Diamines & Chemicals - Rs.61.00

Incorporated in 1976, Diamines & Chemicals Ltd (DACL) is a leading producer of ethylenediamine and polamines such as diethylenetriamine, triethlenetetramine and other polyethylene polyamines. Its products are used mainly in the manufacture of pesticides & fungicides, textiles, auxiliaries, paints and adhesives, drug intermediates, paper, petroleum additives, rubber chemicals and plastics. DACL also started the manufacture Piperazine anhydrous and piperazine 65% and has become the only domestic supplier of piperazine to the pharma and other industries. It offers a range of packaging starting from 40 kg customized packing to bulk packing in ISO containers.

DACL’s manufacturing facility is situated in the Petrochemicals Complex area in Vadodra. Its huge 40,248 sq. mtr plant has in house govt. recognized R&D and fully- equipped Quality Assurance Lab. The company is also ISO 9001:2000 certified for manufacture and sale of Amine based Industrial Chemicals by internationally reputed M/s. BVQI. The Company has set up an integrated on-line information system in all major operating areas including all major offices, warehouses and stores. Last fiscal, DACL also set up a Windmill at Surajbari in Gandhidham for captive consumption, which shall help in bringing down the cost of electricity. Lately, DACL has focused its product mix on Piperazine as it is the main product used by pharmaceuticals, agrochemicals, lubricants, fuel additives etc apart from offering better profit margins. Besides it has also embarked on marketing a new product range after a detailed market survey.

The company has come out with very strong numbers for its Dec’05 qtr. Sales increased by 150% to Rs.6.15 cr. and NP spurted 64% to Rs.1.80 cr. thereby reporting an EPS of Rs.2.70 for the quarter. Considering the company’s strategy, it is estimated that DACL may end FY06 with sales of Rs.22 cr. and NP of Rs.5.50 cr. This works out to a full year EPS of Rs.8.50 on its current equity of Rs.6.50 cr. For FY07, it can report an EPS more than Rs.10. Interestingly, in spite of having negative reserves, DACL is been giving handsome dividends to shareholders and has recently declared 15% interim dividend for FY06. It may declare another 15% as final dividend later. The scrip is trading cum dividend and gives a handsome dividend yield of nearly 5% even in such a high market. Investors are recommended to buy it at current price with a price target of Rs.80 in 6~9 months.

Triveni Glass - Rs.94.00

Incorporated in 1971, Triveni Glass Ltd (TGL) was promoted by S.N. Agarwal who was associated with the first sheet glass plant in the country set up at Bahji (U.P.) four decades ago. Today, TGL is among the largest glass manufacturers with 20% market share in float / sheet glass. In fact, it is the only wholly-Indian enterprise to manufacture international quality float glass. It offers the widest range of glass products in sheet glass, laminated safety glass, toughened glass, float glass, figured glass, tinted glass, reflective glass etc. It has many firsts to its credit like making the first laminated glass, tempered glass, mirror glass and bullet proof glass in India. TGL is also the second largest manufacturer of Neutral Borosilicate Glass Tubes.

TGL’s huge manufacturing facility is spread over 50 acres at Allahabad and over 40 acres at Rajamundry and Meerut consisting of total 8 hi-tech plants. It has some of the best quality processes in India like using the latest laser technology for non-contact measurement, which ensures consistently high quality products for the special requirements of the glass industry. TGL also has one of the largest nationwide distribution networks in the industry that includes 16 sales offices and more than 200 wholesalers. Although it concentrates more on the domestic market, its products are exported to Italy, Greece, Egypt, U.A.E., Iraq, South Africa, Mauritius, Australia, Indonesia, Malaysia etc. TGL is among the few to make pyrolytic reflective glass which is used in construction and building exteriors to keep out the heat, glare, UV rays and sound as well as keep down the air-conditioning costs and sold as ‘Triflect’. Moreover its sister company, Hindustan Safety Glass Works Ltd. has been OE supplier to most automobile manufacturers from Hindustan Motors to Maruti Udyog Ltd and to Defence, Railways, State Road Transport organisation etc.

Now the biggest trigger for the scrip is its debt restructuring. TGL has already repaid the full loan amount to UTI and only the IDBI debt is outstanding for which it has entered into one-time settlement (OTS) scheme with IDBI's Stressed Assets Stabilization Fund. After a waiver of around Rs.98.50 cr. only Rs.67 cr. after Rs.10 cr. payment in FY05 remains outstanding, which will be paid in installments till 2009. It is also considering issuing 40 lakh equity shares to IDBI against part of the interest due. In short, it’s a strong turnaround story available in a fast growing sector linked to automobiles and the construction industry. For FY06, it may report net sales of Rs.190 cr. and NP of Rs.12 i.e. EPS of Rs.14 on its equity of Rs.8.63 cr. For FY07, it can clock a turnover of Rs.240 cr. and NP of Rs.14 cr. (excluding extraordinary items), which means EPS of Rs.17 and diluted EPS of Rs.12. As its 52 week high is Rs.128, the scrip has the potential to give 30~35% returns in the short to medium term. Aggressive investors are recommended to buy it at declines with a price target of Rs.140 in 9~12 month.

