Growth stocks: Riddhi Siddhi Gluco Biols

Starch and Sweetners manufacturer Riddhi Siddhi Gluco Biols is set to announce outstanding results in the June quarter. This agroprocessing company’s underperformance is mainly due to fire in Gokak plan which disrupted its business for 6 months. Both Uttarakhand and Gokak (Karnataka) plants are now operating and company is expected to post turnaround results in the coming quarters. Company bought Bio-polymers business from Hindustan Unilever and this midcap corn-wet-miller company is planning to use this Pondicherry unit as a research hub.

Riddhi Siddhi Gluco stock price analysis:

CMP: 188.25
P/E: 10.6
Book value: 123
1 year high-low: 309-166

Riddhi Siddhi stock target price:

1 year target: 350-380. One will surely get more than 80% returns in 1 year. EPS for FY09 will be around 35-40.

Why Riddhi Siddhi Gluco is a “must buy”?

1. EPS is expected to increase from 18 to 40 by conservative estimates.
2. Sales are expected to grow by 70% and profit may rise by 120%, according to analysts.
3. Agro-processing has huge prospects.
4. Government will promote agriprocessing business aggressively in the next budget.
5. Aggressive expansion plans will help the company in the next 2 years to post good results.

Verdict: Riddhi Siddhi Gluco Biols is a very good stock for accumulation to get more than 80% annual returns. Accumulate this stock without hesitation on any fall for long term investment. This midcap company set to outperform the market in the next 12 months.

Stock rumor: Sony Ericsson may acquire Spice mobile

Sony Ericsson is in advanced talks to acquire Spice Mobile. According to Economic Times, Sony Ericsson is in advanced talks with BK Modi of Spice Mobiles to acquire his 64% stake in the company. According to ET, Modi demanded Rs 80-100 per share from the world’s 3rd largest mobile handset manufacturing company means Spice Mobile will be valued at around Rs 700 crore. This is a steep valuation for the company but Modi is an expert in getting good bargain (Spice Communications sale).

Spice Mobile valuations:

On July 10th: Rs 177 crore (Share price-22.7)

Modi asking rate: Rs 700 crore (share price 80-100).

If this takeover materialises, it will be a windfall for the shareholders of Spice Mobile. Sony Ericsson is in desperate need to get strong foothold in fastest growing Indian market. Nokia is holding more than 65% market share but Sony has good presence in high end market. If Sony Ericsson acquires Spice Mobile, it will give access to low end market.

In India, major growth is happening in the cheap mobile handset segment. Even though this segment offers low margins but it is high in volumes. Unless one gets a strong foothold in this segment, it is impossible to gain market share in India. Even though Spice Mobile is a late entrant in India, it is ideally positioned to give tough competition to Nokia. Sony Ericsson is buying Spice Mobile to make strong presence in this segment.

Spice Mobile stock price analysis:

CMP: 22.70
P/E: 9
1 year high-low: 36-16.

Spice Mobile target price:

1. If deal fails: This news still act as short term trigger.
2. If deal goes on expected lines: Investors will get more than 300% returns in 2-3 months.
3. If deal will happen on moderate grounds: Investors will get 100-150% returns in 2-3 months.

Spice Mobile stake holdings:

Promoters: 64%
Public: 14%
Other corporate: 22%

If Sony Ericsson acquires Modi’s 64% stake in Spice Mobile, it will need to make an open offer, according to regulations. Closely follow this scrip. If Sony Ericsson acquires Spice business, it will become the second largest mobile handset company in India.