El Forge Ltd - 58.00 Rs

Incorporated in 1934, El Forge Ltd (EFL) is one of the leading forging manufacturers in south India with over 40 years of experience in metal forming. It manufactures and markets carbon, alloy and stainless steel forged components for the automotive and process industries. The product range includes press forgings, upset forgings, drop forging etc which are mainly used to manufacture engine parts, transmission parts, steering and suspension parts, break assembly parts, chassis parts, drive line and electrical parts. It supplies both - forging and machining components to OEMs like Ashok Leyland, MICO, Bosch, Rane TRW, Sundaram Clayton, Lucas TVS, & Toyota. Besides, more than 25% of production is exported to countries like USA, UK, Germany etc.

EFL has four manufacturing facilities, one each at Chromepet, Gummudipundi and Thurapakkam in Chennai and one at Hosur in Tamil Nadu with total installed capacity as 18,200 MTPA. In order to become a leading global forging supplier, company is setting up a world class manufacturing facility at Appur Village, Sriperambadur near Chennai. Till now company has already invested 40 cr for this expansion and the plant is expected to start commercial production shortly. With this its manufacturing capacity will get enhanced to 23,200 MTPA. Meanwhile, EFL intends to move up the value chain by shifting its focus to machined components, which offers relatively higher margins than forged products. The company estimates to raise the share of machined components to 50% of its revenues in the next three to four years from the current 20%. To achieve this, company has set up a machine shop facility at Chromepet, especially for MICO with whom it has 30 years of relationship and derives 20% of its total revenue from it. On the other hand, company is approaching consumers of forgings in UK and Germany through its UK subsidiary company namely Shakespeare Forgings and has also been visited and audited by these European Companies. Hence its export business is expected to get a huge fillip in coming years.

On a consolidated basis EFL recorded sales of 141 cr and PAT of 7.85 cr which translates into EPS of 9 Rs on current equity of 8.50 cr. Company declared 14% dividend against 12.50% last year and the scrip is still trading cum-dividend. Last year, to fund its expansion plan, ELF raised around 15 cr thru private placement of 12.15 lakh equity shares @ 120 Rs per share. It also issued 3 lakh share warrants to promoters to be converted @ 132 Rs per share. To conclude, with revenues kicking in from new plant and higher export shipment, company is expected to end FY08 with sales of 185 cr and PAT of 10.50 cr on consolidated basis. This works out an EPS of 12 Rs on fully diluted equity of 8.80 cr. Despite such strong fundamentals, scrip is hitting new 52 week lows. Hence investors are strongly recommended to buy at current levels with an expectation of 50% return in 12 months.

Accurate Transformers Ltd - 127.00 Rs

Incorporated in 1988, Accurate Transformers Ltd (ATL) is the flagship company of the Delhi based Accurate group which has diversified interest in transformers, overhead line conductors, energy meters, insulating oils & chemicals. However ATL is engaged in manufacturing of power as wells as distribution transformers ranging from 25 KVA to 50,000 KVA in upto 220 KV class. These transformers are mainly supplied to various State Electricity Boards including those of Uttar Pradesh, Rajasthan, Punjab, Maharashtra and West Bengal on a made-to-order basis. As its transformers are in operation for years, the quality and reliability of company’s products is well established. Interestingly, ATL also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. It has already implemented two such projects one at Etah district of Uttar Pradesh and another at Nainital District of Uttaranchal. With nearly 50% revenue coming from this segment, ATL’s business model is reasonably de-risked.

Being a nearly two decade old company, ATL has set up huge manufacturing facilities spread across Ghaziabad, Sikandrabad, Greater Noida, Dehradun & Haridwar. Although these plants are not equipped with latest hi-technological equipments, still it has a total installed capacity of more than 8000 MVA, which is quite huge. Unfortunately, due to mounting debtors and shortage of funds company has been working at very low capacity utilization. Hence it has ample scope to ramp up its operation provided it manages to get sufficient money as working capital. To overcome this situation, ATL is planning to raise more than around 10 cr thru preferential placement of equity shares to promoters and strategic investor. Moreover to cash on the infrastructure boom, ATL has taken forward steps in the business of rural electrification being upcoming and thrust area under the Rajeev Gandhi development program of the central government. Besides, it wants to further diversify in energy sector and has ambitious plans of venturing into power generation & distribution in future.

