Mawana Sugars: Operating profit margin up

ANALYSTS' CORNER

IDBI Capital, in its results preview on Mawana Sugars, recommends a "buy". The company has recorded a magnificent 50 times y-o-y jump in Q4 FY05 net profit at Rs eight crore (September ending company). Such bottomline growth has been aided by more than 20 per cent topline growth and sharp reduction in interest expense over the period. Q4 revenue stands at Rs 128.7 crore.

Significant improvement in price realisation has helped the company in registering an operating profit margin of 10 per cent, up by 390 bps. The average price realisation during FY05 is expected to remain at around Rs 17,200 a ton, against Rs 13,914 a ton previous year. The revenue for the full financial year stands at Rs 585 crore, which is above the expectation of Rs 550 crore.

It has recently achieved zero-debt status. Pursuing a scheme of arrangement, it has extinguished long-term debts amounting to Rs 99.2 crore and corresponding sum has been credited to the capital reserve.

The stock trades at 4.5x FY06 earnings.

Dishman Pharma & Chemicals: Diversified contracts drive growth

Edelweiss Securities reiterates its "value buy" on Dishman Pharma. The company's diversified and relatively low-risk contracts continue to drive growth. The report views the recent stock fall as market-related and as a good opportunity to enter.

The company reported fine results with net profit up 71 per cent y-o-y Rs 13.6 crore and sales up 31 per cent y-o-y to Rs 68.4 crore. Q2 FY06 Crams' revenues were about Rs 55 crore, of which Rs 23 crore (42%) came from Solvay.

Even so, Dishman has significantly reduced its dependence on the single customer, Solvay, for growth. For the full year, Solvay will contribute about 27 per cent of revenues. Management has indicated that the margins in its Quats business have stabilised.

This is viewed as a positive development. With focus on high-end products, the management expects this trend to continue, that provides a cushion to estimates.

The stock trades at 13x FY06E and 9x FY07E.

Graphite India: Scores high on valuation & operational parametres

IDBIcapital recommends a "buy" on Graphite India. The company is the largest manufacturer of graphite electrodes in India, being one of just 11 major global producers. These electrodes form an integral consumable in steel production though the EAF route, which is gaining preference over the basis oxygen furnace route.

The report expects demand for graphite to remain strong, especially in Asia. The company scores well over peers across operational and valuation parameters, with EBITDA margin at 20 per cent and EV per million ton at $4,368.

Going forward, strong earnings growth of 65 per cent and 53 per cent in FY06 and FY07 is estimated. This should drive a sharp improvement in return ratios. New steel capacity of 80 MMT is estimated to come up EAF route.

The current spot market rates for graphite electrodes are around $4,250 per ton, against the current average realisation of $2,600 per ton.