Stock Idea: Granules India Ltd

Granules India Ltd (Rs97)

(BSE Code- 532482 NSE Code- GRANULES)

(P/E - 7.5, FY10E Sales - Rs475 cr, Market Cap - Rs194 cr)

Granules India Ltd.(GIL) is a fully backward integrated formulation manufacturer. The Company is a large-scale manufacturer of Finished Dosages (FDs), Pharmaceutical Formulation Intermediates (PFIs) and Active Pharmaceutical Ingredients (APIs). Granules has installed capacities of 13,550 tonnes for APIs and 8,400 tonnes of PFIs. GIL is a fully vertically integrated pharmaceutical manufacturing company with three core lines- Active Pharmaceutical Ingredients (APIs) – Granules has 3 factories manufacturing APIs and is amongst the top global manufacturers of Paracetamol and Ibuprofen. Pharmaceutical Formulation Intermediates (PFIs) – Granules pioneered the concept of PFIs and currently has 2 factories manufacturing single and multiple - active PFIs. Finished Dosages (FDs) – Granules recently opened a dedicated FD plant at its Gagillapur facility. Its plant has the capacity to produce 6 billion tablets annually and is scalable up to 12 billion tablets. GIL’s integrated model allows it to provide products throughout the value chain in a cost-effective and efficient manner. It serves over 300 customers in 50 countries through its sales offices in India, U.S., U.K., Colombia and China.

The company, which is into making of Active Pharmaceuticals Ingredients (APIs) and Pharmaceutical Formulations Ingredients, is confident that the foray into tablets would add to its overall growth. The company, which is in the niche area of granulation technology, is eying high volume business in Europe. The company’s business model is based on focusing on a few products which drive high volumes. Granules India is moving up the value chain from being a predominantly bulk drug player to a formulation player.

For the Q3 ended Dec. 2009, Granules posted net sales of Rs. 122.40 Cr., an increase of 24.7% over the same period last year and a net profit of Rs. 6.56 Cr. as compared to the same period last year at Rs. 0.49 Cr. On a standalone basis, GIL achieved sales of Rs. 101.34 Cr. and a net profit of Rs. 5.87 Cr. This is the first time the standalone unit has crossed Rs. 100 Cr. in sales. GIL’s formulation division continues to grow rapidly and now comprises over 9% of its sales. This division will ramp up significantly over the next few quarters as the company commences work on several key contracts. On a equity of 20 cr. (Promoters stake- 34.5%, FII/ Institutional stake- 32%) the EPS for Q3 stands at Rs 3.27. For the nine months ended Dec. 2009, GIL has posted 28% rise in net profit to Rs 22.99 cr. on 28% growth in net sales to Rs 347.82 cr. on consolidated basis. Going forward, it appears that the foundation for growth at GIL is laid and the company is poised to leverage its manufacturing strength in the respective product areas. With product mix tilting towards prescription formulations, GIL is poised for good growth in earnings in the coming years.

At the current market price of Rs 97, the stock trades at 7.4 times expected FY10E earnings(Rs 13) and at 6 times its FY11E earning(Rs 16). Investors can start accumulating the stock at current levels and add more on declines for decent returns of 40%-45% over the next 6-8 months.
Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Riddhi Siddhi Gluco Biols Ltd (RSGB)

Riddhi Siddhi Gluco Biols Ltd (Rs 216)

(BSE Code- 524480)

(P/E - 7.5, FY’09 Sales - Rs534 cr, Market Cap - Rs244 cr)

Riddhi Siddhi Gluco Biols Ltd(RSGB) is the largest manufacturer of various types of starch, liquid glucose, dextrose monohydrate and other derivatives, high maltose corn syrup and byproducts like corn gluten meal and enriched fiber, which are used in various applications such as chocolates, processed foods, glass and medicines, paper, glucose and textiles. RSGB controls about 17% of the total starch market. About 60-65% of its turnover comes from industry majors such as Nestle, Hindustan Unilever, Ranbaxy, Ballarpur, ITC, Grasim, Indian Rayon and Godrej. Catering to a sizeable market in India, RSGB has continuously tried to increase capacities and feed the growing industry demand, which is about 12-15% at present. Per capita consumption of corn starch in India is estimated to be about 1 kg as compared with 64 kg in US and the world average of 6 kg, which leaves room for a sustainable growth in the years to come. In 2006, RSGB, the largest corn wet milling company in the Indian subcontinent having the highest crushing capacity, had joined hands with France’s Roquette Freres, a leading player in this industry with a consolidated turnover exceeding $4.5 billion, to improve the yield parameters and develop new products

RSGB’s new capacities are already in place and for technical expertise; it has found a partner in Roquette Freres, France, which is the world’s fifth largest starch company. Roquette also has a 14.93% stake in RSGB. Roquette, which sells about 1,000 products, will help RSGB increase its current product offering of 40 to add more value added products in its portfolio by way of providing technology and know-how. These new value added products will be for nutrition, biotech and health and dextrose for sugar free goods. These value added products will also help RSGB in acquiring a larger pie of the existing market and enter new industries. Considering these developments, RSGB is targeting a market share of 25% in two years as compared with 17% now. RSGB currently generates about 65 per cent of its revenues from value added products. It is planning to increase this to 80% over the next two years. RSGB is also working closely with brand-enhancing food companies like Nestle, Heinz, Cadbury, Hindustan Unilever and Britannia and pharma companies like Ranbaxy, Wockhardt, Sun Pharma and Nicholas Piramal with repeat business and sustainable revenues.

