STOCK WATCH
Belonging to Duncan Goenka group, Stone India (158.00) is undisputed leader in locomotive brake systems and has a huge range of mechanical and electrical products for the railroad industry. It boasts of having its own patented beam mounted brake system for all types for freight wagons. Off late, it has ventured into the railway electronics business through introduction of a slew of high value power electronic products like inverters, converters and power supply system for coaches, locomotives, EMUs and metros. Currently, company generates about 90 per cent of its revenue from railways and has a market share of about 25-30 per cent. It has appointed Telewira Tegas SDN BHD, Malaysia, as an exclusive agent for turnkey project work relating to freight car, passenger coach and locomotive up gradation and maintenance for Malaysian railways. Recently, it has partnered with Sumitomo group Japan for manufacturing of air springs which are technically far superior to the existing mechanical suspension system. Importantly, to diversify its product portfolio, it has set up a greenfield facility at Nalagarh, Himachal Pradesh which is likely to go on stream this fiscal itself. Hence for entire FY08 it is expected to register sales of 100 cr and PAT of 13.50 cr i.e. EPS of Rs 18 on equity of 7.60 cr. At a modest discounting by 12x times scrip can touch Rs.220 in medium term.
Wanbury (138.00) is the world’s largest producer of Metformin Hydrochloride - a diabetes management product and Salsalate, an anti-inflammatory drug. With its two USFDA certified plant for multi-products, company already has 23 DMFs with US and is looking to file another 4~5 DMFS in near future. As a part of its growth strategy, it has launched a super specialty research division `Osteolife' catering to orthopedic health issues such as osteoporosis, osteoarthritis and pain management. Recently, company made the first overseas acquisition with the generic ethical formulation business division of IFC-Spain, which owns 17 brands in various therapeutic segments like traumatology, pain management, asthma, anti depressants, anti eplileptics, anti ulcerants, cephalosporin’s, beta blokers etc and is targeting a revenue of Euro 33 million (i.e. Rs 200 cr) with an EBITDA of Euro 8-10 million (i.e. Rs 50~60 cr). Hence on a consolidated basis including the Cantabria business, it is expected to clock a turnover of 375 cr and PAT of 35 cr for FY08. This leads to an EPS of 26 Rs on current equity of 13.60 cr. However on fully diluted equity of 21 cr (post conversion of all warrants & FCCB’s) the EPS works out to 17 Rs. Scrip has the potential to touch Rs.200~220 in medium term. Royal Orchid (142.00) operates in hospitality sector with major presencein Bangalore. Currently it manages eight properties including five star hotels, budget, resort, serviced apartments etc with a total room strength of around 655 rooms. Interestingly, company follows a unique “Asset light” business model of taking properties on lease or entering into a contract for managing & operating the existing hotel instead of owning them outright. This has helped the company manage its funds efficiently, have lower payback period on its projects & earn attractive operating margins. In the next few months, it is planning to open “Royal Orchid Central” – four star category hotels at Pune (120 rooms) and Hyderabad (65 rooms) to cater the business class. Subsequently it has plans to open five star hotels at Mumbai, Bangalore and Delhi. But for major growth, company wants to target the lower end of the hospitality pyramid and has plans to set up a chain of 50 budget hotels across India under the brand ‘Pepper Mint’ in next 3 to 5 years. For FY08, it may report total revenue of 150 cr (excl. other income) and NP of 35 cr on consolidated basis i.e. EPS of 13 Rs on equity of 27.25 cr. For FY09, EPS is expected to shoot upto 16~17 Rs. Accumualte at declines. Lokesh Machines (118.00) is engaged in the design, development and manufacture of custom built special purpose machines and general purpose CNC (computerized numerical controls) machines along with their components. Presently, it derives 70% revenue from machining division whereas rest 30% comes from auto component division. Company primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Hence it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Off late, it has also made a foray in the overseas markets with orders from M/s FPT Industries Spa-Italy, Honda Motorcycles-Japan and HOWA-Japan. Further, its technical partner Wenig Wemas-Germany has also placed initial order of 100 machines worth 20 cr. For the latest Sept qtr, sales grew by 25% to 28 cr and Net profit increased by 50% to 3.40 cr. To fund its growth plan company came out with an IPO at Rs.140 per share in April 2006 and raised Rs.42 cr. On listing day it hit a high of 300 Rs, whereas and currently it’s available at 15% below its issue price. For FY08 it is expected to clock a turnover of 110 cr and PAT of 14.50 cr which leads to an EPS of 12 Rs on equity of 11.80 cr. Scrip can easily appreciate to 175 levels in a years time.
