Tuesday, July 22, 2008

Stock Ideas: Pitti Laminations Ltd. Cosmo Films Ltd. 3i Infotech Ltd.

Pitti Laminations Ltd. (Code: 513519) (Rs.35.75) is primarily engaged in the manufacture of electrical steel laminations and stampings, which form a critical part in all industrial motors, alternators, pump sets, aeronautics, windmill generators and DG sets. It even produces small laminations on its High Speed Press for compressors. With an installed capacity of 25,000 MTPA, it is operating at 70% capacity utilisation leaving ample scope for future growth. Besides in January 2008, it has completed its forward integration plan and has put up a project for fabrication of steel stator bodies, machining of stator bodies and dropping of assembled stator core into the stator body. This will result in value addition and considerable improvement in the margin. However due to the rupee appreciation during FY08, it reported lower OPM of 12% against 14% in FY07. Accordingly, its sales improved by 15% to Rs.170 cr. but PAT declined by 35% to Rs.6.50 cr. after huge tax provisioning of Rs.4 cr. equivalent to 40% of PBT. It declared 20% dividend, which gives a yield of nearly 6% at CMP. With the rupee stable above Rs.42 it has the potential to clock a turnover of Rs.200 cr. with PAT of Rs.9 cr. i.e. an EPS of Rs.10 on its equity of Rs.9.50 cr. for FY09. A strong buy.
Cosmo Films Ltd. (Code: 508814) (Rs.83.60) is the pioneer and one of the largest manufacturers of Bi-axially Oriented Polypropylene Films (BOPP) with an installed capacity of 77,000 MTPA. It also manufactures thermal lamination film, an export focused product with higher margins. For future growth, the company is expanding its capacity by adding two BOPP lines of 40,000 MTA each. The first line is expected to be commissioned before March 2009 for which orders have 10 been placed for all major equipments. In addition, it is also adding two new lines in thermal lamination and increasing its capacity from 13,500 to 19,500 MTA. To fund all this, it recently placed 31 lakh warrants to be converted at Rs.107 per share. It has also taken the approval for issue of 10 lakh equity shares under ESOP. For FY08, it sales improved by 10% to Rs.585 cr. but the net profit zoomed by 80% due to better operating margin, lower interest and lower depreciation. It reported an EPS of Rs.23 and declared 50% dividend, which gives a yield of more than 6% at CMP. However this year, it may face margin pressure due to rise in crude oil prices with polypropylene being its main raw material. Hence it may clock a turnover of Rs.625 cr. with profit of Rs.35 cr. i.e. an EPS of Rs.16 on its diluted equity of Rs.22.50 cr.
3i Infotech Ltd. (Code: 532628) (Rs.94.10) is the fourth largest Indian software products company offering a comprehensive range of software products & solutions primarily for banking, insurance, capital markets, mutual funds, telecom, manufacturing, retail & distribution industries. For Q4FY08, its revenue increased by 70% to Rs.352 cr. and net profit jumped up 60% to Rs.50 cr. With significant growth anticipated in the transaction services business in India, the company has set up a hub and spoke model spanning across the country with cost efficient delivery capabilities and it is into processing of credit cards, insurance applications, contact point verification, soft collections, cheque clearing services, reconciliations, etc. As on date, the company has a very healthy order book position of Rs.865 cr. For entire FY08, it recorded 80% and 75% growth in sales and net profit to Rs.1223 cr. and Rs.183 cr. respectively. This translates into an EPS of Rs.14 on its current equity of Rs.130.50 cr. However, the EPS works to Rs.11 on its fully diluted equity (conversion of all FCCB) of Rs.165 cr. Recently the company has acquired a strategic stake of 26% in the Hyderabadbased Locuz Enterprise Solutions Ltd. for an undisclosed amount, with a commitment to acquire the remaining stake over a period. A strong and a safe bet.
Source: Moneytimes (Internet)


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