Eldeco Housing - Rs.113.00

Incorporated in 1985, Eldeco Housing & Industries Ltd (EHIL) is the flagship company of the Eldeco Group, which is a leading name in township development, group housing, commercial complexes, contract work and enjoys leadership position in Lucknow, Kanpur, Agra, Ghaziabad and Greater Noida. EHIL is also involved civil construction and housing. Since last 20 years, the company has completed more than 50 prestigious projects in Lucknow, Kanpur, Agra and Ghaziabad. Due to the easy availability of housing and property loans, real estate & construction activities have started booming in ‘B’ class towns. This means that the best is yet to come for EHIL.

EHIL has expertise in constructing all sorts of residential projects and can boast of successfully completing various projects including low-rise apartments, multi storeyed buildings, independent row houses to big townships. Last year, it completed and handed over the first phase of its prestigious township ‘Udyan’ in Lucknow and is currently working on another prestigious project ‘Suraksha Enclave’, which is nearing completion. Besides this, EHIL has finalised five new projects with a turnover of more than Rs.100 cr. With these projects, the value of the company’s total projects in hand goes over Rs.450 cr. keeping it booked for the next 5 years.

Fundamentally as well as financially, the company is quite sound and is backed by Eldeco’s strong brand image, which commands a healthy premium in the market place. For FY05, its turnover grew by 25% to Rs.41 cr. but the NP jumped 240% to Rs.5.50 cr. leading to an EPS of Rs.28 on its tiny equity of Rs.1.97 cr. For FY06, it may clock a turnover of Rs.60 cr. and NP of Rs.6.50 cr., which means an EPS of Rs.33. With such an impressive growth rate, its share price shot up smartly from its 52w low of Rs.18 to the recent high of Rs.143, before stabilising at Rs.115. Since the promoters hold 60% stake, the floating stock is only 7~8 lakh shares, which makes it a very volatile scrip. Long-term investors are advised to buy at current levels with a price target of Rs.250 in 12 months.

Sambandam Spinning - Rs.126.00

Established in early seventies, Sambandam Spinning Mills Ltd (SSML) is engaged in the manufacture and sale of cotton yarn. It produces finer and high-count cotton yarns, which are used in making garments and madeups meant for export. Normally, such yarn trades at a premium with higher profit margin compared to the normal coarse cotton yarn. Although the company has been exporting directly/indirectly to Italy, Japan, Spain etc but is currently concentrating on the domestic market due to the higher demand and better price realization. With the removal of quota and cotton prices remaining stable, the future prospects of SSML appear very promising.

SSML has two spinning mills in Salem and one mill in Coimbatore with a total installed spinning capacity of around 55,000 spindles. Since it is an old mill, there is constant technological upgradation by replacing the older spindles. Also, it plans expand its capacity to 1,00,000 spindles by increasing capacity by 20% each year over the next 5 years. In addition, it has finalized outsourcing contracts with 3rd party spinning units to produce yarn on an exclusive basis. To ensure quality and cater to the increasing demand, SSML has set up an in-house R&D centre with state-of-the-art machines for all sorts of testing to produce a better product. Besides a windmill, it has also set up 10 wind energy converters at Tirunelveli district, which has led to a substantial reduction in its power cost. For future growth, the company has planned forward integration and intends to get into the production of knitted garment.

Ironically since the last 10 years, the company has not diluted its equity but preferred to avail of loans under the governments TUF scheme at subsidised interest rate for modernisation and expansion. Though the interest rate is low at 5 ~ 6%, SSML’s debt today stands at a huge Rs.61 cr. against its equity of Rs.4.30 cr. and sales of Rs.90 cr. Still, the company is fundamentally strong and has good dividend payout track record. For FY05 its sales increased by 7% to Rs.90 cr. whereas its NP jumped 65% to Rs.5.50 cr. inspite of higher tax provision of Rs.4.90 cr. and declared Rs.5 dividend (50%). Since the real effect of the quota-free regime will be visible in the current year, SSML can report a topline of Rs.110 cr. and NP of Rs.10 cr. leading to an EPS of Rs.23~24. Investors are advised to accumulate this scrip at declines with a price target of Rs.200 i.e.60% appreciation in 15 months time.

STOCK WATCH

Varun Shipping (Code No: 500465)(Rs.40.80) continues to post encouraging numbers beating all analyst estimates. For the quarter ending 30 June 2005, it total revenues grew by nearly 50% to Rs.117 cr. and bottomline increased by 270% to Rs.26.80 cr. leading to a quarterly EPS of Rs.2.40. Importantly, its OPM was at a record high of 55% compared to 43% which is the average for the whole FY05. Scrip has the potential to give 50% return in a year or so. Keep accumulating at declines.

The effect of higher caustic prices can be clearly seen in Chemfab Alkali (Code No: 506894) (Rs.217.40) latest results. The company came out with stunning numbers for the June quarter whereas its sales spurted by 42% only to Rs.23.20 cr., the NP zoomed 260% to Rs.6 cr. posting an EPS of Rs.17.50 for the June quarter. Consider this in the light that its full FY05 NP stands at Rs.9 cr. It also declared 25% interim dividend and proposes a stock split of 2:1. For FY06, it can post an EPS of more than Rs.45. Grab it before it shoots up!

Due to the increase in business travellers and the booming tourism, city hotels all over India are witnessing not only higher occupancy rate but also higher room rates. Hence Sayaji Hotels Ltd. (Code No: 523710) (Rs.35.55), which operates hotels in Boroda and Indore, is reporting better numbers with every passing qtr. Its OPM has shown a substantial increase from 15% last June to around 40% currently. To cash on this opportunity, the company has ambitious expansion plans of opening hotels in other cities as well. For FY06, it may report an EPS of Rs.6. A very good buy at current levels.

Haldyn Glass Gujarat (Code No: 515147) (Rs.53) leading manufacturer of clear glass containers. Recently, it came out with stunning numbers for March 2005 quarter. It reported an operating profit of Rs.5 cr. on Sales of Rs.14.20 cr., which means an OPM of 35%, which is quite good. Moreover for the first time, the company has declared dividend. For the full year FY05 its turnover increased by nearly 25% to Rs.50 cr. but its NP jumped 300% to Rs.4.80 cr. registering an EPS of Rs.9. For FY06, it can easily report an EPS of Rs.12. A strong buy.

Share price of Can Fin Homes Ltd (Code No: 511196) (Rs.46) was not moving up since its promoters like Canara Bank, HDFC and UTI were selling their stake in the open market. They have reduced their total stake from 60% last year to the current 46%. But it is a good company with significant presence in South India and pays consitent dividend as well. For FY05, its total revenue was flat at Rs.127 cr. and the NP grew marginally to Rs.21 cr. posting an EPS of Rs.10 on its current equity of Rs.20.50 cr. and paid Rs.2.50 as dividend for FY05. Besides, it has a book value of Rs.74. Recently; it has diversified into non-housing finance as well. This scrip is bound to get re-rated sooner or later and investors can expect 50% return in 15 months or so.

After witnessing a smart run up, Sanjivani Parental (Code No: 531569) (Rs.87.15) is consolidating currently. Investors can buy even at current levels as the share price is expected to hit a century soon. Lot of positive developments are taking place in the company and it is expected to make some positive announcement in the near future. Sanjivani’s own drug Cobaz and Trenaxa are doing well in the domestic market. Besides it has a healthy order in hand for contract manufacturing. Though the promoter stake is low, it is expected to report an EPS of more than Rs.12 for FY06. Grab it before it shoots up.