Performance - 2004 Recommendation

Performance update as on November 2007

Sr.	Date	Scrip Name	Recco	High		Return
			Price	Price		in %
	Appreciated more than 5x times
1	6-Dec-04	Alphageo	60	805		1242%
2	27-Dec-04	Orissa Sponge	56	748		1236%
3	27-Sep-04	Madhucon Proj *	41	438		968%
4	29-Nov-04	Bhushan Steel	132	1161		780%
5	25-Oct-04	Deccan Cement	50	387		674%
6	18-Oct-04	Guj Nre Coke *	22	137		523%
7	4-Oct-04	Dhampur Sugar	46	272		491%
	Appreciated 2x to 5x times
8	22-Nov-04	Petron Engineering	89	442		397%
9	25-Oct-04	Shah Alloys * $	44	210		377%
10	20-Sep-04	Man Ind	83	332		300%
11	20-Dec-04	Indo Asian	93	320		244%
12	27-Sep-04	Monnet Ispat	134	460		243%
13	13-Dec-04	Valecha Engineering	121	410		239%
14	4-Oct-04	India Glycols	135	446		230%
15	11-Oct-04	Shivalik Bimetal * $	13	42		223%
16	18-Oct-04	Uttam Glava	27	75		178%
17	29-Nov-04	Jindal Stainless	83	224		170%
18	27-Dec-04	Aarvee Denim	67	166		148%
19	1-Nov-04	Subros	119	285		139%
20	22-Nov-04	Bharat Seats	75	177		136%
21	22-Nov-04	Bharat Gear	52	119		129%
22	8-Nov-04	Finolex Ind (Uflex)	64	129		102%
23	11-Oct-04	Kabra Extrusion	65	131		102%
	Appreciated 50% to 100%
24	13-Dec-04	Bihar Caustic	51	87		71%
	Appreciated 25% to 50%
25	6-Dec-04	Tata Metalics	150	221		47%
26	20-Dec-04	Surana Telecom *	36	49		36%
	Appreciated below 25%
27	1-Nov-04	Sathavana Ispat	52	57		10%

* ---> Recco price adjusted for Split

$ ---> Recco price adjusted for Bonus

# ---> Recco price adjusted for Rights

@ ---> Demerger / Merger Adjustment

Disclaimer: These are not the actual profit figures booked by any investor but an compilation to indicate the potential/quality of recommendations.

Ador Welding - Rs.84.00

Ador Welding, formerly Advani Oerlikon, is a leader in the welding consumables and equipment industry catering to industries like steel, power, oil & gas, auto and infrastructure and is one of the largest exporters of welding equipments. It caters to two segments - welding and project engineering & equipment. It has presence in both electrodes and coated wires apart from welding equipment. Welding (consumables and equipment) accounts for 95 per cent of its sales. It offers automatic and manual welding equipment and products but only 20 per cent of the welding in India is automatic leaving ample scope for growth in this value-added segment.

The Government’s thrust to augment infrastructure has also translated into good order booking for the company’s customers, which in turn means more opportunities for its Welding Products. Another major area of growth comes from the Middle East. Major expansions, new plants and upgradations of existing plants in the Middle East are being announced regularly. Customisation of expertise at Ador to provide products over and above their normal requirements has enabled it to get large volume orders from select overseas customers. Hence, Ador is focusing on the export market with its value-added products to shore up revenues.

Ador has constantly strived to increase competitiveness by lowering operating costs, expanding the Sales Distribution reach of its products, benchmarking and improving on the best-of-class products and reducing wastages. The company has been continuously upgrading its IT infrastructure for reducing transaction costs and improving interactions with customers through instant accessibility. Few months back, Ador established a new manufacturing plant for Welding Consumables (Welding Electrodes) at Silvassa, a designated backward area in the Union Territory of Dadra and Nagar Haveli, with a capacity of 2500 MT per annum on a single shift basis.

On the financial front the company has a strong debt-free balance sheet. It has an impressive dividend payout ratio of more than 40 per cent of profit and in FY05 we expect it to declare 30 per cent dividend. For the fiscal ending 31st March 2005, the company could register sales and net profit of Rs. 185 cr and Rs 13.50 cr respectively. On an equity of Rs 13.60 crore and face value of Rs 10 per share, EPS works out to Rs 10. A strong buy with a price target of Rs.120 in the next 8~12 months.

KCP Sugar - Rs.208.00

KCP Sugar Ltd is a Chennai based well focused, fully integrated sugar manufacturer with a total crushing capacity of 11,500 TCD at its two plants located at Vuyyuru and Lakshmipuram. The unit at Vuyuru has a capacity of 7500 TCD and the second unit at Lakshmipuram has a capacity of 4000 TCD. It also has the capacity to produce 60,000 tonnes of molasses, 25,000 litres per day of industrial alcohol and 12,000 tonnes of bio fertilisers. Though in the South, KCP sells around 85 to 90 per cent of its sugar in the eastern region where the price realisation is much higher. Hence the company has the best of times as sugar prices are ruling high due to shortage in sugarcane production all over India and are expected to rule high in future too due to the demand supply scenario.

The South has additional advantages as Andhra Pradesh does not have administered price (SAP) for sugarcane. Hence KCP pays only as per central advised price (statutory minimum price) for sugarcane which is lower than what UP based manufacturers pay as per their SAP. Secondly, the company is cashing on its huge carryover stock, which will boost its topline as well as bottomline. Moreover, due to decent rainfall in the south this year, it will have enough sugarcane for crushing in 2005.Infact the management expects the production to rise marginally. To further capitalise on the emerging opportunities, the company is installing a 50 kilolitre per day distillery cum ethanol plant at Vuyyuru, which is likely to be commissioned shortly. The Company has also initiated steps to set up a co-generation unit at Lakshmipuram, which will enable it to sell about 2 to 3 MW of power to State grid in 2005. The company is also actively considering setting up 20 MW co-generation powerplant at the Vuyyuru unit as well. For FY05 it is expected to post an EPS of Rs. 30.

STOCK WATCH

Aftek Infosys (Code No: 530707) (Rs.124.25) has announced 1:2 bonus and will go ex-bonus by last week of January 2005. The company is reportedly doing well and will post an EPS of more than Rs.12 for FY05. FIIs are also quite active in this counter and the share price is tipped to trade at Rs.110 ex-bonus. Aggressive investors can buy cum bonus and stay invested for 2 months to reap handsome returns.

Man Industries (Code No: 513269) (Rs.85.65) is expecting to bag huge orders in 2005. The scrip has not rallied in this bull run and is still available quite cheap. Patient investors are advised to accumalate at the current level as the company could post an EPS of Rs.18 in FY05. At though rising steel prices is a concern still this is the best bet among its peer group.

Being in T2T Lincoln Pharma (Code No: 531633) (Rs.34.15)is lying quite low inspite of strong fundamentals and dynamic future prospects. The company has given more thrust on Research & Development in formulation and is getting its NAMSAFE patented. The scrip has the potential to cross Rs.50 easily and may shoot up the way Ankur Pharma did.

Of late Steel scrips has witnessed a smart rally barring Jindal Stainless Steel (Code No. 532508) (Rs.90.10). The company has massive expansion plans and is increasing its steel melting capacity from 5,00,000 to 6,00,000 TPA, Steckel Mill form 4,00,000 to 5,00,000 TPA and Cold Roll capacity will be increased to 2,50,000 from 90,000 TPA. It has also lined up an ambitious greenfield project at Duburi in Orissa. For FY05, the company is expected to post diluted EPS of Rs.16 and the share price could cross Rs.120 soon.

Alphageo (Code No: 526397) (Rs.59.35) is a pioneer seismic contractor engaged in the business of seismic data acquisition, processing and interpretation. It also undertakes seismic surveys and offers a range of services for oil exploration & drilling like evaluation, reservoir services and production services. Surprisingly, its share price has not rallied in this bull run and is still trading reasonably cheap at Rs.58 This company can be a pure multibagger if held patiently for 2~3 year. For FY05, it is expected to register an EPS of Rs.11 and for FY06 it can even post Rs.20 Grab it at every dip.

