dkishore
26-12-2007, 06:29 AM
* Incorporated as a private limited company, Sterling Tools became a public limited company in October 1994 and is engaged in manufacturing high-tensile (HT) fasteners mainly for automobiles at its plant at Faridabad near New Delhi.
The company has been performing consistently well over the last many years having given 1:1 bonus shares about two years back and maintaining a dividend of 30% on its enlarged capital with a strong book value of Rs.67 for Rs.10 paid-up share.
In Q1, margins were affected due to rise in input costs like steel but the management has decided to relook at the sourcing policy wherein emphasis will be more on procuring raw material from overseas keeping in mind the strong Rupee against the US Dollar. As a result, 2nd quarter was better and for H1FY08 operating margins improved from 13.04% to 14%.
The opportunities for growth in demand for high tensile fasteners are a plenty with the growth of the Automobile Sector in India. Further, exports from India have good prospects.
It can, therefore, further improve margins H2FY08 onwards. For the full year, the company expects to achieve sales of Rs.168 to Rs.175 cr. and post an EPS of around Rs.11/12 levels. Investors can accumulate this stock safely on dips around Rs.77/80 levels for good long-term growth.There is good consolidation in the stock. If it sustains closing above Rs.90 level, it may see a target of Rs.120.
* DIC India , formerly known as Coates of India, is a 65.8% subsidiary of DIC Asia Pacific Pte. Ltd., Singapore, which in turn is a wholly-owned subsidiary of DIC Inc., Japan, the flagship company of the DIC group.
The DIC group, with its subsidiary Sun Chemicals, is the largest ink company in the world. Around US $5 billion (Rs.22,000 cr.) of the group’s revenue of more than US $9 billion comes from ink-related businesses. DIC is the world’s largest supplier of inks, organic pigments, varnishes, coatings, resins, and toners and ink jet inks.
The company posted an increase of 19% in its net sales to Rs.292.15 cr. for the nine months ended 30th September 2007. As a result, the operating profit of the company increased by 30% to Rs.19.12 cr.
Other income increased by 32% to Rs.3.92 cr. resulting in a jump in PBIDT by 30% to Rs.23.05 cr. Other income includes foreign exchange gain amounting to Rs.1.25 cr for the nine months ended 30th September 2007. The interest paid by the company for nine months period increased by 71% to Rs.6.51 cr. PBDT of the company increased by 19% to Rs.16.54 cr. With the recent issue of right shares at Rs.225 per share, its interest liability will reduce in future.
Depreciation increased by 14% to Rs.4.96 cr. Total tax outgo increased by 32% to Rs.4.14 cr. Despite it, the company’s net profit for the nine months ended 30th September 2007 increased by 16% to Rs.7.44 cr. compared to the corresponding period of the previous year.
Economic growth, favourable demographic profile, a lower per capita consumption of inks and a radical change in the buying attitude towards print quality are the key demand drivers for maintaining its momentum of growth.
The company is focusing on improving its operating margins through better productivity and greater focus on logistics, developing competence against international players on the strength of the technology provided by the parent company and effective working capital management. Increase in crude oil price is a risk factor for the company.
With a significantly improved customer base, experience in varied markets, continuous technical assistance from DIC, Japan – the world’s largest ink manufacturing company and strong management team, the company feels confident of accelerated growth in all market segments in coming years.
Last year, consolidated sales were Rs.429 cr. and EPS was Rs.21. In the current year, consolidated sales are likely to be above Rs.500 cr. and EPS likely to be in the region of Rs.24 - 26.
Most shareholders may not have subscribed to the right issue as its stock price was well below Rs.225, which was the issue price. Hence, the promoter holding of 65.8% may increase sharply.
The company has around 8 manufacturing units and other real estates at various locations. With consolidated sales of above Rs.500 cr. and EPS of Rs.25 (Rs.20 on increased capital) and a market cap of Rs.205 cr., the stock looks very attractive at Rs.220 level in this heated up market. Moreover, Micro Inks is trading at a P/E multiple ratio of 22 while DIC is discounted by just 10 times. Thus there is good scope for the upside. Accumulate on reactions.
Prime movements and volumes indicate that there is to be good accumulation in the last few weeks on better volumes. If it sustains closing above Rs.230 level for the next few days, it may head to Rs.300.
