Veejay Lakshmi Engineering Works Ltd - 97.00 Rs

Incorporated in 1947, Veejay Lakshmi Engineering Works Limited (VLEWL) manufactures textile machinery namely twisters and winders, which are used in the textile spinning mills for post spinning operations. Infact, company is the largest manufacturer of Two-for-one Twister (TFO) in India with more than 4500 installations worldwide and also the only manufacturer of Automatic Cone Winders (ACW) in India. Interestingly, company also has a high pressure die casting division under which it produces dies, moulds and other precision components from 40 Tons to 400 Tons capacity for the textile and engineering industry. Apart from the engineering division, it is also actively engaged in manufacturing of 100% cotton yarn through its wholly owned subsidiary called ‘Veejay Lakshmi Textiles’ which has a capacity of around 15936 spindles.

VLEWL has four manufacturing facilities, all located in Coimbatore, Tamilnadu. It has also invested in wind mills and has presently installed around nine wind mills having capacity of more than 4000 KW. The power generated from these are used/adjusted for the power consumed from the state grid by itself and its subsidiary. Last year, VLEWL came out of the joint venture arrangement with Savio, but retained the right to continue to produce the automatic cone winders with the know-how given by the Savio. However it cannot use the trade/brand names Savio and Espero, hence is now selling its winders under its own brand name ‘EXCELLO’. Importantly, company is handling all manufacturing, marketing, installation, after sales service and supply of all spare parts relating to automatic cone winder through its own separate sales and distribution network company called Veejay Sales and Services Ltd. This associate company also undertakes annual maintenance contracts for the maintenance of automatic cone winders. Interestingly, VLEWL has even established a full fledged printed circuit board (PCB) reconditioning lab facility to offer PCB reconditioning and repair facilities to all customers with minimal time for service.

On the back of the strong industrial growth and better future prospects, VLEWL has strengthen its aluminum die casting division by installing second hand machines imported from Switzerland. The subsidiary company i.e. Veejay Lakshmi Textiles has also planned for investments in a garment unit and expansion of the spinning capacity. Moreover, most of the spinning mills in India are modernizing and expanding their capacities and there are also new mills being set up. Hence, the demand for company’s main products viz. twisters and winders is expected to go up considerably in future. Accordingly, company has also taken steps to give thrust to its marketing activities by conducting road shows and seminars in different parts of the country and the response is encouraging. Considering all the factors, company is estimated to report sales of 100 cr and PAT of 9 cr for FY08 on a standalone basis. This means an EPS of 18 Rs on small equity of 5 cr. Consolidated nos will be much better. However the rising competition from import of new and second hand textile machines is a cause of concern for company. Still, with a gross block of 75 cr, reserves of 57 cr (i.e. BV of 123 Rs), investment of 21 cr (in subsidiary) this debt free company is a pure value buy at current market cap of 50 cr. Only long term investors are advised to buy for a price target of 175/- Rs (75% appreciation) in 15~18 months.

Micro Forge (India) Ltd - 31.00 Rs

Belonging to New Tech group, Micro Forge (India) Ltd was originally incorporated as private ltd company in 1989 and was subsequently converted to public ltd in 1993. It is primarily engaged in manufacturing of forging and machined components for automobile industry. Its product profile can be broadly segmented into flanges & automobile parts. It produces a wide range of forged & machined flanges made from carbon steel material confirming to ASTM, DIN, JIS, GOST, etc. It also forges alloy steel, stainless steel, carbon steel etc in partially or fully machined like connecting rods, crankshafts, camshafts, crown wheels, bull gears and various other auto part ranging from 0.5kg to 40 kg single piece weight. MFL is well known for its ability to develop & manufacture customized automotive spare on the basis of buyers technical drawings.

MFL’s manufacturing facility is spread over 6 acres of land with built-up are of 6773 sq. mtrs at Rajkot-Gondal National highway conveniently accessible by four track road from Rajkot city in Gujarat. The plant is equipped with the most modern forge shop and machining facilities alongwith latest testing equipments; all under one roof. Presently company has an installed capacity of 14,000 MTPA. Besides catering to domestic OEM’s, its products are also exported to U.S.A. and various other European countries. Infact, company has been conferred with export house status from the ministry of commerce. Its stringent quality control measure and full proof system got it accredited with ISO-9001 certification and registration of CRN of its product with 'MICRO' brand name. The domestic automobile industry is growing rapidly and outsourcing of auto components by the MNC’s is expected to see a substantial jump in coming years due to cost and various other factors. This all augurs well for the company.

