KIC Metalics- Rs.77.50

KIC Metaliks Ltd, promoted in 1986 by Mr Ravi Kajaria, was formerly known as Kajaria Iron Castings Ltd. The company manufactures of Pig iron, castings and slag cement. Due to the boom in steel, auto & construction sectors, its product is witnessing good demand and higher price realisation. It manufactures pig iron of both steel and foundry grade and its castings have a good international market and are mainly exported to various European countries, US and Australia. About 15-20 per cent of the pig iron produced is used captively for making its own castings and the rest is supplied to other foundries and steel companies.

The company’s manufacturing plant is located at Durgapur in West Bengal and currently produces 1,20,000 TPA of pig iron through technology obtained from Korf of Brazil. To get the maximum benefit out of a growing economy, the company is going in for forward integration and is in the process of setting up steel billet manufacturing plant with a capacity of 1,50,000 TPA which is expected to be operational by Sept. 2005. This plant will consume 75,000 tonnes of captive pig iron production. Hence the company is expanding the pig iron production capacity from to 1,50,000 TPA. To feed all its plants it is setting up a captive power plant of 4MW by using the waste gas generated from the blast furnace, which will reduce its power cost substantially. Due to the shortage and rising prices of metallurgical coke, KIC is putting up coke oven battery plant to produce 2,00,000 TPA of metallurgical coke which will meet 100 per cent of its coke requirement. Nearly 30 per cent of the capacity is in place and this coke plant is expected to commence production shortly. In short, the company has an aggressive Rs.100 cr. expansion plan to become an integrated steel manufacturer.

Recently the company came out with splendid Dec.’04 numbers. Its net sales jumped 170 per cent to Rs.68.20 cr. and NP increased by 150 per cent to Rs.2.50 cr. posting an quarterly EPS of Rs.6.70. In future, its profit margin is expected to improve due to cheaper raw material on account of backward integration. Considering the company’s growth plan and the rising demand for steel in the domestic as well as international markets. KIC Metalics could close FY05 with a topline of Rs.180 cr. and Net Profit of around Rs.7 cr. On its current small equity of Rs.3.70 cr. EPS works out Rs.19 and CEPS of Rs.28. Thus its trading at a low PE of 4 with a potential to appreciate by 50 per cent in next 6 months. Its FY05 and FY06 will be much better due to the impact of expansion. But at the same time the management may dilute its equity to fund the Rs.100 cr. expansion.

Metalman Indsutries - Rs. 33.00

Metalamam Industries Ltd (MIL) was incorporated in 1971 as private limited company to manufacture high frequency induction welded tubes and other specialised pipes. In 1986 it was converted into a public limited company and in 1996 it changed its name from Metalman Pipe Manufacturing Company Limited. Today, it is an ISO 9001:2000 manufacturer & exporter of CR Steel Sheets/Coils, CR Galvanised plain steel Sheets/Coils and Corrugated steel sheets. It also manufactures black and galvanised steel pipes, precision tubes and hollow sections and exports its products all over the world including China, USA, Japan France, Germany, UK, Europe, Brazil, South Africa, Philippines, Mauritius etc.

MIL can boast of one of the most ultra modern and hitech manufacturing plant spread across Pithampur, Dhar Dist and Sukliya Industrial Area, Indore. Its total current capacity is 2,75,000 TPA but due to raw material concerns, the company is working only at 40 per cent capacity utilisation. Recently, the company started to manufacture Mild Steel Plain HR Plates and Chequered plates. It also added a Mini Spangle and Tension leveling equipment to its Continuous Galvanizing Line, which will help in product applications such as colour coating. A few weeks ago, MIL completed backward integration by which its sister company, Soni Ispat Ltd., has set up a plant to manufacture 2,00,000 TPA of ingots needed as a raw material for HR products. MIL has also acquired on a long lease arrangement Bhanu Iron, which is adjacent to its plant and has the capacity to produce 6,00,000 TPA of HR steel. Hence, MIL now has fully integrated operations from ignots to HR to CR to galvanized sheets under its control. Going forward, MIL’s capacity utilisation is expected to improve from the current 40 per cent, now that raw material concerns have been addressed. This, in turn, will boost its topline and bottomline in coming quarters.