In the tech sector in such a high market, Rolta India (Code No: 500366) (Rs.80.60) is trading quite cheap with a limited downward risk. Fundamentally, its very strong with book value of Rs.80 and expected EPS of Rs.14 for FY05. It declared 30 per cent in FY04 which means a good dividend yield as well at the current market price. Long term investors are recommended to buy it for Rs.120 in 1 year.

Aarvee Denim - Rs.66.50

Established in 1988, Aarvee Denims & Exports (Aarvee) is among the leading and oldest denim manufacturers in India and manufactures over 70~80 varieties of denim fabric with different textures and style. At present, it exports to Panama, Honduras, Guatemala, Chile, Turkey, Venezuela, Mexico, Morocco, France, US and Bangladesh. It also manufactures and exports jeans and jackets for men and women to Africa, America and South America and also has a brand called ‘ADEN’. With the removal of the quota regime, the company is concentrating on garment exports to tap new markets in America, Europe and other Asian countries.

The company has a spinning unit near Bavla and a weaving & processing unit at Narol, both in Gujarat. It has enhanced production capacity regularly and can spin over 17,000 MTA and weave 19.90 million metres of denim. It outsources another 10 million metres of weaving outside on a contract basis making it the second largest denim fabric producer after Arvind Mills. To match the increasing demand post quota, it is adding another 14 million metres in weaving and 3100 MTA in spinning at a cost of about Rs40 cr., which will be operational by end September 2005. In addition, it is commissioning a new project of Bed Linen with an initial capacity of 1.2 million metres per month for the European and American markets.

During H1FY05, while its sales increased by 63 per cent to Rs114 cr., NP spurted by 71 per cent to Rs9 cr. thanks to its expanded capacity. Given its thrust on exports and debt restructuring, it can register Net Sales of Rs240 cr. and NP of Rs20 cr. recording a likely EPS of Rs11 on an equity of Rs18 cr. As the impact of the new expansion will be visible only in FY06, it’s best to hold it for the longer term for maximum returns. At CMP, it is trading at 6 PE against FY05 forward earning. Investors are advised to accumulate at dips and sharp corrections for 50 per cent appreciation in the coming 12 months.

Orissa Sponge - Rs.55.50

Incorporated in April'79, Orissa Sponge Iron Ltd (OSIL) was promoted in the joint sector by the Industrial Promotion & Investment Corporation of Orissa and Torsteel Research Foundation and its associates. It manufactures sponge iron through the direct reduction route by using non-coking coal as a reducing agent. Sponge Iron is the basic raw material used for steel making and steel manufacturers of late are trying to replace iron ore with sponge iron to reduce their dependency on imported coking coal, which is very good for sponge iron manufacturers like OSIL. The company also has a project consultancy division which provides technical consultancy and project engineering services to sponge iron plants. Lloyds Metals & Engineers, Usha Martin Industries etc. have already adopted the OSIL technology whereas other leading steel producers like the Bokaro Steel Plant of SAIL has shown a keen interest to adopt it.

OSIL has a current installed capacity of 1,00,000 TPA of Sponge Iron and 1,00,000 TPA of Steel billets. It has installed a 10 MW power plant utilizing the waste heat from the sponge iron plant. It is upgrading technologies to allow 100 per cent sponge melting as well as permit the use of iron ore fines generated during mining for sponge iron making. The company intends to install an additional kiln with a capacity of 1,50,000 TPA of Sponge Iron and also to set up a Steel Billet Plant at Bamra in District Sambalpur in Orissa with an installed capacity of 3,00,000 TPA. The company is also setting up a 9 MW power plant using waste heat of the kiln, which will not only make it almost self sufficient in the power requirement of the Steel Billet Plant but also reduce its power cost. The Central Government has also approved the grant of iron ore mining lease to OSIL.

OSIL has reported impressive numbers for the six months ending Sept 2004 with Net Sales up by 30 per cent at Rs64 cr. while NP jumped 124 per cent to Rs5.60 cr. posting an half yearly EPS of around Rs5. Its OPM also improved 550 basis points to 26 per cent compared to last year. Taking into effect the expansion and higher price realization, it could clock a turnover of Rs150 cr. and NP of Rs13 cr. for FY05 This works out to an expected EPS of Rs11 on its current equity of Rs11.90 cr. and it may declare 20~25 per cent dividend, which makes it a good dividend yield at the current price. In the current market sentiment, this scrip can easily give 50 per cent return in 6 months and can double in a year’s time.

STOCK WATCH

In the paper sector, Tamilnadu Newsprint Ltd. (Code No.531426) (Rs.64.50) (TNPL) is the best bet for the long term. It has ambitious expansion plans to increase its copier paper production to 3500 tonnes a month from 2500 tonnes. Its in-house pulp production is set to increase from 500 TPD to 800 TPD and its annual production of paper will increase to 2,45,000 MT from 2,30,000 MT. The higher production coupled with better price realizations will lead to higher profitability, which will drive its share price beyond the century mark in the next 12 months

Navabharat Ferro Alloys (Code No.513023) (Rs.345.95) seems to bottomed out and is ready for a sharp rally. The company has good expansion plans and is the best bet in the current market situation. For FY05, it will sure to register an EPS of more than Rs100 and the scrip can anytime to shoot to Rs500.

Most of the chlor alkali scrips like Gujarat Alkalies, DCW etc. have shot up due to the hike in caustic soda prices. Bihar Caustic (Code No.500057) (Rs.54.60) with an installed capacity to produce 51048 TPA of Caustic Soda, 39600 TPA of Liquid Chlorine and 29040 TPA of Hydrochloric Acid has still not performed as per market expectation and can rally sharply in coming days. For FY05, it is expect to post an EPS Rs11. A strong buy.

In spite of strong fundamentals and all positive news coming in, the India Glycol (Code No.500201) (Rs.133.95) share has not rallied at all and is trading in a very narrow range. But a sharp break out is expected shortly. Be patient and accumulate it at every sharp dip. It is bound to cross the Rs200 mark.

Of late, shipping scrips have reacted negatively on news of the fall in freight rates. This gives a good opportunity of buy SCI (Code No.523598) (Rs.175.65). Its future prospects still remain very promising and the company has many triggers going forward. Its share price has the potential to cross Rs250 in the next 12 months

Karnataka Bank (Code No.590002) (Rs.203.30) still seems cheap at Rs200 considering 2:1 rights offer is priced at Rs20 per share. Post rights, the bank is expected to post an EPS of more than Rs12 on the expanded equity. At CMP, the acquisition cost works out to Rs80. This means it is still trading at 6 PE whereas other private banks have run up a lot recently.

Surana Telecom - Rs.72.00

Originally incorporated as Surana Petroproducts Pvt Ltd in August 1989, Surana Telecom Ltd. (STL) became a public limited company in July 1993. Promoted by G M Surana, G P Surana, Narendra Surana and Devendra Surana. The company is engaged in the manufacture of heat-shrinkable cable jointing kits, Jelly Filled Telecommunication Cables (JFTC), wire connectors, end caps, modular connectors and HDPE pipes catering to the telecommunication sector. STL is also one of the foremost producers of Optic Fiber Cable (OFC) in the country for which it has technical collaboration with Rosendahl, a 100 per cent subsidiary of Alcatel.

Due to the difficult times faced by the cable industry, STL recently diversified into the high growth business of assembling of CDMA (code division multiple access) based telecom terminals. It ventured into this lucrative market of assembling and trading of CDMA handsets with an understanding with LG Electronics Inc & Huawei Technologies Co. Ltd. to supply the CDMA and Fixed Wireless Terminals to BSNL, MTNL, Reliance Infocomm and Tata Teleservices. It is now looking at into Internet Protocol TAX (Telephone Exchange) that is equipment that supports the Internet and converts the existing networks to support IP. The company has also applied for a Qualcomm product license and plans to manufacture some of the CDMA products. Of late, the company has moved into the Handheld segment also and offers CDMA colour display handheld terminals to MTNL. It is also setting up facilities to manufacture switch mode power supply based battery chargers which can increase the talk time drastically The Company is also entering into various products in the Broad Band Digital Loop Carrier (DLC) and shall be in the front end technology partner in the various requirements of BSNL & MTNL. Moreover, its JFTC & OFC division will continue to perform well given the plans for expansion of broadband connectivity especially by BSNL only a few days back, it bagged a Rs.30 cr. order for it cable division.

