Small & Beautiful
For the latest June qtr, Lokesh Machines (64.00) reported almost flat nos with NP of Rs 3.10 cr on sales of Rs 20.50. But importantly it reported a higher operating margin of 37% which indicates company may be able to maintain its profit going forward. Secondly it has declared a dividend of 25% which gives a yield of nearly 4% on CMP. Company is engaged in the design, development and manufacture of custom built special purpose machines and general purpose CNC (computerized numerical controls) machines along with their components. It derives 70% revenue from machining division whereas rest 30% comes from auto component division. It primarily caters to customers in the auto OEM, auto ancillaries and general engineering space. Hence it supplies mainly to Tata Motors, Bajaj Auto, Force Motors, Cummins, Bharat Forge, Kirloskar Oil Engines, Everest Kanto Cylinders etc with separate dedicated facilities for M&M and Ashok Leyland. Although it concentrates mainly on domestic market, but lately it has also made a foray in the overseas markets with good orders. On a conservative basis, for FY09 it can report sales of Rs 110 and PAT of Rs 11 cr i.e. EPS of Rs 9 on equity of Rs 11.80 cr. Accumulate at sharp declines.
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
Caustic soda prices have increased substantially in the recent past, but at the same time the input cost like coal have also shot up considerably. Accordingly, even though there was not much improvement in the profit margin still Bihar Caustic (72.00) reported fantastic nos for the June’08 quarter on the back of increased capacity and sale of aluminium chloride. It registered 55% growth in sales to Rs 53 cr whereas the net profit doubled to Rs 13 cr posting an EPS of Rs 5.50 for the single quarter. To maintain its growth, company has almost completed the expansion of its caustic soda capacity by 20% to 265 TPD by addition of electrolysers as well by debottlenecking. Last fiscal it also commissioned the stable bleaching powder plant with installed capacity of 60 TPD. Moreover its aluminium chloride project with a capacity of 12000 TPA is doing extremely well. At the same time company is taking initiative to reduce its total debt which will bring down the interest cost substantially. To conclude, company is expected to report a top line of Rs 200 cr and profit of Rs 52 cr for FY09 leading to an EPS of Rs 22 on equity of Rs 23.40 cr. Despite being a ‘Aditya Birla’ group company it has been very poorly discounted and is ripe for re-rating.
Accurate Transformers (100.00) is engaged in manufacturing of power as well as distribution transformers ranging from 1 MVA to 40 MVA - in up to 220 KV class. It is looking to venture into manufacturing of higher capacity Power Transformers of 160 MVA from FY10. It also carries out rural electrification project which involves the complete setting up of electricity in remote areas including the laying of lines, poles and substations. Unfortunately, despite having installed capacity of more than 8000 MVA company is working at very low capacity utilization of less than 50% due to high working capital requirement and shortage of funds. That’s why, at the time when its peer companies are growing at phenomenal pace this company has been registering normal double digit growth. Infact for the June’08 it posted marginal de-growth in topline whereas net profit declined by 35% to 1 cr. Despite this it can clock sales of Rs 225 cr and PAT of Rs 8.50 for FY09 leading to an EPS of Rs 29 on tiny equity of Rs 2.96 cr. Company is looking to raise fresh funds thru equity route mainly to fund its working capital requirement. Only aggressive investors can buy at current levels as scrip can double in year’s time.
Recently, Ramsarup Industries (118.00) has come out with decent set of nos for the June quarter. Sales grew by 10% to Rs 383 cr but NP increased by 25% to Rs 15.80 cr on the back of better operating margin. Company is engaged in manufacturing of various grades of steel wires (mainly used by power industry) and TMT Bars. To cater the rising demand company is expanding its total wire manufacturing capacities from 233,000 tonnes to 600,000 tonnes including the production of Low Relaxation Pre-stressed Concrete (LRPC) wires over the next two years. It has acquired 60 acres land in West Bengal and major plant and machinery are being imported from Italy. Importantly, to get access to cheaper and regular raw material supply, last year company took over Balasore Minerals Co, which has iron ore, limestone and dolomite mines located in neighboring Orissa state. But more importantly company is merging its other group company called Ramsarup Loha Udyog which is emerging as an integrated steel producer with captive production of sponge iron, pig iron, billets, power etc. As no official figures are available for the group company, so on a standalone basis company is expected to clock a turnover of Rs 1750 cr and PAT of Rs 65 cr for FY09. This translates into EPS of Rs 37 on current equity of Rs 17.50 cr. Post merger equity is expected to get diluted to roughly around Rs 35 cr.
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