Ind Swift Ltd - Rs.37.00

Incorporated in 1986, Ind-Swift Ltd. (ISL) is the flagship company of the Chandigarh based Ind-Swift Group. Today, it has emerged as a leading formulations company manufacturing various dosage forms including oral solutions and suspensions, dry syrups and hard gelatin capsules (General and Beta-lactam), tablets (general, coated, sustained release and effervescent forms), dermatologicals comprising of creams, ointments and gels, eye and eardrops and injectables (Ampoules and vials). It focuses on the needs of various therapeutic segments, which include Cardiology, Diabetology, Pediatrics, Gynaecology, Surgery, Orthopaedics, Ophthalmology, Neuropsychiatry, Anesthesiology etc. All its products are marketed in an organized manner through its different divisions namely Ethical Division, Ayurveda Divsion, Super Speciality Division, Mukur Division, Resurgence Division, Health Care Division, Max Care Division and Biosciences Division.

Presently, ISL has six manufacturing facilities located in four different states; Two facilities in Parwanoo (H.P.), one facility each in Baddi (HP), Panchkula in Haryana, Derabassi in Punjab and Jammu in J&K. Of these three units commissioned only last year doubling its production capacity and making it one of the largest manufacturing facilities in India. Importantly, these new facilities are US FDA, TGA-Australia, MHRA-UK, MCC South Africa, ANVISA-Brazil, WHO-Geneva compliant primarily to cater the international regulated markets. In fact, its’ Jawaharpur, Derabassi – Punjab facility is 100% EOU. To further seize market opportunities, ISL has recently purchased another 7 acres of land in the tax-free zone of Baddi for setting up a new formulation facility dedicated for manufacturing Oncology, Cephalosporin's, Beta Lactum, Herbal & Neutraceutical products. Last year, the company introduced several new product ranges in the domestic markets including the launch of a unique combination of the Quinoline derivative, antidiarrheal and antibacterial drug which was launched for the first time in India after successful clinical trials. It also launched a new marketing division namely Institutions & Hospitals Division to look after the institutional sales. It added over 250 new marketing professionals to the strong 1000 Marketing team. And 27 new C&Fs were also appointed by the company to further strengthen the distribution network.

ISL has stepped its efforts to tap global markets by filing over 100 product dossiers in countries in Africa, South East Asia, South America & CIS. It is also in an advanced stage of negotiation for signing contract manufacturing agreements with various partners in Europe from its new manufacturing facility. Other additional activities taken up for international alliances include contract research including product development and technology transfer arrangements. ISL’s new R&D set up houses more than 50 scientists, state of the art equipment, separate product development units, IPR cell for patent search and filing, regulatory cell for technical dossiers, is in the process of developing more than 30 new products which includes 4 products to be launched for the first time in India and 5/6 products being developed from the non-infringing processes to be launched in Europe over the next 18 months. Recently, ISL announced decent results for Dec.’06 quarter out and is expected to clock a turnover of Rs.400 cr. with net profit of Rs.23 cr. for FY07. This works out to an EPS of Rs.6 on its current equity of Rs.7.44 cr. with a face value of Rs.2 per share. The scrip is poorly discounted due to promoter concerns but investors can expect a price target of Rs.50 (i.e. 35% returns) in a year’s time.

Agro Dutch Industries - Rs.33.00

Established in 1992, Agro Dutch Industries Ltd. (ADIL) is engaged in the cultivation, processing and canning of fresh white button mushrooms. The company that initially started with an installed capacity of 3000 TPA is today the largest integrated producer of canned mushrooms in Asia and probably the second largest in the world. It accounts for more than 90% of the mushrooms exported from India and more than 85% of the mushrooms being produced in the country. Being a fully integrated producer, it has its own can manufacturing and packing facility with an installed capacity of 10 cr. cans per annum. Notably, the fully automated can unit is the only unit in India to produce resistance-welded cans with high quality coated surfaces. The company has a strong customer base comprising blue chip customers like Uniliver’s Lipton, Rema Foods Inc, ABBY Foods, Goergia Foods etc. The company has also tied up with Leatherhead Food Research Association of the UK to ensure quality compliance for all products prior to shipment.

ADIL’s 100% EOU plant is located in Punjab, which produces over 80% of India’s wheat and wheat straw, which is the most vital substrate needed for growing mushrooms. The mushrooms are grown in climate-controlled farms and processed under sterilized conditions complying with strict quality control norms laid down by the US FDA like HACCP. ADIL has set up 133 climate controlled growing rooms to ensure that mushrooms are available all through the year. In order to become the world’s largest mushroom producer, the company is undertaking aggressive expansion by enhancing its mushroom growing capacity from 36,000 to 50,000 TPA, setting up a Individual Quick Freezing (IQF) plant, new compost making facilities and additional mushroom processing facilities. It is also doubling its can making capacity to 12000 tonnes by way of setting up a new can-making unit with an installed capacity of 6000 TPA near Chennai. The company also plans to set up a 10,000 TPA international scale facility for production of food cans with Easy Open Ends to sell in the domestic and international markets.

