Ironically, the share price of Rama Paper (34.00) which hit a high of Rs 59 in 2005 is still hovering around Rs.35, inspite of improvement in fundamentals. Off late, company has increased its paper production capacity to 44000 TPA and is further enhancing it to nearly 60000 TPA in near future. It is putting up an additional line of paper manufacturing machine to produce tissue and poster paper with annual capacity of 16320 TPA under a capex of 24 cr. But most importantly, company has put up 6 MW co-generation power plant for captive consumption which has already commenced operation leading to substantial saving in power and fuel cost. Last fiscal company raised around 16 cr thru equity route by making pref allotment to promoters and others @ 35 Rs. As on today promoters are holding 41% stake. For FY08 it is estimated to clock a turnover of 80 cr and profit of 5.50 on back of higher operating margin. This can shoot up to 100 cr of sales and 8.50 of NP for FY09. With means an EPS of Rs 6 and 9 for FY08 and FY09 respectively on fully diluted equity of 9.70 cr. Buying strongly recommended as share price can shoot up to 50 Rs in short term and 75 Rs in medium to long term.
Although share price Liberty Phosphate (35.00) has shot up smartly in recent past still it’s trading cheap compare to other fertilizer scrips. Company is the largest manufacture of Single Super Phosphate, commanding more than 14% market share. Presently, it has four manufacturing units having total installed capacity of 463,000 MTPA of SSP fertilizer. Against this, its production stood at only 280,000 tonne for FY07 i.e. capacity utilization of merely 60%. Earlier it raised 10 cr to fund its working capital requirement and hence may end FY08 with sales of 175 cr and PAT of 3 cr. This works out to an EPS of 5 Rs on diluted equity of 6.13 cr. At the current market cap of merely 20 cr, this scrip still has the potential to appreciate 50% from current levels. Accumulate at sharp declines.
Micro Forge (31.00) as re-listed in May’07 with the base price as 23.00 Rs. Since then it made a high of 52/- Rs in early June and has now settled down to 30/- Rs. It is engaged in manufacturing of forging and machined components for automobile industry with an installed capacity of 14,000 MTPA. Apart from making flanges, it also forges alloy steel, stainless steel, carbon steel for various auto part ranging from 0.5kg to 40 kg single piece weight. Company made a strong turnaround for FY07 as sales jumped up 40% to 79 cr but PAT increased multifold to 3.10 against 0.30 cr on back of improved operating efficiency. It has reported encouraging nos for the first six months as well and may end FY08 with a topline of 85 cr and bottomline of 3.50 cr. This translates into EPS of 6 Rs on equity of 5.60 cr. At an EV of less than 35 cr it’s a value buy and share price can once again test 50 levels in medium term.
Mazda Ltd (95.00) is among the few engineering companies in the world, manufacturing very specialized, high technology and critical equipments for various industries like power, refineries, fertilizers, chemicals, nuclear, sugar, paper, food, pharma etc. It has a technical collaboration with world renowned Croll-Reynolds Inc. USA, who holds 12% stake in the company. Besides, company also has a biotechnology division dealing in carbohydrates, rare sugars & miscellaneous bio-chemicals and hence it recently diversified into business of manufacturing food and drink concentrates in a small scale under brand name “BCooL”. Presently, under FII category HSBC Financial is holding approx 8% stake which it acquired at 155 Rs in Dec 2006. For FY08 it may clock a turnover of 60 cr and NP of 5.50 cr which means EPS of 13 Rs on small equity of 4.26 cr. At a modest discounting by 12x times, share price has the potential to cross Rs 150 levels.
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