Vinati Organics:-Undervalued star

Scripscan:Vinati Organics Ltd

Code:524200

Cmp:100

Target:160

Duration:6-9 months

Traded on:BSE

Introduction:
Vinati Organics is engaged in the business of producing IBB (Iso Butyl Benzene) and ATBS (2-Acrylamido 2 Methylpropanesulfonic Acid).

Why i like the counter?
1)The company with a capex of about Rs.35crs is presently expanding its ATBS facilities from 3k MT to 8k MT and the same is expected to be completed by June 2008.This expansion will make the company the world's second largest producer of ATBS.ATBS is a specialty monomer used in oilfield and mining chemicals, water-treatment, acrylic fiber, personal care, emulsions, adhesives etc. The world demand for ATBS is growing steadily and is expected to increase 2 to 3 fold with the production of enhanced oil recovery polymers.The company is in the process of finalizing long-term supply agreements for ATBS with worlds largest buyers based in USA and Europe.

2)The company has entered into a long-term supply agreement with BASF, USA, world's lamest producer of Ibuprofen. The company has increased its Isobutyl benzene (IBB) manufacturing capacity to 14000 TPA and is the world's largest producer with 70% market share.IBB is one of the key raw materials for making Ibuprofen.The supply agreement warrants BASF to buy majority of its IBB requirements from the company up to 2011. The contract can be renewed for additional three years and is expected to contribute up to Rs 240 crore in revenue in the first five years. As per the contract the monthly selling price of IBB is adjusted based on monthly world prices of key raw materials and exchange rate, thus minimizing the company's exposure to these variables.The production and supplies have ramped up since July and the coming quarters should reflect all the developments.

3)The company is planning to convert its ATBS production facility into an Export Oriented Unit from a Domestic Tariff Area.It is understood that the process would get completed by these year itself.It means that the profits from the sale of ATBS could be tax-free for the next couple of years.

4)ATBS/Na-ATBS&TBA:At present except the company there are only 2 other major producers of these monomers in the world.As suppliers of these products are limited,customers remain very keen to work for a new source of supply.All the major users of these products are based in Europe or U.S.A.,thus they prefer to enter into annual contracts.

5)The company falls on the vagaries of currency fluctuation as it exports its products mostly.At present on some cases its passing the extra costs to its customer.Going forward,The Company is aiming at minimizing foreign currency exposure by entering in to forward contracts and negotiating currency risk-sharing deals with customers.

6)Crude oil is one of the prime inputs for the products of the company and in the last few months it increased significantly.Vinati on to a certain extent was able to pass the hike to its customers. Incase of IBB,Vinati has a long term price escalation clause with BASF.On the ATBS front the company faces competition in terms of dollar pricing from majors like Lubrizol.The company though is confident of maintaining margins in this specialty monomer by passing the price fluctuation to its customers.

7)On asking the management about their new product application,they clarifies by saying "We are working on projects such as producing the versatile and high value monomer Tertiary Butyl Acrylamide (TBA.TBA is a high margin product for us and realization per kg is in the range of $5.We have already sent samples to various customers and we expect trial orders to begin soon".Tertiary Butyl Acrylamide or TBA finds its application mainly in the making of hair gel and water treatment polymers.

8)The company recently rewarded its shareholders by issuing them 1 free shares for every 2 shares held.These certainly entails a lot of conviction in the company as it shows the confidence of the management in the growth prospects of the company.

Conclusion:
The company is expected to end the year with sales of about 150crs.Profits could be around 15crs resulting an EPS over 15rs.At present price of 100 its just quoting at 6.6 times its fy08 earnings.With escalating product prices,industry leadership,enhanced capacity utilization,new long-term contracts and roubust business prospects,Vinati organics may just prove to be another of my scrips which satiates ones desires through tremendous capital appreciation in the coming days.

Market Outlook !!!

