Sujana Universal Industries - Rs.25.75

Sujana Universal Industries Ltd (SUIL) was originally incorporated as Sujana Domestic Appliances Ltd in 1986 to manufacture fans, washing machines and other consumer durables. Subsequently the name was chnaged to Sujana Industries Ltd and last year it acquired the current name. SUIL is the flagship company of the Hyderabad based Sujana Group. It is engaged in the business of domestic appliances, bearings, castings and international trade.

Under the domestic appliance division, its ‘Padmini’ ceiling fan and 'Zephyre' designer fan are among the largest selling celing fans in South India, which are also exported to over 15 countries. Apart from manufacture for sales, the company also undertakes job work by producing for others. Under its bearing division, SUIL manufactures high quality ball bearings and taper roller bearings with the latest technology on imported machines. With the resultant rise in demand and higer price realisation, the company has increased its production capacity to 10 million bearings per annum and intends to increase it further through internal accruals. Its Castings Division has two induction furnaces with an installed capacity of 26,000 TPA. This division is doing extremenly well and manufactures 2,500 MT of Alloy Cast Iron, 600 MT of Mechanite Castings and 1,500 MT of Ductile Castings. It also produces special cast iron for use by Sujana Metal Products Limited, another group company.

To encash on the growing economy, the management has turned aggressive about future growth and has taken a several positive initiatives. The promoters have infused fresh capital of around Rs.3.5 cr. and the company is now planning to come out with a GDR/FCCB issue of USD 20 million in the near future. It is trying hard to restructure its high cost debt and reduce the interest cost burden, which will boost its bottomline substantially. A few months back, the company has successfully commissioned facilities for the manufacture of telecom and transmission towers with an installed capacity of 1,000 tonnes per month. Recently, SUIL has got the approval from Andhra Pradesh State Road Transport Corporation as suppliers for taper roller bearings and ball bearings. Importantly, the company has also been approved by the Tecumseh Inc. of USA, the world leader compressors for Air Conditioning & Refrigeration by supplying it specially developed precision ground components. Last month, Schneider Electric, an international giant in the field of industrial automation and switchgear, has selected the company for developing precision engineering components.

Although, the company is not very strong financially but considering the various developments and future growth prospects, it is a good bet for the long term. For FY05 ending 30th June 2005, it may register a turnover of Rs.900 cr. and bottomline of Rs.9 cr. leading to an EPS of Rs.4.50 on current equity of 20 cr. This NP figure is arrived after providing for Rs.37 cr. as interest, which is calculated at 14% p.a. In case its GDR is approved, the interest rate may come down to 8%, which will result in saving of Rs.15~18 cr. per annum. Hence only long term and patient investors should buy this scrip with a price target of Rs.50 in 12~15 months.

Bilpower Ltd - Rs.72.00

Bilpower was established in 1989 in the name and style of Brahm Ispat Ltd. but subsequently changed its name to Bilpower to highlight its business and products comprising all types of Transformers & Electrical Laminations, Stampings and Cores. It is a major player in the electrical laminations market, which forms the core of the transformer industry. Besides it produces the largest range of transformer cores in India. Bilpower supplies its product to almost all parts of the country and enjoys the highest brand preference for superior quality and performance. Currently, the company has a huge & reputed clientele spread across 27 sates and 100 cities, which makes it the undisputed leader in the domestic market.

The Company’s strength lies in its excellent infrastructure, network and remarkable after sales service. Its manufacturing plants are equipped with the latest state-of-the-art technology and communications system backed with efficient planning. The company procures the CRGO Steel Sheets and Coils from leading manufacturers of the world and converts the same into laminations and stampings, which are the main raw materials for transformers. The company has even mastered core manufacturing, which is a very complex process and requires technical expertise and production skills. Moreover, Bilpower is concentrating more on exports and looks forward to international tie-ups to manufacture high-end CRGO stampings, laminations and Ready-to-Use Core for international players in Europe. Due to the huge demand from the power sector, the company is expanding its capacity by nearly 50% and putting up an insulated conductor unit, which would be operational in 2006.

With the government’s thrust on power and power reforms, Bilpower is expected to perform much better in coming quarters. For FY05, it reported impressive numbers. Its total sales grew by 62% to Rs.67.50 cr. whereas its NP spurted by 163% to Rs.4.50 cr. resulting in an EPS of Rs.7.5 and the company declared 10% dividend compared to 5% last year. In expectation of the phenomenal demand from the power sector and the company’s expansion plans it could earn a NP of Rs.7 cr. on a turnover of Rs.90 cr. leading to an EPS of Rs.12 on its current equity of Rs.6 cr. Investors are recommended to accumulate at every decline with a price target of Rs.100 in 12 months.