* The business environment for both the Clay and Starch businesses where English Indian Clays operates are good and the Company continues to improve its performance on almost every parameter like productivity, product mix, quality, exports etc.
The company registered a growth of 22% in turnover and 26% in EBIDTA from operating businesses. The turnover for FY07 was Rs.253 cr. and EBIDTA from operations was Rs.42 cr.
Overall, the company should continue on its growth path in both its businesses and the outlook for FY08 looks positive and optimistic.
For H1FY08, sales were up by 13% at Rs.134.61 cr. while net profit flared up by 40% to Rs.0.46 cr. after providing Rs.4.34 cr. for depreciation. Its equity capital is just Rs.4.47 cr. and H1FY08 EPS is Rs.21 against Rs.15 in H1FY07.
The company has strong book value of around Rs.218 and has maintained the return on net worth of above 17% over the last few years. The company also holds 29,55,173 shares at cost price of Rs.45 cr. whose market value today is Rs.114 cr. The company has an investment division, which is being demerged and has huge real estate worth too.
The stock has flared up in the last few weeks. Investors can keep a watch to accumulate this stock on reactions around Rs.1600 level for good long-term growth. If it closes above Rs.1840, it shall give good breakout for a good upmove over the long run.
Market Guidance
* Insecticides India (Rs.83) came out with an IPO at Rs.105. For H1FY08, the company earned net profit of Rs.9.72 cr. on an equity of Rs.12.68 cr. against Rs.8.57 cr. for the whole of FY07. The company has started production at its Samba plant and Chopanki plant on 24th September 2007, the benefit of which will reflect in the future. Investors can take a small exposure in this stock on dips.
* Arrow Webtex (Rs.90) has a manufacturing facility at Nasik and completed its expansion project in November 2006, which has doubled its manufacturing capacity.
The company also renders consultancy services for development of properties in and around Mumbai and also leases commercial office space to attract corporate tenants. It directly owns about 1,33,000 sq. ft. of property in Mumbai, which has been given on leave and license basis to corporate tenants.
Fasttrack Impex Private Ltd. (FIPL) is its 74% subsidiary. Sailent Real Estate Developers (I) Pvt. Ltd. (SREDPL), a subsidiary of FIPL is also a subsidiary of the company. Further, Aryanish Finance & Investment Pvt. Ltd., (AFIPL) and Highstreet Cruise and Entertainment Pvt. Ltd. (HCEPL) are its 100% subsidiaries.
It earned a consolidated EPS of around Rs.14.37 for H1FY08 and is expected to do very well in the coming years with new developments.
Investors can keep watch to add this stock on reactions around Rs.575 for good long-term investment.
* Strong reports are pouring in from knowledgeable sources on Balmer Lawarie (Rs.605.75), Hind Oil Explorations (Rs.162.20), EIH (Rs.164) and Indiabulls Finance (Rs.854.70).
* There are indications that Kirloskar Pneumatics (Rs.670) is likely to get good orders in the near future. Stay invested. Stock has closed at a new high this week.
* Jenson & Nicholson (Rs.16.82) was advised few weeks around Rs.7. It is now trading above Rs.16, book profits and lock it with a good stock like DIC India for safe and steady growth.
* J P Associates (Rs.400.50) was recommended in this column from Rs.380 onwards for Rs.10 paid-up. It is now above Rs.400 for Rs.2 paid-up in just 18 months since recommendation in this column. Hold on for a target price of Rs.500 over next the 6 months.
* After a long wait, WPIL (Rs.85) has given good returns to investors. Book partial profits above Rs.100 level and switch to Sharyans Resources at Rs.400 for good long-term growth.
* Supreme Industries (Rs.382.45) is expected to report better results for this quarter. The stock closed at all an time high of Rs.382. Stay invested.
* Grauer & Weil (Rs.162.10), Ashapura Mining (Rs.362.90) and Bombay Dyeing (Rs.683.95) may see higher levels over the next few months as per market report. Stay invested.
* Informed investors are bullish on Alfa Transformer (Rs.121.25), Khoday (Rs.290.15), Webel SL Energy (Rs.490.05).
