STOCK WATCH

In the textile segment, Garden Silk Mills (75.00) has posted stunning nos for the Sept qtr and the scrip is hitting new highs. It recorded 45% growth in sales to 435 cr but the NP zoomed up 130% to 17.75 cr registering an EPS of 4.60 Rs for the quarter alone. Company is one of the major players in the Indian polyester yarn and fabrics segment with strong brand name ‘Garden Vareli’. Importantly, it is backward integrated having second largest capacity to produce textile grade polyester chips in India. Few months back it signed a contract with CTIEI (China Textile Industrial Engineering Institute, P.R. of China) to set up a continuous polymerization plant with a capacity of 2,60,000 tons per annum of textile grade polyester chips which is expected to commence production by October, 2008. Besides, it also entered into an agreement with Oerlikon-Barmag of Germany and TMT of Japan for supply of a polyester yarn plant of a capacity of 55,000 tons per annum. Further, it has a capex plan of 240 cr for expanding its polycondensation and POY / FDY manufacturing capacities. Incidentaly, company is not into exports hence is not affected by the rupee appreciation. For financial year ending June 2008, it may clock a turnover of 1800 cr and PAT of 50 cr i.e. EPS of 13 Rs on equity of 38.30 cr. Despite having strong fundamentals and book value of 95 Rs, company is available at an enterprise value which is even less than its gross block.

Recently, Span Diagnostic (56.00) declared fantastic result as its sales grew by 25% to 18 cr but net profit shot up 60% to 1.70 cr for Sept quarter. Further for six months ending Sept’07 the picture is more interesting with sales up 55% to 32 cr and PAT up 375% to 2.50 cr. Notably, the company is a pioneer and trend-setter of high quality products used by pathology & clinical laboratories in the diagnostics industry and also one of the largest manufacturers of diagnostic reagents. Hence it supplies variety of instruments and consumables besides reagents and kits required by modern clinical laboratory. To strengthen its market share in overall diagnostic market, it has just now formed a new subsidiary especially for R&D of instruments. It has exclusive tie-ups with reputed companies worldwide for marketing, distributing and servicing diagnostic products in India. Moreover company also undertakes contract manufacturing of a wide range of quality reagents and kits in bulk for private labels. It may end FY08 with total revenue of 70 cr and PAT of 4.25 cr. This translates into EPS of 13 Rs on small equity of 3 cr. Scrip has the potential to double in a year’s time.

Bilpower (180.00) has once again come out encouraging set of nos for Sept quarter. Total revenue increased by 35% to 77 cr and net profit zoomed up 70% to 5.40 cr. It is one of the well known players in the field of manufacturing transformers of all types, electrical laminations, stampings and cores. Besides it’s a leading trader of CRGO & CRNGO and produces the largest range of transformer cores in India. For future growth, it tookover a private company namely Tarapur Transformers for 3.40 cr which has an installed capacity of 1500 MVA for repair of power transformers up to 200 MVA, 220 KV Class. Soon company is expected to start manufacturing power transformers also of its own. Besides, it acquired Sun Transtamp Private Limited, a company involved into manufacturing of electrical lamination. Importantly, Bilpower is foraying into transmission & distribution segment of power sector as it has been qualified as the ‘turnkey contractor’ for the EPC business by Maharashtra State Electricity Distribution Company Ltd. Further it is in the midst of setting up manufacturing activities for motor stampings in Wada, which is expected to commence operation by end of this calendar year. To fund its T&D venture, it intends to raise nearly 60 cr thru FCCB route in near future which may dilute the equity to extent of 30%. Meanwhile for FY08 it can register a topline of 300 cr and bottomline of 21 cr i.e. EPS of 23 Rs on current equity of 9 cr. Despite low promoter holding it’s a good bet for long term.

Last week, Bihar Caustic (60.00), a Aditya Birla group company reported excellet set of nos for the Sept qtr. Sales improved by 35% to 45 but PAT almost doubled to 14 cr due to better operating efficiency. With an impressive OPM of 51% it posted an EPS of 6 Rs for the quarter. Recently, company has set up an aluminium chloride project and is estimated to produce and sell about 12000 MT of aluminium chloride in FY08. It is also further expanding its caustic soda capacity from 225 to 265 TPD by addition of electrolysers as well by debottlenecking. Besides, it is putting up a stable bleaching powder plant at an estimated cost of Rs.7.50 cr to be operational by mid 2008. Accordingly for FY08 it may clock a turnover of 185 cr and profit of 40 cr which leads to an EPS of 17 Rs on equity of 23.40 cr. Thus the scrip is currently discounted by less thab 4x times. The EV/EBIDTA ratio of the company is also very low at 3x times. Considering reserves of 125 cr & gross block of 305 cr it’s a pure value buy at a present market cap of around 140 cr. The scrip can easily appreciate 50% in 9-12 months.