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Pitti Lamination (34.00) is primarily engaged in manufacture of electrical steel laminations and stampings which form a critical part in all types of industrial motors, alternators, pump sets, aeronautics, windmill generators and DG sets. It even produces small laminations via High Speed Press for compressors. With its installed capacity of 25,000 MTPA, company is presently working at 70% capacity utilization leaving ample scope for future growth. Besides in Jan 2008 it has completed its forward integration plan and has put up a project for fabrication of steel stator bodies, machining of stator bodies and dropping of assembled stator core into the stator body. This will result in value addition and considerable improvement in the margins. However due to share rupee appreciation during FY08 it reported lower OPM of 12% against 14% in FY07. Accordingly it sales improved by 15% to Rs 170 cr but PAT declined by 35% to Rs 6.50 cr after huge tax provisioning of Rs 4 cr equivalent to 40% of PBT. It declared 20% dividend which gives a yield of nearly 6% at CMP. With rupee being stable above Rs 42 it has the potential to clock a turnover of Rs 200 cr and PAT of Rs 9 cr i.e. EPS of Rs 10 on equity of Rs 9.50 cr for FY09. A strong buy.

Cosmo Films (80.00) is the pioneer and one of the largest manufacturers of Bi-axially Oriented Polypropylene Films (BOPP) in India with an installed capacity of 77,000 MTPA. It also manufactures thermal lamination film, an export focused product, which has higher margins. To maintain its future growth company is expanding its capacity by adding two BOPP lines of 40000 MT each. The first line is expected to be commissioned before March, 2009 for which orders have been placed for all major equipments. In addition, it is also adding two new lines in thermal lamination and increasing its capacity from 13500 to 19500 MT per annum. To fund all these it recently placed 31 lakh warrants to be converted @ Rs 107 per share. It has also taken the approval for issue of 10 lakh equity shares under ESOP. For FY08 it sales improved by 10% to Rs 585 cr but its NP zoomed up 80% due to better operating margin, lower interest & lower depreciation cost. It reported an EPS of Rs 23 and declared 50% dividend which give an yield of more than 6% at CMP. However in this year it may face margin pressure due to rise in crude oil with polypropylene being its main raw material. Hence it may clock a turnover of Rs 625 and profit of Rs 35 cr i.e. EPS of Rs 16 for FY09 on diluted equity of Rs 22.50 cr

Accurate Transformers (95.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. 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 high working capital requirement and shortage of funds. As its preferential allotment of 31 lakh warrants @ 56 Rs to promoter has been shelved by the SEBI, company is scouting for strategic investor to fund its working capital requirement and capex for 160 MVA transformers. For FY08 it sales improved by 15% to Rs 197 cr and PAT grew by 25% to Rs 7.90 cr. Incidentally, this translates into an healthy EPS of Rs 27 on a very tiny equity of Rs 2.97 cr. On back of huge investment in power sector in coming years, company can report an EPS of more than Rs 35 for FY09. It’s a screaming buy at an enterprise value of merely Rs 50 cr.

3i Infotech (100.00) 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. For the latest March qtr its revenue increased by 70% to Rs 352 cr and net profit jumped up 60% to Rs 50 cr. With significant growth anticipated in the transaction services business in India, company has set up a hub and spoke model spanning across the country with cost efficient delivery capabilities and is into processing of credit cards, insurance applications, contact point verification, soft collections, cheque clearing services, reconciliations, etc. As on date company is having a very healthy order book position of Rs 865 cr. For entire FY08 it recorded 80% and 75% growth in sales and NP to Rs 1223 and Rs 183 cr respectively. This translates into EPS of Rs 14 on current equity of 130.50 cr. However the EPS works to Rs 11 on fully diluted equity (conversion of all FCCB) of Rs 165 cr. Recently company has acquired a strategic stake of 26% in Hyderabad-based Locuz Enterprise Solutions Ltd for an undisclosed amount, with a commitment to acquire remaining stake over a period. A strong and a safe bet.

