STOCK WATCH

In anticipation of rise in steel prices in coming months, steel scrips are gradually coming into action and Modern Steels Ltd. (Code:513303) (Rs.57), manufacturer of alloy steel and special steel seems a good bet at current levels. The company is now putting more thrust on production of value added products including stainless steel. It has installed a Vacuum Degassing plant of Denelli make in its melting shop and a converter was also installed for the production of stainless steel. Also, post rolling facilities of peeling and grinding of bars was commissioned in the last fiscal. For future growth, it is enhancing its melting capacity from 1,00,000 to 2,27,000 MTA and the rolling capacity will be increased from 50,000 to 1,54,000 MTA. For FY07, it may register a turnover of Rs.300 cr. with net profit of Rs.10 cr. i.e. EPS of Rs.21 on its current low equity of Rs.4.80 cr. Scrip has the potential to double in 12-15 months.

Laffans Petrochemicals Ltd. (Code:524522) (Rs.24) engaged in the manufacture of ethylene oxide derivatives such as Ethoxylates, Glycol Ethers, Acetates, Triethonal-amine and Brake fluids is the only Butyl Glycol and Methyl Glycol manufacturer in India along with their respective acetates. Besides, it also produces 'Theic', an unique surfactant for the wire enamelling industry with micron size of less than 100, which is produced by only 3/4 manufacturers worldwide. Recently, it started catering to emulsifiers in the agrochemicals industry and has introduced products based on propylene oxide where the demand is expected to grow. It reported quite encouraging numbers for the June’06 quarter and for the full year FY07, it may clock a turnover of Rs.160 cr. with net profit of Rs.5 cr. i.e. EPS of Rs.6 on its equity of Rs.8 cr. With a book value of Rs.42 and a market cap of less than Rs.20 cr., the scrip is available extremely cheap and can appreciate 50% in 6-9 months.

Tulsyan NEC Ltd. (Code:513629) (Rs.47) is one of the old and reputed manufacturers of TMT bars/ billets and synthetic products such as poly woven sacks/bags. TMT bars meet the demand for construction in housing/infrastructure sectors and poly woven sacks/bags meet the demand for packing of cement/sugar/fertilizers and other bulk-packaging requirement. For the June’06 quarter, it reported stunning numbers with sales improving by 40% to Rs.88 cr. whereas net profit doubled to Rs.1.80 cr. registering an EPS of Rs.3.6 on its small equity of 5 cr. Due to the buoyancy in the metal sector, it has taken on lease a rolling mill with a production capacity of 36000 MTPA at Coimbatore, Tamil Nadu. For future growth, it is installing a new rolling mill of 1,50,000 MTPA and is undergoing capacity expansion of 10,500 TPA in the plastics division comprising of FIBC, PP Bags and fabrics. For FY07, it is estimated to clock a turnover of Rs.350 cr. With net profit of Rs.5 cr. i.e. EPS of Rs.10. At its current market cap of merely Rs.20 cr., this scrip is trading extremely cheap.

Aarti Industries Ltd. (Code:524208) (Rs.36) has already commenced operation at Block–I of its Tarapur USFDA compliant facilities and started exporting validation batches to regulated markets. Meanwhile, it is in the process of completing the work at Block-II, III and IV during the year and may start commercial production in the near future. Further, it is setting up a new project for a downstream product called Para Amino Phenol (PAP) in Gujarat. More importantly, crude oil prices have tumbled down to around $60, which augurs very well for the company, as it constitutes a major part of its input cost. For FY07, it is expected to report sales of Rs.825 cr. with net profit of Rs.55 cr., which translates into EPS of Rs.7 on its fully diluted equity of Rs.37.75 cr. Relatively speaking, it is a safe bet to get 50% return in the medium-term.

The ban on sugar exports is expected to be lifted in October’06 and all sugar scrips are rising smartly. DCM Shriram Industries Ltd. (Code:523369) (Rs.89) is one of the best bets as it has most modern sugar factories at Daurala in U.P apart from a huge alcohol plant of 45,000-kilo litres capacity. It has recently increased its cane crushing capacity to 10,000 TCD from 8000 TCD and is further set to increase it to 12000 TCD along with modernisation of the sugar plant and powerhouse. Moreover, it is also engaged in the business of alcohol, fine chemicals and rayon. It reported encouraging results for June’06 quarter and can clock a turnover of Rs.775 cr. and net profit of Rs.32 cr. for the full year FY07. This will lead to an EPS of Rs.21 on its equity of Rs.15.30 cr. Having a 52-week high/low as Rs.240/Rs.72, the scrip can give 50% return in a years time.