Rajshree Sugar & Chemicals- Rs.69.00

Incorporated in 1985, Rajshree Sugars & Chemicals Ltd (RSCL) is one of the leading sugar producers in the South having interests across integrated fields such as sugar, distillery, power and biotechnology. It has two modern integrated sugar complexes located at Varadaraj Nagar in Theni District and Mundiampakkam in Villupuram District of Tamil Nadu, which produce plantation white crystal sugar of ISS grade S-30 with an ICUMSA less than 100. These factories have a combined milling capacity of 6000 TCD. RSCL is also engaged in a host of technology development activities such as sugarcane varietal development through plant tissue culture and production of eco-friendly bio-inputs like biofertilisers, biofungicides, biopesticides, biocontrol agents for parasites and predators of pests and pheromones.

The modernization of its sugar factory at Mundiampakkam was completed last year and the company is in the process of increasing its plant capacity from 3500 to 5000 TCD and thereby enhance its total capacity to 7500 TCD. This expanded capacity will be utilised from year crushing season i.e. 2005-06. Earlier in June’05 this year, the company commenced its new 22 MW co-generation power plant at Mundiampakkam. Currently, its bagasse based co-generation plants generate 34 MW of green power and after meeting its captive consumption, the surplus power of about 18 MW is sold to the state electricity grid i.e. TNEB. The Distillery unit at Varadaraj Nagar has a capacity of 45 kilo litres per day 40 KLPD enabling production of 12 million litres of alcohol per year. It manufactures various grades of alcohol such as Rectified Spirit and potable grade Extra Neutral Alcohol and Fuel Grade Anhydrous Alcohol for mixing with petrol to produce eco- friendly green fuel from renewable resources. RSCL has also established a 10,000 TPA organic manure production unit using state-of-the-art composting technology.

For FY05, the company registered 10% growth in Sales but its NP zoomed 85% to Rs.17 cr. due to higher price realization and lower interests cost and the company paid a dividend of Rs.3 on an EPS of Rs.7.50 representing a healthy dividend payout ratio of 40%. Considering the capacity expansion, firm sugar prices and increased sale of power and alcohol, RSCL is estimated to earn a NP of Rs.22 cr. on its total revenue of Rs.230 cr. Hence with an expected EPS of Rs.10 and dividend yield of around 5%, it is a value buy and can give handsome return in long run. Investors are strongly recommended to buy this scrip with a price target of Rs.110 (50% appreciation) in 12~15 months. Little surprise, therefore, that Smt. Rajshree Pathy, CMD, has constantly increasing her stake since a 1st April 2005.

J B Chemicals & Pharmaceuticals - Rs.87.00

Established in 1976, JB Chemicals & Pharmaceuticals Ltd (JBCPL) the flagship company of the Unique Group is engaged in manufacturing a wide range of innovative specialty medicines for the domestic and international markets. Its product portfolio consists of a wide range of pharmaceutical formulations, herbal remedies, diagnostics, generic drugs, bulk drug intermediaries and active pharmaceutical ingredients (APIs). JBCPL has a strong presence in various therapeutic segments that include lifestyle management therapy such as cardio-vascular drugs, dental therapeutics, anti-ulcerants and acute therapy such as pain management and anti-infectives. It exports to more than 50 countries worldwide with a strong presence in Russia, Ukraine and other CIS countries and has successfully increased its presence in USA, Europe and Australia through joint ventures and strategic alliances. Interestingly, JBCPL features in the Forbes global list of Best 100 companies under $1 billion in Asia Pacific and its product Doktor Mom has been voted as the most trusted European brand.

JBCPL has 11 state-of-the-art manufacturing facilities in four locations of Ankleshwar, Belapur, Daman and Panoli. Most of the plants are as per WHO standards as well as conform to GMP guidelines but few of them enjoy approvals from renowned international regulatory agencies like USFDA, EDQM, MHRA (UK), TGA (Australia) etc. Its R&D Centre is located in Thane and Worli in Mumbai. It has recently received ANDA approval on ‘Ciprofloxacin’ and ‘Fluconazole’ (Anti-Fungal) and is awaiting approval on ‘Atenolol’ and two other ANDAs. Currently, it is actively working towards filing ANDA’s in Antihistaminics, NSAIDs and Cardiac and going forward plans to file 4/5 ANDAs every year. For future growth the company has a capex plan of about Rs.65 cr. to set up two new facilities one for Vials and pre-filled syringes and the other for a multipurpose API facility. Moreover, it has created a new SBU called Zephyr to service emerging needs in the neuro-psychiatric Diabetelogy and urology segments. Its R&D division is concentrating to develop NDDS in categories like Antiulcer, Quinolone Antibacterials, Analgesics, Anti-inflammatory, Antifungals, Contrast Media, Vitamins (enzyme cofactor) and antihistamines.