It turned around in both the quarters of FY05 due to strategic shift towards wireless telecom products from cable manufacturing. For the six months ending Sept 2004 its Net sales jumped 8 times to Rs.70 cr. and NP quadrupled to Rs.5.30 cr. compared to last year. This works out to an half yearly EPS of Rs.5 on its current equity of Rs.11.30 cr. taking into account the management’s aggressive style and growth prospects, STL could close FY05 with turnover of Rs.160 cr. and NP of Rs.14 cr. registering an annualised EPS of Rs.12 Hence it is trading cheap at 6 PE only. Investors are advised to buy into the stock and expecting 50 per cent return in 8-12 months.

Indo Asian Fusegear - Rs.93.00

Indo Asian Fusegear Ltd., incorporated in 1984 as a private limited company and converted into public limited in 1991, manufactures a wide range of high quality electrical control & protection products. They include electrical safety devices such as miniature circuit breakers, residual current circuit breakers, HRC fuses, transformers, switchgears wires & wiring accessories, industrial plugs & sockets, contractors relay, distribution boards etc. It has also diversified into the high-tech energy-efficient lighting field manufacturing the ‘Ecolite’ brand of compact fluorescent lamps and light fittings. The company has technical & commercial collaborations with some leading German & Italian manufacturers. The boom in power, housing, hotels, malls, commercial complexes and the construction industry in general translates into increased demand for electrical distribution & safety equipment. Since India is increasingly recognised as a low cost international quality manufacturing base, outsourcing represents an attractive opportunityfor the company. Accordingly, it has entered into an agreement with UK / Europe based companies for export of power distribution equipment like distribution boards, MCBs, RCDs etc., which are used in the construction sector. It has also contracted to export circuit protection equipment

It has five modern and state-of-the-art manufacturing units located in northern India and has a wide distribution network spread all over India. Its clientele include leading industrial houses like NTPC, Reliance, IOC, Tata Honeywell, HLL, Bajaj Auto, Ashok Leyland etc. To cater to the increasing demand, the company is expanding its Himachal Pradesh unit. It has good capex plans and will invest Rs15~20 cr. over the next 2 yrs for expanding capacities of the existing plants. The company also plans to manufacture and market remote reading meters to meet the emerging opportunities. To consolidate operations and increase its market share in Europe, the company has approved a reverse merger with its group company Indo Kopp Ltd., which is a debt free and profitable company.

Due to its various initiatives, its operating margin has doubled to 17 per cent in FY05 compared to 8.50 per cent last year. Net Sales grew by 87 per cent to Rs55.75 cr. and NP zoomed to Rs5.70 cr. from Rs0.30 cr. last year. Considering the orders pouring in and the export growth potential, it can clock a turnover of Rs135 cr. and earn NP of Rs14 cr. for FY05 recording an EPS of Rs14. Although in the T2T segment, the scrip has appreciated smartly in the last few days but is still trading reasonably cheap at PE of 6~7. It can give 50 per cent returns in next 12 months even from the current level. Long term investors can expect more since the company could register an EPS of more than Rs20 for FY06.

STOCK WATCH

In Banking, Dena Bank (Code No: 532121) (Rs.31.65) still looks good from the long term perspective. With the object to increase its Capital Adequacy Ratio to 12 per cent, it is coming out with an IPO early next year, which will be highly oversubscribed at the upper band of Rs27. It has a high NPA level of 8 per cent, which the management is trying to reduce drastically. At the same time, it enjoys the distinction of having the highest productivity per employee among PSU banks. As per RBI guidelines, the bank has shifted securities from AFS to HTM category, which will give some support to treasury income. For FY05, the bank may surprise the market with an EPS of Rs8. At Rs31 it is the best buy as it can give handsome returns to investors.

Natco Pharma (Code No: 524816) (Rs.138.15) has recently launched Curcumin 500 mg. capsules, which act as an essential food supplement especially for cancer patients. Curcumin is found to be effective in the treatment of multiple myeloma, tumours and other cancers. Few weeks back, it launched an anti-tumour capsule for the palliative treatment of metastatic / progressive carcinoma of the prostate. Earlier, it had also released Cantret capsules for the treatment of recurrent / persistent ovarian cancer. The company is now planning for a foothold in the international market as well. For FY05, it may report an EPS of Rs12. A good bet in the pharma sector

Uttam Galva (Code No:513216) (Rs.37.40) has an ambitious Rs350 cr. expansion plan for increasing the cold rolled capacity by 4,00,000 TPA, expanding its galvanising line with a capacity of 3,50,000 TPA and to set up a most modern state- of-art pre-painting line with a capacity of 60,000 MT. For the current first half, its sales was up 79 per cent to Rs1030 cr. and NP was Rs39 cr. For the full year FY05, it can easily report an EPS of Rs12. The best buy in the steel sector at current levels.

Orissa Sponge (Code No:504846) (Rs.47.80) has massive expansion plans and is increasing its sponge iron and steel billet capacity to 2,50,000 TPA each and has also obtained government approval for its iron ore mining lease. Due to the scarcity of scrap iron and the huge demand sponge iron, prices are expected to remain firm. For the current full year, it is expected to report an EPS of Rs10. Its share price can rise 50 per cent from current levels once the scrip catches market fancy.

Aggressive investors can have a look at B&A Plantation (Code No: 508136) (Rs.39) in the Tea sector as it is reportedly doing well. For the current first six months, its total revenue increased by 17 per cent to Rs27.50 cr. and NP spurted 175 per cent to Rs3.05 cr. posting an half yearly EPS of Rs10 on an equity of Rs3.10 cr. For the full year, it may post an EPS of Rs12. Its share price can rise smartly in future.

Valecha Engineering - Rs.121.00

Valecha Engineering Limited (VEL) was promoted by Valecha Brothers as an entrepreneurial concern in 1957 and was converted into a public limited company in 1993. VEL specializes in construction of infrastructure, civil engineering works such as Highways, Airports, Flyovers, Bridges, Tunnels, Canals, Water supply schemes, Sewerage projects, Irrigation Dams, Storage reservoirs, Buildings, and foundation engineering with sophisticated pile drilling Hydraulic Rigs. VEL has entered into a number of technical collaborations as well as joint ventures with overseas companies bringing the latest technical know-how in executing the projects. The management team consists of qualified professionals with relevant experience and expertise to ensure a proper techno-economic feasibility of the projects undertaken to achieve the objectives without any time and cost overruns. This is backed by state of art technology and using the latest techniques in construction. The company also plans to go global and is in talks with a UAE / German company for Middle East projects and is in search of an active local partner over there.

Almost 70 per cent of VEL’s revenues come from execution of road projects. It is also the largest piling company in the country. Capital adequacy, appropriate equipment, expertise and past experience, track record of timely project completion are some of the requisites for pre-qualification. VEL has thus pre-qualified for Rs2700 cr. worth of works in the NHAI projects. The Centre’s thrust on investments in infrastructure with increased participation from the private sector comes as a major boost to VEL with its current order book swelling to more than Rs350 cr. The company still expects good orders in this fiscal and is very bullish about its future prospects for the next 5 yrs.