The government’s rural electrification initiatives such as APDRP, Power for all by 2012 program, restructuring of SEBs, entry of the private sector into the transmission and distribution segment etc, all these have led to substantial jump in demand of transformers. Accordingly, ATL also recorded 20% growth in sales to 180 cr and 40% rise in profit to 6 cr for FY07. Hence it reported an EPS of 20 Rs on tiny equity of 2.96 cr. Notably, ATL is earning very low profit margin compare to its peers and has scope of improving its margin in future. For the June ’07 quarter, sales increased by 40% to 26 cr but NP zoomed up 170% to 1.50 cr on back of higher margin at operating level. For FY08, company is estimated to report a turnover of 225 cr and PAT of 8 cr i.e. EPS of 27 Rs on current equity. This means the scrip is currently trading at P/E ratio of less than 5x times. However, the promoters don’t have a good track record and the scrip was de-listed due to non-compliance of provisions of the listing agreement. Secondly, they are making placement at low price which is against the shareholders interest. Despite all these concerns, the fact remain that company is operating in high growth sector and has enormous opportunity to grow leaps and bounds. Moreover, at an enterprise value of 55 cr, a company of this size is available fairly cheap. Investors are recommended to buy at current levels with a price target of 180/- Rs (i.e. 40% appreciation) in 9~12 months.

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Kamanwala Housing Construction Ltd (96.00) is engaged in real estate development of both residential as well as commercial property. It concentrates mainly in Mumbai city and is carrying out various residential projects at Andheri-E, Malad-W, Santacruz-W, Charni Road-E etc. Under commercial segment, it is developing ‘Pinnacle Corporate Park’ admeasuring 75,000 sq ft at Bandra Kurla complex apart from 1,00,000 sq ft residential cum commercial project at Versova, Andheri-W. On the back of booming real estate industry it made a strong turnaround for FY07 with sales of 83 cr (against 11 cr) and NP of 13 cr (against 0.50 cr). Moreover, it has also purchased two acre plot in Hyderabad and is developing another 35 acre land in joint venture with Prajay Syndicate. To fund its working capital requirement, it made pref allotment of 15.84 lakh equity shares and 19.95 lakh warrants @ 98 Rs per share in Dec 2006. Meanwhile, company has reported encouraging nos for the June qtr as well and is expected to end FY08 with topline of approx 125 cr and bottomline of 16 cr. This works out to an EPS of 25 Rs on fully diluted equity of 6.50 cr. Although its profit margin seems too high and company has a debt of more than 50 cr, still it has the potential to give 50% returns in a year’s time. Buy at sharp dips.

Ironically, Flat Products (312.00) is the only company in India having capabilities for designing, fabrication and installation of cold rolling mills, galvanizing lines and corrugating machines. It provides twenty different solutions to ferrous and non-ferrous metal processing industry with its unique strength, state-of-the-art equipment building, process technology and project management capabilities. Due to sharp rise in raw material cost and no escalation clause, its profit margin fell substantially in FY05 and FY06. But now the company is back on track and with steel & metal producers expanding aggressively worldwide including India, its order book is bulging constantly. For the June’07 quarter its sales jumped up 70% to 105 cr whereas NP shot up to 4.90 cr against 0.75 cr last year. Importantly, company has reported healthy OPM of 8~9% for the last two quarters. Hence, assuming it to clock 8% operating margin for FY08 it may report sales of 600 cr and PAT of 25 cr. This translates into EPS of 50 Rs on small equity of 4.94 cr. Secondly having a book value of around 170 Rs, scrip is ripe for bonus as well.