STOCK WATCH

Indian Sucrose Ltd. (Code No: 500319) (Rs.24) earlier known as Oswal Sugars Ltd, is a small sugar company with a capacity to crush 3500 tonnes of sugarcane per day. Few months back, it acquired M/s Ranger Breweries Ltd from the Modi Group and now owns its distillery at Mehatpur in H.P. Given the uptrend in sugar prices, better operating efficiency and various govt. benefits, this company has sharply turned around in FY05. Its Net Sales grew by 50% to Rs.68 cr. whereas its NP jumped 800% to Rs.10.50 cr. recording an EPS of Rs.7 on its current equity of Rs.15.50 cr. Even if the company maintains its current profit margin, it can report an EPS Rs.5~6 for FY06 and its share price can rise 50% in the next 6 months. A good buy

Recently, all hotel scrips have been re-rated sharply, thanks to the higher occupancy rate and growth in tourism. In such a scenario, Blue Coast Hotel (Code No: 531495) (Rs.69), the owner of Park Hyatt Goa Resort & Spa, is worthy of investment. The company is doing well and has reported a sharp turnaround. For the six months ending 31st March 2005, its total revenue increased by almost 50% to Rs.39 cr. which is marginally higher than the full last year revenue and it reported a NP of Rs.4.40 cr. compared to the net loss of Rs.0.50 cr. last year. For FY05, it may report an EPS of Rs.12 on its small equity of Rs.6.55 cr. Only aggressive investors are advised to accumulate it on sharp declines, as there is a risk of equity dilution in the near future.

Aggressive Investors can consider taking some exposure in Steel Exchange (Code No: 590037) (Rs.24.40) due to the strong uptrend in the steel sycle. This 6-year-old company has reported a substantial increase in bottomline. For FY05, its topline increased by 33% to 343 cr. but its NP zoomed to Rs.8.30 cr. compare to Rs.0.74 cr. last year. It reported an EPS of Rs.6 on its current equity of Rs.14.20 cr. Its OPM improved substantially to above 4% from below 1% in FY04. Its 52-week high/low is Rs.35/13. It book value stands at Rs.16 but promoters hold only 21% stake.

KCP Sugars & Industries (NSE Listed) (Rs.194.75) is a leading sugar producer in the South and has posted an excellent performance for FY05. Sharing the success of the company, the management has announced a total dividend of 100% for FY05 compared to just 25% last year. It doubled its OPM to 25% form 12% in FY04, which is much higher compared to its peers. Its net sales grew by 40% to Rs.310 cr. but its NP doubled to Rs.41 cr. reporting an EPS of Rs.36. And that too after a huge tax provision of Rs.24 cr. Else, its EPS before tax comes to Rs.58. With such a good dividend yield and the bright future prospects of the sugar industry, this scrip is among the best buys from the sector.

Uttam Galva Steel Ltd (Code No: 513216) (Rs.44) is a well-managed and professionally run company. It has huge expansion plans whereby it plans to double its cold rolled and galvanized steel production capacity to 10,00,000 and 7,50,000 tonnes respectively by 2006. It ended FY05 with fantastic figures. Sales increased by 80% to Rs.2094 cr. and NP zoomed 300% to Rs.95 cr. registering an EPS of Rs.12. Though some analysts have concerns regarding its dividend policy and tax provisioning method, it still remains a good buy at current levels. Its share price can double from hereon in the next 12 months.

Telecommunications & Power sector is on expansion spree, which indirectly benefits cable manufacturers. Delton Cable Ltd. (Code No: 504240) (Rs.54.90), a lesser-known Delhi based cable company, which manufacturers almost all types of cables is witnessing a sharp turnaround and is expected to perform even better in coming quarters. It reported excellent numbers for March’05 quarter. Sales jumped 90% to Rs.20 cr. whereas NP stood at Rs.0.75 cr. compared to a net loss of Rs.0.14 cr. It has a very tiny equity of Rs.2.90 cr. with the promoter holding of 73%. For FY05, it registered an EPS of Rs.3.5, which can shoot up to Rs.8 in FY06. Buy at declines as the share price can rise by 50% returns in 6~9 months.