Ind Swift Laboratories - Rs.165.00

Incorporated in 1995, Ind Swift Laboratories Ltd (ISLL) is part of well-known Chandigarh based Ind-Swift group and was promoted by Ind Swift Ltd in joint venture with the Punjab State Industrial Development Corporation Limited to manufacture Active Pharmaceutical Ingredients (API). It is among the first few players to launch complex products like Clopidogrel, Candesartan, Atorvastatin, Pioglitazone and Citalopram. The company is, in fact, the largest producer of Clarithromycin (around 23% of global capacity) and Fexofenadine in the world after the innovators. It has also set up a US subsidiary, which would essentially seek Custom Research, Custom Manufacturing arrangements and strategic partnership in the US market. It has already tied up with four US companies, which are among the top 15 US companies, for supply of its products.
Presently, ISLL can boast of having nine hi-tech manufacturing units of which three units conform to USFDA Standards and GMP guidelines and were recently put into operation. The new facilities comprise an installed capacity of 40TPA of Statins, a new dedicated facility for 27TPA of anti-histamines, a multi-purpose, high value low volume facility and a new API facility of 50TPA in the tax-free zone of Jammu. Its new state-of-the-art R&D Centre at Mohali in Punjab equipped with the latest equipments and gadgets has also become operational. After launching an anti-diarroheal molecule 'Nitazoxanide' for the first time in Asia, ISLL is planning to launch an anti-alcoholic drug, a molecule for Breast Cancer and two molecules from Statin range, which includes an Anti-Hyperlipidemic drug. ISLL is the third company globally to launch this product. Moreover it has a robust product pipeline of 20 products that are expected to go off patent during 2007-2010. The products that will drive the company's future growth include Ezetimibe (antihyperlipidemic), Rosuvastatin, Montelukast (anti-asthmatic) and Pioglitazone, an anti-diabetic drug. ISLL is also focusing on CRAMS in a big way for which it has tied up with two European companies for contract research and manufacturing services.
For future growth, ISLL intends to mark its presence in the regulated markets of USA & Europe by filing of 25 DMFs by 2007-08 when drugs worth US$ 84 billion go off patent by 2008. It has already filed 1 DMF with USFDA and 2 Common Technical Documents (CTDs) with European authorities. Apart from filing the patent for 2 non-infringing processes, it is ready with 4 in the current year and 12 more by next year. Couple of months back, the company raised US $10 million through the GDR to be converted into equity @ Rs.186 per share. For FY05, sales grew 44% to Rs.240 cr. whereas NP tripled to Rs.26.50 cr. As the full impact of the expansion will be visible only in coming years, its future prospects are very promising. For FY06, it may report Sales of Rs.325 cr. and NP of Rs.40 cr. This means an EPS of Rs.19 on its current equity of Rs.20.90 cr. and diluted EPS of around Rs.15~16. Long-term investors are strongly recommended to buy as the scrip has the potential to double in 15~18 months.

Shasun Chemical & Drugs - Rs.80.00

From a modest beginning in 1976, Shasun Chemical & Drugs Ltd (SCDL) has acquired a worldwide reputation in the manufacture of Active Pharmaceutical Ingredients (APIs) and their intermediates. Its main products are Ibuprofen and its derivatives such as S+Ibuprofen and Ibuprofen Lysinate, Ranitidine, Nizatidine (Anti-ulcerants) etc. In fact it is one of the world’s largest producers of Ibuprofen and supplies about 15% of USA’s requirement of the bulk drug. Its products are exported to more than 150 countries across Europe, North America, Latin America & Asia. SCDL has licensed technology from Eastman Chemical Company of USA to manufacture and market the excipients like HPMCP & MAP, which find use in enteric coating applications. Besides, its a major player in the anti-inflammatory, anti-ulcerative and anaesthetic segments. It has also formed an alliance with Suven Pharmaceuticals Ltd and Innovasynth Technologies (India)Ltd in the field of life sciences covering R&D and manufacturing to service global pharma companies in collaboration with Austin Chemical Co., USA.
SCDL has two manufacturing facilities at Pondicherry and Cuddalore, both GMP compliant facilities and inspected by US FDA, UK MHRA, EDQM, TGA and other regulatory bodies. Employing over 100 scientist & research associates, its new R&D facility in Chennai does contract research under a full time equivalent (FTE) model and contract manufacturing under the custom synthesis model. It is also in the process of setting up a commercial facility for creation of significant biotechnology capabilities & capacities especially in the area of protein processing solutions and has already set up a pilot scale fermentation unit with 100 litres capacity. It is accelerating new product developments and drugs such as Isradipine and Gabapentin, which are expected to post a significant growth in the next 2/3 years. SCDL is gradually transforming itself from an export centric approach to a CRAMS centric business model. It is also aggressively expanding its presence in the formulations segment and has entered into various manufacturing and supply agreement with multinationals like Glenmark, Codexis Inc., USA, Alpharma Inc. USA etc for marketing a number of generic formulations in US and Europe.
For future growth, the company is placing a greater thrust on the CRAMS segment. And with a strong infrastructure base and long successful relationships with pharma MNCs, it is all set to grow significantly in coming years. Recently, the company went for a stock split from Rs.10 to Rs.2 face value. For FY05, its revenue grew by 22% to Rs.327 cr. and NP increased by 30% to Rs.31 cr. Its first half for the current year was pretty decent and for the full FY06 it is expected to clock a turnover of Rs.375 cr. and NP of around Rs.35 cr. This works out to an EPS of approx Rs.8 on its current equity of Rs.9.16 cr. on Rs.2 FV. Thus the stock is trading reasonably cheap at 10 PE and investors can accumulate it at current levels for 50% returns in 12~15 months.

