Small & Beautiful (Guj)
Medi Caps (85.00) is one of the largest manufacturers of empty hard gelatin capsules shells which are widely used to package drugs, vitamins, antibiotics and cosmetics. It has pioneered many advanced features in product development such as “Pearlz Capsules” (Metallic Colored) as well as Python Printing & Li-Fill Caps. With all the major pharma companies undergoing aggressive expansion, the future prospect of downstream companies like Medi Caps is encouraging. Financially, it has been reporting consistent nos with other income forming the major part of net profit. Ironically, it is a cash rich company and is having an investment portfolio of whopping 26 cr only in mutual funds from which it has been able to churn out impressive Rs 5~6 cr on annual basis. Being a debt free company, at the current market cap of 27 cr, company’s core business is available for free. For FY08 it is expected to report a topline of 20 cr and PAT of 7.50 cr, including other income. This translates into EPS of Rs 24 on small equity of 3.12 cr. Buy at declines.
To take the advantage of the increased demand of Indian pharmaceutical products in the international market, Ahlcon Parenterals (68.00) - manufacture of life saving Intravenous Fluids and medical disposals, has off late made arrangements with several international agencies for increasing the base of export markets. It has recently added many new foreign customers to its existing list and is putting special thrust to increase direct and indirect exports. It has already filed product dossiers in both the regulated as well as unregulated markets and the registration formalities with more than fifteen countries are in progress. Accordingly company has upgraded its production facilities to conform to latest GMP standards as per international guidelines and specific requirement of the giant pharma customers. Since the plant is working at 100% capacity utilization, company is undergoing aggressive expansion to almost triple the small volume parenteral capacity from 59 million units to 162 million units. At the same time, it will continue to produce 32 million units of large volume parenteral. On the back of lackluster performance for the Sept qtr, scrip has been an underperformer for quite long time. As company is facing stiff competition in domestic market, it may end FY08 with sales of 55 cr and NP of 7.50 cr i.e. EPS of 10 Rs on equity of 7.20 cr. But with new capacity becoming operational and increase revenue from exports it has the potential to report an EPS of Rs 14 for FY09. Keep accumulating at declines.
Murudeshwar Ceramics (112.00) is one of the leading manufacturers of vitrified tiles, ceramic tiles and granites in India with its popular brand 'NAVEEN’. Importantly, company derives nearly 80% of revenue from sales of vitrified tiles which enjoy higher margin than the rest two. On the back of constant expansion, its present capacity stands at 6.3 million sq mtr of vitrified tiles, 2.7 million sq mtr of ceramic tiles and only 72,000 sq mtr for granites. Notably, institutional clients constitute 60% of total sales and retail clients constitute balance 40%. This is backed by a strong marketing network with 6 distributors, 74 show rooms, 45 depots and about 400 dealers spread across India. It is expected to report a topline of 275 cr and bottomline of 30 cr on conservative basis for FY08 i.e. EPS of 17 Rs on equity of Rs 17.50 cr. Notably, its Cash EPS stands at whopping 32 Rs. As current fiscal being a silver jubilee year for the company, it may declare liberal bonus for its shareholders. At CMP, scrip is trading at a P/E ratio of merely 6.5x times and is available at an EV of 400 cr which is below its gross block value of Rs 470 cr. However, icing on the cake is the 20 acres surplus land owned by the company near electronic city where it intends to develop IT park. Share price can shoot up to 175 Rs in medium term.
Belonging to well known Ruchi group, National Steel(40.00) has a cold rolling mill and a modern state-of-the-art colour coating line which produces sophisticated and unlimited range of coloured steel with high corrosion resistance. It manufactures galvanized corrugated & plain steel sheets as well as coils under the brand name “APPU” and currently has a capacity of 2,10,000 tonnes of galvanized steel, 2,40,000 tonne of cold roll steel and 80,000 tonne of colour coated line. For FY08 it is expected to clock a turnover of 2000 cr and net profit of 23 cr i.e. EPS of Rs 7 on equity of 32.60 cr. Notably, company has been making highest tax provisioning of around 34%. Despite its share price has seen a smart rally in recent past and is hitting new 52W high, still it is available fairly cheap at an enterprise value of 400 cr. Considering its book value of 58 Rs, scrip has the potential to appreciate 30~40% in medium term.
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