HYDRO S & S -- long term hold

HYDRO S & S (courtesy ValueInvestor)
CMP: 37

HYDRO S & S is a chennai based compay having three manufacturing facilities one in channai and two at pondicherry.i shall take the liberty to classify this company as an auto ancillary as it engaged in manufacture of Thermoplastic Elastomer compounds .
The companies performance during the year ended mar 05 was affected primarily due steep increase in price of prolyproylene a major raw materil for the company. However the VALUE INVESTOR is of the opinion that the worst for the company is behind .

POSITIVES
1) during the year ended march 05 the company has written off bad debts to the tune of Rs1.34 crs.

2) company is now able to pass on price increases to its customers to a major extent.

3)enhanced volumes needed by the automotive sector has made the company expand its capacities which have already been commssioned.

4)company has also put up 500KW wind energy generator to take care if enhanced power needs and increasing tariff rates
.
5) above expansions are through debts and internal generations.without any equity dilution

6)plans to broadbase its produt profile.(read M D A annexed below.)

7) despite very low profits the company has declared 12% dividend .the dividend distribution is twice the net profit earned.THIS CERTAINLY INDICATES MANAGEMENTS OUTLOOK FOR THE FUTURE.

8)for the current year to end one can project a turnover in range of RS 85/90 crs and profit of Rs 3.50/4.00 crs.(conservatively). giving an EPS of RS 6/6.25.

Given the excellent long tem prospects VALUE INVESTOR expects the price to double in a years time from the current level of RS 37


VALUE INVESTOR


MANAGEMENT'S DISCUSSION & ANALYSIS REPORT

A) INTRODUCTION
The objective of this report is to present the Management's perception of the various developments in the business environment, challenges and opportunities before the company as well as to provide an analysis of Company's performance. This report also summarises the Company's internal control measures and significant developments in the Human Resources front. It should be read in conjunction with the Director's Report to the Shareholders, Financial Statements and Notes thereon included elsewhere in this Annual Report.

B) MACRO-ECONOMIC SCENARIO
The performance of the economy was less than the previous year with the official estimates at 6.9% of the GDP growth. The inflationary impact on the industry due to the sharp rise in fuel as well as the shortage in metals and consequential impact on costs were a matter of serious concern during the year. These increases have affected the bottom line in many sectors particularly where the effect of increased costs were unable to be passed on. The various cesses imposed by the Government to support their schemes have also added to the general costs. The delay in the progress of reforms as well as the slow development in infrastructure is worrying. On the other side, the decreases in customs duties as well as the various FTAs without a level playing field would distort the domestic markets.

C) PERFORMANCE OF THE AUTOMOBILE SECTOR
This sector continues to show impressive growth particularly in the passenger car and two wheeler category, registering a 24% growth. However hike in the prices of key raw materials like steel and plastics exerted the pressure on margins. Both M/s Maruti Udyog Limited and M/s. Hyndai Motor (India) Limited announced major expansion plans for passenger cars in their respective locations. Renault & Volkswagen have also announced entry into the Indian market with production facilities .

D) COMPANY PERFORMANCE
a) Sales
During the year your company recorded a 19% growth in value and 6% growth in volume. Rapid inflation in the cost of polypropylene, the major raw material for the company's operations, with increases as high as 50%, posed new challenges and the company had to settle for sub-optimal growth to restrict the impact on the contribution margins for its products in different market segments.
The company is also looking at business volumes in segments other than automotive where resistance to recovery of cost of inflation in raw material is very less.
b) Exports
Exports remained static with marginal increase in selling prices. Your company has established new customers in the Middle East and Africa for incremental business in 2005-06.
c) Quality Initiatives
Your company continues to invest in hardware and training of its people in improving quality of products and services. An environmental chamber was established in its Research & Development centre to provide new level of quality assurance to the automotive industry for large moulded parts.
d) Technology Upgradation
The company continues to constantly interface with partners and vendors to develop newer solutions to meet its customer expectations. Significant progress was also made in reducing power and wastages in operations. The new products developed by the company led to enhancing its sales volume in 2004-05.
At Pudukkottai, your company commissioned a new mega compounder and successfully established performance within a short time of three months.
e) Business Initiatives
In order to establish markets in the related market sectors and grow with the plastic processing industry in India, your company is evaluating a number of business opportunities to enhance its product profile and expand into other application segments.

