Research Calls: SKM Egg Products Export (India)

Brics PCG Research recommends a "buy" on SKM Egg Products Export. The stock trades at a P/E 6.7x, 5.4x and 4.6x of FY06, FY07 and FY08 earnings respectively. The report states that SKM Egg Products was incorporated in 1995 as a 100 per cent export-oriented unit.

It produces egg powder products, which serve as ingredients in the food industry as well as in the health and pharma sector. Bird flu attacks create an opportunity for SKM through increased realisations of egg powder.

The company is planning to expand its egg processing capacity from 4,300 metric tonnes in FY06 to about 8,000 metric tonnes by FY09 through a series of organic and inorganic growth measures.

The company plans to set up its own poultry farm in 18 months starting March 2006, which would cater to 50 per cent of its egg requirements. This would enable it to save on about 15 per cent of its raw material costs.

Ambika Cotton Mills

Emkay Research, in its visit note on Ambika Cotton Mills, states that the company at present has an installed base of 56,000 spindles, which it plans to increase to 66,000 spindles by end of Q1 FY07 and 110,000 by end of FY07.

All this expansion will take place in the compact spinning technology, increasing spindles on compact spinning technology from 21,000 at beginning of FY06 to 85,000 by end of FY07. Niche product offering, intelligent cotton procurement and low power costs fetch the company the highest margins of about 32 per cent in the spinning industry.

It is also planning to increase its wind mills capacity from 13 MW to 25 MW over the next 12 months. Increase in demand for quality yarns and limited players in this space augur well for the future prospects.

The company is a niche player in the cotton yarn segment, with focus towards high quality compact spun yarns. It manufactures high quality cotton yarn "� compact & elite twist and has established its name in the international market as well as domestic markets.