STOCK WATCH

Metal scrips have been rising again turning analysts bullish once again towards this sector at least for the short term. In such a scenario, investors can look at Shah Alloys (Code No: 513436) (Rs.207.50). It came out with pretty encouraging numbers for June’05 qtr. While its sales grew by just 15% to Rs.258 cr., its NP jumped 42% to Rs.10 cr. due to lower interest cost. The company is the second largest stainless steel manufacturer and has ambitious expansion plans for future growth. Although it is not the preferred choice among institutional investors, still with an expected EPS of Rs.55 for FY06, its share price has the potential to cross Rs.250 in the near future.

Rama Paper (Code No: 500357) (Rs.42.50) which has recently come out of BIFR on restructuring intiatives is doing extremely well. It is into newsprint, writing & printing paper and duplex board for industrial use. It posted excellent results for June’05 qtr whereby its Sales increased by 15% to Rs.17.35 cr. but its NP jumped 140% to Rs.1.80 cr. on higher OPM. Company is taking all possible steps to repay its high debt and turn debt free for which it is raising around Rs.8.75 cr. through preferential allotment of 25 lakh shares @ Rs.35 each. It can post around EPS of Rs.9 for FY06 even on the diluted equity of Rs.7.50 cr. Scrip can rise by 50% in short to medium term.

Sugar scrips are buzzing on the bourses in anticipation of the bright future ahead. Purely on fundamentals Ponni Sugar (Erode) Ltd. (NSE Listed) (Rs.47.15), a south based sugar producer that enjoys export house status, seems a good bet. For FY05, while its sales increased by 11% to Rs.89 cr. the NP zoomed 140% to Rs.6 cr. posting an EPS of around Rs.7.50 on which it declared 10% dividend. The company is restructuring its debt portfolio replacing its high cost debt with lower interest bearing loans. Besides, it has huge inventory equivalent to around 5 months sales. For FY06, it may report an EPS of Rs.9. Buy at declines as the scrip can cross Rs.60 in a year.

Branded PCs have started to grow at a fast pace as people now prefer branded PCs over assembled computers. Zenith Computers Ltd. (Code No: 517164) (Rs.33.95), one of the largest manufacturer & seller of complete range of PCs, servers, LAN, WAN, Unix product etc is available reasonably cheap. For future growth, the company is focusing on its laptop business and is concentrating to increase exports to the Middle East. For FY06, it can earn a NP of Rs.6 cr. on Sales of Rs.320 cr. resulting in an EPS of Rs.4 on current equity of Rs.15.50 cr. In spite of strong fundamentals and huge growth potential, it enjoys a market cap of only Rs.50 cr. It’s a strong buy as the share price can rise 50% in 9~12 months.

Winsome Textiles (Code No: 514470) (Rs.27.60) belonging to the well-known Winsome group is engaged in the manufacture of a variety of 100% cotton yarn used for weaving and knitting. For the June’05 qtr., it posted encouraging results. Sales remained flat at Rs.31.30 cr. but NP zoomed 150% to Rs.1.10 cr. due to lower interest cost and better operating efficiency. The company has a very small equity of Rs.5.90 cr. but has huge debt of around Rs.75 cr. on which it pays around Rs.8 cr. as interest. In spite of this and coupled with the high depreciation of around Rs.5 cr., the company is expected to report a bottomline of Rs.4 cr. on a topline of Rs.145 cr. leading to an EPS of Rs.7 for FY06. With the benefit of corporate debt restructing and higher margins, it can easily post an EPS of Rs.10~12 for FY07. With a book value of Rs.46 and FY07 EPS discounting of just 2 times, this scrip can be a multibagger in the long run.

With crude oil trading almost near USD 70 per barrel, India Glycols (Code No: 500201) (Rs.173), the only producer of MEG through the molasses route, will definitely benefit as the price of molasses has not risen the way crude oil has. As polymer prices are rising, MEG (which is the basic raw material for polymer) prices have also started to move up. Apart from this, the company has recently completed its expansion and is all set to report a NP of Rs.100 cr. i.e. EPS of Rs.35 on Sales of Rs.725 cr. for FY06. Against this, it has a market cap of only Rs.450 cr. and is trading at a PE of less than 5x. Its share price can cross Rs.250 in the near future. A strong buy.