Small & Beautiful (Guj)
GM Breweries (88.00) is the single largest manufacturer of country liquor in the state of Maharashtra and enjoys virtual monopoly in the districts of Mumbai, Navi Mumbai and Thane. This is proved from the fact that Maharashtra govt is getting one fifth of the total excise duty on country liquor from GM Breweries alone. For the latest Dec qtr, company’s sales improved by only 10% to Rs 49 cr but NP shot up 85% to Rs 4.40 cr on back of lower raw material cost and better operating efficiency. It recorded a healthy OPM of 14% against 10% last year. With the installation of additional bottling lines last fiscal, company now has the capacity to process 8.26 crores bulk litres of country liquor per annum. Hence it is expected to end FY08 with sales of Rs 190 cr and NP of Rs 15.50 cr i.e. EPS of Rs 17 on equity of Rs 9.40 cr. Having a gross block of Rs 68 cr, low debt equity ratio, strong cash flow, decent margins etc, company is available extremely cheap at an Enterprise Value of less than Rs 100 cr. With 68% holding, promoters are investor friendly and have an uninterrupted record of dividend payment from the day of listing. Company definitely deserves much better discounting and at a modest PE multiple of 12x times, scrip has the potential to cross Rs 200 mark in medium term.
Bhagyanagar India (51.00) the flagship company of Surana Group is touted as an emerging real estate story by the marketmen. Including its subsidiaries, company boasts of having around 175 acre of land bank valued at more than Rs 600 cr presently. It includes 25 acres of prime land in Gachibowli area Hyderabad, 50 acres in SEZ, Chennai, 25 acres near new Hyderabad airport etc. To take the maximum benefit of the ongoing boom in real estate, company has aggressively forayed into real estate development and construction industry through its various subsidiaries and is, focusing mainly on housing and construction of IT Parks, SEZ etc. Recently, it has formed a SPV along with IL&FS Infrastructure for undertaking, various infrastructure and entertainment projects such as theme parks, special economic zone, industrial parks etc on a large scale basis. On the other hand, it has successfully commissioned the wind power project with an installed capacity of 9 MW in Karnataka last fiscal. At the same time its traditional copper & telecom products business is doing okay. Notably, couple of weeks back company has formed a joint venture with group company for setting up of solar photo voltaic cell and module project and has even been allotted 25 acres of land in the Fab City, Hyderabad. Although promoters don’t enjoy a good reputation in the market, still it’s a good trading bet.
Sarcastically, the share price of Rama Paper (23.00) which hit a high of Rs 59 in 2005 has been beaten down mercilessly to unbelievable levels, 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 set 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 Rs 80 cr and profit of Rs 6 cr on back of higher operating margin. This can shoot up to Rs 100 cr of sales and Rs 8.50 of NP for FY09. With means an EPS of Rs 6 and Rs 9 for FY08 and FY09 respectively on fully diluted equity of 9.70 cr. Buying strongly recommended as share price can shoot up to 35 Rs in short term.
Rohit Ferro Tech Ltd (80.00) is a leading producer of high carbon ferro chrome apart from manufacturing ferro manganese and silico manganese through submerged arc furnace route. During last fiscal only, company has set up a greenfield plant in Jajpur-Orissa thereby taking its total capacity to 165,000 MT from 55,000 MT earlier. Further it has set up fifth furnace with 15000 MT capacity in Bishnupur, which is expected to become operational shortly. To become an integrated player company has applied for mining lease to the state government of Orissa for chrome ore as well as manganese ore. Presently it is sourcing manganese ore from Australia besides local sourcing. On the other hand, due to higher production, better margins, and the better availability of raw-materials company is stressing more on production of ferro manganese in place of high carbon Ferro Chrome For future, it has chalked out a plan to setup a 110 MW captive power plant to being down its power cost. In order to fund this, it recently made a pref allotment of 80 lac convertible warrants @ 43 Rs per share to promoters as well as strategic investors like Kampani Finance, Foster Capital etc. On the back of stunning Q3 nos it may end FY08 with sales of more than Rs 500 cr and PAT of Rs 50 cr i.e. EPS of Rs 14 on current equity of 34.50 cr. Moreover company has the potential to post an EPS of Rs 20 on fully diluted equity of Rs 42.50 cr for FY09. Keep accumulating at declines
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