STOCK WATCH
Few market players have started taking interest in textile scrips since last week. Hence investors can buy Kallam Spinning (Code:530201) (Rs.20), a south-based cotton yarn manufacturer as it’s a pure value buy with negligible downward risk. For H1FY07, its sales increased by 40% to Rs.21.50 cr. but net profit declined by 15% to Rs.2.10 cr. mainly due to increase in other expenditure. A few months back, however, it completed its Phase–I of its expansion by adding 11040 spindles thereby taking its total spinning capacity to 33650 spindles. So, its second half will be far better. Besides, it’s undergoing Phase-II expansion adding another 11040 spindles to be completed by mid-2007. Due to its captive hydel power plant, company’s power & fuel cost is also quite low. So for FY07, it is expected to clock a turnover of Rs.48 cr. with net profit of Rs.3.60 cr., which can lead to an EPS of Rs.5 on its current equity of Rs.6.85 cr. Promoters are also planning to increase their stake by a preferential allotment of equity to themselves in the near future, which will trigger the share price to new highs. With a dividend yield of 5%, it’s a screaming buy in such an all-time high market.
Due to constant expansion Uttam Galva’s (Code:513216) (Rs.32) cold rolled capacity currently stands at 7,50,000 MTA, whereas its Galvanised Steel capacity is 4,50,000 MTA. For the six months ended 30th Sept.’06, its total revenue grew by 35% to Rs.1206 cr. and net profit zoomed up 60% to Rs.50 cr. Importantly, it maintained an OPM of above 10% even in such adverse conditions, which is indeed remarkable. Due to robust demand, the company is still undergoing rapid expansion to increase its capacity further to 10,00,000 MTA for cold rolled coils (CRC) and 7,00,000 MTA for Galvanized Steel. On a conservative basis, it is expected to end FY07 with a top-line of Rs.2500 cr. and bottom-line of Rs.88 cr. This works out to an EPS of Rs.11 on its current equity of Rs.83.40 cr. The company had raised about Rs.200 cr. through the FCCB route, to be converted into equity shares at Rs.64.50. Even if we assume that the conversion rate will be revised to Rs.48 its diluted equity will Rs.125 cr. Hence the fully diluted EPS works out to Rs.7 on a very conservative basis. The scrip is trading extremely cheap and can easily appreciate by 50% in 6-9 months.
Panama Petro (Code:524820) (Rs.123) manufactures speciality petroleum products under the brand name 'PANOL' for diverse user industries like printing, textiles, rubber, pharmaceuticals, cosmetics, power and various industrial oils. The company's tie-up with Petronas of Malaysia and Lubcon of Germany is likely to result in manifold increase in its sales and profitability in coming years. Besides, its also looking forward for further tie-ups with Petronas for the manufacture of its Automotive Lubricants in India. For H1FY07, its revenue shot up 65% to Rs.81 cr. and net profit jumped up 50% to Rs.5 cr. For future growth, it has plans to set up a plant in the excise-free zone in Baddi, Himachal Pradesh in FY08. The fall in crude oil prices is also beneficial to the company to some extent as it constitutes the raw material. For FY07, it is expected to clock a turnover of Rs.165 cr. and net profit of Rs.9.50 cr., i.e. EPS of Rs.20 on its diluted equity of Rs.4.76 cr. Buy with a price target of Rs.160 in 6¬9 months.