Market shorter to medium term Outlook:

The $500 billion, 20-day loan, handed out to banks by European Central Bank has eased short term lending rates in the EU and helped the banks breath easy over the year-end. The amount is twice that the ECB thought the market would need and this dwarfs the $ 20 billion auction by the US Fed earlier. I believe this is a painkiller that has been administered to a tight economy and is not a remedy that will eliminate the root cause of the malady.So while short term looks assured, the crunch will come back to haunt the markets in the New Year.The markets were closed on Friday and then would open for a day on Monday next week to close on Tuesday for Christmas. Logically thinking, punters would not like to trade much in these sort of environment.Lighten up your positions from volatile scrips.


Market longer term Outlook:

The Sensex, at current levels, trades at around 19 times its expected 09 earnings which appears decent from an investment point of view. This takes into account expectations that the top companies will grow bottomlines by over 20% in FY09.However, the fact that most of the results declared so far have been in-line or above expectations, have provided the bulls with another reason to continue to pump in money into Indian equities. The results out-performance from major companies from sectors such as real estate,infrastructure has led to continuing euphoria on the street.I would, however, advise investors to remain cautious, as stocks have discounted valuations of the next 4 to 6 quarters which makes it a rather risky proposition to invest at the current juncture, as any financial disappointments by India Inc could have serious negative repercussions on investors' portfolios.
Happy and safe investing!

18900 ....crucial level on closing basis..

Sensex technical View :
Crucial supports for sensex is placed at 18900 zone which should not be breached on a closing basis. Be highly stock specific. Caution was advised for last few days to the clients as seen in the newsletters posted to them. Keep stoplosses and trailing stoplosses as conserving capital is more important then making profits.

Stocks to watchout for :

Panorama Universal ( 531816 )
High risk traders can buy the stock slowly betwen 124-118 and stop would be 114 on closing basis for a 140-165.

Weird Small cap ideas :
Two Birla Group companies in the highest risk segment.

Birla VXL
The stock has bounced back strongly after being beaten down and shifted to T2T segment and is now all set for possible fresh moves.Risky penny pickers can buy it for 3 months .

Shloka Info (511607)
A yash Birla group co which is into education software and publications !! Earlier the stock was to named Birla Lifestyles !! but with the current trend the new name is going to be Birla Shloka Edutech as per the announcements.... Very high risk stock !!!

Control Print:-Continuation of unnoticed land bank stories

Some land bank stories still available at market.Let me present you them.When the market realises these stories,the value can be tremendous.It would be prudent to note that the below mentioned scrip is not just a land play.The company posses decent fundamentals, solid prospects,bright outlook and huge potential.

Control Print India Ltd

Code:522295

CMP:60

Triggers:

1)Market Value of its quoted investments works out to around 18crs.

2)Videojet:Some times back the company decided to end distribution arrangement of Videojet.Due to termination of distribution agreement, CPIL is likely to get Rs. 25 - 27 crs. as one-time payment.

3)Company owns 1.50 acre land in Mumbai which was bought for just Rs. 50 lakhs.Current Market Value of this land is around 40 crs.However, company is not selling this land. It is planning to make commercial space approx. 1 lakh sq. ft. Construction cost for the same will be less than 25 crs. However, market value of this commercial space can be 120 - 150 crs. Company has still not finalized whether this property will be sold or will be leased.Even if it is given on lease, it can fetch nearly Rs. 25 crs. p.a. as lease rent.

Valuations:

The company at prsent price of 60rs is trading at just 4.5x FY08E EPS.

Strange are the way of Regulatory Authorities

Strange are the way of Regulatory Authorities:-

Ispat Industries has recently been included in F & O category. Almost everyone in India will agree that there may be very very few parallels in Indian corporate sector to match wretched track-record of this company. At a time, when steel industry was witnessing best ever buoyancy, Ispat was still not showing profits. Although it is not easy to prove but there have been many many allegations about siphoning off the funds heavily by promoters and loss-making record is also a pointer in that direction. There have been many whispers in the market that company has been selling big quantities of sponge iron in cash (without bill). Moreover, there have been reports about inflating project costs.Liquidity/floating stock should be a big criterion for eligibility in F & O section.
However, should it be the only criterion? Is it not moral duty of decision-making authorities to give some weightage to promoters/company's track-record? It appears that Govt's intentions are to encourage speculative activities in stock market.And, protection of investors' from fraudulent promoters( thru pre-emptive measures) is never in Govt's mind.

