stocks action on 31st jan 06

eastern silk is holding strong arnd arnd 250.......keep a watch on dec results

jj exports.....keep a watch on this one....right now 83....if it falls to 80 one can take some position in it.......sell at 95 in a short time...prob in 10-15 days....follow the results

karuturi suggested arnd 80 levels a month bck.....was 5% up today at 10%...dec results has been gr8....might show some action b4 valentine...keep a close watch....fundamentally also quite low.....eps exp arnd 20 n 07 at rs.35

gupta synth is 5% up....166 right now....correction had given a chance to buy this one at 130 levels......had corrected frm 200 levels.....good results shld take it above 200 in a short time..keep a watch on results.....buy this one at every dip...eps expected arnd 45 for 06

syncom formulation will be a good pick arnd current levels.....right now 79.55.....keep a watch for dec results.....buy in small qty if it falls more....a close above 80 in future will be a buy signal......till then hold on......short to medium is arnd 90-100.....good results might invite some spark in it

srei infra up 4%

sanjivani paren is looking attracting at 55 levels.....one can take some position in it.....book some profit arnd 65 levels

can take small position in raipur alloys n modern steel at current levels...sell arnd 80-82 levels

rts another 3%...keep holding the same...can add at current level too

polaris has come again with another disappointing results....management shld not be trusted....all big promises have fallen on their chin....booking profit will be ideal thing according to me....i never holded any position in it though

ALPS INDUSTRIES UPDATES

Alps Industries Ltd. has informed the Exchange that Prudential ICICI Emerging S.T.A.R. (Stocks Targeted At Returns) Fund has acquired 300,000 shares aggregating to 2.76% of the total paid up capital of Alps Industries Ltd. on January 25, 2006. The mode of acquisition is Secondary Market and the shareholding Prudential ICICI Emerging S.T.A.R. (Stocks Targeted At Returns) Fund after the said acquisition is 650,000 shares aggregating to 5.98% of the total paid up capital of Alps Industries Ltd

MY CURRENT SCRIPTS

my current holdings is as follows.

SURYA PHARMA
CENTURY ENKYA
SYNCOM FORMULATION
JUPITER BIO
GRANULES
madhav marbles
EASTERN SILK
AARVIN DENIM
NATIONAL STEEL
ALPS IND
AMTEK INDIA
AGRO DUTCH
RTS.......MORE OF MOMEMTUM CALL....STRONGS INSIGHT THOUGH
JJ EXPORTS
SHRACHI SEC....MORE OF MOMENTUM...RISKY ONE
KARUTURI
RAIPUR ALLOYS
GUPTA SYNT
SREI INFRA
TNPETRO
SANJIVANI PARENTAL

i am holding 50% of my portfolio in cash now.......waiting for a correction to buy more stocks at my comfort zone....also i am gonna buy more of the above mentioned stocks as n when they keep declining.....partially invested in them....DETAILED REPORTS ARE POSTED ON MY BLOG...TRY GOING THROUGH THE ARCHIVES...OR U CAN SEARCH ON THE SEARCH ENGINE ON MY BLOG

any change frm here on........either sell or new buys....i will keep up-dating on this blog

views n comments are invited

take care n happy investing

ashu

where are we heading next ?

its quite confusing as to how market will react aft touching 10000 levels...another 250 points up or a 500 points correction....one has to be very carefull while placing his bet.......most of the shares seems to have touched dizzy heights...will the industry keep growing at the same rate ?
all IT companies had posted double digits growth no but valuation wise they seems to be a bit expensive.....who had thought tht HLL wont be able to cross their 1998 sales figure or infosys will trade at current frm their all time high of arnd 10000-12000 something.....there are hardly 15 companies in the whole of BSE which had shown compunded growth consistently for the past 15 yrs....IS IT THT HARD ?
i guess u got the point....its better to be carefull....coz if the correction comes many might burn their fingers severly.....THE FIIS FLOW HAS BEEN LACK LUSTURE in the current rally...mutual funds as usual beeen net sellers.......anyways good amount of money is waiting to be poured in the market which might heal the burns if caused any....in the very near future market might touch 10100-10300 (15-20 feb)....lets keeep our fingers cross

AMAR REMIDIES

big deals were seeen at 55 levesl...someone seems to be accumulating it....been ranging arnd 55 to 67 levels....one shld buy this shares if it comes bck to 55 levels....with a strict stoploss for.....one can selll 65% at 68 levels n the rest if it falls below 64 levels....only for traders n very short term investors

LI TAKA PHARMA

this was suggested 2 week bck arnd 23......touched the high of 35 two days bck.....one can buy this share again on decline for a target of arnd 40....some news r expected which can not be disclosed

MANALI PETRO

Manali Petrochemicals Ltd was promoted by Southern Petrochemicals Industries Corporation (SPIC) in 1986, with promoters' stake being at 44.81 % with remaining shares held by about 1,60,000 shareholders. The two plants of the company are located at Manali , outskirts of Chennai and close to the plants of Chennai Petroleum Corporation from where it sources its major raw material Propylene through a pipeline. Chlorine another major raw-material is sourced from Tamilnadu Petroproducts Ltd., adjacent to its plant, and a group company. Lime, other raw material is sourced from the nearby markets as also imported.
Technical Collaboration :- The company has technical collaboration with ATO Chem (France), Arco (USA), Technip (France) and Montedip (Spain).
Product Profile :- The company has an installed capacity of 35,000 TPA (FY 05 24,000 TPA) of Propylene Oxide , which is used to manufacture 13,250 TPA of Propylene Glycol and 14,000 TPA of Polycol. The company also supplies Methylene Di Iscocyanates (MDI) a complimentary product for the Polyol, by importing it from Japan. Due to over 100 % rise in the prices of MDI in the international markets, and shortage, it posed a serious threat to Polyol users. However , company reformulated the products for use with alternate Iscocyanates and stabilized sales profitability. The company supplies MDI and Polyols to Polyurethane (PU) industry as also provides technical services to user industry. The company is the only producer of Polyols in India which is a highly technology and capital intensive.
PU is a versatile and durable polymer finds use in diverse applications. Flexible PU is used in bedding, carpet underlay, acoustic and mattresses while rigid PU is used for insulation and is widely used in all refrigerators, thermoware, pipe section, panels, engg. components, auto interior trims etc. The moduled variety is used to manufacture auto cushion seats, pillow, bicycle seats etc. Elastomer Grade Polyol is used in the tubeless cycle tyres, rice mill rollers, coatings, sealants, adhesive, shoe sole etc. Polyols is also combined with some supplementary products to produce high margin speciality products.
Propylene glycol is manufactured to IP/USP specifications and finds extensive use in Pharma preparations, food flavours, cigarettes, paints, cosmetics etc. The by-products Di and Tri Propylene Glycol finds extensive use in the resin industry and manufacturing of Fat-G-bricks - an energy conserving building material.
Due to huge demand of the company's products, in various industries, which has great future and good growth, and the company being the monopoly producer in India, can reap benefits by expansion and better margins. The company's plants are presently operating close to or above 100 % of its rated capacity.
Financial Performance FY 05 :- Favourable market conditions , better selling prices, increased sales turnover and high capacity utilization of all plants contributed for vastly improved financial performance for FY 05, which was a year of great turnaround . Gross sales improved to Rs. 309 crores( FY 04 Rs.264 crores) while EBITDA was at Rs.38.66 crores (FY 04 Rs.17.02 crores) . Net profit for the year was at Rs. 23.40 crores ( FY 04 Rs.2.06 crores).
Financial Performance HI - FY 06 :- During six months ending 30.9.05 gross sales was at Rs. 197 crores with EBITDA of Rs. 27.90 crores . The same were at Rs.138 crores and Rs. 9.40 crores for HI of FY 05. Net profit for HI of FY 06 was at Rs. 19.86 crores (Rs.2.17 crores for HI of FY 05).
Financial Restucturing :- The paid up equity of the company as at 31.3.05 was at Rs. 114.70 crores and had a brought forward loss of Rs. 35.33 crores . The company had adjusted the said losses of Rs. 35.33 crores partly by reducing the company's equity by Rs. 28.67 crores and partly from share premium of Rs.6.66 crores. Due to this , the paid up equity of the company will be reduced from Rs. 114.70 crores to 86 crores . This has been made by reducing the face value of the equity from Rs.10 to Rs.7.50. The effect of the same will not result in the market price of the stock or holding of the shares by an investor.
However, due to this restructuring, the company's net worth becomes positive due to which, company would be able to borrow at lower rate of interest as also declaring dividend due to wiping off, of losses. Presently, the company is debt free and this restructuring is being effected to borrow to implement expansion and bio- mass energy project of 5 MW. Of the present debt of Rs. 40 crores , as at 31.3.05 , Rs. 30 crores is interest free sales tax loan while Rs. 10 crores is towards working capital. Gross block of Rs.203 cores is depreciated to the extent of Rs. 145 crores with net block of Rs. 58 crores. However, the replacement cost of the plant is over Rs. 400 crores with equity of just Rs. 86.
FY 06 Performance Projections :- The company is likely to record a sales of Rs. 450 crores, and net profit of Rs. 52 crores resulting in an EPS of Rs.4.50 . However, FY 07 is likely to report a growth of 33 % in topline to Rs. 600 crores and growth of 45 % in its bottomline to Rs. 75 crores translating in an EPS of Rs. 6.50 . The share should rule at a P/E multiple of atleast 8 looking to its product profile, hence can reach a level of Rs. 50 in next 12 months and to Rs. 36 in next six months. The share is presently ruling at Rs.21 which makes it a safe buy for an annualised returns of over 100 per cent in the next one year.
Financial Performance : -
Note :- Equity Capital shall be Rs.86 crores as at 31.3.06, with face value reducing to Rs. 7.50 while no reduction in number of shares

RTS POWER

i have got inside news of this company hitting 150 levels soon....one shld keep a watch on this one....i have got position in this stock....buy according to one risk capacity...right now 70.....was suggested at 55 levels 2 weeks bck.


