STOCK WATCH
Gayatri Projects (Code:532767) (Rs.315) is one of the fastest growing construction companies in India executing major civil works including construction of concrete/masonry dams, earthern dams, national highways, bridges, canals, aqueducts, airports, ports, etc. Currently, it has massive orders in hand of nearly Rs.2000 cr. which is 5 times its FY06 total revenue and is spread across road works, irrigation works and other projects. For the six months ending 30th Sept.’06, its total revenue grew by 20% to Rs.183 cr. but net profit zoomed by 60% to Rs.11.70 cr. A few months back, the company had come out with an IPO and is now further planning to raise capital though FCCB route to fund its various projects. As its IPO was placed at Rs.295, the FCCB issue may be more than Rs.350 per share. For FY07, it expected to clock a turnover of Rs.450 cr. with net profit of Rs.30 cr. posting an EPS of Rs.25 on its current equity of Rs.11.90 cr. At a reasonable P/E multiple of 16-18, the scrip should trade in the range of Rs.400-450. At its current market cap of Rs.350 cr., it is one of the cheapest infrastructure scrips trading at 12 times P/E ratio.
FCS Software Solutions (Code:532666) (Rs.83) is a leading provider of IT services and has carved out a niche for itself in areas like e-learning, digital content services, IT consultancy, product engineering services and 24/7 Application support. It caters to the US market only. With the global demand for IT Applications increasing rapidly, the company is aggressively expanding its overall capacity. For H1FY07, its topline as well as bottomline grew by 35% to Rs.72 cr. and Rs.9.85 cr. respectively. Last year, it started a new unit in Punchkula (Haryana) and this year it has acquired 1.66 acre land at Chandigarh Technology park under the SEZ Scheme. It has been further allotted a plot of 4000 sq. mtrs. at Noida. Besides, it is also planning to expand its operations to Gurgaon. For the full year FY07, it may report total revenue of Rs.150 cr. with PAT of Rs.18.50 cr. This will lead to an EPS of Rs.13 on its equity of Rs.14 cr. At the current P/E multiple of 6 it is one of the most undervalued companies in the mid-cap IT sector and has the potential to give handsome returns if held for more than a year.
Indian Toners and Developers (Code:523586) (Rs.27) is a leading manufacturer of compatible black toners for photocopiers, laser printers, digital machines and multi-function machines like scanners, printers and fax copiers. It is the single largest exporter and undisputed market leader in the domestic market through its brand ‘Supremo’. For the first half FY07, its sales improved by 30% to Rs.21 cr. but net profit jumped up 45% to Rs.2.10 cr. To maintain its market share, the company has decided to set-up a new project in Sitarganj in Uttranchal for the manufacture of toners and developers and plans to enhance its presence in the international market by opening a representative office in China. For the full year FY07, it may clock a turnover of Rs.45 cr. with net profit of Rs.4.50 cr. i.e. an EPS of Rs.6 on its equity of Rs.8 cr. With a book value of Rs.31 and 52-week high at Rs.41, the scrip has the potential to give 50% return in 12-15 months.
The Hotel Industry is currently enjoying the best of times with high occupancy rates and increased tariff charges and Savera Hotels Ltd. (Code:512634) (Rs.74) is no exception. This company owns the huge 260 rooms, centrally air-conditioned ‘The Savera’ hotel located in the heart of Chennai and is expected to report very encouraging numbers for the second half. For the six months ending 30th Sept.’06, its revenue grew by only 17% to Rs.16 cr. but the net profit doubled to Rs.1.60 cr. on the back of robust average room rate (ARR). To cash in on the ongoing boom, the company has started exploring new business avenues in the pilgrims/business destinations and soon new hotel outlets with innovative measures will be launched in Madurai, Coimbatore and Hyderabad. For FY07 it is expected to report a topline of Rs.35 cr. with profit of Rs.4.50 cr. i.e. EPS of Rs.8 on its equity of Rs.6 cr. This means that the scrip is discounted merely by 9 times its FY07 earnings. With a current market cap of only Rs.40 cr., the scrip can easily double in 12-15 months.