Financially, the company has a strong balance sheet with a low debt equity ratio of 1:1 compared to its peers. Moreover, as a promoter of Jyoti Structures it holds more than 10 lakh shares at an average price of Rs40 whereas the CMP of Jyoti Structures is around Rs 140. For the six months ending 30 Sept. 2004, it reported robust numbers with turnover increasing 47 per cent to Rs70.30 cr. whereas its NP increased by 44 per cent to Rs4.02 cr. With such large orders in hand, the company will do much better in the second half and is expected to report total revenue of Rs180 cr. with NP of around Rs10 cr. Due to its small equity of Rs4.50 cr., any small increase in profit will lead to a sharp increase in EPS. With an expected EPS of Rs22 in FY05, it discounts very cheap at a PE multiple of only 5. A strong buy at CMP, which can give minimum 50 per cent return in the next 12 months. Long term investors can expect much higher returns.

Bihar Caustic - Rs.51.00

Bihar Caustic & Chemicals (BCCL), incorporated in 1976 is a Joint Venture between BSIDC(Bihar State Indl. Development Corp.) and Aditya Birla Group. It is one of the leading manufacturers of Caustic Soda in the eastern region. Its product portfolio consists of three products: Caustic Soda and the by-products of Caustic i.e. Liquid Chlorine and Hydrochloric Acid. Since the last few months, the chlor-alkali industry has been witnessing steady improvement in electrochemical unit (ECU) realizations and the trend is accelerating. Moreover, due to the current global upturn in the Aluminium, Iron and Steel and Paper industry, Caustic Soda prices have shot up more than 30 per cent in international market. And as far as BCCL is concerned, it is positioned very well in terms of capacity utilization with its parent company. Hindalco (along with INDAL) buying nearly 75 per cent of its total production of Caustic Soda whereas, the existing capacity for products like Chlorine and Hydrochloric Acid is well absorbed by the network of ancillaries already set up.

Its manufacturing plant at Ghanshyamkunj at Rehta in the state of Jharkhand has an installed capacity to produce 51048 TPA of Caustic Soda, 39600 TPA of Liquid Chlorine and 29040 TPA of Hydrochloric Acid. As caustic soda production is power intensive, the company has put up a 30 MW coal based captive Power Plant due to which company enjoys stable and economic power supply. Further, the company has installed sodium hypo chloride plant to utilize chlorine in its pursuit of value addition. It has also been successful in increasing caustic soda production by operating the plant at 225 KVA load. To encash the demand growth of its product in tandem with the significant growth in the principal user segments i.e. Aluminium and Steel industry, the company is in the process of finalizing the project for conversion of existing mercury technology to energy efficient and environment friendly membrane technology with simultaneous capacity expansion of caustic soda by 50 per cent i.e. increase in capacity from 150 TPD to 225 TPD at an estimated investment of Rs.112 cr. And to utilize the hydrogen as a value added product, the company is setting up a Hydrogen Bottling Plant at a total cost of Rs.2.80 cr. Recently, the company successfully restructured its long term debt from Financial Institutions by reducing the rate of interest. It has also returned to the dividend list after a gap of four years. Promoters hold 65 per cent stake and the rest is with the general public.

For the quarter ending 30th Sept 04, its net sales was up 8 per cent to Rs.26.30 cr. whereas NP jumped 150 per cent to Rs.7.10 cr. due to higher unit price realisation resulting in an EPS of Rs.3. Its OPM also improved 700 basis point to 49 per cent compare to 42 per cent last year. Considering the fact that the global prices of chlor-alkali products led by caustic soda are showing no signs of retreat, the company's profit margins are likely to improve in the second half of the current year and we expect it to clock a turnover of Rs.115 cr. and NP of Rs.26 cr. This works out to an EPS of Rs.11 on current equity of Rs.23.40 cr. Currently this scrip is trading at less than 4 PE, which is quite cheap compared to its peers. Investors should buy with a price target of Rs.80 i.e. 60 per cent appreciation in the coming 12 months.

STOCK WATCH

Raipur Alloys (Code No. 504614) (Rs.63.90) is reportedly doing well. For the first half ending 30 Sept. 2004, it reported Net Sales of Rs83.50 cr. up 50 per cent and NP of Rs9 cr. registering an EPS of Rs7. For the full year, it should earn an EPS of Rs16. The scrip will gradually cross Rs100. Hold it for medium to long term.

Bongaigaon Refineries (Code No.500072) (Rs.92.15) is discounted poorly as marketmen fear that its benefit of only 50 per cent excise duty being in the North East may be withdrawn by the government. For the six months ending 30 Sept. 2004, its net sales was up 57 per cent to Rs2148 cr. and NP jumped 54 per cent to Rs293 cr. Trading at 4 PE on an expected EPS of Rs22 for FY05, makes it quite undervalued and it is sure to be re-rated going forward. Moreover, it’s a handsome dividend paying company.

Tata Sponge (Code No.513010) (Rs.151.60) is enhancing capacity from 2,40,00 TPA to 3,90,000 TPA and has ambitious expansion plans for the future with an investment of over Rs1000 cr. For the first six months of FY05, its Net sales grew 37 per cent to Rs114 cr. and NP jumped an impressive 86 per cent to Rs29.40 cr. Considering the robust sponge iron prices, it is expected to report an and EPS of Rs32 for the full year. It’s a good bet at current levels.

Cement prices have increased by Rs15 ~ 20 per bag in the South and other parts of India, which led to a sharp rally in cement stocks except Deccan Cements (Code No.502137) (Rs.58.95). Its sales was up 19 per cent to Rs62 cr. and NP doubled to Rs3.90 cr. in the first half of FY05. Its second half will be much better and the company is expected to post an EPS of Rs12 for the full year. Share price has the potential to appreciate 50 per cent from current levels. Hold patiently.

Crude oil prices have softened substantially and analysts expect it to stabilize at current levels and Savita Chemicals (Code No.524667) (Rs.162.05) will be a big beneficiary since its the main raw material for the company. But in spite of high crude oil prices, the company posted robust numbers in H1FY05 . Sales was up 35 per cent at Rs234 cr. whereas NP rose 7 per cent to Rs12.70 cr. For the full year FY05, it will report an EPS of more than Rs30. Accumulate it for handsome gains in the medium term. Apart from a good dividend, it is ripe for a bonus too.

Indo Asian Fuse Gear (Code No.517318) (Rs.87.50), manufacturer of switchgears, is having the best of times with good orders pouring in. Company is expected to do much better in future given the huge export opportunity and the booming power and construction sector. For the first half of FY05, its Net sales was up 87 per cent and NP zoomed to Rs5.70 cr. from just Rs0.30 cr. last year. For FY05, it can report an EPS of Rs14. Buy at dips for long term as the share price can double in 15~18 months.

Man Industries (Code No.513269) (Rs.88.30) may rise further before its December results are out. It has a strong order book and the company expects more orders in coming months. For FY05, it should report an EPS of Rs18. Share price can rise 30~40 per cent from the current level once its Q3 results are declared.

Tata Metaliks - Rs.150.00

Incorporated in 1990 and promoted by TISCO, Tata Metaliks manufactures foundry grade pig iron through the mini blast furnace route. Its products are used mainly by foundries for manufacturing automobile castings, industrial castings, pipes and others. The company has an agreement with Tata Korf Engineering Services for technical know-how and consultancy and the company has been following the Tata Business Excellence Model (TBEM) since 1999. Due to its cost competitiveness and other initiatives, it is the lowest cost producer of Foundry Grade pig iron. The company has started producing customized pig iron as per the technical requirements of users along with value added specialized products like high silicon pig iron etc., which have a good export market. Pig Iron prices are still ruling very high and will remain firm as the domestic demand is set to grow on the back of rising demand from auto ancillary and engineering sectors.

The company is putting up a new 1,00,000 TPA blast furnace at Kharagpur, which will take its total capacity to 2,63,000 TPA and is expected to become operational this month. Also, to minimize the adverse impact of the steep hike in the price of imported LAM Coal and Coke, the company has made arrangements for domestic conversion of imported Coal and blending the same with indigenous Coke. It has also decided to install its own non-recovery type of Cokery of 60,000 TPA inside the plant to meet 25 per cent of its total requirement and is examining opportunities to acquire some cokeries. Interestingly, it has applied for mining rights in the neighbouring iron ore rich belt. It is also planning to apply for a coking-coal block. For future growth, it even wants to go in for downstream integration with castings, special steels etc. To gear-up export revenue, the Business Development Group of the Company has taken initiatives to spread its foot print especially in South- East Asia, South-Korea & Japan and in other niche markets like Egypt and Dubai.

