Brief interest

Manish Joshi & Dhruv Rathi

Welspun Gujarat Stahl Rohren (WGSR), a little known stock, has been quoting below par for a long time. However, it has suddenly shot into limelight with a significantly higher trading volume of more than 75,000 shares. The company has announced that it has received a major order worth Rs 443 crore for supplying pipes of various grades. Yesterday’s heavy volume suggests that the stock market may have scented the development in advance and this could be another case of insider trading.

WGSR manufactures submerged arc welded pipe. The size of the order bagged is a very significant one, as the company’s turnover for the year to March 2001 was Rs 256.3 crore. It expects to execute the order within the next five-six months. This may help the company in achieving its targeted topline of Rs 375 crore for the current fiscal.

If the target is achieved, topline may shoot up by 47 per cent. The company has already recorded net sales (excluding excise) of Rs 150 crore in the first half. Even with an OPM of 22 per cent (based on the first half), the company could notch up operating profit of Rs 83 crore. Interest and depreciation outgo (annualised on the basis of first half) are expected to be at Rs 50 crore and Rs 16 crore respectively for the full year.

Assuming effective tax rate at 30 per cent, WGSR still may end up with bottomline of around Rs 12 crore (Rs 0.8 crore in FY 2000-01). This could explain the frantic activity in WGSR stock, which is quoting at Rs 9.

WGSR has also negotiated an order valued at Rs 242 crore from MJF & National Iranian Gas Co. Even if one considers that the company has a very limited competition apart from SAW Pipes in the domestic market, WGSR will have to show sustained improvement in its performance over a period. For the current fiscal, the company could at best achieve an EPS of one rupee for FY 2001-02. Therefore, it is very likely that the short-term euphoria in the WSGR counter may not last long.

Unichem Labs
Unichem’s net sales, during the quarter to September 2001, rose 19 per cent to Rs 73.13 crore. New introductions in an enlarged product basket, consolidation of existing products with better synergy and co-marketing agreement with other major pharma companies are the main attributes of the growth.

Despite a sharp increase in raw material expenses by 33 per cent to Rs 32 crore, the company managed to control other expenses. As a result, operating profit spurted by 32 per cent to Rs 14.2 crore, while OPM rose to 19.4 per cent (17.4 per cent). Net profit too jumped 38 per cent to Rs 9.84 crore.

Unichem introduced four new products during the last six months. New products have been drivers of growth contributing significantly to the sales during the past three years. The company intends to enhance its therapeutic reach by increasing the product basket in chronic therapies that may assure a regular business round the year. Presently, 85 per cent of the sales comes from domestic market (that is mainly comprised of formulations). And nearly 40 per cent of sales come under DPCO controlled prices.

Exports predominantly consist of bulk drugs. The company has taken major initiatives to complete product registration formalities in many countries and that will help to boost its export. Unichem has invested more than Rs 10 crore towards R&D facilities in its Jogeshwari plant. It has also signed a MoU with Indian Institute of Science, Bangalore for setting up a bio-technology lab.

Unichem has forged strategic alliances with Korea Green Grass Corporation to market “Unikinase” in thrombolytic (cardiovascular) segment and also signed an agreement with Baxter Healthcare, Chicago for launching “Partobulin” for women hormonal disease. Besides, the company is adopting aggressive marketing strategy by creating more divisions, acquisition of brands, strategic alliances with foreign partners, new bulk drugs, new formulations and molecular generics. The company is hopeful of achieving around 20 per cent growth in sales and 50 per cent growth in net profit for the current fiscal year 2001-2002.