Nilkamal Plastics - Rs.191.00

Nilkamal Plastics Ltd (NPL) is India's leading manufacturer of moulded furniture and material handling crates. In fact, it is the world's largest manufacturer of moulded furniture and Asia's largest plastic processor of moulded products. Under its material handling division, NPL has the largest variety and widest range of plastic crates and an elite clientele from all sectors of industry & business like automobiles, bottling, breweries, engineering, electronics, food processing, retail chains, logistics, pharmaceutical, textile, garments, dairy, fruits and vegetables etc. The furniture product range comprises chairs, dining tables, coffee tables, sofa sets, trolleys, shoe racks, multipurpose racks, baby chairs, stools etc to mention a few. NPL is now in the process of launching moulded plastic office furniture under the brand name ‘Novella’, apart from introducing storage cabinets and wrought iron look alike rocking chairs for the home segment. Soon it will be launching a range of cabinets for libraries/studies and innovative designs of sofa set among other products. It also has its exclusive stores – ‘Nilkamal Home Ideas’ in as many as 20 B&C class towns and is planning to set up 15 more stores in the next six months.

NPL has five huge state-of-the-art manufacturing facilities located across the four corners of the country besides having joint venture manufacturing plant in Srilanka & Bangladesh. It also has warehousing facility along with marketing office in Ajman Free Zone in UAE, which caters to the requirement of customers in the Middle East & Africa. Recently, NPL diversified into lifestyle furniture business by setting up special large format retail chain under the brand name ‘@home’ that offers imported furniture, home furnishing and accessories. It has already set up 3 stores each in Pune, Mumbai & Ahmedabad and is planning to set up 27 more @home stores in major cities in the next three years and also set up over 40 franchisee operations in smaller towns and cities. Although most of the products available at these stores are currently imported, NPL is looking at tie-ups with international furniture and home furnishing brands to exclusively market them through the @home stores. Also in the pipeline is setting up of a full-fledged kitchen and office solutions facility within the @home stores under the brand names @kitchen and @office respectively. In addition to this retail venture, NPL eventually plans to set up a manufacturing base in India for particle board furniture. In future, NPL also intends to diversify into the business of construction and real estate development.

With increasing disposable incomes and aspirational lifestyles, there is a huge potential in retailing of lifestyle and home furniture business. For the first six months ending 31st Sept’ 05, its sales grew by 6% to Rs.165 cr. but NP was down 24% to Rs.4 cr. due to higher raw material cost. For the full year, it may clock turnover of Rs.350 cr. and NP of around Rs.9 cr. which works out to an EPS of Rs.11 on a small equity of Rs.8.50 cr. Although rising crude oil prices is a concern, its retail venture will improve margins going forward. It can even report an EPS of Rs.18 and Rs.25 for FY07 & FY08 respectively. Hence long-term investors can accumulate this scrip at declines with a price target of Rs.250 (55% return) in 15~18 months.

Nectar Lifesciences - Rs.225.00

Nectar Lifesciences Ltd (NLL), erstwhile Surya Medicare Ltd, was incorporated in 1995 by Mr. Sanjiv Goyal as a joint venture with Punjab State Industrial Development Corporation Ltd for the manufacture of oral and sterile range of Active Pharmaceutical Ingredients (APIs) and formulations. Today, NLL is among the largest manufacturers and exporters of Cephalosporins (antibiotic used to treat bacterial infections) and Semi Synthetic Penicillins. In fact, it is among the few life saving API manufacturing companies with facilities to produce sterile APIs through both Lyophilization and Crystallization processes. Its products are WHO-GMP certified and are exported to over 70 countries across 5 continents and it enjoys an ‘Export House’ status.

NLL’s state-of-the-art manufacturing plant is spread over a massive area of 5,00,000 sq mtrs at Derabassi Punjab with an installed capacity of 950 MT. Its facilities & systems have been audited and approved by technical & regulatory teams of major pharmaceutical companies around the world. NLL is undergoing a major expansion of Rs.100 cr. that includes setting up a formulations plant at Baddi as forward integration, a second unit for sterile cephalosporin facility adjacent to Unit I at Derabassi and a hitech R&D centre and a Quality Control centre. Recently, the company has set up and commercialized a dedicated manufacturing facility (Unit-III) for Ranbaxy for manufacturing a key intermediate of a non-cephalosporin API. These facilities are USFDA, UKMCA, MHRDA and other regulatory bodies compliant and are expected to get all the approvals soon. To diversify its present product portfolio, NLL is planning to enter into the non antiboitic segment like cardiovasculars (statins and prils) and anti-histamines (fexofenadine). Steadily, it is building a presence in the high value generic markets and looking to increase its contract research, custom synthesis and contract manufacturing services for the regulated markets post US FDA approval. For future growth, it is planning to take a strong position in Phytochemicals which will be fully integrated greenfield operation with its own cultivation of speciality herbs, extraction and purification offering quality herbal products.

