STOCK WATCH

Aditya Birla Chemicals (32.00) earlier known as Bihar Caustic is among the leading caustic soda producer in the northern and eastern region of the country having an installed capacity of 265 TPD of caustic soda, 200 TPD of liquid chlorine, 130 TPD of hydrochloric acid, 150,000 Nm3/day of compressed hydrogen and 3 TPD of sodium hypo chlorite. It has also set up a 25 TPD stable bleaching powder plant and 12000 TPA of aluminum chloride unit. To maintain its future growth, company is in the process of further augmenting the capacity of its caustic soda from 265 TPD to 300 TPD at a capital investment of Rs 30 cr. Due to some boiler problem during Sept quarter, company is expected to end FY09 with sales of Rs 200 cr and PAT of Rs 40 cr. This translates into EPS of Rs 17 on current equity of Rs 23.40 cr. Despite belonging to such a reputed group and having strong fundamentals like high profit margin, low debt equity ratio, huge reserves, good dividend yield, consistent growth etc, scrip is poorly discounted at P/E multiple of less than 2x times and EV/ EBIDTA of little over 2x times. Although company is vulnerable to caustic soda price movement, but with Hindalco being its parent company & biggest customer this is relatively a safer bet.

MIC Electronics (15.00) is a pioneer in design, development, manufacture & supply of true color LED Video Displays, LED Lighting products and solutions. Infact, it is the only integrated LED display manufacturer in India with design-to-manufacture capabilities. Being a sunrise technology, its products have tremendous potential for growth and hence to cash on the opportunity, company commissioned a state of the art fully automated manufacturing line at Hyderabad on 29th October 2008. With this EOU facility, it has doubled the production capacity of LED display to 2400 modules from 1200 modules earlier. It is further contemplating to take its total capacity to 3600 modules in near future. Company is regularly making presentations and negotiating with Indian railways to supply LCD display as well LED lighting solutions to them. Its 50:50 USA joint venture has already won a contract for LED display in 50 stadiums in Latin America. Company is also entering the entertainment business through self owned digital theme parks and theatres. For six months ending Dec’08, it recorded 70% rise in net profit to Rs 40 cr despite marginal fall in topline to Rs 144 cr due to change in product mix. Conservatively for FY09 ending June’09 it is estimated to clock a turnover of Rs 275 cr and PAT of Rs 65 cr on a standalone basis. This works out to an EPS of Rs 6.50 on current equity of Rs 20 cr having face value as Rs 2/- per share. Share price can double within a year.


Transformer & Rectifiers (110.00) is one of the few manufacturers in the country manufacturing the entire range of transformers namely power generation, transmission and distribution transformers, industrial transformers such as furnace transformers, and special transformers such as mobile substation, rectifiers, testing transformers etc. Infact, company is among the largest manufacturer of furnace transformers in India. With an installed capacity of 7200 MVA it has the capability to manufacture transformer upto 160 MVA in 245 kV class. To cash on the boom in power sector, company is setting up a Greenfield plant in Moraiya, near Ahmedabad with an installed capacity of 16,000MVA. The new plant, expected to be operational shortly would be capable of manufacturing transformers upto 756kV class, though the company initially intends to manufacture transformers of 220kV and 400kV classes. As of now, company has order book position of Rs nearly Rs 400 cr, out of which 70% comprises of power transformers. For Dec’08 qtr it reported 40% & 30% increase in sales and NP to Rs 97 cr and 9 cr respectively. Accordingly it may end FY09 with sales of Rs 400 cr and NP of Rs 38 cr i.e. EPS of Rs 29 on current equity of Rs 12.90 cr. Importantly, it will start reporting substantial growth from FY10, as new plant will begin operations by then.

Cosmo Films (60.00) is one of the dominant players in the Bi-axially Oriented Polypropylene Films (BOPP) market in India with a 23% market share and also one of the lowest cost producers of BOPP films in the world. It currently boast of having an installed capacity of 56000 MTPA of BOPP films, 21000 MTPA of thermal lamination films & 3000 MTPA of metallized films. Importantly, company is the only Indian player to manufacture thermal laminated films which is a high margin business. Despite demand supply mismatch, company is working at 100% capacity and is further expanding its BOPP capacity to 136000 MTPA & metalized films to 10500 in phases. It has even started a coating film with a capacity of 12000 MTPA last year. Recently company has decided to acquire a USA based company providing thermal lamination films and equipment in Europe, North America, Japan and the Pacific region. However the deal is expected to get complete before Sept 2009. Because of organized retailing, increasing mall culture and higher spending capacity, FMCG and food processing industry is witnessing phenomenal growth and hence domestic BOPP market is also growing @ 15~20 % per annum. Company has already posted an EPS of Rs 17 till date and may end FY09 with sales of Rs 650 cr and PAT of Rs 40 cr i.e. EPS of Rs 21 on current equity of Rs 19.40 cr. It may declare 40% dividend for FY09 which gives a yield of nearly 7% at CMP. A good bet to gain 50% in a year.