Jhunjhunwala Vanaspati - Rs.40.50

Incorporated in 1989, Jhunjhunwala Vanaspati Ltd (JVL) is primarily engaged in the production of refined oil & vanaspati ghee. It markets and sells its products under the brand name ‘Jhoola’ which is a leading brand in UP and eastern India with about 40% market share. Its vanaspati ghee and refined oil is basically consumed by the medium and lower income group and in the rural areas. The company uses modern technology for refining oil as the traditional method of chemical refining leads to high process losses in comparison to the physical refinery

JVL’s has a state-of-the-art integrated plant with an installed capacity of 350 TPD. In fact, it is the single largest unit manufacturing vanaspati ghee in India. The company has continuously gone in for technological upgradation over the last few years and has obtained ISO 9001- 2000 certification for its quality system. JVL has also tied up with the UK-based Oriental Commodities to produce herbal Ayurvedic capsules of various popular vegetables, fruits and herbs by preserving them in their purest form to maintain the original colour, flavour, taste and potency of product. It has also ventured into the manufacture of HDPE containers and tin containers. Apart from all these developments JVL is expected to perform better thanks to the incentives to the sector, which includes abolition of excise duty combined with a possible offer to import vegetable oils at concessional rate for production of Vanaspati.

Fundamentally as well as financially, the company is quite strong. It’s a debt free and cash rich company having huge liquid investments, equivalent to almost Rs.127 per share. On its small equity of Rs.6.83 cr., it has reserves of around Rs.28 cr., which leads to a book value of Rs.61 as on 31st March 2005. For FY05, it earned NP of Rs.5.80 cr. posting an EPS of Rs.8.50 on total sales of Rs.486 cr. Again, the company has posted encouraging result for the June’05 qtr with Sales of Rs.146 cr. and NP of Rs.1.75 cr. Considering all these factors, JVL is expected to end FY06 with turnover of Rs.600 cr. and NP of Rs.6.50 cr. which means an EPS of Rs.9.50. Investors are strongly recommended to buy this scrip with a price target of Rs.60 (50% appreciation) in the next 9~12 months.

Bhuruka Gas - Rs.43.00

Bhuruka Gas Ltd (BGL), was originally incorporated as Karnataka Oxygen Ltd. in 1974 by Shri S.N. Agarwal through Transport Corporation of India Ltd.and Karnataka State Industrial Investment & Development Corporation Ltd. Since then, it has become one of the largest manufacturers of high quality industrial gases in South India producing a wide range of industrial gases like Oxygen & Nitrogen in liquid and gaseous form, Argon, Hydrogen, Dissolved Acetylene, Mixture Gases and Calibration Gases. In fact, BGL is the largest independent producer of argon in India. Due to the growing Indian economy and the strong uptrend in industrial growth, BGL’s products are in huge demand. With no new capacities coming up in the near future, BGL is expected to perform much better in coming quarters.

BGL’s plant is located at Bangalore and is equipped with imported machinery from Germany. This plant is capable of producing 19,00,000 cubic metres per month each of liquid oxygen and liquid nitrogen and 65,000 cubic metres per month of argon. Importantly, BGL supplies the complete range of industrial gases and has established good rapport with its customers for the quality of its products and services. Apart from the gas supply, it undertakes turnkey projects for high pressure gas pipelines with cylinder handling manifolds. It also undertakes up cryogenic pressure vessel installations, liquid bottling pumps supply and maintenance. Of late, company has been laying more emphasis on the manufacture of value added products like high purity, speciality and calibration gases.

Earlier till FY03, the company was not performing well and had huge carry forward losses and was declared sick. However, after various restructuring initiatives and BIFR orders it turned around in FY05. According to the terms of the BIFR order, the paid-up equity share capital of BGL has been reduced from Rs.8.72 cr. to Rs.2.18 cr. by reduction in the face value of its equity shares of Rs.10 each to Rs.2.50 per equity share. Today, it is no longer a sick unit and the BIFR has deregistered it from the purview of The Sick Companies Act. For FY05, BGL reported a topline of Rs.43 cr. and a bottomline of Rs.7.70 cr. including extraordinary items. Since industrial gas is consumed across the industry and most industrial sectors are undergoing expansion, BGL can post a topline of Rs.50~55 cr. and bottomline of around Rs.8~9 cr. and thereby post an EPS of Rs.9~10 for FY06. Investors are strongly recommended to buy the share at current levels expecting 50% return in 9~12 months.

