Small & Beautiful (Guj)

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3i Infotech (88.00) is the fourth largest Indian software products company offering a comprehensive range of software products & solutions primarily for banking, insurance, capital markets, mutual funds, telecom, manufacturing, retail & distribution industries. It provides complete end-to-end outsourcing solutions to various industries mainly in the domestic market and specializes in non-voice based BPO services. It is also recognized as one of the major national players in the e- Governance consultancy space in India. Importantly, company derives revenues from products and services in a 1:1 ratio which differentiates it from other IT companies. In order to beat the competition and grow at a rapid pace, company is betting high on inorganic route and has adopted an acquisition-led strategy to acquire new capabilities and foray into new geographies in the BFSI space. With net dollar inflow of less than 10%, company is hardly affected by the rupee appreciation. On the back of excellent performance till now and considering the strong order book position, it is expected to report total revenue of Rs 1200 cr and net profit of Rs 175 cr on consolidated basis. This works out to an EPS of Rs 10 on fully diluted equity of Rs 175 cr. A good contrarian bet.

Lokesh Machines (55.00) 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 good orders. On the back of encouraging performance for first three quarters, it is estimated to register sales of Rs 105 cr and net profit of Rs 13 cr for FY08. This works out to an EPS of Rs 11 on equity of Rs 11.80 cr. Considering its IPO price of Rs 140 in Arpil 2006 and 52 week H/L as 168/60 Rs it’s a screaming buy.

Belonging to Duncan Goenka group, Stone India (78.00) 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 shortly. 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. Scrip has the potential to double in 12~15 months

Tera software (42.00) is one of the leading e-governance solution providers, undertaking data entry/scanning works for digitization of information maintained under Right to Information Act. It also undertakes short-term projects like issue of photo ID cards, ration cards and election commission cards. In consortium with Electronics Corporation of India Ltd, company has bagged huge e-governance order, taking its total order book position to around 250 crore to be executed in next five years. Recently, company has been selected as empanelled vendor for rollout of IT services in govt sector through National Informatics Centre Services Inc. for a period of one year which can be extended for another one year. Considering its excellent nine month figures, company is estimated to report total revenue of Rs 75 cr and PAT of Rs 16 cr i.e. EPS of Rs 13 on equity of Rs 12.50 cr for FY08. Whereas for FY09 it has the potential to report an EPS of Rs 16. Despiite such strong fundamentals investors are selling the scrip in fear of rupee appreciation without knowing that company derives 100% of its revenues from the domestic markets. Hence it is totally unaffected by any sort of rupee appreciation against US dollar. Moreover company has few acres of surplus land in Hyderabad, which it plans to either sell or enter into JV with infrastructure company. A total risk free bet at current levels.

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