Moreover, it reeks of double-standard mentality of Babus.Could there bigger travesty?? If a small-cap (for that matter any other co which is listed at BSE) company wants to list at NSE, company must have 2 year dividend-paying track-record.There are many cases where BSE listed companies have already paid 1 dividend but NSE refusing list them. Such companies are willing to declare interim dividend (so that criterion of 2 dividends is met) However, reportedly, NSE dont recognize interim dividend and insisting that Final dividend will be considered to meet criterion of 2 dividends. Does it mean that in the eyes of regulatory authorities,BIG IS HONEST AND SMALL IS DISHONEST?

However, more frighteneing is that there is more than what meets the eye.Bringing new scrips in F & O appears a big scam.It was common knowledge/talk in stock market since Sept 07 that 'Ispat will come in F & O" It is a pointer that promoters/big FIIs/stock exchange authorities may be hand-in-glove that "a particular scrip will be transferred to F & O after 2-3 months" which gives ample time for these institutions/individuals to buy such scrip at very low levels to make quick killing. Do you people agree with me?

Shristi Infrastructure Development Corporation:Go for it

Scripscan:
Shristi Infrastructure Development Corporation Ltd

Code:511411

Cmp:449rs

Target:650-700rs

Duration:2-3 months

Story:
The company is listing on tomorow,10th dec 2007.As you all know Peerless absan i suggested the counter at 16rs and it got delisted at 90rs persuant to the merger with Shrishti infrastructure.Shareholders got 1 shares of shristi for every 5 shares held in peerless abasan finance.Now shristi will list at trade to trade group with a 5% circuit limit.The base price has been fixed at 449.25rs.Due to the suitable market sentiment and real estate frenzy i expect the counter to hit 650-700rs in the near term.The company is planning to invest rs 3500crs in real estate over the coming 2-3 years.It has got hardly any floating stock available,so any good news or announcements would be cheered by the market.

New High !! IF U CANT BUY STOP SELLING .. implies to investors only :)

Sensex view :

Markets have scaled new highs but its not that convincing as a breakout into new highs if accompanied but good magnitude moves would be great. So selective picking of stocks needed. CLosing above 20400 for 4 sessions would confirm a fresh sustainable move.

As i had said before IF U CANT BUYING STOP SELLING ....implies to investors only ... trading money needs to be churned to generate more :)

I just remember a few lines which one of our clients and friend spoke. Sir aapse milne ke pehle problem ye tha ki kya buy kare , ab problem ye hai ki kya sell kare sab to chal hi rahe hai :) English : Before getting associated with u the problem was what to buy now the problem is what to sell coz all are running ..

So i dont understand whether we have solved some problems or created much more ;) ha:) Review : No time today so review this weekend ...

Be highly stock specific and in bull runs worst thing an investor can do is forget discipline and buy whole lot of pennies and junk their portfolio . Pennies are good money and fun but creating a habbit can be expensive !!!

Stocks to watchout for :
OBC looks excellent for long term players as a good banking stock which has not got its due. Earlier diwali picks PNB and Canara Bank are doing good :) Short term players can look for swing trades in Sterlite above 1150 , PUNJ lloyd and NTPC in small qty on declines.

Suraj Diamonds and Shrenuj Inds are good from investment point of view with a tgt of 20-30% in next 3 mths . Accumulate on every decline.

Take it from the Middle - Mid Cap Rocking!!!

The small and midcap rally is taking root in an unprecedented way in the Indian stock markets.High liquidity,decent valuations,good prospects are contributing to this phenomenon.Many people are suspicious of the manner in which small and mid-caps stocks have run up lately.However,those claiming to be value investors believe that small and midcaps truly holds tremendous future for long term investors.Both maybe deemed correct depending upon ur risk apetite and investment horizion.Amidst great volatility in the past 7 years,I have discovered that investments in midcap stocks have given much higher returns than large cap stocks provided investors held on to their investments amidst the occasional panic.Also investors should have bot stocks in companies with genuine business model and at reasonably low valuations.

