Venus Remedies - Rs.78.00

Venus Remedies Ltd (VRL), a Chandigarh based pharmaceutical company, was incorporated in 1991 under the name ‘Venus Glucose Pvt. Ltd’ to initially manufacture large volume parenterals with a startup product range of 15 products. Since then, it has reshuffled its entire portfolio of products and is today a niche player in the pharma sector engaged in the manufacture of Super Speciality formulations in the Oncology & Cephalosporin segments. It has range of products comprising anti-cancer drugs, I.V Fluids, life saving drugs, fourth generation Cephalosporins, Super specialty products etc. It has set up a WHO-GMP certified plant with completely dedicated facilities for these formulations. It also does contract manufacturing for top drug manufacturing companies in the world.

In the last few months, it has already filed 4 patents and has another 10 patents to be filed with the Indian patent authorities, which would boost its top line in future. It has successfully launched 10 new formulations in the Oncology segment and Cephalosporin range during 2004-05 and is planning nearly a dozen launches during this fiscal. Recently, it successfully launched its brand ‘Ronem’, a premium Antibacterial for Critical Care, making it the only company in India to manufacture and market this product. It has also entered into marketing agreements with multinational companies for marketing and distribution of its products in the domestic market. It is also exports directly to Nepal, Ukraine, Yemen etc. For indirect exports to C.I.S. countries, Russia, Latin America and some African countries, VRL has tie-ups with some multinational concerns.

It is setting up an exclusive US FDA accredited manufacturing facility at Baddi in Himachal Pradesh to cater to the Super Speciality segments like Carbapenems, Anti-Cancer drugs in Lyophilized form, SVP injections in lyophilized form and injections in pre-filled Syringes. The complete Baddi Project will require capital expenditure (capex) of Rs.500 million to be completed in 4 phases in two years time. It is focusing on entering the Regulated Markets of U.S.A. and Europe in a big way. Work is already on for filing Drug Master Files (DMF) for three new formulations.

For year ended 31st March 2005, it reported very encouraging numbers. Net sales increased by 44% to Rs. 34 cr. and NP has more than tripled to Rs.4.10 cr. recording an EPS of Rs. 6.50. Due to a better margin product portfolio, its OPM improved from 11% to 16.50%. VRL has also declared an interim dividend of 10% for FY05. Considering the company’s dynamic growth prospects and new product launches, it can garner Net Sales of Rs.55 cr. with NP of Rs.7.5 cr. leading to an EPS of Rs.12 on its current equity of Rs.6.40 cr. If things go as per plans, it can even post an EPS of Rs.20 for FY07. A clear mulitbagger in the long run.

Pitti Lamination - Rs.76.50

Pitti Laminations Ltd, a Hyderabad based company, specialises in standard and special purpose laminations for application in industrial and electrical equipments including Motors, Alternators, Power & Wind Generators, Pumps, Medical Diagnostic Equipment and Aeronautics. It manufactures Electrical Stampings, Press Tools, Stator Motor Core Assemblies, Segmental Core Assemblies, Die Cast Rotors and Electrical Laminations, which are used in all types of motors, alternators, DC machines and railway lighting alternators. It has a very strong clientele and biggies from the power sector including Ador Welding, Alstom, ABB, Best & Crompton, Bharat Bijlee, Crompton Greaves, Kirloskar Electric, BHEL, KSB Pumps, Siemens, Otis Elevator, Toyo Denki Power Systems and Welco Technologies of USA etc. It also supplies electrical laminations and press tools to US markets for use in special purpose motors having a wide and varied applications in weaving, diagnostic medical equipment and in aerospace industries.

Its manufacturing plant is located at Nandigaon Village in Mahaboobnagar District in AP with current capacity of 6000 MT. Due to an industrial uptrend, its plants are working at more than 100% capacity utilization. Recently in April 2005, it started commercial production at its new plant with a capacity of 4,000 MT, which will cater mostly to the export market. With this, the company’s total installed capacity goes up to 10,000 MT. Currently, Pitti Laminations is riding the boom with a healthy order book position and is continuously receiving new export enquires. To cater to this increasing demand, the company is planning to expand further by another 10,000 MT by February 2006. It is also contemplating modernizing some of the equipment at its existing plant.

