STOCK WATCH

C&C Construction (200.00) is primarily engaged in construction of airfield pavements-rigid and flexible, state and national highways, city and rural roads, bridges and culverts and other infrastructure projects in India & Afghanistan. It also specializes in laying of optic fibre cables, maintenance of telecom network, electric transmission network, microwave tower and manufacturing & erection of telecom antennas. Presently C&C boast of having an order book of more than Rs 1000 cr, which are entirely road projects and to be fully executed by June 2009. Besides, couple of weeks ago it bagged an addional massive EPC order of Rs 574 cr from Jaypee associates for the construction and development of a four lane road from Zirakpur to Parwanoo, passing through the states of Himachal Pradesh, Haryana and Punjab. For FY08 ending June’08, C&C is expected to clock a turnover of Rs 425 cr and profit of Rs 35 cr i.e. EPS of Rs 19 on equity of Rs 18.30 cr. Whereas for FY09, it can earn a profit of Rs 40 cr on a topline of Rs 1000 cr which works out to an EPS of Rs 22 on current equity. Buy at sharp declines only.

Sujana Towers (105.00) is basically engaged in manufacturing of galvanized steel towers used in the power transmission and telecom tower sectors. Besides it also offer various services including engineering and consultation, turnkey installations, inspection and maintainance of towers etc. Ironically it has set up two large scale units at Hyderabad to emerge as India's largest galvanized steel tower manufacturing company. It has expanded its towers capacity at Hyderabad from 28,125 TPA of galvanized towers to 128,125 TPA. In the light of fast growing demand for supply of power transmission and telecom towers and associated services within the country as well as in the neighboring countries, it is in the midst of setting up another 100,000 TPA manufacturing facility at Chennai in order to cater to the domestic and export market. It also intends to set up / acquire subsidiaries in the Middle East/ South East Asia in the area of power transmission and telecom infrastructure services. To fund its growth plans, company has made preferential allotment of 80 lac warrants @ Rs 140 and is planning to raise nearly 300 cr thru FCCB/GDR route. It is expected to report total revenue of Rs 600 cr and profit of Rs 50 cr for FY08. This leads to an EPS of Rs 13 on current equity of Rs 19.50 cr whereas Rs 11 on diluted equity of Rs 23.50 cr. A solid bet

Indo Asian Fuse Gear (105.00) manufactures wide range of electrical circuit protection equipment including distribution boards, switch boards, switch panels, fuse switches, MCCBs, HRC Fuses, MCBs, RCDs, etc. Besides, it’s one of the largest manufacturers of CFLs and MCB’s in India. To capitalize the ongoing boom, it is diversifying into power sector business and will undertake distribution projects on behalf of state electricity boards, corporations and utilities on franchise basis. Meanwhile, it has forayed into cables & wires manufacturing business as well with a planned investment of 100 cr in phases. For the higher end segment, company is setting up a plant in Haridwar under a joint venture with Simon Holding (Spain) for manufacturing home and building automation products for the first time in India. At the same time it is putting up a facility in Saudi Arabia thru a tie up with Saudi National Glass for production of Compact Fluorescent Lamps (CFLs) and High Intensity Discharge Lamps (HID Lamps). For FY08 it is expected to clock a turnover of Rs 280 cr and PAT of Rs 16 cr on a conservative basis which works out to an EPS of Rs 10.50 on equity of Rs 15.30 cr. However company has the potential to post an EPS of around Rs 15~16 for FY09. Few weeks back, company has finalized to issue 19 lac warrants to promoters and others. At a reasonable discounting by 12x times against FY09 earning share price can move upto Rs 180 in medium term.

Royal Orchid (92.00) operates in hospitality sector with major presence in 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. Recently it bought 30 acre property in Tanzania and also formed a joint venture with Parsvanath to develop 10 hotels at an investment of Rs 500 cr. Couple of days back company also acquired 50% stake in Galaxy Beach Resort (65 rooms) in Goa. For FY08, it may report total revenue of Rs 140~150 cr and NP of Rs 35 cr on consolidated basis i.e. EPS of Rs 13 on equity of Rs 27.25 cr. A decent bet in hospitality sector.