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Bilcare Ltd

Recommended Date – 1 Sep 08.

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Graphite India Ltd.

BSE Code: 509488


(Recommended Date – 10th Aug 08)

Business & Products – Varied business interests such as electrodes, graphite equipment, glass reinforced plastic (GRP) pipes & tanks and power. Graphite electrodes comprise more than 70% of its total business.

Factories – Its plant is situated at Sagarbhanga in Burdwan District of Durgapur and another plant at Satpur in Nashik.

Production – The production of graphite electrodes has gone up in FY08 to 74,414 MT as against 67,576 MT in FY07. The future of the company’s electrodes is related to steel production, which is projected to remain high by an average growth of 8% in 2008-09.

The demand for GRP pipes and tanks is also very commendable with the entry of private sectors in the retailing of petroleum products, which has greatly enhanced the use and opportunities of GRP tanks.

Infrastructure – Since power is the major input in the manufacturing of graphite electrodes, as a part of cost reduction initiative besides adequate and timely supply of power, the company has made in-house arrangement to meet any eventuality. Presently, the company has 33 MW power generation through hydel and multi-fuel routes.

Reserves & Surplus: Large reserves over the years, which is over 20 times its issued capital and thus provides a golden opportunity for bonus shares.

Dividend: The company has been raising its dividend distribution year after year based on its profitability. The dividend paid in 2004-05 was Rs.15.07 cr. in 2005-06 it was up at Rs.20.10 cr., which was further raised to Rs.50.70 cr. and again to Rs.53.03 cr. in the year under review. The 150% dividend is at par to best dividend paying companies like Ashok Leyland, Tata Motors, Maruti, Hindalco and several others.

EPS: The company’s EPS, too, has been rising from Rs.3.27 in 2004-05 to as high as Rs.9.03 in 2007-08, which is 200% higher within 3 years.

Market Price: GIL’s Rs.2 paid-up share is traded between Rs.50-60 since the last 6 months and might flare up anytime as it looks quite underpriced looking to its earning, future prospects and distribution.

Outlook: GIL’s outlook is quite bright looking at its sound financial strength as its turnover has doubled since 2004-05 while profitability has trebled. In view of this, the share looks to be quite good and provides excellent opportunity to buy and add to your portfolio.

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Multi Bagger: Natco Pharma
Recommended Price Rs 74.15

Ashish Chugh, Investment Advisor

Report Dated: Aug 05, 2008 Source: Poweryourtrade.com

Natco Pharma – a Discovery led pharma company with strong R&D capabilities, with potential for significant increase in revenues on account of the company’s entry into retail pharma space in US and its tie-up with Mylan Inc. and with the additional cushion being in the form of land bank valued more than the company’s current market cap, is attractive at the current PE of 6.Natco Pharma was promoted by Mr V.C. Nannapaneni in the year 1981 as a Private Limited Company to be in the business of Research, Developing, Manufacturing and Marketing of Pharmaceutical Substances and Finished Dosage forms for Indian and International markets. NATCO PHARMA began operations in 1984 in Andhra Pradesh, India. The company which began operations with one manufacturing plant and 20 employees today has four manufacturing facilities and 1500 employees. NATCO also has the credit of being one of the largest contract manufacturers in India.

Some of the well-known companies like Ranbaxy, Dr. Reddy’s Laboratories, John Wyeth etc. get their products manufactured by NATCO. The company’s bulk drug and Intermediate facility at Mekaguda, in Andhra Pradesh is certified for its environmental management systems (ISO-14001) and is US-FDA approved plant.

Natco Pharma is a leader in the Oncology segment and is ranked No.1 amongst Indian companies in the Oncology segment in terms of revenues from the domestic market.

Strong Research Base:

The company has a strong research base and has developed various Oncology and non-Oncology drugs. As a recognition of its strong research capabilities, the company has recently been conferred the National Award -2008 by Technology Development Board, Government of India, Ministry of Science and Technology for indigenous technology developed by the company in life saving anti-cancer drugs.

