Albert David - Rs.90.00

Incorporated in 1938, Albert David Ltd. (ADL) is a leading fast-growing and professionally managed pharma company in East India. Its core competency lies in the manufacture of bulk drugs, specialty formulations, herbal/ayurvedic products, disposable syringes & needles and intravenous (IV) solutions. In fact, it pioneered the use of FFS (form, filled & sealed) technology in IV Fluids & Human Placenta extract therapy in India. It has strong presence in various drug therapeutic segemnts like Immunomodulators, Vitamins & Nutritional Supplements, NSAIDs, Apetite Stimulants, Liver Protectives, Anti-Ulcerants, Laxatives, Anti-Arthiritic Preparations, Muscle Relaxants, and Adaptogenics to name a few. New formulations in gynaecology, gastroenterology, anti-diabetics, cardio-vascular, vitamins, anti-ulcer, anti-inflammatory and haematinics are also under consideration.

ADL has manufacturing facilities in Kolkata, Ghaziabad and in Madhya Pradesh, which are WHO GMP certified and accredited to ISO and/or USA FDA. It has technical collaboration with the world's largest manufacturer of amino acids, Ajinomoto Co. Inc. of Japan and with Roussel Morishita of Japan for manufacturing and marketing a wide range of crystalline amino acids, infusion solutions, oral solids and liquids in India. It has a well-organised and well-connected distribution network comprising over 1,25,000 retail outlets, 1600 stockists and 15 Sales Depots spread across the country backed by a 400+ highly trained and dedicated marketing team. Besides, its products are exported to Vietnam, Russia, Belarus, Egypt, Bangladesh, Kenya, Tanzania, Uganda, Sudan, Ethiopia, Nigeria, Zaire, Haiti, Brazil, Canada, USA, UK, Netherlands and Germany. Notably, some of its drugs are already approved by US FDA, UK MCA and European Council and it has DMF registration for bulk drugs like Tolbutamide and Chlorpropamide.

Last fiscal, ADL upgraded and expanded its Ghaziabad facility increasing the installed capacity for IV fluids to meet the robust domestic and overseas demand. Besides, it has already incurred around Rs.17 cr. to modernize and expand its other plants which are expected to be completed this year. In 2006-07, ADL has plans to launch some new products such as ‘Siocare’ (a gynaecological herbal product), ‘Placentrex Cream’ (human placenta extract for wound management), Drotaverine Tablets & Injectables (for management of smooth muscle spasm & colic pain) and a range of Cough Syrups for productive & non-productive cough for adults and children in its product portfolio.

For FY06, ADL’s sales were up by 25% at Rs.117 cr. and net profit increased by 75% to Rs.7.50 cr. For H1FY07, while sales grew by 10% to Rs.74 cr., net profit zoomed up 80% to Rs.10.70 cr. due to the write-back of depreciation. Interestingly, its profit margin improved by 300 basis points to 17% from 14% last year. Hence for FY07, it may report sales of Rs.150 cr. with net profit of Rs.11.25 cr. excluding extraordinary items. This would work out to an EPS of Rs.20 on its equity of Rs.5.70 cr. If we include the depreciation write-back, then the EPS bloats to around Rs.28. With its 52-week high/low at Rs.144/Rs.62, the ADL scrip has the potential to hit a new high. Investors can buy it with a price target of Rs.160 (75% return) in 15¬18 months.

Aftek Ltd - Rs.53.00

Established in 1986, Aftek Ltd. (erstwhile known as Aftek Infosys Ltd.) is a technology-driven company offering Intellectual Property (IP) based products, solutions and services. It specializes in enterprise business management with core competency in communication arena. It has developed and acquired a huge wealth in terms of IP and is reaping rich dividends now. Its flagship software product called ‘Powersafe’ has been well-accepted in the international market. Powersafe is a gold-certified CA smart solution basically used in energy management as it integrates UPS networks with e-business management frameworks like CA Unicenter, HP Openview etc. Its electronic ticketing machines coupled with its ‘Depot Manager’ software fetched excellent response from public and private road transport organization especially in Europe. Its Digital Home Gateway revolutionised the housing industry by catering to security, safety, automation, entertainment, information and communication. It also has user friendly solutions for industry automation like material handling and access management and markets hi-tech products like Wireless gateway black box, VOIP-PSTN gateway device and small applications like prescription writer, panel simulator etc.