In June 05 NLL came out with its IPO rising around Rs.90 cr. by issuing 38.7 lakh shares @ Rs.240 per share. That means that currently the scrip is trading below its IPO price. For FY05, NLL reported a topline of Rs.221 cr. and bottomline of Rs.12.60 cr. For the first six months of FY06, NLL has already posted very impressive numbers with Sales reporting 24% rise to Rs.134 cr. and NP more than doubled to Rs.10 cr. For the full year, it may clock a turnover of Rs.280 cr. and NP of Rs.22 cr. which works out to an EPS of Rs.15 on its current equity of Rs.14.89 cr. The real growth and impact of expansion will be visible only in FY07 and FY08. Although there is a risk of huge equity dilution in future, only long-term investors are recommended to buy with a price target of Rs.380 (70% appreciation) in 2 yrs. It’s another Lupin or Orchid Chemicals in the making.

STOCK WATCH

A few months back, Sujana Universal (Code No: 517224) (Rs.25.05) raised US$ 16 million via the GDR route by allotting 2 cr. equity shares @ Rs.35 per share. It has further decided to issue 40 lakh equity shares to promoters which will expand the equity to Rs.45.40 cr. The company basically deals in all types of bearings, light engineering components, automobile components, castings and domestic appliances. Lately, it also commissioned facilities for the manufacture of telecom and transmission towers. For FY06, it can earn a NP of Rs.25 cr. i.e. an EPS of Rs.5.5 which can rise to Rs.35 cr. in FY07. Investors can expect a price target of Rs.40 in the medium term and Rs.75 in 2 years time.

Looking off of caustic soda prices is good for paper manufacturers. Rama Paper (Code No: 500357) (Rs.28.00) which hit a high of nearly Rs.60 is currently quoting at Rs.28. Due to buoyancy in the paper industry, the company is going for capacity expansion by adding 18,000 TPA of production facilities for high value paper and intends to set up a 6 MW captive power plant. Besides, it is also planning to foray into the business of power generation and deal in sugar and other allied products. Recently, it made a preferential allotment of 25 lakh shares to promoters @ Rs.35. Moreover, higher tax provision by the company confirms its prosperous future ahead. It is one of the cheapest available paper scrip, which can double in 9~12 months. Just grab it!

Although not a niche player in the pharma sector, Syncom Formulations (Code No: 524470) (Rs.90.00) can be bought for handsome gains due to its cheap valuation. It has more than 250 products to offer in ethical, generics, OTC and herbal range which it plans to take to 500 products in the next 2~3 years. Having successfully established its footprint in more than 15 countries of Africa, Latin America, C.I.S. and Asia, the company is putting more thrust on exports by tapping new countries. Due to efficient working capital management and healthy cash position, the company has pre-paid its entire loan and become a debt free company last fiscal. It also has some plan to diversify into power, construction, coal business and investment. For FY06, it may post an EPS of Rs.16 and its share price can appreciate by 50% in 6~9 months,

Mid caps and small caps are again on fire with hundreds of scrips hitting circuit filters. In such a scenario Videocon Appliances (Code No: 500945) (Rs.28.60), which hit a high of Rs.38 is bound to rise in coming days. Ashok Parmar has already exited the scrip so no selling pressure is expected. In spite of having a whopping Rs.1200 cr. in sales, its market cap is merely Rs.100 cr. Having reserves of more than Rs.360 cr. on its equity capital of Rs.33 cr., its book value stands at around Rs.80. It’s been a consistent performer even in such a competitive market and is a regular dividend paying company. Of late, the whole Videocon group has been re-rated due to its huge foray into oil exploration business and capital raising efficiency. The share price of this scrip is estimated to cross Rs.75 in 12 months.

Chemical scrips are once again being fancied in the market with a whole bunch of companies on fire in this sector. Gujarat Alkalies & Chemicals (Code No: 530001) (Rs.137.65) being the largest producer of caustic soda, is still trading reasonably cheap with a market cap of around Rs.1000 cr. In spite of some correction in caustic soda prices, the company is expected to report an NP of around Rs.200 cr. i.e. an EPS of Rs.27 on its current equity of Rs.73.50 cr. Interestingly, it has become the first Indian entity to get carbon trading credit, which it plans to sell in the international market for a sum worth Rs.60-70 cr. Scrip has the potential to cross Rs.200 mark in the medium term. Accumulate at sharp declines.

Few days back, Hazoor Media (Code No: 532467) (Rs.13.50) came out with its November quarter numbers which are quite satisfactory. Its total revenue grew by 12% to Rs.4.70 cr. and NP increased by 10% to Rs.1.27 cr. thereby reporting a quarterly EPS of Rs.1.45. It is basically into production of media content in diversified software categories viz. entertainment, film and film based programmes, sitcoms, news and current affairs, game shows catering to the demands of media companies in the international market. It also provides infrastructure services like shooting locations, floors, studios, post production processing facilities, filming equipments and qualified trained manpower to film & entertainment industry. With 52 week high of Rs.21.50, a book value around Rs.22 and with an expected EPS of Rs.5, this dividend paying company deserves much better valuation.