Incidentally, the company has been de-registered by BIFR in Nov 2004 and is no longer a sick company since its networth has turned positive. In fact, it has already declared and interim dividend of 10% for FY05, which proves the vastly improved financial position of the company. It is expected to come out with encouraging numbers for March’05 quarter and may close FY05 with Net Sales of Rs.45 cr. and NP of Rs.6.25 cr. posting an EPS of Rs.10. For FY06, it can post Sales of Rs.60 cr. with NP of Rs.8.50 cr. reporting an EPS of Rs.14 on its current equity of Rs. 6.20 cr. Investors are advised to buy at declines for a price target of Rs.120 in 12 months.

STOCK WATCH

Jindal Steel & Power (Code: 532286) (Rs1042.20) has completed its Phase 2 expansion way ahead in March 2005 thereby taking its sponge iron capacity to 1.37 million tonnes, power plant capacity to 265 MW and steel melting capacity to 1.15 million tonnes. Moreover, it has recently been included in the F&O list, which will increase its liquidity in the cash segment too. Although most metal scrips, including biggies like TISCO and SAIL, were hammered down recently, this scrip didn’t correct much. It will continue to report record high numbers in coming quarters.

Uttam Galva (Code: 513216)(Rs58.00) has recently commissioned its latest reversible cold rolling mill with an installed capacity of 2,50,000 MTA, which will enable the company to manufacture import-substitute-grade finished cold rolled sheets to cater to the exacting standards of the automobile and white goods industry. Its 31st March’05 numbers were pretty decent but the company disappointed by skipping dividend. It closed FY05 with an EPS of Rs. 12 and is expected to post EPS of Rs.16 for FY06. Share price has the potential to hit Rs.100 mark. Accumulate at sharp dips.

Jindal Stainless Steel (Code: 532508) (Rs102.70) has signed a MOU with Steelway s.r.l. Italy Ltd to establish a world-class service centre near Gurgaon, Haryana, to promote the usage of stainless steel and to serve its existing customers better and thereby expand its market share. Besides, it has continued to report fantastic number for the Q4FY05 quarter as well and ended FY05 with an EPS of Rs.24. A good long term bet from the stainless steel sector.

Indoco Remedies (Code: 532612) (Rs285.00) which touched a high of Rs.440 is quoting near its all time low. It’s a leading pharma company manufacturing a wide range of products in various therapeutic segments such as anti- diabetics, antihypertensives, antispasmodics, anticold preparations, Stomatologicals, cough syrups, antifungals, NSAIDs, anti-infectives, antibiotics, anti-tuberculars, antimalarials, etc. for the domestic as well as export
markets. Last month, it commenced commercial production at its new US FDA approved tablet manufacturing facility at Verna in Goa, which has a manufacturing capacity of 65 million tablets per month. Recently, it also tied up with New Jersey based Strategic Resources USA, LLC, which will market Indoco’s products in the US market. The scrip is quoting at single digit PE and can be accumulated for long term.

Mahindra Ugine (Code: 504823) (Rs108.05) has again came out with splendid numbers. For the March’05 quarter its sales increase by 31% to 153 cr. but NP zoomed 175% to 15 cr. It ended FY05 with EPS of Rs.16 and may report more than Rs.20 EPS for FY06. It has also returned to the dividend list by declaring 30% dividend for FY05. Although mid-cap steel stocks look expensive compared to the current share price levels of TISCO & SAIL, they still have the potential to give 25~30% return in a year or so.

Shreyas Shipping (Code: 520151) (Rs.64.50), a leader in the container feeder segment, reported excellent numbers for March’05 with a total revenue of Rs.31.30 cr., up 63% and NP at Rs.12.70 cr. compared to a loss of Rs.0.53 cr. last year. For the full year it reported an EPS of Rs.13. excluding extraordinary income. It declared a total 20% dividend for FY05. In addition to the coastal trans shipment feeder services, it has been concentrating on developing the coastal shipping trade by promoting a 100% subsidiary to promote and expand its domestic service. For FY06, it can report an EPS of Rs.16~18. This scrip can be accumulated only at declines for a target of Rs.100 in 12 months time.