STOCK WATCH

For the latest June’09 quarter TIL Ltd (250.00) reported flat bottomline of Rs 5.80 cr despite 10% fall in topline to Rs 163 cr on a standalone basis. Company is engaged in three business segment namely construction and mining solutions, material handling solutions & power systems solutions. It has long term technical and strategic alliances with leading equipment manufacturers in the world- Caterpillar Inc, Manitowoc crane Group, USA Famak S.A, Poland and Paceco Corp, USA. Pioneering the manufacture of mobile cranes in India, company deals in hundreds of specialized construction equipment like excavators, loaders, pavers, rollers, concrete mixers, batch plants, forklifts, conveyors, tower cranes, crushing plants, dumpers, demolition equipments etc. To cater the global clients effectively it has set up subsidiaries in Singapore, Myanmar & Nepal etc which are doing well. For FY09 on a consolidated basis company has recorded sales of Rs 1037 cr and PAT of Rs 44 cr leading to an EPS of Rs 44 on equity of Rs10 cr. With government planning to invest Rs. 2,002,000 cr in physical infrastructure (railways, roads, ports, airports, irrigation, urban and rural water supply and sanitation) as per Eleventh Five-Year Plan, the future prospect of the company looks robust. Thus company is even setting up a Greenfield plant in West Bengal under a capex of Rs 175 cr which may get ready by late 2010. Meanwhile the 30 lac convertible warrants (@ Rs 326) which were issued in Dec’07 to fund this expansion got lapsed due to poor market sentiment. But it doesnt make much difference as company can easily raise debt and complete the project. For FY10, on a consolidated basis it is expected to clock a turnover of Rs 1200 cr and PAT of Rs 48 cr i.e. EPS of Rs 48 on current equity. A solid bet

Once again Jupiter Bioscience (48.00) has reported satisfactory performance for the June’09 quarter. Sales improved by 15% to Rs 33 cr but PAT remained flat at Rs 7 cr posting an EPS of Rs 4.50 for the single quarter. Even for FY09, company had clocked 10% rise in sales to Rs 143 cr and 20% increase in profit to Rs 32 cr thereby posting an EPS of Rs 20 on a standalone basis. Although the consolidated nos are not available but it estimated to be marginally better. Company 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. It 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. However few experts have concerns over the non performance of its subsidiaries despite considerable capital being employed into them. Despite this investors can accumulate the scrip at current levels. The days its subsidiaries start performing scrip will see a vertical rise.

After witnessing the worst time of its history, things are gradually improving for Phillips Carbon Black (100.00). Due to economic meltdown and slump in auto sector, demand for carbon black also nose-dived during late 2008 which forced the company to cut down the production. Moreover the carbon black prices also fell due to dumping & inventory clearance by international players. Incidentally, company’s capacity utilization for FY09 stood at merely 79% (against 93% in FY08). However in the last few months the price as well as demand has improved to some extent. Also anti-dumping investigation against import of carbon black from Thailand, Australia, China, Russia, etc. is in progress and it is expected to be concluded in due course during FY10. In the meantime company reported encouraging performance for the June’09 quarter. After reporting significant operating loss in the preceding two quarters it recorded an operating profit of Rs 32 cr (OPM of 11%) for this quarter. Interestingly it reported only 10% fall in sales and PAT to Rs 291 cr & Rs 20.50 cr respectively against corresponding quarter last year. In order to generate extra revenue from sale of power, company has put up a huge 30 MW power generation plant which commenced commercial operation from April, 2009. For future growth company is looking to expand its installed capacity by whopping 140,000 tonne thru Greenfield as well Brownfield expansion along with adding another 32 MW of captive power generation facility. In short, post all expansion by end of 2010, its carbon black production capacity will stand augmented to 410,000 MTPA and power generation capacity to 80.50 MW. Worth a punt.

Ironically, the net profit of Balaji Amines (85.00) remained same at Rs 5 cr despite 25% fall in topline to Rs 59 cr. It recorded a healthy OPM of 17% against 12% in the corresponding quarter last year. For FY09 its sales as well as net profit were up 15% to Rs 252 cr & 15 cr respectively. Company is among the few handful manufacturers across the world producing methylamines, ethylamines and their derivatives, as amine manufacturing technology is a closely guarded process. Ironically company is using indigenously developed technology i.e. without any technical foreign collaboration. It also produces specialty chemicals which are import substitutes like Morpholine,hydroxylamine, N-Methyl Pyrrolidone etc and few natural products (herbal extracts) such as solanesol, calcium sennosoid, coleus forskohlii, camptothesin etc. Infact couple of weeks ago it commissioned Gamma Butyro Lactone (GBL) plant with a capacity of 18 MT / day which is first of its kind in India and is a 100% import substitute. However being in a petrochemical industry with crude based feed stock, company’s performance is affected to some extent by the volatility in crude oil prices. For FY10 it is expected to register sales of Rs 250 cr and PAT of Rs 15~16 cr i.e. EPS of Rs 25 on equity of Rs 6.50 cr. Only long term investors can accumulate at declines.

