Keep your money in fixed deposit - Invest in Reliance Petroleum

Reliance Petroleum has been formed to set up a greenfield petroleum refinery and polypropylene plant to be located in a special economic zone (SEZ) in Jamnagar, Gujarat, Western India. The proposed refinery and polypropylene plant will be located adjacent to the existing refinery and petrochemical complexes of Reliance Industries Limited (RIL). The refinery will have a total atmospheric distillation capacity of approximately 580 kilo barrels of crude oil per stream day and also a 0.9 million tons per annum polypropylene plant. The Company has entered into an agreement with Bechtel France S.A.S (Bechtel) to license the technology for the major process units of the refinery and polypropylene plant. Bechtel will also provide engineering, project management and other construction services for the Company. Reliance Petroleum (RPL) has announced the successful completion of the 2nd year of implementation of its complex refinery, coming up in a special economic zone at Jamnagar. The company achieved 82% overall progress in just 24 months since commencement of the project. Based on the progress so far, the company is on course to complete the project ahead of its initial schedule of December 2008.

Apart from the promoter company, RIL, RPL also offers a good investment opportunity as its 29 million metric tonne per annum (580000 barrels per day ) refinery the world's sixth largest is likely to come on stream before the scheduled December 2008. The commissioning of capacity is well timed given that the outlook for gross refining maragins is bullish till FY 12. Globally refining margins are likely to remain buoyant between $ 5 - $ 10 per barrel from 2008 to 2012 thanks to the huge demand supply mismatch and the time lag of three to four years for new capacities to come on stream.

Reliance Petro to me is like a FD(Fixed Deposit) Invest and forget. Look back in 2012 and you will enjoy the fruits.

Lanco Industries

Lanco Industries Ltd is currently trading at around Rs 54. It has previously seen 100+ and was hammered in Jan 2008 crashlanding. Caveat - Its a smal cap company with 40 Cr of market share. Previous observations says that when this share starts rallying it is locked in upper circuit for days together making it difficult to buy. So have patience in such a scenario. Your comments on this are invited. My two cents on why to buy this stock are as follows -

Lanco Industries Ltd. is a part of Electrosteel Castings Group and manufactures Ductile Iron Pipes, Pig Iron, Cement and Coke. Ductile Iron Pipes is used mainly in Water Supply and Sewerage applications. Considering the growing urbanization in the country and shortage of Adequate water infrastructure, which is a priority for the country, the demand scenario for DI Pipes is positive.

The government of India is currently implementing over $ 5 billion worth of Water Resource Management Projects. We believe the allocations for Water Resource sector will grow substantially in the coming years. The Union Government in its Finance Budget - 2007 has given special emphasis on providing pure drinking water to households and communities in the country and has extended exemption from excise duty on certain water purification devices & pipes of diameter exceeding 200 mm used in water supply systems.

Lanco Industries is the only fully backward integrated producer of DI Pipes. It has capacity of 90,000 tonnes of spun DI Pipes, 150,000 tonnes of Pig Iron , 90,000 tonnes of Slag Cement and 51,000 tonnes of Castings. Besides these it also owns captive Iron Ore Mines and that way its a fully backward integrated DI Pipes producer in India. Lanco Industries has over the past few years taken initiatives which will enable it to emerge as a cost efficient manufacturer of Ductile Iron Pipes in the country – these include enhancing capacities, backward integration by way of setting up Coke Oven Plant and 12 MW Captive Power plant. These initiatives will hold the company in good stead in the years to come. The establishment of Coke Oven Plant and Captive Power generation will not only make it a fully integrated company but will also bring in substantial cost benefits, thereby enhancing profitability.

its time to look for valuations. See results -
With this in place company can achieve revenues of Rs.425-440 crores in FY 08 and PAT of around Rs.26-28 crores, resulting in an EPS of around Rs.7. Current EPS is 5.6 and P/E less than 10. Though it has been a profitable company since last many yrs but it has shown an exponential growth in profit this yr only.

Mar '07 Jun '07 Sep '07 Dec '07

Net Profit 5.05 4.65 4.62 8.06

A company that is doubling net profits in 2 quarters needs to be looked into .
...with the budget in pipeline , further soaps are expected in rural infrastructure and water management sector and company price will get a boost.