New drug discovery: The company has developed a new molecule NRC 19 for treatment of Chronic Myelogenous Leukemia (CML) which is cancer of the blood in which too many granulocytes, a type of white blood cell, are produced in the marrow. The company has applied for Phase I of Clinical Trials. Successful clinical trials and commercialization of the Drug will lead to substantial benefits for the company

Acquisition of pharma retail companies in US: The company has been increasing its presence in Pharma Retail in US through the inorganic route. The company has over the past year and a half acquired three Pharma Retail chains in the US – Savemart Drugs, Nicks Drugs and Newark Drugs. These stores are capable of adding Rs.150 crores towards Sales Revenues for the company in a year. The company is scouting for more acquisitions in this space in the US.

Tie-up with Mylan Inc: The company has recently entered into a Tie-Up with the Pittsburgh based Mylan Inc., for worldwide marketing and distribution of Glatiramer Acetate. The drug is sold as Copaxone R – a registered trade mark owned by Teva Pharmaceutical, Israel. Natco has signed a license and supply agreement today with Mylan for its (NATCO’s) Glatiramer Acetate pre-filled syringes, a generic version of Teva’s Copaxone R, which is used to treat multiple sclerosis. The agreement grants Mylan exclusive distribution rights in the United States and all major markets in Europe, Australia, New Zealand, Japan and Canada, and includes an option to expand into additional territories. Teva’s market cap and profitability is a function of Copaxone, which, with brand sales of nearly $2 billion officially, returns a profitability of 50%-70%.

Land bank near Hyderabad Airport: The company has substantial land bank near the Hyderabad Airport (close to 300 Acres). As per a few press reports of Dec 2007-Jan 2008, the land is valued at around Rs.350 crores. Factoring a possible decline that might have taken place in land values in view of the recent real estate slowdown, the land may be valued at around Rs.250 crores on a conservative estimates – this is more than the current market cap of the company.


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Latest Data As On 04/08/2008

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(Source: Capitaline)


Natco Pharma is a leader in Oncology segment and has strong research capabilities. The acquisition of pharma retail chains viz – SaveMart Drugs, Nicks Drugs & Newark Drugs would lead to addition of Rs 150 crores in the revenues. The company infact is scouting for more acquisitions in this space. The company’s recent tie-up with Mylan Inc for worldwide marketing and distribution of Glatiramer Acetate, which is the generic version of Copaxone R owned by Teva Pharmaceuticals, may lead to significant addition to the company’s Topline and Bottomline. This however may be a long drawn process (may take 2-3 years) since regulatory and legal hurdles have to be crossed before the sales of the drug could start – Mylan Inc is expected to spend between $ 20-30 mn for regulatory approvals and clinical studies. Many analysts opine that Israeli major may try to block the launch of the product by dragging both Mylan and Natco to court since Teva is being threatened of its monopolistic position and may try and block the sales through legal route. The near term growth for the company, however is expected to come from the domestic Oncology segment where the company expects to grow at 20%.

Natco Pharma achieved Sales and PAT of Rs 228 crores and Rs 40 crores respectively for FY 08. This results in an EPS of Rs 12.28. The stock thus trades at a PE of 6. The icing on the cake however is the land bank which the company has near Hyderabad Airport – valued at Rs 250 crores on conservative estimates, is more than the current market cap of the company. Given the company’s current market cap of Rs.208 crores, there is thus a margin of safety or a cushion available incase of any adversity.

The stock available at a PE of 6 with company’s strong R&D capabilities, new Drug Discovery, potential for significant increase in revenues on account of the company’s entry into retail pharma space in US and its tie-up with Mylan Inc. and with the additional cushion being in the form of land bank valued more than the company’s current market cap, merits investment at the current levels.

Updated on 1st Aug 2008

Repro India
Printing a sound growth story
Capitalising on the global trend of outsourcing printing of education books
Repro India: Financials
0603 (12) 0703 (12) 0803 (12) 0903 (12P)
Sales 115.89 130.89 153.73 199.85
OPM (%) 17.8 16.7 17.6 18.5
OP 20.65 21.92 27.11 36.97
Other inc. 0.61 0.46 1.01 1.01
PBIDT 21.26 22.38 28.12 37.98
Interest 3.22 3.57 4.28 5.28
PBDT 18.04 18.81 23.84 32.7
Dep. 4.2 5.58 6.38 7.88
PBT 13.84 13.23 17.46 24.82
EO 0 0 1 0
PBT after EO 13.84 13.23 18.46 24.82
Tax 5.13 3.79 2.91 3.86
PAT 8.71 9.44 15.55 20.96
EPS* (Rs) 8.3 9 13.9 20
* Annualised on current equity of Rs 10.48 crore of face value of Rs 10. (P) Projections. Figure in crore. Source: Capitaline corporate database

Repro India is one of India’s integrated end-to-end content and printing solutions company present across the value chain ranging from creative designing; pre-press, printing and post-press services; assembling; warehousing; dispatching; database management; sourcing and procurement; localisation; and web-based services.