The turnover of the company showed significant improvement during the year. The turnover during the year was 47.72 Crores against Rs.41.46 Crores during the previous year. This is an improvement by 15%. The Company earned a Net Profit of Rs.94.05 Lace as against Rs.12.43 Lacs during the previous year. This indicate an improvement of profit by 756.64%. The Company could achieve this turnover amist keen competition. The consolidation and cost cutting measures have yielded results. The demand of the transformers showed a increasing trend. The financial position of our main customer i.e. State Electricity Boards remain very tight. Undue delay in payment by SEB's have adversely effected the liquidity of the Company. Continuous abnormal price hike of the major Raw Materials like copper, CRGO, Steels, T.Oil both in India and Internationally have caused hardship to the Company's activities to some extant. The scancity of CRGO has also effected the production and the profitability. FUTURE OUTLOOK The Company is continuing it's process of consolidating it's existing operation and optimisations of the use of available resources with reduction in cost at all levels in order to overcome the present competitive business climate. With the privatisation / corporatisation of the State Electricity Boards the Company is hopeful of improvement in the overall scenario. The world Bank is also financing project in the rural sector. The World Bank aided projects will boost the demand of the transformer. Since the payment is secured by the world Bank the liquidity of the Company will improve. APDRP Projects have come up in a big way. This has accelerated the demand of all the substation equipments in which Transformer is one the main item. This will to some extent help the industry which is struggling hard with the problem of over capacity / over production for past few years. Your Company, is also making effort to explore the export market for transformer, Transformer related components, active parts and other accessories. Your Directors are anticipating reasonable profit during the current year if every things moves reasonable
MANAGEMENT DISCUSSION AND ANALYSIS Industry Structure and Development The Company is manufacturing Power and Distribution Transformers. Which are mainly supplied to different State Electricity Board's / Government / Semi Government organization power utilities factories, multi-storied buildings etc. The production capacity includes Power & Distribution Transformers ranging from 10 KVA to 10 MVA 11/33/66 KV Class and Extra High Voltage Power Tranformers upto 40 MVA 132 KV Class. Opportunity and threats Power being the absolute need of every house hold, commercial establishment industry, this is the main thrust area of Govt. of India. The Central Government is stressing on power supply to every household even in the remotest village of India under the minimum need programme. The privatisation of State Electricity Board's is progessing at reasonable pace. This Will increase the efficiency of the generation, transmission and distribution. APDRP Projects have come up in a big way. This has accelerated the demand of all the substation equipments in which Transformer is one the main item. This will to some extent help the industry which is struggling hard with the problem of over capacity / over production for past few years. The competition being fierce, the selling prices are under pressure so as the margins. The price of major raw materials like copper, iron & steel, CRGO, T.Oil have risen sharply in Indian / International markets. The margins are under threat due to this sudden and unexpected increase. The payment crisis from State electricity Board's still continues. Review of performance The production of Power and Medium Power Transformer has shown a increasing trend. The Company's turnover for the year ended 31.03.2005 increased to Rs.47.73 Crores as against Rs.41.46 Crores during last year. Outlook Power sector is priority sector and the Central Government is giving this sector full thrust. Transformer being a key electrical equipment in transmission and distribution of electricity, the Company can expect transformer industry to do well.

favourable devlopments are taking place. current order position is very good around 80 crs. floating stocks is very less.

keep watch for upmove

WS IND

WS Industries (India) Ltd (WSI), a leading manufacturer of porcelain insulators, which are used in power distribution, is all set to reap the benefits of a three-fold increase in investment in the transmission and distribution (T&D) segment in India.
A strong order book of about Rs110 crore coupled with rising exports and a shift to higher-margin product of hollow insulators will drive the company''s earnings at a compounded annual growth rate (CAGR) of a staggering 147% over FY2005-07.
WSI has tied up with The Chatterjee Group (TCG) to develop a 10-lakh-square-feet information technology (IT) park at Porur in Chennai. This, we believe, will result in the unlocking of the huge potential value of the land. We believe the fair value of the IT park is about Rs80 per share of WSI.
Business overview
Market leader with 20% share The total market for porcelain insulators in India is approximately Rs600-crore big and WSI is the leader with a 20% share. Jayshree Insulators, a division of Indian Rayon, and Bharat Heavy Electricals Ltd (BHEL) are the other key players in the industry with a market share of 17% and 15% respectively.
Impressive client baseWSI boasts of an impressive client base consisting of power utilities like Power Grid Corporation of India Ltd (PGCIL) and National Thermal Power Corporation as well as equipment majors like ABB, BHEL, Larsen and Toubro (L&T) and Siemens. Over the years WSI has executed several big orders for PGCIL mainly for usage in systems of capacities 220 kilo volt (KV) and 400KV. In addition, the company has also executed large orders for several state electricity boards (SEBs) as well as the major transmission line/sub-station contractors like ABB, BHEL, L&T, Siemens, Crompton Greaves etc.

Investment arguments

WSI to reap benefits of a three-fold rise in T&D investmentsWSI, a leading manufacturer of porcelain insulators, is all set to reap the benefits of a three-fold increase in investments in the country''s T&D sector. The T&D sector is all set to attract huge investments for several reasons. We have discussed them below.
A skewed generation/transmission ratio The world over the ratio of new investment in generation projects and that in transmission projects is around 50:50. However in India at 70:30 the generation/transmission ratio is skewed towards generation. Meaning in India traditionally the transmission segment attracts lesser investments compared with the generation segment. But with the country''s renewed attempts to improve the efficiency of its T&D sector and power transmission capacity, the T&D sector, especially the transmission segment, has started attracting more investments. The recent Draft National Electricity Plan in Transmission envisages the addition of around 7,000 megawatt (MW) of transmission capacity in FY2006 and FY2007 as compared with the 4,400MW transmission capacity added over FY2003-05. As per the plan, new transmission capacities of 11,400 megvolt (MV) and 16,000MV would be added in the 10th Five-Year Plan and the 11th Five-Year Plan respectively. Further in the distribution segment, sub-stations of capacities 25,555 megvolt ampere (MVA) and 7015 MVA are going to come up in FY2006 and FY2007 respectively.
The Accelerated Power Development & Reforms Programme The country has been perennially plagued by power shortages on account of the T&D losses of the SEBs. Due to the lack of adequate investment in the T&D systems, the losses of the SEBs have been consistently mounting and the same reached a whopping Rs21,000 crore in FY2005. To reduce the T&D losses of the SEBs the government introduced the Rs40,000-crore Accelerated Power Development & Reforms Programme in the 10th Five-Year Plan. The plan, we believe, will encourage the SEBs to invest in their T&D systems. This would involve the upgradation of the existing T&D lines and the installation of new transmission lines and distribution stations.
Planned capacity addition
Source: Central electricity authority
Planned investments in transmission, distribution and rural electrification (Rs crore)
Source: Central electricity authority
The proposal to increase India''s power generation capacity by 60% The government proposes to increase the power generation capacity of the country by 60%, from 41,110MW in the 10th Five-Year Plan to 64,739MW in the 11th Five-Year Plan. This initiative too will generate the need for more evacuation and transmission equipment, and distribution stations.
Even if these T&D projects were to materialise only partially, the same would translate into significant business for the porcelain insulator industry, as porcelain insulators are used in both transmission lines and distribution stations. Needless to say that being the market leader WSI is expected to make the most of the resulting golden opportunity.
Business initiatives to capitalise on growth opportunitiesTo capitalise on this "powerful" opportunity WSI has drafted a two-pronged strategy. As part of this strategy, the company plans to manufacture high-end porcelain insulators and enter new export markets. In addition it proposes to change its sales mix in favour of the high-margin hollow porcelain insulators.
Manufacturing high-end porcelain insulators and entering new export marketsWSI enjoys the status of an export house and exports its products to Europe, West Asia, East Asia, Australia, Canada etc. It is now looking at entering the US markets for which it has developed new products, like disc, pin and solid core porcelain insulators, as per the American National Standards Institute standards. The initiative to enter new export markets has been successful and consequently the company''s exports grew by 31.5% to Rs36 crore in FY2005.
Changing sales mix in favour of high-margin hollow porcelain insulators The margins in hollow insulators are usually two times that in solidcore insulators. Over the past few years, WSI has shifted its sales mix in favour of the hollow insulators, thereby arresting the erosion in its margins on account of high raw material prices. The company is also expanding its hollow insulator capacity from the present 5,000MT to 6,000MT at a cost of Rs5-6 crore. The additional capacity is expected to be fully operational by the end of this fiscal.
Healthy order book position ensures strong earnings visibilityHelped by the surge in investments in the T&D sector the order position of WSI has reached a high level of Rs110 crore, which is approximately nine months’ revenue (based on average monthly sales for the first half of FY2006). The strong order book position and the new orders expected owing to the T&D opportunity provide strong visibility to the company''s earnings.
Margins to improve by 340 basis points, earnings to grow at a 147% CAGRDriven by the change in the sales mix and the resulting higher operating leverage (30% of WSI operating expenditure is fixed and will not grow at the same rate as the revenue), WSI''s operating profit margin (OPM) is expected to improve by 340 basis points. With a 20% growth in the top line and the improvement in the OPM, we expect the company''s operating profit to grow at a 41% CAGR over FY2005-07. However with depreciation more or less stable and the reducing interest cost on account of debt repayment, WSI''s earnings are expected to grow at a CAGR of a whopping 147%. The company should report earnings per share of Rs2.8 in FY2006 and of Rs7.2 in FY2007.
Use of idle land to build IT park to result in huge value unlockingWith the rationalisation of its Chennai factory lay-out, WSI has restricted the areas covered by its Perur plant. Consequently, the company has been able to save a huge area of land measuring 10 lakh square feet. The same piece of land shall now be developed into an IT park. For the project WSI has joined hands with TCG of Kolkata. An application to this effect has already been filed with the Chennai Metropolitan Development Authority and the construction work is all set to commence.
The IT park will come up on the Chennai-Bangalore National Highway, just outside the city limits. According to real estate industry sources, there is a growing demand for quality IT space in the area, as with the crowding of the Old Mahabalipuram Road the land prices on the Chennai-Bangalore highway have escalated. As Perur is close to the Chennai airport and located in the vicinity of star hotels, we believe the site is ideal for IT majors. The project shall be implemented in two phases, with 250,000 square feet being developed in phase one; the work in the first phase should be completed by the end of FY2007.
Fair value of the IT park: Rs40 per share of WSIThe commercial rates in and around the area where WSI intends to develop the proposed IT park are close to Rs4,000 per square feet. Assuming that the entire area shall be developed over a period of eight years and discounting the future value of the same to its present value, we have arrived at the fair value of the IT park: approximately Rs80. Even on an extremely conservative basis (ie at a 50% discount to the fair value), the value of the IT park comes to Rs40 per share of WSI.
Investment concerns
Rising fuel costs could affect marginsThe fuel cost, which normally forms 20% of the total cost in such businesses, is a major cause for concern to WSI. Due to the sharp rise in crude oil prices during FY2005, the company''s fuel cost surged by 33%, negating the effect of a 15% growth in its top line and resulting in a negative operating profit growth. However crude prices have corrected sharply in recent times and are expected to soften further going forward. Thus the threat of high fuel cost, we believe, has receded significantly.
Strengthening of rupee against dollar could hurt export realisationDuring FY2005, the continued strengthening of the Indian Rupee against the US Dollar affected the company''s realisation from its dollar-denominated export orders, which form the bulk of its export orders. However the recent depreciation in the rupee''s value could actually benefit WSI.
Slowdown in investments in transmission segment can restrict revenue growthAs the transmission segment has still not been privatised and as all the new investments in the segment are a function of the government''s commitment to its power reform initiatives, any slowdown in the investments in the segment could hurt WSI. Similarly the lack of progress of plans to reform the state utilities and privatise the distribution segment will adversely affect the insulator industry in the medium to long term.
Valuation and view Even though WSI is a small-sized power equipment company, it operates in a niche industry that is highly concentrated with the top three players controlling more than 50% of the market. Add to it the fact that the company is the market leader in the porcelain insulator segment. We believe WSI is all set to move into a high growth trajectory with its strategy of focusing on high-margin hollow insulators and entering new export markets.