Smart Investment (Guj)

KLG Systel Ltd

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J K Cement Ltd

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Small & Beautiful (Guj)

Jupiter Bioscience (110.00) is poised to become a global peptide solutions group having a broad canvas of peptide chemistry products, peptide reagents, coupling reagents, protective agents and supplier of key ingredients used in peptide based pharmaceuticals. It is operating in a very niche segment and is among the few companies in the world to have competency in synthesis of peptides. It is also setting up a 5500 sq ft manufacturing facility in Maryland, US to cater the USA, Canada and European markets. Earlier company entered into a 10-year product purchase agreement with Ranbaxy on peptide pharmaceutical for gloabal market and as per contract allotted 31.77 lakh warrants @ Rs 147. It has also finalized to acquire a manufacturing facility of Merck Life Sciences, Switzerland and has even signed a long term business contract with them. Recently it has entered into licensing agreement with California based GI Logics Inc for development/sales for the use of Diamox for diagnostic & eradication of H. pylori bacterium. Last fiscal it raised 100 cr thru QIP route @ Rs 153 per share. Further it cancelled the 27.50 lakh equity shares allotted to promoters and instead issued 40 lakh warrants @ Rs 182 to strategic investors. For FY08 it recorded 25% growth in sales to Rs 130 cr but net profit zoomed up 65% to Rs 30.70 cr posting an EPS of Rs 20 on equity of Rs 15.40 cr. For FY09 on a standalone basis, it can report sales of Rs 175 cr and NP of Rs 40 i.e EPS of Rs 18 on diluted equity of Rs 22.50 cr. One of the safest bet at CMP.

Lloyd Electric (85.00) posted satisfactory numbers for the March qtr and ended FY08 with sales of Rs 668 cr (up 40%) and net profit of Rs 60 cr (increase of 40%) i.e. EPS of Rs 19 on equity of Rs 31 cr. Being India’s largest manufacturer of evaporator and condenser (E&C) coils with around 60% market share, company has got itself forward integrated into lucrative business of contract manufacturing of window / split air conditioners for various MNCs in India. It is also into manufacturing of roof mounted packaged unit i.e. packaged AC for railway coaches on turnkey basis and even has an agreement with Australian company for metro rail AC units. Further company is contemplating to diversify into production of roll bond and frost free coils for refrigerators and has tied up with a Korean company. But most importantly, couple of months ago it acquired 100% stake Luvata Czech s.r.o. in Prague, Czech Republic which is also into manufacturing of heat exchangers / coils and has good presence in European market. On a consolidated basis it is expected to clock a turnover of Rs 850 cr and PAT of Rs 65 cr i.e. EPS of Rs 21 on current equity. Company has allotted 50 lakh warrants @ Rs 225 which may not get converted considering the CMP. A screaming buy at current levels.

GM Breweries (70.00) is engaged in the manufacture of alcholic liquor having the facility to blend and bottle both Indian made foreign liquor and country liquor, though it concentrates mainly on country liquor. It is the single largest manufacturer of country liquor in the state of Maharashtra and paid nearly Rs 315 cr towards excise duty and sales tax for FY08 to Maharashtra govt. With its popular brands like GM Doctor, Tango and Punch company enjoys virtual monopoly in the districts of Mumbai, Navi Mumbai and Thane. Due to the installation of additional bottling lines recently, company now has the capacity to process 12.84 crores bulk litres of country liquor per annum. However, only 43% of capacity has been utilized for FY08 thereby leaving tremendous potential to utilise the balance capacity by penetrating into interior districts of Maharashtra. Financially company is doing extremely well and hasn’t even diluted its equity since IPO in 1994 and has uninterrupted record of dividend payment from the day of its listing. For FY08 it posted marginal growth in topline to Rs 186 cr but NP improved by 25% to Rs 14.75 cr due to lower raw material cost. This translates into EPS of Rs 16 on equity of Rs 9.40 cr on which it declared 25% dividend. For FY09 it is expected to maintain the same bottomline with EPS of Rs 16. Scrip can easily shoot upto 110 Rs in 6~9 months. A solid and safe bet.

