Julius Hermes, chemist, engineer and entrepreneur extraordinaire, died last week at the age of 77, leaving behind an aura of mystery about what is happening at his company, Martin Processing Inc. of Martinsville, Va.

The firm -- which had $37.8 million in sales last year -- dyes, metalizes and laminates plastic film, which can be used for everything from blocking out sunlight in car windows to blocking out the electronic surveillance aimed at embassy windows.

Martin Processing also dyes and processes yarn used in carpets, draperies and upholstery. Yarn products, once its mainstay, now account for only 17 percent of sales while film products have moved up to 69 percent.

Part of the mystery is what role Martin Processing is playing or will play in development of film materials for the super-secret Stealth aircraft technology, whose goal is to make future fighters and bombers invisible to enemy radar. Martin Processing was reported to be engaged in Stealth-related work, but company officials were not reachable for comment.

Hermes led his company through the good times of the 1960s and early '70s and the bad times of the late '70s and early '80s, when changes in the carpet industry and the recession chopped into sales that had once reached $100 million. Hermes redirected the company's business, and its turnaround began in 1982.

He lived long enough to see Martin Processing's fortunes rebound nicely and to see his stock rise to amazing heights. Selling at $8.88 a share in January 1984 and $14.75 in January 1985, the stock rocketed to a new high of $71 Friday, for a 21-month increase of 699.5 percent. Hermes, who held sway over about 51 percent of the stock, thus watched the value of those shares go from about $7.2 million to $57.9 million.

Why the stock has run up so fast is a mystery in the Wall Street community as well as in Martinsville. Company officials have contributed to the uncertainty in the last couple of years by becoming increasingly reluctant to talk with stock analysts, brokers and reporters.

One Martinsville broker recalls that as the company's fortunes turned down, Hermes was less inclined to discuss his business. "I'd meet him on social occasions and he'd be pleasant enough, but when the talk would get around to the business, the conversation would come to an end."

With the stock soaring, there has been widespread speculation that the company would be sold. At Martin Processing's annual meeting in April, Hermes told stockholders he was suffering from lung cancer. His age, his health and his majority control of the company provided speculators with all the signposts of a possible sale.

By Aug. 13, rumors of a leveraged buyout by management had become so pervasive that the American Stock Exchange asked Martin Processing to issue a statement. Trading was halted briefly while the rumor was denied.

Hermes preferred to stress the "turnaround" theme, telling The Wall Street Journal at the time: "Now investors see our earnings up and are putting two and two together."

Hermes also said he didn't believe his health was contributing to the rise in the stock price because he had "set up good management" and his will stipulated that his stock go into a trust. Of a buyout, he said, "At the right price everything is for sale," but he declined to name any price.

As Hermes forecast, his holdings have gone into a series of trusts for his wife, his four daughters and their families. They have been combined into a voting trust with three trustees: Hermes' wife, Sally, attorney Fred G. Crumpler Jr., of Winston-Salem, N.C., and attorney Henry G. Zapruder of Washington. Crumpler, who delivered the eulogy at Hermes' funeral, formerly was married to one of his daughters.

Hermes' wish in setting up the trust, Crumpler said, was to "leave us with the discretion to make future decisions."

A short time before Hermes died, the board of directors gave the powers of the presidency to Hermes' son-in-law R. Keith Smith, 34, who was named executive vice president. But it was not clear how the company would set up its future command structure, and company officials were not returning phone calls. Among the firm's key officials are Donald C. Martin, chief financial officer, Albert K. Scriven Jr., vice president, and Richard G. Tilley, another son-in-law.

Smith, who has been at Martin Processing for nine years, holds three academic degrees, including bachelor's degrees in economics and textile technology and a master's degree in science and business administration.

One of the serious buyers of Martin stock is Jack Cooper, manager of the Martinsville office of Scott & Stringfellow. He has been accumulating shares for 18 months, based on what he considers "the real positive qualities" of the company. "For the longest time, I was the only person buying it," he said. Even so, he was surprised by the swift rise in the stock. Price action has been volatile because of the small amount of stock available for trading, he noted.

Martin Processing has 1.6 million shares outstanding. About 51 percent is in the Hermes trusts, and an estimated 17 percent is owned or in the province of L. Glenn Naff, of north Roanoke County, Virginia, who has been buying steadily since 1977 and is still buying. That would seem to leave only about 512,000 shares available for trading. A Wall Street source estimated that fewer than 300,000 shares are available, and Naff said he guessed that no more than 150,000 are available.

Naff said he and other stockholders had been begging the company for a stock split for two years to increase the amount of stock available for trading. He was optimistic about a forthcoming split. According to one Wall Street observer, the financial community would take a split as a sign that the company plans to hang on and run its own business.

Naff said he looks for sales to reach $60 million to $70 million this year, from $37.8 million last year. Rapid growth in the film business, he said, could propel the company to $160 million in sales by 1987. Naff said he believed the company will begin paying quarterly dividends next year.

Martin Processing, which reported 1984 operating earnings of 88 cents a share, ended the first half of 1985 with 87 cents in operating earnings, 65 cents of which came during the second quarter, showing strong earnings momentum.

Naff acknowledged he had heard talk of a buyout and said he knew of two or three serious suitors but declined to name them. The present management, he thought, felt "kind of mixed" about whether the company should be sold. Personally, he said, he did not favor a buyout.

Naff, who said he recently toured Martin Processing with R. Keith Smith, reported that the company is working on the Stealth aircraft technology for Rockwell International.

One brokerage house analyst, admitting he was perplexed, said that by one measure, the stock is selling for more than 50 times earnings. That would make it very dear.

But he noted, too, that the stock also could be considered cheap "if the company's got something that is proprietary or special." In that case, he added, "The sky's the limit."