STOCK WATCH
Micro Inks (125.00) - 70.50% subsidiary of Huber Group-Germany, is the market leader in India having three seamless ink manufacturing facilities across Daman, Silvassa & Chicago. It has presence across the value chain of the printing inks industry like pigments, flush pigments, resins and varnishes, additives and printing inks including offset ink, flexible packaging ink, screen ink, can coatings, UV coating etc. Today, it is amongst the few ink companies in the world having very high degree of backward integration. Hence, despite the sharp rise in raw material cost company posted encouraging nos for CY07 and even for H1CY08 with no fall in profit margin. It posted an EPS of Rs 27 for 2007 and gave 60% dividend which leads to a yield of 5% at CMP. Further it is expected to end 2008 with sales of Rs 1350 cr and PAT of Rs 80 cr i.e. EPS of Rs 32 on equity of Rs 24.90 cr. Moreover it is a strong bonus candidate as company has huge reserves of Rs 750 cr i.e book value of whopping Rs 310. Thus at current market cap of Rs 300 cr scrip is available extremely cheap at P/E multiple of less than 4x times and at 60% discount to its book value. Lastly the recent fall in crude oil price and sharp depreciation of rupee will have positive impact on the bottomline. Hence with a 52w H/L of Rs 478/120 it is one of the safe pick in current market sentiment.
Belonging to the world renowned Kalyani group, Automotive Axles (205.00) is currently the largest independent manufacturer of rear drive axle assemblies for commercial vehicles in the country. Besides it also manufactures brake assemblies and gear sets. It enjoys esteemed client portfolio, which includes names like Ashok Leyland, Tata Motors, M&M, Volvo, BEML, Maruti Udyog etc in the domestic market and Daimler Chrysler, Meritor etc in the international markets. In the last couple of years, company has increased drive axle capacity from 83,000 units to 168,000 units per annum. To cater the robust export demand, it is further augmenting the installed capacity to 240,000 axles under a capex of Rs 112 cr. Apart from this it is also enhancing its gear sets manufacturing capacity from 1,70,000 units to 3,20,000 units per annum. For the first three quarter of FY08 it recorded a growth rate of 35% in sales to Rs 611 cr, whereas net profit increased by 20% to Rs 48 cr. The recent fall in metal prices and sharp depreciation in rupee will give some relief to company on margin front. For FY08 ending Sept 2008, it may clock a turnover of Rs 800 cr and PAT of Rs 62 leading to an EPS of Rs 41 on current equity of Rs 15.11 cr. Scrip can appreciate 50% within a year.
The share price of Sunil Hi-tech (88.00) which raised Rs 81 cr in Jan’08 via QIP route @ Rs 360 per share has now been reduced to merely 25%. Moreover it has also issued 38 lakh warrants in Oct’07 to be converted @ Rs 146/- per share before April’09. Company is engaged in the niche segment of fabrication, erection & testing and commissioning of bunkers, ESPs, boilers, TG sets in the power plants, both in private & public sector. With a client list spanning BHEL, NTPC, Reliance Energy, Jindal Steel and Power, the SEBs of Maharashtra, Chhattisgarh and Madhya Pradesh, Sunil Hitech is also engaged in overhauling and maintenance to ensure proper functioning of plants, post-installation. The company also undertakes projects in the transmission and distribution segments. Remarkably, as on today it has an all time high order book position of more than Rs 1300 cr which is 4x times its FY08 turnover. With the ongoing liquidity crunch internationally, funding such huge projects is a challenge for the company. However, it has an under leveraged balance sheet with a low debt equity ratio of 0.60x times and can raise more debt comfortably. So despite taking into consideration higher interest cost it may end FY09 with a topline of Rs 500 cr and PAT of Rs 20 on conservative basis. This translates into EPS of Rs 16 on current equity of Rs 12.30 cr. At current market cap of merely Rs 100 cr, it’s a steal.
Asian Hotels (285.00) owns and operate three 5 star hotels under the brand Hyatt Regency. Its flagship hotel Hyatt Regency New Delhi has 508 rooms whereas its Mumbai and Kolkata hotel has 401 and 235 rooms respectively. As company derives 65% of its revenue in foreign exchange, the recent depreciation in rupee will improve its operating margin to some extent. For FY08 its total revenue grew by 25% to Rs 514 cr and profit jumped up 45% to Rs 132 cr posting an impressive EPS of Rs 58 on equity of Rs 22.80 cr. Even for Q1FY09 it reported satisfactory nos without any pressure on profit margin. Ironically, company having a net block of Rs 1425 cr and investments worth Rs 230 cr is today available at an EV of merely Rs 800 cr. Secondly, company is run by three promoter groups – Jatia, Gupta and Saraf family who have acquired independent interests in the hospitality industry. Hence to avoid any potential conflict of interest, company is demerging itself into three separate companies with each promoter group managing one of the hotel properties. Meanwhile the combined entity is estimated to register total revenue of Rs 550 cr and profit of Rs 125 for FY09 i.e. EPS of Rs 55. Investors can accumulate at sharp declines.
