Cochin Minerals and Rutile Ltd
BSE Code: 513353
CMP:Rs.27EPS: Rs.5
P/E: 5.42
Dividend: 12%
Dividend Yield: 4.43%
Book Value: Rs.29
Market Cap: Rs.21.22.

Introduction: Cochin Minerals and Rutile Ltd, is engaged in the production of Synthetic Rutile which finds application as R/M for the Paint and Pigment Industries. Its By-products are Ferric Chloride which is used as a cleaning agent and Ferrous Chloride used in affluent treatment. The main raw materials of your company are Ilmenite and Hydrochloric Acid. Both these items are indigenously available.
Cochin Minerals and Rutile Limited is a 100 percent Export Oriented unit in the Mineral Processing sector with manufacturing, marketing and research capabilities. The Company's products and their applications are:
a) Main Products: The main product is synthetic Rutile which finds applications as raw material for the Titanium pigment and titanium sponge/metal industry. The annual licensed and installed capacity is 36000MT.
b) By-Products: The following are the by-products:
i) Ferric Chloride which has applications as a etching agent and in Effluent Treatment.
ii) Ferrous Chloride which is mainly used in effluent treatment.

Shareholding Pattern: The promoters hold 54.53% while the general public holds 45.47%. Among the promoters, Kerala State Industrial Development Corporation Ltd hold 13.41% of the shares of the company.

Investment Rationale:

• The company came out with wonderful set of numbers for the Q3FY09. The total income of the company jumped to Rs.36.03 Cr as against Rs.24.09 Cr in the same period previous year. The net profit of the company for Q3FY09, came out to be Rs.1.82 Cr as against Rs.33 lakhs in the same period previous year. This is on a very small equity capital of Rs.7.8 Cr. Besides this the net profit margin of the company increased from 1.37% to 5.06% in the same period previous year. The cash EPS of the company for Q3FY09 came out to be Rs.3.34 against Rs.1.50 in the same period previous year.
• The increase in the profitability is mainly due to the sharp depreciation of the rupee and fall in input costs of fuel and chemicals. Since it is a 100% EOU, hence the depreciation of INR is acting as a boon for the company.
• The technology transfer agreement has been signed with Regional Research Laboratory Trivandrum (National Institute of Interdisciplinary Science and Technology-NIIST), a detailed project report has been prepared and steps are being taken for implementation of the project.
• The Company continues to be ISO 9001:2000 certified by the prestigious agency, Bureau Veritas Quality International, with accreditation from UKAS London, ANSI-RAB, USA and NA.BCB, India.
• The major strength of your company is that its products are of highest International Standards and are well accepted by the buyers.
• Company had been making profits continuously for almost a decade. The company is expected to show improved performance in FY10, due to the fall in the raw materials and stable product prices. There has been improvement in the global demand and price scenario for Synthetic Rutile and company's order book for FY09 was full, which is a positive factor for the company. Impact of the same will be felt in FY10.
• Company is expected to do well for next 18 months atleast as prices of Synthetic Rutile should remain firm.

Conclusion: Considering the points mentioned above the stock should be purchased for a long term view. The stock has given a break out at Rs.26.5 and should move up from here if it is able to maintain this break out. If it is able to break Rs.29, the next target could be Rs.41. The stock is slightly in the overbought territory and hence a little care should be taken while taking too much heavy positions. Please keep a SL of Rs.23 for a any short term trade.

Note: The stock was recommended to the Paid Groups in the Sunday Report on 05-04-09