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Nath Balakrishnan
Sowmya Sundar

FRESH exposures can be considered in Indian Rayon that trades at about Rs 98.

The stock, which trades at a price-earnings multiple of 5.6 times its FY03 earnings, holds the potential for appreciation in the medium-term as growth prospects appear encouraging.

The company's viscose filament yarn (VFY) division, which performed impressively in the just-concluded financial, will continue to drive growth.

With VFY finding higher acceptability in fashion markets, Indian Rayon is all set to capitalise on this trend.

Though the garment division's performance in FY03 was lower compared to FY02, the increasing preference towards readymade garments and the emergence of multiple retail formats will continue to drive this business.

With an impressive array of brands under its belt such as Louis Philippe and Van Heusen, among others, the company would also benefit from the reduction in excise duty on readymade garments announced in the recent Budget.

The carbon black division, which manufactures the key raw material for automobile tyres, should benefit from the steady trend witnessed in automobile offtake.

And if the monsoon does not belie expectations, the positive effects on this division would be magnified.

Uncertainties surrounding VAT and the trucker's strike (operational for the best part of April) might serve as a blip in near-term performance.

However, over the medium term, the company does represent a good investment opportunity.

Thermax: Warm up to it

INVESTORS can consider fresh exposures in Thermax at Rs 200. Thermax has turned around in the past couple of years and is geared up to capitalize on fresh opportunities both in the country and abroad.

Its subsidiaries in the UK and the US have been successful in procuring business overseas.

These businesses have been growing at a compounded rate of 25 per cent in the last two years. In addition, markets in Russia and West Asia are also being explored.

On the domestic front, the passage of the Electricity Bill has thrown up opportunity for the company's co-generation unit. The demand from the industrial sector for setting up captive power plants is expected to boost its topline.

Its internal initiatives to ramp up the dealer network, optimise its network by cross-selling products and efforts to reach smaller towns might also start yielding results in the next couple of years.

The services could be another major growth area. It has launched 13 service products and is expected to improve its service to sales ratio and projects to products ratio.

These would not only sustain its revenue growth but also improve margins. All these efforts could sustain top and bottomline growth.

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