Suryalata Spinning - Rs.78.00

Incorporated in 1983, Suryalata Spining Mills Ltd (SSML) is engaged in the manufacture of synthetic blended yarns of polyester/viscose, 100% polyester and 100% viscose counts ranging from 20s to 60s and black dope dyed yarn. Besides exporting its product to Italy, Turkey, Taiwan, Iran, Srilanka, Indonesia, Nigeria and other European countries, SSML also caters to the domestic markets of Bhilwara, Ichalkaranji and Bhiwandi, which are large textile processing and producing centres. It has two Spinning Plants one in Andhra Pradesh and the other in Maharashtra. Unlike other players, both its facilities are ultra modern and equipped with hi-tech machines from world renowned manufacturers such LMW, Turmac Engineering and Murata Machinery Ltd, Japan.

Last year, the company completed Rs.8.60 cr. expansion cum modernization programme at its AP factory and a couple of months back it enhanced its Maharastra unit capacity by 7200 spindle at a cost of Rs.11 cr. With this expansion, its present installed capacity stands around 65,000 spindles. To diversify its product portfolio, the company is foraying into the manufacture of cotton yarn and is setting up two new units one in AP (25000 spindles) and the other in Maharashtra (20,000 spindles) at an investment of Rs.90 cr. These units are expected to commence commercial production from December 2006 and will be eligible for various incentives and exemptions allowed by the AP government as per the SIIP policy 2005-2010. Moreover, to become an integrated player, it is planning to set up a weaving and processing unit with a capacity of 50,000 metres per day at an initial cost Rs.35 cr. It is also considering a proposal to set up a Rs.25-cr. garment facility with a capacity of 10,000 trousers a day.

Post-quota regime, EU and US companies are increasing the outsourcing of their requirements from India due to its edge in availability of raw material, skilled labour etc. over competing countries. Taking into consideration its expansion plans, it is expected to report sales of Rs.210 cr. with NP of Rs.9.50 cr. for FY07. This translates into EPS of Rs.17 on its current equity of Rs.5.45 cr. As the full impact of the expansion will come only in FY08, it may report more than Rs.300 cr. in sales.
Although the company may raise around Rs.30 cr. through FCCB/preferential allotment etc. in future, which may dilute the equity capital to some extent, still it’s trading cheap with current market cap of only Rs.40 cr. The scrip has the potential to appreciate 25~30% in a year’s time and can even double in 24~30 months.

Indian Toners & Developers - Rs.34.00

Incorporated in 1990, Indian Toners and Developers Ltd (ITDL) is a leading manufacturer of compatible black toners for photocopiers, laser printers, digital machines and multi-function machines like scanners, printers and fax copiers. Being the first company of its kind, it is the pioneer in this highly technical field and established itself firmly as the leader in the domestic market through its brand ‘Supremo’. In fact, it is also the single largest exporter of toner and developer from India. It manufactures toners for a wide range of models of practically all machine manufacturers – Canon, Hewlett-Packard, Kodak, Lexmark, Minolta, Mita, Olivetti, Panasonic, Ricoh, Samsung, Sharp, Toshiba, Xerox and several others.

With its manufacturing facility located at Rampur about 200 kms. East of Delhi, ITDL can boast of having a highly automated and integrated Swiss and German plant and machinery along with know-how assistance from Japan. To cater to the increasing demand, the company has recently augmented its production capacity to 1200 MT from 700 MT in August 2005. It has adopted strict quality control to ensure that its toners are made to machine manufacturers’ standards for copy quality and yield. Hence raw materials are sourced from world-renowned manufacturers in Japan, Germany and USA. ITDL has already applied and is expected to get the ISO 9001:2000 certification shortly. Backed by a pilot plant and strong R&D team, the company is well equipped to develop a wide range of toners to meet the emerging needs of the upcoming new generation digital machines and laser printers. Importantly, it has the most widespread network of 500 dealers present in every nook and corner of the country apart from sales team of 150 people and work force of more than 250 employees. Having established its customers in more than 20 countries, ITDL is currently focusing more on lucrative export markets. It has set up a wholly owned subsidiary in USA by the name of ITDL (U.S.A.), Inc. with a view to enter into the North & South American markets. It already has a representative office in Singapore as well as sole distributors in U.A.E and Singapore. It plans to open offices in Europe and China shortly in order to further expand its global presence. Besides, the company has been participating in exhibitions all over the world to build new customers and to introduce new products in the international market and has been awarded ‘Excellence in Export Performance’ for 3 consecutive years by the Government of India.

