Gitanjali Gems Ltd investment stocks

These companies are filtered based on following parameters

a) Debt-equity ratio less than 1
b) Return on capital higher than 20%
c) Price-earnings multiple not more than 15
d) Net sales and market capitalisation exceeding Rs 100 crore.
e) The average daily trading volumes (over the past six months) of more than 5,000 shares
f) Their free float (the percentage of shares available to the public for trading) ranged between 20% and 80%.

Important Note

a) Currently Our Indian markets are bearish following the global markets and some more down trend may not be ruled out so investors planning to buy these stocks are advised to buy smaller quantities at a time and do averaging as the stock price comes down. Investors are not advised to buy bulk quantity in single trade.

b) The following companies are having low valuations and high earning growth. The valuation is measured through PE (price to earning ratio) and earning growth is measured through EPS (earning to price ratio). Due to high earning growth the stock prices are trading at higher levels but still looks cheaper taking into consideration there PE ratio.

Aditya Birla Chemicals
Aditya Birla Chemicals (India) (ABCIL) is a 51% subsidiary of Hindalco Industries with 5% additional stake held by other promoter group entities. The company is a leading producer of inorganic chemicals, such as caustic soda, chlorine, hydrogen and their derivatives. It has a 105,000 tonne per annum (TPA) caustic soda plant along with 30 megawatt captive power plant in Jharkhand.

The company has a history of generating strong cash flows resulting in a debt-free position by the end of March 2010. During the five-year period from FY05 to FY10, the company?s sales grew at a CAGR of 15.5% while profits grew at 18.1%. The company?s results in the four quarters of 2010 have been exceptionally superior to the year-ago period mainly because of write-backs to the extent of Rs 14 crore, which may not be available in future.

Current price - Rs 119
PE ratio - 4.47
EPS - 26.81
Market Capitalization - 280 crore

Clariant Chemicals
Clariant Chemicals, a 63% subsidiary of German specialty chemicals major Clariant, is India?s leader in specialty chemicals. During the past couple of years, the company has divested a few of its non-core businesses. In 2009, it sold its flexible laminating adhesives business followed by disposing of its diketene and intermediate businesses in early 2010. These two businesses contributed Rs 85.7 crore to its revenues in 2009 and fetched the company a profit of Rs 8.9 crore on sale. In August 2010, the company has further approved the sale of its land at Balkum, Thane, for a total consideration of Rs 240 crore, which is likely to be completed within the next few months.

After more than doubling its profits in 2008, the company grew its profits by over 60% in 2009. In 2010, it seems to have run into a phase of stagnation, part of which was due to the sale of businesses. Its revenues grew 5.8% and net profit rose 3.9% in 2010 over the previous year. The company has consistently raised dividends to Rs 30 per share in 2010, which is 5% yield on its current market price.

Current price - Rs 717
PE ratio- 6.4
EPS - 111.52
Market Capitalization - 1904

Excel Crop Care
Gujarat-based Excel Crop Care is an agrochemicals company. Over the past five quarters ended December 2010, the company has posted a decent growth in its financials with September 2010 quarter being traditionally the strongest, showing the maximum growth.

In FY10, Excel witnessed a 6% fall in annual revenue at Rs 620 crore from the previous year. This can be attributed to slackening exports due to unfavorable climatic conditions in the geographies the company operates in. However, the company holds a positive outlook for the current fiscal. During the first three quarters of FY11, Excel Crop Care has already achieved a turnover of Rs 564 crore that indicates the company will post double-digit growth for the current fiscal (FY11) against the previous year. The European Union has banned the import of company?s leading product, Endosulfan, which forms over 35% of its total revenue. However, the export would resume once the company receives an approval from the importing country. The procedural delays are expected to hit the company?s topline in the coming quarters. Despite this, the plus point is that India, China and Argentina are against the ban of the product. These countries together form a significant part of the world?s agricultural industry. To an extent, this is likely to offset the impact of EU?s refusal to import the product on the company?s financials.

Current price -Rs 163
PE ratio - 5.54
EPS - 29.4
Market Capitalization- 179

Honda Siel Power Products
Honda Siel Power Products, a part of the Honda Motor Company, manufactures portable generator sets, general-purpose engines, water pumps, lawn mowers and brush cutters. It caters to companies and individuals involved in agriculture, horticulture, lawn/garden maintenance and landscaping sectors. The company?s sales have grown at a compounded annual rate of 8.2% over the past five years and it has given a return on capital of 20% for FY10. Honda Siel is virtually debt free and has adequate cash for any further expansion. Given the power shortage in India, especially in the rural areas, the demand for generators remains robust. The company, however, faces competition from cheaper Chinese products in the market. Birla Power Solutions is its closest competitor among established players, though from an investment perspective, Honda Siel offers more value.

Current price - Rs 381
PE ratio - 16.09
EPS - 23.72
Market Capitalization - 387

IFB Industries
Kolkata-based IFB Industries, a consumer goods company, has come a long way. Though the company was declared sick in 2000, it came out of sickness in 2009 and became debt free and made profits. The company?s more profitable engineering segment contributes nearly 20% to its total revenues. Its home appliances business of washing machines, dryers, microwave ovens and dishwashers is steadily gaining momentum in revenues and profits. A strong brand equity, high product quality and latest technical know-how are its strengths. The Rs 650-crore company is investing into modernising and expanding its capacities in appliances and engineering segments. Due to this, the appliances division is expected to achieve a 20% growth in sales and sales of the engineering division are likely to double by the end of FY12. At a market cap of Rs 377 crore, the company is valued at a little over half its sales. It is better placed against its peers like Whirlpool and Bajaj Electricals in terms of margins and cash flows.

Current price -Rs 130
PE ratio- 9.10
EPS - 14.27
Market Capitalization- 470

Ineos ABS India
Ineos ABS India, which is an 83% subsidiary of Ineos Global Group, is India?s leading manufacturer of an engineering plastic named acrylonitrile butadiene styrene (ABS). It is a high-performance plastic, used predominantly in automobiles and consumer durables. After stagnating at the topline for four consecutive years the company achieved a 33% growth in 2010. In the meantime, its profit has been growing steadily year after year with the only exception of 2008. As a result, the 5-year CAGR in net sales is at 13% against 34% in profit. The company has steadily increased its ABS capacity to match rising domestic demand. During 2010, Ineos ABS India expanded its ABS capacity by 33% to 80,000 tonne per annum. The company remains a debt-free and cash-rich with a consistent dividend paying history.

Current price - Rs 588
PE ratio- 14.31
EPS - 41.11
Market Capitalization- 1034

Insecticides India
Insecticides India (IIL) is a Delhi-based agro-chemicals and pesticides company. Over the quarters, the company has posted a robust growth in its financials. In the past seven quarters, the company?s operating profit margin has been hovering in the range of 8-10%. The company is likely to continue operating at similar margin level in the coming quarters. During the current fiscal, IIL management expects an annual turnover of Rs 550 crore, nearly 40% growth over the previous year. This implies an almost 50% sequential growth in the March 2010 quarter topline to Rs 135 crore. This is going to be possible due to the commencement of company?s facilities in Udhampur and Dahej. Upon commencement of production at these locations, IIL?s production capacity of technical grade pesticides is expected to go up by six times to 12,000 tpa. It also expects to expand its reach in the southern India and intends to develop its exports market in the next 2-3 years. IIL is also exploring inorganic growth avenues through acquisition of insecticide brands.

Current price -Rs 353
PE ratio- 13.93
EPS - 25.4
Market Capitalization- 448.85

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