Bongaigaon Refineries Rs.89.30

Bongaigaon Refinery & Petrochemicals Limited (BRPL) was incorporated in 1974 as Government of India Undertaking. In 2001, it became a subsidiary of Indian Oil after the disinvestment by the Govt. of India. With an investment of about Rs.890 cr. in Refineries & Petrochemicals plants, BRPL has the unique distinction of being the first indigenous grass root Refinery in the country integrated with a Petrochemical complex at one location. Being in the north eastern region, BRPL enjoys special excise duty concession of 50 per cent from the government Petroleum products from the Refinery includes conventional fuels like LPG, petrol, MS, Naphtha, ATF, SKO, HSD, LDO, LVFO, LSHS, etc. Apart form petro products it also produces petrochemical like ylene, Dimethyl Terephthalate (DMT), Orthoxylene, Paraxylene, Ceenine and Polyester Staple Fibre (PSF).

BRPL has two crude distillation units (CDU) in Bongaigaon in Assam with a total crude processing capacity of 2,35,000 MTPA. The major products of this unit are Reduced Crude Oil, LPG, Straight run Naptha, Reformer feed naptha, Raw kerosene & Diesel oil. Reduced Crude oil is then converted into Fuel Gas, LPG, Naptha, gas oils, Fuel oil and Raw petroleum coke under its two delayed coke unit (DCU) each having capacity of 5,00,000 MTPA. Its Coke calcination unit is designed to convert 75,000 MTPA of Raw petroleum coke available from DCU into 52,500 MTPA Calcined petroleum coke. It also has a Kerosene treating unit with a capacity of 2,37,500 MTPA which can process raw kerosene from CDU to produce Superior kerosene oil and Aviation turbine fuel. Moreover its Xylenes plant can produce 29,000 MTPA of Para-ylene,6,000 MTPA of Ortho-ylene and 10,000 MTPA of Ceenine. BRPL also has a Dimethyl Terephthalate plant which can produce 45,000 MTPA of DMT. Recently, the company has suspended its production of DMT and PSF units due to lower market demand and unremunerative sales realisation.

Currently, BRPL is processing crude available from the oil fields of ONGC and OIL located in the North-East India Ravva crude oil from the Krishna-Godavari basin off the coast of Andhra Pradesh. Its working almost at 100 per cent capacity utilisation and gross refining margin is at record high of USD 9.30. For future growth, the company is implementing modernisation and other efficiency improvement schemes under a capex plan of Rs800~1000 cr. to become a vibrant petroleum company of national prominence. Though some analysts expect it to be merged with IOC, chances of it areess as BRPL will then lose the 50 per cent excise benefit concession.

Fundamentally, it is a strong and investor-friendly company having paid a healthy dividend of 77 per cent for FY04. For the quarter ending Dec 2004 it posted impressive numbers. Sales grew by 60 per cent to Rs1174 cr. and NP increased by 40 per cent to Rs134 cr. Its March’05 quarter numbers will be much better compared to March 2004 since the company has already made higher provision for under recovery of CST. With the continuation of strong refining margins, a healthy balance-sheet and the guiding hand of the parent Indian Oil, we expect it to end FY05 with Sales of Rs4300 cr. and NP of Rs550 cr. This works out to an EPS of Rs28 on its current equity of Rs199.82 cr. Hence the scrip is trading very cheap at 3 PE in spite of a good dividend yield. Investors are advised to buy at the current market price and hold it patiently for 12 months to see a price target of Rs150.

Videocon International Ltd. Rs.67.15

Incorporated in 1985, Videocon International Ltd (VIL), the flagship company of the Videocon Group, is India's largest manufacturer of Consumer Electronics & home appliances. It manufactures, markets & exports a wide variety of televisions, audio systems, VCD/DVD players, air conditioners and other electronic components. VIL can boast of having a product for every segment of society from economy to value added hi-tech products. Fired by a passion for innovation, VIL has kept pace with the changing face of technology constantly upgrading its manufacturing facilities to incorporate advanced technology and high standards of quality into its product range, right across the spectrum.

Videocon’s USP lies in introducing innovative products and having state-of-the-art ultra modern manufacturing plants spread across all over India and also in Russia, Bahrain & Italy. At its modern plant at Chitegaon and Aurangabad, the company has undertaken complete backward integration to manufacture all critical and important components of its products, such as Electronic Tuners, FBTs, ATDMs and Deflection Yokes thereby reducing costs, ensuring quality control and becoming vertically integrated. Its subsidiary Videocon Narmada Glass has the distinction of having set up India's first plant with 1.7 million units capacity for the manufacture of Glass Shells for Color Television Picture Tubes, in technical collaboration with Techneglas Inc., USA world leader in Glass Shell Technology. It also enjoys the credit of bringing international brands like Toshiba, Sansui, Akai & recently Hyundai to India. The company has also set up 25 branches across the globe to give a fillip to its international operations. Recently, it acquired Thomson's colour picture tube plant located in Anagni, Italy which has capacity to produce 3 million units per annum. With all this consolidation, the Videocon group is looking at reaching international sales of $1 billion in three years.

