Tinplate Company of India - Rs.60.00

Incorporated in 1920, Tinplate Co. of India Ltd (TCIL), an associate company of Tata Steel, is engaged in the manufacture and marketing of tinplate to provide cost-effective metal packaging solutions for processed products. Today, this 80 years old company is the country’s largest indigenous producer of tinplate with a market share of over 35 per cent. Apart from cold rolled products in coil form, TCIL basically manufactures electrolytic tinplates/tin free steel for can fabrication to pack edible oils, processed foods, dairy products, beverages, pesticides, paints and for manufacturing battery components. It also exports to select customers in some markets in the Far East, South East Asia, West Asia, Europe and neighbouring countries like Nepal, Sri Lanka which constitutes around 25% of its total turnover. TCIL is an ISO 9001:2000 and ISO1400: 1996 certified company.

TCIL’s plant is located at Jamshedpur having two units: a combination line of electrolytic tinplate (ETP)/tin-free steel (TFS) and a cold-rolling mill (CRM). It also has a two-stand (double cold rolling) DCR mill backed by state-of-the-art technology obtained from SMS of Germany and UEC of USA for the manufacture of DR tinplates. The company has recently made technical tie ups with French major Arcelor and Japan giant, Nippon Steel, as consultants for process and technology improvements. For cost-competitiveness, TCIL has adopted the double reduction route for manufacturing lighter and thinner tinplate. Currently, its capacity of ETP (electrolytic tinning plant) stands at 1,50,000 TPA. To cater to the increasing demand TCIL is setting up a greenfield project with state-of-the-art tinning line in Jamshedpur at an investment of Rs.100 cr. Besides, it is already implementing a phase-wise expansion programme of its existing unit and intends to take its total capacity to around 4,00,000 TPA in the next few years.

Incidentally, the company has wiped out all its accumulated losses in FY05 and its book value now stands positive at Rs.12 per share. Although its Sales reported a degrowth of 12% to Rs.253 cr. its NP increased 43% to Rs.30.50 cr. due to better operating efficiency and lower interest cost. TCIL is regularly restructuring to replace its high cost debt by low interest loans, which will result in further reduction of interest cost. With the company’s thrust on innovative products and increasing exports it can post Net Sales of Rs.325 cr. and NP of Rs.40 cr. leading to an EPS of Rs.14 for FY06. Investors are advised to accumulate this scrip only at sharp declines with an expectation of 50% appreciation in 12~15 months.

Delton Cables - Rs.49.00

Established in the year 1948, Delton Cables Ltd. (DCL) is one of the largest manufacturers of telecom and instrumentation data control cables in India. It offers total telecom solution products - from conventional telecom cables to Microwave Accessories. DCL manufactures almost all available varieties of cable from telecommunications cable to railway signalling cables, power cables, data transmission cables, house wiring cables, coaxial cables, instrumentation cables etc. Interestingly, DCL was the first private sector company to venture into Jelly Filled Cables and was the first to develop Axle Counter Cable, which ensured safety in train movements and Auto Cables, Coil Cords, Coaxial Cables and many other speciality cables for the first time in India.

Delton has modern integrated manufacturing facilities at Faridabad (Haryana), Dharuhera (Haryana) and New Delhi. It also has in-house PVC compounding, which ensures the highest quality PVC sheathing and insulation. Besides, it has a high tech wire drawing facilities and a separate unit totally devoted to Jelly Filled cables along with a wide assortment of extruders, bunchers, lying up and armouring machines. Its is also well-equipped with R&D facilities meeting the most stringent national and international standards for quality control and product development. Today, DCL is a prime supplier to the Power, Telecommunications, Railways, Steel and Mining sectors in India and has also firmly established itself in the International market. It has a huge clientele supplying its products to all biggies like Reliance, Bharti, NTPC, Tata Power, Siemens, EIL, MTNL, BHEL, BEL, BPCL, RCF, HAL etc. Moreover to increase its international presence, it has entered marketing tie-ups with various foreign firms in USA, Australia, Swedes, Australia etc.