E) MANAGEMENT'S PERCEPTIONS OF RISKS
Like most industries, the company is also exposed to Business, Asset and Financial risks. Business risks include cyclical nature of demand for the company's products depending on new projects, continued growth in the Indian economy, adequate allocation of Government funds for road and highway development, more "global" design concepts to be used in the new models proposed to be launched b the car and commercial vehicle companies, continued positive climate for foreign investment in the country etc. There is also a need for continuous process and product up gradation to face the challenges of competition. All these risks are continuously addressed and acted upon in the various management review processes.
Asset risk includes threat to physical assets through accidents, natural and unnatural calamities etc. There is a system of continuous evaluation of insurance covers so as to cover both conventional and specific risks peculiar to its business, in an adequate manner.
With reference to foreign currency risks, the Company currently enjoys the advantage of favourable currency rates so far as its imports are concerned in view of the rupee strengthening against the U S Dollar. The forex position is being continuously monitored to take appropriate action to minimize the impact of negative changes.
Since the exports proceeds are low compared to import requirements, the appreciation of the rupee does not significantly affect its realization. The company is continuously evaluating this situation to hedge currency exposures at an appropriate time.

F. ONGOING INITIAVES AND FUTURE OUTLOOK
The O.E. market for Automotive and Appliances is dominated by the Multinational Companies in which tier 2 suppliers like your company face increasing competition from both domestic and multi-national competitors. The three critical parameters of Quality, Cost and Delivery are measured by O.E.Ms to judge the competitive edge of one supplier over the other.
Your company is paying attention to continuously improving the quality of its products and services, in reducing the manufacturing cost through reformulation, productivity improvement, energy conservation and reliable logistics to meet "JIT" requirement of the supply chains of the OEMs. The growing automotive industry is much larger than the domestic market as assembled passenger cars and value added auto components increasingly find export markets.
While the future outlook is bright, the major area of concern is the unhealthy competition and sharp increase in the prices of polypropylene. Realising this, your company is already developing new products of higher contribution margins in sectors other than automotives such as packaging and consumer products.

Excel Crop Care Excellent growth

Excel Crop Care (courtesy InvestmentGrowth)
CMP: 259

With a normal monsoon and easy availability of credit, the agrochemicals industry should see buoyant growth

Excel Crop Care: Financials

Excel Crop Care (ECCL) is engaged in the manufacture and trading of pesticides. The company came into existence as a result of the transfer of the agri-business of Excel Industries (EIL) with effect from 1 April 2002.

ECCL's agrochemicals business includes insecticides, herbicides, fungicides, fumigants and rodenticides. The company has its manufacturing plants at Bhavnagar (Gujarat), Silwasa (Dadra and Nagar Haveli) and Kutch (Gujarat). The increase in manufacturing capacities of various plants and obtaining new registrations of certain products in the last couple of years have helped it to meet higher demands.

Buoyed largely by favourable conditions in the global market, the Indian pesticides industry recorded an impressive growth of over 25% in exports, whereas the growth was around 12% in the domestic market. In particular, manufacturers of generic products optimally benefited from increased exports as well as improving profitability through price and volume. Faster growth in the domestic market was mainly lead by Indian players co-marketing new cotton insecticides and wheat herbicide products from global majors.

Going forward, the near normal monsoons greater thrust on agriculture by the government, and increasing area under cotton crop can result in a strong double-digit growth in domestic demand.