Blue Bird (28.00) is one of the leading manufacturers of paper based notebook products and office stationery. Although notebook forms the core business, company has also ventured into publishing academic textbooks and self study books for children apart from general publications in subjects such as ayurveda and biographies. It also offers end to end solutions for commercial printing. The marketing and sales team at company supports the distribution network of over 600 dealers and distributors spread across 18 cities in India, as also overseas representatives in many countries. In order to cater the central and south India market efficiently, company has put up two new plants at Indore and Bangalore apart from having its main plant in Pune. Financially, company is weak in managing receivables as it has very high debtors equivalent to four months of sales. This has led to huge debt and recently to fund its working capital requirement company has privately placed Rs 100 Crores Redeemable NCD with LIC Mutual fund for one year. Hence interest cost is the biggest drag on company’s financial. For FY08 it reported flat top-line with Rs 459 cr whereas NP actually declined by 15% to Rs 22.60 cr. Ironically it paid Rs 34 as interest cost for the entire year. Hence it reported an EPS of more than Rs 6 on equity of Rs 35 cr. On a conservative basis, it is expected to maintain the bottom-line to Rs 20 cr for FY09. Scrip can easily appreciate 50% within a year

KLG Systel Ltd - Rs 295.00

Incoporated in 1985, KLG Systel Ltd (KLG) offers knowledge solutions to key industries like oil & gas, process, power, metal, manufacturing, infrastructure sectors etc by providing a unique mix of domain expertise, software solutions, consultancy and training. Broadly KLG has classified its revenue model into following two business units:

I. Power system Solutions (60%): The basic objective of this unit is to provide hardware / software solutions and services at the design, implementation and operational stages of power generation and the downstream sector - transmission, sub-transmission and distribution. The unit provides on-line IT solutions to distribution utilities, using its self-developed Software and solution with backing from world renowned companies for determining the Transmission & Distribution losses, fixing the areas of power theft, on-the spot billing & check collection, increasing revenue collection efficiency of the utilities and addressing consumer grievances. This unit has divided into following five sub units.

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  Distribution Management Solutions (SG61 Technology) – Its basically a equipment, which provides the information in the real time over an IP network and this has been jointly developed with IBM and SAP. This system provides real time energy reconciliation.


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  Revenue Management Operations (Vidushi) – It’s a transactional system which allows a utility to have complete management of its assets, management of its consumers, do billing, do metering, and also do energy reconciliation. It uses a GIS as front end and also a normal application and also does connection management.


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  Engineering Procurement Construction: The State Electricity Utilities have taken proactive steps to improve the distribution efficiency under an ambitious Feeder Renovation Program. Accordingly KLG has won huge construction contract under competitive bidding. It has also won various tender orders under Rural Electrification Scheme from Rajasthan govt. Besides, over the last decade KLG has gained engineering design domain-expertise in various industry verticals, the benefit of which it is reaping now by providing Engineering Services Outsourcing (ESO).


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  Utility Distribution Franchising: Due to better synergies and leverage is expertise, KLG is also contemplating to venture into power distribution business thru franchisee model.


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  Demand Response (www.connectgaia.com) - Building on the deep power domain expertise and its relentless R&D, KLG has developed a solution that empowers consumers to manage their electricity consumption. This unique web based solution has been named as www.connectgaia.com which makes it possible for users to View, Visualize, Measure, Optimise and Manage the Energy Consumption in their Domestic, Commercial, Industrial, Government and Semi-Government establishment

II. Business Life Cycle Solutions (40%): Balance 40% of KLG’s revenue comes from this unit which specializes in providing technology life cycle solutions right from concept and creation, through product design and engineering, plant design, project execution, plant automation, management operations & optimisation, to expansion / revamp. KLG has the 'first-mover' advantage of focusing on Indian industry's requirements for automated business life cycle solutions. Further, this unit has been divided into following four strategic business units (SBU).