Earlier, due to some non compliance, trading in equity shares of the company was suspended. It was only from 3rd May 2007, it was revocated with the base price as 23.00 Rs. Since then it shot up substantially to make a high of 52/- Rs in early June and has now settled down to 30/- Rs. Financially company has made a strong turnaround in FY07. Sales grew by 40% to 79 cr but PAT increased by 10x times to 3.10 against 0.30 cr in FY06. Importantly, its OPM improved substantially to 8% as compared to 3% in last fiscal. Meanwhile for the June qtr also its registered 8.50% of operating margin. Accordingly for FY08, it may clock a turnover of 85 cr and profit of 3.50 cr i.e. EPS of 6 Rs on equity of 5.60 cr. Although company margins are quite low compare to its peers, but it has the potential to improve it going forward. At the same time higher steel price is cause of concern. Despite all odds, scrip is trading reasonably cheap at current market cap of 17 cr and can once again test its high in medium term.

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Numeric Power (450.00) is India’s No 1 manufacturer of uninterrupted power supply (UPS) systems, stabilizers and power conditioners. It also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. For the June qtr its sales increased by 30% to 76 cr but the NP shot up 75% to 8.90 cr on back of higher other income thereby posting an highest ever EPS of 18 Rs for the quarter. Last year, company entered into a joint venture with the French UPS major SOCOMEC SA to distribute, market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. Ironically, around 75% of the ATMs in the country are fitted with UPS supplied by the company. With India's significant power deficits and the ubiquitous outages and voltage fluctuations; company’s products still have significant market potential in the country. For FY08 it may report sales of 325 cr and profit of 24 cr i.e. EPS of 48 Rs on equity of 5.05 cr. Buy at declines

Apart from being one of the lowest cost manufacturer, TNPL (101.00) is also having the world’s largest bagasse based paper mill with a capacity of 2,30,000 TPA. It is also the largest exporter of wood free paper from India. To cater the increasing paper demand and become a global player, company has implemented Phase-I of Mill Development Plan envisaging increase in captive pulp production capacity from 170,000 TPA to 260,000 TPA with element chlorine free (ECF) bleaching at a capital outlay of Rs 565 Crore. This will also increase the paper production capacity by 15,000 tonnes to 245,000 TPA and is expected to become operational from Oct 2007. It has further plans to take it to 4,00,000 TPA by Sept 2009. As power is one of the major cost components, company has made the mill self-sufficient by having in-house captive power generation capacity of 61.12 MW and another 35.50 MW thru wind farm. Moreover it has plans to establish a mini cement plant with a capacity of 400 tpd and is also contemplating to construct an IT Park measuring an office area of 4 lakhs sq. ft. on its surplus land. With an expected turnover of 1000 cr and NP of 110 cr i.e. EPS of 16 Rs, company is a value buy at current market cap of 700 cr.

Sukhjit Starch (150.00) is mainly engaged in manufacturing edible and non edible maize starch, dextrine, liquid glucose and dextrose monohydrate. Besides, it also produces sorbitol, maize oil, maize gluten, maize husk, high maltose syrup, oxidized/pregelatinized starch etc. It has an impressive clientele including corporates like Britannia, Dabur, Colgate, HLL, Heinz, Ballarpur, Berger paints, JCT, Mahavir Spinning, Wockhard etc. It is the only multi-locational group in India as of now with a combined installed capacity of 1,50,000 tons corn grind per annum. Couple of months back only company has started commercial production at its new unit in HP which has enhanced the capacity by nearly 25% and is dedicated for high margin starch and derivative products especially for pharmaceutical industry taking shape in Baddi, Himachal Pradesh. It reported satisfactory nos for the June quarter and accordingly may clock a turnover of 210 cr and PAT of 25 cr for FY08. This works out to an EPS of 34 Rs on current equity of 7.40 cr. Scrip has the potential to cross 200 mark in medium term

SEAMEC Ltd (218.00) operates multi-purpose support vessels (MSV) for diving and provides underwater/subsea engineering and construction, maintenance, inspection of under-water structures, rescue-operations and fire-fighting and other support services for offshore oil/gas installations located in India or abroad. Hence it is a pure play of charter hiring of MSVs, which are more specialized vessels than Offshore Supply Vessels (OSV) as they are equipped with Dynamic Positioning (DP) system and can go underwater for repair & maintenances of underwater pipelines. Ironically, there are only 6 MSV in India, out of which four belongs to SEAMEC and the rest two are with ONGC. However, as two of the company’s MSV are under dry dock its FY07 performance will be lack luster. But after that, it is estimated to report bumper results also due deployment of its fourth vessel. Hence, for financial year ending Dec 2008, it is expected to register a topline of 250 cr and bottomline of 80 cr which means an EPS Rs.24 on its equity of 33.90 cr. Being a subsidiary of Technip S.A of France, the largest oilfield engineering, construction and service group in Europe and being a debt free company it deserve much better valuation. Accumulate at declines.

