3 emerging gems to rock

1) Gujarat State Fertilizers & Chemicals Ltd
cmp:167
Traded in:Nse-bse

Story: GSFC operates in two key segments – industrial chemicals and fertilisers. Over the years, it has diversified continuously and it now has a product mix consisting of more than 24 brands of fertilisers, petrochemicals, chemicals, industrial gases, plastics, fibres and other products.How has the company performed in the December quarter? Its sales and operating profit have doubled over the corresponding period and it earns an average operating margin of 13%. Is this a one-off spurt in financials? Its performance over the past five quarters has also been good; sales growth averaged a healthy 51% while its operating profit grew by 37% over the same period. Interestingly, the company maintains a very low debt profile which keeps its interest cost at a minimal level – averaging 1% of its net sales and 6% of its operating profit over the past five quarters. GSFC is among the 12 companies with whom Reliance has recently signed a contract to supply gas from its KG D6 fields. GSFC is also part of a consortium of companies promoted by the Gujarat government which is floating a new chemicals project at Dahej. This is a Rs10,000-crore project for setting up units to manufacture phenol, bisphenol and polycarbonate for use in synthetic rubber, PVC and ethylene dichloride industries. All this provides some clarity on the future of this company. A bet worth taking at its current price and valuation.

2)Lakshmi Precision Screws Ltd
cmp:36
Traded in:Nse-bse

Story: Lakshmi Precision Screws Ltd specialises in fastening products which include 6,000 varieties of standard cold-forged high-tensile fasteners, special high-tensile bolts/screws, studs, nuts and cold-forged components. LPSL also manufactures and supplies a system which offers a simple and cost-effective solution to installing and removing fasteners. Though the December-quarter performance has not been very impressive, sales have been growing by an average 14% over the past five quarters while its operating profit was up 6% over the same period. One positive aspect of its December-quarter performance, however, has been an improvement in operating margin to 16% from an average of 13% that it earned over the past five quarters. Its interest cost as a percentage of sales averaged 6% but as a percentage of its operating profit, it was 48%.A great buy at dips.

3)Upper Ganges Sugar & Industries Ltd
cmp:71
Traded in:Nse-bse

Story: Demand and supply forecasts for the sugar industry have been changing frequently. From a short supply scenario, it has suddenly shifted to an optimal supply position, thanks to the revised estimates of sugar production for the current season. On perceived shortage of sugar, sugar stocks have been doing well; this outperformance may continue for a while. One sugar company that fares well on the valuation parameters is Upper Ganges Sugar & Industries Ltd. At the current price, its market-cap is only 0.09 times its December-quarter annualised sales and 0.50 times its operating profit. Its December-quarter performance has been extremely good with sales rising 53% over the corresponding year-ago period while its operating profit shot up to Rs22.28 crore from a mere Rs24 lakh during the corresponding period last year. Operating margin was 15%. One worry is that its interest cost is 12% of sales. But the huge profits of the past quarters should help it pare the debt.Overall A good sugar stock to sweeten your portfolio.

Source:ML Research Desk

Hidden Gem Stock Picks

Investors generally focus on stocks and industries which are very much in the news. Hence most of the time we end up buying overvalued stocks. The best investment opportunity is however in stocks which have not got lot of public, mutual fund or FII investments but are still good or great companies in the making. Listed below are some of these stocks which are not in focus now but can be multibaggers in the long run.

1)VST Tillers Tractors Ltd

• This company is involved in the manufacture of tillers, tractors and diesel engines.
  

• It has got sound financials with steady revenue growth.
  

• The demand for tillers and tractors is expected to go up locally as well as globally and the company can be a major benficiary of the same.

• The company is currently trading at a PE of 4.19. VST also has no FII holding while mutual fund holding as of 30th September 2008 is 3.78%.

2)Gujarat Reclaim & Rubber Products Ltd (GRRPL)

• GRRPL is another company which very few people are aware of but has got good fundamentals and has been showing good growth on a consistent basis.

• The company is involved in the sale of reclaimed rubber and products are exported as well as sold locally. In short term demant for product might decline slightly but long term outlook looks bright.
  

• Currently the stock is trading at a PE of 4.74 and valuations look attractive from a long term perspective.

• This is another company which does not have any FII holding and mutual fund holding is also very less.

3)Honeywell Automation India Ltd (HAIL)

• HAIL is another company with great fundamentals but has not recieved big investor attention so far. While most of us know about Honeywell but very few may be aware of this Indian listed entity.

• HAIL is in the business of Instrumentation & Process Control. Its products and services cater to broad range of industries such as security, fire detection, home and building control products and solutions and also products serving the process industries, which include Refining, Oil and Gas, Pulp, Paper & Printing, Power Generation, Power Transmission & Distribution, Chemicals & Life Sciences, Petrochemicals, and Metals, Minerals and Mining.

• The company is currently trading at a PE of 10.39. The FII holding in the company is below 1% with arount 4% mutual fund holding. This company has a great future and can reward investors in a big way.

4)Siemens Healthcare Diagnostics Ltd

• While everyone knows about Siemens Ltd. this company has not been much into limelight. It was earlier owned by Bayer and has been acquired by Siemens. The company has got good fundamentals and a backing of the parent Siemens company.

• One might argues why Siemens is better then other medical equipments provider companies. The reason is its cutting edge technology due to the German parent company. So its high end medical equipment products cant be made by Indian counterparts and hence its competitive advantage.

• The stock is currently trading at a PE of 14.29 which might seem bit higher compared to the way valuations are today. But its an attractive long term bet and will give good returns to shareholders. A merger with parent Siemens company in the future is also possible which will also be good for shareholders.

This list is not exhaustive at all and there are many more such companies which are not in the picture bigtime but are doing very well. If one can identify these companies before mutual funds and FII's do then the possibility of returns is the maximum. This is because the retail investor is always the last one to enter into a good stock or industry and by that time its already overvalued.

So try looking and thinking beyond what is already there in front of everyone. It will surely help in picking few multibaggers in the long run.