At the current market price of Rs 51 the stock is discounting its FY2007E earnings by 7x and its FY2007E earnings before interest, depreciation, tax and amortisation (EBIDTA) by 5.3x. The valuations are much cheaper as compared with that of WSI''s peers. 120 seems to be fair value taking Rs72 as the value of the core business and Rs40 (50% of the fair value) as the value of the IT park.

SANJIVANI PARENTAL

Shares in issue: 4.9 mn
Market Cap: Rs 26 crore
FY 05 EPS: Rs 5
FY06 EPS e: Rs 16
PE on 06 estimated EPS: 3.3

Investment Argument

• Sanjivani Paranteral Ltd (SPL), a Mumbai based contract manufacturer of injectibles is likely to witness substantial volume growth over the next two years from the domestic institutional and hospital segment.

• Analysts expect SPL’s Revenues to grow at a CAGR of 125 per cent over FY'05-06 on the back of orders from the Kerala government and new product launches. Thus FY06 Revenues are projected to be in the region of Rs 60 crore, with after tax profits at Rs 8 crore.

Background

SPL promoted by AH Khemka and Ashwin Khemka is a contract manufacturing company specialising in injectibles for the institutional and hospital segments and its key clientele includes Ranbaxy, Zydus Cadila, Alkem, Macleods, Ipca, Intas, Glenmark, Medley and Shreya Life-sciences among others.

Outlook

SPL presently operates in the antibiotic injectible space (anti-inflammatory, microbial, emetic, allergic and spasmodic) with products like Ceftrimax, Ivimax, Piptaz, Cefepime and C-Bactum. However from Q3 this fiscal it has launched new products like Methylcoblamin and Tranexamic Acid. SPL is planning to launch Meropenem broad spectrum injectible in Q1-FY05-06 used in infections like Meningitis and Pneumonia.

SPL would also introduce Aprotimin injectibles used in heart ailments and the anti-amoebic Ornidazole injectibles. SPL has filed dossiers for capreomycin (Anti-TB drug).









Sanjivani Paranteral Ltd (SPL), a Mumbai based contract manufacturer of injectibles is likely to witness substantial volume growth over the next two years from the domestic institutional and hospital segment.· Analysts expect SPL's Revenues to grow at a CAGR of 125 per cent over FY'05-06 on the back of orders from the Kerala government and new product launches. Thus FY06 Revenues are projected to be in the region of Rs 60 crore, with after tax profits at Rs 8 crore.BackgroundSPL promoted by AH Khemka and Ashwin Khemka is a contract manufacturing company specialising in injectibles for the institutional and hospital segments and its key clientele includes Ranbaxy, Zydus Cadila, Alkem, Macleods, Ipca, Intas, Glenmark, Medley and Shreya Life-sciences among others. OutlookSPL presently operates in the antibiotic injectible space (anti-inflammatory, microbial, emetic, allergic and spasmodic) with products like Ceftrimax, Ivimax, Piptaz, Cefepime and C-Bactum. However from Q3 this fiscal it has launched new products like Methylcoblamin and Tranexamic Acid. SPL is planning to launch Meropenem broad spectrum injectible in Q1-FY05-06 used in infections like Meningitis and Pneumonia. SPL would also introduce Aprotimin injectibles used in heart ailments and the anti-amoebic Ornidazole injectibles. SPL has filed dossiers for capreomycin (Anti-TB drug). ValuationSPL trading at 9xFY'05E and 3xFY'06E earnings is on the high growth curve and the stock can be accumulated at declines by investors for the long-term in view of an exciting contract manufacturing story going forward

HYDERABAD IND

price :480
EPS:50
FIIS N MUTUAL FUNDS N BANK :23%
FLOATING :20%

FEW MUTUAL FUNDS HOLDING TOO

MIGHT GIVE A BONUS THIS YR

MANUGRAPH INDIA

The share of Manugraph India (MIL) (Code No: 505324) (Rs.250) is recommended for medium-to-long-term gains. MIL's performance has surpassed all expectations in recent years.

The leader in the manufacture of web offset and sheet fed offset presses has recently produced mind-boggling results for Q2FY06. Going by the trend, MIL is all set to register an EPS of about Rs.20 on face value of Rs.2 for FY06 and may even consider a liberal bonus in the current year.

Established in 1972 by Mr. Sanat M. Shah, MIL is India's largest manufacturer of web offset and sheet fed offset presses. Over the years, it has emerged as a thriving, nimble footed, printing machinery enterprise due to its ability to transform itself rapidly to meet the challenges of a highly competitive global economy and its commitment to become a supplier of choice. Constant modernization and introduction of state of the art technology at MIL has enabled it to stay ahead in the industry and successfully surpass all expectations.

In India, MIL ranks as the number one in the manufacturing and supplying of web offset presses. With a whopping 70 per cent market share, its presses are present in nearly all-major publication houses. With presses having speeds ranging from 35,000 – 55,000 copies per hour, it can meet their production needs efficiently. Its technical expertise and unrelenting thrust towards continuous quality improvement are its principal strengths. It owes its strong position as a supplier of printing presses to its technical competence.
Domestic customers in web offset segment include The Times of India, The Indian Express, The Statesman, Chitralekha, Malayala Manorama, Hind Samachar, Hindustan Times, Hindu, Sandesh and Mathrubhumi. In the sheet-fed category, MIL's clientele consists of Magna Graphics Pvt. Ltd, PS Press, S T Reddier & Sons, Herneggar Offset Druck (Austria), Benfoy Press (UK), 3E(USA), InterDruck (Belgium) and Physics Centre (Thailand).
During FY05, MIL registered 22% increased sales of Rs.248 cr. and recorded 77% higher net profit of Rs.28.4 cr. yielding an EPS of Rs.9.2 and paid a dividend of 100%. During Q1FY06, while sales jumped by 116% to Rs.86.7 cr., net profit skyrocketed by a whopping 428% to Rs.15 cr. During Q2FY06, while sales moved up by 15% to Rs.88 cr., net profit ballooned by 162% by to Rs.20.2 cr. MIL has already declared 60% interim dividend for FY06. In all, during H1FY06, sales increased by 51% to Rs.175 cr., whereas net profit jumped by 333% to Rs.35 cr. from Rs.10.5 cr. in the corresponding previous period.

In its efforts to meet the needs and demands of its customers, MIL has made rapid progress in the international market. Leading publishers from South America, Europe, Middle East , Asia and the CIS countries have all invested in MIL's presses. Its exports during FY05 stood at Rs.60 cr.
MIL is in sound financial health. Against its small equity capital of Rs.6 cr., reserves stand at Rs.60 cr., which gives the book value of the share of Rs.22 on its face value of Rs.2 per share and the debt-equity is 0.4:1. The value of its gross block is Rs.90 cr. MIL has incurred Rs.16.5 cr. towards capital expenditure consisting of building, office premises, plant and machinery and other miscellaneous fixed assets during FY05. This will continue in FY06 to help it improve, enhance and modernize both its plants. The promoters hold 58.2% in the equity capital; NRIs and institutions and bank holds 14.2% aggregate. leaving 19% with the investing public.
The explosive growth in the newspaper business over the past couple of years has led to a substantial scaling up of revenues and earnings for Manugraph. As the English and vernacular language papers are in the process of expanding their footprint, the demand for the company's products are likely to remain robust.
In the current year 2005-2006, demand for 4-page single width single circumference market, which constitutes 90 per cent of company's business continues to remain good. The continuous thrust on the export front has resulted in the establishment of new markets in Sweden, Netherlands and Indonesia and expansion of business in existing markets in CIS countries, Middle East and Latin America. Over and above, the company holds and maintains the major market share in India with the launch of several regional and English dailies who continue to bring out this 4-page market.
Based on its first half yearly results, MIL is all set to register an EPS of Rs.20 on its face value of Rs.2 per share. On a tiny equity of just Rs.6 cr., the reserves are expected to cross the Rs.110 cr., which may prompt the management to declare a handsome maiden bonus apart from a hefty dividend.