If simple criteria like low PE multiple,good promoter background,genuine business operations and a reasonable dividend yield are followed for stock picking.It is unlikely that an investments wud go wrong over a 2-3 year time frame.Those who burnt their fingers in the tech bust of 2000 and the IPO boom of 1994 would recall that most of their money was lost in chasing stocks that quoted at a high PE multiples with no dividend track record and doubtful promoter groups.One of the most reliable methods of checking whether a company has genuine operations is to find out how much income tax and other taxes it pays,if a company is paying taxes then there is more likelywood that its business would be genuine.In addition,if the company is known for its promoters or products,then investors can be more comfortable while investing.It seems likely that in the months ahead,broader indices like sensex and nifty may not make significant moves,while midcap stocks could show more activity.This would attract attract retail investors and HNI individuals to invest in thes companies.

While it may be advisable for small investors to look at midcap stocks for more gains,they would need to follow a disciplined approach and remain cautious.Small and midcap stocks are highly prone to sharp falls when the mood turns bearish.In bad times if the indices falls 10% the midcap stocks can fall upto 25%.And the worst part is that volumes in these counters dry up when prices fall.Threfore small investors panic and exit their investments at huge losses.Sometimes they make not exit the investment and see the company completely vanish.My advice is that if u have invested in a genuine company with good promoters and a long track record,then short term volatility should not cause panic.Even if we look t huge falls in September 2001 or in april 2004,stock prices have climbed back to more reasonable levels within a short time.

Hester Pharma:The scrip to give vaccine to your portfolio

Another scrip which was suggested to members on 7th october weekly report .Here is the report.

Scripscan=Hester Pharma
Code-524669
Industry-Poultry vaccines
Qquity-5.2crs
Price-164
Target price-260
Duration-8-12 months

Introduction=
Hester pharma is one of the largest poultry vaccine manufacturer in india.With work force of around 182(doubled from around employees last year),Hester manufactures 40 differnt kinds of vaccines and supplies live as well as killed vaccines to leading briolers and egg producing enterprise in both domestic as well as in the international market.It is a iso-9002 certified company and has the distinction of winning good manufacturing practises by drug authorities.

Tie-up=
Hester is the exclusive distributor for Merial Inc in India who along with Akzo Nobel and AHP are the world leaders in animal health products. The tie-up provides the company to access the live vaccines for Mareks disease in Chicken wherein Merial is the market leader.Hester produces vaccines for Fowl Pox, Fowl Cholera, Bronchitis, Gumboro, AE, LT, REO, EDS and Newcastle diseases, besides combination vaccines.Moving beyond boundaries-The company has its sales offices in almost all parts of the country and has appointed distributors where it does not have a presence.With nearly all parts of the country covered hester is now planning to expand beyond india.Over the last few months hester has made substantial addition in the plant and machinery to expand capacity and also with the poultry industry getting bigger companies like hester are benefiting the most and thus opening up-of newer oppurtunities to them.The poultry vaccine market in india is increasing at a faster pace.

Export Thrust-
The company has been giving a huge thrust on exports and is currently penetrating in the middle east and african markets.Hester hopes to add more than 8-10crs turnover from the export market this year.Hester has an agreement with merial inc,u.s.a as their exclusive distributors for merial"s complete range of poultry vaccines in india.To avail advantages of lower costs of production, many international companies are in talks with the for getting poultry as well as other large animal vaccines manufactured by the company.With the completion of the expansion program,the company is confident of concluding agreements,which will give a tremendous boost in its capacity utilization,thereby improving the bottom line.