Belonging to the world renowned Kalyani group, Automotive Axles (205.00) is currently the largest independent manufacturer of rear drive axle assemblies for commercial vehicles in the country. Besides it also manufactures brake assemblies and gear sets. It enjoys esteemed client portfolio, which includes names like Ashok Leyland, Tata Motors, M&M, Volvo, BEML, Maruti Udyog etc in the domestic market and Daimler Chrysler, Meritor etc in the international markets. In the last couple of years, company has increased drive axle capacity from 83,000 units to 168,000 units per annum. To cater the robust export demand, it is further augmenting the installed capacity to 240,000 axles under a capex of Rs 112 cr. Apart from this it is also enhancing its gear sets manufacturing capacity from 1,70,000 units to 3,20,000 units per annum. For the first three quarter of FY08 it recorded a growth rate of 35% in sales to Rs 611 cr, whereas net profit increased by 20% to Rs 48 cr. The recent fall in metal prices and sharp depreciation in rupee will give some relief to company on margin front. For FY08 ending Sept 2008, it may clock a turnover of Rs 800 cr and PAT of Rs 62 leading to an EPS of Rs 41 on current equity of Rs 15.11 cr. Scrip can appreciate 50% within a year.
The share price of Sunil Hi-tech (88.00) which raised Rs 81 cr in Jan’08 via QIP route @ Rs 360 per share has now been reduced to merely 25%. Moreover it has also issued 38 lakh warrants in Oct’07 to be converted @ Rs 146/- per share before April’09. Company is engaged in the niche segment of fabrication, erection & testing and commissioning of bunkers, ESPs, boilers, TG sets in the power plants, both in private & public sector. With a client list spanning BHEL, NTPC, Reliance Energy, Jindal Steel and Power, the SEBs of Maharashtra, Chhattisgarh and Madhya Pradesh, Sunil Hitech is also engaged in overhauling and maintenance to ensure proper functioning of plants, post-installation. The company also undertakes projects in the transmission and distribution segments. Remarkably, as on today it has an all time high order book position of more than Rs 1300 cr which is 4x times its FY08 turnover. With the ongoing liquidity crunch internationally, funding such huge projects is a challenge for the company. However, it has an under leveraged balance sheet with a low debt equity ratio of 0.60x times and can raise more debt comfortably. So despite taking into consideration higher interest cost it may end FY09 with a topline of Rs 500 cr and PAT of Rs 20 on conservative basis. This translates into EPS of Rs 16 on current equity of Rs 12.30 cr. At current market cap of merely Rs 100 cr, it’s a steal.
Asian Hotels (285.00) owns and operate three 5 star hotels under the brand Hyatt Regency. Its flagship hotel Hyatt Regency New Delhi has 508 rooms whereas its Mumbai and Kolkata hotel has 401 and 235 rooms respectively. As company derives 65% of its revenue in foreign exchange, the recent depreciation in rupee will improve its operating margin to some extent. For FY08 its total revenue grew by 25% to Rs 514 cr and profit jumped up 45% to Rs 132 cr posting an impressive EPS of Rs 58 on equity of Rs 22.80 cr. Even for Q1FY09 it reported satisfactory nos without any pressure on profit margin. Ironically, company having a net block of Rs 1425 cr and investments worth Rs 230 cr is today available at an EV of merely Rs 800 cr. Secondly, company is run by three promoter groups – Jatia, Gupta and Saraf family who have acquired independent interests in the hospitality industry. Hence to avoid any potential conflict of interest, company is demerging itself into three separate companies with each promoter group managing one of the hotel properties. Meanwhile the combined entity is estimated to register total revenue of Rs 550 cr and profit of Rs 125 for FY09 i.e. EPS of Rs 55. Investors can accumulate at sharp declines.
2 comments:
Hello, great Blog! Hope you can post more on autogas! Thanks alot for this.
Had a quick look at Micro Inks - just a comment - the company's reserves are closer to 450 cr, not 750 cr as it has over 300 cr of accumulated losses in its subsidiaries. On a PE multiple basis, it still is a decent buy, however one needs to evaluate if subsidiaries have turned around or will continue to make losses.
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