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  Computational Engineering and Sciences – This is the main SBU as its strategic focus area includes CAD, CAM, CAE, GIS, rapid prototyping & reverse engineering technologies. Remarkably, majority of all oil refineries, petrochemical / fertilizer complexes, power plants designed, erected or revamped in last ten years in India have used solutions from KLG for mechanical design analysis of steel structure, pressure vessels, heat exchangers, piping systems, etc.


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  Enterprise Project Management: Unit this SBU, KLG offers end to end solutions ranging from consulting, solution customisation, solution deployment, user acceptance and training to support and maintenance. It has developed significant IP in terms of developing a web based Enterprise Project Management System using best practices provided by Project Management Body of Knowledge (PMBOK) Areas.


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  Automation and Manufacturing: Under this KLG offers integrated solution for industrial automation and supply chain planning and optimization. It works closely with Wonderware a division of Invensys PLC, Microsoft, IBM, Oracle and SAP to deliver solutions and integrates diverse automation platforms from ABB, Allen Bradley, Areva, Foxbro, Honeywell, Siemens, Yokogawa and Sensor manufacturers.


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  Enterprise Business: Thru this KLG has put together a basket of solutions, a result of in-house R&D and Strategic Alliances, that cater to special needs of Enterprises like the Supply Chain Optimisation software called 'Chaos', emerging technologies of RFID, technology for 'retailing solutions, and SAP Business One.

Importantly as on today, KLG has a healthy order book position of around Rs 350 cr to be executed in next one to one and half years. Moreover, it is lowest bidder (L1) bidder in contracts worth Rs 550 cr and has a bidding order book of close to Rs 4,500 cr which includes a large 5 years contract of Rs 2,500 cr. KLG has an enviable clientele consisting of top 500 Indian companies (government & private) and Indian arms of the Fortune 500 companies. It has also partnered with leading international technology partners such as Autodesk, COADE, IBM, Microsoft, Oracle, Primavera, SAP and OTI etc. On the infrastructure front it has its own R&D centre spread across 75,000 sq ft in gurgaon whereas another facility with 500,000 sq ft is under construction. It has set up an ultra-modern manufacturing unit for the production of Connectgaia.com in Dehradun with a production capacity of 10,000 units a month. To further meet the growing demand specially for Automatic Meter Reading units group is contemplating to establish a state-of-the-art manufacturing plant at Davni, near Baddi in Himachal Pradesh, with installed capacity of 25,000 units per month

Earlier in Aug 2007, KLG acquired 51% stake in Atlantis Lab which caters to automobile and aerospace segments. Further it is looking at inorganic growth in engineering services and enterprise business solutions. KLG has recently demerged the power systems solutions business into a new subsidiary named KLG Power by transferring assets worth Rs 125 cr. TGP Growth India has conditionally planned to invest nearly Rs 200 cr in this subsidiary for up to 20% holding on diluted basis. Meanwhile couple of days back, IBM group company has invested Rs 12 cr for taking 1.20% stake, thereby putting the valuation of KLG Power Ltd to whopping 1000 cr. Ironically against this, KLG - the parent company which is holding the rest 98.80% is available at a market cap of merely Rs 350 cr.

Financially, for the year ended March 2008, company recorded 120% growth in sales to Rs 269 cr and Net profit increased by 140% to Rs 52 cr thereby posting an EPS of Rs 45 on equity of 11.70 cr. During FY07, KLG raised nearly Rs 100 cr thru FCCB route to be converted into equity @ Rs 400 per share. Out of that still more than Rs 80 cr is yet to be converted into equity shares. Considering all the factors, KLG is estimated to clock a turnover of Rs 400 cr and PAT of Rs 65 cr on a consolidated basis for FY09. This translates into EPS of Rs 45 on diluted equity of Rs 14.50 cr. Investors are strongly recommended to buy at current levels and add on every declines for a price target of Rs 550 (i.e. 85% appreciation) within 15 months.

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