STOCK WATCH

Accurate Transformers (90.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 160 MVA - in up to 220 KV class. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to mounting debtors and shortage of funds. However on the back of ongoing boom in power sector and robust demand for transformers, situation has now improved considerably. Due to better operating efficieny and higher realization company company is expected to improve its profit margin going forward. It may even grow at CAGR of 50% for next three years as far as bottomline is concerned. On a conservative basis, it can clock a turnover of more than Rs 200 cr and PAT of Rs 8 cr for FY08. This works out to an EPS of Rs 27 on current equity of Rs 2.96 cr. As per unconfirmed reports, SEBI has halted its preferential issue of 31 lac warrants @ 56 Rs, hence now it has to go for fresh fund raising program as per SEBI guidelines. Scrip has nearly become one third from its high of 240 Rs. A screaming buy.

Spanco Telesystem’s (160.00) core competency lies in offering telecom systems integration which includes implementation of multi-location, multi-services converged networks for carrying diverse multimedia traffic (voice, data & video) based on latest technologies like ATM, MPLS, Frame Relay, TCP/IP etc. On the other hand it has bagged a 10-year contract to set up, operate and maintain Interactive Voice Response System (IVRS) and Regional Call Centres (RCC) for the Indian Railways in join venture with Spice group. Moreover it has ventured into RFID space by acquiring 51% stake in Skandsoft Technologies - a pioneering software solutions company which is dedicated to revolutionize the upcoming world of automated business processes through technologies like Radio Frequency Identification (RFID) & Automatic Identification and Data Capture systems (AIDC). It has even formed a joint venture “Spanco-GKS” with Golden Key Solutions of Oman to replicate its Indian business in the gulf region as well. For FY08 it may clock a turnover of Rs 625 cr and profit of Rs around Rs 48 cr on a standalone basis i.e. EPS of Rs 23 on current equity of Rs 20.65 cr. A solid bet

ANG Auto (85.00) is among the few companies in the world to be completely integrated – from the manufacture of components to sub-assemblies and assemblies and finally to vehicles. Today it the largest trailer manufacturing company in India with a capacity of 3600 trailers per year and will soon be No. 1 in Asia as it is augmenting the capacity to 6000 trailers. Notably, company has entered into a five year contract with Ashok Leyland for trailers, which is valued at 1500-1800 cr. Secondly, its patented automatic slack adjuster and the single piece dummy axle is witnessing strong demand from all over the world. Going ahead, it intends to manufacture suspension systems and is also setting up a forging unit at Bhiwadi, Rajasthan at capex of Rs 37. To consolidate its operations company has merged ANG Auto Tech, its 75%subsidiary with itself. On a standalone basis for FY08, it is expected to clock a turnover of Rs 120 cr cr and profit of Rs 16 cr i.e. EPS of Rs 13.50 on current equity of Rs 11.90 cr. Being the conversion price as high as Rs 325, its FCCB of Rs 50 cr may not get converted into equity. Moreover, finding the valuation very cheap, management has got the approval for buy back of equity shares up to 24.30% of the total paid up equity capital at a maximum price of Rs 215 per share. A golden opportunity to buy at such mouth watering level

Part of B M Thapar group, Greaves Cotton (205.00) is enaged in production of diesel/petrol/LPG engines for power generation, agro equipment & atumotive apart from manufacturing gensets, agro equipment and construction equipment Besides, it is also engaged in marketing high technology systems for marine, aviation and electronic applications. Last year, to increase its presence in global market it acquired, Bukh Farymann Diesel GmbH (renamed as Greaves Farymann Diesel GmbH) which is engaged in the manufacture and marketing of single cylinder diesel engines and parts for Rs 25 cr. For FY08 it may clock a turnover of Rs 1400 cr and PAT of Rs 115 cr i.e. EPS of Rs 24 on current equity of Rs 48.80 cr. Importantly, few weeks back Piaggio Group's Indian subsidiary signed a 8 year agreement with the company for purchase of mono-cylinder diesel engines for application on the three-wheeled vehicles manufactured by them. This implies that company will continue to be a single source supplier of such mono-cylinder diesel engines to Piaggio. A solid bet for long term

Avaya GlobalConnect Limited - 160.00 Rs

Incorporated in 1986, Avaya GlobalConnect Limited (AGCL), erstwhile Tata Telecom Ltd is India’s leading provider of intelligent communications solutions, systems and services focused on meeting the needs of organizations large to small. It offers a comprehensive suite of solutions for Contact centre, Business Process Outsourcing and end-to-end converged communications. By designing, building and managing some of the world’s most advanced communications solutions, AGCL is helping its customers achieve sustained advantage through superior business results. Notably, it has initiated strong branding on Intelligent Communications covering IP Telephony, Contact Centers, Unified Communications and Communications Enabled Business Processes (CEBP) Solutions. Infact company continues to command leadership position across various market segments in the Convergence and Contact Center domain. So in order to provide best-in-class converged communications products and solutions, AGCL has partnered global technology leaders such as Polycom- the worlds leading video-conferencing solutions provider and NICE Systems-the Israel-based customer experience management specialist. It also has strategic alliances with systems integrators such as IBM, HP, Netsol and Servion.