To fund this expansion, the company has raised around Rs.36 cr. through a rights issue at Rs.25 per share. The German DEG group gave a term loan of Rs.26 cr. and the company availed of loans from various local banks. Besides, the company has also allotted 1 cr. warrants to promoters and others to be converted into equity shares at Rs.27.50 After reporting not so encouraging numbers over the last two quarters, ADIL recently declared very good numbers for the Dec’06 quarter. Sales increased by 35% to Rs.48 cr. and net profit shot up 70% to Rs.10.85 cr. registering an EPS of Rs.3.70 for the quarter. Notably, its OPM stood at 37% after reporting merely 19% in the preceding two quarters. Accordingly, for the full year it is estimated to report sales of Rs.205 cr. and with net profit of Rs.19 cr. i.e. an EPS of Rs.6 on its current equity of Rs.29.60 cr. For FY08, it may register sales and net profit of Rs.240 cr. and Rs.30 cr. respectively. Investors are strongly recommended to buy at the current level with a price target of Rs.50 (50% appreciation) in 9~12 months.

STOCK WATCH

Sagar Cement (Code:502090) (Rs.158) has come out with stunning numbers while sales shot up by 40% to Rs.26 cr. in Q3FY07, the NP zoomed to Rs.6.40 cr. from Rs.0.21 cr. in the previous corresponding quarter. Due to higher price realization, it registered an all time high OPM of 42% in this quarter. For the nine months ending 31st Dec. 2006, it has recorded sales of Rs.82 cr. with NP of Rs.21.75 cr. Importantly, it has made a tax payment of Rs.7.25 cr. for this fiscal till December’06 and announced 10% interim dividend for FY07. For the full year FY07, it may clock a turnover of Rs.110 cr. with profit of Rs.28 cr. This translates into EPS of Rs.25 on its current equity of Rs.11.15 cr. A victim of the government’s initiative to bring down cement prices, its share price has fallen sharply from its recent high of Rs.177 but is bound to rebound and touch Rs.200 in the next couple of months.

Marketmen are apprehensive about Jupiter Bioscience (Code:524826) (Rs.142) as the scrip has been a laggard, its outlook continues to be bright and patient investors will stand rewarded. Recently, it announced very encouraging results for the Dec’06 qtr. On a standalone basis, it reported an all time high sales and NP of Rs.28 cr. and Rs.7.20 cr. respectively registering an EPS of more than Rs.8 for the quarter. Few months back it acquired a manufacturing facility for 15 cr. from Aurobindo Pharma and is presently in the midst of further expansion. Last year, the company issued 27.50 lakh warrants to the promoters @ Rs.146 per share and is now raising further capital of about Rs.100 cr. through QIP route. Post this placement; the company’s share will be listed on the NSE also, which will improve its liquidity and market sentiment. It may end FY07 with a topline of Rs.95 cr. and bottomline of Rs.23 cr. i.e. EPS of Rs.26 on its current equity of Rs.8.86 cr. For FY08, its sales & NP can shoot up to Rs.150 cr. and Rs.30 respectively. It’s time the scrip to got re-rated.

In the engineering sector, Gujarat Apollo Equipment (Code:522217) (Rs.222) reported excellent set of numbers. Sales grew by 15% to Rs.34 cr. but profit jumped up 50% to Rs.4.80 cr. resulting in an EPS of Rs.7 for the Dec.’06 quarter. Importantly, the company recorded an OPM of 24% for the quarter against 18% last fiscal due to better operating efficiency. The company has also cleared shareholders by declaring 1:2 bonus as it had already given 1:1 bonus in 2005. It recently changed its name to ‘Gujarat Apollo Industries’ and has decided to set up a wholly owned subsidiary to consolidate its manufacturing of mobile construction equipment at a new location. The new entity will add several new products to further enhance its productline. For FY07, it is estimated to clock a turnover of Rs.130 cr. with NP of Rs.15 cr. i.e. EPS of Rs.21 on its equity of Rs.7 cr. Of late, reputed mutual funds have entered the counter and the scrip is bound to attract higher discounting. Post bonus, it will list on NSE, which will give a fresh trigger to its share price.

Satnam Overseas Ltd. (Code:512559) (Rs.79) is the undisputed leader in the domestic branded basmati rice market with more than 35% market share with reputed brands like Kohinoor, Trophy, Charminar, Rose, Darbar, Shehanshah and Falcon. It is aggressively expanding its presence in the lucrative ready-to-eat foods (RTE) segment and has also set up a frozen food processing facility at Haryana. Its sales jumped by 30% to Rs.182 cr. and NP spurted by 50% to Rs.8 cr. for the Dec.’06 quarter. It has an exclusive tie-up with Reliance Retail and has also chalked out an aggressive expansion plan for which it raised around 90 cr. through the FCCB route to be converted @ Rs.85 per share. It may end FY07 with a topline of Rs.600 cr. and bottomline of Rs.27 cr. i.e. EPS of Rs.14 on its current equity of Rs.19.60 cr. It is one of the cheapest scrips in the food-processing sector and may shoot up to Rs.110 in the short to medium term.

Ambika Cotton Mills (Code:531978) (Rs.187) manufactures premium quality cotton yarn, both carded and combed, for knitting and weaving. A few months back, it completed expansion of 10080 spindles taking its total production capacity to 66,000 spindles. For the Dec.’06 quarter, its sales increased by 30% to Rs.39 cr. and NP improved by 25% to Rs.7 cr. registering a quarterly EPS of a whopping Rs.12. It is planning to further expand its capacity by 43200 spindles to be operational by December 2007. For tax benefits, the company has also set up its own windmill of 13 MW. For the full year FY07, it may report net sales of Rs.150 cr. and profit of Rs.25 cr. i.e. EPS of Rs.43 on a small equity of Rs.5.88 cr. Although the company has not made provision for deferred tax and has a very high debt of Rs.140 cr., still it’s a good bet at the current level. It has huge reserves of Rs.91 cr. leading to a book value of Rs.160 plus making it a strong bonus candidate as well.