STOCK WATCH

Manugraph (85.00) is India's largest manufacturer of web offset and sheet fed offset presses. With a whopping 70 % market share, companys presses are present in nearly all-major publication houses. Not only in India, it has worldwide presence from Latin America to Europe and from the Middle East to China. Last year it acquired Dauphin Graphic Machines Inc, the No. 1 company in the US market in four page segment for 19.20 million US $. With this acquisition it has become the world largest single width press manufacturing company. Accordingly, the US subsidiary has started outsourcing the component parts from India and even marketing of Manugraph machines in North America. But due to economic slowdown in US, the response is not as good as was anticipated earlier. Still on the back of robust domestic demand it is expected to end FY08 with sales of Rs 400 cr and PAT of Rs 50 cr on standalone basis. This translates into EPS of Rs 16 on current equity of 6.08 cr with face value as Rs 2. Scrip has been beaten down mercilessly from the recent high of Rs 205 in Nov 2007 giving a godo opportunity to buy. Besides its agreement of business co-operation for marketing, with MAN Roland-Germany, is under negotiation.

Lokesh Machines (65.00) 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.

Being the market leader in High Tension XLPE power cables, Torrent Cables (200.00) manufactures XLPE insulated cables in the voltage range of 1.1KV to 132 KV, Low-Tension power cables up to 1.1KV and High-Tension power cables up to 11KV. It also produces EHV, TRS flexible cables, welding cables, lift cables, colliery cables and specialty cables in the form of fire resistant low smoke cables (FRLS), railway-signalling cables, mining and trailing cables. It has a very exhaustive customer base spread over State Electricity Boards, Utilities, EPC Contractors, government/semi-government companies, private companies, dealer network, consultants and many more. Apart from the SEBs, its clientele includes biggies like Tata Power, L&T, BHEL, ABB, Siemens, Alstom, Jindal, Reliance, Essar, Suzlon, NTPC, Railways, Powergrid, SAIL, Torrent Power etc.The rural electrification plans, APDRP programs and govt’s aim to achieve power for all by 2012 has resulted in increased in demand for power related products including cables. Hence, for FY08 company is estimated to clock a turnover of Rs 225 cr and net profit of Rs 30 cr i.e. EPS of Rs 40 on small equity of Rs 7.50 cr. With 52 week H/L as Rs 440/143 it’s a screaming buy as it can easily appreciate 50% within a year.

Patels Airtemp (55.00) is engaged in the manufacture and sale of extensive range of heat exchangers such as shell & tube type, finned tube type and air cooled heat exchangers, pressure vessels, air-conditioning and refrigeration equipments and turnkey HVAC projects in India & marketing of equipments even outside India. It has technical collaboration with M/S. TEK FINS Inc. USA for design and manufacture of air cooled heat exchangers. It supplies to core industrial sectors like power, refineries, fertilizers, cements, petrochemicals, pharmaceuticals, textiles and chemical Industries. For future growth company is concentrating more on high value added engineering products and has even got its product the coveted ASME `U' Stamp authorization. For the Dec’07 quarter company’s net sales declined by 15% to 10.50 cr but NP shot up to Rs 1.40 cr due to delay in dispatches and lower depreciation cost. Hence it is expected to register a topline of Rs 50 cr and profit of Rs 5 cr for FY08. This leads to an EPS of Rs 10 on current equity of Rs 5 cr. Technically, scrip seems to have bottom out and can shoot up 50% in 6~9 months.

Smart Investments (Guj)

Lloyd Electric and Engineering Ltd

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3i Infotech Ltd

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Small & Beautiful (Gujarati)

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Manugraph (90.00) is India's largest manufacturer of web offset and sheet fed offset presses. With a whopping 70 % market share, companys presses are present in nearly all-major publication houses. Not only in India, it has worldwide presence from Latin America to Europe and from the Middle East to China. Last year it acquired Dauphin Graphic Machines Inc, the No. 1 company in the US market in four page segment for 19.20 million US $. With this acquisition it has become the world largest single width press manufacturing company. Accordingly, the US subsidiary has started outsourcing the component parts from India and even marketing of Manugraph machines in North America. But due to economic slowdown in US, the response is not as good as was anticipated earlier. Still on the back of robust domestic demand it is expected to end FY08 with sales of Rs 400 cr and PAT of Rs 50 cr on standalone basis. This translates into EPS of Rs 16 on current equity of 6.08 cr with face value as Rs 2. Scrip has been beaten down mercilessly from the recent high of Rs 205 in Nov 2007 giving a godo opportunity to buy. Besides its agreement of business co-operation for marketing, with MAN Roland-Germany, is under negotiation.