Due to capacity expansion and higher price realisation in the first half, its net sales more than doubled to Rs137 cr. whereas its NP jumped 270 per cent to Rs36 cr. in spite of very high tax provision. Its OPM improved substantially to 43 per cent from 25 per cent last year. And since its new unit is expect to start this month, it will post impressive numbers in the second half also. The company is almost debt free with no Long Term or Short Term borrowing. To share its growth story, it may declare Rs6~7 per share as dividend for FY05. Considering all these factors, the company should report a NP of Rs70 cr. on turnover of Rs310 cr. registering an EPS of Rs28. Investors are advised to buy on dips or in sharp corrections only with a long term perspective. This scrip has the potential to double in 18 months time.

Alphageo (India) Ltd - Rs.60.00

Incorporated in 1987, Alphageo is the first private sector company to enter the field of seismic data acquisition. It is the pioneer seismic contractor engaged in the business of seismic data acquisition, processing and interpretation. It also undertakes seismic surveys and offers a whole range of services for oil exploration & drilling like evaluation, reservoir and production services. It has been acquiring seismic data contracts for Oil India Ltd (OIL) and Directorate General of Hydrocarbons (DGH). Armed with technical know-how from Alphageo of USA, it has acquired equipments to map 2-D and 3-D seismic data, of which the latter is a versatile technique and a precise geo-physical tool to understand the earth's crust in geologically complex areas.

Looking at the opportunities unfolding in the oil & gas exploration and prospecting business, the company is making all efforts to train its personnel and introduce state-of-the-art equipment to meet the growing demand. Seismic surveys are undertaken to identify and study the migration paths, geometry and size of the ‘trap formation’, which enable the explorers to locate the existence of a hydrocarbon structure and decide on drilling an exploratory well or not. The company also has a tie-up with Alphageo, USA, for human resource development (HRD) for conducting advanced geo-seismic surveys in difficult terrains.

The Government of India's continued emphasis on increasing oil and gas production and the farming out of oil fields to private oil companies in the 4th round of National Exploration & Licensing Policy (NELP) has contributed to intense activity in the area of oil exploration. Also, the policy of oil majors to concentrate on their core activity of production and contracting out other related services like seismic surveys implies huge growth opportunities for the company. Moreover, the market for three dimensional seismic surveys is growing and is expected to register an exponential growth in the coming few years. In short, the company has bright future prospects and will grow at a good pace in months to come.

During H1FY05, its sales increased by 70 per cent to Rs11.10 cr. whereas profit doubled to Rs2.34 cr. recording an EPS of around Rs5. The best part is that the company has a very small equity of Rs4.95 cr. and any increase in profit leads to a handsome rise in EPS. The company is also expected to declare a dividend for FY05. Although Alphageo expects to face competition from MNCs going forward, India's aggressive policy to increase oil production given the upward spiral in crude oil prices, the company can register sales of Rs24 cr. and NP of around Rs5 cr. for FY05 which may further increase to Rs40 cr. of sales and NP of Rs7.5 cr. in FY06. The stock is currently discounted at 6 times its projected FY05 earning and 4 times the expected FY06 earning. It is a strong buy which can give 50 per cent returns in 12 months time and double in 24 months from the current level.

STOCK WATCH

Of late, the infrastructure sector has become the market favourite and Valecha Engineering (Code No.532389) (Rs.114) still trading reasonably cheap compared to its peers and considering its future growth prospects. For the six months ending 30th Sept. 2004, its revenues have increased 47 per cent to Rs70 cr. and NP was up 44 per cent to Rs4 cr. For the full year 2004-05, it can report an EPS of Rs 18~20 as it has a strong order book of more than Rs225 cr.

Because of the differences among the Ambani brothers, IPCL (Code No.500105) (Rs.186.40) has been beaten down badly and offers a good opportunity to buy for the long term. For the first half year, the company reported a Net Sales of Rs3629 cr., up 35 per cent whereas NP zoomed 181 per cent to Rs261 cr. in spite of a very high tax provision of Rs171 cr. The petrochemicals cycle is in an uptrend and it expected to report an EPS of around Rs22. Appreciation of Rs 60~75 is possible in the next 3 months.

JB Chemicals & Pharmaceuticals (Code No.506943) (Rs.371.40) is discounted cheap compared to its peers, who have clocked an aggressive growth rate. But now with the company entering the high growth biotech sector, launching new drugs and putting more thrust on exports and R&D it has joined the high growth league. It is a good dividend paying company which reported sales of Rs175 cr. (up 19%) and NP of Rs32.25 cr. (up 14%) during the first half ending 30th Sept. 2004. For the current full year, it can report an EPS of Rs36~38. Applying a reasonable PE multiple of 12, the stock should trade above Rs450. Accumulate at every dip and sharp correction for the long term.

Aarti Industries (Code No.524208) (Rs. 233.60) is a scrip that has the potential to give handsome returns in the medium to long term. In the first half its sales grew 27 per cent to Rs319 cr. and NP increased by 13 per cent to Rs22.30 cr. For the full year FY05, it can report an EPS of Rs34. At the current market price (CMP) it’s trading at a PE of 7 leaving ample scope for an upmove in future.

Balaji Amines (Code No.530999) (Rs.173) is one of the lowest cost producer of Methyl Amines in the world. It is into manufacturing of Speciality Chemicals, which find application in Pharmaceuticals, Textiles, Agrochemicals, Paints and Dyestuff. For the full year FY05, it is expected to report an EPS of Rs25. Buy at declines for long term gain of 40~50 per cent in 15 months.

Ceekay Diakin(Code No.505923) (Rs.40) is reportedly doing well. This auto ancillary posted impressive numbers for the first half of the current year. Sales were up 27 per cent to Rs39.50 cr. whereas NP shot up to Rs1.22 cr. from Rs0.10 cr. last year. For FY05, it is expected to report an EPS of more than Rs7. Buy it and forget it for the next 15 months.

Inspite of declaring a bonus, Orient Abrasives (Code No.504879) (Rs.186) did not appreciate much and is discounted poorly by the market. Its future looks very promising and the company has posted excellent numbers for the current first half ending 30th Sept. 2004. Its Sales increased 33 per cent to Rs80.50 cr. whereas NP jumped 52 per cent to R 9.30 cr. For the full year FY05, it could report an EPS of Rs32 on its expanded equity of Rs6 cr. and 40-50 per cent appreciation in its share price can be expected over the next 6 months.

Bhushan Steel - Rs.132.00

Starting in 1989 with a turnover of 50 cr, today Bhushan steel a 2500 cr company has emerged as a third largest producer of cold-rolled products manufacturing wide range of value added products like Wide CR, Galvanised and colour coated Sheets, High Tensile Steel Strapping , Hardened & Tempered Strips and Precision Tubes. It enjoys a dominant position in high margin automobile & white good sector and is the single largest supplier to them with 60% market share. Company has been recognised by Ford and Honda Motors as their Global Resource Centre for their worldwide operation which is a big achievement in itself. Its technical collaboration with Sumitomo Metal Industries Japan, one of the largest global steel producers has been extended for another six years. Management understands the importance of technology and all its plants are upgraded & equipped with latest machines supplied by global leaders like Hitachi, Ebner, Fimi, MAN B&W, Clecim etc and enjoys ISO 9002 & QS 9000 certification. No wonder its clientele consist of reputed and eminent corporates like Tata Motors, M&M, Maruti Udyog, Bajaj Auto, LG, Samsung, Godrej, Videocon, BHEL, L&T, Whirlpool, Ford, IFB, Daewoo, Electrolux, Carrier etc.

