W S Industries Ltd - 48.00
Incorporated in 1961, WS Industries Ltd (WSIL) is a leading manufacturer of high voltage electro-porcelain transmission insulators and sub-station insulators. Insulators being non conductors are basically protective tools, which subdues the current and are used in transmission and distribution (T&D) of electric power. Ranging from 220 KV till 1200 KV, company now particularly produces only high end insulators in various types such as suspension insulators, pin insulators, solidcore insulators, hollow porcelain insulators, shackle & stay insulators etc. Besides it also deals in other products like dropout fuses, isolators, lightning arresters, coupling capacitors, capacity voltage transformers, instrument transformers, line traps and reactors. Of late company has also ventured into turnkey project execution i.e. designing, execution and construction work of insulators and transmission lines of below 220 KV. Currently company derives 15% revenue from this segment whereas balance 85% comes from sale of insulators.
WSIL has total installed capacity to manufacture 16000 tons of insulators with 8000 tons for substation insulators and rest 8000 tons for transmission insulators. Power grid, NTPC, State electricity boards are among its domestic customers whereas ABB, Siemens, Areva etc are few of its international clients. Interestingly, 95% of transmission insulators are sold domestically whereas on the other hand majority of the substation insulators are exported. Hence to cater the domestic demand also for the substation insulators, WSIL is setting up a Greenfield plant with a name plate capacity of 8,000 tons in Visakhapatnam, Andhra Pradesh. In short, the company is doubling the manufacturing capacity of substation insulators. The new plant is expected to become operational in next couple of months. Meanwhile company is looking to scale up its capacity for executing turnkey project and is even scouting for strategic alliance in this business.
Incidentally, company was having around 14 acres of surplus land which it transferred to its subsidiary called WS Electric which in turn is developing that property into 16 lakh square feet IT park thru joint venture. Phase I of 3 lac sq feet is expected to get completed in this fiscal from which WSIL may start getting a lease/rental income of around 3 cr per year. Balance three Phases are estimated to get completed in next four years. Well, on the back of huge expansion and modernization taking place in power sector, WSIL’s core business is witnessing one the best times in the company’s history. For the latest March’08 quarter its sales shot up 50% to Rs 66 cr where PBT almost doubled to Rs 5.60 cr. Due to high tax provisioning its NP registered only 40% growth to Rs 3 cr. But for the entire FY08, it reported 100% growth in bottomline to Rs 13.70 cr on 40% higher sales of Rs 227 cr. Thus it posted an EPS of Rs 7 on current equity of Rs 21.10 cr. Nearly after a decade company returned to dividend paying list by giving 5% interim dividend for FY08. To fund its higher working capital requirement company is looking to make a pref allotment of 9.25 lac warrants to promoters @ Rs 107 per warrant. But looking at the market sentiment this may not materialize. However, considering company’s new plant to become operational soon, it is expected to clock a turnover of Rs 275 cr and profit of Rs 16.50 cr for FY09. This leads to an EPS of Rs 8 on current equity. Investors are strongly recommended to buy at current levels with a price target of Rs 80 (i.e. 75% appreciation) in 12~15 months.
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