STOCK WATCH

Of late, metal scrips are coming back in action and Stelco Strips (Code No: 513530) (Rs.25.55) can rise sharply to hit a new high. It is engaged in the manufacture of cold-rolled close-annealed (CRCA) steel strips of mild steel, medium and high-carbon steel. Recently it came out with very encouraging numbers for the June’05 qtr. Its Net Sales & NP grew by 50% to Rs.31.50 cr. and 0.94 cr. respectively. For full FY06, it can report an EPS of Rs.7 on its small equity of Rs.6.90 cr. Share price can rise by 50% in 12 months. A good medium term buy in the metal sector.

Mahalaxmi Seamless (Code No: 513460) (Rs.41) is among the largest manufacturers of cold drawn seamless pipes and tubes in India. Since the future prospects of the pipe industry are quite good, investment in this company is quite promising. Its FY05 numbers were quite encouraging with Sales up 60% to Rs.28 cr. and NP increased by 140% to Rs.2.05 cr. For FY06, it is expected to post a topline of Rs.35 cr. and NP of Rs.3.5 cr., which means an EPS of Rs.7 on the current equity of Rs.5.30 cr. Buy at declines only as the scrip has seen a smart run up.

Pacific Cotspin (Code No: 531118) (Rs.15.43) is a leading producer of superior cotton yarn in eastern India. It’s planning to increase its capacity by over 50% from around 26000 spindles to 40000 spindles. Notably, the company is raising about Rs.10 cr. by way of preferential allotment of 58 lakh shares to promoters @ Rs.17.25 per share. Its June numbers were quite impressive with sales rising 50% to Rs.36 cr. and NP stood at Rs.1.50 cr. compared to Rs.0.10 cr. last year. For the full year, it may report an EPS of Rs.2.5 on its diluted equity of Rs.27.90 cr. A few days back the company has also approved to merge Salem Vanijya, an unlisted company, with itself.

Purely on fundamentals, Konark Synthetic (Code No: 514128) (Rs.52.15) looks extremely cheap and can double from the current level. It’s a relatively smaller player in the texturised yarn business with a topline of around Rs.20 cr. It has a very tiny equity capital of Rs.1.33 cr. and promoters hold around 49% stake. It came out with excellent result for June’05 qtr. Its Sales grew by 50% to Rs.5.65 cr. whereas its NP zoomed to 52 lakh compared to 2 lakh last year. For FY06, it may report an EPS of Rs.14, which means its trading at a forward PE of 3x. Grab it before its too late.

One textile scrip that came out with stunning numbers for the June’05 qtr was Gupta Synthetics (Code No: 514116) (Rs.150.50). It is engaged in texturising, twisting and dyeing of yarn, weaving of fabrics and is also one of the largest manufacturer and processors of man-made fabrics specially sarees and dress materials. Sales have more than tripled to Rs.36 cr. and NP jumped nearly 900% to Rs.1.25 cr. reporting an EPS of Rs.16 for the qtr. It has a very tiny equity of Rs.1.60 cr. in which the promoters hold 54% stake. With an expected EPS of around Rs.40~45 and such low floating stock this scrip can easily double in a matter of few weeks. Catch it if you can.

Although FY05 was not that good for Mayur Uniquoters (Code No: 522249) (Rs.28.00), the current fiscal can turnout to be a good year. The company is engaged in the manufacture of PU/PVC Synthetic leather. It is expected to report higher margins this fiscal due to better operating efficiency and good price realisation. It came out with pretty decent results for the June’05 qtr. Its turnover grew by 22% to Rs.13 cr. but its bottomline increased by 65% to Rs.0.61 cr. It can report an EPS of more than Rs.5 on its current equity of Rs.5 cr. Accumulate on declines.