HUL has an extensive reach in the rural areas (aptly reflected in its total reach of 6 million outlets) and implementation of ‘Project Shakti’ (rural initiative) shows its intent on expansion into rural markets. Further, the per capita consumption in Unilever categories is only 33 per cent of those in urban markets. Launched in 2001, Project Shakti, a self-help concept, has turned rural women into direct-to-home distributors of its products and also educates the rural community about basic hygiene. By 2010, the company is aiming a three-fold jump in the number of villages covered to 500,000, which augurs well for its rural prospects. While rural penetration levels of soaps and detergents are relatively high, it is low in case of personal care products (tooth-paste, skin creams and shampoos). Introduction of lower-priced sachets, increasing awareness of oral hygiene and focus on mass-products should help improve sales. Even in case of urban markets, the company has been equally aggressive in terms of introducing new products and expanding its business. Put together, the company is expected to report a 20-22 per cent growth in earnings in FY10.

 JAIN IRRIGATION:

 Greater emphasis on agriculture, under penetration of modern agri-technologies and rising farm incomes make Jain Irrigation Systems a long term play in this space. Jain Irrigation’s business can be classified into three broad categories viz. micro irrigation systems, food processing and plastic pipes and sheets.

 Its micro irrigation systems division, which accounts for 50 per cent of total revenues, is the fastest growing business among the three, having grown at about 80 per cent annually in last four years. The company expects this segment to continue to grow at about 45-50 per cent for the next two years. This could be attributed to higher demand from the existing markets such as Andhra Pradesh, Maharashtra and Gujarat and its entry into other emerging markets such as Chattisgarh, MP, Rajasthan, Haryana, Punjab and Himachal Pradesh.

 More importantly, the penetration levels in new markets are very low at about 1-1.5 per cent even as compared to 5-8 per cent in existing markets, offering good growth opportunities. Also, with state governments now providing subsidy on these equipment (ranging 50-70 per cent of the cost), the demand should pick up further. As a part of its future growth strategy, the company is also diversifying its product offering to suit different crops helping create new markets.

 Jain Irrigation is also the largest domestic food processor, which accounts for over 15 per cent of its total revenues. This business has grown three-fold during FY05-08 to Rs 303 crore. The company is expecting this segment to grow at about 40-45 per cent annually over the next two years on the back of growing opportunities in food processing space (fruit juices, etc), entry into new fruits (bananas, oranges) and expansion of capacities. Meanwhile, key developments such as falling interest rates, lower raw material prices and expected improvement in the future cash flow are key positives in the near term.

 PUNJAB TRACTORS:

 Higher farm incomes, output yields and a low base pushed up Punjab Tractor’s tractor volumes by 33 per cent year-on-year to 26,621 units for the first nine months of FY09. Low tractor penetration (half of world average) and priority sector lending norms (18 per cent of net assets to be allocated to the agriculture sector) are helping the company push up its tractor count. The company’s move to hike prices in the December quarter (raw material costs were up 18 per cent year-on-year in Q3 and, 43.6 per cent for 9MFY09) and cost control measures helped it to maintain operating margins at 12.4 per cent. Further, integration with Mahindra & Mahindra, including vendor rationalisation and better working capital management, should help bring down interest and operational costs.

While there is scope for growth, both on the count of the customer’s ability to pay and penetration levels, lower credit availability from financiers looking to cut their NPAs could be a dampener in the near-term. At current levels, the stock has priced in some of the pos