STOCK WATCH

After the removal of quota in 2005, Kallam Spinning Mills Ltd. (Code:530201) (Rs.21.75) is aggressively expanding capacity to cash in on the increased demand. In FY06, it augmented its spinning capacity by 50% to 33648 from 22608 spindles. It is again increasing 30% capacity by adding another 11040 spindles at investment of Rs.22.50 cr., taking the total to 44688 spindles. For the June’06 quarter, its turnover as well as PBT grew by 30% to Rs.9.90 cr. and Rs.1.40 respectively. For FY06, it declared 10% dividend and the scrip is trading cum dividend offering an yield of 5% at CMP. The company has its own hydel power plants, which generate power for captive consumption reducing its power cost considerably. For FY07, it is estimated to clock a turnover of Rs.45 cr. and net profit of Rs.4.25 cr. i.e. EPS of Rs.6 on its current equity of Rs.6.85 cr. At the current market cap of Rs.14 cr., it’s a steal!

Although Indian Toners & Developers Ltd. (Code:523586) (Rs.26) is facing stiff competition from local importers and its margin is under pressure in absolute terms it is performing better on the back of higher volumes and development of new products including toners for the new generation digital machines and laser printers. For June’06 quarter, sales recorded a handsome gain of 40% at Rs.9.20 cr. whereas net profit increased by 25% to Rs.0.82 cr. For future growth the company is betting high on exports, and has set up a wholly-owned subsidiary in USA and a representative office in Singapore. Further, it is planning to put up offices in China & Europe to capture new markets. It has also started selling printer components through its existing network to increase its top-line. For FY07, it may register a top-line of Rs.40 cr. and PAT of Rs.4 cr., which leads to an EPS of Rs.5 on its current equity of Rs.8 cr. Having a book value of Rs.31 and 52-week as Rs.41, the scrip has the potential to give 25-30% return in a year’s time.

As Gujarat Reclaim & Rubber Products Ltd. (Code:509152) (Rs.242.40) is traded only in physical form, only genuine long-term investors are recommended to buy this scrip. Due to the sharp increase in the price of natural and synthetic rubbers, the demand for reclaim rubber has increased considerably. And to cater to the rising demand, the company is putting up a third plant at Panoli in Gujarat with a capacity of 10,000 MTA. Post expansion, its production capacity will stand enhanced to 40,000 MTA making it among the top three producers of reclaim rubber in the world. For FY06, its sales increased by 30% to Rs.59 cr. and net profit jumped 40% to Rs.5.80 cr. reporting an EPS of Rs.44 on its very tiny equity of Rs.1.33 cr. It declared Rs.10 as dividend leading to a yield of around 5%. It also announced very encouraging numbers for the June’06 quarter as well. For FY07, it may post an EPS of Rs.50. Share price will shoot up sharply once it goes for demat trading or declares liberal bonus as it has huge reserves of around Rs.15 cr.

Ahlcon Parenterals (I) Ltd. (Code:524448) (Rs.50) manufactures life-saving Intravenous Fluids and medical disposals employing highly sophisticated production process imported from Switzerland. Its product range includes Dextrose, Saline, Electrolytes, Amino Acids, Fat Emulsion, Blood Substitutes, Small Volume Injectables, Eye Drops etc. It as also setting up a state-of-the-art testing facility and formulation development lab equipped with the best infrastructure. It ended FY06 on a buoyant note with 25% higher sales at Rs.45 cr. while the net profit tripled to Rs.6.70 cr. recording an EPS of Rs.9 on its equity of Rs.7.20 cr. For June’06 quarter, its sales and PAT grew by nearly 15% to Rs.12 cr. and Rs.1.72 respectively. With an expected EPS of Rs.10 for FY07, this niche company is trading fairly cheap at a P/E ratio of less than 5 times.

Power sector is the flavour of the season and is expected to remain so for the next 5 years as massive investments are lined up in coming years. GIPCL (Code:517300) (Rs.62.60) is also in the process of doubling its capacity at Surat Lignite Power Plant (SLPP) to 500 MW from 250 MW and is 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. For June’06 quarter, its sales increased marginally to Rs.192 cr. but the net profit jumped 65% to Rs.70 cr. due to lower tax provisioning and higher extra ordinary income. For the Full year FY07, it is estimated to clock a turnover of Rs.825 cr. with net profit of Rs.150 cr. leading to an EPS of Rs.10 on its equity of Rs.151 cr. The scrip can easily hit a new high above Rs.100 in 9-12 months.