Aftek among the few Indian companies to specialise in Automotive Telematics Embedded Technologies, which is a next generation technology and impacts all aspects of the automotive user experience from human-machine interface, navigation, mapping, traffic information, safety and security aids, mobile internet to remote vehicle diagnostics and control. The company already provides these services to BMW – one of the world’s biggest and most prestigious automobile manufacturers. Presently, it is working on development of Consumer Portal for residential, commercial and industrial consumers, which will act as an intelligent meter and besides measuring the electricity consumption, it will proactively manage the load on the grid in terms of lighting, heating, ventilation, air-Conditioning based on the pre-determined policies and real-time conditions like load on power grid, ambient temperature, power price, etc. Also since last one year, it is developing software called SEPA (Search Engine Performance Advertising) which is state-of-the-art, cutting edge search technology for sponsored links. Incidentally, Aftek is the only Indian company being selected as one of the 200 companies world-wide for innovation, technology, financing and entrepreneurial activity by Red Herring - a renowned US-based media company.

Apart from its organic growth, Aftek is betting big inorganic growth too. It has a wholly-owned subsidiary in the USA called Opdex, which focuses on Energy Management space. Arexera Technologies GmbH is also a wholly-owned subsidiary in Switzerland which specializes in ECM (Enterprise Content Management) and offers a suite of products for Unstructured Data Management. Importantly, via Arexera, Aftek holds 33% stake in Seekport which is the third largest search engine after Google and Yahoo in German language apart from being very popular in French, Italian, Spanish and English. It will also be available in Arabic and some Indian languages in the near future. Aftek has a 25% stake in Digihome, which specializes in the Intelligent Home Management market. It also holds nearly 17% in V-Soft, which handles marketing and sales of the company’s professional services in North America. It also has a strategic 15% stake in Elven, a specialized player in ASIC (Application Specific Integrated Circuit) and FPGA (Field Programmable Gate Array) technologies in the VLSI (Very Large Scale Integration) space. These companies use Aftek’s intellectual properties and/or professional services and thus bring significant value to the company.

Financially, Aftek is debt-free and cash rich company. As on 31st Mar.’06, its cash holding was a whopping Rs.330 cr. (including Rs.75 cr. of unutilized FCCB money) whereas its current market cap is around Rs.475 cr. only. Its strategic investment in other companies including Arexera stands at Rs.118 cr. It has massive reserves of Rs.460 cr. against its small equity of Rs.17 cr. leading to a book value of Rs.56. Last fiscal, the company raised around Rs.160 cr. by allotting 3450 FCCB of US $10000 each to fund an acquisition. Of these, 2270 FCCBs have been converted into equity shares at Rs.94 per share whereas the balance 1180 will be converted at the revised conversion price of Rs.75 per share. Interestingly, possibly to increase their stake, the promoters have allotted 37 lakh share warrants to themselves to be converted at Rs.120 per share and they have already paid 10% of the amount. For FY06 ending 31st Mar.’06 (9 months only) it reported sales of Rs.193 cr. with net profit of Rs.67.50 cr. For H1FY07, its topline grew by nearly 30% to Rs.155 cr. and profit increased by 55% to Rs.59.50 cr. Hence for the full year FY07, it may clock a turnover of Rs.325 cr. with net profit of Rs.108 cr., which works out to an EPS of Rs.11 on its fully diluted equity of Rs.19.50 cr. Thus this company is trading extremely cheap and can easily shoot up by 50% in 6-9 months. Buying is strongly recommended at CMP.