Kamanwala Housing Construction Ltd - 125.00 Rs

Kamanwala Housing Construction Ltd (KHCL) was originally incorporated in 1984 as Kamanwala Housing Development Finance Company mainly to cater middle class buyers by constructing low cost housing and financing it at nominal rates. Attar Apartments and Kamanwala Nagar at Virar were built under this program. Subsequently it also ventured into acquiring few old building and tenements and then transferring the ownership to tenants at reasonable rates after carrying out repair and renovation. Later in 1995, company diversified into manufacturing of steel ingots for own construction requirement and got renamed as Kamanwala Industries Limited. However, company does not undertake this activity any longer. And hence in 2006 it finally changed its name KHCL, to reflect the focus on its core activity i.e. construction. Today, from the low cost housing projects it started out with, the company has now transitioned itself to executing prestigious projects of high quality in prime locations.

Having a track record of more than two decades, KHCL have completed the execution of 18 projects in Mumbai, with saleable area totaling more than one million square feet. Few of its well known constructions are Manavsthal-Andheri, Krishna Kunj-Goregaon, Mukta Apartment-Khar, Manavsthal I & II-Goregaon, Vaibhav Apartment-Bandra, Maker Kundan Garden-Anderi etc. However till now company was only into residential segment and that too in a small scale. But off-late, on the back of boom in real estate sector, company has entered into commercial segment as well and has drawn up ambitious expansion plan on a much larger scale. In the last couple of years, it has acquired good land bank in Mumbai for future projects. Its ongoing and future projects are:

Manavsthal - Saki Naka, Andheri(E): This project emerged as premier project which helped KHCL to come out of difficult times. It’s a residential project divided into three phases consisting of 240 Flats. Phases I and II have already been completed and sold off. Phase III is now on a completion stage with 70% area sold off.

Pinnacle Corporate Park – Bandra Kurla Complex: This is a commercial project comprising of 75,000 sq. ft. out of which 43,000 sq.ft. area has already been sold. It is expected to complete by 2008 and will enhance the image of the company in the construction Industry.

Residential Project - Malad (W): This project is being taken up at Marve Road under the Slum Rehabilitation Authority (SRA) scheme. Architectural plans for this Rs.33 cr project have already been approved, and financing obtained. Implementation is in full swing, and the project of 2,03,000 sq ft is slated for completion in September 2009.

Vallabh Terrace - Opera House: KHCL has purchased an existing building at Opera House admeasuring about 15,000 sq. ft. area for redevelopment/upliftment and subsequent conversion of tenancy rights into ownership rights. It will be completed during the current year.

Commercial cum Residential Project - Versova, Andheri(W): The total cost for this project is Rs. 40.50 cr for developing 1.00,000 sq. ft. area. As soon as the architectural plans are approved by the concerned authorities, the construction work will commence.

Rishi Tagore - Santacruz (W): Being in a prime location, company is planning to develop this into a luxurious 60,000 sq ft residential complex for which the land cost alone is 35 cr.

To de-risk the business model further, KHCL has undertaken geographical diversification as well and entered into a joint venture agreement having 20% share with M/s. Prajay Engineers & others for the development of a land admeasuring 35 acres at Patancheru, Hyderabad. It has also purchased additional 2 acre land in Hyderabad for 1.60 cr to construct commercial / residential buildings. Moreover KHCL has acquired some land in Mahim under SRA scheme. In a 33% joint venture with Aspen Property Pvt. Ltd., it is developing a property at the famous Filmistan Studio, comprising both residential and commercial units. Meanwhile it is negotiating for few projects at 4 bunglow, Andheri Kurla Road, Mulund, & BKC phase-II.