ECCL has impressively capitalised on the opportunities at and out of home, with registration of new molecules and enhancing existing capacities. The major work of installation of plant and machinery for setting up a new plant for triazophos and its formulations at its Bhavnagar unit is in the advanced stage of completion. The company has carried out the expansion of production capacity at its profenophos plant and also implemented an improved process for the manufacture of chlorpyriphos at its Bhavnagar plant. This is likely to fetch greater revenue from FY 2006 onwards.

ECCL has posted a 15% growth in sales to Rs 99.19 crore in the quarter ended June 2005. However, the operating profit margin (OPM) jumped by 120 basis points (bps) to 14.1%, despite the firmer raw materials. As a result, the operating profit (OP) advanced by 26% to Rs 13.97 crore. The profit before tax (PBT) increased by 28% to Rs 11.48 crore and the profit after tax (PAT) recorded a healthy 37% rise to Rs 7.53 crore.

In FY 2005, the sales jumped by 32% to Rs 387.72 crore and OP jumped by 57% to Rs 40.93 crore. The growth in sales was powered by the impressive 34% growth in exports to Rs 129.27 crore. OPM gained 170 bps to 10.6% mainly due to improved realisation and focus on cost reduction. The interest cost reduced by 31% to Rs 6.99 crore, which strengthened the financials. PBT and PAT jumped by 112% to Rs 33.91 crore and 113% to Rs 21.93 crore. This performance was achieved despite the poor agricultural scene due to below-normal and uneven rains.

With the monsoon turning out to be normal this year and easy availability of rural credit, the pesticides industry should see buoyant growth for the rest of the year. With expanded capacities, improved processes and a larger number of registrations, ECCL is well set to capitalise on the better times.

In FY 2006, ECCL can report sales of Rs 460.98 crore and net profit of Rs 30.03 crore, giving an EPS of Rs 27.3. The current price of Rs 228 (05 September 2005) discounts this only 8.4 times, leaving decent scope for appreciation.

SR Industries

S R industires ( courtesy InvestmentGrowth)
CMP: 32.50

S R INDUSTRIES is a chandigarh based company engaged in manufacture if terry towels.

POSITIVES

1)the company has undertaken expansion of its capacities which shall enhance to 4500 tonnes as against current 1000 tonnes.

2)the promoters of the company have recently acquired the stake of 24% held by PSIDC in the company

3) S R caters the entire requirement of BOMBAY DYEING.

4)MORE than 70% of the production is exported.

5)LOT of developments are taking place on export front with international companies placing strong orders.

6) FOR the year to end march 06 S R is projected to earn a turnover of about Rs 60 crs and net profit in range of Rs 8/9 crs.

The company has informed that the Company is presently engaged in the manufacture of terry towels at Derabassi, Distt. Patiala, Punjab with an annual capacity of 1500 MT.

The Company had pre-paid & cleared the dues of Industrial Development Bank of India. In the current financial year 2005-06, the Company has undertaken a major expansion programme to double its capacity to 3000 MT/annum and is likely to be commissioned by December 2005. The Company during the current year is expected to achieve a turnover of Rs 500 million and a cash profit of Rs 75 million.

The Private Promoters have bought the entire holding of 26.10 lac equity shares equivalent to 24.08% from its co-promoter / Joint Sector partner The Punjab State Industrial Development Corporation Ltd - a Government of Punjab Undertaking.

LONG TERM INVESTORS MUST ADD S R INDUSTRIES TO THEIR PORTFOLIO.
VALUE INVESTOR expects the company to grow at a rate of 40/50% in the coming years.

Canfin Homes -- Looks good

Canfinhome (courtesy Investment Growth)
CMP: 51

The hsg Industry is continuing to grow at a fairly vigorous pace. There are clear indications of increasing demand for houses whether in metros, urban or semi-urban centers there by offering good business opportunities to Housing Finance Companies. The available tax benefits would possibly further aid the Industry's growth.company is also re-orienting its strategies with a view to acquiring a higher share in business which, however, shall be sound and profitable by adopting the best Industry practices.

