International Combustion - Rs.320.00

In 1936, International Combustion Ltd (ICL) commenced operations in Calcutta as a trading house representing the interests of International Combustion, U.K. In 1974, this FERA company changed its status from a private limited to public limited company. But in 1990, the foreign promoters sold their stake to the NRI Directors. It has foreign technical collaborations and licensing agreements with world leaders in the respective product groups for manufacture of premium equipment. Besides, its strong marketing and service organization across the country enables quick and direct contact with customers during all phases of consultation, contractual negotiation, followed by execution and after sales service. It has a large clientele with major players from across all industries including metal, mining, chemical, pharma, construction, sugar, cement, power, textile, paper, fertilizer, plastic etc. ICL has fully equipped manufacturing facilities at Calcutta, Nagpur and Aurangabad which ensures total control over production and product quality. Presently, ICL has following three manufacturing division:-

Heavy Engineering Division :
With technical knowhow from Carl Schenck ZchBehenck AG of Germany, ICL manufactures and markets a wide range of mechanical and electro-magnetic vibrating screens, feeders & conveyors to handle all types of bulk solids, whether large lumps or very fine grains, whether wet or dry, whether abrasive such as scrap, flux and sinter. Under bulk material handling, the company deals in Spiralling Belt Elevators, Scooping Belt Conveyers, Girdle Pocket Elevators, Apron Feeder, Mining Haulages etc. As accessories it manufactures Exciters, DC Brake Unit & Monitoring System for vibrating machines. ICL also manufactures multi-deck sizers, bar sizers, vibro bar sizers, flip flop screens in technical collaboration with Mogensen GmbH, Germany. ICL also has a Grinding, Classification & Drying unit under which it markets ‘Raymond” American brand roller mill, pulverisers, grinding mills, mechanical air separators and flash drying system, which can reduce many products by 95~98% or refine them below 10 microns. The company has also entered into a licence agreement with Ecutec, Spain to manufacture Microfine Classifiers from this year.

Polymer Division :
With technology from Gummi Kuper GmbH, Germany, ICL produces various Polyurethane and Rubber Screen Decks and Liners for wet and dry applications including scalping, load relieving, sizing, washing and dewatering in this division. The operation in this unit was suspended for some time and has resumed from this fiscal to manufacture modular screen decks.

Bauer Division :
Under license from Danfoss Bauer, Germany, ICL offers a comprehensive range of Geared Motors, Gear Boxes and Electric Motors manufactured on specially designed inter-linked CNC production lines. Major growth is expected is this segment as the company has introduced Bauer current generation B-2000 series, in India and neighbouring countries. These equipments have strong global presence in Steel, Automobiles, Beverages, Material Handling Systems and various other industries.

With strong industrial growth and major expansions by manufacturing biggies and in the construction sector, ICL has a very promising future ahead. Moreover, it is eyeing major business from exports by tapping newer markets in Europe and South America apart from supplying to Kazakhstan and some countries in South East Asia. It is also enhancing its production capacity at Aurangabad and Nagpur with a capital investment of Rs.5 cr. for which it has made a preferential allotment of 2,30,000 warrants @ Rs.178 to the promoters. For FY06, it is estimated to clock a turnover of Rs.65 cr. and NP of Rs.5.50 cr. For FY07, Sales may rise to Rs.85 cr. and NP to Rs.7 cr. This works to an EPS of Rs.23 and Rs.29 respectively on its diluted equity of Rs.2.40 cr. With a reasonable forward discounting of 14~18 PE, the scrip has the potential to trade between Rs.400-Rs.500. A solid buy.

Gujarat Reclaim & Rubber Products - Rs.250.00

Established in 1974, Gujarat Reclaim and Rubber Products Ltd (GRRP) is the largest manufacturer and exporter of reclaimed rubber in India. K. M. Philip, founder director of MRF Ltd and the president of the Indian Rubber Manufacturers' Research Association (IRMRA) is the Chairman of the company. Apart from producing a range of natural reclaimed rubber grades, it also produces synthetic rubber reclaims such as Butyl reclaim, Nitrile reclaim, EPDM reclaim, Latex reclaim, Fluro-elastomer reclaim, etc. Reclaimed rubber is produced from used tyres and waste rubber and is considered to be the third source of rubber after natural and synthetic rubber. 'Reclaiming' is a process of de-polymerization wherein vulcanized waste rubber is ground, then treated with heat, chemicals and is then intensely worked mechanically. Reclaim Rubber has established its worth and versatility by use in automobile tyres, butyl tubes, cycle tyres & tubes, battery containers, tread rubber, belts & hoses, moulded & extruded products etc.