MANGALORE CHEM

mangalore chemicals had posted gr8 results in september......the sales had jumped frm 1722 to 3540 against the prev qtr....the sales on sep 04 was 2867.

the netprofit was at 134.3 as against 32.4 in the Q1.

one can buy this with a stop loss of 14.

can turn to be a multibagger if held for a yr...keep a watch on its Q3 result

FIRST LEASING

price 60
eps:10
consistent dividend pay....best in its sector

benn consolidating for a long time arnd 45-50 levels....have shown spurt in the past 3-4 days to 75 levels....news of FIIs entering it......someone seems to be accumulating it....can show some quick actions......a good n safe pick for decent returns over a period of time...can expect 100....any dip shld be used as a buying oppurtunity




First leasing company of india is one of best NBFC in india
Farook erani (Chairman) has gr8 experinece of banking domain
in last 30 rs compny is continuouly posting higher revernue & profit growth YOY .30 yrs dividend paying history (above rs 2 / share)
This is entring into IT leasing & aircraft leasing
which is emerging as a new revenuew segment
They have wind power project aslo in rajasthan
It has expaned its operational activities in all metros of india

AKSH OPTIFIBRE

I HAVE BEEN HEARING ABT GOOD MEDIUM TO LONG TERM TARGET ON IT......BEEN CONSOLIDATING ARND 70 FOR THE PAST 2 MONTHS...KEEP A CLOSE WATCH ON THIS ONE

SHRACHI SEC

have heard frm unconfirmed resources tht this stock is gonna double by feb....dont expose much in this stock

RAIPUR ALLOYS

one shld invest with a stoploss of 65....though i dont think it willl reach tht level.....excellent support at current level of 70.....a must buy according to me keeping medium to long term play

Raipur Alloys has now emerged as an integrated steel plant by enhancing capacities not only for sponge iron but also undertook backward and forward integration into mining and final steel products like with Tisco & Sail.
Huge expansion:
1. Sponge Iron: Initially the company was manufacturing sponge iron having installed capacity of 60,000 MT which was been enhanced to 2,10,000 MTA last year and is now planning to add one more sponge iron kiln to increase the capacity further to 360,000 TPA in the current year itself. This means that the capacity expansion for sponge iron alone has gone up by five times from a mere 60,000 to 3,60000 TPA within two years, which is indeed a landmark for any company in such a short span of time.
2. Steel: The company has also embarked upon the expansion of steel making capacity from 40,000 to 2,40,000 TPA which is expected to be completed by end of this financial year itself as orders for major equipments have already been placed. This is also a five-fold expansion.
3. Coal Mines: The company has also taken the mines on lease over an area of 336 hectares for mining of coal for captive use. The work on development will start soon once the formality of acquisition is completed shortly.
4. Iron ore mines: The iron ore mines, which were acquired last year have produced 15,548 MTA of ore initially in FY05 and is now geared to increase to produce multifold iron ore during the current year. Its captive consumption will meet its entire requirement for steel production.
Thus the company has successfully implemented its multifold expansion cum diversification plans to be fully operative by the end of this year strengthening its product profile from iron ore to sponge iron to finished steel products.
Production
2003-04
2004-05
2005-06
Target
Steel Ingots (MT)
26994
20,274
40,000
Sponge Iron (MT)
64303
91767
210000
Besides, the company has also proposes to merge two entities with the company viz. Chhattisgarh Electricity Company and Raipur Gases Pvt. Ltd. The merger of these two entities will provide synergies and size for rapid growth while meeting its power requirement, Ferro alloys, Gases etc.
The company has completed the forward integration to produce value added products, which will help to boost its bottomline manifold from the current year onwards.
Performance Review: (Rs. in lakh)
Particulars
2003-04
2004-05
2005-06
Target
Net sales including other income
12490
23442
50,000
Operating Profit
1624
3625
7500
Interest
34
247
500
Depreciation
345
427
1000
Profit after dep. & Int
1245
2951
6000
Taxation Current & Defferred
113
1164
2000
PAT before extraordinary items
1132
1787
4000
From the above highlights it may be observed that its operating profit went up by 125% and gross profit has also gone up by 158% after providing manifold increase in interest from merely Rs.34 lakh to 247 lakh, Depreciation from Rs.345 lakh to Rs.427 lakh, Net profit was however higher by 58% because of huge tax provision of nearly tenfold to Rs.1164 lakh as against Rs.113 lakh in the previous year.
The spurt in profit in the current year is estimated to be manifold as stated under the target column and will be mind boggling as production volumes will be several fold on account of the five fold expansion in existing product capacities and the diversifications as enumerated above. They will start giving results from the 3rd quarter onwards as half of the enhanced capacities will come into commercial production. Besides, the increased production capacities and availability of captive mines, coal will bring down the cost of production substantially and will also enhance the competitive strength of the company.
Project Finance: The entire project cost is reflected in the increase in secured loans availed from banks. Raising unsecured loans from promoters has already been tied up and the rest is expected to meet through internal accruals only. The rate of the secured loan is also quite cheap.
Future Outlook: Based on multiple increase in production capacities and captive mines of iron ore and coal, the company's future can be safely forecast to be highly encouraging. The company expects the demand for its products to remain good and the prices to remain stable with reasonable growth resulting in a positive and robust outlook.
Dividend: The company has recommended a dividend of 30% for the year ended 31st March'05 which may be enhanced further to over 50% in line with the expected encouraging bottomline on account of increase in volumes, which is likely to more than double as shown in performance review under the 2005-06 targeted figures.
Exports: The company is also looking forward to enter the international market and a modest beginning has already been made with the export of 1700 MT of iron ore fines through an export house. The company is, therefore, exploring all possibilities for all its products such as iron ore, sponge iron, steel ingots and billets. The company has also been awarded ISO9001-2000 certification from ABS Evaluations Inc. The company is making TMT bars under its registered Trademark as 'HYTECH', which has fetched tremendous response from large corporates due to its better quality.

Market Price: The company's share had hit Rs.158.25 in March'05 while fluctuating between Rs.100 to Rs.125 most of the time thereafter. It has the potential to go up Rs.200 to Rs.250 in the short term and Rs.400 to Rs.500 in the long term after its fivefold capacities become fully operational. Its share price has been in a massive consolidation phase ever since it hit Rs.158 mark in March'05. No sooner the consolidation is over, the market price of its share is likely to spurt in line with Elecon Engineering & Usha Martin.

Conclusion: Based on the higher demand, it's fivefold enhanced production, backward & forward integration with captive mines, a well established brand with increased export sales, the future of Raipur Alloys is highly encouraging. One should keep this stock in his portfolio according to his capacity. Raipur Alloy's future is building up in line with Usha Martin and Elecon Engineering as these shares were also lying low earlier but shot up sharply ever since their growth prospects came into light. So will be the case with Raipur Alloys.It may also be noted that the promoters of Raipur Alloys have increased their equity stake in the company to over 74% and it may go up further as soon as the two entities referred above are merged with it. It is, therefore, the right time to pick up this share at the right price to reap rich harvest like Elecon Engineering, which is Rs.700 now as against Rs.125, a year ago and Usha Martin Rs.200 against Rs.60 a year ago

SREI INFRA

FIIS:48%
mutual funds:3%....many funds are invested
floating juss 15%
target 130-150


SREI International Finance is engaged in the leasing and hire purchase of construction equipment, commercial vehicles and automobiles in India. The company is also authorised to purchase foreign currency notes and travellers' cheques. The company also acts as a category-I merchant banker. The merchant banking division of the company offers various services like corporate advisory services, project counselling, preparation of project reports and appraisal, underwriting and issue management, etc. The company extended its operations by venturing into mutual funds, corporate stock broking, housing finance and other related areas. SREI has Rs 2,500 crore assets under management. Of this, 80% is in the finance of infrastructure projects, equipment hire purchase and leasing. The company also has an equipment bank, from where contractors can hire equipment. Apart from infrastructure financing, SREI is also involved in infrastructure advisory services, which is growing. It also participates in the equity of projects. Of late, SREI also entered funding renewable energy projects like wind and solar energy. It advances micro-credit, through NGOs, for setting up solar energy units in rural areas, with funding of between Rs 10,000-Rs 20,000. The company has an ongoing micro-credit funding in West Bengal and Karnataka. The company is also planning fund water management and solid waste management projects. The company expects growth rate of between 30-40% on the back of the need for infrastructure like airports, roads and sea ports which is growing rapidly in India. A lot more infrastructure projects are getting off the ground. For the quarter ended 30 June 2005, the company posted a net profit of Rs 10.94 crore (Rs 3.59 crore). Net sales also increased 34.75% to Rs 38.59 crore (Rs 28.64 crore.

INDIA GLYCOLS

India Glycols: This counter has been attracting investors and operators. Dealers say that this attraction for the scrip is attributed to the expansion and the diversification into production of industrial gases that IGL has initiated. It is setting up the plant for the manufacture of oxygen and nitrogen, which is expected to be commissioned by September 2005. Also, the price of molasses, a raw material for making MEG, too, has fallen by 25-30 per cent in the last 3-4 months, which makes IGL’s operations even more profitable. The effects of this expansion will be fully reflected in the working of the current fiscal. IGL could easily register 45 per cent higher sales of over Rs.810 cr. and earn a net profit of about Rs.110 cr. in FY06. Net profit is expected to jump to over Rs.135 cr. in FY07. The estimated EPS for FY06 works out to Rs.39 and Rs.48 for FY07. In view of expansion and diversification, leading to higher profitability, the low valuation of the scrip coupled with its bright future prospects, the shares of IGL can be purchased for decent appreciation for medium to long-term gain. The investment in this share is likely to fetch minimum appreciation of about 50 per cent in six-to-nine months

GUPTA SYNTH

PRICE: 160
EPS:40-50
TARGET:350
EQUITY:JUSS 1.5 CRS







incorporated in 1984. gupta synth was promoted by the renowned gupta group of companies which had a wide n varied exp of over two decades in the manufacture of polyester yarn apart frm texturising, twisting, sizing, dyeing of yarns n processing of fabrics
the group is known in textile circles for their business acumen n techno savvy attitude, which has helped them in charting consistent growth even under unfavourable conditions.its world class facilities arelocated in silvasssa and surat.the company has gone for expansion which will be completed by april 2006.





