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Monday, August 24, 2009

OCL India and Uflex Ltd:Future growth prospects and outlook(buy or sell?)

1)Scripscan:OCL India Ltd

Story:OCL India is an efficiently managed cement plant. This company has got a clean balance sheet. It is one of the most undervalued and under-researched stocks in the cement sector. Even many analysts have not heard of this stock. This company has the largest cement plant, which is located in Orissa, which is supposed to be a cement deficit region. The company also has besides limestone mines access to coal mines and captive power.This company has been expanding its capacity. If one looks at the financials, sales for FY09 is Rs 1,120 crore, profit after tax (PAT) is Rs 116 crore. Its Q1 sales are of Rs 350 crore with the PAT of Rs 57 crore. Company paid tax of Rs 27 crore in Q1 alone. So you have a company with a small equity of Rs 11.5 crore and a market cap of Rs 630 crore paying tax of Rs 27 crore in one quarter and making a PAT of Rs 57 crore in one quarter and trading at a price to earning multiple of about 4.5.This stock looks undervalued compared to the peer group.A safe bet at these prices for investors willing to hold the stock for coming couple of years.

2)Scripscan:Uflex Ltd

Story:This is a Noida based company. This is one of the largest manufacturers and suppliers of plastic films in the world. This company has thirteen manufacturing plants in India, one in Mexico, one in Dubai and they are putting up a new plant in Egypt besides taking up the expansion project at their existing Mexico plant.This company has been buying back the Foreign Currency Convertible Bonds (FCCBs) which it issued a couple of years back; it has bought back about 70-75% of the outstanding FCCBs. If you take a look at the financials of the company, FY09 sales were about 2,000 crore, profit after tax (PAT) was about 187 crore which results in an EPS of Rs 29. So at the current price of Rs 92, this stock is trading at a price to earning ratio of 3.2.Q1 again the financials have been very good, PAT is up by about 40% to 50 crore. Good point is that the current price of Rs 92 is – this stock is available cum dividend. The company announced last week a dividend of 40% which means anyone buying today will get about 5% taxfree dividend yield besides the capital gains which will accrue to the investors over a period of time. So I think this company has identified a target of putting up seven manufacturing plants in seven different countries by the year 2015 and given all these factors I think this is on the path of becoming a multinational company having 13 plants in India and would have 7-8 plants in other parts of the world.I believe this stock has the potential to go up many fold if one chooses to hold on for this stock for a few months or a couple of years.

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