The Capital Adequacy of the company as at March 31, 2005 was 18.92% against the minimum stipulated requirement of 12%. This stock is under performer in the sector in spite of having Better fundamentals like eps of around 10, good payout 25% dividend,RONW is also 14.6 %
compared to `13.3 % of lic hsg which at quotin at p/e rato of 11.4 dewan hsg pp/e is around 15.compared which canfin is around 5.2.

INVESTORS CAN ACCUMULATE THIS STOCK AS SAFE investment for long term investment.

Coastal Roadways---worth a look

Coastal Roadways (courtesy Suman Speaks)
CMP: 24.90

The company purchased 25 out of the 40 heavy duty vehicles for the Castrol Ltd. contract. The contract is so huge that if they supply 100 more vehicles then that will also be absorbed. But the company has to behave according to it infrastructure facilities.The rest 15 vehihcles will be added in the second week of next month. It has opened the Refrigerated Container Service to all the branches in India. Previously it was available only in Bangalore branch.It has introduced Palletisation of Cargo, which calls for high quality mechanised handling of cargo. It has state of the art ware- house facility. It has property worth crores. As everyone is aware that the real estate market is hotting up in the metros and land valuations is competing with that of gold. It has near monopoly of its services in the Eastern India.It has aggressive plans ahead. The disel fuel hike will not too much affect the bottomline in this quarter as it is almost over. But such charges will be subsequently passed on to the customers in the subsequent quarters. The company is aggressively pursusing to acquire more vehicles to cater to FMCG, Petroleum, Electronics etc. sectors. It is in talks with a number of players in various sectors and more deals like the Castrol ones are likely to follow suit.It is coming up with very good results in the September quarter.

Kaveri Telecom

This article is from Suman speaks. Looks good to me

Currently it is traded at 165-170 /-

Following orders they have:

1/ 20th May 2005: The Company has secured an order from Bharat Electronics Ltd (BEL) worth Rs 17,70,77,000/- for supply of Company's products

2/ 4th August 2005: ZTE Corporation, the largest Telecom Equipment Manufacturer in China has signed Supplies Co-operation Agreement with the Company for supply of Kavveri Antennas for ZTE CDMA Equipment

3/ There is some big NEWS expected and the order which they have received from China is x crorers worth and BEL's itself is a 18 crore order.

And just check its equity which is just 5 crore with EPS of 1.12 and all they have to do is just execute the orders in hand. Its just the mater of time. Its going to be one more Astra Micro. Currently Astra Micro is trading at 2600.

Ashish Chugh's Hidden Gems

Among the many hidden gems I liked this one. Not becuase its fundamentals are good or on the basis of technical analysis, but simply because I like the health sector and I think that in the near future this sector will have a dream run

Devaki Hospitals:
CMP: 37.35

In the last couple of days, this stock has run up from Rs 18 to Rs 32. So investors should wait for a correction before getting into this stock. This stock again was mired in a controversy. It was a management tussle around three years back. The earlier management was accused of financial irregularities, which led to company not paying up the banker. So they defaulted all the loans to the bankers. They could not even pay salaries of the employees and also defaulted on statutory liabilities, like PF and electricity bill.

In the last one year, this company saw a change in management. The new management was taken over by a set of doctors, who were working there. The old management sold out their shares to the new management.
The new management infused more capital into the company, and cleared all loan to the bankers. They have restructured the loans, and cleared the high cost loans, which were at 14-15%. They have recently substituted it with a loan from HSBC, at about 9%. They have paid off all statutory liabilities. Now the hospital seems to be coming back on track.
The new set of doctors who have taken over this hospital, enjoy a good reputation in their own fields. So in future, they have plans for this hospital. They are doing renal surgeries. The hospital is a specialist in kidney transplant, and it is also planning to add up a cardiac department, which could be a big money spinner. Mind you, this stock has run up from Rs 16-Rs 17 to Rs 32 in a matter of one month. So one can wait for a decline to Rs 25-Rs 26 before investing

Some long term speculative stocks

These stocks are recommendations from various sites, groups etc...that I have liked. These are some of the stocks, I would put around 5000 and just look at how it shapes up in the long term.