For the six months ending 30 Sept. 2004, it posted very impressive numbers with Net Sales rising 50 per cent to Rs134 cr. and NP increased in line by 55 per cent to Rs5.35 cr. recording a half yearly EPS of Rs 4.5. Its second half is expected to be much better given the new developments and initiatives taken by the management. The company also has huge reserves of around Rs50 cr. on its current equity of Rs11.72 cr. taking its book value to around Rs 45. With higher production and improvement in profit margin, the company can report Net Sales of Rs290 cr. and earn NP of Rs12.50 cr. resulting in an EPS of Rs11 in FY05. Currently, the share is trading very cheap and investors are strongly advised to buy . Although the promoters stake is only 28 per cent and the scrip is in ‘Z’ category, still it has the potential to double in year’s time and turn into a multibagger in the long run.

STOCK WATCH

Ashapura Minechem is a pioneer in mining, processing & exporting bentonite lumps and powder and other minerals like china clay, calcium carbonate, barytes, etc. It is one of the largest producer of Bauxite in the world, controlling 10 per cent of the world’s freely traded bauxite. Its bulging order book position & excellent December’04 numbers makes it a good long term bet. For this quarter, its total revenue increased 6 times to Rs.165 cr. and NP increased by 700 per cent to Rs.5.50 cr. posting a quarterly EPS of more than Rs.8.5. For FY05, it can report an EPS of around Rs.25 Accumulate it at sharp declines for the long term

Sarla Polyester is a 100 per cent EOU engaged in the manufacture of synthetic and texturised yarn. With the removal of the quota system, this company is bound to benefit and will post much better numbers in coming quarters. It posted good numbers for December’04 as well with Sales up 24 per cent at Rs.18.50 cr. and NP at Rs.2.60 cr. up 13 per cent. It enjoys a decent OPM of around 20 per cent. At current market price (CMP) the dividend yield works to more than 5 per cent with an expected dividend of 28 per cent for the full year. For FY05, it is expected to post an EPS of Rs.14. A strong buy in the growing textile sector.

Recently, Aarti Industries has approved 1:1 bonus and the second interim dividend of 40 per cent and the scrip is expected to turn ex-bonus this week. The company came out with fabulous December’04 numbers. Its Net Sales grew by 41 per cent to Rs.183 cr. and NP increased by 37 per cent to Rs.14.85 cr. The Company is reportedly doing well and is expected to end FY05 with an EPS of around Rs.40. Long term investors can buy it for handsome gains at CMP

Caustic Soda price are rising and so will the share prices of caustic soda companies. In this sector, a relatively small and lesser known company, Chemfab Alkali, is performing exceedingly well. Due to lack of investor awareness it is trading very cheap compared to its peers like Guj Alkalies etc. For the quarter ending 31st December 2004,its Sales grew by 14 per cent to Rs.19.50 cr. its bottomline doubled to 4 cr. recording an EPS of Rs.11.50 on small equity of 3.47 cr. but due to better price realisation and lower interest cost. For the full year FY05 it can report an EPS of Rs.35. A good buy for the short term as well as the long term.

For quite some time, Tata Sponge is trading in a very narrow range band and its share price has not risen even in this bullish market. Investors are advised to hold it patiently as the scrip has the potential to touch Rs.250 mark. For December’04 quarter its Sales increased by 37 per cent to Rs.61.40 cr. and NP zoomed up 86 per cent to Rs.15.45 cr. maintain its OPM at 38 per cent. For the full year FY05 it can post an EPS of more than Rs.36. Hold it patiently.

As mentioned earlier in this column, Shah Alloys has come out with flying colours beating all the analyst expectation. It reported record high sales and NP figure for December’04. Net Sales was up 40 per cent at Rs.343 cr. and NP jumped 162 per cent to Rs.17.10 cr. posting an EPS of more than Rs.19 for the quarter. For the full year FY05 it can report an EPS of Rs.45. A screaming buy. Grab it before its too late. Share price is expected to hit Rs.250 mark soon.

Mro-Tek has turned quite active by developing certain high-profile indigenous technology products to maintain future growth. It reported quite impressive numbers for December’04. Net Sales increased by 4 per cent but NP doubled to Rs.5.60 cr. excluding extraordinary items. Interestingly, it’s OPM for this quarter stood at 18 per cent compared to the normal 10 per cent. If we do not consider the extraordinary item, the Q3FY05 EPS works out to Rs.2.75 on Rs.5 face value on its current equity capital of Rs.10.22 cr. The company has also approved the buy back plan but deferred it due to some SEBI regulation.