Medi Caps (65.00) is one of the largest manufacturers of empty hard gelatin capsules shells which are widely used to package drugs, vitamins, antibiotics and cosmetics. With all the major pharma companies undergoing aggressive expansion, the future prospect of downstream companies like Medi Caps is encouraging. But more importantly, it is a cash rich company and is having an investment portfolio of Rs 26 cr only in mutual funds. Ironically, against this it is available at an enterprise value of only Rs 20 cr. From the Dec’07 qtr nos it seems that management has smartly made lot of selling before the Jan’08 crash and booked a profit of whopping Rs 7 cr, only from investments in a single quarter. Hence, the recent carnage in 2008 wouldn’t have affected its portfolio to great extent. Till now, in this fiscal company has already registered a cool profit of Rs 11 cr from investments alone. However management may book some loss in this qtr to set off short term capital gains. Still it is available at decent valuation. Moreover company has entered into a joint venture arrangement with M/s. Mission Pharmaceuticals for setting up a plant at SEZ in Pithampur (Dist DHAR) for manufacturing softgel capsules with the total proposed investment of Rs 20 cr.

For the Dec’07 quarter Mazda Ltd (64.00) reported 40% rise in sales to Rs 18 cr whereas Net profit shot up 80% to Rs 2.40 cr posting an EPS of almost Rs 6 for Q3FY08 alone. Hence its nine months profit of Rs 4.90 cr has already surpassed the entire FY07 PAT of Rs 4.70 cr. Importantly, company has a technical collaboration with world renowned Croll-Reynolds Inc. USA, who holds 12% stake in the company. Besides, HSBC is holding 8% stake under FII category. To cater the increasing demand, Mazda is setting up a third unit with an investment of approximately 5 to 6 crores. It is among the few engineering companies in the world, manufacturing very specialized, high technology and critical equipments for various industries like power, refineries, fertilizers, chemicals, nuclear, sugar, paper, food, pharma etc. For FY08 it is expected to clock a turnover of Rs 65 cr and profit of Rs 6.50 cr. This works out to an EPS of whopping Rs 15 on small equity of Rs 4.26 cr. At a very modest discounting by 8x times scrip has the potential to double in a years time. A screaming buy.

In anticipation of correction in real estate prices, share price of housing construction companies have been beaten down badly and Kamanwala Housing (85.00) is no exception. From the recent a high of around Rs 210, it has tumbled down to Rs 85 in two months. However company is mainly operating in Mumbai and has few good residential projects in Malad & Santacruz and huge commercial project in Bandra Kurla complex where real estate prices are still on an upmove. Besides it has several projects lined up for future in Andheri, Mahim, Goregaon etc and even in Hydrabad. Recently it also bought 10,000 sq mtr land in Turbhe for 15 cr. It is also merging its 52% subsidiary company called “M/S. Doongursee Diamond Tools Ltd” which actually holds one lakh FSI for its Malad project. It is expected to register total revenue of around Rs 90 cr and profit of Rs 18~19 cr for FY08. This works out to an EPS of Rs 26 on fully diluted equity of Rs 7.20 cr. Hence, it is available extremely cheap at a PER of 3x with market cap of less than Rs 50 cr.

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C&C Constructions Ltd - 180.00 Rs

Incorporated in July 1996, C&C Constructions Ltd (C&C) is an infrastructure project development company that provides engineering, procurement and construction services for infrastructure projects in India and Afghanistan. It is primarily engaged in construction of airfield pavements-rigid and flexible, state and national highways, city and rural roads, bridges and culverts, OFC backbone projects etc. Hence its expertise is primarily in transportation engineering projects including roads, bridges, flyovers and airport runways. It also specializes in laying of optic fibre cables, maintenance of telecom network, electric transmission network, microwave tower and manufacturing & erection of telecom antennas. C&C has been executing projects independently as well as in 50:50 joint venture with BSCPL, Hyderabad. Its projects are mainly located in Punjab, Bihar, Himachal Pradesh and in the new Delhi region. Major clients of the company include NHAI, AAI, Infrastructure Boards and PWD's of various State Governments, Govt. of Afghanistan, The Louis Berger Group Inc, RITES Ltd and UNOPS etc.

As on date 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. Out of these more than 90% order belongs to Indian terrain whereas balance is from Afghanistan. Hence, company has considerably de-risked its revenue model by lowering its dependence on Afghanistan which couple of years back, use to be more than 70% of total revenue. So, although road projects in Afghanistan offers higher margin of around 30% against 10% in India, but the risk attached was quite high due to economic uncertainty, politics and various other factors. Now C&C is concentrating to offset this lower margin by higher volume of sales, increased efficiency and effective cost control measures. In the same direction, company bagged its first BOT projects last year worth Rs 400 cr, to develop, design, construct, maintain and operate a 44 km stretch of the highway in Punjab from Kurali to Kiratpur on NH21. It has also diversified into other sectors such as water and sewerage, transmission towers and constructing niche commercial buildings. Notably, C&C has been adjudged as L1 bidder for the project of supply of 132KV transmission Line Tower Package (including supply of conductors and insulators) associated with Phase-II project of Bihar SEB, initiated by the Power Grid Corp of India. Recently, company has made its first entry in Himachal state by bagging two contracts amounting to Rs 202 cr from the Himachal Pradesh Road and Infrastructure Development Corporation Ltd.

