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Wednesday, September 30, 2009

IFGL Refractories Ltd and Vipul Ltd:Future growth propsects and outlook,buy/hold?views,news,results

1)Scripscan:IFGL Refractories Ltd

Story:IFGL is a Kolkata-based company belonging to the BP Bajoria Group. This company manufactures refractors catering mainly to the steel industry. It has two subsidiaries––Monocon International and Hofmann International. Through these subsidiaries, this company has to undertake manufacturing operations in seven countries including Europe and China.FY09 was a tough year for the company, primarily due to the meltdown witnessed in various commodities and metals and the operations of IFGL were greatly affected too.In spite of that, the company was able to register higher revenues of about Rs 410 crore as against Rs 393 crore for FY08 but the profits took a dive and dropped from Rs 28 crore to Rs 6 crore.The situation after that has improved significantly and the situation in the metal space has also stabilized. If the financials for the Q1 are any indication, then the worst maybe over for the company. In Q1, the company achieved profit after tax (PAT) of about Rs 7 crore which is higher than full year profit of last year. Besides that, this company also put up a bio-ceramic plant which manufacturers substitute for human limbs. This plant manufactures products like hip joint, bone substitute, orbital implants which are used for artificial eyes and also dental implants. This is typically a business with high margin but low volume. In future, the company has plans to scale up this business. The bread and butter for the company still remains the refractory business but this could be a business where as volumes grow more profits would start coming from it. So all in all, you have a company that has got reasonable market share in the refractory business and operations in seven countries with revenues more than Rs 400 crore and a market cap of Rs 100 crore. This company had been doing operating profit of about Rs 50 crore a year and in 2009 they did about Rs 30.So you have a business which is available at two–three years of operating profits. So given all these factors at the current price of Rs 28–29 this stock could be a value buy for investors.

2)Scripscan:Vipul Ltd

Story:Vipul Limited is an ignored stock in the real estate sector. This company has its operations primarily in Gurgaon. Over the last few years this company has expanded to other cities also. They are currently executing projections in Ludhiana, Bhuvneshwar, Kolkata, Faridabad and Hyderabad besides Gurgaon. What we like about this company is that it has got a land bank of about 1,400 acres out of which the economic interest of Vipul in the land bank is more than 1,000 acres. This land bank is situated at Gurgaon where they have about 425 acres of land, in Hyderabad they have 400 acres, in Ludhiana 130 acres, and about 95 acres in Faridabad. Besides they have small pockets of land at other places also.The company in 2007 had given 15% stake to Wachovia at a price of about Rs 1,300 per share which when adjusted for the stock split translates into price of about Rs 260 per share as against that the stock is available between Rs 55 and Rs 60 and its been consolidating for a while in that range. If you look at a recent deal which has happened in Gurgaon, DLF has bought about 350 acres in Gurgaon from Haryana State Industrial Development Corporation (HSIDC) for a total consideration of Rs 1,750 crore. This deal is significant in two ways. One, it talks about the valuation of the land bank in Gurgaon and second it also talks about the change in the attitude of real estate developers. They were earlier risk averse and they were shying away from buying any fresh land bank. Now real estate developers have started buying land bank at places where they see good sales potential.Vipul owns about 425 acres of land in Gurgaon. This land is close to Sohna Road in Gurgaon and this land also has good sales potential and with Commonwealth Games coming up. The new toll road Delhi-Gurgaon has also come up nicely. All these factors augur well for companies like Vipul and with 425 acres in Gurgaon where the sales potential maybe high and land banks at other places also at marketcap of about Rs 350 crore, the stock looks undervalued.


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