Fundamental Stock Picks
IG Petrochemicals Ltd. (Code: 500199) (Rs.57.10) is the world’s third largest producer of Pthalic Anhydride (PAN), which is used in the manufacture of plasticizers, alkyd resins and as an intermediate in the production of dyes and pigments. Due to major financial restructuring and capital infusion by Spinnaker-a global fund, the company has made a strong turnaround this fiscal. For the December 2006 quarter, while its sales increased by 50% only to Rs.150 cr., its net profit zoomed to Rs.10.90 cr. against a net loss of Rs.15.60 cr. last year. Notably, it recorded the highest OPM of around 14% due to high realization, low raw material costs and higher capacity utilization. For the full year FY07, it is expected to clock a turnover of Rs.600 cr. with PAT of Rs.33.50 cr., which translates into an EPS of Rs.13 on its current equity of Rs.26.30 cr. and EPS of Rs.11 on its diluted equity of Rs.30.80 cr. A good turnaround scrip.
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A major beneficiary of the Railway Budget will be Kalindee Rail Nirman (Engineers) Ltd. (Code: 522259) (Rs.164.75). It is a forerunner in execution of the railway signalling, gauge conversion from metre gauge to broad gauge, new railway line construction, modernisation of railway yards. up-gradation of railway sidings in ports, power plants, petroleum sidings, access control systems for metro rail, fibre optic networks, etc. Recently, it merged group company, Kalindee India Projects, through a swap ratio of 17:20, which will help it to bid for larger projects. Besides, it just now raised around Rs.27 cr. through a preferential allotment of 17.25 lakh shares at Rs.156.50 per share. Further, it is planning to raise approx. Rs.30 cr. through the GDR or FCCB route. It may end FY07 with a turnover of Rs.175 cr. with net profit of Rs.10.50 cr. i.e. EPS of Rs.10 on its diluted equity of Rs.10.34 cr. Since the company has more than Rs.750 cr. of orders in hand, its top-line is expected to shoot upto Rs.300 cr. with PAT of around Rs.22 cr. i.e. EPS of Rs.21 on its current equity for FY08. A solid buy as its share price can shoot upto Rs.240 in 12 months.
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By this year’s budget, the government has expressed its special thoughts on health and family welfare by increasing its allocation by 20% to more than Rs.15,000 cr. This is positive for Sanjivani Parenterals (Code: 531569) (Rs.32.85) to some extent as it a supplier of pharmaceutical products to government bodies. Few months back, it bagged a prestigious order from the Mumbai Municipal Corporation and also won the bid of CMS Tender for bulk supply to all hospitals of the West Bengal government. Recently, it also entered into some contract with the defence ministry for three years, which is a good breakthrough for the company. For FY07, it may report a total revenue of Rs.75 cr. with net profit of Rs.4.50 cr. i.e. an EPS of Rs.8 on its equity of Rs.5.90 cr. Technically also, the scrip has bottomed out and the risk:reward clearly favours the bulls in this scrip.
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After hitting a high of Rs.122, Paradyne Infotech Ltd. (Code: 532672) (Rs.87.30) has corrected sharply to Rs.80 levels on fears of MAT implementation and the FBT on ESOP. However, it is a rapidly growing mid-cap IT company set to capitalise on strong growth opportunities in HR and Banking software products, offshore & domestic software services, e-governance projects and IT infrastructure management services through both organic and inorganic initiatives in domestic as well as global markets. For the December 2006 quarter, its top-line grew by 60% to Rs.34.50 cr. and net profit more than doubled to Rs.3.95 cr. registering an EPS of Rs.3.65 for the quarter. For full year FY07, it may register total revenue of Rs.125 cr. and after providing Rs.2.50 cr. as current tax, net profit may stand at Rs.14 cr. This translates into an EPS of Rs.13 on its current equity of Rs.10.88 cr. For FY08, its EPS can rise to Rs.16. Buy on declines.
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PBA Infrastructure Ltd. (Code: 532676) (Rs.95.30) executes civil engineering projects and specializes in construction of highways, dams, runways, heavy RCC structures, bridges and other infrastructure projects for various government bodies. Although the shares of construction and infrastructure companies have tumbled sharply on withdrawal of some tax exemptions in the budget, the future prospects of PBA Infrastructure are very encouraging as it regularly bags good orders. Its first three quarters revenue is up by 75% to Rs.187 cr. but net profit grew by 20% only to Rs.10 cr. only due to higher interest cost and tax provisions. Since it has pending contracts worth more than Rs.500 cr., it may report sales of Rs.265 cr. with net profit of Rs.12 cr. for FY07, which may shoot up to Rs.325 cr. and Rs.16.50 cr. respectively for FY08. This works out to an EPS of Rs.9 & Rs.12 for FY07 and FY08 respectively. The company is also planning to raise capital through FCCB/GDR/ preferential allotments, which will lead to its re-rating going forward.