With strength of around 800 plus professionals, AGCL has over 30 offices spread across the country, from Jammu to Trivandrum to Ahmedabad to Siliguri. The company has an extensive distribution network comprising over 50 systems integrators, channel partners and dealers. With over 6,000 customers, it provides world-class service support through a remote maintenance integration (RMI) system. It has state-of-the-art Lab & world class Customer care center in Gurgaon, Customer studio in Mumbai & Development center & Solutions support center in Pune. Today, the role that communications networks play extends far beyond basic connectivity. The effective use of communication tools can have a major impact on any company’s success by enabling the delivery of better customer service, helping to empower key decision makers and enhance the brand image. To remain competitive, enterprises are looking at the emerging technologies to utilize the common infrastructure for voice, data and multimedia applications and are also expected to deploy Modular Messaging, Unified Communications and high-end Video conferencing Solutions in near future. This all augurs well, as for AGCL is uniquely positioned to offer solutions for convergence for such customers. Accordingly company has been expanding its focus on `3C' strategy of converged communications, contact centers and customer services to address specific industry verticals. The industry verticals approach helps it to differentiate its products and solutions in a highly competitive market environment.

Last year, AGCL has launched new products and solutions like customer interaction express solution to address the needs of domestic call center customers, high definition video end point (HDX) and IP based high definition multi conferencing unit (RMX) for video conferencing and wireless infrastructure & handheld devices for mobile computing to address the needs of key vertical segments like retail, hospitality, etc. It is also focusing to develop domain knowledge of Banking & Financial Services, retail & manufacturing and Travel & Logistics. Its endeavor is to tap large investments in these sectors by developing and deploying new applications / solutions and thereby create an experiential selling environment. On the other hand its WOS in Australia has expanded its geographical/customer base and now has presence in Sydney, Melbourne, Adelaide, Brisbane and Perth with over 100 customers. Financially company has reported disappointing nos for last 2~3 quarter but still on a conservative basis it is estimated to clock a turnover of Rs 550 cr and PAT of Rs 30 cr for FY08 ending Sept 2008. This translates into EPS of Rs 21 on current equity of Rs 14.20 cr. Investors are advised to buy at current levels with a price target of Rs 250 (i.e. 55% appreciation) in 12~15 months.

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Shilchar Technologies Ltd - 125.00 Rs

From a modest beginning of manufacturing only R core transformers in 1989, Shilchar Technologies Ltd (STL) erstwhile Shilchar Electronics Ltd today boast of manufacturing various types of transformers and cores catering to a wide cross section of the industry segments ranging from highly competitive consumer goods to the tech savy industrial segment, both at home and abroad. Backed by a state of the art manufacturing facility in Vadodara, Gujarat and competitive pricing strategy, today STL holds a dominant position and is recognized as a world class manufacturer of transformers and cores. It has UL and CSA approvals for its products and caters directly to the market requirement as well through its franchisees in different parts of the country. Ironically it serves to a wide range of industry segments which can be seen from below mentioned product profile.

· Power Transformers: STL can manufacture and test transformers upto 66KV Class and 15MVA capacity. It makes three Phase oil cooled transformers with & without OLTC and with & without RCC Panel. Presently it has an installed capacity of 1000 MVA for power transformers alone.

· Distribution Transformers: Under this division, STL can manufacture & test transformers upto 33KV Class and 10MVA capacity with an installed manufacturing capacity of 200 MVA per annum at present. It specializes in producing single phase oiled cooled up to 100 KVA, three phase oil cooled transformer up to 2 MVA, 33KV class & three phase dry type rransformers upto 1 MVA, 11KV class.

· Linear Transformers: STL manufactures new age power rangers for all electrical needs. Be it for computers / peripherals, telefax / copiers, audio / video equipment, medical or communication equipment, STL has an extensive range from R core transformers to El Transformers and Toroidal to Current transformers used in electronic energy meters. These transformers are supplied according to customer's requirement of different class of thermal insulation, cut-offs, static-magnetic shielding, special mounting, epoxy moulding, vaccum impregnation etc.

· Telecom Transformers: With engineering support from Custom Magnetics-USA, STL manufactures telecom and data transformers with highest quality standard for all sorts of telecom equipment. Its ferrite transformers are exported regularly and used by leading telecom giants of the world.

· Core & Laminations: STL manufactures various types of cores including R-Cores, R-Toroid cores, rectangular cores, cut C cores, split cores etc on SPM Japanese winding machine and using M2H/M4 grade CRGO material. On the other hand it produces EI lamination using M6 grade CRGO material of 0.35 mm.

· Bobbins: STL has set up ts own Plastic Bobbins manufacturing unit to support the need of the industry for high-grade quality bobbins. This division also makes plastic parts for transformer industry using all engineering plastics viz. Nylon 6, PBT, Ploycarbonate, ABS, Glass filled Nylon 6, Nylon 66 etc depending on the requirement.

Indian transformer market size is estimated at Rs.10,000 cr approximately and is likely to grow at a rate of 8 to 10% annually for coming 10 years. The growth is mainly due to large power generation projects coming into the various parts of the country. The electrification of rural areas all over the country will require many transformers and the present capacity in the country is not to enough to meet the growing demand trend. Hence to cash on this opportunity, STL is in the midst of expansion and modernization of its plant and has also enhanced the existing production capacity up to 20 MVA Transformers from 15MVA earlier. Last year, company bought new land, installed modern plant and machinery and completed the construction of new building for manufacturing of power and distribution transformers upto 500 KVA. It also merged its wholly owned subsidiary called Shilchar Payton technology Ltd with itself. For FY08, it is expected to clock as turnover of Rs 75 cr and PAT of Rs 4.25 cr i.e. EPS of Rs 11 on equity of Rs 3.80 cr. However, considerable rise in stell and copper wire prices is a cause of concern. Still for FY09 company has the potential to register a topline of more than Rs 100 cr and profit of around Rs 6 cr i.e. EPS of Rs 16. That means the company is current available at a PE ratio of less than 8x times against FY09 earnings. Investors are advised to accumulate this scrip at sharp decline for a price target of Rs 190 (i.e. 50% appreciation) within a year.

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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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Smart Investments (Guj)

Avantel Softech Ltd

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Yuken India Ltd

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