Wanbury (138.00) is the world’s largest producer of Metformin Hydrochloride - a diabetes management product and Salsalate, an anti-inflammatory drug. With its two USFDA certified plant for multi-products, company already has 23 DMFs with US and is looking to file another 4~5 DMFS in near future. As a part of its growth strategy, it has launched a super specialty research division `Osteolife' catering to orthopedic health issues such as osteoporosis, osteoarthritis and pain management. Recently, company made the first overseas acquisition with the generic ethical formulation business division of IFC-Spain, which owns 17 brands in various therapeutic segments like traumatology, pain management, asthma, anti depressants, anti eplileptics, anti ulcerants, cephalosporin’s, beta blokers etc and is targeting a revenue of Euro 33 million (i.e. Rs 200 cr) with an EBITDA of Euro 8-10 million (i.e. Rs 50~60 cr). Hence on a consolidated basis including the Cantabria business, it is expected to clock a turnover of 375 cr and PAT of 35 cr for FY08. This leads to an EPS of 26 Rs on current equity of 13.60 cr. However on fully diluted equity of 21 cr (post conversion of all warrants & FCCB’s) the EPS works out to 17 Rs. Scrip has the potential to touch Rs.200~220 in medium term. Royal Orchid (142.00) operates in hospitality sector with major presencein Bangalore. Currently it manages eight properties including five star hotels, budget, resort, serviced apartments etc with a total room strength of around 655 rooms. Interestingly, company follows a unique “Asset light” business model of taking properties on lease or entering into a contract for managing & operating the existing hotel instead of owning them outright. This has helped the company manage its funds efficiently, have lower payback period on its projects & earn attractive operating margins. In the next few months, it is planning to open “Royal Orchid Central” – four star category hotels at Pune (120 rooms) and Hyderabad (65 rooms) to cater the business class. Subsequently it has plans to open five star hotels at Mumbai, Bangalore and Delhi. But for major growth, company wants to target the lower end of the hospitality pyramid and has plans to set up a chain of 50 budget hotels across India under the brand ‘Pepper Mint’ in next 3 to 5 years. For FY08, it may report total revenue of 150 cr (excl. other income) and NP of 35 cr on consolidated basis i.e. EPS of 13 Rs on equity of 27.25 cr. For FY09, EPS is expected to shoot upto 16~17 Rs. Accumualte at declines. Lokesh Machines (118.00) is engaged in the design, development and manufacture of custom built special purpose machines and general purpose CNC (computerized numerical controls) machines along with their components. Presently, it derives 70% revenue from machining division whereas rest 30% comes from auto component division. Company primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Hence it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Off late, it has also made a foray in the overseas markets with orders from M/s FPT Industries Spa-Italy, Honda Motorcycles-Japan and HOWA-Japan. Further, its technical partner Wenig Wemas-Germany has also placed initial order of 100 machines worth 20 cr. For the latest Sept qtr, sales grew by 25% to 28 cr and Net profit increased by 50% to 3.40 cr. To fund its growth plan company came out with an IPO at Rs.140 per share in April 2006 and raised Rs.42 cr. On listing day it hit a high of 300 Rs, whereas and currently it’s available at 15% below its issue price. For FY08 it is expected to clock a turnover of 110 cr and PAT of 14.50 cr which leads to an EPS of 12 Rs on equity of 11.80 cr. Scrip can easily appreciate to 175 levels in a years time.
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