Companys manufacturing plant is spread across Shahidabad with a capacity of 5,00,00 TPA and at Khopoli with a capacity of 4,00,000 TPA. Infact its state-of-the-art Khopoli plant started full operation only in Jan 2004. This plant will operate as a single point source for almost all value added products and will help the company to strengthen its grip on the Western & Southern market. To continue its growth path and also in order to become self reliant and have control over its raw material, the company has proposed to set up an integrated steel project of 3200 cr capex with a capacity of 12,00,000 (1.20 mn) TPA of Hot rolled coil & 3,00,000 TPA of long products and power plant of 110 MW in the state of Orissa. The project will be set up in modular format where part facilities would be set up during implementation and start generating cash accruals. Company has already identified land in Dist. Dhenkanal in the state of Orissa and has also signed MOU with Government of Orissa for allocation of Iron ore and coal mines. Though it’s a long term plan but with this Bhushan Steel will become a fully integrated company from iron ore to finished steel products.

Fundamentally & financially also company is strong and doing well. For the half-year ended September 2004, it posted an increase in net profit of 100% to Rs 68 crore on a net sales growth of 82% to Rs 1187 crore. Exports posted a jump of 184% to Rs 341 crore enjoying 27% share of gross sales. For FY05 it is targeting an export of 800 cr to 40 countries of which export to China will be 25%. With the high growth witnessed in the automobile, white goods and construction sector, and companys thrust on export and improving efficiency we expect it to register an sales of 2450 cr and NP of 140 cr So with an expected EPS of 35 Rs and CEPS of 75 Rs its trading very cheap at current price. Notably it has huge reserve of 550 cr on current equity of 40.50 cr leading to a book value of 145 Rs. Though equity dilution is there on its cards to fund the Orissa project but we done expect it to happen in this fiscal. Hence investors are advised to buy at current price for 50% appreciation i.e. price target of 200 Rs in next 12 months.

Jindal Stainless Steel - Rs.83.00

Jindal Stainless Steel Ltd. (JSSL), is a Rs. 2600 cr. turnover company is the flagship company of the Jindal Organization. It is the largest integrated manufacturer of quality Stainless Steel in India that caters
to more than 40 per cent of the total demand for Stainless Steel in the country and ranks amongst the top 10 producers globally. Products ranging from Stainless Steel Hot Rolled / Cold Rolled Coils, Plates & Flats, to Slabs and Blooms are produced keeping both national as well as international standards in mind. The main reason for the success of JSSL is the fact that everything from melting, casting to hot rolling and cold rolling is done in-house. Recently, the company acquired Maspion Stainless Steel of Indonesia, which is a Cold Rolling Mill with a capacity of 50,000 TPA, for $ 30 mn and is planning to double its capacity by the end of this fiscal. The company also wants to acquire the Salem Steel Plant of SAIL and is waiting for the government’s clearance on it.

The company has an integrated stainless plant at Hisar in Haryana and a Ferro Chrome unit at Vizag. It also has an offshore facility in Ohio under the name of Massillon Stainless Inc. with a cold rolling capacity of 50,000 tonnes. The Hisar plant has capacity of 5,00,000 TPA with integrated operations from melting to continuous casting of billets and blooms to hot rolling and cold rolling. An exclusive complex for manufacturing stainless steel for razor and surgical blades has been created. A coin blanking line has also been installed while its Vizag Ferro Alloys plant has an installed capacity of 40,000 TPA of high carbon Ferro Chrome. The company is upgrading its Hisar plant and has a mega expansion plan with a capex of Rs.450 cr. in a phased manner till 2007. By 2005, the company is increasing its steel melting capacity from 5,00,000 to 6,00,000 TPA, Steckel Mill form 4,00,000 to 5,00,000 TPA and by 2007 its Cold Roll capacity will be increased from 90,00 to 2,50,000 TPA. its ambitious greenfield project at Duburi in the State of Orissa is under implementation. Phase-I of the project is expected to be completed by the end of FY06. It will be backward integrated plant with capacity of 1,50,000 TPA of Ferro Chrome, 30,000 TPA of Ferro Manganese, 60,000 TPA of Silico Manganese and a Coke Oven battery unit with a capacity of 3,00,000 TPA. It is also setting up a 40 MW power plant for its own consumption. In Phase 2, the company is planning to set up a stainless steel melting unit with capacity of 8,00,000 TPA and 120 MW power plant with an capex of Rs.1000 cr.

For the half year ending Sept 2004, its net sales jumped 30 percent to Rs.1376 cr. whereas NP reported a modest gain of 7 per cent to Rs.91 cr. due to higher interest, depreciation and deferred tax provisioning. The company has a strong balance sheet with Rs.537 cr. of reserves on its small equity of Rs.20 cr. Its RONW is 40 per cent and ROCE is 27 per cent with OPM of 17 per cent. Looking at the company’s expansion plans, thrust on exports and higher stainless steel prices, it is estimated that the company will report Net Sales of Rs.2850 cr. and NP of around Rs.190 cr. leading to an EPS of Rs.19 on its current equity of Rs.20 cr. But equity dilution is expected going forward which may reduce the EPS to around Rs.15-16 on the diluted equity of Rs.25 cr. It is a relatively safe bet at the current price with an upside potential of 50 per cent in the next 15 months.

STOCK WATCH

Videocon International (Code No.511389) (Rs.207.60) is discounted poorly by the market due to concerns about the promoters and their investor-unfriendly attitude. Inspite of being in a highly competitive market the company enjoys a dominant position and is expected to perform well due to the increasing rural demand for its products and thrust on exports. Its glass business is performing well and contributes nearly 50 per cent to its profit. For the full year ending 30th Sept 2004 its sales was up 11 per cent to Rs.3990 cr. and NP increased by 69 per cent to Rs.177.50 cr. registering an EPS of Rs.25. The company has massive reserves of Rs.1390 cr. on an equity of Rs.71.20 cr. Aggressive investors can buy for medium term with a target of Rs.90.

As expected Star Paper Mills (Code No.516022) (Rs.51.15) is getting re-rated sharp rally is likely in coming days even from the current level. For half year ending 30th Sept 2004 its NP jumped 71 per cent to Rs.10.30 cr. due to higher price realization and better efficiency. For the full year FY05 it could report an EPS of Rs.12. The scrip has the potential to hit Rs.75 in the next 6 months. Buy at dips

Sunflag Iron & Steel (Code No.500404) (Rs.13.64) is hitting a new high on the bourses. This integrated specialty steel producer from the SunFlag group is doing well due to current steel boom. For Sept 2004 quarter, its Net Sales grew 43 per cent to Rs.182 cr.and its NP stood at Rs.10 cr. against loss in last year. Its OPM improved by 500 basis points to above 13 per cent from 8.5 per cent last year due to higher price realisation. For the full year ending 31st March'05 it can report an EPS of Rs.2.5. The scrip is expected to cross 20 going forward. Buy only at dips and sharp correction.

One more sugar sector scrip has caught market attention and it is KCP Sugars (Rs.157.05). Being in the South, it has additional advantages like decent rainfall and absence of state advised price on sugar cane in AP etc. Secondly it has a huge carry forward stocks and enjoys a good market share in the eastern region too. For the first half its sales zoomed 84 per cent to Rs.134 cr. and it posted a NP of Rs.19.85 cr. against Rs.1.03 cr. last year. For FY05, it is expected to register an EPS of more than Rs.30 Investors can accumulate it for handsome gains with medium to long-term perspective.

If you believe in the telecom growth story, here is one good scrip which can appreciate handsomely going forward. Surana Telecom (Code No.517530) (Rs.63) has big plans for wireless telecom products and wants to create assembly line for CDMA terminals. Its also looking at the possibility of foraying into Internet Protocol TAX. For the first half it reported impressive result with Net Sales of Rs.70 cr. up 680 per cent and NP of Rs.5.30 cr. up 300 per cent. For the full year FY05, it may even report an EPS of Rs.12 and the scrip is expected to shoot up substantially if everything goes as per the plan. FIIs / Domestic funds are not active in this scrip as 71 per cent holding is with the promoters and 20 per cent with the public.