STOCK WATCH

Tyche Industries (Code:532384) (Rs.32.65) is a custom contract/toll manufacturer of specialty chemicals & intermediates. It is planning to move up the scale as a generic pharmaceutical company and has obtained a drug licence for Sertraline HCI, Venlafaxine HCI, Tamsulosin HCI Sumatriptan Succinate, Propofol, Losartan Potassium, Phenyl Ephrine HCI and Propafenone. It made a sharp turnaround in FY06 as its OPM shot to 24% from 9% in FY05. Maintaining the trend, it reported robust numbers for H1FY07 as sales doubled to Rs.12.60 cr. and net profit jumped up 80% to Rs.2.40 cr. It is planning to enter the regulated markets by filing DMFs with the regulatory authorities in USA and Europe and is also in the process of applying for WHO GMP licence. For FY07, it may register a top-line of Rs.28 cr. and PAT of Rs.4.75 cr., which will lead to an EPS of Rs.5 on its equity of Rs.9.84 cr. Buy on declines

In spite of threats from cheap Chinese import, Murudeshwar Ceramics (Code:515037) (Rs.115.60) continues to report an encouraging topline and bottomline. For Sept.’06 quarter, its sales grew by 35% to Rs.62 cr. whereas net profit increased by 50% to Rs.8.50 cr. Importantly, company is maintaining a healthy profit margin of more than 30%. Last fiscal, it completed the capacity expansion for manufacturing Vitrified Tiles at both Hubli and Karaikal taking the installed capacity to 30,00,000 sq. mt. and 33,00,000 sq. mt. per day respectively. In December’06, the ceramic tile unit at Hubli has become operational with a capacity to produce 12,000 sq. mt. per day. Hence for FY07, it is estimated to clock a turnover of Rs.240 cr. with net profit of Rs.32 cr., which leads to an EPS of Rs.18 on its fully-diluted equity of Rs.17.50 cr. Recently, the company has allotted around 25 lakh preference shares to be converted into equity shares at Rs.124 per share to fund its expansion plans.

Indo Borax & Chemicals Ltd. (Code:524342) (Rs.37) is synonymous with Boric Acid and is referred to as a benchmark for any comparisons made in the industry. It operates a modern boric acid and borax plant at Pithampur near Indore in M.P. In the last two quarters, it reported fantastic numbers and closed the half year ending 30th Sept.’06, marginally improved sales of Rs.10.30 cr. (up by 5%) but net profit increased by 25% to around Rs.2 cr. This is in spite of a sharp reduction in ‘other income’ to Rs.0.27 cr. from Rs.0.93 cr. last year. Hence its OPM has improved dramatically to 28% from 18% in FY05. Even on a conservative basis, the company is expected to clock a turnover of Rs.22 cr. with net profit of Rs.2.50 cr., which leads to an EPS of Rs.7 on small equity of Rs.3.50 cr. The scrip has the potential to once again test its 52W high of Rs.49. However, since boron minerals are not found in India and the basic raw material has to be imported, only risk bearing investors can buy on sharp dips.

Promoted by Andhra Sugars and APIDC, Andhra Petrochemicals (Code:500012) (Rs.12.80) main business is the manufacture and sale of Oxo-Alcohols and it has an installed capacity of around 42,000 MTA. Its products are witnessing strong demand and the company is planning to increase capacity in the near future. Incidentally, as the entire feedstocks and fuels used are petroleum products, the sharp fall in crude oil price will have a very positive impact on its bottom-line going forward. For the Sept.’06 quarter, it has reported stunning numbers. Sales spurted by 60% to Rs.71 cr. whereas net profit shot up by 560% to Rs.8.70 cr. compared to Rs.1.30 cr. last year. Notably, its OPM doubled to 25%. The company has also initiated steps to install Uninterrupted Power Supply (UPS) system to feed all essential equipment drives which will lead to substantial savings in power cost. Assuming an OPM of around 20% for the full year, it can register total revenue of Rs.250 cr. with net profit of Rs.23 cr. This means an EPS of Rs.3 on its equity of Rs.85 cr. Accumulate at declines.
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