GRRP has put up units in Ankleshwar and Solapur for the manufacture of surface treated crumb and for manufacture of commodities punched and split from waste tyres for use in engineering, civil construction and ground surfacing applications. In fact, GRRP is the first to offer technical collaboration (named Rubplast SDN BHD) for supply of machinery and technical knowhow to manufacture reclaimed rubber and was also the first to introduce a surface treated crumb rubber manufacturing facility in India, with technical knowhow from an American company. With electrical power being a major input, the company has installed a captive power generating capacity to ensure continuous production at its Ankleshwar unit. Starting with a modest capacity of 2400 MTA, it has grown leaps and bounds to the present capacity of 27000 MT. Further capital expenditure to step up production capacity has been planned. With a variety of grades of reclaimed rubber under its belt, the company caters to some of the largest tyre manufacturers in India and abroad including USA, Australia, France, Japan, Korea, Spain and UK among others. Its products are approved by 7 of the Top 10 to 12 out of the Top 20 tyre companies in the world and 4 of the Top 10 non-tyre rubber companies in the world. Importantly, GRRP has a distributor presence in 18 countries offering 'just in time' inventory management, logistics planning and local administration support. It has also been conferred the 'Export House' status by the Government of India for its steady export growth and performance. For future growth, it is focusing on sales of synthetic rubber reclaims which find more uses compared with the Natural rubber reclaims.

The need to counter the potential hazard of environmental degradation caused by waste tyres has led to the increasing popularity of the reclaim process and its use in rubber products. With the prices of natural rubber and synthetic rubber showing an increasing trend, the demand potential for reclaim rubber continues to be promising. Considering all these factors, the company is estimated to end FY06 with Sales of Rs.60 cr. and NP of Rs.6 cr. This works out to an EPS of Rs.45 on its tiny equity of Rs.1.33 cr. Being a consistent dividend paying company for more than a decade, it seems to be good bet for a target price of Rs.360 in 9~12 months.

STOCK WATCH

Excise authorities recently objected to certain cenvat credit availed by Ind Swift Lab (Code No: 532305) (Rs.112), due to which it share price has crashed. Besides, the promoters being not so investor-friendly, the scrip suffers from poor rating. Despite all this, the company is on a high growth trajectory and will report bumper results in coming years. The company is fully geared to enter into regulated markets particularly in USA and Europe. It has already filed 7 Drugs Master Files (DMFs) in US and 50 DMF in other European countries. Couple of days back, it inaugurated its state-of-the-art R&D Centre in Mohali. In short, the day it gets USFDA approval the scrip will shoot up like anything. One of the best long term bets for 2~3 years.

Steel scrips are back in action due to uptrend and price hike in the international market especially China. Mukand Ltd. (Code No: 500460) (Rs.98) being the largest manufacturer of specialty carbon/alloy steel and stainless steel is tipped to witness some sharp rally in the short term. Besides steel, it is also among the largest suppliers of high capacity EOT cranes in India. Moreover, the company has also taken a Rs.700 cr. highway construction project in collaboration with a Russian company. For future growth, the company is expanding its Hospet unit’s steel manufacturing capacity from 1,60,000 to 2,90,000 MTPA. Due to debt restructuring and other factors, the company is estimated to report an EPS of nearly Rs.18 for FY07.

Interest rates are on an uptrend and LIC Housing Finance (Code No: 500253) (Rs.188) has already raised the interest rate on home loans thrice in a short span of time. With 85% of its total loan portfolio on a floating rate basis, this will have a positive impact on its bottomline. Company is only second to HDFC in the housing finance business but in valuation it is available for a song compared to HDFC. For FY06, the company is expected to register total revenue of Rs.1240 cr. and NP of Rs.220 cr. This translates into an EPS of Rs.26 on its current equity of Rs.84.99 cr. With a book value of more than Rs.150, it’s a value buy at current levels with minimal risk of any further downfall.

DHP India (Code No: 531306) (Rs.23) is a leading manufacturer and exporter of domestic and industrial pressure regulators for LPG, Propane and Butane cylinders. Recently its new factory became operational w.e.f from 1st March 2006 which has almost doubled its manufacturing capacity. Besides, it has also shifted its old factory from Belgachia to Sankrail, Howrah, to consolidate and benefit from economies of scale. To shore up revenue, the company is concentrating more on exports, which has a huge potential. For FY07, it is estimated to report Sales of Rs.13 ~ 14 cr. and NP of Rs.1.75 cr., which will lead to an EPS of Rs.6 on its equity of Rs.5.30 cr. Dividend of 10%, provides a cushion for any further downfall in its share price making it a good bet for the medium to long term.

ITL Industries Ltd (Code No : 522183) (Rs.35) is the pioneer and leader in high speed sawing technology offering 60 different models of bandsaw machines ranging from 100 mm to 1500 mm cutting capacity with manual, semi-automatic, automatic and fourth generation CNC machines. It is also engaged in trading hydraulic power packs and hydraulic presses. Apart from making Industrial Blades, Power Hackshaw Machines, Special Purpose Machines, Hydro Testers, lubricants and other supporting equipments it is also manufactures Tube and Pipe Mills, Section Mills, Straightening Machines, Draw Benches, Automatic Cut-offs, Accumulators etc. Considering its strong order book position, it may report Sales of Rs.35 cr. with NP of Rs.2.50 cr. i.e. EPS of Rs.8 for FY07. With dividend expectation of around 15% for FY06, this is another company with a good dividend yield.