Main clients include publishing houses such as Alligator Books, Heinneman Educational Books (Nigeria) Plc, Modern Publishing Inc, Orient Longman, and Oxford University Press. Software companies like Microsoft Inc and hardware company Lenovo India are its customer. Indian clientele includes Tata Steel, Nokia India, NIIT, Wipro and Satyam Computer Services. Repro India is the only authorised Microsoft replicator in India.

Repro India is completely focused on one-stop solution including providing content to book publishers, both overseas and in India, of scientific, technical and medical books; trade books; digital books; magazines, and children’s books as well as to brochures, pamphlets, companies’ annual reports and investor communications, and educational manuals of IT companies. Apart from that, it caters to on-demand business.

Globally, the printing industry is as large as US$ 500 billion, growing at a steady pace of 2%. Of this, education publishing business comprises around 10%, i.e., US $50 billion. The long-term plan of Repro India is to try to grab a 2% market share of the segment, which comes to around US$ 1 billion. India has the advantage of low-cost paper. Paper prices in India are lower than international prices as the Indian paper industry uses baggasse and pulp to manufacture paper as against global players’ reliance on wood. This is apart from the cheap and talented labour in India. What was lacking was a complete value chain, which Repro India has built over the years. Although China has the same advantage as India, it is far behind in terms of assuring quality and timely completion of high-end jobs. Also, piracy is a big issue in China.

In the long run, Repro India has plans of building a print city at a suitable location. However, considering the nature of the business, the company would invariably require funds to invest in its business. It is looking for investors for private placement/sale of stake at an appropriate time.

Printing is a capital-intensive industry. Globally, the industry operates at an asset-turnover ratio of 1:0.75, i.e., for every Rs 100 crore invested, one can generate a turnover of Rs 75 crore at around 2%-3% margin. This is one of the reasons why global printing players are outsourcing to India and are not expanding any capacities. In India, the unorganised sector operates at a 1:1 ratio (i.e., asset-turnover ratio of 1:1). As against this, Repro India is operating at an asset-turnover ratio of 1:1.4 currently, which is derived from long experience, in-house technologies and a built-up of complete value chain. In the long run, Repro India aims to maintain an asset-turnover ratio of around 1:1.25.

Of the total sales of Rs 155 crore in the year ending March 2008 (FY 2008), nearly 50% was from exports. Within the global market, Africa forms a major market. Nearly 75% of the export sales are from the African market, and the rest from the US and UK. Going forward, export sale as a percentage to total sales will increase as more markets and new clients are captured.

Repro India has already invested around Rs 20 crore for expansion of its existing location to gear up capacities. The effect of the expansion will be seen in the turnover of FY 2009. Further, the company is going for greenfield expansion by setting up an special economic zone (SEZ) in Surat. The plant will be operational from Q3 of FY 2009. Around Rs 32 crore will be invested in this plant that can print around 80 million books per annum. Overall, Repro India expects Rs 80 crore additional turnover on the complete operation of the Surat plant. Export income is exempt from tax for the first five years of operation. The company will meet the capex plans through combination of internal accruals and debts.

Net sales grew 26% to Rs 49.26 crore in the quarter ended June 2008. Operating profit margin improved 230 basis points mainly due to operating leverage and ability to demand better pricing for printing annual reports. Profit after tax was up by 70% to Rs 5.15 crore. We expect Repro India to register EPS of Rs 20 in FY 2009. At the current market price of Rs 119, the scrip discounts its FY 2009 earning six times.