VIL derives almost half of its profit from its glass shell business due to which it enjoys the highest operating margin of 16 per cent compared to its peers. Fundamentally, its a very strong company with a book value above Rs180 due to huge reserves and posted an EPS of Rs25 for the year ending Sept 2004. Its first quarter ending 31 December 2004 is also quite impressive with net sales growing 18 per cent to Rs1165 cr. and the NP increased 26 per cent to Rs55 cr. leading to a quarterly EPS of Rs7.75 on current equity of Rs71.10 cr. FIIs and MFs are also active in this scrip with 4 per cent and 2.65 per cent stakes respectively. With the rural demand picking up coupled with the increased spending by urbanites and the huge potential in the export market, we expect VIL to clock a turnover of Rs4250 cr. and NP of Rs200 cr. for FY05 which would mean an EPS of Rs28. Thus the scrip is trading extremely cheap (below 3 PE of FY05 EPS) and investors are advised to buy with a price target of Rs110 in 12 months time. At the same time, investors should remain cautious as the promoters don’t enjoy a good reputation in the capital market and some analysts even doubt the group’s financial numbers as the dividend payout ratio is very poor.

STOCK WATCH

Lot of rumours are buzzing the market about consolidation in the banking sector and Banking personalities opine that mergers and acquisitions are inevitable in the current situation. Hence South Indian Bank given its strong fundamentals and wide regional presence is being targeted by several big private and foreign banks. It’s safe and good bet in the banking sector.

Purely on fundamentals National Oxygen, a very small company manufacturing oxygen, nitrogen gas etc looks fairly cheap and can rise sharply if the market remains bullish. For the December quarter it reported excellent set of numbers. Its Net Sales was up 60 per cent to Rs.3.85 cr. and NP zoomed 360 per cent to Rs.1.25 cr. posting a quarterly EPS of Rs.4 on equity of Rs.3.10 cr. Its OPM also improved substantially to 39 from 14 per cent last year. For FY05, it is likely to post an EPS of Rs.12 and the scrip can cross Rs.60 in medium to long term.

Haldyn Glass Gujarat Ltd is one of the major players in the Clear Glass Container manufacturing segment and has a diverse and reputed clientele including Glaxo, Cipla, McDowells, Shaw Wallace, Camlin etc. Its December’04 quarter was quite good as Sales grew by 17 per cent to Rs.13 cr. and NP jumped 80 per cent to Rs.1.10 cr. For the full year, it can post an EPS of Rs.7 and the share price can cross Rs.50 mark if the market sentiment remains bullish

Era Construction, a lesser known and relatively smaller company in infrastructure construction sector is reportedly faring well. Thanks to the growing economy and its bulging order book. For FY05, it may report an EPS of Rs.9 which may shoot up to Rs.14 in FY06. Accumulate it at every dip to get handsome returns in the long term.

Jupiter Biosciences is among the very few companies in the world specializing in peptide chemistry, organic chemistry, chiral chemistry and biotechnology. Recently it has entered into a general cooperation agreement with a Clariant Pharmaceutical Fine Chemicals of Germany. For the full year, it is expected to report an EPS of around Rs.20. The management is very media shy but the share price can rally sharply in future like Ind. Swift Ltd. Investors are advised to hold it patiently. There is hardly any downward risk even if the market corrects.

DCM Shriram Industries has one of the most modern sugar factories at Daurala in U.P. with 8000 TCD capacity and the country’s largest alcohol plant with a capacity of 45,000 kilo litres of bulk alcohol. For December quarter its total sales was up 24 per cent and NP increased by 30 per cent to Rs.6.30 cr. posting a quarterly EPS of around Rs.5 on its current equity of Rs.13.70 cr. Sugar prices are expected to rise further in future, which will lead the company to report an EPS of Rs.18 for FY05. A strong buy for a target of Rs.150 in the next 15 months.

Textiles scrips have seen a smart rally and an analyst feels that most of the scrips are fairly valued against their FY06 earning. But Eastern Silk being in T2T segment is still trading reasonably cheap and can be accumulated for long term gains. The company has good growth plans for the future and is expected to close this financial year with an EPS of Rs.38 .The scrip has the potential to rise 50 per cent from the current level in a year’s time.