Stock Idea: Omnitech Infosolutions Ltd

Omnitech Infosolutions Ltd (Rs 120)
(BSE Code – 532882, NSE Code - OMNITECH)
(P/E- 4.5, Market Cap - Rs157 cr, Equity - Rs13.13 cr)
Omnitech Infosolutions (OIS), incorporated in 1990 by engineering graduates, is a niche player offering business availability services including infrastructure management, application management and software testing; business continuity services comprising disaster recovery management and disaster recovery consulting and auditing; offshore-centre services using onsite, offshore and built-operate-transfer (BOT) models; systems integration solutions, and framework solutions and products such as Omni Manage IT, Omni Audit, Omni Transport and Omni Monitor. OIS has 150 active customers currently. Some of them include Kotak group of companies, Birla Sunlife, Philips, Grindwell Norton, Accenture, Patni etc. OIS derives 53% of its revenues from top 10 customers. About 66% of OIS’s business comes from repeat customers.
In its two joint ventures (JV) in Bahrain, OIS holds 24.5% in DRC Gulf LLC and 32.75% in Omnitech Gulf Technologies WLL. DRC Gulf provides data-storage-centre services among other things. Through Omnitech TSB Company, in which it holds a 67% stake, Omnitech has entered into a JV with Sanwell Company from Japan for IT consultancy, software development for embedded systems, infrastructure management with remote management services and performance management services (testing) for telecom, banking, financial services and manufacturing. Looking out for acquisition of about US$ 10 million -15 million in the infrastructure management services (IMS) space, Omnitech has shortlisted a few companies in the US and UK.
For FY09, Omnitech reported 30% rise in net sales to Rs 171.42 cr. and bottom line stood at Rs 33.09 cr.(up 30%) cr. On a equity of 13.13 cr. (Promoter stake- 54.45%), the EPS stood at Rs 25.2 and the dividend declared was 12%. For the half year ended Sept. 2009, OIS has posted net profit of Rs 16.62 cr. (down 7%) on net sales of Rs 93.75 cr.(up 7%). OIS’s order book position stands at Rs 115-120 cr. and for the financial year 2009-10 it expects to grow by 15-20% organically.
OIS is establishing itself as a dominant player in the infrastructure management, disaster recovery and business continuity space. OIS's infrastructure management and application management coupled with performance management and software testing services which have better margins could drive its revenues and profitability going forward. OIS is well placed to tap the opportunities in the IT services and product domain with both organic and inorganic growth in infrastructure management and software testing services going ahead. At current market price of Rs 120, Omnitech stock trades at 4.7 times FY09 earnings(Rs 25.2) and at 4.4 times expected FY10E earnings(Rs 27). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Nagarjuna Agrichem Ltd

Nagarjuna Agrichem Ltd (Rs 228)
(BSE Code - 524709)
(P/E - 5.7, Equity - Rs14.9 cr, Promoter’s stake - 78.29%, Market Cap - Rs340 cr)
Nagarjuna Agrichem Ltd (NAC), a co. belonging to the Hyderabad based Nagarjuna group, was established in 1994 for producing Monocrotophos Technical. NACL has since grown substantially and now manufactures a comprehensive range of pesticide technical's, formulations and custom manufactured fine chemicals. NAC has tie-ups with large Indian Agrochemical Majors and MNC’s for the domestic and export markets. NAC has an impressive range of branded formulations in the categories of Insecticides, Fungicides and Herbicides. NAC has one of the largest dealer network spread across India, with marketing and sales offices in addition to an extensive Warehousing & Logistics Infrastructure to handle operations in 20 Indian states. NAC has been continuously expanding its production capacities and reporting better results. On a equity of 14.9 cr. the public holding in the company is 15.48%, and that of the promoters is 78.29%.
The export market offers good growth opportunities to the NAC and it has been strengthening its presence in the overseas market by exploring new markets, promoting existing and new products and protecting its existing product registrations and making investment in new product registrations. NAC’s market spans the entire Indian subcontinent as well as Europe, the Middle East, Japan, USA, Australia and Africa. Low cost production of the Indian agrochemical manufacturers helps them to win CRAMS business from the global agrochemical majors. The extremely low per hectare domestic consumption and thrust on increasing output per hectare promise healthy domestic growth going forward. The per capita consumption of crop protection products in India is one of the lowest in the world
NAC’s sales have been growing by an average 37% over the past five years, while its operating profit rose 35% over the same period. Margins have averaged a decent 15% over these five years. Most importantly, Nagarjuna is a very efficient user of capital. Its RoE has averaged 41.27% over the past three years. For the year ended March 2009, NAC reported 46% growth is net sales to Rs 605.3 cr., whereas net profit grew 91% to Rs 49.2 cr., despite 120% rise in income tax to 31 cr. from 14 cr. NAC improved its operating margins from 17% to 19%. On a equity of 14.9 cr, the EPS stood at Rs 33 and the dividend declared was 50%. The company improved its OPM from 17% to 19.5%. For the half year ended Sept. 2009, NAC has posted 42% rise in net profit to Rs 28.5 cr. on net sales of Rs 338 cr.(up 12%). Interim dividend of 20% has also been declared.
Going forward, emerging global imperative of productivity enhancement will revitalize the crop protection industry. The crop segment that NACL is targeting, is its key crop segment- rice, cotton and in the tea plantation. NAC is a company from the farm sector which combines a high RoE (41.27%) and reasonably low current valuations as compared to its peers such as Rallis India, Bayer Cropscience etc. At current levels the stock trades at about 6.9 times FY09 earnings and at about 5.7 times FY10E earnings (Rs 40) and has a market cap of about 340 cr.. The stock is certainly cheaply valued with its market-cap at just 2.9 times its FY09 operating profit of Rs 117 cr. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-50% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: DIC India Ltd.