Pricol Ltd (27.00) is the largest manufacturer of dashboard instruments in India with nearly 80% market share. Infact it is a global supplier of automotive systems and component offering more than 60 products with over 2,000 variants. Inspite of having five manufacturing facilities across India, company has recently set up a greenfield plant in Pantnagar, Uttarakhand and is further putting up one more facility over there which is expected to commence operation shortly. For better customer service it has opened representative offices in USA and Germany and may also open in Italy soon. Moreover under a joint venture with Nava Khodro, it is setting up an assembly unit in Iran to be operational by end of this fiscal. For FY08, it is expected to clock a turnover of 650 cr and PAT of 35 cr i.e. EPS of approx 4 Rs on equity of 9 cr having face value as 1 Rs per share. Although its debt equity ratio is quite high but at the same time its gross block stands at whopping 395 cr. Due to some labour unrest at its Coimbatore factories, the share price has been beaten down to 52week low. Long term investors should take this opportunity and start accumulating at dips for a price target of 35 Rs in 12 months.

Shree Hari Chemicals (35.00) made a strong turnaround in FY07 with its operating margin shooting up to 15% against 6% in FY06 on back of higher price realization and better operating efficiency. It is one of the reputed manufactures and exporters of dyes and intermediaries and produces reactive, acid as well as direct dyes and a wide range of dye intermediaries like H-acid, Gama acid, Peri acid, vinyl suplhone etc. For the latest June’07 quarter its sales jumped up 40% to 16 cr and NP increased to 1.00 cr in comparison to 0.20 cr last year. On a very conservative basis also it is expected to clock a turnover of 75 cr and NP of 3.75 cr i.e. EPS of more than 8 Rs on equity of 4.50 cr. Importantly, company has decided to declare a maiden dividend for FY07 and is also planning to raise capital thru preferential allotment which may lead to re-rating of the scrip. At the current market cap of 16 cr, scrip is trading reasonably cheap and can give handsome return in medium term.

Roto Pumps Ltd - 55.00 Rs

Roto Pumps Ltd (RPL) was established in 1968 for manufacture of progressive cavity pumps with indigenous technology, for the first time in India, as an import substitute. Since then it has emerged as a reputed manufacturer primarily for progressive cavity pumps and twin screw pumps. It offers a comprehensive range of pumps as per application, apart from horizontal internal bearing, horizontal external bearing, vertical bearing pumps etc. Company markets its products under brand name ‘RotoFLOW’ and ‘RotoPOSI’ which are very well accepted in the market. These pumps have very wide application and are used by across the industry including oil & gas, sugar, paper, steel, fertilizer, agriculture, good, chemicals, mining, ceramic, waste water treatment, pharma etc. Importantly, RPL also manufactures pump’s spare parts and other accessories like pressure switches, gauges, relief valves, strainers, dry running protection device etc. It also offers paid annual maintenance contracts including spare parts for its own pumps as well as pumps of other makes.

RPL has two manufacturing facilities – one unit at Noida and the second one at Noida Special Economic Zone (NSEZ). Being an integrated player, most of the critical components of the pump are manufactured in house leading to lower cost of production and best quality. Infact, company has a rich heritage in manufacturing technology with sophisticated machine tools and testing facilities. It has a good distribution network across the country with offices in Noida, Vadodara, Kolkata, Bangalore, Chennai, Pune, Mumbai etc. Besides India, it has warehouse cum marketing office in Australia and U.K. Due to higher realization, company is putting special thrust on export with its products being exported to USA, Canada, Brazil, Spain, Germany, Egypt, South Africa, Japan, Taiwan, UAE etc. RPL is strengthening its supply chain system and has increased stock levels at UK and Australia warehouses to enable them service the market more effectively and also penetrating in other existing markets. Meanwhile, company is developing other markets in China, Middle East, Far East Asia, Africa and have been able to establish contacts with potential partners. In future, RPL has plans to introduce Triple Screw pumps and Lobe pumps to enhance its product line.