* SSI Ltd. (Rs.179) was recommended earlier in this column. There are indications of favourable developments and the stock may be heading for a new high on real estate developments. Stay invested.
The company has been performing consistently well over the last many years having given 1:1 bonus shares about two years back and maintaining a dividend of 30% on its enlarged capital with a strong book value of Rs.67 for Rs.10 paid-up share.
In Q1, margins were affected due to rise in input costs like steel but the management has decided to relook at the sourcing policy wherein emphasis will be more on procuring raw material from overseas keeping in mind the strong Rupee against the US Dollar. As a result, 2nd quarter was better and for H1FY08 operating margins improved from 13.04% to 14%.
The opportunities for growth in demand for high tensile fasteners are a plenty with the growth of the Automobile Sector in India. Further, exports from India have good prospects.
It can, therefore, further improve margins H2FY08 onwards. For the full year, the company expects to achieve sales of Rs.168 to Rs.175 cr. and post an EPS of around Rs.11/12 levels. Investors can accumulate this stock safely on dips around Rs.77/80 levels for good long-term growth.There is good consolidation in the stock. If it sustains closing above Rs.90 level, it may see a target of Rs.120.
* DIC India , formerly known as Coates of India, is a 65.8% subsidiary of DIC Asia Pacific Pte. Ltd., Singapore, which in turn is a wholly-owned subsidiary of DIC Inc., Japan, the flagship company of the DIC group.
The DIC group, with its subsidiary Sun Chemicals, is the largest ink company in the world. Around US $5 billion (Rs.22,000 cr.) of the group’s revenue of more than US $9 billion comes from ink-related businesses. DIC is the world’s largest supplier of inks, organic pigments, varnishes, coatings, resins, and toners and ink jet inks.
The company posted an increase of 19% in its net sales to Rs.292.15 cr. for the nine months ended 30th September 2007. As a result, the operating profit of the company increased by 30% to Rs.19.12 cr.
Other income increased by 32% to Rs.3.92 cr. resulting in a jump in PBIDT by 30% to Rs.23.05 cr. Other income includes foreign exchange gain amounting to Rs.1.25 cr for the nine months ended 30th September 2007. The interest paid by the company for nine months period increased by 71% to Rs.6.51 cr. PBDT of the company increased by 19% to Rs.16.54 cr. With the recent issue of right shares at Rs.225 per share, its interest liability will reduce in future.
Depreciation increased by 14% to Rs.4.96 cr. Total tax outgo increased by 32% to Rs.4.14 cr. Despite it, the company’s net profit for the nine months ended 30th September 2007 increased by 16% to Rs.7.44 cr. compared to the corresponding period of the previous year.
Economic growth, favourable demographic profile, a lower per capita consumption of inks and a radical change in the buying attitude towards print quality are the key demand drivers for maintaining its momentum of growth.
The company is focusing on improving its operating margins through better productivity and greater focus on logistics, developing competence against international players on the strength of the technology provided by the parent company and effective working capital management. Increase in crude oil price is a risk factor for the company.
With a significantly improved customer base, experience in varied markets, continuous technical assistance from DIC, Japan – the world’s largest ink manufacturing company and strong management team, the company feels confident of accelerated growth in all market segments in coming years.
Last year, consolidated sales were Rs.429 cr. and EPS was Rs.21. In the current year, consolidated sales are likely to be above Rs.500 cr. and EPS likely to be in the region of Rs.24 - 26.
Most shareholders may not have subscribed to the right issue as its stock price was well below Rs.225, which was the issue price. Hence, the promoter holding of 65.8% may increase sharply.
The company has around 8 manufacturing units and other real estates at various locations. With consolidated sales of above Rs.500 cr. and EPS of Rs.25 (Rs.20 on increased capital) and a market cap of Rs.205 cr., the stock looks very attractive at Rs.220 level in this heated up market. Moreover, Micro Inks is trading at a P/E multiple ratio of 22 while DIC is discounted by just 10 times. Thus there is good scope for the upside. Accumulate on reactions.
Prime movements and volumes indicate that there is to be good accumulation in the last few weeks on better volumes. If it sustains closing above Rs.230 level for the next few days, it may head to Rs.300.