Aegis Logistics Ltd. (Code: 500003) Rs.167.80

Founded in 1956, Aegis Logistics Ltd. (ALL) started operations as a specialty chemicals manufacturer and supplier to the paints industry. In 1977, the company diversified into liquid logistics management when it set up a port terminal in Mumbai to handle ships carrying cargo of chemicals. Later in 1994, it became India’s first company to set up a private refrigerated liquefied petroleum gas (LPG) terminal with know-how from Tractebel Gas Engineering of Germany. Today, ALL is engaged in providing integrated supply chain management services, which includes product sourcing, shipping, import/export, custom clearance, storing, moving and distributing petroleum products to the end user. From its headquarters in Mumbai, the company serves clients all over India in the automobile, steel, glass, ceramic, petroleum, chemical, vegetable oil and petrochemical sectors. The main products handled by company are LPG, naptha, diesel, caustic soda, motor spirit, EDC etc. The company has segregated its business process into five heads namely – tank storage and terminalling, chemical distribution, gas storage and distribution, petroleum distribution and logistics management services. Broadly, ALL’s business model can be divided into the following two segments:

Liquid logistics (20%): The company owns and operates one of India’s largest private sector liquid terminal on a 20-acre plot at Trombay having storage capacity of 165,000 KL with 26 tanks of sizes ranging from 1,100 KL to 10,000 KL. During 2007, the company acquired 75% stake in Adani group’s Sealord Containers Ltd. located at Trombay with a storage capacity of 75,000 KL. Immediately, it also acquired 100% stake in Konkan Storage Pvt. Ltd. at Kochi having a storage capacity of 51,000 KL and boasts of a total capacity of around 290,000 KL. Notably, ALL specialises in handling hazardous chemicals and dangerous goods classified under the Petroleum Act as Class A, B and C for IOC, BPCL, HPCL, Reliance, Supreme Petrochemicals, HLL, Jubilant Organsys among its main customers. Its high profit margin, almost half of the profit, came from this segment in FY08 although it contributed only 20% to the topline. Considering the robust future outlook, ALL is setting up a third terminal in Trombay with a capacity of nearly 55,000 KL by FY10. ALL intends to emerge as a national player and has accordingly acquired land in Haldia and Mangalore port. For future, it’s looking to have set-up in Kandla and Chennai port

Gas Storage & distribution (80%): ALL imports, markets and distributes bulk propane, propylene and LPG to a variety of industrial customers in the western region and is one of the largest private sector supplier in India. It operates a 20,000 MT fully refrigerated LPG terminal, which is connected to the Pir Pau Jetty in Mumbai by 12″ low temperature steel pipelines. It also offers gas storage and handling to various LPG bulk suppliers on an open user terminal basis. Of late, ALL has ventured into the lucrative business of marketing and retailing of LPG through autogas dispensing stations under the brandname ‘AEGIS Autogas’. This business is presently at the take-off stage with vehicles increasingly converting into gas-based vehicles due to the unprecedented rise in crude oil price. Initially, the company is targeting only Tier 2 cities and has already opened 38 retail outlets across five states. It intends to open 100-150 such stations over the next few years and achieve sales volume of nearly 100,000 MT of LPG through retail sales. Importantly, it plans to set up around 90% of the stations under the dealer owned dealer operated (DODO) model, with only 10% under the company owned dealer operated (CODO) model. To conclude, the retailing business alone is estimated to contribute sales of around Rs.250-300 cr. by FY10, which will boost the profit margin

Recently, ALL took over its 70% joint venture undertaking namely Hindustan Aegis LPG, which actually owned the refrigerated LPG terminal. Effective 01/04/2007, ALL has become the owner of that terminal. Hence it does not have to pay the tankage charges, which it used to pay for the use of the terminal facility. Against this acquisition, the company has allotted 36 lakh equity shares to the other 30% shareholders of Hindustan Aegis and also absorbed approx Rs.30 cr. of debt. Fundamentally, ALL has been faring well and ended FY08 on a buoyant note with 55% rise in sales to Rs.374 cr. and 65% jump in PAT to Rs.39 cr. This translates into an EPS of Rs.20 on its expanded equity of Rs.19.90 cr. Accordingly, for FY09, it is expected to clock a turnover of Rs.450 cr. with net profit of Rs.45 cr. i.e. an EPS of Rs.23 on its current equity. Considering its aggressive expansion plans for LPG retailing and pan India distribution in liquid logistic, the ALL scrip is trading extremely cheap at the current market cap of less than Rs.350 cr. Investors are strongly recommended to buy it at current levels and add on every declines for a price target of Rs.275 (i.e. 60% appreciation) within a year.



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