STOCK WATCH
Couple of months back Ind Swift Lab (54.00) has received the USFDA approval for its API manufacturing facility at Derabassi Punjab for Clarithromycin. For other API’s, FDA inspection is expected to be done shortly. Presently, exports constitute around 45% of sales with company having presence in 45-50 countries - principally European countries, Asian countries, Latin American countries and Middle East. For future growth the company has a robust product pipeline of 25 products which includes blockbuster drugs like Clopidogrel (Anti-Cholestrol), Pioglitazone (Anti-Diabetic), Letrozole & Anastrozole (Anti-Cancer) Venlafaxine (Anti-Depressants) Quetipine & Aripirazole (Anti-Pshychotic). It has successfully filed over 72 DMFs with the US, Canadian, UK and European Drug Authorities. The DMF filing will facilitate the launching of the drugs by the company upon the patent expiry in those countries. Hence company has been aggressively expanding its capacity and has quadrupled its Gross Block to nearly 400 cr from 100 cr two years back. Considering the robust half yearly nos, it may end FY08 with sales of 450 cr and PAT of 22 cr. This translates into EPS of 9 Rs on fully diluted equity of 25.25 cr. With a book value of whopping 93 Rs and expected CEPS of 16~17 Rs, scrip is trading extremely cheap at a P/E ratio of merely 6x times. A screaming buy at is has the potential to double in 12~15 months.
Orient Ceramics (52.00) produces wall as well as floor tiles under the brand name “Orient” and offers one of the largest range by way of designs, colors, sizes, choice of surface finishes etc. It also makes special tiles under various collections branded as Artline, Midline, Vivaldi, Novista, Goemetricos & Egyptian Rustic collection which are unique and based on some theme, finish, pattern, cost etc. Besides, company has created a niche for itself thru “Rangoli” - its designer collection which is fusion of tradition with modernity. With the introduction of latest machinery, it has started producing high value glazed and polished vitrified tiles from current fiscal. Further, it has converted all manufacturing lines to fuel saving single fast firing technology. To increase the presence in south, it has opened a regional distribution centre in Bangalore apart from strengthening its dealership network. Fundamentally also company has been successful in maintaining its profit margin despite intense competition. On the back of expanded capacity to 220,000 TPA, it is estimated to clock a turnover of 240 cr and NP of 13 cr i.e. EPS of 12 Rs on equity of 10.50 cr. Which means the scrip is currently available at a discounting of hardly 4x times. Moreover, a company having a gross block of 157 cr, is available at an enterprise value of merely 115 cr which is extremely cheap by any standards. It’s an indirect bet on infrastructure play.
FCS Software (75.00) is basically providing customized software solutions to the clients based in US. Its revenue model is segmented into four divisions viz. IT consulting (55%), e-learning & digital consulting (25%), application support (10%) and infrastructure management services (10%). Apart from Sun Microsystems it is also a Microsoft certified solution provider. As US firms feel more secure in doing legal contracts with a fully US entity and in order to service its client more effectively, company has set up a subsidiary called FCS Software Solutions America Limited, incorporated in America in 2006. Here in India, company is increasing its overall capacities by putting up world class development centers at Chandigarh, Dehradun and two new centers in Noida at Sector 73 and Noida Special Economic Zone (SEZ). To summarize, currently it has 32,000 sq. ft. of space with 850 seats and additional 45,500 sq. ft. is under construction that would provide 1125 seats. To fund this expansion company is also looking to raise capital thru equity route in near future. On the flip side, it does not have any protection for US $ fluctuations against Rs as it doesn’t provide for any hedging of US $. Hence conservatively, on an estimated OPM of 14% (although it has registered 20% for H1FY08) it can earn a net profit of 20 cr on topline of 200 cr for FY08 on a consolidated basis. This works out to an EPS of 14 Rs on equity of 14.25 cr. With promoter holding of 69%, dividend yield of more than 3%, book value as 64 Rs and P/E ratio of 5x, it’s a value buy at current levels.
