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.