Due to the huge expansion undertaken by telecom players and the government’s thrust on the power sector, DCL is witnessing good times. But due to the increase in copper prices, it is yet to see the best of times. For FY05, its turnover grew by nearly 80% to Rs.68 cr. and NP stood at Rs.1 cr. against a net loss of Rs.1 cr. in FY04. Notably, its OPM improved to 6% from 2% last year. Considering the future growth prospects for the cable industry, DCL can end FY06 with net sales of Rs.90 cr. and NP of Rs.3.5 cr. leading to an EPS of Rs.12 on its tiny equity of Rs.2.88 cr. Investors are recommended to buy this scrip with a price target of Rs.75 in 12 months.

STOCK WATCH

Last fiscal, Kilburn Eng (Code No: 522101) (Rs.53.60), a Williamsom Magor group company sold off its Baroda property to retire a part of its debt, and has brought down the total debt to Rs.24 cr. from Rs.87 cr. It is expected to wipe out its accumulated losses in the next 2 years. Besides to improve its working capital requirement, the company is coming out with 1:1 right issue at Rs.25 i.e. 50% discount to its CMP. Due to the strong uptrend in the industrial cycle, the company is doing very well and has good orders in hand position. For the year ending Sept’ 05, it is expected to post an EPS of Rs.12 on its current equity of Rs.6.75 cr. Share price has the potential to double in 12 months. A great buy.

Sathavahana Ispat (Code No: 526093) (Rs.33) has completed its expansion/modernization programme and commercial production has already begun. With this, it has nearly doubled its production capacity of pig iron to 2,10,000 TPA. Moreover the work for its Rs.170 cr. greenfeild project of 3,00,000 TPA of metallurgical coke with co-generation of power of 30MW is going on as per schedule. For FY06, it is expected to report a topline of Rs.280 cr. and bottomline of Rs.28~30 cr., which means an EPS of Rs.11~12. With a dividend yield of 5%, it is a strong buy with minimal downward risk from the current levels.

Of late, renewed interest is emerging in the Shipping sector in anticipation of a rise in freight rates. GE Shipping (Code No: 500620) (Rs.154.40), being the largest player in the private sector is all set to rise sharply in coming days. Currently, the company’s fleet size stands at 75 vessels – 44 ships aggregating 3 million DWT and 31 offshore units. Apart from its new building, it has ordered 12 vessels - 5 MR Product Tankers and 7 Offshore Supply Vessels. For FY05, it had reported an EPS of Rs.42 and declared Rs.9 dividend. For FY06, it can report an EPS of around Rs.35 and Rs.7/8 as dividend. Share price is expected to hit Rs.250 in 6~9 months. A very good long term bet with a good dividend yield as well.

After bottoming out at Rs.130, India Glycols (Code No: 500201) (Rs.157) has once again begun its upmove and is expected to hit the double century soon. With crude oil hovering around $ 60 a barrel and predicted to move up higher, MEG prices be bound to shoot up in future. Secondly, the duty on molasses has been reduced a few months back. Considering these factors and the company’s recent expansion, India Glycols could register Net Sales of Rs.725 cr. and NP of Rs.100 cr. in FY06. With an expected EPS of Rs.35, the share price can easily cross Rs.300 in the next 15 months. A very good buy.

Due to a strong uptrend in the industrial cycle, the demand for industrial gases has also increased substantially. Strong demand has led to higher prices, which in turn means better margins for manufacturers. Bhuruka Gas (Code No: 509728) (Rs.44.10), which produces a variety of gases like Oxygen, Nitrogen, Hydrogen, Argon etc and under takes turnkey projects for high - pressure gas pipelines of Cu/SS/Carbon Steel with cylinder handling etc is available quite cheap compared to its peers. Post restructuring, its equity stands at Rs.2.18 cr. With the face value of Rs.2.50 per share. For FY06 it is expected to report a top-line of Rs.60 cr. and NP of Rs.9 cr. leading to an EPS of Rs.10. Its share price can double in 12 months.

Gulshan Polyols (Code No: 532457) (Rs.19.25) is engaged in manufacturing Sorbitol, which is mainly used in cosmetics, pharma, food products, paper, dentrifice etc. Recently, it completed its backward integration to produce its basic raw material i.e. starch. Due to the strong demand from the user industry, the company is expected to perform much better in coming years. For FY06, it is estimated to post Sales of Rs.60 cr. and NP of Rs.3 cr., which means an EPS of around Rs.5. On its current equity of Rs.3 cr. and FV of Rs.5 per share. It is a dividend paying company and the share price can rise 50% in 6~9 months.