Rajendra Mechanical Industries (92.00), part of the Mumbai based REMI group, is a pioneer in manufacturing of stainless steel welded and seamless pipes & tubes. These pipes and tubes are used extensively in critical process industries such as refineries, petrochemicals, paper and pulp, fertilizers, pharmaceuticals, nuclear plants, etc. IOCL, IPCL, GNFC, IFFCO, Madras refineries, Mangalore refineries, Ranbaxy Laboratories are few among its reputed clientele. It has also developed specialized stainless steel tubing especially for critical power industry. To cash on increasing demand, company has been constantly expanding its production capacity which now stands at 7500 MTPA from 4500 MTPA in 2005. Notably, company has also ventured into power generation thru wind mill and has total installed capacity of 2.25 MW. With the expansion effect kicking it, company has reported stunning nos for the both the quarters of H1FY08. For the Sept qtr, sales jumped up 90% to 55 cr whereas NP tripled to 2.30 cr. Accordingly it can register a NP of 6.50 cr on sales of 200 cr for FY08 which leads to an EPS of 14 Rs on equity of 4.80 cr. However this profit is excluding extraordinary item of 1.50 cr - profit on sale of property. Otherwise the EPS works out to 17 Rs. Moreover it has the potential to earn an EPS of 20 Rs for FY09 from business operations only. A good bet for medium to long term
Orient Ceramics (52.00) produces wall as well as floor tiles under the brand name “Orient” and offers one of the largest range by way of designs, colors, sizes, choice of surface finishes etc. It also makes special tiles under various collections branded as Artline, Midline, Vivaldi, Novista, Goemetricos & Egyptian Rustic collection which are unique and based on some theme, finish, pattern, cost etc. Besides, company has created a niche for itself thru “Rangoli” - its designer collection which is fusion of tradition with modernity. With the introduction of latest machinery, it has started producing high value glazed and polished vitrified tiles from current fiscal. Further, it has converted all manufacturing lines to fuel saving single fast firing technology. To increase the presence in south, it has opened a regional distribution centre in Bangalore apart from strengthening its dealership network. Fundamentally also company has been successful in maintaining its profit margin despite intense competition. On the back of expanded capacity to 220,000 TPA, it is estimated to clock a turnover of 240 cr and NP of 13 cr i.e. EPS of 12 Rs on equity of 10.50 cr. Which means the scrip is currently available at a discounting of hardly 4x times. Moreover, a company having a gross block of 157 cr, is available at an enterprise value of merely 115 cr which is extremely cheap by any standards. It’s an indirect bet on infrastructure play.
FCS Software (75.00) is basically providing customized software solutions to the clients based in US. Its revenue model is segmented into four divisions viz. IT consulting (55%), e-learning & digital consulting (25%), application support (10%) and infrastructure management services (10%). Apart from Sun Microsystems it is also a Microsoft certified solution provider. As US firms feel more secure in doing legal contracts with a fully US entity and in order to service its client more effectively, company has set up a subsidiary called FCS Software Solutions America Limited, incorporated in America in 2006. Here in India, company is increasing its overall capacities by putting up world class development centers at Chandigarh, Dehradun and two new centers in Noida at Sector 73 and Noida Special Economic Zone (SEZ). To summarize, currently it has 32,000 sq. ft. of space with 850 seats and additional 45,500 sq. ft. is under construction that would provide 1125 seats. To fund this expansion company is also looking to raise capital thru equity route in near future. On the flip side, it does not have any protection for US $ fluctuations against Rs as it doesn’t provide for any hedging of US $. Hence conservatively, on an estimated OPM of 14% (although it has registered 20% for H1FY08) it can earn a net profit of 20 cr on topline of 200 cr for FY08 on a consolidated basis. This works out to an EPS of 14 Rs on equity of 14.25 cr. With promoter holding of 69%, dividend yield of more than 3%, book value as 64 Rs and P/E ratio of 5x, it’s a value buy at current levels.
Rajendra Mechanical Industries (92.00), part of the Mumbai based REMI group, is a pioneer in manufacturing of stainless steel welded and seamless pipes & tubes. These pipes and tubes are used extensively in critical process industries such as refineries, petrochemicals, paper and pulp, fertilizers, pharmaceuticals, nuclear plants, etc. IOCL, IPCL, GNFC, IFFCO, Madras refineries, Mangalore refineries, Ranbaxy Laboratories are few among its reputed clientele. It has also developed specialized stainless steel tubing especially for critical power industry. To cash on increasing demand, company has been constantly expanding its production capacity which now stands at 7500 MTPA from 4500 MTPA in 2005. Notably, company has also ventured into power generation thru wind mill and has total installed capacity of 2.25 MW. With the expansion effect kicking it, company has reported stunning nos for the both the quarters of H1FY08. For the Sept qtr, sales jumped up 90% to 55 cr whereas NP tripled to 2.30 cr. Accordingly it can register a NP of 6.50 cr on sales of 200 cr for FY08 which leads to an EPS of 14 Rs on equity of 4.80 cr. However this profit is excluding extraordinary item of 1.50 cr - profit on sale of property. Otherwise the EPS works out to 17 Rs. Moreover it has the potential to earn an EPS of 20 Rs for FY09 from business operations only. A good bet for medium to long term
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