Lately, the company has introduced premier quality consumables for laser printer cartridges – OPC Drums, Doctor Blades and Wiper Blades, which will further boost its topline. With its vast experience in the industry along with an efficient and sound technical team, ITDL is poised for further expand its capacity to meet the growing needs of the market. Tough competition in the domestic market, especially from the import of toners by the traders, is a cause of concern. Another negative factor is that, in spite of being a profit making company, it’s a non-dividend paying company. Anyway for FY07, it is estimated that the company will clock a turnover of Rs.45 cr. and NP of Rs.5 cr., which will lead to an EPS of Rs.6 on its current equity of Rs.8 cr. With a reasonable discounting of 12x times, its share price can double in 15~18 months.

STOCK WATCH

Mid caps are back in action and hitting new highs. With 52W high of Rs.29, Manali Petro (Code No: 500268) (Rs.19.60) has the potential to rise 25~30% in the short term. It is engaged in the manufacture of Propylene Oxide, Propylene Glycol and is the sole producers of Polyols in India. To strengthen its balance sheet, the company is implementing financial restructuring to wipe off its accumulated losses by reducing its share capital to the extent of 25%. Post restructuring, the face value of the share will stand reduced to Rs.7.50 and the equity capital will be Rs.86 cr. For FY07, its topline and bottomline is estimated to be Rs.475 cr. and Rs.52 cr. respectively, which translates into an EPS of Rs.5. The scrip can shoot upto Rs.35 in a year’s time.

Kilburn Engineering (Code No: 522101) (Rs.43) belonging to the Williamson Magor Group operates process design, engineering, manufacture installation and commissioning of turnkey plants and systems catering to industries such as petrochemical, chemical fertilisers, refineries, oil and gas and food processing. Recently, it bagged a huge order or around Rs.19 cr. from a Malayasian company. For FY07, it is estimated to report a turnover of Rs.90 cr. and NP of Rs.7.50 cr. This works out to an EPS of Rs.6 on its expanded equity of Rs.13.50 cr. The company is even expected to return to the dividend form FY07 after a gap of 10 yrs. Scrip has the potential to hit Rs.75 in 6~9 months time.

Apart from being a leading integrated diamonds and jewellery manufacturer & exporter, Gitanjali Gems Ltd (Code No: 532715) (Rs.178) is the largest player in the branded jewellery segment with well-known brands like GILI, NAKSHATRA, ASMI & D’DMAS. Recently, it formed a joint venture with Sanghvi Exports to manufacture and market SANGINI brand of diamond jewellery. It already has a large retail set-up with 26 exclusive distributors and 620 outlets across 30 cities in India. To increase its market share, it is setting up further 10 Asmi retail outlets, 100 D'damas stores, 90 kiosks at Shoppers Stop departmental stores, 6 Nakshatra flagship stores and 25 outlets for Fantasy Diamond. For FY07, it is estimated to report sales of around Rs.2000 cr. and NP of Rs.50 cr. posting an EPS of Rs.12 on its equity of Rs.59 cr. Considering its brand image and expansion plans, it should trade between Rs.220~260 at a reasonable discounting of 18¬22 times.

GM Breweries Ltd. (Code No: 507488) (Rs.104) has come out with terrific set of numbers beating the expectations of the most optimistic analysts. For March’06 qtr., its Sales increased by nearly 50% to Rs.44 cr. whereas the NP zoomed 250% to Rs.7.40 cr. reporting a. quarterly EPS of Rs.8 on its current equity of Rs.9.40 cr. Its OPM improved substantially to 28% for the qtr. compared to 12% in the corresponding previous quarter. It even declared 15% dividend. With FY06 EPS of Rs.14 and having a market cap of less than Rs.100 cr., it is trading very cheap. For FY07, it can even report sales of Rs.175 cr. with NP of Rs.18 cr. i.e. an EPS of Rs.19. Scrip has the potential to touch Rs.220 in a year or so. Just grab it!

Some analysts feel that sugar as a commodity is in secular bull run for another 5 years at least. In such a scenario, Mawana Sugars (Code No: 532512) (Rs.127) can give extraordinary return if held for 2~3 yrs. It has already merged its 100% subsidiary, Nanglamal Sugar Ltd., which recently expanded its capacity to 8000 TCD. With this, Mawana Sugars total capacity stands enhanced to 30,000 TCD. Besides, it is implementing aggressive expansion plans to further add around 8500 TCD by Nov 2006. It’s also setting up 30MW co-generation plant and ethanol distillery units to produce 40 million litres per annum. Considering all this, for FY07 ending 30 Sept.’07, it is expected to report Sales of Rs.850 cr. and NP Rs.85 cr., which means an EPS of Rs.20 on its equity of Rs.42.50 cr. Although, the company is expected to raise more than Rs.200 cr. through FCCB/ADR route that may dilute the equity by Rs.15 cr. or so, still it’s one of the best bets in the sugar sector for the long-term.