FCS Software Solutions (Code:532666) (Rs.83) is a leading provider of IT services and has carved out a niche for itself in areas like e-learning, digital content services, IT consultancy, product engineering services and 24/7 Application support. It caters to the US market only. With the global demand for IT Applications increasing rapidly, the company is aggressively expanding its overall capacity. For H1FY07, its topline as well as bottomline grew by 35% to Rs.72 cr. and Rs.9.85 cr. respectively. Last year, it started a new unit in Punchkula (Haryana) and this year it has acquired 1.66 acre land at Chandigarh Technology park under the SEZ Scheme. It has been further allotted a plot of 4000 sq. mtrs. at Noida. Besides, it is also planning to expand its operations to Gurgaon. For the full year FY07, it may report total revenue of Rs.150 cr. with PAT of Rs.18.50 cr. This will lead to an EPS of Rs.13 on its equity of Rs.14 cr. At the current P/E multiple of 6 it is one of the most undervalued companies in the mid-cap IT sector and has the potential to give handsome returns if held for more than a year.
Indian Toners and Developers (Code:523586) (Rs.27) is a leading manufacturer of compatible black toners for photocopiers, laser printers, digital machines and multi-function machines like scanners, printers and fax copiers. It is the single largest exporter and undisputed market leader in the domestic market through its brand ‘Supremo’. For the first half FY07, its sales improved by 30% to Rs.21 cr. but net profit jumped up 45% to Rs.2.10 cr. To maintain its market share, the company has decided to set-up a new project in Sitarganj in Uttranchal for the manufacture of toners and developers and plans to enhance its presence in the international market by opening a representative office in China. For the full year FY07, it may clock a turnover of Rs.45 cr. with net profit of Rs.4.50 cr. i.e. an EPS of Rs.6 on its equity of Rs.8 cr. With a book value of Rs.31 and 52-week high at Rs.41, the scrip has the potential to give 50% return in 12-15 months.
The Hotel Industry is currently enjoying the best of times with high occupancy rates and increased tariff charges and Savera Hotels Ltd. (Code:512634) (Rs.74) is no exception. This company owns the huge 260 rooms, centrally air-conditioned ‘The Savera’ hotel located in the heart of Chennai and is expected to report very encouraging numbers for the second half. For the six months ending 30th Sept.’06, its revenue grew by only 17% to Rs.16 cr. but the net profit doubled to Rs.1.60 cr. on the back of robust average room rate (ARR). To cash in on the ongoing boom, the company has started exploring new business avenues in the pilgrims/business destinations and soon new hotel outlets with innovative measures will be launched in Madurai, Coimbatore and Hyderabad. For FY07 it is expected to report a topline of Rs.35 cr. with profit of Rs.4.50 cr. i.e. EPS of Rs.8 on its equity of Rs.6 cr. This means that the scrip is discounted merely by 9 times its FY07 earnings. With a current market cap of only Rs.40 cr., the scrip can easily double in 12-15 months.
Few weeks back, RPG Life Sciences (Code:500384) (Rs.94) confirmed that its lease agreements with Hindustan Antibiotics Ltd. for the Pune property and other lease related agreements stand terminated in entirety effective from 15th Feb.’06. This is quite positive, as the company had taken that property on lease till 2015 but had closed down the plant due to uneconomic conditions. Still it was paying the rent and other expenditures as per the lease agreement and will now save that amount, which comes to around Rs.4-5 cr. Meanwhile, the company has filed the DMF for two new oncology products: Dono and Doxo. It is also setting up a new FDA compliant API plant at Thane, which will be operational by Mar.’07. Although its first half numbers were disappointing, for the full year it may report profit of Rs.15 cr. on sales of Rs.135 cr. i.e. EPS of Rs.10 on its diluted equity of about Rs.15 cr. Buy at sharp declines.
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