STOCK WATCH

Panama Petrochem (60.00) manufactures specialty petroleum products for diverse user industries like printing, textiles, rubber, pharmaceuticals, cosmetics, power and other industrial oil. The product portfolio of the company consists of transformer oil, liquid paraffin, petroleum jelly, cable jelly, ink oil, rubber process oil and antistatic coning oil. It manufactures more than 80 product variants with major supplies to corporate’s like BPCL, Micro Inks, Alok Industries, Merck, Bayer Cropscience, JBF, Usha Martin, Cipla, government ordinance factories to name a few. Recently, company has developed a new product called mining oil for mining industry which is in its testing stage and is expected to be launched in the market soon. To maintain its growth momentum, company is in the midst of huge expansion whereby it more than doubling its production capacity to 159,000 MT from 69,000 MT currently. But most importantly the drastic fall in the crude oil prices is a big positive for the company as base oil forms the major part of input cost. Accordingly for the first three quarters, company has recorded an impressive rise of 70% in sales to Rs 300 cr and 40% jump in bottomline to Rs 19 cr. Thus it has already surpassed the sales and NP of entire FY08 by decent margin. It may end FY09 with net sales of Rs 375 cr and PAT of Rs 22 cr i.e. EPS of Rs 46 on current equity of Rs 4.80 cr. With a dividend yield of more than 5%, book value of Rs 121 and PE multiple of merely 1.3x times, it’s one of the safe bet in current market sentiment.

Gayatri Projects (60.00) is engaged in execution of major civil works including concrete/masonry dams, earth filling dams, national highways, bridges, canals, aqueducts, ports, etc. Although the company has executed various projects in different sectors of infrastructure, its expertise lies mainly in the road and irrigation sectors. Of late company has moved up the value chain and is executing five lucrative BOT road projects which are estimated of having very healthy IRR of around 14%. It has also entered into joint ventures with DLF for construction of road on BOT basis and with ION Exchange for water transport projects. Moreover company boasts of having a massive order book position of more than Rs 3000 cr which is 4x times its FY08 turnover thereby providing strong revenue visibility. Notably, irrigation projects constitute 30%, transportation projects 60% and industrial building constitutes the balance 10% of order book. Despite having huge debt of Rs 450 on its books company can be bought at current market cap of Rs 80 cr. For the Dec’08 quarter, company reported 25% rise in revenue to Rs 256 cr but profit declined by 20% to Rs 10.70 cr. However for the nine months ending Dec 08, its topline has increased by 40% to Rs 670 cr and PAT has also risen by 15% to Rs 30.50 cr thereby posting an EPS of Rs 30 till date. Although promoters have chequered history, still the future prospect looks promising.

With a rich experience of 25 years, JK Lakshmi Cement (45.00) is a leading cement manufacturer and a proud owner of reputed “JK LAKSHMI” brand known for its strength, quality and performance. It has a wide network of about 1,500 dealers spread across Rajasthan, Gujarat, Delhi, Haryana, UP, Uttaranchal, Punjab, J&K, HP and Mumbai with 65% of sales coming from northern region and balance 35% from western region. Interestingly, company has also diversified into lucrative ready mix concrete (RMC) & plaster of paris (POP) business thru its brand “JK Lakshmi Power Mix” & “JK Lakshmiplast” respectively. Company has recently expanded its production capacity to 3.65 million TPA and is in the midst of taking it further to 4.75 million tonne by end of this fiscal. The recent fall in coal and pet coke prices augurs well for company as it has fully stabilized the working of the 36MW captive thermal power plant. To maintain its margin, company has increased the sale of blended cement which now constitutes more than 75% of total sales. Secondly it is also constantly expanding its RMC business and currently has a total of 9 RMC plants in operation with an overall production capacity of 5.58 lacs cu.mtr. In contrast to industry estimates, company posted encouraging result for the Dec qtr and is estimated to report a turnover of Rs 1125 cr and profit of Rs 135 cr which leads to an EPS of Rs 22 on current equity. Although experts are still apprehensive about the demand supply scenario going forward, investors can buy it as a contrarian’s bet for medium term. At the same time, a huge of debt of Rs 700 cr on its books is a cause of concern.

Vivimed Labs (40.00) is a speciality chemical manufacturer catering to segments including oral care, sun care, skin care, hair care, natural extracts, preservatives, anti microbial, anti oxidants, anti-aging molecule etc. Infact it is world’s 2nd largest manufacturer of Triclosan - an antibacterial used for oral care and one of the top three companies for Avis – a chemical which improves UV absorbing ability of Sunscreen. Last year it acquired 100% stake in M/s James Robinson,UK which is an international manufacturer and supplier of speciality chemicals used in hair dyes, pharmaceuticals and photographic films/prints to ophthalmic sunglasses. Recently, company has decided to acquire Har-met International Inc a small importer of pharmaceutical & cosmetic product, based in USA. Organically as well company has been expanding its capacity and has chalked out Greenfield expansion plan in Uttaranchal and Hyderabad. Presently it boasts of having five manufacturing facilities spread across Karnataka, Andhra Pradesh & Uttaranchal. Notably company has been churning out encouraging nos has reported 50% jump in net profit to Rs 16.50 cr despite marginal fall in sales to Rs 108 cr on standalone basis. On a consolidated basis it is expected to end FY09 with sales of more than Rs 275 cr and PAT of Rs 25 cr. This translates into EPS of Rs 26.50 on current equity of Rs 9.40 cr. It has raised nearly 60 cr thru FCCB route which may not get converted into equity considering the CMP. Accumulate between Rs 30 ~ 40 levels to get handsome gain over long term.