Virinchi Technology (Code:532372) (Rs.36) is an e-Business solutions provider for large enterprises and government establishments in the areas of e-procurement, private exchanges, supply chains and finance Few of its software products such as Enterprise Enabler 3.0, CaseTrail, Financial & Accounts Management for Enterprises (FAME), TrackPORT, MarketSmart, Secure, Hospitality Management System (HMS) have been huge successes and are witnessing good demand in the global markets. For H1FY07, its sales increased by 30% to Rs.15.50 cr. whereas the net profit spurted by 35% to Rs.5.45 cr. Accordingly, for the full year FY07 it may report a top-line of Rs.32 cr. with net profit of Rs.10.50 cr. This works out to an EPS of Rs.7.50 on its current equity of Rs.13.95 cr. However, to fund its growth plans, the company has already allotted 52 lakh convertible warrants to promoters and strategic investors, which will bloat its equity capital to Rs.19.15 cr. Hence the fully diluted EPS works out to Rs.5.50. The company is expected to perform exceedingly well in coming years and with a NPM of over 30%, this scrip deserves much better valuation.
Due to constant expansion Uttam Galva’s (Code:513216) (Rs.32) cold rolled capacity currently stands at 7,50,000 MTA, whereas its Galvanised Steel capacity is 4,50,000 MTA. For the six months ended 30th Sept.’06, its total revenue grew by 35% to Rs.1206 cr. and net profit zoomed up 60% to Rs.50 cr. Importantly, it maintained an OPM of above 10% even in such adverse conditions, which is indeed remarkable. Due to robust demand, the company is still undergoing rapid expansion to increase its capacity further to 10,00,000 MTA for cold rolled coils (CRC) and 7,00,000 MTA for Galvanized Steel. On a conservative basis, it is expected to end FY07 with a top-line of Rs.2500 cr. and bottom-line of Rs.88 cr. This works out to an EPS of Rs.11 on its current equity of Rs.83.40 cr. The company had raised about Rs.200 cr. through the FCCB route, to be converted into equity shares at Rs.64.50. Even if we assume that the conversion rate will be revised to Rs.48 its diluted equity will Rs.125 cr. Hence the fully diluted EPS works out to Rs.7 on a very conservative basis. The scrip is trading extremely cheap and can easily appreciate by 50% in 6-9 months.
Panama Petro (Code:524820) (Rs.123) manufactures speciality petroleum products under the brand name 'PANOL' for diverse user industries like printing, textiles, rubber, pharmaceuticals, cosmetics, power and various industrial oils. The company's tie-up with Petronas of Malaysia and Lubcon of Germany is likely to result in manifold increase in its sales and profitability in coming years. Besides, its also looking forward for further tie-ups with Petronas for the manufacture of its Automotive Lubricants in India. For H1FY07, its revenue shot up 65% to Rs.81 cr. and net profit jumped up 50% to Rs.5 cr. For future growth, it has plans to set up a plant in the excise-free zone in Baddi, Himachal Pradesh in FY08. The fall in crude oil prices is also beneficial to the company to some extent as it constitutes the raw material. For FY07, it is expected to clock a turnover of Rs.165 cr. and net profit of Rs.9.50 cr., i.e. EPS of Rs.20 on its diluted equity of Rs.4.76 cr. Buy with a price target of Rs.160 in 6¬9 months.
Virinchi Technology (Code:532372) (Rs.36) is an e-Business solutions provider for large enterprises and government establishments in the areas of e-procurement, private exchanges, supply chains and finance Few of its software products such as Enterprise Enabler 3.0, CaseTrail, Financial & Accounts Management for Enterprises (FAME), TrackPORT, MarketSmart, Secure, Hospitality Management System (HMS) have been huge successes and are witnessing good demand in the global markets. For H1FY07, its sales increased by 30% to Rs.15.50 cr. whereas the net profit spurted by 35% to Rs.5.45 cr. Accordingly, for the full year FY07 it may report a top-line of Rs.32 cr. with net profit of Rs.10.50 cr. This works out to an EPS of Rs.7.50 on its current equity of Rs.13.95 cr. However, to fund its growth plans, the company has already allotted 52 lakh convertible warrants to promoters and strategic investors, which will bloat its equity capital to Rs.19.15 cr. Hence the fully diluted EPS works out to Rs.5.50. The company is expected to perform exceedingly well in coming years and with a NPM of over 30%, this scrip deserves much better valuation.
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