Sales
Q2 04-05 = 32%
Q3 04-05 = 533%
Q4 04-05 = 243%
Q1 05-06 = 780%
Operating Profit
Q2 04-05 = 38%
Q3 04-05 = 263%
Q4 04-05 = 515%
Q1 05-06 = 702%
Gross Profit
Q2 04-05 = 67%
Q3 04-05 = 91%
Q4 04-05 = 477%
Q1 05-06 = 489%
Net Profit
Q2 04-05 = 110%
Q3 04-05 = 36%
Q4 04-05 = 888%
Q1 05-06 = 520%



Company is performing at full capacity and is achieving constant growth on y-o-y basis
Last full year EPS is Rs.18.71
Current year Q1 Basic EPS is Rs.16.31
Full year EPS is expected to be a minimum of Rs.30 after dilution n for 07 rs.40
Presently trades @ Rs.140/- at a P/E multiple of only 8 on 04-05 earnings and only 3.75 times discounting the projected 05-06 earnings.
Can be accumulated aggressively to double with a one-year perspective

KARUTURI NETWORKS

CURRENT PRICE: 100
EPS:35 (06-07)....60(07-08)...CONSERVATIVE BASIS
TARGET:250

TWO BUSINESS: A) FLORICULTURE.......B)TECHNOLOGY
the company had started its business with floriculture but then diversified into tech too......its debt free...dividend paying.....2nd largest in the world.....its 3rd n 4th quarters r the best considering the nature of its business...the it business is also growing by 42% on year on year basis...ofcourse the main business drivers being the florichem one

1) Wal-Mart will pluck roses in Bangalore and expected to place an order of 4-5 million roses this year. ASDA, the large UK retail chain owned by top US retailer Wal-Mart, has placed an order for one million cut roses with Karuturi Networks Ltd last year.2)The company is also preparing to enter the US market in a big way with the expansion of their operation in Ethiopia. It has promoted a dollar 6 million cut rose farm on the outskirts of Addis Ababa, the Ethiopian capital.A subsidiary, RoseBazaar PLC, has been incorporated for this purpose. Zemedeneh Nagatu, managing partner of Ernst & Young (Ethiopia) has a 30 per cent stake in the venture which will be in production by mid 2005-06.3)Making efforts to increase capacity in Ethiopia and India to ensure that they are ready to take bigger orders from companies like Wal-Mart.3)The company has chosen Ethiopia not just to expand capacity but also to gain a quicker and an easier entry into the US market.Ethiopia currently enjoys a 10-year tax holiday for exports to Europe and a 25-year tax holiday for exports to the US. This is as per the Africa Growth Opportunity Agreement signed by President George Bush over a year ago to boost Africa's chances of agri-exports into a developed economy like US.4)The cost of airfreight out of Africa is dollar 1 per kg of rose as against Dollar 2.5 per kg out of India, a 60 per cent cost saving.By setting up operations in Ethiopia, Karuturi will avoid a customs duty of 28 per cent levied on goods entering the US. Karuturi's newly-acquired 25 hectares of land in Ethiopia will be ready for production by Mid 2005. Around the same time Karuturi will also have nearly 20 hectares of land ready for cultivation in India.5)Last year, Karuturi shipped 4.8 million rose stems. They will ship seven million by the end of this year. With the recent acquisitions as well as land in Ethiopia, production capacity will go up by 150 per cent.6)Karuturi finds that it is more viable to hire charters for its shipments to the US, Japan, Singapore, Italy and Germany. It costs Rs 2 to grow a rose and Rs 4 to ship it. A charter pegs the landed cost at Rs 5 per rose. "We still manage to make a significant profit as they are sold at Rs 30 per rose," Karuturi said.When the company was looking at newer options to diversify and derisk its rose export business, it came up with a novel idea of exporting rose plants.
Company will have projected turnover on completion of project (Ethiopia0 in excess of 60 Cr (SIXTY Cr). The full production capacity will be available in 07-08. the Q4 of 05-06 will see contribution from ethiopian offshore initiative in addition to Indian operation. This is the forecast by the company. Assuming min. 60 Cr turnover (05-06 or 06-07), EPS min. expected around 25.


Looking to the future, the company is looking forward to increased revenues both from existing Floriculture and ISP business as well as increased earnings from off shore initiatives. The Ethiopian initiative of growing roses in 50 acres land with a planned output of 75 million roses in stages will significantly contribute to the bottomline. With Prudent financial management the company has been able to fund the acquisitions and joint venture through internal accruals and does not plan to increase share capital •The company has rewarded the shareholders with an interim dividend and a final dividend The management is transparent and very professional

JJ EXPORTS

PRICE:88
TARGET:150-200

jj exports is looking quite good at 80 levels...one can do short term trading also in it....by buying arnd 80 levels n selling arnd 100...the target tht is been tlked abt for this is 150-200...promoters holding 75%....so one can take some position in it n can trade too......78 shld be a stop loss for this company...i am positive on this company

national oxygen

CURRENT PRICE : 100
EPS:16-18
TARGET:200


POWER TO GENERATE PROFITS FOR NAT.OXY:
For National Oxygen Power and Fuel costs amounted to Rs.6.50 crores out of total Manufacturing expenses of Rs.7.39 crores. This is the reason why National Oxygen now proposed to enter Wind Power generation project. The Wind Power project which will be implemented in short time will reduce its power bill substantially or generate other income. On account of this new venture, even if 50% of power costs are saved, the company can save Rs.3.25 crores(50% of power costs)and this alone gives an additional EPS of Rs.10. Already EPS is expected at Rs.16 to Rs.18 for this year and add this to earlier estimate, there is every chance that the EPS may touch Rs.25 shortly. For the next few years, the prospects of National Oxygen are very very encouraging and buying at current level of Rs.90 will surely give a more than 100% gains.

HIGHLY POTENTIAL SHARE NATIONAL OXYGEN: The Demand for its products is very strong and margins are improving. Main demand for its products is from Steel Rolling mills, shipbreaking/ making industry, cheicals, pharmaceuticals and hospitals. The clients include numerous local and outstation units and Govt of India undertakings. The beauty is it is totally DEBT FREE company-no interest burden. Entering Wind Farms will generate other income and reduce power costs. Compare to Bombay Oxygen share price at Rs.6000/-FV.100 (or Rs.600 for FV Rs.10), National Oxygen at Rs.90 is very cheap and poised for a big jump.

NATIONAL OXYGEN A PIONEER IN INDL. GASES: NATIONAL OXYGEN is PIONEER in Industrial Gases Sector which has show first signs of BOOM CONDITIONS in this sector almost a year back. Now all other Industrial Gases are moving fast after a year like BOC … Bombay …. Bhoruka Gas and Bhagawati Gases. All this shows the tremendous BOOM CONDITIONS in this sector.

NATIONAL OXYGEN is having the following advantages over others

01.National Oxygen is a totally Debt Free company-no interest burden
02.Already additional capacities are available to meet the demand and no need for further investment immediately
03.Raw material costs are almost nil as plenty of 'AIR' is available free of cost. Major manufacturing cost is Power. Now the company is enering WIND POWER generation to reduce its only cost.
04.Already enjoying highest margings
05.Having wide network and client base for a regular market.
06.Most of the consumers are in and around the plants-thereby lower transport costs.
07.Promoters are well experienced in the line of busines to encash the BOOM CONDITIONS
08.Power generation will bring additional other income by selling the surplus power to others
09 Company can enjoy huge tax benefits by way of huge depreciation provisions on WindMills to be set up immediately in the current year it self.
Considering the above favourable conditions and inview of the expected EPS of Rs.16/- in current year, there is enough scope for appreciation

Results : http://www.bseindia.com/qresann/result.asp?scripcd=507813&scripname=NAT.OXYGEN

Amtek India

promoters holding 52.82
Fiis n mutual fund holdings : 14
private corporate bodies :16
public:16

one of the best auto ancillary play according to me valuation wise....available cheap arnd 105....been consolidating for the past 5 months arnd 100 levels...this yr shld be a good yr for most of the auto anci companies....n amtek group being quite a name in the market...a lot of players r betting on amtek india.
amtek india is a must buy according to me at current levels n at every dip....a minimum of 6-9 months view shld be taken on it......a rally can be seen in this b4 the budget

National Steel

National Steel is performing very well with huge turnover and is expected to report at least 50% higher profits than last year. the expansion was completed...n the results of which shld be seen frm the current quarters.....the stocks has beeen hammered frm 28 to 20 levels during the midcap correction.....the worst is over according to me in the steel sector...dont see more softing of steel prices.....The Ruchi Group is also planning to form a FLAGSHIP COMPANY of the Group and a likely merger of Ruch Industries and National Steel is likely which will be beneficial for National Steel shareholders....a multibagger according to me if held for 12-18 months

aarvee denim

CURRENT PRICE :125
EPS:18-20
TARGET:200-250

Result highlights
The results of Aarvee Denims & Exports (Aarvee) for Q2FY2006 are in line with our expectations. The company''s net sales grew by 17.79% from Rs66.38 crore in Q2FY2005 to Rs78.19 crore in Q2FY2006.The operating profit grew by 41.26% from Rs12.81 crore in Q2FY2005 to Rs18.09 crore in the quarter. This was primarily on account of the operating profit margin (OPM), which improved by 384 basis points from 19.30% to 23.14%.
The spurt in the OPM is mainly on account of a 411-basis-point savings due to lower raw material cost. The raw material scenario was favourable as a result of lower cotton prices, thanks to a bumper cotton crop. The company''s profit before tax (PBT) grew by 46.79% from Rs9.84 crore in Q2FY2005 to Rs14.45 crore in the quarter. The reported net profit was higher by 77.88% to Rs9.12 crore as compared with Rs5.13 crore in Q2FY2005

Aarvee''s performance for H1FY2006 has been healthy. Its net sales have grown by 22.13% from Rs117.22 crore in H1FY2005 to Rs143.15 crore in H1FY2006. The operating profit has increased by 59.54% from Rs20.91 crore in H1FY2005 to Rs33.36 crore in H1FY2006. The reported profit grew by 95.09% from Rs9.01 crore in the first half of FY2005 to Rs17.57 crore in the first half of FY2006. The company has declared an interim dividend of 5%. This has been in addition to the 5% interim dividend announced after the Q1FY2006 results.