Arston Engineering: (K R Choksey Securities views on Arston Engineering)
CMP: 34.30

The company has two interesting business segments, one is the construction of turnkey projects and second is the manufacturing of storage tanks which are mainly required by customers who are in petrochemicals and petrol and refineries segment. This company is into the fabrication of this particular storage tanks. Essar Oil has confirmed its package and the company is on track as far as the execution of project is concerned. This company is now expected to complete Rs 20 crores worth of pending orders from Apparel Plus. They also have some overseas orders particularly from Dubai in which they will be supplying some storage tanks. The important aspect is that they have been in negotiations with some of the retail outlets of petroleum companies where they would be putting up their petro gas stations. This company would be completing those projects and hand it over to the company. I think that is where opportunities lie as far as business is concerned.

In a Rs 10 crore equity, the management holds just about 15% or so. Net worth is almost negative at Rs 10 crores but they have outstanding dues to the tune of Rs 25 crores plus. In the past, in the balance sheet they have written of these dues and whatever recovery is made is being added to P & L. So we believe that if this kind of progress goes forward and if this company can probably receive this kind of money, they have the capacity to deliver.


Hotline Glass (views of K R Choksey Securities )
CMP Rs 19.50:

Hotline Glass produces glass funnels. The company has put up a JV with LG Electronics to manufacture colour picture tubes. So Hotline Glass supplies colour funnels to them, and they have another JV with LG Philips to whom they supply colour TV panels. This business has just started and the production is getting stabilised. The company will have a 10 million ton capacity which will result in a substantial increase in business for the company. And in June 2006 and thereafter they will also be starting with the production for the glass panel business for colour picture tubes which will go to LG Phillips. The company will shift to gas based fuel in the first quarter of the next financial year, which will bring down the company's fuel costs. So we are expecting this company to have a good run hereafter as they are based on a good business model.

If one looks at the financials of the company it certainly does not look interesting because on an equity of Rs 80 crores, the EPS is hardly anything to talk about. The company also suffered when it had to stop production for sometime because it shifted majority of its production capacity to 29” colour picture tube funnel. One cannot find any attraction with Rs 80 crore equity and with almost a loan of about Rs 50 crore in the balance sheet and with a profit of as little as Rs 2 crore and the total capital being employed of about Rs 150 crore, yet going forward this business is likely to find better performance as a result of which I think the stock is available at Rs 18 at this point of time and maybe when the performance starts coming in, the market will take note of it.

Ester Industries (vews of Anand Rathi Securities)

CMP: 20.25

am not saying that this is the stock to be bought right away. There are certain potentials and risks in this stock. However, this stock is worth watching for investment. This is a Polyethylene Terephthalate, PET, film maker with the capacity of 25,524 metric tonnes, and 85% of its turnover comes from PET films. The rest comes from engineering plastics.
Right now the concerns are that, the high raw material prices of both these products, i.e, Purified Terephthalic Acid, PTA, and Mono Ethylene Glycol, MEG, are very high, looking to the oil prices. Therefore, the margins are under pressure.
Apart from this, the other concerns are that, there has been a large domestic capacity addition in last one year alone, nearly to the extent of 65%. The other concern is the reduction in the Duty Entitlement Passbook Scheme, DEPB rate, for this product from 4% to 8%; as well as reduction in the import duty from 20% to 15%.
But the potential lies in the strong demand for PET films. Exports are also rising and utilisation levels are very high in the industry. The company is going into more value added products like metallizing films, where it has recently added 4875 metric tonnes of the capacity. That is going to be commissioned in this month alone. So it has potential, and I think at around Rs 19, this stock is for the long term. It is for people who can bet on reduction in either the raw material prices, or improvement in the realisation of the product.