Value Buy......Screaming at the Loudest....

Oriental Carbon & Chemical Ltd. (OCCL) and Sree Rayalaseema Hi-Strength Hypo Ltd. (SRHHL)

I had mentioned these two stocks last October. From the October levels, they have fallen down. A lot in case of SRHHL. OCCL even fell down to 100 levels but has managed to recover till 133, the CMP. OCCL and SRHHL was broken down on very small volumes. However the optimistic views that I shared wrt them, still stands strong. Infact, I think they have become more attractive in terms of valuation and has a massive amount of value to be realized. In my view, over long term, value always gets realized. So here are two stocks screaming out loud - VALUE BUY.

OCCL is a manufacturer of insoluble sulphur which is used in tyres. I am very optimistic about the auto sector in the long term, thus the demand for insoluble sulphur is set to increase. OCCL is in a kind of monopolistic position, thus putting it in a very sweet spot and making it a great attractive target for merger or aquisition. Value is always realized when there is a potential buyer, and with its monopolistic position in the market, its value can possibly be realized.

OCCL is available at almost its book value and has posted an earing of Rs. 36.30 for the year ending March 2011 as against Rs. 28.61, showing a growth of 26.7% y-o-y. This is incredible. Its PE at the CMP stands at just 3.24. It is a good dividend paying company with dividend yield of 3%. A good thing about it is that it has a very small equity of just Rs.10.31 cr. Thus even a small rise in its earning can reflect in a much higher rise in its market price. A potential MULTIBAGGER.

SRHHL is the only Indian manufacturer of Calcium Hypochlorite. Although being blessed with adequate rainfall, alot of it is wasted and there is less and less of CLEAN and SAFE water available per person. Due to this, water treatment industry has changed considerably during the last 50 years and is growing with each passing year. Thus a lot og growth potential lies ahead for companies involves in manufacturing of water treatment chemicals, just like SRHHL. SRHHL is one such company that is dedicated to research and development of products in water treatment and purification.

SRHHL is internationally recognized as the provider of unmatched quality products through its world-class sodium process technology developed through highly skilled in-house research and development team. It has grown to become a global leader in exports too.

SRHHL is available at such high discount, almost at 0.63 times its book value at the CMP. Its EPS for the year ended 2011 stood at Rs.18.97 against Rs. 3.28 in the previous year, showing a growth of 4.78 times. At the CMP and the FY11 earnings, its PE stands at just 2.25. It paid a dividend of Rs.1.5 per share resulting in a dividend yield of 3.5% at the CMP. Like OCCL, even SRHHL has a very small equity base of Rs.10.45 cr. It looks very attractive at the current valuations.

Happy Value Investing.