STOCK WATCH
Couple of days back Shanthi Gears (40.00) announced encouraging set of result for the March quarter. Its topline remained flat at Rs 69.50 cr but bottomline witnessed an increase of impressive 20% to Rs 14 cr despite industrial slowdown. Incidentally, company had taken an exceptional hit of nearly Rs 7 cr as interest and forex loss towards redemption of FCCB during the Dec Qtr. Hence for the entire FY09 its sales was well as profit remained almost flat at Rs 253 cr and Rs 44 cr leading to an EPS of more than Rs 5 on the equity of Rs 8.20 cr having face value as Rs 1/- per share. It has announced 120% dividend i.e. Rs 1.20 per share for FY09 which gives a yield of 3% at CMP. But most importantly, company has reported an operating margin of above 40% for FY09 due to lower raw material cost. Even for the latest March’09 quarter it clocked an OPM of 43% which is a very positive sign. However at the same time, company has informed that it is in the process of revamping and restructuring the entire operational and organisational structure which may lead to slowdown in production in all units for a short tenure. Thus H1FY10 performance may be lack luster. Despite this, investors are strongly recommended to accumulate the scrip at sharp declines as company is the second largest player in industrial gear segment with 20% market share. Of late, company has even started manufacturing gearboxes of 250 KV for windmills which has great potential.
Taking the benefit of recent notification related to AS-11 amendment, JK paper (25.00) opted to capitalize the foreign exchange loss retrospectively w.e.f. July 01, 2007. Hence purely on the account of write back of forex loss to the tune of Rs 10 cr (which it had provided in the first three quarters) company was able to post healthy net profit of Rs 15 cr for March’09 quarter. Effectively, for the entire FY09 company has 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. 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%. The dividend yield works to 7~8% at CMP. Operationally company is facing some pressure on margin front due to rise in raw material cost due to which its OPM for FY09 stood lower at 16.50% (against 18% last fiscal). However the margin is expected to improve in coming quarters due to softening of coal and pulp prices. 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. Despite tempting dividend yield sell now and buy later between 18~20 levels.
For the March’09 quarter, JK Cement (80.00) has come out with excellent set of nos. Sales improved by 12% to Rs 433 cr but PBT shot up 25% to Rs 107 cr. However due to very high tax provisions in this qtr, net profit remained flat at Rs 60 cr. Remarkably, company’s operating margin for the March’09 quarter improved dramatically to above 30% due to sharp fall in power and fuel cost. Incidentally it had reported an OPM of 19%, 14% & 22% for the preceding three quarters respectively. But for the full year it reported 30% fall in PBT to Rs 234 cr and 45% decline in net profit to Rs 142 cr depisuite marginally increase in sales to Rs 1502 cr. Thus it posted an EPS of Rs 20 on current equity of Rs 70 cr and announced 35% dividend for FY09 leading to an yield of more than 4% at CMP. JK Cement is among the largest grey cement manufacturers in North India and the second largest manufacturer of white cement in the country. It boast of having 4.4 million TPA of cement manufacturing capacity along with 43MW captive power generation facilities. It is in the midst of setting of up another 3 million TPA Greenfield cement plant in Karnataka. Incase company is able to maintain the current margin for coming quarters as well, scrip may see a sharp re-rating.
J Kumar (100.00) has once again reported decent set of result for the March’09 quarter. Total revenue increased by 55% to Rs 148 cr but net profit grew by only 15% to Rs 12 cr due to declined in operating margin. Still on the full year basis it recorded 85% growth in topline to Rs 389 cr and 70% jump in bottomline to Rs 33 cr which translates into EPS of Rs 16 on equity base of Rs 20.70 cr. Last fiscal company bagged huge order from MMRDA & MSRDC to the tune of Rs 560 cr for construction of 16 skywalks in Mumbai. Recently, in last couple of months it won another Rs 130 cr order for construction of nallah & Railway Bridge (Jogeshwari) in Mumbai. In order to fund the project, company recently approved to make preferential allotment of 40 lac convertible warrants to promoters and others. Although the conversion price is yet to be finalized, it is expected to be around 70~75 Rs. Post conversion equity will get diluted by nearly 20% to Rs 24.72 cr. As the scrip has seen smart rally in short time, investors are advised to accumulate it between Rs 80~90.
Taking the benefit of recent notification related to AS-11 amendment, JK paper (25.00) opted to capitalize the foreign exchange loss retrospectively w.e.f. July 01, 2007. Hence purely on the account of write back of forex loss to the tune of Rs 10 cr (which it had provided in the first three quarters) company was able to post healthy net profit of Rs 15 cr for March’09 quarter. Effectively, for the entire FY09 company has 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. 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%. The dividend yield works to 7~8% at CMP. Operationally company is facing some pressure on margin front due to rise in raw material cost due to which its OPM for FY09 stood lower at 16.50% (against 18% last fiscal). However the margin is expected to improve in coming quarters due to softening of coal and pulp prices. 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. Despite tempting dividend yield sell now and buy later between 18~20 levels.
For the March’09 quarter, JK Cement (80.00) has come out with excellent set of nos. Sales improved by 12% to Rs 433 cr but PBT shot up 25% to Rs 107 cr. However due to very high tax provisions in this qtr, net profit remained flat at Rs 60 cr. Remarkably, company’s operating margin for the March’09 quarter improved dramatically to above 30% due to sharp fall in power and fuel cost. Incidentally it had reported an OPM of 19%, 14% & 22% for the preceding three quarters respectively. But for the full year it reported 30% fall in PBT to Rs 234 cr and 45% decline in net profit to Rs 142 cr depisuite marginally increase in sales to Rs 1502 cr. Thus it posted an EPS of Rs 20 on current equity of Rs 70 cr and announced 35% dividend for FY09 leading to an yield of more than 4% at CMP. JK Cement is among the largest grey cement manufacturers in North India and the second largest manufacturer of white cement in the country. It boast of having 4.4 million TPA of cement manufacturing capacity along with 43MW captive power generation facilities. It is in the midst of setting of up another 3 million TPA Greenfield cement plant in Karnataka. Incase company is able to maintain the current margin for coming quarters as well, scrip may see a sharp re-rating.
J Kumar (100.00) has once again reported decent set of result for the March’09 quarter. Total revenue increased by 55% to Rs 148 cr but net profit grew by only 15% to Rs 12 cr due to declined in operating margin. Still on the full year basis it recorded 85% growth in topline to Rs 389 cr and 70% jump in bottomline to Rs 33 cr which translates into EPS of Rs 16 on equity base of Rs 20.70 cr. Last fiscal company bagged huge order from MMRDA & MSRDC to the tune of Rs 560 cr for construction of 16 skywalks in Mumbai. Recently, in last couple of months it won another Rs 130 cr order for construction of nallah & Railway Bridge (Jogeshwari) in Mumbai. In order to fund the project, company recently approved to make preferential allotment of 40 lac convertible warrants to promoters and others. Although the conversion price is yet to be finalized, it is expected to be around 70~75 Rs. Post conversion equity will get diluted by nearly 20% to Rs 24.72 cr. As the scrip has seen smart rally in short time, investors are advised to accumulate it between Rs 80~90.
