STOCK WATCH

Interesting Jindal Polyfilms (300.00), has recently approved a second buy back for an aggregate amount not exceeding Rs 73 cr at a maximum price of Rs 400/- per share from the open market. In the first buy back which it closed in April 2009, company bought back an aggregate of 32,34,492 equity share at an average market price of Rs 270.17 per share absorbing a total amount of Rs 87.38 cr. So it seems that company may actually buy back further shares which will restrict the major correction in the scrip. Incidentally company didn’t take the benefit of recent amendment in AS11 and provided huge forex loss to the tune of Rs 61 cr in P&L a/c for FY09. Despite that it recorded a PAT of Rs 124 cr on sales of Rs 1417 i.e. EPS of Rs 47 on standalone basis. Company is a leading player in flexible packaging, basically makes polyester films (BOPET), polypropylene films (BOPP), metallised films and coated films with in house ability to produce polyester chips (93800 TPA) for captive consumption. It is the only company in India to offer PVDC coated BOPP and Pet films having a capacity of 4500 TPA to manufacture PVDC, Acrylic and LTS coated films. Remarkably, company has been constantly expanding over the years and has further lined up aggressive expansions till 2011. For the latest June’09 quarter, company has posted good set of nos as it provided Rs 25 cr as forex gain leading to a net profit of Rs 85 cr on sales of Rs 381 cr. Even excluding the forex gain company has recorded an EPS of Rs 24 on current equity of Rs 24.90 cr which is quite encouraging. Purely on the operational front company can register sales of Rs 1500 cr and profit of Rs 160 cr i.e. EPS of Rs 64 for FY10. Keep accumulating at sharp declines.

Bharati Shipyard (150.00), second largest private shipyards in India is engaged in design and construction of bulkers, cargo/container ships, tankers, dredgers, passenger vessels, chemical carriers etc. It has special expertise in construction of offshore support vessel required for oil exploration industry and is the first Indian player to bag an order of an oil rig. However, the shipyard sector is going thru a bad phase as very few shipping companies are placing major fresh order for ships due to world economy slowdown. However company is having sufficient order position (of more than Rs 3000 cr) for next two years and by then the situation is expected to improve. Secondly the crude oil prices have also recovered smartly which will lead to continuation of increased E&P activities. But because of the ongoing slump in business, company has slowed down its Greenfield expansion and other capex plan. For FY09, its topline increased by 45% to Rs 934 cr but bottomline grew by 20% to Rs 125 cr due to significant increase in employee and interest cost posting an EPS of Rs 45. In May 2009 company acquired 15% stake in Great offshore and since then it has been constantly in news as it is competing against ABG shipyard to acquire Great offshore. As of now it holds nearly 20% stake in Great offshore against 8% held by ABG shipyard. Ironically ABG has made a counter open offer @ Rs 520 per share to acquire 1.26 cr shares of Great Offshore against companys open offer of Rs 405 per share. So even if company sells the 72 lac shares to ABG it will make a cool gain of Rs 155 cr on its investment.

Indag Rubber (50.00) has reported satisfactory result for the June’09 quarter. Sales as well as NP improved by 20% to Rs 23 cr & 2.30 cr respectively. Thus it posted an EPS of Rs 4.50 for the quarter. For the entire FY09 its sales marginally grew to Rs 76 cr but net profit declined by 10% to Rs 7.60 cr posting an EPS of Rs 15 on equity of Rs 5.25 cr. It declared 20% dividend for FY09. Company is one of the reputed players in tyre retreading business and has been benefitted to the drastic fall in prices of raw material like poly butadiene rubber, natural rubber, carbon black and rubber chemicals. Due to high prices of tyres, retreading of tyres has become all the more necessary as tyres retreaded with quality material give about the same mileage as new tyres and that to at a much lower cost per mile. On the other hand the concept of retreading is bound to grow in coming years being environmentally friendly. However the performance of the company will be vulnerable to commodity prices and hence scrip wont command very high premium. Buy only at sharp declines

By capitalizing all the forex gain/loss as per AS-11 amendments, JK paper (29.00) has reported decent set of nos for the June’09 quarter. Sales remained flat at Rs 261 cr and net profit stood at Rs 20 cr posting an EPS of Rs 2.50 for the quarter. Surprisingly it reported an impressive OPM of 23% due lower raw material cost. It will be interesting to see if company can maintain this margin going forward. For FY09 it had clocked a turnover of Rs 1077 cr and PAT of Rs 38 cr leading to an EPS of almost Rs 5 on equity of Rs 78 cr. With more than dozen of popular brands, company is India’s largest producer of branded papers and commands 40% market share in branded cut size papers. It is engaged in production of writing & printing paper and has recently ventured into high-end coated packaging boards. It operates two integrated plants in India with an total installed capacity of 180,000 TPA. Of late it has setup Rs 300 cr state-of-the art multi layer packaging board plant with an installed capacity of 60,000 TPA, thereby taking the total installed capacity to 240,000 TPA. But the most interesting aspect of the company is the high dividend payout ratio. Company has announced a dividend of 17.50% (against 15% last year) which translates into payout ratio of more than 35%. At CMP the dividend yield works out to more than 6%. However the record date has gone and scrip is trading ex-dividend now. So buy during corrections.