The US$ 24 billion global pharmaceutical outsourcing space is expected to more than double to US$ 53 billion in five years from now, which provides a huge growth potential for Indian pharma companies and JBCPL is all set to tap this opportunity. For FY05, its Sales grew by 20% to Rs.358 cr. whereas as its NP increased by 16% to Rs.59 cr. i.e. an EPS of Rs.7.50. Considering all these factors, JBCPL can end FY06 with Sales of Rs.450 cr. and NP of Rs.70 cr. This works out to an EPS of around Rs.9 on its current equity of Rs.16 cr. and face value of Rs.2. Investors are recommended to buy it at the CMP for 50% return in 12~15 months.

STOCK WATCH

Kallam Spinning (Code No: 530201) (Rs.30.55) has once again announced fantastic results for the Sept.’05 quarter. Its Sales grew by 12% to around Rs.8 cr. whereas its NP stood at Rs.1.22 cr. compared to Net loss of Rs.7 lakh last year. Its OPM improved substantially from 13% to 31% this quarter and the company even declared a maiden dividend of 7%. For future growth, it is constructing an export-oriented spinning mill with a production capacity of 14,500 spindles in Guntur at an outlay of Rs.22 cr. For FY06, it can report an EPS of Rs.7 and more than Rs.10 for FY07 and its share price can easily appreciate by 50% in 6~12 months.

Due to their strong performance, sugar scrips are getting back in to action with renewed interest from institutional investors. Ponni Sugars Erode Ltd (Code No: 532460) (Rs.39.50), a small South based sugar company also reported excellent numbers, which went unnoticed by retail investors. Sales increased by 40% to Rs.29 cr. and NP spurted 160% to Rs.2.10 cr. posting an EPS of Rs.2.60 for the quarter. Its second half will be much better and for the whole of FY06, it can report an EPS of Rs.9 on its current equity of Rs.8.20 cr. With a forward PE of 4x and dividend yield of more than 3%, this scrip appears to be a good value buy for the medium to long term.

After hitting a recent high of Rs.78, Bhuruka Gas (Code No: 509728) (Rs.47.80) has corrected sharply by more than 50% in the recent carnage. This is inspite of the fact that its fundamentals are improving with every passing quarter. For the Sept.’05 quarter also its NP grew by whopping 200% to Rs.2.40 cr. due to better operating efficiency whereas its revenues were flat at Rs.11 cr. Moreover, its promoters have increased their stake this quarter to 79% from 64% by way of preferential allotment to themselves. For full FY06, it can clock a turnover of Rs.50 cr. and NP of Rs.9~10 cr. which works out to an EPS of Rs.7 on its expanded equity of Rs.3.52 cr. For the short-term, this scrip can give 20~25% return in 6 months or so.

Eldeco Housing & Industries Ltd (Code No: 523329) (Rs.114.10), which is engaged in civil construction and housing has declared encouraging results for the Sept.’05 quarter. Its total revenue grew 22% to Rs.8.30 cr. but its NP multiplied 5 times to Rs.1.10 cr. due to higher operating margins. This leads to a quarterly EPS of Rs.5.50 on its tiny equity of Rs.1.97 cr. Considering its order in hand and the work in progress position, the company is estimated to report a topline of Rs.55 cr. and bottomline of Rs.4 cr. i.e. EPS of Rs.20 for FY06. In spite of such strong fundamentals and part of a growth sector, its current market cap is only Rs.22 cr. and is discounted merely 5 times against its forward earning. It’s a good value buy, as the scrip has corrected sharply from its recent high of Rs.178.

Tinplate Co. of India (Code No: 504966) (Rs.72.05) which is undergoing capacity expansion to 1,70,000 MT by 2006, recently came out with very impressive numbers for the Sept.’05 quarter. Its Sales increased by 50% to Rs.82 cr. and NP jumped 170% to Rs.11 cr. in spite of the lower other income and higher tax provision. For FY06, it can report a Net Sales of around Rs.350 cr. and NP of Rs.40 cr., which works out to an EPS of Rs.14 on its current equity of Rs.28.90 cr. Its share price is bound to cross Rs.100 sooner than later

In the recent onslaught where most of the mid caps corrected sharply, GSFC (Code No: 500690) (Rs.148.15) stood firm and is currently trading near its 52-Week high of around Rs.160. It is the largest producer of caprolactum and has one of the largest capacities of Diammonium Phosphate. Besides, it also manufactures chemicals, fertilisers, petrochemicals and other allied products. For Sept.’05 quarter, it reported a decent set of numbers with Sales remaining flat at Rs.612 cr. but NP registering an impressive growth of 70% to Rs.58 cr. due to lower interest cost and better price realization. For the full FY06, it can post an EPS of Rs.26. Its only a matter to time for the scrip to cross the Rs.200 mark.