As per Economic Survey, an investment of Rs.14,50,000 cr would be required in the infrastructure sector during the Eleventh Five Year Plan. Secondly, the National Highway Development Program (NHDP) Phase-I to Phase-VII envisages a comprehensive road development program for India which the govt has intended to implement thru public private partnership (PPP). Accordingly it has been decided that all the subprojects in NHDP would be taken up on the basis of PPP on Build Operate and Transfer (BOT) mode. Moreover, the private sector participation in Phase-II of NHDP has also been increased. In short, C&C being one of the few Indian companies, carrying out construction work in Afghanistan is set to benefit from reconstruction activity in Afghanistan and also from ongoing boom in construction / infrastructure sector domestically. In Feb 2007, primarily to fund its BOT projects and working capital requirement, C&C raised nearly Rs 125 cr thru IPO route @ Rs 291 per share. Besides, it also made a pre IPO placement of nearly 12 lac equity shares @ Rs 275 to various prestigious institutional investors. But in the recent carnage the share price has tumbled down to Rs 180 levels. 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. And for FY09, despite lower margins, 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. Therefore investors are recommended to buy at declines as scrip can appreciate 50% in 15 months

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ABM Knowledgeware Ltd - 38.00 Rs

Promoted by Mr. Prakash Rane in 1993, ABM Knowledgeware Ltd’s (ABM) core competency lies in providing solutions for e-governance and systems integration. Being one of the earliest private sector companies in India to focus on e-governance, ABM possesses over 600 man-years of experience with in-depth domain expertise in computerization of diverse areas like secretariats, administrative offices, urban & rural local self-government bodies like municipal corporations, district administrations etc. The various areas that these solutions cover include file tracking and registry management, grievance redressal & management, utility billing, accounting systems, citizen services etc. This has endowed ABM with a microscopic view of the functioning of government officials right from Patwaris & Gram Sevaks to Chief Secretaries and Ministers. Moreover it has now got an in-depth understanding of the grass-root needs of citizens as well as administrators. Notably, ABM is having presence in Maharashtra, Goa, Gujarat, Karnataka, Andhra Pradesh, Madhya Pradesh, Delhi (North India) in India and Middle East, South Africa overseas

Today ABM boasts of executing several e-governance project right from conceptualization to implementation and ensuring its continuity. Company has pioneered the concept of Citizen Facilitation Centre (CFC™) in the state of Maharashtra by successfully providing time bound service delivery to citizens in municipal corporations, district collectorates and zilla parishads. It is also one of the few companies in India that has developed ready-to-deploy, customizable e-governance products / solutions for vital generic functions. Its suite of e-governance products and solutions offer an excellent opportunity to administrators for rapid implementation of e-governance solutions. Some of its popular, successful & award winning products are:

· ABM MOIS 2000 ™ : for monitoring & tracking movement of any file/letter in Govt/Semi-Govt offices.

· ABM CARE ™ : helps any organization to monitor the status of complaints received by them as well as ensuring time bound Redressal of the same

· ABM MAINET ™ : flag ship product for complete computerization of Municipal Corporation & Councils.

· ABM CFC ™ : e-governance solution for rendering more efficient & effective service to citizens in Municipal Corporations, Collectorates, Zilla Parishads, Hospitals, PSUs etc.

· ABM AQUA ™ : for Water Billing, Receipt & Accounting, useful for Water Boards & Local Bodies like Municipal Councils/Corporations.

· ABM SWS ™ : for time bound processing & delivery of various certificates / Licenses / Permits at District Collectorates & Tehsils

One of the mainstays of ABM's products and solutions is their total bilingual nature i.e. solutions which not only have bilingual user interfaces, but provide the functionality of data entry, capture, storage, retrieval and display of all data in bilingual mode, across a variety of technology platforms. It has been awarded the ISO 9001:2000 certificate for quality management system in design, development, implementation, maintenance and technical support of software. To address the growing need for security in software solutions and on-line transactions, ABM has tied up with Verisign, the global leader in e-security solutions. Besides it has partnered with leading technology companies like Microsoft, Oracle, IBM, Sun-Solaris, SCO, Unix, Safescrypt etc.

Apart from generic e-governance solutions, ABM is developing Strategic Business Units focused on revenue earning areas like urban administration, utility and ERP by inducting experienced professionals and laying down quality processes. The need for ERP has also been increasingly felt by the e-governance customers due to several advantages of the packaged software like ERP over the be-spoke software development approach. Hence, ABM has effectively leveraged its domain expertise by working closely with SAP and Oracle for developing this market. To sum up, ABM’s strength as a e-governance solution provider lies in software development, project management, domain knowledge, citizen service delivery experience, institutionalization of IT & systems integration. On the back of bold initiatives and huge allocation/spending on e-governance by various govt bodies, the future prospect of ABM is very encouraging. Considering the stunning performance for the first three quarters and robust order book position, ABM is expected to register a topline of around Rs 30 cr and bottomline of around Rs 7 cr. This works out to an EPS of Rs 7 on equity of Rs 10 cr. Investors are advised to buy at declines for a price target of Rs 60 (i.e. 50% return) with in a year.

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