STOCK WATCH

GIPCL (Code No: 517300) (Rs.70) which recently completed its IPO at Rs.68 came out with impressive numbers for Dec’05 qtr. Its topline was marginally down to Rs.195 cr. but its NP increased by 28% to Rs.30 cr. in spite of lower other income. For the full year FY06, it can report a NP of Rs.125 cr. i.e. an EPS of Rs.8 on its expanded equity of Rs.151.25 cr. The company is in the process of doubling its capacity at Surat Lignite Power plant (SLPP) to 500 MW from 250 MW and is also working on setting up two 1000 MW project in South Gujarat besides diversifying into power distribution in the State as part of its expansion plans. Leading mutual funds have evinced interest in this company and will gradually increase their stake going forward. A good long term bet in the power sector with a minimal downfall from current levels.

Ramsarup Industries (Code No: 532690) (Rs.80) is a leading manufacturer of TMT bars and steel wires which are mainly supplied to the power sector. For Dec.’05 qtr. its sales grew by 18% to Rs.247 cr. whereas its NP jumped 72% to Rs.8.20 cr. due to better operating efficiency and declared an interim dividend of 10%. For the full year FY06, it may report a NP of Rs.30 cr., which works out to an EPS of Rs.17 on its equity of Rs.17.50 cr. The company is expanding its product portfolio by setting up a structural mill with an installed capacity of 1,35,000 TPA at Shyamnagar in West Bengal at a cost of around Rs.70 cr. Besides it is planning to enter the power transmission and distribution business in the near future. Scrip has the potential to rise 50% in 9~12 months.

Shrachi Infrastructure (Code No: 511591) (Rs.50) offers a wide range of financial products and services from financing passenger cars and light commercial vehicles to heavy commercial vehicles and construction equipment. For rapid growth, the company is concentrating on infrastructure funding operation since it has a huge potential. For the full year FY06, it may report a bottomline of Rs.9.50 cr. leading to an EPS of Rs.11 on its current equity of Rs.8.50 cr. Recently, it allotted 19 lakh warrants to promoters @ Rs.53 per share and intends to raise further capital to fund its expansion plans while there is a risk of equity dilution going forward, its results are expected on 31st Jan. and we may see some firework in the short term.

Bombay Oxygen (Code No: 509470) (Rs.4933) is engaged in business of industrial gas and produces various types of gases like gaseous and liquid oxygen, liquid nitrogen, liquid argon etc. For Dec’05 qtr. sales were up 19% at Rs.12 cr. but its NP zoomed 53% to Rs.3.20 cr. For full year FY06, it may report Sales of more than Rs.50 cr. and NP of around Rs.12.00 cr. This works to an EPS of whopping Rs.800 on its tiny equity of Rs.1.50 cr. and share having a face value of Rs.100. Its book value as on 31st March’05 is Rs.1700 which may shoot up to Rs.2400 by 31st March 06. This means that the management may anytime announce a stock split and liberal bonus which will take the stock to dizzy height. Its 52-week high is Rs.6826 i.e. 30% lower than its recent high. Since promoters hold 59% of the stake the scrip is bound to hit continuous circuit filters in the near future. Catch it if you can.

Though most cement scrips are busy hitting new highs, Mangalam Cement (Code No: 502157) (Rs.91) is still bit far from its recent high of Rs.101 and trading reasonably cheap due to constant selling by financial institutions like IDBI. It began its new fiscal with excellent numbers. For Dec’05 qtr. Sales spurted 42% to Rs.86 cr. and NP stood at Rs.7.20 cr. compared to 0.61 cr. Its Operating Margin also improved to 14% against 10% last year. For FY06, it is estimated to earn a profit of Rs.25 cr. i.e. an EPS of Rs.9 on its current equity of Rs.28.20 cr. For FY07, it can report an EPS of Rs.12. Ironically; in the last 2 qtrs. IDBI sold a whopping 10% of its equity in the open market and has brought down its stake to 4%. Not much selling pressure is expected now and the scrip is poised to hit a new high soon.

In spite of being considered defensive sector, pharma has been ignored and that too when markets are trading so high. Ind Swift Labs (Code No: 532305) (Rs.158) announced decent numbers last week. Its turnover has increased by 23% to Rs.82 cr. whereas its profit increased 21% to Rs.9.10 cr. In its effort to tap the regulated markets, the company has filed 6 DMFs in USA and targets to file 4~5 DMFs every year. It has also filed 13 patents for non-infringing process for its APIs in USA & India and has put to commercial launch, 4 new APIs during the quarter. Besides, lot of other positive development and massive expansion is on which lead to a sharp re-rating of the company going forward. Although promoters stake is 26%, FIIs hold 30% and MFs hold nearly 4% stake. For FY06, company is expected to report topline of Rs.330 cr. and bottomline of Rs.37 cr. i.e. EPS of Rs.18 on its equity of Rs.20.90 cr. Even at a reasonable PE of 12x, the scrip is bound to cross Rs.220 in the short to medium term.