Purely on fundamentals VBC ferro Alloys (Code No.513005) (Rs.122) looks quite cheap and the share price may run up sharply in the current bull run. Promoter holding (36 per cent) and the management quality however, remains a concern. It declared excellent results for the Sept quarter as well. Now if we see for six months Sales grew by 26 per cent to Rsd72 cr. and NP increased 22 per cent to Rs.6.30 posting an EPS of Rs.16. Surprisingly, the company has very huge reserves of Rs.124 cr. on a very small equity of 4.05 cr. For full year, it should report an EPS of more than Rs.30 and the scrip has the potential to rise 25-30 per cent from hereon.

MUHURAT PICKS

Shah Alloys - Rs.108.15
This Rs.1000 cr. company is its way to become an integrated stainless steel producer and is setting up a backward integration project at Gandhidham for producing sponge iron, ferro alloy and power. It’s the second largest stainless steel producer and has ambitious growth plans for the future. It has just started to gain market fancy and can give handsome returns going forward.

Ankur Drugs - Rs.39.10
Ankur Drugs is into contract / license manufacturing of Tablets, Capsules, Liquid orals, Dry Syrup for pharma MNCs and Indian companies Like IT, contract manufacturing or outsourcing in the pharma industry is expected to see phenomenal growth in coming years. Ankur is well-poised to encash the trend that and is setting up a new plant at Baddi, Himachal Pradesh as per US FDA requirement. It will manufacture injectibles also alongwith high value products for direct export on behalf of foreign pharma MNCs. A good long-term story

Star Paper Mills - Rs.43.00
This Duncan Group G.P company is set to see better times ahead, thanks to robust paper prices and the strong demand. Recently, it upgraded and modernised its integrated plant Saharanpur and is increasing its capacity in a phased manner over the next 3 years. Its gearing towards becoming a more professionally managed company and has taken various initiatives to achieve high operational efficiency. To turn more investor-friendly, the management may even declare 25 per cent dividend for FY05. This muhurat pick has the potential to double by next Diwali.

Dhampur Sugar - Rs.46.40
We can’t ignore this sector which is estimated to see best of times in the coming 2 years and Dhampur Sugar is a good bet in the Sugar sector. It is one of the largest sugar manufacturing group in India with 5 sugar mills in India and one in Nepal with a total installed capacity of 32,000 tonnes of cane crushed per day. Other than sugar, it also manufactures Alcohol, Acetic Anhydride, Oxalic Acid, Ethyl Acetate Nicotinamide, INH etc. More importantly, all its 5 sugar plants have cogeneration by bagasse based power plants with a combined capacity in excess of 83 MW, out of which approx 41 MW is being evacuated to the UP Grid. Due to poor rainfall and various other factors, the sugarcane output has dropped drastically this year which lead to a spurt in the sugar prices and in coming year demand is estimated to exceed supply. Considering all these aspects Dhampur will see a good growth in its bottom-line.

SCI - Rs.164.95
Although shipping scrips have seen a good rally in the recent past but still shipping holds a promising future for at least one more year or so. SCI being the largest player will benefit the most. First of all, freight rates are very high and will remain high due to the Chinese demand and crude oil factor. Secondly, tonnage tax will boost its bottom-line substantially and the company may even report an EPS of Rs.40 for FY05. Thirdly, the Government is planning to divest 20 per cent its stake, which will improve its liquidity and will attract more FII / FI participation. Last but not the least, the dividend yield will be too good to resist. In short, 50 per cent return can be expected in the next 12 months.

Uttam Galva - Rs.28.55
Scrips from Steel sector have become the darlings of investors. We, too, couldn’t stop from recommending the one. Uttam Galva Steels Limited is involved in the production of Cold Rolled Coils & Sheets and Galvanized coils & sheets. The company has more thrust on exports and around 70 per cent of its production is exported all over the world to over 103 countries. To cater to the increasing demand, the company has chalked out huge expansion plans to be completed by mid 2005. It’s a multi-bagger in the long-run.

STOCK WATCH

Bhushan Steel targets Rs. 800 cr. exports for FY05. Its new hi-tech Khopoli plant is working at almost 100 per cent capacity. For the half-year ended September 2004, its net profit doubled to Rs 68 cr. on a sales growth of 82 per cent to Rs 1187 cr. It is expected to post an EPS of around Rs. 35 for the full year. Moreover, for future growth the company is going in for backward integration and has plans to set up an integrated steel project with a capacity of 1,50,000 TPA in Orissa at an investment of Rs.3200 cr. A strong buy with a medium term perspective

By early 2005, GIPCL is planning to raise funds for its expansion plans by issuing shares. This will lead to a re-rating of this scrip in future. The company posted excellent numbers for the Sept.’04 quarter with NP zooming to Rs.32 cr. from Rs. 1.90 cr. in the corresponding last quarter. Its revenue was up 6 per cent to Rs. 203.40 cr. but its operating margin improved substantially to 55 per cent from 48 per cent YOY basis and from 46 per cent sequentially. For the full year FY05, it should report an EPS of around Rs.12, which discounts the current price of Rs. 65 merely by 5 times. A relatively safe bet.

Shree Cements is setting up 1 million MT greenfield cement plant at Ras in the Pali district of Rajasthan involving an investment of Rs.300 cr. This will take its total capacity to 3.60 million MT. For the six months ending Sept.’04, it reported an NP of Rs 43 cr., up 166 per cent on net sales of Rs. 292 cr. For the full year FY05, it is estimated to report an EPS of more than Rs. 25. A good long term bet which will provide Red-Oxide to your portfolio.

DCM Shriram Industries is reportedly doing well. For six months ended Sept 2004 sales increased by 30% to 249 cr and NP was 12.60 against 72 lac last year. Its operating margin also improved 200 basis point to 14.50%. For full year company is expected to post an minimum EPS of 14 Rs. Investor are advised to buy at dips keeping long term in view.

Bharat Gears - Rs.46.00

Bharat Gears Ltd, promoted by Bharat Steel Tubes and Raunaq & Co. in collaboration with ZF Friedrichshafen (ZFF), Germany, was incorporated in 1971 to manufacture automotive gears. The foreign collaborator holds 26 per cent stake in the company. Today, it is one of the largest gear manufacturers in India producing a wide range of gears - hypoid, spiral gears and differential gears, which go into axle assemblies and parallel axes gears and shafts that make up the gear box assembly. The company supplies to OEMs in Tractors, Trucks and Bus and Utility vehicles. It also serves the replacement market and exports to overseas market. The Company also specializes in heat treatment furnaces, manufactured and installed under licence from Holcroft, USA. It has a diversified client base with many OEM manufacturers including M&M, Ashok Leyland, Toyota Kirloskar Auto Parts, Volvo India, TAFE, Hindustan Motors, Escorts as domestic clients and New Holland, L&T John Deere, Same Deutz-Fahr, ZF Hungary, ZF China, Funk USA, TDI USA are some of its international clients. Its gear manufacturing units are located in Mumbra near Mumbai and Faridabad in Haryana near Delhi.

Bharat Gears actual turnaround in Q1FY05 was thanks to the financial restructuring package, which was approved under Corporate Debt Restructuring (CDR) scheme in FY04. Under this scheme, financial institutions and banks sanctioned additional term loans amounting to Rs.12.05 cr. and enhanced working capital facilities. Further, 10 per cent preference shares of Rs.2.08 cr. have been issued to institutions and banks as part of their dues. Monies were also received from ZFF and Indian promoters aggregating to Rs.3 cr. as stipulated in the CDR package. A part of the company's corporate office premises was sold during the year resulting in a profit of Rs.5.51 cr. Proceeds from this sale were utilised towards repayment of term loans. Total repayment of long term loans in FY04 amounted to Rs.6.46 cr. Further repayment of other term loans/debentures/10 per cent preference shares falling due for repayment during the year were rescheduled / rolled over in terms of the CDR package. In short, this restructuring scheme has resolved most of the issues and has brought the company back on track.

