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Thursday, October 1, 2009

Sree Rayalaseema Hi Strength Hypo Ltd and WS Industries:Future growth prospects and outlook

1)Scripscan:Sree Rayalaseema Hi Strength Hypo Ltd

Story:The rewarding thing about trawling the papers day in and day out is that one day god may smile and say, “Bachcha, I am pleased with your devotion. I shall grant you a bargain penny stock that shall be hidden from public view as long as you want it.The moment manifested in the form of SRHSH.SRHSH manufactures calciumhypochlorite and monochloroacetic acid; the former is being increasingly preferred as an environment-friendly alternative for chlorine in swimming pools and water purification the world over. The company exports nearly all of this product so the results that you see in the first quarter of this year is after the impact of the rupee’s appreciation. The company manufactures the product through the specialised sodium route, developed in-house, mastered only by a few companies in AsiaThis is my turn-on: SRHSH has embarked on an expansion of its sodium hypochlorite capacity by 50 per cent and its monochloroacetic acid capacity by more than 100 per cent; out of internal accruals and debt, enhanced utilisation should translate into huge revenues for 2009-2010.If margins are maintained, shareholders could be laughing all the way to the AGM. Provided it is not in Kurnool, Andhra Pradesh.A good buy at sub 25 levels.

2)Scripscan:WS Industries India Ltd

Story:Suddenly, half of India including my mother-in-law is bullish on this porcelain insulator company.The reasons: India’s considerably-under-provided power transmission sector is the next big thing, the country’s transmission lines are graduating towards higher voltages, Power Grid’s next mega tender is around the corner, global opportunities are emerging in East Asia, Latin America, North America, North Africa and Europe (going through aggressive line refurbishment) and the insulator industry growth of 12-15 per cent over the last three years of the Tenth Plan is going to lead to an average 20-22 per cent per year in the Eleventh Plan.So what does all this mean for dear WS? An order book for more than a year, a new plant under commissioning which will enhance capacity from 16,000 tpa to 27,000 tpa, additional capacity to go on stream in the first quarter of the next fiscal, project funded through a private placement (equity already diluted) and enriched product mix (first to develop products for the 800 KV line and is working on the 1200 KV line) will strengthen margins, a debt-equity ratio of less than 1 will translate into improving interest cover and the company possesses a full-blast revenue potential of around Rs 350 crore.What is not widely public is that the business has a high fixed cost but once that is covered, it recruits people to count the money. But that’s only between you and me.Can be a doubler over the coming 2-3 years.

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