Vivimed Labs Ltd - Rs 76.00

Incorporated in 1989, Vivimed Labs Ltd (VLL) is a speciality chemical manufacturer with prime focus on the Home and Personal Care (H&PC) segment. Its extensive range of speciality chemicals caters to segments including oral care, sun care, skin care, hair care, natural extracts, preservatives, anti microbial, anti oxidants, anti-aging molecule etc. In short company’s primary strength is in synthetic organic chemistry. Remarkably, VLL is the worlds 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. Thru acquisitions of Creative Health Care and merger of associated company VVS Pharmaceuticals & Pharmaceuticals Pvt Ltd, VLL has entered into the speciality pharma business as well. This specialty division has its inherent strengths in drug delivery and drug discovery with focus on providing cures in the oncology space, arthritis, syndrome X, macular degeneration, psoriasis and stress. Moreover, VLL is an active player in CRAM (Contract Research and manufacturing) segment providing vendor partnerships ranging from molecular research to collaborative manufacturing. It holds a unique position in the international H&PC industry with supply-chain relationship with global leaders including - Unilever, L'Oreal, Procter & Gamble, Johnson & Johnson etc. Having exclusive tie ups with global logistics companies, VLL has been offering shipment, warehousing, redistribution and door delivery services to large global majors. It has global network of offices, representatives and distributors across America, Europe, Far East and the Asia Pacific region.

Importantly, in May 2008 VLL acquired 100% stake in M/s James Robinson,UK (JR) which is an international manufacturer and supplier of speciality chemicals used in hair dyes, pharmaceuticals and photographic films/prints to ophthalmic sunglasses. Infact, one out of every three hair dyes in the world has a specialty chemical from JR. With manufacturing plants in UK, Germany and India, JR now a 100% subsidiary of VLL also offers a novel range of photochromic dyes for a wide variety of applications including ophthalmics, plastics, coatings and inks, and fluorescent dyes for both textile and non-textile applications. Thus this acquisition has seamlessly positioned VLL in the larger and high value space of high-end specialty chemicals. In order to avail the benefits of lower cost of production, manufacturing of most of the products of JR is being shifted to India.

As of today, VLL has two speciality chemicals plants – one in Bidar (Karnataka) and second in Hyderabad(AP). Apart from these it has three other pharmaceutical finished dose plants one each at Hyderabad (AP), Kashipur (Uttaranchal) and Haridwar (Uttaranchal) where it manufactures all types of solid oral, liquid orals, topical applications, small volume parenterals, cytotoxic etc. As the demand for end products in H&PC industry (like skin care, hair care, oral care products) is growing substantially, VLL is also witnessing robust demand for its chemicals. It has been constantly expanding its capacity and has chalked out capex plan for coming years as well. It has already bought land in Uttranchal for Greenfield expansion and another 23 acre land in Hyderabad to set up state-of-the-art R&D centre and pilot plant. Meanwhile its CRAM division, is focusing on exploring joint ventures / strategic alliances with manufacturers and IP companies in the specialty chemicals sector to partner in areas ranging from custom synthesis to commercial production. It offers contract manufacturing services from less than 1 metric tonne to more than 100 metric tonne. On the other hand its R&D section, is busy in researching and collaborating for creating new drug delivery systems with special thrust on anti-obesity dieting products, anti arthritic drug, anti-wrinkler, an anti oxidant, an anti cancer drug and an anti acne products. Notably, it has undertaken new formulations in urinary disorder and psoriasis treatment and the results are very encouraging.

Meanwhile, VLL is also open for inorganic growth. To increase its global footprint further and cut down the time to market for global customers, company recently in Dec 2008 finalized to acquire & merge Har-met International Inc, USA which is an importer of pharmaceutical and cosmetic ingredients since last two decades. To fund the JR acquisition and expansion plan, VLL had raised roughly Rs 60 cr thru FCCB of US$ 15 million in June 2007 to be converted @ Rs 185 per equity share. However out of this, company has now bought back US$ 12.50 million of FCCB with only US $ 2.50 million outstanding as on date. For FY09, on a consolidated basis VLL reported a turnover of Rs 280 cr (up 55%) and PAT of Rs 22 cr (up 40%) i.e. EPS of Rs 24 on equity of Rs 9.40 cr. Even for recent June’09 quarter it recorded 50% rise in sales to Rs 80 cr whereas net profit zoomed up 70% to Rs 7 cr. Accordingly for FY10, it is estimated to report a consolidated sales of more than Rs 325 cr and net profit of Rs 25 cr. This leads to an EPS of Rs 27 on current equity of Rs 9.40 cr. Investors are strongly recommended to buy at current levels as share price can double within 15 months.

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