the share price of the company will rise. Investors can buy at declines for a 50% return in 15-18 months.