For the Q3 ended Dec. 2009, RSGB has posted net profit of Rs 12.77 cr.(up 913%) on net sales of Rs 193.58 cr.(up 56%). For the nine months ended Dec. 2009, RSGB has posted a 158% rise in net profit to Rs 27.08 cr. on a 38% rise in net sales to Rs 514 cr. on consolidated basis. The EPS for nine months stands at Rs 24.3. For the year ended March 2009, RSGB had posted net sales of Rs 533.9 cr.(up 60%) and net profit of Rs 13.98 cr.(down 30%). The net profit was down mainly due to higher interest burden, forex losses and higher depreciation. On a equity of 11.13 cr.(Promoters’stake-43%), the EPS stood at Rs 12.5 and the dividend declared was 20%.

With global economy showing signs of recovery, consumer’s willingness to spend more and demand picking up, demand for products like starch & glucose is also likely to pick up. Also, FMCG companies have continued to grow by volume and there by would in turn increase the demand for raw materials/inputs used in bakery & confectionery products. At the current market price of Rs 216, the stock is trading at a P/E multiple of 7.6 times its FY10E earnings (Rs 28-Rs 29) and 6.4 times FY11E earnings (Rs 33-Rs 34). RSGB’ market cap stands at Rs 244 cr, against expected net sales of Rs 675 cr. for FY10. Considering that the company is the largest player in its sector, investors can expect good returns over the medium-long term. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 45%-50% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)

Stock Idea: Allcargo Global Logistics Ltd.

This goods moving company, through its acquisition of ECU has a 50% exposure in Europe and USA. And with these companies being in a ‘recovery’ mode in 2009, the financial performance of Allcargo for year ended 31st Dec 2009 took a slight hit.

Net sales dropped 8% at Rs.2060.93 crore. EBIDTA was down 6%. But it managed to end 2009 with a 5% rise in net profit at Rs.129.95 crore.

During the year, the company sub-divided the face value of equity shares from Rs.10/per share to Rs.2 per share. On an equity of Rs.24.96 crore, its EPS for the year stands at Rs.24.96. Its reserves for the year stood at a healthy 954.48 crore, giving a book value of Rs.78. At the current EPS, the stock, at the current price of Rs.186, is available at a PE of 7 times only.

It has five business verticals - Container Freight Station (CFS), equipment hire, project logistics, less-than-container load (LCL) and warehousing. Full cargo load accounts for 85% of Allcargo’s business and LCL at 15%. In November 2009, it commenced third party logistics solutions (3PL) which now enables Allcargo to offer full service end to end logistics service package comprising in house expertise and facilities for freight forwarding, customs clearance, transport, warehousing and distribution services. With warehouses in Mumbai and Goa already operational and plans afoot for facilities in Indore, Hyderabad, Nagpur and Bangalore, Allcargo is on an aggressive expansion mode.

It has three CFS near JNPT, Chennai Port and Mundra Port. These three ports handle 95% of the container cargo in India and this puts Allcargo in an enviable position. It has also got 5 inland container depots at Dadri, Pithampur, Nagpur, Hyderabad and Bangalore, which is expected to give it around 55% market share soon.

In Sept 2009, Allcargo board approved an investment of 1.5 million warrants of Rs 10 each, convertible into equal number of equity shares of the company, at a price of at least Rs.934/share by Blackstone Group and its affiliates. With this, Blackstone’s total commitment to Allcargo now stands at $75 million. It would continue to have representation on the Allcargo board. Akhil Gupta, CMD of Blackstone Advisors India, is a director on the company’s board. As at 31st Dec 2009, Blackstone has a 14.63% stake in the company.

Source: Internet (premiuminvestments.in by S P Tulsian)

Intraday Trading Calls for 12th April

Indian Stock Market may open positive and remains highly volatile for the day today. A good positive closing expected.

Today's Intraday Stock Tips / Trading Calls (Keep strict Stop Loss for Each Trade):

SCRIP NAME	TRIGGER	PRICE	TARGET 1	TARGET 2
IVRCL INFRA	Buy Above	178.50	184.20	190.00
	Sell Below	175.60	171.35	168.00
ROLTA INDIA	Buy Above	194.20	200.00	205.00
	Sell Below	191.35	187.15	182.00
PUNJ LLOYD	Buy Above	184.25	189.45	195.00
	Sell Below	182.40	178.10	173.00
INDOWIND ENEGY	Buy Above	50.70	53.15	56.00
	Sell Below	49.30	47.10	45.00
CAIRN INDIA	Buy Above	308.65	312.45	316.00
	Sell Below	306.35	302.70	298.00
PURVANKARA PROJECTS	Buy Above	110.00	115.35	121.00
	Sell Below	107.40	102.65	98.00
ESCORTS	Buy Above	160.25	164.30	168.00
	Sell Below	158.20	154.35	150.00

GOOD LUCK