The benefit of this financial restructuring in FY04 can be seen in the first half FY05 results. In both the quarters, the company reported good profits with substantial improvement in operating margins. For the half-year ending September’04, it registered Net sales of Rs.66 cr. up 70 per cent and earned a NP of Rs.2.30 cr. against a net loss of Rs.6.40 cr. last year. Currently, the company is also concentrating on exports and has receiving good orders from Europe, China, USA and the Middle East. Here in the domestic market also, the demand is expected to increase due to the aggressive growth plans of all OEMs in the auto sector and tractor sales picking up. To sum up, the future looks promising for the Bharat Gears and it could post a sale of Rs.120 cr. and earn a NP of Rs.4.75 cr. i.e. an EPS of Rs.8 on a small equity of Rs.6 cr. With auto outsourcing expected to boom in coming years, this auto ancillary should be accumulated for 100 per cent appreciation in 18~24 months.

Finolex Industries - Rs.63.00

Finolex Industries Ltd., (FIL), a part of the Finolex group promoted by Mr. PP Chhabria, was incorporated in 1981 and is today the largest PVC & PVC pipe manufacturer in India. It makes a wide range of PVC pipes and fittings for diverse applications in agriculture, housing, telecom, industry etc. It also manufactures specialty pipes and fittings, namely SWR (Soil, Waste and Rain Water) pipes and fittings for the construction industry and ducting for the telecom industry. It has a huge distribution network and enjoys a strong brand value.

The company has advantage over its competitors since it is backward integrated with its own PVC resin plant, which contributes nearly 70 per cent of turnover. Though the price of its raw materials have risen. PVC prices too have shot up, which will enable the company is able to maintain its profit margin. Its PVC resin plant, which makes suspension grade PVC and paste grade PVC has been set up in technical collaboration with Uhde GmbH of Germany under technology licence from Hoechst AG and currently has a capacity of 1,30,000 TPA. Its Pipes Division and associated concerns consume about 45,000 TPA of PVC. Its Pipe & Fittings Division with two ultra modern plants at Pune and Ratnagiri has the capacity to manufacture 58,000 TPA of pipes. To exploit the rising demand from agriculture, irrigation and housing sector, the company is doubling the PVC resin capacity to 2,60,000 TPA and increasing the PVC pipes capacity to 80,000 TPA at an investment of Rs.500 cr., which will be funded by internal accruals of Rs.150 cr. and by Rs.350 cr. of debt. The new capacity expects to be commissioned by end 2005, which will increase its market share from 16 per cent to 30 per cent. As part of its expansion plans, the company also plans to construct a breakwater facility so that its jetty, which is utilized for importing the feedstock for manufacture of PVC as well as for importing LPG, can be used in the monsoons too.

As far as shareholding is concerned promoters stake are 19 per cent but Finolex Cables and its subsidiary hold 32.40 per cent, which comes under non-promoters. Thus indirectly, the promoters stake can be said to be above 51 per cent. Recently, the company came out with very good Q2FY05 numbers. If we see its half yearly numbers ending Sept. 2004, the company’s Net Sales has increased by 25 per cent to Rs.482 cr. and NP has more than doubled to Rs.56 cr. leading to an EPS of Rs.4.50. Historically, its second half has always been better than its first half. Considering the upturn in the petrochemical cycle, the government thrust on agriculture and irrigation projects and the boom in housing sector, the company is to clock sales of Rs.1030 cr. and NP of Rs.125 cr. Given this perspective, Finolex Industries is trading quite cheap at a PE of 6 on an estimated EPS of Rs.10. The long-term prospects are very bright and investors are advised to buy at every dip to fetch a minimum appreciation of 50 per cent in the next 12 months. Its share price can even double in 2~3 years.

STOCK WATCH

A reputed analyst is quite bullish on Shah Alloys. The company has reported encouraging numbers for the Sept.’04 quarter with a top-line growth of 22 per cent and the bottom-line growth of 45 per cent. For the full year FY05, the company could post an EPS of more than Rs.35 and its share price is expected to shoot up substantially in future.

Although sales were down again this quarter for Murli Agro Products, its operating profit was up 24 per cent and it maintained a NP of Rs. 2.30 cr. recording an EPS of Rs. 3.30 for Q2FY05. Also, its paper division is reported to be doing well and the company is expected to report an EPS of Rs.12 for FY05. A good medium term bet.

Garware Polyester appears the best bet from the packaging sector. For H1FY05 ending Sept.’04, its sales grew by 21 per cent whereas NP increased by 29 per cent in spite of higher tax provisioning. For FY05, it could report an EPS of Rs.12. A good buy.

Despite the cut throat competition and price wars leading to worries about its operating profit, Videocon International continues to post robust numbers quarter after quarter. Short-term traders can accumulate with a price target of Rs. 65.

Some market-men feel that Varun Shipping can turn out to be a dark horse in the Shipping sector as it has potential to post an EPS of Rs 6 on its expanded equity of Rs.108 cr. They also predict a re-rating of the scrip once it gets listed on the Singapore Stock Exchange.

Subros Ltd - Rs.118.50

Subros Ltd, incorporated as Subros Pvt Ltd in Feb.'85, was promoted by Ramesh Suri, Lalit Suri and Jayant Nanda. Today, the company is the market leader in automotive air-conditioning systems, parts and components. In fact, it is the only integrated player in India with capability to manufacture Compressors, Condensors Evaporators, Hoses, Tube liquids and other connecting elements. It has collaboration with Denso Corporation and Suzuki Motor Company of Japan with each of them holding 13 per cent equity stake. It supplies mainly to Maruti & Tata, which constitute around 90 per cent of its sales. Besides it also supplies to Bajaj Tempo, Hindustan Motors and Reva. It is also in advanced stage of finalizing supplies to Mahindra & Mahindra and Hyundai Motors, which will boost its topline substantially going forward. It has also signed a MoU with Allied Signal Environment Catalysts (ASEC) of USA for a joint venture to produce catalysts to be used in catalytic convertors in vehicles using unleaded petrol.

To meet the growing demand, the company has recently expanded its capacity to 4,50,000 units per annum and is gradually working on increase it to 10,00,000 units in the next 2 years. The company's core strength lies in its R&D and the latest technology it derives from its technical collaborator, Denso Corp. of Japan. In addition to providing technical advice with regard to the design, manufacturing and production problems, Denso Corp also trains the technical personnel of Subros. The company now manufactures its own condensor and compressor and has set up facilities for squeeze die-casting and the manufacture of multi flow condensor. It has already set up state-of-the-art Product Design, Development and Evaluation facilities, which consist of virtual proto-typing and virtual analysis using high-end computer software and use of facilities such as Wind Tunnel and Calorimeter for product evaluation. The Company has successfully implemented SAP R/3 system for Enterprises Resource Planning (ERP), which will lead to improved controls and efficiency in business operations. The company is now concentrating on its core competencies, leveraging its brand and spreading its reach by increasing its customer and product portfolio to meet future challenges.

On the fundamental side too it is strong with sales increasing 42 per cent to of Rs.492 cr. and NP jumping 100 per cent to Rs.14 cr. in FY04 leading to an EPS of Rs.24 and CEPS of Rs.55 on an equity of Rs.6 cr. Recently, the company issued 1:1 bonus and thereby doubled its equity to Rs.12 cr. In Q1FY05 sales increased 31 per cent to Rs.152 cr. and NP jumped 50 per cent to Rs.4.60 cr. posting an EPS of Rs.4 maintaining its growth story. Moreover, various user industry players like Maruti Udyog, Tata Motors, Mahindra & Mahindra, etc have lined-up expansion of production capacity to meet the rising demand. Besides, many new players are planning to set-up car manufacturing units in India Hence, given its status as the market leader, the encouraging demand scenario, improving operating efficiencies and the rising economies of scale it is estimated that the company will register a turnover of Rs.590 cr. and NP of Rs.20 cr. This means that the share price is available less than 7 PE against an expected EPS of Rs.17 on expanded equity of Rs.12 cr. The share price could rise by 50 per cent in the next 12 months.