Easing cotton prices help improve OPMThe country is heading for a bumper cotton crop for the second year in a row. The cotton output in the 2004-05 season stood at 21.5 million bales, thanks to favourable weather conditions, increased area under cultivation and the extensive use of BT cotton seed. The average cotton prices for the quarter under review were Rs45-46 per kilogram as against Rs55-57 a kilogram for the corresponding period in the last year. The softening cotton prices have helped Aarvee to improve its OPM. There has been a cost savings of 411 basis points on account of lower cost of raw materials (excluding colour and chemicals), which has declined from 51.14% in Q2FY2005 to 47.02% in Q2FY2006. The new arrivals of the 2005-06 season are just around the corner and it is expected that the production would reach 23.5 million bales and the cotton prices would stabilise in the range of Rs45-50 a kilogram.
For Q2FY2006 the realisations stood at Rs90.15 per metre, similar to that in the corresponding period in the last year. Thus the major reason for the increase in the OPM is lower raw material cost as the realisations are flat on a year-on-year basis.
Higher contribution from the domestic market, lower contribution from exportsIn Q2FY2006 the company''s domestic sales stood at Rs65.25 crore as compared with Rs49.82 crore in the corresponding period of the last year, a growth of 30.98% year on year. For the first six months the domestic sales have grown by 41.85% from Rs84.19 crore in H1FY2005 to Rs119.43 crore. If you remember, in our report titled "Dressed to Kill" and dated October 4, 2005, we had made a point about Aarvee''s dominant presence in the domestic market. As the Rs1,000-crore domestic denim market is poised to grow at the rate of 10% for the next three to four years at least, the company is well positioned to tap this positive trend.
However for Q2FY2006 the exports are lower at Rs12.20 crore as compared with Rs16.91 crore a year ago, as the same have fallen by 27.88%. For H1FY2006 the exports were down by 31.65% from Rs33.02 crore a year ago to Rs22.59 crore. This drop can be attributed mainly to the release of the piled-up denim inventory from Turkey. The importers preferred to procuring denim from Turkey as a result of which the exports were down. However the management believes this trend is a temporary phenomenon lasting for six to seven months and the things would improve after that. On a quarter-on-quarter basis however the exports grew by 17.66% from Rs10.40 crore in Q1FY2006 to Rs12.20 crore in Q2FY2006.
Additional 30 looms to go on stream wef Q3FY2006Aarvee has installed 30 new looms as part of its existing capacity of 47 million metre per year and the same are supposed to go on stream from Q3FY2006. These are superior, high-resolution looms with a better capacity. The trial production is already on and the looms would go fully on stream from November 2006. Thus these looms would generate incremental revenues from Q3FY2006. This fact has been factored in our financial projections.
The capex programme is running on scheduleAarvee is currently undergoing a major capex plan. The Rs130-crore capex will see its installed capacity increase by more than 50% from the existing 47 million metre per year to 72 million metre a year; correspondingly the spinning capacity would increase from 18,500 metric tonne (MT) to 28,500MT. This capex exercise is scheduled to get over by H1FY2007. It is on schedule and the civil work is currently going on, as the floor space at the current shop floor is full. The orders for the looms (as a part of this capex programme) have already been placed and the management expects the new capacities to become operational as per schedule. ValuationsAt the current market price of Rs133 Aarvee is available at a price/earnings ratio of 8x FY2006E (5x FY2007E) and enterprise value/earnings before interest, depreciation, tax and amortisation of 4.74x FY2006E (3.36x FY2007E)

EASTERN SILK

FIIS N MUTUAL FUNDS TOGETHER HAVE 19% OF THE EQUITY.

ESI is targeting a turnover of over 320 crores for 05-06 with profits in the range of 36 crores (conservtive estimate). The EPS on the current equity should be more than 50. However, the company is in the process of a merger with 2 group companies which will take the equity to 14 crores. Even on this enhanced equity on can expect an EPS of more than 27.The company has undertaken a massive expansion and modernization plan whereby handmade fabrics are manufactured by machines. This transition had led to the reduction in turnover and profits for the qtr ended March 05.The company has already disbursed an interim dividend of 15% and is likely to declare a final dividend as soon as the merger process is complete.The existing qtr results are expected to be above market expectations. The NPM during the last qtr increased to an all time high of 9.6% and is sure to increase going forward.HSBC securities has bought a large chunk of shares recently from the promoters thru a market transaction in the range of 250-260 levels. The management went through this exercise to increase the liquidity. The effect was evident from the very next day of this placement when the volumes went up 10 fold. This liquidity has opened the intrinsic value of the scrip to some extent.If the scrip is compared to its peers, it is grossly underpriced. Fair value of this scrip is 320 levels on a very conservative estimate.

Eastern Silk Industries is an established player in the exports of silk fabrics and made-ups, it is likely to have a competitive advantage in the post-quota regime.The lifting of quota regime in global textiles trade is a huge growth opportunity for Indian companies with a presence in specialised products. ESI Limited (formerly Eastern Silk Industries) is a Rs 270-crore company with 80% revenues from exports of silk fabrics and garments.The company's revenues are almost double the topline of its nearest competitor - Himatsingka Seide - in the silk fabrics segment even as its equity capital is less than half of Himatsingka Seide's equity base. On a valuation basis, ESI appears to be much more attractively priced than its better-known counterpart.A major trigger for the re-rating of the company's value could come from a recent decision to merge two other silk fabric exporters - Sstella Silk and Eastern Jingying- into it. Both these companies have a foothold in overseas markets in the area of silk fabrics and made-ups.This move should further strengthen the operations of Eastern Silk Industries at a time when quota dismantling for WTO countries in the textiles sectorhas happened . This should create a huge opportunity for ESI to improve its earnings per share (EPS) to a significantly higher level.Dismantling of quotaThe biggest trigger which the company had been awaiting and preparing for a long time . This would be the end of the multi-fibre agreement following which the quota system for textile exports would be dismantled.Textile exports would become more competitive and leading exporters from various WTO countries would start enjoying the edge. Since Eastern Silk Industries has been an established player in export of silk fabrics and made-ups, it is likely to grab the competitive advantage.FinancialsESI has performed consistently over the past year-and-a-half. The company has been expanding operations throughout North America, Europe and other countries for presence in the markets for silk fabrics and made-ups. It earns as much as 80-85% of its annual revenues from exports to these markets.In the current financial year, the company has sustained its strong momentum. Its performance on various financial parameters like sales and profitability has shown healthy growth in the first quarter of the current year. Since silk exports are prone to swing with weather cycles, the company's performance too takes an upswing in the later half of its financial year.Therefore, even on a conservative basis, the company should turn out much better numbers than in the previous financial year. Great future ahead

GRANULES

the stock seems to have come out of the accumulation levels.......been consolidating for a long time arnd 80-90 levels......the company will be showing good growth q-on-q basis........future is bright for this company......the stock is tipped to be a multibagger according to my sources close to 300-400....one can invest in this keeping a view of minimum 6-9 months.....patience will surely pay

JUPITER BIOSCIENCE

CURRENT PRICE:145.....EPS:20....TARGET 225-250 IN A YR


jupiter is the largest player of peptide in india n comes under the 3-4 globally......company is doing extremely well......the promoter MR. agarwal who made the company reach such gr8 heights passed away few yrs bck....so now everything thing depends on the new management n whos hand the sterring is......if the company is acquired by someone then also its good for the company
those holding continue holding....n those who wanna invest can invest at current levels of 150 n if it falls can average arnd 125 levels.....eps is arnd 20 levels......grossly undervalued.

SYNCOM FORMULATION

syncom formulation is consolidating arnd 80 levels for the quite sometime....some accumulation was seen few months bck.....quite some action is expected by many players in this one....one can take some exposure in this script....full yr EPS is shld be arnd 15.....a price of 160-200 in 6-12 months

CENTURY ENKA

current price :188
century enka has showed a loss of 6.84 crs....which is due to raw material....i am sure it will show good results frm next qtr again.....one shld use this fall in the current market as a buying oppurtunity....one shld keep a slightly longer term view on it...many mutual funds are invested in it.


