STOCK WATCH

Modern Steel (Code No: 513303) (Rs.86) manufacturer of alloy steel and special steel seem a good bet at current levels. Its products are in good demand due to increased requirement from the automotive sector and the engineering industry. Under modernization, the company has already installed electro magnetic stirrers (EMS) and a vacuum degassing plant in its steel melting shop. It is also expanding its melting capacity and in-house rolling capacity from 50,000 to 84,0000 MTPA at an estimated capital outlay of Rs.35 cr. Due to debt restructuring and its tiny equity capital, its EPS can post a substantial rise in coming years.

Due to its aggressive promoters and proper planning, Monnet Ispat (Code No: 513446) (Rs.161.25) has finally emerged as a leading integrated producer with its own coal mine, iron ore mine, captive power plant, sponge iron unit and steel plant. Recently it announced its plan of acquiring a manganese ore mine in Africa and also contemplates on setting up a ferro-manganse unit, as power is very cheap there. Moreover, it is implementing an Rs.630 cr. expansion in Raigarh which will increase its sponge iron capacity to 8,00,000 tonnes from 3,00,000 tonnes, steel capacity is to be enhanced by 4,00,000 tonnes from the present capacity of 3,00,000 tonnes. It is also setting up a 250 MW power plant. It’s a solid buy for the long term.

Crude Oil prices have cooled off substantially from their recent highs and their chance of crossing even 80 USD seem remote. This will help keep raw material costs under control for Laffans Petro (Code No: 524522) (Rs.24.10), which is engaged in manufacturing of ethylene oxide derivatives such as Ethoxylates, Glycol Ethers, Acetates, Triethonal-Amine and Brake fluids. Due to higher demand and better price realisation for its products, Laffans is expected to perform better in coming quarters. For FY05 ending 30th Sept 2005, it can report sales of Rs.140 cr. and NP of Rs.3.80 cr. registering an EPS of around Rs.5. With an expected EPS of Rs.6 for FY06 and book value of Rs.38, the scrip appears very cheap and can give handsome returns if held for the long term.

Eldeco Housing & Industries Ltd (Code No: 523329) (Rs.87.80), the flagship company of the Eldeco Group is trading very cheap at 4 PE. It’s among the very few listed companies engaged in civil construction and housing. Due to easy availability of housing loans, this two decades old company is witnessing enormous growth. It is fully booked for the next 4 years with various residential projects amounting to whopping Rs.450 cr. spread across Lucknow, Kanpur & Delhi. For FY05, its topline grew by 25% but its bottomline more than tripled to Rs.5.50 cr. leading to an EPS of Rs.28 on its very tiny equity of Rs.1.97 cr. The company is likely to make some positive announcements like preferential allotment, merger with another group company etc soon, which could push up the share price. It’s a financially strong group and the scrip can be a multibagger in the long run. It’s a risk free buy at current levels.

Although most cement companies are richly valued on the bourses, Mangalam Cement (Code No: 502157) (Rs.65.50) is somehow ignored by investors and analysts alike. It’s a BK Birla Group company with more than 1 MMT installed capacity. Due to various restructuring initiatives, the company is expected to post an EPS of Rs.8.50 and Rs.11 for FY06 and FY07 respectively on its current equity of Rs.28.20 cr. Share price is bound to cross Rs.100 sooner than later and long term targets are much higher. A safe bet in such a risky market. With cement prices expected to remain high due to strong demand and no major capacity coming up in the near future, cement companies will report much better numbers in coming quarters which could change the perception to this scrip over the next 6 months.

Sujana Universal (Code No: 517224) (Rs.25.15) primarily deals in all types of bearings; light engineering items, auto components, castings and domestic appliances. Lately it also commissioned the facilities for the manufacture of telecom and transmission towers. Apart from Schneider Electric selecting it for developing precision engineering components, Sujana has successfully developed Precision Grinding Components required for Tecumseh Inc, USA. Recently, Sujana has entered into a contract manufacturing agreement with Bajaj Electricals under which it will be manufacturing ceiling and ventilator fans for the Bajaj brand for which it is ramping up its production capacity to 1 million fans per year. Couple of months back, the company completed a GDR issue of USD 16 mn., which can be converted into equity shares @ Rs.35.25. With expected EPS of Rs.6 and BV of Rs.25 on its diluted equity of Rs.50 cr., the scrip is trading reasonably cheap and can appreciate 50% in a year.