STOCK WATCH

At a time when the Sensex has crossed the 12000 mark and all engineering companies are richly discounted, International Combustion (Code No: 505737) (Rs.380) is trading fairly cheap. Under licence from Danfoss Bauer-Germany, the company offers a comprehensive range of Geared Motors, Gear Boxes and Electric Motors manufactured on specially designed inter-linked CNC production lines. It also manufactures and markets a wide range of mechanical and electro-magnetic vibrating screens, feeders & conveyors to handle all types of bulk materials. Besides, it also markets ‘Raymond’-an American brand roller mill, pulverisers, grinding mills, mechanical air separators and flash drying systems, which are in strong, demand. For FY07, it is expected to report a turnover of Rs.85 cr. and NP of Rs.7.25 cr. i.e. an EPS of Rs.30 on a very tiny equity of Rs.2.40 cr. Having huge reserves of Rs.25 cr., it’s a strong bonus candidate as well. A solid buy for medium to long term.

Ramsarup Industries (Code No: 532690) (Rs.84) is a leading manufacturer and exporter of steel wires, galvanized wires, TMT bars and rods, which are primarily used in the power, housing and infrastructure sector. Presently, it has an installed capacity to produce 1,37,000 MT of steel wire and 72,000 MT of galvanized wire with 87,000 MT capacity of TMT bars. Besides, it is expanding its product portfolio by setting up a structural mill with an installed capacity of 1,35,000 tonnes to produce medium structurals like angles, channels and beams at a cost of around Rs.70 cr. For FY07, the company is estimated to register a topline of R1250 and bottomline of Rs.38 cr. which means an EPS of Rs.22 on its equity of Rs.17.50 cr. It’s a well managed dividend paying company with 67% promoters’ stake. A screaming buy.

Being underperformers for long, textile scrips are now gradually catching up and have started to rise. Eastern Silk (Code No: 590022) (Rs.225), a leading producer of silk fabric recently came out with impressive numbers for the March’06 qtr. Sales increased by 70% to Rs.80 cr. whereas NP rose 60% to Rs.5.40 cr. For the full year ending 31 March 2006, sales were up 15% to Rs.387 cr. but NP jumped 55% to Rs.38 cr. It reported an annual EPS of Rs.28 on its diluted equity of Rs.13.50 cr. For future growth, it is expanding its weaving capacity at its Bangalore unit by 4,50,000 metres per year, which will include double width jacquard and velvet fabrics. Besides, it is also setting up an in-house facility for made-ups with capacity of 1500 sets / day. To fund this expansion, the company has already raised Rs.57.50 cr. through private placement @ Rs.250 per share. For FY07, it may register total revenue of Rs.475 cr. and NP of Rs.46 cr. i.e. an EPS of Rs.29 on its fully diluted equity of Rs.15.80 cr. The scrip has the potential to cross Rs.300 in 9~12 months.

Indian Toners and Developers Ltd (Code No: 523586) (Rs.32) is a leading manufacturer of compatible black toners for photocopiers, laser printers, digital machines and multi-function machines like scanners, printers and fax copiers. It is the undisputed leader in the domestic market and the single largest exporter of toners and developers from India. To increase its global share, the company is regularly augmenting its capacity and has recently increased it to 1200 MT from 700 MT earlier. The full impact of this expansion will be visible in the current fiscal. It may earn a NP of Rs.5 cr. on sales of Rs.45 cr. for FY07. This will lead to an EPS of Rs.6 on its current equity of Rs.8 cr. In the bullish sentiment, the scrip can hit Rs.50. Buy and hold it for a year.

Although most of the large cap as well as small cap steel scrips have witnessed a sharp rally, National Steel (Code No: 513179) (Rs.26) hasn’t appreciated much. Zinc prices are scaling new highs and as the company manufactures galvanized steel also, marketmen are not so sure about its bottomline. But it should be noted that with the rise in zinc prices, the price of galvanized steel has also been raised. Due to strong demand, steel companies are able to pass on this rise in raw material cost to customers. Moreover, because of such wide fluctuation in raw material cost most of the contracts are signed with escalation clause. Surprisingly, in such a market, a company having a capacity of 2,10,000 tonnes of galvanized steel and 2,40,000 tonne of cold roll steel is available at market cap of merely Rs.85 cr. It’s a steal and pure multibagger if held for 2~3 years. Just go and grab it.