STOCK WATCH

Of late, steel scrips are coming back into action and Uttam Galva Steels (Code No: 513216) (Rs.55.55) may see a smart rally in coming days. The company has huge expansion plans whereby it plans to double its cold rolled and galvanized steel production capacity to 10,00,000 MTA and 7,50,000 MTA respectively by 2006. To fund this expansion, the company raised USD 30 million through FCCB route, which were recently listed on Singapore Stock Exchange and can be converted into equity shares @ Rs.65. For FY06, the company can report an EPS of Rs.10 even on its fully diluted equity of around Rs.100 cr. FY07 will see exponential growth due to the impact of this expansion. A very good long term bet.

Apart from Canfin Home in the housing finance sector, investors can also look at GIC Housing Finance (Code No: 511676) (Rs.49.85). With the government relaxing the entry norms for 100% Foreign Direct Investment (FDI) through the automatic route in construction & development for mega housing projects, this sector is expected to witness phenomenal growth in coming years. Moreover, the govt. has also allowed indigenous housing finance companies to raise resources through external commercial borrowings (ECB) by way of FCCB. Due to the rising standard of living and increased tax benefits on housing loans as per Finance Bill 2005, GIC Housing is bound to do well and may report an EPS of Rs.9~10 for FY06.

SAIL and Tinplate Co. of India Ltd (Code No: 504966) (Rs.74.60) are the only indigenous producers of tinplate in the country with TCIL enjoying 35% of the market share. It has already increased its capacity to 1,45,000 MTA and is further expanding to 1,70,000 by 2006 on an investment of Rs.42 cr. With debt restructuring, it has brought down its debt-equity ratio to nearly 1:1 from 2:1 last year. On the export front, the company is targeting specific end users in niche markets of SE Asia, West Asia, other neighbouring countries and even Europe. It is also establishing a 'Solution Centre' with scrolling, printing and lacquering facilities to provide value added forms of tinplate. With an expected EPS of Rs.14, the scrip is available quite cheap in the current market

In the sugar sector, Ponni Sugar (Code No: 532460) (Rs.48.20) a South based small sugar company, looks good for investment with a long-term perspective. For FY05, while its sales increased by 11% to Rs.89 cr., its NP zoomed by 140% to Rs.6 cr. registering an EPS of more than Rs.7 and it declared a maiden dividend of 10%. The company is aggressively liquidating and restructuring its high cost long-term debts and has successfully brought down the interest cost to 9% form 15% earlier. Due to better monsoons this season and sufficient sugarcane availability coupled with higher sugar prices, the company is expected to report Sales of Rs.120 cr. and NP of Rs.7.50 i.e. EPS of Rs.9 on its current equity of 8.20 cr.

To cater to the increasing demand of sponge iron, Tata Sponge (Code No: 513010) (Rs.182.70) is undertaking expansion by installing 3rd kiln of 1,50,000 tonne taking its total capacity to 3,90,000 TPA. Recently, the company has further approved an investment of Rs.300 cr. for installation of the 4th kiln of 1,50,000 tonne capacity and a captive power generation facility of 18.50 MW. Gradually, the company intends to take the total installed capacity to 8,40,000 tonnes and power generation capacity to 60 MW. It is also planning for forward integration to produce steel upto 2 million TPA in a phased manner. With an expected EPS of Rs.35 and promising future ahead its share price can easily cross Rs.250 in the near future. Besides, its possible merger with Tata Steel in the future cannot be ruled out.

Paper prices are rising and so are the share prices of paper companies. But South India Paper Mills (Code No: 516108) (Rs.73.80), a Rs.100 cr. company, has still not caught the market fancy and is available relatively cheap compared to its peers. For FY05, its sales grew by 30% to Rs.91 cr. and NP increased by 35% to 4.35 cr. resulting to an EPS of Rs.6 on current equity of 7.50 cr. It gave 20% dividend, which means dividend yield of approx 4% at CMP. Its an investor-friendly company, which gave 1:1 bonus last year and with promoter holding of about 66%. For FY06, it can report an EPS of Rs.9-10 and its share price can appreciate by 50% in 12 months.