Century Enka is a joint venture between the B K Birla group (to become part of the Aditya Birla group) and the Acordis group (formerly Akzo Nobel) of the Netherlands. The company manufactures polyester yarn, nylon tyre yarn, nylon yarn, and engineering plastics at Bhosari, Pune. In FY 2005, cotton was cheap because of abundant availability. On the flip side, prices of key raw materials for making polyester — PTA and MEG — went through the roof. Because of the available of cheaper substitute, the polyester industry could not pass on the rise in raw material prices to end users. Therefore, the industry suffered in FY2005. Century Enka's margin was down by 500 basis points to 9.5%.Although cotton production is set for another bumper ride, the demand for polyester is also rising rapidly. With all the frontline players expanding their capacities to cater to the international markets, which primarily consumes polyester, the offtake of polyester is increasing.Moreover, prices of PTA and MEG have come down from their peaks. For example, in FY2005, PTA prices were on an average up 22% and MEG 34%. But POY prices were up only 4%, leading to a 34% fall in the gross contribution. In the first half of FY2006, PTA prices have come down 6% and MEG prices by 19%, lifting the gross contribution for POY up by 23%. Going forward, the situation will improve further. Though crude prices may remain high and continue the upward trend, the commissioning of new plants of PTA and MEG in India and China will boost their availability and hold down prices. Thus, the polyester (POY) division of Century Enka, which constitutes nearly 50% of its revenue, is set to get the dual benefit of lower raw material cost year-on-year (y-o-y) and rising offtake. The company has already increased its polyester capacity by 14,600 tonnes to 74,100 tonnes in FY2005. By June 2005, the capacity was raised to 81,000 tonnes.Till July 2004, cheap imports of nylon tyre cord (NTC) from China caused Indian players to suffer. Yet, Century Enka outperformed the industry with its cost-effective measures and its ability to retain clients. After anti-dumping duty was levied in July 2004, the entire industry got a revival. Century Enka has finalised a Rs 160-crore nylon tyre cord (NTC) fabric expansion project to take the installed capacity to 22,000 tonnes. The company plans to complete the expansion by the last quarter of FY 2006.However, cheap imports of nylon filament yarn (NFY) from China continue. As a result, all the industry players as well as Century Enka are suffering. The Indian industry has proposed anti-dumping duty on NFY as well. However, the increase in POY demand, cooling off of raw material prices and the rise in the margin of NTC will more than mitigate the negatives for NFY (which contributes less than 15% of the sales). Once the anti-dumping duty is levied (which is very likely), the industry is set to show a surge in the margin. Century Enka has decided on a scheme of arrangement with its non-resident shareholder Acordis Overseas Investment BV to buy back 30% of its paid-up equity share capital at a price of Rs 122 per equity share, reducing its equity share capital by 30% to Rs 20.05 crore. Acordis will be entitled to tender up to 30% of its 38.24% shareholding.The FY2006 EPS on current equity is expected to be around Rs 23.4. At the current market price of Rs 259 (as on 20/09/05), P/E works out to only 11. Once the equity is reduced, EPS will jump to Rs 33.4 and P/E will fall to just 7.8


Century Enka looks under valued and has a big potential upside. This company will soon come into the management fold of Kumaramangalam Birla, which has a better market perception.
Positive factors
· Equity capital has been reduced to approx Rs. 21 crores from Rs. 28.6 crores as the stake of the foreign partner has been purchased from the reserves of the company. Thus the market capital capitalization is only Rs. 450 crores which is very little for a company with such assets and earnings.
· The annual sales are expected to be around 1000 crores with PAT of Rs. 50 cr. The EPS should be about Rs. 24 on the reduced capital
· The present promoters B K Birla group now only owns about 20 % of the reduced capital, which they would like to increase over time through creeping acquisition.
·This company will soon come into the management fold of Kumaramangalam Birla, which has a better market perception.
· Although POY prices have come down recently due to the market leader Reliance Industries' dropping prices, the input costs re down also.
·The synthetic textile industry prospects in India are bright.
· The stock has hardly participated in the bull market since mid-2003.
· The stock looks under valued and has a big potential upside.

MY VIEWS ON SURYA PHARMA

the stock is consolidating arnd 120-145 levels......125 seems to be support levels...on the upside of 155 levels....a bit of supply pumps in.....the EPS of 06 shld be arnd 12 n 07 arnd 25...the stock can see a price of 200 in 6-9 months....FIIs n mutual funds hold 6% of its equity...A GOOD PICK ACCORDING TO ME IN THE PHARMA SPACE

SURYA PHARMA

Company Details
BSE Price: 139.00 NSE Price: 138.20 Industry: Pharm-Ind-BD&For
BSE Code: 532516 NSE code: SURYAPHARM Free float: 17.12%


Company details
Price target: Rs205
Market cap: Rs154 cr
52 week high/low: Rs177/53
NSE volume: 56,290

(No of shares)
 BSE code: 532516
 NSE code: SURYAPHARM
 Sharekhan code: SURYAPHARM
 Free float: 84 lakh
(No of shares)
Key points
 Surya Pharmaceuticals is moving up the product value chain in the anti-infective segment from being a manufacturer of betalactum antibiotics (a low-margin product) to a maker of third- and fourth-generation cephalosporins (a high-margin product).
 The company is expanding its production capacity to tap the growing contract manufacturing market. These capacity expansions will raise its cephalosporin capacity by 154% and formulation capacity by 567%. The expansions are backed by contract manufacturing deals worth over Rs350 crore that include a Rs220 crore-deal with a British pharmaceutical firm and a Rs36 crore-per-year deal with an Iranian firm.
 The company has refinanced its debts at lower rates, reducing its interest burden to an expected 7.1% in FY2007. Its plants in Baddi and Jammu will enjoy income tax and excise exemption. These cost reduction efforts will contribute to improvement in the net profit margin from 5.2% in FY2005 to 9.2% in FY2007.
 We expect a 106% compounded annual growth in the net profit on the back of a 52% compounded annual growth in the sales over FY2005-07. For FY2007 the company is estimated to record gross revenues of Rs418 crore, yielding earnings per share (EPS) of Rs25.5.
 At the current market price of Rs139 Surya Pharmaceuticals is trading at 5.4x its FY2007E earnings, clearly at a discount to its peers. We believe that assigning Surya Pharmaceuticals a price/earnings (PE) multiple of 8x its FY2007E earnings is a fair valuation. Hence we initiate a Buy recommendation on Surya Pharmaceuticals with a price target of Rs205.
Shareholding pattern


Price performance
(%) 1m 3m 6m 12m
Absolute 5.0 -12.5 -1.8 148.1
Relative to Sensex -8.3 -26.2 -36.4 102.1

Company background
Surya Pharmaceuticals, a Chandigarh-based pharmaceutical company, manufactures bulk drugs (primarily anti-infectives) and also produces formulations in smaller quantities. Started as a manufacturer of penicillin derivatives in 1993, the company now concentrates on contract manufacturing for global pharmaceutical majors. It is setting up bulk drug and formulation manufacturing capacities in Jammu and expanding its formulation facility in Baddi.
The management is headed by Rajeev Goyal (managing director) and the promoters hold close to 24.5% stake in the company while corporates hold a substantial 48% stake.

Key financials Rs (cr)
Year ended 31st March FY2004 FY2005 FY2006E FY2007E
Net profit 6.2 8.6 16.6 36.9
EPS 4.3 6.0 11.5 25.5
PER (x) 32.7 23.3 12.0 5.4
Book value/ share (BV) 38.2 47.1 75.4 101.2
P/BV 3.6 3.0 1.8 1.4
Cash EPS 7.6 9.8 17.6 35.5
P/cash EPS 18.3 14.2 7.9 3.9
EV/EBIDTA 10.5 8.7 8.0 5.3
RONW (%) 10.8 12.4 15.1 25.1
ROCE (%) 15.9 16.7 11.4 15.7
Business model
Surya Pharmaceuticals has changed its business model from the one that involved just manufacturing bulk drugs and intermediates to the one that involves being the partner of choice in the contract manufacturing space while maintaining the earlier businesses. The company has tied up with the other pharmaceutical companies, both Indian and foreign, and carries out contract manufacturing of bulk drugs and formulations. It is also involved in technology development related contracts but the major chunk of its revenues comes from the contract manufacturing business.
The anti-infectives segment
Of all the therapy segments in the pharmaceutical industry, anti-infective is the third largest in the world and largest in India having a share of over 22% of the Indian pharmaceutical industry. Three types of drugs—cephalosporins, fluroquinones and betalactum antibiotics—dominate the global anti-infective segment. Cephalosporins are the new (high-margin) drugs having the widest usage while betalactum antibiotics are the older (lower-margin) drugs.
Indian pharmaceutical industry break-up


Investment arguments
Moving up the product value chain
Till last year Surya Pharmaceuticals was amongst the top Indian players in the betalactum antibiotic manufacturing segment. Now it has expanded its operations to manufacture bulk cephalosporins and with increasing capacities is set to become one amongst the five leading manufacturers of cephalosporins in the country.
It already manufactures second- and third-generation cephalosporins, such as cephaclor and cephixime, which are high-margin products. It is increasing its cephalosporin manufacturing capacity by 154% of the earlier capacity, thereby boosting not only the sales but also the margins. This change in the product mix is partly responsible for the improvement in its margins, as can be seen from the results of the recent quarters.
Operating margin
FY2006 (%) FY2005 (%) Improvement (basis points)
First quarter 19.4 14.0 540.0
Second quarter 19.4 15.0 440.0
The company is also diversifying into high-margin lifestyle segments like anti-histamines and cardio vascular drugs, and increasing its focus on exports for the long term. The improved product mix will be one of the key growth drivers and lead to good profit margins in the future.
Massive scaling up of capacity—another key growth driver
The company is carrying out capacity expansions at its existing facilities at Baddi and Banur. It is also coming up with a greenfield project at Jammu. The bulk drug facility at Panchkula has been completely revamped to produce 24 tonne of anti-histamine bulk products like loratidine and fexofenadine per year. At Baddi the de-bottlenecking of operations is expected to be complete by April 2006, resulting in the tripling of the utilisable capacity from the current 33%.


