STOCK WATCH

Ratnamani Metals (35.00) is basically engaged in manufacturing welded and seamless stainless steel (SS) pipes & tubes, carbon steel (CS) LSAW, HSAW and ERW pipes. To cater the rising demand company is adding 3,000 TPA of capacity in stainless steel tubes and pipes segment, which is to be operational shortly thereby taking the total stainless steel pipe capacity to 22,000 tonne. In carbon steel segment, it is adding 100,000 tonne of HSAW capacity through brown field expansion, which will double its HSAW capacity of 200,000 TPA and take the total carbon steel capacity to 400,000 TPA. Company meets 100% power requirement from its own 24 windmills generating 20.54 MW of green power. It has also got itself partly backward integrated by establishing hot extrusion line which has reduced its dependence on imported material to some extent. As a part of forward integration, company has recently set up a 3 layer polyethylene and epoxy coating line with capacity of 2.7 million sq mtrs. As most of the company’s sale is to oil, gas & petrochemical industry it reported poor performance for the Dec qtr. Even for the nine months ending Dec’08, its topline grew by 12% to Rs 690 cr whereas NP declined by 25% to Rs 55 cr thereby already posting an EPS of Rs 11 on current equity of Rs 9 cr. However company hasn’t made the notional forex loss provisions to the tune of Rs 12.50 cr on the outstanding foreign currency loan. So taking this into consideration company may end FY09 with sales of Rs 900 cr and profit of Rs 50 cr i.e. EPS of Rs 11 for the entire year. For FY10 it has the potential to do much better with enhanced capacity. Accumulate only at sharp declines.

Hitachi Home & Life Solutions (35.00), a 68% subsidiary of Hitachi-Japan and proud owner of “HITACHI” brand, is amongst the top air-conditioning companies in India with an installed capacity of 250,000 units per year. It manufactures high technological home and commercial air conditioners like window AC, split AC, concealed splits, ductables, chillers and specific telecom cooling solutions. To capitalize its brand equity and strong distribution network in India company has also ventured in the business of trading for the refrigerators and washing machines. Its plant at Kadi, Gujarat is among the seven Hitachi room air conditioner facilities worldwide. Being a technology driven company, it has introduced several innovative products such as “ACE, IOTA, ATOM Square, Takumi” which are doing extremely well in the market. Its refrigerator and washing machines sales are also picking up. On the other hand its commercial air conditioning division is also on a rampant growth mainly due to the retail sector and mall culture expanding in a big way. However, there is bit of slowdown currently for consumer durable as well, but the situation will improve in due course. Hence, company has planned a capex of Rs 45 cr for the current year to expand its line of business. Surprisingly for Dec quarter company reported a loss even at operating level due to which its share price got hammered badly. Still it may end FY09 with sales of Rs 450 cr and PAT of Rs 21 cr leading an EPS of Rs 9 on equity of Rs 23 cr. Being almost a debt free company, foreign promoters may even come out with buy back to delist the shares. Keep accumulating at declines

Jupiter Bioscience (35.00) 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. The technology focus of the company has enabled it to develop more than 400 products in its catalogue and establish a leadership position in the peptide business internationally. For the first three quarters it has already clocked an EPS of Rs 13 as it reported 15% growth in sales to Rs 95 cr and 5% increase in PAT to Rs 22 cr in comparison to corresponding previous period. Company has been regularly investing considerable resources in developing the processes for manufacture of generic peptide APIs. It has finalized to acquire a manufacturing facility of Merck Life Sciences, Switzerland and has even signed a long term business contract with them. Earlier it entered into a 10-year product purchase agreement with Ranbaxy on peptide pharmaceutical for global market, but it seems the contract may get cancelled by the new management Daiichi Sankyo. They didn’t even opt for conversion of 31.77 lakh warrants @ Rs 147 and allowed it to get lapsed. However the cancellation of this deal will not affect the company substantially as it will go for other options to market its product. For FY09 on a standalone basis, it can report sales of Rs 135 cr and NP of Rs 25 i.e. EPS of Rs 15 on current equity of Rs 16 cr. A strong buy.

Nitco Ltd (22.00), owner of “NITCO TILES” brand is a complete flooring solutions provider, focused on the premium tile segment which helps it maintain margins at higher levels. It has exotic range ceramic tiles, vitrified tiles, cement-terrazzo tiles, pavers, steps & risers, Italian marble, & artistic creations in mosaic tiles which covers entire gamut of indoor, outdoor and even industrial applications. Last fiscal company successfully forayed into the business of sourcing cement from Pakistan etc and selling them in India. Recently it ventured into the real estate business and is developing a total area of 37.3 acres with a saleable area of 16.28 lacs sq. ft at Thane, Mumbai and Alibaug. The projects include premium residential, premium villas and IT park formats. On the other hand it is increasing the ceramic production capacity by 10,000 sq mtr at Alibaug and enhancing the processing capacity of imported marble at Silvassa thru a capex of approx Rs 200 cr. As 60% revenue comes from institutional clients, company is now focusing on retail segment and has planned to open 43 Le Studios Express (retail outlet) soon against 12 studios already operational. It is also contemplating to diversify into new products like sanitaryware, CP fittings etc in near future. Ironically, share which was placed at Rs 260 to QIB one year back is not finding any buyer even at Rs 25 now. With expected EPS of Rs 8, book value of Rs 155, EV\EBITDA of less than 3x times, company is trading reasonably cheap at market cap of merely Rs 75 cr.