ALTHOUGH the recent stock market rally has been very much led by blue chips, a follow-through into second-line stocks by retail investors seems inevitable, and the rewards promise to be considerable. One small company which has been left behind is integrated circuit manufacturer QPL International, whose shares have remained flat in the face of substantial earnings growth. At the end of July, the company announced a 64.5 per cent jump in net profit to $201 million, reflecting strong demand for its products from the personal computer and telecommunications industries and a substantial increase in capacity, primarily from expansion of its Hong Kong plant. The share price closed yesterday at 93 cents compared with a 1993 high of $1.29, primarily due to concerns over the impact of the explosion at Sumitomo's epoxy resin factory in Japan. The factory is the world's major supplier of a vital moulding compound. However, epoxy resin represents less than three per cent of QPL's total costs, and the 30 per cent increase in prices that resulted from the Sumitomo blast would directly hit profit margins by less than two per cent. Since demand for ICs remains extremely strong, and all manufacturers will be affected by the shortage of epoxy resin, increased costs should, in part, be passed on to customers through higher prices, meaning profit margins will be less affected. In addition, Sumitomo's plant will soon be back on stream, and QPL has sufficient inventory of the product to ensure the impact of the problem will be short-term. Based on the group's historic earnings for the year to April 1993, the shares are currently trading on a price-earnings multiple of 7.4, and this is fully diluted for the substantial 1993 warrant issue. Undiluted, it is an even more ridiculous 5.2. Despite the short-term effects of Sumitomo, QPL's earnings growth should be double its historic PE in the current year, a statistic which should appeal to serious investors. Crosby Securities is forecasting net profit of $232.4 million for the year to April 1994, putting the shares on a fully diluted PE of 6.5, and growth should accelerate more strongly into 1995. The shares also are on an attractive dividend yield of 5.9 per cent. According to Crosby, the company should report net profit of $286 million in 1995. None of this appears to be reflected in the share price. The Hong Kong IC manufacturing business will remain the major source of profits. However, the group has expanded overseas, setting up low-cost manufacturing facilities in France and Britain. These will help expand the group's existing European client base. Also, QPL has bought a silicon wafer fabrication plant in Wales in order to build up the group's vertical integration. QPL chairman Li Tung-lok has always demonstrated a keen eye for value in his own shares, and he recently started buying QPL ordinary shares - the ultimate Hong Kong affirmation that business is good. Investors should consider following suit.