Capacity expansion=
Due to the on-going over whelming market demand, the company completed its expansion project and the new expanded capacity went on-stream in March 2007.The new expanded capacity is now 500 crore doses as against the earlier capacity of 120 crore doses The results of this capacity enhancement will be seen in this financial year.The new facility has distinct manufacturing areas for chick embryo origin, tissue culture and bacteria vaccines. Outlook=Apart from consolidating the business in the domestic market the company is aggressively persuing the export business of its products.Also after these massive expansions the company is having now one of the most modern plants in the world.I expect the company to become a a big sourcing agent for animal vaccines for many international companies in the coming future.

Financials-
The company has shown strong consitency in both topline and bottomline over the last 5 years and we beleive that the same trend is likely to continue in the upcoming years.Hester is looking at a turnover of 40crs this yr compared to 22cr last yr with PAT expected to be over 10crs(5.15crs last yr 2007).With a mere equity of 5.2crs ,E.P.S is expected to jump to around 20rs

Valuations-
Hester is on the path to exponential growth over the next two years. The current market price of Rs 164 discounts its FY08E earnings of Rs 20 by 8.2x.Given the high revenue and earnings visibility, i believe that the stock is highly undervalued.A discounting in the range of 13x gives us a target price of Rs 260 over the next 8-12 months.I rate the stock an Outperformer.

Why I chose the company-
Its into a very exciting space,poultry vaccines.Demand has been rising since last few years at a scorching speed.It has got no listed peers to compare with.Its backed by a dynamic and very aggresive management.The company increased its capacity by over 4 times which speaks about the demand itself.Has got immense potential in exports.Its such a competitive company that even imports cant make any significant dent to it.The company has got a small base,its an emerging story,looks great to opt for.As the company recently expanded its capacity and as the poultry industry is back on track after bird flu hassles,The company is certainly something to watch out for in the bourses.

Sensex Technical View :

Sensex has given a promising move on friday and closed above 19300 which is a good sign ... Above 19400 for few days can actually test the crucial 20k levels .... Sensex and nifty have tested the 50 dema levels in the previous correction .. As per all the previous moves bounce from 50 dema or 200 dema should be of bigger magnitude and in a matter of less then 3-5 weeks should make newer highs or if it doesnt then its a very weak sign .... Strategy is watchout for 19800-20000 as it needs be broken convincingly to expect a very good year end :) Reliance is the stock which can set the momentum .....

Review :
Avantel Soft given on FREE sms also does 20% freeze at 96 given at 80 odd :) hold on for more or book partial above 100 + .... IL N FS does 10% freeze hold with trailing stop for 360-400 also on higher side... TISCO doesnt break 795 so no trigger...Ispat does 50 + again from recommended levels of 18 and 32 now the world talking about it :) ... I continue to maintain my 1 yr view on the small cap steels segment to be multibaggeres namely Sun Flag , Ispat , Vikas Metals , Southern Iron etc .....

Some technical Views :
JSW steel , Hinduja Tmt , R systems intl charts posted in the blog below ....Long term investors can read the DIWALI newsletter posted to our subscribers on 5 th November quite some time before diwali .... Many of the stocks might have appreciated from the recommended levels but there is much much more left in the longer run ....

INTRA DAY CKt Hitters
MID DAY Multimedia ...The stock has given a good breakout on weekly charts ... Buy for extreme short term tgt of 70 and 85 .... for day traders can buy on opening bell with 58 stop for intra freezeTechnocraft and Sel manufacturing for risky day traders who can see 5% loss and stand for 10-15% gains :)

Weird Small cap Idea : Noble Explochem

The stock might have been written about earlier as well ......Now some facts... 14000 acres and 15 lakh jetropa plants done in sept 2005 ..... So gestation period can get over soon and the Bio diesel story could pan out in coming months.... DO ur own research and take exposure as its a high risk bet ...
Some very speculative lines _____not buy or sell calls :RNRL , IDBI , JSW steel could be the stocks for this month .................. And the unexpected heroes Reliance , Neyvyeli , GMR infra............LOK Housing could see better days in coming days after being battered for a long time...
Sugars can come out with astonishing moves in next 2 weeks any time blast .... ( disclosure BTST suggested in Bajaj Hind at 202 , Balrampur at 97 booked more then half already )