To conclude, KHCL has entered into an exponential growth trajectory and market is bound to re-rate this company sooner than later. For FY07 it made a strong turnaround for FY07 with sales of 83 cr (against 11 cr) and NP of 13 cr (against 0.50 cr) posting an EPS of 26 Rs on equity of 5 cr. To fund its working capital requirement, KHCL made pref allotment of 15.84 lakh equity shares and 19.95 lakh warrants @ 98 Rs per share in Dec 2006. In near future, company is planning to amalgamate its subsidiary called M/s. Doongursee Diamond Tools Ltd with itself. Meanwhile for the June qtr it recorded revenue and NP of 17 cr & 3 cr respectively. Hence for entire FY08 it is estimated to report total revenue of 125 cr and PAT 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 handsome return over a period of time. Considering its 52 week H/L as 314/47 Rs, investors are recommended to buy at declines only.

Numeric Power System Ltd - 440.00 Rs

Incorporated in 1995, Numeric Power System Ltd (NPSL) is a leading manufacturer of uninterrupted power supply (UPS) systems, stabilizers and power conditioners in India. Infact, it has been the undisputed leader for online, offline/ interactive UPS in India for more than a decade. Ranging from 0.5 KVA to 4800 KVA, company offers the total range of 1 Phase and 3 Phase UPS systems that are built with advanced technology and state-of-the-art features suitable for unitary and parallel redundant configurations addressing a wider band of the industry from PCs, servers, banks, data centers, healthcare and large IT network protection. Apart from products, it also undertakes turnkey projects and offers end to end solution for SCADA/EMS package, large network of industrial process, power transmission support systems and distribution management. It also provides services such as annual maintenance contracts of UPS and power conditioners of not only its own brands but also for other brands. NPSL has been regularly exporting its products to Canada, UK, China, South America, Singapore, Vietnam, Mauritius, Dubai, South Africa, Nigeria, Kenya, Ethopia, Uganda etc. Incidentally, NPSL is a national distributor for a range of ‘Panasonic’ brand of sealed lead acid batteries.

NPSL has eight world class manufacturing facilities spread across Pondichery-TN, Chennai-TN, Parvanoo-HP and Colombo-Srilanka, thereby emerging as the biggest integrated manufacture of UPS in India. The company's fully-owned subsidiary in Sri Lanka, Singapore, Mauritius and an export-processing unit in Chennai cater to the overseas markets. In India, it has a strong distribution network through 1800 channel partners spread across 400 towns. This is backed by 201 sales and service location apart from specialized 27 test and repair centre along with exclusive helpdesk which works 24x7. It has an enviable and high profile clientele including Infosys, Siemens, Intel, Philips, Microsoft, Veritas, HDFC, Citibank, ICICI, RBI, NIC, Reliance, ABB, BMW, NCR, Nokia, major stock exchanges etc. Interestingly, around 75% of the ATMs in the country are fitted with UPS supplied by NPSL. Last year, the company implemented an auxiliary power systems project for Power Grid Corporation in the entire north-eastern States, in a turnkey effort involving design, supply and installation of total power conditioning systems.

For future growth NPSL has adapted the latest power conversion techniques combined with advanced digital controls in the newly designed ‘NUMERIC DIGITAL HPX’ series in addition to the HP and HPE models which are already deployed in the market under power ratings from 2 to 60 KVA. This new version HPX series is designed to primarily address IT and Industrial requirements including intelligent monitoring using Internet. After terminating its 10 year tie-up with Meril Gerin Asia in 1996, company lately entered into a joint venture with the French UPS major SOCOMEC SA to distribute, market and service the 3 phase range of UPS systems (greater than 10 KVA) products to customers in India. To consolidate its operation, NPSL has recently demerged the UPS manufacturing business of Numeric Electronics Pvt Ltd (NEPL) and got merged it with itself against allotment of 52,920 equity share to NEPL.

With more and more businesses running on technology solutions, the need for power protection systems for reliability and quality has become vital. Given India's significant power deficits and the ubiquitous outages and voltage fluctuations; NPSL’s products have significant market potential in the country. For FY07, it recorded 20% growth in sales to 272 cr whereas NP increased by 10% to 18.80 cr posting an EPS of 38 Rs on small equity of 5 cr. For the first quarter, sales jumped up 30% to 76 cr but NP zoomed up 75% to 8.9 cr against 5.10 cr last year. Accordingly for full year FY08 it may report sales of 325 cr and profit of 24 cr. This works out to an EPS of 48 Rs on equity of 5.05 cr. At current market cap of 220 cr, company is available reasonably cheap and deserves better valuation being in a high growth sector. Hence investors are recommended to accumulate at declines with a price target of 575 Rs (i.e. 30% appreciation) in 9¬12 months.