Capacities: Present and future
Location Product lines Units Capacities Growth (%)
FY2005 FY2007
Banur & Jammu Cephalosporins Tpa 177.6 451.6 154
Panchkula Anti histamine and Lifestyle Tpa 12.0 62.0 417
Baddi & Jammu Formulations tablets+capsules crore 36.0 240.0 567
Baddi Betalactum Antibiotics Tpa 1200.0 1200.0 0
Baddi & Banur Intermediates Tpa 82.0 82.0 0
The greenfield project at Jammu is expected to provide a big boost to its sales. It will be set up in two phases. The phase 1, which would involve the setting up of a plant to manufacture sterile cephalosporins and high-value bulk drugs, is expected to be completed by September 2006. In the phase 2, a facility to manufacture formulations will be set up. Bumper revenues from the utilisation of these capacities are expected in FY2007.
Debt refinancing deals to decrease the interest rate
The capacity expansion exercise is expected to cost about Rs136 crore and will be funded by the 40 lakh zero coupon warrants issued by the company (last date of conversion into shares is 6thAugust2006), the proceeds of the foreign currency convertible bond (FCCB) issue and long-term loans raised at reduced rates.
Figures in Rs crore FY2006 FY2007 Total
40 lakh zero coupon warrants of Rs70 each 28.0 0.0 28.0
12000 FCCBs of 1000$ each 52.8 0.0 52.8
Bank loans 60.0 50.0 110.0
Total 140.8 50.0 190.8
In the past the company had financed its debts at very high interest rates. It has now refinanced these and new debts at lower rates. Due to the new deal, term loans will be raised at a reduced cost of 8.25% (interest rate for term loans was 15.7% in FY2005) while working capital will cost 10.5% (for FY2005 and working capital loan rate was 19.3%). Also the company issued 12,000 FCCBs (due conversion in FY2009) at a rate of 1%. The cumulative effect of these financing deals will be that in FY2007 the effective interest rate for term loans (including the FCCBs) is estimated at 6.4% while the effective loan rate for working capital is estimated at 10.5%. This reduction in the financing cost will reflect in the bottom line.
Effective interest rate

Source: Sharekhan Research
Tax benefits to provide an additional edge
The company''s major expansion plans include the de-bottlenecking of the formulation facility at Baddi, and the installation of bulk drug and formulation capacities at Jammu. Baddi is a tax haven and the formulation plant will enjoy a ten-year excise holiday and a five-year income tax exemption here. Also at Jammu the company will enjoy a five-year income tax exemption on both formulations and bulk drugs and a ten-year excise refund policy. As a result although the company''s gross sales are expected to increase by 67% from FY2006 to FY2007, yet the excise duty during the same period is expected to increase by merely 4.2% while the income tax is expected to increase by 34.8%. The net effect of these exemptions will manifest itself in an improvement in the net profit margins in FY2007.
Cost cutting mantra expected to work well
The company has taken up cost cutting and process optimisation measures. These include improving the solvent recovery process, optimising the temperature requirements and reducing the fuel, power and refrigeration costs. The company is also setting up a 2-megawatt captive power plant, which is expected to be operational by April 2006 and would further decrease its power and fuel costs per unit consumption. These measures are expected to reduce the company''s manufacturing costs by over 20%. However keeping in mind the gestation period for these changes, we are estimating an improvement of 10% in Surya Pharmaceuticals'' manufacturing efficiency in FY2007.

Comparative increments


Source: Sharekhan Research
Strong deal flow to provide the foundation for healthy growth
The company has tied up with pharmaceutical firms both in India and abroad to supply bulk drugs and formulations. It has made a deal with a British pharmaceutical major to supply six bulk drugs. This deal is valued at Rs44 crore per year, aggregating to Rs220 crore over the next five years. The company has also signed another deal with an Iranian firm to supply advanced cephalosporins at pre-determined prices. This deal is expected to generate revenues of Rs36 crore a year. In addition the company is also manufacturing cephalosporins for Indian pharmaceutical majors. As a result it has a healthy flow of orders. Since the major orders in the coming years are expected from foreign firms, the contribution of the high-margin export business is bound to increase to 60% of the total sales by FY2008.
Portfolio break-up

Source: Sharekhan Research
Surprise acquisition could be in the offing
Surya Pharmaceuticals is sourcing one of its raw materials from a company in China. It is in negotiations to acquire this company. If the acquisition does occur in the second half of FY2006 or early FY2007, we expect the deal to materialise at close to Rs17.5 crore. Surya Pharmaceuticals has plans to convert the Chinese plant into a formulation manufacturing facility and this could prove to be a significant revenue source. Although we have not discounted the revenues from this possible acquisition in our FY2007 estimates, we remain bullish about the acquisition.
Sales to increase at a CAGR of 52.01% from FY2005 to FY2007
The increase in the capacities and the deal flow are expected to result in increased sales in FY2006 and FY2007. The company has in the first half of FY2006 notched up net sales worth 71% of its FY2005 sales and surpassed the FY2005 net profits by 30%. On a year-on-year basis, the H1FY2006 net sales have increased by 68% as compared with that of H1FY2005. This is an indicator of the measure of increment expected in the sales in the coming years.
Gross sales

Source: Sharekhan Research
Profit margins to zoom, PAT to surge over the next two years
The expected increase in the sales will provide the initial momentum. A better product mix and lower interest rates along with manufacturing efficiency will result in higher net profit margins. The tax savings will further improve the margins as we expect the net profit to increase at a CAGR of 106.7% from FY2005 to FY2007. The net profit would rise on the back of a 52% compounded annual growth expected in the sales during the same period and a 209-basis-point increase in the net profit margins from FY2006 to FY2007. This would improve the return on net worth from 12.4% in FY2005 to 25.1% in FY2007.
Margins

Source: Sharekhan Research
Valuation
Surya Pharmaceuticals has shown a good growth over the previous quarters and its future growth prospects look even brighter. For FY2007 we estimate it to record gross revenues of Rs418 crore, yielding earnings per share (EPS) of Rs25.5 and cash EPS of Rs35.5. In our estimates we have not considered the revenues from the possible Chinese acquisition. At the current market price of Rs139 Surya Pharmaceuticals is trading at 5.4x its FY2007 estimated earnings and 3.9x its FY2007 estimated cash earnings.
PE Surya Pharma Shasun Drugs Dishman Pharma
FY2006E 12.1 10.1 17.0
FY2007E 5.4 9.1 11.4
In comparison with its peers, like Shasun Drugs (trading at 9.1x its FY2007E earnings) and Dishman Pharmaceuticals (trading at 11.4x its FY2007E earnings), Surya Pharmaceuticals is clearly trading at a big discount at 5.4x its FY2007E earnings. Moreover the bulk drug industry has an average price/earnings (PE) of 8x FY2007E earnings.
Surya Pharmaceuticals has all the pre-requisites for growth: it is increasing its capacities, has a healthy order book, is in the right business segment and has increasing efficiency. Considering this unique combination that adds to its sound business model, we believe that assigning Surya Pharmaceuticals a PE multiple of 8x FY2007E earnings is a fair valuation. This translates into an 18-month forward fair price of Rs205.
Keeping in mind the good growth prospects, new product stream, major capacity expansion plans and signing of major deals to support the revenue flow, we believe that Surya Pharmaceuticals shall definitely perform brilliantly in the coming years. Hence we initiate a Buy recommendation on Surya Pharmaceuticals with a price target of Rs205.
Valuations
Particulars FY2004 FY2005 FY2006E FY2007E
EPS 4.3 6.0 11.5 25.5
PER (x) 32.7 23.3 12.0 5.4
Book value/ share (BV) 38.2 47.1 75.4 101.2
P/BV 3.6 3.0 1.8 1.4
Cash EPS 7.6 9.8 17.6 35.5
P/cash EPS 18.3 14.2 7.9 3.9
EV/EBIDTA 10.5 8.7 8.0 5.3
M Cap/Sales 0.9 1.1 0.9 0.5
Financials
Profit and loss statement Rs (cr)
Particulars FY2004 FY2005 FY2006E FY2007E
Gross sales 172.5 180.9 249.9 418.1
Excise duty 11.0 12.2 15.6 16.3
Net sales 161.4 168.7 234.3 401.8
Other income 0.5 0.2 1.3 1.1
Total income 161.9 168.9 235.6 402.9
Total expenditure 138.7 138.7 191.9 326.1
Operating profit 22.6 29.9 42.3 75.7
Interest 9.6 11.7 11.7 16.5
Depreciation 4.8 5.5 8.7 14.5
Profit before tax 8.8 12.9 23.2 45.8
Total tax 2.6 4.3 6.6 8.9
Profit after tax 6.1 8.6 16.6 36.9

Balance sheet Rs (cr)
Particulars FY2004 FY2005 FY2006E FY2007E
Sources of Funds
Share Capital 10.4 13.3 14.5 14.5
Reserves & Surplus 46.4 56.1 95.5 132.4
Secured Loans 49.0 63.9 179.4 229.4
Unsecured Loans 1.8 3.5 3.5 3.7
Deferred Tax Liabilities 8.2 10.7 14.4 19.4
Total 116.1 147.6 307.4 399.5
Application of Funds
Gross Block 65.2 75.9 75.9 200.8
Less: Depreciation 19.5 25.0 33.8 48.3
Net Block 45.7 50.8 42.0 152.4
Capital Work-in-Progress 0.0 0.0 124.9 0.0
Investments 0.1 0.7 0.7 0.7
Current assets
Inventories 43.9 60.3 71.5 129.5
Sundry Debtors 32.0 44.1 52.9 122.5
Cash & Bank Balances 8.2 6.1 33.0 28.3
Loans & Advances 16.1 19.6 25.7 38.9
Total 100.4 130.2 183.2 316.2
Liabilities 31.8 35.6 44.3 73.3
Net Current Assets 68.6 94.6 138.8 248.3
Miscellaneous Expenditure 1.6 1.4 0.9 0.4
Total 116.0 147.5 307.4 399.5

Key ratios
Particulars FY2004 FY2005 FY2006E FY2007E
Debt: Equity 0.9 1.0 1.7 1.6
Operating Margin (%) 14.1 17.8 18.1 18.8
Net Profit Margin (%) 3.8 5.1 7.1 9.2
RONW (%) 10.8 12.4 15.1 25.1
ROCE (%) 15.9 16.7 11.4 15.7