STOCK WATCH

Recently, GIPCL (Code No: 517300) (Rs.68) raised Rs.275 cr. through a public issue to fund its 250 MW lignite-based expansion plant near Surat and for development of lignite mines for captive fuel requirement. The company is also working on setting up two 1000 MW projects in South Gujarat besides diversifying into power distribution in the State as part of its expansion plans. Since all these are long-term plans and will take a few years to start commercial production, only long-term investors are advised to buy. Moreover, as the scrip is currently trading around its allotment price only, the downside is very minimal whereas on the upside it can cross Rs.100 in 12~15 months.

After hitting a high of Rs.62 Jhunjhunwala Vanaspati (Code No: 519248) (Rs.41) had corrected sharply to around Rs.36 and has once again started to move up. The company is engaged in the manufacture of vanaspti, acid oil, refined oil, tin plate containers, soap and herbal healthcare products and sells its product under the brand name ‘Jhoola’. For the Sept’05 qtr, it reported encouraging numbers. Its sales increased by 50% to Rs.189 cr. whereas its NP jumped 84% to Rs.2.60 cr. due to high other income. For FY06 it is estimated to report an EPS of Rs.10. With a book value of Rs.51 and market cap of merely 30 cr., it’s a great buy.

Shrachi Securities (Code No: 511591) (Rs.39.30) offers a wide range of financial products and services from financing passenger cars and light commercial vehicles to heavy commercial vehicles and construction equipment. It has emerged among the 10 biggest commercial vehicle financing companies in India. For the Sept’05 qtr., its topline grew by 30% to Rs.8 cr. and bottomline increased 35% to Rs.2.35 cr. i.e. quarterly EPS of nearly Rs.3 on its current equity of Rs.8.50 cr. Recently, it allotted 19 lakh warrants to the promoters @ Rs.53 per share and plans to raise another Rs.100 cr. through various means. Aggressive investors can take a position as the scrip has bottomed out and may move up sharply in the near future.

Due to better monsoons and strong demand fertilizer companies are doing well and are expected to do even better in the coming year in anticipation of good rainfall. But Liberty Phosphate (Code No: 530273) (Rs.33) somehow didn’t catch market attention in spite of good numbers. It is one of the lowest cost manufacturer of single super phosphate (SSP) with 12% market share. Its manufacturing facilities are spread across Rajasthan, Gujarat & Maharashtra. For Sept’05, its NP doubled to Rs.0.63 cr. due to higher price realization inspite of 13% degrowth in Sales to Rs.18 cr. For FY06, it can post an EPS of Rs.7 on its small equity of Rs.4.10 cr. A good value buy for the medium to long term.

The share price of Pacific Cotspin (Code No: 531118) (Rs.13) has tumbled down nearly 50% from its recent high of Rs.23 although it reported good numbers. It is one of the leading producers of superior cotton yarn in eastern India and is planning expansion of its capacity by 25,200 spindles at an estimated cost of Rs.80 cr. Earlier this fiscal, it allotted 58 lakh shares to promoters @ Rs.17.25 and is planning to raise further money to fund the expansion. For Sept 2005, its Sales increased 30% to Rs.37 cr. whereas its NP stood at Rs.1.50 cr. (0.20 cr.) due to better operating efficiency. For FY06, it may report an EPS of Rs.2.5 and can be accumulated for 30 to 40% gain in 6 months. However there may be equity dilution in future also as it is merging Salem Vanijya, an unlisted company, with itself and which may affect its fundamentals to some extent.