On the back of strong industrial growth, it registered 40% jump in sales to 34 cr whereas PAT shot up 125% to 2 cr for FY07. So it reported an EPS of nearly 7 Rs on a small equity of 3.10 cr. It declared 15% dividend for FY07 against 10% last year and the scrip is still trading cum dividend giving a yield of approx 3% at CMP. For the June’07 quarter, sales grew by 35% to 7.90 cr but NP increased by 70% to 0.44 cr due to better operating margin. Accordingly for the current year it may clock a turnover of 45 cr and profit of 3 cr i.e. EPS of 10 Rs on current equity. With 52 week H/L as 71/30 Rs and promoter holding of 70%, this engineering company is trading reasonably cheap at a market cap of merely 17 cr. Investors are advised to buy at current levels as share price has the potential to appreciate 50% in 12~15 months.

Ansal Buildwell Ltd - 78.00 Rs

Incorporated in 1983, Ansal Buildwell Ltd (ABL) - flagship company of the high profile Ansal Group, is a well known player in the field of real estate development and construction. It has presence across the real estate sector and has expertise in developing shopping complex, malls, residential township, row houses, sky scrappers, corporate offices etc. In short it caters to both - residential as well as commercial sector. Notably, the group has a major contribution in converting the Connaught place, Delhi into an enviable commercial business district. Although company has majority projects in Gurgaon, still it can boast of developing landmarks like Sushant Lok I, II and III in south of Delhi, Ansal KRSNA-I & II, Ansal FORTE at Bangalore, Ansal's Riverdale at Kochi and Ansal's Green Valley at Dehradun and Prakash Enclave at Moradabad.

Shalimar Residency, Executive Residency, Silver Crest, Eden Villa, Oriental Homes, Royale Casa, Sushant Floors and Flexi Homes are few of its popular residential creations. In order to cater the elite class, company has recently designed and constructed prestigious projects namely 'Florence Homes', 'Florence Super', 'Florence Grand', 'Florence Manor' & 'Florence Elite' in Gurgaon. All these schemes are complete and possession is being offered to the respective clients. Among the ongoing and new projects, ABL is developing Florence Marvel & Florence Villa in Gurgaon and a huge residential township called “Ansal City” in Amritsar, Punjab. It has also acquired around 35 acres of land at Kochi for development of plots, villas and town houses, again under the project name “Ansal City”. On the commercial front company has completely handed over the corporate park namely Sushant Tower and Navkriti Arcade. It is now constructing a huge shopping mall called ‘BOOM PLAZA’ in Guragaon only. In the wake of the booming real estate industry, ABL has acquired land in Amritsar, Jaipur, Panipat, Faridabad and Jhansi. Infact in Faridabad company is venturing into multi-storeyed group housing societies.

Apart from real estate, ABL also carries out hi-tech engineering projects and has successfully being associated with Baner hydel project, Sardar Sarover Narmada main canal project, Jammu Udhampur rail link project, Bangladesh road project etc. Currently it is engaged in Thoubal spillway project-Manipur, NEIGRIHMS Project-Shillong, Palam Drain Project-Delhi & C-DOT main R&D building project-Delhi. Incidentally, company has diversified into hospitality also and has completed the work of group housing club namely 'Harmony Club'. Due to encouraging response for the membership, it has started another hospitality project 'Club Florence'. ABL has further expanded its area of operation by giving consultancy in sales & marketing of real estate to various new property owners. Moreover in joint venture with Chaudhari group of Nepal it has developed three projects in Nepal namely Kathmandu Residency, Mount View Residency Phase-I & Phase –II which are completely sold out and handed over.

Financially, ABL recorded a marginal growth of 5% in total revenue to 120 cr but its PAT quadrupled to 7.25 cr for FY07 against 1.70 cr last year. Hence it reported an EPS of 10 Rs and declared 18% dividend. For the latest June qtr, its topline grew by 30% to 28 cr whereas NP jumped up 70% to 1.80 cr. Hence for FY08 it may report revenue of 150 cr and profit of 10 cr which leads to an EPS of 14 Rs on small equity of 7.40 cr. Even at a modest discounting by 8x times, share price can shoot up to 120 Rs (50% appreciation) in 9 - 12 months.