DIC India Ltd (Rs 180)
(BSE Code - 500089, NSE Code - DICIND)
(P/E- 8, Market Cap - Rs165 cr, Net sales - Rs515 cr, Equity - Rs9.17 cr)
DIC India(DIC), formerly known as Coates of India, is a 71.75% subsidiary of DIC Asia Pacific Pte Ltd, Singapore, which in turn is a wholly-owned subsidiary of US $ 9 billion Dainippon Inks and Chemicals (DIC) of Japan, world leader (40% global market share) in printing inks, organic pigments and thermosetting resins. The DIC group, with its subsidiary Sun Chemical, is the largest ink company in the world. Around US$ 5 billion (Rs 22,000 crore) 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. DIC India enjoys strong market position (33% market share) in Rs. 1,500 cr. printing and liquid ink market. There are three segments in printing ink, viz., Publishing inks (covers newspapers, magazines & books), Packaging inks (as covers FMCG sector, has tremendous potential to grow) and high quality emerging segment – Commercial printing inks (covers sales literature, leaflets, brochures, tourist literature, catalogues, etc). Company is the market leader in high volume low value publishing inks segment.
The fortunes of the printing ink industry are linked to the economy, particularly the publishing and packaging sectors. Despite the high GDP growth in the recent past, the growth of the packaging sector in India was impacted by the slow growth of the FMCG sector, restricting the top line growth of the printing ink industry. However, the fortunes of the FMCG industry have revived. This will directly benefit DIC India. Moreover, the publishing sector is on the rebound. The increasing urbanisation and literacy levels as well as new launches and higher media spend are likely to result in comfortable growth rates for the publishing industry. With more foreign publication houses setting up their outfits in India, the publication sector is poised for major growth. All this will benefit DIC India.
DIC India’s focus remains on maintaining strong position as a leading supplier to the high technology and quality end of the market, where new presses with full automation require rapid drying and coating with quick wash-ups and make-readies. In India, the company also manufactures and distributes Varn chemicals and blankets from Day International. DIC India will have full access to the total portfolio of products and technology available with DIC and Sun Chemical. Therefore, the value from DIC and Sun Chemical will be added to its brands and products. The beneficial impact of this is expected to result in better range and quality of DIC India’s products. The parent company has launched several new products in the recent past, to which DIC India is expected to get access. For the nine months ended Sept. 2009, DIC on standalone basis has posted net profit of Rs 14.58 cr. on net sales of Rs 340 cr.. On a consolidated basis, the revenue grew 20.5% to Rs 515.1 cr. in CY 2008 (ended December 2008). The consolidated net profit stood at Rs 18.07 cr.. On a equity of Rs 9.17 cr. consolidated EPS stood at Rs 19.7 and the dividend declared was 35%. The Book value per share stood at Rs 196. The company’s market cap is just Rs 165 cr. against CY08 net sales of Rs 515 cr.
DIC India has changed its business focus towards highly profitable publishing ink and commercial printing ink (growing at 12-15%), while simultaneously cutting down on sales of low margin packaging ink segment. Changed business composition and new product launches will be driving volume growth. Considering good industry prospects, low valuations, DIC India’s strong market positioning and technological & marketing support from DIC, Japan, company is poised for good times ahead. At current market price of Rs 180, DIC stock trades at 9.1 times consolidated CY08 earnings(Rs 19.7) and at 8 times expected consolidated CY09 earnings(Rs 22.5). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 35%-40% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)