* The business environment for both the Clay and Starch businesses where English Indian Clays operates are good and the Company continues to improve its performance on almost every parameter like productivity, product mix, quality, exports etc.
The company registered a growth of 22% in turnover and 26% in EBIDTA from operating businesses. The turnover for FY07 was Rs.253 cr. and EBIDTA from operations was Rs.42 cr.
Overall, the company should continue on its growth path in both its businesses and the outlook for FY08 looks positive and optimistic.
For H1FY08, sales were up by 13% at Rs.134.61 cr. while net profit flared up by 40% to Rs.0.46 cr. after providing Rs.4.34 cr. for depreciation. Its equity capital is just Rs.4.47 cr. and H1FY08 EPS is Rs.21 against Rs.15 in H1FY07.
The company has strong book value of around Rs.218 and has maintained the return on net worth of above 17% over the last few years. The company also holds 29,55,173 shares at cost price of Rs.45 cr. whose market value today is Rs.114 cr. The company has an investment division, which is being demerged and has huge real estate worth too.
The stock has flared up in the last few weeks. Investors can keep a watch to accumulate this stock on reactions around Rs.1600 level for good long-term growth. If it closes above Rs.1840, it shall give good breakout for a good upmove over the long run.
Market Guidance
* Insecticides India (Rs.83) came out with an IPO at Rs.105. For H1FY08, the company earned net profit of Rs.9.72 cr. on an equity of Rs.12.68 cr. against Rs.8.57 cr. for the whole of FY07. The company has started production at its Samba plant and Chopanki plant on 24th September 2007, the benefit of which will reflect in the future. Investors can take a small exposure in this stock on dips.
* Arrow Webtex (Rs.90) has a manufacturing facility at Nasik and completed its expansion project in November 2006, which has doubled its manufacturing capacity.
The company also renders consultancy services for development of properties in and around Mumbai and also leases commercial office space to attract corporate tenants. It directly owns about 1,33,000 sq. ft. of property in Mumbai, which has been given on leave and license basis to corporate tenants.
Fasttrack Impex Private Ltd. (FIPL) is its 74% subsidiary. Sailent Real Estate Developers (I) Pvt. Ltd. (SREDPL), a subsidiary of FIPL is also a subsidiary of the company. Further, Aryanish Finance & Investment Pvt. Ltd., (AFIPL) and Highstreet Cruise and Entertainment Pvt. Ltd. (HCEPL) are its 100% subsidiaries.
It earned a consolidated EPS of around Rs.14.37 for H1FY08 and is expected to do very well in the coming years with new developments.
Investors can keep watch to add this stock on reactions around Rs.575 for good long-term investment.
* Strong reports are pouring in from knowledgeable sources on Balmer Lawarie (Rs.605.75), Hind Oil Explorations (Rs.162.20), EIH (Rs.164) and Indiabulls Finance (Rs.854.70).
* There are indications that Kirloskar Pneumatics (Rs.670) is likely to get good orders in the near future. Stay invested. Stock has closed at a new high this week.
* Jenson & Nicholson (Rs.16.82) was advised few weeks around Rs.7. It is now trading above Rs.16, book profits and lock it with a good stock like DIC India for safe and steady growth.
* J P Associates (Rs.400.50) was recommended in this column from Rs.380 onwards for Rs.10 paid-up. It is now above Rs.400 for Rs.2 paid-up in just 18 months since recommendation in this column. Hold on for a target price of Rs.500 over next the 6 months.
* After a long wait, WPIL (Rs.85) has given good returns to investors. Book partial profits above Rs.100 level and switch to Sharyans Resources at Rs.400 for good long-term growth.
* Supreme Industries (Rs.382.45) is expected to report better results for this quarter. The stock closed at all an time high of Rs.382. Stay invested.
* Grauer & Weil (Rs.162.10), Ashapura Mining (Rs.362.90) and Bombay Dyeing (Rs.683.95) may see higher levels over the next few months as per market report. Stay invested.
* Informed investors are bullish on Alfa Transformer (Rs.121.25), Khoday (Rs.290.15), Webel SL Energy (Rs.490.05).
* SSI Ltd. (Rs.179) was recommended earlier in this column. There are indications of favourable developments and the stock may be heading for a new high on real estate developments. Stay invested.